How to Scale Your Real Estate Portfolio with Smart Lending Strategies (Derek Brickley Interview)

Derek Brickley (00:00)
So, you know, on the investing side with my duplex that I house hacked,

I’ve since moved out of

had gotten a call.

always when you’re out of town, right? You’re never, you’re never there.

I was out of town and I got a call

the tenant that I rented my unit to.

And she had said,

know, there was police called the other unit sounded like there was maybe a domestic dispute. Maybe something was broken.

it’s just like, ⁓ here we go.

didn’t realize necessarily that two tenants that were there invited a third to live with

When obviously she was not on the lease

that was a huge issue

this third tenant ended up scamming the other two

out of their money.

Fortunately, they figured it all out.

But the third tenant ended up stealing their

Michelle Kesil (02:22)
Hey everyone, welcome to the Investor Fuel podcast. I’m your host, Michelle Kesil. And today I’m joined by someone that I’m looking forward to chatting with, Derek Brickley, who’s been making serious moves in the lending and the investing space. So glad to have you here with us today, Derek. I think the listeners are going to take something away from how you’re approaching helping investors with lending.

getting higher returns from the deals they have and your own personal investor journey. So let’s dive into all of that.

Derek Brickley (02:58)
Yeah, for sure. Well, thanks for having me here. I’d love to talk about it. Happy to help.

Michelle Kesil (03:03)
Amazing. So just first off for those who are not familiar with you and your world, can you give the short version of what your main focus is?

Derek Brickley (03:12)
Yeah, totally.

got into the world of lending because in my mind, real estate was always important and a great asset tool. So regarding my past with that, it got into the world of real estate from when I was very young and shifted quite quickly to helping people actually grow their portfolios and everything as well through the lending. so just providing those different options. Because again, as we were talking about before, it’s ⁓

You don’t know what you don’t know. And when it comes to the investing side of things, it’s about maximizing the deals you have and your returns on those because nobody buys an investment property to lose

So anyway, we can help with that. That’s what we’re here to do.

Michelle Kesil (04:00)
and what markets do you operate in?

Derek Brickley (04:03)
So with

specifically, pretty much nationwide. So myself, I’m located in our headquarters in Ann Arbor, Michigan. So I’m a Michigan fan. I don’t know if you have anybody who’s maybe a state, Ohio state, I won’t live against them. with being here in Michigan though, again, almost the whole country, 45 states.

Michelle Kesil (04:26)
Amazing. Yeah, so what are some common strategies that you use to support investors?

Derek Brickley (04:35)
And well, at first, and I did this myself when I actually got my first property was house hacking. And house hacking is a great way to start and get into it, lower barrier to entry.

it’s a little, a little less risky for people. They don’t have to put all of their money into one basket and hope that deal goes well. It’s a way for them to offset their living costs so they don’t have to worry about that added risk.

So starting with that.

We help a ton of people sort of structure that because there’s different ways to do it. Most of the time people hear FHA is the way to go with the house hack. And it might, might be, but there’s ways to utilize FHA conventional, even VA financing or 0 % down if you’re a veteran, right? So everybody’s going to be different, but it’s finding those niches within their situation to best help them. And after that, right, everybody.

starts at one, but it’s never ending cycles with us. So it comes to, okay, well, does it make sense to continue to go that route and use kind of your standard conventional loans to scale? Or there’s even the other options that are non-conventional that have a little bit more flexibility to help more people qualify and scale their portfolios. So there’s a lot of different ways and things that we have to look for. that’s

The biggest reason a lot of people come to us, right, is to try and figure out which of those options will actually work better.

Michelle Kesil (07:02)
Yeah, absolutely. And what is kind of like the criteria you use to help people figure out like what would be the best?

Derek Brickley (07:11)
So, I’m a

guy, I’m a boring finance numbers guy. I went to school for mathematics, economics, statistics, data science, finance, like a ton of stuff. And so, on my side, when we’re going through that with somebody, there’s never a one size fits all. And of course we can all say, well, yeah, there is, everybody wants to make the most money we can. But the problem is, not everybody has the same end goals.

Not everybody starts in the same place. And so it’s taking a look at where your portfolio is at now, how you got there, what your actual end goals are, and seeing the best way to actually get from point A to point B with what you have. And so it’s just a conversation of better understanding what that looks like for somebody to see which one of those might even make sense in the first place.

Michelle Kesil (08:12)
Yeah, absolutely. That makes a lot of sense. So what has been like the key to keeping this business running smoothly?

Derek Brickley (08:22)
It’s just the more people you help, right? The easier it gets because investors always know other investors. And so that’s the biggest source of our business. And that’s where a lot of the people we work with come from is from past clients, people that know us, trust us and see how we were able to help. It just translates really easily to say, okay, well, you know, my, my.

whatever it is, my uncle in a van down by the river is looking to buy his first house hack. It’s like, okay, great. And it’s that, that trust and credibility that we can can build and by all means, it’s not like from a 20 minute podcast, everybody listening is going to go, I trust Derek like, let me let me put everything through Derek. It’s never going to be that way. And that’s not the expectation. But the, thing that is important is

If you can build enough trust at the beginning, the rest is what’s earned. That’s what we get during the transaction. When you close on that deal, when you start making five, six, $700 a month in pure cashflow, that’s where that comes in to how we can actually continue to grow the business and help make it more sustainable for us so that everybody benefits.

Michelle Kesil (09:47)
Yeah, absolutely. I love that service is your core. That’s important. So what are you most focused on solving or scaling next?

Derek Brickley (09:53)
Don’t like.

Well, my own investment portfolio is something I’m always looking to scale. Right. So on my end, I started house hacking a duplex and from there, ⁓ ended up acquiring a four unit just back in June and working with now a business, a group to have about 15 doors. And that’s a mix of long-term or short-term and you know, anywhere from Michigan down to Florida. But.

Obviously being in Michigan, sent, we focus a lot here because of the fundamentals of like the Midwest market. So my personal growth is to continue to acquire properties here in Michigan, in the Midwest that are, you know, the cashflow. I’m definitely never a, you should buy a property if it doesn’t make money because cashflow is what supports it. But you know, whether that’s appreciation through work.

cosmetic rehabs, whatever it is, just looking to continue to grow that in a way that’s scalable and sustainable for myself. Because my problem is I want to grow too big too quickly. And when I try and do that, I see the effects. You see how quickly things can be unbalanced. So it’s important to grow at a pace that things can still be stable. That’s my path on that side of things.

Michelle Kesil (12:05)
Yeah, that’s a great goal. So what does like your investment journey look like? Like how did you get started? ⁓ Yeah, kind of what’s your process been?

Derek Brickley (12:18)
Well, so my process is I kind of always knew

when I was in college that real estate was important. And my dad growing up, was, he was a sales person for a new construction company here in Michigan. And so I was the kid out at the model homes, waving people, greeting people, and

It sort of sparked in me, okay, well, this is what real estate looks like. My family in the past, my relatives have owned a duplex was my great aunt. That was her first investment property very early on, way before I was born in 19, mid

1900s. I don’t know when. And she house hacked, but that wasn’t a thing at the time. ⁓

It wasn’t something that was talked about. wasn’t an idea that was made available to many people. And so I just sort of had that insight, fortunately, from people around me, my family, and just my own desire to learn more about it, to get into it more. And I realized that, you know, the best way for me at the time to grow my portfolio and

and grow within the real estate industry was to work in the real estate industry. And so that’s what led me to the lending side, but they always went hand in hand because,

know, being able to analyze my own deals and acquire my own properties, that just makes it even easier for me and maybe more helpful to help other investors analyze theirs and help them figure out again, which options work because, you know, it’s, can often go, well, this is what I would do.

and give them a natural perspective as to not just, well, you have option A, B, and C, but if I was actually to acquire this property, this is the way I would go about it because of these reasons. And so it’s almost like giving me an additional insight to lead me where I am now, not just, you know, not just being in the mortgage industry, but taking

four or five mortgages myself over the past year or so.

Michelle Kesil (14:47)
Yeah, I love that you just dove in to this industry and learned all aspects. That’s amazing.

Derek Brickley (14:55)
Yeah, absolutely. I tried. I tried.

Michelle Kesil (14:58)
Yeah.

So let me ask you this. Every operator has a moment in their business where things get real. Maybe a deal goes sideways or you have to make a fast pivot. Would you mind sharing one of those moments that you have experienced?

Derek Brickley (15:58)
Yeah. What’s more useful do you think for your audience, the investing side or the lending side?

Michelle Kesil (16:05)
You can share both.

Derek Brickley (16:06)
Okay. All right. I’m not limited. Okay.

So, you know, on the investing side with my duplex that I house hacked, I’ve since moved out of that. I’m no longer in that duplex. And I had gotten a call. was, it’s always when you’re out of town, right? You’re never, you’re never there. But I was out of town and I got a call from the tenant that I rented my unit to.

And she had said, you know, there was police called the other unit sounded like there was maybe a domestic dispute. Maybe something was broken. Now it’s just like, ⁓ here we go. And

had been a chain reaction of events. First of all, unbeknownst to me, cause I had moved out. I was a little, ⁓ I took it for granted. Assumed everything was great and.

didn’t realize necessarily that two tenants that were there invited a third to live with them. When obviously she was not on the lease and that was a huge issue because what ended up happening is fortunately for me, very minimal, but this third tenant ended up scamming the other two out of their money. so next thing you know, I

Rent this month is going to be tough. And it’s just a chain reaction of negative things. Fortunately, they figured it all out. Everything’s okay. But the third tenant ended up stealing their stuff, leaving like a leased car that she had, took all the electronics and tracking out of it and left it in my driveway.

Michelle Kesil (18:00)
Wow.

Derek Brickley (18:01)
Yeah, I don’t know what was going through her mind, where she is. Nobody knows. She’s off the grid. But that was a crazy one for me because, again, I’m out of town. I don’t know what’s going on. And so the lesson I learned there, though, to be more vigilant and to be sure as to do checkups and everything on the property. ⁓ And I don’t think I even mentioned that there

Michelle Kesil (18:07)
You

Derek Brickley (18:29)
was a minimum at that time of nine cats in this two bed, one bath, 800 square foot duplex.

Michelle Kesil (18:33)
Wow.

Derek Brickley (18:36)
So a number of things that my focus wasn’t on and I did learn from that. ⁓ And I guess if I’m to shift to the lending side, sorry, you know, there’s always things that come up. You know, for example, ⁓

Michelle Kesil (18:36)
my gosh.

Derek Brickley (18:58)
We were working with this investor time, I mean, time and time again, right? Again, an investor once it’s the mindset you’re never a one time investor. It’s you’re an investor in everything you do. It’s the way you think. ⁓ but this one specific investor, we were working a lot with them and I think he had, say maybe 10 properties at this point, mostly single family homes. Well,

little be notes to us at the time. And he didn’t really understand that he had his mother pass away and she had left him a few homes that she had that were rental properties as well. But his mom hadn’t paid taxes on these properties for three or four years. And so there’s a huge tax bill and all of a sudden his

because he was the heir to his mother’s estate, right? All of these tax liens and everything are now going against him. And so now we’re working to sort of switch everything up. like, my gosh, how do we fix this? First of all, make sure

you get out from these tax liens, but how do you make sure that you also don’t lose the properties? Because I four years of back taxes, it’s shocking that he didn’t lose them already, but they were…

borderline, get ready to take them. And it was a huge switch up we had to do, totally different type of loans now, switching from a standard, you know, again, conventional route, because you can generally get 10 conventional loans

you need to switch to a non-conventional or something different. ⁓ But totally had to switch it up, go the debt service coverage ratio, investor loans to

access the equity in his homes to pay off all the debt that his mom had unfortunately left for him. But geez, like it was it was a number of things that just kept piling up and it was like, what’s next? But I mean, fortunately, he got to keep all the properties, got up from the tax leans and everything, but it did not make it easy on him or us, that’s for sure.

Michelle Kesil (21:20)
Yeah.

How did you guys overcome that?

Derek Brickley (21:23)
⁓ so specifically it was switching to a different program that has different guidelines because when it comes to the DSCR space.

I guess I’ll start with the alternative. When you’re in the conventional space, there’s the government sponsored entities, Fannie and Freddie, who control what we do and how we do it. They go ahead and say, well, if you don’t make this much money, Mr. Jones, I’m sorry, you’re not going to qualify. What the non-conventional space does, and there’s a lot of different options that go into that. There’s debt service coverage ratios, there’s asset based lending.

There’s a ton of different ways to tweak that and I can go into that if that’s helpful. But so it’s a matter of when someone doesn’t fit into that conventional box for one reason or another. And sometimes there’s just advantages to the other side too, but it’s, switching and finding whatever other strategy will actually fit their bucket. ⁓ and there’s

I’d say probably hundreds of ways to do that. And so that’s where it’s really difficult. And this was what was hard to understand for me at first too as a lender is like,

somebody who doesn’t understand the non-conventional side of things, it’s going to be very difficult for them to even remotely help somebody who needs that route because there’s so many different options and strategies and guidelines and the different programs and everything. It’s not a one-size-fits-all and it’s not a one-page pamphlet that says, okay,

Check this box, check this box. It’s finding, okay, well, maybe you don’t meet that one requirement, but this other type of program doesn’t have that same requirement. And just being able to know it well enough to, when talking to someone, switch it and go, okay, well, we can’t do that one, we can’t do that one, but here’s where we’re gonna take it. And so that’s the…

crazy thing about it. Sometimes they sound crazy, but there’s still no income loans. Like you think of 2008, 2009, when people didn’t need to have a job or anything to qualify. Obviously, there’s now factors like Dodd-Frank, the Dodd-Frank Act, and everything that were put in place to protect consumers, which is great. It should be there because people were taking advantage of. ⁓

The other side is there’s other ways to document those things that are needed outside of just a conventional loan. And so.

It’s really important to be able to distinguish those.

Michelle Kesil (24:30)
Yeah, absolutely. That is some good wisdom and yeah, it seems like you really know how to support people through that. So before we wrap up here, if someone wants to reach out, connect with you, learn more from you, where can they find you?

Derek Brickley (24:48)
Yeah, well, the easiest way to get ahold of me, actually the quickest way, is to text me. So if you want to text me, I’m always on my phone, right? Always available, as soon as I can I’ll get back to you. But my cell phone here is 734-645-7722. And again, that’s my direct line, so feel free to shoot me a call or text. If I don’t get back to you right away, I promise I’ll get back to you as soon as I can.

Michelle Kesil (25:16)
Perfect. Well, listen, I really appreciate your time, story and perspective. We need more people in this space doing things in this right way. So thank you for being here.

Derek Brickley (25:26)
Yeah, happy to be here. So thank you for the opportunity and hope to connect in the future.

Michelle Kesil (25:32)
Yes, and for those of you tuning into the show, if you got value, make sure that you’ve subscribed. We have more conversations coming with operators just like Derek, who are building real businesses. And we’ll see you all on our next episode.