How to Succeed in Foreclosures, Short Sales, and Cash Flow Real Estate

Mahmoud Faisal Elkhatib (00:00)
That’s a great, great question. think one of the, there’s a couple mistakes I think investors do. One, they fall in love with the deal, right? You cannot fall in love with property. Property is property, right? It’s not about how pretty it looks, it’s about does it make money, right? So I think a lot of them fall in love with the deal. The second thing I think is they, in my opinion,

an investor’s approach looking at, you know, it’ll be more valuable five years from now, and that’s what I’m looking at. So they’re actually investing and spending money on the future as opposed to what’s it gonna do today.

Right. So I believe in cash flow. Right. That’s just my personal opinion on investing and what I recommend is does it cash flow today. Can it cash flow today. Can you flip it today and make the money today. Right. Not necessarily you have to do that but that’s your exit strategy. Right. ⁓ And I think the third place where they make a mistake is I believe there’s two places you make money in a trans and a real estate transaction.

You make it on the buy, you make it in the demo. Your buy is when you buy it right. So buying a property at the right price that makes sense is critical. ⁓ And at the same time, if you over demo a property and you start demoing the entire property, now you lost, that’s where your cost is tonight, you have to replace on that. So I found that, ⁓

which kind of leads into your construction cost, managing your construction, managing your property, Or managing your contractors. And I think the fourth space where contract or investors go sideways is they think cheap, right?

It’s like, me find the cheapest guy for the cheapest price, and next thing you know, it’s gonna cost them twice as much because the contractor underbid the job, and now everything’s more expensive, and now you’re doing change orders, and contractors make their money on the change orders, right? So they wanna cut corners early on, and it costs them more money in the long term. So…

I think those are the, if I were to say what are the four big mistakes that investors make, those are them.

Erika (03:58)
Hey everyone, welcome to the Real Estate Pro Show. I’m your host, Erika, and today I’m thrilled to be joined by Mahmoud Elkhatib, known as the bow tie attorney. He’s been crushing it in the real estate and legal space. Mahmoud, it’s awesome to have you here.

Mahmoud Faisal Elkhatib (04:15)
Thank you for having me. Super excited. Super excited. Thank you, Erika.

Erika (04:20)
Me too. So let’s dive on in then. For those who don’t know your story Mahmoud, give us the rundown. How did you get started in real estate and law and what led you to become the bow tie attorney?

Mahmoud Faisal Elkhatib (05:21)
Great questions. I started as a chemist.

So ⁓ that’s my original job, original way I started my undergraduate degree. ⁓ But I couldn’t sit in the lab and then I moved on from there. I went into manufacturing. ⁓ I used to make care care and skin care products, selling it to retailers across the country. And then I moved from there into turnaround consulting and from turnaround helping companies who are in distress. From there, I went into other types of consulting and then I got into trouble with my properties and

my family’s properties and houses and stuff. And so that gave me ⁓ a huge wake up call and ⁓ jump into the foreclosure world.

⁓ I think if I remember properly between my battles and things that I did and fighting the bank and everything else, must have kept the property and stayed in foreclosure for seven or eight years ⁓ and learned a lot. If I knew what I knew now, then I would even probably be longer ⁓ or even done more, right? And then I got my real estate license, became a real estate broker. ⁓

and then realized as I was dealing with a lot of different attorneys, I was finding a lot of struggles. Like just one, attorneys not understanding the full breadth of an entire business deal, right? Reading a financial statement or getting to know the business aspect of the transaction, not just legal, right? ⁓

And as I kept going, was finding I needed solutions in certain types of transactions that required creativity or outside the box thinking or how do I structure this and how do I do that? And I was finding a lot of roadblocks from the attorneys that I was working with. And I’m like, I can do this so much better. So I went to law school. I was 30 when I started law school ⁓ and then graduated and.

went into and started doing foreclosure litigation, defending people who were in foreclosure for many years, and got introduced to short sales and loan mods through that process, obviously, and realized that there was a gap in the real estate transactions world in handling some of these complex types of deals.

I did receivership for a while where, you know, working through the city Chicago and getting appointed or having my clients appointed as receivers to manage properties to get them out of where they were like what we called zombie properties, where…

the owner died or the owner doesn’t exist and the bank won’t foreclose and no one is taking control of the property and it just sits there as a vacant boarded up building and no one knows how to untangle that title. So then I had to get really deep into really complex title situations. So that was how I got into real estate law. The bow tie, now that’s a different story. Bow tie, I ended up going to a gala.

wore a bow tie and got a lot of compliments on the bow tie. I think this is pretty cool. So then I started wearing the bow tie just as a fashion thing, as part of my repertoire. And then one day I showed up to court wearing a bow tie and being a, I’m 5’11”, at the time I was over 220, 230 pounds, I’m a big guy. So I’m pretty, people get intimidated.

I think I’m really sweet and nice, but for some reason people get intimidated, right? And charming too, right? But anyway, so I show up and this is post-COVID and I’m there and all of a sudden I feel like I’m a professor, right? So I’ve got my glasses, you know, got the bow tie. I look like a college professor and the response I was getting was different. And I was like, interesting. And so then I started wearing bow ties more often. Well…

my name being Mahmoud Faisal Khatib, right? Some people just can’t remember it, right? Or can’t pronounce it. And so they’d be like trying to remember that, you know, that guy, what’s his name? The one attorney, you know, the one who wears the bow ties all the time. And next thing I know, I became bow tie. And so then I’m like, well, this really sticks. And I realized it became a great way to differentiate myself publicly. And so I became the bow tie attorney.

and it just stuck. there’s bowtie at eeveelawgroup.com is my email and got a Bowtie Facebook page and Bowtie everything. So yeah, so then I became Bowtie.

Erika (10:36)
Yeah,

yeah, I love that. So Mamu, with the work that you do, it’s a very detail oriented space. How do you stay ahead of the curve and manage that?

Mahmoud Faisal Elkhatib (10:49)
That’s a great question. I ⁓ don’t typical. My personality is big picture. I can figure out to untangle things. I can solve problems. What’s important, but at the same time…

I’m not the bookkeeper, right? I’m not the guy who’s gonna sit in the corner wearing the accounting hat and trying to figure out every little detail, right? I can figure out the details, I can get the details, but what I’ve been very ⁓ intentional about is building a team around me of people that are highly detail-oriented, right? So they can do the minutia and get the deals done and make sure all the T’s are dotted. T’s are crossed and I’s are dotted, right? And…

At the same time, I also know that human beings are limited, right? Just, we have limitations. But we can use technology to offset that. So we’ve invested heavily in technology, heavily in AI, to really help support our abilities to maximize productivity and stay on top of things, right? So, yeah, we threw money at it. That’s how we stay on top of stuff.

Erika (12:05)
Yeah, absolutely. I want to pivot a little bit and ⁓ talk about what you see with working with investors. What’s one common mistake that you see real estate investors make and how can they avoid it?

Mahmoud Faisal Elkhatib (12:23)
That’s a great, great question. think one of the, there’s a couple mistakes I think investors do. One, they fall in love with the deal, right? You cannot fall in love with property. Property is property, right? It’s not about how pretty it looks, it’s about does it make money, right? So I think a lot of them fall in love with the deal. The second thing I think is they, in my opinion,

an investor’s approach looking at, you know, it’ll be more valuable five years from now, and that’s what I’m looking at. So they’re actually investing and spending money on the future as opposed to what’s it gonna do today.

Right. So I believe in cash flow. Right. That’s just my personal opinion on investing and what I recommend is does it cash flow today. Can it cash flow today. Can you flip it today and make the money today. Right. Not necessarily you have to do that but that’s your exit strategy. Right. ⁓ And I think the third place where they make a mistake is I believe there’s two places you make money in a trans and a real estate transaction.

You make it on the buy, you make it in the demo. Your buy is when you buy it right. So buying a property at the right price that makes sense is critical. ⁓ And at the same time, if you over demo a property and you start demoing the entire property, now you lost, that’s where your cost is tonight, you have to replace on that. So I found that, ⁓

which kind of leads into your construction cost, managing your construction, managing your property, Or managing your contractors. And I think the fourth space where contract or investors go sideways is they think cheap, right?

It’s like, me find the cheapest guy for the cheapest price, and next thing you know, it’s gonna cost them twice as much because the contractor underbid the job, and now everything’s more expensive, and now you’re doing change orders, and contractors make their money on the change orders, right? So they wanna cut corners early on, and it costs them more money in the long term. So…

I think those are the, if I were to say what are the four big mistakes that investors make, those are them.

Erika (15:30)
Yeah, totally. Illinois is a unique market with its own quirks, as I’m sure you know. How do you tailor your strategies with your clients to succeed in this market?

Mahmoud Faisal Elkhatib (15:43)
Yeah, think ⁓ what I normally do with my, it really is about the, so there’s a book called The Art, The Subtle Art of Not Giving a Fuck. I don’t know if you’re familiar with that book and if I just violated some sort of censorship, can bleep me out later when we edit it, but ⁓ one of things that I talk about in that book is it’s not about what your pleasure is, it’s about what’s your pain point. And.

once you’ve figured out what your pain point is, what you’re willing to sacrifice, that’s really where the direction of your life is gonna be, right? So, do you want to be at home and to be with the kids and spend more time with them and have more family oriented? Well, the sacrifice you’re gonna make is, you’re not gonna make, you may not make as much money, you may not have that corner office, but if you wanna have the corner office and make a ton of money, then you’re working 18 hours a day, right? So, what is the pain point? And so, that comes back down to your question about…

where is the struggles and how do I work with my clients is what is their pain point? Are they willing to get into a property that is vacant, abandoned, in a D neighborhood where their entry point is lower, their construction cost might be typically higher because they gotta do more work on it, but at the end of the project, their total cost of occupancy or ownership is much lower, right?

And so now they have ⁓ a faster path to profitable cash flow. Or that takes a lot of pain, right? You gotta worry about someone’s gonna break in the house and steal all the pipes, and they’re gonna go, know, the neighborhood that you’re in, and security, and do I put motion sensors in cameras? There’s an extra level of pain that you have to sustain.

Or does the person want to be, you know what, I want to buy in an A neighborhood, in a better neighborhood, in a better area. My cost of acquisition is higher. My construction cost might be overall lower, but now I’m paying for more stuff. So I have to put granite or marble or quartz versus for Mike or something, right? So now my, but overall my cost is higher, but my pain points are less. So each investor is different based on their pain point and what they’re willing to take on.

and

think the thing is just be conscious of not biting off more than you can chew. Right? And having a support network, a support team, right? Make sure you have a good lender, a good attorney, ⁓ a good real estate broker, at least one of each. ⁓ Make sure you have a good set of contractors and subs. And even I think the bigger thing that’s really, really, really important, all that, is having a good network. So.

Erika (18:09)
Yeah, yeah, absolutely.

Mahmoud Faisal Elkhatib (18:33)
Are you tied into 15 or 20 other investors who have done this before or done something similar where you can get on a community WhatsApp, like the Bowtie community, which by the way we have a WhatsApp group of professionals, but just my little plug, right? But you get on, you’re like, hey, I need an HVAC guy who can help me out. Or I a plumber who’s a good plumber in the western suburbs. I think…

Of all of those things, I think it’s really important for investors to have a network of people that they can rely on and turn to.

That’s how I think I’ve helped them overcome challenges.

Erika (19:12)
Yeah, absolutely. For you, Mahmoud, what would you say has made the biggest difference with building those relationships and networking? What should someone do if they know they need to make those connections but they feel stuck?

Mahmoud Faisal Elkhatib (19:29)
You know, it’s really pounding flesh, right? It’s hitting the pavement. It’s getting out to events, getting out to meet people. It’s really old school, right? Instead of actually meeting for coffee, you set up Zoom meetings, right? And doing this, where you’re communicating and meeting people. I that’s very important. But even, that’s the good start. But I think the next piece is…

I really do believe that you get back what you give. So being vulnerable, being authentic, and helping, supporting other people, it comes back tenfold. It really does. How can I help this person be better? How can I help them, whatever they’re working on? Obviously not to the point where I’m hurting myself, but if I can help, I’ll help. And I think…

That’s an important distinction because people sometimes will give everything to somebody and they’ll write and they’ll they’re left with nothing. So it has to be balanced. Everything is moderation. But ⁓ getting out to networking events, meeting people, whatever those types of events are, ⁓ being authentic and vulnerable with them. And then.

being helpful and supportive, right? What can I do? Like my approach is how can I support you? What can I do to help you out in what you’re trying to achieve and accomplish? I have all of these tools in my tool belt. Which ones can I bring to help you with it? And that’s really been my approach. ⁓ And the universe will respond.

Erika (21:05)
Absolutely. So Mahmoud, I know we chatted about this a little bit before and you have experience with some deals that got a bit hairy and you’ve helped your clients out with that. Can you share a time where a deal or a legal issue went sideways and how you navigated that?

Mahmoud Faisal Elkhatib (21:26)
Yeah, there’s a lot of them, right? I think, so my…

My approach is, I’m a history buff, so I love, I’m a hobbyist in history, right? So Teddy Roosevelt had a saying, know, speak softly but carry a big stick, right? My background in litigation has me understand the limits and the boundaries and what’s capable and possible in transaction world. And…

I think my first approach is always how to find, how do I work with someone? How do we cooperate? Let’s have a conversation. We’re all trying to get to a certain spot, right? We’re trying to get somewhere, both of us, both sides. So how do we do that together? At the same time, sometimes you end up with very difficult parties. And so how do you get around and away from that? Or how do you untangle that? And I think… ⁓

I guess one, you know, there’s situations where the transaction was just so hairy that it couldn’t be undone or needed more time. And there are some transactions that, you know, the part is just so difficult to work with. ⁓ I would say that I did have a deal, we just recently closed on it. ⁓ The mom had died many, many, years ago, or the dad had died many years ago.

and then conveyed it to his wife, was second wife, and she had like five kids, and he had five kids. And the interesting part was they never actually dealt with the property until everybody died. And so now you’ve got like 15 heirs, and some of them talk, some of them have disappeared, some of them don’t exist. So now, how?

what helped me out was understanding the intricacies of real estate law. And it really was a law school real estate property question, right? Like, I think it was on my bar exam, right? And so how do I close this deal in such a way where I don’t have to wrap in 15 people at the closing table?

And how do I structure it where that way I can, like what we identified was in the will, the will had named his second wife as an heir, but only certain rights of it. So she had a life estate, which means that when she died, she no longer had an interest, which meant that her entire side wouldn’t get any part of the property. And so the challenge that we had,

was trying to convince the title companies, their underwriters, what this meant. And because it’s such a nuance in real estate law, we had to go through like six different title companies to finally get them to understand that we don’t need 17 out of 18 people that they wanted, we only needed these few, right? And so, like I said, the challenge was how do I get people to understand?

the intricacies of what we’re trying to do and how we can make it work. And we ended up closing the deal and we insured it. And this is one thing that I was willing to do was because I was so confident in what I had done, I took on a personal undertaking. So I insured the deal personally in addition to the title company insuring it. Because I was like, I know this is gonna be the way it is. So I don’t have to worry about it.

And we got the deal closed and the heirs got their money and the grand kid got their money and the seller got their money and the wholesaler got their money and the buyer got their property and it all worked out. It took me a minute, but we finally got it done. So that’s an example of a deal that almost went sideways, but we’re able to pull it back in.

Erika (25:36)
Yeah, yeah, it’s really awesome. Mahpood, what do you see next on the horizon?

Mahmoud Faisal Elkhatib (25:44)
I mean for me personally or for the world or for illinois or for real estate

Erika (25:51)
I would say for ⁓ you as an attorney.

Mahmoud Faisal Elkhatib (25:55)
for me as an attorney. ⁓

think, so I think we’re for an interesting run in the Illinois real estate market. Illinois leads one of the leading states in foreclosures. I think people are really feeling the squeeze. I think the crackdown on immigrants and people with ITINs who may have bought properties using their ITIN.

I think all that has an impact across the board. think, and interest rates where they’re at, it’s interesting because people aren’t selling, so we have low inventory, but also peer-preachers aren’t moving.

So I think where I see ourselves is our unique positioning as both a law firm that defends and handles distressed assets for borrowers for closure defense work and our ability to negotiate short sales and real estate transactions puts us in a very niche position to help investors, borrowers,

and property owners really maximize their deals. And so I think my big push and what we’re pushing on now is I want to meet as many people as I can. If you’re a broker or you’re an investor, I want to sit down and have a cup of coffee with you. I want to get to know you. I want you get to know us. Because I’m sure there’s somebody in your network that needs our help, ⁓ that doesn’t know how to solve their problem.

and we can provide them with a myriad of solutions. So I really see us really expanding our referral network and connecting people and becoming a connecting post. Like we have a community called the Bowtie Community, the Bowtie Network, and it’s a…

WhatsApp group of like seven or eight different groups where we’ve really connected professionals to meet each other ⁓ and communicate and help each other out and hey I need a so and so, I can do that or I need a lender or I need a private money lender. And I think building those networks is important. So I think our future is to help as many people as we possibly can by building a referral network.

Erika (28:11)
Love that. All right, Mahmoud, before I let you go, if someone wants to connect with you, learn more about your work, or they need help with a deal that they have going on, what’s the best way for them to reach you?

Mahmoud Faisal Elkhatib (28:23)
Yeah, so they can email me at bowtie at eeveelawgroup.com ⁓ or if clients at eeveelawgroup.com. Our phone number also for our main number is 312-775-0980 and we can hit our website as well. It’s a full closure defense law office.com. ⁓

or you can just go go tie attorney Illinois and I will pop up. ⁓ And we’d love to hear from you. We’d love to connect ⁓ and love to grab a cup of coffee. So let me know.

Erika (29:05)
Awesome. Mahmoud, thank you so much for dropping all this knowledge today and sharing your journey as the Bow Tie Attorney.

Mahmoud Faisal Elkhatib (29:11)
Thank you. Thank you. It’s a pleasure to meet you. Thank you so much for having me.

Erika (29:15)
for everyone tuning in. If you got value from this episode, make sure that you’re subscribed to the Real Estate Pro Show. We’ve got more conversations coming up with powerhouses like Mahmoud who are building incredible businesses. We’ll see you on the next episode.

Mahmoud Faisal Elkhatib (29:31)
Take care.