The Biggest Risk in Multifamily Real Estate Happens Before You Close

Alex Ilchenko (00:00)
I think my nightmare ⁓ is ⁓ every deal that I do. ⁓ so whether you know it’s a five unit deal or a 10 unit deal, or ⁓ right now we’re gonna be closing on a 40 unit deal ⁓ in in in 30 days. So I think my biggest ⁓ nightmare ⁓ is kind of ⁓ from you know.

looking at the property, getting it under deposit, and then ⁓ closing on the property because every single ⁓ you know, ⁓ deal I do is like, you know, I take a lot of responsibility. There’s ⁓ you know, there’s always a risk.

Issa Hanna (02:10)
Welcome back everybody to another episode of the Real Estate Pro Show. Today I have somebody who took his career in the healthcare field, bought a house seven years ago, left the healthcare alone, and morphed it into over a hundred of his own properties. Ladies and gentlemen, I want to bring to you Alex Ilchenko. Alex, welcome to my show.

Alex Ilchenko (02:31)
Thank you for having me. Thank you.

Issa Hanna (02:33)
I’m I’m glad to have you. I’m so glad to have you. So Alex, for people that are just getting into this and and maybe we’re in the healthcare field just like you ⁓ and wanting to invest, ⁓ give us a little bit of rundown on what you’re doing right now.

Alex Ilchenko (02:49)
Yeah, so I I I started my ⁓ real estate career ⁓ seven years ago. I was ⁓ full time ⁓ nurse manager in healthcare at Hartford Healthcare and ⁓ I bought my first property. and it was an eight unit ⁓ property, so it was it was a good start. I didn’t know anything about real estate. ⁓ never ⁓ you know, was never in construction, real estate property management.

⁓ so it was kind of ⁓ my first property. So obviously, you know, I was super nervous, ⁓ didn’t know what I was doing, asking a lot of questions, doing a lot of research. ⁓ did the, you know, that that timing was right. ⁓ you know, my attorney, ⁓ who’s also ⁓ a very good friend, ⁓ was moving out of state and he came to me and he’s like, you know, do you want to buy this property? ⁓ so you know, after some due diligence and you know, some some research,

decided to, you know, to move forward. ⁓ you know, closed on the property after two months, ⁓ and, you know, started, you know, really managing and and and learning about it, versus, you know, going to go, you know, maybe a property management route, hiring somebody to manage it. ⁓ kind of wanted to do everything on my own. and, you know, after a couple of months of managing the property, I’m, you know, I I

started to realize, you know, the value of, you know, owning real estate. And, you know, I’m like, well, if I do it 15 more times, I can quit my my nursing job. ⁓ and I ended up you know buying another property. and you know I was up to you know 12 units. ⁓ this was around like you know like pre-COVID kind of time ⁓ you know in 2019.

And ⁓ after, you know, buying, you know, two, three properties, ⁓ obviously you you, you know, you start running out of money to to just keep going. And, you know, I definitely wanted to keep going. ⁓ so I I went back to ⁓ some of the doctors that I worked with and ⁓ kind of you know talked to them about real estate, educated them and kind of, you know, saw that you know, that if you know they wanted to invest and then they you know they they

They knew me from the hospital. So they they trusted me and, you know, they wanted to invest. And we ended up, you know, buying more properties. ⁓ you know, fast forward to about a hundred and, you know, fifty units.

I just I couldn’t do both, right? So I was doing everything, you know, from acquisitions to dispositions, property management, unit turnover, rent collections, tenant relations. ⁓ and, you know, at that point I just couldn’t do it anymore. So I, you know, s wanted to

Quit my W two job, focus on real estate full time. ⁓ you know, and you know, fast forward to now, you know, we’re up to about three hundred units. ⁓ we’re, you know, totally vertically integrated. ⁓ so we do everything in house. ⁓ you know, we have full time, you know, property managers, we have full time contractors, we have full time maintenance guys. ⁓ so we really try to ⁓ you know, keep everything ⁓ in-house so that, you know, we have ⁓ you know.

control over ⁓ you know, anything that we provide ⁓ to the tenants or how we service ⁓ the properties. ⁓ during that time, ⁓ I also did some ⁓ land development. So I had, you know, I got a project approved ⁓ to build sixty units. ⁓ and you know that was too big of a project. So I ended up selling it to ⁓ a local

building family here in Connecticut carriers. ⁓ and in the meantime, I was able to ⁓ take a four unit property that I that I had and, you know, get all the approvals to build another four townhomes on the same lot. ⁓ and, you know, did some ground up construction there. And, you know, working right now on getting approvals for ⁓ another 14 townhomes in Simsbury. ⁓ so we’re kind of, you know, pivoting a little bit.

⁓ to ⁓ ground up construction and ⁓ you know general contracting work because we see that’s kind of where where the need is.

Issa Hanna (08:06)
Nice. And when we were talking earlier, you told me the reason for the pivot is the unpredictable market that we have right now, this post COVID market that’s fluctuating up and down interest rates. Can you shed a little bit of light on that?

Alex Ilchenko (08:20)
Yeah,

yeah. So, you know, what we’re realizing is that the you know the p multifamily market ⁓ is very tough right now. you know, we’re dealing with ⁓ increased prices, we’re dealing with, you know, low cap rates, we’re dealing with high insurance quotes. So, you know, there’s very, very few properties that are really penciling in and you know, that make sense or, you know, that are cash flowing. So unless, you know, you’re you’re

you’re buying it off market ⁓ or you’re going to, you know, direct ⁓ to seller, that’s really the way to go. ⁓ there’s not that many ⁓ you know, deals that pencil. you know, here in Connecticut, with this supply and demand, there’s still not a lot of supply. And, you know, people ⁓ you know, are still paying, you know, top dollar for these properties. And, you know,

I think one of the one of the things that people are are not seeing ⁓ are ⁓ the capex costs also. so that’s where you know the labor rate is so expensive, the unit turnovers are very expensive, the maintenance insurance i is expensive, the taxes are going high. So I think when people are running their numbers or doing the their numbers, they’re not really ⁓ you know, running it to the numbers that they’re supposed to be. So people are still

you know, paying top dollar just to, you know, just to get into the real estate or, you know, they’re they’re doing it, you know, just so that they can have a write off.

Issa Hanna (09:53)
Definitely. And that’s somebody who’s a real pro. the difference between somebody who’s a real pro and somebody who just dabbles because people like Alex know there’s a right time to buy, a right time to sit, a right time to pivot into construction. And and what a genius move it was to build the GC company and then start doing the ground up construction as a pivot. I mean, super smart move. What came first? Was it GC or was it the ground up?

Alex Ilchenko (10:55)
we kind of came at the at the same s ⁓ at the same time. So we basically tried to kind of adjust and and see what’s needed and and build a team around it, kind of like around the, you know, the it all started w around the property management when we were buying, you know, value add properties where where where the need was for general contracting and then you know kind of pivoted into ⁓ you know new construction and kinda kept, you know.

kept growing our team. So basically whatever ⁓ the need is, we we try to kinda adjust and and and and build the right team to succeed ⁓ in that area.

Issa Hanna (11:35)
Well, every real estate investor, ⁓ and I ask this to all my guests that they come on, ⁓ I find it a fun little story time. Every real estate investor has a real estate nightmare that they had to overcome. Do you mind sharing one of your real estate nightmares with us?

Alex Ilchenko (11:52)
it’s a good question, nightmare. ⁓ I think ⁓

I think my nightmare ⁓ is ⁓ every deal that I do. ⁓ so whether you know it’s a five unit deal or a 10 unit deal, or ⁓ right now we’re gonna be closing on a 40 unit deal ⁓ in in in 30 days. So I think my biggest ⁓ nightmare ⁓ is kind of ⁓ from you know.

looking at the property, getting it under deposit, and then ⁓ closing on the property because every single ⁓ you know, ⁓ deal I do is like, you know, I take a lot of responsibility. There’s ⁓ you know, there’s always a risk.

⁓ you try to mitigate that risk. You don’t really know what you’re ⁓ walking into. ⁓ right. So, you know, how many, you know, how many vacant units are you gonna have, you know, at closing.

how many people are are not, you know, are not paying, you know, you never know. ⁓ you know, you can estimate and, you know, look at some of the averages and, you know, and ⁓ but you know, you you just don’t know. So I think and you know, knowing like are you getting a deal? Because you have to buy the property right and you know, so that you always have an e exit strategy. ⁓ so I think my my biggest nightmare is is that period. And I think once

I close and the property stabilizes, I think that that all goes away. ’cause there’s really nothing that you can’t ⁓ fix. ⁓ but if you buy a bad deal, like that’s hard to fix ⁓ after the fact.

Issa Hanna (13:32)
No, definitely. And you can do all the speculating in the world, but you you know, sometimes things come up that you can’t speculate for. ⁓ and I always tell everybody when when you are speculating, when you are estimating, estimate low, estimate worst case scenario. That way you are prepared, you know. and I’m sure you would agree with that, right, Alex? Yeah.

Alex Ilchenko (13:54)
Hundred

percent, hundred percent. You can never like there there’s always you know, no matter how long you do it for and how many properties you buy and how many properties you manage, there there there’s always some kind of ⁓ unknown.

Issa Hanna (14:10)
Definitely. What does the future hold for Blue Key Property Group?

Alex Ilchenko (14:15)
⁓ yeah, so like I think we’re we wanna continue to, you know, grow portfol grow the portfolio, ⁓ continue to grow ⁓ you know, the space in ground up construction, also general contracting ⁓ work. So our goal is to, you know, continue ⁓ building that wealth. right now we’re probably acquiring on average about fifty units a year. So we wanna, you know, try to increase that number. But again, at the same time.

⁓ you know, i if there’s no deals, ⁓ there’s no deals. we’re not gonna just, you know, jump into something ⁓ because other people are are doing it. So we’re very ⁓ meticulous and we’re very ⁓ you know, when it comes to properties, like we we we we look f we have s a specific buy box, we have specific areas w that you know that fits in the portfolio. ⁓ so we’re not, you know, just out there, you know, buying, you know, whatever comes.

⁓ so we we try to, you know, build those ⁓ niches ⁓ around Connecticut and in different towns.

Issa Hanna (16:04)
I s and you’re telling me now that your G C company’s even taking outside work, ⁓ like kitchen bathroom remodels and whatnot.

Alex Ilchenko (16:13)
Yeah, so we’re doing like a lot of remodel work ⁓ for other other investors. ⁓ you know, some of the investors, you know, might be out of state or might be ⁓ you know, local, but you know, the j the general contracting work, ⁓ you know, obviously, you know, it’s a it’s a lot of work. ⁓ you want to do it right. ⁓ so there’s a there’s a lot of investors that have bought properties that are either looking for general ⁓ contracting work, unit turnovers or property.

management. So we’re we’re trying to kind of you know, fill that void.

Issa Hanna (16:47)
Definitely. And in our business, ⁓ it’s great because you can open multiple businesses around one booming business. So Blue Key Property Group is not just investors, they’re not just a a GC company. They also manage ⁓ other investors’ properties for them. Correct, Alex?

Alex Ilchenko (17:04)
Correct, correct. Yep, we do that. So we do everything. What whatever the need is. So we do lawn maintenance, we do snow removal, we do property, you know, management, property maintenance, ⁓ you know, unit turnovers. ⁓ so but wherever there’s there’s a need or a void where other other people are struggling, ⁓ you know, we’re there to kinda jump jump in and kinda, you know, get the get them through that.

Issa Hanna (17:30)
Definitely. And you’ve been able to grow your network from talking to doctors in your previous job to getting other investors on board to getting clients to manage their properties. For people just starting off, maybe getting inspiration from your, you know, maybe they were a nurse and they went, you know, they see you and they’re like, you know what, let me try to do that. Can you give us some advice on how to grow and foster these business relationships?

Alex Ilchenko (17:59)
Yeah, ⁓ there’s there’s a lot of ⁓ you know ⁓ you know real estate meetups there’s a lot of different ⁓ different groups that that you can you know get involved so I would you know h highly recommend that in in your local areas. ⁓ I would also recommend ⁓ you know networking with other ⁓ you know brokers or real estate agents you know that constantly ⁓ you know have deals coming in

⁓ you know, depending on your, you know, buyer’s market. also, ⁓ again, just, you know, just reach out, you know, if if you need help, you know, whatever that is, what you know, reach out to ⁓ other, you know, multifamily investors, other ⁓ you know, flippers, other, you know, just you know, just ask ask questions, you know, and you know, that’s kind of what I do. So if I, you know, I have a problem, I try to find the best resource, somebody who’s

an expert in that area and that can kinda, you know, help me answer the qu those questions or guide me ⁓ you know, through those steps. So I I still reach out to many different, you know, resources depending on, you know, what I need ⁓ for some, you know, second, you know, expert advice.

Issa Hanna (19:17)
Definitely. And you can’t be too proud to take advice. You can’t be too proud to ask questions if you don’t know. Because in our business, ⁓ a mistake can cost thousands and thousands of dollars. So ⁓ Alex, if people wanted you to manage their properties, maybe they wanted to get a hold of Blue Key property group, the GC contractors and they wanted a kitchen remodel out in Connecticut, where could they get a hold of you?

Alex Ilchenko (19:43)
yeah, I mean they can go to BlueKeyPropertyGroup.com. ⁓ you know, we’re also on Instagram, Facebook, ⁓ and they can reach out to me directly. my phone number is eight six ⁓ four nine four three four seven two. That’s eight six ⁓ four nine four three four seven two.

Issa Hanna (20:02)
Alex, thank you so much for coming on the show. You’re truly a very knowledgeable ⁓ real estate investor, and I’m honored to have you on the show. If you guys enjoyed the show and my conversation with Alex and want to hear more just like this, make sure to like and subscribe. I talk to people every day that could give you different knowledge on every aspect of the real estate business. Alex, once again.

Thank you so much. Good luck in the future with Blue Key Property Group. Keep doing big things. I know you are.

Alex Ilchenko (20:32)
Thank you, thank you. Thanks for having me.