Transform Your Investments: Master the BRRRR Method for Maximum Returns

Stephen S. (00:04.305)
Welcome to the show where we interview the nation’s leading real estate entrepreneurs. It’s your host, Stephen Schmidt, and I am back again. If you’re joining us for the first time or for the second, third or hundredth time, welcome here. I’m here today with Eli Mongold. And today we’re going to be talking about how to win and succeed in real estate investing with the burn method, cash is collateral, and then some, some interesting things that he’s got going on within the commercial multifamily.

Space as well as what are some pitfalls people think about when they get the Midas touch I think they killed it in one method and you’re gonna hop to something a whole lot bigger in a different field So just remember at investor fuel we help real estate investors service providers and real estate entrepreneurs 2 to 5x their businesses to allow them to build the businesses They’ve always wanted to allow them to live the lives. They’ve always dreamed up that being said Eli my gold. Welcome to the show brother

Eli Mongold (00:59.758)
Hey there, Stephen, happy to be here. Thank you for having me on.

Stephen S. (01:02.161)
Super excited for our conversation today. Before we get into today’s topic and before we get started on that, can you just share a little bit about yourself and how you got here for our listeners?

Eli Mongold (01:14.562)
Yeah, of course, absolutely. I I had started my career in real estate investing at 19 years old. I bought my first flip at a tax auction that I was lucky enough that they forgot to put it in the paper. So that’s how I got it. I showed up, had five grand in my pocket, was able to grab it from there, and then just kind of started and soared. Went to school, trained in real estate finance, quickly became a quantitative analyst for a small investment trust based out of Cleveland.

moved over into more of the real estate brokering side and traveled all the way here to the investment mortgage broker in business.

Stephen S. (01:46.897)
That’s awesome, man. So give us a little bit of a background on your investing experience specifically. I you started at 19. Were you investing yourself personally while you were doing all of these other things in tandem? What did that look like?

Eli Mongold (02:02.636)
Yeah, correct. I, to this day, still invest. mean, just last year I did 17 flips and bought five more rentals. And I’ve significantly scaled it up since then, as of last year. And no, I mean, as I’ve done everything I’ve done, I’ve always tried to buy at least three to five properties a year via the BRRRR method. If people aren’t familiar with what that is, buy, rehab, rent, refinance, buy it cheap, fix it up, place a tenant, get another loan, get your money back, move on to the next one.

Stephen S. (02:30.075)
Right. Way to get the property, find a distressed property, get that property, rehab it, take your cash out of it while also then still having a cash flowing asset. Anything I said incorrectly there? You seem like you’re more of the expert in this space than I am. Okay, awesome. now what got you started and really excited about using Burr as your niche within investing?

Eli Mongold (02:45.312)
Yeah, no, that’s basically the blueprint.

Eli Mongold (02:57.422)
I think it was the fastest way to make yourself feel like a real investor because you are, if you do it properly, are able to effectively recycle the same capital over and over and over again. The money that I used to buy my first one came from a tax refund and I’ve just been able to kind of grow it and scale it from

Stephen S. (03:16.433)
Yeah, that makes sense. And so what attracted you to do in that and taking on some of that risk versus something like wholesaling, for example? Like, why would somebody want to get into that?

Eli Mongold (03:28.49)
Well, when I had gotten started, I was 19, 11 years ago, wholesaling wasn’t necessarily as popular then as it is now. And I had always had the thoughts, and the specific thing that drove me there is not really built in math or anything like that because I wasn’t as educated then, was when I sat down and I thought about who’s the rich guy? Like if you sit down at a dinner with someone and they tell you what avenue of real estate investing they take, who’s the guy in your brain is rich? It’s always the guy with the boatload of rounds.

Stephen S. (03:56.049)
Yeah, the guy that buys and holds in some capacity, right? And then it’s just a matter of what strategy are you gonna use? So with Burr, mean, you were doing that before it was popular, Like in terms of doing the method before the method was a method.

Eli Mongold (04:08.832)
Mm-hmm. Yes, correct. Yeah, I’d say…

Eli Mongold (04:14.048)
Yeah, correct. think Burr kind of got its name during like the COVID era, TikTok, know, like mass explosion of real estate investment, and real estate investment is a popular form. But yeah, no, prior to that, I had heard about it in some circles from lot of people. I come from a real estate background. My grandfather was a home builder. My grandmother was a realtor in 1980s real estate relationship right there. And so they were kind of able to guide me into a lot of what he was able to do because he did all of his own work. And so he kind of specialized in it even then before he knew what it was.

Stephen S. (04:44.347)
So is that where you got it from then? Was from that background?

Eli Mongold (04:48.078)
don’t say so, yeah. I had never had a mortgage before. My parents are career renters. They didn’t own their primary home, and so I wasn’t really familiar with the process as it sat. But he had explained, hey, you close on it in cash, you get the work done. Once it’s all said and done, you can go back. If I recall correctly, he was explaining to me the concept of a refinance. Didn’t even know you can get a mortgage outside of just a purchase at the ripe age of 19. And just kind of walked me through that entire thing and decided once I got my taxes, there ain’t nothing to it but to do it, went and graduated.

Stephen S. (05:17.513)
You bet. That’s awesome, man. So now tell me a little bit more about what you’ve got going on with like Cassius Collateral and then let’s get into the commercial multifamily space, what you see going on there.

Eli Mongold (05:28.716)
Yeah, of course, absolutely. The Cash’s collateral program is a unique burn method product that my funders have access to where it removes the seasoning requirements for the cash out refinance of the DSCR, which depending on the lending institution is three to six months. And then it also increases the loan to value on the cash out refinance from 75 % to 80%. And so a lot of people when they’re looking at these burn method deals, they can be really tight, real thin margin, you like you only maybe have like 10, 15 % cash out coming back to you.

it barely covers your expenses and that kind of throws the whole allure of BRRRR method out in the first place. If you, instead of paying your down payment in a difference of the loan amount, so like the bank’s only giving you this amount and you have to bring this much to cover the rest of it to give the money to the seller, instead you give the money to this funder in the form of just the down payment, not the closing costs, in the form of cash as a wire to them at the closing table so they can turn around and redeploy the capital immediately.

then they fund the 100 % of your transaction, the purchase and the rehab. And once you finish up the renovations, you get your tenant in there, you get your first month’s and your security deposit, know, $20,000 job in Northeast Ohio, that’ll take you a month and a half. We could immediately put that capital back in your pocket.

Stephen S. (06:46.129)
Wow, were you born smart or did you just learn all this?

Eli Mongold (06:51.278)
I would like to say a mixture of both, but honestly a lot of this was learned through making a lot of mistakes that cost money and cost time and heartache and everything like that.

Stephen S. (07:03.339)
sure yeah I’m just listening to you talk and I’m like dang man like this is there’s so there’s so many layers I don’t know which one to peel back first if you had to if you had to like kind of simplify things for for somebody you know let’s say that that you know is is not going to be as analytical you come off as the type that you’re going to read every single little piece of everything right not everybody’s like that

So if you had to simplify it, what do you think is the most important thing for somebody to know about what you just said?

Eli Mongold (07:34.67)
I would say that it makes it so that way you can scale up your rental portfolio with the BRRRR method faster. Generally people are on that six month cycle waiting on the refinance. With us, we can do it as quick as you’re ready for us to do it and we can give you more money back on the cash out.

Stephen S. (07:43.089)
Hmm.

Stephen S. (07:54.351)
Hmm, that’s huge. That’s huge. so, then why is it, are some of the mistakes that you see people like currently making that like aren’t doing this, for example?

Eli Mongold (08:08.878)
I would see the biggest mistakes a lot of people are making is in their initial underwriting of the deal. I see a lot of people bring to me their numbers and I assist them in reviewing it before I submit the file to make sure it’s a good deal for them. A lot of people, they’re not incorporating their interest payments into their total cost basis. They’re not incorporating the potential of the contracting going up. You never know what you’re getting into until you start taking walls down, so you better add.

at least 15 % as like a miscellaneous buffer to whatever the contractor gave you as their bid. Because on some of these Burr Method deals, your margins are tight. You could be at a 15, 20, hopefully 25 % return on your investment and then you still get the asset. But you can eat that up pretty quickly in some of these lower dollar, like $125,000 homes.

Stephen S. (08:59.953)
That’s interesting. Tell me more about that.

Eli Mongold (09:03.758)
So, if you have somebody who, they find a deal, hey, I’m gonna put $50,000 into it, I’m buying it for $50,000, it’s worth $120,000, well, when I, or it’s worth $150,000, when I turn around and refinance that at 75%, my loan amount’s 125, my total cost basis is 100, I just netted $20,000 and I get to keep the property for free. But then, oh man, my furnace went out. Oh no, we actually started looking more into the electrical, we gotta do,

not just the panel box, we have to do the service line and the meter too. And you know, the, my interest is at 10%. I didn’t even think to calculate those payments as they’re coming in. And that $20,000 net that they thought will quickly become $7,000, well, and then they’re agitated because they’re leaving money in the deal that they didn’t want to.

Stephen S. (09:50.595)
And for most people their cycle is so long that seven grand for six months worth of headache and work and whatever else is not worth the, that juice ain’t

Eli Mongold (09:58.606)
Correct.

No, no, especially if you’re bringing five grand to the table to close on the loan, for example, like you’re getting about $2,000 back to turn around and cycle into the next thing. So, yeah.

Stephen S. (10:15.077)
Right. So why do you see people missing that a lot? Is it just not having accurate numbers? How do you see them miscalculating to where then they end up in an shoot moment like that?

Eli Mongold (10:29.25)
would say it was that, Steve. They don’t have the accurate numbers that they’re looking at, and a lot of the times people don’t even know to consider that in the first place. I get with a lot of people who, they’re like, I watched this on YouTube, I read this on BiggerPockets, I downloaded this calculator that I found on Instagram. Now I have an expert. think it would be smart to either, if you have access to a coaching program, or us here at NEO, we pride ourselves in assisting people on.

underwriting their deals to the fullest extent with a private equity professional’s mind. I think that can really help them save a lot of heartache in the future because I love real estate investing and I think people just making simple mistakes like not knowing, it’s not even really a mistake if you really think about it, it’s just they don’t know what they don’t know and then they get turned off by it because it’s not like this promised land that they expected when they first read it on the subreddit.

Stephen S. (11:21.329)
Right. Yeah, exactly. Quite literally. So that’s hilarious. So, you know, because one of the things that we we talk about a lot, you know, like even with investor fuel is, you know, the hardest thing for us to get anybody to do is go from zero to one. Right.

Eli Mongold (11:23.479)
Hahaha… Yeah…

Ha

Stephen S. (11:43.491)
I think like what you’re talking about is in a way like somebody that’s new listening to you talk is going to think to themselves, I could never learn every single little piece of all of these things to avoid a mistake that’s going to cause me pain, heartache, etc. And that as humans, like we run towards pleasure, run away from pain, right? So it’s hard to get people to go from zero to one, one in that sense. So like, how do you even

Eli Mongold (12:04.014)
course.

Stephen S. (12:12.141)
Let’s say somebody’s wanting to get into it, but like for example, they’re gonna take your advice and like join a coaching program. How do you even select the right coaching program to know that the tools that are being provided are going to actually work?

Eli Mongold (12:24.59)
I would say it’s like getting a second opinion when you get a diagnosis from the doctor. When you get into real estate investing, like you said, people get really caught in analysis paralysis. There’s a lot of big numbers that get thrown around and they can get nervous. It’s all going to go kaput. But I would say checking on reviews, checking references, a lot of these people are doing their own personal research on bigger pockets. Really make sure you vet who it is you’re going to be utilizing as a coach.

And never stop learning, right? Like just because you hired, you know, Jim Jones, hypothetical name for an example, as a coach, like don’t just take what he says for granted. Go to the networking events. Hop on the Zooms, listen to podcasts like these and really try to grasp as much as possible. And eventually you’ll find that secret sauce that works for you.

Stephen S. (13:12.145)
How important do you think being in the right rooms is it to somebody’s success in learning how to do these deals and getting them done?

Eli Mongold (13:22.414)
It is the most important. I attribute maybe 1 % of what I know how to do to what I learned in a classroom. The rest of it truly is just bumping elbows and making friends, truly. It’s one of my biggest advisors when I was kind of learning to scale my business here. I met him by cold calling him on accident. I was making a cold call for a property that I wanted to buy. I accidentally hit nine instead of six when I made the call.

and he and I had a two hour conversation, had dinner, and I sold him and funded probably 35 different properties. I swear on my daughter.

Stephen S. (13:58.417)
Sorry.

How does that even happen? You hit a wrong number and you’re like, hey, Mr. Mark, I’m calling about news. Like, this isn’t Mark, but you sound interesting. Let’s talk for two. How does that even happen?

Eli Mongold (14:13.39)
Basically, he’s like I own a bunch of properties. I don’t think that I own that one. What’s the address one more time? He’s like we’re on my cell phone. I texted to him. He’s like yeah, I don’t I don’t own that he’s like I mean I sell properties I own a bunch of them I mean like if you if you’re trying to buy one of mine I’d love to sell it to you I guess but that one’s not mine at all and then it just kind of rolled and rolled and rolled and rolled he’s he’s in his 60s at the time when I called him I was 25 26 I think that he had a son my age or something like that so we kind of

clamored on there and yeah, now I probably talk to them once every other day. But it really is those kinds of things. You don’t know who you’re gonna meet when you walk into those networking events. And a lot of people, they’re like, oh, I don’t wanna put pants on, is it gonna be a waste of time, is this guy just gonna blabber on about nothing? Just go, I promise you there’s a benefit. If you get one thing and a free dinner, it’s a way better way to spend the evening.

Stephen S. (14:46.801)
kidding.

Stephen S. (15:06.417)
So one of the things too that I think a lot of people run into is like, especially when they’re getting started or even when they’re not like a real serious investor. say not real serious in the sense of like maybe they’re working a W-2 job and at the same time and it’s just like, hey, I’m gonna do one deal a year, right? Which, know, cool, awesome. know, it’s their long-term, their retirement plan or whatever.

Eli Mongold (15:17.784)
Mm-hmm.

Stephen S. (15:33.775)
But for like people that are like, going to make this my, my career, my passion or whatever. One of the things that, you know, we find is, like people have a hard time sometimes paying to be in the room. Right. Which I don’t know if, I don’t know if you’ve done this, but like, even with me, like I’ve paid, you know, tens of thousands of dollars for self-development education, learning outside of college, all of that. but what, what do you think is, can you find it in free rooms, accidental cold calls? Like, can you find it there?

Eli Mongold (15:43.822)
Mm-hmm.

Eli Mongold (15:51.469)
Of

Stephen S. (16:03.063)
Is that the norm or do you think there’s some importance to like actually paying to be in rooms with certain people? What do think there?

Eli Mongold (16:10.518)
Yeah, I think that there’s value to both. mean, there’s a million and one free networking events that wholesalers put on and lenders put on and title companies put on just to get you to be in the room, bump shoulders with them and listen to it. Exactly, yeah, there’s tons of them that are capable of going, but there are plenty of them as well that you can find that cost even $100 just to get into a Facebook group where people are constantly talking about things.

Stephen S. (16:21.446)
Right.

Stephen S. (16:25.357)
Legion. Yeah.

Eli Mongold (16:39.15)
I think that when you’re trying to pay for it, would say aim for paying for more of like an intimate training. Like, hey, let you get to know me about what I’m looking to do specifically and have someone who, like you had said, educated on the matter that has all these numbers flying around in their head kind of place you in the box that they think is smartest for you. And then you take that and you run.

Stephen S. (17:01.041)
versus like a one size fits all type, hey, here’s our program and our method and whoever you are, because realistically 10 % of people in a one size fits all are actually gonna do anything with it.

Eli Mongold (17:05.77)
Yeah… Yeah!

Eli Mongold (17:12.494)
No, they’re not and like the biggest the biggest time that my heart ever breaks for some of these people to come to me is when they tell me they paid for a section 8 investment course where it’s like yeah, I paid this 23 year old $20,000 to explain to me what cash flow means he gave me this calculator that is full of either fraudulent information or incorrect information Because I want to be at $500 a month net cash flow and then it then I have to be the guy who has to explain to them they’re like

Unfortunately, that’s not real. And all they’re doing is paying 20 grand to watch six different pre-recorded videos. Like, yeah, no, I would definitely look for something that’s a little bit more intimate with your coach because they’re gonna learn you, you’re gonna learn them, you’re gonna be able to bounce things off of each other way easier.

Stephen S. (17:56.079)
Yeah, love that man. So now what are some of the pitfalls you see? I know we spoke a little bit before the show, but kind of transitioning a little bit here into like commercial multifamily properties. You see a lot of people that, you know, during COVID times, they, you know, were successful with the bird method and now they’re thinking, well, let me go and do this with, you know, a hundred doors at a time versus, you know, a single family unit. Like tell me what you’re seeing going on in that space right now.

Eli Mongold (18:24.886)
Yeah, absolutely. The commercial multi-market, it sounds sexy, right? You want to go to the dinner and you want to say, I’m a commercial multifamily investor. I have all of these units and blah, blah, blah, blah, blah, blah, blah. But right now, I would say, and for the foreseeable future as well, commercial multifamily is not the sexy fun form of investment that it sits at. mean, just number one, the rates right now, like I can get DSCR rates 30 or fixed with a bank statement product at 7.25 % to 7.5%.

For a near full doc program, you’re seeing lenders, even the commercial, like actual community banks, not just the private funds that I work with, those rates are sitting at 8.75 to nine and a half. And some of the prices that these sellers are trying to sell it at because they way overpaid during COVID because the cost of money was nothing.

Like it doesn’t cash flow not even a little bit. And those people even further mess up the underwriting because they don’t understand that now you’re paying for every utility regardless. There is no getting away from it. You have to factor in for vacancy. You have to factor in for additional capital expenditure all the time. You’re turning your units every year regardless because per the US Census data in buildings that are over 20 units, the rate of people leaving after their one year lease is some 92%.

So you’re constantly paying to have those units painted and reflored and get the cat pee smell out and everything like that. And when you’re dealing with all of that and a 9 % interest rate and a price that barely makes a cash flow in the first place, you want more units, just go buy turnkey portfolio. Don’t try to just slam it into the commercial multifamily space because I don’t think that it’s really the smart buy right now.

Stephen S. (20:08.721)
And based on all of that, why do you think that, again, in a simplified format, for somebody that’s thinking that, what’s the real application of what they’re in to lose if they get into it too quick and really don’t have all their ducks in a row?

Eli Mongold (20:26.316)
being net negative every month, like it’s no longer an investment. It’s a money pit, know, like you’ll, I’ve corrected people’s underwriting when they wanted to buy, it was last week, they sent me their spreadsheet to review, it was a 45 unit apartment building in Massillon, Ohio that they wanted to buy. And just with putting in algorithms and changing some of the metrics that they were using,

just to match what the market was showing, not even what the actual financials of that building were bringing in, but just what the market averages. It took their net cash flow from $400 a door to negative $280 a door.

Stephen S. (21:04.005)
Wow. So did they get saved in that deal or what happened though?

Eli Mongold (21:08.824)
Thankfully they were working out like a due diligence period to run their numbers and everything. It’s called a letter of intent in commercial real estate. They were working through their LOI and they were able to kill the deal beforehand unless they can get a significant price reduction.

Stephen S. (21:25.669)
Now if you had to take all of the knowledge and experience that you’ve got currently, right, and you had to go back to the beginning when you started everything, what would you do different, what would you do the same?

Eli Mongold (21:38.126)
What I would do differently is I would

I would say I would be wary of partnerships because a lot of the times I’d get in with, you know, I’d have one house and because I wanted to try to save money, I’d get five of my friends to pull a little bit of cash and we’d all go into it. I promise you I’m not friends with any of those people anymore because it would always become a hairy headache. I would also recommend truly vetting your contractors. Like I would make sure that you understand what the market.

pricing is for work to get done, you know, like price per yard on concrete and price per sheet on drywall installed and stuff like that because you, even if the number makes sense to you, right, like, hey, I budgeted $20,000 for this job to make sense. my bid came in at $20,000, that’s absolutely perfect. But then you see that the contractor’s charging you $9,000 for 1,000 square feet worth of drywall, you’re like, whoa, like what are you doing to me here, So yeah, I would say truly,

understanding how to manage your contractors and not having too many cooks in the kitchen.

Stephen S. (22:46.705)
How does somebody figure out how to do that?

Eli Mongold (22:51.438)
I would say just shopping it around really like I would if you’re have a bid done I would have a bunch of people go look at your first one It’s gonna be the most annoying thing in the entire world But I would have like five different contractors that a couple of them you find personally and a couple of them that you find just organically like on Facebook or something like that have them all bring you the bid and then sit down and analyze it and Over time with experience you’ll kind of start to understand like yeah No, this makes sense for this square footage and this price for paint and stuff like that

Stephen S. (23:20.515)
I that makes sense because I know one of the things you mentioned on your survey before the show was finding consistency with contractors. Why do you think they’re so inconsistent?

Eli Mongold (23:31.214)
I think, I can only speak to the Northeast Ohio markets, but I think they start to become inconsistent because they themselves are not very good bookkeepers. And so a lot of the times, they’re constantly robbing Peter to pay Paul. They take a deposit from this job to buy materials for your job, but the reason why they’re taking a chunk of yours, because the last job never sent them their final payment, and then they have to pay their guys and get another job started. That guy hasn’t sent their deposit yet, so they’re working off of that one.

and then they go and they hit a snag on your job because they, for some whatever reason, didn’t get the funds back paying people or a back-do bill that came up, and then they’re coming to you and they’re asking you for an advance on a labor draw or anything like that, and you as the investor, you’re like, no, we had an agreement that I signed that you get this and I get that, and then they just take off and they get agitated, or they get sued by somebody else and their company goes down. You have no idea. I’ll give you an example of an inconsistent contractor for my last flip that I did in Norton, Ohio.

where contractor relationship was absolutely great. He gave me his bid, I paid him on time with his bid, I paid per our agreed upon draw schedules, but he never paid his subcontractors. He wasn’t screwing me, he was screwing them. And then by like the ninth or tenth day that I went out there and there was just like one guy there working and he was, I don’t even know what he was doing, he just sweeping the floors and patching drywalls basically, I’m like, what are we even doing here? He’s like, hey, can you?

pay, I won’t say the contractor’s name, can you pay the contractor? Like I haven’t been paid in six weeks and like I’m living off credit cards. I need to take out an installment loan to get Christmas for my kids and he’s saying you haven’t paid him in a month. I’m like, I pulled up my banking app on my phone, I was like, just sent him a wire yesterday, I’ve sent him total of 70 grand so far. And then I called the contractor to just let him know kindly, hey, like your guys are saying that they’re not.

getting paid, like I just want to let you, I’m looking out for him because nobody wants that reputation as a GC when your subs are saying they don’t pay you. Blocks my number, blocks me on Facebook, his wife sends me a text like if you’re so concerned with what my subs are doing then F off and blah blah blah blah blah. She blocks me right afterwards and then I have to go and source a new contractor to finish up the last 30 grand worth of work. Yeah. And that is, I have done probably over, over 100 projects in my lifetime between

Eli Mongold (25:48.302)
Probably over 200, honestly, if want to count what I’ve helped with clients and then helped on myself or worked with on myself. And that is 80 % of what you hear from these guys. They are excuse-making machines.

Stephen S. (26:02.417)
That’s crazy. Man, well, Eli, thanks so much for being here today. We appreciate you coming on, sharing your wisdom and all the things that you’ve gathered over the years. Now, if anyone wants to learn more about you or what you’re working on, where should they go for that?

Eli Mongold (26:16.95)
If they want to go to neo-innovative.com, neo-innovative.com, that’s my website. You can look at all of our available off-market properties. You can see the breakdown of our terms for our fix and flip and Burmeth and products as well as our 30-year fix. And you can request a quote on a deal you have going on right then and there, or they can call or text me directly at 330-754-8376.

Stephen S. (26:40.449)
Awesome. Well, what you don’t know is you just shared your cell phone on a show that has 17 million weekly listeners. So I’m just kidding. I’m just kidding. Got him. You’re like, wait a second. All right. Well, thanks for joining us for today’s episode. Y’all make sure to subscribe and learn more about InvestFuel by going to www.investfuel.com and we will see you on the next episode. Until next time.

Eli Mongold (26:48.974)
I was gonna say I’m happy for that. No, please. Yeah, so

Eli Mongold (27:08.268)
See ya.