Why Vertical Integration Helps Real Estate Investors Scale Faster

Morgan Ehrenzeller (00:00)
So after about two months of excuses, deadlines not being hit, this, that, this, that, I pulled the plug. I said, all right, we’re done. We’re done here. You want something done, right? You got to do the damn thing yourself. Pulled the plug, said you’re done. Your construction guys, they’re done. Get them out of there.

Michelle Tack (00:07)
Hahaha!

Mm-hmm. Mm-hmm.

Morgan Ehrenzeller (00:22)
So what I did was, and I had to pivot, all right, Morgan, you’re jumping in, you’re hopping in the seat, playing property manager until you find his replacement. And then I’m calling my construction guys to come travel and getting my guys on site because, you know, we’ve done it successfully before, if we can travel, you know, I already know what I like, how I like it done, awesome. And that was a very pivotal thing

Michelle Tack (00:22)
Mm-hmm.

Hi, Michelle Tack. I am the podcast leader today for Real Estate Pros and I’m psyched to be here. have a wonderful operator, Morgan Ehrenzeller. I hope I pronounced that correctly. Morgan, introduce yourself.

Morgan Ehrenzeller (02:34)
Hi, thank you for having me. My name’s Morgan Ehrenzeller. I am a 28 year old real estate operator, vertically integrated everything. And yeah, it took a little bit to what some would call a lot.

Michelle Tack (02:50)
Yeah, Morgan, thanks for being on the podcast. think, you know, we’re gonna have a great conversation today. You are based down in Florida, correct? Awesome. For those of you know, what I really liked about when we were prepping for this podcast is, you know, your 360 view of exactly what you’re focused in on in terms of buying property.

Morgan Ehrenzeller (03:01)
correct.

Michelle Tack (03:20)
⁓ You know, specifically distressed, etc. Commercial property, the ability that you have to serve that property by being, you know, have a construction business as well and then being able to get people into these properties for less than they would normally have to pay in a normal normal down payment. ⁓ And that’s a great strength. So with that, can you for those that may not be from your world, explain what you do?

and what market you serve please.

Morgan Ehrenzeller (03:51)
Yeah, absolutely. So we acquire commercial real estate, multifamilies are bread and butter. We also have some RV parks, mobile home parks, industrial flex space retail, but we buy properties low and no money down ⁓ and we buy them in turmoil. And then we come in, we fix them up with my construction crew and then we refinance them and pull the chips back off the table. Generally this is done in eight to 12 months.

⁓ We release it back up with our leasing and marketing team, vertically integrated. And then like I said, we refinance, generally get all the money back out within 12 months, pull that out tax free because debt is not a taxable income. I’m not a CPA, so consult with one prior. ⁓ And then we pay back all the investors their money. And then we, if there’s whatever the cherry is on top, we get to split that up nicely. And then we ride it out cashflow for the rest of our life.

Michelle Tack (04:49)
That’s awesome. Do you only ⁓ focus on Florida or geographically? Does it matter?

Morgan Ehrenzeller (04:54)
Sorry about that. Yeah, so we invest we’re currently in 13 different states. We’re open to ⁓ most markets ⁓ generally staying away from New York and California ⁓ But we do a lot around the Pittsburgh PA region West Virginia in the northwest, West Virginia and by the Ohio Valley by Morgantown ⁓ Another big area for us recently is East East, Texas

All the way from Beaumont up to Longview and then Dallas. ⁓ Some other stuff in the Midwest, the Little Rock, Arkansas, Northeast Arkansas we’re in. We have some smaller stuff in Southern Illinois, but primarily, you know, Sunbelt states ⁓ and South, I’d say South of PA, East of Mississippi. We like red states, very business friendly states. ⁓

Michelle Tack (06:10)
Mm-hmm.

Morgan Ehrenzeller (06:36)
But yeah, we’re open to it. ⁓ We’re open to other locations. It just comes down to time and money.

Michelle Tack (06:43)
Yeah, as always, what caught my attention as I mentioned before that I’d like to explore a little bit is how you got into the construction business. I mean, it’s rare that someone will have that 360 view where.

You can go out and find the properties. you service the properties by you know you’re able to have your own team there that report to you being able to do construction processes. How did that happen? It was one before the other or you know, can you talk about that a little bit?

Morgan Ehrenzeller (07:18)
Great question. ⁓ So growing up, my dad was a ⁓ carpenter. So he’s like third generation. So ever since I was young, he had the mindset, the mentality, know, kids aren’t going to sit inside and play video games. You’re actually going to learn something useful with your life. ⁓ So ever since I could walk, I had the pleasure of holding the flashlight, so to say. So.

Michelle Tack (07:26)
wow.

Morgan Ehrenzeller (07:47)
Ever since I could walk, you know, even changing oil probably at the age of like eight, nine, you know, even very blue collar, very,

Michelle Tack (07:56)
my gosh, that’s great!

Morgan Ehrenzeller (08:00)
very, very blue collar. you know, fast forward to what I do today, very thankful that have that education, that education background with what I do today. So in a nutshell, that’s how I got into construction a bit, no construction.

Michelle Tack (08:11)
Awesome.

Morgan Ehrenzeller (08:15)
is because I’ve been in it since I was a kid because of my father.

Michelle Tack (08:20)
That’s awesome. You know, in terms of how do you keep your business running smoothly, what’s been the key to keeping your business running smoothly when you think about it today?

Morgan Ehrenzeller (08:33)
This is a really good question. would say being proactive is a very big thing. Proactive and forecasting. If you’re proactive, you can stay on top of things versus if you’re reactive and you wait for something to happen, then you react. Generally bad things happen. I would say another big thing is always try to identify bottlenecks or constraints and remove those bottlenecks or constraints immediately. So wherever you can find bottlenecks or constraints,

whatever you can do to remove those constraints, you’ll slowly see afterwards the business starting to take off like wildfire. ⁓ If that makes sense. So would say, know, constraints, identifying constraints. And then one of the things that I like to do personally is, okay, you know, of the entire whole shebang, where is the weakest link in the chain, wherever that weakest link in the chain is, that’s generally where I like to go.

Michelle Tack (09:29)
Yep, that you know that that relates to and thank you for that. You know, should my next question, which is every operator I know has a moment when where things got real and real, not necessarily in a good way, although it. Turned out good. Maybe there’s a deal that went sideways or time that an operator had a pivot fast. It was able to learn through that process.

Right in their business. Can you talk about anything like that? That’s happened to you on a deal or personnel where you’re like this is going sideways on me and I have to change it and pivot quickly and you again had said just a moment ago, you know, to recognize the situation in and then act on it. So maybe you can talk to that a little bit.

Morgan Ehrenzeller (10:10)
Mm-hmm.

Great question again. Yes, I think every, if you’ve been in this business long enough or generally probably any business, things generally don’t always go to plan. I can think of so many times in my life where things have not went to plan, but it’s really how you react and how you pivot and the mentality going into it. I can think of one specifically, we bought a 47 unit.

Michelle Tack (10:35)
you

Morgan Ehrenzeller (10:51)
out of state and this one guy had a construction company, had the property management, was saying all the great things. This was a third party. This was earlier in my career. ⁓ And we ended up using him and his construction for a little bit. It was about a month to two months. And at the rate things were getting done for the amount of people that were there.

Michelle Tack (11:00)
Mm-hmm.

you

Morgan Ehrenzeller (11:17)
I knew something wasn’t right, something was off.

So after about two months of excuses, deadlines not being hit, this, that, this, that, I pulled the plug. I said, all right, we’re done. We’re done here. You want something done, right? You got to do the damn thing yourself. Pulled the plug, said you’re done. Your construction guys, they’re done. Get them out of there.

Michelle Tack (12:03)
Hahaha!

Mm-hmm. Mm-hmm.

Morgan Ehrenzeller (12:18)
So what I did was, and I had to pivot, all right, Morgan, you’re jumping in, you’re hopping in the seat, playing property manager until you find his replacement. And then I’m calling my construction guys to come travel and getting my guys on site because, you know, we’ve done it successfully before, if we can travel, you know, I already know what I like, how I like it done, awesome. And that was a very pivotal thing

Michelle Tack (12:19)
Mm-hmm.

Morgan Ehrenzeller (12:41)
because at that moment I realized…

I’m never going to allow someone else to have control of this again. I will never allow someone else to put me in this situation again. ⁓ So, you know, I flew out there, got my guys out there, we got the thing back on track. And at that point forward, Morgan is never hiring third party management again. He’s setting himself up in house and he’s virtually integrating everything. ⁓ And that was because of that deal. Fast forward now today.

Michelle Tack (12:50)
Yep.

Morgan Ehrenzeller (13:13)
Everything is vertically integrated. ⁓ Things run a lot smoother. It’s how we want it done. There’s not a million excuses. The whole shebang.

Michelle Tack (13:23)
Yep, understood. We talked earlier about, and I thought was fascinating, your network and how you have sort of this filter going on in your network that is combination of what you love to do, which is to help people. And then also it also is able to

⁓ create ⁓ potential prospects for you. So can you talk to a little bit about networking for a moment in terms of what you’re doing and how you do it that you think maybe some folks would be interested in hearing about it?

Morgan Ehrenzeller (13:57)
Yeah, so I say I have, you know, I’m a part of a lot of communities things. I know, you know, high net worth people. Some of my partners are family offices. I know I met a lot of incredible people throughout my life so far have done pretty amazing things. But one of the things that I personally started doing a year ago to create this re-evolving engine for my network ⁓ without having to go constantly chase it was ⁓

We created a real estate community. That’s a paid community. And it’s one where we teach, you know, how we find low, money down deals, how we operate them, how we do the leasing and marketing, how we do the construction, literally everything from A to Z. ⁓ We teach us and it’s, you know, community full of, of investors could be investors, operators, you know, construction guys, mortgage people, house flippers, whatever the case may be somewhat exposed to the business.

Michelle Tack (14:28)
Mm-hmm. .

Mm-hmm.

Mm-hmm.

Morgan Ehrenzeller (14:54)
one to learn how to really scale up. So what that does, it’s a never ending circle of new people coming in, could be investors, could be people where, you know, they found a, you know, a, there’s one guy, he didn’t have experience, but he found a a hundred unit deal in Dallas, Texas. No money down, the bank would just let us take over the debt for the right operator. He didn’t have the net worth,

he didn’t have the experience that the bank would feel comfortable letting him, but guess who did? I did.

So guess what? That deal gets passed to me. Morgan, do you want to take down this deal together? Okay. Yes. Do I or no, do I not or do, will you take a wholesale fee? Whatever the case may be, you know, it’s a, it’s a, it’s an engine that, hits a lot of aspects, you know, and in our business, you know, you need three things to get a deal done. You need money, you need the deal and you need someone that knows what they’re doing.

Michelle Tack (16:06)
Wow. Mm-hmm. Mm-hmm.

Morgan Ehrenzeller (16:32)
⁓ So that community solves two of the three challenges ⁓ and I know what I’m doing. So that’s what we created a year ago to continually grow the network, continually feed the pipeline of investor dollars ⁓ and put deal flow as well too.

Michelle Tack (16:32)
Yes. hmm.

Sure. This has been fabulous. ⁓ Morgan, before we depart, first of all, thank you very much. Will you

provide the best way folks can get in touch with you if they have interest in investing or looking or just learning. Do you mind doing that for us?

Morgan Ehrenzeller (17:10)
Yeah, absolutely. So you can reach out to me on social media. All my social media is Morgan Ehrenzeller So just like you see probably right here, my name M-O-R-G-A-N-E-H-R-E-N-Z-E-L-L-E-R. So Instagram, LinkedIn, Facebook, YouTube is just Morgan Ehrenzeller. Feel free to email me, [email protected] It’s just the last name and then capital C-A-P-I-T-A-L.com. And

If you want to learn more about our community, it’s called The Closers Table, ⁓ www.thecloserstable.com.

Michelle Tack (17:44)
Mm-hmm.

Morgan, thanks so much for today. You’ve been of great value. I’m sure to a number of people that are tuning in and to those that are tuning in. If you found value for the podcast, please continue to subscribe and to those that have not subscribed yet, take a take a dip in the pool and join us. Morgan again. Thank you so much.