Entrepreneur Intel

Wes: I am really excited for today's guest, uh, and a very experienced entrepreneur who is driving the real estate industry forward. He bought a company for 25, 000 and turned it into a 30 million business. Received numerous accolades, uh, including being one of the top 99 fastest growing companies on the Inc.

500 list. Currently chief executive officer at Great Lake Investments. Welcome Mike Kalis. Mike, thanks for coming on.

Mike Kalis: Well, Wes, it's awesome to get a chance to connect with who I think is one of the best marketing people, uh, that I know. So it's, it's really cool to have a chance to get to chat.

Wes: well, thanks man. I appreciate it. I was super excited to have you here. Um, but I, I have to start with this question. You've been an entrepreneur for over 15 years. What's the, what's one of the most important lessons you've learned over this journey? We got a lot to go into, but

Mike Kalis: Well, um, you know, at this point, um, my, my number one thing that I would tell, business owners out there that are starting is, put yourself first. Um, I think we get really driven with our, our cause. And, and what we're behind and how we're trying to change the world and how we're trying to make an impact.

And I can't tell you how many business owners I talked to that say, I put everything into the company. I put everything into my vision. And, maybe if they would have just set aside a little bit, for themselves, it would have been all right. I paid everybody on my team more than I made.

I invested in our office and I made it beautiful. We had customer service challenges. So I plowed money into that. But then if you leave yourself kind of out in the cold, thinking that there's going to be that payday down the road. It's possible that it never comes. So, uh, from my experience and everything that I've been through right now is, um, invest in, in cashflow, understand the difference between an investable asset and something that is a business that's a wonderful business, but maybe good for you to have a lifestyle off of, um, and put yourself first.

So that, that's, that's really my, my lesson of the moment, I suppose,

Wes: no, that's great. I mean, there's a lot of nuggets to unpack there. Uh, 000.

Mike Kalis: seller financing

Wes: Seller financed it.

Mike Kalis: Yeah, we had to pay this. So, uh, so to go back to that, um, you know, I was 20, 26. Um, you know, I, I'd had a job for three years at Pulte and, and I think this is a really good, uh, lesson if there's anyone out there that's thinking about starting a business. Um, just do it. Like you don't necessarily have to quit your job.

So we kind of created that within the business we were in. So I was working for a large builder. They couldn't sell any homes and, uh, you know, you'd make 100, 000 on a new home and somebody would have 100, 000 home to sell. So it's kind of like, you know, can we just sort of put the money together a little bit here?

Um, and so I started doing that and, and I just went to all the real estate investment meetings and stuff around Detroit. So I just kind of knew everybody. And, um. Somebody would come in with a 100, 000 home and the builder could pay 50, 000. And I would just have a list of investors I'd go through. And in 2008, when nobody could sell a home, I had it sold in like 20 minutes.

Um, so we just kind of started this. And, and, uh, at some point, one of the investors I had was like, you know, What are they paying you? And I was like, nothing, like, it's just really fun. Like, you know, and they're like, you've moved like 5 million worth of real estate in the last few months when nobody's able to sell anything.

Like, you know, maybe you have a business here. And so I was kind of able to like, sort of build up this thing and sort of do a proof of concept that was helping the company that I was in. And, and as I got out of that, that was by accident, but I've seen so many other people do that. Maybe, you know, maybe they start in the company.

Any company that you're in, there's going to be something where you're like, man, this could be better. Well, like how much better make it better, like do it. And, and one of two things will happen. Like either the company will have to pay you more money because you came up with a really good idea, um, or that good idea is so good that it could be spun off and be its own thing.

And now you've already got a proof of concept and you can just kind of move into it. So, so that was how it started. Um, so I partnered with one of my investors and then after about a year. Um, it was basically like just me running the business. So it was kind of like, Hey, there's a website. So like. Um, you know, we'll, we'll buy the website and we'll kind of take it.

And then, uh, from there we grew, you know, all around the country.

Wes: So this is back in, is this 06 or 08?

Mike Kalis: Yeah. I think right in the middle, probably, I

Wes: Well, what's, what's interesting to me. So at that same time, you're, you're doing this, you see this opportunity, you're working at Pulte selling homes. I'm on the other side of this thing, right? We don't know each other. I have a condo in Canton, Michigan that I think I bought at the time, again, I'm 25 or something and 145, 000 it's, it's worth probably 80, right?

Cause the 2008, 2009. So here I am sitting on this condo one day, my, my brother in law at the time, he's like, you got to listen to this radio ad. There's a company out there that will guarantee your rent on your condo, and you can go buy a new home. Because at the time, I was sitting there banging my head against the wall, and I'm like, How the hell do I get out of this condo?

Like, we're a young family about to have a baby, or had a baby, I can't quite remember. And I had like, I was running out of options and I didn't want to short sale the condo. A lot of people around me was letting places go and I'm like, I don't want to do that. I made a commitment, whatever. And, uh, I heard an advertisement for Marketplace Homes and I remember calling and actually getting this deal done and fast forward, it got me out of my condo and solve that problem and I bought a new construction home in Novi and that was like my, my Kickstarter to my life on a new construction home, which.

I had never thought new construction was even in the cards for me, which led into another new construction home, etc. But I just go back to that point where it's like, holy cow, like that was to me at the time I had a problem. You had this like crazy solution and I did it and it, and it worked amazingly, which created a huge opportunity.

Mike Kalis: well, first of all, what you're saying was like the whole reason I was doing it, right? So I think a lot of entrepreneurs start start businesses where that that's it. Is you're just like, there's really a problem. And like. Um, you know, we had kind of that starfish analogy. There's that story of the million starfish that are dying on the beach and the boy picks up one and saves it.

And they say, what's the point? You're never going to save all of them. And he's like, I just saved that one. And, and, uh, that was kind of what we did with the foreclosure crisis. Cause people be like, what's the point? Like everyone's going to, and I'm like, well, Hey, if we can help one person not do that, then that's better.

And if we can help a hundred people not do that, then that's better. This kind of goes back to my original point though, is we were so driven. Like you said, you, you heard, uh, You know, marketing, I mean, the amount of money we reported into marketing, um, and we were just taking everything and just like dumping it.

Cause we felt like we had to shout this to everybody. So, um, you know, we were on like every radio station and every TV station and, you know, this was back when like people listened to radio and TV, so it actually kind of made sense. Um, you know, and later kind of transitioning into a lot of the, the online stuff.

Um, and. And, uh, ultimately, uh, there were some good lessons learned from rapidly growing, uh, a marketing funnel, uh, where we, man, I could share some crazy stories of things that we lost a lot of money on, uh, I'll give you one. So we, we opened up, uh, in, in the Inland Empire in California. And we were opening so many new markets around the United States and I was just flying all of them.

And I'm like, we weren't able to get out to this one. So I'm like, ah, you know, just kick on the marketing. Like, you know, I got some people in the ground where, and, uh, so they bought ads across Los Angeles, which isn't even, it's like three hours outside of the Empire. And we had somebody in there, like you're running ads for like a neighborhood that is like, not even like, like the, in the vicinity, you know, it'd be like running ads in Chicago for homes in Detroit, you know, it's like, This is the silliest thing.

And, and so I think we spent 70, 000 on, on radio in Los Angeles talking about something that applied to absolutely nobody there before we figured out how to kill it. And that's one of the crazy parts of being on something that's hyper growth. And, you know, there's, there's things that are like medium growth and then there's hyper growth.

Um, and, and I think the thing that was unique about our journey is we had no outside money. So this was like my checking account, you know, taking money and just being like, eh, this will probably work. Um, and, and making sure that it would. And, and why did we do that? And I think that this is, this comes to, if you talk to an entrepreneur, you know, Hey, are you open to marketing or are you not the ones that are really open, genuinely believe that they need the world to hear what they're doing.

Uh, they, they just believe it. It's just kind of like, I know what I'm doing is so good. Kind of what you said. And we tell people and they go, this is too good to be true. And you're like, If that's the biggest objection that I have from everybody, it's like what we're offering is too good to be true. We will work to like solve that objection, but if everyone just hears it, I swear.

You know, we'll be able to change, uh, real estate. We'll be able to change the landscape. Uh, you know, and then if I look back at it, you know, what if I tapered that a little bit? Uh, probably.

Wes: Yeah. Like what, what, what fueled that from you? I mean, were your, did you grow up in an entrepreneurial family of just like building massive companies or, you know, if I, if I look at your path of, you know, buy a business for 25, 000, but then you just like scale this thing massively, right? Versus some people, like you mentioned, buy a business, just kind of grow it to a lifestyle, but you went the other way.

You're like, you're flying here. You got boots on the ground. You're nationwide. You're just grow, grow, grow, pumping money back into this beast. Why that path?

Mike Kalis: I don't think that, um, I felt fear. Um, and maybe that comes from, um, probably my mom, you know, we all, um. I'll give you a good example of what I get from her was I remember going to her and we were one of the first people to invent what we called cloud real estate. It was the idea that we could sell homes over the phone, anywhere in the country.

And then I, I went to my mom and I'm like, dude, I'm going to change this to like, you know, our company slogan is going to be, we move the world. Like forget this man. Like why just the United States we're going global baby. And her first like straight faced response to me was like, have you thought about the universe, Mike, you know, there's a whole entire.

You know, realm that you're not even like thinking about right now, you know? And so, so I think when you have somebody kind of behind you, that's, that's sort of like, you know, that's a great idea, but, but what if we made it a little bigger, you know, and, and, and I was just raised with that. So I kind of just had that around me.

Um, my dad was a stockbroker. Um, so I had that business side, you know, I 11, I can tell you the price of Ford. Like that's just what I grew up around, you know, um, and, and, uh, curiously, um, through different reasons, it gave me an incredibly cynical view of stocks. I refuse to buy them. Uh,

Wes: Still today. You won't buy them today?

Mike Kalis: have nothing, I have nothing in the stock market.

Everything's private investments. I refuse. Um, and, and I, so my dad's a wonderful financial advisor. He still does it. He's in his seventies. It's like, it's like, you know, kind of pastime. He loves stocks and the stock market and this and that. So, uh, we'll, we'll debate it and talk about it. But for me, I saw way too much, um, in corporate America.

They do not care. about the little investor guy that's in the Midwest who put, you know, his 100, 000 into their 200 billion company. They just don't care. And my biggest experience came when I was 19 years old and I worked the entire summer at the, uh, rock shop over there in Plymouth. Uh, which is still there.

I, so we work 60 hours a week. I was making 10 bucks an hour. You get overtime. I saved 15, 000. I put it all into WorldCom. And within 90 days, it was worth 300 bucks. And that was supposed to be everything for college. So I went from being like, Hey, I've got enough money here. My buddies went and bought cars, had fun, and I was left with nothing.

Um, and, and there was that experience. Like if you've ever been really broke, um, you maybe don't have a drive to be rich. You just have a drive to not be broke. Um, because like for people that have really been there and like really know what it's like to think, I'm not sure how I'm going to be able to like.

Eat.

Wes: Yeah.

Mike Kalis: That feels bad. Um, that, that is a bad, bad feeling and you want to like get out of that place. So I think that experience turned me off to, um, stocks. It turned me off to, um, big companies and it turned me on to saying like, how do you just control your own. your own destiny. And more recently with our new endeavors with Great Lakes Investments is how do you help people invest in their own community with people with their own values and build hard assets that are actually sellable.

So for the guy that's got the cool lawn, landscaping business with a lawnmower, that's a wonderful cash business. He might make great money off of it. Tough one to sell, you know, it's a tough one to sell. And that's the truth for like 90 percent of entrepreneurs out there is you don't have Facebook, you don't have quit Twitter.

I grew up around that West, you know, Zuckerberg's the same age as us.

Wes: You're right. I

Mike Kalis: Facebook started when I was 18 years old, you know, when, when I was at Michigan state and, and, you know, we all kind of jumped on and we're like, Hey, this is cool. And it felt like, Hey, your company doesn't have to make any money. It just has to grow rapidly and money then, and investors will come from somewhere. Well, my experience was the opposite. Um, people said, you're in the Midwest. You're not in California. We don't really care about you. And that was sort of what I heard over and over and over. And it got irritating enough that we kind of said like, I'm just done. Like, I'm really not going to talk to people that are on the coast.

Um, we're going to work with people that are in our community, that understand what we're doing, that see the value of what's happening here. And, um, and, and that's kind of my new drive. So I'm sorry if I went off on a

Wes: No, that's great. I mean, that's an amazing experience, Cher. So is that what led, so you go through the Worldcom ordeal at 19, go to Michigan State, I'm assuming for business or something. And then you get into real estate. I mean, did you go into real estate because of the experience you had on the stock side?

Or did you already, did you always have like a passion for real estate or that hard asset?

Mike Kalis: So two things happened there. Uh, so one was, um, I, I was, I got a job at a pizza place. Um, but I figured out how to like make them a bunch of money. So I got, uh, uh, somebody to sponsor our pizza boxes at Colorado. So I ended up, they, they made a bunch of money. They gave me like 500 bucks and I was like, yes, like I'm finally like, uh, out of the hole.

Um, that led to a speaking thing. I, my senior year, I went around, I spoke to over a hundred, um, high schools, like inner city schools, different schools. I'd give presentations to like 600 kids, um, about going to college. And it was funny because I was showing up in my rusted out Jeep, you know, like I would smell like oil.

And I'd stand up and I'd give these big presentations and, and I loved it. And that basically led to me getting this, this job at, um, at, at. Honestly, Wes, they offered a hundred grand to a 22 year old kid and I was just, I had been broke and I was like, I will jump through a wall. Like, what do you want me to do?

And, uh, I, I remember my first check was three grand. And I was like, mom, I We're going to Applebee's. Like everything's going to be okay. Like we're out of this, you know, no more. So I think a lot of it, um, honestly was twofold. It was, um, I, I needed to make some money. I didn't want to be poor. And that was a big driver.

And then the second part was I really loved real estate. Like I, I just, I thought it was a really fun business and I enjoyed being in it. So,

Wes: So the opportunity, like how does this opportunity present itself where you are in Pulte doing your thing, and then all of a sudden there's this opportunity or deal comes across your path where you're like, I'm leaving this secure a hundred thousand dollar plus Pulte job to, I'm going to go down this path.

Mike Kalis: yeah. So, um. And I mean, I remember our, our sales, we had like 40, 50 people on our sales team. It was like the lowest guy made a hundred. The top guy was making a half a million. I mean, it was, it was fun. Right. Like it was a cool place. The thing that ultimately led me to that was I was just constantly the guy in the back of the room that was like, I have an idea, you know, and it sort of became like, does anyone have any questions?

Not Mike, you know, and, and, and I had, uh, you know, they match you with like an older person there. That's, you know, kind of been down the path. And I just remember I had my little thing and he goes, Mike, like. Probably you need to run your own business because none of these things are going to happen here.

Like, like these might be all really good ideas that you're like putting out there. And, and, uh, but, but you may be just kind of need to do. And so it was like very consensus driven in my life that people were like, this guy's a huge pain in the rear, um, in an organization where it's like, Hey, just kind of follow the line.

I was the guy that was like, what if we did this? And what if we did that? And how about we change this? And. Um, you know, in a, in a fortune 500 company, uh, that doesn't really get you the bonus.

Wes: Yeah. I kind of hear right in the entrepreneurial, uh, village, right. It's, uh, uh, very unemployable or entrepreneurs are very hard to employ. They're, they're unemployable to a certain degree.

Mike Kalis: Uh, yeah, there, there's probably a certain level of truth to that. And I think it's just matching people with their giftings. Like, you know, my gifting was going like, why are we doing this? Why are we doing this? Why are we doing this? You know, and if you're in the place where you're getting rewarded for that, which is when you run a company and you can self deprecate it and give it to the whole team and let them take.

You know, credit and run with it. It works very well. But if you're in a company, I had seven bosses, seven, um, and you got to make them all happy. That kind of approaches stuff.

Wes: So talk about, so you, you buy marketplace homes, talk about the speed of growth, whether it's revenue people. I mean, you did this in a very short amount of time, and there's a lot of crazy things I would imagine throughout this process, but I think about revenue. People, you talk about plowing in capital back into the business on your checking, you know, not raising outside money to do that.

Like, where do you start? Like, how do you, you know, how, how do you, how do you manage that?

Mike Kalis: Yeah. So first year, um, you know, it was just me. So I had my car and, and that was before we sort of had the remote stuff. So I put a hundred thousand miles on my car the first year, you know, just driving. And I was on Craigslist, like. There was a home swap tab. People would be like, Hey, would you buy my home in East Point?

And I'll trade you for your home in Novi. And it's like, no, one's going to do this isn't happening. Um, but, but I would reach out and be like, Hey, I might be open. You know, I've got a thing here and maybe we can do that. And then I'd go and meet them and, you know, see if we could put something together. Um, eventually I had an assistant and then another one, it got to where I had like four or five people in my living room, like we had phone cords like stretched over TVs and stuff and it was like, okay, we got to get an office.

So, you know, finally grew into an office, but, um, ultimately it was just about. How did we get the message about what we're doing out? Um, and I had to kind of learn the hard way, how to grow, grow teams, how to figure that out. Um, you know, and, and we felt we had an opportunity because the market was only giving us that for a certain period of time.

And that, that was part of why we had our foot on it. And part of it was just that we really felt that we were doing something good. Um, and, and people needed to hear about it. So yeah, there, there was a year, you know, we went, it was like zero to five people and then like five to 30. And then we had a year that we went 30 to a hundred, um, and like growing your overhead while you're growing your marketing budget while you're trying to keep revenue, um, basically means that you're left with nothing, right?

So, you know, I mean, people go, you know, how do you, how do you hit those kinds of revenues and not make money? And you go, wow. Allow me to show you. Um, and, and that's why maybe when you asked at the beginning, you know, what, what's a good lesson. As I look back at that, we had an incredible model and a fabulous business.

And I was just so driven, uh, to help the people on our team, to grow our culture, to build cool stuff, um, that, that we really didn't set aside money. And, and, uh, my propensity to take risks, um, kind of outweighs the fear probably too much. Um, so sometimes it's good to have, you know, something that would taper that a little bit.

Um, you know, and. I can certainly talk about things there. Um, you

Wes: Did you bring in like, you know, what, who, who was there along for the ride? I mean, did you bring in a number two, like a COO? Did you bring in strategic advisors or just, you know, real estate tycoons or

Mike Kalis: all the above, you know, the, the absolute best thing, uh, well in 07 and 08, you know, we were hiring like college grads with tons of experience for like 10 bucks an hour. And then after three months, we're like, Oh my gosh, I got to pay this guy like a hundred grand somehow. Right. Um, so, I mean, like we just had a lot of those sorts of stories because there was not a lot of employment and we were hiring.

And so, um, we got great people. at relatively inexpensive prices and then very quickly figured out how to pay them. And, and that's a dynamic that doesn't exist right now. Right now you sort of have to pay it up. You kind of like kind of pay the premium just to get anybody. Um, so that dynamic was unique and special to that time.

Um, I did different things with bringing in different, you know, CFOs and people that I thought were strategic, but every single time the absolute best people were the people that kind of started and sort of like. We worked them up. I had probably 25 or 30 people that started in our call center, answering phone calls and then, you know, began running a department and then oversaw something else.

And it was always those people that, um, kind of had the passion, kind of understood, and they like holistically had learned the whole entire thing from being in it, and they were always the best leaders. Um, you know, so we promoted people up by asking everyone, you know, you'd just be like, well, who should run this thing?

We're going to start. And it was amazing how everyone would always go, Oh, that kind of sounds like so and so and you could, you could ask people in different rooms and they'd all be like, Oh, that that's this person. Um, you know, and in a growing company, that's so cool because you're able to kind of pull people and promote them and give them different things and sort of realign their, their, um, passions.

And that's probably one of the most fun parts, um, about it. Yeah, we, we had an advisory board. Uh, so we brought in people like that and that, that was helpful. Um, you know, but, uh. The best thing, honestly, was just bringing people in and organically training them and promoting them and doing it that way.

Wes: so you grew it to a 30 million company, which is, I mean, to be on the Inc 5, 000 top 99, like to be number 99, that's amazing. So how fast are you running the whole time you're at this company? I mean, it just sounds like you're just 24 seven. Like, did you ever have an off switch or were you just go, go, go, go, go?

Mike Kalis: No, it never stopped. We, we were, um, I remember actually that was one of the first things I had an advisory board and they were like, well, let's see your calendar. And they were like, you're, you're booking your days on the 15 minute. And I was like, yeah. So, so like I had an assistant where it was like, you know, at 8, at 815, at 830, you know, because I mean, that's just.

Like it just didn't end. And then the weekends were just my day to catch up on all the stuff that I didn't get. And then I was basically late to every single meeting and, you know, it was like comical. It was like, you know, Mike's supposed to be here at nine, 15, um, you know, and it just never worked. And I was trying to change.

So, I mean, it was just running like crazy. And, um, we did end up with a very good executive team, you know, like, you know, in different phases, it was different people, but good people running sales, good people, uh, running marketing, all that kind of stuff. Um, but even so, um, there's so many things that when you're the guy running it, um, it just, it's just, you're like, you gotta figure out, you know, there's no one else to do it.

And so you're, you're the one that's stepping in and, um, you know, handling the stuff that falls way outside the bounds of normal. And uh, yeah, so I'd say it's pretty crazy for at least the first six or seven years. Um, and that's a long time to be crazy.

Wes: so you grew it to 30 million. Are you still affiliated with marketplace homes or no, or no? What year, what year did you leave

Mike Kalis: Uh, so that would have been three years ago.

Wes: three years ago? Cause I look at this, I look at this path of, you know, you, you, you fall in love with real estate, you buy the, you buy this company, you turn it into the behemoth it is.

But then at some point now you have a hundred people like now that's the business, like where, where did you focus your attention or to that? You know, you have the real estate side, you have the people side, you have leadership. I mean, all of a sudden, I think on this entrepreneurial journey, people have an idea.

You know, I always say like, they're the ones swinging the hammer and then you have to start managing and growing and scaling. And now you like, don't swing a hammer. Um, I mean, there's a lot of analogies, but as an entrepreneur, you have to evolve. Right. But you, you scale that company so fast.

Mike Kalis: Yeah. For us, it wasn't that, um, it was that the market got good. So, so what happened was in about 2012, 2013, we had ramped up. We hired all these people. We were pouring money in. And, uh, like all of a sudden builders had laid off everyone, right? Like the, the building industry had basically been eliminated.

And all of a sudden they started selling a bunch of stuff again. And this really happened in about 2012, about 10 years ago. And they didn't have staffing and they didn't have people and they couldn't do it. So we started getting calls from all of our clients, basically saying, we don't want to sell homes anymore.

Like we're, we're good. We're booked for the next 10 months. So just stop. And like, you know. You're a marketing person. Like if, if you're marketing some product and they're like, stop selling the product, it's like, but this is what I do. Like, what do you mean? And certainly the builders were like, well, we're not going to pay you these big fees because we don't even want you to sell anything.

Like, so, so we kind of had this period where we're like, Oh man. So we basically had to take our fees in half. We had to half our fees in the same year that we had grown. Like some absurd amount. Um, and it did actually fuel more business. Like, and in some cases it was just a function of keeping our business.

Um, so that was, that was one thing that happened. And then the second thing that happened was we started getting competition from, uh, funds that were funded from California inappropriately, in my particular opinion. Uh, one of them being Opendoor. Uh, so Opendoor became one of our biggest competitors. Uh, for people that don't know, um, Opendoor was about five years after us on the, I buying a kind of thing.

And basically we were the first people that were doing it. Um, they went out and they raised an absurd amount of money, like 10 billion. Um, basically going and undercutting, um, pricing or overcutting pricing. So we would come in and we would buy it what I thought was a very fair price. They would overpay for houses and bulk in multiple markets, um, to a point that it became ridiculous.

Now, I turned out to be correct. Uh, I sat in a conference with the guy that was running the company and he was like, we're really helping people. And I was like, you're screwing every investor in your company to his face. And like the whole room was just like, whoosh. And, and I was like, I have literally watched you buy houses and lose 50, 000 on home after home after home.

And you keep doing it. And then you go to your shareholders and you tell them you're getting volume. Well, that is stupid volume. Right. And this is one of those things where you can be right. But lose. So while we were getting this pressure from everybody and our builders are like, well, why don't we just go with them?

They pay a lot more for everything. And I had to be like, probably should, like, uh, I just don't think they're going to last and they didn't their, their stock fell 95 percent they screwed all their investors, which just further goes back to like my whole thing about watching corporate America do this to people, but you know, Hey.

Uh, you know, all of the big funds in Silicon Valley were able to cash out when it went public. And then, you know, it went down and it crushed every little mom and pop and person that invested in that company. And in the meantime, it really harmed our company. Um, that, that wasn't a fact that kind of led to some of the different challenges and things that, that we ended up having at the end, which, you know, I don't mind talking about, but.

Wes: How did you concoct that idea? Like, I think it's brilliant. Like, was that an idea that was already budding a little bit, or the idea of getting involved with builders and going through that channel, I think as an entrepreneur, I often think about. When you need to educate somebody on a, on a new idea or new widget versus sort of piggybacking on a widget or idea, making it a little bit better, what was that for you?

Like, was that brand new for, like, I could see you trying to pitch a builder and he's like, Mike, what are you talking about? Like, do your thing. We do our thing. These worlds don't collide.

Mike Kalis: Well, you know, everybody that we hired at Work4Build. So, so it's like we were in the industry. Um, it had come from being at one of the biggest builders. And so it's sort of, I think your, your point about like, are you better just being like, Hey, I've got a crazy wild widget or am I somebody that's kind of like adding on, um, when I was young, I thought it was the crazy wild widget idea, but, but truly like incremental gains are.

Really where you make a lot of, a lot of money, you know? I mean, I think that's, that's where it's at. Um, so yeah, we, we, uh, one of my favorite marketing campaigns you might appreciate is I was like, Hey, each builder's worth like a million dollars, right? Like we get a great client, you know, it could be a million dollar clients.

So we can spend a lot like marketing to these people. So I went and I bought these giant bulldozers. Like kid bulldozers. Right. And I put them in a giant box, wrapped it and like mailed it to them, you know, and it was like a hundred dollars for each one, but I was like, Hey, if any of these, and then it just said, bulldoze the competition, you know, with our company on it.

And I had a lady call, um, it was the police saying that they thought they'd received a bomb from our company because they couldn't understand this is like giant box from an, but I was like, they have to, you have to open it, right? Like, like, if you get a box that's delivered to your office and it's like three feet.

Big, I mean, you got to open it. And then at least, you know, it's got our stuff. And, and alternatively, we did pick up a couple of builders. And the reason we did was they were like, this is just weird enough that if like, this is what you're going to kind of like bring to our team, then we're, we're in. And we were like, cool, then these are probably the right people for us.

Uh, to be doing cool marketing too. So, yeah, I mean, we had builders that were like, absolutely not, like, it doesn't make any sense. And then we had other folks that were like, um, yeah, this makes a lot of sense. Um, ultimately, uh, for us, and I think that this is true for, uh, we, we had, we won with D. R. Horton, um, they're, they're the nation's largest builder.

We spent an entire year with their purchasing team, like getting authorized to work with their, their whole company. And then, um, once we did, um, you know, we, we earned it like we were able to work in one division. Um, and then that guy moved up and, you know, they spread us all over. So, you know, I, I think that happens to a lot of companies.

You end up with one client, they're able to give you an absurd amount of revenue in comparison to, you know, the other a hundred small clients that you have.

Wes: Yep. So you leave and what drove you to leave? Is this 2019, 2020?

Mike Kalis: Oh, I was forced out. So, um, what, what happened was right around 20, uh, late, you know, 2017, um, we took outside capital. Um, and, and I think it should be clear, like, I didn't take outside capital. Again, this is one of those lessons where I was still on the, like, we have a mission. We're going to grow this. Like, you know, surely outside investors just want to like grow this with me.

Uh, so, so they invested some capital. I put my equity up as collateral. Um, and then they sat on money for a really long time. We were buying and selling homes. And we had term sheets come up on homes that we were going to flip and basically said, Whoa, look, now there's, there's no capital. So we're calling all your equity due.

And I lost 100 percent of everything that I built over 12 years.

Wes: What does the next day of that look like for you? I mean, you're, you built

Mike Kalis: I, uh,

Wes: massive company, massive amount of people, and now all of a sudden it's just, it's just done.

Mike Kalis: I'll never forget. Um, we had a 24, 000 square foot office that I had built and it was, uh, you know, bright fluorescent colors and it had a beanbag pit and it had all this stuff and, um, we'd invested a half a million dollars, um, in. I mean, it was the least awful, but we made like the interior just amazing.

And I wanted it to be this incredible, like creative place. And, um, when it was all going down. Um, it was just piles of paperwork, like, like just heaps of paper everywhere. It was just completely trashed. And like people had taken computers and chairs were flipped upside down. And I mean, it looked like a hurricane went through.

And I remember, um, my mom came and we sat there and she was just helping me move my desk and we just started crying and just thinking about it, uh, takes me back to that. Um, on how just, I can't believe, um, after 12 years and everything that you put in here. I can't believe that it's over. And, um, it was sad.

It was really, really sad. Um, but like anyone that's got four kids, I think we can really done that, figure it out, right? I mean, you got to get up, you got to go and do the next thing. Um, and I was incredibly blessed to be able to do that. Um, but, um. It's really sad. And, and, uh, you know, they say like 90 percent of businesses fail or whatever.

Um, but when you're an entrepreneur, you're hopelessly optimistic and that number just means nothing to you. You know, like you're just like, well, yeah, that's the 90 percent that are dumb. Like I'm super smart. So like, we'd be able to make this work and, and you have no idea. The thing that I took away from that was we had a core value that said we wanted to create a story worth telling.

Um. And nobody can take my story. They can take my money. They can take the company. They can take the employees. Um, they can take absolutely everything. Um, but they can't take my story. And so that's where I'm grateful, Wes, for even letting, letting me tell it. Um, because it's something that I lived, that I created.

I know what I put into it. Uh, there were a lot of great people that contributed to help build everything that we built. Um, but ultimately. Uh, it was a dust to dust kind of story. And, and that was what I thought. I thought, you know, I, I started with nothing. Um, if I ended up with nothing, well, I didn't really lose.

Wes: No, that's, um, I, I really appreciate the share. I mean, in, in reflecting back now, you've had three years, right. To digest this, you know, you're, you're now CEO at Great Lakes Investments. You know, did you take a period of time to sort of just kind of figure things out or was it like, you know, the next day you're just like, it's, it's go time.

Mike Kalis: So, so, uh, I, I, uh, put together an idea with, uh, a client. It was one of the biggest builders in Michigan, and it was on how we could do build to rent. And we created a company, um, called it Copper Bay. Um, and, um, they assisted and we worked together. I helped lead it, um, as a partnership. I was a minority.

Owner, shareholder, you know, um, and we were able to build, um, an incredible amount of home homes in a really short period of time. Uh, that was very scary because that was right when COVID hit. So this was all, uh, like this happened. And then one month later COVID hit and, uh, they actually banned home building.

Right. So I'm like, Oh, uh, this is going to be a little tricky. And I earnestly thought I was like, Oh, like, you know, here we go again. Right. Um, and. And actually home prices, uh, escalated, uh, tremendously. And, uh, within a year and a half, we were able to sell 283 homes, uh, for, uh, almost 84 million, um, which was a fully leased, uh, package of homes.

And I thought, uh, to, to your point about being people that are, although I was kind of like the CEO, like it wasn't. This isn't my thing, right? Like these guys all started it. They're got the whole building thing down. Um, and that was a, an appropriate time for me to be able to exit, um, you know, with a little bit of capital, um, hopefully some goodwill, uh, still, still a partner on, um, some of the projects and things that we created.

And, um, just said, you know, this, this is an incredible model and we're just going to kind of keep doing this with our family and friends. And that, and that's what we've done ever since is, um. We do build to rent. Um, you know, our friends and family kind of invest alongside of us. And they're hard assets.

It's housing. It's easily understandable. I've got some very strong rules that we have to follow to hit them, um, which are super easy. Uh, we have to buy below replacement. So if we can't get land below replacement, we have to have an eight cap and we have to have 20 percent embedded equity from day one.

Right. So if we, if we hit those things, um, then we are rocking and we'll move forward, uh, with deals, um, which ended up being, you know. Really conservative, but, but good investable deals. And what I learned was that it's, it's much easier for investors to be able to invest in a pool of real estate. So I had two things happen.

I had my brokerage that in the end, didn't make the guy that originally owned it money, didn't make me money. God bless the people that are there now. Um, Whereas I saw what a portfolio of real estate could do. It could appreciate, it could easily be liquidated and sold. And everybody that was behind it could pretty easily agree upon values and what was there.

And I'm like, this is just a better, more investable model. So for me, it's like, I will never take outside capital for our building company. or for our real estate company. Those are just things I do for personal cashflow for my family. But we do take capital on outside assets that are incredibly easy to understand.

Uh, you know, you just know if there's a house there, it's like it's worth, you know, 300 or 305, but it's somewhere in there. And if we built it for 220, there's a nice chunk of equity there.

Wes: So I've got to ask, I mean, we have similar stories in the sense of, you know, I, I left the company, I started a couple of years ago. Um, yeah, I have questions every now and again, where, where they're like, would you do it differently? Or like, do you regret anything or this, that, and the other? And I'm kind of like, I think for a moment I did, right.

You kind of relive this, like this was my life. And I didn't really realize like how much of me was tied up in that business. But as I look to the future. Or like, as you look to the future of Great Lake Investments, is it just take all your experience and then apply what you really want here and you can kind of put that past behind you?

Because I look at it personally as like, those are sort of all building blocks to the next thing. And like, I'm not going to, I personally don't try to dwell back and look back and what could have been. It's like, no, it is. You just kind of make adjustments as an entrepreneur does and just kind of move forward with it, with the new thing.

Mike Kalis: I think you have to do that. Um, there's some things that retrospectively I can look back at and go, well, that was, I'll give you a big. Foolish one. I lost a million dollars on an app West. And I feel like you can relate to this cause you've been, so, uh, at a time when the market was shifting, right? So like our builders said, Hey, uh, we're going to lower our fees.

I said, you know what I'm going to do? I'm going to become a technology company. So our revenues were declining and I went out and I hired seven full time coders, including like a, a chief, you know, technology officer. So like a CTO. So just throw more overhead onto the mix. Right. And I had them build a, what we called was zip tours, which was this whole app where you could self tour houses.

I then proceeded to go on a PR blitz where I said that I was going to bankrupt, remax, um, and like some other things, which. Immediately prompted the National Association of Realtors and like four other brokerages to sue me. So I started getting attacked by all of them. And, and I had like every brokerage in town was like, we're not even going to let them show houses.

Like we're shutting this down. So I, so I basically just had this like side war going on. Right. Um, while internally we were trying to like build this and put it together. And the thing was, is this was like. Kind of before all the videos, you know, we can just jump on here and this is very normal, but this was 10 years ago.

And so we were having to really do a lot of, um, the basics and like building video technology and putting things together. So this was like a very expensive, uh, situation. Um, I didn't know much about technology. That was way out of my realm, but I did know the real estate side and I knew how it was going to work.

We ended up building something that was kind of awesome. Um, but because I managed to make such a scene about it, we basically like, couldn't, couldn't get it in. The thing it ended up working for was rental homes, um, because nobody was going to protest us showing up to show their 900 rental in Detroit.

Right. Like they were like, fine, like, go for it, use your thing. Uh, but they were not real happy about us showing, you know, a million dollar home in some beautiful suburbs somewhere. So. Um, we ended up using it mostly for ourselves. Um, there were other variants of it that ended up coming out over time and they ended up being more focused specifically on just that thing and then licensing it, whereas my thing was like, no, we're going to build a platform.

No one else can use it. It's only mine. And if I had any, uh, advice for anyone that's thinking about internalizing technology, um, don't like, don't like if you have enough capital, go and build an, build, build a separate company. That's a tech company. And then like, is building something where, Hey, cool.

We've got one client and it's us, and then we're going to license it to everybody else. But like, there's just two different, um, core competencies there. And, and I greatly lacked the one, um, and lost, you know, over a million dollars on that endeavor. Um, but equally, like, I don't know. It's the same thing. You look back at it.

Like, I love the story kind of,

Wes: Yeah.

Mike Kalis: I like what we did. I liked building it. I wanted to put it together. We made, of course, glorious advertisements because those were amazing. Uh, you know, we could make better ads than we could, you know, the actual product. But, um, but I don't know. I mean, it's part of the story, but if I could change that, I would.

Wes: So at what, at what point with that widget, right? A million dollars, I think as an entrepreneur and for you, like you have so much passion, how do you know, or when did you finally cut that off? You've got a CTO, you've got seven people you're on this mission, right? And you're the type of guy to me, like you're, you're going to do it.

You're going to make it happen. I mean, what finally clicks where you're like, I got to stop pumping money in here, or it has to stop. Because I see that a lot. It's, it's hard because again, I, there's no crystal ball. You invest all this money. You're like, I'm already a million dollars in, you know, how do you make that decision?

Mike Kalis: So I had 12 months and I knew that when I started it, I had 12 months to kind of make this do something. Um, and, and my bet was either like, I got to get revenues up over here, or I got to get something coming in from this and that's what we got and. I remember talking to the tech people who, uh, you know, I remember we had like a really good product, like it was really great and I'm like, guys, we got to just turn this on, like, you may not fully understand the situation, but we need to go live with this baby.

Like, like now as I'm like watching, you know, money go down on the backside and I had one guy and he's like, you know, if people saw this code, I'd be embarrassed with how messy it is. And I was like, dude. The thing looks good. No, one's going to see the code. It's like, well, it throws up an error, you know, like one in 10 million times, you know, one out of 10, dude, just please, can we go live?

So it's having a lot of these arguments with people where it was just like, can we please go live and you have tech people that want like the perfect, you know, thing before it goes live. Um, and then finally there was no money and we had to have a bad day of reckoning where everyone was like, oh, um, and that was horrible.

And you know, there were a lot of people that were like, wow, Mike was awful at this and I can look back and go.

Wes: You're right.

Mike Kalis: But, but I paid for it, you know, so, so it was like, it all came out of my pocket. It's not like I was taking shareholders money or anything else like that was totally me. And so, you know, if somebody wants to spend a million dollars of their own money and it doesn't work, well, shame on them.

Now, I might feel differently if that was somebody that was at like. You know, messing around with some public company's money and they do something goofy like that, but it was my own. So, um, yeah, it's a hard one when you got to pull the plug on something that you're, you're really driven about

Wes: Yeah. Yeah. So looking, looking at the future, like currently what you're doing now. I mean, I think a lot of people, myself included, is very interested in, you know, your focus and direction now on your model, uh, where are you doing it now in the West side of Michigan? Is that,

Mike Kalis: Yeah. So we've got, um, we did a couple of different developments, um, in West Michigan. Uh, we did one in Holland. We did one in Grand Haven. Uh, we've got one that we're doing up in Traverse City. Um, I'm really excited about Traverse City actually. Um, and, and the, the math on it's just, um, disproportionately, um, good.

And, and that's like everything that we're looking for just has to meet fundamentals. Um, so. From having managed 5, 000 homes, uh, we had like 5, 000 accidental investors. And there were so many reasons that people would have a rental home and there just started to be a lot of truths, um, where you could kind of look at it and go like, this is going to work, or this is not going to work.

Um, and so over the last. 15 years, you know, we kind of started to put together, um, truths, you know, just when, when this hits, it works. Um, so from having flipped, uh, 500 homes plus, um, you needed to have 20 percent embedded equity when you're done. And so what that means is if I have a hundred thousand dollar home, I need to be in it at 80, 000 after all of my expenses to make any money.

Um, because people don't think about transaction costs. Transfer taxes, vacancies, interest, yada, yada, yada, yada. So if I have that, I actually have a 10 percent margin. Right. So it was kind of just learning, like I gotta have 20% to get 10%, and if I end up with 30%, then I got, you know, so, so having 20% embedded equity in anything that we go to minimum, um, is just a truth.

Um, having, uh, something that is an eight cap or higher, and, and I know it's a bit of a real estate term, so if there's other business owners who are like, what's a cap rate? Um, all it is is to say if you bought a hundred thousand dollars home and you paid. All of your expenses, taxes, vacancy, like everything.

And then at the end of the day, you were left with a 10, 000 and you had no loan on it, so you just paid cash. You put a hundred grand in and you have 10, 000 at the end. You have a 10 cap. It means you get a 10 percent cash on cash return without leverage. Now that doesn't mean you don't have to do leverage, but it's just a good way to kind of see deals without the leverage messing up the returns and stuff.

So we said, Hey, you have to be at least an eight cap. Because, you know, people can get non risk adjusted returns in the 4 percent and 5 percent range. So, so why would you go and do this, um, on an income basis for that? And then you're not betting on appreciation. You treat appreciation as just nice. Right?

So it's like, you know, if the home ends up appreciating, now that is, candidly, where we won over the last three years, is things appreciated like 30%. So then, you know, you have a 20 percent embedded equity, you get another 30%, and it looks like a really nice, nice deal. Um, but you try to not bet on luck. You try to bet on just like, how do we get fundamentals in a place where we're safe?

Um, if we're holding this, we're getting an 8 percent ACAP. That probably means you're getting close to a 14 to 18%, uh, IRR, which is really good. And then you're okay holding it. So, uh, if you can sell it and the market goes great, then awesome. And everyone gets a good return. And if it doesn't, you just kind of hold it for a really long time.

Um. That works as well. And then the other is, how do you do that? Well, you got to buy stuff below replacement. Um, and so in new construction, that's buying land below replacement. And this is the one where everyone's always like, how do you do that? Um, and, and that is the hard part is you got to go and find it.

So like it costs. 30 plus thousand to develop a lot if it's free and it's not. So say the land, you know, it, it's hard to have a lot that would take vacant land for less than $50,000. So we try to buy lots at 20 to 30. Um, and uh, the only way you do that is you're finding somebody that's in some kind of a distressed situation, whether that's a city that owns lots or other people, um, so that you're able to come in at basically below replacement and our bet there as well.

Um, you know, if I'm buying below what this can be replaced at, I have an intrinsic value um, advantage over other people that are going to try to do this. Um, so, you know, those are kind of the big things is, is embedded equity, getting a minimum of an eight cap coming in, um, below replacement value. And then the other part is to be unafraid to go where others aren't. Traverse City is a good example of that. Um, you can't get money from California and New York for Traverse City. It, it falls outside of everyone's, basically anything outside of Atlanta, Florida, and Arizona and Texas falls outside of everyone's like, you know, manifesto that they can invest in. Um, and so because of that, I think it's a big opportunity.

They completely overlook, uh, things in the Midwest that, you know, we. If we're folks that live here, uh, we look out and we're like, well, this is a really nice area. I live here. It's beautiful. Like, you know, these homes are just better values. Um, you would get like a five cap in Atlanta right now, and we're getting eight to 10 caps in Michigan.

Um, so to me, just on a risk off base, just like looking at the two, this 5 percent return when rates are six and a half. They're literally taking cashflow negative positions. On a bet that things are going to go up and we try to take a cashflow positive, um, position on a statement of, I don't know if things are going to go up, which to me feels a little bit more, uh, true.

Wes: So you mentioned a lot of it now with Great Lakes. It's friends and family. Are you open to, is this, do you call, do you call, is it a syndication? Is that the correct terminology for it or?

Mike Kalis: here's a good lesson that I've, the answer is yes. Like we'll syndicate stuff and we're, we're open to work with, but it's earnestly, you know, it's, it's people we want to work with. And, and what I've learned, um, is that a good deal. A bad deal with good people is still a good deal. Um, a good deal with bad people is a bad deal.

Um, and so this is just one of those lessons, uh, from, from the last three years where, um, I just feel like I'm at a spot where, um, I want to work with people that I want to work with. And, and I want people who go I kind of like Mike and I like what he's doing. Um, I understand me. I'm, I'm a little goofy and I'm a little different.

I'm going to push things. But because of that, like we find interesting value and we can make things happen. And if somebody looks at that and they're like, that's, that's interesting, then yeah, we want to. Talk and see if there's a way that we can, you know, put something together. Um, but equally, um, we're not doing the rapid growth thing.

We're just doing enough. Um, and maybe that's another lesson, uh, Wes, know what enough is. I didn't know what enough was. Um, and I've talked to a lot of entrepreneurs that make millions and they're like, What is enough, you know? And, and, um, I, I think it's important that people have that in their head because that, that really changes how you shape a business.

And you can much more cohesively have a business where you go, I want it to just be this size and be great. Like, be really, really great, but be like right here. And when people are like, do you wanna be bigger? I can put more money. And you can be like, no. Like, I'm . This is where I want to be. Whatever that is for people, you know?

And it's different for each person.

Wes: Well, Mike, I, I really appreciate the share. Uh, I picked up a ton of nuggets with your story. I'm super excited for you in the future. Um, if there are those really great people for good deals and relationships, how can people contact you? I'm sure there's some people out there that, you know, would love to connect with you to get some more information as to what you're doing now.

Um, I know for one, for me. Uh, the product and company you built served me in my life extremely well, kind of helped me get to that next phase of life. So I really appreciate it. I think what you're doing in this next version of your life, I'm excited to see where that goes and I'm sure there's some people that would love to, uh, you know, connect with you too.

So how can people find you?

Mike Kalis: Cool. Well, um, first of all, it is cool that we got to meet as like a, a client that way. And also it's been cool to, um, see everything you can put together from a marketing standpoint, which I think is outstanding. Um, clearly like you have a professional microphone. I've got to upgrade my game a little bit less.

Wes: It's fancy.

Mike Kalis: LinkedIn is a great, great place. Just Mike Kalis on, on LinkedIn. Um, I have a sort of, uh, decent, uh, following there and I'm on that a lot. Uh, the other place of course would be great. Greatlakeinvestments. com is our investment website. If you wanted to see some of the homes and things that we put together, uh, greatlakerealty.

com is a good place to just go and see, uh, the different rentals and things that we've, um, been able to, to build and create.

Wes: Awesome. Well, Mike, Mike, thanks so much. I really appreciate it.

Mike Kalis: Cool. Thank you.

Wes: And, uh, if you learn something today, uh, tell me about the podcast. Thanks again, Mike Kalis. This has been another exciting episode of Entrepreneur Intel. See you next time. Thanks.