What does it take to run a vertically integrated multifamily operation—and do it well?
This week, we’re joined by Michael Root, Co-Founder and Strategic Leader of Root Property Group, who breaks down the systems, strategies, and lessons behind managing nearly 1,000 doors in Chicago’s north side.
From understanding why “selling is a decision made before closing” to avoiding the trap of over-improving a property, Michael shares real, practical insights for investors who want to build long-term wealth the right way.
Key Takeaways:
- 3:07 – Michael’s Core Roles: His three main hats are underwriting deals, asset management (executing strategies), and running the renovation crew.
- 5:44 – Niche Strategy: Focusing on 10-unit, scattered-site buildings in core neighborhoods allows for hyper-accurate local data and pricing.
- 10:26 – Tech for Efficiency: Software like ShowMojo automates scheduling and showings, eliminating phone tag and preventing lead loss.
- 12:41 – Data-Driven Diligence: Use your own portfolio’s data to accurately benchmark expenses against the seller’s claims before touring the property.
- 15:16 – Avoid Over-Improving: The worst mistake is over-investing in renovations, causing the property value to exceed what the local market can support (“meeting the market”).
- 17:02 – Legacy Transition: Buying the existing family business structure secured better lending credit and leverage for future acquisitions.
- 19:55 – When to Sell: Consider selling if you’ve maximized value, plan no further capital investment, and wouldn’t buy the asset back at the current market price.
- 21:47 – Hindsight: Regrets include not networking more when younger and passing up “good deals” out of fear.
Michael speaks Corwyn’s “real estate dialect,” diving deep into the world of multifamily acquisitions and the strategic vision needed to lead a multi-million dollar firm.
Connect with Michael:
- Contact Number: 773 -904-1 383
- Website: https://www.rootrealty.com//
Connect with Corwyn:
- Contact Number: 843-619-3005
- Linkedin: https://www.linkedin.com/in/cmelette/
Shoutout to our Sponsor: Mellifund Capital, LLC
Need funding for your next real estate flip or build? MelliFund Capital makes it fast, flexible, and investor-friendly. Visit MelliFundCapital.com and fund your future today. Again, that’s MelliFundCapital.com, M-E-L-L-I-L-U-N-D, Capital.com.
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MICHAEL:
Selling the property is something that you decide to do before, during underwriting, basically. It’s like, can we do this by ourselves or do we need other people? If we need other people, then it’s okay. What’s the story? When we tell them, how long is this going to take? Is it three to five years? Is it five to 10 years? So that decision is made before you even go to a closing deal.
CORWYN:
Good morning. Good morning, guys. Great morning to you. Welcome to another fabulous episode of Exit Strategies Radio Show. Hey, I’m your host, Corwyn J Melette, broker and owner. That’s who I am today of Exit Realty Lowcountry Group, in beautiful North Charleston, South Carolina. Hey, if this is your first time listening to this show, you sir or ma’am are in for a treat. That’s because our mission here is very simple. You simplify it to impact and empower our community to financial literacy and real estate education, guys. We’re legacy building. That’s what we do. So guys, look, today we have an amazing show set forward. Got an amazing guest, but I got to give my shout outs. You know how I love y’all. Got to shout out my folks in Muddy Mullins up there in Marion County, the folks that listen to us in the PD. Thank y’all so much for tuning in. Super excited to hear what you guys are endeavoring to do. And most importantly, that you’re taking the information and knowledge from this show to apply to it. The second thing I’m going to add to that, guys, is this. I am going to say a shout out to my folks that’s listening in the Charleston area, who from Hollywood, what you know no good to monkey’s corner. Y’all know my mama live out there, y’all. Y’all tune in faithfully. The Q family, Pastor Vanderbilt Evans Senior, and I got to put that senior on that thing. That guy will get me if I don’t. And his beautiful wife, Elder Evans. Thank y’all so much for tuning in. So today, today we have none other than Mr. Michael Root. Now, Michael is the co-founder partner at Root Property Group and the strategic leader at Root Property Group. So that means that not only was he there at the beginning, he is also the person who was carrying that vision, who was making sure that their company does the amazing things that they do. So I’m super excited to have him on today because as I told him backstage, he speaks my dialect. He talks that language in regards to real estate investing and being the head, if you will, the visionary within a firm that focuses on multifamily acquisitions. And he’s going to share a lot of that insight and knowledge with us today, right here on this show. So Michael, hey, welcome to the Exit Strategies Radio Show. How are you doing today? That was a great intro, Korn. I’m doing well. Thank you. Well, well, just so you know, I’m available just in case you ever need me to introduce you on a stage or conference. I’m your guy. So Michael, thank you. Thank you. Thank you for being here. If you don’t mind, tell our folks in your own words, our level, what it is that you do.
MICHAEL:
Yeah, no problem. We are a vertically integrated multifamily owner, operator, and property management company. I wear three main hats. That is underwriting new investment deals, trying to put together apartment buildings to acquire, doing the asset management and executing the strategies for the buildings that we had acquired to make sure that our performance hit what we told our investors we were going to do. And then also running our general construction crew on the renovations that we do throughout the year.
CORWYN:
Okay, cool, cool. So that is a fairly large operation that you guys do. So if you don’t mind, give our listeners an idea of how many properties currently, how many doors. I’m pretty sure you guys focus on multifamilies. That means you got a number of properties, but on each property, you got a vast number of doors. So currently how many properties and doors are you guys currently overseeing?
MICHAEL:
We’re a boutique shop in the north side of Chicago. We have under a thousand doors, but about 90 addresses. So our average building size is around 10 units building.
CORWYN:
Okay. Okay, perfect. So if you don’t mind, what got you into this space? What was the thing that said, all right, hey guys, this is what we’re going to go do?
MICHAEL:
Well, it started out managing a handful of apartment buildings that our parents owned. And from then we started looking at third party property management. And as that business grew, our efficiencies and our professionalism in managing apartment buildings grew stronger and stronger. And then eventually it was, we need to start buying our own buildings and let’s figure out how to do that. And then once we did our first one, it was kind of no looking back and that’s been it primarily for the last 15 years.
CORWYN:
So that’s interesting. Okay. So a slow walk, if you will, into the business and then kind of a, okay, let’s shift our focus into more into acquisition and maintaining our own units versus five. I could definitely appreciate that. So what is your strategy on acquisition? What I mean by that? I’m obviously, but your niche, as you may mention of is smaller apartment buildings. So 10 or so unit, what has caused you to focus and direct your efforts in that particular niche in that particular area? What was defining for you to do so?
MICHAEL:
I think it’s because what we’ve learned over the years, I mean, I started in 2005 managing apartment buildings for other people. And it’s kind of like learn to walk before you run. And I think that’s definitely one of our core assets as a business is my brother and I were partners. We have hands-on experience managing apartment buildings and the middle market size. So we have five flats and we have 60 unit buildings, everything in the average size is 10 units. I think having the confidence of having a scattered site portfolio on the core neighborhoods in the north side of the city, it was just natural for us to stay here because I can look at a building that’s for sale and say, oh, I have a building on the other block. I know exactly what the rents are if we do this work to this building. And we have a small group of investors that do deals with us. It’s always interesting to think about, let’s go buy a 600 unit apartment building or 600 unit complex out in the suburbs. But I’m having a ton of fun staying where we are. And if it’s not broke, don’t fix it, I suppose.
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CORWYN:
So essentially, I just used to say that. So conversations at times that we have on this show is about conformity but uniformity, meaning that whatever it is you say you’re going to do, you bring everything to that’s where you’re going to be. But subsequently, you do the same thing because you already know the result. So if you’re renovating property or something that means you put the same materials in it so you know your cost on the material. So buying in the same neighborhood and similar types of properties allows you to understand your numbers much quicker than somebody who has to do the research and then figure it out. So that’s very strategic, coinciding with one of your titles, your roles as strategic leader. So you guys do a lot of renovations. And if so, what does that entail? What is it typically that you’re like, okay, well, this is in our wheelhouse. But no, that’s something that’s much, much greater than what we’d like to do.
MICHAEL:
I’d say for existing apartment buildings, we can do anything from a light turnover to a medium value-add to a heavy turnover. And I think the difference between those would be ripping out kitchen cabinets, redoing floors, putting in HVAC, immediate laundry, all that stuff, new bathrooms. That’s what I consider a heavy value-add. That’s a job that would probably take us three to four and a half weeks to finish. And when those units are becoming available, you’re not pre-leasing those. You’re waiting for the work to finish and say, okay, I’m going to start this and I’ll be finishing four weeks. So start working on leasing it for four weeks from now. And you have the light value-add, which might be refinishing floors, painting, replacing a few light fixtures and things like that. And we can do that in a couple of days. So that’s all stuff that we do in-house with our own renovation crews. But if we were to get involved in a ground-up development or something like that, which we have been, we usually pull in another partner and do JV with somebody who specializes in that.
CORWYN:
Now, you guys are part of or work with technology that exists in this space. So tell us about that. Managing these types of properties, these types of portfolios, if you will, is challenging. And oftentimes my imagination says most people have to kind of bootstrap stuff together. So you guys have a solution that you guys have figured out how to do this and how to manage it effectively utilizing technology. Is that correct? Absolutely.
MICHAEL:
I think we wouldn’t be able to manage the amount that we manage today without the technology, unless our staff was twice as big.
CORWYN:
So tell us about that. Not that you have to reveal any proprietary secrets to anything, obviously, but how do you manage to do that? Because that’s also something that for our listeners, oftentimes overwhelming. How in a ham sandwich do I manage all of this?
MICHAEL:
Right. I think you try to automate what you can and use technology to do things that they’re able to do well. And a good example of that is in leasing. I’d say six years ago, we leased around 300 apartments a year in our portfolio. We have about 20% to 30% turnover a year. Before the leasing agents would put their ads online, they’d feel the calls. If they were unavailable, they’d listen to the voicemail, call the person back, leave them voicemail, they call back, set the time, go do it. Now we have a software called ShowMojo that links directly to our portfolio, integrates with our portfolio and goes out to our website. So if you were looking at one of my apartments, Corwin, you could say, all right, I like this apartment. I want to see it. So you click tour this unit and it has the available times that leasing agent assigned to that property is available. And you just click it and it’s immediately booked and it goes to our leasing agents calendar. So it eliminates the back and forth. So you don’t lose leads that way by playing phone tag. So that was, in my mind, that was one of the biggest time-saving things that we have done in terms of operations.
CORWYN:
So let’s shift a little bit from technology because you got to have it. It has to function. I’m personally, Michael, I’m very big on efficiency and trying to figure out how to improve it. But it’s a constant, Lord, it’s a constant fight. Because the day you think you got it right and tomorrow something happens, you just realize how inefficient you really are. But in that process, so now we’ve kind of identified, okay, leveraging the technology in order to manage scheduling, having showings and all those things happen. But how do you manage the other part of it? And then let’s also focus on or touch on the importance of due diligence when you’re pursuing a property such as this. I mean, there’s definitely a right way, if you will, to do it. So if you could kind of touch on that, about that diligence piece and what’s important in it to ensure that if you’re going to pursue a property such as this or any investment property, that you have as much information as you can to make an informed decision.
MICHAEL:
Yeah, sure. Quick comment though. I couldn’t agree more that the feeling of thinking that you have something right and then recreating it or tweaking it a little bit and it’s so much better. So don’t ever think that you have it perfect because it’s not. But in terms of underwriting, we’ll see what the broker says about the building and what the seller is asking for the building. And we’ll compare what they have their pro forma rents to what we might have on the same block or the next block or in the same neighborhood at least and say, okay, these numbers make sense. We think that these pro forma rents are accurate. Or if we feel differently, we’ll underwrite it with our numbers and back into our offering price that way. We use our own data for checking the expenses. So if someone says this building operates at 15% expenses, there’s absolutely no way. So we have all of our property types grouped into categories. So we can say, okay, this building that we’re looking at is a 1960s building with a boiler in it with under 20 units. So we can pull up that category in our portfolio and say, okay, here’s the operating expenses for this. And then we apply them to that. And that’s the first thing we do to see if it’s worth going to the second step of trying to even tour you. We do that before we even tour the building. And then it’s the same things. I don’t hire like an inspector to go tour the buildings. I look at things myself. Maybe I’ll bring my roof rooftop pointer so they can give an idea on that. But it’s all penciling it out and not overextending. And if we make an offer for say 5 million bucks on a property and they come back and say, there’s somebody else that’s 300 grand more than you. And that goes over our threshold. Then we say, okay, it’s not for us. And that’s how you corn though, because you’ve already spent quite a bit of time on doing that, that you might make a bad decision and say, okay, fine, we’ll do it. Just because you don’t want to waste the time that you’ve previously spent on it.
CORWYN:
So- It’s interesting you used to say that, because that is most certainly the case. Sometimes you feel if you’re not careful, you can find yourself under pressure to perform on a deal that you’re uncertain about. And it’s one of those things, if I could spend $300,000 more in that particular instance, but end up with a $3 million problem. Yeah.
MICHAEL:
That’s right.
CORWYN:
Yeah. Yeah, definitely. So let’s take it a step beyond. So let’s assume that you’ve done diligence. You’ve got to put in some equity into this, some work into this property, if you will, sweat equity in order to get it to a place where it’s going to be able to perform or even remotely close to what you have projected. So obviously revitalizing a property has its risks and its perils. If you don’t mind, share an example of when it went right, but also when it went wrong.
MICHAEL:
I think the lesson I learned was something that I call meeting the market. And I learned that from going beyond what I needed to do. And so in a renovation, maybe putting in $15,000 more than we need to, making it too nice. And then the market not being able to support that when we could have gotten the same exact rent if we spent $15,000 less. So that’s like a tricky line to balance on. But once you’ve done enough of them, you can say, okay, this one only needs package A, or this one needs package A and B because it’s in bad condition. So the worst mistakes that I have made have been over-improving buildings and then the market value not being reflected because of neighboring properties or whatever the case is.
CORWYN:
Yeah. That takes me back to real estate school. So I’m a licensed instructor, actually a school loan among a number of other things, but that’s a whole nother animal. Short version is that assimilation. You never want to be the most improved property in the neighborhood because your value is pulled down by the surroundings. So what you’re talking about, improving a property, yeah, you could invest that money in some other place, or otherwise saved it for some other use in the future. So I completely get that. Now, you guys focus on this particular genre, this realm, if you will, because you’re looking long-term. What I heard you say, this is you and your brother, and then you got started by managing property that your family owned. So this is a family business, a legacy for you all as you go forward. Does that sound about right?
MICHAEL:
Yeah. My brother, Joe, and I are actually second generation. So when we started, my dad ran the business. It was a sleepy shop and he was just managing a handful of buildings that him and my mom owned at the time. And then in 2005 to 2010, Joe and I really started trying to modernize the company, put technology into it. Technology was available in 2005 and 2006, but we bought the business from our parents in 2013, I think. And the reason we did that is because we went to our dad and said, we need to buy the company because we’re trying to buy these apartment buildings and we’re showing them they’re asking for assets. We’re showing them the ownership of the company and it’s not us. So we’re not getting the credit that we need to buy these buildings ourselves. So we sold it. And then once we had the backing of the company behind us, it made getting loans a lot easier.
CORWYN:
That’s the strategy that changes everything. It’s simple. I mean, obviously I have no idea. I mean, I think I can imagine what that structure on that sale could have looked like so that it benefited you. You got the history of the business, which then immediately gave you leverage and more presence and prominence as you try to make and take the next steps. And you guys have been successful with that. So that’s huge. Now, do you guys ever sell? And if you do, then what is, I mean, my assumption is you do some repositioning. So you may sell or refinance in order to make a different acquisition or something, but what does that typically look like? And what is your reasoning behind that?
MICHAEL:
I’ve sold three buildings total. And one of them was very recent. And the reason we sold that one was because at the time it was a large deal for us and we brought in some other investors and they wanted to know when they would get their money back. And so we put a timeline on it. So we added all of our value, increased the value of the property significantly and sold it. It’s great. Everyone did really well, but I’ll drive past that building and I’ll be sad that we don’t still own it. So I prefer not to, I prefer to refinance and pull as much of the initial equity as we can out without being strapped for cashflow or not having good debt coverage ratio. But I think selling the property is something that you decide to do before during underwriting, basically. It’s like, can we do this by ourselves or do we need other people? If we need other people, then it’s okay. What’s the story when we tell them, how long is this going to take? Is it three to five years? Is it five to 10 years? So that decision is made before you even go to closing deal.
CORWYN:
Interesting. Interesting. So Michael, in that particular situation, there was a reason you guys had an agreement with your investors. This is technically when we’re going to do something different that will either buy you out or sell and everybody cashes out. So understandable, completely understandable. Outside of buying that type of situation and scenario, when should someone who is investing, whether it be single or whether it’s multifamily, preferably they’re getting into the multifamily realm, having more doors as always, when should they consider sale? Or is there a particular point that you believe that someone consider selling versus just continuing on? All right.
MICHAEL:
I’ll use you as an example, if that’s okay. Like let’s say you found a landlord directly and you made out a really good deal with this person and you bought the building from them direct and he’s happy, you’re happy and you got a good price on it. And over the next two or three years, you cleaned the building up from stuff that he wasn’t doing to defer maintenance. And at the end of three years, it’s cash flowing well for you. You have a note coming due in two years though. So at that point, I would say, okay, you’ve increased the value of this building, this amount. Are you planning on taking it any further than that? Investing any more capital into the building? And if you’re not, consider selling and then find out what the value is, what someone paid for it. And if you wouldn’t buy that same building for what somebody else is offering you, then I’d say sell.
CORWYN:
I like that. That’s interesting. Interesting as you kind of consider it, you lay it all out. Makes perfect sense. Makes perfect point for our show today. But I want to make sure people can get in contact with you. Maybe someone is considering this particular path. Maybe they’re interested in investing with your group. You guys have tremendous success in doing what you’re doing. Or maybe somebody’s just, I got some questions. Where can people get in contact with you? Where can they reach you?
MICHAEL:
Look me up on LinkedIn or you can find me on our website at RootPG.com. That’s PG for property group. And I’d be more than happy to touch base and connect on a call with anyone who just wants to talk shop or is getting themselves started. Happy to share info with everybody because I think this is a business where the peers in my industry in this market, we don’t keep things from each other. If I say, what are you getting for rent on that unit? The majority of people are going to tell me. So that’s kind of an open book policy and I believe in it. So I’m willing to help anyone who wants to chat about it.
CORWYN:
Awesome. Awesome. So Michael, hindsight question. Oftentimes we think back over, man, sometimes there’s this thing that happens or something as you go through and you’re like, dang, man, if I’d have known this now, I would have whatever. Right. So for you, knowing what you know now, if you could go back to the beginning, what would you have done differently that you think would have catapulted you or had you guys on a completely different trajectory?
MICHAEL:
I think there’s two things. I think I would have networked more when I was younger, because today, like I said, the people I interact with the most are my peers in the industry. So I wish I had started building a relationship with them much earlier or having a wider network of them. And then I think the other thing that I regret is not buying the building. I feel there’s opportunities that I passed up where they could have done really well at the prices back then. For some reason or another, the economy or whatever the case is, we decided to pass. So I’d say if you feel in your gut, like it’s a good deal, try to figure out how to do it.
CORWYN:
Okay. Okay. Fair, very fair. So Michael, I want to thank you for one, for sharing that to, for basically taking your bag, your bucket, if you will, of expertise and passing it out and distributing it to folks on our show today. I really appreciate it. And I appreciate you taking time out of your business schedule to be here with us today. Absolutely. Welcome. So for our listeners, guys, look, y’all got some great information. Look, y’all know where to get in contact with Michael. So y’all can do some application of it because information without application guys is you might as well be talking to a wall. So let’s make sure that we do something with it. Most importantly, that we engage with the professionals that can help us to get further. We don’t go far alone. We go much further together. So guys, please make sure that you connect. So for our listeners guys, one more time, y’all know how I feel. Y’all know what I say. I always put the two of those things together and I give it to you this way, which is to tell you that I love you. I love you. And we’re going to see you guys out there in those streets.
