Real Estate Chicago Style Podcast Recap

The following is a conversation recap, from the “Real Estate Chicago Style Podcast,” hosted by Joe Smazal, a broker and partner at Interra Realty. The episode features Sal Becovic, President of Becovic, a family-owned real estate firm.

The conversation was recorded on April 10th 2025, during “tariff nut week” with Trump, noting market volatility, with interest rates on the five-year at 4.0% and the ten-year at 4.37%. The conversation is intended as a “time capsule” to reflect on market conditions. Becovic is “dedicated to fostering the diversity, integrity, beauty and vitality of the neighborhoods” they operate in, primarily Rogers Park, Edgewater, and Uptown. This mission is achieved by continuously investing in their buildings and improving residents’ homes and lives.

The Becovic Family Legacy: Roots and Rising

• Immigrant Dream: Sal’s parents, a union painter and an office cleaning lady, were Albanian Muslim immigrants from Yugoslavia (now Montenegro). They lived in Paris, France for three years before arriving in Chicago in November 1968, settling in Uptown.
• Early Ambition: Despite having no formal higher education, Sal’s father, Husein, had a vision and was very motivated. He worked as a union painter in Lake Point Tower, and his mother, Ese,  was an office cleaner at 307 North Michigan.
• First Property Purchase (1973): Tired of paying rent, his father bought a 17-unit courtyard walk-up building in Albany Park using a purchase mortgage. The model was to live in the building and use residents’ rent to cover costs, while both parents initially kept their jobs, focusing on stability, not on building wealth.
• Transition to Full-Time Real Estate: By 1976, after being furloughed, Husein decided to go “full bore” into real estate. Ese continued working her cleaning job for insurance but also worked around the properties, eventually quitting in 1981.
• Growth and Mentorship: The family expanded by acquiring more properties, including two 36-unit “4 plus 1” buildings in Edgewater (1979 and 1980). They found a key mentor in Harry Toporek, a Jewish Holocaust survivor, who sold them properties and guided them. This exemplifies the “American Dream” with a “mashup of cultures”. Within about 12 years of arriving in the country, Husein and Ese owned over 100 units.
• “Passing the Baton”: Sal views the family business as a relay race, where his parents built a strong foundation of 400 apartments. He and his brothers (Muhammad, Isa, Dino) are now running their “laps,” aiming to pass the baton to the next generation, driven by a desire to impart purposeful work.

Deeply Rooted Community Engagement: Service and Accountability

• Philosophy of Service: Becovic operates on a philosophy of service to residents, the property, the neighborhood, banks, and their own people, inspired by Bob Dylan’s “Got to Serve Somebody”.
• Living with Residents: The family moved into their buildings in Edgewater, fostering a deep connection where residents became “part of family”. This direct experience cultivates empathy and responsibility.
• Putting Their Name on It: Husein hung a hand-painted “Becovic Management” sign, symbolizing pride, accountability, and a commitment that “the buck stops with us”. This philosophy means not hiding from the work and constantly striving to improve management.
• Owner-Operator Model: Sal strongly asserts that “serious operators must manage their own properties;” relying solely on third parties is deemed “not serious”. This direct involvement ensures quality control and alignment with their service philosophy.
• Intensity of Relationship: The landlord-resident relationship is described as the “most intense” business-to-customer relationship, as they protect residents’ homes 24/7 and handle their biggest monthly payment. This underscores the significant responsibility they feel towards their residents and the community.
• Instilling Purpose in the Team: The COVID-19 pandemic served as a “holy cow” moment, highlighting that housing providers were “the only game in town” and that managing someone’s home, property, and neighborhood is a purposeful calling. Sal emphasizes this mission to his team, promoting career-minded individuals.
• Active Community Stewardship: Becovic’s deep roots mean local aldermen call Sal when there’s a problem property, indicating their trusted role as community stewards. They are “advocates for positivity” in the city and their neighborhoods.

Shaping Investment Strategies

These deeply ingrained values directly influence Becovic’s investment strategies:

• Long-Term Holding and Investment:
  • Becovic operates on a “we don’t sell” model, with Sal even having nightmares about selling properties. This commitment means they prioritize investing in properties for the next generation rather than quick turnovers or speculation.
  • Their strategy is about “compounding” and “hammering it” through sustained effort, focusing on the “long-term game”.
• Hands-On Owner-Operation and Value-Add:
  • They have an in-house construction team for extensive gut rehabs and value-add projects, viewing challenging properties as opportunities to “stretch muscles” and grow.
  • They are strong advocates for preserving “beautiful relics of the past,” such as 100-year-old courtyard buildings, by renovating them rather than tearing them down.
• Financial Discipline for Sustainability:
  • Rent increases are seen as necessary for “sustainable management,” not greed. They are crucial to cover rising operating costs (like property taxes that doubled in 20 years), insurance, labor, and significant capital expenditures (e.g., $120,000 for porches wiping out 1.5 years of income).
  • They maintain a “balanced balance sheet” with a healthy equity-to-debt ratio (e.g., 45-50% equity) to navigate turbulent debt markets and ensure resilience.
  • Their “refi” model focuses on deploying “loan proceeds” back into the business for continued investment and growth.
• Collaborative and Responsible Community Development:
  • Becovic partners with organizations like the Preservation of Affordable Housing (POAH) to improve the housing stock. They emphasize that “you cannot kumbaya better housing” – it requires “commitment, spending, and investment”.
  • An example is relocating 34 households from a dilapidated POAH property into Becovic’s “Class A” units for a year during major renovations, demonstrating a commitment to “better housing”.
  • They work with voucher programs (like Section 8), finding them “great” when administered well, as they provide incentives for both residents (to be good neighbors) and owners (to receive market rent and sustain properties).
  • They advocate against “performative policy” that makes it punitive for housing providers, arguing such policies are dangerous for neighborhoods and impede progress.
  • They firmly believe there should not be a “false choice between homelessness and unsafe bad housing,” emphasizing that properties must be safe and properly maintained.

Significant Properties and Growth

Sal highlighted key properties that marked significant “next steps” for the business, often requiring substantial work and pushing the firm to grow:

• 4520 North Clarendon: A mid-rise building on the lake in Uptown, acquired in 1996, considered a “legacy property” from his parents’ era.
• Edgewater Gardens (Winthrop and Glen Lake): One of their first big value-add projects, requiring extensive gut rehabs and leading to the development of their in-house construction team.
• East Lake Portfolio: Another significant acquisition from a long-term owner-operator who could no longer manage the property.
• Duplex Deal/Condo Conversion: A high-rise property that represented stretching into a different asset class.

Sal’s Musings and Wisdom

Sal shared several key points reflecting his operational philosophy:

• “Higher rates force higher rents” – it’s about survival.
• Owners need a plan for loan resets, especially in turbulent times.
• “Great fixed debt allows for some animal spirits,” but “sheep spirits can come quick”.
• “You cannot kumbaya better housing; it requires all hands on deck”.
• “You got to have faith” in your neighborhoods and the city.
• Real estate is a “long-term game – not Bitcoin, this is not Robin Hood”.
• Going from “Survive to 25”  to “Survive 2025” (referring to market challenges).
• “You can’t choose who you’re born to, but you can choose who your kids are born to”.
• Loan proceeds are meant to “keep deploying capital and proceeding forward”.
• Multifamily Broker Pet Peeves: 1.) The monopoly sell. 2.)The stock broker sell 3.) The Grandpa Sell
• “No one will blow more smoke up your ass more than yourself”.
• “Don’t underestimate skin in the game incentives”.
• “Don’t overestimate your contributions and underestimate your blessings”.

Why Chicago?

Sal emphasizes Chicago’s unique advantages for real estate investment and family life:

• Intangibles: Chicago offers “capital absorption, differentiated economy, culture, location, natural beauty”.
• Opportunities: Compared to cities like New York or California, Chicago presents more investment opportunities, particularly in neighborhoods where properties might be acquired for less.
• Pride in Craft: It’s a place where one can practice the real estate craft with pride.
• Future Generations: He’s grateful his parents chose Chicago and hopes to provide his children with a solid foundation through the business.

In summary, the Becovic family’s legacy of hard work, combined with their deeply rooted community engagement, shapes an investment strategy centered on long-term stewardship, hands-on management, community vitality, and financially sustainable practices, rather than short-term gains.