Epic Real Estate Investing - Investing in Multiple Rentals Using 10 31 Exchange with Mark Crawford | 1199

Episode Date: May 3, 2022

In today’s episode, Mercedes, the Turnkey Girl is joined by Mark Crawford, an Epic student who took advantage of our education, specializing in turnkey investing. Particularly, our guest underwent a life-changing event that constituted selling a rental property, taking the profits of that sale, picking up 3 rentals, and wrapping it up in a 10 31 exchange with a time crunch! Tune in and hear Mark’s story so you can adopt his approaches and do the same for you!  BUT BEFORE THAT, in the opening segment, our Epic star, Matt Theriault explains what is a good price to cash flow ratio! Are you ready? Let’s go! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. What is a good price to cash flow ratio? You know, passive income, it's the goal of every long-term real estate investor. And that goal begins with calculating cash flow. You know, understanding how good cash flow is generated can help you select the best rental properties and also unlock hidden opportunities that other investors may miss. And that's what we're going to talk about here today. You ready? Let's go.

Welcome to the all-new, epic real estate investing show. The longest running real estate investing podcast on the interwebs, your source for housing market updates, creative investing strategies, and everything else you need to retire early. Some audio may be pulled from our weekly videos and may require visual support. To get the full premium experience, check out Epic Real Estate's YouTube channel, epicore.com. If you want to make money in real estate, sit tight and stay tuned. If you want to go far, share this with a friend.

If you want to go fast, go to reiase.com. Here's Matt. So for many, many investors, you either invest in real estate for cash flow or you don't invest at all. Why such a strong statement? Well, that's because cash flow is such a strong force when it comes to income properties. So strong, in fact, that cash flow is essentially the main form of profit that you experience right away and consistently over time. The type of income that can render you financially independent. This makes investors wonder just how much cash flow is good for rental property.

Well, let's take a look. Oh, and by the way, if you're still looking to get that first deal under your belt, I put together a free training just for you to help you get that first deal done. And then how to earn $5,000 a month flipping contracts and properties working as little as one hour a day. And you can access it at mats free training.com. But before we dive into what makes for a good cash flow ratio, it makes sense to define what cash flow actually is. So, you know, we're on the same page.

You know, in real estate, cash flow is what you get when you subtract a property's expenses and debts from the income the property produces. A property could have positive cash flow where there is more income than expenses and financing costs or negative cash flow where the expenses and financing costs exceed the income. And in this scenario, the landlord loses money each month. Most real estate investors aim at owning rental property with positive cash flow, of course. The more cash flow of property has, the better the return and the more income the real estate investor earns. Having higher cash flow also provides the landlord with a safety net for when unexpected expenses arise, like a burst pipe or roof replacement or a new AC or furnace. The more cash flow you have, the easier business and overall life are. Now, how is calculated?

Calculating a rental property's cash flow is a relatively simple process. One, determine the gross income from the property, deduct all expenses relating to, the property, subtract any debt service related to the property, and what you're left with is the property's cash flow. The gross rental income of a property is the total income from all sources before any expenses or mortgage payments are made. And some properties, like a single family rental, will only have one source of income, the rental income. But commercial properties may have additional income streams like on-site laundry or parking fees or vending machines or storage fees. Expenses relating to a property can differ greatly by property type as well. A single

family residential property may have just taxes and insurance. Well, with a commercial property, the owner may have all of those plus maintenance fees, service fees, and utility fees. Subtracting the property expenses from the gross income provides you with the property's net operating income, or the NOI. Now, if there is debt service, this can be subtracted after the expenses to provide the property's cash flow after financing. And this is the true cash flow number. When looking at a property to purchase, there are times when a property's expenses aren't available at front.

And that can be a problem to determine whether or not a property is worth your time even analyzing. No problem, though. I've got a quick way to analyze any property to determine whether it is a worthwhile investment deserving of your time. So if you don't have all of the numbers from a property that you need to calculate its cash flow, as a shortcut, you can use what's called the 1% rule. The 1% rule, it's a formula used in real estate to determine whether a property is likely to have positive cash flow. Now, the rule states that the property's monthly rental rate should be, at a minimum,

1% of the purchase price. So if a property is for sale for $200,000, it should produce a rental income of $2,000 a month or more if it's going to produce a positive cash flow. If it only has a rental income of $1,500, it wouldn't satisfy the rule because $1,500 is less than $1% of $200,000. And therefore, it's unlikely to produce a positive cash flow. The higher the rental income in relation to the purchase price, typically the greater the cash flow you can expect from that property.

Now, keep in mind, the 1% rule is a general rule of thumb. There are certain real estate markets where this rule simply just doesn't apply. For example, if the rental property is in a state with high, property taxes or an area that requires additional insurance for floods or hurricanes or has deferred maintenance that will require additional ongoing expenses, the 1% rule might not work. But for most markets, you're good to go with. Just know this. The rule is not the final cash flow analysis.

It's simply a quick tool to use to see if you want to pursue a property further, if you want to go deeper into the detailed math. So exactly how much cash flow is good for rental property? Well, there's not a clear-cut universal answer to that question. Like many things in investment property analysis, the answer is it depends. The one thing that is for sure, however, is that positive cash flow properties are what real estate investors should aim for. The more positive cash flow and investment property has, the better, in my opinion. From there, along with some variable influences, we can determine how much cash flow is good for rental property.

So to do that, there are four things to consider. one, the type of property. The type of rental property is vital when figuring out how much cash flow is good. Investment properties with multiple units are expected to have higher cash flows than single unit properties. As a result, multifamily properties typically have higher cash flow than single family units. So the overall price of an investment property also factors into how much cash flow is good for a rental. Properties that are more expensive and typically are of a higher risk would warrant more income than less expensive. real estate investments. Properties with newer or more elaborate renovations and amenities also would

warrant a higher rental income, of which most of the time results in a higher cash flow. Then there's the location. You know, the most significant aspect of real estate market analysis is location. And we hear it all the time, location, location, location, location, location, location, is vital when discussing cash flow property analysis as well. A lot of the primary expenses like interest rates, property taxes, and association fees are strongly influenced by the location of the property that's determined geographically. The amount of rental income, it's also heavily tied to the areas, like the job market most notably. Other non-real estate market factors impact in areas measure of good cash flow, too. Influences from legislation and the economy can significantly

impact cash flow in an area. And then there's the investment strategy. You know, the investment strategy of a rental property also impacts cash flow. For example, a short-term rental investing strategy tends to yield higher cash flow than traditional landlord. Or using the property for student housing or assisted living will also produce much higher cash flows. And then you got to consider the financing. The financing of an investment property will play a significant role in a property's cash flow analysis. For example, the higher the interest rate on your loan, that results in the higher payment, and that directly gobbles up your cash flow. Really fast. So good financing is very important. The final answer? To determine how much cash flow is good for rental property,

need to express cash flow as a percentage, not as a value or a dollar amount. So there are two ways to turn cash flow into a percentage. Both ways are fairly similar, though. The first way, the cash on cash return calculation. So cash on cash return is a result of this equation here, the annual rental income, less the expenses and the cost and the debt service divided by the total cash investment, and then you multiply that by 100%. And that will give you your, cash-on-cash return percentage. So a respectable positive cash-flow investment property in terms of a cash-on-cash return is a property that generates something in the ballpark of 8% or more. Second, the cash zone formula. So cash zone equals gross annual rental income divided by the

property price multiply by 100%. A good cash flow in terms of cash zone, you might have also heard it as the gross rent multiplier, is anything that is between 8 to 10% or more. If you're in the market for income properties that meet these criteria, I've got some free information for you. Download an investors package at cashflow savvy.com. And if you like what you see, you'll have the opportunity to pick a time for us to hop on the phone and strategize your passive income retirement. And it all starts at cashflow savvy.com. Thanks for sitting tight while we pay our light bill.

We'll be back right after this. Hit pause on whatever you're listening to and hit play on your next adventure. fall get double points on every qualified stay. Life's the trip. Make the most of it at Best Western. Visit bestwestern.com for complete terms and conditions. She's been helping busy professionals for more than a decade now build passive cash flow with real estate so they can take their foot off the gas a bit and enjoy the good life. Let's raise our hands, unless you're driving, of course, for the turnkey girl, Mercedes-Torres. Hello, epic listeners, and welcome back. Mercedes-Torres here, partnering crime to Mr. Matt Terrio, the guy who created the epic real estate empire.

I decided to jump in here just to kind of share with you some amazing highlights of a student of ours or but yet a client that has taken advantage of the epic education and the tricky world. So I decided to bring on this gentleman that recently underwent a life-changing event that constituted selling a rental property that he'd had for quite some time with his wife and taking the profits of that sale and picking up three rentals and wrapping it up in a 1031 exchange with a time crunch. So without further ado, I will allow my guests to introduce himself because this gentleman is nothing outside of ordinary. So Mr. Mark Crawford, welcome to the epic real estate investing show.

How are you today, buddy? I'm great. Thank you for having me on. This is really cool. I feel like I think call you buddy because although you. Of course. We are buddies. As a student, you transformed into a client.

And man, sometimes we had these late night. conversations or early morning conversations about your exchange. So without further ado, I'm going to let you get into your story. So first off, I'm still a student. I am still learning from Matt because he is awesome and teaching me things all the time. So and from you, I am learning constantly. And I constantly ask questions because I'm just that guy. I am a native Houstonian here in Texas. I am married and my wife and I have three wonderful little girls who we just adore. We both have full-time jobs. And, And we are active real estate investors on the side.

I have that. So wait a minute. You said something intriguing. You're a native Houstonian. So you are probably one of 10 natives of Houston, Texas, right? And there are very few of you. Is that right? There are very few of us and he left anymore.

Yeah, Houston's really changed into either Illinois, New York or California. But yes, native Houstonian and love it. So what are people leaving Houston in your opinion? I don't think it's people leaving Houston. I just think it's other states coming to Houston quite rapidly. So the population is definitely grown over the last few years of a lot of other states moving in. That makes sense. Okay.

And then you mentioned you had three kids, ages, please. My oldest daughter is nine. I have a middle daughter who is six and a young baby daughter who is almost two. Ooh, a girl dad. And I love it. I am a girl dad and I love it. I love it. He'll be buying for that term, girl dad.

Yes. I even have the T-shirt. So appropriate. Okay, so tell me what you said you and your wife have full-time jobs and you're also a part-time real estate investor. I somehow feel that this part-time gig is for you to become your full-time gig just because I know the Crawfords. But tell me what you and your wife do for a living if you don't read sharing. Sure. I'm going to give you a little background about that, too, of what we do and why we jumped into kind of real estate.

So I spent nine years in the oil and gas industry working for a pipe manufacturer. And I left that industry because, as you know, oil goes up, oil goes down. And the company is due to, they hire, you know, 10,000 workers and they allow 10,000 workers. And it's kind of a six, every six to nine month rotation of how that works. And my wife and I were both in the oil industry. And we just said, you know, this is too stressful. got to find something new here. So I started working for a really cool company here in Houston in a different industry. And they're wonderful people. I love working for them, but I love working for

myself also. My wife works for a company out of California, and she really enjoys her job. And the reason we both kind of work from home now, but before when my two older daughters were a little younger, we were getting up at 6.30 in the morning, dropping them off at daycare, not getting home until five or six in the evening. And we weren't spending time with our kids and it was just driving us nuts. So we really tried to find one, a different occupation to be in now. And then two, a vehicle to get us out of that quicker, the rat race every day quicker than we were basically projected on now. You know, everybody lives the work 40 years, retired 65 and then spend time with your grandkids instead of your actual kids.

We just didn't want to do that. And we leaned on real estate to start helping us make that dream happen. I love that. I love that. So two questions. What made you completely unrelated to real estate, by the way? But what was that moment that you decided I'm spending so much time at work and not enough time with my daughters? Like what happened there that you finally saw that?

There was a time period there where we had clients in and out of the office. We have a conference here in Houston that's the world's largest oil conference. and it's called the OTC offshore technology conference. And every night I was having dinners or clients and meeting with folks. And I was getting home. I was leaving the house before they got up and I was getting home after they were in bed. And my middle daughter said, oh, hey, dad, I haven't seen you since last week. And I was like, I've been here every night.

But in my mind, I'm like, oh, my God, my child, she's missing me. And this just isn't cool. But I have Bill Spay. You've got to take care of your family. You've got to take care of the things you're supposed to take care of. And I just, you just get burned out after a while. And I had to make a change. Yeah, for sure, for sure.

And then you see your little girls no longer in diapers. And now you see them drinking out of a, from a sippy cup to a real cup. And you're like, holy cow, I missed all of that. Oh my God. I'm very lucky. I didn't get to miss that. But I can't tell you how many of my students and clients I speak to that the reason they jumped into real estate is exactly that.

They were never around their children. They didn't get to see their children's. first steps and they didn't get to see when their child like finally took off on the bicycle. Yeah, that's that. That's why I asked that. And so then who was the first one that stepped outside of that field between you and your wife to actually look for a different occupation that allowed you guys to transition to whom? So my wife did back in 2014 when oil hit about 100 bucks. I don't know if you remember, but that January oil just collapsed. And by March, it was down to like 20 bucks. And so her company were doing several rounds of layoffs. And she was in the final round, the seventh round

of layoffs. And when she, you know, tears in her eyes, she said, I got to find a new job. And I said, you're not going to find a job in oil like gas. I guarantee that. We're not doing that again. And so we did searches for jobs outside of that industry and found her something that she loves. And over that time period, I said, I got to do the same thing. I can't. And I was never laid off. I just couldn't. You just have that uneasy feeling. Yeah, it's just constant. And I don't want that feeling anymore.

And I had it out of that. And just the peace of mind of not having that stress is huge for you, for your daily activities with your spouse, for your daily mindset with your kids. It's just a huge relief. I'd like to be around when they, you know, when they get married and go to college and all those different things.

And my heart, I felt like I was going to have a heart attack any day. I couldn't do that anymore. this is a real estate podcast, and you're like, why is she asking about his life and his story? It's because your story is the story of thousands of people that are looking for that,

a way out of that rat race, that daily grind or some people live on pins and needle like their job, that rug can be pulled from them at any second. And they live like that. And so they take that home every night. When they go to sleep, that's in their mind every single night. And you can't possibly live a complete fulfilled life if you have that in the back of your mind all the time. So, um, okay, great. So then came real estate. Like,

what happened that you decided, okay, my wife found a job she loves. Now I found something that I love. Why real estate? So that's a very easy question to answer. So in January of each year, we have our, my wife and I is financial advisor that pays a visit to us and kind of goes over everything of how we're planning, you know, things out for colleges and life insurance and preparing for retirement. And each year he brings out a sheet and shows us how close we are retirement. And in my mind, it was always 65 or whatever the age is. And his sheet showed that. And he was in this past year, he was like, oh, you moved up a year, like 64. Like you're going to have enough finances. And I'm like, last year, that was kind of cool. This year.

that sucks. And I'm like, no. And I'm just thinking to my mind, like, there has to be a better way. And so I had bought a property 10 years ago and had it in my mindset that, oh, we're going to, we're going to start snapping these properties off. We want to retire. And then life happens. You forget about it and you move on to other things. A few years ago, about three or four years ago, my wife and I bought a second property. And it was just a great deal. We got it. And we had a. property manager take it over and she started seeing the revenue coming in for it. And she said, what are we doing here? Like, well, why aren't we rinse and repeating this? Yeah. And so she got my mind to thinking like, yeah, you're right. And it's funny because I don't

know if a lot of people know this, but like there's these algorithms you have on your cell phone where if you say something out loud, you'll start getting those feeds in your Facebook and your Instagrams. I don't even know if I can say those words, but you'll start getting those feeds. And you're like, well, how did this happen? And so one day we were talking. talking about real estate and I was really like, like, gosh, I really need, I need to figure this out because I can't do it on my own. I can't teach myself what I don't know. And so it's funny. I was scrolling their Instagram and what pops up. It's a seminar for epic real estate. And I said, you know what? I'm going to check this out. Clicked on it, signed up. And I tell you,

I know I'm on your podcast, but I'll say it to anybody. It's one of the best and greatest decisions I've ever made in my life. It is already changing one. My mindset. for my wife and I to our pocketbook, which is outstanding. And it's putting us on a path. We kind of set a plan for 10 years. I think we can get there in seven to basically quit the rat race in about seven years. And that's on a slow pace while we're still working. We are just head steam, like full steam ahead, ready to go. And I love it. I love it. So thank you for the compliments. When Matt and I created epic real estate, our mission was really to help other people see that they can do this too. We're all about creating financial freedom in other people's world.

And look what you just went from, how old are you Mark, by the way, if you don't know. I'm 44. 44. Okay. So now you just went from, you move that needle from retirement at 65 to 64. You're 44 right now when you said that. You could do this in seven years. That's huge. And this is why we do this. So, okay, I love it. Tell me about the, you said you bought a property and then you bought a second property. Was the first property you bought like the property that you and your wife flipped in or how did that first property come about? So the first property, both my parents are investors. And they started doing it in the 80s

when properties were really inexpensive compared to what the market, but not compared to what the market is today, but for that time, you could get properties at a pretty inexpensive price. They were school teachers, and every penny and dollar they say they invested into properties. And when it came time for their retirement, they were able to retire a little bit early

and have a comfortable life instead of relying on teachers' retirement plans. And so I took some of those thought processes at that time in my late 20s and early 30s to say, oh, I want to do this. But I also had a lot of party left in me too. And after we bought the property, it kind of went to the wayside of in my mind, like, to continue to do this. So I bought that property in Houston. And I bought it for, I think at the time, $50,000. A single family home in a middle to lower income area. It had three bedrooms, one bath. Okay. It was about 1,275 square feet. A nice backyard, good neighbors. And we held that property. with a tenant, the tenant lived there for almost 10 years.

Wow, that's like a perfect tenant. Yes. Yes. Okay. And it's funny. He was such a nice, nice man. He would like fix something and then call me and say, hey, Mark, by the way, this broke, but I went ahead and fixed it.

Okay. He was just a really sweet, nice old man and took care of his family. He was 65 when he moved in and he was 75 when he passed. Just a really good guy. And so at that point, right coming up close to the end, of where he was when he was living there, the property ran into some troubles. When Christmas Eve, we had a electrical fire that happened at the house. Everybody was safe. Everything, you know, was okay. But Christmas morning, I wasn't with the kids. I was at a rental property fixing,

boarding it up and calling repair guys and trying to get things done. And so at that point, I kind of, we never had it under a property manager, which is one of my mistakes. I should have had it under property manager. But the market in Houston kind of started to accelerate. rating. This was right around 2020 Christmas morning 2020 and then going into 2021. And a market just started skyrocketing. And so I looked at kind of the values and I said, you know, this is kind of one, I'm not managing myself. Two, it's kind of far from my house. So it's an hour drive to get here every time something goes wrong. But three, I've learned that there's other ways to do this versus just owning one property and paying off the mortgage. And we found in the market that,

we could move the property for about $140,000, which is a pretty darn good profit to make. And so at the same time as when we started talking to Epic and listening to the various amazing ideas of how to do real estate with little no money or do real estate with just your get your mind out of the go to the traditional bank, get a mortgage, think differently. And we said, you know what, let's take this profit and let's go somewhere else and let's buy as much as we can. And that's actually kind of what we did. We closed it in December and I think I picked up the phone and called you the next day. So it's safe to say that you bought it for 50k. You sold it for 140. It's easy to say that you profited. Let's just call it 90K, right? Right.

Okay. Awesome. So you take these 90K and you said, I don't want to pay taxes on it. And you decided that you wanted to do a 1031 exchange. So it's your words. Tell me what a 1031 exchange is. So I had never heard of this until I talked to a few people in Epic and just understanding what it was. And one of the cool things was you guys have a list of, you know, as you call it, your team, build your team. And one of your team members is a 1031 exchange company. And so I picked up the phone. I said, I don't know what this thing is. But can you explain it to me and tell me how I can work with it. And just in layman's terms, it's basically deferring the tax that you pay on the gains of a property until another property until you're ready to sell that final property. So you can

exchange it as many times throughout properties like properties as you want and pay the taxes at the end. And that's what we did. I worked with a company IPX 1031, a great guy named Doug, and he walked me through it and he said, hey, let's get this rock and roll. Let me know when you get to close. It may have been the simplest part of the entire transaction, to be honest. Yeah, you know what? I love 1031 exchanges. They sound really complicated. But the reality is they're really not. It's the same exact process. And really what it is just an extra step of paperwork to avoid paying taxes on the capital gains that you're making on one of your properties. And there are exceptions to the rules and there are guidelines. And this is why we get a third party involved so that they could explain to you what you can

and cannot do because, again, there are limitations and there are rules. But heck, you defer your taxes for what could be a lifetime. So I am a huge advocate of when my client sell properties, whether it's a property that they've owed, whether it was a primary, whatever it is, if there's capital gains and it meets the guidelines, I'm the first one to say 1031 exchange. And then there's rules that you have to identify a property in a certain amount of time and you have to close in a certain amount of time. So why don't you share how you frantically call to me? Yes, that was a tricky situation.

So early on, we did identify properties through cash. flow savvy, which we wanted to invest in. And we wanted to move to a market where we could have long-term rentals. The market had about 50% of the residents there rented, which is always a good thing. Learn from Matt, but always a good thing from a property owner perspective. And we picked Kansas City, Missouri, and Kansas City, Kansas. And the amount of value you can get there compared to in other larger cities is amazing. And so working with you, we identified, I think, like, six properties maybe, and we picked three of them. And we said, you know what, we're just going to bite this big apple. Let's buy three at one time, which is kind of nuts. But you had to do it because of your exchange.

Exactly. Exchange, you have to buy like properties to meet the value of the previous property that you sold with the profit that you gained. So we had to strategically find properties that were going to exceed the value of the property that meet or exceed the value of the property that you sold. So we were kind of forced to do multiple properties, but I'm a huge advocate of diversifying your portfolio

and buying as many properties as you can without over leveraging yourself. So when I built a portfolio for you, Mark, I was pretending I was like building it for me because the properties that I sold to you and what I sell to all of my clients, those are properties that I would keep from myself and add to my portfolio anyway. When I was building your portfolio, I gave you six to choose from the gamut. But you had to choose multiple properties because of your exchange. Absolutely.

And one thing about the properties, you know, I don't know a great deal about what the aesthetic look of properties outside of Houston are. and because this is where I live. I know what house is supposed to look like here. And you kind of see Brown Sons in New York, so I kind of get that. When I clicked on the web address, you showed me each property. I was blown away of how beautiful these homes were redone and ready for moving. And I was absolutely stunned. I mean, I was ready to pack my bags and move in one of them.

It was, they were absolutely beautiful, which really took a lot of the stress and the anxiety out of the process. Now, of course, there's still stress and anxiety, but it relieved that a little bit to know, okay, I am in the right hands. I'm ready, ready to go here. And so we identified the three properties and we began working immediately with the finance company. Again, another great recommendation. It's Ridge lending. I think they're in Portland or Seattle or I'm not really sure. Portland, yeah. The wonderful person there, Shaley, she just, she took the idea, okay, you're buying three properties through a 1031 exchange. Okay, got that. Okay, let's figure out how to do this. And she took it and ran with it. And she identified exactly, you know, everything that we needed to lay out in front of her and have ready for clothes. So when you went to rich lending, you had to pre-qualify just like everybody else.

Now, the pre-qualification process is everything short of your DNA. Literally, it is such an extensive process. But the one thing I tell all of my clients is, listen, you go through the process once and then you never have to go through it again. Now, you have to update your bank statements and your pay stubs and your financials because naturally that changes. But the core of it, you only have to do once. Tell me about that experience when you went through that pre-qualifying process. What was it like? Sure.

It was like you said, it was a lot of data and a lot of information. We had to pull download and pull files from every account we owned. every property we owned, a 401k's, job records, W-2s, driver's license, just short of a blood sample. I mean, you've got to have that information ready to, and it's a business. You've got to have that information ready to go. And so it did take us a couple of days, get all that together, you know, working even at night. Kids are asleep to just get all that paperwork ready and then start sending it over to them so that they can make sure that we pre-qualified to buy these properties. Yeah.

And how long did that process, too? So that process, the pre-qualification probably took, I'd say two weeks, maybe up to two weeks. Yeah. And yours was a little longer because we had the moving part of an exchange as well. So not only was I working on, you know, preparing the portfolio for you, we then had the exchange company. And then we also had the moving part of the actual lending bank. And then all four components, including escrow, have to constantly be in communication is top on your behalf. and you know, you're copied on every single piece of correspondence, which I'm sure could be overwhelming, but I'm sure it's easier than you doing it yourself, right?

Exactly. Yeah, it could be 50 to 100 emails a day of going between different groups, but you want to make sure you're involved. This is your money and your future. So, yeah, I was on every correspondence and reading everything and making sure I understood everything. And most of the timing, you don't have to respond to that. That's just we're letting you know what we're doing in the background to ensure that you're taken care of. Yeah. And we also had the changing of the year from December over into January. So you had to update stuff right at the beginning of January again.

So it was a lot of paperwork. A lot of back and forth. Yeah. Mark, let me tap on some things. You said that when you saw the properties, you were blown away. They were beautiful. You would move into them yourself. To me, as a normal cash flow savvy property, that's kind of what we do.

And there are your instances. where occasionally I'll run into a property that I sold a couple years ago. And because my clients are going to need to do a divorce, I get to resell it. So it's not as fresh. But why were you so surprised that these properties were so great? The older homes don't tend to give off the great curb appeal. And these homes were a little older. And what I didn't know is that inside the homes were not older.

These inside the homes look like every construction you would do today in a new build. Because aesthetically, yes, the paint colors and those things, but it was new countertops. It was new furnace. It was the floors had been redone to vinyl flooring that is kind of modern. Two of them have like the grayish type with the gray wall with agreeable gray paint, which is pretty popular these days. White trim. The exteriors were all repainted, new roofs. One of them didn't need a new roof because the roof was like four years old.

but the other two. And the yards were cleaned up. There was one of me, it had like a new porch put on it, a nice modern wood porch, which was awesome. It looks like those properties you see in every major city where they're re-urbanizing the inner cities and some of the areas and just making it. Like, I could see a Starbucks going in next door, like that kind of stuff, you know, just that kind of beauty. And I just say, I thought I was walking in a grandma's house. But it was not that, you know, it was very modern and very, very cool. We do go out of our way to ensure that our properties are top-notch. But I mean, kudos to my Kansas City team. McAley and that team is just amazing. We, all of our teams, but we take personal pride in what we do. And 95% of our properties fit that description that you're talking about across all of my markets. But Kansas City is pretty special. That's just what we do. And really for making that happen. But okay, so you also, you know, tapped on the older home. And you know, Mark, I can't stress that enough because typically the price points that turnkey properties are in specifically cash flow savvy. Our price point is between $100 to like $160,000. And that is typically going to bring you an older home. But it's older on paper because although we keep the shell of the property, everything else is pretty much updated from the, you know, from the roof to the aft track, to the water heaters, to the inside countertop, the bathroom. So, yes, on

public records, the home could have been built in like 1940. But the reality is, we just redid the entire property in 2022. Or even, you know, before we bought it, somebody did the Volfiene in 1999. Yeah. And then we just got to do it again. So chances are that although you will come across an older a property. It's just older on paper because everything else has pretty much been redone. Nothing looks like the mindset of the older home, but nothing looks old in these homes at all. I know. But the most important thing was, and even though, you know, the pictures are secondary to me, the data you sent with the properties to identify the cash flow that would come from them on a monthly, quarterly and yearly basis, along with all the other analytics, that was the focal point.

And that was right on point. Like literally you said one property will rent for 1,200 a month and we rent it for 1,200 a month. And so that's what was like, okay, how many more can we buy it? Okay. So I know everything wasn't always roses. I'm hearing on the information and people are like, oh, that's too easy. Oh, she paid Mark Crawford to say that. Tell me there were some bums. Because let me tell you, I was up with you at like 10 o'clock at night before. Share a couple of those bumps in the road. Absolutely. So we had homes inspected. One of the bumps in the road was after the inspection, you know, these are, like we said, older homes. And so aesthetically, they look really beautiful. And but when the inspector went into a couple of them and dug down really deep, we had some issues. And the inspector gave us a full list of all of the items that needed to be fixed or replaced in, you know, before closed. And I knew in my mind, I wasn't closing until these properties are on point like they should be. be. And so that list, you know, we, I got it. Then I talked to Michaela and her team and said, hey, look, you guys got to fix these items. And I don't live there. I live in Houston. So I can't be on site to say, oh, it's fixed or it's quote fixed, you know, so. How do we handle that? So I had to rely on on the team to say, you know what, Mark, we got you. So every time an item was fixed on the list, there would be a photo attached to the spreadsheet that we were actively keeping as a

Google Doc between the two teams, my team and the sellers team. And every time something was fixed, there was a new photo updated saying, hey, I don't fix on this date. And here's a new picture of what was fixed, which again gave me pretty darn good relief. And so as we were moving closer, that was another point. We were still kind of fixing things all the way up to close. And I was getting a little nervous because, uh-oh, we're going with some close dates here. But it's amazing how quickly things can get fixed when it's a little pressure on there. So, Everything on the list got taken care of in the right way and all the photos. And, you know, I said, even down to the one item, if it's one item left, you got to fix it.

And it was done, which is really cool. Yeah, no, we do go out of our way to fix things. And the reality is that we prove to you that it's corrected, but you, the buyer, has the right to even conduct a post inspection. Yes. We're sure that we did everything that we said we were going to do. And our teams are really, really good about that. And we're also really good about timelines because I know that you and I were running up against the clock with your 10-31 exchange. So tell me about that. So one aspect about the Texas market, and I'm going to go back to Texas, but I'll come back to how that relates.

In Texas, as a husband and wife to buy real estate, you have a joint account. It doesn't matter if it's my wife's account or her or my account. We're a married couple. I can pull from her. She can pull from me. We can go buy property. in individual names or joint names. Rules don't quite work like that in Kansas City or Missouri. So where we ran into trouble was we put all the bulk of the money, the additional money we needed at close, not the exchange money, but we put the bulk of it in my name in a bank account sitting there thinking,

great, you know, we're going to move forward with this. Well, the properties were being bought in my wife's name as an individual because we want to spread out the amount of properties we can individually hold. And so she was taking this package. I'm taking the next package. We didn't know I can't have the money in my account. So we had to scramble and work through our financial advisor to move money from him, which is under my wife's account, then had to repay it, move money from my bank account

into the 401K, make sure we didn't break the rules there. I mean, it was kind of a nightmare. But my financial advisor, his office closed at 4 o'clock and he was there to like 7 or 8 clock at night trying to help us manage this, you know, headache. So that was my mistake. Make sure we understood the rules before going through the pre-qualification, but we sure as heck know now of how to manage this on our next buy. So yeah. Well, you don't know what you don't know, Mark. And the reality is that one of the questions, and we learned from your transaction as well, when you do a 1031 exchange, it has to be like for like. And so we talk about that it has to be like for like. So if you

close it in the name of, you know, Mark Pofford, then the properties that you buy have to be in, you know, that thing. So speaking of like for like, when we talk that in lingals, sometimes we don't remember that we do this 100 times a week. You do this two times in your lifetime, maybe, you know. So when we talk about like for like, it just really taught us to really break down what that means to you even more on an elementary level. So I know you got a resolve and I knew it was going to be resolved. I just, we could have avoided that headache for you because all of the parties were scrambling at the last moment because it's not something, we knew the funds were there. So we didn't dive into it until the end and the end was near our exchange deadline. So interesting.

But I learned a lesson too. I mean, you know, these are things that need to be discussed at the pre-qualification to make sure we got ducks in a row before, you know, we go off to venture to find the properties. That was pretty scary at the last moment because not only could I have potentially lost the property. But I could have potentially had to pay a huge amount of tax in it, which would have heard even worse. Everybody starts their world to ensure that that would happen. That would have hurt. We totally took responsibility, which is why we started moving mountains at the last hour. I mean, it's not normal.

I remember it was like a Friday evening. And it was like six to the evening, my time, California. So that meant in Houston, it was 8 p.m. And in Portland, Oregon, my bank was still working. they were still up. Ridge lending, kudos to you. And they were like,

we will get these documents out tonight. And they did it. And so, yeah, this is why your team is so important. Because if you didn't have those relationships, if you didn't have that team, then you would have lost the properties and you would have a hukubugs in the

text in Texas. Yeah. We were signing documents like 9.45 that night just to get this thing closed. I mean, But we were ready to do it. I mean, we wanted those properties. You wanted those properties and you didn't want to have to pay Uncle Sam. Absolutely. Yeah. Absolutely. He gives us taxes in another way. So you talked about how I quoted that you were going to get $1,200 in rent and long and behold, I got you $1,200 in rent.

And it was that case for all three of the properties. Were your properties teneted at closing? Was it 50-50? Tell me about that. So two of the three were tenanted and the third came shortly right after like within, I think the next week it was tinted it really, really quick. It was awesome because I knew going into closing, okay, two of them are done. I know these two are done. And luckily enough, the last one that was the two bedroom one bat that had a lower price point wasn't done, but I knew it was coming. So I wasn't stressing too hard. But having that kind of walk in the door, you already have a.

tenant in place. And I don't want to just say any tenant, the abetted tenant through the property management agency, because at your advice, we started that process early to say, hey, we haven't closed yet, but here's all the information you need about the property. Let's start moving forward to try to find a tenant so that we can get this thing rented on day one. So we're working on that in tandem while we're closing because remember, property management, the way they get paid is if they collect your rent. So if they don't put a tenant in your property and they don't collect rent, they don't make money. So if that's as important for them to place a quality tenant,

than it is for you as the owner to have a quality tenant to pay the rent. Yeah. And the good thing is the company we went with, they were really, it's alpha one property management. They're really responsive. Like, I can email them at 5 o'clock at night, and the next morning I got, you know, a response to it. So I was pressing them pretty hard, but through it in that last week,

because I wanted to know if that last property was going to rent it. And they were right behind me working on it. the reasons why we've rejected this tenant or what the answers were. So, yeah, our team has no problem rejecting a not qualified tenant because we've learned through the hard, through the punches of life that if you just put a hot body in there, it's so much harder to remove a tenant if they're not qualified after the fact. So yeah, yeah, they do go out of their way. So tell me, let's dive into the properties a little bit more.

You picked up three properties. We know that they're ones in Kansas City, Missouri, and then, one's in Kansas City, Kansas, two are Kansas City, Missouri. Tell me about the price point of the properties. Tell me about their rents. If you know them off the top of your head. Sure. So we picked up one that was at $148,000. That is one that's in Missouri. The rent for that one is $12.50 a month. Second property is in Kansas City, Kansas. We picked that one up for 102. The rent is $9.95. and the third property was $112,000, I believe. And I believe the rent is $1,000,000 a month, if I'm not mistaken.

And it's obviously, you know, 20% down, exchange money all involved. Let's talk about that for a second. You said, obviously it's 20% down from exchange money. But I remember the property that you sold, you bought 10 years ago for $50,000, and you sold it in January of this year for $140,000. So basically, the money that you used to buy this property was free money from appreciation of real estate. Absolutely.

What a concept. So I was going to break down the returns because each property averages anywhere from like a 6 to 8% cash on cash return. But the reality is. This is infinite returns because the money that you used to buy this property wasn't money out of your pocket to begin with. It was profit. Now you see why I'm so mad at myself. I didn't continue doing this 10 years ago.

One question that we asked, what would you have done different in real estate? And the answer is, I wish I would have bought more and held more across the board. So my goodness, Mark, I mean, I'm really big on the numbers and breaking down the numbers and the reality. is with the 20% return, you did pretty well. You were at a 6 to 8% cash on cash return. You avoided. You deferred taxes. I'm not saying you're avoiding taxes. You deferred the taxes. And then in addition to that, the reality is you bought this with profits from a property that you bought 10 years ago that performed amazingly well because you were very lucky to have one tenant for 10 years. Yeah.

The past in your property, bless his soul in heaven. but the reality is this is an infinite return for you. And you know what? I'd like to say that your kids are, they're really, really young. So I'm going to say that one of these properties goes to each one of the girls. And my forecast is that each one of these properties is going to pay for college education and a wedding for each one, those girls. One thing you guys taught me was about the equity you have in other properties.

And I have another rental property here in Houston that I'd never thought of about the equity. And I looked it up the other day, just, you know, trying to get a beat on what the equity is. It's enough to pull out, still make one, but still make cash flow on the property and take that cash to buy the next property. So you should be here for me pretty soon because it's time to get another one. I've got some more amazing stuff in Kansas City for sure. Mark, I love that you shared your journey with us and I love that you were so candid about it. So now I'm going to ask you the questions that I want to know about every business that I do business with.

There are roses and thorns, roses being the highlight of this whole experience. And thorns being not so great. I wish I would have done it different or that didn't really work for me. What was your sword about this whole experience for you? One, the anxiety of not being in the same city, which can give you quick anxiety of Is this really, you know, is this really happening? Are they just sending me fake pictures or, you know, whatever the case may be? One of the thorns was not having the information I needed to know to get things done a little smoother. And we've talked about that about, you know, how money works in different states.

I wish I'd known that earlier. I think one of the thorns, too, was there's a lot of paperwork and there's a lot of the same paperwork you have to continually send. And again, and I started getting a little snippy like, man, I've sent this. like three times. Like, you know, but it's, they need it the third time because they need the original copy for me and the show proof that it came from me. And so I think those are the immediate things that kind of stick out with me. Okay.

So those are the ones that are all that for the next time you could overcome because reality is the paperwork. Yeah, you can create an electronic file. You always have it. They need it. You just send it over. And really the education part of the laws, Mark, even sometimes I don't know all of the laws in all of my markets. And I've been doing this for 17 years. So that takes a little bit of

patience and a little bit of a learning curve. But how did you overcome the anxiety of not being in the same city? Because that's a very common feeling, if you will. It changes when you start to get the cash flow. But that happens after the fact. But how did you overcome it during? So I think if the teams that were in Kansas City and the weren't communicating like I like or like I would expect, I would have kind of freaked out. But because they were responsive to every email, every phone call, and even like, hey, I don't like that picture of the angle. You got to step back because I'm not trusting that. Ten minutes later, you get a picture of that angle that you're looking for. And I think there's a little bit of trust you have to put in people, too. Like, not everybody

in the world is out to get you. And so I had to put a lot of trust into cash flow savvy, you and your group. I had to put a lot of trust into Michaela and her group and put trust in the ridge to know that they have worked with y'all in the past, know you guys, trust you guys, and make sure that it's done right. That's a lot of money I'm putting out into the world to say I'm going to put some faith out there. So I had to have some trust. But trust, like I think it was Ronald Reagan trust, but verify. Yeah, I needed to verify every step of the way like, I know you're saying that pipe is fixed, but I need you to get down there and send me a picture of it right now. And so I think because of the, again, the communication that was coming towards me,

that's what made me feel comfortable. And it wasn't like communication like once a week. No, it was 2 o'clock, 6 o'clock, 9 o'clock, here, I just did this. So here's a quick picture. It was on point the entire way. You know, some people believe it or not, complain about our overcommunication. So it's like sometimes we can't figure it out. Is it either over communication or is it under communication?

That word shouldn't even exist. Whatever. I'd rather get complaints about that I reach out to them too many times that I don't reach out enough. So that's awesome. Okay. So I heard you at Thorns. What are your roses? Cash flow in my bank account every month.

That's definitely number one. It's pretty cool when you pop that account up and you see the auto deposit. You're like, yeah, buddy. I think the ease of working with the property management company, like taking over day one, knowing that, you know, they've kind of got the problems handled as the problems pop up. You know, I have a buddy right now that's going through a 1031 exchange. He's selling a property and he is having a nightmare. He can't. You should refer him to Casual Salmi.

I know, right? But I think the ease of working with the IPX company, you guys always talk about build your team. And I know I've taken some folks from your team to utilize myself, but that stuff's important because I got a full-time job. I can't look after every single aspect of this deal all day long. And I need some folks to step up. And that's what the groups that we've kind of put together have done. They've stepped up and made sure that I was taking care of through the process. My wife and I take care of.

And then that's the other important thing. I think building a real estate portfolio makes a lot of people nervous. And my wife was one of those folks who was pretty nice. nervous about going into building a portfolio saying, oh, you've got a lot of debt out there. But it's not bad debt. It's good debt. And so proof is in the concept when you show the proof and she's seeing the proof. She's like, how many more we got on the plate?

When can we do the next one? You know, it's the proof of the concept that you're showing. And I think that helped solidify it in her mind. Hey, we can really do this. We can really be done with the game in seven years. We got to work our butts off to get there. can really do this. You can work your butts off to do it.

You can work smart. You have equity in property sitting idle. All you have to do is pull that equity out and buy another property. Look what your first property did that you bought for $50,000. You sat on it for 10 years and it produced, you sold it at 140. So that's crazy. I'm a huge believer in Michael Todd. He is the bishop of a transformational church in Tulsa.

And he talks about having crazy faith. And of course, we talk about crazy faith and just our own spiritual beliefs. But you're going to have crazy faith in the system to make this work, especially if you live in one market and this is happening in another. But you said it spot on. The proof is in the pudding. And it starts with one. It starts with one property.

I mean, look at that one property that you bought 10 years ago for $50,000. That bought you three more properties that's going to pay for your kids education and their weddings. Yeah. You are a girl, dad. I am. I love it. Fantastic. Okay. So my last question to you, Mark, is very, very simple. What would you tell somebody in your shoes that are stuck in the rat race that has considered real estate, but no, not really. I'm not sure. What would you tell them?

Walk over to the mirror, take your hand, slap yourself in the face, lick yourself in the eyes and say, it's time to get up and do something about it. That's a lot of people's issues is that they want to do it, but they end their minds. I just don't know. I don't know can I do it? And you always laugh at me because I swear I took this from Matt, and I repeated all the time.

Move at the speed of instruction because it's so important in life. If you get stuck, ask somebody for help. Pick up the phone, Google it. I don't care how you do it, but ask somebody for help. Do it. This is going to be the. vehicle that gets me out of the rat race. And it took me slapping myself in the face saying, Mark, what the hell are you doing? You want to spend time with your kids. You want to retire early.

You want to take a nice vacation every year. I'm not trying to buy a yacht. I'm just trying to be around for my daughter's wedding and not have the stress of a full-time job taking it away from me. And so get off your butt and go do it. I even, we started, my wife and I started, even this year, we started the company now to expand our real estate investing. And we named it after our daughters. We are building this for them. And that's my motivation. Every morning I have a sign in my window that has their names on it and how many houses exed out that we bought. Every morning and every night, I see that sign and I know this is why I'm doing this for them, for my wife, for my family, to have some freedom and to build something that's better than what I'm doing now.

I couldn't have said that than myself. I've taken so many things from that because he's just amazing. But he lives off of moving at the speed of instruction. And he lives off of travel as far as you can see. And when you get there, you'll see further. And that's what I can tell. All of our listeners, if you just take the next step, the following step will appear without you even knowing from where crazy faith.

But it will create a true transformation in your financial future. Mark, it has been amazing. This is why I call you a friend. I feel like she invited me for dinner. I was just on saying that. Next time you're in Houston, you're having dinner with me and my kids and my wife. Mark, thank you so much for your time, your wisdom, your sharing. I absolutely know that this segment is going to make a difference for not only one, but many people out there.

Awesome. That's how we do it. And I'm really happy that you're apart. I love paying it for it. or people paid it for me. Let's do it. Awesome. So if you want to be the next person to buy a Cashflow savvy, turnkey property, reach out to me, go to our website, go to cashflow savvy.com. That's Savvy with two Vs. Click on the link of contact me or download the rat race escape plan because that's going to show you exactly what Mark is doing in his life to get out of the rat race.

a very good day to you. Thank you so much for your time. And to my fellow listeners, I will catch you on the cash flow side. Have a great day. And that wraps up the epic show. If you found this episode valuable, who else do you know that might too? There's a really good chance you know someone else who would. And when their name comes to mind, please share it with them and ask them to click the subscribe button when they get here and I'll take great care of them. God loves you and so do I. Health, peace, blessings and success to you. I'm Matt Terrio. Living the dream. Yeah, yeah, we got the cash flow. We didn't know home boy, we got the cash flow.

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