Epic Real Estate Investing - Mark Kenney - Think Multifamily | 404

Episode Date: June 6, 2018

Mark Kenney, seasoned real estate investor, entrepreneur, and founder of Think Multifamily, joins Matt Theriault for today's Thought Leader Thursday! Learn the biggest mistake newbie multifamily investors make, what Mark wishes he knew when he was starting out, the indicators of a good multifamily deal, and much more! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. Hello, I am Matt Terrio of the Epic Real Estate Investing Show, and this is Thought Leader Thursday. Today I'm joined by a seasoned real estate investor, entrepreneur, and founder of Think Multifamily. He started his real estate career over 20 years ago and has extensive experience in property valuation, acquisition, and operations. He has a passion for helping others succeed in the multifamily arena as well. He's invested in over 1,200 units and has a... the top-notch reputation among the multifamily investment community for providing exceptional value

to investors and a community while being very easy to work with. So we like those types of people here. So let's get at the show. Mark, Kenny and Mark, welcome to the show. Thank you, Matt. Appreciate it. Yeah, glad you're here. Hey, before we get into multifamily investing, what were you doing just prior to getting involved in real estate? For larger properties, I was doing IT consulting, but I actually started buying originally right when I was getting out of college. Smaller two, three, four unit properties. So I was pretty much a new student. So what was the actual inspiration that had you choose real estate other than IT for a career path or something else? Well, I kind of, I was doing pretty well with IT. I ended up starting my own IT company in 2008,

had some pretty big customers like Marathon Oil and T-Mobile and had projects kind of all over the world. But slept about three hours a night and had no time for family. And it caused a lot of issues more marriage-wise because of that. So I had to make a choice to either keep doing what I'm doing or try to start buying larger properties and try to replace my income and have a better family life. When did you realize or what caused you to realize what inspired you to pursue multifamily? I mean, with so many different options inside of the real estate arena, what made you do do is multifamily? When you decided that was going to be a thing? When I first started buying, I was like 21, 22, I really didn't know much of it. You know, it was years and years of

ago and it was self-storage and really wasn't very popular especially in our town at all because you're talking 20 25 years ago almost now and really didn't know about you know some of the other asset classes like assisted living things like that so to me it made sense because we lived in places we run in places and everyone needs a place to live not everybody needs a storage unit not everybody needs assisted living but with unless you live on the streets you need a place to live The multifamily, that was because it served the most people. Yeah, serve most people. And it's kind of, it's one of those things you can't go without.

We all need a roof. That's right. An argument online, which I felt a sucker to just the other day. And he was arguing with me about how crypto was going to take over real estate. And I was like, I can't live in a cryptocurrency. You can't eat it. You can't drink it. Yeah.

I'm not saying people can't make good money with it. it because they can. But at the end of the day, I look at it, if people want to actually really have something with hard times come tough, you can place to live, whiskey and ammo, you're probably pretty good for bartering. You must have been talking to Mitch Stevens. As someone's getting started, because we don't do a lot of multifamily conversation here. So I'm really glad that you're here to talk about this because I'd rather have someone much smarter than me about it, address the audience. When someone decides to go in and get involved in real estate or multifamily, what's the biggest?

mistake you see people make right in the beginning. Not getting educated enough up front, thinking they can do it all on their own. I did it on my own initially and made mistakes and a lot of hard lessons learned. And I think people just think, well, maybe you're a smart guy. You can figure it out. End of the day, I use examples of like the UFC a lot. So, you know, someone's reading books for a while, how to fight. Someone's actually training how to fight.

The person training how to fight more times than not going to beat the guy. that's reading a book, right? So that experience is invaluable to me. You know, been through it, lived through mistakes, lived through some tough times, and how did you deal with that? Mm-hmm. You know, I had over 100 single family houses. And I decided, okay, it's time to go into multifamily. And I started with a 40-unit building.

I was going to completely rehab. And I said, how difficult could it be? It's just 40 doors all underneath one roof. And there are very different animals. I quickly learned that. They are. totally all right so how should it be approached someone says okay i'm ready to make that transition um i mean education yes and maybe partner i don't know but how would you recommend someone get started

i think finding a partner has done it before we still partner deals we don't have to from a skill set perspective we still decide to partner with people it makes it you know you can share different skill sets maybe someone's better than at a different area than i am and maybe i'm better than them and something. So I think really finding a partner to team up with. And then, you know, I would also say don't don't go small necessarily. I mean, there's no reason necessarily to start small unless there's a, you want to, right? We have people in our group that will start with an 80 unit or a three, you know, a guy actually last year did a 321 unit his first year. So it can be done. It's just, it's that confidence builder that yes, if we find a deal, we can close on it.

Finding someone that's experienced and go along for the ride, so to speak. Right. And that would be a good starting point. What's one thing that you wish you knew when getting started? Plan for the worst, pray that never happens, but put every single thing in writing no matter how small it is. True. And engage those attorneys. Don't try to skimp and have someone that's not an attorney, put the documents together.

But account for everything. For example, I have properties I wanted to sell before. Can't sell them because partner doesn't want to sell them. I don't have a tag-along clause in there. Well, that's my fault, right? So there's so many things we've learned and we've accounted for in our agreements now that account for almost every single thing that we think could go wrong. Everything's fine when it's fine until there's money involved or money lost.

And then that's when people's true character comes out. There's a lot of people out there that teach multifamily and talk about multifamily and advocates of multifamily. There's countless books on it. Is there a piece of bad advice out there? that you see or hear frequently, that you just kind of cringe when you hear it. I think people say it's easy, you know, when a guru stands up there and acts like, everything's always perfect, nothing ever goes wrong.

It's not reality. Things do go wrong. You're buying a business. So to give people this misconception that everything's always perfect all the time, it's not. So that's probably the one, I don't know if it's advice or not, but the one approach people have when they say it's easy. Yeah. Anybody can do it.

Well, anyone can do it, provided they're, you know, capable of doing it and have the drive and desire. We look at hundreds of deals, you know, before we get deals. So it's not like you just go out and buy a deal. It might look at 100 deals before we get one. So there's a lot of work involved. Right. So you look at 100 deals. How do those 100 deals find that way to you?

Typically for us, we have a lot of good relationships with brokers. We bought from in different areas. We also get some deals sent. to us from some of the mortgage brokers, property management companies, and the people we just know in the market. We don't do necessarily, we don't do actually at all any of the direct marketing campaigns or anything. I'm not saying anything wrong with it. It's not something we've gotten into, but it's all been more through relationships of other mortgage brokers, mortgage brokers, property management companies and selling brokers for us. So relationships, right?

Yes, for sure. So one thing that's, you know, is very much a part of my world inside of single family homes is we do a lot of direct to seller marketing. Right. We're looking for that distress. We can solve their issue. And this is a fair trade. And it works really well.

But for the most part, for a single family or a house guy that's out there investing, to go with relationships, to go with brokers and stuff like that, you run into a lot of people that want to sell, not necessarily the people that need to sell. And it's a little bit more difficult, even if you have good relationships to find a deal, there with any sort of equity spread or any sort of return. Right. How does that differ going through brokers, say, for multifamily? How do you find good deals or what are some indicators of good deals?

Yeah, I mean, a lot of brokers we work with kind of know what our criteria is or what we're looking for or else we typically look for a deal that has some sort of value-ed component, like most people. The best in my mind is when you have a management company that's messing things up. That's usually pretty easy to fix. And then we try to look for deals that have some sort of cash flow component to them up front. Sometimes we don't. Sometimes we look for a real true, true value ad deals.

But I think with the market right now and where the cap rates are so compressed, I think this speculation that things will keep going up and up, great if it does. But I'd rather be in a position where the cash flow is there and we can ride out the wave because end of the day, you know, the cap rate only impacts a sale or purchase, right? It doesn't impact my cash flow. That's a refy, right? But at the end of the day, I think the cash flow is really, so we talk to brokers, they know what we're looking for.

Then it's a lot easier for us to weed through those deals rather than going through every single deal they send to us. I don't have time to do that. Is it fair to say that the big distinction there is, say with single family and obviously there's some grand overlapping area there, but with single family, more of kind of looking for the equity and the profit that already exists, and inside of multifamily, you're looking more for the potential. I think one of the biggest difference between single family and multifamily

just the way the property is valued. I can buy a single family home and put gold around the floors and countertops and everything. The end of the day, they're going to say, what's the cop next door and down the street? It's limited, right? With multifamily, I can go in and improve the property either by increasing, you know, the rent, revenue, and or decreasing the expenses. Well, for every dollar I can do that for, you know, it's at least $10 of value because of the way you're buying a business, right?

And without going to all the details, but that's the way it works with the cap rate. So every dollar I increase the value of the property, I can increase the value by, you know, $10 to $16 for every dollar. That's the difference between single family. Well, on the flip side, we still have plenty of people out there in that choosing single family over apartments. What would you say is the advantage inside of single-fam it doesn't exist in multi-fam? I think it's easier to sell for one, maybe not right now, but typically easier to sell. I think it's a little easier if you want to self-manage, have more control over it. And in some areas, I mean, you know, you can buy something that actually really have the appreciation go really high.

Like I live in Dallas and it's done really well. But I think the cost of entry is much lower, really. And sometimes though you'll have recourse notes and things like that where multifamily we don't. But I do think it's attracted to people because you can relate to it. They live in a house. They can easily relate to I can have somebody else live in a house. Nothing wrong with it. We did it.

Like you said, you have 100 homes. It's tough to get to 100 homes. Right. Generally speaking. So you go slower, but you also don't necessarily have as many people involved. We buy multifamily. you know, we're inheriting things like issues at the property from, if there was a fire before, that's now my problem is a new buyer. It's my problem. I have to inherit some contracts

for laundry contracts sometimes or, you know, cable contracts. So it's more complicated for multifamily, not hard. It is more complicated. So single family is still good for sure. Yeah, totally. No, I think that there's one for both in someone's portfolio and it's just personal preference when it comes down to it it is right super well thanks mark for for joining us if someone wanted to get in contact with you or learn more about what what you do and how you do it what would be the best way for them to do that our website is think multifamily dot com and then my email address is mark maryk at think multifamily dot com super that's pretty darn easy easy easy enough great well thanks for being here mark it was a pleasure and we'll do it again

Thank you, Matt. Appreciate it. You bet. All right, that's it here at the Epic Real Estate Investing Show, and I'll see you next week for another episode of Thought Leader Thursday. Take care. This podcast is a part of the C-Suite Radio Network. For more top business podcasts, visit c-sweetradio.com.