Mark Kenney – Think Multifamily | 404

mark kenney

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!

mark kenney

What You Will Learn About Mark Kenney and Think Multifamily:

  • Why Mark switched from IT consulting to real estate investing after college
  • How Mark chose multifamily out of all his real estate investing options
  • The biggest mistake of newbie investors
  • The value of partnerships in multifamily investing
  • What Mark wishes he knew when he got started
  • The worst multifamily advice Mark hears
  • Indicators of a good multifamily deal
  • The biggest difference between single- and multifamily deals

Whenever you’re ready, here are a few ways we can help:

  • Would you like to meet in person? Our next live event is right around the corner! Go to EpicIntensive.com for the details.
  • Become an Epic community member at The Epic Real Estate Investing Show 
    One of my favorite things to do is share with investors the latest and greatest tactics and strategic friends I make. I do it every week and you can listen in by subscribing to The Epic Real Estate Investing Show podcast on iTunes – Click Here.
  • Grab my book, Epic Freedom ($1) 
    I frequently hear from people looking into investing in real estate for the first time, “How long is it going to take?” So much so, I wrote a short book about the 2 easiest and fastest strategies to a paycheck in real estate. You can grab a copy for $1 and I’ll pay the shipping – Click Here.
  • Join our Badass Investor Program and be a Case Study 
    I’m putting together a new Badass Investor case study group at Epic Real Estate this month… stay tuned for details. If you’d like to work with me on your real estate investing, go to FreeRealEstateInvestingCourse.com to get started.
  • Work with me One-on-One 
    If you’d like to work directly with me on your business… go to REIAce.com, share a little about your business and what you’d like to work on, and I’ll get you all the details!
  • Also, check these out:

Thanks!

Thank you so much for joining us on this episode of The Epic Real Estate Investing Show! Please subscribe to the podcast so that you will get instant access to our new episodes.

If you found this podcast helpful, please take a few minutes to leave us a positive review in iTunes. Your reviews help to improve our search rankings so that we can spread the love. Thank you!

Transcript:

Matt Theriault: Hello, I am Matt Theriault of the Epic Real Estate Investing Show, and this is Thought Leader Thursday.

And 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 evaluation, acquisition, and operation. He has a passion for helping others succeed in the multifamily arena as well. And he’s invested in over 1200 units and has a top-notch reputation among the multifamily investment community for providing exceptional value to investors, and the community, while being very easy to work with. So we like those types of people here, so please welcome to the show, Mark Kenney. Mark, welcome to the show.

Mark Kenney: Thank you, Matt, appreciate it.

Matt: Yeah, glad you’re here. Hey, before we get into multifamily investing, what were you doing just prior to getting involved in real estate?

Mark: For larger properties, I was doing IT consulting. But I actually started buying originally when I was getting out of college. Smaller two, three, four-unit properties, so I was pretty much a student.

Matt: So what was the actual inspiration that had you choose real estate other than IT for a career path or something else?

Mark: 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.

Matt: Mm-hmm (affirmative).

Mark: 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.

Matt: 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 choose multifamily, when did you decide that was going to be your thing?

Mark: When I first started buying, I was like 21, 22, I really didn’t know much … it was years and years ago, and it was self-storage wasn’t very popular, especially in our town, at all. Because you’re talking 20, 25 years ago almost now.

Matt: Mm-hmm (affirmative).

Mark: And really didn’t know about some of the other asset classes, like assisted living, things like that. So, to me it made sense because we lived in places, we rented 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.

Matt: The multifamily, that was because it served the most people?

Mark: Yeah, it served the most people, and it’s kind of … it’s one of those things you can’t go without.

Matt: We all need a roof.

Mark: Yeah, that’s right.

Matt: An argument [crosstalk 00:02:34] I fell 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 …

Mark: Well-

Matt: I was like, “I can’t live in a cryptocurrency, I still need shelter.”

Mark: You can’t eat it, you can’t drink it.

Matt: Right.

Mark: I’m not saying people can’t make good money with it, because they can, but at the end of the day, I look at if people want to actually really have something when hard times come tough, you have a place to live, whiskey, and ammo, and you’re probably pretty good for bartering.

Matt: You must have been talking to Mitch Stephens. As someone that’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-

Mark: Sure.

Matt: 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 in multifamily, what’s the biggest mistake you see people make right in the beginning?

Mark: Not getting educated enough up front. Thinking they can do it all on their own. I did in on my own initiative and made mistakes, and a lot of hard lessons learned.

Matt: Mm-hmm (affirmative).

Mark: And I think when people just think, “Well, maybe you’re a smart guy, you can figure it out”, end of the day if you haven’t … I use examples of … I like the UCF a lot, so 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 is going to beat the guy that’s reading a book. Right, so that experience is invaluable to me. Been through it, lived through mistakes, lived through some tough times, and how do you deal with it.

Matt: Mm-hmm (affirmative). I had over 100 single family houses, and-

Mark: Wow, that’s a lot.

Matt: I decided okay, it’s time to go into multifamily, and-

Mark: Sure.

Matt: Started with a 40 unit building I was going to completely rehab, and I said, “Well, how difficult could it be, it’s just 40 doors all underneath one roof?” And they are very different animals, I quickly learned that.

Mark: They are.

Matt: Totally. All right, so how should it be approached? Someone says, “Okay, I’m ready to make that transition.” I mean, education, yes, and maybe [inaudible 00:04:31]

Mark: I think partner. Yeah.

Matt: How would you recommend someone to get started?

Mark: I think by finding a partner that’s done it before. We still partner on deals, we don’t have to form a skillset perspective, we still decide to partner with people. It makes it … you can share different skillsets, maybe somebody’s better at a different area than I am, and maybe I’m better than them in something, so I think really finding a partner to team up with. And then I would also say don’t go small, necessarily. There’s no reason necessarily to start small unless you want to, right? We have people in our group that will start with an 80 unit, or a guy actually last year did a 321 unit his first year. So it can be done. It’s that confidence builder, that yes if we find a deal, we can close on it.

Matt: Finding someone that’s experienced, and go along for the ride, so to speak.

Mark: Right.

Matt: And that would be a good starting point. What’s one thing that you wish you knew when getting started?

Mark: Plan for the worst. Pray that never happens, but put every single thing in writing, no matter how small it is.

Matt: True.

Mark: And engage those attorneys, don’t try to skimp and have someone that’s no an attorney put the documents together. But account for everything. For example, I had properties I wanted to sell before, can’t sell them because the partner doesn’t want to sell them. I might have a tag-a-long clause in there. Well, that’s my fault. So there’s so many things we’ve learned, and we’ve accounted for in all our agreements now, that account for almost every single thing that we think could go wrong. And everything’s fine when it’s fine until there’s money involved, or money lost, and then that’s when peoples’ true character comes out.

Matt: There’s a lot of people out there that teach multifamily, and talk about multifamily, and are 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?

Mark: I think when people say it’s easy. 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.

Matt: Yeah.

Mark: “Anybody can do it.” Well, anyone can do it, provided they’re capable of doing it and have the drive and desire. We look at hundreds of deals before we get deals, so it’s not like you just go out and buy a deal. We might look at 100 deals before we get one.

Matt: Mm-hmm (affirmative).

Mark: So there’s a lot of work involved.

Matt: Right. So you look at 100 deals, how do those 100 deals find their way to you?

Mark: Typically for us, we have a lot of good relationships with brokers we’ve bought from in different areas. We also will get some deals sent to us from some of the mortgage brokers.

Matt: Mm-hmm (affirmative).

Mark: Property management companies, and then people we just know in the market.

Matt: Mm-hmm (affirmative).

Mark: We don’t necessarily … we don’t do, actually, at all direct marketing campaigns or anything. I’m not saying anything’s wrong with it, just not something we’ve gotten into. But it’s all been more through relationships of other mortgage brokers, property management companies, and selling brokers for us.

Matt: So relationships, right?

Mark: Yes, for sure.

Matt: So one thing that is very much a part of my world inside of single-family homes, is we do a lot of direct to seller marketing.

Mark: Right.

Matt: We’re looking for that distress, and that’s typically where we can get a good exchange for equity if we can go in and we can solve their issue. And it’s a fair trade, and it works really well.

Mark: Right.

Matt: 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.

Mark: Right.

Matt: How does that differ going through brokers, say for multi-family, how do you find good deals, or what are some indicators of good deals?

Mark: Yeah, I mean, a lot of brokers we work with a kind of know what our criteria are, or what we’re looking for. For us, we typically look for a deal that has some sort of value-add component, like most people.

Matt: Mm-hmm (affirmative).

Mark: The best, in my mind, is when you have a management company that’s messing things up.

Matt: Mm-hmm (affirmative).

Mark: That’s usually pretty easy to fix. [inaudible 00:08:49] we try to look for deals that have some sort of cash flow component to them up front.

Matt: Mm-hmm (affirmative).

Mark: Sometimes we don’t, sometimes we look for real, true, true value-add deals, but I think with the market right now, and where the cap rates are so compressed, I think there’s 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, at the end of the day, the cap rate only impacts the sale, or purchase, right, it doesn’t impact my cash flow.

Matt: Mm-hmm (affirmative).

Mark: Unless I refi, 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.

Matt: Is it fair to say that the big distinction there is, say with single family and obviously there’s some gray overlapping area there, but with single family, you’re more kind of looking for the equity and profit that already exists.

Mark: Right.

Matt: And inside of multifamily, you’re looking more for the potential.

Mark: I think one of the biggest differences between single-family and multifamily is just the way the property’s valued. I could buy a single family home and put gold on the floors and countertops and everything, at the end of the day, they’re going to say, “What’s the comp next door and down the street?”

Matt: Right.

Mark: It’s limited, right?

Matt: Mm-hmm (affirmative).

Mark: With multifamily, I can go in and improve the property, either by increasing the rent, revenue, and/or decreasing the expenses.

Matt: Mm-hmm (affirmative).

Mark: While for every dollar I can do that for, it’s at least $10 of value, because of the way you’re buying a business, right, and without going into all the details, but that’s why it works with the cap rate, so every dollar I increase the value of the property, I could increase the value by 10 to 16 dollars, for every dollar. That’s the difference between a single family.

Matt: Well, on the flip side, we still have plenty of people out there choosing single family over apartments [crosstalk 00:10:43]. What would you say is the advantage inside of single family that doesn’t exist in multifamily?

Mark: I think it’s easier to sell.

Matt: Mm-hmm (affirmative).

Mark: 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, you can buy something and actually 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.

Matt: Mm-hmm (affirmative).

Mark: Really. Sometimes, though, you’ll have recourse notes and things like that, where multifamily we don’t. But I do think it’s attractive to people because they 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. As you said, you have 100 homes, it’s tough to get to 100 homes.

Matt: Right.

Mark: Generally speaking. So you go slower, but you also don’t necessarily have as many people involved. We buy multifamily, we’re inheriting things like issues at the property from if there was a fire before, that’s now my problem as a new buyer, it’s my problem.

Matt: Mm-hmm (affirmative).

Mark: I have to inherit some contracts, for laundry contracts sometimes, or cable contracts, so it’s more complicated for multifamily. Not hard.

Matt: Mm-hmm (affirmative).

Mark: It is more complicated. So a single family is still good, for sure.

Matt: Yeah, totally. No, yeah, I think there’s room for both in someone’s portfolio, and it’s just personal preference when it comes down to it.

Mark: It is.

Matt: Right.

Mark: It is.

Matt: Super. Well thanks, Mark, for joining this. If someone wanted to get in contact with you, or learn more about what you do, and how you do it, what would be the best way for them to do that?

Mark: Our website is thinkmultifamily.com, and then my email address is mark@thinkmultifamily.com.

Matt: Super. That’s pretty darn easy.

Mark: It’s easy. Easy enough.

Matt: Great, well thanks for being here, Mark, it was a pleasure, and we’ll do it again.

Mark: Thank you, Matt, appreciate it.

Matt: 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.