BiggerPockets Podcast 112: “Little Old Lady House” Investing with Mark Updegraff

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Get ready for another incredible episode of the BiggerPockets Podcast! On today’s show we talk with real estate investor and property manager Mark Updegraff about buying homes from little old ladies, managing tenants with less stress — and who has the bigger beard: Brandon or Mark.

If you want to learn about developing a buying criteria, how to get great leads through BiggerPockets, the “extra step” you should most definitely take while screening tenants, and a whole lot more, then don’t miss out on this entertaining show!

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ls_logoWe just wanted to give a shout out to our podcast sponsor on today’s show: LandlordStation. LandlordStation provides online tools to small and midsize property managers or landlords throughout the US.

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In This Episode We Cover:

BiggerPockets-Podcast-Cover 300 300

  • What everyone should know about growing beards
  • How Mark got started in real estate
  • How to find a 100 percent value neighborhood
  • Perspectives on Section 8 and slumlords
  • The “extra step” you should perform during tenant screening
  • Lessons learned from Mark’s very own property management business
  • Clever methods for finding deals
  • How Mark get leads through BiggerPockets
  • Mark’s take on real estate agents
  • How to develop a solid buying criteria
  • Thoughts on get-rich-quick schemes when it comes to real estate
  • And SO much more!

Links from the Show:

Books Mentioned in this Show

Tweetable Topics:

  • “We go through our policies up front so they know that we take our business seriously.” Share on Twitter
  • “I’m not trying to sell people things that I don’t agree with.” Share on Twitter
  • “The secret to why I’ve been so successful is that I don’t screw around.” Share on Twitter
  • “The first person to establish a relationship to the other agent has an upper hand when it comes to closing the deal.” Share on Twitter
  • “Your net worth is in your network.” Share on Twitter

Connect with Mark

About Author

Thanks for checking out the BiggerPockets Real Estate Investing & Wealth Building Podcast. Hosts Joshua Dorkin & Brandon Turner strive to bring top-notch educational content and interviews to our listeners -- without the non-stop pitch prevalent around the industry. With over 180,000 listeners per show, the BiggerPockets Podcast has become the biggest real estate podcast in the world. But don’t take our word for it. We’re the top-rated and reviewed real estate show on iTunes — check it out, read the reviews on iTunes, and get busy listening and learning!


  1. Chris Purcell

    Mark, question on your buying criteria. I was with you until you said “divided by all cash purchase”. What do you mean by that? Then you said ‘plus closing costs, plus rehab and ideally you should be at 10% or higher.”

    • Mark Updegraff

      Thanks Chris,
      We’re calculating a cash on all cash return to quickly analyze each deal. It is our benchmark regardless of how we’re going to finance it. If we add leverage we will re-run for our client when we are getting closer to a buy decision.
      Gross Yearly Rent
      (10% Vacancy reserve, 10% Capital Reserve, 10% PM reserve, 5% Repair reserve) = Net Operating Income (NOI)
      NOI – operating costs (taxes, insurance, water if paid, snow, lawn etc) = cash flow
      Cash Flow / (acquisition + closing costs + rehab) = cash on all cash return.
      We want this to be 10% or higher.
      We go view the best properties and if our client has financing we help them do the calculation.
      (out of pocket is less, and ROI is higher)
      NOTE: If the cost of borrowing is higher than your Cash on Cash it will diminish your return when adding leverage.
      Let me know if you have any more questions!

        • Mark Updegraff

          Thanks Chris! I have a lot of clients that ask me to review their analysis and it is always a crazy spreadsheet with a ton of numbers that I’m stumbling through ultimately not really understanding what they’re trying to show me. I like the simplicity of this as it allows for quick analysis and reminds us that if we’re investing time we should remember to focus on what yields the highest return. In this case, I argue we’re better served looking at a bunch of these quick pro forma rather than looking at fewer number of fancier spreadsheets.

        • Mark Updegraff

          absolutely. As you get experienced you’ll learn what is typical of negotiations (5-10% in my area) as well as what is possible (I’ve seen instances of 20-30%). Of course everything is relative to the accuracy of the listing price set by the broker. Market value is location driven. You can’t force some areas to be a 10% , they’re just too strong to be unless you get a great deal (examples: Short Sale, highly motivated to sell, an agent not from the local market lists it way too low and the seller doesn’t know better). There are areas where you will find 10% and there are others where you won’t. As you shift locations you will see the average of the location change. As you learn how each localized market performs you can make decisions on things like “how important is location to me as an investor”. That will usually depend on who is managing it and other factors of vacancy, crime, turn over, tenant pool, job growth, etc. You will see a correlation (better area lower ROI) and be able to pick strategically knowing what to expect on average. Once you’ve honed in on area you’re targeting, you strive to crush the average with a really sweet deal 😀 If average is 10% – I really want a 14 ;C) If average is 8, I want a 12 etc

          Hope it helps!!

          Hope that helps!!

  2. Mark Updegraff

    On Josh’s question in the fire round, where he asked me how a PM company carrying Errors & Omissions insurance helps him as the landlord I answered on the General Liability Policy and did not comment on the E&O policy. E&O provides coverage in the event that a tenant files a lawsuit like discrimination, or there is an issue with the lease etc. You want to make sure your PM co has E&O so this policy will cover any such lawsuits and it will not blow back onto the landowner.

  3. Jonna Weber

    Mark – Love the podcast! As a fellow agent/investor – I relate to much of your story. I enjoyed your forthright style, and for addressing unqualified investors. If a person wants to be an investor, but has no way of paying for a property, then they really shouldn’t be having agents running comps or showing them properties. I truly love working with new investors and guiding them along the process… but time is a precious commodity for all of us. Thanks for sharing!

    • Mark Updegraff

      Thanks Jonna!
      I enjoy working with the newbies too, as I was a newbie once and would have loved to have some expert guidance 😀 Most new investors do really appreciate having agents like us, and that is why I love doing it. The ugly side of real estate (people that only care about themselves) can deliver some punches, but the victories we bring in putting studious pupils on solid foundations is well worth it, even if they aren’t million dollar listings!

  4. James Stevens

    OK, for a couple minutes there I thought I was listening to a politician. (no offense, meant) lol You talked fast but didn’t answer the questions asked. At one point they asked you how long your “turn around” was when you had a vacancy and you talked about a good screening process for your tenants and never answered the question. Then when Brandon joked about spamming people, you started talking about being bad at communication and hiring new people, but didn’t refute the idea of spamming people. (I think there were a couple other instances too, but I’ll have to re-listen to the podcast to name them.)
    Don’t misunderstand me, I think it was another great podcast that I learned things from. It’s just that he seem evasive on a few of the questions.

    • Mark Updegraff

      Sorry James, you are correct. I can answer these now.
      1. Turn around times vary based on market demand. There are a lot more people on the market for housing in my location May – August. Outside of those months there are significantly less applicants, and of those applicants a lower percentage will qualify compared to the percentage that will qualify during the busy season. We alway strive to align our leases to be at turn over during the peak moving season and adjust our out of season lease terms to get us back on track. The average of an entire year for our PM co. includes units that are coming on-line in the off months (new acquisitions etc). Once we get on schedule we strive to keep the turn over times non-existant or very short. Out of season it could take many months to get a good qualified prospect. To answer the question I would say if you’re leasing May – August expect a very short turn around time (month max), and if you’re outside that it will depend on location and current supply levels. An excellent location could remain vacant the entire winter (Nov – April) due to market factors. In our pro forma analysis we budget for 10% vacancy over a long hold period. We feel that it accurately reflects reality, and so the answer is 36.5 days turn around time on average.
      2. I don’t spam people other than sending them MLS listings that fit their buy criteria. The reason I talked about working on communication is because it is the most essential element of brokering. SPAM is communication, be it dumb communication or not. Some people don’t prefer it for the first communication, but regardless it is essential for me to have a level of it in order to work with someone.

  5. Terry Alexander

    Hey Mark,
    I just listened to this podcast. Some good information, thanks for sharing. I like your purchasing criteria you described, is similar to the one I use. I would like to find a real estate agent near me to work with that is also a knowledgeable investor, as you are. Any advise on finding good team members?

    • Mark Updegraff

      It’s gotta be hard. Most “investors” really have no clue what they’re doing, and they think the agents shouldn’t or don’t either…. what you want is the most local professional you can find for your specific market that has the time to service you. These are going to be the buyer’s agents that work HIGH volume. They know what sells, because they have the buyers. They know when they’ll sell for more and how much price fluctuates from peak season. Always remember, the good agents are seeing if they want to buy you as a client so try to provide some value right away. What is the value? Sincerity and loyalty to start. Also, know WHAT market you want to buy in, if you don’t know you need to trust them to guide you. Are you relying on them to help you with other aspects of the property? I have no interest helping people buy things that I don’t agree with. When a house is CHEAP, there is usually a reason… location location location, you can never change it. Stick with the fundamentals, dish out sincerity and honesty and look for someone that is highly active and passionate about real estate. Once you find them, listen to them AND ALWAYS TAKE NOTES!

      • Katie Rogers

        “I have no interest helping people buy things that I don’t agree with. ” Would that more agents had the same attitude in the run-up to 2006. If more agents had told their buyers NOT to buy overpriced houses, possibly the whole thing could have been averted, or at least we could have avoided the underwater problem.

  6. Roy Kwak

    Mark, just joined BP. Heard the podcast, awesome advice. I am going to try to apply your purchase criteria in Los Angeles and I am guessing that it won’t yield many purchasable properties…maybe which means I should be buying somewhere else! 😉

    • Mark Updegraff

      Good luck Roy! Let me know how you’re making out in LA and if you’ve explored any other markets. I’m still grinding away in the ROC with no time to look else where… If you need an opportunity, we’re still flush.

  7. James Stevens

    In my process of re-listening to all of the BP Podcasts, this is the ONLY one I couldn’t force myself to listen to all the way through again. I tried!! But Mark Updegraff is SO rude & arrogant I just couldn’t take it!!

  8. Katie Rogers

    “I am a market professional. I know the value of the house.” So said my most recent buyer’s agent a month ago when I balked at the comps he presented for a house I wanted to make an offer on. Two of his three comps was an after repair flip. The house we were looking at was a fixer. I had already compiled ten comps, so I knew he was wrong. A broker needs to back up his numbers and recommendation. “Just just me,” is inadequate.

    “(Agents) don’t get paid from the buyer; (agents) get paid from the seller.” As my real estate lawyer says, “Ultimately, the buyer pays for everything because the buyer is the one bringing the money to the transaction.”

    I have not found a buyer’s agent yet who is ready and willing to do any homework. That’s okay, but then they resent that I do the homework and usually know everything I could find about the house at the recorder’s office and permits office before I even ask to see the house. They never suggest a house they saw on caravan. They do not even keep an eye on pending houses in case escrow falls through thus making their clients lower offer even more viable. Most of them seem incapable of negotiating a deal on behalf of the buyer, or logically explaining why the buyer’s offer on terms is a win-win. They are absolutely wishy-washy about negotiating a price reduction based on the cost of repairs. The only option agents are interested in is seller pays or seller credit, but NOT reduction in purchase price. Could it be because the lower the purchase price, the smaller the commission? This attitude is a breach of fiduciary duty.

    Every “old lady house” in my market has been a serious fixer.

    Removing your mortgage contingency is dangerous. There might be nothing wrong on the buyer side at all. The problem might be the seller side. My lender refused to lend on one house unless the seller replaced the roof, and the seller refused. The mortgage contingency is generally cleared after the inspection contingency. So you could find yourself in the situation where you have already cleared the inspection contingency and boom!

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