BiggerPockets Real Estate Podcast

BiggerPockets Podcast 386.5: Still Doing Deals… Thanks to These 2 Pivots With Marcus Maloney (Part 2, Post-Coronavirus)

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Yesterday, Marcus Maloney showed us how he built his deal-finding machine. Today, he tells us how he’s hanging onto it by making two big shifts in his business.

When the pandemic hit, lenders got nervous… and that put a couple of Marcus’ deals in danger. So did he give up? No! He tapped his own network of private lenders to provide financing to his end buyers—a win-win-win.

Plus, Marcus tells us why he’s shifted focus to the Midwest since we first spoke and how he worked out a deal with a “great tenant” who wound up unemployed and unable to pay rent.

Wondering how to adjust your business to the new normal? Check out this episode, and subscribe to the BiggerPockets Real Estate Podcast so you won’t miss the next one.

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Brandon:
This is the BiggerPockets Podcast, show 386 part two.

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Marcus:
Actually, during COVID-19 we learned quite a bit. We learned that we can tap into other markets pretty quickly, and actually pretty affordably.

Speaker 3:
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Brandon:
What’s going on, everyone? It’s Brandon Turner, host of the BiggerPockets Podcast, here with David Green, for a follow-up to yesterday’s episode. What’s up, David?

David:
What’s going on? This is David Green, bodyguard to Brandon Turner, and suitcase carrier, at times.

Brandon:
Bodyguard from 2000 miles away, that’s awesome. Thank you.

David:
Yeah, you’re like Whitney Houston, and I’m like Kevin Costner. Remember that movie, The Bodyguard?

Brandon:
I never saw it, but I just know the song from it.

David:
Yeah, that’s exactly right. Yeah, we got a great show today. We are following up with Marcus Maloney, who we just interviewed a couple weeks ago. I believe I was in Hawaii when we did that.

Brandon:
Yeah, I think you were.

David:
That’s when we took those pictures on Instagram of us rolling around in the grass on your front yard, that went viral.

Brandon:
Oh, that’s right, that was then. Yeah, that was …

David:
Yeah, Marcus gives us an update on what he’s been up to, how he had to pivot, where he started buying, what he did with the houses that he had under contract that he lost his buyers for. It’s really good stuff, for how changed his business when the economy changed.

Brandon:
Yeah, he's also got some good thoughts on the rental side of things, because he has some rentals. We didn't really talk a lot about it yesterday, but on today's follow-up episode we do. If you didn't listen to yesterday's episode, go back and listen to that one. That's today's quick tip is listen to yesterday's episode, maybe before this one, though. You technically could do it in either order, but if you want to know more about who Marcus is, I'd go back and listen to yesterday's right now, and then come back to this episode to learn about how COVID changed his business.
All right, and with that, let’s get to today’s show. Let’s bring in Marcus Maloney for the follow-up interview.
All right Marcus, welcome back to the BiggerPockets Podcast. How have you been, man?

Marcus:
Man, I’ve been doing pretty good. Thanks for having me again, Brandon and David.

Brandon:
Yeah. Last time we talked, David and I were hanging out here in the sea shed in Maui, and you were off, I believe you were in the Phoenix area, right?

Marcus:
Yeah.

Brandon:
You were investing in a couple different places, you were doing a lot of stuff. If you’re listening to this, everybody now, go back and listen to yesterday’s episode to learn Marcus’ story. But, for those who won’t go listen to that episode, they’re like, “No! Screw you, Brandon, I won’t take your advice.” Tell us a quick recap, who are you? And, your real estate niche, what do you focus on?

Marcus:
All right, Brandon. Well, I'm a buy and hold guy, but I got started with wholesaling. We still do wholesaling also, here in Phoenix, but we're primarily virtual wholesaling in different markets. One of our main markets is Chicago. During this whole COVID-19, we had to pivot a little bit, and I'm sure we're going to talk about that.
That’s who I am, man. I have a small portfolio that I manage outside of the Phoenix, and we’re doing deals here in Phoenix and in Chicago.

Brandon:
All right. I love that you said that word pivot, because … Let’s just go into it. What does that mean, to pivot? In business, there’s been a lot of good books written about pivoting. What does that mean, and why is that important?

Marcus:
Well, pivoting is just basically knowing the track that you’re on, and really having hindsight, seeing that something is about to change in the market, or in your business industry, and being able to turn, change your directions. Those who are able to pivot quicker than the others, or their competitors, really stay ahead of the curve, and stay ahead of the game. So pivoting is just being able to have that foresight to see change coming in the industry, and being able to make that change yourself and still stay profitable.

Brandon:
Now, I’m not a basketball guy, but I believe … isn’t that a basketball term? David, I know you’re a big basketball game guy. Marcus, are you a basketball … isn’t that a basketball term?

Marcus:
Yeah.

Brandon:
Am I making that you?

Marcus:
Yeah.

Brandon:
Am I getting that right? Okay.

Marcus:
Yeah, it’s just changing direction.

Brandon:
Okay, all right. So you’re going to change your direction, you’re going to pivot a little bit, which is what a lot of people are having to do from COVID. A good example, a buddy of mine has a bunch of vacation rentals, and the COVID thing happened and he’s like, “Oh crap, I can’t pay my mortgages.” So he pivoted quickly, and started filling all his vacation rentals with emergency health workers, so it was a very quick pivot. That’s what you’re talking about, and that’s what we’re talking about today, is how you were able to pivot. So, why don’t we go into that?
How did you deal with COVID? What happened during that thing, what did you see in your business?

Marcus:
So during COVID, right before everything got shut down, we’d done a ton of marketing and we had a few deals that were in the pipeline, these were wholesale deals. Actually, one of them, we were going to do the rehab ourselves, so we was going to do the fix and flip. But with COVID, some of our lenders, and some of the people that we were investing in, they pulled back a little bit so they wasn’t lending.
I'll give you just one quick classic example. We had a buyer on the line for one of our properties, and the lender sent out an appraiser, and appraiser was appraising very, very, very conservatively. We had at ARV at 250, and he came back at 180, 185.

Brandon:
Oh, wow.

Marcus:
And due to that terrible appraisal, that scared the lender, scared the buyer, and they backed out. Well, what we had to do was we had to contact some of our other private lenders and say, “Hey, we understand what’s going on in the market, but we have a slam dunk deal, we vet the deal. Would you be interested in partnering with this fix and flipper that we know, that has done deals with us before, has a track record? Would you mind lending to them?” And, they absolutely stepped up to the table and did it, and we was able to get the deal done. So that was one of the ways that we pivoted, by using some of our resources, some of our private lenders to help the flippers that couldn’t get those deals closed.

Brandon:
Yeah, that’s really smart because, at the end of the day, it just means that your buyer, or your buyer’s lender or whatever, if they [inaudible 00:05:58]back out, rather than going, “Well, sucks, can’t do anything, better go and watch some TV,” you’re like, “No. How do we step up, and overcompensate? How do we do a better job to make sure that this product works out well?” I think that’s very cool.

David:
We’ve done that before in my business as well, where an appraisal comes in low on a property that we’re selling, their appraisal comes in low. Where we’ll just say, “Hey, we’re going to give you another two weeks, you’ve got to get another lender.” Then, you get another lender, the lender orders a different appraisal. Low and behold, all of a sudden it appraises where you needed it to.
It seems very simple to us, but to a lot of people who aren’t as experienced investing, that seems brilliant. It really just is born of pivoting. Okay, plan A didn’t work. What’s plan B? Marcus, I think that’s something you’ve done really, really well in your business. Do you mind sharing with us a little bit about … I know I’m getting you away from real estate, we’ll come right back to it. But just, what you feel like you went through in life, that got you to think this way, where instead of saying, “I can’t do it so I quit,” “I can’t do it, so let me find another way?”

Marcus:
Yeah, absolutely. I mean, it goes back to my childhood. My dad, for those who are looking, I have a Panamanian flag up behind me, he’s from Central America. Being an immigrant coming over to this country, it was always you find a way to get it done, no matter what. That’s one thing that I can say about the immigrants that I know is they never take no for an answer, they always find a way. Okay, if this didn’t work, this has to be the answer. He really instilled that into me and my brother when we were younger, “Hey, if plan A didn’t work, what’s plan B? If plan B don’t work, what’s plan C?” He would always challenge us to try and find ways for us to think outside of the box, to come up with other solutions. I just apply that in our real estate business.

David:
That’s awesome.

Brandon:
Yeah, we did an episode back in the day with a guy named Diego Corzo, I think it was episode 352. I mean the guy, he was a dreamer, they call them the dreamers, right?

Marcus:
Yeah.

Brandon:
So he came with his parents, his parents moved here when he was just a little kid. He had no driver’s license, and he was taking a bike to work every day, he’d put on a suit and tie, and try and build his web design business. It was such a ridiculous story, in such a good way because this guy had every reason to not make it as a successful anything, and yet he just kept saying exactly what you said, he just kept pushing going, “No. Okay, plan A didn’t work, let’s go to plan B, let’s go to plan C, let’s go to plan B.”
What about somebody who, let’s say, is listening to this show, and they are not that way? They don’t have that immigrant mentality of I’m going to make it work, no matter what. Is there any suggestions you have for people developing that? I know it’s a hard question, but how does somebody develop that grit, to stick through things?

Marcus:
You know what? I start with discipline, Brandon, and it’s the small things that you have to start with. So each day if you say, “I’m going to wake up a five o’clock in the morning,” then that’s what you set yourself to day is each day, at five o’clock in the morning, I’m up. Then, at seven o’clock, if this is your time for meditation and prayer or something like that, then that’s what you do at seven o’clock. So it’s building that internal determination, and that internal discipline in order to … Then, that help spawn that grit because then you start seeing okay, well if I can be consistent in these small areas, I can be consistent in these larger areas, and I will find a way to get it done.
Not only that, you’ll start attracting people that have that similar mentality, and you can feed off of their energy as well.

Brandon:
That’s so good. What is the quote? “How you do anything is how you do everything.”

Marcus:
Yeah, yeah.

Brandon:
People wonder why they can’t succeed in business and I’m like, “Well, you lied to yourself this morning with what time you were going to wake up, you’ve lied to yourself about eating healthy breakfast and you had marshmallows in your cereal.”

Marcus:
Yeah.

Brandon:
“Stop lying to yourself, start treating yourself as a respectable person that you wouldn’t lie to.” That discipline is huge.

Marcus:
Yeah. I mean, that’s one of the key things, I would say, in any business. Especially being an entrepreneur, and sometimes we have a lot of solopreneurs so you don’t have anybody that’s over your back saying, “Okay, at this time you have to do this, one, two, and three.” That’s why some employee mentality people just can’t make it as entrepreneurs because they don’t have that discipline.

Brandon:
Yeah. They go to work and if their boss doesn’t tell them what to do, they sit down and play on their phone until their boss tells them what to do or whatever. Yeah, it’s like that …

Marcus:
Exactly.

Brandon:
[inaudible 00:10:28].

David:
Brandon, that's such a good point. I'm working on a new book for BiggerPockets right now, specifically for real estate agents because there's not very good training for agents, and I was thinking about what is one of the things that makes it hard for real estate agents to succeed, but really it applies to anybody whose getting into any form of entrepreneurial or independent contractor business, it's not just being an agent. Anything where you don't have a boss telling you, "Go do this," most people struggle with because your mind is conditioned to think a certain way.
So agents go to the office, and they sit there in an office all day, and it tricks you into thinking you’re working, and so you’re getting paid. But, you’re not getting paid just being there, right?

Brandon:
No.

David:
As investors, we’re working when we’re on our computer, answering emails, making calls, but you’re not making money unless you’re putting something in contract. That’s really what the good entrepreneurs understand.
So part of being successful in real estate investing is understanding that your mindset of the employee is getting in the way.

Marcus:
Yeah.

David:
Employees don’t really have to solve problems very often. Something goes wrong, and they raise their hand and say, “Supervisor, there’s a problem, go deal with it,” and then they covered their butt so they’re okay. You don’t really have to figure out how to do something when you’re an employee, it’s usually somebody else’s job. You just focus on stay in your little lane that you’re in.
And then, you get in this world of real estate investing, and you’re a business owner, every problem is your problem. Everything could require a solution that could make you a whole bunch of money, it’s a completely different world. A lot of people are drawn to it because they like the freedom of it, which is a great reason to be drawn to it, but with that freedom you have to understand you’re taking responsibility. There’s not other people that come fix stuff for you. When the appraisal comes in low, when the rehab’s not going well, when the tenant trashes the house or when you can’t find the tenant that you thought, all of that is your responsible to fix.
That’s why we talk so often about mindset, because a lot of people want the quick answer. “Well, just tell me what I’m supposed to do,” that’s an employee way to thinking. “What does the manual say?” When this happens, I’m supposed to do that. Their minds looking for the solution that’s worked in the past, but in this world there isn’t a quick answer. It’s different for everything, you have to take the principle that we’re teaching and apply it to the solution.
One way that screwed up a lot of people was COVID-19. It was different, right? It was like you’re an employee, and you worked at this company, and then new management came and in they do everything different. You can’t figure out what you’re supposed to do.
I’d like to know, Marcus, what are some of the ways that you specifically had to pivot your business, and how did you come up with the solutions that you did?

Marcus:
So one thing that I look at, David, is to much is given, much is required. So a lot of people want a lot of stuff, they want to see, they want to reach that end goal, but their not willing to put in that work, that discipline work.
Some of the things that we had to do in pivoting is here in Phoenix, the price point for homes, $300,000 and above. Well in Chicago, you can acquire some properties at $40, $50,000. So what we did to pivot was we focused more so in that Chicago, that Midwest market, because the risk was a little bit lower. Instead of being on the hook for a deal that’s going to cost you $400,000, we said, “Hey, we’ll be on the hook for a deal that costs us $100,000.” Can we make the same profit on a $400,000 house versus $100,000? Absolutely.
So we took that mindset of instead of playing in our own backyard, let’s pivot and start looking at some of these things that we can do over here. Still make the same amount of money, but we just had a few different things that we had to work out.

David:
I love that, because I’ve noticed the pattern that coastal markets, the West coast and the East coast, overall, they tend to shoot up in price, and then crash down really hard. There’s a lot of undulation. Whereas Midwest markets, and some in the South-

Brandon:
Undulation? Look at this guy.

Marcus:
Yeah, tell me about that.

David:
I clearly prepared for this podcast today. I don’t know about you guys, but I showed up.

Brandon:
Undulation, wow.

David:
I need a raise.
So Midwest markets, they’re just flat-lining. I don’t know a fancy word for flat-lining, right?

Marcus:
Yeah.

David:
But what you’re saying makes a lot of sense, because when there’s risk it makes sense to move to the market that’s going to be less risk, less reward. When it’s less risky, then you go to the markets where you can get a bigger profit, and that is a very simple principle that makes a very big impact on how safe your business is run. I love that.

Marcus:
Yeah, and that’s just one of the things that we had to do. So we looked at that, so we pivoted most of our marketing to the Midwest.
And then, also, what we did was we had some lenders that really wanted to do business with us. Well, at the time we wasn't really focusing on a lot of fixing and flipping in that market, but we had these lenders that were sitting on the side, raising their hand saying, "Hey, how can we work with you? How can we work with you?"
So when we had some of these deals that were falling apart due to lending concerns, then that’s when I picked up the phone and I called some of these private lenders and said, “Hey, you’ve been wanting to work with me during the good times. There is some little challenging times right now, but if you can work with us through these times, then the good times will be even better.” So we brought them to the table, and they worked with some of our end buyers on some of those deals. Were they a little skittish at first, because they wasn’t working directly with us on the fix and flip? Absolutely, but we eased those concerns, letting them know here’s what we have on this property, here’s the specs, here’s the ARV, here’s the amount of work that we had our contractor to go through and see. So what you’re getting, what you’re lending on, is something that we personally vetted. So at the end of the day, they felt comfortable in putting their cash up with the fix and flipper, to get the deal done.

Brandon:
Now, you’ve been investing for a number of years now, so you’ve got these contacts you’ve made of these potential private lenders. Now, some people listening to this show right now are going “Whoa, I want that, I want somebody that I can just call up and be like hey I need your money, and they’ll just give it to you.” How do you get there? How does somebody whose listening to this, how do you start getting that network, building that relationship with private lenders?

Marcus:
Yeah. One thing I do want to tell people, just like we was talking about, it takes time to build those relationships, things don’t happen overnight.
For example, with me, I’ve been blogging on BiggerPockets for almost eight years now. So in the beginning, it was a struggle, I was like, “Nobody’s reading my content, nobody’s looking at my YouTube videos,” and things like that. But then, it’d start picking up steam, so it goes back to discipline, and back to consistency.
So for someone that’s looking to really start build that rapport with hard money lenders and private lenders, you just have to get out there, and you have to be consistent at what you’re doing. So if you’re each fix and flipper, document, let people know exactly what you’re doing, share it on YouTube, share it on Facebook, on Twitter, everywhere, and let people know what you’re doing. Then also, you have to pick up the phone, and you have to contact people. Get of your comfort zone, go to some of these REA meetings and things like that, and let people know exactly who you are, and what you’re doing.

Brandon:
That’s so good.

David:
You know, the more you talk, the more I’m like, “That’s what I’m writing in this book.” I’m almost thinking, instead of writing a book for agents, I should just write a book for anyone who’s a salesperson or independent contractor, how do you make money, because that’s so right.
Brandon, how many times have you noticed that in so many of the businesses that we … mortgage lending, real estate agent, wholesaler, house flipper, contractor, that the successful people are the ones that are talking all the time, about what they're doing, and what they're looking for.

Brandon:
Yeah, all the time.

Marcus:
Yeah.

Brandon:
It’s because …. Go ahead. Go ahead, Marcus.

Marcus:
One quick thing, Brandon, and I speak of consistency because I was doing these Facebook Lives, and I was absolutely nobody. I mean, no guests, no visitors, no views or anything like that. I was like, “I’m just going to keep doing it, I’m going to keep doing it.” Then, all of a sudden I started sharing it, me and my assistant started sharing it, and now we have a pretty strong following. It was just because, during those times that I didn’t think that it was working, it started working later on down the line.

Brandon:
Well, two points on that. First one, I'm also … David and I are competing, sort of. We're both writing separate books right now, I think. I'm writing one on multi-family right now. So in the book, I just talk about this section, I actually talk about BRRRR. I think I learned this, actually, from you David. One of the benefits that you talk about, so I just stole your idea and put it in my book so thank you.

David:
[inaudible 00:18:44]

Brandon:
Well, I think I relabeled it and made it sound better. It's called the do, learn, repeat cycle, all right? The idea is one of the reasons BRRRR is so powerful is because it allows you to do more deals, even if you were making less money initially. This also applies to lending, like why would you pay all cash for a property versus lending, getting a loan? It's the more frequency you can do, the faster you do that do, learn, repeat cycle. You do something, you learn from it, you do it again. You do something, you learn, you do it again. Every time you repeat that cycle, you get better and better.
So if you do one deal every eight years because you have to spend eight years saving up for your money, that do, learn, repeat cycle is very, very slow. I should write a book called Do, Learn, Repeat. I’m doing it. So, this idea, and I’ll credit David for the idea … See, David? I’m a nice guy. Anyway, the same thing applies to, I guess, planting seeds is where I want to go with that. This idea of the content you produce now, the Facebook Live, the Instagram Live, the social network, that stuff might not give you any results now. When you first write a blog post, or when you first start going to REA meetings, the same thing applies there, if you were going to host a local real estate club.
In the beginning, it is more important that you develop that do, learn, repeat cycle, over, and over, and over, so that down the road, those seeds have grown into trees. Yeah, you’re going to do it 50 times, and have nobody show up. I mean, my first year of doing webinars for BiggerPockets, back five years ago, were just so bad. The first podcast, don’t go back and listen to the early episodes of the BiggerPockets Podcast, they were awful. But, every episode we’d learn, and then we’d repeat it, and we’d do it again. And we’d learn, and repeat it.
Anyway, I like that point you made there about just put yourself out there, start building the relationships now for the network and the contacts you’re going to need five years from now.

Marcus:
Yeah, absolutely.

Brandon:
That’s what I hear you saying. Yeah, it’s start doing it now.

Marcus:
And us having this conversation, really, is the fruit of those seeds that I planted five or six years ago, writing blogs.

Brandon:
Yeah.

Marcus:
Because I said, “One day, I’m going to get on, and I’m going to be able to talk to Brandon, and be on a podcast.” And now hey, it took me five, six years but I’m here. That’s what I tell people is you don’t have to always look for that instant gratification, you have to go through the trenches. When you go through the trenches, then you begin to respect the profession and the craft that you’re in.

Brandon:
Yeah, people want to eat apples from … Watch this analogy, David, then I’ll let you take it. People want to eat apples from apples trees that they never planted.

David:
Oh, wow.

Brandon:
They want to enjoy the apples from the apple trees they never planted.

David:
A mic dropper.

Brandon:
That is a quote, you can put that on Instagram, right there.

David:
This is what Brandon does really well, is he takes other people’s ideas and makes them better. Our friendship works this way, Marcus. I’m basically the Toasted Oats, Cheerios that aren’t really Cheerios, just a big bag that says Toasted Oats, a white bag with black letters. Then Brandon comes along, he’s like, “Oh, I like this,” and he puts the bee on it, and he gets these cool colors, he calls them Honey Nut Cheerios. All the kids love it, he puts a cool toy in the box, and then he gets all the credit. And I’m just Toasted Oats, generic Dave over here. That’s exactly what it’s like all the time. But, I learned a lot from him, from how he does things, his style.

Brandon:
I don’t think that’s true at all.

David:
You’re really good, Brandon, and here’s the thing. I’ll be you Brandon was not that good at doing this when he first started.

Brandon:
[inaudible 00:22:07]

David:
He had to, what was it? Learn, do, repeat, is that what it was?

Brandon:
Do, learn, repeat.

David:
There you go, do, learn, repeat your way to excellence. And then, I would add on what happens is it becomes do, learn, repeat, teach, scale. Then, then, you get to learn the new thing. This is your analogy of all the bridges people build, and you're trying to build a bridge from California to Hawaii, and you're building 20 bridges at once. You can build more than one, but wait until you finish the first bridge. Do, learn, repeat, teach someone else. Now, they're doing it for you, scale where several people are doing it. Then, go build your next bridge. And that gets into the systems that we're all creating, and Marcus you're in the middle of that.
For people that want to follow in your footsteps, what was the one thing that you felt like, when I figured out how to do this part right, my business really took it to the next level?

Brandon:
Oh, that’s a good question.

Marcus:
I’ll give you two answers to that.
One, was internal, one was just my internal self confidence because I was just so fearful, I was so scared that was going to make a mistake. I was so scared that I was going to do things wrong to where it took me so long in order to do step one, to where I just didn’t have that confidence. I just want to tell the listeners, don’t worry about having all of the answers, don’t worry about having every tool in your toolbox, start with what you have. If you have a hammer, start with that. Start with the hammer, you’ll go and find the nail, you’ll go and find the wood, so on and so forth. So really, the first thing was internal, I had to get out of my own way.
And then, secondly, because I started building that self confidence, then I was able to go out and find strategic partnerships, to where I didn’t have to try and do it all on my own. So it was getting out of my own way, having that self confidence, and then finding the right people that can really push me along my path a lot further, and that was really just getting out there. Again, networking, still have to have that education, still have to sit behind a computer for hours and learn, and learn, get on webinars, and things like that. But, that was basically the two things.

Brandon:
Awesome, really good stuff, man.
All right, well what do you see going in the future, now? What do you see happening with the next few months? None of us have a crystal ball, but where do you see your business headed? Are you going to keep doing what you’re doing, are you going to keep pivoting? And then, what does lead gen look like in the future as well, I’m curious about that?

Marcus:
Okay. Some of the things that we’re going to do, actually during COVID-19 we learned quite a bit. We learned that we can tap into other markets pretty quickly, and actually pretty affordably. So we’re going to look at looking into more markets in the Midwest versus staying on the coastal cities. So the Indianapolis, St. Louis, Chicago, those metros, so really just pivoting with our marketing, and looking at those areas, and build relationship in those areas.
So if anybody is in the Midwest, reach out to us, and we can definitely help you out, and get you started in real estate investing.

Brandon:
That’s awesome. Very cool.
All right, well I guess, that’s probably about what I’ve got to go. I guess, there’s one more topic I wanted to cover, because you also own some rentals, and we didn’t talk a lot about them last time. But, what’s COVID done to your rental properties, and what have you changed, or pivoted, or adapted, during this time? What have you seen?

Marcus:
Well you know what, Brandon? We’ve been pretty stable. I mean, we don’t have a large portfolio so it’s not like we have 100s of 1000s of units, but the units that we do have, we were pretty consistent on keeping our tenants abreast of what’s going on.
I'll give you an example, we had one tenant, perfect tenant, excellent tenant, always paid rent on time, actually paid rent early. She worked for Bed, Bath, and Beyond, and she gave the property manager a call and she was like, "Hey, I paid my rent up two months, I know I can live out for at least these two months. But, this is really becoming a headache, and its additional stress in my life. Is there any way that I can break my lease because I won't be able to pay?"
I talked to the property manager and I told her, I said, “Look, what we can do is if we can find a tenant in her stead before the month is over, I’ll refund her the rent that she paid in advance. That way, it can help her move.” She was going to move with a family member. I said, “That way, she can have something to bring to the table.” With that being said, the property manager agreed, she was able to move, we were able to get someone in the rental, and we refunded her that credit, that rent credit, instead of just holding onto that rent. It wasn’t going to make or break us, but it was going to make or break her so we said, “You know what? We’ll pay it forward, here’s the return of your June rent,” and we gave that back to her. She was definitely happy.
That’s what we’re all about, is just making sure our tenants, the people that we do business with, definitely enjoy doing business with us.

Brandon:
Yeah, very cool.

David:
How do you guys feel about telling your tenants upfront, “Here’s your lease, this is the way it works. However, if you ever need to break it, this is what we’ll do. Don’t trash my house, give me notice, let me find another tenant. If I find one, I’ll let you out early, without penalty. If I don’t find another tenant, then I’m going to hold you to it.”

Marcus:
I haven’t crossed that bridge, but that’s a good idea. The only thing that I’m fearful about is you’re giving that tenant an out. Normally what we do is you can start seeing a track record of a tenant, they’ll start paying rent late, things like that. That’s when you step up to the table and you have that conversation, and you say, “Hey, we noticed that you’ve been paying your rent late. Is there anything that we should be concerned about, or anything that we should know? That way, we can try and help you out, before it gets to a place where we have to do an eviction. Then that eviction is tied to your name, and now you won’t be able to rent anywhere.” Let’s have that conversation upfront, and see how we can help, versus going through that whole eviction process.

David:
Brandon, what do you think?

Brandon:
That’s like that conversation you and I had, I think you and I had it the other day, about as is. When you sell a property and you say, … Let’s say you’re going to sell a property, and you’re debating back and forth, and negotiating with the buyer. And then the buyer says, “I’ll pay you $1 million.” You say, “Fine, but that’s as is.” We were talking about how that entire phrase, as is, is completely irrelevant, and agents use it all the time, and I hear investors use it. It’s completely ridiculous.
Let’s say I say as is, and then two weeks later you come back to me and be like, “Well, I know I was going to buy your property but we just found this nasty infestation, so we’re walking unless you pay for it.” I could be like, “No! I said as is.” And you’re like, “Well, sorry. I know, but rules change.” So in other words, it’s completely non-binding and whatever. That’s kind of how I see this situation as you could always add it later, you could always tell people later, “Hey, if you want out of your lease,” because somebody asked you. Yeah sure, here’s what I want you to do, don’t trash my unit.
But, by proactively doing it ahead of time, you just show all your cards ahead of time to everybody, versus the ones that you need it. I guess, that’s my thought.

David:
I guess my thoughts were if you have a tenant who gets a new job, they’re moving out of state, they’re going to move, they’re going to break their lease, if you don’t tell them that, then they’re going to wait til the very last minute, tell you three days before they’re gone, you’re going to spend 30 days finding a new tenant. If they know they have a chance, if I give him enough notice he can advertise it and find another person, it benefits me because I’m not going to be held to pay the damages, you’re more likely to have them give you the heads up. But, if you don’t find a tenant, they’re still on the hook, they’ve still got to pay the money that they would have to pay. Is there a downside to that?

Marcus:
I think it’s all your communication with the tenant, and your rapport and relationship with the tenant. Most people want to do right. Albeit, you have some people out here that are just sickos and crazy, but most people want to do right. If you do right by them, then they’ll return that gesture, and nine times out of 10 they’ll do right by you.
If you consistently make any repairs to the unit or anything like that, then they’ll let you know. I went through that situation, I had a guy just moved into the property, been there for about four months. He was like, “Hey, I had an excellent opportunity, I need to move but I’m not moving for another 45 days. How can we handle this?” I said, “Hey, it’s better for you to let me know upfront, and we can make provisions and handle it then.” And that’s exactly what we did.
But, if you’re one of those landlords that don’t fix anything, when they call you don’t answer, then naturally they’re not going to have that same respect for you so it’s not going to be reciprocated. They are just going to leave in the middle of the night.

Brandon:
Yeah.

David:
Side note, as is is exactly what Brandon said. That is one of the biggest scams in the real estate industry, as is means nothing. If you have a contingency in the contract that lets you back out, or you didn’t put a deposit down, you can tell them anything you want. What you do is you just say, “I told you it’s as is, I’m not buying the house.” Well, why not? “Because there’s a plumbing leak.” Oh, well what can we do? “You can give me three grand.” Now, as is means nothing.

Marcus:
Yeah.

David:
That’s how that works, so don’t fall for this. Imagine when you were a little kid, and you say jinx or something like that, like it’s going to work on a grownup. “Ah, he said shotgun, I don’t get to sit in the front!” Your dad doesn’t care, he’s putting you in the back, it doesn’t matter if you said as is or not.

Brandon:
Yeah, that’s funny.

Marcus:
Yeah. It’s just like crossing your fingers.

David:
Yeah, there you go. But, my fingers were crossed. The judge doesn’t care.

Brandon:
Yeah, exactly.

David:
He looks at what the contract says.

Marcus:
Exactly, exactly.

Brandon:
Oh, funny. Hey Marcus, before we go, we don’t need to redo the whole famous fork, we just did it yesterday, on yesterday’s show. But, anything you’ve been reading or consuming lately, that you want to recommend anything? Again, whether it’s reading a book, watching something that you’ve just been learning from, or any educational stuff that people should check into?

Marcus:
Yeah, man. You know what? I’m speaking about pivot a lot. As you can see behind me, I’ve got Jenny Blake’s book Pivot up there. I started reading it right before COVID, so it was perfect timing. Guys, going through this time with COVID-19 and everything else like that, pick up the book, $12, read it. It’s good, it’s strategic on how to shift your thinking, and shift what you’re doing. And, if you’re coming from the corporate world or a W2 employee, it helps you shift that mindset to being an entrepreneur.

Brandon:
Yeah, awesome man. That’s pretty cool.

David:
Yeah and side note, if you guys want to learn more about appraisals, if we didn’t mention this, episode 382 we did with Josiah Smelser, he is a real estate investor and an appraiser. He gives some really good behind-the-scenes information about how appraisals work, and how to talk to an appraiser. To me, it felt like we were talking to a guy that used to work for the IRS and we’re like, “Okay, how do you put your taxes together in a way that you won’t get in trouble?” That’s what that episode felt like, so definitely go check that one out, too, there’s some good tips there.

Brandon:
I like it. All right dude, well thank you so much, Marcus, for being on the show again today. Again, if you did not listen to Marcus’s first episode, go listen to yesterday’s episode where he tells you his story, it’s got a lot of really great tips, and really fun lessons and stories in there, so go check it out right now everybody.
We’ll end with this. Marcus, where can people connect with you, where can they find out more about you?

Marcus:
My YouTube channel, YouTube.com/mrcsmaloney. You can find me on social media everywhere, my handle is @mrcsmaloney. Or, my website, marcusemaloney.com.

Brandon:
All right. Marcus, thank you so much, this has been fantastic, appreciate you a lot. Thank you for all the good advice you’ve been putting out on the BiggerPockets community for years, I know you’ve benefited 1000s of people you’ve helped, so thanks.

Marcus:
Well thank you so much, Brandon, thank you, David, thank you, Kevin. Guys, always remember to enjoy the journey, no matter where that journey takes you.

Brandon:
All right man, thank you.

David:
All right.
This si David Green, for Brandon “Do, Learn, Repeat” Turner, signing off.

Speaker 3:
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In This Episode We Cover:

  • The problems Marcus ran into in mid-March
  • How he plugged the gap with private money
  • Developing relationships with private lenders before you really need them
  • Why he’s concentrating on a lower-priced market
  • How he negotiated with a resident who could no longer afford rent
  • And SO much more!

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Books Mentioned in this Show:

Connect with Marcus

Real strategies that work for real people seeking to build wealth through real estate investments. Co-hosted by Brandon Turner and David Greene, this podcast provides actionable advice from investo...
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