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Josh: This is the BiggerPockets podcast show 68.
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Josh: Hey, what’s going on everybody? This is Josh Dorkin host of the BiggerPockets podcast here with my grouchy cohost Mister Brandon Turner. What’s going on, grouch-pants?
Brandon: What’s going on? I’m not grouchy! Today is, like, the best day in the world we’d had here in Washington. It’s 80 and sunny and perfect. I’m not grouchy on a day like today.
Josh: Ah, so that’s why you ditched work.
Brandon: That’s why I left to go to Starbucks, yeah.
Brandon: No, but I do miss the wonderful weather that we had down in California as well. It was wonderful.
Josh: Yeah, it was alright. You know, the wonderful it rained almost every day…
Brandon: It rained for, like, an hour! You don’t know what rain is.
Josh: No, it rained, man, it rained.
Brandon: You don’t know what rain is.
Josh: Alright, listen, Captain Depressive, let’s get to this thing here. so, for those of you guys who don’t know we were in Southern California. We were actually invited by Google to speak on their campus on the topic of real estate investing, and I think it went really, really well. It was a big honor. It was exciting to be there, and I think we did well for ourselves, what do you think?
Brandon: I think so too. Thank you, Jordan, for inviting us down. That was great.
Josh: Yeah, props to Jordan.
Brandon: Yeah, I liked it. I thought it went perfect. I really liked the food; that was probably my favorite part. They, like, give everybody free food. It was incredible.
Josh: They do, which is cool, but it was alright.
Brandon: Maybe because the gnocchi that we had wasn’t from an authentic Italian place that you’d been to.
Josh: It was not. It definitely was not, but it was good. I definitely would not turn it down if I was offered it again.
Brandon: I wish more companies offered free food for lunch for their employees.
Josh: Clearly you have an axe to grind, Brandon. Alright, well, listen, let’s get on to the show here. before we do we’ve got a really good
Josh & Brandon: Quick Tip
Josh: Yeah, we’ve got a Quick Tip for you guys. So, today’s Quick Tip is this: share your success stories in the BiggerPockets Success Stories forum, and we’ll be picking upcoming guests for the BiggerPockets podcast based on those success stories. We’re going to link to the Success Stories forum in the show notes at BiggerPockets.com/show68. So, whether you just did your first deal, or your hundredth deal, let us know about it. Share it with the community. What went right? What went wrong? Maybe a little bit about the journey, and if we like your story we will reach out to you and see if you want to jump on as a guest here on the BiggerPockets podcast.
Otherwise, sharing your success stories is really great for one other thing which is building credibility for yourself. As you share your success stories, and people hear about them they realize you’re out and about, you’re doing things, you’re making things happen, and they’re more inclined to work with you. So, if you want more people to work with you tell everybody about what you’re succeeding at, tell people what you’re doing right, and they’re going to want to work with you. So, make it happen. Share your stories, share your successes, and that’s today’s Quick Tip.
Brandon: Cool, alright, well let’s get on to the show
Josh: Cool. Well, listen, today we’re going to introduce you to somebody who you probably already know: real estate investor Mark Ferguson. Mark has been a contributor on the BiggerPockets blog for a while now, and is a real estate—I don’t know what you want to call him. A semi-super hero, or a semi-something or other. I mean, the guy is doing a lot of stuff in real estate. He’s flipping, land lording, running a real estate sales team, writing on his blog, and the BiggerPockets blog, and he does all of it in less than 40 hours a week which is supposed to be impressive to me, isn’t it?
Brandon: Yeah, when’s the last time you worked 40 hours in a week? You’re, like, 90 hours a week. So, imagine doing everything you do in 40 hours, and having 2 little kids at home like he does.
Josh: I’ve got 3 little kids at home, and I do it in 90. Well, oh, well. What are you going to do? So, Mark is a super star. He’s rocking it, and of course today we’re going to talk with him about how he does it all, and we’re also going to cover his journey towards ultimate end-all-be-all goal of buying 100 homes. So, why don’t we get to it? Mark, welcome to the show, man! Good to have you here.
Mark: Thank you, guys! I appreciate you having me on the show, and I look forward to it.
Brandon: Awesome, well, let’s get started. Why don’t we get started at the beginning? Because, as Julie Andrews tells me, it’s a very good place to start.
Josh: Oh my. Did you really? Did you just—
Brandon: How did you get started in real estate investing, Mark?
Mark: Well, when I was a kid my dad, he wasn’t really an investor so much as a real estate agent, and I used to sleep below his desk when I was 3 years old and he would be working in the office so it was kind of my pre-destined—well, to be honest when I went to college, and through high school, I never wanted anything to do with real estate, but I got out of college, had a degree in finance, could not find a job. This was 2001, and I said, “hey, I’ll go home. I’ll work for my dad for a summer then I’ll go find a real job,” and that summer turned into 13 years of real estate.
Brandon: Nice. Good summer job.
Mark: Oh, yeah. It was great. My dad primarily sold houses as a realtor, but he also did a few fix and flips and that’s the part that I really love doing, and it progressed from there and I bought my first long-term rental in 2010
Josh: Nice. So, when you got into the business what did you start doing? Did you start as an agent?
Mark: Yes. I first started helping him with the fix and flips as well so he taught me where he bought them, fixing them up, the real basics of it, and then while we were doing that I got my real estate license and I started selling real estate, I think it was September, and I had graduated in May. So, pretty soon after I graduated I started selling real estate, and I never really liked selling real estate that much. I liked the fix and flip.
Josh: Nice. Yeah, been there.
Brandon: So, did you start—you said you got your first long-term rental in 2010, but you also flip houses so did you start flipping your own houses before that, or was that after that? Like, what was your first deal of your own?
Mark: My first deal of my own was that long-term rental in 2010 because up until September of 2013 my dad and I worked together. So, we flipped houses together that whole 12 years, and then my first fix and flip was September of 2013 when I took over the entire business from him.
Josh: So, what was your role when you guys were working together? Did you pretty much do everything, or did you have any specific thing that you were doing?
Mark: It progressed through the years from maybe looking at houses, and driving by them to towards the end I was almost doing everything so I would find houses for us to buy, I would coordinate with the contractors, I would put them in MLS, I would take pictures, pretty much everything at the end I was doing, and he supplied the money.
Josh: Nice. Sugar daddy.
Josh: That’s awesome, and then ultimately you said you ended up taking over the business from your dad?
Josh: Okay. Right on, that’s great. So, let’s go back a sec. Let’s go back to being an agent. So, do you recommend others become an agent and if so, why? If not, why not?
Mark: Yes, I do. Even though I didn’t like being an agent when I first started out I think the biggest problem was I was trying to follow what my dad did in his business plan, not so much my own plan, and I never liked cold-calling people. I never liked doing open houses trying to reach out to people to get business, and then once I found my own niche which was REO and HUD homes I loved it. I could not get enough of it, and from the investor’s standpoint it saved me so much money. It’s ridiculous how much money I saved being a real estate agent buying/selling homes, and I know I get way more deals because I’m an agent cause I can act so fast.
Brandon: Well, let’s talk about that cause this is something that people who listen to the show a lot know that I talk about, and I’ve taken the class twice to get my real estate license and I still have not actually taken the test yet. Something always comes up, like, the first time I said I was going to flip houses, the second time I decided I was going to be a blogger on BiggerPockets instead.
Josh: I think it’s fear of failure, maybe?
Brandon: Not fear of—it’s, I’m like, well, it’s like $2,000, you know, a year to hold my license and I’m not going to be an agent, I won’t make that back, but every single year I’ve kind of regretted it thinking I would have made 10 times that back by being an agent? I don’t know, maybe I undervalued what my potential was at the time, like, I didn’t think I was going to buy as much real estate as I did? I don’t know. So, let’s talk about, like, convince me, Mark. You say you can do things faster by being an agent, how is that? What do you mean?
Mark: Well, first off, if it makes you feel better, I’ve been around real estate my whole life and I failed my test twice before I passed it.
Josh: Oh, there you go.
Mark: Mostly because of, “hey, I know this, it’s no problem,” and I didn’t really study. Not a good choice.
Josh: On the questions they ask, you know, on the bottom of page 324 of the book, and they want to know how many centimeters it is between A and B. there’s a lot of real silly little questions that they ask so I wouldn’t really feel too bad about that.
Mark: I tell people the questions they ask are meant to try to trick people. They aren’t meant to try to teach you about anything. They’re meant to trick you, but yeah. So, anyway. Acting fast when I get deals. I buy, I’d say 95% of properties, off MLS, and when a property comes onto the MLS system, you know, I check it probably 5-10 times a day for new listings, and as soon as I see that price that’s like, “okay, that’s a good deal,” I can set up a showing. I can go look at it, and I can have an offer submitted in less than 2 hours. So, for me I know that’s, probably the last 3 deals I got, because I acted so fast.
Mark: A couple of them were listed on a Friday, and for some reason, I just wrote a blog about this on BiggerPockets, nobody else made offers until the Monday when I already had it under contract because they took the weekend off so just acting fast is just a huge benefit.
Brandon: I read that in your article, and I’ll link to that in the show notes at BiggerPockets.com/show68, but in that article you mentioned the Friday thing and I thought, “that’s genius,” because that’s so true. Everybody’s, like, by Friday morning everybody’s checked out. Especially if you’re self-employed and the investors are all out golfing or whatever. You can get an offer in on a Friday and try to negotiate it on the weekend, I mean, I thought that was a genius idea.
Mark: Yeah, I think my last 2 properties I made an offer, they weren’t listed Friday morning, but actually Friday afternoon, and I’m dragging, and I’m like, “I don’t want to drive 30 minutes to go see this house, but it’s such a good deal I have to do it,” so I went out there, saw it, I’m like, “okay,” had my assistant write up a contract, I signed it on docusign, and had it to them the next day, they countered us and I accepted.
Mark: And they told me, “hey, we had five more showings today, and expecting at least one offer so you’d better accept this quick,” and I’m like, “yup, no problem”.
Josh: There you go, and acting fast is something that, not only as an agent, but as an investor in general you need to be prepared. I think a lot of new investors seem to find themselves losing potential deals because they’re not ready to act fast, they don’t know how to analyze properties, they’re not prepared, and when a good opportunity comes up it takes them a little bit longer which is totally understandable, but that’s where the experience comes in, and gives you the chance to scoop in and make offers on better deals more quickly.
Mark: Yes, for sure, and my agents and I have a joke where, it doesn’t even have to be an investor, but even an owner/occupant buyer. When they first look at a house, and they see a great deal we always say it takes at least one, because almost everybody waits a couple days, you know, talks it over with their family, talks it over with their lender, and then it’s gone, and it takes them that one deal to realize you’ve got to act on those good deals immediately. You can’t wait two to three days for it, you’ve just got to go for it. Sometimes it takes more than one, but usually it takes one deal.
Josh: Yeah, for sure.
Brandon: Just this morning there was a friend of mine from BiggerPockets, like we met on BiggerPockets, sent me a text message saying, “hey, a new triplex just came up in your town,” I don’t know how he saw it before I did, or before my agent did, but anyway, so I reached out and had an offer in this morning by 10 AM cause I knew, like, it was $40,000 for a triplex that brings in $1,800 a month. It’s so absurdly good that it’s going to be gone by noon. I mean, and I haven’t heard back yet, but I mean, in today’s market where those deals that are just really, really good deals they’re gone in a heartbeat so if you aren’t really quick on those you’ll miss out on them.
Josh: So, that’s why you were late for work. Got it.
Brandon: Yeah, yeah, yeah, yeah.
Mark: That is a great deal if you get that one.
Brandon: Yeah, I don’t know what the inside looks like, but I put a contingency on an inspection and I’ll go check it out later, but we’ll see.
Josh: Nice, I think.
Brandon: I’ll let everyone know how it comes in the next couple weeks.
Josh: Cool. Alright, Mark, so let’s talk about buying properties on the MLS. I think a lot of people are struggling to find deals on an MLS. What gives you the advantage? Is it just your market? You’re up in Greeley, Colorado which is farm country, what’s it? About 2 hours? Hour and a half north of Denver? And is it just by virtue of where you are, or are you doing something different from most folks we hear complaining?
Mark: I think our market is really similar to other parts of the country that see the huge competition on MLS. Last year in the Greeley area, there’s about 100,000 people in Greeley, and we’re about an hour north of Denver, not an hour and a half.
Josh: I’m so sorry. For those of you who are not from Colorado and you don’t know how this works: when we get a windy day here in Denver it starts smelling like cow manure, and what we say is, we’re like, “aw, man. It smells like Greeley, I guess a storm is coming,” because it means the winds have gone around the mountains, started heading south past Greeley where all the cow poop is and basically comes down here and delivers it to us in Denver so our weather is typically determined by the stench from Greeley coming down to Denver.
Brandon: That’s what we say about Tacoma, we call it the Tacoma-roma.
Brandon: Yeah, when the wind’s blowing the right way it stinks up western Washington.
Josh: So, okay it’s an hour north. I stand corrected.
Mark: Alright. So, let’s see, a year ago we had, I think, 1,500 active listings on MLS in our Greeley/Evans area, which is actually a suburb of Greeley, and this week we had 250. So, our inventory is just nothing. Owner/occupants can’t find a house to buy, let alone investors, so it’s not like we have a special market where there’s an abundance of MLS deals. It’s just being able to find them, to act quickly, and convince the seller that you’re the best buyer for that house.
Brandon: Yup, and are they mostly REO’s that you’re buying, or are they private sellers, or what kind of people are selling?
Mark: They’re a mix of everything. Our REO’s are way down as well. Really, really few REO’s. Very few short sales too. I do have one REO under contract now for a fix and flip and I’ve had three short sales under contract for six months that I don’t know if they’re ever going to go anywhere. We’ll see, but most of my deals lately have been regular sellers, or estate sales. So, it’s houses that need work, or people that just want to sell them fast.
Josh: Yeah, and Denver’s really tight too. I mean, the market here is crazy. There’s nothing. Nothing on the market. So, the flippers I know in town here are all scrapping. They’re really struggling to find any kind of opportunities.
Brandon: Hey, I have a question about—for somebody who is not an agent, for those people, maybe they want to become an agent, maybe you’ve convinced them, but they’re not yet: how can they best work with their real estate agent, like, how would you work with a client best to get those deals quickly? Cause I mean, a real estate investor is not the only client for a real estate agent so how do I convince my agent, like, why did my friend from BP call me this morning before my agent called me? Why wasn’t my agent calling me at 8 this morning instead of—
Josh: That’s a great question.
Brandon: But how do I get him to do that, and other people?
Mark: Right, that’s a great question, and hard to answer. I’ll be honest, I’m the wrong agent for those investors. You know, I’m not going to be the one sourcing out deals to my investors, either. Really, it’s not always a bad thing to find a new, young agent who’s hungry, and is looking for that deal. For one thing they probably have time. If you’re dealing with an REO agent, or a big agent who’s doing a ton of deals a year they’re not going to be sending out deals the second they hit the market, but if you’ve got an agent who’s only working with one or two clients and they need that commission check to live they’ll be searching MLS every day and as soon as they find a deal they may send it to you. You still want to make sure they know what they’re doing, but when I first started out in the business that’s how I got my clients is when I was searching MLS I wasn’t searching for myself, I was searching for them and just doing everything I could to find them deals so I could get paid a commission check.
I also think it helps to take care of your agent. You know, take them to lunch once in a while. If you want them to submit a bunch of offers for you, especially if they’re low offers, you need to at least give them something back that says, “hey, I’m not just using you to submit all these offers that will never get accepted, I do appreciate your work.”
Brandon: That’s a good idea.
Josh: Yeah, especially, you know, take them to a nice steak dinner versus, you know, McDonald’s, right?
Brandon: It really is a good tip, and I feel like I need to take my agent out, right? Cause my agent does stuff, and I kind of always have that impression of, like, well he works for me because I give him all this commission, but at the same time he’s put in a lot of offers that I know will probably never get accepted, and chances are I’m going to do that. I didn’t mean to throw my agent under the bus earlier either. It was like 8 AM when the BP guy told me, and 9 AM when he did when he got in the office so that was pretty good on his part, but just in case he’s listening to the show I’ve got to make sure he knows I love him.
Josh: But, I mean, truth be told, how many offers are they writing versus the commission check? Brandon you’re a savvy investor, right? You’ve said on previous shows that you don’t even have to call your agent and get on the phone. You text them, “I want to put an offer in, here’s the price,” and they write an offer so, you know, you’re not wasting their time, and if you write 10-15 offers and one of them closes they’ve probably spent as much, if not less, time with you than they do with a typical buyer, don’t they?
Brandon: I would imagine so, yeah. This is morning is a good example, right? This is something, Mark you brought up a little bit ago, when you’re out looking at a property you do the electronic signature and you can offer in the field immediately, I mean, you can make it happen quick so that’s a tip that I would throw out there is well. If people want to work with an agent quickly, like you said, then find an agent that can do electronic signatures. Exactly this morning my agent emailed me, then he called me and I texted him back cause I was talking with you, Josh.
Josh: Oh, yeah, how about that?
Brandon: So, yeah somewhere in that process he emailed me the offer, I emailed it back to him and it took 15 minutes for us to have an offer in so that’s my tip to piggyback on your tip there, Mark.
Josh: I think, Mark, that would explain why people should look at agents who are technically savvy, right? If you’ve got an agent who’s still working with paper, and paper docs and doesn’t get social media and doesn’t get the speed thing they’re probably not the best agent for investors, right?
Mark: Right. One of my agents was working with another agent, and she was emailing her a contract and she didn’t hear back for a day and it turns out the other agent didn’t have a smart phone, and checked her email once at night.
Josh: Aw, man.
Mark: And it’s like, if you’re working with an investor who wants to submit offers and beat the game not only is she probably not going to be able to submit that offer very quick, but if the seller comes back and says, “hey, we have another offer,” or, “hey, we have multiple offers,” you may not even hear until another offer is accepted, and right now so many sellers, or agents are using email primarily, they aren’t even calling people anymore. So, yeah, your agent has to be tech savvy.
Josh: And I think, you know, to that I think that’s dangerous too. The email thing. That’s assuming that somebody’s going to be sitting in front of a computer when you email them, and it reminds me of a story; I had a lunch meeting with a guy and I went, and I showed up, and the guy never showed up, and I’m sitting in the restaurant, it’s like 7 minutes after we’re supposed to meet and I start going through my email and he had sent me an email like a half hour before we were supposed to meet and said, “hey, I’m not going to make it,” instead of calling me. Instead of texting me. He emailed me, and instead of calling me, instead of texting me, he emailed me and so I showed up and I’m sitting there and I’m, you know, I was livid. I mean, that’s not the way that you—
Brandon: Were you throwing food?
Josh: I threw food at everybody in the restaurant, yeah, I was like a petulant child. No, I mean—
Brandon: “Hulk smash”
Josh: But I think a lot of people just don’t get it. Like, email is great for communication, but there’s a lot of stuff that has to be done through texting or a phone call, and the same goes for somebody who’s slightly less savvy. They have to start getting to the email because people expect it.
Mark: Yeah, and whenever I make an offer on a house I’ll email it then, and then I’ll always follow up with a call, or I’ll have my assistant call them, and make sure, “hey, did you get this offer? Do you have any other offers?” get as much information as they can so, yeah. I never depend on just an email, or just a call. I always try and do both.
Josh: Confirm and verify, right?
Josh: Alright, so real estate agents; should they be investing in real estate as well, or should they just be doing this commission thing where they’re selling properties and making that 3% from deal to deal?
Mark: Well, they should be investing of course. Really, if you think about it real estate agents are self-employed so they have no benefits. They have no health insurance, they have no 401k plan, it’s all up to them to provide their own retirement, their own savings, which I think is how a lot of agents get in trouble, but I think buying rental properties is the best way to provide retirement, especially for real estate agents.
Brandon: Yup, they have the tools already, and everything already lined up so it just seems like it would be easier for them to make that transition. I mean, I know probably 30 or 40 agents in my area that I maybe interact with on a semi-regular basis and I know two that own real estate. Like, they don’t own rental property.
Josh: Why do you guys think that is? I mean, I’m really, really curious of that because when I was an agent I wanted to invest, and I was investing, and so I don’t really understand why more agents aren’t jumping in to become real estate investors, particularly given the access. Maybe it’s just the lack of knowledge, or maybe they don’t have money and don’t realize that you can get into the game without cash. Well, a lot of cash.
Mark: Yeah, I would say the same statistics with agents I know as well. I mean, maybe one out of twenty invest, and I don’t know why, either, it’s so low. I think it might be—it just matches the general population of people who actually save money and invest themselves. Most people don’t save money, they don’t invest, they just kind of live paycheck to paycheck and assume things will work out.
Josh: Makes sense.
Brandon: I think that’s a really good way of looking at it. Real estate agents are just people in general. They don’t realize they could be an investor like their clients are, but I know a lot of real estate agents say they want to invest. I hear that all the time, but so does the general population also. They watch the flipping shows and they say, “man, I’d like to do that,” but then they don’t actually. So, I think this is probably a good time to plug that we actually have a guide for real estate agents. It’s free, it’s online, it’s just a massive, epic blog post called The Ultimate Real Estate Agent’s Guide to Working with Investors, you can get it at BiggerPockets.com/AgentGuide. If you’re a real estate agent check it out, it teaches you how to work with investors like us. So, anyway why don’t we move on?
We talked about your first deal was a rental property. Can we actually dig into that a little bit? You said that was in 2010. What was that first property? What did it look like, and what did you buy it for?
Mark: It was a small, cookie-cutter two story built in 2005, I believe, and I had just—I wanted to invest for probably 2 years, but I had problems saving up for the down payment, you know, I was going the 20% down route. Finally had my money saved up, been searching for a deal, this one popped up, it was an estate sale. I made an offer on it, I thought it was a great offer, waited for a response, the agent calls back and says, “hey, we accepted another offer, sorry,” I was like, “you guys never told me there were any other offers! I would’ve offered a lot higher,” so I wasn’t happy and I let the other agent know that.
Three weeks later he calls back and says, “hey, the other contract fell apart, do you still want this for your offer price?” I said, “of course,” and he said, “okay, I’m not going to call anybody else, it’s yours,” and I’m like, “sweet, worked out better for me,” because i would have paid more if he would have told me there were other offers to start with, but I don’t suggest other agents deal that way.
So, I bought that for $96,900 I believe. It needed about $2,000 in work. Just a little bit of paint, some fixtures, and some appliances, and I ended up renting it for $1,050 a month right away. Right now, to show you what our rents have done, we just re-rented it for $1,300 a month and I think we had 7 applicants in the first day.
Josh & Brandon: Wow.
Mark: Yeah, we might have been able to get more than that, but yeah, it’s been a great rental. It really got hit by a massive hail storm over the summer so that house had $12,000 in damage from the hail storm. New roof, and it had vinyl siding so two sides of the house had to be re-sided.
Brandon: Ooh. Did insurance cover all of that?
Mark: Exactly, that’s what insurance is for.
Josh: Yup, you know, Mark, you had talked about the agent, you putting in the offer and not hearing back and later finding out that there were other offers in; is that something that is typical of agents? Are they doing their job by doing that, or is that really something where they’re supposed to let everybody involved know that there’s other offers in? Ultimately, the final question is: what can investors, or traditional buyers, even do to improve that line of communication to make sure they don’t find themselves in that kind of a situation like you were where you’re putting in an offer and you’re just told, “oh, well, sorry, you lost it,” well, I didn’t have a chance to even fight?
Mark: Yeah, so in Colorado our listing contracts have a spot where you mark, “I will notify other buyers if multiple offers are received, or if we have other contracts,” so, technically, that agent is supposed to tell each person who submits an offer if they already have a contract, or if they get more contracts on the house. I would say most of the time agents do notify buyers that there are more offers. Every once in a while they won’t. Usually, I notice, it’s kind of a lazy agent, someone who just wants to get the deal done and move on.
What you can do about it, I mean, whenever I submit an offer I say, “hey, please let me know if you have any other offers, or if you get anymore offers,” just reiterate that it’s very important to me that I might be willing to raise my offer if you get more offers on it. There’s not a whole lot else you can do except hope that agent is acting ethically.
Josh: Yup, and, of course, report them if they’re not.
Mark: Yeah, I mean, you can report them. I don’t know if there’s a whole lot that would be done in that situation, but you can try.
Josh: Yup, right on. I think that’s one of those things that people don’t realize; that it’s part of their job to actually do that, and so if they’re not you need to know how to handle yourself.
Mark: Right, and they’re doing a disservice to their seller as well.
Josh: Oh, yeah.
Mark: I mean, they could be costing them thousands of dollars by not telling other buyers that there’s multiple offers on this house.
Josh: Absolutely. Well, cool. Good advice.
Brandon: Well, let’s move on and talk more about the rentals. I know you kind of focus on two aspects here; flips and rentals. So, why don’t we start with the rentals since we already talked about that first one. First of all, do you mind me asking, how many rentals do you have so far since that first one?
Mark: I have 10 total. So, I just bought my 10th one last month.
Brandon: Right on. Nice. Congrats, and what kind of—are they all single family? Are they multi-family?
Mark: They are all single family.
Brandon: Okay, is that because that’s what the deals have, or is that all you buy?
Mark: So far that’s all i buy. I am open to great deals whether they’re single family, or multi-family. I don’t know if it’s a Colorado-specific thing, but multi-family in my area has worse returns than single family so it’s just a no-brainer to me. Part of that might be because I can get better deals on single family homes. There’s more distressed single family homes, more estate sales. The multi-family there just aren’t that many of them, and very few ever come up for sale.
Josh: hey, Mark, you’ve mentioned a couple times, estate sales, and you say you find those on the MLS. Can you, for those people who don’t quite understand fully what that is, explain what an estate sale is, and how would they actually find that specifically?
Mark: Right. Well, an estate sale is where the owners of the home have passed away, and the home has transferred possession to their heirs and they now are selling the home. To be honest all of the estate sales I have bought I did not know were estate sales until I had my contract accepted so there’s really nowhere on MLS that says, “estate sale,” or, “distress sale,” it’s just one of those things where it’s a great price and I made an offer and then I found out, “oh, that’s why it was such a great price. They wanted to sell it quickly.”
Josh: Gotcha. Makes sense.
Brandon: Well, and you know the thing you mentioned about in your area multi-family doesn’t make sense, I think that’s a really important point we should touch on here is that every area is different. People often times want to pick a strategy based on what they heard on the BiggerPockets podcast, or what they read in a book, but the fact is sometimes certain families do not work. Multi-families work well in my area, single families work okay, and in your area it’s the opposite of that.
So, I think it’s important for people to just know that every market is different, and try to find what works in your market and make a strategy fit with where you live.
Josh: Good advice.
Brandon: Thank you. So, do you have any tips on how people can figure out their market? If they’re not an agent, how do they know what’s good in their market, and bad in their market and what their area is like?
Mark: They’ve just got to get out there and look at houses. You know, there’s really no shortcut. You can look on Zillow, you can look on listings online, but really you’ve got to get out and look at houses, look at Craigslist to see what rental rates are, you’ve got to get out there, get in the market, see what’s for sale, see what’s selling and then try to match that up with what rent rates are, and kind of make the numbers. Once you start figuring out what certain properties rent for you can figure out where those sweet spots are that rent for the most compared with what price you have to pay. I don’t think there’s any short cut. Just getting out in the market.
Josh: I mean, that’s all part of the job, right? Being a real estate investor you have to understand your market. You should be able to walk into a house and say, “okay, well this house is overpriced,” or, “this is underpriced,” you should be able to without even thinking know what the comps are on any property that comes up in your farm which is kind of the area that you’re focusing on, right?
Mark: Exactly, and going back to the real estate agent aspect, a lot of them don’t invest themselves so you can’t necessarily rely on them to tell you what a good investment is if they aren’t investing themselves. It’s something the investor themselves has to know, and has to figure out.
Josh: And I think that’s another thing that, in the agent guide that Brandon had mentioned, we really want to get that in the hands of every single agent out there because we filled that thing with information about how to invest, how to analyze deals, how to work the numbers, all that stuff. When new investors rely on a real estate agent that doesn’t have the knowledge they can put themselves in a dangerous position.
Mark: Yes. I was talking to an investor today who started fix and flipping homes with a realtor who told him what deals to buy, what they’ll be worth, and he ended up losing $20,000 in one deal.
Mark: Yeah. Because I don’t know if either the agent didn’t know what the values were, or they just wanted to make a sale, but yeah. You’ve got to, even if you trust your agent, you have to be able to confirm his information.
Brandon: I think that’s a really, really valuable tip. You can’t just rely, I mean, when you’re a real estate investor nobody else is going to do your job for you. Even if you have people on your team, which I know I want to talk to you about cause you’re the master of having good teams, but we’ll get to that. So, even if you have good people on your team nobody’s going to do your job for you. I think that’s just what it comes down to. Well, very cool. Why don’t we talk about funding? How are you funding? You’ve got 10 properties. First of all, I thought there was a rule that said you can’t buy more than 4 so how do you have 10, and how are you funding them?
Mark: There are no rules. No, when I first had 4 properties I went to my bank and they were like, “you can’t lend on more than 4. That’s a rule,” they said that. I was like, “well, that doesn’t make any sense,” so I started looking around researching, and it may be a rule, but it’s a rule for individual banks. there’s no law, there’s no lending guideline that says you can’t have more than 4 loans, but most of the big banks, Citibank, they won’t lend on more than 4 properties.
So, what I did is I found a local lender, a portfolio lender, which means they keep the loans in-house. So, they lend their own money, they don’t sell the loans to investors, they keep them in-house, they can lend on as many properties as they want. They still have to follow guidelines, like, the laws, but they’re much more flexible on who they loan to, how much they loan, and I can get more than 10 loans. They told me I will be able to get as many loans as I want as long as I can still qualify for them.
Brandon: Nice, and we’ve talked a couple times on the BiggerPockets podcast before, and I’m a huge fan of portfolio loans. I’ve been using them the last few properties I bought because it just works, and people wonder so why don’t we ask this question, even though we’ve covered it in other shows, but how do you find a portfolio lender? How do you find a guy that will do more than 10 properties?
Mark: The first thing you do is you ask everyone you know in the real estate business. So, investors, real estate agents, title companies, other lenders. Just ask them, “hey, what banks are investors using to get their loans?” cause many people won’t have any idea what a portfolio lender is. They won’t know what that term means, but they’ll know who investors are using to get their loans from.
Josh and Brandon: Yeah.
Mark: So, if that doesn’t work check your local banks, local credit unions, call them up. Again, you might have to ask for their commercial loan department, tell them what you’re looking for, don’t just say, “hey, I want a portfolio lender,” because they might be a portfolio lender and not know that term themselves.
Josh: That’s good advice, too, by the way.
Mark: Yeah, and then you can always search online too. Type in portfolio lender for your state and see what pops up. Might take a few hours of searching, but it’s well worth it if you find one.
Brandon: Yeah, another tip that people can use to find portfolio lenders that people have done for me is they sent me a PM, a private message on BiggerPockets, cause they knew I was investing in western Washington, and said, “hey, Brandon, where are you getting your loans from,” and I say, “oh, this is the bank I used. This one’s good too, and here’s another one,” and it took me ten seconds to reply to that private message. So, I mean things like that. Just go to BiggerPockets.com/meet and you can find people in your zip code, in your area and then just find someone who’s in your area, who’s active and looks like they know what they’re doing and just ask them who they’re using. I mean, those referrals and those recommendations can be great. So, anyway.
Brandon: Yeah, cool. Well, hey, alright, what condition are the properties in? The rental properties when you’re buying them.
Mark: They vary greatly. That first one I bought was pretty good condition. The next one I bought needed $18,000 in work so it was paint, carpet, kitchen counters, landscaping, had a fire place in the basement where the chimney went up through the master bedroom closet. So, that was pretty safe. Put your clothes next to a chimney. So, we took that out. Needed quite a bit. I love the ones that don’t need the work because it takes less cash, but usually the great deals are the ones that need the work.
Josh: Yeah. Yeah, yeah, yeah. Well, cool. What are you doing in terms of management? Are you managing them yourself, or do you have a property manager?
Mark: I will manage myself until September. So, when I took over the team from my father I actually hired a new person on my team, and one of his jobs was to learn how to do property management. So, I kind of helped him out and he is now handling, I’d say, 80% of the work.
Josh: So, does he work for your company? Does he work for you, or is he an outside property manager that works for lots of different land lords in your area?
Mark: Nope, he works for me. He’s on my team. He only does property management on my properties. So, he has a lot of other tasks, he’s a real estate agent as well, so that’s just one part of his job is managing those properties.
Josh: Right on, and at what point do you think it’s okay for somebody to do that? Hire somebody in house versus outsourcing to a third party?
Mark: You know, if I didn’t have him doing other things for me I don’t think it would make any sense at all to hire him just for property management. That’s a good question.
Josh: Put you on the spot, c’mon.
Mark: In house? Boy, 50 single family properties? I don’t know. Multi-family it might? I’ll think about that some more.
Josh: Right, well, at some point you need to be generating enough cash to pay for him. That’s ultimately probably the right answer. Figure out how many units you have, how much you’re paying a PM, and if it’s coming close to the salary of a potential property manager in house I guess you could replace and try to hire someone.
Josh: That would be my thought.
Brandon: My tip is what I did; I scaled up small, right? I’m scaling up small so when I had too many properties I could handle on my own I hired, well, my wife took over and started doing a lot of it, and then when it got too much for her to handle we hired a part-time assistant to help, and that’s working anywhere between 5 and 20 hours a week, and as we get more and more properties we’re looking after we’ll get more and more hours, and maybe another person eventually. So, you don’t have to have a full-time in house person immediately, you could do part-time.
Josh: Yeah, that makes sense.
Brandon: Alright. What kind of cash flow do you look for in a rental property?
Mark: You know, my real basis has been $500 a month is what I really want on my properties. I know a lot of people see my numbers and they say, “I don’t know how you could possibly get $500 a month cash flow when you bought it for $100,000, and you’re renting it for $1,100 or $1,200,” but one thing I like to point out is Colorado has some of the lowest taxes in the country.
Josh: Shhh. Hey, no seriously, be quiet.
Mark: On the last property I bought I paid $99,000 for it and my taxes are $362 a year.
Josh: Wow, yeah, that’s crazy.
Brandon: I’m moving to Colorado.
Josh: That is not Denver taxes.
Mark: No, that one’s really low. I don’t know why it was so low, but usually they’re around $500-$600 a year on a $100,000 purchase on my rentals.
Brandon: That’s much better, that’s about half what I’m paying. Cool. So, is that after paying everything out? Is that gross, or is that your net cash flow?
Mark: No, I look at that as my net. So, after paying taxes, insurance, my mortgage, and expenses. I’ve also been really lucky to have very, very few vacancies, but I still do factor in a percentage for vacancies and maintenance. So, I’ve been pretty good at hitting that figure overall on my properties.
Josh: What about CAPEX, are you figuring that into the cash flow equation for yourself, or no?
Mark: No, I’m not.
Josh: Okay, so if we were to spread that sucker out over 30 years we’re looking at different numbers.
Brandon: You might need a new roof in 20 years or something.
Mark: Yeah, I mean, I am taking a percentage for maintenance. I don’t know exactly if it’s high enough. I usually do 10%-15% of the rent. I usually fully repair my properties before I rent them so to start out with there’s usually not much. Of course, there’s always some surprises, but they should be pretty close to that over the years. Other factors I’m paying off properties. I paid off my first property this year so that increased the cash flow significantly on that one.
Brandon: That was going to be my next question: are you paying off these properties?
Brandon: Why is that? Why are you not just letting them, I mean, people argue that point all the time on BiggerPockets, and elsewhere, that it’s smarter to pay off your properties completely. Kind of the Dave Ramsey approach and just kind of get out of debt completely, or leverage to the hilt and rock as much leverage and mortgages as you can. Why do you choose to pay off the rental?
Mark: Well, to start with I love debt. I’m not going to lie. I love debt because it makes me more money. I can buy a lot more houses by getting loans than I can paying cash. The biggest reason is I take my cash flow from all my properties and I use it to pay off one loan at a time, and in a perfect world where I knew I could get unlimited 30-year fixed-rate mortgages for the rest of my life I wouldn’t pay a dime extra on any property. I would just collect cash flow, but, like you said, you know, right now my portfolio lender said they’ll loan on as many properties as I want, but I don’t know if that policy will be there forever. They could change it next year, they could go out of business. If something happens, and all of a sudden I’m stuck at 10 mortgages I can’t buy anymore properties. So, it’s kind of just a balance of trying to keep as small an amount of mortgages as I can while still purchasing as many properties as I can, and then I’m not relying on my cash flow to buy properties. I have enough income to do that so it’s really a specific strategy for my situation. I don’t know if it works well for a majority of people out there.
Josh: How does the mortgage/interest deduction play into your equation too? Because does it makes sense to hang on to some sort of note to being paying off so that you can write off the mortgage, or is that just kind of an irrelevant part of the equation for you?
Mark: I’ve never understood that logic, because sure I can write off the interest on the mortgage, but if I’m not making that mortgage payment my income is going to be much more than the tax savings I had with that mortgage payment. So, I’m making more money if I’m not making a mortgage payment even if I’m making more taxes. So, to me, that does not have any effect at all in my strategy.
Josh: I mean, the math should be pretty simple. Are you making more money when they take your taxes out? Which is bigger? And you go with the strategy that is going to net you more cash in your pocket, right?
Mark: Exactly, yup.
Josh: Right on. So, we’ve been talking about these rentals, and it’s interesting. Lots of tips there, and advice there. We want to transition to flips. So, how are you funding your flips, then? Are you using the portfolio lenders? Are you using partners? Are you using hard money lenders? What are you doing there?
Mark: I am using the same portfolio lender. So, it’s kind of a mixture. I’ve heard of some awesome deals that people are getting out there from portfolio lenders for their flips. I think mine’s a great deal, but it doesn’t finance as much as some other loans would so I am able to do 75% of the purchase price with my portfolio lender and their rate right now is 5.25% on those loans for 1-year loan I think it’s 1.5 points.
Josh: What do you mean 75% of the purchase price? So, you buy a house for $100,000, it needs $20,000, and the after is $150,000. Let’s just use the simplified example. What is that 75%? How does that work out?
Mark: It’s $75,000. So, I can’t factor any repairs. The ARV is not considered, it’s just how much I pay for the house. So, if I pay $100,000 for it they’ll loan me $75,000 on it.
Brandon: And the rest of the money you’re coming out of pocket with?
Mark: Right, and my sister actually provides me with some private money. It’s a great rate. I think she’s charging me 6% so I use that, and then over the years I’ve saved up kind of a bank roll, I like to call it, to fund repairs, fund down payments, take care of all the other expenses.
Brandon: That’s great. Alright, here’s a question that I struggle with a lot: how do you find, and how are you finding, good contractors?
Mark: Oh, it’s tough. We actually had to stop using one recently because he just lost touch with his workers, but we generally use a general contractor who will handle most of the repairs himself and this guy was great because he knew the light fixtures, the paint colors, everything we did, he knew it. We barely had to talk to him for what to do with a house, but then he ended up having some health problems, hired a couple new guys who didn’t know what they weren’t doing. He wasn’t at the properties, he wasn’t keeping track, and all of a sudden I’m going out to a property 8 times thinking it’s done, and the work isn’t done yet, and the work is done just horrible. So, it’s really a constant struggle to find great contractors who won’t gouge you on prices. Recently I just hired a new contractor who I found through Home Depot, and the way I found him was Home Depot has their contractor where they’ll do work for you, and I called him up and said, “hey, can you give us some bids on some properties?” and he was like, “okay, sure,” and the guys shows up and says, “you know, to be honest we’re going to be more expensive than local contractors, but we can do some stuff cheaper,” I said, “alright, do you know any contractors?” and he said, “I can’t recommend any, but I can tell you who comes into our store at 6 AM every day,” and he gave me a list of three guys. I’m like, “awesome.”
Josh: That’s similar to J Scott’s advice from his episode which is: be at Home Depot at 6 AM and see who shows up.
Josh: Awesome, yeah, that’s great.
Brandon: Great. Well, what about managing those contractors? If you’re managing a flip are you personally doing that, or do you have somebody on your team that does it, or how do you deal with the day to day?
Mark: My wife actually does a lot of it. So, she loves to see the houses and decide what to fix, what to replace, so she does a lot of the day to day picks out materials, decides how much needs done. Decides if it needs granite counters, or if it just needs, you know, regular cheap Home Depot counters. So, she does a lot of that. Our contractors text so she’ll text them and tell them what she wants. So, she does a lot of that, and I am also going to start having one of my assistants help her out with that too because we’re starting to get pretty busy on that end.
Josh: Right on, that’s great. So, where then are the holes? You said this one contractor just wasn’t doing their job, and how often, I guess, do you need to be visiting a job site, particularly with a new contractor, until you can be comfortable? Until you know that they’re kind of on the ball, that they’re doing what they’re supposed to be doing, do you have to show up every day three times a day just to make sure you aren’t being robbed? What do you need to do?
Mark: You know, I don’t think you have to be there that often. I think the most important thing is to always get a bid beforehand. So, always have a written bid. Make sure everything is in writing, everyone’s on the same page, they all know what is expected to be done, and then with a new contractor I’d say two times a week, although I doubt I would go out there that much, but to be safe I would say two times a week to make sure things are being done in a timely manner and they’re done correctly. I mean, it amazes me how often things will be written down that don’t get done.
Josh: Wow, yeah. I tell ya I don’t think there’s a chance in hell I could wait to go twice a week. I mean, I think, personally, I would be there every day until I was comfortable, but that’s just me being me. What about you, Brandon? What would you do with a new contractor? How often would you be out there?
Brandon: I don’t know. a couple times to get them started, and then, yeah. You can usually tell pretty quickly, I think, what kind of contractor they’re going to end up being, but I don’t know. It’s a struggle for me.
Josh: That’s a struggle for everyone. We’re not alone.
Brandon: I feel like this is a support group, you know, Bad Contractors Anonymous or something.
Josh: Aw, man, and then we always get slammed by the contractors every time we talk about this stuff you always get the contractors who are like, “hey, I do a good job, man,” I’m like, “yeah, well, yeah”.
Brandon: We can’t afford that guy so that’s the problem.
Josh: Yeah, you’re charging 6 times retail, right? Alright, so what about selling the flips? Are you prepping them for sale before you’re done? Are you listing them for sale while you’re still working on them? I know a lot of flippers go and first do landscaping and curb appeal before they even touch the inside just to get people excited in the neighborhood. What’s your theory on selling these things?
Mark: In our market I put them in MLS, and that’s—no, I have put up For Sale by Owner signs kind of at the end of the rehab just to see if we can get any calls and we can sell it ourselves without paying a commission, and really that’s the extent of it. I don’t have any real secrets or tips to getting it done early. I really should work on that myself because that’s probably my weak point.
Brandon: Do you stage them at all?
Mark: I don’t. I don’t stage them at all.
Brandon: Gotcha. I’ve probably staged half of mine, and the other half I haven’t, and I don’t know if I’ve seen a difference. It’s too hard for me to tell if statistically I’ve seen them sell faster. I don’t know, so, who knows? The ones I don’t stage and they take a long time to sell I look back and I’m like, “well, I should have staged,” but other ones I don’t stage and they sell right away, I’m like, well, I don’t know. anyway. What about, final question about the flipping is: what is the minimum profit that you usually look for in a flip? Actually, I have two more questions. Sorry, that’s not the last one. First one is: what is the minimum profit that you look for.
Mark: I usually look to make at least $25,000 so my sweet spot right now seems to be in the $70,000-$100,000 purchase price range so I’m looking to make at least $25,000 hoping for more, and lately we’ve been averaging about $35,000 profit.
Brandon: That’s great.
Josh: Not bad, yeah.
Brandon: Alright, my last question about my flipping then is: how are you going to decide whether to flip a property, or rent a property?
Mark: Oh, great question. My criteria for renting is actually much stricter than for flipping and it boils down primarily to the location. I want to be in the best rent-to-value ratio location I can find, and I’m lucky that that happens to be within my home town in Greeley. So, I want houses in Greeley. I’d love to have them needing as little work as possible, and I prefer houses that are as new as possible, although most of them are 30-40 years old, but I try to stay away from houses that are older than 50 years just because maintenance can really creep up on you, and as far as the flips my main goal is to meet that $25,000 profit, and I’m probably going a 40-mile radius around my town. You know, I look at the age, but it’s not nearly as important to me because I’m going to be selling the house. The repair cost isn’t as important because once I sell the house I’m going to be getting that money back. You know, with a rental the only way to get that money back is to refinance the home so I’d say there’s probably a 4-to-1 ratio of flips to rentals I buy.
Brandon: Okay, that makes sense. I think that’s important. You define your criteria, and you can be a lot more strict with the ones that you’re going to hold for a long time. I mean, some of my older rental properties are just irritating cause they’re 100 years old. Things are constantly breaking a lot more than my newer properties so I think age is definitely a good thing to look at.
Josh: Definitely. Cool, so look, it sounds like you do a lot of stuff, you’re a busy agent, you flip houses, you’re a land lord, you blog on your site, you write for BiggerPockets, oh my gosh I’m getting tired just saying it all. You’re connecting on the forums, you’ve got a wife, how do you have time to do all this stuff?
Mark: I also have twin 2 year olds too.
Josh: Wow. Alright, crazy time. Busy, busy, busy, man!
Brandon: You’re like a super investor.
Mark: I probably work 35 hours a week so I’m not—
Brandon: You mean just for the real estate agent job, or everything?
Josh: No, he’s talking just about the twins, Brandon.
Mark: I would say everything real estate involved. So, my rentals, my flipping, my house selling I work 35 hours a week, maybe another 5 hours blogging and writing which isn’t as much a job for me as it is a hobby and something fun to do so, I mean, the key is having a team. There’s no way I could do a quarter of what I do without people to help. I’m just a strong advocate of: as soon as you can hire someone to help you with tasks that you don’t like doing, the better your life is going to get, and the happier you’re going to be.
Josh: So, what does that look like for you? I mean, we know you’ve got the guy who’s the property manager who’s doing a couple other things. Who else is on your team? Who do you work with and what are their roles?
Mark: Right, so I have 9 people on my team. So, let’s see, 3 of them are just real estate agents so they work with buyers and sellers they don’t really help me with my business, they do their own thing. I pay for some of their expenses and get a cut of their commissions.
Josh: So, you’re a broker as well then?
Mark: I’m not, well, technically I’m a broker, but I’m not the broker of my own office.
Josh: Okay, so you’ve got a broker at your office who these agents are working under and you as the owner of the company gets to collect a piece of the commissions as a result? This is starting to sound sexy, here, hold on.
Mark: Yeah, so the broker is over all the agents, so Pro Realty is where I work, within Pro Realty you have agents, or you can have a team too, so I have a team that’s under that broker. So, everybody on my team, those three agents, if they sell a house it technically goes through me, and I get paid, and then pay them after I get paid if that makes sense. So, they don’t really, they aren’t working individually for that broker, they’re on my team and I’m working under that broker.
Brandon: Yeah, that makes sense.
Mark: And I have another full-time assistant who is the first assistant I hired. She’s been with me four years I think? So, she does, she started out helping me with EPO’s which are broker-price opinions. I do a lot of those for banks, REO companies. She’s great at that. She helps me with evaluations, she’s also licensed so she does a few of her own deals a year. Helps with expenses, just a lot of different things. So, then I also have another full-time assistant who handles contracts, paperwork, dealing with the title companies, helping out with some of my REO and HUD putting houses in MLS. So, he was basically my dad’s full-time and now he’s turned into my full-time assistant as well. So, he’s the one who writes contracts for me whenever I see a great deal.
Then, I also have the person I hired who helps me run the property management. He is also kind of the team manager, so he helped me set up payroll, he got us all legal as far as taxes, keeps track of what’s going on with the team, our numbers, how many houses we’re selling. He’s also a licensed agent, also does the property management, and then he also helps out on the blog side too. He actually worked at my portfolio lender a few years ago and helped them with their website. I went to college with him so we’ve been great friends for a long time, and then my cousin helps with accounting, and another cousin helps with drive by inspections on home, and then my dad is still on our team too as an agent. He doesn’t do as much now, but he still sells a few houses.
Josh: Okay. Very cool, very cool.
Brandon: That’s something that I struggle with a lot, and I think a lot of investors do, and that’s the whole idea of a team, and building, getting people to do work for you so do you have any tips for hiring? Making that first hire how do you know you’re hiring the right person? I know right now BiggerPockets is hiring.
Josh: We are.
Brandon: Yeah, so I’m sure Josh is probably interested as well.
Josh: I am interested. This has been impossible. It’s really hard to find good people to work for you, I got to tell you. Brandon, I don’t know why he’s still there, but no, Brandon, I count my blessings that we found Brandon and some of the other people we’ve got, but finding new people it’s just so tedious in my business, and I know it’s got to be the same.
Mark: I’ve been really lucky that I’ve found great people, but the first thing I always do is ask around. Other agents, anybody I know in the business: who’s looking for work? Do you know anybody? And my first assistant was actually working for my sister who used to have a property management company, but no longer does so she was kind of phasing her out and she needed more work so I interviewed her, my sister said she was awesome so that was a no-brainer, and she’s been great.
Another agent had said this person was looking for a job, they’d been in the industry for a long time, very computer savvy. I interviewed them, and they worked out great so I haven’t done a whole lot except for ask people that I know who was looking for a job.
Brandon: I think word of mouth is probably the best way to find somebody.
Brandon: So, definitely cool. Well, I really actually would love to spend an hour talking about building a team, but we don’t have the time so let me move on to our last question we have here in our main section of questions before we get to the Fire Round, and that is: what are your long-term goals with real estate? I know something about 100 houses you’ve written about, can you talk about that?
Mark: Yeah, about a year and a half ago I really got into goal setting. Planning my life, just writing everything down, and it really just boosted my whole career and everything, but really my biggest goal is to buy 100 single-family homes by January of 2023. So, my first goal when I started buying rentals was to buy 30, and I figured, “hey, this is doable. I can buy 3 a year for the next 10 years no problem, seems like a good goal,” then when I started to look at it it’s not really challenging me if I knew I could reach 3 houses a year, and that’s when I thought, “man, I’ve got to bump this up,” I made it 100 houses. I have no idea how I’ll do it, but if I’ve got that huge goal maybe I’ll figure it out.
Josh: Nice. So, you’re pushing yourself. You have these attainable goals, and then you’ve got these quasi-unattainable goals, and you’re looking at the realistic ones ensuring that you’re meeting those and then setting these kind of tougher goals and saying, “hey, if I really kick butt I can get those”.
Mark: Exactly, yeah, and I think, I mean, I can see how improved my business became almost immediately setting those huge goals and taking over my father from everything was something I had in the back of my mind for a few years, but never had the guts to approach him about it or really figure out how to do it. Then, once I started going through this kind of transformation into like, “I can really do this,” and I talked to him and he’s like, “you know, I’ve been thinking about it too, I think this is a good time,” so it worked out great.
Brandon: That’s cool. So do you recommend writing your goals down? Do you think it’s okay just to have them in your head? I mean, when people are planning their goals how should they do that? You’ve been through goal training, what was it? Jack something or other?
Brandon: Yeah, Jack Canfield. So, what do you recommend to people for setting goals? What should they do?
Mark: I think you should write everything down. Really. Not just because you see it, but it’s weird, but the actual act of writing it just burns it into your brain, and you think about it while you’re writing them down, you start imagining them, it’s just, I think it makes a huge difference when you write them down, and just being able to review them too. Part of our goal training was to have 101 goals, and it’s really hard to think of that many goals, even little ones, and so it makes you think of everything you want in life, and a lot of those things are small things you forget about and when you write them down you can go back and review and say, “oh, hey, that’s not so bad. I could do that today,” so it’s really cool.
Brandon: How about I toss out this challenge, just to everyone listening, is I want to encourage everyone out there to just go and write down one goal, like something that’s important in their life, go write it down or go on the BiggerPockets forums and start a thread that’s just My Goal Is:
Josh: We have a goal forum just for that.
Brandon: Yeah we do. So go ahead and do that. This week go and write a big goal, or one of your goals. Very, very important. Goals are very important. So, let’s move on.
It’s time for the Fire Round
Brandon: Alright, this is the Fire Round. These are questions straight from the forum. Mark, I know you’re pretty… yeah, you’re pretty. You’re pretty involved in the forums. Got to finish my sentences and figure out where to put those commas in. You are pretty involved in the forums so you’ve probably seen a lot of these, but first question: what is one piece of advice that you would offer to newbies?
Mark: Set your goals first. Make your goals and then break down your goals to step that you can take to create action. I mean, so many newbies want to get started, are all gung-ho about investing, but they never actually, physically do anything to get started. So, I think just list steps out that you can do. Go talk to a real estate agent, talk to a lender, visit a house, get out there and do something so that you’re physically in the game.
Josh: Do something.
Brandon: Do it.
Josh: That’s great. Alright, I’m 23 years old, good income, good credit, just bought my first rental, but I cannot get approved for anther rental property. How do I keep moving forward when the banks keep saying no?
Mark: Keep talking to more banks. If you’ve got good income, good credit, and you only have one rental there’s going to be a bank out there that’ll finance you. It may have to be a local portfolio lender, it may even be a big bank, but if you’ve got the money and the credit and your ratios are okay you should be able to do it.
Josh: Good, right on.
Brandon: How do I comp a property, in other words: how do I determine the value of a property, that I know is a tear down?
Josh: Ooh, that’s a good one.
Mark: Ooh. Like, I guess you would comp out the lots. So, try and find vacant lots in your area that are similar and then you would have to subtract the tear down cost from that.
Josh: I think that’s a fair way to do it. I’m not sure what the right answer is, but that seems like a good way to do it.
Brandon: Makes sense.
Josh: Yeah, right on. Alright, consistent late payments. So, you’ve got a tenant and they’re constantly paying late. Is it stupid to keep this person? I mean, ultimately they end up paying they’re just always late.
Mark: Yeah, I’ve dealt with this a little bit and I think the first thing you have to do is be in constant communication with them. So, every couple weeks even call them up and say, “hey, just want to make sure your rent’s going to be in,” we started sending statements every month to people who are late just to remind them this is what’s due with late fees if they’re going to be late. Make sure you charge late fees so that people actually have a penalty if they’re paying late otherwise, what’s the point? They’re going to just keep doing it. I struggle with that, because it’s hard to try to do some of those things, but in the long run it’s going to be better for both you and your tenant if you stick to your guns.
Josh: Yup, I agree.
Brandon: I have a tenant right now who’s been with us for 3 or 4 years now, but about 2 years ago he got off somehow on his rent and he cannot seem to catch up no matter what he does so every month he writes us two checks. One for like half of it, and another one he postdates the check for two weeks later, or a week later, yeah, cause he gets paid weekly, a week later, and then he includes the late fee. So, I’ve been getting an extra $50 a month out of this property every month for the last year and a half or two years on this, and some people would say I should just kick him out, but he’s so regular with it and it’s easy. It’s not a black and white answer I don’t think. Anyway, throw that in there. Why don’t we move on? Let’s move into the last section of the show we like to call the—
Brandon: Alright, the Famous Four. These are questions we ask everyone, and we’re going to fire ‘em at ya. Alright, first one: What is your favorite real estate book?
Mark: I would say The Millionaire Real Estate Investor by Gary Keller for investors, and then I’ll throw in The Millionaire Real Estate Agent by him as well for real estate agents. They’re both awesome books.
Brandon: Somebody just recommended the other day that I read the Millionaire Real Estate Agent even though I’m not an agent they said it’ll just improve your business in just all regards no matter what business you’re in so it’s on my list now.
Josh: And I’m actually surprised. I think that’s the first time the Keller books have been recommended on the podcast.
Brandon: Might be.
Josh: I could be wrong.
Brandon: Investor was very early on, but it’s been a long time. Never Agent I don’t think.
Josh: Yeah, interesting. What about your favorite business book? Non-real estate.
Mark: Think and Grow Rich. That really got me started on my whole goal and positive thinking transformation. Great book, old book, but a great book.
Josh: Right on. What about hobbies? What do you do besides pull your hair out with your 2 year old twins?
Mark: I love golf. So, I probably play once a week. I love cars. I’ve got a few cars. I love working on them and trying not to break them too much when I do them myself, and then just my family. I spend a lot of time with my kids, and my wife, and just have a lot of—it’s important to me to spend as much time as I can with them.
Josh: Right on.
Brandon: Very cool. Alright, final question from me: what do you believe sets apart successful real estate investors from those who either give up, or just fail?
Mark: Kind of a common theme, but goals. I think when I first started real estate I had no goals, I had no road map, I was just kind of doing it to see what happened and it didn’t get me very far. Once I started having goals, writing them down, and breaking them down into actions I could take things just exploded.
Josh: That’s great. Well, where can folks find out more about you?
Mark: Well, a few places. Like you said, I’m active on BiggerPockets, I’ve got a profile on there that you can send a colleague request to and email me there. I also run a blog on investing at InvestFourMore.com and that just kind of played off the whole getting more than four mortgages thing.
Josh: Ahhh I always wondered what it was. Okay, perfect.
Mark: Yup. So, talk a lot about my flips, my rentals, and being a real estate agent on that blog.
Josh: Right on, well listen, man, we really, really appreciate having you on the show and of course, as a blogger on BiggerPockets and all your contributions on the site, I think it’s a pretty good formula for success. Being active, and engaging in the community I’m sure has led to some opportunities for you so—
Mark: Oh, yeah.
Josh: That’s great. So, thanks so much and we really appreciate having you on the show. For those people who are interested, you can ask Mark any questions you’ve got on the show notes at BiggerPockets.com/show68. Mark, thanks so much we appreciate having you.
Mark: Alright, thanks so much.
Brandon: Alright, thank you, Mark.
Josh: Alright, guys, that was mark Ferguson with a ton of really good information about everything from flipping to buying and holding, and being an agent, and working with agents, and finding contractors so hopefully you guys enjoyed today’s show as much as Brandon did.
Brandon: I’m going to actually call up my agent and ask him out to go get some lunch at a fancy restaurant in town.
Josh: Oh, yeah? Nice job. Mark Ferguson, all the real estate agents who service real estate investors are going to thank you for the fine dinners they’re going to be taken out to.
Brandon: There you go.
Josh: Yeah, well, listen guys, thanks as always for listening. Check out the show notes at BiggerPockets.com/show68, jump on Facebook, Twitter, G+, LinkedIn, and everywhere else online, and make sure to follow us and keep up with what we’ve got going on, and of course be sure to join us on BiggerPockets, and you too could interact with wonderful guys like Mark Ferguson who are there helping out, interacting, and doing their part to help make you successful. So, thanks for your time, and we will see ya at show 69. I’m Josh Dorkin, signing off.
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