This is the BiggerPockets podcast Show 280.
“It bought at $435,000. I put down $43,500. I didn’t know about that FHA loan where you can go even lower than that. But I got 10% down and sold it for $1.27 million and made, at the end of the day, about $835,000 on my $435,000 investment”.
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Brandon: What is going on, everyone? This is Brandon Turner, today’s host of the BiggerPockets podcast, here with my bald friend, Mr. David Greene. How are you doing?
David: What is going on, Brandon? How are you, man?
Brandon: Man, I’m really good. I’m fantastic, actually. I’m waiting on an appraisal to come back on a property I’m trying to buy so fingers crossed it comes in high enough. Otherwise I’ve got to renegotiate, which is not bad. But whatever. What about you? What have you been up to?
David: This is your house in Hawaii and I know I’ve been involved in it. I feel like we’re waiting to see if the baby’s going to be delivered or not. I’ve been there for you during the pregnancy.
Brandon: I know.
David: We’ve been negotiating this thing together. It’s pretty cool.
Brandon: It is pretty cool. I’m looking forward to it. So anyway, what else have you been up to? Anything fun?
David: I’ve actually been doing awesome. I just got back from Atlanta where I got to fly out and record a segment for CNN.
Brandon: I’m sorry.
David: No, Atlanta is awesome, man. That place is like blowing up right now. The plane ride across the country wasn’t so great. But shout-out to Emmy-winning producer, America Arias. That’s her Instagram name, America Arias. She heard me on the podcast, reached out, and said hey, we’d like to bring you in to talk about the top five most affordable housing markets in the country, because I wrote the book on long-distance investing. I got to go out there and record a blip for CNN. It aired not too long ago so it was pretty cool.
Brandon: That’s awesome. That’s fancy. Look at you, growing up, putting on your big boy pants. I’m proud of you.
David: Yeah. I wore a suit and everything. If you guys could see Brandon right now, he’s wearing a denim shirt. We call it his Handsome Shirt.
Brandon: It is my Handsome Shirt. Whenever people are like, that’s a nice shirt—everyone says, that’s a nice shirt. I’m like I know, it’s my Handsome Shirt. I have like one shirt that kind of tries to make me look handsome. This is it.
All right, enough about Handsome Shirts. Let’s get on with today’s show. Today’s show is fantastic. I know we say that all the time but man, this guy today, Mark Hentemann, he is a writer, a comedy writer for a little show that nobody’s probably ever heard of called Family Guy. It is a fantastic show. That was sarcasm, David Greene, in case you don’t know sarcasm. I know you don’t know analogies but I’m not sure how you are on sarcasm.
And he’s a comedy writer but he also owns over a hundred units and he talks about how he’s been able to do that. Tons of good stuff like he’s talking about house-hacking, how he started with house-hacking on a deal that led to $800,000 in profit. He goes in-depth on how he analyzes deals using the price per square foot method, which is something that we don’t talk a lot about here.
And his advice on filtering could save you so much time when you’re looking for deals. And a lot about just buying properties that everybody’s just turned off from. You guys will love that as well, how he finds deals in today’s competitive market.
So a very, very good show. So before we get further into this episode, let’s get to today’s Quick Tip. All right, today’s Quick Tip is go to BiggerPockets.com/events and look for an event in your area. There’s networking events happening all around the country, all the time. Go look for one in your area and I want you to register to attend it. You can just click a button that says “I’m attending”. And then attend it and actually show up and go meet people.
It’s like people who get together with other people, like you’re naturally going to get more excited about real estate, learn from people, learn what works, what doesn’t work, and you’re going to have a way more likely chance of pulling off some cool stuff in the near future. And if you don’t see an event in your area, you get to start an event in your area, which is super cool. So find a little restaurant, bar, club, daycare center, whatever, and host an event at BiggerPockets, and event—what do we call them? Meetups? Events? Networking things?
David: If you’re in California, check out mine. I do it every single month. I do a Meetup, different topic I teach on every single time and the last one is how to analyze an investment property. We’ve done them on the BRRRR method and out-of-state investing, something cool every single month. So check out if you’re near me and if you’re not near me like Brandon said, make up your own. You get to be the man.
Brandon: You get to be the man or the woman if you’re—
David: A woman.
Brandon: Cool. All right, well let’s move on to today’s show sponsor.
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All right, thank you to our show sponsors always, and now let’s get on with today’s show and like I said, today’s show is awesome. Mark Hentemann’s a super cool guy. Last thing I want to say before we bring Mark in is we’re doing a special event next week at BiggerPockets. Totally free, but I want to invite everybody here.
I’m going to be hosting a live webinar, like an online class, a 90-minute class on how to buy small, multi-family properties. Because today’s podcast is actually, a lot of it is on buying multi-family. People wonder how do you get started with it. I’m going to go through how to find multi-families, how to analyze multi-families. We’re even going to look for a real one live on the webinar.
We’re going to look for a property and we’re going to analyze it together, find out how much to pay for it. It should be a lot of fun but I want this thing to be the largest webinar we’ve ever done at BiggerPockets so sign up at BiggerPockets.com/webinars. Or webinar. Both gets you there. But enough about webinars, let’s get to Mark.
All right, Mark. Welcome to the BiggerPockets podcast. Good to have you here.
Mark: Great to be here.
Brandon: Yeah, so this is kind of a cool show because you have kind of a unique job. I love talking to people who have unique day jobs. You’re also a very active real estate investor. You’re crushing it. You’re killing David and I and so we’re going to talk about that. First of all, what is your day job and why is it kind of cool? Or why do I think it’s cool?
Mark: I’ve been a writer in television for a while. I am currently on Family Guy. I’ve been one of the original writers of that show. I’ve created a couple of shows, run several shows including Family Guy, and written in late night for David Letterman and yeah, that’s kind of the career path I started down the road on and been lucky enough to kind of stay gainfully employed.
Brandon: Nice, nice. I’ve got to ask you before we get into the real estate stuff. I’m sure you get asked this all the time but like, were you funny growing up? Was that like a thing or do you learn to become funny or are you funny? Are you actually just a really lame guy in life?
Mark: Yeah, I would be terrified to be a standup comic. I don’t know if I’m that but I’ve always been like this head in the clouds kind of weird ideas, conceptually weird and so I think I always had a knack for expressing ideas in writing or whatever. And I loved comedy from an early age. So I was drawn to it.
Luckily, it worked out. It was hard getting into the business but yeah, you throw me up on a stage, I’d be petrified. But in a writer’s room, I can be funny when I’m relaxed.
Mark: There’s a lot of very introverted writers. Very funny people and very smart people but—
David: Well, you have nothing to worry about, Mark, because there’s only a quarter of a million people listening to you right now. No stress.
Mark: All right.
Brandon: All right, so let’s get into your story about real estate. How did that begin? What was your very first deal or maybe even, let’s go before your first deal. Why did you even get the idea I think I’m going to go into real estate. Maybe that leads into your first deal.
Mark: Yeah, I mean it coincides with that first season of Family Guy. I had moved out to L.A. I had been broke through most of my twenties and I got to join this new show that was starting up called Family Guy. And I wrote with my first couple script payments for that show, I finally had some money in the bank. I was looking for a new apartment and while looking for an apartment, I went to an open house and a broker said, why are you throwing your money away on rent when you could be putting it towards the mortgage and own a house?
And I was like, I’m in the entertainment business. Do you think I want the responsibility of a mortgage? My show could be cancelled tomorrow and I could be out of work for two years. I didn’t want that kind of responsibility. But she—we had no idea that Family Guy was going to last more than a season. We were like, this will be here and gone. But she made some arguments as to why it could be a good idea and I said basically, the only way I would ever consider buying a house—it would have to be the best investment I have ever made.
Don’t show me any cute, charming houses. I want rough around the edges in a marginal but improving location. And that’s the only way I would consider it, because it would have to be like a fallback, financial bedrock for me. And so we parted ways. I figured I’d never hear from her again but two weeks later, she calls me and she said, I found the property you need to buy but there’s a catch. You need to become a landlord. And I was like, a landlord?
Like that doesn’t sound very fun at all. But I met her at the property. It was a duplex from like the 1920s. It needed a lot of TLC. The owners, I remember, were raising goats and chickens in the backyard in the middle of Los Angeles and they were planning to move to Kansas to dig a hole and build an underground house and live off the grid.
But the broker was like, I think this is a good opportunity. And I was standing there looking at the building and I was like, yeah, it is. I could see this could be a great property if some effort was put into it. So I made that big step and pulled the trigger and took that leap into the unknown and it was in L.A. so of course, there were 15 other offers and it was immediately a bidding war. It became the most stressful two weeks of my life.
My offer was having to be raised like $15,000 every day. I was on this roller coaster ride where I had no idea where to get off because I had no sense of the intrinsic value of this property. I couldn’t sleep at night. I had started at $350,000, which was my original offer. After two weeks, I was at $435,000 and that’s where I won the bidding war.
I immediately had tremendous buyer’s remorse. I thought this was the worst decision I had ever made and would probably be a bankrupt, possibly because of this dumb decision I had made. But I tried to embrace it. I moved in and my first tenant was a guy that I worked with named Mike Henry and he does the voice of Cleveland and Herbert and Consuela if you’ve ever seen the show.
Mark: Yeah, so he was my first tenant and he was a good tenant to learn how to become a landlord with because he was just a huge pain in the ass. I had to basically threaten to evict him on a weekly basis. But you know, we were still friends but, I hope he doesn’t watch this.
Brandon: I rented my very first property. Well, it was a first rental anyways. It was a duplex. I rented it to a friend of mine and he ended up getting arrested and hauled off to jail. That was fun. Since then, I do not rent to family or friends anymore. I’ve actually gone back on that a few times and I regret it. Do you have any rules like that, like do you not rent to family or friends anymore or are you all right with that?
Mark: Right now I am completely in multi-family so I have a management company that manages the whole thing. So I don’t really have too many friends that are asking me for housing. So no, I kind of have escaped that since that time. But it was fun. I tried to embrace being a landlord. I mowed the lawn. I tried to fix it up but I needed a ton of help.
We completely redid the kitchen, redid the exterior of the house, tried to restore it to its original character. And you know, after five years, I sold it and did phenomenally well. I was lucky to be in getting my first deal during an upswing in the market. I didn’t know it at the time. I thought we were at the peak when I bought.
But yeah, I bought—the numbers are I bought at $435,000. I put down $43,500. I didn’t know about that FHA loan where you could go even lower than that but I got 10% down and sold it for $1.27 million and made, at the end of the day, about $835,000 on my $42,000 investment.
Brandon: That was a good investment. That turned out really well.
Mark: Yeah it was kind of lifechanger. Not only did it give me a financial cushion for the first time in my life but I was hooked. I had found this practice, this investing habit in practice that I wanted to do for the rest of my life. At that point, I kind of shrugged and said I don’t care when I get spit out of the entertainment industry. I am going to do real estate investing until I’m 100. And yeah, I’ve tried to do that.
Brandon: I love that, I love that. I have other friends that have been on the show before and people that I’ve known that they’re in similar industries. At any point in time, like the job could stop whether it’s professional athletes or musicians or producers or whatever. It’s funny, we think of people in your line of work and you’ve even kind of mentioned it—it’s kind of a you might lose your job at any point sort of business.
But at the same time, in today’s world, almost every job is like that. There’s no such thing as job security anymore the way that our parents maybe had it, you know back in the whatever, back in the day. Everybody’s job is potentially gone at any given point.
Mark: It’s kind of a cool time, too. It’s like everybody is carving their own path and everybody’s an entrepreneur to some extent whereas 30 years ago, you just get the company man and write it out.
Brandon: Well, here’s what’s interesting about your story and it’s really prevalent to today. What year was it, by the way, when you bought this?
Mark: I bought it in 2000. Sold in 2005.
Brandon: Okay, so you thought in 2000, you were at the height of the market. Clearly, it had a long way to go.
Brandon: Today, I keep hearing the question over and over and over. We have these webinars like we have every single week on BiggerPockets and I get this question, should I wait until the market drops again because we have to be at the peak right now. So, very similar thought process where we must be at the peak, right? What do you say to people who might ask that question to you? Are we at the peak? Should I wait to buy? How do I know?
Mark: Yeah, I would say be very careful. I think bull markets in the real estate industry tend to go on longer than anybody expects and that could be kind of like a seductive temptress that could be very dangerous. Because I remember I thought in 2000, we were done. And it was going to go down very soon. But it went until 2004, and then 2006, and we were setting records every year and it feels like we’re kind of doing that now.
Yeah, I would go in small if you’re a first-timer. Go in small. Go in on something with cash flow. But be careful. People say, never try to time the market but real estate cycles. The years that they happen are not very predictable but the cycles themselves are very predictable so just be aware and be a little bit careful.
David: There’s something that really jumps out to me there, Mark. You overpaid in your mind at the time, right? You wanted to pay $350,000. You ended up paying $435,000. In my experience, I would bet you there’s five to ten other buyers that said this is ridiculous. That guy paid way too much. This market is so crazy expensive. Let him have it if he’s going to pay that much, right? And now, five years later, you sell it for $1.2 million and you make $835,000 and I bet you did not care that you spent some extra $50,000 or $55,000 to get that house, right?
It’s easy for us to focus on when things don’t go our way and think well that’s the way it’s going to be and we like ignore a story like this where, who cares what you had to pay to get that house? You made it a performing property, you put it in great condition, you bought it in an area that was appreciating and you cashed out huge later on. And I’m always trying to get people to stop thinking about the list price. Like that’s where the value of the property is.
Your property is valued for whatever it was. Five years later, it had nothing to do with the price that you paid for it when you bought it or whatever that realtor happened to list it at. As far as trying to time a market and knowing should I buy now or should I wait, can you talk a little bit about how that property cash flowed and how that played into your peace of mind and you didn’t worry about it if you overpaid?
Mark: Yeah and you know I’ve got to say, while I owned that building, I was not celebrating. I was not being like woo, this thing is charging upwards. It boils down to, what I was fretting about, and this is my first deal and there’s a lot of things I don’t do now that I was doing on a first deal. When I was operating that deal and being a landlord in this duplex, what I was fixed on usually was the dishwasher that broke down next door that was going to cost me $250. And I was like oh man, what a mistake. Why did I get into this? It’s like why did I do this?
And this was three years down the road. I wasn’t paying attention to appreciation. It goes to like, I have this theory that real estate, unlike every other vehicle in the financial world, there’s things that you’re not—the hidden things that you’re not paying attention to, in real estate, they work in your favor.
And in every other aspect in your financial life, they’re working against you. The things that you can’t see are usually working against you. If you’re investing in stocks, you’ve got layers of fees that you’re not aware of. You could have front loads, back loads, or the company could decide to make a stock issue and dilute the value of your shares. There’s all these things.
But in real estate, like while I was fretting about that $250 that was going to eat up all my cash flow that month, I was not at all paying attention to the fact that I had my loan payment on autopay and in that loan payment was about $1500 in principle I was getting depreciation, that my accountant was figuring out. I didn’t know how to calculate that at the time and that was probably contributing to it being $500 that month.
I was also riding a wave of appreciation that was probably adding $4000 a month to the value of that property and then I had leveraged it and I had leveraged it at 10% down. So I had a ten multiple. So I was gaining like $55,000 a month, but all I was aware of was that $250 broken dishwasher that I was like, this is a big mistake. What am I doing?
David: Isn’t that amazing? Brandon and I talk about that all the time, like the mindset that you have to get in is so powerful and you have to protect it because there’s always something that wants to steal that from you. I remember the second house I bought, a drunk driver—it was a house on a corner and a drunk driver turned the corner too sharp, went across the front lawn and ran into the fence that separated it from the neighbors.
And the insurance company wouldn’t pay for it. I had to pay like $700 to build a fence. And I remember kicking myself saying, why was I so stupid as to buy a house on a corner? I should have seen this coming. Like, nobody would have done this. That’s all I was focused on. That’s my $250 dishwasher. And now that house is appreciates a quarter of a million and it’s on a 15-year note and it’s $800 a month of principle that I’m paying off. If you just own real estate long enough, eventually you can ride out those cycles because it cash flows. You’re going to make money.
Brandon and I have these conversations between ourselves all the time that you can go out and buy a place in Malibu for $10 million dollars and you could lose a couple of thousand dollars a month. But as long as you can ride that out, do you think it’s going to be worth less 20 years later in Malibu than it is when you bought it?
Getting stuck on those details of the small things can really rob you of the future and it sounds like once you sold it and you had a windfall of what you had, you realized oh, my God. I’m going all in on this. Can you tell us about what came next after you sold that property? What did you do?
Mark: And you know, I’ll mention an interesting thing though. I was reading a lot of books while I was living in that duplex and learning about investing, landlording, and accounting. And so I approached my accountant after the sale and I said, hey, we’ve got about $800,000 in gain.
Is it possible for me to take advantage of both the primary resident tax credit of $500,000 and also 1031, the next door unit as a rental property, and my accountant said yes, you can. And we basically took $500,000 out tax-free and then we took the other $330,000 and I 1031 exchanged that into a 14-unit building.
Brandon: That’s awesome. For those people who don’t know what that is, look up 1031 exchange over on BiggerPockets. But the short explanation is yeah, you sell a piece of property and you make a bunch of money. If you do it right, there’s a bunch of rules to follow, you can roll all your profits into the next deal.
But what Marks’ saying here is even cooler than that because he lived in half the duplex, there’s also the IRS exclusion on if you live in a house for two years that’s your own home, that you can potentially offset, if you’re married, up to $500,000 of gain.
So like, you just capitalized on both of those things and did awesome. Which is another reason having a good CPA is really important or knowing the stuff yourself because those little rules probably saved you hundreds of thousands of dollars there.
Mark: Yeah. Absolutely. And yeah, during the time that I was living there, there was a couple of years where I was just learning how to be a landlord and getting comfortable with real estate investing. But I was hooked while I was living in that duplex and I started buying other properties. I bought a fourplex after that one and then picked up another fourplex out of foreclosure and then 1031 exchanged the duplex into a 14-unit building.
So I was all in on real estate at that time and I was spending a lot of time. I loved it. I was obsessed with it and I loved it. It was a passion for me. I would come home from work and it was just going over to the opposite side of my brain from writing jokes all day to this. But I also became like an evangelist for real estate investing to all of my colleagues to everybody that I worked with. I was like, dude, you’ve got to get into real estate investing. This industry has so much uncertainty to it. You’ve got to build yourself this financial foundation and you’ve got to be smart with your money.
But yeah, nobody would take that step on their own so I eventually decided to buy a building and I was going to bring them in. It became my first syndication. Of course, that was 2008. October of 2008 and I had five friends of mine and we were in escrow and a week after we removed contingencies, Leeman Brothers crashed and then the entire economy collapsed, led by the real estate market. I was like, oh crap. These guys are all smartasses. I see them every day.
They’re never going to let me hear the end of this and I’m going to lose all their money. But luckily, we bought right—in contrast to that first duplex that I bought, I have been cheap ever since. Like I am a low—I hunt for low cost per square foot. I hunt for undervalued buildings that I could buy for less than their replacement costs given L.A.’s building codes and all that stuff in L.A.
And that’s what I did on this 14-unit building. But we rode through the entire downturn. I’m sure we were underwater but it didn’t matter because we had cash flow and we eventually sold that building and everybody tripled their money. And knock on wood, it was a little terrifying and nerve-wracking going through it but we made out okay.
Brandon: And is that because you ran the numbers ahead of time? Maybe you budgeted for the fact that the market wouldn’t go up forever or did you just get lucky or you held long enough to recover from that? How’d you get through that?
Mark: I think it was a little bit of all of those things. I made sure there was cash flow. I was nervous, jittery about the market and you know, interesting phenomenon and I think this happens to a lot of people is I was one of those people that were watching the market set records every six months in terms of prices and watching it go up and up and up. And I had a portfolio. I had a lot of buildings at the time so I was happy to have skin in the game. I was happy to be benefiting from that.
But I also was like, it had been a little bit of time since I had bought and so the market dipped 10% and I was like yes, finally. I can take advantage of this dip and then ride it as it reverts to its upward trajectory. But that’s not what happened. That 10% dip was the beginning of the rollercoaster plunge. But we bought it.
It was a distressed sale. The sellers were suing each other, bought it at a good discount and it was a strong cash flow building in a B Class location, a B Class building so I think there wasn’t a ton of movement—knock on wood—with those rents while we owned it. Although banks became more stringent and the values took a plunge, we were able to just ride it out.
Brandon: Yeah, that makes a lot of sense. What I hear you’re saying is I mean, you basically bought with solid fundamentals in place. Like, there was cash flow there. You weren’t completely going crazy with anything. You just bought with solid financial fundamentals. So when the market does go up and down, you can ride through that, just like we said earlier.
If you can hold on long enough—a lot of people get into real estate and they can’t hold on long enough and they end up losing it because they don’t have good financial backing from their job or from whatever. But it sounds like you had that going for you. Again, I think that translates so much to today. Like yeah, we might be at the peak. We very well might be. I’m still buying though because I am on solid fundamentals. I’m not letting the fever of 2007 of, I’ll just buy a horrible deal and appreciation will save me long-term.
Mark: Right. Don’t chase it.
Brandon: Yeah, yeah. We’re not chasing it. So you started buying a lot more deals until 2008 happened. Over the next ten years now, maybe we can go to the end—how many units have you purchased now? What do you have? And then let’s go backwards and kind of fill in the spaces.
Mark: Right now, so I’ve exclusively been in multi-family. I’ve tried some other things. I’ve tried condo conversions. I’ve bought vacant land. I’ve tried flipping houses. But mainly, my sort of sole focus is multi-family. I now have 130 units across 15 buildings. I’m in escrow to buy a new one. Yeah, that’s kind of where I am despite having a bunch of buildings that I owned during that downturn, I also knew that it wasn’t going to last forever.
Clearly, there was an overreaction. There was overexuberance leading up to the plunge but I knew there was exaggerated fear and I was waiting. David, like in your podcast, you mentioned waiting for that bottom of the market to get in again. I was kind of waiting for that and once I saw it turn, I started to buy aggressively. And yeah, I bought a 20-unit. I bought a 13-unit in ’12 and ’13. I got a show picked up that I created that took me out of the real estate for like a year and a half. Probably a great time to have been continuing to buy.
But then, I’ve probably bought eight buildings since the downturn. Like I said, the most recent one that I closed on was a 36-unit building and I’m in escrow now with a seven-unit building. And I’m continuing to buy but like, really it’s got to have really strong fundamentals. And I’m going for really low cost per square foot.
David: So why multi-family, Mark?
Mark: Why multi-family? I realized that because I have a full-time job that I really enjoy, I needed something that I could give to a property management company. I don’t want to be involved in the property management. I want to oversee it and I want to be aware of everything that’s happening but it’s not a good use of my time and just multi-family. Like, the economy’s upscale was what drew me to it in the first place.
And I think ever since, even when I was in that duplex, I was looking across the street at the fourplex across and was jealous. I was like aw, man. It would be better to have four. And then next door to that fourplex was six. And I was like, yeah. It’d be even better to have six. Because when like somebody moves out, you’re not hanging in there with an empty building.
David: What I love about what you’re describing is you’re not looking for real estate to be your savior or salvation from a job that you hate. Like you separated them. Real estate needs to stand on its own fundamentals and my job needs to stand on its own. If I’m happy with my job, then I need to do better at it. I just read the book yesterday on the plane, So Good They Can’t Ignore You. Such a good book.
Brandon: I love that book.
David: It confirms everything that I was thinking inside. Like, oh other people think this, too. And they talk about being so good at what you do that he earns what’s called career capital that you can exchange for a better job. I think a lot of people are looking to real estate to be a magic bullet that’s going to rescue them from an unhappy life. They end up making bad decisions because they’re trying to force something that’s not working.
You’ve separated them and I like it. And you recognize multi-family is the best vehicle to get me what I want. I’m not going to stop working on this awesome career that I have. I’m trying to be the best writer, the best producer. I mean, you’re involved with Family Guy, which is one of those popular shows that’s on television.
You mentioned strong fundamentals, which I know is so important to being successful at whatever you do, including real estate investing. Can you share some of those with us? What are you looking for in a deal that gets you excited so you pursue it?
Mark: Yeah, I think to your point, it has benefited me that because I have a job, I’ve been able to be very patient. Because sometimes you see investors anxious to get in and almost they force it on some things and it’s really valuable to be able to sit back and wait for the deal to come to you.
That was something that I’ve had the luxury to do because I didn’t quit, walk away from a job that I needed real estate cash flow to survive. But some of my fundamentals, my fundamentals are like I said, real estate is this—you have to synthesize multiple metrics. There’s all these metrics that you hear about a building. My one as I mentioned, that I zero in on, is cost per square foot.
You’re comparing apples to apples. It feels to me like the most honest metric cost per unit, has caveats to it. It could be what bedroom mix is it? How much square foot cap rates can be fudged by the brokers? And then they don’t always tell the whole story. GRM is half the story because you don’t have expenses but cost per square foot, that’s my first filter.
If I’m going on a hunt, if I go on LoopNet and want to start doing a search of the 20,000 buildings in L.A. that are for sale, I’ll make a really low cost per square foot as a filter and see what comes up. And usually, it will be like 25 buildings. I’ve put a ridiculously low cost per square foot and then I look at those 25 buildings and 22 of those buildings will be in terrible neighborhoods. But there’s a couple that are in interesting, up and coming neighborhoods that may not be great right now but they’re on the rise.
And that’s when I get excited and that’s where I kind of start my search. But like I said, I look for up and coming neighborhoods as a lot of investors do. I also like to draft off of major development. Like once you find that—in L.A., it’s a huge market. It’s dynamic, strong economy market. So it’s a good place. It’s a nice city to have to be invested in but within this city, there’s a hundred neighborhoods.
Some are accelerating and others are decelerating and some of the most prime neighborhoods in the city are decelerating because they’re mature markets. So I look at those like accelerating markets that are affordable now because they’re affordable and well-located—they’re accelerating and they’re appreciating quickly.
Brandon: Can you give us an example of that, like something you bought that you were like, oh, I see development happening here. I’m going to buy that. Just so we can get a clear picture?
Mark: Yeah, the two things that jump to mind is—I’m not from L.A. I’m from Cleveland, Ohio. And when I moved out to L.A. I came from New York, one of the first impressions that I’ve had of L.A. is I got here and I got to Hollywood and I was like, oh my, God. Hollywood is a dump. Like, there was drug dealers and prostitution. I was like, how could that possibly be?
This is like a brand that’s known worldwide. There’s nobody on earth that doesn’t know Hollywood. And the architecture, the history, it’s like what a resource it has in the city of L.A. in Hollywood, and there’s no way this is going to stay the dump that it is. So I was like, I started watching it and I saw—I was reading about Hollywood and I was like, I want to be in Hollywood before it turns because I know—I’ve got my whole life and I know it’s going to turn.
And I saw, there was this redevelopment committee of private money that put like $4 billion dollars into it, like we’re going to revive Hollywood. And then I watched, there’s a great thing if you live in a big city, you go to the city planning website. And in L.A., we have a map of major development. And you could look at the city and see where all the big developers are going. And you can look at those projects.
It’s like if you compare it to the stock market. In a stock market, people would kill to have a crystal ball. But anytime there’s like a new product that a company has, or some innovation, it’s immediately baked into the stock price. But in real estate investing, you kind of do have that crystal ball.
You go to the city. You look at these major developments. You could see exactly what they’re building and where and this is going to take five years. And that neighborhood might be a dump right now and you could get in and buy a B-class building, do your own value add, and then let this development come in and you could ride that wave.
Brandon: Yeah, I love that because it applies to anything, like big or small deals. You should be looking at where’s the path of progress happening? And it’s not like you can’t make money if you’re not buying in those areas but man, if I see a Starbucks go into an area, I assume—my assumption is that Starbucks has way smarter people to do market research than I am ever going to do.
If I ever see a Walmart going in somewhere—I’m like, let the professionals do what they do and I’m just going to not reinvent the wheel. I’m just going to piggyback on them. Or a stadium if there’s like a new stadium that goes in somewhere, I’m like oh, that’s a really good indication that there are smart people moving things around there.
Mark: Yeah, I bought near the L.A. Rams stadium that’s still being built. In Inglewood, I’ve got two properties down there. And I had to ride the wave of, it was between Inglewood and Carson, this other location. And I was in escrow and I had to close and I’m like, I’m going to double down and bank on Inglewood and luckily, they chose that.
David: You know, it’s kind of like drafting. Race car drivers will get behind another car and they won’t use as much of their gas or energy because the other car is, they’re braking. I first learned about this through Open House Teachings by Joshua Smith. He’s a big realtor in Phoenix and he talks about like how to have the perfect open house.
And what he does is he looks to hold houses open that are right next to grocery stores because he knows the grocery store spends so much money advertising their sales to get people to come in over the weekend that they’re driving all this traffic. And he wants you to see his big Open House sign on your way to the grocery store so you stop by and he collects your information and then they can follow up with you and make you a client.
That’s really smart. I’m always saying, we don’t have to know everything. We don’t have to learn everything. We have to have the right people around. You know, Mark, you had your CPA come up with this great plan when you brought it up to him so you save money on a 1031 and you save money on a primary home residence exclusion. You took that money and reinvested and turned it into 136 units or whatever you said.
You bought near the Rams Stadium so you recognize hey, they’re already going to be spending tons of money to revitalize this area so that people want to come here. I want to buy the property before that happens. There’s countless examples of this and it’s why I’m always telling people, you’ve got to get out of this cash flow mindset where all you think about is cash flow and then you end up running to a turnkey provider and say, oh, I want to buy a house from a turnkey house because it’s cash flow.
It’s just a lazy way to invest. There’s so many things that you need to be considering and open your mind to these possibilities because you would never have built a portfolio you did if you were just only thinking about cash flow and that’s all.
I’ve also heard you mention a few facts about the ways that you’ve taken a deal and you fixed it up and made it better. You looked for a low price per square foot because you know I can take that, that is not being run very well and revitalize it and make it worth a lot more. Can you tell us some of the ways that you’re taking these deals that don’t look like deals and making them into good deals by targeting low price per square foot?
Mark: Yeah, last year I finished like an eight-month renovation on two side by side five-unit buildings that were just, weren’t in a great neighborhood. They were in Koreatown in Los Angeles. And you know, really did maybe more of a renovation than I wanted to but I knew going in that they needed new systems. They needed new heat. They needed upgraded electric. Some of the major systems but did kind of a ground up renovation on that.
And I also, my last building, I guess this I bought for a very low cost per square foot. But after 18 years of experience, I was looking in. I was doing my filter where I was just looking for what’s got a really low cost per square foot and is it in a good neighborhood? And I spotted this building and I was like, this is remarkably cheap. And I had done some deals with this broker so I call him and I’m like, hey, is this thing still on the market?
And he’s like, it’s about to be. And I was like oh wow, but he was like, my advice to you is run the other way. And I was like, what do you mean? He said, this is the third buyer here that’s about to fall out. There’s lawsuits. There’s multiple tenant lawsuits on this property. The sellers are in distress. They’re getting clobbered.
And his description of it was like, this is a building that, kind of a predatory law firm had seen a goldmine in and he was going to initiate these tenant lawsuits and he was successful on the first one and then followed it up with going to other tenants in the building and doing these multiple—he went actually back in time to previous renters so the seller was just getting killed.
And I was like all right, well obviously, the seller is not going to sell. He can’t sell a building that has legal exposure to a buyer. And the broker was like, no no, he’s got to address all this and give you an assurance that everything is addressed. And I was like, this is kind of an interesting deal. So I went to my team. I’m lucky enough to have a good team in place now.
And I went to my attorney. I said, can I do this? Can I take on a deal like this? And he was like, you absolutely can. You need an indemnification agreement which absolves you. It’s a document from the seller that absolves you of any legal exposure. I went to my insurance agent and said how can I protect myself and he said, yeah, you could do this. You need liability insurance.
I went to my property manager. I said, this seller has tried to manage this building himself and my property manager—all of these people are also multi-family investors so it’s good. They’ve got tons of experience and my property manager was like, yeah, what you do on day one—you put out a notice that all issues must be submitted in writing. You get a completely thorough paper trail of everything that you’re doing and you make repairs promptly and he’s like, you’ll have no problem.
He’s like, we’ve invested in buildings like this. They’re good opportunities but you’ve got to be careful. You’ve got to dot your I’s and cross your t’s and stay on top of it but you could profit from it. And eventually, a predatory law firm is going to give up. They’re going to realize that you’re not the opportunity that the previous seller was and they’re going to go find another building.
Brandon: This is fascinating because so many people out there will look at a deal like that and say, I would never buy xyz or an agent or a lender or a broker, whatever. They’re like no, you shouldn’t do that. That’s a horrible idea, right? Everyone’s got their opinion on why it’s a bad deal. For example, you should not buy that house because it’s got a bad foundation. People make these general rules, right?
You should never buy a house with a bad foundation. Or you should never buy a house in that neighborhood. You should never buy a house or a property that’s being litigated on because it’s going to be drama. But that is where opportunities are in today’s market.
And for those people willing to ask the question like you’re asking, how do I get through this? How do I buy it even though there’s litigation on here? That is what turns you just from one of the many people complaining about, there’s no deals in my market, to somebody who’s actually closing stuff. And that’s what I love about that.
Mark: Yeah, there was a ton of fear surrounding this building and it seemed like opportunity to me.
Brandon: I’m sure you were probably fearful as well. You didn’t want it to screw up. But you didn’t let that stop you and that’s what’s so cool about your story. You just did it anyway.
Mark: Yeah, just be very careful.
David: We interviewed another investor from L.A., same market you’re in, Paul Morris, and he talked about barriers to entry. He always wants to find something that has barriers to entry and what you’re describing is a huge barriered entry. This scared everyone. This is the big, mean, fire-breathing dragon that all the other investors are running away from. And you’re like, no, no, no—I just need an indemnification agreement. It’s the shield that will stop the fire from hitting me.
And you pushed forward and you got to the gold. And Brandon pointed it out, your mindset was how do I get around this problem? Not, oh there’s a problem, let me run away. And if you want to be a good investor, you need to just embrace the fact right now, you make money by solving problems. That’s what termites and foundations and lawsuits and everything else we’re talking about here, those are problems and that’s how you get properties at good prices. And that didn’t scare you and you went forward. Can you tell us a little like how did you build that mindset?
Mark: Yeah, this building, I think it was my experience. I was ready for a challenge with this and when there was a lot of fear and the price was going down, I saw that it was at a price point that was very attractive. Like it was almost half of what it should have been. And it became, I went to my team. And I went around the horn and I’m like, how do you solve these problems and once I talked to everybody, can I be comfortable continuing forward on this deal?
I don’t know how I’ve gotten to that point. I feel like trying to break into the entertainment industry has conditioned me in a way—like you’ve got to be relentless to get in and you’ve got to be prepared to deal with failure, frustration, and setbacks. I remember those in my early twenties trying to break into the entertainment, in the writing business.
And I eventually realized, you’ve just got to almost become numb to the emotional side of that stuff and be like a river moving forward. You just have to move forward, take steps forward, all the time and there’s going to be like boulders in your way, trees falling in your path. But you don’t stop and you don’t get flustered.
You don’t get all frazzled and get in your own head. You just keep moving forward and that’s writing you can always write, right after someone has rejected your script. And you can do that with real estate, too.
David: Yeah, oh man, that’s such good advice. Because I mean, are you trying to say that you didn’t become a writer and producer for Family Guy on your first try and you didn’t just walk in there and say listen, I’m a genius and it’s time you all recognize me and I got the job.
Mark: Yeah no, not at all.
David: So what I’m picking up is you developed this river mentality. Maybe you couldn’t articulate it when you were learning it but later on, you learned that that’s what you were doing through all the failures that you experienced in this one part of your life. But because you wanted it so bad, you pushed through that and developed this mindset that now became a weapon that you can use and all kinds of other things.
Like, I don’t know any other anything about your finances but I venture to say you probably made more money in real estate than you have in your career as a writer or at least close to it. And that’s from skills you learned from working as a writer, you know? And now that you learned in real estate, I bet you whatever your next pursuit is going to be, you can do even better at it because of these things you built up.
That’s what the ladder of success is like. It’s taking skills you’ve learned in one area of your life and applying them into the next area of your life and pushing forward. One thing you mentioned that I know you attribute a lot of your success to is the team that you built up. Can you tell me a little bit about how you built them, what the team members are, and then how you used them so that you can be a river that’s always pushing forward?
Mark: Yeah, I built them over time and two new investors, for example, you know what? I try to give them advice. I know the value of a team and you want them to build their own team but sometimes it takes you to have a deal or something to be working on to kind of bring them into the picture. But my team evolved over time. I’ve got a loan broker who is great and he’s an investor.
The interesting thing is everybody that is on my team in every aspect of it is also a multi-family investor and they’ve got hundreds of years of investing experience between them and I use them, not only for the services that they provide but they’re all my mentors and we talk and we discuss problems and opportunities and I’ve got my loan broker who I guess I don’t get too kind of crazy or creative with financing. I always get a pretty good leverage from him. Leverage in my opinion is hugely important. It’s dangerous. It’s tricky.
I always feel bad saying that but if I look across all my investment performances, the one common denominator in the highest returns I’ve received is leverage. But anyways, that’s my loan broker who helps me with that. I’ve got an insurance broker who he and his brothers are huge investors. They’ve got probably 900 units and they’re like my age but they started out in the insurance business and started buying L.A. real estate in the early ‘90s. And then I’ve got my property management company.
They are like third generation multi-family investors in L.A. They’re one of those old school families where every family member is somehow involved in the real estate business but they do the property management firm. And let’s see, I’ve got an escrow officer, a guy who owns the escrow company. It’s right across from pretty close to where I live and he’s great. Really good guy and he’s been doing this for 40 years.
David: Yeah, in my book, I talk about the Core Four you want to put together, the four people you need that if you have the money or team, you can buy property in any market and one of the things that I pretty much demand is that they’re also investors themselves. I want my deal finders to be investors. I want my property managers to be investors. I want my rehab guy to be investors.
Because they just help you in so many ways other than just doing the one job they’re doing. They bring experience. They bring advice. They bring in other set of eyes so they get a deal. They bring me referrals. They bring me deals themselves. If you were working with other real estate investors, it helps your own business so it like amplifies and exponentially increases how quickly you learn because you’re around all these people that do it, too.
Can you tell me, Mark, in this market where we’re in today, it’s obviously a hot market. You’re in a hot market. L.A. It’s incredible you’re finding deals right now. What are you doing to find them? What’s your secret?
Mark: You know, I hired somebody and I hired somebody off of BiggerPockets a little bit ago and he’s my asset manager and now he manages my portfolio. But you know, how do I find deals? I get brought—a ton of deals get e-mailed to me almost on a daily basis. A lot of them off market. Half of them are off market. Half of them are on market. And you know, off-market deals get a ton of press as being this great thing. I find a lot of the off-market deals more expensive than the on-market deals.
And then sometimes brokers will bring me a specific deal that he or she knows that I’ll be interested in and often I will. But you know, I don’t know why this has happened but I found a ton of deals still off of LoopNet. I’ll come home from work. I’ll have been in Wacko Land of comedy all day and I’ll be like, I want to just go on the math side, the hunt, look for deals.
And I’ll go on LoopNet and just start using different filters and looking at demographic shifts, looking at reports. I don’t know if you guys look at like the Marcus & Millichap ad survey, what is it called? Like the milk-in annual outlook report? There’s a couple that like give you tons of like growth population, job growth data, even within a particular city. I could look at the L.A.—there will be six pages on L.A. But they do that—I like looking at LoopNet.
I’ll do the filter, I literally think L.A. probably has an average square foot cost of about maybe high $300s. It’s anywhere from $250s typically to $750 if you go out to the coast. I usually set the filter at like $230 a square foot and there will come up a batch of buildings that are small enough for me to sift through. I’m not getting 10,000 things.
But I bought my last building, that 36-unit. I got that for $178 a square foot. And you know, this is, I’m just going to sit on this but this is already probably worth double once the litigation cloud goes away.
Brandon: I want to point out some kind of neat here that you do that we haven’t really talked a lot about but it applies to everybody no matter what size real estate they’re trying to do. Like, in the market, if you’re looking on-market with a real estate agent or whatever, there’s a lot of properties for sale. So I love that like you’re setting a filter, a very simple filter.
And yours is price per square foot. What that does, it takes the 20,000 properties on the market and drops it down to 25 or 50. Something much more reasonable for us to flip through. So I talk a lot about one of the filters that I do is if I’m trying to buy a single-family house, I’ll look for a two-bedroom house over 1000 square feet.
It’s like a simple filter and it drops off 99% of properties out there because I know if there’s a two-bedroom house that’s like 1200 or 1300 square feet, I can probably turn it into a three or four bedroom house so I can add value. So like that simple filter helps me like really narrow down what I’m looking for. Because people will spend forever going I don’t know, there’s so many properties on the market. You need to filter, filter, filter.
Mark: You end up going in circles when you’ve got all these different metrics to balance. That’s why I love the cost per square foot. I usually then take it because yeah, it gives me a batch of like 15 to 20 properties to look at. And then I created a filter. I don’t know if other people do this but this makes sense to me, is I not only want a very low cost per square foot, but leverage has been the great driver of return in my investing experience.
So I have a metric that I’ve created. It’s called leveraged cost per square foot. I apply it to like whatever the eight or ten candidate buildings that I find and nine times out of ten, whatever building wins the leveraged cost per square foot metric is the building I’ll buy.
Brandon: That’s cool. I really like that a lot. So yeah, I guess that will the advice I got to everybody and I think you’ll probably agree is like, find a metric. If you’re not looking for large or multi-family, maybe this price per square foot isn’t the right metric. Maybe it’s number of bedrooms. Maybe it’s this square footage. Maybe it’s price per square foot. Maybe it’s square foot period. Maybe it’s a certain neighborhood, but whatever you do, I love that. And then kind of figure out what defines a good deal for you.
David: I think the reason people are afraid to filter is because they have a scarcity mindset and they’re afraid I’m going to lose that great deal. I’m not going to find it because my filter was too thin. As opposed to having an abundant mindset, which is there are so many deals out there. I need to narrow it down so I can find the one that’s perfect for me.
And just that little tweak of I’m not going to let fear dictate the decisions that I make in my investing, I’m going to let logic dictate that. Obviously, you need filters. It’s so much easier to be overwhelmed by properties than it is to find the ones that are going to meet your criteria.
And what you’ve done, Mark, whether you realize it or not, was you set a metric that was so specialized, you only were looking at problem property. You are going to find something that you can go in and add value to because that price per square foot was so low. And by doing that, you increase your odds of success.
Before we head over to the Fire Round, I want to ask you again, can you tell us a little bit more about how you found this person on BiggerPockets that you hired? I think that’s kind of cool.
Mark: Yeah I put out an ad on both BiggerPockets and LinkedIn and Zip Recruiter and I got flooded with hundreds of applicants and yeah, this guy, I met and interviewed with several people with BiggerPockets, I’ll say. Give you guys a plug. Everybody I met on BiggerPockets was awesome. And they were passionate. They were enthusiastic. They were smart. And it was a really tough decision. I ended up giving up a shout-out.
His name is Robert Ott. He was up in San Francisco in the tech world. He had grown up in a real estate family and invested with his mother so he knew real estate but he had been part of like three startups that were all successful but he realized he didn’t want to be writing code and he had made the decision he wanted to pursue real estate and I tried to convince him to come down here and work with me and be my asset manager.
And I’m trying to teach him everything I know. But he’s bringing tons of value. He’s breaking down all the numbers. I have such a crystal clear picture of my portfolio, the economics of every building. And it’s great. It’s really nice and we’re growing.
Brandon: What all is he going to be doing for you? When you say asset manager, is he taking care of former properties and new ones, just kind of being your right hand or what?
Mark: Yeah, yeah. I just said would you be willing to come down here? I want to grow this. I’m now like at critical mass where I’ve got 130 units. Cash flow is there. We could grow. It’s just my time is kind of limited. I have the experience. I want somebody who’s hungry, who’s smart, and could take this point, all aspects and kind of do a little bit of everything.
But eventually, maybe he’ll specialize in one specific aspect of it. But right now, I’m calling him my asset manager and you know, he helped me with acquisitions, too. He helps me with property management. We’re trying to reduce expenses, add value, all those little things. Adding storage, all these like initiatives that were coming up that will add value to the properties.
Brandon: That’s super cool. The reason I ask that, too, is because I mean one, it’s always cool to see like relationships form and build off BiggerPockets. I love that about the community, I mean working with people from the community are kind of the same mindset, but also, I just love the fact that you did this because I’ve been thinking for months now that I need this person in my life to come live that would move near my area, work with me on my current properties, help buy new ones, just to be there. I haven’t officially decided that I’m going to do it yet but I’m going to have to talk to you more about that later.
Brandon: Yeah, that’s cool.
Mark: Yeah, it took me ten months of thinking about it, ten months of telling myself I need to do this, I need to do this. I finally pulled the trigger. So he’s living in one of my two-bedroom units. He’s acting as a resident manager of that building but he’s getting such a great vantage point of how the operations are going on the ground floor and it’s great. It’s really fun. He’s a great guy.
Brandon: That’s super cool. Super cool. This has been fantastic but we’re not quite done yet. We’re going to shift gears here and head over to the world famous Fire Round.
It’s Time for the Fire Round.
All right, let’s get to the Fire Round. These questions come direct out of the BiggerPockets forum. We’re going to fire them at you right now, Mark. You ready for this?
Mark: I think so, yeah.
Brandon: All right, number one. What was your worst property renovation fail? Do you have any good stories of a property renovation fail?
Mark: Property renovation fail. My worst property renovation fail would be I got caught in the—do you remember the correction double dip, when in 2010, I think the market plunged in 2007 and 2008. The real estate market started going down in 2007. The whole economy collapsed in 2008. In 2010, it started to improve and then it did a double dip.
Well, I was trying to time the market and in 2010, I bought a house and it was a cool house on an acre of land in L.A., one of the last remaining acres of land—it was an old adobe house. So this is a single-family house story that I tried to rehab. I ended up bringing in some partners and I was going to live in the building in-house but then I decided I wanted to live closer to work because I wanted to have like a two-minute commute and that’s where I live now.
So I didn’t want to give up this opportunity so I brought in I think four other friends and we invested and we were going to do a flip. It was like a $600,000 flip that we did in this building and we got caught in the double dip of the downturn. So we didn’t get the upswing that we were hoping for. It was a lot of work. It’s a great learning experience. I saw every aspect of all the construction and it was major.
But at the end of the day, I think—so in a $600,000 renovation, I think we ended up like $8,000 down. So I paid everybody back. I was not going to have a loser deal on my track record. But you know, a learning experience. I wish—I had put in so much time in that thing. Great learning but no return.
Brandon: All right, well, I like that you shared that story, though. That’s cool. I mean like, it just shows that even when like you’re a good investor and you’ve done good things, I made mistakes. I bought properties. I lost money. It happens.
David: Gotta be a river. Keep pushing forward.
Mark: That’s right, zen.
David: Let us know what are some unique ways you earn or save extra money? And I think coming from a producer of Family Guy, you might have some cool stories about this.
Mark: Unique ways that I earn or save money?
Mark: How do I earn or save money? I earn money through—one way that I never expected to earn money is through voiceover. I never set out to do voiceover but you pitch jokes in the writer’s room and sometimes they’ll be like, oh yeah, go into the record booth and do exactly that.
Brandon: Have you had a voice on Family Guy?
Mark: Yeah, I’ve got a couple. Not big ones but I play Peter’s co-worker. His name is Opie and he’s brain-damaged and of course, they give me the brain-damaged character to voice.
David: Would it be rude to ask you to do it right now?
Mark: It was in an office, a character that he’s sitting across from, and you want Peter to be the lowest man on the totem pole. So I had this brain-damaged co-worker who was somehow higher up and was a supervisor of Peter. But this was his voice, it was basically, “Rarrr, rarrr, rarrr”. Just completely nonsense.
David: Do you ever write yourself into scripts to do these voices the same way that Brandon Turner will quote himself on a podcast and not tell people it was his quote?
Brandon: I did that once, all right? Just one time, David Greene. One time. Let it go.
David: He’s got a reputation for doing this all the time. He’s always getting outed for quoting himself. It’s really funny. He would look arrogant if he actually said if this was his profound thought and he’ll just say, “I once heard” and he would just say it in a Confucius voice or something. I know. It sounds very—
Brandon: I did it one time. One time.
Mark: That was hilarious. It was a good quote though.
Brandon: It was a good quote. And it was something I had actually written so I was reading something I wrote and I just didn’t tell David what it was.
David: A wise man once said—
Brandon: I don’t think I put it that way.
David: No, you didn’t.
Brandon: All right. Moving on. Enough making fun of Brandon time. Anyways, so you make extra money sometimes doing voices. That’s cool.
Mark: Yeah, I do an ostrich, too. He’s an ostrich that shows up sometimes and all he does is go, “Hahah!”
Brandon: I’ve heard that. I know that.
Mark: They were making fun of me because that’s how I laugh at people’s jokes in the writers’ room. For some reason, they turned that into an ostrich.
Brandon: That’s hilarious. All right. I’m going to go onto the next Fire Round question but first, you know what my favorite Family Guy is—it is totally random but my favorite Family Guy moment of all time was—okay, it’s two of them. I’m just going to throw it out there. The throwing up scene where I think it was Peter, maybe. Whatever that’s called. That scene—I still think that’s the funniest thing I’ve ever seen on TV on any show of all time. I still laugh hysterically. I will send that to people randomly, the YouTube of that. And then the money where Brian goes around punching Stewie or vice versa?
Mark: Oh, gimme the money. We were doing like a Sopranos thing. Where’s my money? Where’s my money?
Brandon: Yep, it’s so good. Yeah, those two things I share constantly to people. So anyway, you have good work. You have a good show. Number three, totally unrelated to that but do you believe it’s possible to self-manage and still remain anonymous?
Here’s the question. I closed my first single-family house next week. The property comes with tenants occupied. There’s two individuals renting rooms. I found out that both have a violent criminal record so I’d prefer that they don’t know that I’m the landlord. Has anyone self-managed a property while also remaining anonymous? How would I do that? Any tips or ideas?
Mark: Yeah, the easy answer is just a management company. Personally, I’m a little shy about—maybe it’s because I’m in the entertainment industry. I don’t want them to see my name on TV and then think that for some reason, I don’t know what it is, but if people had a criminal past, I would be inclined to get a management company. I like and am impressed by good management companies that just know what to do.
I mean David, maybe you were bringing this up on your podcast. It’s like, it’s so great and such a relief when you’re in all these crazy weird situations and then you talk to your management companies. Like yeah, we’ve dealt with this a hundred times. And they’re like that. It’ll be done tomorrow. I really like that. It frees up your life. It lets you enjoy life a little bit. It’s a cost. It’s an expense to embrace.
Brandon: But if you calculate for it—
David: So if you had to self-manage, Mark, would you just do it in one of those crazy voices so they don’t know that it’s you? Pretend to be someone else? And then document it? Just create a character for dealing with that specific tenant. And that’s how you talk to them and you have your own name. You can get away with that, right? Because you’ve had experience dealing with these kinds of things.
Mark: Yeah, absolutely. Maybe your whole landlording would be a bit.
Brandon: I expect that to be a Family Guy character someday. The Landlord.
David: My favorite Family Guy little segment is the two bald guys on the elevator where they have like a secret between bald guys and the two guys get in, and everybody walks out and the door closes and one of them leans over the other and licks the other one’s head, implying that it’s what all bald guys do when they get alone. We have a friend, Beau Epstein, who is also bald and like people are always sending us that little clip. It’s very funny.
Mark: The cult of bald guys.
David: Exactly. Let me just set the record straight. We don’t do that. At least I haven’t been invited into that cult yet.
Brandon: There’s still time.
David: All right, so here’s a cool question for you, Mark? What is your second favorite investment after real estate?
Mark: Oh, wow. You know, my second favorite investment is private equity, I guess. You know, I’m not a huge fan of the stock market but I have had success when I like talking to people who are doing something interesting that are specializing in a very specific area and that they’re committed to it. And I like to see a good track record and you know, talk to me after they lose all my money and I’ll have a completely different story. But so far, I’ve had a pretty good track record getting not phenomenal returns, but very solid returns.
David: Okay, I think you’re being a little modest here because we didn’t talk about this on the show but you have a brother who actually runs a hedge fund, right?
Mark: Yeah, my brother runs a hedge fund.
David: Like a typical New Yorker. Hey, it’s due in 20 and I’ll take care of everything, right? Is he outperforming you or are you outperforming him?
Mark: I was hoping to avoid this question so that he doesn’t get mad at me.
Brandon: I think you’ve said enough.
Mark: He invests in my real estate deals and I invest in his hedge funds and yeah, he had a 35% year, a couple of years back, which was phenomenal, but on the whole, he likes to—he is asking me to find more buildings. He wants to go in on more multi. He likes multi-family as a guy who is on Wall Street investing in the market.
David: You navigated that like a politician, Mark. Not answering my question at all. Long story short, real estate is not a bad investment vehicle, folks. We’re just going to leave it right there. All right, Brandon.
Brandon: All right. Well, let’s move onto the last segment of the show but before we do, let’s hear a quick word from Mindy Jensen on what is going on this week over on the BiggerPockets Money podcast.
Mindy: Student debt is a huge problem and it continues to grow every year. On Monday’s episode of the BiggerPockets Money podcast, we talked to Travis Hornsby from Student Loan Planner about different options for paying back your loans. Travis also shares things future college attendees should consider before choosing a major. The episode actually runs a little bit long because Travis had so much to share with us. Okay, thanks, Brandon. And now back to the Famous Four.
Brandon: All right, thank you, Mindy, as always. You guys should check out that show. It’s fantastic. It is a super-fast growing show that has some really, really powerful guests on there. And they’ve had David on there. So you guys will love that show. Definitely check that out. You like that?
All right, so let’s get to today’s Famous Four. All right, these are the same four questions we ask every guest every week. So Mark, I’m sure you’ve heard it before but let’s hear what you’ve got to say. Number one, what is your favorite real estate specific related book? Real estate related book.
Mark: Favorite real estate related book. You know, possibly the one that hit me at a time when I was trying to learn everything about multi-family was Steve Burgess’s, I think it’s The Complete Guide to Investing in Apartments.
Brandon: I love that book, yeah.
Mark: And that was like, I had gone through, slogged through a number of books that felt like they were more fluff than content. And I really was like, all right, this guy’s delivering a lot of—there’s a lot of great stuff that I’m digesting here and will keep with me.
Brandon: Yep, I love that one.
David: Okay, what about your favorite business book?
Mark: My favorite business book. You know, I like a lot of the ones that people mention all the time but I’ll throw out a new one just because I read it fairly recently. The book was called Sapiens and it was written by Yuval Noah Harari and he’s an anthropologist and a historian and a scientist.
And he traces the human race from its earliest stages up until where we are now and it’s relentlessly thought-provoking. It’s not outright a business book but it’s tracking like where we’ve been and where we’re going to and it tracks capitalism and how it’s changed society and all these different things that have changed society.
And then at the end, it speculates about where we’re going and I think so much of business and so much of investing is trying to grasp where we’re headed and I think a book like that, I walked away smarter and opened up my mind in a business sense as well as just a great read.
Brandon: Fantastic. I have not read that yet but it’s on my list.
David: That’s just the best feeling though when you walk away with that feeling of oh man, this just gave me a new way of looking at the world that’s going to make me better.
Brandon: All right. Can you tell us some of your hobbies?
Mark: I grew up in Ohio. I’m living in the dense city of L.A. so when I have free time, I get out into the mountains. I like to get out to the woods. I like to ski, run some of those mud runs or do some races. I sit in a writers’ room so I really gotta get out and do something physical outdoors, ideally. I have three little girls that are the best. I like to spend time with them.
Got a great job that I like going to, like the friends that I have there. So yeah, I try to help people. I love—I really enjoy trying to help people, trying to get into whether it’s the writing, the entertainment business. I see younger versions of myself and it’s a hard journey and you know, I try to help people if I can.
Brandon: That’s cool. This is a random, not part of the Famous Four. But I’m wondering, do you ever talk to people in the industry? Are you proselytizing like real estate people around you that are making maybe, not necessarily active, but people in the industry that are making good money. Are you saying hey guys, looks what I’m doing because this might not last forever. Are you doing that?
Mark: Yeah, I do that. I do that to a fault. And I try to hold back. I try to not be talking all the time about real estate. But yeah, I mean the people that are smart, that have good heads on their shoulders, I tell them get your finances in order. Don’t be a slob like so many people in this business.
The entertainment business model is nowhere near as good as the real estate investing model as far as an economic or a financial model that, to go onto—there’s so many agents. You’re paying agents, lawyers, managers. Your taxes are high. But you make money. That’s why I tell them, put that money into something that’s a good vehicle and yeah, let it grow. And please, set yourself up because this won’t last forever.
Someone in the writers’ room was telling me just the other day, he’s one of the showrunners on Family Guy right now. He’s like yeah, he was like a Harvard lawyer that was a New York City district attorney before becoming a comedy writer.
And he was like yeah, with all my lawyer friends, their careers kind of take off after age 60. They’re in the government getting political appointments. But it’s like when you’re a comedy writer at 60, you’re kind of done. So that’s part of the reason I’m like, when you make the money, handle it well. Be careful. Don’t waste it. Invest it.
Brandon: I have a dream of writing a book called Massive Income to Passive Income. Because like there’s this problem, like everyone who makes really, really good massive income, and I define that as anything over six figures and above, but like, they’re really bad at putting the money long-term and they just kind of get caught up in this is what life is. But like, how do you take massive income? How do you get a good career but turn it into something that’s generational wealth? So I’ll get that writing someday done.
Mark: Yeah, I mean it’s like you buy a building—I tell this to all my entertainment friends. You write a script and maybe sell it and maybe it gets made, maybe it goes away. If you buy a building, you’ve just bought a stream of cash flow that will last you the rest of your life. It will grow every year and you could pass that onto your children. You just can’t beat that. And you don’t have to do anything.
Brandon: It’s so true. We love real estate. So speaking of that, a lot of people love real estate and they want to get into real estate but they don’t. So my final question is, what is it that separates successful real estate investors from those who give up, fail, or never get started?
Mark: I’m going to go kind of a cliched one but it’s perseverance. It’s moving forward all the time and through thick and thin, when you’re discouraged, just keep going forward. Learn it. Keep learning. Keep growing. And keep making effort every day.
David: Like a river that never stops flowing.
Mark: That’s exactly right. Yeah.
David: It doesn’t matter what falls in, it carves its way right through.
Mark: Right, right.
David: Okay. Mark, tell me where people can find out more about you.
Mark: I have a website that’s called QuantumCapitalInc.com. They can reach out to me on BiggerPockets. I also have an e-mail address. [email protected]. But yeah, love meeting people on BiggerPockets. I get really busy but I’ll try to respond to everybody that reaches out.
Brandon: Cool. All right, well good deal. Well, Mark, it’s been fantastic. I love talking to people about like just multi-family real estate growing their wealth. Even if they have a good job, just looking outside of that and saying I’m going to prepare for whatever eventually is going to come. I think that’s fantastic that you’re doing that. So keep it up and love to have you back on the show again sometime in the future and talk about your next few deals.
Mark: Yeah, keep up the great work on your end. I got in real estate before you guys were around and you guys have turned this thing that was opaque, murky, scary, something that was unknowable and you’ve made it knowable and friendly and it’s just amazing, so great work.
Brandon: Thank you. I appreciate that a lot.
David: That’s the same way that I describe the evolution of Brandon’s beard.
Brandon: All right, thank you, Mark.
Mark: Thank you.
Brandon: All right. That was our interview with Mark Hentemann. That was a fun interview.
David: That is a fun guy and I had a really good time talking to him. That’s my favorite type of investor is you can talk real estate, you can learn, and you can laugh at the same time.
Brandon: Yeah, me too. I love that. I always wondered about comedy writers, if they’re actually funny people or if they’re really boring. They’re funny. Mark’s legitimately a funny, well-rounded guy. And I love the fact that he makes good income right now. We didn’t talk about that but I’m assuming he’s making good money. And then he turned it into something that’s going to last a long time. Massive income to passive income. And that’s what it’s all about. Very cool.
David: You’ve got to make hay while the sun shines then convert that into passive income that you can benefit from all the way into retirement.
Brandon: There you go. Now if only we can become writers for Family Guy. We should have asked. We should have asked while on the recording so that he’d feel obligated to say yes. Next time.
David: We’ve got to bring him back on. Yeah. We’ll just ask that time.
Brandon: All right, let’s get out of here. Make sure if you guys have not yet subscribed to this podcast, make sure you do so in iTunes, you can do it. On YouTube, you can do it. You can call up your mom and subscribe with her. I don’t know. Does that make sense? Probably not. Anyway. Subscribe however you have to subscribe and then get somebody to subscribe as well. Spread the news about what we’re doing here at BP and what real estate can do for your financial future. Anything you want to leave us with, Dave?
David: If the writer from Family Guy is buying real estate, then everyone is buying real estate. Share this with your friends because you never know how many other people are interested in this and you just didn’t realize it. And with that, this is David Greene for Brandon “Handsome Shirt” Turner, signing off.
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