BP Podcast 202: Escaping the Rat Race Through Rental Properties with Mark Walker

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Most people dream of getting out of the “rat race,” quitting their day job, and living on passive income sources. However, usually that’s just wishful thinking. But today, we’re excited to introduce you to a real estate investor who did just that using rental properties, and he explains just how he did it. You’ll learn how our guest, Mark Walker, used single family houses at first to begin building his portfolio, and how his passive income really took off when he switched to multifamily. And you’ll love the in-depth discussion on exactly how he acquired his 64-unit apartment building!

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In This Episode We Cover:

  • How Mark got started with a duplex that yielded a 36.5% cash on cash return
  • Tips for shifting from developments to rentals
  • Why he doesn’t want anything to do with property management
  • Why it’s a matter of finding the right financing
  • The basics to know about amortization and cash and cash return
  • How to partner with the right people along the way
  • How he finances his deals
  • How he structures his partnerships
  • The difference between conventional and commercial loans
  • How he ended up partnering on a deal with a property manager
  • How he knew that it was the right time to quit his job
  • Tips on job shadowing someone with great experience
  • Details on his 64-unit deal
  • What you should know about syndication
  • How much time he is spending on his business
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “I’m the guy who likes to say yes. I don’t like saying no. I let somebody else do that for me.” (Tweet This!)
  • “It’s been a pleasant surprise for a multifamily owner. Once you get that property stabilized, it can go to autopilot.” (Tweet This!)
  • “Never stop learning. Learning leads to action, and action leads to success.” (Tweet This!)
  • “Do your first deal and learn from it. Ask yourself what’s working, what’s not working, and what can improve.” (Tweet This!)

Connect with Mark

Show Preview

About Author

Thanks for checking out the BiggerPockets Real Estate Investing & Wealth Building Podcast. Hosts Joshua Dorkin & Brandon Turner strive to bring top-notch educational content and interviews to our listeners -- without the non-stop pitch prevalent around the industry. With over 80,000 listeners per show, the BiggerPockets Podcast has become the biggest real estate podcast in the world. But don’t take our word for it. We’re the top-rated and reviewed real estate show on iTunes — check it out, read the reviews on iTunes, and get busy listening and learning!

23 Comments

  1. Greg Wang

    Mark, great story about how you started and the changing strategies you used to get out of the rat race! This is exactly what I want to do as well, so it’s getting me pumped!

    I’m really interested in your development story. How did the numbers work out on your duplexes? I’m trying to figure out develop and hold on numbers, but can’t seem to make the numbers work for less than 10 units.

    • Mark Walker

      Thanks for listening, Greg. Here’s a breakdown of the numbers for the development deal I did in 2010 and 2011: The total project cost was $905K. We sold the first side for $625K, and the second side for $615K. We had a construction loan that allowed us to go in at 15% down and roll the interest payments for the first year into the project costs. I know construction costs have gone up in Colorado since then, so I’m not sure whether my example is a good benchmark for today or not. Nonetheless, I was very fortunate to partner with an experienced builder, who had a solid track record and relationship with our lender. That played a huge role. I hope that helps. Good luck!

  2. JOE MILL

    Hi Mark, – you have had a fascinating real estate journey. I am from the brooklyn, NY area and own one small multi family. I’m actively looking for my next one, and your podcast caused me doibt if I should continue looking in this area. The price you paid for your 64 unit and manage to live without having a job is the price I would have to pay for a small 3-4 multi unit in my area and the income would in no way be sufficient. Would you say I am making a mistake in pursuing this area when alternative areas (evidently) provide far better opportunities or am I interpreting your story incorrectly and missing some key points

    • Mark Walker

      Hi Joe. Thanks for listening and commenting. First, it’s outstanding to hear that you are an active investor and you are looking to scale. But, I want to clarify. Prior to buying the 64-unit apartment complex, I had acquired two dozen residential rental properties in the Denver metro of Colorado (from 2011 to 2014). I acquired the 64-unit in late-2015, which was 11 months after leaving my full-time job. Although my apartment complex does cash flow quite nicely (especially since I’ve renovated it and been raising rents), my residential portfolio continues to contribute significantly to my monthly passive income as well. As for whether you should consider alternate areas…I cannot comment specifically on New York, because I don’t know that market. But, there are always more deals to be found when you cast a wider net. That’s what I had to do when buying an apartment complex in Texas, because I couldn’t find any more deals that matched my acquisition criteria in Colorado. If you choose to invest in another state, my advice is to consider three things. First, target a market with existing and projected housing shortages. I obviously like Dallas-Fort Worth right now, but that doesn’t mean there are not other areas to consider. We are fortunate to be part of this amazing community on BiggerPockets, and there are many experts with firsthand experience in their markets and may have some suggestions. Second, consider the local landlord/tenant laws. For example, if someone doesn’t pay their rent, how long will it take you to regain possession? Some states are landlord-friendly, and other states are tenant-friendly––making it more difficult and costly to get rid of a bad tenant. Lastly, once you’ve identified your geo, build a solid team and systems in that area. I’d start by choosing a property manager, because they will have a network of experts you can leverage. Plus, they can help you narrow down your acquisition criteria even more. I hope this helps. Good luck!

    • Mark Walker

      Hi Mohammad, I completely agree with your other source. In general, C-class multifamily properties are more difficult to manage than B-class. But, if you have the right team and systems in place, combined with a smart plan to deploy CapEx and increase the NOI, there can be a greater reward with C-class investments. With that said, you need the right property manager to handle the day-to-day. One thing I keep in mind when screening property managers is that I am not picking a person. Instead, I am picking a system. I invest a lot of time up front understanding the processes they have in place to manage the property operations. For example, how do they screen and qualify applications? Do they accept the first applicant with a deposit and first month’s rent? Or, do they have established requirements for credit score, monthly income, criminal record (no felonies), etc.? Another one of my favorites is what they do when someone doesn’t pay. Do they have and enforce a strict policy which takes full advantage of the local laws? How they manage collections is extremely important with C-class apartments, and it requires consistency. My experience with C-class apartments has been really good overall. I find the tenants that stay (and pay my increased rent) are great, family-oriented, working class people who appreciate having a nice community to be a part of. That doesn’t mean there are not issues, but I have a fantastic management company that I partner with, and issues are addressed quickly. Thanks for the question, and good luck with your investments!

  3. John-Delfin Skovira

    Mark, thanks for sharing your story and all the great insight into what it took for you to be successful in real estate investing. There is so much information that we were able to take away from your interview. Then I came here to find the link to your website and learned 100% more from your comment responses. As a new investor just starting out all of this information is an invaluable resource.

  4. Julie Marquez

    Great podcast and so informative! I really like when you mention that you are a YES man, and you know your personality. And you also know that certain aspects are real estate aren’t for you (like property management) and you save that for the pros. I think, too often, people want to become experts in all parts of real estate, and that could just lead to more troubles. Way to find what your niche, but also ALWAYS LEARNING MORE!

  5. Brendan Harrison

    Hi Mark!

    Fantastic podcast here! I especially appreciate your willingness to take questions & comments afterwards.

    You mentioned briefly you do some of your own bookkeeping using QuickBooks, and had some helpful systems in place.

    Would you mind sharing a couple quick highlights on those systems, please?

    We are looking to scale our business more and the bookkeeping system seems to be a current temporary roadblock for us.

    Thank you again for your time, your podcast was inspirational and we are looking forward to continuing our quest towards financial independence!

    • Mark Walker

      Hi Brendan-

      Great question! As I was scaling, the bookkeeping became very cumbersome after about 10 rental properties. I had to address this to continue growing. I wanted to keep detailed books, inclusive of business transactions I made outside of property operations. But, 90% or more of the transactions were related to operations and happening through the property management companies software. My effort was redundant to a certain extent.

      So, I hired someone who was both an expert bookkeeper and a programmer to write me some code that took the transaction exports from the property management companies software and enabled me to import them into my Quickbooks file. It cost me quite a bit to have this automation created, but it has made it a lot easier to maintain a very detailed Quickbooks file which matches the property operations records maintained by the property management company. This way, I’m able to maintain my business credit card transactions, the mortgages, out-of-state properties (under different management) and anything else outside the property manager’s day-to-day on my own.

      The tool I had created is a combination of an Excel macro and another useful software tool called Transaction Pro Importer. The exports from the management companies software needs to be reformatted by the Excel macro to put it into a compatible flat file which can be fed into Transaction Pro Importer and then on to Quickbooks. The Excel macro also maps the transactions from the management company to my own GL accounts in Quickbooks. There’s a few quirks to it (e.g. if the management company back-dates a transaction, etc.), but it saves me a ton of time.

      Thanks for listening and good luck with your investments!
      Mark

      • Brendan Harrison

        Wow, that is an awesome idea! We have properties in multiple states using different PM’s as well, so this strategy sounds like it could definitely help us. Excel macros seem to be very effective if you know what you’re doing (which I don’t!) so outsourcing is a great call.

        If your contact is still looking for business designing programs like that please let them know I would be interested in chatting about options! If not, no worries, I can research some VA’S!

        Once again, I certainly appreciate your insight and your time, Mark!

  6. Bryan Sandera

    Hi Mark,

    Thanks for doing the podcast! I was inspired to learn more about the insurance policies you stated in the 10 “Not So Obvious” Ways to Boost Your Multifamily Property NOI. Does this portfolio insurance policy apply for student rental properties, or properties that have escrow? Also, do you recommend a insurance provider for rental properties both student and non-student?

    Thank you so much for your time and valuable information given!
    God Bless,
    Bryan

    • Mark Walker

      Hi Bryan-

      Thanks for listening! My 64-unit property is under the portfolio policy held by my management company. They have about 3,000 units under management, so it’s far more cost effective. Rather than guess on your specific questions about student housing and escrow, I recommend asking an insurance producer with expertise in this area. Our policy was produced by Virtus Insurance in Overland Park, KS. Hope that helps!

      Mark

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