Table of Contents - The Credibility Shortcut To Doing REALLY Big Deals with Mark Kenney
Dave Debeau [00:00:09] Hi Everyone, Dave Debeau with another episode of the Property Profits Real Estate podcast today with Mark Kenney all the way from beautiful Dallas, Texas. How are you doing today, Mark?
Mark Kenney [00:00:19] I'm doing well, Dave. How are you doing?
Dave Debeau [00:00:20] I'm doing great. So if you're not familiar, the Mark Mark and his wife have done some amazing things with multifamily investing. In fact, they've built up a portfolio of over five thousand units in a, relatively speaking, very short period of time. So we're going to dove in today into the pros and cons of multifamily investing with Mark. So, Mark, thanks again for being on the call and just let people know a little bit more about you. How was it that you first got started in this crazy world of real estate investing?
Mark Kenney [00:00:53] Yeah, so I started pretty young. I was twenty two. I was in college at the time and I have identical twin brother. We both kind of sat there going out. We didn't really have much money growing up and we my dad was always fixing everything and I don't want to do that. So I didn't really have anyone as a role model, but we said, hey, everyone needs a place to live. So we started making offers on kind of two to four unit property. That's all we kind of could do at the time. And we ended up buying several properties. I was in Michigan at the time and bought them together, didn't know what syndication was, which is a fancy word for raising money for the people. But I still worked corporate world. So I had, you know, I had some smaller properties, not enough to to live, if you want to say it financially at the time. And I was doing a lot of the work myself and fixing toilets and things like that. I'm not very good at that either, by the way. So I said I'll keep keep working the corporate world. I was a CPA then I.T. consultant company, and then 2013 was kind of where I was working a lot with work, you know, like minimum 80 hours a week. I mean it consultant and cause a lot of issues with my wife, the right place. So I ignored her. We had two kids who I paid a lot attention to and didn't pay much attention to my wife, which I don't recommend. By the way. It was kind of all situations where you need to do something different or not going to go very well. So I'm like, OK, what do I do with all, you know, how much time we both loved real estate. We bought real estate together because we got married pretty young. And I said, well, in order for me to replace my income, which frankly at the time I didn't think I'd be able to do it, I said we need to buy a larger multifamily properties and syndicate. A friend of mine was syndicating deals. I invested with him and somebody else passively. And I was like, this makes a lot of sense to me. And that's kind of how we got started. It took us almost a year to get our first deal after we got our first deal, got easier and easier and we expanded into multiple state four and five states now and about 12 submarkets.
Dave Debeau [00:02:55] Wow, wow. That's pretty short period of time to build up that size of portfolio, especially when I took a year to get your first deal. Big deal like that on your belt, so.
Mark Kenney [00:03:04] Right. Yeah.
Dave Debeau [00:03:06] So is are one of those things where it's the learning process, the shifting from small multis to big multis. That's what takes took a lot of effort and work and then you just kind of started the snowball or whatever.
Mark Kenney [00:03:18] Yeah. The learning process to be if you ask me, I'm probably a little different than some other guys out there. I don't think multifamily is that much different than a lot of the other asset classes. I think 80 percent of its overlap between almost everything you buy, you go buy a single house, you go through very similar steps. It's more complicated. There's more terminology. You have to analyze it deal differently. But that came easy to me just because of my accounting background and things like that. What took the most for me? It's really getting the track record and getting credibility with brokers. That's the biggest struggle we find people have. We called people, too, and that's kind of where when they start out, it's kind of like that's the biggest struggle. So I had a partner at the time that I partnered up with. He had more credibility than I did in larger multifamily helped me. We did some deals together and that's kind of how we got our start. And we were frankly looking at everything else. I was looking at self storage. I was looking at starting a franchise, custom home development, you name it. Right, everything and landed on this. But a learning process is, I would say, to learn how to analyze things like that. You can do it pretty quickly, but there's nothing nothing substitutes doing the deal, everyone that goes through a deal. So that's that's way more than I thought it was going to be. But it just gets easier as you do more.
Dave Debeau [00:04:37] So very cool what I picked up on there. Correct me if I was wrong, but he said the biggest challenge was getting credibility with brokers. Very, very interesting. So that's even a bigger issue. But it makes sense, right? Why are they going to pay attention to a brand new lobby? Every time there's a seminar company comes sweeping through town. The guy they're inundated with a whole bunch of people that want to buy no money down apartment buildings. Right. Right. So so that's interesting. The other thing I would I would ask about is so there's the challenge of creating credibility with. Brokers, which helps if you've got a partner with some experience under their belt and get a few deals on your belt first. Now, what about I mean, because I imagine if you're getting into these bigger deals and you're encouraging your students to do that as well, they're working with joint venture partners, money partners. They're raising capital. They're doing syndications. How much of a challenge is that for most people when they first get started? I'm really curious about that.
Mark Kenney [00:05:33] Raising capital. Yeah. So we have 14 steps to our process. We didn't invent multifamily investing, but we have our kind of own spin on it. Two areas out of the 14 people struggle with one is deal analysis. And that's going to be be easier if you're an engineer typically or I.T. guy, whatever math person you can get, pick it up faster than somebody else. But no doubt everyone, almost without exception, has a fear of raising capital. I was petrified of doing it. I never, never asked my dad for money, for anything. I never asked anyone else for money. So it was really hard. And that's kind of the area where people do struggle. They're like, I don't want to ask people. I'm going to get rejected. I'm going to I don't know what to say, things like that. So it's a good, good point. It's the number one fear people have in syndication for sure.
Dave Debeau [00:06:25] Interesting. So what do you suggest to people that are kind of wanting to take some baby steps into that realm and see how, yeah, we've got to kind of jump all in. I know, but.
Mark Kenney [00:06:35] Oh, yeah, well, you do. But I think what we have found, we have kind of we have something called Family Syndication Group, which people in our group that everyone kind of works together and things like that, different aspects of the deal kind of focus on things that you're good at. But with raising capital, there's no question in my mind the easiest way to try to raise capital is to partner with somebody that has a deal already that, you know, like trust and you're coming in there and have a track record. So when you're going to talk to your friends, you can say, yeah, I'm just one person on the team. I'm I'm teamed up with Dave and Dave and you in 20 years. He owns whatever three thousand units and he's been doing it. So I'm teamed up with him. So you get to learn the question people ask because you're going to hear the same questions over and over again. You're more comfortable with it. And then end of the day, hopefully raise some capital. And if you don't you and say it's still not great, but it's not your deal. Right? No one has a deal. You. Yeah. This right. So no question the easiest is it coming in somebody else's deal. There's some legal aspect to how you do that and things like that will go and all that at the end of the day, getting somebody else's deal that already has a track record raise capital and partnered up with them. And you're one of one person on the entire team.
Dave Debeau [00:07:51] Yeah, that makes a lot of sense. So you and your twin brother, you say you got an identical twin brother and the is he still investing in real estate or, you
Mark Kenney [00:07:59] know, funny enough, now or even though we're same DNA, we have a lot of his wife didn't want anything to do with a real estate when he got married, which was like, I don't know, five years after I did. And we sold the property we had together. And my wife and I just my wife to me was full time in real estate. So we do it together.
Dave Debeau [00:08:16] Wow, that is awesome. Yeah, that's great. So you guys start out with a small multis you got into you know, you had that epiphany moment. Happy wife, happy life moment there. You can start getting to much larger deals. You took your own advice and you partnered up with somebody that had a track record for for that first one. How long until you started doing your own deals like or deals?
Mark Kenney [00:08:42] Yeah, three deals. And even now I still had partners, but I was leading them. So it took me about sixty four or two hundred and twenty five units. After that I was next wanted to have that was four hundred four units but I love that one.
Dave Debeau [00:08:57] Very, very cool. All right. And typically for those kind of the size of projects, how big is the investor group that you guys are usually working with and what do you do usually kind of structured for the minimum investment.
Mark Kenney [00:09:09] Yeah, too big, but usually a minimum is going to be usually seventy five fifty to one hundred seventy five. Pretty, pretty standard for us. And you just kind of do the math. You know, we have we've raised and we have one right now raising over seven million on raise, six plus million multiple times so you can have sixty, seventy investors in it.
Dave Debeau [00:09:32] Yeah. That's, that's a lot of people report to that's for sure.
Mark Kenney [00:09:36] It's a
Dave Debeau [00:09:36] lot. That's how you got big though, right. It is. Now, I think we've touched on this because you come from an accounting background, but I was going to ask you, when it comes to real estate investing, what would you consider to be your unfair advantage for us?
Mark Kenney [00:09:51] And I think the brokers would attest to this, is that you need something of value you can bring. So starting out or not for us now that I'm where I'm at. It's our unfair advantage. Want to say is being easy to work with, not pushovers, but easy to work with, doing exactly what they were going to do in closing deals. So there's one firm brokerage firm in the Atlanta area. We close 11 deals in eight months with. Wow. And they'll tell you mean hands down that they bring us off market deals all the time and then other people as well. But we're a handful of people that they go to. And because we get, I would guess, probably 20 percent of deals, maybe a little higher of deals, we get we weren't the original buyer. Somebody else got it ahead of us because maybe they were higher in price. They fall out of contract and we come in and get the contract. And we've done that many, many times. You know, I tell people, if you have an opportunity to screw somebody, don't do it because it's a small world and we just have a good reputation with sellers and brokers that we do or say we're going to do our fair people reasonable and we close the deals.
Dave Debeau [00:11:00] So with that in mind, what would you suggest to somebody who wants to create that unfair advantage themselves? What would you suggest? I mean, obviously, do what you say you're going to do, but where do you see people screwing up with that most?
Mark Kenney [00:11:14] Yeah, I would say it really comes down to me all probably a little pride, but it's being prideful and being not making business decisions. You're making emotional decisions. And even people say, oh, most guys, it's the girls that are emotional. Now, believe me, I've seen a lot of guys get really emotional over a deal. It makes them really short-sighted decisions. Once you do that and you you kind of only takes once you kind of mess up someone to kind of of want don't ruin your reputation, but start hindering your reputation right. In your progress. So, you know, sometimes you sit there and go, well, it might be you look at everything from a financial standpoint to only a course of deal has to work. But if a deal still works and you have to pay an extra fifty thousand dollars or whatever it is to get the deal to work, then it works, do it. So some people are like, well, I that guy only paid two million for it like two years ago. Now he wants four million more. And I'm like, oh well, good for him. Does the deal still work? Does it make sense? And if it does, then go for it.
Dave Debeau [00:12:19] Yeah, that's why we're in this business. Right. We get the other guy making a profit as well. Yeah. Yeah. I've seen that often myself as well, Mark and my and myself at times as well, letting pride get in the way and my way or the highway. And then you lose out on a good deal because you're just too damn stubborn to write that down a little bit or negotiate a better one. Right. Excellent. All right. So you guys, you and your wife, are you doing coaching and training for folks these days? But when it comes to real estate investing, what are some of the other big challenges or mistakes you see people, newbies making when they want to break into multifamily investing, especially the really big properties like you guys are doing?
Mark Kenney [00:12:59] A high percentage of people think they're just going to go directly to sellers and bypass brokers. I'm not saying it's not possible to do that because it is. But you're going to spend a lot of time, a lot of wasted time. You want to develop relationships with brokers. They have way more inventory and access to sellers than going directly to a seller, spend a lot of time and then just having the properties scooped out from under you anyways with a broker gets involved. So that's one. And then the other one is we just see a lot of mistakes on underwriting. You know, I look at a lot of deals. I look at I analyze a lot of deals. People send me various pro Formosan. They don't follow the steps, frankly. So there are two things happen. One, they might buy a property that you shouldn't buy, or two, they're putting a lot of offers in getting more information as time goes on. What they should have gotten ahead of time and now they're backing out of deals. You know, it doesn't look good with brokers if you're going to put a letter of intent sending them back. And I had dinner with someone in Denver and he said he kept backing on ideals. And I'm like, what are you doing? Are you talking to a man in a company where a budget are you talking to a tax consult? Are you doing X, Y, Z? He wasn't doing anything, this letter of intent. So not doing those you're not taking the proper steps before you submit it. Letter intent, a big issue.
Dave Debeau [00:14:22] Yeah, that makes sense, Mark. So if there's a little bit about if people want to find out more about what you're up to and what you do with real estate investing, what should they do?
Mark Kenney [00:14:33] Sure. My email is Mark MRK at THINK Multifamily Dotcom website. Just think multifamily dotcom. We go to a lot of events. We hold events where I talk to people on a regular basis for different things. So I'm more than happy to chat with different people about how they get started. Or maybe it's not a good fit either. Right, but I get educated first, find out, hey, there is for me or not. But most people, when they start really learning about multifamily and how is valued and how quickly you can build networth and things like that, they're usually pretty hooked,
Dave Debeau [00:15:05] I would imagine. So just out of curiosity, so your wife kind of gave you the ultimatum. How long between that and when you're able to replace your high paying job income?
Mark Kenney [00:15:16] So I was able to quit and I had my own IT company. I did, but quit my own company, if you want to say after three deals. So it was probably like two, two and a half years, a lot less. And then but at that point in time, I had not replaced my income. I was making pretty wide a lot of fortune. One hundred customers. So I was doing pretty well, but now far surpassed that. So it probably took probably four years. I'm guessing I should know about four years, probably. But I was definitely a very, very high income earner at the time,
Dave Debeau [00:15:49] so I don't have years to make enough to keep the lights on. And then a few more to
Mark Kenney [00:15:54] me, because now I'm doing the math part a little less than two and a half. But either way, too, and then four years probably to to completely surpass my I.T. business.
Dave Debeau [00:16:04] So now happy wife. Happy life, right? That's right. Thank you very much for your time on the show. I really appreciate it. It's been great getting some insights from you.
Mark Kenney [00:16:13] Thanks, Dave. I appreciate it.
Dave Debeau [00:16:14] All right, everyone, thanks a lot for tuning in. See you on the next episode. Bye bye. Well, thanks very much for checking out the property profits podcast and you like what we're doing here. Please head on over to iTunes, subscribe read us and leave us to review it. Very, very much appreciated. And if you're looking to create a regular flow of inbound investor inquiries about your real estate deals, then I invite you to attend one of my upcoming live online demonstrations. And you can check that out at Investor Attraction Demo Dotcom Ticker.