In this show, you’ll hear Mark’s relatable and successful journey as a real estate investor. He discusses the benefits of investing in large apartment complexes and the lessons he has learned throughout his 25+ years experience purchasing over one billion dollars in assets.
WHAT TO LISTEN FOR
“I think you owe it to your investors to sell after you met the business plan. We kind of got a fiduciary responsibility to say, 'Okay, the velocity of money comes in, now we've accomplished what we wanted to do, we did it in half the time so let's give your money back and now you can do something else with it.'"
“We're going to get the highest, generally speaking, the highest leverage, the best terms, non-recourse debt without personal liability and things like that on multifamily than virtually any other investment, period.”
ABOUT MARK KENNEY
Mark is a seasoned real estate investor, coach, two-time best-selling author and co-founder of Think Multifamily — an apartment investing group that he runs with his wife Tamiel. Mark started his apartment investing career over 25 years ago as a side hustle, while working 80+ hours per week in the corporate world. He has now purchased over 16,000 units totaling over $1 billion in assets across 13 states. He is one of the most respected authorities on acquiring and managing multifamily apartments assets.
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Welcome back to the show it's my honor and privilege to have Mark Kinney on the show today Mark is a seasoned real estate investor coach two-time best-selling author and the co-founder of think multi-family which is an elite apartment investing group that he runs with his fabulous wife Tamil actually full disclosure I'm a member of that group as well Mark started his apartment investing career over 25 years ago as a side hustle while working 80 hours per week in the corporate world he's purchased over 16 000 units over one billion dollars worth of assets across 13 states and is one of the most respected authorities of acquiring and managing multi-family assets In The Biz so Mark again a pleasure to have you on the show we're going to talk a little bit about what it takes to be a good General sponsor to a deal and how the expectations of the passive investors what they should be looking for in a great deal sponsor because you have done over a hundred deals hundreds and hundreds thousands of probably investors that you've helped move their money from Wall Street to Main Street passively investing in apartments so tell us a little bit about I guess first how did you get into this from I think your training was a CPA how did you get into multi-family to begin yeah thanks for having me Matt always a pleasure to speak to you uh yes so I was going to college for accounting I have a identical twin brother and we didn't grow up with a lot I mean most you know food place to live which is more than a lot of people but anything extra we were buying ourselves and I'm like this kind of stinks so for some reason we didn't have anyone in our family or relatives or anything like that doing real estate but my brother and I are like people who need a place to live I'll try to buy some real estate so seniors in college we decided to go look at smaller properties two to four units uh we we bought a property when we were you know 22 21 22 you don't remember exactly but and uh rehabbed it kind of ourselves and we both graduated in accounting I was like you mentioned a CPA for a while then I did business manager Consulting at the big four I.T Consulting continue to buy smaller properties I started an I.T firm 2008 and I was doing pretty well at least I thought it was doing pretty well at least financially but I was my wife when I say 80 hours a week she's like uh no that's that's a level you used to work way more than that uh 90 100 hours a week you know consistently for years though not just like once in a while and it caused some issues because I was 24 hours a day I would sleep like three hours a night and my wife and I were buying small properties and she's like this is you know your your schedule is like it's not working you need to do something different and I'm like okay my spare time okay let's figure this out you know but I said okay I mean it was It was kind of more an ultimatum you know and uh so got you know got a little serious and I said well we're gonna have to do it together because you're gonna have to help me we both loved real estate for whatever reason just had a passion for it and so I invested passively first in a syndication in 2013 didn't know a syndication even was until that time had a friend that was doing it used retirement funds but basically that kick-started kind of the light bulb and say okay well I think we can do this too we're already buying small properties and then we looked at doing syndication ourselves and it took us about a year to find our first property we were looking a lot of other things to to get me out of my it business essentially but we ultimately ended up with multi-family which I'm very excited and happy that we did and then we just kind of went off the races and it you know purchased a number of larger larger properties so what was your first deal what did that look your first syndication deal so you're got rid of the single family stuff and you transitioned to multi-family what would that first deal look like yeah for for one when you're looking at becoming a syndicator you want to build relationships with Brokers so there was a deal that was a 32 unit deal I had very little interest in it because it was really too small I didn't want anything that small but I wanted to build a relationship with a broker here in Dallas first time meeting him and then when I was touring the property he mentioned well the seller has another 32 units right there like it was 200 feet away and he might be interested in selling that well lo and behold we ended up getting both properties and it was still a little bit smaller we were looking for 100 plus unit we wanted to go you know I'm kind of glad we probably started with a 64 because the the raise I was really petrified to be trying to bring Capital to a deal it was a million dollar raise at the time never had you know even tried to raise capital I mean it was I.T guy CPA background but we ended up getting that one at our first indication and it was here in Dallas and again it was about about a million dollar raise on that one wow in a great market and you just happen to live in a great Market to do that locally which is good A lot of people try to do that remotely like I live in Michigan for a while I was driving down to Indiana Ohio trying to find deals there but it's like a six hour drive you can't really ride yeah and you were in right there in a great market so that's a huge Advantage it was yeah so what's your criteria well I guess what's your criteria now for properties that because you you really cater to your investors you're a so investor focused I know you really do a great job of communicating educating so what do your investors look for in properties what's the criteria that that they're gravitating towards right now yeah I would say it's going to vary a little bit on on the investor if somebody is a pretty seasoned investor meaning they've invested a number of deals been investing for years and like myself included because I'll tell you kind of how I've changed a little bit too for myself I'm I'm more like hey let's have properties all things we need equal less headaches um less potential risk more uh no ones and rather rather than unknown to give you some examples of that and even though the returns could be a little bit lower you know we were buying before some properties that are zero percent occupied and 28 occupied and there are a lot of issues with that you can we've had properties where we've you know returned a hundred percent of the money and over 100 return in 14 or 15 months on those type of deals you can't do that typically on a real you know stabilized deal but but a lot of people I think are are kind of learning hey if I'm going to do a big distressed deal you can pick your number maybe one in five you're going to do that way um but I wouldn't I personally wouldn't do all that unless you're going to be you're a contractor full-time and things like that just too much time effort too many issues whether you're alone trying to get reimbursed so I a lot of investors are like well the nicer properties and a cap rate perspective which just means how the property is valued um you know the spread between like a really nice property and a property that could be considered older or maybe not as nice it isn't that big anymore so I do like the you know newer is relative we bought a lot of 60s and 70 properties about 1945 property um but you know that the 80s 90s plus properties just generally speaking have less issues just even from a physical perspective um you usually have all separate HVAC units where we own you know a few properties that have a chiller which means one machine basically Heats and cools everything if it goes down which it's gone down before in the middle of you know summer in Dallas there's a big issue there right so uh and then just physically the way they look and then clientele wise you know people argue well hey they're better tenants in an A versus B and C I I guess I wouldn't probably really totally subscribe to that because there are certain markets We Buy in that a lot of C Properties but the people grew up there they lived there they never move it's not very transient there so the bad debt in some cases is really really low I mean we've had I think 14 15 months in a row on the C property where there was no bad debt which is pretty much unheard of wow so very few class A's probably can say that but I do like properties that are you know all things being equal a little bit nicer newer and then Market wise we've bought we've bought in a lot of markets a lot of tertiary markets a lot of markets probably inferior to the primary markets I think we're we still like those markets provided we have a kind of long-standing history there so if we've bought there before we've exited there and performed really well I'm still still good there going to a brand new tertiary market for myself right now I don't like doing that they're they're there are a little bit more risk in my opinion in those markets and if we don't have a history there I'd rather go to market either we already have the history there so a little you know same management company same GP team same kind of Mo less risk generally speaking I like prefer that better than some of these other other choices and then you can't just go to Every primary market and start buying Class A unless you accept your return is going to be quite a bit lower which it will be that's okay so it's kind of a mixture of certain things some people are like hey I want to be able to go and you know dump my money in two three years that's getting very difficult to do and I'm gonna say impossible very very difficult to do on a property is already stabilized you're going to be forced to most likely buy distressed property and contend with all the issues potentially there right and there's that's the beauty of the think multi-family group is you kind of alluded to this is like once we get into a market because the reputation is so good that you've you Tamil have created is it like Decatur Decatur Georgia I think the city that a suburb of Atlanta that how many properties does our group have there six eight a number and then we've bought like adult in Georgia which I never heard of two until 2018 through some circumstances my twin brother lives in Atlanta area too but you know we've we've bought and exited three properties there the returns have been like I mean insane we have another two properties right there under contract but it was just through some circumstances right time right place we've bought in places like Memphis starting six years ago done really really well there personally I wouldn't go there right now it's my personal opinion we were buying stuff for twenty five thirty thousand dollars a door and selling for you know 80 85 000 yep I'm pretty happy with those but I'm I'm not comfortable going to a Memphis in pain we have some properties that are over a hundred thousand dollars a door right and I'm like nah there's other markets I'd rather be in now there are other reason you might go there because of their tax incentives and things like that but we did we learned a lot how things reacted during covid what landlord friendly really means because when you say Estates landlord friendly lots of times it's not it's county by county so it depends on the judge so we ran across that if we buy a property which we bought a couple right before covet hit like a couple months and then the business plan only worked if we retended the property and do a major capex well when Kobe had we couldn't do either of those things so I'm more of the opinion let's let's find properties that will perform regardless maybe it wouldn't perform quite as well if you can't totally meet your business plan but you don't run that risk of oh my goodness we can't even you know retain the property because we can't evict and we can't do cap back so nobody wants to work and Kenny you know all those things like that or properties where we actually did go in and do a lot of capex and we've had you know if it's almost vacant you know zero percent one building we had well then we do it and then people you know vandals come in and destroy the property in hundreds of thousands of dollars of damage then you're paying 200 000 a year to have a security guard so again not saying anything wrong with all those things I mean if you look at the ones we've done like that and the returns I mean they're on average phenomenal but more risk bigger headaches you're dealing with lenders that are slow to reimburse you you're paying vendors hundreds of thousands of dollars waiting in some cases months to get reimbursed by lenders so for me I've made a shift more I'm not doing any distressed properties anymore I quote people on it I think I have a lot of experience with it you know fortunately unfortunately I'm not sure which but uh definitely coach on it but I'm not buying them anymore right right and that's the great thing of the experiences you have in the markets you've you know played in and the the Cycles you've been through you you continue to you know modify or pivot if you will okay this is the market I want to be in these are the type of properties we want to go for like you said I know years ago we there's one big huge distressed property it was like 400 some units that you we took over the group did and I know you were lead with one of the other individuals like wow my eyes pop when I heard and it did extremely well but that's a whole different Beast than a typical light value ad where you're putting you know five or six thousand per unit right versus oh it's 40 occupied and a whole bunch of units are burnt out and all that so I love the fact that we've kind of specialized I think multi-family deals are typically um Class B C plus nice population and employment growth areas right in South Southeast we're getting into Arizona now right we're in Arizona that's right I mean it's not about like you know you're mentioning right now Sunbelt as you know the top 10 markets through September has been in the Sun Belt right so we we Southeast in Texas are where we're at and you know I wouldn't say hey just because like when we exited a bunch of properties at top of the market you know last year people look in the old look how smart I am I'm a genius like that no I think you probably got lucky just like we got lucky we happened to time it at the right time um but to sit here and to say all the property's gone up because you know yeah you can contribute to that but you have to get some credit to the market you do um and you know it's it's some cases there's a little bit of luck involved on it and it's calculated luck I mean it at your level you're looking at things to say we're looking at it saying can we hit our some of these cases we've properties we've owned for two years or less we're hitting our five six year projections right so now I would say well it makes sense in my opinion to sell so you know the the people that sit there and then you know I have another partner who doesn't want to sell anything ever right from back in the day and doesn't matter how good the returns are going to look and I don't think that's as a syndicator I don't think that's fair I don't I think you owe it to your investors to have either a major Capital event through a refi or a supplemental loan and continue to cash flow if you can't do those things I think you owe it to your investors to sell yeah after all you met the business plan we kind of got to fiduciary responsibility to say okay the velocity of money comes in now we've accomplished what we wanted to do we did it in half the time well let's give your money back and now you can do something else with it with all your gains indicator that's right so if you and I are both General Partners on deal and you want to sell and I don't we have an issue so you need to make sure your your docs support the ability to have some sort of tiebreaker which I didn't have back in you know when I started doing this originally so literally prevented from selling without both of us agreeing to it so big lesson learned there it's uh it's it's painful yeah so there's triggers in there there's yeah you've accommodated for it now that you know this could happen like right how do you how do you address it and right in a fair and Equitable way particularly to the investors got it oh that's interesting so let's talk a little bit about um how does somebody overcome I know this has been six or seven years when I did my first passive investing I wrote that why are that first hundred thousand dollars what do you do because you work with lots of investors what do you do to help them get over the the the apprehension of okay I'm sending this money to Mark or two it's actually to the LLC of the apartment complex what are the typical concerns that you usually hear from new investors that you kind of hate I'll explain this to you and this is the reason why or this these are the challenges that they have because it's really a mindset thing if you never people only invest in Wall Street now there's an opportunity to invest in apartments this is all new informed so how do you get over that learning curve for your well some of the benefits to it that that doesn't really exist typically in Wall Street would be you have direct access to the sponsor right the the general partner so if I invest in Coke I don't think the CEO is going to take a call from me they're not so you have direct access there here and then you have the ability to you know go touch the property see it feel it you have tax benefits that generally speaking don't exist in the you know regular Wall Street just don't um now it's different for every person but you you will get tax benefits allocated to you depending on your timing when you can use it and things like that and then you know Mark as far as the market for multi-family it performed really well during good times it performed really well during covet there was some rent relief to help there it did and it's basically you know as much of an inflationary hedge as almost any investment period out there continues to perform well we're still increasing rents um rents are renewal rates are up across the entire country by 125 a month which is about thirty thousand dollars of value per per unit without going into all the math so um renewal rates I think about 60 percent so there are a lot of good things going for it now am I happy the interest rates are through the roof and fed you know keeps do no I'm not I you know all things be equaled rather than they weren't doing that so people ask well hey it's now still a good time to invest well there are a lot of good stats if you look at it and say Yes single family homes are being priced out for many many people so more people are renting we're pushing rents on you know every four to six weeks but we're pushing rents you know on our our properties and we're getting it so yeah I think it's still now to sit on the sidelines people go I'm sitting on the sidelines do nothing well that's doesn't make sense to me uh is this indicator or an investor now as a syndicator you always need to be looking maybe you don't find anything because nothing you know you just can't find it but you need to underwrite with you know the current terms of the market and things like that as an investor if you say well I'm going to sit on the sidelines well okay but you know in the market in Market you know God really knows what's going to happen in the market right with a roller coaster and things like that you don't make money or lose it lets you sell either um you know the bank is pretty much you know it's going to take you a thousand plus years to double your money in the bank if you want to double your money so I mean you know what and with inflate that's not even including Faith inflation by the way so you know what what do you do now with all that said and I generally mean this is that in some cases not everything is a financial decision if you're gonna invest in anything I don't care if it's a market or in multi-family and you're going to be so petrified and petrified and so nervous and scared and sick to your stomach then don't do it accept the fact that you're going to lose money by having the bank and I really mean that and be okay with it that might be okay because the stress related to it the best way though for people to really figure out hey should I be investing or not is okay how do I know that a deal is good well reality is you don't nobody knows right we're using data it's going to be good right we're using data to project to say okay here's data we have based on our experiences based on third-party input from management companies and Tax Consultants and all these things this is what we believe is going to happen on a performer right so as an investor I have a guy that I spoke with last week he's he's gone into he said ace indication like in six weeks no joke um and he's like I don't even feel like I'm probably really that qualified you know as far as like to to know whether a deal looks good on paper or not well there are certain things you can learn pretty quickly as even a passive investor you don't have to be in Excel every day and you know do what we do on a daily basis you don't have to do all that but there's certain things you can look at or questions you can ask to say okay based on you know these questions and input I'm getting doesn't look like this deal is legit looks like it's potentially doable and people say what's the worst case scenario worst case scenario you lose all your money people like oh I can think no that's your worst case scenario what's your worst case scenario in the stock market you lose all your money now does it typically happen in real estate no but you need to go into an investment realizing that it's an investment their risk involved in this so get educated as much as possible to feel comfortable one way or the other to invest in the deal or not absolutely absolutely the beauty thing about you know from a risk adjusted standpoint real estate's still one of the best investments because it's collaterized by real estate you know it's it's a physical asset it's not a Paper Stock you know so there's some advantages but you're right like any other investment catastrophic things can happen the world can change you never never really know well yeah and you look at it from the standpoint who are the largest investors in real estate it's actually the lender right they're putting the most in so if you look at it and say how do lenders look at multi-family real estate versus things that aren't real estate and even things that are real estate how do they look at it well if I'm by and large or multi-family which I have like no joke 800 million dollars in non-recourse loans well the lenders look at it differently right single family home you know one to four units you're gonna have recourse personal liability they look at it differently we're getting higher levels than we would off an industrial building or higher levels leverage than we would off of you know Self Storage so how do the I'll tell you that probably the two people in the world that never lose industry-wise insurance companies in in lenders they just never lose yeah they don't so look at what they're doing we're reporting their money they have risk tolerance levels associated with every investment and we're going to get the highest generally speaking the highest leverage the best terms non-recourse debt without personal liability and things like that on multi-family than virtually any other investment period. that's a great sign that's an indicator that people that are right the people that are making all the money the profit margins are phenomenal for banking Insurance you know right yeah if they're putting their money here well that's probably a good place for as an investor to put your money because they're usually 75 percent or 70 of the equity of an apartment is the lender right and the other the other percentages the capital raising from the investors like you and I and our and our friends are certainly that invest with us good point that's a really good point I never thought of it that way it's absolutely true that's where they're putting their money right yeah that's that's a good move so what do you what should a person look for if you're new to what's a good person you should invest in like you said you want to trust somebody that knows the market knows what's going on so what are your expectations or and I know you treat your investors really well but what are the expectations that you make sure you fulfill for all of your passive investors what are the things you do for them yeah I mean it's a small world right and I think that that the whole idea around having the communication the open communication responsiveness I mean don't get me wrong there are some investors that are pains they really are I'm not just saying to say that overly for no reason right just because that's the way they are but that's that's very rare it really is so I have found that as long as you communicate with an investor saying that hey I'm not sure I'll get back to you the worst thing you can do is ignore uh an investor right just like I never never respond and uh it's happened before with asset managers and you know we've taken you know corrective actions you can't do that right you have to respond the response could be I'm not sure I need to get back to you but much better than not responding at all right so response time for sure um making sure that you're providing monthly reporting I don't some people do quarterly I don't I don't know that seems like a long time to me but providing the you know profit and loss which is the T12 the rent roll balance sheet general ledger all those type of things so that full visibility here are all the books right the there are a number of things out of our control unfortunately this year was horrendous for k1's as an example so you know investors get get uh frustrated I get frustrated too but I would say if you're coming in potentially investing as a multi-family investor I would assume you're going to do an extension if you can't like if you want to say come to terms or accept that I probably recommend you don't invest now a lot of other years we only want that many issues this year was horrible I mean just not just for us ever crossed the whole entire entire country right so um those are things too right you have to accept that hey I'm going to come in probably going to have to do an extension no I don't want to do one okay then don't invest you know so um and then I think you know one of the big things is is really and you talk to people that I've spoken to investors is trying to put myself in their shoes I really do and say okay here are different deals we have going on here's what if I was in your shoes here's what I would do I was put your money up don't put you know if you have 500 000 invest I wouldn't put 500 000 in a single deal general statement um because something could happen right but put myself through shoes and say okay and then also as a general partner if someone if you let's say you're putting a deal together and I say hey Matt what do you you know like about the deal you tell me and I and I ask you what do you what don't you like about the deal and you're like nothing actually everything about the deal I love I probably no probably not true there's probably I mean I can't think of a single deal out of 100 where there isn't something there's one thing that's not equation yes something that's like you know but it's not enough to like not move forward right so if uh syndicator is like well you know everything's great hunky dory I probably wouldn't invest and then a couple other things you know it's not really geared towards what we do but just the general statement you need to make sure that the person running the project if they have a full-time job somewhere else they need to have a ask and more of an opinion that they asset managers need to be full-time um I'm not saying you can't get away without doing that if you have one or two properties you can probably um but you know we've done it before people with WQ jobs running running deals things like that just harder to do that so having dedicated asset management team is always good uh to have some properties if you had 10 properties your asset management you're going to have one that takes 80 of your time you just have that one property just reality so and then just at the track record right I mean for me we can go through kind of you know and be totally transparent you know where have you had struggles I mean I can't tell you how many times I hear and I see all those stuff posted and these groups and things out there and like nothing ever goes wrong and I know firsthand like inside information and they don't share any of that you're doing it you're doing a disservice in my opinion two syndicators and also investors or without sharing that you know I've shared on different podcasts and one Horror Story that I've had I mean thankfully it was only one like to that level but um I know for for a fact the lessons learned from that story in that real example have helped a number of people not make the same mistakes I made on that deal so even from a legal structure that was one of the biggest things we did differently than any other time and it causes issues so be transparent own up to own up to things no one's ever gonna be perfect um be responsive and you know just try to always put yourself in their shoes and be sympathetic to it to them and do do what you can there's so many easy things you can do and there are hard things that just are hard right so the easy things always do well they're easy right and then the things that out of your control like k1s you can push and push and push and I know investors get frustrated with it we get frustrated too but the reality is that we have very little control how fast some of those things are getting done so um you know and we've learned more and more right if you do more and more deals you learn every single deal and then you can convey that to other people and say Here's what we've done we tried this we tried using you know a proper management company and uh in-house on the same unit to fix things it doesn't work typically you know you need one neck to choke I mean just things you know you can convey to people say here's what we've tried didn't work so we don't do it anymore um so but the biggest thing for me I think it really is it's the communication being at least responsive to people right those are some great great tips for new investors everything Mark says is what you should expect from your general partner transparency clearly telling you what the issues are you know because there's always something you know we've done lots of deals and there's always one or two things that are not quite right about the property it's better to disclose that now than them Discover it later and it gives you more credibility because there's no deal that's perfect they're just they don't there's not there's nothing so somebody's telling you there is and there's yeah exactly excellent excellent advice thanks so much and I've learned so much for you from you Mark and that's how I treat my investors based on you know very strong ethics I mean that's something I really really enjoy about the group that think multi-families like there's just no gray area at all you do the right thing for your investors your business partners your service providers it's really you have high standards and I really appreciate that and it's it's not right for everyone not everybody can live to those standards but but you set those in we all comply with it or we don't stay so and that's what I love about yeah that's right yeah that's wonderful well now it's time to get to know Mark a little bit more on a person level the rapid fire five are you ready mark I don't know what's coming so I'll let you know okay the first one what was your nickname as a child uh my brother Eminem is a identical brother we were called the bopper uh Papa Brothers we used to fight a lot so like in Mark yeah Eminem that's pretty good yes are you a morning person or a night owl morning but yet you replied 24 7 pretty much to me and tax this guy is incredible no matter when I text you it doesn't matter you're just boom I again you're so accessible so I'm surprised morning but you don't sleep often um what would be the first thing you did if you won the lottery uh by Koenigsegg car and I want to ride one too when you get it for sure if you could live anywhere in the world where would it be wow that's a good question um probably California without the politics and taxes so if I could change that that's probably where I live we're in California Southern for sure San Diego yeah warm warm yeah and he was my favorite and then finally what one piece advice would you give to a new investor to help them get better Returns the one key piece of advice uh educate yourself and then talk to other investors that have been investing longer than you and ask them their input and what they would have done differently and what they learned through the deals that they've actually invested in that's really really good people don't think about check references and ask somebody that's been doing it for a while and say well what are the things you have to look up that's really good I haven't heard that one excellent thanks so much for your time Mark how can people get a hold of you uh best just email it's Mark m-a-r-k at think multifamily.com and I'm just going to give a personal plug think multifamily if you want to be a syndicator a general partner there is no better group in the world than Mark and Camille's Kenny's think multifamily I'm putting the plug right out there it's a very cohesive group everybody shares information there's not a whole bunch of inner competition it's everybody raising everyone else and that's just really rare in the world today so I thank you for putting that group together and I'm glad I'm a member thanks so much me too glad you're in all right have a great day you too Matt take care and that's a wrap thank you for listening to better returns brought to you by Hanson Holdings if you enjoyed this episode please leave a five star review because it helps others discover this valuable content if you would like to earn truly hands-off passive income go to hansonholdings.com where we help you invest in large apartment complexes to grow your family's wealth see you next week with another awesome episode have a great day.