256: Building Wealth Through Apartments with Mark Kenney

Mark Kenney is a seasoned real estate investor, entrepreneur and founder of Think Multifamily. Mark started his real estate career over 20 years ago and has extensive experience in property valuation, acquisition, and operations. He has a passion for helping other succeed in the multifamily arena. Mark is invested in over 3,500 units and has a top-notch reputation among the multifamily investment community for providing exceptional value to investors and the community while being easy to work with.

Mark is a 1993 graduate at Michigan State University, Accounting and is a CPA. Mark has also provided IT technical and business consulting for 20 years and is leveraging his vast IT experience to bring new creative technologies that will help others in the multifamily space. He has worked for large organizations such as KPMG Consulting, EDS, SAP, and HP; he founded Simplifying-IT in 2008 which provides IT services to fortune 500 companies.

Key Points
Turning the corner from small multifamily properties to large apartment deals
How to position yourself to raise capital
What value you can bring to partnerships
 Real estate is a relationship business – you have to build personal relationships 
Be willing to be scared 
Lightning Questions
What was your biggest hurdle getting started in real estate investing, and how did you overcome it?
Mark’s biggest hurdle was the fear of raising capital. TO overcome that fear, he put himself out there by going to events and talking with people. 
Do you have a personal habit that contributes to your success?
Always stay humble and exercise. 
Do you have an online resource that you find valuable?
Google.com
What book would you recommend to the listeners and why?
The ABC’s or Real Estate Investing by Ken McElroy
If you were to give advice to your 20 year old self to get started in real estate investing, what would it be?
You don’t have to start out small. Find someone who is doing what you want, and learn from them. 
Resources
Visit Audible for a free trail and free audio book download!

Think Multifamily

Email: Mark@ThinkMultifamily.com

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255: The Power of Your Mind – Friday Fundamentals

A placebo is an inert (inactive) substance, typically a tablet, capsule or other dose form that does not contain an active drug ingredient. Placebos are often used in clinical trials as an inactive control so that researchers can better evaluate the true overall effect of the experimental drug treatment under study. In these clinical trials, one subset of patients would receive the placebo and one group would receive the experimental drug, but neither group is aware of which treatment they have received. In addition, researchers in the study would not know which patients have received active or placebo treatments.

Why am I telling you this? Because I want to introduce and talk about the Placebo Effect. The Placebo Effect is defined as “a beneficial effect produced by a placebo drug or treatment, which cannot be attributed to the properties of the placebo itself, and must therefore be due to the patient’s belief in that treatment”.

Let’s look at and well-known placebo study.  I first heard of this study in Vishen Lakhiani’s book, Code of the Extraordinary Mind. This study and corresponding article titled “Mind-Set Matters: Exercise and the Placebo Effect” was lead by Harvard University Psychology professors, Alia Crum and Ellen Langer.

In a study testing whether the relationship between exercise and health is moderated by one’s mindset, 84 female room attendants working in seven different hotels were measured on physiological health variables affected by exercise. Those in the informed condition were told that the work they do (cleaning hotel rooms) is good exercise and satisfies the Surgeon General’s recommendations for an active lifestyle. Examples of how their work was exercise were provided. Subjects in the control group were not given this information. Although actual behavior did not change, 4 weeks after the intervention, the informed group perceived themselves to be getting significantly more exercise than before. As a result, compared with the control group, they showed a decrease in weight, blood pressure, body fat, waist-to-hip ratio, and body mass index. These results support the hypothesis that exercise affects health in part or in whole via the placebo effect.

I find the placebo effect fascinating, due mostly to the power of the mind. Everything we do starts in our mind. But strangely enough, it’s not necessarily what or how we do things that impact our outcomes, but rather our mindset. 

I had a coach that recently told me the only difference in feeling excited and feeling nervous is your mindset. The feeling is the same, and the only difference is your mindset.  I  think that the only difference in living an extraordinary life and an average life is your mindset. And the best part is, you can control your mindset. 

Your Mindset
Let’s look at a few ways you can grow, change, and control your mindset. 

The world around is filled with both absolute truths and relative truths. Absolute truths are the things that are… well absolutely true. An absolute truth is the sun rises in the East and sets in the West. No matter who you are, this is true. A relative truth would be there are 2 political parties. This is true in some sense, yet only relative to U.S. politics. In other political systems, there are two political parties. To constantly grow and expand your mind, you can challenge these relative truths. Doing so will make you look at things in new perspectives, possibly even solving challenges with new solutions. 
Growth mindset vs. a fixed mindset. A fixed mindset is one that doesn’t change. The way things are now is the way they’ll always be in a fixed mindset. With no perception of abundance, one with a fixed mindset settles for how things currently are and thinks that’s the way they’ll always be. ON the other hand, a growth mindset is one that is constantly growing and changing. A person with a growth mindset understands that life is an ebb and flow of progress, status, success, etc. With a growth mindset, you realize that life is abundant and you’re constantly growing and learning. 
H
“Most human beings underestimate just how powerful their thoughts are in creating the world around them.” – Vishen Lakhiani

When I say “Engineer the lifestyle you want” all starts with your thoughts and mindset. With the right mindset, you can accomplish anything you can imagine. Your thoughts, nurtured by your mindset, turn into action. Little steps turn into larger steps. What started off as an idea will become a reality – your reality. Whatever you can imagine is completely achievable. Everything in this world was just once an idea in someone’s mind. The automobile, telephone, space travel, internet, and everything else was once just an idea. 

Your mindset if the foundation to your success. Without the right mindset, you won’t be able to build your life very far. But with the right mindset, the sky is the limit. Grow your mindset, question everything, always look for solutions to problems, and never quit learning. The thoughts you have today, will be your reality tomorrow. 

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254: Commercial Real Estate Lending with Nick Chapman

Nick Spent 15 years in the lending side of banking. Originally focusing on residential mortgages but as a result of the financial collapse in 2008, he transitioned to business banking and was recruited to work for one of the largest privately held lenders in the country. Shortly after being introduced to Jake and Gino through some mutual friends in the real estate industry, Rand Capital was created as part of the Jake and Gino family of companies. Our goal is to serve our community of students with education about the different lending options available in the market along with providing financing for every deal possible.

Key Points
How and why banks lend on commercial real estate
Agency debt – Fannie Mae and Freddie Mac – how they work 
CMBS – commercial mortgage-backed securities 
What lenders require and look for when lending on commercial assets 
How a commercial real estate broker can help you get the best financing
 Agency lending limits – how that impacts investors 
Interest-only terms, non-resource, and other unique features of commercial loans
Resources
Rand Capital LLC

Email Nick at Nick@RandCapLLC.com for a white paper

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253: Leverage – Friday Fundamentals

Leverage is a powerful tool. It can come in many different forms, from the mechanical leverage of a seesaw to the financial leverage of a real estate loan. We’re constantly using leverage in some form or another. Leverage defined is:

use (something) to maximum advantage.
use borrowed capital for (an investment), expecting the profits made to be greater than the interest payable.
Financial leverage is simply borrowing money to invest, with the expectation of making a profit. Leverage, in the context of real estate investing, is debt. We’ve been conditioned to view debt as a negative thing, and rightfully so. But not all debt is created equal. There is good debt (the kind that others pay for you) and then there is bad debt (the kind you have to pay yourself). Leverage is an area where many real estate investors struggle because it can be counterintuitive in the sense that real estate debt can and usually is a good thing. Let’s look at how that can be true.

Leverage magnifies your return on investment, both positive and negative returns. Let’s look into some investing metrics here. Two important metrics are Cash on Cash Return (CoC) and return on equity (ROE). Let’s take a duplex for example. This duplex purchase price is $100,000, and rents for $500/unit per month for a total of $1,00o total rents per month.  One of the most important things we consider as real estate investors is the bottom line cash flow number – that is how much does the property profit per month, after paying all the expenses from the rental income. There are two ways we can look at this example:

Scenario 1. We buy the property without leverage, and pay all cash for it.
Scenario 2. We buy the property with leverage, by borrowing money from a bank and putting down 20% of the purchase price which is $20,000.

Let’s look at Scenario 1 where we do not use leverage. The monthly break down looks like this:

1,000 in monthly rents
– $400 in expenses (Vacancy, Insurance, Maintenance, Taxes, Utilities, Management)
= $600 per month in positive cash flow

Now let’s look at Scenario 2 where we use leverage and put down 20%. Our loan for the remaining 80% is a 30 year fixed rate with a 4% interest rate.

1,000 in monthly rents
– $400 in expenses (Vacancy, Insurance, Maintenance, Taxes, Utilities, Management)
– $382 for the mortgage (principal and interest)
= $218 per month in positive cash flow

At first glance, you might look at the $600/mo. cash flow of scenario 1 as outweighing the $218/mo. cash flow in scenario 2. But let’s compare the important Cash on Cash returns.

Scenario 1: We paid $100,000 for the property in cash. The property makes $600/mo., which equals $7,200/year. $7,200/$100,000 = 7.2% Cash on Cash return.

Scenario 2: We put $20,000 down for the property and it makes $218/mo., which equals $2,616/year.
$2,616/$20,000 = 13% Cash on Cash return.

That other important metric we mentioned is the Return on Equity, or ROE. Let’s calculate the ROE of each scenario. In both examples our $100,000 duplex appreciates 5% over 1 year.

Scenario 1 (no leverage): After one year our property is now worth 5% more, or $105,000. We made $5,000 from the appreciation of our property. This $5,000/our initial $100,0000 investment = 5% ROE.

Scenario 2 (with leverage): After one year our property is now worth 5% more, or $105,000. We made $5,000 from the appreciation of our property. This $5,000/our initial $20,0000 investment = 25% ROE.

With these two CoC and ROE metrics, you can begin to see how leverage magnifies your returns.
Leverage Your Way to Wealth
“Savers are losers and debtors are winners.” – Robert Kiyosaki

The ability to leverage debt is what makes real estate investing so powerful. When you use debt, you can control property for a fraction of the cost of that property, allowing you to spread your money across several different properties. When you invest your money across more than one propety you not only increase your returns with leverage, but you accelerate the velocity of your money. If you can control 5 properties with a 20% down payment for each, you then get to realize the appreciation for each of those properties, along with the leveraged Cash on Cash returns.  Remember, you want to be a debtor as Robert Kiyosaki says.

This concept can take some time to fully understand. On the surface, it may sound simple to you. Or it may sound like it doesn’t make sense at all. I encourage you to give it some thought and look at the numbers.

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252: Rockstar Real Estate Investing with Robert Martinez

Robert founded Rockstar Capital in March 2011 and since directed the growth of Rockstar’s portfolio to 19 apartment communities consisting of 3,243 rental units. He entered the multifamily industry in March 2007 when he co-founded a previous management company and oversaw operations of 11 apartment communities consisting of over 2,000 units. Since 2011, he has directed the underwriting, acquisition, and management of 30 apartment communities consisting of greater than 5,243 rental units.

Robert holds an Engineering Degree from Texas A&M University and in 2013 earned the National Apartment Association Independent Rental Owner of the Year Paragon Award. Under Robert’s visionary leadership, Rockstar Capital and its staff have earned 15 city, state and national apartment awards as well as being named #15 in the Fast 100 Fastest growing companies with the Houston Business Journal. Robert shares a passion for soccer with his two boys, Ryan and Conner and enjoys supporting their daily efforts in local club soccer. Robert’s favorite saying is:

“You only have one life. If you don’t like your situation, do something about it.”

Rockstar Capital Management is a superior real estate organization founded in 2011 as an investment and property management company. With a dedicated hands-on approach, each of Rockstar’s communities are managed by a seasoned team of professionals that pride themselves in taking care of its managed properties and valued residents. Rockstar’s highly motivated and well-trained team provides the highest quality of service and expertise in managing multifamily properties.

Members of Rockstar Capital Management are top in the industry and have received numerous awards for workplace excellence. It validates that their properties operate with market-leading occupancy, resident retention, and profitability.

Key Points
The myth of saving your money and retiring with a nest egg
Breaking into the multifamily apartment space
Building your network and marketing yourself
Do whatever it takes to be successful
Buy one deal and guard it with your life
Reputation is everything – you have to have a great online presence
Lightning Questions
What was your biggest hurdle getting started in real estate investing, and how did you overcome it?
Fear and analysis paralysis.
Do you have a personal habit that contributes to your success?
Ivan listens to good content on self-development, sales, and real estate.
Do you have an online resource that you find valuable?
Podcasts, BiggerPockets, and Audible
What book would you recommend to the listeners and why?
If You’re Not First, You’re Last by Grant Cardone
If you were to give advice to your 20-year-old self to get started in real estate investing, what would it be?
Tell them all the things he’s figured out at 30 – focusing on cash flow!
Resources
Rockstar Capital

Apartment Rockstar Podcast 

Connect with Robert on Social Media here

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