Overall, there are various ways to actually build wealth through real estate. There’s not just one strategy, one formula, one benchmark to look at. And that’s why not all real estate investors are the same.
The next highly-experienced investor we’re featuring in our Investor Highlight Series is Brian Maginnis. He’s a tremendous person with a unique way of investing here in Long Beach, CA. Currently at 71 years old, Brian owns 59 doors in the city of Long Beach, a few commercial buildings, 15 self-storage units in California, and over 5,500 self-storage units out of state. On top of all that, he’s still an active investor buying properties in Long Beach whenever he has funds available!
This Investor Highlight Series is developed for you, because as an investor there are three things that you’re looking for: 1) Most folks want to create passive income, so income that they don’t have to go to work for. 2) They want to build wealth. 3) They want to be able to leave a nest egg to their family; the wife, their kids and they want financial freedom. The investors that we’re highlighting are investors that have already achieved every single one of those goals that I’ve talked about. They have tons of experience and we have a lot to learn from them.
Brian Maginnis has been investing in real estate for a very long time and we have a lot to learn from him. The one thing about Brian that you’ll probably take away is how active he is in managing his properties. He’ll joke around that he carries around a tool bag in his car because he’s not afraid of getting his hands dirty fixing a toilet, fixing that leak that a tenant called him on but he always wants to make sure that he plays an active role in selecting his tenants. It’s important to him that he surrounds himself with capable and trustworthy people. He’s up to date with all the tenant laws. He’s out there doing the leasing, dealing with vacancies and dealing with all the repairs that any landlord is going to be dealing with. But he’s doing it at a very successful level. Today, I’m really excited to have you learn from Brian Maginnis. He could certainly sit back on a boat and retire but he continues to invest in real estate.
Here are text snippets from the interview:
What first inspired you to get started in real estate investing?
Brian: Well, it’s a great question. And kind of an unusual story. I worked at the airport and one of the coworkers that I had was a mechanic, who was selling his house $23,000. He told me, you know you want to buy a direct sell at 21,000. I didn’t have much experience. And I said, wow, that’s a great idea. And so I walked into a bank close to my house, I asked him for a loan. I was very put off because I was very young and they kind of laughed at me. What do you want in a home loan for? That kind of set that tone of, I can’t get a loan therefore I won’t get a loan. And this guy was kind of a mentor to me. He really helped me with my job. I really respected his lifestyle. And so that kinda got me thinking about real estate. An year later, married and looking for our first home price of the home was $32,000. That house is not worth $30,000 is ridiculous. And of course I had the pressure from the home track. We got to buy a home. Fast forward, about four months in that we paid $42,000 for almost the identical home, because prices accelerated so quickly.
Juan: It seems to me like you had some success and you just kept buying properties and it wasn’t so much like, “Hey I’m buying it for this purpose” but I guess now, you know, now looking back there’s been a lot of benefits to the risks that you took or the decisions that you made.
Brian: Right. You know, an instructor at Cal State Long Beach for some reason is, I remember this very well. He said the number one responsibility is taking care of your family. And once you have disposable income act like you’re the biggest dealer in the world and keep reinvesting that income, he said but don’t ever jeopardize your family. And then the people, you know, immediately in your life always have a little nest egg for them but take that extra money and go for broke with it. I remember, you know, he was kind of a rebel in a lot of ways himself because he was an instructor teaching us all about it. But yet he was saying, you know, once you’re secure once Maslow’s theories are taken care of, then go for it. Don’t mess around.
What do you like best about owning real estate? What makes it fun?
Brian: You know the funnest part again, I’m kind of a rebel. The funnest part is dealing with the people. My tenants, I take a great pride in making sure I get the right people. I want people around me that are, you know, good solid people. And that really helps me with my Saturday. I don’t need to do this. I enjoy it.
What are your thoughts on investing for cash flow vs for appreciation?
Brian: I guess it depends on, who’s asking the question. When I was in school, I was told you know it’s all about money. It’s all about cash flow. It’s all about, you know, living day to day with the money that you have. Once I reached that level that I had enough money to survive, I kind of threw all those rules away. And I don’t necessarily look at a property today in cash flow. And again every investor out there is going to say this guy’s a nut. Well, you know what? I am. But I look at the long-term picture. I can buy property in Arizona and I can buy property in other States and have a positive cash flow, but that’s not going to help me with my sanity. Because I want to walk through, I want to check it out. I don’t want to have to pay a property manager, you know $95 to put up a “no trespassing” sign. No!
So my recommendation is what’s worked well for me: to stay close to home, and try to do it that way. That way you can kind of get a sense of satisfaction out of what you do.
Juan: And for the folks that are just getting started, you know, they kind of have a longer lifespan in their investment career. I always tell them like, “Hey, this is a two-part approach.” First, start with the goal of appreciation investing in Southern California. Let that appreciate make, make that nest egg. And then once you’re older and you need that cash flow then at that moment is when you should consider kind of switching the strategy. So I always think it’s kind of a two-step process go for appreciation first. And then once you’ve met that goal, then we go for cash flow. So that’s just some of the advice that I give some of the younger folks.
Brian: Yep! And that’s good stuff. There’s two levels in your life that you have to consider. We talked a little bit about, you know you got to just meet your basic needs in life and provide for your family. That’s a whole different strategy., when you do that. Then once you start investing, it becomes totally different. My recommendation is when you’re in that mode of providing, mine was a million dollars in the bank. I wanted a million dollars and I wanted my house paid off. And that was earlier on in my life. Now I don’t care if my house ever gets paid off, because I want to leverage my house. You know, that doesn’t make Vicky comfortable but the rest of what we do makes her real comfortable. So, you know, what I’m saying is not necessarily the game plan for your whole life. It’s a game plan that I’m living now. It’s totally different.
Juan: So let’s talk about comfort. You talked about comfort and just knowing a little bit about you, you’ve been able to successfully invest in self-storage facilities out of state. And I would imagine that has probably created some level of comfort with the success of those of those buildings.
Can you talk to us about investing in self storage facilities? How you got started? What did you like best about it?
Brian: For sure, yeah! You know self-storage was a dream of mine, 20 years ago. I was in the equipment rental business and that’s how I got to that first level in my life. You know for the longest time, I’ve been comfortable with myself and my family. Then I had this crazy idea to get involved in self-storage in North Carolina.
And it was truly a crazy idea. But once again, I kind of walked the walk. A family friend’s son asked me one time, “If you’re going to start over what would you do?” And I said, “self storage” Two years earlier, he called me up and wanted to borrow $75,000 to build a house. Coincidentally, his dad was next to me and heard the whole conversation. He told me not to do it, so I didn’t loan him $75,000.
The reason I didn’t loan that money was because he already had a loan at the bank but he was irritated that the bank was going to charge him $25 every time he made a draw. And so he put the roof on the house, bank comes over, charges him $25 to say, yep, we put a roof on the house. So he sent me a plane ticket, and I flew in to see his house it was done. And it was unbelievable. That’s when he asked me, what are you going to do? If you had to start over, what would you do? Self-storage. At 3:30 in the morning, we went to bed. He woke me up at 6:30 am, we looked at 20 self-storage facilities and we bought a piece of land about three months later on which he built the first building. That’s what got us started in owning self-storage facilities. And that was literally a retirement goal of mine. We shopped about 60 units, in 21 years later we have 5,500 units.
When you’re looking at properties in Long Beach what kind of properties are you looking for?
Brian: You know, mostly I’m attracted towards properties that are 85%, well run, 85% maintained. They have reasonable people in there, you know a great example and I really enjoy using real life examples. This morning I met a young person who I’ve been dealing with for probably two years now. I met him at one of my open houses, we’ve been communicating back and forth. Well, he wants to buy a piece of property, and he is probably 28 now. So I went over and looked at the piece of property together. So I looked at, how do we maintain this property? It was almost amazing because the property manager happened to be there making unit. They didn’t, they probably didn’t know we were going.
And the property manager was there. So we got to look at the inside of the unit. We got to talk to the property manager. Three minutes later, the two tenants that are going to rent the unit were actually there. And so now I got an idea of what kind of people are going to move into this property. And in a matter of maybe 35 minutes we got all this information. So I’m looking at how is it maintained? How is it run? There happens to be a bootleg (un-permitted) unit on the back of it.
So I kind of get a real life idea of what kind of property it is. And again, I don’t want to discredit you or anybody else but I want to see what’s going on. I want to see how many meters are on the property. I want to figure out how many preventative maintenance things that I’m going to have to do. I want to look at the rooms. I want to look under the sink so I can get a clearer picture of expenses. And this particular one this morning, it was bizarre because the broker underestimated the revenue. Now that’s the first ever occurrence, in my entire career.T
The moral of that is do your own homework. And really dive into these properties on your own. When you’re first starting, find somebody who is willing to share their experience with you. So you don’t have to learn the hard way.
What advice do you have for apartment owners in terms of how to maximize the return on their buildings?
Brian: I can’t stress enough. This is going to sound funny, but don’t be Mr. Nice Guy. Raise those rents. Even if you raise the rents and then you know give them back a hundred dollars a month in plants or decorations or what would you really like to change about your unit? Because when it’s time to sell it’s all about money. You’re starting out with the gross rent multiplier. And if that’s not there, you’re probably going to sell a property that’s going to take a little bit longer to sell.
You’re probably going to sell it to an investor who is not quite as ready as they possibly can be. And you’re not going to get the value out of your money. So, maintain the properties. Before my people move in, I tell them right up front you’re going to get a 3% or 5% annual increase, and you’re going to have to pay every year.
I give them a warning and they expect that. So raise your rents and maintain your properties. You know, leaks are the number one issue. Take any property. Don’t save a buck and not replace a roof this year. Replace the roof, caulk the windows. You have all the windows, spend $20,000 put new windows in all buildings. Maintain that investment because if you don’t, you’re going to pay and you’re going to pay dearly for it a lot more than that roof or window will cost you.
The people that know me, they know I’m probably the nicest guy in the world. But when you’re dealing with business you really have to be concerned about your bottom line.
Are you actively investing in Long Beach apartment buildings right now?
Juan: And then maybe share to shed some light on why you’re investing in Long Beach, where some folks might say we’re already at the top of the market. There’s the eviction moratorium. There’s rent control. Apparently California is going down the wayside. Well these are some of the comments that I hear from people leaving California. But you, you’re still investing in Long Beach.
Brian: Absolutely! I’m investing in Long Beach. The sky is not falling. It’s never fallen, 71 years old and it has not yet. But you know what? There’s the average person has a negative concept about of what if, oh my goodness this is going to happen. It doesn’t work in my book. You know, when I was asked to do this I thought about a little bit how to prepare myself. One of the things that comes to mind is the baseball player Babe Ruth. I’m not a real fan of sports. I don’t follow it a lot because I do all this other stuff. But Babe Ruth, the personality of Babe Ruth. He lived the fast life. He had some habits that, you know, I don’t recommend anybody has and we all know him for hitting home runs. It’s like, wow. But he’s also the strikeout. And I think about that. I want to fail as much as I can because I can’t hit the home run. Well, this is another great example. Who cares if you fail?
What would you do different in your investment career? Do you have any advice for younger investors?
Brian: You know, that’s real easy now because I’m living the dream. I’m not sure I do a whole lot of different cause I’m very very conservative. Believe it or not, very conservative. And until I got to that time in my life that I could start swinging for the fences I was worried about everything. So I think now that I know how it turned out, I’d take more risks. When I walked into the bank when I was young, I probably would have been more forceful and not allow them to discourage me that they weren’t going to give me a loan. I haven’t walked into the bank since trying to get a loan but I didn’t know what I was doing. So I think I’d take more risks. I’d leverage myself even earlier. And I would also align myself with mentors earlier!
For the people who want to find a mentor, they’re not gonna knock on your door. They’re not going to call you up. You’ve got to reach out to them. You’ve got to say, “Hey, you know Juan, I understand that you’re a really good local broker. Can I buy you breakfast tomorrow morning? You know, or can I meet you at 10:30 tomorrow night when you’re available? Whatever is convenient for you.” You know, I know that Juan’s a runner. If I was younger, I’d say, “Hey Juan, what time are you running tomorrow? 5:30. Can I run with you?”
Brian: Going back to my other point, you don’t want to take a risk when you can’t provide for yourself and your family. Get to that level where you don’t have to. And then once those needs are taken care of don’t listen to everybody about whether the market’s going down or up. Whether it’s a bad area to invest or not.
Twnety years ago when I came to Long Beach, and it wasn’t a very nice place to live. Some of my friends, chastised me for it and now I’ve been here for 20 years. I mean, I read about the the council and how Long Beach was progressive. You know, at the time that Queen Mary was coming the Pike was being redeveloped and they had these big plans to modernize the city. So I said, Long Beach is the place I want to be. The first building that I bought in Long Beach was literally a slum building. You know, it was, it was a crack house. The second one was a crack house. But both of those buildings are now in Retro Row, and it’s a great area in Long Beach. I had the luck of saying, you know the vision is 10 years down the road.
So take that risk, take a calculated risk. Minimize the chance of loss. You know, don’t just willy-nilly every deal you get involved in. Think about it, ask some good questions, but don’t wait. Just do it.
Juan: So just to get kind of recap. So to get started or to be successful in estate you know, I don’t need an MBA. Right? I don’t need a college degree. I don’t need all these things that some people sometimes think like we, you know I feel like a lot of the folks that follow us or want to get started, they create the scenario of like I’m not ready or they think they need something. And what you’re saying, you don’t need any of that. If you’re going to look at a deal and underwrite it properly, just take that first step forward is what I believe you’re saying.
Brian: Yeah, absolutely. I didn’t have a degree when I walked into the bank to try to get a loan $23000. However, I do disagree a little bit. You know, the moment that I got my Diploma changed my life. You feel internally like you’ve succeeded. So to be successful your whole life you absolutely have to go to school. But you’re not going to learn that much in school. Sorry. All the professors that taught me. But you’re going to get that air of confidence when you get that diploma. And so by all means go to school but you don’t need to go to school to be successful.
Do I need an agent or broker to get started investing in real estate?
Brian: Absolutely necessary. Going back to some of what I said earlier, find the right one. I’m a firm believer in looking for a professional before you need that. Pick up the phone today. Call Juan, or anybody else.
Then figure out is that the person someone you want to work with? Ask them the questions about how many properties they own? How do they manage properties? Get the feel of the person. And then once it’s time that you need that person, you’re going to have them ready. You’re gonna need to have that relationship going. Cause if you got out, to try to find a piece of property and when you have the down payment, it’s too late to find your people that are going to support you.
Juan: So there you have it. Find the professional before you know you even need them. So if you know at some point, year or two, two years, three years out, you know you’re going to want to get started with real estate investing Brian saying, find someone, interview them and make sure that they’re actually walking the walk. And that’s a great idea. You know, any professional out there if you offer them, “Hey, like I want to pick your brain I’ll treat you to lunch or coffee or breakfast.” Most instances they’re going to say, Yes That’s a great tip Brian.
Can someone begin investing in real estate with zero money? No money down. Is that possible?
Brian: I don’t think so. I don’t think you can. I think money talks and I don’t think you can walk in off the street with no money.
Juan: Yeah. And that’s not what we pitch here. Although someone who reached out to me said, well technically you can pay zero money down if you served in the military, and got a VA loan with 0% down. There is an option if you’ve served in the military, and it’s a terrific program. A VA loan is better than an FHA loan. The Veterans Affairs Administration will actually provide mortgage loans on multifamily apartment buildings. For someone who’s actively served in the military it’s zero down. It’s pretty neat. But that is the only that’s the only time that I’ve seen it work successful.
Is there anything that we didn’t touch on that you just want to share with us today?
Brian: You know, you’re only as good as you know, the weaknesses, whatever that weakness is of yourself. So it be no good for me to be successful in real estate. If I couldn’t walk around. If I didn’t have my health. It would be no good if I wasn’t a happy person. Like the holistic approach. It’s not only about real estate. It’s about just being a good happy person and being willing to, you know put it all on the line whenever you can.
Tell us the best piece of advice that you’ve ever gotten. What is it?
Brian: When I worked at the equipment rental company, I was an employee of another company. One of the two owners for some reason took me under his wing. And he told me, “it don’t make any difference what business you’re in. Just work that business so that you could buy the real estate that that business is on. If you can break even with your business, buy that property.” And he drummed it in me. I worked with him for a year and a half. When I resigned, it was like, oh my goodness. You know, we really did bond, but then he followed me after that, I competed with him. He helped me with my business so I could buy the property. So that’s a great piece of advice.
The second piece of advice from another equipment round company in another country is some Australian and he came over one day, one month, and he spent some time with us because I was in the business. He was in the business. We shared notes and his advice to me was align yourself with a good person. And once you align yourself with a good person, make a business out of what their strength is. And he lives this walk. So he’s got so many businesses now. You know I talked to him and he’s in the party business. He’s in the railroad business.
Your favorite book. All time favorite book?
Brian: Actually, there’s two. The Millionaire Next Door. And that’s a real basic book. Every entrepreneur should read that and live that lifestyle. The second book is Rich Dad, Poor Dad. Both of these books are like timeless books a long time ago.
Conclusion and Biggest Takeaways
Personally, my biggest takeaway were three major points that Brian made:
- One was one that I haven’t ever heard of: When Brian buys a building, he’s paying himself. When we buy a building, we believe that we’re maybe misplacing money. But not in Brian’s mind. In Brian’s mind, he’s paying himself because why? That asset, that he’s buying, at some point it’s going to make him cash flow. Maybe not on day one or maybe year two, but it is, and he’s going to build equity.
So technically in the way he sees it every single time, the more buildings he buys the more he pays himself. And that mindset I have never read that. I’ve never heard of that from anyone else but that meant a lot to me.
- The second thing is, Brian really really pushes taking risk. When I asked him what makes a successful investor? His number one response was, “got to take a risk.” That’s it. It’s not, you have to be an appraiser. You have to be a contractor. You don’t have to have an MBA. None of that matters. Although education is important to him, he said you have to be willing to take risks. And quite frankly, he wants everyone out there taking risks, calculated risks. But it’s with that risk, you get the reward.
- And then three, the last point was this. And again, I just love it. It almost gives me the chills because just like you, I’m still learning too. I don’t know at all. Yes. I’m an investor. Yes. I’ve been able to purchase properties but this last point was amazing. Brian doesn’t care if we’re at the top of the market, bottom of the market, if we’re at a stalemate. In Brian’s mind, if he has enough money to buy a building he goes and buys a building. That’s all he cares about. He’s not going to wait a year, and hopes that interest rates drop or he’s not going to wait two years and hopes that the market corrects itself by 10%. None of that matters to Brian. In Brian’s mind if he has the funds, he’s going to go buy something.
That it’s important for a lot of those folks out there that I know have reached out to me who are viewers, who are supporters who reach out because a lot of us get stuck and we’re trying to time the market. We don’t need to time anything. Both investors we’ve interviewed so far, have proven to be successful despite market conditions. Both are still buying properties today. We still believe in the market. And I hope that resonates with you folks out there.
Brian Maginnis has also been generous enough to share with us his information in case anybody wants to contact him directly: (562) 552-0758 or [email protected].
And that’s it! I hope you guys enjoy this interview. For those of you who have reached out in any fashion, thank you so much for the kind words. And it’s that type of motivation that makes us want to continue doing what we’re doing for you folks. Thank you so much. I’ll see you next time!