Yes, we’re launching a new educational series just for real estate investors like you! Our goal is to expose you to top real estate investors, and extract their wisdom, mindset with finding deals, advanced strategies and advice for you to become a better investor and build your wealth.
For our first official launch, we interviewed one of the savviest local real estate investors here in Long Beach, and someone that I refer to as the king of value-add investing: Mark Malan.
Mark has had a multitude of accomplishments a successful local real estate investor:
- MBA in Real Estate Finance from CSU Fullerton
- College professor in CSU Long Beach
- Certified Commercial Investment Member (Only 6% of commercial brokers have such a designation)
- MAI Commercial Appraiser Status from the Appraisal Institute
- Highly-experienced contractor
- Self-manages as an apartment owner
- As an investor has purchased and worked with every type of property deal (from small condos and residential properties to hotels, self-storages, and land)
I’m extra excited for you because he comes with a ton of experience when it comes to buying, owning, and selling real estate investments. You’re going to learn a lot!
In this video interview we talked about:
- 1:56 – Who is Mark Malan?
- 2:54 – What first inspired him to buy real estate properties?
- 4:10 – What was his main motivation to invest in real estate?
- 5:01 – When should real estate investors decide to buy more real estate?
- 7:05 – Is it better to invest in California or buy properties in other states?
- 9:09 – Which is investing strategy is better: Cashflow or Appreciation?
- 10:10 – Why Long Beach is a great place for real estate investors?
- 11:34 – Can someone invest into real estate and buy properties without money?
- 12:32 – Do I need to hire a real estate agent or broker to help me invest?
- 13:19 – How do you determine the rent to charge on a property?
- 14:22 – Which mentors played a role in Mark’s success?
- 15:29 – A day in the life of a real estate investor and apartment owner
- 16:25 – Should apartment owners hire a property manager or manage it themselves?
- 17:08 – What characteristics or skills do people need to become good real estate investors?
- 18:26 – What holds people back from investing in real estate?
- 20:54 – What to look for when considering buying a property?
- 21:45 – What are the pros and cons of hiring a property management company?
- 24:13 – What is value-add and why is it so important for investors?
- 29:00 – What is the state of the real estate investment market right now?
- 30:26 – Why should we buy real estate if we’re at the top of the market?
- 31:56 – Is it still a good time to buy properties and invest in real estate?
- 36:43 – What some challenges and risks can real estate investors and apartment owners face?
- 40:38 – Is there a real estate market crash coming?
- 41:24 – Mark’s tips and advice for new investors and experienced investors
What first inspired him to buy real estate properties?
Juan: So, the first one is Mark, tell us what first inspired you to buy your first investment property?
Mark: Oh, very good. Very good. We had sold the big house in Cypress when our daughter went off to the university. And what we decided was to buy something in Long Beach that was a smaller house and had some units next door to it. And so we started that particular way.
Juan: And what was the goal with having units? Because a lot of folks don’t want to have a house and have tenants next door. What were you thinking when you first did that?
Mark: Well, let me tell you two things. The very first off, the tenants next door is the best. The reason it’s the best is because, I don’t have anyone next door who rides a Harley, who tunes up jet skis in their garage till 10:00 PM. I actually control my neighborhood by renting to the people who I figure are most similar to me. Not in age, or size, or religion, or race, but in the type of personality, personality that they have. So, like I said, I don’t have a, that kind of neighbor that I wish I could get rid of. In fact, if I ever did, I’d just give a 30 day notice, right?
What was Mark’s main motivation to invest in real estate?
Juan: When you first got started was it creating passive income? Was it building net worth or was that not even part of the equation? What was the real motivation?
Mark: That’s a good question because like a lot of investors, I didn’t have a regular day job, selling some real estate, doing some construction, doing appraisals. There’s no 401k essentially. There’s no retirement package. And so, we thought if we sold the big house in Cypress and move to Long Beach, that the units would supplement whatever social security was available at the time that we did get to retirement age, and we would have that additional income. And that also taught us to have the units close to our house and how to pick good tenants. And so, with that said, it just made sense that we bought more and more properties near where we live.
When should real estate investors decide to buy more real estate?
Juan: So, a lot of our clients are first time investors. Some of them own a lot of units. Some of them have started with their first triplex, fourplex, et cetera. When should they consider buying more? When did you decide after that triplex, I’m gonna buy something else? And then how did it just go into all the things that you ended up buying through the years?
Mark: I was a late bloomer. It took me awhile to get that. Of course you had to build the equity in the bigger house before I bought the small house with the units. But the idea was is that, as I realized how easy it was, not simple but easy. The rent checks come in on the first of every month. And the beauty is, is that, although your mortgage might be tapped for 30 years. So you’re, let’s say you’re payment’s $3,000 a month. Well, your rent might start off at 2,500 a month, but within a couple of years it’s at 3000, a couple of years after that it’s at 4,000, but your margin is staying right there simple at the 3000 level.
So, it made sense that I had more and more retained earnings and, to buy more units, gave me more retained earnings. And so that was the, the idea was to just keep growing the, the, the net worth, and of course the monthly income.
Juan: Mark, tell us, there was a story that you shared with me in the past, that when you were an appraiser you experienced something, that you experienced that as an appraiser you were getting paid per the report, but tell us, but, what was that experience that you saw what the investors were doing?
Mark: Thank you to my wife. Okay, the reason that I’m rich is because I’ve got a great wife, okay. I come home frustrated. I get paid fine. I get paid like, back 25 years ago, $5,000 for an appraisal of a corner. And I come out with what they ought to do with the strip center and a 7-Eleven. And you know, the nail salon, the typical strip center. No, they put it in like a carwash. It’s gonna make half as much money for them. It’s not the, it uses up all the land but it didn’t make money. I come home frustrated and my wife said, “Love, you know so much. Why don’t you do it yourself?” So, I gave it a shot and we’ve been buying ever since.
Juan: One of the things that Mark had shared with me early on was, I realized that the guys making the money was the real estate investor. And I guess when you’re an appraiser, maybe that, that was kind of your, maybe that was your inspiration. You saw these guys building wealth and you’re like, you know, “I should give that a try.” And certainly you were the one that was advising him. So that made perfect sense.
Is it better to invest in California or buy properties in other states?
Juan: A lot of our clients are calling us and there’s two questions. And so the first one is, “Juan, do I buy here in Southern California?” Where in their perception, it’s a really low rate of return or do they go out of state where they, where they could buy more doors? Tell us what your thoughts are about that.
Mark: My thoughts come from my friends because when you have friends, when you do apartments you have friends that have apartments. So, I’ve got the friends that went out to Arizona and bought a gigantic complex at a low price. No one told them that the, we didn’t think to ask. No one thought to ask the air conditioner for the entire complex, on massive chillers, that are the size of railroad cars up on the roof. Well, when those go down you’re hundreds of thousands of dollars in the hole. It’s not a window air conditioner, it’s a chiller.
I’ve got another friend that went to Texas. Bought 50 units, never figured out, although they were sub-metered, and he did a very good job ’cause he was an appraiser. He went through stuff. He looked at his list, he checked things out. No one told him that the landlord pays for all the electric meters. Yeah, they were sub-metered but it was an expense of the landlord. So, I see these experiences about going out of town. I’m a more simple kind of investor. I want things a little easier in my life. So, I buy where I can, what I call, kick the tires.
I may not know who my tenant is. If it’s been rented by my property manager, my teammate but I can drive by. I can tell you whether the porch light works at night, which is on without a switch because of the security reasons, so that we have good insurance, but I can also tell you about, Oh, what’s going on out there. Did someone graffiti something? I wanna know that my properties are at the top end of what they can be, so that I can get the maximum profits and minimize my expenses. Buy local, kick the tires.
Juan: There you go. So, one reason to stay in Southern California is to be able to visit your property. We’ve had friends who have gone out of state and sometimes their property manager at a state tells them that there’s vacancies. When all along there was no vacancy, they were just scamming the rents off the top.
Which is investing strategy is better: Cashflow or Appreciation?
Juan: Talk to us about cash flow and appreciation.
Mark: Well, first off, if you want a bigger cash flow. If you want a bigger rate of return, you can go Inner City. You can go to Barstow. You can find these, “don’t wanters”. People who have investments, they don’t want them and they want out. And you can get the better cap rate and still be in state. So, the idea is that it’s, it’s close. I know I’ll never have a problem with my vacancies because when I get a 30 day notice, I put out the sign. And before that person’s moved out, it’s already re-rented. You don’t get that in other markets. Then I always get to jack up the rates, which is a neat thing.
Your rent increase is really positive, not only for your cash flow, but when the other tenants see that the new one goes for 1895, and they’re still back at 1695, they realize, “Oh, I’ve got a great deal. I’m not gonna leave.” And so, they understand the market value just by seeing the for rent sign in front of their property. And that keeps them right in their own place and they get a great deal out of it.
Why Long Beach is a great place for real estate investors?
Juan: Where do you see Long Beach as an option for other investors that are just getting started? Oftentimes investors from other cities who are looking in, you know, El Segundo, Inglewood, and they’re comparing us to them and they’re calling me and saying “Why should we choose Long Beach?” What advice do you have for those investors?
Mark: Long Beach is a phenomenal city. I’m not just saying that ’cause I was born here and I live here, okay. Long Beach is great. They’re organized, it’s a regular city. You’re talking fourth or fifth largest in the state. So, it has all the benefits of being a full-blown city. At the same time it’s large enough that we have areas of single family homes where there aren’t apartment complexes. And we’ve got every kind of retail. We’ve got the port authority and the largest shipping container equivalents, is what it is.
Our Harbor has more freight going through it in containers than any other Harbor in the United States. So, we’ve got the port, we’ve got the city, we’ve got all the benefits and the infrastructures. It’s old, so it’s not brand new, which means we have space.
If you get to a new city like Lake Forest and the people park on their driveways in the bumpers are on the sidewalk, because there’s just no driveway. Here we got driveways that fit four and five cars. So, it’s just a different thing. Lots and lots of old properties. So there there’s opportunity to find those investments that they’d love. And that’s where we can make extra money. Is we find the one that the other person didn’t love. And then we make it be this beautiful alternative to the future.
Can someone invest into real estate and buy properties without money?
Juan: Can someone begin investing in real estate with no money?
Mark: I see those things on the internet and Channel 13 late night programs. Invest in real estate. Come to our seminar. Yeah, the seminar’s free. They’re gonna sell you a 350 or $500 course of books and. Who’s gonna loan to you with no money? Who’s gonna loan? No, the answer is no.
Now, do you need to have money? Let’s look at it. You’re gonna buy a house to invest, maybe your first investment is a house, and you can put the ADU in the backyard. So, to buy the house maybe you need 50,000 down. So, why don’t three buddies get together and put up $15,000 a piece? Boom, you got it. You don’t need to have the $50,000. You’re gonna need to originate it somehow. Okay? Why? But why not tie in with your buddies that you already do bowling or drinking or whatever?
You got friends. So, pull together on your first one. Then the next time there’s only two of you, and the next, what time after that, there’s just one of you. So, you don’t have to bring everybody with you the entire path, but if you don’t have enough money to go out and buy one, then put together a couple of guys and go do it together.
Do I need to hire a real estate agent or broker to help me invest?
Mark: You don’t need one by law. When you’re buying it costs you nothing to have a real estate broker or agent with you, because those fees are paid by the seller. So, I would say definitely use one, get the professional to take you through the course. I even, in fact you do too.
When we do a deal we hire an outside person, a transaction coordinator just to make sure. Every year there’s more and more pages of these, of these contracts. So, and so that we don’t get our licenses in trouble. You actually have someone who’s called a TC or a transaction coordinator. So even though we’re licensed and we all know how to do these things and we go to the seminar, it’s too easy to have a mistake. So have a licensed professional take you through the process.
How do you determine the rent to charge on a property?
Juan: How do you determine the rent to charge on a property, Mark?
Mark: I’m always doing a rent survey. When you’re in the business, you’re in the business. So, when a for rent sign pops up a couple blocks away from a property that I have, I’ll read the sign, I’ll stop and pull over. Sometimes I just take a quick picture of it, so that later I can call the person and figure out what it was. Was it a two bedroom, was it bathroom. two bedroom one or two bedroom two. You know what exactly configuration, did parking included or not. So, I like to know what’s going on in the market. I always enjoy when I go to re-tenant a slot at a higher rate than what the existing tenants in my building already are paying. So, they know they’re getting a good deal.
Juan: Got it, got it. So, a rent survey is something that anyone could do, right?
Mark: Absolutely! I mean, you don’t need a license. All you’re doing is walking around, driving around, looking for “For Rent” signs or going online and just simple comparison is what you’re doing. And then you start to get the flavor of what’s going on in that neighborhood.
A Day in the Life of a Real Estate Investor and Apartment Owner
Juan: Can you describe a day in the shoes of a real estate investor or an apartment owner? What’s it like?
Mark: There’s always something. You never know what that day is gonna be. You know, these other jobs you go to your desk, you work certain hours. You know when your break is, you know when your lunch is. This is different. You’ll get a phone call. You’ll pick up a message and you’ll have to, someone might want to say, “Oh, my water’s not working.” Or, “Hey, this is that.” You gotta check it out or assign it out.
I always have a little project going somewhere. So, I like to, on my way to or from lunch to drive by that project and see uh, did the concrete get delivered or are they all through? Is this smooth? Is there a problem? Do I have to figure it out? So, I’m a little hands-on. I don’t want to be the guy pouring the concrete. I don’t want to be the guy running the wires, but I would like to go see and say, “This is where the meter is gonna go.” And come back when it’s all done.
Should apartment owners hire a property manager or manage it themselves?
Juan: I know you’ve managed your own buildings this entire time. That was kind of your, part of your full-time job. It gave you something to do, right? But do you recommend that someone gets started to be their own manager or do they hire that out?
Mark: I think that the best way to get the experience is just to do it yourself. Yeah, even if it’s a single family home and someone will do it for $50 a month, I do it being the manager. It’s more important that you get the experience. Now you’re gonna go months that you won’t even get a phone call from that particular property. And the checks just come in on time. But then you know whether or not they’re coming in because they’re coming into your house, to your office, to your P.O. box, wherever it is.
So, you are involved with the management at that level. Yes, if you have a whole bunch of stuff, you need a staff or you need a management company. But I’m back to being a small time investor, thinking that I want to kick the tires. I want to know the properties and I want to know where they are and what condition they’re in.
What characteristics or skills do people need to become good real estate investors?
Juan: Mark, what characteristics or skill sets are needed to become a successful real estate investor?
Mark: Patience. patience. It’s not get rich quick. It’s not get rich quick. You’re not gonna buy it today and become a millionaire tomorrow. That’s not gonna happen. I don’t care how many courses you go to or how many books you buy. It’s not gonna happen overnight.
But if you’re buying in California, if you’re buying at Southern California, you know it doubles. Now you can say every 10 years or eight years or 12 years, but somewhere out there, that thing is doubling. So, just buy and hold, take care of your tenants.
Juan: Pretty simple strategy. I mean, it’s not rocket science.
Mark: In Long Beach, there’s tens of thousands of units. I mean, everybody’s doing it (investing). There’s no reason for everybody not to have a couple of fourplexes.
In fact, my theory is that if you have three fourplexes paid in full, you will have more money for the rest of your life than you could ever spend.
So, what’s it take 20 years, 25 years? You’re gonna live 20 or 25 years anyway. Why not just be really rich? That’s, I never understood that, when I was teaching at the college and these guys are taught all week. Every week they come with the name of a new seminar sponsor, something they saw on TV or on the internet. It’s like, no. It’s nothing is gonna happen for you.
Nothing is easy. It’s just something that you do. It’s not hard, but it’s just a process.
What holds people back from investing in real estate?
Juan: You taught at the college. You know, people come to you for advice all the time. People wanna get started. They see what you’ve done. You make it look easy. What holds people back from taking that first step on their first investment?
Mark: You know, it’s not just about real estate. It’s about investing. And I don’t know exactly, but this is what I’ve seen: I have buddy who invented a left-handed wrench for one-armed mechanics. Perfect. And he had like three of these different kinds of tools that he created ’cause he was a craftsman, he’s really good, but he never took them to market. He never did anything. Anyone can sit around and have a beer and come up with a new idea for a business, but that isn’t doing it. So why aren’t people doing it?
I think the first thing is they lack support. Now they lack support a lot of times from their family and their friends, which is counterintuitive. And so why is that? And I come to the idea that perhaps when you come up with the new concept, a bowling ball that someone can use that didn’t have fingers. When you come up with a real estate deal that is, you can’t miss. Your friends are worried. Some of them love you so much that they’re afraid that you’re gonna lose your money and you’re gonna be destitute, and you’re gonna be all depressed. And there’s a good number of your friends that are afraid that now you’re gonna go be a millionaire and you’re not gonna be friends anymore. You can’t have beers anymore because now you’re hanging with the fancy guys, okay. And you moved to the fancy neighborhood, ’cause now you’ve got good money. You got big money and so you move away. So, you’re not gonna come to Long Beach to have a beer if you’re living out in the Palos Verdes Estates.
Okay so. I’m worried a lot of times that people don’t take that jump because they’re not getting the right amount of support at home and from their friends. So, if you find that the solution to this, if you find that you’re not getting that level of support and people are nay-saying you, don’t tell them.
Now still let them be your friends, still love those guys ’cause they like you. Okay, you got a relationship with them but don’t tell them about your next investment until you’ve made it. If they’re not one of the people you’re asking for cash to be your partner, don’t tell them about it, because then they’re gonna worry that you’re gonna get all rich and then you won’t like them anymore. So, they want the status quo and they like you and they don’t want to lose you. And so, I think that’s the serious reason why people don’t move forward. Is they just, are not getting that buddy to say, “Hey, yeah, let’s go do it.”
What to look for when considering buying a property?
Juan: When you’re touring a property that you might buy like what, what things are you looking for? Whether it’s an apartment building, a commercial building, a house.
Mark: I’m a little different. It’s not a technique that people use so, don’t try this at home.
I put in offers to buy properties without ever seeing them. I know approximately how much per square foot I want to pay in a range. I assume the stuff I’m buying is not pretty. So that’s okay. I assume I’m gonna be putting in new kitchens and bathrooms. I just assume that because that’s the kind of property that I buy. Then once I’m accepted into escrow and I know that I’ve got a locked up deal, then I will go look at the property almost all the time.
What are the pros and cons of hiring a property management company?
Mark: Property management company: you’ve got someone to handle all your problems. They will handle the bulk of your problems. And they will collect your rents and even sometimes pay your mortgages.
Now, I did at one time use a management company ’cause I had a partner and the lady collected rents for two months, didn’t pay the mortgage and then left town. So, I have had personal experience of that not being good. Prior to that and after that I’ve always managed my own.
Most management companies, you can find them, they’re legal. They’re, they’re licensed, they’re bonded. If they’ve got a California license which they have to have, there would be a restitution if they did wrong. I would just say that the management company is a way to remove yourself from the ownership of that investment.
Juan: And I would say this, if someone has a full-time job that takes a lot of their time, then that person should have a manager. I have friends that have extra time because they’re firemen. They work three days on and get so many days off. In that situation, that’s a perfect type of opportunity where they could manage.
Mark: Especially when you buy local, then you can see your property. If you’re buying 10 minutes, 20 minutes from your house, you can be there at any time to check out things. A tenant will say, “Oh, water’s coming off the roof, the water’s coming off the roof.” Well, you gotta go see what it is.
You’re gonna hire a plumber for $85 an hour, you’re gonna go look. Now, “Oh yeah. That’s the rain gutter, I guess it broke.” Okay so, go figure it out yourself. It’s really easy. It’s not hard to manage these properties. I’m not saying that everybody who buys a property should be a handyman. You don’t fix your tubs. You’re not putting in new kitchen faucets. It’s great if you can, but you don’t need to. There are all those things or services that you can buy. But if you have a local property, you can touch it, you can know it. You can see what the problem is.
What is value-add and why is it so important for investors?
Juan: We worked together for 20 years now. You were my mentor. We became business partners and we’ve had a lot of success together. And so, and so a lot of what I, a lot of my coaching came from learning from you and learning from the best.
Because of your appraisal background, your construction background, you’re literally the, the king of value-add. I’ve seen you reposition convalescent homes into self storages. I’ve seen you take old industrial run-down buildings and made them into little strip centers.
Obviously that’s your investment of choice is value-add. Talk to us about value-add, the importance of it. Because a lot of investors out there, that’s what they talk about.
Mark: I owe that education and that experience to the Appraisal Institute, where I was later designated as a MAI. Learning the highest and best use. It’s always the highest and best use analysis. It’s more risky than a standard apartment or buying a house. when you buy beat up industrial building and turn it to a retail center. I mean, there is more risk and perhaps more costs, but the upside is significantly more.
But right now, especially in Long Beach and all of California, what’s really got my attention is the opportunity in ADUs or accessory dwelling units.
I will just tell you that anybody who has a house should be focused on thinking about the ADU. Don’t worry about having a tenant in your backyard. Every month you get to take couple thousand dollars check from them. You’ll turn out to like them and they might even be your friends. Okay, they’ll take the newspaper off the porch when you’re not there.
So, the idea is to find that application that works for you with your risk level. The one thing I’ll say about the ADU which is the most amazing thing and I’ve built them and I’ve sold them. And I will tell you that when I put an ADU for $150,000 or $200,000, the value of the property goes up double that.
I’ve got closed escrows to show me that when I put in an ADU in the backyard that not only do I remodel the house and have its value go up, but I also have a doubling of the value of what the ADU cost me. If I had my druthers, I would just buy all the houses in Long Beach and do it to all of them.
Juan: One example that we have, in fact it was an investment that we did successfully where we realized that if we put in $150,000 on the ADU cost, right, that’s our total cost. The value of that actual ADU is $300,000. So that’s a perfect example of value-add. You’re adding value, not to mention we’re creating housing to help the California crisis, right?
Mark: The most important portion is that we’re creating housing. We know there’s not enough housing in California. That’s why the vacancy is so low. There’s just not enough housing out there. So, the State of California wants more housing. This is kind of a way to work with the City of Long Beach and with the state. Create more housing and at the same time, set yourself up for cashflow, for appreciation, and net worth growth.
Juan: Your net worth goes up and the bottom line is in the end. You don’t always have to be buying more properties. You don’t always have to be working hard. Some people actually turn their properties over to management companies so that all they have to do is cash one check a month.
How can long-term owners maximize their investments?
Juan: We deal with a lot of investors who have owned apartments for a while, right? And they’ll contact me and say, “Hey Juan, like am I maximizing my investment? What should I do next?” Right? “Do I, do I sit tight? Do I refinance? Do I go out of state?” What advice do you have for someone that, called him a, a longtime apartment owner?
Mark: I would say the most important thing to do is the, the gentrification. You already own the building. You already have the mortgage. Sometimes you own them long enough that the mortgage is nothing or paid off. But you have the asset so gentrify it. And I’m telling you that the tenants will pay extra. If they move into a place where there’s a brand new stove. When I installed the new stoves and the dishwashers in my apartments, I leave the owner’s manual, and in the dishwashers, the sample soaps that come from the manufacturer. I leave them in there. So, when the tenant comes and looks at the apartment and they open up, it might be a hundred year old apartment but they opened up the stove and there’s the warranty. And they open up the dishwasher and there’s the soap from the manufacturer. Put in the new appliances. Drop in another three or $5,000 with the appliances.
Make it be nice, make it, make it be the apartment that you want to move into. And if you do that, the income will go up. And it’s very solid, the people stay because they know when they leave you, they have to go to a place that doesn’t have a digital timer on the stove. They have to go to a place that doesn’t have an ice maker. Oh my God, it’s prehistoric. So they stay with you because you gave them the best and it doesn’t cost that much to do it. And you’ll make it back very quickly.
Juan: So Mark’s advice is for, for those owners that have owned for a long time, is make your units better. Invest back in your product and that return will come back. Because what we found is that our tenant base here wants a better product. It doesn’t always exist but when someone does do a good job on a remodel and offers the amenities that they’re looking for, they’re gonna pay a higher rent. So, and then obviously that’s how the value goes up on the property.
What is the state of the real estate investment market right now?
Juan: You’ve seen ups, you’ve seen downs. You’ve seen bubbles. What would you call the state of the market that we’re in right now? Like, what are your thoughts about that?
Mark: Exciting. Opportunity is phenomenal. When you can borrow money for 3% or 5% on 30 years, just do it, just do it. You’re stealing money. If you want, you want a great deal then you lock up a mortgage, a 30 year mortgage. Don’t go interest only. Don’t go with some balloon payment in three years.
Just get a 30 year fixed rate loan at a low interest rate. And you can’t go wrong. Even if there’s some vacancies, you can cover those, the small little payment negative. The bottom line is it will come back and over time, we’ve got a history. Even recession, no recession, whatever, it always increases. I look at it as a stair-step that we go up in the good times. We come down a little in the bad times. We go up in the good times. We come down a little in the bad times and the up is always higher than it ever was. And we all know that and the down never goes down as far as it did in the last time it went down.
So don’t sell in the down period, just sell in the up period. I’ve got property right now listed with Juan because it’s that’s, this is a good time to sell. There are buyers out there and they can borrow money at three, four, five percent.
Like I said, anyone who can borrow money that cheap, you got good credit, you got fair credit, go get it. Even if it’s a house, go get it. Whatever it is, go get it. Because it’s gonna be worth more tomorrow than it is today. That’s just what we’ve learn through years of investing and holding properties.
We’re always at the top of the market. We’re always at the top of the market. I buy something that’s too much but I really want that piece. So I pay just a little too much for it. A year later someone tells me, “You got the last best deal on that street.” It’s like, “No.” You can’t understand the frustration I have as an investor. I taught at CSU Long Beach for 15 years. I taught real estate, finance, economics. I’m a contractor, I’m an appraiser. Okay. I’m in the market full on, my whole body and soul is into the market. And I hear people tell me how lucky I am. No, not lucky. I bought something and I held it.
How can you hold something in 10 or 12 years and not have it double? It’s not genius. It’s just what happens. Now, this may not work in Topeka or Cincinnati, where people walk away from properties. Detroit, where they can’t tear them down as quick as they go vacant. But we’re talking Southern California. There’s no more land here. Now to get land you need go out to Hesperia or Barstow. So that’s why the ADU opportunities are so great. It’s using land that’s already here. And most people who own a house, not paying anything extra for the land, but they get to put a house on it. It’s just, it’s just genius. That is the truth.
Why should we buy real estate if we’re at the top of the market?
Juan: Are you still buying in this market? So, everyone says we’re at the top of the market. You as an experienced investor, would you? Are you buying right now, Mark?
Mark: I’m in escrow right now, I close the next week. I found a really beat up duplex but it’s right over by the Long Beach Airport. And it has a gigantic 8,000 square foot yard. So, I’m putting in a 20 by 40 ADU. That, so the duplex will be a triplex. It will spin handsomely every month.
The opportunities are out there, but yeah. This property I bought had a terrible termite report. I’ve never seen a termite report so bad in my whole life, as the termite report on this one deal. And it’s like, okay, whatever, they’ve agreed to fix it. They’ve lived their life. They’re done with it. They’re off to another thing. And, and this is my opportunity.
Juan: And this is a perfect example. For some of you out there that want to get started but you’re, you’re getting advice from so-called online Instagram folks who are saying we’re at the top of the market, here’s a local investor, who’s buying something right now because he believes we’re always at the top of the market.
Mark: And the top of the market for this beater property that I’m buying right now will be significantly more in three years. Significantly more. I don’t have to wait forever for it to be a positive cash flow.
What some challenges and risks can real estate investors and apartment owners face?
Juan: Through the years of owning, it’s not been easy for you. And I don’t wanna create this series to show that you’re gonna get started and you’re gonna end up like Mark in year one because clearly this is a long process. Talk about the journey. Some of the challenges. Owning real estate, it’s not easy. I’m not making it seem like it is but tell us some of your experiences.
Mark: The one thing that drives me crazy is: banks. If you have a regular job, keep your bank account. Banks want to give you a loan if you get a paycheck and you have regular pay stubs and the little boxes that they check somewhere in underwriting when you get a loan.
If you’re self employed, it’s really hard to get a loan. If you’re self-employed and have a whole bunch of properties, someone could say, “Oh, well, you’ve got $10 million with the loans.” You’ll say, “Yeah, I’ve got $50 million with these properties.” But they don’t care about that. They know you’ve got $10 million worth of loans. How are you ever gonna pay for those? So, banking is one thing that gets me.
Tenants are sometimes a problem but they’re typically a problem when they have a problem. If you’re taking care of your tenants, you don’t really have the tenant problems, just the bank problems along with cities all the time.
Somehow the City of Long Beach decides to make a new law where everybody with a fourplex has to pay a new fee. It’s not a big thing, it doesn’t affect you significantly. But all of a sudden, you just have to pay. So there will always be fees, and there will always be issues.
Juan: And the bank issue is only an issue when you wanna buy more.
Mark: And I’m not big on refinancing to take my money out to buy another one. I think that if you have a property that’s 50 or 60% loan to value, you’re in a big fat cash flow. Why mess with that?
Juan: Okay. I think so people would say, “Well, how do I move up? How do I scale up without that?”
Mark: All of my buildings are typically smaller. I don’t have any 50-unit buildings or 25-unit buildings. So, I’m a small individual investor. And coming from a really poor family, it’s been a lot of hard work, and a very slow trend up. So, now I got a lot of years and the trend is very successful, but certainly it’s more helpful if one of us would’ve come from a very rich family.
Is there a real estate market crash coming?
Juan: Online, there’s a lot of folks saying that there’s this crash coming. What are your thoughts about any current crash that could be coming? Or is it not gonna happen?
Mark: It has to happen. It is coming. It’s called a business cycle. If you’ve been to one semester of business school or a junior college class, you’ll learn business cycle. Everything goes in cycles. So, will there be a tough time? Yes. Will there be a time of high interest rates? Yes. Those will come, those will go. The time of our growth is always more and better than the time of our demise.
Juan: This year, next year, two years, five years. Any idea?
Mark: No idea. It will happen, it must happen. Even if it does, it’s okay. That doesn’t mean don’t buy. It doesn’t mean don’t invest. It just means maybe don’t make a crazy investment.
Tips and Advice for New Investors and Experienced Investors
Juan: What would be some tips that you would share with investors, either experienced or up and coming?
Mark: Invest where you want to own. Invest where you want to be, where you want to visit. You don’t have to live on-site. You don’t have to buy the apartment buildings on your block like I do. But invest locally, invest where you have comfort. You already decided to live there so you must like the area. So, why wouldn’t someone else like it?
Be good to your tenants. If you’re good to your tenants, even if they have a problem, they’re good to you. If you’re mean to your tenants or they don’t even know who you are and they’re not comfortable with you, then they’re the kind of people who you end up having to sue or who would sue you.
Be honest to the banks. Don’t lie, don’t lie, that’s. Now it’s a federal crime. When you lie on an application, you go to federal penitentiary. It’s not like it used to be 20 years ago when you could say it was flimflam or rounding errors. So be honest, just do a good job. If you do a good job, it’ll all come back to you in aces and you’ll have more wealth and more income than you can use. Just do the logical thing.