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Cash Flow Champs

Cash Flow Champs Real Estate Podcast

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 purchased over 18,000 units totaling over $1.5B in assets across 14 states. Mark has the desire to help others learn how to get started and go bigger with apartment investing. Mark is a graduate of Michigan State University in Accounting and is a CPA. 

What You’re Going to Learn:

  • The Right Age to Get Involved in Real Estate Investing
  • The Transition from Small Properties to Syndication
  • Active Asset Acquisition or Passive Approach Amidst Rise in Interest Rates and Cap Rates
  • Strategies for Utilizing Databases and CRMs to Foster Long-term Relationships
  • Mark’s Most Memorable Experience in the Business

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Show Highlights

The Right Age to Get Involved in Real Estate Investing

The Right Age to Get Involved in Real Estate Investing

Prashant Kumar- Can you tell us a little bit about yourself and share any unique background information you’d like our audience to know?

Mark Kenny- I grew up in Michigan, but I now reside in Dallas, Texas. I come from a family of seven kids, and there weren’t any entrepreneurs in my family or extended family. However, my twin brother Michael and I decided at a young age that we didn’t like not having things, and we didn’t want our dad to have to work all the time and fix everything that broke by himself. So we decided to start a business, which at the time was going to be a sporting goods business because we both loved sports as kids. As we got older and were in college, we realized that we were both analytical people who needed a place to live. This led us to start investing in real estate, despite having no idea what we were doing and no one to teach us.

During our senior year in college, we purchased our first property, which was a three-unit that we converted back to a two-unit to make it a bit larger on one side. Since then, I have continued to purchase small properties ranging from two to four units and started doing the math. This was almost 30 years ago to the day, and before my foray into real estate, I was an IT consultant and CPA working 80 to 90 hours every week for two decades. This lifestyle, which involved a lot of traveling, caused a lot of issues from a family perspective, and I never seemed to have enough time.

My wife pointed out that I needed to make a change, so we started buying larger properties together. I initially invested passively and made my first syndication as a passive investor through a Sep IRA back in 2013. After that, we started looking at doing syndications ourselves and continued to buy more and more properties, which eventually evolved into a full-fledged coaching program. Presently, we own properties in 14 states in the Southeast and Texas. This is a brief summary of how I got started, what we have been doing, and what we plan to continue doing in the future.

Prashant Kumar- Mark, your story is exactly what I feel like I should have done 25 years ago. I’m just 25 years late in starting. But to me, your story is inspiring. When do you think is the right age for people to get involved in this kind of thing? Should they start young?

Mark Kenny- When we began exploring syndication, my son was just turning 18 and had recently graduated high school a bit early. We even incentivized him by paying him to complete his education early. My daughter is currently a freshman in high school. I believe it’s never too early to start learning about finances and real estate. This was not something that my parents shared with me when I was younger. I was unaware of how much money my father made or what our expenses were. At a young age, I have shared these things with my children. I explain to them the cost of owning a car or a house and the monthly expenses associated with them. Our son will soon begin working for us in real estate, and although he is not going to college, I still believe he will succeed. When I graduated 25 years ago, it seemed that the only path to a decent job was to attend college. I had no idea about alternative options, such as syndication. My brother and I had started buying small properties, but we had no idea that we could own 100+ unit properties. I think it’s important to share what younger people can understand, without trying to force them to conform to your preferences. My son is different from me in many ways, and that’s okay. He is his own person, and I have learned not to compare him to myself. The biggest mistake you can make is not sharing your experiences with your kids, including the mistakes you’ve made and the struggles you’ve faced. Many kids don’t even know that a syndication is an option, so it’s important to educate them early on. While they may choose a different path in life, at least they will be informed and knowledgeable about their options.

Paul Senior- That’s amazing! Mark’s message needs to be spread even further. When you spoke, it reminded me of “Rich Dad Poor Dad” and that’s the type of mentality and philosophy we need to promote. Teaching kids from a young age is definitely the way to go. I have three young ones myself and I’m starting to do the same. I can already see the impact it’s having on their lives, despite their young age.

The Transition from Small Properties to Syndication

The Transition from Small Properties to Syndication

Paul Senior- Your story is fascinating and inspiring. Starting with smaller properties such as single-family homes and duplexes, you have become one of the biggest operators in the country. Can you tell us about the path you took to transition from these smaller properties to syndication, and how others can follow in your footsteps?

Mark Kenny- Let me ask you this: your story is fascinating. Of course, you started in a smaller space, probably single-family or duplexes, but now you are one of the bigger operators in the country. What was the path you took to move from these smaller units into syndication? How can others follow that path?

I started by investing passively when a friend brought me an opportunity. But you don’t have to start there. Some syndicators will overplay how helpful it is to say that you’ll learn so much as a passive investor, and then you can go syndicate your own deals. That’s not entirely true. You’ll only learn about 2% of what you need to know before you can syndicate a deal. However, it is still beneficial. For me, it came down to having a big why, and a big desire for change due to family situations and other factors.

But if you put yourself in a position where you have realistic and stretch goals, that can help. For example, saying that you’ll buy 5,000 units in your first year is probably not realistic. But don’t limit yourself to just single-family homes either. Having goals and being around others who are doing this can help.

Surrounding yourself with people who are already in the business is essential. I told my super smart nephew, who is trying to get into the business, to come down and visit us, attend our events, and surround himself with others who are doing this. It’s essential to expose yourself to new things.

Secondly, you should strive to be a person that people want to do business with. I don’t think most people need to be told they’re a jerk, but some may not know it. I want to do business with kind people who are not pushovers, but who will go out of their way to help others. Learn the ins and outs of the business, but don’t go too fast because you can make mistakes. Surround yourself with people who have already made mistakes and learn from them.

I’ve done 119 deals as a general partner and have learned a lot of things that I wish I had known when I first started. I made many mistakes that I can share with others, so they can hopefully avoid those same mistakes. These mistakes can cost hundreds of thousands of dollars or even millions of dollars.

The easiest way to get involved is to meet people. Attend events and put yourself out there. Don’t expect people to knock on your door asking to invest. Even as a passive investor, you still need to put yourself out there to get to know people in the marketplace. Ask around about people, it’s a pretty small world, and you’re going to get some interesting feedback.

Prashant Kumar- Mark, I know you started in real estate. At what point did you transition into syndication, and how difficult was it? Did you have a mentor to guide you along the way?

Mark Kenny- So, syndication was completely unknown to me until 2013 when I attended an event with my wife. We did have a mentor, but unfortunately, some mentors don’t share everything that you really need to know. However, partnering up with someone who already had experience and a bigger balance sheet allowed me to get into syndication. What value did I bring to the table? I was analytical, being a CPA, and this person wasn’t, which was fine. Additionally, I was able to raise capital, which was something that I had never done before and was initially scared of. It’s not a typical background for IT guys or CPAs, but I was able to contribute in this area. I’m grateful that I partnered up with someone because it allowed me to acquire a bigger property than I would have been able to on my own.

Prashant Kumar- How do you assist others in achieving financial independence, and which asset classes do you work with? I understand that you invest in multifamily properties, but are there any other asset classes you deal with? Furthermore, how do you assist others and attract investors to your network?

Mark Kenny- We host multifamily events, offer a coaching program, and are actively involved in the market to help others gain financial freedom. We typically have multiple offerings available and I am honest with investors about the strengths and weaknesses of each deal. Before choosing multifamily, we looked at other asset classes such as self-storage and hotels. While they have potential, we realized that people don’t necessarily need them, unlike housing, storage, and assisted living. I’ve invested in other asset classes such as ER clinics and IT businesses, as well as cars as an investment. However, multifamily has been the most reliable and consistent asset class over time.

Active Asset Acquisition or Passive Approach Amidst Rise in Interest Rates and Cap Rates

Active Asset Acquisition or Passive Approach Amidst Rise in Interest Rates and Cap Rates

Paul Senior- You’ve been in the business since at least 2013 when you started syndication. It’s almost like a full cycle now, although not entirely. There have been some significant changes in the market, especially in the past few years. At one point, it was difficult to predict the valuation of assets, as they continued to skyrocket.

Regarding your current activities, are you still actively acquiring assets under contract, or have you shifted towards a more passive approach of observing the market with the rise in interest rates and cap rates? How do things compare for you now, as opposed to two years ago?

Mark Kenny- Yes, the pace of things has definitely slowed down. However, we are still very active. You should always be active, although getting something under contract may be difficult at times. Even during COVID, we were super active and were able to acquire some deals that others had passed on. It’s a mistake to sit on the sidelines. In 2020, 2021, and 2022, we sold a lot of deals, but the volume has decreased substantially across the country. Recently, it has picked up, but we only have one deal under contract right now, unfortunately. Usually, we have three or four at any given time, so the first half of this year is going to be slow. However, it allows us to focus on operations, which is important now more than ever. We are still active, but it’s been slow. Many of the deals coming out that seem to make sense are loan assumptions. Some advantage of these is fixed debt, maybe with interest only on it. The concept of buying and knowing what’s going to happen is impossible. Nobody knew what was going to happen before. We sold 21 deals in 2021, one of the best years you could possibly have. Not because we’re geniuses, but because it made sense to sell, and we got lucky in some cases. There are still many deals being sent to us, but there needs to be a bigger connection between buyers and sellers. Some people will be forced to sell, but right now, many deals can’t cover their loans for sale, which is the biggest issue we are facing.

Prashant Kumar- That is a valid point that people may be compelled to sell. I would like to revisit the question I asked previously. Where does the equity originate from? Suppose you engage in regular deals, such as the couple you mentioned, and currently have an active deal. In that case, do you solely rely on common equity from private investors or also obtain it from family offices? What are your sources?

Mark Kenny- We managed to generate a substantial amount of equity last year, roughly $160 million, which is quite significant for our small group. We closed 30 deals in a single year, and a majority of the equity came from our regular investors, albeit the process can be excruciating. Although we have tried private equity a few times, it is not as glamorous as people may think. They do provide a hefty sum, but they also come with their own set of challenges. Some private equity groups attempted to renegotiate the terms of the deal three days before closing, causing us to remove them from the deal. Therefore, you should be cautious and refrain from approaching private equity without prior experience. If you’re new to the industry, and a private equity group shows interest in you and your deal, they’re probably wasting your time and theirs. I estimate that less than 15% of the equity came from private equity last year, with the rest being contributed by investors.

Prashant Kumar- Based on your earlier statement, it seems like you raised approximately $140 million from common investors out of the $160 million total. I’m curious about how you structure your inner circle. Are the people working with you in your group becoming general partners? Do you have an inner circle at present?

Mark Kenny- There is currently one inner circle, and we are in the process of creating others. It has been that way since the beginning, and it’s composed of people who want to syndicate since our training revolves around it. I provide one-on-one coaching, and we do not have a sub-coach model at the moment. We keep the group relatively small, with active members involved in deals and other aspects of the industry. While passive investors could benefit from it by avoiding mistakes, they should be aware that they will learn things that are not necessarily relevant to their passive investing goals. Typically, it is best suited for someone active in the field. Each member plays specific or multiple roles, such as asset management, deal sourcing, or deal analysis. The goal is for each person to work in areas they are good at and enjoy while avoiding those they are not good at or dislike. This is how we have managed to collaborate as a team. Our group is called the Family Syndication Group, and the term “family” was intentionally used to foster a family-like environment where people work together to assist each other.

Strategies for Utilizing Databases and CRMs to Foster Long-term Relationships

Strategies for Utilizing Databases and CRMs to Foster Long-term Relationships

Paul Senior- Could you provide more details on your operations? Specifically, I am interested in knowing the type of database and CRM that you utilize to engage with your extensive database. How frequently do you reach out to maintain their interest and engagement? While it’s true that having a lot of deals going on is one way to keep them informed, I would like to know how you establish and sustain relationships with potential repeat investors from your database.

Mark Kenny- We sometimes face an issue where we communicate too much because we hold a lot of events and have many deals going on. For instance, if we push out a deal in Atlanta and then another one in three days, some investors might get confused. So, if you have a similar volume of activity and exclude coaching, I would suggest reaching out to your investor list monthly. You could start with quarterly if you need to. Doing it weekly can be overwhelming for both you and your investors, leading to people unsubscribing or ignoring your emails altogether. You don’t need to create a lot of original content; you can share other people’s content and give them credit for it. For instance, you can share information about the Fed, the housing market, etc. If you’re just starting out, you can use email communication tools like MailChimp, which is free. As you grow, you can use more advanced tools like click funnels. You can segment your audience and send different content to different groups, depending on whether they’re already active investors or not.

Prashant Kumar- Mark, could you tell me more about the size of your team and the structure of your internal operations in terms of people?

Mark Kenny- In our group, which includes spouses, we have around 180 members. Overall, our team is pretty small with about eight people or so, but we have been adding new members. In the past six months, we have added four new people, and we plan to bring on a couple more. We have learned some lessons along the way, such as the importance of having a full-time asset manager dedicated to each deal. For example, someone with a W-2 job may find it challenging to asset management while also looking for deals. We recently hired an experienced asset manager with over 20 years of experience. We also have people on board for marketing and other tasks. We have grown more than I anticipated, and we’re now in a growth year, which is challenging due to the lower volume of incoming funds. However, it’s all part of business, and we’re focused on improving the investor experience. In December, we had a board meeting and brought in a third-party consultant to help us structure our team better. Going forward, we plan to have an umbrella structure that everyone falls under. Unfortunately, we have had to remove some asset managers from deals, not because of wrongdoing, but because they were not meeting our expectations.

Paul Senior- Do you consider your group to have a vertically integrated structure?

Mark Kenny- To some extent, yes. We handle certain aspects of the business vertically, such as construction, asset management, and property management. However, we still work with various property management companies, and we are currently exploring the possibility of further integrating this aspect of the business under our umbrella. There are advantages and disadvantages to both approaches, so we’re carefully considering our options.

Mark's Most Memorable Experience in the Business

Mark's Most Memorable Experience in the Business

Paul Senior- Mark, you’ve been in this business for a long time, and I’m sure you’ve had your fair share of good and bad days. Can you tell us about one of your favorite or most memorable experiences in this business?

Mark Kenny- Well, from a personal standpoint, one of my favorite experiences in this business has been not having to pay federal income taxes since 2016. It’s been a great relief after paying a lot in taxes through my business. Additionally, the amount of money we’ve made from capital events such as refinancing or selling properties has been a pleasant surprise. Of course, I had to invest a lot of money last year to avoid paying taxes. From an overall perspective, I never expected to become a coach, but we started coaching in 2017 and it’s been a great experience. Our clients have become our friends and we even go on vacation together to Florida. Seeing our clients succeed and achieve financial freedom is truly rewarding. It’s not just about their first deal, but also hearing stories about them quitting their jobs or their spouses quitting their jobs to pursue real estate investing full-time. Most people don’t just want to sit on the beach and do nothing, but having the freedom to choose what to do and when to do it is priceless. I was also able to spend time with my sick father for twelve days without having to ask anyone for permission. And on a non-political note, real estate investing has given me the freedom not to conform to political mandates and regulations. It’s the financial freedom that allows me to pay my bills and pursue my passions without worry.

Prashant Kumar- Mark, this recording has been awesome. Your story is truly inspiring. As we near the end, could you share one personal habit that you believe has contributed to your success and that you think will benefit others?

Mark Kenny- For me, it’s all about consistency. I focus a lot on fitness, although it doesn’t have to be that for everyone. I believe that people get too caught up in the pursuit of money like I did when I had my business. It’s easy to become so fearful of not having money that you neglect other important aspects of your life. I would encourage everyone to establish good habits and routines. For example, I try to go to bed and wake up at the same time every day. I understand that this may sound monotonous, but it has been hugely beneficial to me. I also eat the same food every day, but of course, you don’t have to do that. I believe that getting into a routine will help you feel much better as a person, and you won’t have those days where you feel “off” or that something isn’t quite right. Of course, there will still be days when you stay up late or something unexpected happens, but sticking to a consistent routine is key. If you try to do different things at different times and places, you’re less likely to stick with them. Some facts and studies support the idea of establishing a routine and doing it consistently for a set number of days.

Prashant Kumar- Would you like to share a message with college-going youngsters? Offer them some valuable advice that you believe will be beneficial to their lives.

Mark Kenny- Sure. Earlier, I mentioned something about my son graduating from college yesterday. We offered him an incentive in the form of money to finish his studies early, and now he’s going to work for us. However, when it comes to investing, some people just tend to spend, spend, and spend. For instance, we bought a vehicle for my son when he was 16, and just last month he traded it in for something less expensive, earning a good amount of money, which he plans to invest. In my opinion, young people should be aware that there are alternatives to going to college, and it’s not necessarily a bad thing. However, I would suggest that if your parents are not successful entrepreneurs, you should seek advice from someone else who has achieved success, made mistakes, and had to pivot in their career. Find someone who can teach you or share their experiences with you, and don’t take advice from people who are not qualified to give it. For example, my dad, whom I love dearly, gave me real estate advice that I didn’t follow through with, and I’m glad I didn’t because I later found out it would have been a mistake. The key is to surround yourself with people who are taking action and doing things, as well as finding a group of people that you can connect with. When doing business with others, make sure to connect with them based on integrity and character, not just the potential for making money. Trust your gut when it comes to doing business with people, and if you have any doubts about their character or history of cheating, find someone else to do business with.

Prashant Kumar- How can our audience get to you? 

Mark Kenny- Just reach out to me at mark@thinkmultifamily.com, that’s the best way.

Paul Senior- Thank you for being a part of the Cash Flow Champs Real Estate podcast today. Your time and insight are highly appreciated.