RG 079 – How to close large multifamily real estate deals like a rockstar with Mark Kenny
About Mark
- He and his wife are the founders of Think Multifamily
- Mark was previously a CPA and an IT consultant
- Mark is now a full time real estate investor and educator
Nuts and Bolts
Mark Kenny was brought up as 1 of 7 kids so there wasn’t always a lot of money around, this gave him an entrepreneurial spirit from childhood. When he left college at 23 he went straight into real estate at the same time as training for a full time job. He was a CPA for a few years and then went into IT consulting. While he was consulting he was earning a lot of money but sacrificing his social life and family time. He felt stuck because he wasn’t sure if he could replace his consulting income on real estate alone however he had a mindset change and went full time into real estate at a significant pay cut. While in full time work Mark had been doing 2, 3 and 4 unit deals and once he had quit his day job he quickly jumped to a 64 unit and then 454 units. He mainly invests in Dallas, Atlanta and Colorado although he’s looking at making relationships with more people in new markets in order to expand. He favours Atlanta over Dallas because although the CAP rates are similar, there are more value-add deals in Atlanta.
Mark outlines his process for quickly closing on a multifamily deal by starting with defining what you’re looking for, First you need to make decisions on markets, value-add or stabilized, cost and criteria. After you know what you want to invest in Mark recommends finding deals through brokers and then when you have a short list doing an analysis on the figures and touring the property. When you’ve found a deal that you think is good you can submit your Letter Of Intent (LOI) which is normally about 1.5pages and will explain the price, how much money you’ll initially put down and the hard money. There is usually a 2 week window between LOI and contracts when after this you’ll be able to complete due diligence which is the physical analysis, contract analysis and lease audit. You normally have 30 days for due diligence and during this time you should also be talking to lenders and mortgage brokers. The next step is raising money with syndicators but don’t wait till this point to do this, this should be an ongoing conversation throughout the whole process.
Mark doesn’t work on his own though, he has a team that helps him and his wife with this process. He hires legal and financial experts to help with the money and contract side of things. He also has a third party that does the due diligence, although him and Tami are always present throughout. A third party due diligence company might seem like a lot of money to spend but it keeps investors happy and they are trained to spot things that you might miss. For example they look at roofing, plumbing, electrical and supply reports on the upkeep and with costs if you wanted to do work on these parts of the property. Before hiring a company like this, always ask for sample reports to check that they provide prices. Mark also has a third party company for property management who also do their own walk through of the property during the 30 day due diligence period.
Re-trading is a tricky step when investing in property, this is where you can go back to the seller and re-trade on the contract if you find something wrong during due diligence. Mark advises that you don’t do this often, because although you might save some money you will also get a reputation in the local market. Don’t go back to the seller on initial things for example the parking lot or external paint. Once you’ve had the property looked at by the professionals eg plumber and you find a problem with the pipes then this is a good point to re-trade. Mark summarizes by saying you can re-trade on things that aren’t immediately obvious to the naked eye. If you find financial differences during the due diligence period, for example a problem in the lease audit then you should go back to your broker and you may want to walk away from the deal because financial tricks are easier to hide than physical ones.
Top tips
- Most important habit – Flexibility; being able to overcome unplanned issues that arise on a daily basis.
- Most influential person – Carl Wilson who introduced Mark to lots of influential people.
- Most important tool – His phone
- Most important mistake – When he built an IT product but never marketed it, so it went nowhere.
