Today’s guest is Mack Benson.
Mack is a husband, father of three, and a real estate investor working a full time job in IT.
Show summary:
In this episode, Mack Benson emphasizes the importance of thorough tenant screening and the need for a property manager who understands the unique challenges of managing an apartment complex. He shares his journey in managing a 44-unit apartment complex, highlighting the challenges he faced with property management and the lessons he learned along the way. Despite the setbacks, he remains optimistic about the future of the property and plans to continue investing in real estate.
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Intro [00:00:00]
Mac's real estate journey [00:00:49]
The challenges of property management [00:06:29]
Challenges with Property Management [00:11:06]
Lessons Learned from First Deal [00:11:44]
Finding the Right Property Manager [00:13:59]
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Connect with Mack:
Facebook - @MackBensonOfficial
Instagram - @MackBensonOfficial
LinkedIn - https://www.linkedin.com/in/mackbenson/
Twitter - @MackBenson
Web: https://www.infinitefocuscapital.com/
Connect with Sam:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Facebook: https://www.facebook.com/HowtoscaleCRE/
LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/
Email me → sam@brickeninvestmentgroup.com
SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson
Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234
Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f
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Want to read the full show notes of the episode? Check it out below:
Mack Benson (00:00:00) - I think some things were misaligned between our group and the property manager, where the property manager was really focused on getting people into the units and some of the screening that should have been done probably wasn't because we ended up having to evict three quarters of the tenants that were placed by that first property manager.
Sam Wilson (00:00:23) - Woah.
Intro (00:00:24) - Welcome to the How to scale Commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big.
Sam Wilson (00:00:37) - Mac Benson is a husband, a father of three children. He's a real estate investor, also working a full time job in information technology. Mac, welcome to the show.
Mack Benson (00:00:48) - Thank you.
Sam Wilson (00:00:49) - Absolutely. Mac, There are three questions I ask every guest to come to the show in 90s or less. Can you tell me where did you start? Where are you now and how did you get there?
Mack Benson (00:00:59) - Where did I start? I started real estate like everybody else does. Reading Rich Dad, poor Dad. But mine was in about 2001 and didn't quite do anything with it.
Mack Benson (00:01:11) - As in I did nothing with it until about 2018 when I was listening to a just a random podcast. It was about making yourself a better person because that's what I was into at the time. And the guy started, he was interviewing a real estate investor, but the guy was a surgeon and he was buying apartments on the side. I was like, You know what? If he's doing it, I probably can too.
Sam Wilson (00:01:38) - And so then so that that's that's. Where do you start? Where are you now?
Mack Benson (00:01:43) - Right now, I've got 44 units, 40 of them a single apartment complex that was 2021 build that. When we toured it, it was literally two by fours and a couple pieces of sheetrock on the third floor. Wow.
Sam Wilson (00:02:01) - Wow. Okay, cool. So you bought so you bought that building in 20 when it was finished, I would assume.
Mack Benson (00:02:07) - Yep. If right at the tail end of 2021. Okay. And it's been a work in progress since. So it's been taking all of the attention.
Sam Wilson (00:02:18) - For that 44 unit building.
Mack Benson (00:02:21) - Yeah. Yeah. It was obviously newbuild, so completely vacant. So our value add was to get people to live in it.
Sam Wilson (00:02:31) - Right.
Sam Wilson (00:02:32) - Well, talk to us about that. This is your first syndication. Are you the lead sponsor on this deal? So this is just solely your deal.
Mack Benson (00:02:41) - So we were going to syndicate it. We ended up going through the entire process. We had all the paperwork drawn up, PM everything ready to go, bank accounts open, ready to start taking funds. And then the seller slash builder came to us and said, Hey, would you guys be open to seller financing? Berry. You know what? Talk to us about that. What does that look like? Yeah. And what he proposed, we took it back to our underwriting and said. You know what? This actually makes it a lot better for us. So we're going to pull back and say, can we come up with a down payment he's looking for without syndicating? Right.
Mack Benson (00:03:26) - And turns out the partners that we had on board that we're going to be our key principal on the syndication said, you know what, we want to stay in this And they were able to help get us the entire down payment and off to the races we went.
Sam Wilson (00:03:41) - Okay, now that is interesting. What were the terms? That the seller proposed that made it good for them, but also a win for you.
Mack Benson (00:03:52) - Mainly the down payment. So he was we were looking at having to put up about our total acquisition was going to be about 2 million. Out of pocket to begin with. It's a 2.
Sam Wilson (00:04:06) - Million in equity. We're going in the deal. Yep. Okay.
Mack Benson (00:04:10) - And his proposal brought it down to 800 K plus. We would we were going to need operating expense and operating account.
Sam Wilson (00:04:21) - Sure. Sure.
Mack Benson (00:04:23) - So it cut what our our total capital contribution by about half.
Sam Wilson (00:04:29) - Right.
Mack Benson (00:04:30) - And then rates. Rate was good. I mean, what was that, 2021 So I mean, if you were looking at agency, you could have gotten in the threes.
Mack Benson (00:04:41) - If you remember back then. I do. And think we're at 4 or 5, which back then we were like, You know what? It's a little bit high today. That sounds like a steal. And the term was good also because the term was going to bring us into 2026.
Sam Wilson (00:05:02) - Okay, So you got a five year term fixed fixed, I'm assuming, at 4.5%. Yep. Okay. And what happens in 2026?
Mack Benson (00:05:13) - Balloon, refinance or refinance, sell or extend if that's available, but with what rates are doing. Doubt that's going to be available from the financing.
Sam Wilson (00:05:27) - What what did they what did the seller gain by owner financing that were they're trying to offset taxes? What was what was their play? Do you know?
Mack Benson (00:05:37) - Yeah. He did not want that big giant income that he was going to have to pay taxes on. So this is extending it out for him. He's getting the interest payments, which he wouldn't have gotten. I mean, he's going to end up getting more than he got to begin with.
Mack Benson (00:05:54) - With the interest payments that we're giving.
Sam Wilson (00:05:58) - Sure. Now, that makes sense. That makes sense. Yeah. He's he's it was a tax attack strategy there. So you've got this 44 unit building, your first your first commercial real estate asset, if I'm not mistaken. Is that It is yeah. And so you said you have it's taken all of your attention in focus. So I guess this would be now two years in of owning this asset. What are some things that you've learned owning and operating this asset? What would you do differently?
Mack Benson (00:06:29) - One of the biggest things we've learned is that property management can make or break a deal. We are currently on our third property manager. Which has been tough. And if you've ever tried if you've ever transitioned from one property manager to another, I mean, it takes the second one two months to even figure out where the light switches are. Right. And then they're having to clean up whatever they don't like and whatever the owner doesn't like from the previous property manager.
Mack Benson (00:06:58) - I mean, there's a reason you left the original to begin with. And I mean, we're nine months in and nine months in with a third property manager and we're about two months. From having our head above water.
Sam Wilson (00:07:15) - When you say head above water, when you feel like you finally solved all of the kinks in the system.
Mack Benson (00:07:21) - Yeah. And we're finally in a place where instead of. Re tenting for business reasons. We're on a normal cadence of filling units that are in the process of moving out. We're not finally. We're finally not chasing our tails. Yeah.
Sam Wilson (00:07:39) - Yeah.
Sam Wilson (00:07:40) - No, that's that's interesting. On a brand new build like I've seen tenant turnover, not tenant turnover, seeing property management. Turnover in difficult to manage assets in the wrong. Class C assets and or you know, there's just some problems that come along with certain types and location at location assets. It's like, okay, well you know it's going to be harder just based upon where the asset is. But a brand new build seems like something where property management could come in and have a brand.
Sam Wilson (00:08:13) - I mean, it's a clean slate. What what were the things that maybe they didn't expect? That they encountered.
Mack Benson (00:08:23) - One of the things that we worked through was. Some of the tenant screening that had gone on or lack of I think some. I think some things were misaligned between our group and the property manager, where the property manager was really focused on getting people into the units and some of the screening that should have been done probably wasn't because we ended up having to evict three quarters of the tenants that were placed by that first property manager.
Sam Wilson (00:09:01) - Well.
Mack Benson (00:09:02) - Yeah, it it. There was some pains. It was rough. And luckily we had gone into the project well capitalized, knowing that we were going to have we were going to be operating in the red for we expected nine months. We didn't expect 15 months.
Sam Wilson (00:09:21) - Right. Have you guys hit?
Sam Wilson (00:09:23) - Black yet. I know you said 15 months. It sounded like a 15 months or so you started to actually have. Those colors switch a little bit.
Mack Benson (00:09:32) - Yep, we are. We are running in the black.
Sam Wilson (00:09:36) - That's good.
Mack Benson (00:09:38) - Yeah, we had a couple. Surprises along the way other than the tenant issues from the first property manager, One of the first tenants that they had placed started a fire, which was our first insurance claim, and then we had a flood, which was a second. So. Within the first seven months of operation, we were back into a construction zone, which put the second property manager in a really awkward position for showing units through a construction zone. Right. So yeah, construction, reconstruction and rehab is done. Tenants are in. We're at the break even. We're at or above our break even occupancy and things are humming.
Sam Wilson (00:10:27) - Along, right?
Sam Wilson (00:10:28) - No, I mean, that's a tough it's a tough project for for even seasoned veterans like. Oh, okay. Well, I mean, do you feel like when you run the tape back, were there things that you could have or should have done differently to have avoided many of these pitfalls?
Mack Benson (00:10:49) - So for the first I would say for the first two managers, we weren't necessarily.
Mack Benson (00:10:55) - I don't think we were paying attention as well as we should have.
Sam Wilson (00:10:59) - Yeah.
Mack Benson (00:11:00) - And that's something we we learned. We learned our lesson and it did not repeat.
Sam Wilson (00:11:06) - Got it. Got it. Yeah. Pay attention, man. And that's tough, especially when there's so many moving like you in that early stage. You're pushing hard and you're hoping that everyone else is taking care of what they're supposed to take care of because you've got limited bandwidth, especially if you're still working a job. And it's like, okay, well, I'm hoping the property manager is doing right and instead they're just slapping tenants in there. Anybody that applies, Oh, you have a pulse. Cool. Yeah. Come on in. You can come. You, you, you. And then you're you're kicking out 75% of those. What did you say ten months later? I mean.
Mack Benson (00:11:44) - Yeah, within the first year. Basically, as soon as the eviction moratoriums were over, we were in the, what was it, a three month line of other owners trying to do the same thing.
Mack Benson (00:11:58) - Right?
Sam Wilson (00:11:59) - Right. Oh, man. Oh, that's brutal. That's brutal. Looking back on this deal, are you still glad you did it?
Mack Benson (00:12:08) - You know, I am. I have basically gotten a PhD in operations in my first deal. And who else can say that? I was at an event last year just talking to some other guys about the experiences that I've had. I mean, just. To get this deal over the finish line to close. I mean, that was a process because we ended up bringing on we ended up doing seller financing, brought in at 1031, we were going to syndicate. So it's like, okay, you pretty much covered all your bases on there and you didn't even you hadn't even closed yet. And then with the fire, with a flood, they said, Well, you're only missing blood. I'm like, All right. So I guess I have one more thing that I have on the horizon at some point and some deal. Hopefully not this one, right? Other than me smashing a finger, swinging a hammer at some point.
Sam Wilson (00:13:01) - Right. Right.
Sam Wilson (00:13:03) - May that be the only blood you ever see at one of your properties. And even then, try to avoid that. If you can tell me about this. Working a full time job. I mean, you're still you're still full time it still managing this project. Where where does your real estate investing career go from this point forward?
Mack Benson (00:13:23) - One day the real estate will be this wood. Well, I'd say the sole focus, but I've still got the kids and the wife, so not the sole focus, but the the primary source of income will be real estate at some point.
Sam Wilson (00:13:39) - Yeah, right. Oh, that's that's really interesting. Tell me about the size, like a 40 unit building or 44 unit building. Um, has that. Has that made it challenging to find good property management where you are, or is that no problem?
Mack Benson (00:13:59) - Yes and no. And it's kind of funny because before when we were. Still under contract working towards close. We interviewed a number of property managers and and settled on landed on the first one that we ended up with.
Mack Benson (00:14:15) - We had actually interviewed the property manager that we currently have in that first wave and decided not to go with them. We were nervous about their lack of experience because they had never managed an apartment before. All they did was single families, duplexes, quads, but never anything in the apartment world. They really wanted to, but they just hadn't found an operator that would take them on yet. So nine, ten months later, we were back talking to them and they had evolved as a company. They had gotten a lot of their processes and systems and processes had gotten a lot smoother and more professional and ironed out, and it seemed like a great fit. And it so far it definitely has been.
Sam Wilson (00:15:09) - Oh, that's interesting because you would think. Now the people with the experience would be the right ones to hire, but maybe not necessarily so. Maybe the ones that are really willing to put in the work and do the right thing is far, far more valuable. Very, very interesting. Mac, thanks for taking the time to really share with us your growth.
Sam Wilson (00:15:31) - You're kind of journey thus far from 2001 reading a book and then 2018 rolls around. You say, okay, I think now is the time to get into real estate. Did you feel like in that window in your early 2001 to 2018 window, was it was there like, okay, there's a better way, or was it just a distraction in your job or what kept you from really making that leap sooner?
Mack Benson (00:15:58) - I wasn't ready. Um. I was too immature and mean, to be honest. What? Following 2001 to 2008, I just hid in the bottom of a bottle. I mean, in 2009, I look back and I had a Facebook memory celebrating sobriety in 2010. And it was I had thought that I was on the three case a week plan, but my memory reminded me that I was on the five case a week plan.
Sam Wilson (00:16:33) - Yeah.
Mack Benson (00:16:35) - So got rid of that and then went back to college again because the first time was so successful and just started working on myself. And after my first kid was born, like, you know what? I really need to do something better for myself.
Mack Benson (00:16:57) - I was like probably 260 then and was like, I need to focus on my health because I want to be around for my kid. And, um. The realization that I needed to do that myself. I need. I'm the only one that can make myself healthier. So focusing on that, and that's what actually got me into the podcasts that talked about health, fitness, self improvement, and it was on the Self Improvement podcast that the real estate syndicator was on.
Sam Wilson (00:17:31) - Wow, wow. And you're like, Hey, I've heard of this before, This rings well, gotta rewind.
Sam Wilson (00:17:37) - And I actually and.
Mack Benson (00:17:39) - I actually went and got the Purple book out again because I still had it. It was in the back of a bookshelf covered with dust, dusted it off and opened it up and just devoured it. And probably 100 other books since then.
Sam Wilson (00:17:53) - What's what's one personal habit you have right now or personal discipline you have that you feel like makes you better every day?
Mack Benson (00:18:04) - For me going to the gym.
Mack Benson (00:18:07) - Um, lifting heavy things.
Sam Wilson (00:18:11) - It.
Mack Benson (00:18:12) - And that's twofold. I mean. I mean. Well, multiple I would wouldn't even say two because there's a litany of reasons and mean strength and muscle is part of it. But putting off the things that will take me down in old age, right? Like if I have more muscle now, that's more muscle that I can have to lose as I get older. Right. And. More of more muscle now means more bone mass, which means my bones won't be as brittle until later. Right. So all of that goes to I want to be here for my kids and I want to do better for my kids. And if I'm not healthy, well, I'm not going to be here for them.
Sam Wilson (00:18:56) - Right?
Sam Wilson (00:18:57) - Right. Oh, that's so true. That's so true. Health is absolutely wealth. And it's funny, man, because. Because. Yeah, no, we could I could talk about this all day long because it's something I have spent. Too long.
Sam Wilson (00:19:12) - Thinking about reading, about studying. I mean, cracking the cracking the human code of my own code of like, okay, what's it mean to be, you know, what's my version of healthy look like? And trying to figure that out. That's, that's really, really cool that you do that because I think it's important that you bring up the point of like. You're not just going to the gym to be a meat head and make your make your biceps bigger. I mean, okay, that's cool. But there are long term health benefits that go right alongside of that that you you mentioned that I think are very, very compelling. Like, oh, I want to be I don't want to be prematurely old. I mean, none of us got to here alive. But there's no sense in no sense in getting old before before its time. So very, very cool. Mac Love what you've done in the commercial real estate space. You've taken on an incredibly challenging project. It sounds like out of the gate and you're still sticking with it, which I think is a testament to you and to your commitment to continuously learning.
Sam Wilson (00:20:07) - And of course, you know, figuring out the commercial real estate game. I love the fact that you got an owner finance deal and how you guys structured that. Very, very cool. Keep up the good work. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?
Mack Benson (00:20:24) - Best is either on Instagram, Mac Benson Official or my website Infinite Infinite Focus Capital.
Sam Wilson (00:20:32) - Infinite Focus capital.com and we'll include both that and Mac's social handles. They're in the show notes. Mac, thank you again for coming on the show today. I do appreciate it.
Mack Benson (00:20:43) - Thank you, sir.
Sam Wilson (00:20:44) - Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for.
Sam Wilson (00:20:58) - Us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories.
Sam Wilson (00:21:05) - So appreciate you listening. Thanks so much and hope to catch you on the next episode.
