7 Deals in 2 Years with HUGE Cash Flow

Ashley:
This is Real Estate Rookie episode 317.

Mackenzie:
So it was definitely scary to get into investing, but then we started seeing the long-term benefit of just this multiple streams of income and residual income, and by being in real estate, I started to see, oh, my gosh, the equity, and when we had bought and sold houses before, so that opportunity for equity and appreciation in there too opened our eyes, “Okay. I feel like this is a safe route to go,” if that’s a good word to use. So that made us jump into doing that.

Ashley:
My name is Ashley Kehr, and I’m here with my co-host, Tony J. Robinson,

Tony:
Welcome to the Real Estate Rookie Podcast where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Ashley Kehr, I’m pumped for today’s episode. This is actually someone that you recruited into the ranks of the real estate rookie world that you met at an event, and I’m super glad you did. We got Mackenzie Brogdon on the podcast, and she’s just a ball of energy and she’s got a really, really cool story as well.

Ashley:
I met her at AJ Osborne’s CRE Circle live event in Boise, Idaho, and she was just a ball of fire, had great energy, but also had a really good story. So she’s going to tell you all about that story of how she got into investing in real estate. She’ll do a great job of actually explaining why she chose not to invest out of state and give some of the reasons that turned her off from doing that. One thing to highlight with Mackenzie is that she was a new investor. She hadn’t done a deal, but she’s going to tell you how she got a partner on her very first deal that pretty much put in the majority of the capital.

Tony:
She also talks about how she started off as a real estate agent, how much volume of sales she did in a relatively short period of time, which was amazing. She goes in to talk about how she manages her rehab and what she learned between that first deal and that second deal. She’ll go on and tell you guys a really cool strategy for how she’s finding subs, managing her budgets, and keeping her projects on track for both time and money. So just overall, I think you guys are really going to get a lot out of this conversation with Mackenzie.

Ashley:
Mackenzie also breaks down what sub two is, a creative financing strategy, and also a sober living facilities, and how she actually was able to coordinate arbitrage situation, and she will go into and explain what that is.

Tony:
We go over a few real estate terms throughout this podcast, and we probably didn’t do the best job of breaking those down in the moment. So just a resource for all of our rookies that are listening, if you go to biggerpockets.com/glossary, there’s actually a glossary of terms that are all important in the world of real estate investing. So for example, we talked about EMD on the podcast today. That stands for Earnest Money Deposit. So if you weren’t familiar with that phrase, that’s what it means, but if you want the whole rundown of all the real estate key terms, again, head over to biggerpockets.com/glossary.
Now, I want to give a quick shout out to someone that left us a five-star review on Apple Podcasts. They go by the name of JeanBean16, and Jean says, “Truly the best podcast for rookies.” Her review’s a little bit longer, but it’s such a good one. I got to read the whole thing. She says, “Ashley and Tony, I love you guys. I’ve listened to over 100 BiggerPockets podcasts,” and she’s talking about the real estate show, “and recently listened to the one with the two of you on it.” So Ash and I recently co-hosted an episode on the Real Estate Podcast. She says, “I really love the information you both provided, so I immediately followed your podcast and, wow, the wealth of knowledge that has come from the two of you in just a few short days is unbelievable. Listen, you guys, if you’re truly new or relatively new to the real estate investing market, this is the podcast to dive into headfirst. Between the BP Podcast and the Rookie podcast, I feel like I have my degree in real estate investing for beginners. Keep up the good work.”
So Jean, or I’m sorry, it’s actually JenBean16, but Jen, I think you’ve said everything that is the goal of Real Estate Rookie Podcast is to help folks at that beginning phase and give them the confidence to move forward. So for all of our rookies that are listening, the reason we ask you guys to leave reviews is because it encourages that next person that’s on the fence about listening to actually dive into the whole BiggerPockets ecosystem, and when they do that, it’s a life-changing moment. So take a few minutes, leave a review on whatever podcast platform it is you’re listening to, and you can inspire that next person to become a real estate investor.

Ashley:
Mackenzie, welcome to the show. Thank you so much for joining us. Do you want to start off with telling everyone a little bit about yourself and how you got started in real estate?

Mackenzie:
Yeah. Well, first of all, thank you so much for having me. I’m so excited to be here. I am a Southern California native, born and raised in Southern California. I moved up here to Boise, Idaho in late 2017. I got licensed as a real estate agent in 2020 and started investing in 2021. I have a husband and two little kids. Both of them are toddlers under three years old, so life’s a little bit crazy, but we love it.

Ashley:
So what’s that first initial thing that got you into real estate?

Mackenzie:
I actually can’t take credit for it. In 2020, my husband was the, I guess, main income earner, main breadwinner for our family, and he goes, “Hey, Mackenzie, we should get an investment property,” and I go, “Okay. Cool. That sounds awesome. Let’s do that.” We owned our house at the time, we had some equity in it up here in Boise. So he sat down with a good friend and mentor of ours who was a real estate agent, Shelby Paget, and Shelby goes, “Hey, yeah, let’s get you in investing, and Mackenzie should just get her real estate license.” So that sparked, “Yeah, I should get my real estate license.” I have a background in network marketing, sales, graphic design, interior design. My dad was a general contractor growing up, so done all the things, it seemed to be a good fit. So I got licensed in October of 2020, and then my husband ended up quitting his job to let me thrive in real estate. So it was like a make it or break it, has to work in real estate moment for us, and thankfully it did.

Ashley:
So tell us about that first conversation about investing in real estate. What were some of the things that piqued your interest? Did you have any hesitation that maybe buying an investment property wasn’t the right thing for you?

Mackenzie:
Yeah, I think it was tough. We were looking at going the house hacking route, and at the time we had a , I think, four or five-month-old. So we said, “Wait a second, are we really going to do this right now? This is crazy.” So the fear of, “What if it doesn’t work out? What if you move your family? What if you stretch yourself too thin?” and knowing that, “Okay, maybe my husband is going to quit his job. We don’t want to stretch our finances so far and then get too overextended,” and we don’t have a fallback plan. So it was definitely scary to get into investing, but then we started seeing the long-term benefit of just this multiple streams of income and residual income, and by being in real estate, I started to see, oh, my gosh, the equity, and when we had bought and sold houses before, so that opportunity for equity and appreciation in there too opened our eyes, “Okay. I feel like this is a safe route to go,” if that’s a good word to use. So that made us jump into doing that.

Tony:
Mackenzie, I just want to pause for a second, and if you can, let’s give our listeners just an overview of where you’ve gone since October, 2020 when you got that license to where you are today. So I guess, how many transactions have you done? What does the portfolio look like today?

Mackenzie:
So I feel like real estate sales for me on the realtor side of it is different than real estate on the investing side of it. It’s completely different. I think people think, “Oh, my gosh, all real estate agents are investors,” and that’s actually very much not the case. Most agents don’t invest in real estate, which I don’t understand how that happens, but I got licensed in 2020 and it was a make it or break it moment for us. So I just put my head down and started working probably harder than anyone else, and I was grateful to Shelby for mentoring me and teaching me a lot of the ropes and I watched him as he was investing and things like that.
So as far as the sales part of it, I’ve been really blessed. I’ve done over, gosh, three million in my time here and then a little over 60 transactions. Actually, it’s probably pushing 70 now, a little over 70 transactions in my sales time. Then as far as investing goes, we started in March of 2021 when I found a opportunity on market that looks like a good flip, and I always wanted to flip. Of course, everyone’s seeing all the flipping shows, and with my background in interior design I’m like, “This just goes hand in hand.” So we ended up grabbing this flip. We brought on a partner, that partner took the main equity stake, and I said, “Hey, you’re out of town. I’m going to help manage it for you, and I’ve got a little bit of cash that I can invest in it. Will you just let me partner in this with you?”
So he said yes. So we flipped that house in April of 2021. That went well, and then within another calendar year, one full calendar year, we had flipped a second house and that one we had more of an equity stake. So those were just fix and flips, and then we started moving into long-term holds. So now we have four long-term hold rentals, and then we are under contract on another that’ll help us house hack a little bit and then working on some other creative finance deals in the background, underwriting them right now. So we’ll see how that goes.

Ashley:
So you have really propelled yourself over the last couple years, even two years. Congratulations on that. I want to go back to that first deal where you talked about you found a partner. How did you find this partner? How did you approach them? That’s one of the biggest struggles of a rookie. You’ve never done a deal, but yet you’re asking somebody to be your partner in this. So go into the details on that for us, please.

Tony:
Before you do, Mackenzie, anytime we say the word partner now, we got to plug our book. So this podcast is going to come out in the future, but today, the day that we’re recording this is actually the day that mine and Ashley’s book Real Estate Partnership launches. So if you guys head over to biggerpockets.com/partnership, you guys can pick up a copy of this book, and I think there’s still a couple bonuses that are available for folks that order during the first month that it releases. So if you want to capture some of those heads of real estate or heads of biggerpockets.com/partnership, just pick up a copy. So Mackenzie, sorry to interject there, but it’s just a mandatory now that anytime anyone says the word partnership that Ash and I plug our book.

Mackenzie:
I love it. I love it. Worth the interjection. So I was newer to real estate, but what I did is I started with finding the deal. So I found the deal, I ran the numbers, I had learned how to comp properties so I knew what this property would be worth after the repair, I knew what it would take to go into it just with my background in general contracting, had some people look into it. So I started with finding the deal and then we go, “Okay. How are we going to fund this? Who’s going to buy this?” Even though I didn’t really have real estate experience at the time, I had life experience.
So back from my home in Southern California, my husband and I were very involved in multiple circles. We were coaches in different aspects and sports and things like that. So this connection was someone who we had worked with for years. They had trusted us with their kids. So I was like, “Well, if they trust us with their kids, they’re going to trust us with their money, right?” So we just called him and we said, “Hey, Bob, I know this is crazy, but this is the deal. This is what it’s looking at. Here’s the numbers, I’ll show you. I’ll send you the comps. Here’s what I think it can do,” and because they had that trust aspect I think already with us, they trusted us in the opportunity.
So because we had already built that relationship with them, they felt comfortable to take that leap into partnering with us. So since then, they actually are one of our main partners. They partner with us on a lot of deals now and we’re very grateful for them.

Tony:
Mackenzie, you just did a phenomenal breakdown of a lot of what Ash and I talk about when it comes to finding partnerships. So I’m just going to break down what you said here for a second, so bear with me. So first, you identified what your unique skillset was, and that was finding the deal. So you leveraged your strengths, you leveraged your skills to find a really good deal. Then you said, “Okay. If I’m looking at the puzzle pieces of making this transaction happen, I’ve got the deal finding, I’ve got even the property or the project management side, but I’m missing the capital side. So okay, let me go out and find a partner to fill that void.” So you go out there and you find someone that has those resources that you’re lacking.
Now, this person had never really done real estate before, but you said the reason that they were willing to work with you was because there was that level of trust there. One of the things that Ash and I say in the book is that when you’re looking for a partner, people typically partner with people that they either know, like or that they know, like, and trust. So you need all three of those. So even though this person had never invested in real estate before, because you had that foundation of know, like, and trust, when you presented them with an opportunity, they were willing to jump at it because you guys had built that foundation.
Ash talks a lot about her first partnership where that partner invested his life savings into a deal, and it’s because him and Ashley had that know, like, and trust. So I just love that story because you really exemplify all of the critical elements of putting a partnership together.

Mackenzie:
I think a lot of people think, “Oh, I can’t get started until I have all this real estate experience.” Well, you’re never going to get started if … because it takes deals and capital and things to get that experience. So I completely agree, and I think if people open their eyes to, “Oh, maybe this person …” I hear that all the time, “I don’t know anyone with money.” I actually really doubt that’s true. So really look, and it never hurts to ask, and I always say, if you find a deal, I feel like the money and the capital will follow. You just got to start with the deal. So yeah, I agree.

Ashley:
That’s definitely great advice. Mackenzie, would you go into how did you structure this deal? Would you mind sharing the numbers of how much money each person contributed, what your role was, what their role was, and how much equity each person got?

Mackenzie:
Yeah. So probably not the prettiest on paper, meaning that there was no paper. It was a handshake agreement, which now that I’ve done more deals, I’m like, “Oh, man, that was sticky for me, that was sticky for them,” but we just trusted each other so it worked out. So essentially, we just structured it as whatever anyone was putting into the property was their equity stake in the property. So they fronted the majority of the money for the … They bought it in cash, took title to the property, and then they funded most of the renovations. I guess we funded a lot of the purchases of the supplies because we said, “Hey, we can buy in …” I think we sent in $30,000, which was like, “This is a 10% equity stake in the property.”
So then at the end of the day, we put together all the profits and losses once we sold it and just distributed things out from there. I actually, because I didn’t really have experience, I didn’t even charge. We’ve worked other deals now where I’m like, “Okay. If I’m going to property or project manage it, I’m going to take an additional portion of the equity or charge or something like that.” I didn’t even do that on this one because I just wanted them to feel like they could trust me. So I just took the portion of what I put into it, capital-wise, of the profit and the deal when we sold it.

Ashley:
Mackenzie, I did the exact same thing on my first deal. I didn’t put any dollar amount to my value. Really, I gave up a lot in that first deal, but that’s what gets you started. Being able to show that you can do that, you can be the boots on the ground, you can be the project manager, whatever that is, then that’s where you can go and bake your value in. It sounds like you also dated this partner. You went into this partnership not just, “Okay. Every flip now we’re doing with you guys and this is how it is. Whatever the money you put in, that’s your equity from now until forever,” but you did one deal and then you bring the next deal and you’re able to renegotiate with them. I think that is a tremendous point is when you’re dealing with a partner is to try to set it up that way you’re not locked into something that you end up regretting and you can change it for the next deal.

Mackenzie:
Yup, absolutely. It’s changed every deal. We’re on our third partnership deal with them, and then they’ve done a few investing deals with me that I’ve just served as their agent on it, and every deal has looked different.

Ashley:
That’s definitely cool of having that flexibility with somebody. So let’s talk about, okay, so you did your flip and then what comes next? Did you get the bug? Did you guys make a bunch of money on that one? What happened?

Mackenzie:
So that one, I’ll be honest, the margins were slim. We ended up learning a lot of what, I guess maybe not even what to do, but what we wanted to do because we learned a lot of what not to do. I’ve heard multiple guest speakers on here talk about the struggle with general contractors and, oh, man, we struggled with a general contractor. So it was in the heart of 2020 where everyone was slammed, the real estate market was going crazy, everyone was losing it. So I brought in someone who was a mutual friend and I go, “Oh, this is going to work out great. I know them,” and it didn’t work out great.
So it ended up we were overpaying for terrible work that was taking way too long and me being over here on the project management side of it too, I’m like, “Okay. Let’s push it along.” The partner’s like, “Hey, what’s going on?” because he lives out of state and I’d be there all the time, “No one’s here, no one’s here. We got to push this along. This is a terrible job. The paint’s bubbling,” all this stuff. So we ended up about a month or two before we wrapped up, I said, “This is it.” I told the contractor, I’m like, “I’ll pay you for what you’ve done. We’re going to just finish the rest of it.”
So then I just brought on subcontractors for it. So at the end of the day, it worked out. We made a little bit of money enough to put a good taste in everyone’s mouth, but I think that we realized we just learned a lot. So then there was more competence in what we’re going to do next. So actually, when we were in escrow on that property under contract to close it, it sold after two days on market. It didn’t even get through first full weekend. We wanted a contract to buy another flip. So we did another flip with them, and this time we were actually a higher equity stake, and then I also buffered in a portion of the profit for my project management in the next deal.

Tony:
So Mackenzie, you said that the margins were slim. So it sounds like you didn’t maybe make as much profit as you wanted to, but there’s something important I want to point out there. You basically got paid to educate yourself on how to flip a home for a profit.

Mackenzie:
Oh, absolutely.

Tony:
There is an incredible amount of value even if you broke even on everything that you learned throughout that first flip that you were then able to apply to that second flip to do it more confidently. So I would love to break down some of those lessons you learned in the first flip that you’re like, “Okay. We need to change this for the next one.” So what were some of those lessons learned and how did you change when you went into the second flip?

Mackenzie:
Yeah. Well, you totally touched on it. Honestly, even if we had lost money in it, which thankfully we didn’t, it probably still would’ve been a good opportunity because I was very vocal on social media with it. So I shared the whole deal, “We’re flipping this and we’re doing that,” and I shared all of the, “Oh, man, this didn’t work out, but this is working out and this is how it turned out.” It actually solidified me as a real estate investor. So it pushed my career forward in sales for investors, “Oh, Mackenzie knows how to work the real estate market.”
So that was huge. I can’t even put a value on how that pushed me forward, but then as far as lessons that we learned in it, I definitely think we learned, one, you got to be conservative on your numbers. You think it’s going to take X amount of dollars and X amount of time, just double it, just plan to double it. Then if you end up closer, everyone’s happy, it’s a great day.
Then I think on the other side too, we really did learn, “Hey, I don’t think I need to bring a general contractor in,” because at the end of the day, they’re just project managing it. They’re bringing in all their own subs, and the most times they don’t even know what’s happening. So for me to have made connections during that by reaching out and just building my book of people I want to work with, it made the next process so much smoother and quicker. There was just so much more of an ease because it’s like, “Okay. I trust my tile guy to come in and do an amazing job. I trust my painter to come in and do an awesome job.”
Then I don’t even worry about, “Oh, was that a good bid? Did I get a second one?” I just know it’s going to be great. So I just learned to grow your list of people that you know and trust and use them, and it makes it a lot easier. Then we learned too the benefit of just not using a general contractor personally.

Tony:
Mackenzie, you talked about growing your list of people, but I think for a lot of our rookies that are listening, that’s where that challenge is is that, “How the heck do I find a sub?” So is there a Facebook marketplace that you’re going to? Is there Craigslist? How are you identifying these subs? How are you vetting them? Then how are you as the, quote, unquote, “juicy for your own property”, making sure that you’re sequencing these subs at the right time so they’re not getting each other’s way because I think that’s the challenging part as well?

Mackenzie:
I think experience and referrals are the greatest place to find people. So it goes back to that like, know, and trust people. So for instance, I found my tile guy through another agent at my brokerage. She goes, “Oh, my gosh, I’ve used this tile guy for my houses before. He’s the best. You have to talk to him.” So that starts the conversation. Then I always look for how responsive are they and then how professional are they in my interactions. My tile guy showed up on time, he brought a notebook, he brought a tape measure, he measured all down. He had a professional invoice that he sent to me. I think a lot of contractors fail in that part because they’re more of just like the hands-on, they don’t understand the admin part of it, but if you really care about the process from start to finish, I feel like that gave me peace that I know he’s going to be an exceptional tile worker before he even laid a tile for me. So I think that was huge.
Then, yeah, I did share a lot and I wouldn’t just blast it on Facebook marketplace. I started with people I knew. So I started within real estate agents that I worked with, “Who are you using to paint houses? Who are you using as electricians?” Then in my personal Facebook sphere, if someone I knew had used this person, he did a great job on their plumbing, I would talk to that person. So really trusting that personal word of mouth referral helped build that book a lot. If someone I know had a great experience with them, I feel like that’s just an extra leg up that I’m going to have a great experience with them.

Ashley:
How has your process changed as far as estimating the rehab from that first deal until now? Give us those scenarios and then maybe even some tips for somebody getting started as to what they can do to learn how to estimate a rehab. You said your dad was a contractor, but beyond that, did you really know a ton about what it costs to do construction?

Mackenzie:
Honestly, I tend to wing it a little bit, which probably isn’t a great advice here, but I’ve just gotten a lot of bids. So in that first Reno project, I got three general contractors to come out and bid the job, and I would see where everything would line up. Then you just start realizing, “Okay. To paint an exterior of a house should be around maybe $7,000, $10,000.” So on my estimating, I always estimate on that slightly higher range of what I know. The houses we’re flipping are all about the same. We’re looking for that mid-range square footage, so you can ballpark, “Okay. This is about the same house, so this is probably what it’s going to cost for exterior painting.”
If you’re not sure, I think you just get multiple bids. Most contractors, especially now that they have a little more time on their hands, are great at getting you bids. So I do try to gather as many bids as I can, but to put together that budget, I’ll aim high with my estimate when you have to move quick on getting a property under contract. Then we just put in placeholder bids Let’s say $10,000 for painting, and then the paint comes in at 9,500. Cool, I have an extra buffer. So I say aim high and then get the actual bid and then adjust your spreadsheet.

Ashley:
Mackenzie, as a real estate agent, do you think that you have an advantage of getting contractors into the property because you can really schedule a time for you to go anytime you want to a property, correct, and bringing them in?

Mackenzie:
Yeah. Most of my deals have come on market or coming soon or now, I’m starting to build a network of people who are bringing me deals off market, but most of mine are coming from on market. So I think a lot of people say, “Oh, you can’t find a deal on market.” Well, that’s not true. That’s happened multiple times for me. I love the coming soon listing on the MLS. It’s like this sweet pocket of time. People don’t ask questions. I don’t know if they’re scared of being told no or what, but they don’t ask questions and I’ll ask questions. So both of my flips actually were coming soon. They weren’t even on the market, but I just called the agent. I said, “Hey, I know this is coming soon. I know I can’t see the property because we can’t get into it until it’s on market. Can I submit an offer before it’s even on market?”
They’d say, “Yeah, sure,” and then I can write contingencies in there like, “Let me get my inspection done. Let me do things like that,” so yes. Then as far as if you’re working on market deals, I do think that agents give you a little more credibility and it gives them a little more confidence too even when negotiating with their sellers of like, “Oh, she’s an agent and I’m a very high producing agent in the area. Oh, I’ve worked with her before. I’ve heard of her,” whatever. It does help give some credibility to it. So I do think it’s been helpful.

Tony:
I just want to go back to one thing you said, Mackenzie, because you mentioned spreadsheet, and this is something we’ve always struggled with with our flips is just the best way to manage all of the expenses and make sure you’re coming in on budget. So once you set up that initial budget, what are you using to track expenses to make sure you’re within range?

Mackenzie:
Google Drive all day, every day. You should see my spreadsheets. I feel like nothing makes me happier than a good spreadsheet that auto sums down at the bottom. I’m not even that good at creating them, but I can use the sum. Sometimes I was like, “Oh, this one turns green,” if you’re under, “This one turns red.” So honestly, we just do Google spreadsheets. I will say now too even moving forward, I’ve delegated a little more of that. So my husband does most of that now, which is great because he’s actually better at numbers than me, but we just use good old Google sheets for everything. Then it’s so great too because we share that with our investors. So look at it. So we’ll share that with our partners and everyone has access to it so they can see, “Hey, this bid came in,” or, “Hey, this came in lower, this came in higher,” and they could just see it all.

Tony:
So Ash and I are both spreadsheet nerds here. I’ve probably seen more pivot tables in a week than most people see in a lifetime. So are you just literally taking every single transaction like, “Hey, we just paid the painter X dollars. We just paid our drywall guy this much”? Are you taking every single transaction and just drop it into a big Excel sheet and then categorizing all of those?

Mackenzie:
So we’ll have the master budget. So let’s say painting came in at $10,000. We have set aside for it in the master budget, but at the end of the day, we only paid him 8,500. That goes in there. So then we see that $2,500 surplus. Usually it gets spent somewhere else, but it all balances out like over here we had 5,000 budget, but it took us 5,500, somewhere in there. So yeah, we have the big bid and then underneath it will be what the actual was.

Ashley:
I want to pivot to a different direction. So you did your flips and then you mentioned you have four rental units too. So can you tell us how you made that pivot from doing flips to acquiring rental properties?

Mackenzie:
So our first flip that we partnered in on was March of 2021. We caught the bug for investing, but we want to do this, and at that time, my husband had quit his job, so we couldn’t qualify conventionally because I didn’t have two years of tax returns so we don’t look good on paper, but we owned a house that had significant amount of equity in it because we bought it before everyone thought Idaho was cool. So in July, we said, “Well, we wish we could do a HELOC or something like that, but we can’t. Let’s just sell our house and take the equity out of it.”
So we put our house on the market, our primary house on the market in July and netted a very large amount of money from it. So that helped catapult us into things. So from selling that house, then we bought a new primary residence. We used those funds to partner in on that other flip. We purchased a property. We went under contract for a new build actually in Tennessee out of state.

Ashley:
What made you find that and decide on that?

Mackenzie:
It’s been a learning lesson. I actually don’t really investing out of state as I’m learning. I think maybe it’s my realtor pride. I just like that I can run my own comps. It bothers me to use another agent. I would just rather run it myself, but it was through a friend of ours who we … Actually, the agent, Shelby, who mentored me, he had a agent connection over there and it was these four houses that were being built, and $300,000 purchase price. It rents for $2,800 a month. The earnest money was a thousand dollars. Then at the end of the bill, it appraised for 350. So it was a huge win. So that’s just how we found it was I guess word of mouth connection for that one.

Tony:
I was just going to ask one followup on the Tennessee. Outside of the comping, is there anything else that I guess you’re not enjoying about the long distance piece? Is it the management itself? I guess what advice would you have for rookies to make that piece a little bit easier?

Mackenzie:
I don’t know this area of Tennessee, I’ve been to Tennessee before. My property’s in Maryville, which is about 30 minutes outside of Knoxville from my understanding. I’ve been to Knoxville, I’ve been to Nashville, but so yeah, just difficult working with another agent. I don’t know, you just see like, “I feel like this could be a little bit better,” when numbers kind of go from a high end to a low end, just a little bit of confusion. I love Zillow, but I can get the data that I can get from the MLS. So just working with another realtor, I prefer to be my own realtor.
Then we do hire a property manager for that, which is fine. He does great, but I just don’t know the market there as much as I know here. So when I have my in-state rentals, I manage them myself because I know the area. It’s easy for me to pop over. I know my contractors. I don’t know anyone there. So to be honest, it’s probably probably an issue with my own. I want to micromanage everything. So I don’t like that I have to trust other people to tell me what the rental estimate is, and yeah, I can run it, but that in neighborhood like, “I know this street, I know …” For instance, we bought this property and I look it up on Google Maps, but you don’t even realize what’s down the street from you. You’re like, “Ah, that’s a weird spot for a rental.” So just not being able to see the property, touch the property, know the area, and then you’re having to pay property managers, and if I want to sell it, I have to pay a new realtor fees and all that stuff.

Ashley:
After that property, did you only do deals in Idaho for your rentals after that?

Mackenzie:
Yeah. So now we have, let’s see, three, soon to be four in state. One of ours we bought, it was the good old end of the year scramble so we don’t have to pay some taxes. So we bought a property here in Idaho and renting out as a sober living facility, which is great. Then our next one, our last primary residence that we purchased, we flipped into a rental and moved into a new primary. So that helped us put less down. Then we just bought a property subject to that we’re renovating. That will be a long-term hold and will also be sober living. Then our current property that we’re in right now is a primary, we’re building a new primary, and so that’ll flip into probably a corporate living or executive rental.

Ashley:
We have a lot to unpack there. Let’s start with-

Mackenzie:
I know that was a lot.

Ashley:
Let’s start with, what is sober living? Explain that strategy and what you’re doing with the property to make it sober living.

Mackenzie:
So there’s a couple ways that you can go about this. The way we’re doing it, I love it because it’s very hands off. So I know someone who actually has been in the prison system, turned her life around, she’s amazing, she’s awesome, and she has a heart for people in those situations. So she actually has a direct contract and connection with the Idaho Department of Corrections. So what happens is when people get released from prison, they get released with $650 for their first month’s rent, and it goes directly to this gal for them to live in this house, and in the house, they have to abide by the rules, drug tests, do all this stuff. So they have to remain clean.
So it’s nice because I actually feel like I’m providing a place. There’s, oh, my gosh, I can’t remember the line, there’s literally people that can’t get released from prison because there’s not a sober living house for them to go to. So we’re actually trying to help her in gaining as many houses as we can for her. So how it works with her, you can do sober living on your own where you just literally market it almost like you would a rental and people can come to you, but there’s just a lot more management with it, but how it works with her is she signed a two-year lease and then essentially, it’s arbitrage or she’s subleasing it out.
So she signed a two-year lease at a fixed rate with me, and then however many people she puts in it, whatever income she brings, that’s all icing on the cake for her. So it’s really nice. It’s a set it and forget it from me, and they also property manage the house. They have a house manager that lives there. So they take care of any repairs under $500. If it’s major, we talk about it. So it’s been great so far.

Tony:
Mackenzie, did you charge a premium to them for this arbitrage deal or was it basic market rents?

Mackenzie:
No premium because it doesn’t make sense to have that many people living in the house. So the house that we have right now that she’s renting is a four-bedroom house, and I think she fits 10 to 12 people in it. So there’s certain state criteria that she has to follow, but it has to be above market value for me to justify the wear and tear on my property. So she does, for instance, that property, probably long-term rent, would rent for around 22 maybe, if I’m lucky, $2,400 a month and she signed a two-year lease at $3,200 a month.

Tony:
That’s awesome. I think that’s a big benefit as a landlord to doing rental arbitrage, which is what you said, where you lease it out to someone who instead of them living in it themselves, they turn it around and sublease it to someone else. So arbitrage is pretty big in the Airbnb space. If you’re listening to this and you’ve got a small multifamily or single family house, you want me to arbitrage it, send me a message, I’d love to connect because I think it’s a win-win situation. The landlord gets an elevated rent and the operator gets to acquire a unit at a fraction of what it would cost for them to purchase that. So it really is a win-win situation.
For our rookies that are listening, if you guys want more information on the sober living model, we interviewed Davana and Reed back on episode 265, 265, yeah. They did an entire hour breakdown of this model that Mackenzie’s talking about. So if you want to learn more about that, go there, but you also talked to, Mackenzie, aside from the sober living, you talked about subject to and creative finance. What the heck does that mean? We’ve got some other resources in the BiggerPockets ecosystem, but I’d love to hear from your experience. What does creative finance and subject to mean?

Mackenzie:
So to be honest, I’m newer to it. I guess I was doing creative financing without realizing I was doing creative financing because our property that we just bought, the sober living one that I was telling about that we bought last year, we ended up bringing in our partner as a private money lender. That’s a form of creative financing because we bought in cash, but we needed a little just to make up a little difference. So that was one aspect of it. When we purchased our property in Tennessee, still couldn’t qualify for traditional loans, so we purchased it using a DSCR loan. So there are other ways to go about it, but I really just got opened up to this world of true creative finance where we’re talking about subject to or really seller financing.
A lot more people have heard about seller financing. They have a bad taste in their mouth over it I think just because they’re not educated on it, but subject to is this powerful tool, and I really feel like it’s having its day in the sun right now. What it is essentially is we go into a contract with a seller where we agree to make their payments on their behalf. We take title to the property. The property is legally mine. I can use it for tax depreciation. I can do whatever I want with the house, but the power is that the debt actually stays in the seller’s name. It doesn’t negatively affect them, but it stays in their name so that I don’t have to go through credit checks, I don’t have to go through loan closing costs, I don’t have to go through debt to income. No one looks at my stuff. It’s actually scary. No one even looks at my stuff and I buy this house.
So it’s really the easiest way of transferring title and then agreeing to make payments to the seller. So we did that, and what sweet is now, I’m paying a mortgage that has a 2.6 rate on it, and I should be able to cashflow about a thousand dollars a month once it’s renovated and up and running.

Ashley:
That’s awesome. That’s really cool. We did interview Pace Morby on here. It was episode 280. He’s always a wealth of information. He’s also going to be one of the guest speakers on the Real Estate Bootcamp for BiggerPockets. So if anyone wants to join the bootcamps, you can go to biggerpockets.com/bootcamps and Pace will be one of the guest speakers on it. So really exciting, but that’s an awesome deal.
I want to ask, and you mentioned a couple of lessons that you had learned along the way, such as dealing with a general contractor, such as investing out of state, but what do you think was the hardest lesson that you had to learn? What was the most difficult thing through your journey as a rookie investor?

Mackenzie:
I think sometimes I’m all about you have to start to get anywhere. You’re never going to get further along if you never start. So that’s a huge piece, but also sometimes you get this adrenaline rush of like, “Let’s keep going, let’s keep doing this.” So sometimes I just think you need to be wise about the steps you’re taking before you take them. So probably our biggest moment was my husband and I went under contract to build a house, and we did the number one thing that you don’t do, which is buy the most expensive house in the neighborhood, right? Never do that. It’s terrible for values, but when it comes to a primary residence, this was going to be our house. We’re going to be in it with our family, dream home, blah, blah, blah.
However, we went into a contract on it at the peak of the market. So the market started tanking, which is okay if you’re going to ride it out. During that, just life changed a little bit for us. We want more kids, and this house wasn’t perfect for it, and just different things came up. Here nor there, at the end of the day, we ended up pivoting. We lost some money, but not as much as we could have. That’s actually going to turn into our new rental property that we bought. It worked out, but the biggest life lesson for me was the amount of sleepless nights I let it cause me.
The market is out of my control. Yeah, I can try to watch trends and follow it as quickly as I can, but sometimes the government does crazy stuff and here we are. So you can’t time it perfectly and you’re not going to win in every investment. You’re going to win some, you’re going to lose some, yes. Leverage your risks, be smart, don’t overleverage, but at the end of the day as long as you did your research before, what you’ve put out isn’t going to ruin your family if you were to lose it all. Just chill out. The peace of mind and the quality of life that you give up when you’re stressing over something you can’t even control is not worth it.
So I think when you go into investing, you just have to have a level mind about it and make sure that you keep that perspective about it, “I might lose some, but I’m going to win some and I’m usually going to come out over top.”‘ So I think that was probably my biggest struggle was I had to learn that the hard way, but I’m on the other side of it now and now I know

Tony:
You make a fantastic point, Mackenzie, about most real estate investors don’t have a perfect track record.

Mackenzie:
Absolutely.

Tony:
A lot of those failures, a lot of that adversity is what makes you a better investor in the long run. For example, last summer, we attempted to do our first syndication and it was a small hotel here in Southern California and we had to raise, I think, five million bucks was our target raise, and we ended up raising 2.9 or 2.8 or something like that. So we got a little more than halfway there and we just couldn’t raise anymore. I put up a 50K EMD. We probably spent another 50K in legal fees and inspections and all these other things, and we ended up having to pull out of the deal because we couldn’t finish the raise.
Luckily, I was able to get my 50K EMD back, but the other 50K that I spent on legal fees and all that other stuff, that was a sunk cost. So I think there are sometimes risks that you get when you go into some of these deals, but to your point, as long as it’s not a fatal amount of money, take those lumps and use those to be better on the next deal.

Mackenzie:
100%, yeah, completely agree.

Tony:
So I want to take us to our rookie exam, Mackenzie. These are the same three questions we ask every single guest, probably the three most important questions you’ll ever be asked in your life. So are you ready for question number one?

Mackenzie:
I’m so ready. Let’s go.

Tony:
All right. What’s one actionable thing rookies should do after listening to your episode?

Mackenzie:
Go do something. I don’t care what it is. Just go do something. I feel like we take so long … Pace Morby, actually, my favorite. He has a story of he talks to somebody, he goes, “Man, I’ve been working for …” I think it’s like three years, four years, “and I haven’t gotten my first deal.” What are you talking about? Go find a deal. Go do something. Yes, education is great, but you will never know anything. Here I am, I just learned about creative financing two months ago and now I got a subject to deal and it’s amazing. If I hadn’t been open to that or hadn’t acted before I knew everything, I never would’ve started.
So I feel like figure out what it is that you can go start on, whether it’s finding a deal, whether it’s finding a partner, whether it’s finding a contractor, building a contract list, do something to get you closer to your next deal today. That’s what you need to do. Do something. It never works if you don’t work. So just start working.

Ashley:
What is one tool, software or app or system, in your business that you use? You can’t say Google Drive because you already said that one. So what’s another tool that you use in your business?

Mackenzie:
Honestly, this might be a slightly unconventional answer, but Instagram. You guys, you need to be using social media. The power of sharing my journey on social media even when I didn’t have a lot of real estate sales behind me, even when I had no investing experience and I’m winging it on my first flip, use that tool. I feel like when you offer value to people, don’t even say, “Hey, I’m getting into real estate investing. I want to find a partner.” Just start adding value to people and people will come to you because they feel like what you’re giving them, what they’re getting from you is way more than what they’re going to give to you.
So I would absolutely use your social media channels, whether that’s Instagram, Facebook, Snapchat, Pinterest, whatever, the new threads, all the other things. Use your social media and just start sharing what you’re doing and share opportunities and start establishing yourself as a professional in real estate. Whatever that is, start becoming the educated voice of reason in all of your followers’ heads, and I think it will absolutely multiply your business and be your partners later in life.

Ashley:
Mackenzie, you make a great point about just sharing your knowledge and you don’t have to have any experience to share what you are learning. So if you’re listening to a podcast, what’s one thing you learned in that podcast? Post about it. You’re reading the new book you’ve just got in the mail, Real Estate Partnerships, post one thing you learned about it when you read that book. So I think that’s great advice.

Mackenzie:
I feel like everyone feels like they need to reinvent the wheel when it comes to social media and they need to know it all. I think you just need to remember that you probably know 1% more about whatever topic you’re talking about than most of your network does, especially when it comes to real estate investing. So even it’s that you just read the Real Estate Partnerships book and you got one quote and you put it on there or use ChatGPT. It’s not cheating. Use ChatGPT and share that knowledge with people. So I completely agree. You don’t have to know it all. Just share something and you probably know one more percent than everyone else.

Tony:
I think the other challenge people have is that they’re thinking about the wrong person when they’re creating content. When I post something on my Instagram, I’m not posting to educate Ashley about real estate investing. I’m not trying to impress her with my knowledge. I’m trying to give information to the person that doesn’t have that. So I think if you reframe who your audience is, it makes it a little bit easier to be transparent and vulnerable on social. All right. Last question for you here, Mackenzie. Where do you plan on being five years from now?

Mackenzie:
Ooh, that’s such a good question. It’s a good time that you asked, actually. I just reevaluated where I want to be. I’ll give you my three year, two and a half year plan, okay? So I’m 27 years old. This is fun fact. You know the whole golden birthday where you turn whatever year on your day? So I will turn 30 January 30th, 2020, oh, gosh, six, okay? So in about two and a half years, my golden birthday I’ll be 30. My goal is to increase my rental cashflow to replace my real estate sales income right now.
So buildup, it depends on the cashflow, it equates to around 20 doors, but it depends if cashflow is higher. So that’s my goal is to make enough income from my rentals every day over the top on top of expenses, so what I’m taking home after all my partnerships is enough to replace my real estate sales income. Then I do run a team here, and so my goal with that is then to be able to feed my team more deals, give them more opportunities. They love sales, they love that. So if I can give them more deals and I can focus on more of the real estate investing, it’ll free up a little bit more time for my family. My town will be my own. I can travel more, do all of that, create that financial independence life. So that’s my goal, I guess, financial independence by my 30th birthday.

Tony:
Well, Mackenzie, it’s been an absolute pleasure getting to dive into your story. I know I picked up a few things in our conversation as well, but before we wrap things up, I want to give a shout out to this week’s Rookie Rockstar. This week’s rockstar is Mimi Fenton, and Mimi says, “This is a really proud moment. We just closed on our first multifamily. I’ve been dying to get into multifamily for years, but felt so restricted by living in an expensive city and not having the capital. So I just followed the Zillow map until I hit areas with multifamily properties I could afford and then identified which of these had the best rents.” She finishes off by saying, “You can’t sit on the sidelines and plan. You have to jump in even if you don’t think you’re ready.” So Mimi, congratulations to you and can’t wait to hopefully get you on the podcast one day and you can tell us more about how you made those multifamily properties happen.

Ashley:
Mackenzie, thank you so much for taking the time to join us here today. Mackenzie and I had actually met at AJ Osborne’s conference in Boise, Idaho, and we got to talking and I just knew you would give tremendous value. So thank you so much for taking the time to come on the show. We really appreciate it.

Mackenzie:
Thank you so much for having me.

Ashley:
Yeah, you’re welcome. Can you let everyone know where they can reach out to you and find out some more information about you?

Mackenzie:
You can follow me on Instagram and TikTok. I’m also on Facebook. My name’s just Mackenzie Brogdon. I’m sure you’ll see it here in the comments. On Instagram and TikTok, it’s Mackenzie Brogdon Realtor. That’s it. Everybody will find me. I’m also on threads now, testing that out to see how that goes. So Mackenzie Brogdon Realtor anywhere you can find me and I’d love to chat and connect with you all. So thank you Ashley and Tony so much for having me. It’s an honor to share my story. I hope it can inspire even one person listening to this to go out and do something and get your first deal.

Ashley:
Okay. So you guys, give Mackenzie a follow and let her know how she has inspired you today to get your first or even your next deal.
I’m Ashley, @WealthFromRentals, and he is Tony J Robinson, @TonyJRobinson, and we will be back on Saturday with a rookie reply.