Mark had worked his way to a $6 million portfolio, before losing some cash flow and properties because he was too busy taking care of everything. Once he realized that he needed to replace himself on those tasks, Mark got back on track and even grew his business. Hear the difference he says between being self-employed and being a business owner. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
Mark Dolfini Real Estate Background:
- Husband, Father, and U.S. Marine Veteran
- Currently oversees the ownership, operation, and management of $40 Million worth of Real Estate
- Volunteers with various veteran’s causes as well as Junior Achievement
- Based in Lafayette, Indiana
- Best Ever Listeners can get a free pre-release version of his new book at www.LandlordCoach.com/BestEver
- Say hi to him at https://landlordcoach.com/
- Best Ever Book: Think and Grow Rich
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I'm Joe Fairless, and this is the world's longest-running daily real estate investing podcast. We only talk about the best advice ever, we don't get into any of that fluffy stuff.
With us today, Mark Dolfini. How are you doing, Mark?
Mark Dolfini: I'm doing great, and hello to all the Best Ever listeners out there.
Joe Fairless: Well, they say hello back, and looking forward to our conversation, Mark. A little bit about Mark - he is a real estate investor and a former U.S. marine. Thank you, sir, for your service, first and foremost.
Mark Dolfini: It's my honor, thank you.
Joe Fairless: Mark currently oversees the ownership operation and management of 40 million dollars worth of real estate. He volunteers for various veteran causes, and he's based in Lafayette, Indiana. With that being said, Mark, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Mark Dolfini: Yeah. My background, after I got out of the Marine Corps - which seems hard to believe, but it was over 20 years ago - I went to university and I got a degree in accounting; I worked in that field for a while, but I had always had a bent on something more entrepreneurial.
While I was in school, I started buying real estate, and by the time I graduated, I had about a dozen rental units. At that point, that's where my education really started, because I proceeded to make every mistake a person can make in real estate. I worked that through, I managed that for a while and built to a fairly sizeable portfolio. The mistakes just kept on coming, but eventually I learned an awful lot from them and I was able to get to a point [unintelligible 00:02:35.08]
Joe Fairless: I introduced you as you oversee the ownership operation management of 40 million dollars worth of real estate - is that your property, or are you doing third-party management, or what's the deal with that?
Mark Dolfini: Yeah, it's a mix. I had accumulated at one point about six million dollars worth of real estate that I owned in my name, and then I started doing third-party management, then I got my broker's license; in our state we're required to have a broker's license to do that... So I was getting approached by a lot of outside investors, because they saw how I was managing their properties and thought that I was doing a pretty decent job. They were having a lot of heartburn trying to manage their stuff, so they reached out to me and wanted me to manage it for them, but I had to get legal, of course - get my licensing, and all that stuff. I started doing third-party management and learning how to run that as a business, so now it's a mix between what I own and what I manage.
Joe Fairless: Got it. And of the 40 million, what amount is what you own versus what you manage?
Mark Dolfini: That's a good question. Right now, it kind of goes back to another story. So right now I have about two million dollars worth of real estate personally. I'm in kind of selling mode right now; I'm in cash accumulation, just because of people wanting to pay a lot more money for things than I think they're worth, so I'm just gonna take advantage of it and put cash away.
People who are a motivated buyer - and in my opinion, that's just never a good mix... There's lots of motivated buyers out there right now, but by the time I got to the pinnacle, where I had about six million dollars' worth of real estate - and that was until 2008 came along... That changed things significantly for me.
Joe Fairless: Fair enough, as it did a lot of people. Looking back on it, how are you structuring your portfolio differently now than you did prior to 2008, whenever you got hit pretty hard?
Mark Dolfini: Well, I think it might be easier to go back to kind of the beginning, to understand the why behind that.
Joe Fairless: Please, yeah.
Mark Dolfini: So back when I had 93 rental units, I was self-employed, and that's an important distinction between being a business owner. So when I decided that I really needed to be more of a business, rather than some guy who's just really busy running around, being at the beck and the call of this residence all the time, that's when it really started to change for me... But unfortunately, it came too little, too late, because I had (I thought) enough cash sitting in the bank, I thought I had 3-4 months in reserves, I was doing good. Then later the market fell apart, and not only was I financially underwater, but I was time-wary, and I was working 20-hour days, back to back to back, with no end in sight.
So the problem was I did not have a business that was scalable, and it was all based on my labor. I didn't do a good job of firing myself from the low end tasks so I could focus on the higher end tasks. So from that perspective, I was at 6 million dollars worth of real estate, and my revenues went from $60,000/month to about $30,000/month. That was just something that I couldn't weather... And not much time at all; I lost about 4,5 million dollars in real estate pretty quickly, and realized that my problems were just much larger than just being financially weary; I was time-weary, I was time-bankrupt. I didn't have much hours in the day to get things done, and I didn't have enough (at that point in time) foresight to replace myself as quickly as possible.
The way I'm structuring things now is really about managing the highest and best use of my time. And I think that's where a lot of entrepreneurs - especially real estate entrepreneurs - are wrong, because they think that they're just gonna end up doing it themselves, and all they end up doing is creating a job for themselves.
Joe Fairless: Amen. I love the "managing the highest and best use of your time." I approach my stuff the same way. What is the highest and best use of your time?
Mark Dolfini: So what dug me out of that hole was I can fix anything. That was one thing I was really good at. Now, it's not that best and highest use of my time now, but that's what kind of got me out of my hole. But what it was not doing was showing apartments, cleaning apartments, things like that, that were $10-$12/hour jobs.
Somebody had turned to me one time and said "Mark, you need to fire yourself from those jobs, because you realize when you're doing those jobs, that's what you're paying yourself."
At the time, my billing rate was $35-$40/hour, I don't remember exactly. But when I was doing those $12/hour jobs, it was actually costing me opportunity cost somewhere between $28-$30/hour while doing those jobs. So once I got my head around that paradigm, then I realized "Oh, the math is really easy." So from that perspective, that's what helped me dig out of my hole, which at that point I was able to start turning roughly $500-$1,000/day in free cashflow, which really got me back to solid footing. Now, it was unsustainable, because it was a year's worth of solid work in 12 hours days, but it's really helped get me out of the whole.
I didn't declare bankruptcy, which I do pride myself on that. And it was a mess. It was an absolute mess, and that's where I realized "Okay, sending and returning e-mails six out of the eight hours of my day is not the highest and best use of my time." So any job that I can replace that with someone who can do that job cheaper, to a point, you're gonna have to do some of that work, but to a point... Then I try to focus myself and remove myself as a bottleneck as quick as possible.
Probably the highest and best use of my time right now is coaching and inspiring others, and helping to educate others avoiding the mistakes that I had made, and being time-wary.
Joe Fairless: The two million in real estate you have right now, what type of properties are they?
Mark Dolfini: They're all residential. Most of them are single-family properties.
Joe Fairless: Okay. And where are they located?
Mark Dolfini: Central Indiana. Many of them are in Lafayette, but we have some around the Indianapolis market as well.
Joe Fairless: How do you determine which ones to sell off to those motivated buyers, as you mentioned, versus keep?
Mark Dolfini: Well, I don't have an exact metric on that [unintelligible 00:08:35.21] there's a tax consideration there as well, just what makes the most sense to keep and transition to a different ownership, sell it on contract, that sort of thing, to help defer the capital gains. But realistically, it's just a simple "What can I get that cash-on-cash return for?" The cash that's gonna be sitting in my account right now... Am I gonna get to a point where -- right now I'm hoarding cash, because I feel that there's gonna be a lot of deals that are gonna be coming down the pipeline, not now, but in the future, and I wanna be sitting heavy on cash... Because the cash-on-cash returns that I see right now that people are just paying for just flat don't make sense to me.
So when I see the opportunity cost that I have for getting to cash -- and I don't mind it sitting idle for a little bit... But I wish I could answer that question a little bit better; I don't have an exact metric. I just see if someone's willing to pay something more than what I think the property is worth, I'm willing to let them pay it.
Joe Fairless: Would there be an evolution in your buying process whenever the downward cycle hits? For example, would you go more apartment buildings, or would you stick to what you have experience in, primarily in the single-family homes?
Mark Dolfini: I always recommend people to go with what you know. I like the single-family dwelling market, and I hear the multifamily people screaming at me, saying "No, the returns aren't there..." But the thing that I like about single-family dwellings is that, at least in my town, there's hardly ever an issue of vacancy. A lot of times I have three or four people lined up to see the property before the property is even vacant. So from that perspective, when you're dealing with multifamily, that's a different bird, and a lot of times I see a lot of people wanting to get in multifamily and they vastly underestimate any vacancy expense.
My perspective to vacancy expense does exist with a single-family dwelling, but if you manage that properly, you can get easily 11,5 to 12,5 months of rent from a property, and the cashflow running well. And at 12,5 months you're thinking "Well, how do you get a half month extra cashflow?" - that's just from good management... Because sometimes people will move out early and you still have possession of the property, but they still paid to the end of the month. So if you can get that pre-possession and then go ahead and get it re-rented, there's nothing wrong with that.
So it really just depends on what it is that you're good at. Personally, I'm a single-family dwelling guy, I've always been that. The one thing I do like about the single-family dwelling is that they're much, much easier to find buyers for if you have to, because not only could you reach out to investors to buy that property, but people who want to buy a home to live in... Whereas if you have a 16-unit - yeah, the returns potentially are different, but it could take two years to find a buyer for something like that, even in a good market.
Joe Fairless: How has your experience as an investor influenced how you approach property management?
Mark Dolfini: It makes me realize that a lot of property managers that are out there forget what it's like to be an investor. They often will feel like the property manager almost has a blank check to go do with the property whatever they feel like, and they don't really act as their fiduciary. So from my perspective, I'm always looking at when money needs to be spent, are we doing a good job of keeping the owner of a property in the loop on things?
From that side of things, I think -- there's a lot of property managers out there that just don't do a good job of that, and I think from that perspective, that's why I've built the infrastructure of my business to do the best job that we can to make sure that we as a property manager are keeping our owners in [unintelligible 00:12:07.07] and I think we do a good job of that.
Joe Fairless: How does that bring itself to life? Can you perhaps give a story or an example?
Mark Dolfini: Yeah. One of the things that we've done -- I wrote about this in my book, The Time-Wealthy Investor... One of the things that we do, just as an example, we recognize pretty early that most of the investors that do come to us, they are investing out of state because they can buy a property almost outright here in Indiana, where they would have to certainly leverage a property if it was in California, or West Coast, or East Coast, or something along those lines. But if they're investing here, they can almost buy a property outright.
So almost by default they're living out of state, and sometimes three timezones away. So one of the things that we do is we started doing a video inspection at every change of possession. For example, whenever the resident would move in, we're changing possession from us to them, we do a video inspection of the property, usually with the resident [unintelligible 00:13:08.26] they're usually there for that.
That really gives an overall view of how the property was given to the resident, and it captures a lot of things... It doesn't capture everything, but it captures a lot of things. It also helps set a base standard with the resident that "Hey, this is the property. We're taking this very seriously, and we're letting you know that we've got documentation on how the property is being given to you."
Then, of course, when they change possession again, when they are moving out of the property, we do a video inspection of the property then. Why that's important is because, again, documentation, and they may say "Oh, no, this was damaged when I moved in" and so on and so forth. But the real critical thing is that the owner sees that video and they see it saying "Okay, yeah, we're gonna have to replace carpet, we're gonna have to do this" or "This is just worn out." So when they see the follow-up video for the next move-in, they can actually see the work that's been done. They're gonna see that new refrigerator sitting in the kitchen, they're gonna see that new vinyl that was replaced in the bathroom, and not just rely on the word of the property manager that it actually got done.
We're finding out there's a lot of that that goes on, where the transparency of the transactions and the transparency of actions, what's going on in their property just doesn't exist a lot of the times. So we do that, and that really enables owners that live on the other side of the planet - they might live in Singapore, or they might be Americans that are living in different countries, working abroad... Or not - they might be foreign investors... They're actually getting to see what they're actually paying for, and I think that's a big deal. I think that transparency is something that we brought to the arena. That flat didn't exist in the industry.
Joe Fairless: Oh yeah, I definitely could see how that would be beneficial for many different reasons - for the resident, as well as the owner, and your company. Is there anything with that video that you've done that you've evolved - perhaps you weren't videoing a certain aspect of the property before, but after coming up with some discrepancy with the resident who's moving out, now you video that part of the property? Or anything that you've evolved with that process?
Mark Dolfini: The main thing that we've figured out is that it really gives an opportunity for the whole transaction -- and it really wasn't intended this way, but the whole transaction is kept at an arm's length, both from the resident to the owner, and us to the owner, and us to the resident... It really keeps it at arm's length, because there's a lot of times owners might wanna charge a resident for something, and we have to say "Look, the carpet really wasn't in great shape when they moved in." Let's be fair, it's not about always [unintelligible 00:15:40.28] resident for something, because when they moved in the carpet wasn't brand new, but it was okay... But if they lived there for three years, there's gonna be normal wear and tear, and there's a lot of owners that would otherwise say "There's nothing wrong with the carpet. The carpet should be perfectly fine for them to move in. They should pay for it." Well, not necessarily. There has to be some accountability that runs in both directions.
So I really feel that -- that was an unintended consequence, but it really was nice that it really provided that buffer and protection for both the owner and the resident. So it's really nice that that evolved in that way. It certainly wasn't intended when it started.
Joe Fairless: That's interesting. An additional benefit for the resident, and just the overall process. In terms of taking the video itself, does the video that you took the first time - is that the same type of structure that you take today, or has that format or what you video changed at all?
Mark Dolfini: We've always been really intentional with it. Like anything, we would have to go back to the person doing the video and say "Hey, slow down, you're going too fast." I know one thing -- there's a hilarious YouTube video out there about "no vertical videos" which is hysterical; I don't know if you've ever seen it, but it's absolutely priceless... Don't do vertical videos. You wanna make sure the camera is held in the proper orientation; make sure you're going slow if you're gonna do videos like that.
Again, I wrote about this in the book - this isn't a reality TV show; don't walk through and be surprised, like "Oh my gosh, I can't believe --" Like, this is [unintelligible 00:17:13.25] video. [laughter] Don't make it look like reality TV. You wanna walk through the property first, you wanna know what you're walking into... We've never done that; we've always been intentional. Start outside, at the street; make sure you get the whole property. You wanna be at the outside of the property first. Make sure you get the address. Ideally, you might catch the residents being seen in the video, but keep their kids out of it, because that's just creepy. Don't do that.
As you're walking through the video -- probably the best evolution I would say is that we had to slow down. When you're there and you just wanna get the thing done... It's gotta have to be a 12-15 minute video if it's a 1,500 square foot house; there's lots of nooks and crannies, and you wanna open all the drawers, you wanna make sure [unintelligible 00:17:54.03] and check everything.
So that's probably been the biggest evolution, but the biggest problem that you can have when getting these videos is how to archive them so you know where to find them. Because if you have to find them eight months later, when you have to record for this stuff, and then you're like "Okay, now I've got to go find this video that's buried somewhere", either on someone's phone, or wherever... So you do need to be intentional with it from the beginning.
Joe Fairless: Is there a voiceover, or is there no voice?
Mark Dolfini: You want a narrative, you wanna talk through it. Let's just say for argument's sake you're gonna move in, and you open up the oven and it hasn't been cleaned. Don't try to be like, "Oh yeah, the oven's fine." Just own it. Say "Oh, it looks like we missed the oven. We're gonna go ahead and make sure that gets taken care of." Walk through it. It's a narrative, and you're gonna miss stuff. If there's just too many balls in the air... Maybe your cleaner was just off that day, or you just missed it; it happens... But own the mistake, because then it's just gonna make you look really disingenuous if you ever have to show that video, and especially if you're showing that to an owner and they're paying for the place to be cleaned, and obviously something significant got missed.
Joe Fairless: Let's use that example - the oven's filthy, and you say "Oh, it looks like the cleaner missed this. We'll have to get to it." Do you then take another video or pictures of the clean oven, so that you show that you actually did that, so the resident can't later say "Well, you never cleaned the oven", even though perhaps you did?
Mark Dolfini: Well, what we will do at that point - we'll create a supplemental work order and we'll send the cleaner back over to do that, and then the cleaner would come... This is where it gets into another part of our system - he'll come back, give us back the work order, and at that point in time our resident resources person would reach back out to the resident and say "Hey, did that get cleaned to your satisfaction?"
We do everything on a recorded line, so there usually isn't an issue with that, but that's how we follow up with that. We don't do another video because again, we wanna make it right, even though -- doing another video just isn't something that we feel is necessary. We've addressed it, we've put a work order on it, and that's how we do it.
Joe Fairless: Based on your experience, what is your best real estate investing advice ever?
Mark Dolfini: In terms of real estate, the best advice I've ever gotten and I would love to pass along is to learn to value your free time. Fire yourself as quick as you possibly can from the job that you're doing. You're gonna have to do some of the jobs in the beginning; you're probably gonna have to do all the jobs in the beginning, and it's important for you to do those jobs, because as much as you're able to do -- I mean, there's some people that just should not do accounting and they should not do the other stuff, but whatever it is, if you're gonna do the work yourself, learn to value your free time and fire yourself as quick as possible. Once I did that, it really opened up a world to me, and it really opened up my business, as well.
Joe Fairless: We're gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Mark Dolfini: I am ready for the Best Ever Lightning Round.
Joe Fairless: Alright, let's do it. First, a quick word from our Best Ever partners.
Break: [00:20:53.27] to [00:21:41.22]
Joe Fairless: Okay, best ever book you've read?
Mark Dolfini: The best ever book - Think and Grow Rich, by Napoleon Hill.
Joe Fairless: Best ever deal you've done?
Mark Dolfini: The best ever deal that I've done would actually be a collaboration with another property manager. I thought about an abundance mentality, and I got hooked up with a property manager that was similar to what we did, but not the same... And I ended up renting an office within their own office, and even though that property manager never as much as gave me a dollar, that mentoring relationship and that partnership paid me over and over and over, and they did well with that, too. So I extended my network [unintelligible 00:22:16.20]
Joe Fairless: Oh, wow. So it wasn't a transaction -- or I guess perhaps in an indirect way it was a transaction, because you rented an office with someone who you learned from? Did I capture that correctly?
Mark Dolfini: Yeah, so if I can -- I know this is the lightning round, so maybe if I can...
Joe Fairless: Yeah, please elaborate.
Mark Dolfini: So it's really important, because I learned in my networking that you're gonna get more referrals from people who are more like you than are less like you. So I ended up having this relationship - we would share referrals back and forth between people that were looking for places, but since I was a single-family dwelling guy and they were more multifamily, we would often be able to share... Like, the house that the person was living in was just getting too expensive for them, I could send them over to a guy whose rates were significantly less, and the apartment would work out better for them... Or vice-versa - if they were somebody who was looking for more space, they could go into our house.
So that was a referral relationship that really worked out, and I eventually rented a single office from them when I was starting to establish a more robust infrastructure for my business, to the point where I ended up growing out of that office, within a couple years... But we're only about a hundred yards from each other in terms of actual distance now, but it's been a relationship that has since just paid over, and over, and over.
Joe Fairless: What's a mistake you've made on a transaction?
Mark Dolfini: On an actual transaction? Oh, Lord... I've paid too much for properties. That's probably the biggest thing. I paid too much and did not consider the value of my time of having to maintain the property.
Joe Fairless: Best ever way you like to give back?
Mark Dolfini: Junior Achievement. I just did a Junior [unintelligible 00:23:52.01] and I love it. I really recommend people do that. Junior Achievement is fantastic. If you don't know about it, look into it.
Joe Fairless: And how can the Best Ever listeners get in touch with you?
Mark Dolfini: Through Facebook, at Landlord Coach, that's probably the best way. But you can reach out to me on LinkedIn, at Mark Dolfini, Landlord Coach, or at landlordcoach.com.
Joe Fairless: Awesome, and we also have a unique URL, landlordcoach.com/bestever to get a pre-release version of your new book... Congrats on that. Mark, thank you so much for being on the show, talking about some unique ways that you differentiate your property management company. One is, from a macro level, remembering what it's like to be an investor, and then having the communication process with your investor clients. Be very transparent, and one of the ways that comes to life is through the video inspection that you do.
Some tips for anyone on that: 1) no vertical videos. 2) Go slow. 3) Start on the outside of the street, work your way up, and make sure you get the address. You mentioned in passing you were opening up all drawers, so clearly it's a very detailed video... And have some narration going on along the way.
Thanks so much for being on the show. I hope you have a best ever day, and we'll talk to you soon.
Mark Dolfini: Thanks again. Take care, and good luck to your Best Ever listeners.