This week we have, not just one guest… but two! I know we haven’t had guests on the podcast in quite a bit, but we’re very excited to be sitting down this week with Johnny Nelson and Mack Benson.
Johnny is a fund manager focusing on A & B class multifamily real estate, and Mack is a multifamily investor and syndicator.
Dan and I have known the two of them for quite a while, we go way back. But in the last year, we took down the craziest deal that I’ve ever heard of. It had so many twists and turns and so many learning opportunities.
So listen in as we discuss our life journeys as multifamily real estate investors, as well as our most recent rollercoaster of a deal.
All of this, and more, on another episode of Multifamily Investing Made Simple.
“Most people don’t even realize that control is a thing that they could, and should, want and that they could realistically go get.” – Anthony Vicino
“Sometimes you need to find something better, as opposed to just kind of accepting what’s in front of you.” – Dan Krueger
“I needed something that would allow me to take control of my future and commercial real estate and commercial multi-family real estate is where I found that.” – Mack Benson
“I do a lot of meditation and make sure I feel like there’s an inner peace there, when all that aligns, then I’d go after it. I go to go after it hard.” – Johnny Nelson
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Anthony Vicino: [00:00:00] Welcome to multifamily investing podcast is all about taking the complexity out of real estate investing so that you, yes, you take action today. I’m your host, Anthony Messina joined as always by Dan Berger. I am pointing at you. Dan, you can take, you can take action today. You’ve been sitting on the sidelines for far too long.
I want you to get involved in real estate than nothing. I want to get you out of your corporate finance. Hell. Want to set you free? So
Dan Krueger: going back in time and talking to.
Anthony Vicino: Oh, my goodness. Wouldn’t that be a fun episode? Should we do a metaphysical, like trip back in time and should
Dan Krueger: not this one this time.
We’re not this one focus
Anthony Vicino: now it’s actually today is kind of a blast to the past, a little bit of a rewind, because if you’ve been listening to the podcast for a while, you probably realized that we haven’t done an interview episode. A really long time. Um, part of that laziness because arranging to bring guests on is a lot of work.
And then part of that [00:01:00] is also Dan and I just, uh, we have a lot of fun just kind of nerding out by ourselves. So kind of two fold there, but today we actually have two really good friends from the twin cities who we’ve known and been, um, part of educational community of Jake and Gino for a long time.
We’ve been following their, uh, I’d say trials and tribulations and successes. And so today’s going to be a fun episode as we welcome on to the podcast, the one, the only Mac Benson, the other, and only, that’s a really weird way to introduce that, but we’ve got Mac Benson and Johnny Nelson here with today with us.
Johnny Nelson: I’m doing fantastic. Doing fantastic here. Thanks for allowing us to, uh, you know, maybe share maybe a scare and, uh, maybe, uh, you know, maybe entice some people to even dip their toe in the world of real estate investing and try it out. I like that.
Anthony Vicino: We’re here to share
Dan Krueger: in stair. Uh, that’s good. That’s good.[00:02:00]
Um, no, I’m super excited to chat with you guys specifically because we’ve known each other for so long and I’ve been aware of what you guys are doing, but never really had an opportunity to really just unpack everything in detail. Um, uh, prob uh, so I’m really excited
Anthony Vicino: to hear. Yeah. And I want to set the, I want to set the intrigued hook for the listeners at home who are like, no, no, don’t care.
Why, why should I listen? Here’s why you should listen, Johnny and Mac and, and Johnny’s wife, uh, Probably took down the craziest deal in the last year that I’ve ever heard of. I had so many twists and turns and so many learning opportunities. Like, as we unpack this story, you’re going to be listening to this going holy crap.
And they got it done. It’s amazing. So that’s the intrigued hook. I guess if you’re listening to this, like you keep listening, cause you’re gonna want to hear this story. I guarantee you it’s gonna make you go. Wait, what? So, but before we do that, guys, why don’t you to introduce yourself, Johnny? Who are you?
What brings you? [00:03:00]
Johnny Nelson: Well, it brings me here is actually kind of reverse, reverse that, uh, admiration, if there is any admiration, maybe that’s presumptuous on my part that you have admiration for what we’re doing, but watching you guys watch and Mack actually max stepped into it. And I think you guys were even into it in the real estate space before him and just getting more and more.
Um, I used to be stepping way back in time here or teleporting backwards. Uh, my family moved to Alaska and I was a teen. I would became a general contractor. I used to build houses and light residential. Then I went back to school and became an engineer, spent the last eight years as a mechanical. And, uh, just, uh, thinking dang for myself here.
Two months ago, I left that actual, you know, the corporate, you know, somewhat corporate, this was a small startup out of Metta, Tonka as an engineer, and now, you know, working full time and the real estate space, my only focusing full-time. And, uh, also kicking off with fun. So that’s kind of a really that’s me in a real quick nutshell.
Anthony Vicino: Congrats on leaving W2, man. That’s like a lot of people that are listening to this are [00:04:00] thinking they want to be operators. And a lot of times the goal is to lead the W2. So you are a spark of inspiration for those people who are listening. Like you can do it. Yeah. It’s not an easy path as we’re going to unpack here in a little bit, but you can death for sure.
All right, Mr. Mack. Mack Mack is like one of my, I would say like my OJI real estate buddies. Um, so we, we reference you on the show frequently for listeners who are really astute. They’re going to be like, wait, is this the Mac? Ben said, yes, it is. I mean, even
Mack Benson: listening to you at three X, I can still catch my name
Anthony Vicino: from the crossword squirrel.
Mack Benson: I can tell it’s there. Um, I mean, what brought me here is, I mean, frankly control, um, I’ve spent what, the first 35 years of my life allowing things to happen to me. Um, once I got married and had kids and more kids on the way, [00:05:00] um, realized that. If I kept allowing things to happen to me, I’d be working until I’m 65, 70,
Anthony Vicino: 80,
Mack Benson: depending on how long I’d keep having kids.
Um, and that just, it didn’t sit well with me and with my new bride. So I needed something that would allow me to take control of my future and commercial real estate and commercial multi-family real estate is where I
Anthony Vicino: like.
Dan Krueger: That’s cool. That’s a pretty big mental shift. There’s a lot of people I know that don’t, uh, know they can make that adjustment.
A lot of people just kind of stay in the receiving end of things for their entire life and complain. So I love that. I
Anthony Vicino: control such an interesting one because I think. Um, our culture for a lot of people, like if you’re on that American dream path, where you go, go to college, get your degree, go get your W2 and stay in that until you die.
Like most [00:06:00] people don’t don’t even realize that control is a thing that they could yeah. That they should want and that they could realistically go get, so like Mac, what was, what was like the, you had that beginning impetus of like, I kind of want control. What then did you do from there? What was the plan forward?
Mack Benson: Oh, back up from that a little bit. It was once I got a new W2 and, um, supporting a brokerage, not real estate brokerage, but stock brokerage. Account and it infrastructure. And I’m looking at. All the, um, brokerage account. I can see into the brokerage accounts and like, I’m going, okay. So these people have this much and I have this much, what’s it going to take me to be able to get to that and mathematics background?
And obviously I can model something and assuming everything’s great for here until eternity, which is very likely not going to happen. [00:07:00] Determining what I need to do to be able to get me to where I want to be. And I’m telling my wife like, okay, so we can basically live in a
Anthony Vicino: shoe box. And if
Mack Benson: we take all that extra money and put it into the stock market, we can probably retire when we actually want to.
Anthony Vicino: didn’t like that idea. I like the shoe box idea. No, not really.
Mack Benson: No. So, um, yeah. And just decided, you know what, this is the path forward and what is, what do I do next? Well, I do what pretty much anybody would do. Well, the ultimate goal was to buy an apartment. So I started looking for single family homes to rent because I mean, that’s what I say, BiggerPockets. That’s what BiggerPockets tells you.
Um, and you’re going to scale up from there. So you start off with one single family and then a duplex and then a [00:08:00] quad. And then eventually you can get into a small apartment and I’m going, and I map that out. I’m no better off than if I would’ve just risked it in the stock market.
Find out about this elusive buzzword of syndication, and then dive down that rabbit hole.
Dan Krueger: It’s interesting. Your, your kind of, um, mental shift after mental shift, after mental shift, you have to kind of go through all these stages, but you kept, uh, doing something which I think is super cool. Is that you just said that this isn’t good.
I need to find something better, as opposed to just kind of accepting what’s in front of you. I think that’s a really, um, you know, valuable and not that common attribute. A lot of people really struggle with that. So I’ve found it really, um, enjoyable to watch you progress because I’ve seen so many people, especially in real estate that just, they love the idea of it, but then they [00:09:00] never actually.
Are you able to bring those ideas to fruition? Um, nine times out of 10, because of just mental hurdles that they’re not willing to make changes in order to see changes.
Anthony Vicino: Yeah. And Johnny, your, your path is a little bit different, right? Like you, I think if I remember correctly, you did have duplexes and like short term rentals.
Yeah. Like your first foray into real estate was slightly different than max. And I’m curious, like why start where you did, and maybe you could like clarify where you started and then. You know, what was the light bulb moment that for you, where I was like, okay, this isn’t going to be the thing long-term that we want to do.
We want to shift. Yeah, for
Johnny Nelson: sure. The, uh, I was thinking about this last couple of days actually, and because I’ve, you know, a lot of people ask you, like, when was, when did you start thinking about real estate, your light bulb moment, right? Like, yeah. So let me just take that just another. For me backwards.
And even though we dealt houses and work for developers, I never thought that I was. [00:10:00] You know, a real estate or investor. It was not that I was at contractor that was a builder, it was carpenter. And then I became an engineer and it still didn’t click with me. And then some, one day and another engineer and a fellow cube was like, Hey, I’m house hacking.
And I’m like, what’s that? And also, uh, I started with the, uh, you know, the podcast realm and all those things. And I think it, um, there’s something, uh, this is maybe a little bit fluffy, but for people, but I think when. Has an immediate appeal to you and you don’t know why. And all of a sudden you have develop a passion around it and you don’t even fully realize all the.
Elements w that there seems to be right. And I might, I also also do a lot of meditation and make sure I’m, I feel like if there’s an inner peace there, when all that aligns, um, then I’d go after it. I go to go after it hard. So like the actual, see the initial thought. Um, it’s a little bit actually Misty, even though it’s a couple only a couple of years.
So I bought, I bought my first house in 2017. Um, did fixed up the basement or an added a room and a bathroom. And then that was actually before I [00:11:00] even heard about the house hacking thing. And then we bought a duplex and this was at the beginning of 2019, and we got another duplex and did a flip. Um, and just kind of do, you know, a few just kind of dabbled in a few things like that.
And then just being on Facebook, you know, it was probably maybe his element of a little bit of envy and also, you know, looking at the scalability of this process and like, oh, like there’s people doing apartments. Like this is, uh, if, if a duplex is good, then apartments are good or so. Yep. And, uh, that same, that same, I guess that same element of you’re.
You’re not exactly sure. Uh, you, you haven’t really fully, um, self-actualize all the different elements of why you’re chasing this, but like I already knew that I wanted it. It seemed to be aligned. And there just seemed to be a natural progression into the larger space. And, uh, I saw people as you’ve got, as you kick it off with Anthony, you know, the jacket, you know, committee and there’s others out there as well.
But you know, like, well, how, uh, time is super value to me. I, you know, the last couple of [00:12:00] years, time had just gotten more and more precious, valuable, whatever word you want to say to me. And I don’t want to take 10 years. Many people have learned the space naturally. I want to shrink down on the compressor.
And I w I want to get a lot of things done. I’m very, very, there’s a lot of things I want to do. And, uh, I don’t, I don’t want to spend 10 years learning something
Anthony Vicino: I want to, I want to rewind real quickly to something that you said, which I’ve been reflecting on a lot this past week, actually, as I’ve been writing, um, a chapter on this concept.
And as you said, this, like when you become passionate about something, you become, you just go all in, you become like, obsessed with it. Right. And. The thing that I’ve been reflecting on is that PI uh, the passion is a biological imperative towards something that your unique genetics has determined is good for you.
Right. If you think about it from an evolutionary standpoint, we’re always trying, our body is just trying to self propagate and do what’s best for us in the longterm. Right? Right. So if you look at passion, like if this thing intrigues you, if it’s interesting to you, [00:13:00] that’s your biology saying, like it’s recognizing that there’s something in that thing for you.
That would be good for you to pursue. Right. And so being open to our passions and allowing it to dive deeper into obsession now, you know, like drugs and addictions, like gotta be careful here, but what you said there was like super cool because a lot of people, they have that passion, they have that interest, but then they, they build a wall of excuses around themselves of like, why they can’t.
Johnny Nelson: Totally. And that’s, there’s something, um, I know this again where maybe you’re dabbling in the metaphysical or the psychological space here. And I do think it’s super, I do think it’s super powerful, um, where you have, I think there’s deep. That’s one thing that I guess really bothers me and I’m not going to get political or not got too political here, but that’s when sometimes it really bothers me.
When people try to change a massive pieces of society, like, oh, we’re gonna burn this down and rip this down. And, but it’s also just going to build something new. I’m like, you have no idea. Um, the intrinsic wisdom and the deep historical and ancestral, [00:14:00] um, reasons for doing what we’re doing. Like many of us can’t even really explain how society and I’m not getting, I’m not, I’m not defending bad things, but many fundamental things that we do and how we set ourselves up is for reasons we can’t even explain the wisdom is so deep and so fast.
So we can’t really explain that. So that, that kind of ties into. That kind of that inner wisdom, that deep, deep ancestral and other things, you know, whatever, however you want to put it, that type of wisdom. And that’s why that passion, there’s a spark there and you attracted to it and you’ll do well to heat that.
And I think that’s, uh, that’s what dreams and passions are made of, and that’s ultimately. To a fulfilling life. And also, you know, like, uh, Dan said a moment ago to Mac, like you’re pivoting and I’m not just latching onto that, but I mean, I had some fundamental changes in my own life where I, you know, as a contractor and now it was a radical change.
I didn’t know that I, if I could do it or not go back to school and become an engineer, I actually thought I was too stupid. I re I really did like, and this is just a personal win for myself. And I went back and got my master’s. So like, I’ve had a number of like revolutionary changes, just personal victories that only [00:15:00] Johnny is going to appreciate.
The carers, but that’s not the point it’s Johnny. That cares.
Anthony Vicino: It’s
Dan Krueger: amazing. How much of those, um, those, those obstacles or boundaries that we perceive are just entirely, um, you know, figments of our mind, um, sleep and what you said, Anthony, about the whole like biological draw, I think was really interesting.
Cause I had a decent little stint in the nutrition space back, uh, a long time ago and what I constantly found in that space, um, From like a physical level is like 99.9% of the time. Every time your body’s doing something. Because it’s just trying not to die. And so it’s like, it makes so much sense that like your brain is effectively wired the same way where it’s like, if you get kind of just drawn to something, like, you just feel like this is it.
I don’t know why, uh, one of you guys said, I can’t remember who, but like you didn’t a hundred percent understand, you know, how was all the shakeup, but you just knew this. The right way to go. Like that’s your, your body and your mind telling you like, yeah, your livelihood is this way. Like this is what’s going to make you happy [00:16:00] and, and survive, and it’s going to produce for you some way.
And so you’re drawn to it. I think it’s just kind of fascinating to connect those.
Anthony Vicino: Yeah. And I do think that this is like, I know for our listeners at home that they’re getting value by to this because yes, this is a podcast about multifamily. And whether you want to be an operator or just a passive investor, like belief precedes everything in your life.
And so if you want to be a successful real estate investor, it really does start with believing that you can do that. Right. And I know from talking with Mac in the past, like there’s a lot of mental belief and hurdles and stuff that you had to overcome in your own world of like, I can do this. It was a long journey for you, like Mac from the time that like, since I’ve known you and I, I think that you had even started before that, like actively trying and like, it was a long run until you got that first thing.
So like help us understand, like, what were you wrestling with that? Oh, I long
Mack Benson: run. I think that depends on your perspective. Um, I calculated it, it was 1,260 days [00:17:00] from the first time I had a conversation with my wife until I closed on my first.
Dan Krueger: Um, I love the, did the math.
Mack Benson: Yeah.
Anthony Vicino: Shocker it for those of us who are not math literate, that’s like over, just over three years, three, four years.
It was about three and a half right now. Okay. Um, but as long as some people know, like in the grand scheme, like we know that this is a long-term game. Right. But like, most people think I’m going to get in and it’s going to be like six months later, I’m going to have a thousand doors under, under a contract.
Right. And it’s like,
Mack Benson: Good luck. Yeah, it might happen. It could happen
Johnny Nelson: probably suitcases of passive money coming in suitcases.
Anthony Vicino: Yeah. That’s what I signed up for. That’s how I get my money. I don’t know. How about, I forget about the mailbox. I’m like suitcases case cash. That’s
Dan Krueger: very like a cartel.
Anthony Vicino: Yeah. I’m sorry.
I’m sorry to cut you off though. Thousands a thousand plus
Mack Benson: days. Um, and. Taking making sure I was always moving towards my [00:18:00] goal. I knew what my goal was. Um, and I knew it would have, it would, as long as I kept doing something to move me towards the goal, I would get there. Um, I mean, in that amount of time, we had two more kids.
Okay. My goals shifted the focusing, the ability to focus 100% of my efforts outside of work on real estate didn’t exist. I was, and still am changing diapers constantly. Um, having kids that won’t sleep,
Anthony Vicino: um, Gavin kids
Mack Benson: that will only sleep while they’re on top of me. So I think priorities shifted. But the constant pressure to move in the direction that I wanted to get to was always there.
Dan Krueger: Yeah. I think that’s such an important piece for people psychologically. It’s just like, if you know, okay, these are the steps necessary to get to the place. And if I just keep [00:19:00] doing them, even if it takes me like 50 years, like unless I stopped doing these things, it’s almost guaranteed that I’m going to get there.
It’s only a matter of time. So at least for me, when ever there’s kind of like a. A large mountain to climb, you know, of some sort, I find comfort knowing that, okay, these, I know for sure these are the things, and I know for sure if I do them it’ll work eventually. So it’s like success is guaranteed. It’s just a matter of whether it’s going to be a month, a year, a decade.
Um, I personally find competent that I think some people also could, if they kind of try looking at, through that lens, some people might just think that’s what. I want two weeks or less kind of like places to be, man. You just don’t want it that much. That I hang out with a lot of people, like the idea of things, but they don’t want to bad enough to invest years.
Anthony Vicino: And so let’s, let’s actually segue this now, um, to the deal to this deal that you guys just recently did. Um, I wanna, I wanna, I wanna break [00:20:00] down this story. But before we do, let’s do our bad investing advice, because I think that also serves as a nice segue corollary into this. So Mack, I think you were bringing some bad advice.
Johnny Nelson: Typically I can count on back on the bed. I can typically count on Mac to bring bad advice.
Dan Krueger: That’s his role on the, on the
Johnny Nelson: team? I know you’re good at it.
Dan Krueger: I’ve got, yes, let’s
Mack Benson: it. I had a chamber.
Anthony Vicino: One thing
Johnny Nelson: we chatted about was about finding a deal and then the money will come. We, this kind of flip it a phrase out there, some meat at some don’ts and we’re kind of cynical about it. Um, I guess we can just identify it as is this deal that we thought we found a good deal and hopefully, um, hopefully that was kind of our operating scheme there.
The money would come. Do you want to just elaborate on that night before?
Anthony Vicino: It’s [00:21:00] like the field of dreams, right? Like the whole, if you build it, they will come and you hear this a lot. It’s such a popular site here, this and entrepreneurship of like, Hey, if you build a business or get a good product, people will come.
It’s like, okay, well you have to advertise. You have to advertise it to market. You have to find a way to get people in the door. Same with capital. Like I’ve heard this so many places where people are like, Hey, just get that. Capital we’ll come and listen. Like first deal. It’s a second. It never comes like that.
Like if you haven’t been planting the seeds, like you can’t expect there to be fruit. So why don’t you guys? So this deal, and then what led that to that, that realization that if you, if you don’t just have the deal like money, doesn’t just show up.
Dan Krueger: Johnny.
Johnny Nelson: So start, how do we get it initially? Sorry. I kind of
Anthony Vicino: defined the deal too. Sure.
Johnny Nelson: So there’s so many, so in interest of time, because we can talk about this for eight [00:22:00] hours here. Um, and we’ll, we’ll just, we’ll kind of lay out the bones of it and then whatever you guys want to dig into, we’ll just like, we’ll just go, we’ll go plunge in and go a hundred feet down.
So it was a foul, the deal with direct to seller campaign. There’s a texting campaign. Um, there’s a lot of people actually that was, um, or that, that were saying, Hey, you should do this. It’s been successful in my area. I was talking to people of any Apolis at Florida and Texas. I know you guys probably have done some things like that yourself and, and.
Oh, sorry, Nick, from
Anthony Vicino: down in sexist,
Johnny Nelson: Nick, I think I did. Yeah. I think it was part of his group. Yeah. Uh, one of the guys, actually, Mike, Mike Thomas, you know, Michael Thomas, you know, and, uh, um, so yeah, so that was, you know, we took, we contacted them, you know, in the community, you know, there was a few people doing different versions of it and next, those guys seem to be.
Pretty, you know, um, well operated machine connected with them. And, uh, this, this, this was actually before Mack and I even were kind of, uh, real working together real tight. And, um, so I launched that and then, you know, I got like, you know, they were doing get a puzzle all over [00:23:00] the city and finally found it just in short, you know, finally we found this deal.
It was kind of surprising. Um, the guy was like, Hey, you wanna come over tonight? And I’m like, holy crap tonight. Um, and it’s like, it’s a new build. I thought, I really thought it was ridiculous. Like, this is a new bail. This is nothing that we know about in our, any of our mentors or training or anything that we know this is going to be like exorbitantly expensive.
So I call it Mac like, Hey, can we come look at this with me? So. Um, myself and Mac all went sought that evening. When we finally reached out to those that the builder slash owner. And, uh, it just seemed to kind of make a good connection, uh, just to, you know, just like the way we liked what we saw. Um, the suggested price seemed to be reasonable and the underwriting.
I actually thought when I first threw it in there, that kind of the napkin underwriting by no, this, I think I had, maybe I missed something here on the, on the underwriting, uh, line items. Uh, I, that price is cause I knew I knew what deals were going for in south Minneapolis. And this was not that far away, uh, relative to the cap rate and the price per [00:24:00] unit.
Anthony Vicino: Yeah. And this is an interesting one. Um,
Dan Krueger: okay. I’m sorry if you said it, how many units was.
Anthony Vicino: 40 40. It was a 40 unit plus a quad. Yeah,
Johnny Nelson: exactly. Yeah. So I ride around town people. It’s a portfolio. I’m kidding. That’s a really fancy word for
Anthony Vicino: two buildings. Yeah. And, and, um, if I remember it, so we, we know the seller, we talked to him, um, because you know, building takes a really long time.
And one of the things I think that makes this deal unique and it presented a really cool opportunity. Is if I remember correctly, the seller wanted to pretty much get this off the books so that he could redeploy the capital into his next deal, like into his next build. Cause he’s a builder, right? Like, Hey,
Dan Krueger: you just want me to get his like loan covered.
That was his hurdle, which was like a low hurdle to your point. Johnny liked the price point. Like his, I forgot what it was, but
Anthony Vicino: yeah. So you guys like coming in like already, like have this cool opportunity where you have a seller who’s [00:25:00] amenable, who’s flexible. It’s not just price driven. Um, And that’s a really big takeaway by the way, for people listening is like, not all sellers are price driven and like, there are really good deals to be had out there.
Do you just have to understand, like, what is the motivating factor for that person? So, okay. So great point. If you guys are looking at this thing, what’s the next thing that happens in the process?
Mack Benson: Sorry. We tried to figure out what we were missing. So we’re underwriting it and we’re like, God, there’s gotta be something we’re missing because the numbers are actually working. And I mean, you guys underwrite enough to know, okay, this looks really good. So what did I miss? Um, and we’re going through it, going through it again, re going through it, um, and like, you know what, it looks like a good deal.
Uh, one of the things that the seller had said is if we are able to meet this price, he’ll throw in the quad next door. That’s how that thing came along for the [00:26:00] ride. Um, And I mean, it was a cashflowing quad, so
Anthony Vicino: you don’t, why not? And a quad and like the, the location of this is like Minneapolis proper.
Right. And so a quad is even if you’re going to tear it down and build something there, like the land value of that is still very high. So like at minimum you’re getting like some good baked in value from day one. Absolutely.
Johnny Nelson: Yeah. And he was living. I just, I just kind of just a curious note, really with, you know, here, here nor there, but he was actually living there.
He was actually building the 40 unit. Yeah. He was living in, I was like fantastic communicator.
Anthony Vicino: I didn’t, I didn’t realize he was also living there. That’s amazing. I mean this cell, it doesn’t surprise me. That’s always kind of like that salt of the earth type guy. Who’s like outgrew, I’m just gonna live here, build it while I’m doing the thing.
Johnny Nelson: And that’s what he, that’s what he did on his other one, too. That, that deal that you just mentioned down there, or, uh, Anthony, you want had to basically exit out of his capital, get the equity that his family had loaned him in his own [00:27:00] and started his next deal. He actually did the same. Jack thing again, he got another piece of land or, you know, somebody empty lot with a tear down and then a fourplex or a double, a duplex next to it.
And he’d ex that’s a texted what he’s doing. That’s where he’s living now. Actually, if it ain’t broke, don’t
Anthony Vicino: fix it. Right.
You guys get this thing under contract and from day one, you’re thinking syndication, right? Like 40 units plus a quad downtown Minneapolis. What was, what was the purchase price on that?
Mack Benson: Everything together, five and a half,
Anthony Vicino: five points. So then you’re probably thinking like a $2 million raise two and a half million, maybe a little bit less.
Cause the class, it was like 1.8.
Mack Benson: Okay.
Dan Krueger: because you guys aren’t doing like improvements on cap
Anthony Vicino: X it’s brand new. Yeah.
Mack Benson: So we did a budget for obviously it’s brand new, so completely empty. It’s not cash flowing. So we budgeted for, I want to say six months of principal and interest. [00:28:00] So, I mean, there was an additional, it would be similar to a CapEx budget on a renovation, but it was just going to be paying off the debt service.
Dan Krueger: Yeah. Yeah. I guess you’re only real expensive early on is, uh, the leasing you got to pay to get all those units leased. So instead of improving units and spending money there, that’s your ex your expenses are pretty much leasing commissions with, I’m trying to
Anthony Vicino: do math in my head. What’s what’s the purchase.
What’s the per door. Because that has to be like 1, 1 25, 1 25. Yeah. Yeah. That’s crazy. Yeah, this is that’s. That’s crazy. Like, um, for context for listeners like brand new class a builds, and these are small units, but still like brand new, um, easily goes for north of 20. Right. And so the stuff that we buy a lot of like class B, class C assets, we’re picking up for 1 0 7 to one 20 a door.
So for you guys to pick up, you know, 40 brand new units, plus a quiet at about 1 25, a [00:29:00] door that’s killer.
Mack Benson: Yeah. Yeah. I mean, we’re pretty damn
Johnny Nelson: excited. Yeah. I was like, holy, like, this is strange. These numbers are lying to me or long to us,
Dan Krueger: or that is the unit size as well. Where these studios primary. Yep.
Yep. Yeah. So that’s something to factor into. Cause I mean, some of the stuff we look at and kind of B C class spaces also like, you know, two and three bedrooms, right? So. Price per foot, you know, that’s another thing to kind of look at if you’re kind of thinking this seems too good to be true. If you look at the price per foot is probably not too far off, but I’ll told, I mean, you said the underwriting looked good and the cash flow and all the returns were there.
So you’re just like kicking it and like trying to figure out, okay, what, what did we miss? But that’s anything from the sounds of it, at least as far as underwriting goes,
Mack Benson: Yeah. And we knew since we were go on to the syndication that you had touched on Anthony, uh, we knew we were under a tight timeline on it because what we [00:30:00] toured it, there weren’t leaves on the trees yet.
It was April. Um, was it April or may. Uh, all right. So spring last,
Anthony Vicino: a long time, it really does. It was
Mack Benson: June 1st when we got another contract and we expected to close on August. So we had basically less than a month to be able to get the syndication set up so that we could start raising funds. So there was a very tight window to basically figure out everything that we should had figured out prior to getting a deal under contract, getting your syndication attorney and everything also.
Dan Krueger: Yeah, there’s a lot. And for listeners too, if you’re syndicating, you’re raising capital, you’re, you’re doing all these things. You’re doing your underwriting or your, um, your due diligence on the property. You’re getting all your docs ready for this indication. And you’re going out and sharing this with your investors and getting them up to speed on [00:31:00] it.
So it’s, it’s, uh, a lot to cram into a month. And lining up a
Mack Benson: key
Anthony Vicino: principle. It’s
Dan Krueger: a laundry list. All these people need to be kept up with. It’s not like a quick phone call. It’s a yeah.
Johnny Nelson: Nurtured and nurtured relationship. You have to cultivate and know basically at the A-list people think of a list is doing in sequence a, this is a all concurrent activities.
It has to like, it’s like a, you know, like a blast, like boom, all of a sudden you need to find a bank and a. And a, you know, a couple lawyers and, you know, and the KP and all these things all at once here and a property management. So you relax all of a sudden you went from having, by being fairly busy to being like insanely like, oh my God, everything has to be done within the, you know, find all this stuff within a week.
Anthony Vicino: An interesting thing. I’ve is, um, uh, I was listening to Dan Kennedy. Who’s like a direct, uh, sales direct copy, um, marketing guru, and one of the things that he was saying, and one of his speeches he’s long since dead. Um, so those are long. These are speeches from a long time ago, [00:32:00] but what we were saying is that geniuses.
Operate sequentially. They operate simultaneously. So it’s all the things simultaneously. And it’s hard for us as humans and especially the way our education system works, where it’s like do this and then do this. And you work your way through the to-do list, but nobody ever makes her way all the way through the thing is like the takeaway there is it’s all sequence, it’s all simultaneous, not sequential.
And that’s really what a syndication, right. We’re doing it. Right. And because there is no other option in the syndication, it’s like, you get the thing closed. 50 things that all have to happen simultaneously concurrently. And it feels very, very chaotic. So for you guys stepping into that world, knowing you had a really short timeframe, how were you feeling when you went to the investor, your investor pool?
Like, was there high confidence? Was there low confidence? What were you guys was there? Butterflies in the stomach of like, oh God, what are we doing here? Is this all gonna actually going to be able to do this? Or what was the
Mack Benson: thought process from mine? It was. [00:33:00] The people I had talked to said, oh, that’s all that you only need to raise 1.8.
Yeah. That shouldn’t be a problem. All right, confidence. Here we go. This is going to be great. It’s going to be
Anthony Vicino: simple.
Dan Krueger: Um,
Mack Benson: fast forward a little, uh, and it wasn’t, but Johnny, how was your, uh, how has your investor bench taken it? I had.
Johnny Nelson: Fewer. It was a kind of a part of a different, a little different group here.
So, you know, this we’re now we’re going to touch just a bit on our kind of our circles of influence of the people that were around here. Mack had, has cultivated a little bit different group than some of the people that I was connecting with. So my, and I’ve been in.
Dan Krueger: Sorry.
Johnny Nelson: I hadn’t been, I had not been cultivating my investor base or nor working specifically or explicitly on cultivating that base for as long and as much. So mine was, I had a few, a handful of solid [00:34:00] people that I, that I knew, but even with that, it was like soft it, so, you know, maybe 5,100, you know, um, and again, until you actually have the money in the bank account, so I was quite, uh, I was quite okay.
I was very nervous, but also I was like, hyper-focused, uh, knowing that like once if this doesn’t materialize, then I’m going to go on to some, you know, plan a, B, C, and D like that. Cause I, I didn’t know whether, you know, whether max people could actually come through a little bit of more confidence on mine, but I knew it wasn’t enough as well.
So basically it was kind of just relentless. I mean, again, it sounds like. Promoting or whatever, but I mean, it was really like this grinding focus. So that even though this is not going to happen, I’m going to go to the next thing. But as far as like the traditional syndication, I’m going to go out and get some investors.
I did not, you know, I had a real, like 50, 50, whether that was actually going to be something that we could pull off using that model.
Dan Krueger: It’s interesting on one hand Mack, on your end, you look at like how long it, it, uh, it took you from when you [00:35:00] brought that conversation up to your wife, the first time to when the actually closing the first deal, then the on one hand that might be frustrating while you’re going through it.
And you’re like, oh, I wanted to like start yesterday. Right. But on the other hand, that also kind of gave you an opportunity to plant some seeds for a very long period of time with your network and people around you. So there’s that when you did close on it, this is something that you’ve been involved with, that you’ve been shopping for, that you’ve been working on and you’ve made a big.
Three years. Um, so that, that usually ends up making it a little bit easier of a conversation when this isn’t like the first time they’re hearing you talk about real estate, when you’re showing them a deal, it’s like, oh, this is Mack. Who’s been in the sphere for a long time. Um, even if he hasn’t been doing deals, you know, all day, every day, he’s this isn’t new.
Right. Um, that helps a lot. So that first deal.
Anthony Vicino: Okay. I’m curious though, like knowing how this story ends, is that how it went back for you?
Mack Benson: Not at all. Okay. Dan, you said that [00:36:00] the me talking about real estate as a new. It’s not, but what is new is this was a brand new bill. Yeah, this wasn’t what we had talked about before we even thought about buying something.
That’s older rents below market. It’s covering all the bills and get service, and we’re going to get in. We’re going to do maybe a light renovation, maybe a heavier renovation. We’re going to increase the rents, bring them up to market, you know, the textbook. The value add deal. Um, this didn’t fit in that box, not at all
Dan Krueger: this, uh, price where people off, because I’m guessing in your network of people that you’re raising capital from max, since you’re newer to this, your network probably isn’t, you know, super experienced with syndications.
So they might look at this and be like, this is drastically different and not really appreciate it’s different. Uh, it could potentially be good too, but just not exactly what you’ve [00:37:00] been educating us on for the past, however many years. Exactly.
Mack Benson: And because it didn’t fit inside that box, the response
Anthony Vicino: was less than lukewarm.
Mack Benson: It was pretty cold actually.
Dan Krueger: And even if, I think from our experience and from everyone I know in this business, like even if you had brought your investor base, uh, the first deal, and it was exactly what you’ve been talking about, that first deal is always going to be the most, uh, uh, difficult and stressful with respect to capital raising, because your confidence is probably at its lowest.
Uh, with your ability to do it and the investors coming in, you don’t have a track record yet. This is the first one. It’s it’s it’s the toughest sell from that perspective. So even if you had the perfect deal, it still probably would have been nerve
Anthony Vicino: wracking. Yeah, I think there’s, I think this is the, there’s a little bit of survivor by bias where it’s like, okay, this is your first deal.
Let’s see what this bring the next deal. Bring the next deal to me. If you’re still around, then we’ll take a look at it. [00:38:00] Um, so anybody listening to this, like something that everybody has to, this is a hurdle you will have to get over at some point, you figure out how to get through this. Um, I don’t have a good answer for you.
Uh, I know Dan and I had to navigate it. Like our first capital raise is. Um, much harder than they are now.
Dan Krueger: Brandon Turner who start raising capital, like after starting bigger pockets, that’s a, probably a little better setup.
Anthony Vicino: I think it’s easier to raise capital when you like with Johnny, like you had duplexes and had like, Prior real estate.
Right. And so that makes it a little bit easier to say, like, I have a track record of portfolio. I can point to it, right? Yeah. Brandon, where you can point to, like, I’ve done all this other stuff. So it’s, it’s easy to get, get the buy in. But when you’re looking at that first syndication and that first asset, it’s like, Hmm, how do I get people bought into the so, okay.
So the capital has been good to plan. So the syndication is like, oh, dire straits. Now, what do we do? Yeah.
Mack Benson: And, um, at one point [00:39:00] we realized there were. Construction delays shocker. Right? Um, so things weren’t going to be done by the beginning of July, like we originally expected. Um, so we knew that we were.
Time was being bought for us. We hadn’t closed the ad, um, building wasn’t done so we couldn’t close. And there were a lot of delays with the construction and with the city bureaucracy. And I’ll shock her. Right. Um, so time was beginning to be on our side. So we kept pushing and with the construction delays, we had started weekly calls with the seller just to get progress updates, what he’s, what
Anthony Vicino: he’s doing, all the buildings going,
Mack Benson: um, any of the delays with the city so that we can get in front of it and be able to start moving people in before.
Um, and during the weekly calls, [00:40:00] he kept talking to us and bringing up the idea of seller financing, uh, which Johnny, what? For the first two, three weeks we summarily shot him down. Um,
Johnny Nelson: Yeah, I guess we didn’t, we didn’t, I didn’t know. We didn’t know for sure if he actually meant like contract for, cause he said, he actually said on another call was like, oh, I actually a contract for deed.
So like, oh, you’re going to have like a carryback and some other like other creative ways. And he’s like, do you realize what I’m, what, I’m what I’m offering here. Right. And I’m like, well, give it to me. Like, I’m a, like a golden retriever here. He was like, I’m going to have a contract for deed. I’m like, oh, hold on.
Let’s talk about that Nirvana
Anthony Vicino: kind of a best case scenario for listeners who don’t understand what that means. It’s effectively the seller saying, listen, I’m going to finance this for you guys. And you come in, you pay me and you buy this out from me. And so it really reduces the amount of capital that you guys need to come to the table with and like bringing in a bank loan.
And so. [00:41:00] It’s kind of like the holy grail of when you’re looking at new deals, but it’s usually the buyer having to convince the seller. But here it was the seller coming to you guys and being like, Hey, I’ll do this thing. And you guys are like, no, no, no. And then you’re like, oh, light bulb.
Dan Krueger: Yes.
Johnny Nelson: All right, Anthony, here, we,
Dan Krueger: do you think it was going to negatively impact your ability to syndicate it? Is that why you were initially like, no, no, no. We need traditional financing. If you know, investors are going to invest in this, is, was that kind of the thought process or I’m wondering why you were kind of shooting it down initially.
Mack Benson: was exactly why we were, um, I didn’t, I was not comfortable. Uh, with the idea of taking an investor capital and doing a contract for deed.
Dan Krueger: Yeah.
Anthony Vicino: That makes sense. Those don’t blend super great on your first deal.
Johnny Nelson: No, keep it simple.
Mack Benson: And obviously since it was a new construction and empty, there were issues, issues, difficulties, um, with securing financing.
Anthony Vicino: Yeah. [00:42:00] So guys, we’re getting to the top of the hour here. I want to be respectful of everybody’s time, but there’s so much more to the story that I think it would probably want to have you guys back on at some point to unpack the rest
Mack Benson: of the
Anthony Vicino: story. Um, because like w where this started was, you know, a syndication and now where it’s at was a pivot into more or less just a joint venture contract for deed.
And like, so the whole landscape of the deal just fundamentally changed. Right? Absolutely.
Mack Benson: Yeah, it went from all right, so we need 1.9 million to, we need a lot less, but we need to plan for the future because we still need a key principle to be able to sign on the debt. Do we bring them in now? Do we wait?
Dan Krueger: What do we do?
Anthony Vicino: So this is, this is maybe a good pausing point for the listeners and because it leaves a lot on the hook in terms of like, okay, what happens? That eloquent fingers? Um, so my story seller side, um,
Johnny Nelson: the question it could hanger question is just how [00:43:00] much we, he agreed that we, that we needed to bring to the table.
We brought more. So he actually agreed with. So do a number. I was like, yes,
Anthony Vicino: this is good. This is good. Okay. Let’s devise the listeners. If you’re listening to this, I want you to go to iTunes and in the reviews, you’ve got to leave a review and it’s gotta be five stars. That’s how I, that’s how I negotiate right in the, in there.
You’re going to put, how much do you think Johnny and Mac had to bring in? Krista had to bring to the table. It one point initially, initially 1.8 now it’s. That’s going to help you. So it’s new build whoever’s closest is going to get a very special package from Anthony, which sounds really weird. Um,
Dan Krueger: be more specific
Anthony Vicino: because we don’t know if we want a mystery package, but it’s going to be better.
Not, not matter. Is it a mug? It’s not a. Because your
Johnny Nelson: emotional promotional package for me,
Anthony Vicino: going to make something awesome. It’s not just [00:44:00] listen guys. Only one person gets to find out what it is and it’s the person who’s closest, but it’s not a mug. It might be a mode. Okay. So let’s put a pin in there and let’s guess who like what, that, how much they had to bring to the table.
We’re going to have these guys back on in the episode. On another episode here. Hopefully in the short while so that we can keep this going. Um, not sequentially, but simultaneously. Um, but before we get out of here, guys, I need a book. I need a book review or not a review book recommended. I always say review every single time.
It’s a recommendation. Not. Um, might be bad book, but it’s like, I keep telling Dan, like, it can’t be a book, um, that he’s just seen on a bookshelf.
Dan Krueger: I dunno. I recommend books that I start not necessarily finished because I don’t know. It’s finished books. I know
Anthony Vicino: you’re like Nepal. It works. You
Dan Krueger: get what you need, you move.
Anthony Vicino: All right. So who’s got the book recommendation this week.
Johnny Nelson: I’ll take it. Um, this is a. As you dive into all this stuff. I know [00:45:00] we all, a lot of us know, you can need to scale up so many elements of your, of your life, your, um, your entrepreneurial focus, your mindset, all these things. So one thing I’ve got a lot of value of was distractible, uh, by near ELL.
And he basically ended up, there’s a lot of, a lot of other books out there as well, but he kind of just go through it, like, you know, Techniques how to not get so frazzled distractible with all these things, it kind of explains the biology and why we are so prone to, you know, whether it’s picking up your phone or jump on a Facebook or, you know, all of a sudden got to do something hard and you want to rent it a snack and you gotta take a drink of water, et cetera.
So, anyway, so it’s very valuable if you’re trying to up your game, get more out of your life, get more, um, um, get more done, get, I guess, impact, you know, busy-ness versus impact is, is what, uh, how, how, what I’m trying to achieve here. And I’ve gotten a lot of value out of it. Did you say it was
Anthony Vicino: called distractible in distractible distractible.
It’s good. It’s good. Um, at a school, one of the cool things that he points out that I had never connected before is that the root word of in [00:46:00] distractible is traction, right? Like, so the opposite of traction, which is what we want. We want momentum and traction and like forward momentum is.
Johnny Nelson: And the respect there, what you want, right.
Anthony, so traction in the direction of something that you, that you want, that’s a goal or a target for yourself because we can have traction in the wrong direction.
Dan Krueger: So in college, whenever I had to study, and I just decided for whatever reason, that was always the perfect time to start my laundry, that illustration
Anthony Vicino: took you away.
Biological imperative said, now it’s time to do laundry. Cause that will be. You can’t always trust your biology, Dan. Well, maybe he was
Dan Krueger: like, no, no, no. You need to go buy properties. Not study with
Anthony Vicino: that. Could be, that could be you’re on the wrong track. I was trying to tell you the whole time that’s one.
Listen. All right guys. So that’s going to do it for us, uh, for the listeners at home, we really appreciate you taking some time to join us Mac Johnny, before we let you out of the cage, where can people get.
Johnny Nelson: Uh, LinkedIn. I like LinkedIn spent a lot of time there. Uh, Johnny Nelson, you can [00:47:00] find me there or shoot us an email.
Arcos capital that’s AARC T O S C a P I T a email@example.com. Marco’s firstname.lastname@example.org is a good, good place to find us. Nice, man. How about you?
Anthony Vicino: I can’t stay on LinkedIn. Nice space. Now your Facebook you’re on Facebook, right? Uh, yeah, I
Mack Benson: got a lot of pictures of my kids up there. Shouldn’t announce that on a.
National podcast. Um, no one watches
Dan Krueger: this over here.
Mack Benson: Just want to point that out in Singapore. Oh, the best for me is the cell always taxed, uh, 6 1 2 4 6 6 0 2 5
Dan Krueger: 1. Oh, that’s bull put up
Anthony Vicino: the numbers. I like
Dan Krueger: it. Put out the new are a few people listening.
Anthony Vicino: That’s going to do it for us. We will see in the next episode, let me try this. Let me try this. Let me try this.
Exit again. All right, guys, that’s going to do it for us here at multifamily investing made simple the podcast that took [00:48:00] all the complexity out of real estate investing. Now you can go take action. Never ended a podcast like this before, but you
Dan Krueger: know,
Mack Benson: you guys in minutes.