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SHOW NOTES FOR EPISODE 121: MICROSOFT STRATEGIST CREATES REAL ESTATE CASH FLOW MACHINE
This smart old dawg has been ramping up for retirement since March of 2015 and already has more than 25 units. In this episode, Mackal Smith, a 20 plus year Microsoft employee and part-time real estate investor, shares how he is generating significant rental income for his future retirement while still working a full-time job.
What you will Learn
- How you can use one real estate investment to pay for another
- Ways to leverage various types of assets to fund your real estate investing
- The value of real estate investing podcasts and website to your investing education
- The importance of understanding how certain seasons and times of the year affect your rental property activities and profitability
- Partnerships can not only provide talent and resources but they can help relieve some of a newbie’s fear of investing
- The advantages of investing locally
About Our Guest
Mackal “Mac” Smith has worked for Microsoft for a little over 20 years and, before that, spent almost 20 years in with DEC (Digital Equipment Corporation) and a global chemical company.
He started investing in real estate in March of 2015 with the goal of acquiring 25 units over the next 5 years. However, by the end of 2015, he had already acquired 13 units. Last year, he started working with a partner and acquired another 12 units. So far, with a duplex he acquired this year, he has already surpassed his goal.
His goal is to both provide additional retirement income, as well as have some projects to play with during retirement.
Currently, Mac and his partner and are looking at acquiring some larger properties (25 to 100 units) and potentially looking at some syndication deals.
He recently bought a lake house (got a great deal on it) and continues to work on it in his spare time. Mac is 56, married, with three grown children, and looking to retire in the next few years.
How Mac Got Started
- Lives in St. Clair, MO (near St. Louis)
- Bought a house by the lake (was going to be a vacation home) but ended up selling his other home and now lives in the lake house.
- The Lake house has 6,000 square feet, 100 acres, indoor swimming pool
- Huge utility bills – electric bill ($950/month) Propane – ($4,000 per year)
- Installed solar panels
- Wanted to go with geothermal but it would cost around $100K
- Thought, “Hey, I could buy a rental house and use the cash flow to help pay my utility bills.”
- He has purchased properties and now generates much more than he needed to cover utilities
- Now he is looking forward to buying more properties to supplement his retirement income
- Hired two property management companies
- Started listening to podcasts
- Set up his real estate investing company
Partnership
- Mac participates on BiggerPockets.com’s forum and often answers questions about St. Louis market
- Connected with a local guy who met with Mac to discuss real estate and the guy offered to partner with Mac
- So, in year two, after he already had 13 properties, he started partnering on some of the properties
- With the partner he hopes it will be easier to acquire larger multifamily properties to take advantage of the economies of scale
Biggest Mistakes
- Had duplex with 2-bedroom on top and 2-bedroom on the bottom.
- Property manager said if he added closet to downstairs unit, he could make it into a 3-bedroom unit and could get an extra $100 per month in rent
- Thought he could build closet himself for $200
- He didn’t take into account the time of year (Oct) and the type of property he had (3 bedroom attacks families)
- School had already started
- Didn’t have a renter in unit for 5 months
Biggest Success
- First two houses
- Didn’t do a ton of analysis
- Did know they were high quality homes
- Knew the debt service but not a lot of other factors
- Has had to put very little into the properties
- Cash cows!
Property Criteria
- Mostly C and C+ properties
- Only properties in St. Louis
- Older properties (before 1920s)
- Near up and coming area of downtown
- As more the area becomes more gentrified, they should increase in value and cashflow
Advice to Other Old Dawg’s Looking to Invest in Real Estate
- Real estate is less a risk as other investments
- You can control a lot of the value
- If you are just starting out:
- Get educated (listen to podcasts, read)
- Learn how to evaluate a property
- Don’t be afraid to jump in
- Partner with someone if you are not that confident
- Great way to supplement income
Where Does he See His Business Going
- Another 10 years yet before he goes more passive
- Wants to get one or two larger properties (50-100 units) in the next couple of years
- Would like to make 300-units his end goal
Rap-It-Up
- Favorite real estate book: Rich Dad Poor Dad by Robert Kiyosaki
- Favorite business book: The One Thing Gary Keller and Jay Papasan
- Most valuable web site for success (other than your own): BiggerPockets.com
- Favorite app: MileIQ (tracks your mileage)
- Favorite quote: “Fail the plan or plan to fail.”
- If you had to start all over, knowing what you know, and you only had $1,000, what would you do to launch your real estate investing business? It’s all about relationships. He would join a local REI club, find the most successful investor there and try to partner to build up his real estate business again.
How Can You Reach Mac
- MaCyn Capital Group (MaCynCG.com)
- You can also find him on BiggerPockets.com
Pictures of Mac’s Lakeside Home
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