What I Wish I Knew Before Buying My First Property

Summary

Rich Dad Radio Show: In-Your-Face Advice on Investing, Personal Finance, & Starting a Business

Episode: What I Wish I Knew Before Buying My First Property
Release Date: January 23, 2025
Host: Jaron Suster
Guest: Mark McMahon, Real Estate Expert

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Introduction

In this insightful episode of the Rich Dad Real Estate Show, hosted by Jaron Suster, longtime real estate expert Mark McMahon joins to share his extensive experience and the invaluable lessons he's learned over 18 years in real estate investing. The conversation delves into Mark's journey from a contractor to a seasoned investor, the challenges he faced during economic downturns, and the critical strategies that have shaped his success.

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Mark McMahon’s Journey into Real Estate Investing

Mark McMahon begins by recounting his transition from a 41-year contracting career to real estate investing, a shift driven by necessity during the Great Recession. He explains:

"My construction company took a nosedive during the recession, and I took a nosedive. Coming up out of the ashes, I don't know why I picked real estate investing. It was one of those weird things." ([04:18])

Mark emphasizes that his foray into real estate was not premeditated but rather a response to financial hardship. This necessity pushed him to explore new avenues, leading to his enduring career in real estate.

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Navigating Economic Downturns

The discussion highlights the impact of the 2008-2010 Great Recession on Mark's business and personal life. Mark shares:

"The worst period of my life ended up being the best... Hard times make strong people. You really do." ([07:18])

He reflects on the harsh realities of the recession, including property repossessions and financial losses. These experiences, though challenging, provided him with resilience and a deeper understanding of the real estate market's volatility.

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Cash Flow vs. Appreciation: Building Wealth

A significant portion of the conversation revolves around the debate between cash flow and property appreciation as primary drivers of wealth in real estate investing. Mark articulates his approach:

"40% of your rent, 40% of your rent minimum is going to go to expenses... Whatever's left over afterwards is your cash flow." ([11:50])

Jaron Suster challenges the conventional focus on cash flow, arguing that appreciation holds more long-term wealth-building potential. They agree that while cash flow serves as a defensive metric protecting investors from financial downturns, appreciation drives substantial wealth growth over time.

Mark concurs, adding:

"Rents minus mortgage isn't enough. You have to account for property taxes, maintenance, insurance, and all the unexpected expenses." ([13:40])

This balanced perspective underscores the importance of comprehensive financial analysis in making informed investment decisions.

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The Importance of Discipline and Continuous Learning

Mark emphasizes the necessity of discipline and continuous education in real estate investing:

"Practice is so important. If you're not sharpening that sword every single day, you're going to fall behind." ([11:50])

He advocates for persistent deal analysis, making numerous offers, and learning from each interaction to refine investment strategies. Mark also warns against overbuying properties and stresses the value of selective investment to ensure portfolio stability and growth.

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Risks of Using Private Money

The conversation turns to the use of private money in real estate deals. Mark cautions:

"Private money is a dangerous tool. You have to treat it as real money because many people fail by using private money irresponsibly." ([26:01])

He shares personal anecdotes of financial losses incurred due to permitting issues and partnership breakdowns, highlighting the critical need for financial preparedness and integrity when handling investors' capital.

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Maintaining Integrity and Building Trust

Integrity emerges as a central theme, with both hosts agreeing on its paramount importance in sustaining long-term success:

"Operate with integrity. Those who continually do the right thing will win in the end." ([31:06])

Mark underscores that maintaining a reputable standing ensures lasting relationships with investors and preserves one's standing in the business community.

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Setting Realistic Financial Goals

Jaron and Mark discuss the importance of setting realistic financial goals based on personal fulfillment rather than societal expectations:

"What truly fulfills you? Base your goals on reality, not the shiny objects portrayed on social media." ([37:13])

Mark advises investors to define their financial objectives based on their lifestyle aspirations and daily fulfillment, ensuring that their investment strategies align with their personal values and long-term happiness.

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Personal Fulfillment and Work-Life Balance

The episode concludes with a heartfelt discussion on personal fulfillment and work-life balance. Jaron shares his journey of overcoming debt through real estate and emphasizes the importance of being present for family:

"Being able to be there for my family... that's my biggest why." ([34:10])

Mark echoes this sentiment, advocating for a balanced approach where real estate investing serves as a tool to achieve personal and financial freedom without compromising one's well-being.

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Key Takeaways

• Adaptability in Crisis: Mark's pivot to real estate investing during the recession showcases the importance of adaptability in the face of economic challenges.

• Balanced Wealth Strategies: Combining cash flow and appreciation is essential for long-term wealth building in real estate.

• Discipline and Education: Continuous learning and disciplined investment practices are critical for sustained success.

• Integrity Matters: Maintaining integrity and building trust are foundational for enduring relationships and business longevity.

• Personal Fulfillment: Aligning financial goals with personal values ensures meaningful and sustainable success.

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Notable Quotes

• Mark McMahon: "Hard times make strong people. You really do." ([07:18])

• Jaron Suster: "Cash flow is a defensive metric. Appreciation is where you build your wealth offensively." ([14:05])

• Mark McMahon: "Private money is a dangerous tool. You have to treat it as real money because many people fail by using private money irresponsibly." ([26:01])

• Jaron Suster: "Operate with integrity. Those who continually do the right thing will win in the end." ([31:06])

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Conclusion

This episode of the Rich Dad Real Estate Show offers a deep dive into the realities of real estate investing, emphasizing the balance between defensive strategies like cash flow and offensive strategies like appreciation. Mark McMahon's candid sharing of his experiences, challenges, and philosophies provides listeners with practical insights and reinforces the importance of integrity, discipline, and personal fulfillment in achieving financial freedom through real estate.

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For more insights and strategies on real estate investing, visit Mark McMahon's YouTube channel or follow him at Mark McMahon Real Estate.

Transcript

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[Jaron Suster]

Welcome to the Rich Dad Real Estate show where we talk about the good news and bad news of real estate. Hosted by yours truly, Jaron Suster. I'm here with Mark McMahon and I am stoked to talk with Mark. Mark came on my personal podcast probably a year and a half ago and his story was literally one of the most inspirational. It's actually sad at one point, but it gets inspirational and had a huge impact on me. It was one of our listeners favorite episodes and I said I gotta have Mark on the Rich dad show to share his story, to share his experience. He's been a contractor for 41 years. He's been an investor for 18 years, small business owner for 41 years. He's married, he's got three kids. Mark has seen it all and so I'm simple enough to say I want to listen and learn from people who are already where I want to get to and have been through the fire. And Mark is a perfect example of that. So Mark man, thank you so much for being on the show today.

[Mark McMahon]

Thanks Jerry man, it's good to see you again and to see you. By the way, just want you to know I've got several of these cups but this is my favorite.

[Jaron Suster]

Oh I love it. He's repping, he's repping My brand's coffee cup. But I love it. I absolutely love it. You know, Mark, talking with you this morning has put me in a lot better mood because before I hopped on and we started this episode, I was paying taxes on all of my real estate.

[Mark McMahon]

Yeah.

[Jaron Suster]

And so I've just been in a real bad. You know, it's like a bittersweet thing. Like, I don't want to give the government any money. But then it also reminds me, it's like, of the success I've had. I'm like, thank you, God, that I own all these properties and they cash on. I had the opportunity to pay the taxes, but, dude, when you watch tens of thousands of dollars go out of the account to pay the government taxes, it absolutely crushes the soul to a certain degree.

[Mark McMahon]

100% agree. We have to do it twice a year here in California, and my wife does it and her assistant, and I'm not involved in the process, but I hear about it, and I know when I walk into the office, the mood is definitely black. It's not good. Yeah. Every time we have to do it, it's like, I can't believe we got to pay this much out. It's like, I know. It happens every year, so you know it's coming.

[Jaron Suster]

It's not a surprise.

[Mark McMahon]

Yeah, yeah, yeah, yeah. And hopefully. Hopefully, your properties are making enough money where it covers. Right. That's not the case with a lot of people these days, and we might have time to address that today.

[Jaron Suster]

Yes. That's why cash flow is so huge. If you don't have cash flow, then a property that could be an asset can quickly become a liability. So you were a contractor for 41 years. You've been one for 41 years?

[Mark McMahon]

Yeah.

[Jaron Suster]

The real estate game for 18. How did you make that transition? A lot of. I hear stories of a lot of folks who, you know, they're in the real estate space, but they're not an investor. And most people never take the jump you did. What does that evolution look like?

[Mark McMahon]

Well, it was. It was based on necessity at the time. My construction company took a nosedive during the recession, and it took a hard nosedive, and I took a nosedive. And coming up out of the ashes, I don't know why I picked real estate investing. It was one of those weird things. I'm a real estate agent also, and. And one of my title officers, I literally called her one day and said, look, I'm lost. I don't even know what direction to go right now. And she said, just come to this investment club for women meeting tonight. And I did. And that was, that was it. I had never thought about investing in real estate before that I had no thoughts of doing. It went there. Long story short, I got my wife involved and we ended up just kind of blowing up in many different ways. We blew up on, in a lot of bad ways on the journey. But, but for, you know, I think I've used this analogy before. It's, it's one of these, you know, you look at the stock market, that's mine. And probably your real estate investing trail or road, and massive highs, massive lows and property taxes and all that other crap that goes along with it. Right. So that's how we got into it. It wasn't something I was, you know, there's a lot, there's so much social media out there today that that kind of points you in that direction. And I, and I, it's, it's a, it's a good thing and a bad thing because not everybody's, not everybody's cut out for this gang. But we did it. We didn't have any other choice. We were broke and hungry and we made it work. And we can dive deeper into that. But it was a journey, let me tell you.

[Jaron Suster]

Yeah. Well, it's very interesting what you can do when you reach that point of we have no other choice. We live in a very comfortable society, especially here in the US where most people never get put in that position. And I think that's what holds a lot of people back, is they don't feel a necessity. So if you can't create the inner drive to want more without pain, then you pretty much have to wait until you have pain to get more. And that's a very place, very, very hard place to be. But when, when life throws you, some people just get thrown there like you're doing the right things and you just, you fail because you were trying something very hard. It gives you this motivation to go and achieve more than you ever have before. And for your case, it was an external factor. And so you had to go through the Great Recession of 08090 10. You didn't know it was coming, you didn't cause it.

[Redfin Representative]

Right.

[Jaron Suster]

But you were in the marketplace at the time and you had to navigate it. So what was that like? I don't get to talk to investors all the time who live through that. What was that like going through all that, you know, compared to where we are today?

[Mark McMahon]

You know, it's interesting because, you know, and first off, let me preface it by saying, I'm so glad it happened to us. The worst period of my life ended up being the best. And it was horrific. It was horrific. You know, cars repossessed, you know, people knocking on the door and the whole nine yards. And had we not gone through that hard part, we wouldn't have what we've got today. You know, I think, you know, hard times make strong people. Is that the same? I can't remember. There's so many different little sayings out there about it, but you got to go through the crap. You really do. You really do. And you learn. You have to learn to appreciate it. I think what's going along on now with a lot of younger investors and. And it's a really. It's a dangerous place to be for a lot of them because they don't really listen to the folks that have been through it. You and I sometimes is. They go out and buy properties that don't work because they want to get involved, and they find out later on that it's draining their bank account just to own that property. And then they end up quitting and saying real estate investing is stupid and never doing it again. And it's because there's so much misinformation out there about it. Investing is very simple. You and I both know that, right? It's a couple of things. It's always looking and having a money source and educating yourself. If you can do those three things, you're going to do fine. But most people skip the education part. They don't find the money, or they use their own money, or they do all kinds of stupid things and they're not looking for deals. It's like, yeah, you know, Mark, I've been looking for properties all year, and I haven't been able to find one. It's like, oh, man. How many offers did you make? I made. I made seven offers. Seven offers last week. No, no, seven offers. It's like you're. You're wasting your time. So. Sorry. I get off on tangents.

[Jaron Suster]

You know, it's funny. I mean, I cold called for four hours straight the other day. I hadn't done it in a while. We got teams of people who do it for. I just woke up and I was like, I want to cold call today.

[Mark McMahon]

You want to cold call? Wait a second.

[Jaron Suster]

I wanted to cold call because that's how. That's how you find deal. I've been in sales my entire career. So whether it's the business world or whether it's real estate, I know that Associated on the other end of the pain of cold calling is money.

[Mark McMahon]

Yeah. Yeah.

[Jaron Suster]

And it's the pleasure paying law where if I put myself through enough pain of this cold calling, there's going to be some pleasure on the back end.

[Mark McMahon]

100%.

[Jaron Suster]

I call for four hours and I think I got five total answers. One lady to schedule a meeting with. The rest of them were no, that's good. And that were no answers. And that's a good day.

[Mark McMahon]

Yeah.

[Jaron Suster]

And to your point, people who don't really understand the game and it's okay, they don't know. That's why we, we're talking right now, so that you can learn from us.

[Mark McMahon]

Yeah.

[Jaron Suster]

It is a very big volume game when it comes to finding deals to invest in. In real estate, you have to analyze deals daily. Like you just said, you have to always be looking. Then you got to know how to run those numbers. And as soon as those numbers make sense, then we make an offer at what the number needs to be for us to make a deal. Now, to the point that you mentioned earlier, there's a lot of people, I think that we're so antsy to get into real estate because it got real popular. Remember when the prices started going up in 20, 21, 22, everybody wanted to get in. Well, yeah, it was, I want to say it was a bad time to get in, but it's interesting that the masses want to get in when it's actually skyrocketing. But then when it's back down and it's slowed down when, when, when it's the real good time to buy, like I think right now is at least over the last three years. No doubt right now is the best time to buy because there's the least amount of homes sold currently since 1995. And so the market slowed. But nobody wants to do real estate right now because it's not popular. But when it was, people wanted to jump in and they were just buying properties that they had no idea if they were going to make sense or not. I, I talked to so many people, Mark, who think that cash flow is rent minus mortgage. That's it. And I'm like, bro, you are going to lose lots and lots of money. The real estate has to be respected. It needs to be pursued because it will completely change your life, but it has to be respected because it has the power to change your life negatively if you do not treat it the correct way.

[Mark McMahon]

So I have a little formula that I use when I'm looking at properties. And to your point, your Analyzing properties, you're making offers. Guys, that's like baseball practice, right? You want to be a good baseball player, you got to practice every day. What did Kobe do, go in and shoot the 80,000 shots a day or some crap like that? I don't know. But if you're not sharpening that sword every single day, you're going to fall behind because that teaches you all the little market nuances. And everything too is you're, you're learning things from real estate agents that you're talking to. You know, 80% of our deals come from real estate agents, me, whatever. And, and you got to listen to people. You know, you got to find the right people to listen to, but you got to listen to people. And then I was going to say, you know, I, I love what you said about people buying properties. It's like, you know, rent minus mortgage or mortgage minus rent or rent minus mortgage. Yeah. And it's really, it's a really simple formula. 40% of your rent, 40% of your rent minimum is going to go to expenses, not including debt. Not including debt. So guys, to write it down, 40% is going to go to property taxes and maintenance and, and capex and insurance and management and repairs and whoopsies and all kinds of things like that. Add your debt on top of that, that's your mortgage payment. And that whatever's left over afterwards is your cash flow. So typically, you know, we do cash flow. We do cash flow much lower than most people because we're west coast. So our formula is scary over here. You know, we're an appreciation driven, invested investment. But would you agree with that?

[Jaron Suster]

I would. Oh yeah, no doubt I would agree with all that. And I would venture to say, and I'm gonna go against the grain here and probably gonna get some angry comments.

[Mark McMahon]

Do it square peg, boy.

[Jaron Suster]

90% of the time, maybe higher. In the majority of real estate deals, cash flow is a defensive metric and it's not where you build your wealth offensively. Oh, that's.

[Mark McMahon]

Yes.

[Jaron Suster]

After being talked about that a long time. Do you, You've been doing this 18 years. You've been a contractor for 41, 100. What's your take on that?

[Mark McMahon]

So my take on that is. I'm so glad you brought that up because it's something that I was always reluctant to talk about because you keep in mind, Jaron, right now I'm in a space where I'm getting kind of close to where I'm making some strategic investments right now and things like that in my online Persona I'm not. I don't have anything. So I want everyone to know out there, I've got no agenda whatsoever to be online anymore. I don't. I've got a show. I've got all kinds of stuff, but I have no agenda anymore. I don't. I don't have anything. I'm not selling anything. I'm not promoting anything. I'm just helping. But everybody that's out there right now that wants to get into this game needs to realize that if you want to get good at it, you got to practice, practice, practice, and you've got to be realistic about your numbers then. Most people are not. But the practice part, and I'm glad you brought that up, practice is so important. I mean, I doorknock. I'm 62 years old and I still doorknock, and I get deals from it. So it's. It's whatever works, but you got to practice your craft. It's. It's not one of those things where you can just kind of sit back and, I'm gonna buy. I'm gonna buy a property every year. It's not that easy.

[Redfin Representative]

Yeah.

[Jaron Suster]

And that cash flow, that cash flow piece is. Is the defensive part when you're running those numbers. I. People will. They'll be like, hey, man, I'm only buying a property for cash flows. 400, 500, 600 bucks a month. And I'm like, okay, well, you're going to miss out on a lot of great deals, cash flow, at least when we're starting, in my opinion. Now, if we're talking about an Airbnb, we're talking about. There's different scenarios where you're buying certain assets for a high cash flow number.

[Mark McMahon]

Yeah.

[Jaron Suster]

Let's say you're looking at the. The residential single family home, or whether it be a duplex, triplex quadplex in the residential space. There's a really good chance you're not going to hit high cash flow numbers at the beginning of owning the property. Agreed. There's a very strong chance. But what that cash flow does is it protects you from the downside while tenants are paying off your debt and the property's going up in value over time. Now, rents based on historical data are going to continue to increase based on history. Rents are going to go up over time. So what's this going to. What's that going to do to your cash flow? It's going to increase over time. But the whole point is, how can this money coming in protect us from the things that happen, you know, a Water heater going out, maintenance repairs that we didn't account for in our pro formas while we build the spread of net worth. Because every deal I've ever been a part of, mark every one of them, even my high cash one deal, I've had mobile home parks at cash flow, 4 to 5,000amonth. I've had Airbnbs that are right at a thousand a month. They were all fantastic. You know what made me wealthy off of those properties? The, the, the appreciation gap over time, going up in value while potentially paying down my debt. Every single property, from the $50 a month in cash flow properties to the four to $5,000 a month in cash, it can't compete with the spread.

[Mark McMahon]

Same with me. And the funny, the funny thing is is people will get into this looking for cash flow and sometimes in some areas it's not that available. And another thing too, and I'm not saying don't look for cash flow, but you know, appreciation is a very real thing too because this is a long term thing. But if, if, if you're looking at your cash flow. So I'm a big proponent of never, never quitting your job, your job until you've got like twice the amount of cash flow and it's been regulated over a year. So in other words, you have to understand that rents, you know, you might be getting $15,000 a month in cash flow from your properties in one bad month. You know, three air conditioning units put you in a tailspin. So I strongly suggest people do not touch the rents that are coming in for the first year or two and build up that war chest of cash so that when bad things happen, you've got enough money. So in my 40% rule thingy, I put in for capex and repairs every month, whether I've got them or not, right? And I don't stick to this anymore because I've got enough money in the bank that whatever comes up I can cover. But I certainly do stick with the rule that I really don't touch my cash flow. You know, that's something that I bank for another day. I've got businesses that bring in lots of money, I've got other things that do things for me. And my real estate has become more of a tax haven, so to speak, than a source of income. And I know that's disappointing to some people, but as your business grows, I'm going to be a lot of tentacles out here. As your business grows and your circle of friends and colleagues grows, opportunities are going to come to you. If you're in this business long enough, you talked about a mobile home park that didn't just land in your lap. You know, you, you have other businesses that you do right now that are related to real estate investing. You did not have those. I've known you since the day you began. I remember you started following me. I didn't even know who you were at the time. And, and you were commenting on all my stuff, and I was like, oh, I like this guy. This guy's kind of cool. He's really nice.

[Jaron Suster]

From South Carolina.

[Mark McMahon]

Yeah, he's, he's, he's, you know, and then look where you're at now. And it's like, I'm so happy for you. But that's, that's the idea behind real estate investing. It's going to open a lot of doors for you, and you need to make sure that you kind of turn that knob and open that door. Don't be afraid to do it. I'm looking. You know, I do flip still, but I only do really, really profitable flips. I won't touch anything under $100,000 net profit, and they go much higher than that. So you'll evolve over time. You'll evolve over time. You know, service businesses, all kinds of different things you can get into. And I don't mean to be so broad, but people are so narrowed down on that cash flow thing, you know, and that's just that small, small piece of it.

[Jaron Suster]

Small piece of it. I love that there's so many opportunities that open up through networking. And you're right, I still do it to this day when I go into new endeavors. I know that it's going to evolve over time because you just meet people who give opportunities and you run into things, situations. But when we set out, we get such tunnel vision. But I think the biggest thing to take away is we're going to get upside with owning this asset. This asset has been giving upside to people who've owned it since the beginning of time. So part of our job is how do we mitigate the downside? We can mitigate that downside. We're going to win on the upside. We'll be right back with Mark McMahon.

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[Jaron Suster]

Welcome back to the Rich dad real estate show. We're talking about the good news and bad news of real estate with Mark McMahon. So, Mark, you've done a lot of different deals over the last 18 years. How did you get started? Tactfully when you're like, all right, your wife and you were ready to jump into this thing, what was the strategy that you deployed?

[Mark McMahon]

Huh? Work. You know, it was, it was pretty simple. We did a, we did this. It was a competition at that investment club for women thing that I talked about earlier. And it was, it was a course I signed her up for. She didn't know about it, but I signed her up for it. My follow through is not so great, so I had to get her in there. And the, the competition was to get as many houses under contract and 60 days, I think as we could. And so what we would do is I'd go Out at that time I was, I found work. We hadn't started investing yet, but I had found work with the banks doing property preservation for REOs for foreclosure homes. So I was changing lots, remodeling them and getting them ready for the real estate agents to put them up for sale. Wishing I was the real estate agent that got the listing, but I was the one that got the crap. You know, eventually I started getting some stuff, but that in the beginning now, so we would do that all day. She would, she would run the back office for that and I would go out and do all the work with a couple of guys and then I'd come home at night and we'd stay up till probably 2 o'clock in the morning making offers on listed homes. And at that point I didn't know what wholesaling was, but that's what we were, we were finding houses to, for, for the person that was, was teaching the course. We were finding them houses to flip. So we were getting paid a fee if we found something. So we ended up getting two houses under contract in the two months and they ended up buying them. And so we won the contest. But it took us from probably, you know, 7:00 at night till 2:00 in the morning, five to six days a week to get those two houses under contract. And you know, we had sort of a light bulb moment and that's when the tactical stuff started coming in. Okay, well, why can't we do this for ourselves? Because we were making three grand on each one, which was, which was life saving. I mean, we got that first check in, we can buy whatever we want at the grocery store.

[Jaron Suster]

No, it wasn't goodbye tonight, baby no.

[Mark McMahon]

I mean we didn't even, we didn't go that big. But I mean, before that it was, it was literally, okay, what are we going to eat this week? What are we going to spend our money on? And you know, as the cars are slowly leaving, we were going through all that financial crap at the time. And because it wasn't paying, you know, we had a house and the toy hauler and the truck and all that stuff from my contracting days. So that stuff was all kind of slowly going away. So tactics had to be, okay, what do we do to do that? But for ourselves, because we knew these guys were making 30, 40 grand on their flips and I'm a contractor. So. Okay, what's the one thing missing? It was money, right? It's always typically money. If you can work hard, you're 50% of the way there. Right. But the other 50% is finances. And we figured that out. So we started. And I, and I, and I want to preface this by saying private money is a dangerous, dangerous tool. And you know as well as I do, I got semi famous for talking about private money for all those years. Right. And now I've kind of backed off on that a little bit because I think it's like heroin, man. You use it, it's amazing. But it can kill you. Right? It can kill you. Or fentanyl, I guess, would be the more appropriate thing to say. And I see so many people fail by using private money because it's not their money and they don't treat it as real. But that was the component that we needed. So we started raising private capital. And I'm happy to say after nearly 18 years of investing, none of our investors have ever lost a penny. However, we've lost somewhere in the, in the, in the realm of a million dollars. And that's a million dollars that we had to come up with out of our pockets or by selling a property or whatever the case may be to pay our investors off. So they never knew we were in trouble. And every investor we had back then we still have today. But unless you've got the intestinal fortitude to be able to do that or the financial ability to do that, do not use private money until you do have that ability.

[Jaron Suster]

Yeah, it almost seems like Monopoly money. If you're not disciplined, you're like, oh, it's not mine. You don't feel the pain. You didn't work for it. I mean, you work to, to get somebody to give it to you. But I would say you don't. You have to treat that more precious in your own capital. And you, you give 100%. How, Joe? How'd you all lose a million over time? Just bad flip deals, not analyzing correctly. Project cost and more. Yeah, city permits.

[Mark McMahon]

Yes, yes, yes, yes. So, I mean, and it happens, it happens. I mean, the most recent one was there's a real, real famous airbnb area out in the desert called Joshua Truth. And we had a house out there that we were going to flip. And permitting. You brought that up. We had a permitting problem there that held us up for a year. And it was not even a big deal, but it's just the bureaucracy was crazy. So the house value went from $600,000 when it was done to 350. And so there was, you know, we lost 50 grand on that. That's, you know, that required A band aid that, that wasn't as painful as it could have been. But we had another large project in Hawaii. We were building four or five, six. Six houses and a couple of. Flipping a couple of houses. And we had done really well with this gentleman that we were partnered with over there. Then all of a sudden he took on too much and ended up just leaving the state. And I got stuck with all these projects. All my investors money were and so I had to go over and finish them up and we lost money on all three of them. So I had to write checks out of all three of them. So that was another, that was a quarter of a million and then a lot of little things here and there. But we've done hundreds of things. So it's.

[Jaron Suster]

Yeah, yeah. I mean you're net positive. But it's, it's always interesting to hear just those stories because everybody only hears the good stuff.

[Mark McMahon]

Yeah.

[Jaron Suster]

And you got somebody who's been doing this two decades, a lot of success, you know, can pretty much wake up every day and you know, do what.

[Mark McMahon]

He wants pretty much at this point. Yes, yes.

[Jaron Suster]

In still throughout the course of it. But I think the, the biggest thing is you made it right. You, if you once you kill your rep reputation and this is anything in life, this isn't just real estate.

[Mark McMahon]

Please.

[Jaron Suster]

All you have is your name.

[Mark McMahon]

Yes.

[Jaron Suster]

When your name has nobody, nobody respects or even more than respect trust you any longer, then you're pretty much done in the business world because every business transaction is done on the basis of trust. And so you look at and I can tell you examples just like Mark did of where I've used other people's money and we didn't. We had a limit of a deal. My investor got all their capital back plus their interest.

[Mark McMahon]

Yeah.

[Jaron Suster]

And to this day they still invest and the same things we. And that's the important part is, okay, this, you mentioned it earlier, there's gonna be ups and downs over time. It's gonna go up.

[Mark McMahon]

Yeah.

[Jaron Suster]

You're gonna have both. How do we do the morally correct thing? How do we operate with integrity? How do we do the right thing throughout our journey? Because those who continually do the right thing over time take care of the people, take care of their partners and are honest. They are going to win. It's biblical principles. It's, it's, it's principles that have been around the earth forever. You may take a hit immediately in the short term, but if you do the right thing, eventually you're going to come out on top.

[Mark McMahon]

Don't put yourself in a situation where you can hurt somebody. Right. So in other words, don't start off with private money. Save your money. Put 20% down. You know, do it the old fashioned way. I don't suggest anybody does it the way that I did it. Desperation is a funny thing, right? But we were desperate and we, we didn't have the financial backing to make it right if something went wrong in the beginning. Thankfully the bad things that happened didn't sink us and we were able to sustain our payments to our investors. But had that not happened because we were not prepared when we got into this game. Had that not happened, we would not be investors today. Right. We would have been about three or four months of investing and that would have been it. So again, when you're just starting and investing, make sure that you've got another source of income. And I know there's people out there that are in the same situation as me or the same situation I was in and they want to get into this game. It's still possible. I'm not saying don't do that, but for the majority of the people out there, they do have a paying job, right? Keep that job, live on that income. Whatever money you make from investing for the first two years, do not spend a penny of it. Build up, build up that, build up your bank account. Don't, don't buy so many properties. I see people also over buying properties too. It's a slow thing. You don't have to buy every property that comes along. Be very, very careful and selective about what you buy. That portfolio is your retirement. It's your retirement. It can eventually be your ticket to getting out of the rat race, so to speak. But you're just trading it for another rat race. People think that, oh, I'm going to be a real estate investor. I mean, I've been at this for a long time and I'm just getting to the point now where I'm not working 60 hours a week. So make sure that you realize that going into it. It's an amazing thing. And when you're in control of your own time, that's also amazing. But it can also be, if you're not really disciplined, it can also be very difficult to stay in the game. So keep your job.

[Jaron Suster]

You know what escaping the rat race is? To me, it's doing what you love.

[Mark McMahon]

Yeah.

[Jaron Suster]

Because you're going to be, we were made to work. And so this notion of I'm just going to get to a point where I don't have to do Anything ever is going to lead to misery. It just is. It's going to lead to misery because that's not how we were created to do. And you're probably going to die early and you're going to have all these problems. You want to, you want to be able to choose what you want to do. That is what is.

[Mark McMahon]

Well, let me ask you something. What is retirement? I'm sorry, interview you? What does retirement look like for you?

[Jaron Suster]

Exactly what I said. So for me is being able to choose what every day looks like. Some days that's cold calling for four hours a day. Other days that's driving around looking for deals. Other days that's sitting and shooting content. Other days it's doing this, do that. The biggest thing for me was I am very passionate about real estate. I'm very passionate about helping people with their finances through real estate. Get to a place to where money isn't an issue. So for money was an issue for me. When I first came out of college, I had over a hundred thousand dollars in debt. 65 that of student loans, had a truck debt, had credit card debt. And I was making 45000 a year but driving a box truck at Centos. And so it was a problem. I was in big, big trouble. I was behind the eight ball. And so for a decade I've climbed out of that. For half of that I just paid off bad debt. People think, oh man, it's great to own real estate. Well, yeah, but for five years I was just making money paying off debt. Making money paying off debt.

[Mark McMahon]

Yeah.

[Jaron Suster]

And so I would live the blue collar life. Bunch of debt, middle class, middle lower class. And then I said I wanted more. So we worked to increase our income while paying off our debt. And once our debt was paid off for like holy crap, what do we need to do next? Real estate seems to have made people wealthy for a long time. So we got into real estate. And so today because of that, I am able to really, really choose most of the time. Not even, not all the time. Because you don't get to choose what every day looks like all the time. Sometimes your wife's going to tell you, sometimes your kids are going to tell you. Sometimes your customers are going to tell you. Sometimes your contractor's going to tell you. To this day, I don't have 100% freedom over what I get to do. Sometimes God's telling me to do. You just, you don't get to choose. You're not in full control. Sorry, you're just a little blip. On this earth for a very short amount of time and it's been here for a long time. But I, for me, I have four young children, to answer your question, in a roundabout way is being able to be there, be present with them for the things that matter and pour into their life. So I am the number one influence on them. And some random teacher at school isn't for me. That is my biggest why, outside of being able to help all the people from this brand and my own personal brand, that's. That's what it is for me. So it's not quitting working. It's doing things that I love for work because I love to work, and then being able to be there for my family. I love the dream life.

[Mark McMahon]

And see, you didn't one time mention a Lamborghini or anything else. So this is not your audience. That's not, that's not the audience I want to reach out to necessarily is the people that want the Lamborghinis.

[Jaron Suster]

It's empty. They're going to be miserable in a couple of years.

[Mark McMahon]

That's why I think with real estate, investing, any other business, you do work backwards. Start here and work backwards.

[Jaron Suster]

Yes.

[Mark McMahon]

I think a lot of people say, oh, I want to make a lot of money. Well, let's dig into that. What does that mean? What does a lot of money mean to you? I want to make a hundred thousand dollars a month. It's like, okay, let's talk about what you're going to do with that hundred thousand dollars a month. And it's like, well, what do you like to do? Well, you know, I like to go this and that and the other. And it's like, okay, so you like to go to your kids sporting events, you like to do this, you like to hang out with family, you like to go fishing. You like the blah, blah, blah, blah, blah. And you got to be based in reality too, because you spend most of your time doing those things. And so you figure out, okay, I actually need about 15 grand a month realistically, to get to the point where I can do all those things that I want to do. And so that's why I say work backwards. So look at what you really, really want to accomplish. Because, you know, buying rentals and things like that, you get to a certain point where you're just going to maintenance mode, where it's like, I'm buying another building to shelter my income from some other stuff. And you need to be really, really careful about that because so many people go into this and they can never achieve any goals. Because it's like, yeah, I want the Lamborghini, I want the yacht, I want this, I want that. You think you do, but really think about what you do. What do you enjoy doing? So, you know, base it on reality, not the dream that you're saying on Instagram and YouTube.

[Jaron Suster]

Mark, that's wisdom. Seriously, that is what you just said is true wisdom. Because people go floating through life thinking that they just want this certain dollar amount, but they don't really know why they want it. And they're at the end of that rainbow is emptiness. I'm telling you, at the end of that rainbow, you're going to be empty. You're going to be hollow. You're not going to be happy. I do a gratitude journal every day and every night. It's something that helps keep me grounded. It's very simple. It takes three minutes and it's all pre done for me. I think it's called the five minute journal if anyone wants to do that. I have no affiliation, but it's good for me because I can struggle not being present if I don't take the time to do that. I went back and I looked at the end of each day. It asked for the highlights of every day. Okay, do you know, I just wrote them down right here. The four biggest highlights for me now you do amazing stuff in your life. I've got to do amazing stuff. I get to travel and speak. I get to do all kinds of cool stuff. Here's my top four in my gratitude journal. Breakfast with my family that we cook and sit in the kitchen. Number two is working out at CrossFit with my buddies. There's three or four of us who eat daily. We have an absolute.

[Mark McMahon]

I'm out. I'm going to come out one day.

[Jaron Suster]

Please, you're going to whoop me. Mark62 and you can see his abs. You can't see mine. My third is my kids sports practice and fourth is date night with my wife. Date. Those are the top four things out of all the things that I've been able to do that show up the most. And so what that helped me realize is what's important to me, what fulfills me in life. And it really opened my eyes to.

[Mark McMahon]

Say if you had to put a dollar amount on that and realistically, if you had to put a dollar amount on what it costs and you know, you got to include your house payment and groceries and things like that, if you had to put a dollar amount on that, what would it cost a month for you to be able to enjoy the things that you enjoy the most. What would it cost?

[Jaron Suster]

I'm looking right now, you're at. Counting my house payment, 5,600amonth. My house payments, 3,700 because I have a big old house, but other than that, the rest of it is what's 56 minus 30 $700.

[Mark McMahon]

Yeah. So. So your goal, your financial goal is that's your financial goal, in my opinion, would be 10 to $12,000 a month. Yeah, because I want to double. I want to double everything because you're.

[Jaron Suster]

Not going to be happier. And there's other things I enjoy doing. I think everybody likes to travel, blah, blah. I'm talking about daily fulfillment to where you're just like. You go to bed at night, you're like, that was a good day. And then if I keep going, it's a community hangout, pickleball, my friends, and then lunch with buddies. And so the whole point is all of it is very, very simple. It's not my nice, you know, this, my, my nice that. I mean, my. My newest vehicles are 2019, so I don't even have nice stuff. My house is big and I got land because I just. Yeah, a big house because I got kids and land, but other than that.

[Mark McMahon]

Yeah.

[Jaron Suster]

Yeah. Anyway, we could talk about this all day. I love.

[Mark McMahon]

Yeah.

[Jaron Suster]

This is why I love having you on here, because you reinforce things that I'm still working through at 33 that I know to be true. But you can still get pulled to the shiny object syndrome if you're not careful. But hearing someone who's six. Listen, dude, listen. This is the way. I've been there, done it all. This is the way. That's very encouraging.

[Mark McMahon]

Yeah. Thank you. Yeah.

[Jaron Suster]

Well, Mark, thanks for being on today. It's a pleasure as always. Where can folks find you if they. If they want to follow up, ask you any questions?

[Mark McMahon]

Well, I live right here in Costa Mesa. If y'all come down, you just come come see me. No. Yeah. Mark McMahon Real Estate. You know, I post, look at my old stuff, go to YouTube. Same thing. Mark McMahon Real Estate. I've got a lot of tactical stuff in there that you guys can learn from. There's, you know, that's it, really. I. I still post occasionally when I get something that I think is worth talking about. I don't put out a lot anymore, but I've got thousands and thousands of posts, so go enjoy.

[Jaron Suster]

I'm thankful that I was able to pull you back onto the world wide web for 30 to 45 minutes today.

[Mark McMahon]

I had fun man. Thank you.

[Jaron Suster]

And he's three hours behind. We record these at 11am Eastern. He did this at 8am his time and he had already been up at 5:30, 62 years old to do his workout. The man is he's just a stud. I'm so glad you joined us today. So Mark, thanks a lot man. Look forward to talking to you soon.

[Mark McMahon]

Thanks bro. Peace.

[Jaron Suster]

Thank you for tuning in to today's episode of the Rich Dad Real Estate show where I Talk with Mark McMahon and the strategy he's used to invest in real estate for the last 18 years. Guys, if you have not already, go down to the show notes and grab my ebook how to buy your first investment property. It's going to walk you through all the steps you need to get started in this amazing asset called real estate that can completely change your lives. Thanks for tuning in this week. I'll see you next week.

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