Managing Real Estate Investment Strategies with Marck de Lautour – Part 2

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Marck, is Founder and CEO of SBD Housing Solutions, a Real Estate Investment firm based in the Kansas City area. He has been investing in real estate since 2002 and has successfully flipped over 1,800 homes in the United States of America. His property management firm now manages over 650 rental homes.

Marck’s investment firm specializes in delivering quality rental investment opportunities to passive investors looking to deploy their capital outside of the stock market into alternative investments. The SBD team’s mission is to help investors deploy $1 billion into Real Estate by 2030.

He also loves to invest in multifamily apartment complexes and has successfully raised over $10mill to deploy into assets through the Midwest.

His expertise is wide and diverse. Marck’s Beliefs In Real Estate include:

1. Real estate is a safe investment vehicle.

2. Rental real estate is a long term play – so start early!

3. Real estate is best done at scale – so buy as much as possible.

4. Good Real estate should never be sold.

5. Real estate provides great tax benefits.

6. Real estate investments can always be cash flow positive.

7. Good Real estate can handle 80% leverage, if needed.

8. SFR Real estate is less impacted in a downturn.

9. Real estate is a basic necessity (e.g. food and shelter!)

10. Professional Management decreases the 2 biggest killers of cash flow – vacancy and maintenance.

As a company, they keep to a small group of core values. Accountability, Commitment, Communication, Professionalism, and Quality.

Episode Notes:

Narrator  This is The Norris Group’s real estate investor radio show the award-winning show dedicated to thought leaders shaping the real estate industry and local experts revealing their insider tips to succeed in an ever -changing real estate market hosted by author, investor, and hard money lender, Bruce Norris.

Joey Romero  Welcome back to the Norris group Real Estate Radio Show. This week we continue with Mark de Lautour CEO and founder of SBD Housing Solutions.

Bruce Norris  So, here’s a good question in 2000,I mean, you had trustee sales declined from 2001 to 2007 But then they exploded in 2009 to 2012?

Marck de Lautour  Yes.

Bruce Norris  That doesn’t mean they were worth going to. You might have had REOs way cheaper than your opening bid. So, just curious, did you during that cycle, did you end up finding more deals as REOs and short sales as you did as, the at the courthouse steps?

Marck de Lautour  Now it comes back to my mile deep, that was a massive opportunity for me at that time. So, the answer is a small fraction we got as REOs in MLS, they were still getting multiple bids, but we would show up at the courthouse steps and just have one or two people. So you know, that was where we were getting homerun deals, quite frankly, could have just taken them from there, put them on the MLS and made money. But now we pivoted and that’s kind of where the turnkey provider mentality came from. Because at the time, you know, as you know, when the market tanks, the one of the first things to dry up is financing to, you know, to, to flippers, and, you know, the banks were no longer lending to us in the same capacity and really shriveled up pretty quickly. You know, real estate, single family was kind of a four letter word inside the banking community. So, we needed capital and so one of the ways I did that was went back to, you know, people that had seen me do what I was doing it heard the stories about the homeruns, I was getting on the courthouse steps and said, Hey, if ever you can find me a deal, let me know. So, I started saying, Hey, thanks for lending to me, but there’s still deals and I know how to buy and rehab and manage, how about we build you a portfolio. And so I just got a few really good buyers and expanded that base. And so now, you know, to this day, we’ve been kind of steady to that task of buying a house rehabbing it, get it rented out, and then selling it to an investor, you know, as a turnkey, done for you portfolio and some of our investors are up with they have, you know, 40 50, 60 homes, that in their portfolio that they’ve been buying since 2010 until today and just continue to change their family tree by investing in single family.

Bruce Norris  That’s a, that’s a pretty amazing thing, especially since they didn’t have to locate the property, they’d have to have the experience to fix it. And it probably changes what you can the amount of homes you can buy. You’re not necessarily having to resell everything or have a margin, let’s say as a if you were buying it to fix it, to sell it in the marketplace, you have a ready willing buyer. I just think it’s probably, it’s one of those business models that are, is very sustainable, because you’ve got a clientele that’s not trying to, trying to chase deals, they’re trying to chase inventory, they have no access to getting it there themselves. And they want to…

Marck de Lautour  You’re right now…

Bruce Norris  …that’s a long term.

Marck de Lautour  Yep. Know that you’re exactly right. That’s one of the things that I think gives me comfort in any of these, you know, times where we don’t quite know what’s coming down the pipeline is that if we stick to our model of buying homes, you know, $240,000, in, you know, between 100 & 240,000. And in the Midwest, they’ll always be you know, quality rental homes that we can sell to investor base. So, we’re kind of cheating, we kind of already sold the asset as soon as we buy it first.

Bruce Norris  No, it’s great. It’s a very smart, it’s a very smart business model. And it’s nice that it’s a smart decision on the, on the part of the buyer that buys it from you, when 2009 half and I recall having lunch with a gentleman named Mike Cantu very successful real estate investor. And since I had seen it coming, I had gotten out of harm’s way. And the first 10 minutes of lunch was talking about all of the people in our lives that were caught off guard and that were devastated and all that. And then the next 50 minutes were just about hey, how are you doing? Because our world was different. Because we had sustainable rents. We had our monthly not covered. And that’s a big deal. You know, to be able to provide that for people in a system where they can do that on their own. A lot of them. See what’s interesting about your client is most of them not are not really into real estate…real estate. Yeah, that’s, that’s interesting thing.

Marck de Lautour  Yeah know, our ideal client is you know, dentist, doctor, lawyer, accountant, someone that’s, you know, making good money and thinking, is the stock market really worth the gamble? Why am I putting all my faith in these this roller coaster ride and living and dying by having to watch CNBC all the time to see if we’re going up and down. Look there’s a time and a place for the stock market but I believe that the, you know, the benefits of cashflow depreciation and appreciation that you can get from real estate and of course, leverage, you know, being the fourth wonderful component of real estate, you know, is, is why I’m encouraging a lot of investing activity, you know, in through our office and trying to get people to deleverage from the vagaries and the and the risk of the stock market, understanding that real estate can be done. The reason it hasn’t been done, I think, quite frankly, our real estate industry that you and I operate in verse has done a poor job of catering to high income high net worth individuals that want to get into real estate, it’s always been a, you’ve got to hassle with go and find the, you know the deal or go find a realtor that you know, and everyone’s a realtor, right. So, you know, get a realtor that may find you a deal may not and then as soon as the transaction closes, then they leave you at the altar. And then you’ve got to go find construction people to rehab the house, then you got to find a property management company and they do one or two of these and they think oh my gosh, real estate’s not for me, this is a nightmare. And so yeah, there’s been a revolution turnkey revolution of people that are providing this ‘done for you product,’ that when properly managed, again, it’s one thing to just sell someone a house, it all comes down to property management, you’ve got to have in-house property management that that offsets the two big killers of cashflow, which of course, you know, kill any real estate transaction, which if they can see maintenance, but if you can control vacancy and maintenance, real estate is a pretty profitable venture.

Bruce Norris  A lot of that too has to do with what you’ve chosen to buy, right? Where you’ve chosen to buy it. So, location has a lot to do with the hassle you’re about to experience.

Marck de Lautour  No doubt, no doubt.

Joey Romero  What, Marck where are you guys buying everything right now.

Marck de Lautour  So, we’re in Kansas, in Missouri, we’re also in Alabama, and looking at opening up markets in Tennessee, and Northwest Arkansas round where the Walmart and Tyson plants are. So, yeah, just in the Midwest, we tried and failed up, you know, we’ve, we’ve kind of scraped our knees and elbows in a few areas, we were up in the Quad Cities market up in Iowa and Illinois. You know, anytime we go into a new market, we always do it ourselves. First, before we sell an inventory to an investor, we want to make all the mistakes so that our investors don’t have to. And so we went up there and boy, the bureaucratic red tape and that little town up there was too much to overcome, unfortunately. And you know, when you have to wait a month for an inspector to come inspect the electrical, it just to your point, I think we were talking earlier versus just sometimes, you know, the supply chain and the labor constraints, such that we’re getting very difficult for the actual construction work to get done and ended up having to pull out so we did 10 properties up there, barely broke even and said, that’s enough for us. And we’re going to move on to other areas where we’re having great success in those markets I mentioned.

Bruce Norris  Yeah, but how great that you’re willing to stub your toe and not other people’s toe?

Marck de Lautour  Well, I think that’s the whole benefit of investing through someone else is, you know, we are the experts in the market, you know, and that’s why we like working with people that have no knowledge of real estate is because hey, you know who better to you know, we don’t want to say what color paint the auntie or what street you want to buy on. We are the experts who have done the due diligence to know that, what we’re proposing to our clients, so just quality rental properties in good markets that will stand the test of time. And then it just comes down to executing on the property management.

Bruce Norris  So, hence the title of your book mistake free real estate.

Marck de Lautour  Mistake-free real estate. Yeah, we’ve made all the mistakes so that others don’t have to, Yeah, it’s very much tongue in cheek, right. I mean, clearly, there’s a million mistakes to make in real estate. I’ve pretty much made most of them. Over the 20 years that I’ve been investing in real estate, but yeah, I think we’re at an age now where collaboration over competition is kind of our mantra, you know, understanding that real estate is a crock pot business, not a microwave business. I’m not telling people they’re gonna get rich overnight, but they can certainly get wealthy over time.

Bruce Norris  You know, what’s interesting is that real estate is a fit for my personality too, because I don’t like to watch. I’ve invested in stocks on occasion. I even though if I don’t have enough money to worry about I pay attention to the price, like six times a day. And when I own a house, I don’t or a trust deed, I don’t look at it at all. I don’t you know, it’s not why I own it. It’s just a different mentality for me, so it’s a good fit.

Marck de Lautour  Yeah. And once you get to scale, you know, we teach our investors scale with leverage and then start paring down debt. And I think once you get to over 10 houses, certainly over 20 you don’t even notice vacancy and maintenance are just two little line items in a monthly P&L And you’re get extremely steady cash flow. So those of our investors that have got over 20 homes, they just like, ‘gosh, sign me’ I just, you know, anytime you send them a new deal, they’ll ‘Oh, great. Thanks so much’, you know, sign me up for another one. Because they understand the benefits of of that, that long term appreciation. And my goodness, I mean, you know, I know that, you know, we’ve had 12 years of bull market, but still real estate has just outperformed. It’s been crazy.

Bruce Norris  Yeah, it’s been a great run. Do you have a favorite real estate trainer?

Marck de Lautour  Favorite real estate trainer? I would go with probably Steve Trang certainly helps out a lot of our local acquisitions agents here at SBD housing. John Martinez is another guy out of Springfield, Missouri. That is really good in the, in the real estate space. I’ve recently expanded my operation into apartment buying apartment complexes and I do that through a partnership with one of my mentors, Corey Peterson with Kahuna investments, and Corey and I are buying apartment complexes and so in the multifamily space, he’s certainly been someone that I look to for guidance and wisdom for sure.

Bruce Norris Okay. What about outside of the real estate world, any influential mentor, outside of the real estate world?

Marck de Lautour  So, I’m a guy that reads a lot. And one sometimes people sometimes I have mentors and they don’t even know it. So, I think my most recent one in that regard would be Keith Cunningham. The Road Less Stupid is a phenomenal book. I actually I’m always read my books, but occasionally I’ll download the audio off. I’ve got a long car ride and my goodness, just at the end of every chapter, have you read the book Bruce?

Bruce Norris  No, but I’m about to.

Marck de Lautour  Oh, yeah, it’s phenomenal. So, as a business, he just talks in general about business ownership. He does technically have a little bit of a real estate background he dabbled in real estate I think in the Phoenix area. I said dabbled he had a big real estate company but I think he owns multiple companies. But Keith’s actually claim to fame. I think he was the the rich dad that inspired Kiyosaki Rich Dad Poor Dad book, or at least had some collaboration along those lines. But you know, Keith ends every chapter by saying, ‘now go think you’ll thank me later.’ Meaning, it’s easier to do than to think sometimes slowing down to think about something. And I think you could appreciate this because you’re a guy that likes data and charts. Sometimes if you slow down and think before you act, you know, good things happen. And he’s a guy that has written I think it’s a 57 chapter book called The Road Less Stupid, and kind of similar to mistake for real estate where I’ve made all the mistakes, I think he’s made a lot of mistakes. And it’s just telling people how to avoid them, but very influential book that I constantly go back to. And then I would be remiss, also, if I didn’t mention, I do have a CEO, coach and mentor, Daniel Marcos. He is the CEO of Growth Institute. And Daniel and I have, you know, a call just every other week, he keeps me on point, I bounce any ideas off him. He’s been instrumental in my growth as a leader now that I’ve kind of elevated to the CEO position. He certainly helped in you know, it’s been a blessing for me, and over the last 12 months.

Bruce Norris  How have you avoided the hard money loan business?

Marck de Lautour  You mean, as a lender?

Bruce Norris  Yeah.

Marck de Lautour  You know, I think it’s probably something I should have got into. You know, I certainly understand that, you know, selling I guess it’s because as a turnkey provider, we’re not we don’t really have those relationships with, you know, other fixin flippers. You know, we were the guys that were doing it ourselves. I’ve got deep banking relationships that that we use on our own. And so I’ve always had the the sale on the back end secured by my turnkey provider, if I was selling to investors, you know, I certainly would have seen the light I have a lot of friends that are in hard money, you know, with with guys that are lining up to not only buy the inventory from them, but also the hard money. So yeah, because we don’t wholesale. That’s probably one of the reasons that we’ve avoided it, but I love the business model. You know, clearly the money’s in the money. And, you know, I guess I would say, I’m still a young guy, there’s still time, Bruce.

Bruce Norris  You know, some of the stuff you get involved in is it seems quite accidental, honestly. That’s the journey for me, it seemed like that, you know, I never intended to teach. That was accidental. And I never intend to be in a hard money loan business and that sort of, it just, it’s kind of domino. It’s been. It’s been a great journey, though.

Marck de Lautour  I think real estate offers you a great variety. It’s just you know, it’s pivotal to so many different industries between mortgage and title and lending and, and appraisals and inspections. I mean, there’s just so many variables, property management. Yeah, I think it’s a wonderful segue to for people to expand and grow their options.

Bruce Norris  Collective Genius, we’ll kind of wrap up with this. What, when did you was after your trustee sale business sort of got depleted by the course of things, Auction.com, and so forth. So, what did Collective Genius have to offer you that really has made an impact?

Marck de Lautour  Yeah, so a backup and say it was actually before that, thankfully. So, I joined in 2016. Business going well, buying north of 100 houses a year on the courthouse steps. And again, you know, people are putting your life at a time. I think when the pupil is ready, the master appears, and Jason Medley, the founder of collective genius, called me up one day from a referral. And he was just speaking my language, he understood that I was just a lonely Entrepreneur on an island. I don’t know if you’ve ever felt this way, Bruce. But I was weighted down with, you know, the, the burden of having to be a funnel of top-down decision making, because I did not have any processes or systems or procedures. I’m 100% visionary. I struggle with implementation of accountability and systems and procedures, obviously, I did it. But the more you scale, and grow, doing it with two or three people that report to you is different than doing with a, you know, organization of 35 employees. And so Jason spoke to me in a language that, that I was just relieved that someone could relate to what I was going through. And so I went and investigated and suddenly found a group of peers and now, Collective Genius is, it’s an insurance policy, it’s my lifeline, it’s who I turn to when COVID hit, because you have the best real estate minds, guys that are flipping, all of them are flipping over 100, some of them 500 homes a year, some I think there’s a guy that’s wholesaling, you know, 10,000 homes a year in this community. And so you have the biggest minds of self storage of fix and flip wholesalers, turnkey providers, property managers, all in the same community from different marketplaces that will come in with the idea that you drop your ego at the door, and you’re there to help each other, survive and thrive and protect yourself from, from what’s coming, hey, whatever your wins, what are your losses? How can you learn and grow together? So, I was in there in the room, and I was seeing, obviously, what I can’t do is pay attention to the people that are operating on the coasts, I think we have a mutual friend and Phil Green, who’s a part of the group, he operates down in San Diego. And, you know, Phil was kind of, you know, feeling a little bit of a shutter in the market, I would pay attention, because I knew that that shutter would come, you know, start hitting east and we hit Kansas City soon enough. And so those are the relationships that I now value. We spend one week, every quarter together, we come into a room and have keynote speakers such as yourself, but more importantly, we, we present on something that’s going really well on the business and we ask for help with something that we’re struggling with. And that allows the veil of pride and ego to be dropped. So, that you can actually say, hey, shoot with humility, here’s what I need help with, who’s an expert in this field. And, you know, without without any doubt, there’s always someone that either is doing well or knows someone that’s doing well that can help you stumble from stumbling and get back onto the road of prosperity. Daniel Marcos, my coach talks about the valleys of death, meaning every time of growing and scaling, it’s not linear, but it’s you have these valleys of death that you have to get through. And I always find that when you’re going through one of those valleys of death, whether it be with an acquisition strategy, or sales, or HR, or property management or, you know, rehab, there’s always someone in the community that has been there, done that, and surrounding yourself with like minded smart individuals as a way to kind of fast track yourself to get through those valleys of death.

Bruce Norris  Do most of the members sign up year after year?

Marck de Lautour  Oh, the longevity of the group is something that you don’t see in typical masterminds. Yes, is the answer to that question. So, I’ve been in there six years now going on 7 and have now been elevated onto a leadership position on that, on the, in that group, but I am not even one of the most veteran. There’s probably at least 20 people that have been in there longer than six years. And I think the average life cycle of a mastermind group is typically around two years you get anywhere and you get out. But no, it’s massive, left this, lot of because this community there and this value that’s coming every single, every single time. So, yes, there’s a there is strong longevity in the mastermind group itself.

Bruce Norris  That’s fantastic.

Joey Romero  Mark, you’ve talked about the places that you guys are in and they weren’t exactly migration hubs in the country. Is it, Is it the, the price point or what is it that keeps you in those markets and not you know, going in Florida or Texas or Idaho, places like that?

Marck de Lautour  Texas is Texas, Idaho’s priced, what you’ll find is that it actually they do have positive migration though the sleepy ones under the radar, Joey, it’s a great question. But what we’re looking for is not your top 20 metropolitan areas, we’re looking for obviously cheap land, but with inflated rents. You know, the old 1% rule has kind of flown out the window, it’s very rare now that you can actually buy a house of quality, that you can get $1,000 a month of rent for $100,000 house, but we’re probably somewhere hovering around the you know, .87 to .9, where you would get for $100,000 house, you might get you know, 870 or $900 a month. So, we’re we’re still pretty close and they cashflow significantly better than in those other markets. We did operate down in Florida, we had a division down there and we still have a few rentals. But we’re not actively buying in Florida just because it’s extremely challenging on the buy side to make something cashflow as a you know, $500,000 rental home, you know, we look to deliver cap rates in the Seventh Street investors between six and 7% cap rate, oftentimes up to 7.3, 7.4. So, really strong returns. And we just can’t replicate that in these in, you know, the bigger markets that you’re talking about like Idaho, Salt Lake City, Phoenix, you know, Florida.

Joey Romero  Well, the other thing I wanted to say thank you, you guys were one of the first to commit to our I Survived Real Estate sponsorship. So, I wanted to thank you personally for, for that also.

Marck de Lautour  You bet. Well, that’s actually on behalf of the Collective Genius mastermind group. We’re proud to be hosting Bruce as our keynote speaker coming up. And yes, at least we could do. We’re excited not only to be financially supporting the event, but come along and gain from the wisdom that’s going to be shared at that event. We’re really excited and thank you again.

Bruce Norris  Our pleasure. Well, Mark, I have enjoyed talking with you today. Really, I think you got a brilliant business model and you’re doing a lot of good for a lot of people. So, that’s that’s really great.

Marck de Lautour  Elevating communities and simplifying real estate. That’s our two things. So, we’re trying to do both at scale.

Bruce Norris  All right, Mark, have a great day.

Marck de Lautour  Thank you, Bruce. Appreciate your time.

Bruce Norris  Okay.

Narrator  For more information on hard money, loans and upcoming events with The Norris Group, check out thenorrisgroup.com. For information on passive investing with trust deeds, visit tngtrustdeeds.com.

Aaron Norris  The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669.  For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.

 

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