Posted Monday, July 17th, 2023 by Enterprise Property Management
California to Memphis for a real estate tour. Investor Mac flew in from California to check out Memphis and join us on the podcast. Mac has an impressive background in banking and finance, and he’s also passionate about real estate. Aaron and Mac discuss their careers and experiences, including the financial collapse and unethical behavior in the corporate world. Mac emphasizes the importance of visiting properties and experiencing them firsthand before making investment decisions. They explore different real estate markets and the advantages of owning properties directly rather than investing in REITs. They also talk about their recent tour of neighborhoods in Memphis and the potential opportunities they discovered. Stay tuned for more episodes where they delve deeper into these opportunities and non-traditional financing.
Aaron Ivey
0:00:00 – Hey, thanks for joining us today. This is Aaron Ivey. Welcome to the Behind the Curtain Podcast. I have with me today an investor who I’ve been working with for about three months. It’s been a long time.
Mac
0:00:24 – Something like that.
Aaron Ivey
0:00:25 – I’d like to introduce Mac to you. Mac flew in a couple of days ago from California and I’ve really enjoyed getting to know Mac for the last two and a half, three months and apparently said something that was attractive enough to have him fly out to Memphis to sort of experience the city for himself. So thank you for coming to the podcast. Oh, thanks for having me. Yeah, it’s a lot of fun. Yeah. For the listeners out there, just want to let you know, Mac is a normal person and I almost hate to say that because Mac is actually extraordinary. He’s had an amazing history or career in banking and in finance. He is a constant researcher of trends, of concepts that help investors move forward in their investment process and he’s actually impressed me so much because he’s come to me with a lot of research that he’s done and he has a very colorful current career as well that we’re going to talk about a little bit. So, Mac, speaking of careers, what have your careers been? Like what’s led you to have an interest in real estate?
Mac
0:01:19 – I’ve always had a passion for real estate. I think it started when I started looking at structures and just liked the way they look and I always wanted to frankly live in a big house, right? Not necessarily a crazy mansion but I just need to have something bigger, something a little more where I can be free and be able to do what I’d like to do. So I think that started my initial interest in it. In college, one of the electives I took was Real Estate Principles, which is the initial course to get your real estate sales license. And so that introduced me to the concepts, to the terms, and then there’s Continuing Education after that. And I just took a liking to it and it was very easy for me. I never got into real estate sales, although I probably should have, but I didn’t. So again, banking showed up at that time and I went that path. So, and that kind of leads me into what my career started. So I started as a bank teller and moved up very quickly into being a personal banker for one of the big five. They’re still around today, this bank. And this was prior to the financial collapse, prior to Dodd-Frank. Things were very good. Yeah, things were very good at the time. So I was young, I was 20, 21, by the time I was a personal banker and we were doing large loan volumes on a monthly basis in the millions, each one of us. And our mortgage broker out of our branch was doing in the hundreds of millions origination so it was very busy it was very good it was very tumultuous to say the least and there’s a lot of stories behind that.
Aaron Ivey
0:02:57 – Yeah you had mentioned in the car yesterday some stories you’re very respectful you know of the people that were participating in these things but you and I spoke about you know some movies and some depictions of what you know the corporate world was like you know as far as like interpersonal relationships and maybe some unethical behavior and you basically let me know that you witnessed all of it which I think is extremely interesting you know looking back at that point in history pre crash post 9-11 pre crash and we were experiencing a massive boom California real estate was just blowing up and our company was growing at the same time there are a lot of people that were doing cash out refinance and we’re taking advantage of what is considered now to be normal interest rates and that’s that’s a funny juxtaposition we’re going to talk about a little bit because these interest rates really aren’t terrible people are just they are so used to paying 2.95 right now right so yeah the stories that you told me really gave me some her lit some credibility to what I’ve seen in television and film.
Mac
0:04:01 – And I was at the very bottom of it you know what we see in television and film, that happened way above me. Right. You know, I was just the lowly personal banker, opening checking accounts, doing seconds on people’s homes, lines of credit, loans, and then certain types of loans where you advance part of it and fix part of it. But yeah, we saw a lot of it happening. And there was a lot going on our end, too, that has never been depicted in media or in film, which maybe we could someday, but there’s more story there too, as we talked about yesterday.
Aaron Ivey
0:04:33 – Yeah, I think it was a really strange time, and I think that the people that were trying to process what happened during that time, they really wanted to move past it. Probably one of the most interesting things that you had told me, and I’ll just sort of end your experience based on this story, which I found very interesting, is that there was a probably middle range executive that ended up taking responsibility for many people that were above that person and is currently serving jail time. And this is a major national bank name. Like, I mean, we’re not gonna say it on the podcast, but if we were to say it, you know, people would be saying, oh yeah, I heard all these stories about that particular bank.
Mac
0:05:13 – If we said the name, anyone listening would go, oh yeah. Even if they didn’t work in it, even if they didn’t, they would know right away. And yes, that story, I mean, I sent you the article on it, and we remember this person very well. I guess I didn’t know this person directly, but they were on the C-suite list, and there were people above this person that a lot of us felt, frankly, they were the ones who were part of this also, and they walked away with their parachutes. But it is what it is. Well, the rest of us got either fired, canned, or run out for whatever reason. You stop, you don’t want to participate, you feel uncomfortable, they give you the invite to the party, you say no, and then suddenly you’re persona non grata type thing. All that stuff’s very real. And it extended into another industry that I was in after the fact, after the banking industry. Very similar, but not so much, so.
Aaron Ivey
0:06:05 – We’re gonna talk about financing in a coming episode, and so I’m excited about that, and I wanna touch back into your banking experience, because I really feel like a large reason why you’re here looking at me today is because you were immersed in banking, and you were immersed in financing. Obviously, you had an interest in that, but I think that that time really sort of molded and shaped your perception of what is possible. And that’s just such a really important point. What is possible is what investors should be considering. That’s what they should be looking at. What can I achieve? And so often, what we see investors do is they’ll freeze right before making the decision to buy their first house, or they get frightened by a banker that says no no we need this documentation or we need to show this these reserves in order for you to move forward and so they don’t think outside the box so one of the things that was really made me curious about you and your your direction that you’re taking right now even though we haven’t like made the jump yet it’s that you see the possibility in non-traditional financing and so we’re definitely going to get to that. One of the questions that I’ve got is, what made you decide that you were done with the sort of spreadsheet that we were working on together and you wanted to actually fly out? Like, what led to that decision?
Mac
0:07:24 – It kind of a culmination of things. When I first started looking at markets other than what I’m used to dealing in, I had specific criteria that I was looking for. I wanted to be out of the areas that I was and need to be in a certain price range. I was looking for opportunity for appreciation in the future, you know, on a 10-year time scale and I was looking for cash flow now. And so there were several markets that I had considered and would still consider and am considering.
Aaron Ivey
0:07:53 – Do you want to share those other markets? I’m curious. We haven’t talked about this yet.
Mac
0:07:56 – So Memphis was one of them, Dallas-Fort Worth, Detroit, Cleveland area and some places in Pennsylvania.
Aaron Ivey
0:08:05 – So we’re the only Sunbelt, so to speak, the only Southeastern market that you’re considering?
Mac
0:08:10 – At the time, yes. There’s some maybe outside of Orlando, but I didn’t really have it on the list. And a lot of it had to do with price range and comfortability with the area. And frankly, sometimes you just see something and you go, I want to look at that, right? Yeah. You just get a feeling, and then you start reaching out. And so this is where it ended up working. Yeah, I’m so pleased that you reached out to us. You know, there are some massive companies out there. I don’t know if you ran across any of them that are looking to sell, you know, real estate either from Memphis, you know, Memphis real estate from Memphis or like you and I were talking about Jeff Bezos, Amazon related company that was basically like roof stock and or something to that effect and you were talking about how few properties were available through that company and that’s a very interesting comment that you made as well that it appears that these large companies are not buying obviously as much as they were. A lot of coming soons on that website and very few available shares to buy. Right. So that was kind of interesting and it seems like you know if you look at real estate news and articles they want to lead people into buying into REITs. They want to lead people into buying shares. There’s a lot of securitization of real estate these days. A lot of big names, I’m not going to say any, but that are on YouTube and they’re on TV. They want to own and then sell you shares. There’s nothing that is pushing the individual to invest for themselves. And I kind of look at that kind of funny. I mean, I get these people want to sell a product, but there’s no real education to the individual to how do you do it yourself. And the ones that are doing that teaching are kind of, I wouldn’t say they’re frowned upon, but they’re not as advertised, they’re not as promoted as heavily. And I don’t want to buy into someone else’s project. I want to be a part of that project. You know, I’m not saying I don’t want to partner with people, but I don’t want to buy it like a stock. You know, I want to be in control of it. I want to make the decision on what I buy. I want to get the tax benefits and I want to have the pride of ownership. And so that’s one of the reasons why I’m here because I could very easily buy into a REIT or one of these things and get the same return or pretty close to it without any of the work, without any of the headache. I mean, the fees that, you know, any sort of fund or REIT that you would buy into, the profit, I know you know this but for our listeners, the profit that’s there, let’s say that you wanted to own real estate and so you had the option of buying 123 Main Street for $125,000, you understood your financing to where it was going to be profitably cash flowing. In year two, let’s say worst case scenario, the tax benefits that you get, the single person ownership, the operation, you’re the one in control of all the operations versus shares of a REIT for $125,000 where you’re having to pay annual maintenance, you’re having to pay transaction fees. Inside of the REIT itself, there’s a lot of the profit that’s taken out of that. It’s kind of like the difference between buying into a mutual fund, you know, or putting your money in a mutual fund or buying the individual stocks. There’s so, there’s more volatility with the stocks and more risk, but there’s much more profit realization with the stocks.
Mac
0:11:17 – Exactly, and it’s more liquid too. Yeah. You know, you buy direct real estate, you can choose when and what to do with it at any given point. You buy into someone else’s program, you’re stuck to their timeline, right? And it may not be the best for you. So for me, I wanna be more actively involved and because I like to research and follow the trends and everything, I feel I would better manage my own asset than someone else. And if I falter or fail, then it’s on me and I can accept that. But here’s the thing. I have met a boatload of property owners that don’t care, right? And hanging out with you, like, you care. You care a lot about people. And so the most successful investors that I work with are people that care about their residents. It’s people that care about the contractors that are in the property. It doesn’t take that much more time and energy to be a decent person, right? And you’re much more than a decent person. And so your temperament and your skillset, honestly, and your career history and your experience, all of these things are gonna lead to you being a phenomenal landlord. I wish that you’d write that book, you know, like, how to be a decent landlord. Maybe someday.
Aaron Ivey
0:12:32 – And I’ll join you with it. We’ll write it together. So we saw some of the city yesterday. Mac and I started a spreadsheet, I guess, about 60 days ago. I am so sorry that I was lax in the middle, probably 20, 30 days in, like, acknowledging it and looking into it. But you did a lot of your own homework. For the listeners out there, Mac shared this spreadsheet with me, and so we were able to see live changes. That it was an excellent way for us to remain creative. In the process, we used colors, and you, I think, had like 20 columns on your spreadsheet. So there was a lot of information there. And you really processed the reality of these properties that were available. And what’s really interesting, listener, is that right about, I guess it was, you were like, hey, I want to come out to Memphis, but you didn’t really pull the trigger on that and make the decision until we had processed probably two rounds of properties. Oh yeah, at least. Like what, something in there you were like, I got to go. Like what was it?
Mac
0:13:30 – I have this principle that we never pull the trigger on anything unless we see it, touch it, smell it. And that comes from partly my career after banking. I was in the auto business, sales and finance as well. We call it F&I. And we always told the customer, you have to drive the car. You can’t buy something without driving it. I can’t buy a house without walking it, maybe two or three times. I can’t buy a pair of pants or shoes without putting them on. It doesn’t make sense. You know, there’s so many regrets if you don’t do that and you might say, hey, it looks good on a new picture. It looks good maybe in front of me, but until I walk it, wear it, drive it, smell it, touch it, feel it, I don’t know for sure if it’s going to work. You don’t know it. And so many times we’ve done that, all of us, tried on that pair of pants, we walked that house, drove that car, and you realize, this isn’t going to work for me. There’s something about it that doesn’t work. And it could be something major, and it could be something tiny. But you have to get out there, you have to try it. And that’s the same thing when it comes to investing in a market. If I’m gonna invest in a market that I don’t live in or I can’t get to, I have to go there. You know, even if I can get to it, I still have to go there. So all of what we did is for not, if I come out here and it doesn’t work, you know, I don’t feel comfortable. If I don’t come out here and discover for myself if it’s the right place, and I start buying, I start investing, whatever we end up doing, I’m going to regret it if something fails because maybe I could have discovered, hey, maybe I shouldn’t have never pulled the trigger here from the get-go, had I just spent a week income out. Or maybe some of these things could have been mitigated had I spent the week in Come Out and I would have known do this, not do this, whatever the case is.
Aaron Ivey
0:15:20 – Yeah, so one of the things that’s really interesting just kind of hit me as you were conveying that is most investors do not visit Memphis. They just, they don’t come out and they rely on us as realtors to do a lot of the homework for them. So I have probably visited 1500 houses in my career, which never went to an offer. Or if they did go to an offer, we went to the inspection period and we never made it past the inspection period. We withdrew. So hopefully one of the things that you experienced with me yesterday is that I love testing the market. Like what you came out here to do is what I do every week. You know, sometimes three or four days a week. You know, going and taking a look at these houses, looking at the information, looking at the data, looking at what the seller is presenting, is this enough information, reading between the lines, considering cash flow versus purchase price as far as the monthly rental amount, like really helping investors see, because they’re not going to come out, what the opportunities are. So I really enjoyed yesterday and we’re going to head out again today. Yesterday just to give some context for where we were in the city, we saw parts of Northwest Memphis, parts of the western part of Memphis, mainly lower income or more blue collar neighborhoods and the average price range in those areas were anywhere from, like you found one for $11,000 that ended up being purchased, probably should be raised, but the average purchase price was somewhere between 30 and 90. Just regarding that neighborhood, what were your initial takeaways? Like, could you convey some of the experiences that we had when we were driving?
Mac
0:17:01 – We had some interesting experiences, very memorable. I’m still optimistic about certain areas, maybe not as a new investor to Memphis, or maybe as a more experienced. And I think the first house that we looked at, you said exactly what I thought, you know, when we’re in this house, is the way that we would make this work is if we bought the whole neighborhood and then rebuilt it, you know? And that’s obviously not something we could do right now, but that, I think, when the time comes, we could do something like that. And, you know, it’s a beautiful area, beautiful neighborhoods, and we could really bring up the standard of certain areas, you know, and it would be really nice. That’s something I’m passionate about and not realistic at this time. I think what it did is, it kind of, I think you wanted me to experience this, is focus more on the areas where we think we can have a better opportunity, right? More realistic. And it also enlightened me to a lot of things too, which was really interesting. Some of the neighborhoods that you have, we don’t have anything like that where I’m from. So it’s, or it’s very few and far between, you know, it’s not that way. It’s just very interesting to see everything and to get understanding. And it’s definitely helping me in my journey and with the knowledge I need to invest here.
Aaron Ivey
0:18:25 – It’s so funny that you should mention that lots of investors will call and or email and they will begin to collaborate with us on investigating Memphis and the possibilities in Memphis and they see these properties that are priced between ten and $50,000 and Richard remembers ten years ago. I mean 12 15 years ago we were able to find really quality properties that were in the $60,000 to $75,000 range and that same property isn’t out there anymore. In fact, for the people that bought properties between $75,000 and $100,000, between 2009 and 2013, they made out like bandits. I mean, just tremendous amount of appreciation. Obviously, the factors were geared more in that direction, just this absurd growth in value, but we don’t know when that’s actually going to end. I mean, we haven’t seen the net result of this year yet, you know. We were in some neighborhoods that had good opportunity. The reason that you had not experienced that probably where you’re from, I think, is that there is more of a capacity by either the city or the people that live in the city, you know, the government or the residents, citizens, to improve those neighborhoods. So some of the neighborhoods we saw yesterday, neither the city nor the people that live there have the capacity, the means to be able to improve those areas. And so we saw some areas where you would really have to invest your care into that neighborhood in order to improve it. And then one of the points that I brought up yesterday is Memphis is a little bit like a jungle in certain parts. You know, it’s very wet, very green, lots of trees. And so in these neighborhoods, you have to be vigilant or the jungle’s gonna come back and take it over again. You know, the trees are gonna grow up, the bushes are gonna grow up, the foot traffic is gonna come. We actually saw a very interesting house yesterday that we were very interested in, and then we drove up and what did we see?
Mac
0:20:20 – There were several reasons as to why I would be interested in it, right? But then when we drive down the block, you know, now the reasons are not to. We pull down, we come in off the main drag down the street and the gatekeeper, if you want to call it that, is there and immediately says something to us as we’re driving by and takes out his phone and starts to take pictures. And then we get to the actual property that we’re interested in and there’s clearly a union meeting or whatever you want to call it there. You know, the heads of state are there discussing their old news and new news, right? So we’re like, no, this is not going to work. You know, let’s just keep it moving. So that was very interesting.
Aaron Ivey
0:21:03 – Yeah, we saw neighborhood bosses is like one guy in particular, you noticed his, his clothing and you were like, that’s the guy. So yeah, the neighborhood bosses were there. And so we just, I just told him, I was like, do you wanna see, do you wanna do that? And he was like, no, no, let’s just keep going.
Aaron Ivey
0:21:22 – The one interesting thing about back two is that he has a knowledge just from being in California, the various gangs that are out there. And so he was pointing out various tags, you know, that were on buildings, that were on fences or whatever. And so it was insightful. Now, again, for the listener, I wanna make sure that you understand that this is only a small portion of the city of Memphis probably I would even just say 10 to 15 percent of our city. Memphis is a is a large geographical area like were you surprised at how big the city is for the population? You know
Mac
0:21:54 – I what I was surprised is how things change very quickly from one area to the next. It’s big but it seemed like I said it seems I wouldn’t say close together, but things change quickly. I mean, you turn one street and it’s a totally different neighborhood, you turn another and it’s something else. The city where I live, it’s more, I wouldn’t say overlapping, but it’s a smoother transition between areas, you know. We don’t have such highs and lows, I guess you could say. In Memphis, you can have high six-figure, low seven-figure homes, one block from where someone has a flag posted, right? Right, yeah. Someone’s banner is flying and you need a permission slip to go down that street. So, what I’m used to, it’s more smoothed out, right, from that regard. Yeah. That was new to me, but the bones of the city, driving around, the way the landscape looks, the way it feels, I like it. Yeah. Now, I’ve been to some places where you think it’s a nice place and you just you get Yeah, it doesn’t I don’t like it just like walking a house or driving a car you think it looks good You drive me like it’s not for me. Maybe it’s for somebody else. It’s just not for me
Aaron Ivey
0:23:01 – So, you know one of the things I think that we haven’t like crystallized this, you know, like in a phrase But one of the things about Memphis that’s very attractive to me is that there are people. There are a lot of people that live in this city. There are more employment, there are more art, music opportunities, there are more expressive opportunities, there are more creative opportunities, they’re just out there. And I think, forgive me for saying this, but I feel like our city’s a little bit spoiled in having all of these possible possibilities at their fingertips.
Mac
0:23:35 – Now I’ll say, one of the things I liked about driving around yesterday, you didn’t just show me houses, we did look at a lot of houses, but in between You took me to a lot of Historical types of things right we saw the hotel where MLK was shot. Oh, yeah, that was really nice and got pictures We went downtown on the main drag, and I said some to you this could be like another city That’s hustling and bustling you know with young people that have money that like to spend money, you know, to your point, there’s a lot of opportunity here. And it seems like, and maybe you can attest to this, and I don’t mean this in any negative way, but the people in the city don’t realize how much opportunity there is. And so it’s taking someone like me from outside to come in and say, there’s a lot of opportunity here. I mean, I’m going to take advantage of this, not in a negative way, but why not? And it’s only gonna help the city, in my opinion. It’s only gonna help the people here. There’s a lot of opportunity here. I don’t think a lot of the locals notice it, because you get set in your ways, you kind of blur the lines of where you are because you’re used to it. There’s a huge opportunity here, and it’s something I want to be a part of.
Aaron Ivey
0:24:49 – That’s awesome. Well, we want you to be a part of it as well. Why don’t we close out our episode for now? I’m glad that our listeners have had a chance to get to know you and a little bit of your optimism on our next episode. We’re just going to talk about some of the opportunities that you have seen here, and we’re going to juxtapose that with the previous neighborhoods that we were discussing.
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