Welcome to The Wild West Real Estate Podcast, the show that brings you real estate strategies and insights to help you navigate an investing landscape that often feels like the Wild West. I’m Mark Hentemann, a comedy writer with a 20-year side hustle in real estate investing. After starting out in the early 2000s buying multifamily, I have since built a $75 million portfolio in what is often considered a market you can’t invest in: Los Angeles.

In this first episode, I will share my story, including the good, the bad, and the ugly. Now, I am not a guru and I do not want your money. I just have a passion for real estate I am on a mission to share my knowledge and help friends and like-minded investors achieve their investment goals. Listen in to learn about the best investment I ever made, how it got me started down the path I am on today, and more.

What You’ll Learn In Today’s Episode:

  • How I got started in real estate.

  • Why it is not that hard to invest in big markets.

  • The importance of perseverance.

  • How to make the best investment of your life.

  • Why house hacking is a great way to get started.

  • How I avoided financial ruin.

Ideas Worth Sharing:

“I was on this rollercoaster ride and I didn’t know when to get off … so I didn’t” – Mark Hentemann

“House hacking is a great way to get started.” – Mark Hentemann

“Buy in an up-and-coming area of a major city.” – Mark Hentemann

Resources In Today’s Episode:

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Transcript

 

Mark:                 My name is Mark and I am a real estate investor. I started out in the early 2000s buying multifamily and have since built a $75 million portfolio in what’s often considered a market you can’t invest in – Los Angeles – and I did it as a side hustle. I’m a writer/ producer in the entertainment industry. One of the original writers on the show Family Guy, I have created some shows for Fox and MTV, done some movie projects and been lucky enough to be nominated for a couple Emmys, but this is my real estate story.

                        I got started in multifamily about the same time I got started in the entertainment industry and I got into multifamily because I had been horrifically broke. I was looking for a way to make sure that never happened again. My hope is that with this show you might find a story you can relate to, and that through interviews with some of the smartest investors I know and deep dive discussions, you’ll discover strategies you’ve never thought of and, find out it’s not so hard to invest in big markets, global 24 hour cities that scare most investors off, but I think are the safest investments out there and also happen to have the highest returns. I’m not a guru. I’m not here to sell you anything. I don’t want your money. I just happen to have a passion for real estate investing, multi-family specifically.

                        This is a weird thing for me to be doing being a comedy writer. I don’t want anyone I work with to hear this. They’ll just make fun of me. It’s not cool to talk about investing or being smart with money, but the truth is getting into real estate investing early made my career in the entertainment business a lot more fun. It took the pressure off. So since I don’t have a guest for this episode, I’m going to tell you the story of how I got into investing. I grew up in Ohio and after college I moved to New York because I thought it would be fun and I wanted to try to make it as a writer. I was the proverbial starving artist. I was broke, writing scripts 12 hours a day, trying to scrape enough money for food and bolting awake in the middle of the night wondering how the hell I was going to pay my rent each month. The starving artist thing gets romanticized, but I’m here to tell you there’s nothing romantic about it. It sucks. Anyway, that experience made me make a vow. Whether I ever made it into the entertainment industry or not, I would do whatever it took to never go through that again. Looking back, that was the fuel that drove me. I was committed to take control of my financial future, to educate myself and be smart about it. See, this is the stuff that’s going to get me ridiculed at work, but it’s the truth. I was chasing a pipe dream. I never knew anyone who’d made it in the entertainment business and knew it would be a rocky ride at best, if I even made it in, and if I did, I’d probably be spit out at an early age. But then a miracle happened. I got hired to write for David Letterman. I then moved to LA and joined a new show called Family Guy.

                        Today, Family Guy has done almost 400 episodes, but back then we were constantly on the verge of cancellation. No one expected it to last, but Oh my God, I was actually employed. I got my first couple of script payments and had maybe $45,000 saved. I also had debt. I had moved to LA from New York with my wife, my fiancé at the time with about $30,000 of student debt. So you we had some money in the bank, but we also had loans to pay. We were living in a one-bedroom apartment in this place called Park La Brea, this massive former World War Two army barracks in the centre of LA that was converted into an apartment complex. A lot of people started out there. It was cheap, but then my landlord raised the rent and on one bored Sunday morning after looking at new apartments, I wanted across the street into an open house. There was a broker there and she asked me why I wanted to throw my money away on rent when I could put my $45,000 towards a mortgage payment. That sounded like the dumbest thing I could possibly do. I was like, are you crazy? In my job, I could be out of work tomorrow. You think I want the responsibility of a mortgage? Apparently there wasn’t much traffic at this open house because I talked to this broker for a while and eventually I said, if I were to ever take on a mortgage, it would have to be the best investment I have ever made. Not that I’d made any investments, but I said, don’t show me any cute houses. I wanted something in a good location that I could fix up, rent out, something that could provide a financial cushion that I was desperate for, for when I was unemployed, which I was certain was coming at any moment.

                        We parted ways and I figured I’d never hear from her again, but two weeks later she calls and says, I found the property you need to buy, but there’s a catch. You have to become a landlord. I was like, a landlord? That doesn’t sound very fun, but I was curious. So I met her at the property. It was this 1920s duplex. It had charm, but it was pretty rundown. The sellers were raising goats and chickens in the backyard – in the middle of LA. I remember they were moving to Kansas to dig a hole and build an underground house and live off the grid. There was graffiti on the block, but several properties were being renovated and I knew this was an up and coming area, walking distance to Larchmont Village, this charming strip of coffee shops, restaurants in a farmer’s market that everyone seemed to go to. In LA, being able to walk everywhere on the weekend is huge. So I saw the potential and I told the broker, all right, what do I got to do? I thought maybe this could be step towards financial security. It could also be a disaster.

                        Well, it was LA, so of course there was 15 other buyers. It was listed at $379,000 and I offered $350,000. The seller countered everyone. Over the next two weeks, the price went up about $15,000 every day. I had no idea how to assess the value of this thing. I couldn’t sleep. I was on this roller coaster ride and I didn’t know when to get off, so I didn’t. It was listed at $379,000 and I paid $435,000. I was sure I had just made the biggest mistake of my life. I thought I was going to be bankrupt, broke, possibly even in jail for my dumb decision. If I could just survive this, I vowed to learn everything I could about real estate, so this would never happen again. There was nothing I could do except try to survive and avoid financial ruin. My first tenant was Mike Henry, my friend who wrote for Family Guy and also does the voice of Cleveland, Herbert and Consuela, if anyone watches the show. Mike made fun of me for being a landlord and I threatened to evict him on a daily basis. I thought I had way overpaid, so I immersed myself in learning real estate, investing, reading every book I could get my hands on, trying to navigate my way out of this mess I’d got myself into, but I fixed up the property, renovated the kitchen, the exteriors and landscaped. I found that I really enjoyed it.

                        In year one, I thought I had made the biggest mistake of my life. In year two, I refinanced, got a better rate, got out of PMI and thought maybe this isn’t such a bad thing. In year three, Mike got his own place. I boosted the rent $400. It was covering all my expenses and I thought this is the greatest thing in the world and by the way, Family Guy did get cancelled during that time, I think twice. Boy, would I have been a lot more panicked if I didn’t have this duplex.

                        I bought in the year 2000. The market had already gone up significantly and most people, including me thought we were at the end of the run, but as some people may recall, we still had a ways to go. I sold in 2005. I had bought it for $435,000 and sold for $1.2 7 million. I put down 10%. Back then, I wasn’t aware of the FHA loan that would have allowed me to put down maybe three and a half to four and a half percent. My down payment was $43,500 and I netted 835,000. It was roughly a 2000% return on my investment. Ridiculous! I’d also made good on my commitment to read and learn everything that I could about real estate. I asked my accountant if I could claim the $500,000 primary residence tax credit on my side of the duplex, then also 1031 Exchange the profits allocated to the rental side. To my surprise, they said yes, so we pulled out $500,000 tax free then deferred the rest by buying a 16-unit and a 4-unit.

                        I was off to the races, hooked. I liked this game and I was committed to doing it for the rest of my life. I had unexpectedly discovered financial security faster than I ever could’ve hoped. This would be more than a side hustle for me. It was something I wanted to do until I’m 100. It would become my devotion, my financial practice. I wanted to study and learn every aspect of it. It was also the perfect hedge against the uncertainties of the entertainment business, providing financial security in a volatile line of work. Anyway, that’s how I got into real estate investing.

                        Here’s some takeaways. Number one, house hacking is a great way to get started. I know this is a cliché, but you get to own your own residence and still get into the rental business. A huge benefit is the FHA loan I mentioned for first time buyers, which allows you to get into the game with the smallest possible amount of money. You can potentially put 4% down. I put down 10% because I didn’t know about the FHA loan, but that 10% loan resulted in a 2000% return. I’ve never matched that return because I’ve never had such strong leverage. Just be careful.

                        Take away number two. I got lucky. The real estate market was an expansion when I bought and it sure helps having the wind at your back. It forgives your mistakes. I invested throughout the 2008 recession and it was the opposite. It took a lot of skill to navigate that and make a profit, but luckily I was prepared by that time. The 2008 recession took a lot of investors down.

                        Take away number three, buy in an up and coming area of a major city. These transitional pockets are in every city. Find one. Often they’re adjacent to or on the fringes of higher priced areas. Just like you want the momentum of a good economy, you want the momentum of a growing area. Well that wraps things up. In the future, we’ll have guests on this show, hopefully more entertaining than me. Some amazing investors and pros using really creative strategies that I don’t hear on other podcasts, and that’s really the reason I wanted to do this, to come at real estate investing from a different perspective, to show how you can live and invest in a major city or invest out of state. I do both.

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