October 12, 2020

JF2232: Self-made Multimillionaire Willie Mandrell


Willie Mandrell is a self-made multimillionaire real estate investor, broker, coach, lecturer and author and has been investing in buy & hold rentals for 13 years. He shares how he started and his journey to where he is today. 

Willie Mandrell Real Estate Background:

  • Self-made multimillionaire real estate investor, broker, coach, lecturer & author
  • Has been investing in buy&hold rentals for 13 years
  • Portfolio consist of  40+ units valuing at $10 million
  • Based in Boston, MA
  • Say hi to him at: www.WillieMandrell.com 
  • Best Ever Book: Retire Young, Retire Rich

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Best Ever Tweet:

“What helps me is I wake up every morning with the same focus” – Willie Mandrell


Theo Hicks: Hello, best ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks and today, we’ll be speaking with Willie Mandrell.  Willie, how you doing today?

Willie Mandrell: I’m doing well, Theo. Thanks for having me on the show.

Theo Hicks: Absolutely. Thanks for joining us. Looking forward to our conversation. A little bit about Willie; he is a self-made multi-millionaire real estate investor, broker, coach, lecturer and author. He’s been investing in buy and hold rentals for 13 years and has a portfolio of over 40 units valued at $10 million. He is based in Boston, Massachusetts and you can say hi to him at his website http://www.williemandrell.com/.

Willie, do you mind telling us a little bit more about your background and what you’re focused on today?

Willie Mandrell: Yeah, sure. I’ve been a buy and hold investor since the very beginning of 2006. So 14 years, right at the height of the market, right before the housing market crashed 2007/2008, rode the market down and rode it back up again, and made some stupid mistakes, made a lot of great purchases… But I love the business; rental business is great, housing is something that’s always going to be needed, doesn’t go out of style… It’s been a great business for me.

Theo Hicks: You’ve got 40+ units. How many buildings is that? What are the types of buildings you focus on? Is it all single families? Are they a four-unit property? Somewhere in between?

Willie Mandrell: In Boston, everything’s a three-family. Almost all of our stock is twos and threes. Fours are pretty rare. They’re out there, but they’re rare. The majority of my portfolio is three family, so roughly 12-13 of them. I don’t even know. I can’t keep the count anymore. I know it’s a lot for the landscapers, it’s a lot for the snow removal guys, but 13 properties, 14 properties somewhere around there. I have a couple single families mixed in there as well.

Theo Hicks: Sure. Maybe tell us about one of your earlier deals. I know in Boston—I’ve talked to a few people in Boston on the show before; real estate is a little bit more expensive than it is in, say, Ohio or somewhere, so you’re going to need a little more money to buy these properties up front. So maybe walk us through one of your earlier deals. Walk us through how you found it, how you actually afford the down payment, what the business plan was, what the numbers were, things like that.

Willie Mandrell: Yeah, sure. The earlier deals — I worked with a lot of, on the brokerage side, a lot of buyers as well. The earlier deals are always those properties you find on MLS; they are FHA deals, mass housing deals here in Massachusetts, low down payment, 3%, down, 3.5% down. You scrape that money together. Me personally, I went out and borrowed some money from my mother, borrowed some money from my grandmother, friends, I did what I had to do, worked a couple extra jobs, and got that down payment. I think it was at the time roughly $15,000. My first multifamily sold for roughly $400,000.

Today, those prices in Boston since 2006 have basically doubled. The market obviously took a little bit of a dip and now they’ve pretty much doubled. But it’s the same method. Today, if you’re just getting into the business, it’s a high barrier to entry here in Boston. Yes, the real estate prices are high, you do what you can to scrape, crawl, grab, pull, and get yourself in the business. But once you do, it’s really great.

Today, I am no longer spending or putting 20% down or 25% down. My focus is on the BRRR strategy; the buy, rehab, rent and refinance strategy. I’m going out and looking for dilapidated three families, anything that is seriously broken down; heating systems, roof, bad siding, bad windows, no insulation, anything that needs a significant amount of work, and basically buying that with the combination of private money and commercial construction financing, rehabbing the property, and then going out and getting a commercial loan where I can put that into a permanent financing position.

Theo Hicks: I want to talk about that, but I want to ask a few follow up questions on that first deal. The first deal, you said that you used an FHA loan. Did you house hack this property?

Willie Mandrell: I did; lived in one unit and rented out the other unit. In addition to that, it was a three-bedroom unit, so I rented out the other two units and my bedroom as well. I was relatively young, I think it was 23 at the time, and I still wanted to travel, still wanted to do other things with myself, so it was a great opportunity… I think my mortgage was roughly, call it, $2700. I was getting about $1500 from the lower unit, and then another thousand bucks from the other two tenants within my rental unit, one of them being my brother. I would say 85-90 percent of my mortgage was paid off by somebody else. It was a great experience right from the start, and that’s why throughout the housing market crash 2007, I was still able to hold on, because the majority of my mortgage was being paid by other people.

Theo Hicks: Did you do the first BRRR strategy house with your own money or did you immediately jump from this house hack to raising money for BRRRs, or was there like an in-between step where you did something else first?

Willie Mandrell: Oh, yeah, no, there was definitely an in-between step. I think it’s very difficult for you to go from buying your first house to doing a complete rehab. Some people do it, but you really want to learn the business and learn rental property business, you want to learn, how to evaluate and how to figure out ARV and everything else.

For me, there was a couple in-betweens. I started a rental brokerage, and to be quite honest, I don’t advise everyone to do this. This is not what you’re supposed to do. But I was given a line of credit for my rental brokerage; brokers was doing pretty well,  I received a line of credit, and I used that line of credit as funding for the downpayment. In that particular situation I had about $100,000 line of credit for my rental brokerage and used almost all of that as downpayment and then the rest of the purchase price came from hard money at the time. It was hard money, it was financing 75% to 80% of the purchase price, and then 100% of the construction loan was given by hard money. That was my first BRRR strategy.

Theo Hicks: Was that a house hack, turnkey, or did you do some renovations there too?

Willie Mandrell: Minor. For the most part, it was turnkey. Very turnkey compared to what I’m doing now. I’m going in and pretty much gutting things down to the studs now. For the most part, that first house hack was all cosmetic; kitchens, bath, paint, carpet type of situation.

Theo Hicks: Perfect. Okay, let’s talk about the BRRR strategy. Maybe let’s start by talking about the private money raising for that. How are you structuring that with the people you’re raising money from? Who are you raising money from?

Willie Mandrell: Sure. When you first start out – and this is why it’s difficult to go out and do the BRRR strategy the way I’m doing it now initially, because you don’t really have those connections, you don’t have the resume. But once you build up a solid resume for yourself, you have that first two-family that you bought or three-family that you bought with an FHA loan, and then you can probably work the system, buy another one with a very low downpayment loan as well.

Now, you have four, five, six units under your belt. That initial private capital is probably still going to come from somebody within your family, somebody who understands what you’re trying to do, what you’re trying to build. It might be an aunt, it might be an uncle, it might be a parent, it might be a cousin.

The initial loan for me was my grandmother, who provided that initial private capital to go out and do and purchase that third or fourth property that I was working on. I basically presented it to her as, “Hey, I have this great opportunity. I’m going to buy this property under market. When I’m finished fixing it up, it’s going to producing let’s call it $2,000 a month. I think that the $24,000 or $25,000 that I’m borrowing from you right now, I can basically if everything goes smoothly, get it back to you within two years, basically giving you the cash flow of $2,000 a month.”

With my track record – she’d basically said, “Okay, you bought one two-family, and you bought another three family. I see what you’re trying to do.” That prior resume made her comfortable to make that purchase; couple that with the plan of getting that money back to her made her comfortable enough to go ahead and make that initial loan.

And then from there, it’s just networking. At that point, you start to go out and you get to networking meetings, you’re talking to everybody that you know, you’re telling them what you’re doing in the business, and then from there it springboards, and now you have eight units or 10 units under your belt, and you really start to put your name out there, and you gain the trust of other people. And now your access to private lending starts to expand.

Theo Hicks: Perfect. The structure is you return all their money within a certain timeframe because you’re doing full rehab. Is she getting that cash flow—that two grand a month, is that happening after you return the money to her? Is she getting the upside, like are you giving her money plus equity, or is it just, you give me the money and then two years later, you get the money back, plus you’ll get an ongoing cash flow forever?

Willie Mandrell: No, she had no desire, —and again, this is my relative, right? What you’re saying is—great question. It is a typical private money situation that I’m working on today. They’re either equity or debt partners.

My grandmother in this particular situation said, “I just want my cash back.” That’s pretty much what it was. I want to help you and I want to do what I can. There was no embedded interest rate, there’s no equity position. I own the property outright and still do today.

Today, though, my private money lenders are not my family members. They’re looking for a return on their investment. I either structure it as debt or equity. If there’s a really sweetheart deal on the table and I know that I’m going to be in and out of this thing in no time, and I can get all my money back and refinance and pay the lenders back, I’ll probably structure that deal as a debt partner. So meaning, “Hey, Theo, can I borrow 100 grand from you,” or “Here’s an opportunity to invest 100 grand with me, and I’m going to pay you 12% on your money.”

So 12% of the money on 100 grand is roughly 1000 bucks a month. Once I’m all said and done, if I’m rehabbing that property for six months, and it takes me another three months to lease up, then they’re going to earn $9,000 on their money during that nine-month period. Then I’m able to basically go back to the bank and once I consolidate those loans, and refinance out that private capital, I’m basically paying that private lender back; that’s a debt structure.

Or I can structure it as equity, and basically say your $100,000 comes in. And that $100,000 is now giving you a position of 20% within the property. For every $1000 that the LLC disperses from this property, you’re taking $200. And then if we ever sell the property in the future, let’s say we sell it for $100,000 profit, $20,000 of that $100,000 is yours. So they would own whether up or down; if you’re an equity partner, you participate based on your percentage ownership.

Theo Hicks: Is this something where you offer debt and equity in the same deals, or do you offer only debt for some deals and only equity for other deals?

Willie Mandrell: When I started off, it was a little bit too complex to do both in the same deal. Today, we do have deals where we are offering debt and equity to potential investors. Obviously, your equity position will be lower, but you are also achieving some type of return right from day one as well based on the performance of the property.

The calculations are a lot easier for debt. It’s a better upside for you if the property’s doing really well. It’s a better upside for an investor if the property’s not doing really well. Equity – if the property is doing really well, you’ll probably wish you’d gave away less equity and you’ll wish you had debt. There are give and takes for both. It all really depends on how you want to structure the deal and your access to capital at the time.

Theo Hicks: Sure. I’m trying to understand… From your perspective, why wouldn’t you just do debt in every deal?

Willie Mandrell: I’ll give you a perfect example. Today, we’re looking at Coronavirus. Since March, we’ve been dealing with this thing and no one has a crystal ball and no one really knows where the markets going to go. If this was 2014, we’re trending upward and it’d probably be best to do debt. But let’s say hypothetically we take a 10% to 15% downturn in the next couple months. It actually is safer for me, especially because—let me give another example. Here in Boston, we have an eviction moratorium, right? We’re not allowed to evict anybody. We have roughly 36 to 40 million Americans out of work at the current time. So if I have tenants that are not paying their rent, it’s better for me to have an equity partner, because that equity partner is also participating in that downside. If I had a debt partner, they want their interest payment regardless of the performance of whether the tenants are paying or not. The equity partner participates, it’s safer for me in an unknown environment. The debt partner doesn’t participate, it’s a better investment for me when things are a little bit more certain, if that makes sense.

Theo Hicks: That totally makes sense. Thanks for elaborating on that. All right, Willie, what is your best real estate investing advice ever?

Willie Mandrell: Stay patient. The best real estate investing advice I can give to anybody is stay patient. I’ve been in this business for 14 years now. People look at me and they see the end product, right? They see what’s at the end of 14 years. But it was a struggle going through the 2007, 2008, 2009 years, where people were getting foreclosed on and my home was worth less than what I owed on the property. It wasn’t certain whether my tenants were going to lose their job. This is a great business. I’m in my mid to late 30s right now, I’m probably going to see several more recessions. But I understand that I have a 20-year timeline before I’m even looking to settle down or retire and cash out.

Real estate – and again, this is just my opinion – people in society today, we live in a world where everybody wants something tomorrow; instant gratification. They’re not willing to wait for it typically. You can’t do that in buy and hold real estate. It’s a long game. It takes 5-10, 15-20 years to really start to see, but the upside is so great that if you just stay patient, this business is a terrific business.

Theo Hicks: All right, Willie. Are you ready for the best ever lightning round?

Willie Mandrell: Absolutely. Let’s do it.

Theo Hicks: Okay.

Break: [00:16:24] to [00:17:11]

Theo Hicks: Okay, Willie, what is it the best ever book you’ve recently read?

Willie Mandrell:  Retire Young, Retire Rich. I wouldn’t say it was recent. It was probably maybe five years ago, but that was the game-changer for me. That was the one book that said—I’d read Rich Dad, I’d read The Millionaire Real Estate investor, I’d read The 10X Rule. A lot of great books. Start With Why, another great book. But Robert Kiyosaki’s Retire Young, Retire Rich is kind of like the next level to Rich Dad, Poor Dad. It really kind of took my mindset to the next level and said, “Yes, I can do this. This is absolutely doable for me.” It was more about just buying real estate than it was all the other things that come around that topic as well; the asset protection side of it, the making your real estate business an actual business.

I think people go in and they get that first multifamily or that second multifamily, and then they get stuck. They try to do everything themselves. They try to manage, they try to be a legal adviser, they try to be their own accountant. You can’t do it like that. That book really kind of took me to the next level and allowed me or helped me turn my rental property business into an actual business.

Theo Hicks: If your business were to collapse today, what would you do next?

Willie Mandrell: If my business were to collapse today… I would have to push back on you and say, I would want to see how my business collapsed. Because that’s the thing that I love about real estate – you always need somewhere to live. I don’t know what a business collapse would look like. I still own the property at the end of the day. I look at it like this, if the market was to take a serious dip, we got hit by 25% in terms of my values – well, my net worth is going to take a serious hit. A lot of my net worth is tied up into the value of the real estate. My net worth would take a hit. But I’m not sure that the cash flow would change.

Let’s say for instance, 100 million people lost their job, right? And I have 10% to 20% of my tenant base that can’t pay, well, there’s a lot of other people in the country really struggling at that point, and I don’t see banks foreclosing, I don’t see banks taking my property back from me, because where would they go with it?

I can go on this long road of this hypothetical scenario that I’ve done 100 times in my head, but that’s what I love about real estate – the hypothetical collapse, I just don’t it see happening. If it did, I would do everything I could to find more money and to buy more real estate, because I don’t think that the collapse would last very long. I think we would end up coming back. Again, at the end of the day, everyone still needs somewhere to live and I think real estate is one of those investments that are tried and true, and that you can bank on.

Theo Hicks: What is the best ever way you like to give back?

Willie Mandrell: Education. I don’t think that I’m unique in any way. I think probably the only thing that makes me unique is, I wake up every morning with the same focus. I think that this business takes a lot of focus. It’s again, and like I’ve mentioned before, it takes patience. It’s a long haul. The thing that I would tell people and the thing that I go out and kind of preach is patience, consistency. But the way I give back is just through education; letting people know that you can do this as well. I’m not unique. I’m not gifted. I’m not Mark Zuckerberg, right? I didn’t come up with this secret algorithm for Facebook in my dorm room. This is one of the oldest businesses in the world. I did it, my grandmother did it. There was hundreds of people before her that did it. You can do it too. That’s kind of my message out to the general public in most cases.

Theo Hicks: Lastly, what is the best ever place to reach you?

Willie Mandrell: I would say Instagram and LinkedIn, I’m @wjmandrell. I also run a real estate investment group called Wealth Builder Nation. We are at at Real Wealth Builders on Instagram as well. I’m also on LinkedIn, and Facebook as well.

Theo Hicks: Perfect. Willie, thanks for joining us today and giving us your best ever advice. Some of the big takeaways from me was learning about how to determine whether to use debt or equity or not. When you’re raising money, the two options are debt versus equity. The debt would be get 100 K, pay 12% interest. You fix the property up, you lease it up, you refinance in however long, you hold on to it, you pay them back their equity plus interest.

Your example is nine months, the $100,000, down 12% would be $9,000, pay them back entirely and then the deal is yours. Equity would be, you borrow 100K and they get a percentage of the deal, say 20%. You offer both on your deals now, but equity is the safer bet for you during a downturn, because that investor is going to want that interest rate no matter what. If you’re not able to hit that 12% interest, I’m assuming the property as collateral – they can take the deal from you. That was interesting to learn.

And we talked about some strategies on how to raise money. You were very specific in saying how you first need to build a solid resume, do your first deal, FHA. Try to figure out another way to do your next few deals with low money down. Transition to raising money from some family member. For you it was your grandma, and she was nice enough to give you money without asking for any type of equity or interest rate. Do that and then start networking, you said.

Willie Mandrell: Absolutely, and that’s going out and networking, telling everyone and anybody who will listen exactly what you’re doing.

Theo Hicks: And then from there, it springboards. Lastly, was your best ever advice which is to stay patient. Realize that buy and hold real estate is a long term game. You’re not going to see massive upsides for a few decades. But once you actually do, the upsides are going to be massive.

Willie, thanks again for joining us. Best ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.

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