February 22, 2022
Joe Fairless

JF2730: Increase Your Community Impact with Multifamily Using These 3 Steps ft. Marcus Long

 

After spending 15 years focused on single-family properties, Marcus Long took the leap to enter multifamily as a passive investor. Fast forward, and he now is General Partner of 183 units and Limited Partner of 215 units. In this episode, Marcus shares the challenges he faced when transitioning from single-family to multifamily and how he achieved his success.

Marcus Long | Real Estate Background

  • Founder of Long Legacy Capital. He primarily focuses on 100+ unit Class B/C value-add properties with project scopes that allow for cash flow to commence in the first year and currently plan for 3-7 year hold periods.
  • Portfolio:
    • GP of 100-unit in Pryor, OK; 75-unit in College Station, TX; and an 8-unit (short term rental conversion) in Arlington, TX.
    • LP of 24-unit mobile home park in Canon City, CO; 103-unit in Mobile, AL; and 88-unit in Tulsa, OK.
  • Based in: Cheltenham, England
  • Say hi to him at: www.alonglegacy.com | Instagram: @alonglegacyrei
  • Best Ever Book: The Hands-Off Investor by Brian Burke

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TRANSCRIPTION

Slocomb Reed: Best Ever listeners, welcome to The Best Real Estate Investing Advice Ever Show. I’m Slocomb Reed. This is the world’s longest-running daily real estate investing podcast. Today we have Marcus Long with us. How are you doing, Marcus?

Marcus Long: I’m doing great. How are you, Slocomb?

Slocomb Reed: I’m great. Marcus is the founder of A Long Legacy REI. He primarily focuses on class B and C value-add properties with 100 plus units, with project scopes that allow for cash flow to commence in the first year, and currently plans for three to seven-year hold periods. He’s currently the GP of a 100-unit in Pryor, Oklahoma, he also has a 75-unit in College Station, Texas, and an eight-unit short-term rental conversion in Arlington, Texas. He’s an LP as well on a 24-unit mobile home park in Canon City, Colorado, a 103-unit and Mobile, Alabama, and an 88-unit in Tulsa, Oklahoma. He has been living for the last two and a half years in Cheltenham, England. Marcus, tell us how you got into commercial real estate.

Marcus Long: I got into real estate 17 years ago, more on the single-family side. I’m active-duty Navy, and I’m towards the end of my career now, but through my career, I picked up a number of single-family units. It wasn’t actually until after I moved to England about two and a half years ago, as you mentioned, that I started joining the mastermind for active duty and veterans, and I started getting exposed to some different strategies, particularly multifamily and syndications. At that point in time, I ended up investing. I had sold a single-family house in Colorado when we left. I had a little bit of cash available to invest, so I decided to invest as an LP to get exposed to the strategy a little bit more.

I invested with other active-duty guys that I met through the mastermind, because I had close access to them, I could ask questions, follow the deals, things like that. From there, I decided to transition into the GP side of commercial real estate. Towards the end of my career, I’m getting ready to transition out here later this year. Looking at it, it gave my family a lot of flexibility, geographically and timewise, and I enjoyed the impact that I can have, both for the residents as well as our passive investors and stuff. It looked like something that I really enjoyed doing and wanted to transition into as I left the military.

Slocomb Reed: Yeah. You transitioned to being a GP while your active-duty military; the ability to move around the world while still investing is super-valuable. It sounds like you’re going to value that when you leave the Navy here soon, when you retire from the Navy. Within your general partnerships, what do you specialize in?

Marcus Long: I think I bring some skills in some different areas. Because of my background in single-family, while it is different than multifamily – I’ve had a number of, like I said, single-family for 15 years, so I understand some of the property management aspects, which translates into being able to manage the assets. I’m also a finance major; while they don’t teach the real estate aspect in school, I spent quite a bit of time looking at spreadsheets, things of that nature as well. So I think as I joined in with the GP teams — some of the original ones, I wasn’t necessarily the primary underwriter, some of my partners maybe found the deal and underwrote it initially… But I think I brought quite a bit of value there, being able to look at the underwriting, poke holes or ask some tough questions to see if we can make some improvements on that.

I really enjoy also looking at it from an asset management perspective. I think that I really enjoy the impact we can have and be very intentional about how we can improve the residents’ lives. When we look at our underwriting, the things that we are doing, the CapEx, and stuff – are we doing them just to do them or does it improve their lives, and what is the ROI to improve the return for our investors as well?

And finally, the capital raising aspect – I actually really enjoy that as well, because I have a passion for education and helping others. I think that capital raising, some of that comes naturally. You spend time talking to people, educating them on different opportunities, because, as I said, they don’t teach this stuff in school. Even getting my finance degree, it’s very Wall-Street-esque; you don’t hear about the real estate portions of it. So I think spending time educating people and informing them of the opportunities that are available, like providing that opportunity to them to raise capital for these deals, comes naturally as well.

Slocomb Reed: Yeah, that’s awesome and it makes sense that you can do it quite remotely. It’s interesting, too, that when you talk about capital raising, for you that is the joy you find in educating others. Speaking of capital raising, these deals in which you’re a GP, you underwrite to a three to seven-year hold. Why not just underwrite to the five-year hold every time, like everybody else?

Marcus Long: I would say that we are generally underwriting to a five-year hold, but we look at opportunities in either direction. Five years is probably similar to other people, but depending on the project and stuff, we’re looking for opportunities… In one case, one of our most recent ones, we were looking at it where if the market’s right, we might sell it three years; if not, we’ll refinance there and continue to hold it beyond that. Others, we have underwritten at five years, but if the property is performing, we wouldn’t actually mind holding on to it longer than that. So I would say that we probably do underwrite to five years, similar to other people, but we just like to have that buffer and not lock ourselves into one timeframe.

Slocomb Reed: Gotcha. Marcus, what’s been your biggest learning curve so far as a commercial real estate investor? What I’m really asking is, what’s your biggest screw-up and how did you fix it afterward? What’s been the toughest part of this so far?

Marcus Long: I don’t know that we’ve massively screwed stuff up, but I think that based on your question, the learning curve from 15 years of single-family – I did a lot of that in a small community close to my hometown, where I knew the banker personally, I knew the insurance agent personally, I knew the real estate agents personally; I knew a lot of them. It was a lot easier to talk — I shouldn’t say it’s a lot easier to talk to them, but I knew them and it was easier to coordinate those transactions.

So I think moving into the commercial real estate space, there’s a lot more at play there. With the SEC attorney. The insurance is very different on a larger property, or working with a broker; there are a lot more things going on. You are taking large sums of money from your investors, and they’ve entrusted you to do that. So I think that that has been one of the biggest transitions there, is — I don’t know if complexity is the right word, because once you’ve learned, you’ve gone through your experience, it’s not necessarily complex. But there are a lot more moving pieces than there are in single-family, and a lot more like legalities that you’re working through taking other people’s investment.

Slocomb Reed: Gotcha. So this is way more complex… Why not just stick with the single families, why not just end up with 150 of them?

Marcus Long: I think that, for me, there were a couple of things. As I got in and was exposed to the strategy, just the scale, the economies of scale, and the ability to get the same returns or better returns, in many cases, with a lot less transactions. Because with single-family, you’re going to do that multiple times to do that.

The other thing for me — this isn’t to say that you can’t have a massive impact in the single-family space. Obviously, those residents and stuff need a place to live in as well; but for me, part of it also was the impact perspective. As I mentioned before, with these communities, the things that we do, whether it’s simple as putting washers, dryers in a unit, barbecue grills, and park benches, or things that we can do to make residents lives better or build a community around that complex – I find fulfillment in that.

Also, I mentioned the ability to provide our passive investors an opportunity. A lot of people don’t realize, and I think, “Hey, these are wealthy people that own all these apartment complexes.” And it doesn’t have to be massively wealthy people; it can be my family, my friends, or others just like me, and you to do that. I think that’s a pretty powerful thing, to provide that opportunity.

Slocomb Reed: Marcus, you’re an LP on a 24-unit mobile home park in Canon City, Colorado. I’ve never heard of Canon City; is it close to a major metro area?

Marcus Long: It’s kind of Southwest of the Colorado Springs area.

Slocomb Reed: Kind of Southwest of the Colorado Springs area. Let’s play a game. I’m going to make a broad assumption that I want you to respond to; and I’m not going to be offended, no matter what you say. I’m going to be a little reactionary, because that’s the way that I think most people are going to hear this. So here we go. Marcus… There’s no way to syndicate a 24-unit mobile home park in Canon City, Colorado. There’s absolutely no possibility for scale and there can’t be enough room in it to bring in limited partners. That’s just not going to work. Please respond.

Marcus Long: Admittedly, it was one of my first investments. I knew the syndicators pretty well, so that didn’t even come across my mind whenever I was investing in it myself. I think they did it simultaneously with another property next to it. There’s not a lot of [unintelligible [00:12:43].08] on the deal.

Slocomb Reed: Are you in on that property next to it as well? Or were you?

Marcus Long: I am not. No, it was separate from this; they were just buying it altogether. But this particular property – it’s a low number of LPs. I think the rehab they have done is pretty significant to the properties, and the rents are significantly higher than even…

Slocomb Reed: Oh, do you guys own the mobile homes themselves, or just the land?

Marcus Long: They do own the mobile homes, yes.

Slocomb Reed: Okay, gotcha. I heard 24-unit mobile home park, and the reason I’m being so terse, Marcus, is because my expectation is that most people in our space who hear this are thinking the same thing that I am. I want you to have the opportunity to respond to that. So the first thing is the real value-add in this is that you were also buying the mobile homes.

Well, you were an LP, so I’m asking you about your opportunity to invest capital in this, and what you saw and what you’re seeing. But we’re talking about 24 mobile homes, as well as the land, and you said there was some serious value-add potential here. So what kinds of returns are you seeing here? Is this another five-year hold? Are you expecting to sell this after a turnaround period?

Marcus Long: Yeah, it was a similar five-year hold type of thing to sell. And from the returns perspective, I don’t really know that yet, because in all honesty, we didn’t get distributions for a significant period of time, because of the amount of rehab that they were doing to the project. We just recently got our first distribution. And it was communicated that that distribution would be delayed. As we all know, there are different types of deals; sometimes that distribution comes six months in, sometimes it’s going to become 12 to 15 months in, depending on the type of deal. So that was communicated…

Pretty much, we had all of the units, and when you see the pictures — we showed pictures sometimes on social media, and people are like, “That’s not actually a mobile home.” We’re like, “Yeah, it actually is.” They did a really nice job, they’ve done a great job with the rehabs. It’s taken a while to start getting that income coming back in from the increased rents after the rehabs. I think the total value of the property at the sale will be pretty nice.

Break: [00:14:53][00:16:49]

Slocomb Reed: I know you’re an LP so figuring all of this out is not your responsibility. But I’m wondering, who is the end buyer for this property? Are they planning to package it with the property next door, to find someone who’s buying larger-scale properties?

Marcus Long: I honestly don’t know. I know they bought that at the same time together. Whether they package it to sell together at the end, I’m not sure if that’s the GPs intention at this time or not.

Slocomb Reed: Gotcha. Do you know the average rent for those mobile homes?

Marcus Long: I did look at them recently. I asked for some of the financial details when I was filling out some of my real estate owned for some of my own acquisitions. I don’t know the average off the top of my head, I know that many of them are up over $1,000 now for the rents.

Slocomb Reed: Okay. A couple of things, Marcus… It sounds like you’ve got yourself in a great situation as an LP, if you’re not having to ask for the financials and you’re not needing to have all of these details in order for the GPs to perform, number one. Number two, I should have asked you to lead with the rents because you’re getting $1,000 a month for mobile homes. This 24-unit is then producing over 24k a month in gross revenue when fully occupied. That sounds like a much more scalable deal now, and that’s not what people think of when they hear syndicated mobile home park. That sounds like a cool opportunity. Marcus, your company name is A Long Legacy REI. What brought you to choose that name?

Marcus Long: A couple of years ago, I mentioned joining the mastermind for active duty and veterans and started getting into the multifamily space. When I started, some of the guys were challenging us to start a platform, start putting ourselves out there and things. I started thinking about what if there was a podcast, and what it’d say, things of that nature. I started putting my head around it and I wanted it to mean something. At the time, I didn’t know that I was going to go as a GP in multifamily and what direction exactly I was going to be going, so I wanted the name to be deeper than just real estate itself or whatever. So I was just thinking about that, and why was I doing real estate, why was investing in real estate, whether it’s single-family, commercial real estate, or anything else. It went to the impact that I mentioned, that I enjoy providing for the residents, the impact that now I’m able to provide for investors.

Real estate provides me the flexibility geographically and timewise to be more present with my family than many of my years in the military… Just all of that kind of stuff. I was thinking about the legacy. I have a seven-year-old daughter and a four-year-old son, and I started thinking about the legacy that I wanted to provide, the example that I provided them. I don’t know, I came up with a couple of other names I had in my mind, and one day that popped into my mind, and I was like “That’s it.” It was a spin on my name, as well as the legacy aspect. Once it came to me, it made sense and I never questioned it.

Slocomb Reed: Yeah, absolutely. I have a two-and-a-half-year-old daughter. One of the phrases I learned early on in my career that I stick to is digging your well before you’re thirsty. I know a seven-year-old, a four-year-old, and a two-and-a-half-year-old can’t comprehend how much you and I are doing for them and for their future, but I know our kids are going to be grateful, for sure. And especially for the trajectory that you are creating for your family and for the families of the people who have the opportunity to invest with you.

Marcus Long: 100%, I’m just going to agree with you there. As I go through this and as my children get older, I want to show them everything I’m doing. Whether they go into real estate or do something else, that doesn’t matter. I just want them to see the skills or the reasons behind the things that I do. They can take those lessons and place them wherever they choose to do so. But again, even beyond our own families, the ability to impact and for those that invest with us, for them to create their own legacies as well. Maybe they love their W2, maybe they’re happily retired, whatever it is, maybe they don’t want to dive deep into real estate and do it on their own. For us to provide them that opportunity for them to go in the direction that they want to and build their own legacies I think is really impactful as well.

Slocomb Reed: Yeah, especially with our industry being so focused on commercial real estate syndicates and bringing in passive investors, it’s really easy to hone in on the numbers, how deals spreadsheet. At the end of the day, at least the most important thing to me, and it sounds like the most important thing to you, Marcus, is the impact that this is having on our lives, on our family’s lives and on the families of the people who go into business with us.

That being said, I have one last question about numbers, before we dive into the last segment of this interview, Marcus. You got into single-family rentals around 2005, before the recession; I don’t know how long you were buying SFRs yet, but do you still own any of them?

Marcus Long: I own all but one of them. We just sold one a few months ago, it’s the first one. Other than a personal residence I’d sold a couple of years ago of the rentals, the first one I ever sold was about three months ago.

Slocomb Reed: How many of them do you have?

Marcus Long: About 12.

Slocomb Reed: So you have 12 single-family rentals, while also GP-ing and LP-ing hundreds of units. How do you compare the financial returns of holding those single-family rentals over the long haul? Frankly, the amazing appreciation that we’ve seen – let’s not just talk about the last two years, but since the recession, we’ve seen not just a steady climb in property values, we’ve seen a steady climb in appreciation; appreciation has accelerated for a long time now. How do you compare the growth that you’re seeing with your single-family rentals to the returns that you’re getting with your apartments?

Marcus Long: To be fair, most of those single-family rentals were probably purchased later on, probably four or five in the first 10-year period or so, and the rest after that. Also, many of them – not all, but many of them are in a fairly rural area of Missouri, close to my hometown. I have a couple in Kansas City, things like that. Many of them are in a rural area; so there’s a big demand for rentals, there is a big demand for houses in general based on the population, but it’s not a market that sees quite the appreciation in stuff that you might see in some larger metro areas.

Slocomb Reed: Sure. But these are still assets that you’ve decided to hold longer-term. So why hold those? How does that compare to the investing you’re doing now?

Marcus Long: I would say we’re in the process of starting to offload some of those now. That’s why we sold the one in the fall. I think that I don’t have any regrets about the path that we took, some of those, between the slight appreciation, the rental income, the debt paydown; we cross-collateralized a few times, taking some of the equity in one property to buy another. Early on, it allowed us to scale to a limit and to get a number of assets there. But because of the market, of where it is, there’s not a lot of professional property management, we’ve managed some of those assets ourselves. So from a returns perspective, the amount of work and effort we had to put in to get those – it is not as great of a return on investment as I’m seeing in the multifamily space.

Some of those properties I partner with my brothers, and stuff. Part of our goal was to provide some of the family with some passive income and stuff. They all have W-2’s, so it became more work than we initially anticipated. So we kind of transitioned and are starting to sell off some of those single-family homes and turning that into an LP investment in some of my multifamily deals, to make it more passive for them as well.

Slocomb Reed: That makes more sense now, especially since you had other family members involved. You’re in England, but you had invested with other members of the family, people who are local, and that complicates just making the decision to sell and get all your money into apartments. Gotcha. Marcus, are you ready for the Best Ever lightning round?

Marcus Long: Let’s do it.

Slocomb Reed: Great. What is your Best Ever way to give back?

Marcus Long: That’s really challenging to narrow down into one, because as I mentioned a couple of times, I think we have the opportunity to give back every day in commercial real estate, how we look to intentionally impact the residents, how we’re able to give back to our investors. I get a lot of fulfillment from that, so I think those are big. As I mentioned before, I’m pretty passionate about education, personal finance, and things like that. This stuff isn’t taught in schools, and I see a lot of people get to later in life before they realize these other opportunities, other than just like [unintelligible [00:25:34].08] money into their 401K, or stocks; that’s all they’re ever taught. So I like to get back just by being there for people and providing my experiences and education and stuff. I make myself pretty available to have conversations with people, and particularly, I really enjoy connecting with younger individuals, hopefully so that they have an opportunity to implement some of this stuff earlier on in their life, to make a bigger impact.

Slocomb Reed: Nice. What’s the Best Ever book you recently read?

Marcus Long: I recently read The Hands-Off Investor by Brian Burke. I thought it was pretty phenomenal, both from a perspective — I think it’s a great book, it’s pretty thorough for limited partners, but I also think it’s a great book for general partner sponsors and operators to read as well, particularly if you’re newer, to understand what your limited partners should be asking or expecting, or if you want to be working with one advisor, maybe you only know one way to do things. It opens your eyes to some other options.

Slocomb Reed: Marcus, what is your Best Ever advice?

Marcus Long: I heard the quote, “Be the change you wish to see in the world.” I think that would be my advice. Whether it’s in business, whether it’s in our community, whether it’s in our family; it’s very easy for us to point fingers, it’s easy for us to complain about things that aren’t right. I think it takes a lot more courage to do something about it with action. That’s one of my best pieces of advice.

Slocomb Reed: Awesome. Marcus, where can people get in touch with you?

Marcus Long: The best place is alonglegacy.com. It’s kind of a one-stop-shop, you can send me an email, set the time to talk, all my social media stuff is right there, alonglegacy.com.

Slocomb Reed: Best Ever listeners, thanks for tuning in. If you enjoyed this interview, please follow and subscribe to our podcast, leave us a five-star review and share this interview with someone who could benefit from what Marcus has had to say to us today. Thank you and have a Best Ever day.

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