Robert Leonard (03:37):

If you were looking for something passive, you probably pretty quickly learned that flipping was not going to be the solution to that, and it wasn’t really going to provide for your family. If you were looking for something that was going to provide for your family, God forbid something happened to you, flipping is not going to really be that solution.

Mark Horton II (03:52):

Yeah, no. No, flipping’s not. That is a grind that HGTV and all those other places make it look super simple. Getting a flip and then actually trying to do your scope of work and getting contractors to be there on time and get done on a timeline is not an easy task. Maybe other people have better luck on it in other markets, but I know personally, I’ve even owned houses with the person I was flipping with and they have screwed me over. Contractors, that’s just a different ballgame.

Mark Horton II (04:18):

Hoping, now I finally have a good contractor, but you’re right, it’s not passive, but that’s what I learned. That’s why I started off and got me interested in it, and then I learned that there was a thing called the BRRRR Method. I was like, “Oh, I can flip the house and then keep it and get income, and if I do it good enough, I can get paid to do it?” That’s what really motivated me. It’s not as much money as a flip, but if I keep doing it the right way, I’m going to keep building up a war chest. I’m going to keep building up passive income, and now I can just collect checks and chill out.

Robert Leonard (04:44):

Somebody once told me that if you’re getting into flipping, there’s nothing wrong with that. It can provide great income and it can be pretty lucrative, but you’re really just buying yourself a job, and it’s not really what a lot of real estate investors want to do. The other analogy that somebody once told me that is interesting to me is that you don’t see any nationwide multi-billion dollar flipping companies. You do see that with rentals, but you don’t see that with, with flippers. At least with this guest had told me he had never heard of one. I haven’t heard of one either. Not that you have to build a multi-billion dollar company, but that just tells you a little bit about the business model and how scalable or passive it can possibly be.

Mark Horton II (05:20):

I think there isn’t a niche for it. I think there is having that tool, being able to flip a property in your tool belt is something good. I can just use this example of a house I recently just purchased. The house was purchased for 152, we needed about 20K worth of work, and it will sell for about 245, 250. I’m about to list of pretty soon up here. Because the way our rent market works, it doesn’t make the 1% rule to it wouldn’t be a cash flowing asset, but because I have those skills from BRRRRnB and stuff, I was like, “Well, it’s a good deal. I’m the only one that has access to it,” so I flipped it.

Mark Horton II (05:53):

Yes, I absolutely agree. It’s the BRRRR technique or buying long-term rentals or any type of real estate that’s passive is great, but I definitely think it’s something you shove in your tool belt, because any opportunity you can have to move the ball forward, now you can buy another house with that money in. That’s why I at least have done a few, just so I’m up on those skills and able to flip houses when they come by. I know a good deal when I see one and I’m able to manipulate the deal or see which way my outs are. It’s been really helpful helping grow everything I’ve gotten so far.

Robert Leonard (06:21):

We’ve talked about the 1% rule, which you just mentioned here on the show, but it’s been a little while and we always get new listeners. For someone who hasn’t heard that before, as a new listener, tell us exactly what the 1% rule is. Then I’m also curious, how much do you rely on that, because certain markets, it’s more reliable than others? Certain market conditions like right now, it’s a pretty hot market. The 1% rule might not make as much sense as it once did. At one point it was the 2% rule and not the 1% rule.

Mark Horton II (06:46):

Yes.

Robert Leonard (06:47):

So I’m curious, what are you finding with the 1% rule and also explain what that is for us?

Mark Horton II (06:53):

All right. So 1% rule is super basic, and I like to call beer math. This is the beer math that you’re doing when you’re at the bar with your boys. Basically, if you buy a house for $100,000, each month rent should be $1,000, super simple. That’s how much it should be, and that should be cash flowing. But 1% rule, I remember when it used to be the 2% rule, the people who bought houses before this COVID pandemic, whatever, jacked up are now starting to get the 2% rules, because my OG houses are getting that, which is nice. That cashflow is really good, but the 1% rule is really market dependent, and it also depends on what your play is, how you’re purchasing the house. So the 1% rule, I think, is a good guideline for new people like, “Hey, all right, this is a good life smell check. If it smells decent, let’s dig into it.”

Mark Horton II (07:35):

You also need to determine what type of loan you’re going to be using, what advantages that you have with that loan and what I personally do as a real estate agent or as a real estate investor, I look at the actual cash-on-cash ROI, the return on investment, because my market in Fairfield, North Carolina is very heavily dependent on the VA loan. It’s a veteran’s loan that’s given to service members. It’s a 0% down. It is a loan that you only get when you’re in the military. It’s 0% down and it changes the ballgame on how you look at numbers for your first property. What I do is when I’m at Fort Bragg, I also teach other service members how to use the VA loan for investing purposes, because there’s some rules and regulations and restrictions on how you can use it.

Mark Horton II (08:18):

The reason I’m talking about this, because it gets into the 1% rule. When veterans, like the people that use the VA loan, it might be different than what someone who is a BRRRR investor does, because a BRRRR investor has to get that 1% rule because they’re leaving so much money on the table because they have to either BRRRR and they’re going to get a ton of equity. With my service members, we can go buy a house for 140 and they’re going to have 36, maybe $5,000 worth of closing costs. In two years when they PCS to another duty station and it’s cash flowing $200, their cash-on-cash return on investment is nearly 50% a year. If you break it to a cash-on-cash ROI, is how I like to look at it like, “Dude, you are beating the stock market. You’re at 50%. The stock market over the last 40, 50 years has averaged 10%.”

Mark Horton II (09:04):

That’s how I use it in my market when I’m dealing with VA loans. Now I go to a person who is an investor who has to use commercial loans, who are doing BRRRR deals, the way they look at the 1% rule is going to be completely different, because they have a cashflow. They have to make sure they’re giving good investments and the way the lending is going to lend on that, because they’re going to have to have a lease when they go to refinance, especially if they’re using hard money, private money and different things. So the 1% rule is a good rule of thumb. It’s a good like, “Hey, okay. This is about right. This house ARV’s 130, 130K. It’s going to rent for 1,300. Now let’s break down the numbers.” So then we go to a BiggerPockets calculator.

Mark Horton II (09:40):

I put in all the estimates on the repairs and everything, and I still look for that cash-on-cash return on investment. My rule thumb is I don’t touch a property unless at cash-on-cash ROI is 12%. So the 1% rule I think in my market for what I’m doing is very good. As a quick sniff test, it allows you to like, even if we want to look at the property, if I’m buying a property for 200K, but it won’t even rent for 1400, that’s not an investment property, that’s a primary residence. So it’s a good like, “He, no. We’re not even going to look at this property. Let’s just throw it to the side and then we can go deep, if it passes that first test.” It’s your introduction test is the way I look at the 1% rule.

Robert Leonard (10:17):

Yeah. That sniff test is exactly how I use it too. If I have 50 different deals that I want to analyze, say I’m looking at a market there’s 50 different deals on the MLS I want to know which ones I should dive into a little bit more, I’ll basically quickly do the 1% rule for all of them. Not to say if something’s 0.8% or 0.7% that I won’t look at it, but if something’s 0.2 to 0.5 or 6, I know it’s probably not going to be a great investment. So I just knock those off or at least put them on the back burner when it comes to analysis and I’ll focus on those ones that are a little bit closer to the 1% and then go back to the others if I need to.

Mark Horton II (10:50):

There’s another thing that I like to do when I’m doing analysis is like you talk, you look at 50 properties. If a property’s close, let’s say it’s at 0.7, it’s not that 1%. What I actually do on those properties is I have a spreadsheet. I’ll put them on the back burner, but I’ll keep checking them every week, because in at least in this market now, I start it off, when I started off, it was completely different, but in this market, if a property sits for more than 21 days, now I can low ball them and maybe now the property is at the 1%.

Mark Horton II (11:16):

So that’s just another technique that I use for my investor clients is I keep those properties if I think they’re overpriced in a separate category and I keep checking them every week and then I can throw a low ball offer in. Actually, I’ve snagged two properties recently that are completely redone. The listing agent overpriced them. I used that to advantage because it was sitting there a little too long, at least in North Carolina, I could tell that they were using hard money, so I knew they had a timeline and I was able to pick up two good properties for my clients recently.

Robert Leonard (11:42):

One of the great benefits we have today is that we have a ton of educational materials available for free, but this can actually also lead to a problem which is information overload. I know this because I’ve experienced it myself. There’s just so much on a specific topic maybe that I’m interested in learning about, and sometimes that leaves me at a point where I don’t really know where to start. If I have a hundred or 200 different resources that I could choose about one topic, I don’t really know which one to begin with. Once you decided you were going to get into real estate and start investing, where did you turn for resources. For someone that’s new, they’re about to get started in real estate. They want to learn more, but they’re not sure exactly what resources to use, what were some of the most impactful and helpful resources that you used to learn?

Mark Horton II (12:26):

The way I did stuff is I initially started BiggerPockets. It’s like everyone started with Rich Dad Poor Dad, and in 20 years, I think everyone’s going yo be “Oh, I started on BiggerPockets.” It’s going to be the new Rich Dad Poor Dad. Then I read Rich Dad Poor Dad, that was the next step, because I listened to a bunch of podcasts and that’s what everyone told me to read. But from there I got actually connected with a local real estate meetup called Pints & Properties. It’s the real estate firm that I worked for, but it was just like a meetup once a month, where you go to a bar and you would have a drink and they would have some speaker. They weren’t there to sell you anything. They were just there to teach you, so that got me going into the real estate, learning about different techniques. Then when it came down to it, it was after, for me, four weeks, which I thought was a long time, I just said, “Screw it. I’m going to get into this,” and I went and bought a house.

Mark Horton II (13:10):

I had some cash from deployments and different things saved up, so I just went out and I was like, “You know what? I’m going to do this.” The easiest way for me to learn something isn’t by watching, isn’t by reading those aren’t my strong suits, is my ability to take information from a book and apply it. I’m more of a, “I got to have the information beat into me. So putting up my own 20, 30 grand into a property to make it work, that taught me more than anything. So I went out and bought my first property. I self-managed it at the beginning. It was a long-term. It was a turnkey. It needed a light rehab. I did all the work myself. That was a pain. That was, “Oh, I can do this in three weeks.” Seven weeks later, I finally got into the property manager type deal, one of those real classy ones, but I learned a lot, so that’s how I learned, initially started BiggerPockets.

Mark Horton II (13:55):

Then I found a local real estate meetup because they would know the area best. BiggerPockets is good for the broad information, but I knew where I wanted to invest, so I met at real estate meetup. I met a investor-friendly real estate agent who actually knew how to run numbers, and that’s a huge thing that I think a lot of people get confused about. A lot of agents will put out there, “Oh, I know this type of investor.” They talk a big game, but this guy actually owned properties, and I got involved with them because they actually taught me how to raise the numbers. Then from there, my next step was I just went out and bought a property and it’s super simple. Just go out and did it, and I figured it out and made it work, and then I went from there.

Robert Leonard (14:29):

I’ve never personally been in the military, and so I’m not saying that sports are working out or motocross is nearly as difficult as being in the military, but what I’ve seen in my life or what I’ve experienced is that there are certain things that are difficult that teach people lessons, and have actually helped people in other parts of life. What did you learn in the military that you’ve been able to apply to being a real estate investor that has really helped your journey?

Mark Horton II (14:53):

Oh man, not sleeping much when you’re stressing out about numbers and your first property, “Am I going to get this deal?” The not sleeping, that and actually, the biggest thing that I took from the military was SOPs. They’re called standard operating procedures. They’re basically how we do things. The reason I had to develop SOPs early on was because I was still National Guard. Even though I left my and active duty orders were finished, I went back to the National Guard and I was still special forces in the National Guard. So I knew I had a deployment coming up and coming up from a deployment, you have schools nine months out, which was actually the reason I planned to get into investing full time was because I knew I had orders in case I failed as real estate agent. I knew I had a deployment to pick me up and made sure I had money.

Mark Horton II (15:35):

So I had a year, I was like, I knew I was going to be able to go to Army schools. I was going to be able to do different things and get still a paycheck. It’s called guard bombing. I’m a great guard bomb. I had to develop SOPs because I knew I was going to be gone for my different companies, so I had to develop, write different things out so in case I wasn’t there or my wife or some of the people that we hired to be part of our team could just take this sheet and be like, “All right, this is what you need to do. This is how it’s going to be done, and this is how we make it successful.” What I’ve learned later as I started reading more is I started developing myself to hire myself out of my own job early on because I was forced to knowing I had a deployment coming in.

Mark Horton II (16:13):

So developing those SOPs, having SOPs, and I know if there’s military people out here, we hate the word SOPs, “Oh, go write your SOPs out. Go write your SOPs.” Well, those stupid things that we did while in the military, developing those rules and regulations, or like hey, the process of doing something has really helped my business grow. It’s helped me grow other businesses now, and this is helping me to hire more people and continue to grow and be part of the financial independent movement and have an early retirement. I’m aim to retire at 40 and I’m able to do this is because I’ve taken this one thing from the military, SOP development and I have developed how other people can do my job so I can start taking a step away and go build something else so I can develop that 5, 6, 7 streams of income that aren’t just in real estate. This allows me to grow and continue to grow my businesses, and my companies.

Robert Leonard (17:01):

Like I said, I was never in the military, but SOPs are still something that I personally, I’m not sure really where I picked it up, but maybe I just read about it in a book, or I think I might have read it in The 4-Hour Work Week, or something like that. But it’s been crucial for me too, in my business, whether it’s real estate or the podcast or whatever it is, I rely super heavily on SOPs. I highly recommend anybody that doesn’t know much about them or isn’t using them now and you want to scale a side hustle or even a real estate business, to really learn what SOPs are and start to implement them today.

Mark Horton II (17:30):

Yeah, man. They are key. Have a process to maintain them. Everyone I talked to, and when I was talking about books that I read later on, I read 4-Hour Work Week and I was like, “Oh, I’ve been already doing this, and I’ve messed up a bunch of times. If I would’ve just read this book right off the bat, I would’ve been months ahead of where I was,” and I had a lot less stress. Reading too, actually reading books, that that was a new thing for me as well.

Robert Leonard (17:52):

You told us earlier that you got started with long-term rentals. Talk to us a bit about your transition from long-term traditional rentals into becoming a short-term rental investor. When in your investing career did you make that transition and why did you decide to do that?

Mark Horton II (18:09):

At the time, my market was Fayetteville. I’m still in Fayetteville, North Carolina. There wasn’t a lot of short-term rentals and the real estate team that I eventually joined when I became an agent was Five Pillars Realty. And I learned from Shelby Osborne. She’s been on the BiggerPockets podcast. She talked about the BRRRRnB. She was showing me her numbers for her properties and I was looking at them and she got to talking about she’s starting to do the BRRRRnB, so it’s basically BRRRR to an Airbnb. I was like, “Wow, this is a way I can make more income, less houses to manage on my backend, and from there I don’t have to own 50 houses if my income is great.” Maybe own 25 because the market at that time was really producing a lot of income. I looked at the numbers and it was just basically the money. I hooked up with a couple other guys that were ex-military guys. We started looking. One of our first Airbnbs we ever bought was an ex crack house. We bought a crack house and it was this one street.

Mark Horton II (19:05):

It’s like the nicest neighborhood in Fayetteville, but there’s this one street that was run down at the time. Out of the rundown street, we went and bought the worst house and just a quick numbers on it was, we bought it for 52K wholesale deal with owner seller financing. We put $35,000 into it. Seven months later at ARB for 165K, and right now I’m cash flowing just over $2,000 of pure cash flow on this house. That’s why I decided to get into it because it was so much more lucrative. So that was the biggest turning point was also learning how to do BRRRRs, put BRRRR into Airbnbs, because I could keep my money. I can keep developing. I can keep buying up short-term rentals, and when my family comes into town, or I have friends that come to towns, now I can just put them in one of my own places, cut the price. I’m still getting my money from it and everything like that, and it just made more sense to me, because my goal is still early retirement.

Mark Horton II (19:59):

I know you’ve had Travis Zappia on the show, and me and him are friends and the way he does Airbnb is a little bit different. He has a high-income producing job. He’s able to go out. He maximizes FHA loans, conventional loans and different things like that, and he goes and buys out nice properties just that are basically turnkey, comes in there, refreshes them. Then he makes a lot of money for them, or makes a good investment and he’s done really good on his end. Well, I don’t have a high-income job like that. I’m a military guy. I’m a real estate agent. At the time, I really didn’t have a job. I was a brand new real estate agent who was using Army schools to supplement while he was growing his real estate portfolio, so I had to figure out different ways to make that income. The quickest way for me to be, feel comfortable with my family and our expenses was the Airbnb, the BRRRRnB methods, and developing those high cash flowing assets.

Mark Horton II (20:45):

My family’s taken care of, and I can use that money and invest into more stuff, so that was the biggest pivot. To short-term rentals, not right now because of market saturation. I’m actually pivoting back into long-term rentals because everyone went out and talked about short-term rentals in Fayetteville. We went from, if you check Air DNA, 267 Airbnbs a few years ago, 21 months ago, so there’s 517 now. The market’s completely saturated, so me personally, I’m pivoting back to long-terms, because there’s a need for them. They’re good cash flowing, and there is a stability with a long-term over a short-term because short-term, you might have some bad months in there. If you do nicer, long-terms, you can usually guarantee a check back, maybe not as cash flow, but I like to balance my portfolio so I’m evened out. If my long-terms cover all my mortgages for all my properties, anything short-term is just profit, and that’s how I’m starting to build my portfolio, having a mixed bag.

Robert Leonard (21:40):

Where did that decision come from to become a real estate agent?

Mark Horton II (21:43):

Man, that decision came from honestly talking with Shelby Osborne. She started Five Pillars. She’s been on the BiggerPockets, so I was talking to her and for me I needed a job. I had been a police officer in the past and one of the advantages and I just did not want to go back to being a police officer, especially when I was doing it. There was a lot of stuff going on. It’s a different topic. I talked with Shelby and she’s like, “Well,” because of some of my skill sets, some of the things that I had done in the military, I can conversate. Okay, and I can talk to people. I’m very confident, whatever. She’s like, “Why don’t you try to being a real estate agent?” I was like, “Okay, I guess I’ll just try to do it.” It made sense for me because I needed a job.

Mark Horton II (22:20):

I had a lot of connections to other military investors that maybe other people didn’t too, so I was able to pull on that thread more than others. It was an advantage for me because I was able to look on the MLS. I’m able to see properties and now I’m tied in with all the wholesalers. I know the foreclosure process. I know a bunch of different things now, so I’m able to see properties before they go on the market. That just works for me better as being a real estate agent because I can see them. Plus when I’m driving by a really nice house and my wife likes it, I can just go on show time like, “Oh, I want to go see this nice house,” and walk a million-dollar house just for the fun of it. That happens every once in a while.

Robert Leonard (22:55):

Do you focus a lot on military vets and just anybody in the military really as being a real estate agent? I think that’s possibly a good way to differentiate yourself. Being an agent is pretty competitive, so I think if you could really provide that niche service, that could be a big value add for people.

Mark Horton II (23:10):

If I ever went into a different market, I would say yes, but Fort Bragg itself is the largest military installation, I think, in the world. It’s the largest one in the Army, so everyone is the dad, son, wife, husband of a military guy, so it’s basically, if you weren’t the military guy, you’d be an outcast here. Now I do say one of the advantages is not a lot of the agents aren’t specs. I’m still current, but Special Forces, Green Berets, that’s definitely a niche for me because that’s special operations. That’s us doing different things. I got a little niche in there. I’m able to go see, go to different buildings that I’m familiar with because some of the guys that was when I went through the qualification course are now being in charge, all different phases of the qualification course, so I got a niche into that.

Mark Horton II (23:52):

They’re cadre at some of the schools that we go to, so that definitely helps. It definitely helps on one of the unique, I have those extra qualifications. I wear a tag that says Special Forces. It really doesn’t mean anything, but it does give me a small vantage, but in my market personally, you got to know how to use a VA loan if you’re a real estate agent, because I would say 80% of all offers are VA loans. Almost everyone’s PCS-ing, and the good thing about my market is mostly years, every three years is a PCS, is a change of duty station, that happens every two to three years for regular soldier members. So we’re always having the same amount of people come in and out during the summer, which actually gives you a little bit of stability, because there’re going to be a new crop coming in this summer in about two months looking for houses.

Robert Leonard (24:34):

A very common question I get from new investors is whether or not they need a real estate license to become an investor. Because I’m asked this so frequently, I often ask the various guests on the show their opinions so that investors that are listening to this can get a diverse set of opinions. Some people think they should. Some people think they shouldn’t. Some people think it doesn’t really matter, so I like to give people different perspectives on that. I want to ask you the same thing. Do you think being an agent is required to become a successful investor, and if it’s not, do you think it’s at least beneficial?

Mark Horton II (25:06):

My personal opinion is no. I don’t think you need to be an agent to be an investor. I don’t think you need to be an agent to be a successful investor. I harp on this, maybe this is me trying to keep my own business, because most of my clients aren’t only be residential, but most of my clients are actually investors that are trying to invest in the Fayetteville market. Me personally, I don’t think you need those to be that is because is that what you’re going to be good at? Is that where your time is best spent, or are you one of these people who can make a $500,000 tech job pay a little bit extra to someone like me to go find you those investment properties? You’re going to save your time, stress and all that, and I’m going to do it for you. We’re going to build this together. The way I explain it to everyone when I talk to them, a lot of my investor clients, especially all my out-of-state ones is, “Think of our relationship like a triangle. Each point of that triangle is a different thing.

Mark Horton II (25:53):

I’m going to bring the knowledge part of this triangle, especially in my market, whether it’s Airbnb, long-term, short-term, flips, commercial, that’s fine with me. That’s when I need you to bring the money part and at the tip of the triangle and we’re going to both bring the time, effort into it. I’ll bring knowledge, you bring the money, and then we both bring time and effort and I will get you wealthy by finding new properties.” So I personally don’t think you need to have that license. I think it more hinders you, especially if you have a high-performing job, it’s more stress on you. It’s actually going to deter you away from real estate because you’re going to be searching for yourself on top of doing your regular job, on top of a bunch of your family life and doing all this, you’re going to become past saturated, or if we find a good enough deal, I have a minimum fee.

Mark Horton II (26:36):

I take my cut off that fee. My job is to find you those good deals, knowing that I’m going to have to pay that fee. I’ll find you a good deal that still makes your cash-on-cash return on investment. We will build your portfolio by me finding it, and you’ll be a lot less stressed because when you come to me, I’m tied in with some contractors. I’m a short-term property manager. We’re launching our own long-term property management. Not only do I have knowledge of being a real estate agent, I have two companies, and even if you don’t use us, I have pretty accurate data, but maybe it’s not on other places because I’m managing those properties I can give you the most accurate on what’s happening in those neighborhoods, whether it’s short-term or long-term. I don’t think you need to be that agent part, but I think it is important to find an agent that is a very investor savvy agent.

Mark Horton II (27:17):

But me personally, I teach a Short-term Rental 101 course on a lot of real estate meetups. My number one thing to do for any investor client or any person who’s trying to invest into a city is the first question I ask any agent is, “Do you own investment properties?” If it’s a no, I don’t even have a second conversation with them because you don’t understand the stress that a lot of us investors go to, but you don’t comprehend someone like, “Oh, my gosh, $20,000 back for me when I start off was a lot of money. It’s a good chunk now, but I’m a little bit more comfortable.” Unless you understand that fear of losing basically your whole entire investment and this is the catapult to me being successful, I don’t think you could be a good real estate agent. That’s why I think you just need to find agents who specify investors if you have one of those high performing jobs. It’s a lot less stress.

Robert Leonard (28:06):

I completely agree. When I’m looking for an agent, especially when I’m investing long distance, people who listen to the show for a while know that I live in the Boston area, but most of my properties are in Texas. When I was looking for an agent there, I was looking for one that at least owned rental properties themselves. If they didn’t, because I knew my stuff, I had my knowledge. I would really not grill them, but I’d test them and see if they really knew what they were talking about. If they did, I would potentially work with them and be okay with it, but really I was looking for somebody who had investor experience. When I would tell people that they’re like, “Oh, well, why would you ever work with them? They’re your competitor. How do you know that they’re actually going to give you good deals, wouldn’t they want to buy them themselves?” So what do you say about that kind of dynamic between incentives, where your agent is probably looking to buy the similar deals that you are?

Mark Horton II (28:50):

That is a great question. I’ll be honest, there’s some agents that have fizzled out and burned out. I can think of a couple at the top of my head that have come out strong for a year. They’ve done that to a number of people, and by year two, no one wants to work with them. I don’t disagree with that concern with people. The way I handle it right now is this. I tell all my clients I have a board. I have a board of who my next client is. I’m really looking for properties are. I have different sections, so if you’re in short-term rentals, you’re in this section; long-term, this section; commercial, you’re in this section, and I have a list of people. Until I’m at the top of that board where I’ve taken care of all my clients, I’m not looking for another property.

Mark Horton II (29:30):

I purchased two those soon as I came back from this deployment, but I told all my clients, “Hey, I’m taking a month off from my deployment. I’m looking for two properties for myself.” I was very upfront with them, but once I get these two properties, “I’m looking for myself under a contract, I’m going to get back to becoming an agent. I’m referring you out to other clients until then.” Then once I got my two properties, so I wasn’t competing with them. I came back into the fold like, “Hey, I’m back working again. I’m off my term to leave. I got my properties done very up upfront and now I’m finding them.” Anytime I come across that issue, I’m very honest with them. If at the time we’re looking for the same property, I have no problem referring you out to another agent. I’m going to take 25% of the other agents’ commissions still.

Mark Horton II (30:06):

I’m not going to jeopardize my own brand or my own name by trying to screw over my client. I think what’s most important is showing that is I’m going on year three of doing this. By continuing doing this, I have a reputation of, “Hey, this guy hasn’t screwed me over,” and I haven’t fizzled out like other agents have. I’m continuous. I’ll do three, four deals. There’s agents that do 100 deals a year, three deals a month, four deals a month. That’s good enough for me. I have a bunch of other things going on, and that’s how I just churn out my clients. I don’t market a lot. I have repeat fenders as I call. They keep coming back to me because I find them good deals, and I think that’s another key factor showing them that I’m doing the right thing is. I have guys, this is their fifth and sixth houses I’m buying for them.

Robert Leonard (30:47):

That’s exactly what’s happened with my real estate agent is I’ve bought five or six deals through him now, and so if he had “screwed me over” on that first deal, I wouldn’t have gone back to him. Yeah, he probably would’ve made a little bit of money on that first deal, but now he’s made commissions on what, five, six properties and probably another five or six in the next year or two? You got to find somebody, you can ask questions. There’s a lot of times, if you’re concerned about that, you can just ask questions. You can gauge what this person’s like. You can feel how their ethics are. You can feel where their incentive structure is, and it would be very easy to tell somebody like you has their right structure in place.

Mark Horton II (31:20):

Here’s one more thing about that is, how many times have now you’ve recommended that agent to someone else? How many times have you been like, “Oh, if that guy’s in that market, I’m going to recommend him?” Agents who are here to play a short game and won’t last, I’m here to play a long game, so I’m going to make as many people happy because I know it’s going to be tenfold on the back end.

Robert Leonard (31:35):

You’ve done long-term rentals, short-term rentals. You’re a real estate agent and you’re also doing or operating a co-hosting company. What exactly-

Mark Horton II (31:44):

Yes.

Robert Leonard (31:44):

… is a co-hosting company, and why did you want to start one?

Mark Horton II (31:48):

After I did my first BRRRRnBs, I learned that the co-hosts that were available in Fayetteville did not meet the standard that I wanted. This also plays into, there’s another reason for this is, my wife personally, as we were having kids wanted to start developing to where she can just be a stay home mom. That is what she wanted to do. So as we’re starting to take these steps to be financially independent, do the fire movement financially, independent retirement early, we also looked at the map and this is all why we started this co-hosting company is, to put kids in daycare. It’s like 12, $1,300 a month, which is an insane amount. What we thought is, if we started a company good enough to replenish what her salary was at her current job, not only were we making the same amount of money, but we’re actually making $1,200 more because her job would’ve basically evened out us sending our kids to daycare, she’d be working for nothing.

Mark Horton II (32:42):

What was the point of her working then if it’s just to put the kids in daycare? We were looking at different things of how we can have her be a stay-at-home career. What we can do with that? We are looking at online sales, different things like that, consulting. Then at the same time, I’m like, “Man, all these other property managers suck. They’re terrible. They don’t care about the client’s property.” It’s like, “I think we should start a co-hosting company for Airbnbs.” We’re getting into it. We have two. What we’ll do is we’ll test out our company on our own properties. So when people ask us how we started, it’s like, “Hey, man. I put my money where my mouth was. I test out my properties. That is why I become successful. You should have us co-host your property.” We talked about it on a Tuesday. At this time, I was a full-time real estate agent, so I went into the hang spot with the other real estate guys from Five Pillars. Me and my wife were like, “Oh, okay, let’s just talk about this.”

Mark Horton II (33:29):

I walked into the office two days later and told them, “Hey, I’m starting a co-hosting company. We’ll be up and running in 90 days.” I went home, told my wife that and she was not happy because she wanted to figure out what we were doing first. But no, I said, “No, we’re just going to commit to it.” We committed to building this company. We first co-hosted our first two properties and we learned a lot of lessons, and then we started developing those SOPs. We started hiring other people. What we found out is people really liked our services, so the difference between us and a lot of co-hosting is we’re basically centralized out of Fairfield. We’re like a traditional long-term property management company where we are just local boots-on-the-ground. We walk our properties after every cleaning. We do some of the basic maintenance ourselves. We just launched our own cleaning company as well, so we had that internal. We’re launching our own long-term property management company that’s coming up.

Mark Horton II (34:18):

So we have all that internal where we’re these other companies that are like, “Hey, I’ll manage property in the Smokey Mountains. I’ll manage them in Texas, where we’re just concentrating in one market.” Hey, our market is Fayetteville. We’re going to be the best in Fayetteville. We’re going to maintain the super host status, and what is happening is because the way we do stuff, the way we’re always checking properties, if there’s an issue we’re able to get out there that night because we always have someone on call. Even if we can’t fix that issue, what we found is just talking to someone, knowing that someone’s there to care about you or care about the problem, we’ve been maintaining our five-star reviews. I think we’re at 39 properties or no, 42 properties because we just dropped the triplex and where we’re still super hopes under one account with 42 properties, so that was our biggest pivot. Because there was bad service, we saw an opportunity, no one was taking it and we grew and blew up because of that.

Robert Leonard (35:07):

What exactly is a co-host? I’m not super familiar with it. So does somebody else own an Airbnb, and they come to you and say, “Hey, will you host this with me?” Or, “Will you essentially be my property manager for my short-term rental?”

Mark Horton II (35:19):

That’s exactly what it is. We’re going to take care of all your automatic generated messages. We’re going to respond to all the guests for you. We’re going to handle all the reviews. We’re going to ensure all the cleanings are done. We’re going to ensure that if there’s any maintenance it’s done. For us, if you do our premier service, which is local to only Fayetteville, we’re walking the properties after every cleaning to ensure they meet standard. If a property sits there for more than three or four days and we haven’t had a guest check in, then we have a guest check-in, we’re walking that property again before that guest checks in. We’re replenishing all the supplies, all your toiletries and all that we pay for. We take care of all that for you. At the end the month, all you do is collect the check from our bookkeeper. We have a CPA that we have that does all of our bookkeeping. They do owner breakdowns. Basically, it’s completely passive at this point because all we’re doing is like, “Hey, we’re using pricing software for you.”

Mark Horton II (36:04):

We have a professional writer out of California that writes all of our descriptions. You hand the property over to us, we get it set up and meets our standards. We do inspections every six months. We go around and take photos like, “Hey, this needs to be fixed. This, this and this.” We send you photos with a document saying, “Hey, these are the issues you need to fix this.” If you’re saying, “Okay, we’ll fix them.” We’ll get all the maintenance people out there, any type of things, we’ll handle all that. And it just comes out of your stuff. Now it’s just really our approval. We wanted to develop something that was completely passive for someone, because that was a complaint, a lot of people were like, “Short-term rentals aren’t actually completely passive. There’s a lot of work to do.” No, if you get a good co-hosting service, and I prefer boots-on-the-ground local, you can be passive. There’s just going to be, hey, answering a couple messages from that co-host and we’re going to handle all the other issues for you.

Robert Leonard (36:51):

What does a fee like that cost? How do you structure that?

Mark Horton II (36:55):

So we actually have three different structures depending on what you want. So we have the Premier Service, which is the 25% where it’s all inclusive. Everything’s going to be done. We have a 20%, which is more typical towards your traditional where, “Hey, you’re still going to pay for the supplies. We’ll coordinate a bunch of stuff. We’ll still coordinate the maintenance, all the messages. We’re not going to walk the properties after every cleaning.” That’s more traditional towards your virtual management companies where they’re not walking between every cleaning. They’re coordinating some of the work to be done by the cleaners, so you’re giving the cleaners a little extra fee and now we’ve just launched our 10% management fee. All we’re doing is we’re handling all guest communications and we’ll coordinate with any cleaners. Then our CPAs will still pay you out at the end of the month. That’s what we’re calling our Slack service, that one’s just we’re going to handle the communications and the cleaners. Everything else is on you, so we have different options. All of it’s based off the percentage, 10, 20, 25.

Robert Leonard (37:49):

Is that based on revenue?

Mark Horton II (37:51):

Yes. It depends on what type of revenue, because the way Airbnb pays off, let’s say you stay at a house for four nights and it was $100 a night plus a $100 cleaning fee. Airbnb is going to pay you out $500. For four nights, a $100 night, that gives you $400 plus a cleaning fee is $500.

Robert Leonard (38:08):

Minus their little fee.

Mark Horton II (38:09):

Yeah. They’re going to take that out. This is what Airbnb completely pays you out at is the $500 when it hits your bank account. What a lot of property managers will do is they’ll take their 20% off that $500. That affects on how much money because you still have to pay fees to the cleaners. The way we do it is we just pay the cleaners their $100 dollars as owe and then we take our 25% off the $400 that you only earn for the booking. That’s also a little trick for people out there. Check how your co-hosting service is taking their cut of their money. You might be owed some money.

Robert Leonard (38:42):

As I was preparing for this interview, I was going through some of your properties and checking out your website. I noticed that you actually have listings of your properties on your own site, and the checkout or property page on your site actually looks quite similar to Airbnb, but it’s your own and you own that digital real estate. Do you utilize Airbnb and do your own marketing-defined guests or do you do it solely on your own?

Mark Horton II (39:06):

We do it on everything. We do on traveling nurses pages, Airbnb, VRBO, and our own personal page. We have a certain quota of how many people we want to push to our personal page. We leave all doors open. We post on Facebook’s, traveling nurses pages so they can direct book with us. They can book through Airbnb, VRBO. Then we found out VRBO actually put some of our properties because of how highly they rate on booking.com and a few other places, which we didn’t know happened. I guess it’s how they own it. So no, we market everywhere, but our goal is still for a certain percentage to be booked direct booking. The advantages for the guests is it’s going to save them some of those Airbnb costs, and the advantages for us is if we can develop that direct booking site, it allows us in case anything ever happens with Airbnb to still live, not die, and not have to rely on one pod or one ecosystem to eat of us.

Robert Leonard (40:04):

What would you say your breakdown is of bookings? What percent comes from Airbnb? What comes from VRBO what comes from direct bookings?

Mark Horton II (40:11):

Right now, it is, actually I know the numbers. It’s about 82% come from Airbnb. Another 11 percent-ish comes from VRBO and then the remaining comes from direct booking.

Robert Leonard (40:25):

How do you handle all of the backend operations that Airbnb provides when you do your direct bookings, like messaging or even the biggest pieces, like maybe insurance and the coverages that Airbnb protects hosts with?

Mark Horton II (40:38):

The way we basically handle that is, for us, to book on our website, there is a $600 hold on a security deposit for the property and that’s how we do it. Then there’s some contract stuff that we do through it where you say, “I agree to these rules,” when you’re booking. That sets a standard, but you also go on the same automatic generated messages that Airbnb and VRBO get sent out. The rules are all sent out to you the same way, whether it’s your cell phone and stuff like that, all that same information, so we could set up in case if we ever had to go to court or anything like, “Hey, they’ve been warned about this. They said, ‘Yes, I agree.’ They signed off on this. They even got text messages,” and then we keep a $600 security deposit for every booking that you do on a direct booking site. As soon as you come out, we clear it and it goes back into your account.

Robert Leonard (41:23):

How about insurance?

Mark Horton II (41:25):

Insurance is handled by, the owners all have to have a specific insurance to work with that. On top of that, we have insurances, whether it’s general per property and umbrella that handles all those issues. We’ve worked through our insurance guide to tell exactly what needs to be in their policy for that, and that’s how that’s handled. That question is 100% on my wife. I have a breakdown. She understood that a little bit better than me when the insurance guy was talking, but basically the way it’s explained to me by the insurance guy is basically, we’ll have insurances. The property owners have some of that and we tell in their contract that they sign with us. They have to have a very specific type of insurance to help cover them.

Robert Leonard (42:05):

I’ve been battling the same dynamic of utilizing a third-party platform versus doing it myself when I’m renting out my RV, but it just doesn’t seem to be worth it until I have a bigger fleet. Right now, I just have one, but as I prepare for 2, 3, 4, 5 of these it starts to make a little bit more sense potentially to go on my own. So I’m curious, at what point is it worth it to build out your own booking platform for short-term rentals? How big does the business need to be, or how many units do you need for it to make sense?

Mark Horton II (42:31):

For us, it’s actually pretty cheap. This is more back information, we use Hostway as our backend system. Hostway itself allows us to book on all these different platforms at once, so if one gets reserved on VRBO, it automatically blocks out Airbnb and vice-versa. If you actually look on our website, it’s presented by Hostway. So we built our backend website through Hostway itself. I’m not good with computers, nor is my wife, so we hired a website designer. She learned the system. She designed it all from us, and then she integrated all the pieces for Hostway in there, so it was actually pretty cheap because once you get Hostway, it’s just a free part of Hostway, you just need to figure it out. We just paid someone to do it. I think it hosted us a couple grand to help build that website.

Mark Horton II (43:15):

That was just the easiest way for us to do is just outsource it to someone else and Hostway already had that option for us, so it made sense. I think for growth, direct booking websites, I think you can get away with, if you only have a couple units with Facebook advertising, good Instagramming and using a marketing campaign on them and they directly contact you and you work a deal through Venmo and different things like that. I think once you get to that five, 10 mark is where you definitely can start considering bringing in your own platform so people have options. I’m about to get some hate for this what I’m about to say, but I don’t know. I think it’s a little janky when people like, “Oh, check out my direct booking website. I had one property for the last four years.”

Mark Horton II (43:53):

I get you proud of it, but did you really need to spend all that money? Was that the right investment, or can you invested in something else on your property? Just have a good Facebook page. Do a good Instagram, do a TikTok and book like that. I don’t know, but that’s just me, but like us, we have so many. As we continue to grow, we’re starting to open up and maybe franchise to another market our branding and stuff like that. It makes sense for us because we’re going to start adding more places as the growth. So I think at that about five, definitely that 10 mark that’s when you start looking into it and definitely finding a backend system like Hostway that allows you to build into it and just eat off that ecosystem.

Robert Leonard (44:29):

Short-term rentals have been gaining in popularity a lot over the last few years. You even mentioned earlier in that conversation that in Fayetteville listings have doubled, or more than doubled in just a couple of years. Are you worried about not only the competition, but also the hype, the “hype” that is around short-term rentals right now?

Mark Horton II (44:49):

Yes. I don’t worry about it from my own standpoint, I worry about it for other people. I remember when I was a young agent or not, a young investor and I got lucky, I found a good agent that actually taught me, the unfortunate part of doing some real estate investing, is there some predators out there that can advertise very well and people will lose money because they’re going to buy into these so-called, so-called programs. They’re going to teach them how to be the next super host and stuff like that. That’s where I worry about it the most, as from an investor to an investor is someone getting used because this guy just says a good marketing. There’s plenty of people who do good at marketing. What they’re teaching isn’t the best. What they’re teaching is very basic, where if you just follow the right people, you get part of the right real estate teams or you get into the right group of circles, you can learn a lot of this yourself and that will definitely help.

Mark Horton II (45:39):

The hype, I think the hype of investing will go down, which will be good for the properties that have been able to survive. There are going to be a lot of people whose properties that bought into short-term rentals because it was the hype, everyone was doing it. short-term rental shock was going here. Avery Carl is posting here, and these different people are talking about these different areas, which they’re doing really well. But some people are going to get used by agents who are just looking for a sale and not know what they’re doing when they buy these properties and they’re going to die out and they’re going to have a bad taste in their mouth for short-term rentals. I think the Market for people renting them out is going to stay the same because legislations level. You’re seeing a lot of states fight back saying, “Hey, cities can’t regulate these things like that. They can’t ban Airbnbs.”

Mark Horton II (46:27):

I know North Carolina’s one of them. I believe Michigan’s another state that are really pushing for people to have independent rights at their states. So I think the hype of there being people to stay at those is going to grow. COVID was good for that in a lot of ways because people wanted their own house. They wanted their own unit. They wanted to stay in a hotel. Hotels shut down. Airbnb is on, a lot of places were still up and running. So even when you were traveling, you can go to an Airbnb. It’s usually sanitized. It’s usually pretty clean, at least all of our properties are. So I think the hype of people using them is going to continue to grow, and I think probably in four or five years, the hype of people investing in them are going to die out because they didn’t get with good agents. They bought some plan that didn’t really teach them how to be real estate investors and they half-assed their property, and they aren’t able to keep the numbers that they want, and then they’re going to have to sell it off.

Robert Leonard (47:14):

Are you concerned about the risk from increased laws and regulations around short-term rentals? It sounds like you’re focusing in states where ideally that’s not going to be an issue, but as you expand maybe into other states or just even in your state, is there any risk for you there? Are you any concerned about that?

Mark Horton II (47:31):

I actually am somewhat concerned with that, because they have done no regulations. There’s no regulations on it. As long as you pay your taxes if you have a direct booking website, that’s the whole thing. But if you do your own direct booking website, you have to remit those taxes yourself, learn that. I definitely think that’s definitely one of those situations where us down in the future, it’s something to be concerned about. That’s one of the reasons I’m starting to get more involved with the city council. I want to be at the city meetings when they talk about this, and right now our regulations haven’t happened, so I actually have more of a concern because there’s nothing on the books. Now, if there was a city that had the same regulations the last seven years. Everyone’s happy. There’s a comfortability of that like, “Hey, I understand. I know how the play inside the rules.” When they actually do regulate it, what’s going to happen we’re going to have to be able to flex.

Mark Horton II (48:18):

I think for the most part, we’re going to start seeing a lot more legislation at the state level saying to cities that they can’t regulate people’s personal properties. There was definitely a pendulum swing a few years ago with cities were coming down left and right banning Airbnbs, especially cities with big hotels. A lot of hotels were losing business and magically, all of a sudden regulation for Airbnbs came in. It’s just a huge surprise. That was all sarcasm, But what you’re seeing at the legislation level is people who are starting to get involved with them, whether it’s the VRMAs, other local investing groups and making sure we have a voice in them, I think that’s going to be the biggest thing that we need to make sure we continue being able to invest into this type of asset, is people being involved in their local city council, showing the good light.

Mark Horton II (49:02):

I know with all of our properties, since most of my properties were BRRRRnBs, usually took the black eye in the neighborhood, the worst properties. Now I have one of the nicest properties. I have fenced-in, nice lights. There’s flowers there. It looks good. It makes that street look good. That whole street that I said used to be like drugged-out houses has been almost completely flipped. I own three houses on there. It was part of that. All the other places have been bought out and turned into nice houses, sold to nice families. Even though the apartment complexes have been upgraded. So there’s definitely advantages to it, but it all comes down to people staying involved and it should be concerned of everyone, because any time city council can get the wrong person that is a stay-at-home wife or a stay-at-home dad who wants to get their five minutes of fame and goes to every city council meeting, you need to be there and involved in them.

Robert Leonard (49:44):

What is the biggest thing that keeps you up at night in your real estate business?

Mark Horton II (49:48):

That is a great question. Finding deals from my clients, I think, is the biggest thing. It used to be contractors. I’ve paid out a lot of money to bad contractors, but just to get the job done, but it’s going to be continue finding new deals and shifting as the market shifts, making sure I’m finding deals that other people aren’t looking and moving to the next thing before everyone else. I think one of the reasons I’ve been successful as an agent is because I’ve always pivoted before everyone else. I pivoted into Airbnbs, right when they’re still fresh and new in Fayetteville. Now I’m going to be one of the first people, I’m pivoting back to long-terms. A lot of people are still calling me about Airbnbs, and I’m telling them the same thing. “The market saturated. I wouldn’t recommend them in Fayetteville.” So it’s finding those deals and making sure I keep pivoting from my clients and my own investments.

Robert Leonard (50:32):

As we wrap up the show, I often like to turn the tables for a second and let the guest become the host and ask me a question. So Mark, what question do you have for me?

Mark Horton II (50:40):

You’ve had a lot of people on your show. I love what you’ve been doing. What type of guest would you like to hear about? What is you looking to develop and what would be beneficial for you to have on your show so you can learn some information about?

Robert Leonard (50:54):

What I like most from a guest is somebody, it’s kind of selfishly, but is most beneficial is somebody that is talking about something that I’m looking to do. I’m looking to start buying some Airbnb properties eventually in the short-term, and so talking to somebody like you, and like you mentioned Travis, and we’ve had some others on the show talk about Airbnb. So they can come on the show and I can learn from some of the greatest and most successful Airbnb investors that there are one-on-one right here on the show. So for me, my favorite thing is to bring on people who can talk to me about the things that I’m looking to do at my business. It just so happens that a lot of people that listen to the show are also interested in some of these ideas, and so it works out.

Robert Leonard (51:35):

It was awesome, I read a really good BiggerPockets tax strategy book, and I was able to have the author of the book on the show. I read through the book, I had a bunch of questions. I was like, “Awesome. I could just invite her on the show, get my questions answered directly from the author of the book,” and that’s happened a bunch. A bunch of books that I’ve read, I’m like, “Oh, I have these questions. I wish I could ask the author,” and I’m like, “Oh, wait, I can.” So I just reach out to them. They come on the show and we talk about the questions I have about the book. As a byproduct, other people that are listening get to learn from it as well. Those are my favorite guests. Now, before we sign off, I want to give you a chance to tell the audience where the best place is to connect with you and learn more if they’re interested.

Mark Horton II (52:14):

Best place to connect with me on all platforms, Facebook, Instagram, TikTok, eventually YouTube, working on that one, but Horton Stay Rentals, Horton, H-O-R-T-O-N, Stay, and then rentals with an S at the end. That’s on all platforms directly to me on my Instagram, Mark_II, Mark II. Those are your best areas. Then if you want to check out hortonstayrentals.com. You can find us on there, and those are all the best places to hit me up. Whether it’s short-term rentals, real estate agents, I’m in a group with a lot of real estate agents that are all over the country that do short-term rentals in their market. So if you’re looking for something and you like what I have to say, I can link you up with those people. Just let me know.

Robert Leonard (52:54):

Awesome. I’ll be sure to put a link to all your different resources in the show notes for anybody that’s interested in checking them out. Mark, thanks for joining me. I appreciate it.

Mark Horton II (53:01):

All right. You have a good one.

Robert Leonard (53:03):

All right, guys. That’s all I had for this week’s episode of Real Estate Investing. I’ll see you again next week.

Outro (53:09):

Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday we teach you about Bitcoin and every Saturday, We Study Billionaires and the financial markets. To access our show notes, transcripts or courses, go to theinvestorspodcaster.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.