Mark Weinstein is the founder and president of MJW Investments, which specializes in acquisition, development, and asset management across a diverse billion-dollar portfolio. He’s a respected investor, developer, and philanthropist, and today, he joins us to share his journey. We learn about the strategies he’s used to scale his business and some of the risks and success factors involved in student housing, development, and more.
Listen to this insightful episode!
[00:01] – [04:49] From Law School to Real Estate
- Mark on convincing his fellow students to buy a property with him
- He believes real estate will help him make more impact as a philanthropist
- Going to real estate full time and focusing on great write-offs and great cash flow
[04:50] – [14:08] Growing and Diversifying
- Creatin go-GP platform for people who are looking to grow
- Why invest in student housing
- The formula: best schools always thrive, especially if they are close to campus
- Renting by the bed instead of by room
- His experience with a development project that was mothballed for nine years
- Don’t be distracted by deals you don’t need to be in
- Be careful with personal guarantees
- Mark explains why development projects are risky
- The cost to build is too much
- You can do a value add play without construction by buying a new product from developers who are exiting early
[14:09] – [15:33] Lessons on Debt
- Relationships with different banks are crucial
- Look for fixed rate loans
[15:34] – [16:49] Closing Segment
- Reach out to Mark!
- Links Below
- Final Words
Tweetable Quotes
“I try to take everything I could and invest myself in every deal as much as I possibly could, do as much as I could and share with investors the deals that I thought were safer and grow the company that way.” – Mark Weinstein
“It’s not the money you lose on the deal. It’s the opportunity cost that you lose.” – Mark Weinstein
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Connect with Mark at mweinstein@mjwinvestments.com or head over to MJWinvestments.com.
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Want to read the full show notes of the episode? Check it out below:
[00:00:00] Mark Weinstein: So I think it’s very risky for people that aren’t really good at it. I have some friends that are really, really good builders and they still have a spread, but sometimes I kind of feel like they have to keep the machine going. And so sometimes they lose sight of maybe it’s a good time to take a pause. I think it becomes a machine you’re feeding. You have so many people and you have so many mouths to feed and there’s a spread between what it costs to build and what the sell cost is.
[00:00:38] Sam Wilson: Mark Weinstein is a self-made owner and developer who scaled from five units to a 1.5 billion portfolio of multifamily and student housing. Mark. Welcome to the show. Thank you. Thank you. Hey man, the pleasure’s mine, mark. There are three questions I ask every guest who comes from the show: in 90 seconds or less, can you tell me where did you start? Where are you now and how did you get there?
[00:00:58] Mark Weinstein: Well, when I was in law school, I discovered real estate and I convinced a bunch of students at the law school that we should buy a building and they gave me their money, student loan money, whatever money they had. And we bought a five-unit building back then and we grew it to a large portfolio in both multifamily and student housing. And I enjoy great family life and really, really happy for the success we’ve had in real estate.
[00:01:24] Sam Wilson: Man, that’s kind of a wild story all in itself. I mean, you saw a five-unit building and you just had a wild hair and said, Hey, let’s go buy that. I mean, was there more to the, to the bug than that, that caught you that day or?
[00:01:36] Mark Weinstein: Well, I think that when I realized, you know, wanted to be a lawyer and if that was a really noble thing to do, as something I wanted to do as a. But I also wanted to do a lot of philanthropy and I kind of realized that being a lawyer probably wouldn’t be able to scale to be able to do the type of things I wanted to do. And so I saw real estate as an opportunity to create wealth and be able to give back on a higher level, more impact by in real estate.
[00:02:00] Sam Wilson: Gotcha. So what was your next move? You buy this five unit building. You beg, borrow, steal and rob all your friends for whatever capital they had to take it down. How did you grow the company? What were the next logical steps? You said, man, I’ve got to do X, Y, and Z next if I’m going to take this to the next level.
[00:02:16] Mark Weinstein: So I passed the bar. I’m practicing law. I said, well, I got to do a couple of deals. And then finally it came to an inflection point where I needed to make a choice. Am I going to just kind of do law part-time and do real estate part-time or am I going to really go for it? And so I gave up the law completely and went into a large development in old town, Pasadena, very complicated and historic buildings and mixed-use and all this stuff. And so it started with that, which was a very big learning experience. And then eventually got back into multifamily and student housing and some other items that I bought along the way to grow where we are today.
[00:02:53] Sam Wilson: Did you do this all on your own? Did you have mentors? Were there partners? Those are big bites to take out of the gate.
[00:03:00] Mark Weinstein: Well, in Pasadena, I raised the money and I had a partner who didn’t work out so well, so I had to take it over. So I learned construction at an early age on these historic buildings, which was very complicated. And I never really had partners. I had investors in some of this stuff, but my thing was, I tried to take everything I could take and invest myself in every deal as much as I possibly could and do as much as I could by myself and share with investors on deals that I thought were safer and grow the company that way.
[00:03:30] Sam Wilson: Wow. That’s really cool. What gave you the confidence and what would you tell to somebody who was going out maybe on their own for the first time to raise capital? What gave you the confidence to go to investors and ask for that money?
[00:03:42] Mark Weinstein: Well, I’d been successful the few deals that I’d done. And I believed in real estate and I believe that I could find deals that were unusual, that had hidden value. And I thought, you know, there’s good write-offs and good cash flow. So I convinced people that if you marry those two things you can do well.
[00:04:00] Sam Wilson: Yeah, no. And that’s absolutely true. Tell me, you said you believed in real estate, where are we now and how are you positioning yourself maybe differently than you would have at the beginning of your career?
[00:04:11] Mark Weinstein: I now have almost nine-year-old twins and a beautiful wife. And I don’t go into big-ass development deals like I used to, and I do have silver hair that I got and retained from some of those development deals that I did earlier in my career. And so now I’ve, you know, we got a really diversified portfolio of student housing and multifamily, mostly with fix rate loans, with long term horizons, good cash flow, good write-offs, you know, a well-balanced portfolio in great markets, you know, that I could own long term if I wanted to, or I could sell intermittently when the opportunity arises.
[00:04:49] Sam Wilson: Do you feel like your company is where you want it to be? Are there still yet boxes you want to tick off or is it something at this point where it’s just kind of maintain the status quo and write it out?
[00:05:01] Mark Weinstein: Well, we have a couple of different platforms. One of our platforms is the Co-GP platform. We’re taking people that maybe are already successful in their career, but they need to grow or want to grow. We could use our capital, our relationships. We’re doing self-storage, we’re doing student housing, we’re doing multifamily with other operators. So that helps us leverage, you know, our kind of secret sauce to get great returns for ourselves and our investors by doing that. And then our, you know, our existing, you know, acquisitions, you know, are still going on, but right now it’s an inflection point in the economy. So we’re being a lot more careful, whether it’s finding a new operator to partner with buying our own deals, type of financing that we’re doing, you know, refinancing when we can get to from variable to fix rate. So those are a lot of different things that are going on and we’re kind of opportunistic. We’re always thinking they’re no matter how the economy is, there’s always some type of opportunity.
[00:05:56] Sam Wilson: Yeah, no, absolutely. I love that. I love the idea of Co-GP. It’s funny, ’cause a lot of people start off that way. You know, raising capital a Co-GP as you well know their way in the deal. Like, Hey, I can bring, you know, a million bucks to a deal and then they come in as can get a, you know, very, very minority slice in the deal. But you guys sound like you go the other way where it’s like, Hey, you’re probably going to be the, and correct me if I’m wrong here, but you’ll be the larger portion of the equity, if not all of it. And that’s how you guys are coming in really diversifying, is that right?
[00:06:23] Mark Weinstein: Right. Partially we’ll put up or raise the equity on the LP side, but on the GP side, we’re helping them maybe get the loan. We’re helping, you know, put up the GP side of the capital and either we put up or arrange the LP side of the capital generally. So it’s a, it really allows someone to focus on finding their deals, operating their properties, and they can grow their business, whether it’s self-storage, whether it’s student housing, whether it’s multifamily.
[00:06:48] Sam Wilson: Tell me about the student housing market. What are you predicting on that front? What does that look like? We’ve had several guests come in the show and I’m just curious where you see where we are in the cycle of student housing and what are the prospects there.
[00:07:01] Mark Weinstein: Well, I think, you know, the student housing that we do is usually at major schools, walking distance to campus. That’s one of the formulas, the best schools thrive. They’re recession resilient. They’ve done really well during the pandemic and the, you know, potential recession that we may be upon. And so we like student housing, you know, it’s very operationally intensive and you know, you have your more bumps, ups, and downs with student housing, but if you’re in the best markets, great locations, you do well.
[00:07:29] Sam Wilson: Yeah. How has that changed? We were talking about this at dinner last night with some buddies, and we were just talking about, you know, student housing, where they lived when they were in college and how that has changed dramatically. Like, one of the guys was just fussing, he’s like, Man, my son thinks he’s got to have his own private bathroom and X, Y, Z and this, and he goes, one of my other buddies sitting across me, he goes, man, he didn’t have doors to my house. No joke. He said, we just locked the hallway doors and we didn’t have front and back door. I’m like, that’s pretty hysterical. It’s a lot of fun, but I know that market has changed. What’s it look like now versus what it was 30 years ago?
[00:08:01] Mark Weinstein: Well, interesting. When I went to school, I lived in the dorms in my sophomore year and it was like a four-man suite, four-person suite. And so it had a couple of bathrooms in private rooms and you know, it’s not so much different from the purpose-built stuff we have today. A lot of the stuff that we’ve done though has been regular apartments, scattered sites where I live in UC, Santa Barbara, the same apartment building’s still there. And, you know, you, convert it to a bed basis, possibly where you’re renting by the bed as opposed to a one bedroom or two bedrooms so it’s changed in the sense that it’s more by the bed. And, you know, there’s purpose-built student housing, which, you know, four bedrooms, three bedrooms, two bedrooms, and there’s apartment buildings that, you know, you reconfigure or you have students live in. And the key is being close to campus.
[00:08:46] Sam Wilson: Got it. Got it. That’s really, really cool. Love how you guys have made, you know, this journey thus far. I mean, gosh, you’re in multifamily, you’re in student housing, you guys are doing large Co-GP projects. Tell me, I guess, what are, if you were to rewind the tape and go back through your investing career, what is one thing that you feel like you would either do differently or maybe the other way to think about it is something that you could say, Hey, I can help somebody avoid this pitfall.
[00:09:09] Mark Weinstein: Well, I do try to help people avoid pitfalls. I was doing some massive, large-scale development while I was doing some other massive development at the same time. I thought that I could do no wrong. Like, you know, the good news, I had my own money in it. So I wasn’t risking other people, but I did some of the largest projects in LA. You know, I was this kid that had nothing, came from nothing, and kind of rolled the dice. I wasn’t married. And, you know, I didn’t really think at the time I was rolling the dice cause everything was going well. But I started thinking, Hey, in 2007, you know, things are changing. I want to get out of this and sometimes forces beyond your control, economy, politics, don’t allow you, even if you’re smart enough to want to get out at a big profit the right time, can’t always do it. And so I think that having so many developments going on at once and, kind of being an entrepreneur, I think that, you know, maybe I would’ve focused on more conservative, existing, you know, investments and could have done way better at a lot more time. And the opportunity cost that you lose when you get distracted by a development deal that gets mothballed like mine did for nine years. It’s a lot of money and you lose opportunity. It’s not the money you lose on the deal. It’s the opportunity cost that you lose by being distracted by deals you probably don’t need to be in.
[00:10:30] Sam Wilson: Yeah, man, a nine-year mothball. Did you retain the project through…
[00:10:36] Mark Weinstein: Sold it, sold it at the, probably, the loan amount. I lost all my equity. Thank goodness, it was all my money. Great write-off, you know, was able to use the write-off for many, many years. And one time a bank was looking at my tax return and said, you know, there’s no way that, you know, you, what of these losses? And, you know, these are depreciations. So no, these are checks that I actually wrote that, you know, to keep on, the project going ‘Cause I had personal guarantees, which is also something you got to be very careful with and, you know, banks change, the bank went under. And so all of a sudden, a personal guarantee with somebody, you know, so a new bank, you never know who your banker is going to be and so they might not be as kind with giving you extensions, even if you’re paying, you know. So it’s just, you learn a lot, you know, that you got to be careful.
[00:11:22] Sam Wilson: Do you see similar risk in development today? Everybody I talked to in the development world says that now is different. How do you feel about that?
[00:11:32] Mark Weinstein: Well, I think that it’s a slippery slope because look at how much prices have gone up. Look at the cost of financing, look at pandemics, you know, all the things that happen. So I think it’s very risky for people that aren’t really good at it. I have some friends that are really, really good builders and they still have a spread, but sometimes I kind of feel like they have to keep the machine going. And so sometimes they lose sight of maybe it’s a good time to take a pause. I think it becomes a machine you’re feeding. You have so many people and you have so many mouths to feed and there’s a spread between what it costs to build and what the sale costs is. If cap rates could go up and cost keep on going up, the interest rates are going up, all of a sudden you don’t have that spread. There might be a need for multifamily, but, you know, it might cost you too much to build it.
[00:12:21] Sam Wilson: Well, that’s it. And that’s been the argument I’ve heard from a lot of people, especially in the, you know, Texas markets and places like that. They’re saying why buy existing value add multifamily when we can go out and build it for less per door than what people are bidding over for used inventory.
[00:12:38] Mark Weinstein: Yeah that makes sense, but I just don’t think it’s so easy to build it. I think that one thing’s going to happen is when the prices have to go down. It’s interesting enough is that we’re buying a lot of newer apartment buildings below replacement costs, developers have various things that need to get out. They had too much going on and so they’re going to sell. They leased it up quickly. The rents aren’t what the market are. And so you buy these things under the cost of, of construction. You take no construction risk. And then over time, you can raise rents and you make a nice return. it’s a solid market. So that’s a value add play without doing value add.
[00:13:13] Sam Wilson: Right, right. It’s buying new product without the value add. What’s the developer’s angle on that? ‘Cause I’m not a developer, so I don’t understand how they exit a property like that that maybe is only two or three years old and still walk out with their shirts on.
[00:13:25] Mark Weinstein: Well, sometimes it’s very close to shirts on shirts off, ’cause you know, often we’ll do it right year one because they want to get out. ‘Cause they’re also, they make a profit. So they bought the land a while ago. Their costs were in and so they can still make money. They don’t make as much because they need to move their money around. And so you’re able to get in at a fair price and if you buy it right and you can marry it with fixed-rate financing. You’re in a strong market and you manage well, you’ll, you know, you’re not going to make the kind of value add returns that we used to make with value add, but you’re also not going to take the risk. You’re going to mix fixed-rate financing with a steady, great asset with gradual rent growth. You know, don’t get greedy. That’s a good return.
[00:14:08] Sam Wilson: Right. Absolutely. Let’s talk about debt. What are your strategies on debt right now?
[00:14:14] Mark Weinstein: Relationships. So you need relationships, you know, with different banks, First Republic Bank, Banc of California, two banks that are California-based, have been really loyal to us in giving us debt. You know, they held the, in the threes, mid- 3, 3- 4. You know, while rates were changing dramatically now, it’s, you know, about 4.1, fixed rate, lower leverage, 55% non-recourse. You know, reliable, good, you know, good bank relationships. You know, also balance sheet loans from other lenders. Really, you got to do fixed-rate loans. You got to be able to do that in this, you know, this part of the cycle.
[00:14:50] Sam Wilson: Right, right. Yeah. And I heard somebody say that earlier this year, I’m probably going to butcher the way they said it, but it was something like borrowing long-term debt at a fixed rate is its own inflation hedge in its own right if you’re able to then obviously redeploy that capital and collect the delta, redeploy at a higher, higher rate of return.
[00:15:06] Mark Weinstein: Yeah. The only other thing I’d mention is that I like the flexibility. If you can marry a fixed rate with, being able to prepay it without the feasance, that’s also a really good thing that you try to do to, you know, ’cause one of the negatives of fix rate financing is that when you want to get out of the loan, it could be very costly. So if you’re able to get fixed rate financing that is flexible like you can with private banks, it’s a really big win.
[00:15:33] Sam Wilson: Yeah. Yeah, absolutely. That’s a fantastic point. Mark, I’ve really enjoyed you coming on the show today. Certainly appreciate it. I love how you’ve kind of bootstrapped your way from five units all the way to a billion-and-a-half dollar portfolio. Your thoughts on the student housing market, the multifamily market, how you guys are finding opportunity, and where you just kind of see risks and the potential for success here today. So certainly appreciate it. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?
[00:16:00] Mark Weinstein: They can email mweinstein, W E I N S T E I N, @, all one word, mjwinvestments, plural, .com. You could also go to our website, MJW Investments, and see what we do and contact through our website. MJW Investments.
[00:16:19] Sam Wilson: Fantastic, mark. Thank you again for coming on the show. I certainly appreciate it. Have a great rest of your day.
[00:16:24] Mark Weinstein: Bye. Bye.
