Cash Flow Feeds Families: Marcus Saxon’s Real Estate Investing Strategy

Marcus Saxon (00:00)
Yes, cash flow will feed my family today. equity won’t. equity is important, but I believe at the end of the day, what are we all doing here investing? We’re looking to harvest what you know is— is money. Okay. And sure, you can continue to 1031 into bigger properties. Hey, I’ve done that myself a few times. But if you’re able to put together a portfolio that has a good margin that’s cash flowing, that’s putting money in your pocket to continue the cycle with taking what’s you know, the yield off of that to buy more properties, as well as doing cash-out refis too—

Issa Hanna (02:09)
Welcome back to another episode of the Real Estate Pro Show. I’m your host, Issa Hanna, and today I have somebody who’s a maverick in the real estate game, a self-built man who’s here to share his knowledge with us, Marcus Saxon. Marcus, welcome to the show.

Marcus Saxon (02:23)
Hey, how you doing, Issa?

Issa Hanna (02:24)
I’m doing great. I’m doing great. I’m excited to pick your brain about the knowledge that you have.

Marcus Saxon (02:30)
Great, great. Look forward. I’ve— I’ve been looking forward to this for a while. So yeah, let’s— let’s get started.

Issa Hanna (02:35)
Let’s get into it. So you’re in the rental game. You’re also a broker. for our viewers, give a little rundown of of what you’re doing day to day.

Marcus Saxon (02:44)
What I’m doing day to day is managing thirteen LLCs. I keep busy. I collect rents. I review insurance rates. I— I— I’ve got a phone that rings almost twenty-four seven. And you know, what I do is— is I keep busy. I raise family with my fantastic wife and you know, life is a journey, for sure. So I— I’m— I’m— there’s— there’s always new challenges to navigate, and I’m always excited for it.

Issa Hanna (03:14)
Definitely. Well, on this journey in life, we’re— we’re all somewhere, we all end up somewhere, but we all start somewhere. So how did young Marcus get started?

Marcus Saxon (03:24)
Well, you know, I— I got my bachelor’s degree in finance from Washington State University in ’99. From there, lived in San Diego for years, worked for a brokerage in La Jolla. From there, I learned quite a bit as far as the time value of money, which I learned in school, but how that applies to everything from buying a depreciable asset, let’s say a car, versus a leased investment piece of real estate that should go up in value. So getting that knowledge there, years later I started incorporating it to what I can actually do with, you know, money that I save for a down payment. Not on a huge, large scale like what I was seeing in San Diego, but you know, easy, you gotta start somewhere. And you know, that’s what I did when the real estate crash happened in two thousand nine. I— I— I think the bottom of the market was around twenty eleven and I made a couple key purchases there. bought a three-bedroom condo, bought a three-bedroom townhome, and then from there I 1031’d them into larger properties that— that point was— was the catalyst to where I started growing my portfolio. sometimes there’s great deals out there, sometimes there’s not. It’s okay to hit the pause button and wait for something that you think makes financial sense. Sometimes they come across your desk, sometimes they don’t, for years. So you gotta be patient and you gotta keep the money ready for whenever you decide to make that move.

Issa Hanna (04:53)
Definitely. You have to speculate and you can’t be desperate to just buy a property ’cause you want to buy a property. The numbers have to make sense. So I can definitely relate to that.

Marcus Saxon (05:52)
Yeah, I think a lot of people get into trouble. They get excited and they think, “Hey, you listen, all real estate goes up in value. If I just buy something, if I just, you know, get it— get it under control and under my name and, you know, things will turn out.” It does work out many times, but there’s other times that— lit— listen, Issa, there’s a lot of sharks in the water there. So you— you really gotta know what you’re doing. You— you need a mentor, you need to talk to people who have done this before. That’s crucial before you start making your moves. I’m always concerned and always looking out for the young investor who’s trying to get started. You know, “Hey, what do I do? This is a— this is a big thing. What am I doing?” You know, I’m— I’m watching these podcasts and these things on YouTube, what really makes sense? And frankly, there’s more knowledge coming out now that’s, you know, dis— discrediting people who just say, “Buy this, buy that,” without any, you know, true theory behind it. You know, people always say, “Study the market.” Yeah, well, you know, look into, well— well, what does that really mean? I mean, you’ve got to look at margins, you gotta look at depreciation, you gotta— listen, Issa, wherever you’re at and wherever I’m at, you know, the interest rates are generally the same, but the rental rates are different. The insurance is different. Within parts of the city, it’s different. So all these things really need to be, you know, looked into— the utility costs, of course, the taxes. My goodness, all sorts of stuff. So, you know, with— without getting too far into it, I— I just think people really need to understand the fundamentals before they make their moves.

Issa Hanna (07:19)
Definitely. And another thing that stuck out in our conversation earlier is you prioritize cash flow, sometimes even over equity. Could you shed some more light on that philosophy?

Marcus Saxon (07:30)
Yes, cash flow will feed my family today. equity won’t. equity is important, but I believe at the end of the day, what are we all doing here investing? We’re looking to harvest what you know is— is money. Okay. And sure, you can continue to 1031 into bigger properties. Hey, I’ve done that myself a few times. But if you’re able to put together a portfolio that has a good margin that’s cash flowing, that’s putting money in your pocket to continue the cycle with taking what’s you know, the yield off of that to buy more properties, as well as doing cash-out refis. So you’re kinda hitting it from a couple different angles. And if you’re cash flowing, well, there’s a higher likelihood, depending on what it is, it could make you more self-sufficient where you could leave your W-2 job. So equity’s not gonna feed my family right now, but cash flow will. And you know, as an example, just in the last fifteen months I’ve bought— I’ve bought eleven properties. That’s crazy in this environment with the same interest rates that we’re all seeing. but my cash-on-cash return is averaging close to twenty percent with what I have, which is almost unheard of. I also give a heck of a margin with that. I give some grace, it’s really important. I usually take twenty percent or so off of— off of my cash flow as well as the cash-on-cash returns to give some more validity to it, because you and I both know that we don’t know what repairs are going to happen, what maintenance is gonna need to be done. We always know it’s gonna be there. I like to give a conservative twenty percent that protects against vacancies as well as, you know, whatever else might pop up.

Issa Hanna (09:15)
So not only did you share the cash flow and why it is king—it’ll feed your family—but you just shared another piece of knowledge with us too. So, man, you’re— we’re just rolling right now. I feel like you’re just oozing knowledge from your fifteen-plus years in the real estate industry.

Marcus Saxon (09:33)
Yeah, people really need to get in the trenches and understand things from the ground up instead of, you know, being an owner and, you know, ruling from an ivory tower. You— you really gotta understand what it means to replace a toilet. You gotta understand some of the— the crazy variables that could happen when you have a tenant whose kids summer break right now, they’re getting a little bonkers in the neighborhood, and then you have to hear about it. How do you deal with things like that? It’s not always what’s on the spreadsheet, but it, you know, for you to be able to understand with what’s happening on on the ground level, that could really make you. If you don’t, it won’t break you, but it’s gonna cost you more money.

Issa Hanna (10:48)
Definitely. I always say you can be book smart and street smart as well in the— in the real estate industry. And what you described is a street smart aspect of it, and you definitely need that. so with that, every real estate investor has a real estate nightmare. so this is the part of my show where I love to ask our seasoned vets of a time where they may have had a real estate nightmare and then overcame it. So you’ve got the floor.

Marcus Saxon (11:15)
Well, I’ve got one that is actually not appropriate for this show, where with actually a— a derelict tenant’s kid during summer break. That was— I alluded to that one we just last spoke about, who was, let’s just say, being inappropriate with— and just being inappropriate and having to reel that in with— families in the neighborhood was not fun. But you know, one— one thing that— something else. You know, everyone asks me, “Hey, how many doors do you have?” I go, “I don’t know about how many doors I have, honestly.” But I can tell you how many toilets I have, because you know, it’s the toilet that’s calling me at two in the morning with an issue. Well, it’s the tenant, but you know, I’ve never had an issue with the door. It’s always the toilets. And, you know, there’s— you know, there’s many issues that I’ve had from replacement to, you know, a partial flip that someone did to where they misgauged the— the piping for the sewer lines going out, and that’s always an unauspicious situation to be in. So there— there’s— there’s been many stories. My short-term rentals, you know, someone let their dog in the hot tub. My goodness, I called them saying, so, “Why— why would you do that? You know, the— the hot tub’s green. There’s dog hair everywhere. It smells disgusting. Should I call animal control for— for, you know, the abuse here?” You know, I’ve had situations like that. I mean, you— you— you name it. people trying to tap into electrical buildings, you know, just— you know, silly stuff. So you you just have to overcome it. I mean, easily, you just— you— you just have to deal with it. You have to absorb what the problem is. Don’t have a freak-out. Just, you know, talk to the people that you should have there saying, “Hey, obviously we have a problem. What can we do to remedy this problem with the least amount of— with the least amount of cash and hopefully headache?” But you know, you can only control so much at that point.

Issa Hanna (13:05)
Definitely, you’re gonna run into problems, especially in the real estate, the landlord game and the investment game. They come with a unique set of problems sometimes. So you sound like a lot of the seasoned investors I’ve spoken to. With that, though, I know we spoke a little bit about opportunities on the horizon and the future. What do you see coming up in the industry?

Marcus Saxon (13:30)
I see defaults coming on the commercial side. there’s many people who had bought five years ago interest-only loans—I don’t know why they did that—but now— now they’re starting to go back to the bank. Right now. It’s happening right now and it’s gonna happen through at least next year. there’s gonna be some opportunities, I think, for people to pick up if they’re able to get— the money together with or without a team, to be able to pick something up that’s newly priced that a bank wants to get off their books. I would love to be in that position. I’ve been in that position before. I just— I just don’t know if I’m gonna be there. but right now, what I’ve been able to identify in the last year, I’m pretty darn happy. but I’m absolutely keeping my eyes out for— for what I think’s in the pipeline right now. I think we’re in the fourth or fifth inning of this, to be honest with you. that’s the opportunity that I see in the future. but also for the investors that are starting out, you know, I gotta tell— I gotta tell all of them, you know, don’t just look in your neighborhood. You’ve got to be able to look in the entire country. I own properties 3,000 miles away from where I live. I sleep well at night. I’m confident with what I have in place. And people need to be able to get out of their comfort zones and look at places where the numbers do make sense. You know, there’s— there’s no valor in buying something local if, you know, the numbers are weak. And sure, yes, it— you know, it might be only fifteen minutes away from you, but you know, what are you gonna do? Set up a picnic table and watch your triplex or— a small commercial property do it— do its thing? Well, you know, if it’s— if it’s not making you much cash flow or— or any, or you gotta put down a huge down payment, which seems to be the name of the game in certain places to make it cash flow, what’s the point? Go somewhere else. Okay. That really scares most investors. And I— I really ask the young investors and the people that— that have money to really look outside your area. Okay. Where I’m out on the West Coast, there’s not much here as far as cash flow, to be honest with you. to these investors, overcome your fear. You’re gonna thank yourself in the future. Just make sure the right fundamentals are in place, right people in place, understanding the numbers, do dry runs. Do everything you can. just try and shake loose everything—worst-case scenarios, reverse engineer it, whatever. And you know, if we leave my contact information, I’d be happy to share some pointers with people that are things that you’re just not gonna be able to Google. So I’d be happy to help people out for a cost of zero.

Issa Hanna (16:47)
Just because you’ve been there, and for the young investors, he doesn’t want people to make some of the same mistakes he will. So he’ll take time out of his day to educate you. So make sure later on when you— when I ask him for the information, you guys jot that down. so we’ve covered what your future holds, we’ve covered some nightmares, you’ve given some great advice to new investors. another piece of advice I’d like for you to give to new investors or— or— or new people just starting off in the real estate industry in general: cultivating business relationships. That’s super important in our industry. Growing your network. Give them some advice on— on how to start doing that.

Marcus Saxon (17:29)
There’s so many facets to that. Case in point, make the relationship happen. Pay people directly. Here’s— here’s— here’s an example of it: with my short-term rental that I have, there’s all these companies that want to take over your business and they’ll— they’ll take care of everything for you, which is, you know, that’s one way to do things, but they’ll say, “Hey, listen, with housekeeping, we’ll take care of that too.” Great. If a guest pays me to take care of housekeeping, I’m going to give my housekeeper all of that money, $200. I don’t care if you clean it in 45 minutes or three hours, that $200 is yours. What the bigger company is going to do—and they know this as well—they’re going to pay this person $15, $16 an hour, and they’re going to keep the majority of it. Okay, that’s not very motivational. But when I’ve got housekeeping who knows that no matter what happens, they’re just going to get the cash right there, these are the people that are going to pinch it for you when you’re in a tough spot. These are the people they’re gonna take care of your property and put you in first place. And you better pay them at least once a month. I usually pay at that— the end of the month for the entire month. That’s just the best way to do it. Send it to them through Venmo. Send it to them through ACH. Take care of these people. Let them know they’re appreciated. And it’s housekeeping that’s an example, but do this with your property management who’s taking care of things. Do this with the handyman, do this with your insurance person. Do whatever you can. Now, do you talk to a brokerage for, you know, all your insurance needs? Yeah, you can do that. And I have that in some of my— some of my investments, but I also call a company direct, you know. I own a Dollar Tree and I save about 37% talking to a company direct in my insurance cost versus if I was to use the brokerage down the street here, because you got to pay them directly. that was a no-brainer. I literally saved thousands of dollars doing that directly, making that direct connection. That’s a little bit off about what I spoke about, but it’s you getting out from behind your desk or sitting at your desk and picking up the phone and doing what’s best for you, doing what’s best for taking care of other people. Things will go— don’t want to say bad, but they’ll get rough at times. Yeah, we— we all know it. We’ve all been through it. You know, it’s not a matter of if but when. You know, we— we know that. So when that happens, taking care of people now, they’re gonna be on your side for when those— those tough things happen because, hopefully, they like you. hopefully, they don’t want to stop the money train coming in from them. Working as a team, it’s really important.

Issa Hanna (19:57)
Definitely, definitely. You take care of people, and— and they have a good image of you and— and a good feeling in their heart of you, they’re gonna do more for you, they’re gonna work harder for you, and they’ll probably even give you better deals. So great piece of advice, great. With that, if people did wanna reach you for any reason, maybe to ask you a question, how could they reach you?

Marcus Saxon (20:19)
Well, best way to reach me is through my website. I’m a managing broker in real estate in the state of Washington. you can find me online, homesinthe360.com. H-O-M-E-S-I-N-T-H-E— t-h-e— three-six-zero dot com.

Issa Hanna (20:37)
Homesinthe360.com. Make sure you guys check it out. Shoot him an email. You know, he can answer some questions. Great brokerage he has. So with that, Marcus, I’d love to thank you for coming on the show. We’re a little bit out of time. I would love to keep going with you, but maybe we’ll bring you on for another— another round soon. How does that sound?

Marcus Saxon (21:03)
Issa, that would be great. I’d love to chat again. This— this is a great time. I— I’d so much knowledge to share.

Issa Hanna (21:09)
Definitely, and I would love to have you on again, and I love to have you on today. And to my viewers, if you guys enjoyed mine and Marcus’s conversation and want to see more just like this, make sure to hit like and subscribe. I talk to people every day that could bring us different knowledge on every facet of the real estate industry. Until next time, the real estate pros are out.