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Show Summary
In this conversation, Mark Borge discusses the importance of shifting our mindsets to effectively tackle the world’s problems. He emphasizes the need for entrepreneurial thinking and innovation in problem-solving, referencing Albert Einstein’s idea that we cannot solve problems with the same level of thinking that created them. Borge advocates for applying knowledge and creativity to find real-life remedies for global challenges.
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Investor Fuel Show Transcript:
Mark Borge (00:00)
there’s really a five-step program to getting your life back. And the first thing is you apply your time and focus towards knowledge and skill. going to college can be hard.part
of that, but it’s also learning. Just learning at all. Learning about these exchanges, learning about cost segregation, learning about what you can do in real estate. So step one is apply your time and focus to knowledge and skill, then apply the knowledge to produce income, save for making investments, build wealth of incoming producing assets, and with the income from those assets, buy back your time and focus. So it’s a full circle.
Kristen (02:11)
Welcome back to the Real Estate Pros podcast. I’m Kristen and I’m here with Mark Borge, is the owner of Borge Properties, LLC, and also the co-founder of Best Facility Services. We have a lot to talk about today. We’re going to talk about some real estate, how to scale, how to switch from growth to yield, and also some tax strategies as well. Thanks so much for being here,Mark Borge (02:31)
It’s mypleasure. Thank you for having me.
Kristen (02:33)
You have a very interesting progression with real estate. You’ve been able to really build something very impressive. Let’s talk about how you started in the industry and how you’ve been able to scale.Mark Borge (02:42)
Certainly. Well, my first job out of college, I learned about tax sale auctions. And what has always been in the back of my head is how do I apply that knowledge? And how do get it working? It wasn’t until much later in life after we were into Best Facility Services several years. And as a startup business, it just takes a while to start establishing yourself and getting to a point where you can save. ButWe achieved that and when we did, I was asking myself how in the world…
am I going to retire off of this interest rate off of my savings? We have enough here maybe to buy four Happy Meals a year and that’s not going to get it done. So I went to investigate tax sale auctions. I’m fortunate, number one, I think that I live in the state of Texas which has some very tax sale auction friendly rules for buyers and ⁓ also some very good rules for ⁓ how that process is done. But long story
short is I started researching properties and I ended up purchasing one at a tax sale auction. It was my third auction to go to and
It was a remarkable experience and I won’t forget it. I remember the day that I purchased it off the courthouse steps. simply returned with a sheet of paper that said bill of sale 521 Holly street, Everman, Texas. And I informed my wife that congratulations. We now have a boarded up white house in Everman. we, uh, I better go mow the lawn because it has about $2,000 of weed lanes on it. Uh, so the journey began at that
point and it’s been a great journey about learning about how to improve real estate and you learn a lot along the way. There’s a lot of great tools that can help you these days in learning how to do that. But that’s really where it all began for me and then that parlayed into other rentals and it really
It was a wonderful thing. It came at a great time in our lives because it was an enabling factor for both of us. Real estate retired my wife down the line, but I may be getting ahead of myself. But ⁓ it’s just remarkable how many tools are available to people in real estate, and that’s just a lot of what I would like to share today.
Kristen (05:12)
Yeah,and I’m sure you’ve seen a really interesting progression, you know, starting in, starting a while back in 2008 and then to this day, you’ve seen a lot of ups and downs in the market and a lot of technology progression as well. What are some of those tools that you can recommend to people?
Mark Borge (06:15)
Well, first of all, being aware.of all the real estate products that are available and what they can do for you. think, right, the first thing ⁓ that’s important is to simply have awareness. Before I did this, I had no idea what a 1031 exchange was. I had no idea what a 721 exchange was. I had no idea what cost segregations were. I didn’t know what any of this stuff meant or how it applied, but it’s there and, you know, knowledge is power. So as far as the auction is concerned, just understanding that
that
it’s there and it’s real and if you go and buy a property, you just bought a property and it can be redeemed but there are rates of return that you realize if it is redeemed and most properties are not. Well, once you get into rentals, then you start having conversations about… ⁓
tax advantages. can write off things. You can have depreciation write-offs. And that is a real part of your net result is your tax consequences and you can’t put those aside. That’s really important. It’s an important benefit that you get from real estate that I don’t know where you can get anywhere else, frankly. So for single-family rentals, some of the benefits have been number one, asset appreciation. Excuse me.
tax basis depreciation, expense write-offs, and course, cash flow.
And then later I learned about 1031 and 721 exchanges. Well, what is that? Well, that’s basically an ability for you to transfer that asset into the value of that asset into another asset and not have a taxable event at that time. It’s not tax evasion. It is ⁓ tax deferral. ⁓ you know, it’s a great strategy because if you’re not
Kristen (07:56)
ThankMark Borge (08:04)
If you’re not having a decrease in your net worth because of all these tax payments, just how much quicker can you build your wealth snowball, if you will, if you’re not enduring these tax events. So I didn’t know this existed, but then I found out that it does. And I’ve put them into play into several different transactions that we’ve done. And then I learned about multifamily syndications and I learned about cost segregations. And I know this is probably language for and to many people,But the main emphasis that I’m making here is that these things actually do exist. And if you are willing to research them, if you’re willing to learn ⁓ in a place like Investor Fuel, you too will be made aware of these things that you can apply and build wealth for yourself.
Kristen (08:39)
writing.Yeah, and I know cost segregation is such an important part of this. Can you expand a little bit more about that?
Mark Borge (09:01)
Yes,I can. Basically, it’s accelerated depreciation. ⁓
What does this mean? Well, first of all, what is a syndication? A syndication is basically a group of people throwing money in a pot, going by an apartment. You have a sponsor or a lead investor that leads the charge, but there’s passives like myself that basically will go in on a financial level of some point. Usually there’s a minimum, could be 25,000, could be 50,000, whatever it is. But you become a part owner of this asset. As such, as a part owner, you’re entitled to
Number one distributions from that asset. And number two, the tax benefits. And in real estate, there’s nothing that is better. Or there aren’t any other vehicles that I know of that can give you the tax benefits real estate can. So a cost segregation is a fancy word of saying, I realized a lot of paper depreciation in a year that I can write off on my taxes. And I get it through my K1. I turn it into my CPA.
The CPA says, Mark, you’re in a great tax position and everybody’s happy.
Kristen (10:11)
Yeah, that’s amazing. mean, thesethings, they’re all at your fingertips and, you know, I’m sure a lot of it is also building out a great team around you and having a great CPA that can kind of, you know, make these things available to you. How do you, how did you go about building your team?
Mark Borge (11:02)
⁓ The same way I did with everything else is just whenever I needed something, I started researching and looking for these resources. It so happens that my CPA is a friend of mine that I used to work with way back when I was in the corporate world, but ⁓ he gave me some great advice. The other thing I’ll tell you is that ⁓ being a of a moonlight,you will real estate person. I wasn’t a full-time real estate person until I sold my business and then I was a full-time real estate person simply by default. ⁓ But ⁓ I found a person that I could really trust and he’s my repair guy and I really consider him more of a partner than anything else because I literally put him on a retainer and when the phone rings when there is a problem basically I say okay talk to this guy.
They talk to them. He goes and fixes it. He sends me a bill online. It goes against the retainer. When the retainer is consumed, I owe him another retainer. So what this does is it allows me to maintain my focus on other things. You know, while I was doing it, I was building a business and that was my primary gig, if you will. But really what was serving us, I think even better than that,
Well, it’s arguable, but the point is we were able to build by building a team and talking to people and networking. That’s how I started establishing my portfolio. just so happened that the lady next door to the first house that I purchased at a tax sale auction owns several rental properties. So I became friends with her, asked her how I can help her. And eventually she said, I want to start rolling off my properties. Look at this one.
And
what was important to her wasn’t so much price, it was the people inside the property and maintaining their ⁓ lease amounts and things like that, which I was glad to do because I was able to buy these properties at a significant discount ⁓ as a result. So it was a win-win for both ways. But my point is when you’re talking to people, find out what’s really important to them. And ⁓ once you find ⁓ that need, once you’re able to fill that
need, it’s probably not what you think it is, but it’s a great way to build relationships and a great way to build your portfolio.
Kristen (13:30)
Absolutely,I think it’s so important to lean on other people and really have people that are aligned with you on values. I think it’s probably contributed a lot to your success. So talk about, you went full time with this after you sold your business. Talk about that progression of where you are today and how maybe your priorities and your goals have shifted along the way.
Mark Borge (13:39)
Yeah.Well, along the way, I also got older. So when that happens ⁓ and you become, know, quasi empty nesters and now we have a grandson and
Kristen (13:56)
Hahaha.Can’t get out of that.
Mark Borge (14:12)
We have parents that we want to focus on because we’re at that stage in life where they need much more focus. Number one, thank goodness there are vehicles in real estate investing that allow you to buy your time so you can provide that focus. I think that if I was to boil down to greatest benefit,That would be it. It buys back your time, it buys back your energy so you can direct your focus towards things that are really important. And what’s important to us of course are the people that are in our lives. And our parents need that care at this time. So rather than buying a bunch of rentals right now or buying more multi-family syndications or whatever you want to…
whatever you want to do. ⁓ I’m now getting into private credit funds. I’m now getting into mortgage notes. I’ve learned that there’s a ⁓ lot of things you can do with mortgage notes. You can buy them, you can sell them, can, there’s this partials you can buy and sell, you can do hypothecations. And look at this brand new universe that’s just opened up to me just by learning how to make paper happen.
So you become more of a lean
than a landlord, but we couldn’t have gotten to that place until we were first a landlord. And I’m still a landlord. I say that I’m rolling off properties. Well, even before we started today, I’m researching one that I’m fixing to purchase. But ⁓ the point is we’re shifting our focus towards yield rather than growth. And what yield does is yield is the product that buys back that time. ⁓ Yield is what ⁓ provided the opportunity for
my wife to become real estate retired. And she can pursue whatever she wants to pursue now. She chose to go back to school. She got a master’s degree in counseling. I don’t know how many degrees I’ve paid for now between my wife and my daughters, but the point is…
If you want to be a homemaker, you can be a homemaker. If you want to be a teacher, you can be a teacher. Real estate can walk beside you to help you achieve not just your current goals, but your life goals. so I’m switching my head a little bit from growth to yield, even though…
Kristen (16:52)
Smart fan.Mark Borge (17:13)
I’m still addicted to growth and probably for the rest of my life will be addicted to growth. ⁓ I can’t help it. It’s just in my blood. ⁓ But yes, and it’s just such an enabling mechanism for people at whatever stage in life that you’re in. And there’s so many real estate products. If you don’t have the information, if you don’t have the knowledge,Kristen (17:16)
ThankMark Borge (17:35)
You know, there’s networking groups like Investor Fuel that can provide that knowledge for you. ⁓ So we’re morphing as we’re aging, but we’re having fun with it and ⁓ it still continues to be a great learning experience.Kristen (17:50)
Yeah, real estate is so interesting because there’s so many different ways to get involved with it. And I think a lot of people try to get involved, maybe something doesn’t work out well, and they say, well, this isn’t for me. But you have really demonstrated there’s so many different ways to get in. I would love for you to talk more about these yield strategies you have and how it’s really helped you with that. The yield strategies.Mark Borge (18:12)
The deal strategies?the yield strategies, okay. Well, okay. So you get yield from…
rental houses. mean, ⁓ in my case, and there’s arguments to be made whether you should ⁓ use leverage or not use leverage, et cetera. But in my case, I’ll just be straight with you. We only owe money on one rental house. The rest of them we owe outlights. So they’re providing relatively good yield. For that, I’m grateful. And particularly that came in handy when the interest rates all blew up and other elements of real estate were taking a hit.
we still had that consistent yield coming in every month. And that still provided our base level income to basically support our lifestyle. ⁓ and when the environment changed, when interest rates go up, well, why not at that point consider switching my hat or becoming more diversified to being a lender rather than a borrower? Because now interest rates are working to my advantage and what I discovered
is that there are private credit funds out there that will pay 10, 12 percent. They’re going to lock up your money for a period of time and there’s minimums to it. But that’s pretty good yield for having a passive investment. You can buy mortgage notes and mortgage notes are going to you sometimes at a discount. You could buy mortgage notes at a discount. So these products, these I should say paper products rather than brick and mortar partners, it’s almost like a
now that I think about it from brick and mortar to paper, ⁓ provides this yield that you’re looking for ⁓ and you can do it all from your desktop, you can do it from your phone. I still take a laptop with me when I go out to our ranch or when we go on vacation just to keep up with what I’m keeping. But as long as I can move information around and move money around, there’s almost nothing I can’t do.
when it comes to paper products and yield in ⁓ the mortgage note industry.
Kristen (20:21)
I mean, that’s so interesting. Yeah, and then you can become… Is it a little bit more passive? Yeah.Mark Borge (20:27)
Yes.It’s as passive as you want it to be. You could simply just buy a note and just start collecting the income. And then you’re the bank. You have become the bank. And like I said, in the great state of Texas, there are wonderful rules for ⁓ being the bank and there’s good rules for being a landlord. ⁓ I’ve experienced the ⁓ difficulties as well. I’ve went through several of them.
when in learning how to do that. It’s not fun. It’s not enjoyable. But unfortunately, sometimes people just don’t tell the truth. there’s a specific path you need to follow to go through that. And you learn that over time too. But to me, it’s like, okay, look at what this vehicle has provided for us. If I have to go through an eviction, if I have to show up in court, it’s usually about a 20 minute
minute
thing ⁓ and then it’s over.
and I’ll eventually get my property back. I’ll fix it up again. I’ll rent it again. I’ll sell it. I’ll put it on a 1031 exchange. Or recently I found out about another passive vehicle, the 721 exchange, where essentially you are exchanging your asset to get into a real estate investment trust. And I didn’t know anything about Delaware statutory trust, but that’s things like that make these things possible. So there’s still a wealth of information and
I’m just naturally curious. think Julie and I are both just curious people and we enjoy learning. And if you enjoy the learning process and if you’re a curious person, there are these tools like the exchanges that are available to you that beforehand I had no idea. And I didn’t realize that there was a pretty strong and getting stronger secondary mortgage note market. And you can go online and buy a mortgage note. You just bid on a mortgage.
note and you get it. You can have people send you lists of mortgage notes that are available and you can bid on them. ⁓ So you buy a mortgage note, all of a sudden you’re in a first lane position with it. Most of the time you’re in a first lane position on that property. Well, if you have equity coverage from the basis of your note basis to the value of that property, you’re in a very safe position and it’s very unlikely that the fault is going to happen. But if it does, you just may have just picked up a house for ⁓
about a third of the cost and ⁓ tell me that’s not a bad position to be That’s a good position to be in. You can still work these things to your advantage and then when you have this property, what do you want to do with it? You want to sell it? What’s interesting about the very first property I bought, which I still own, all my properties have a name. This one’s called Buttercup. Now,
Kristen (23:16)
Okay.Mark Borge (23:17)
Buttercupis what I bought at the tax sale auction way back in 2008. It’s the one I tried to sell but couldn’t, so I rented it and I’m still renting it today. Over the course of the last, what is that, 17 years, I don’t even know how much money Buttercup has presented me and I bought this asset for $31,000. So not only the asset appreciation, but look at the cashflow that we’ve realized. Now think about this. What if I turn around and owned or financed
to sell a buttercup. Now I’ve got a 30 year value mortgage at the rate that pretty much I choose because if it’s out of the non-standard lending, if it’s the higher risk environment, I’m probably going to get 9, 10 % on this note. Now I’ve converted this asset once again. It’s gone to a different state where now I’m not having to fix up the property more. I’m just collecting money every month. And if it pays off early, then
I just take all that cash and I just reinvest it in maybe a note fund or something like that and pays me 12%. So the point is there’s so many iterations of what you can do with assets that will serve your lifestyle over time. And that’s, I think that’s important for people to realize because a lot of people feel stuck.
⁓ They feel stuck because the only thing they know to do is to get up and go to work. Well, that’s a wonderful and honorable thing to do. But ⁓ the people usually at your work aren’t there to serve you. You need money to serve you, not you serve money. ⁓ And that’s just a big deal to me because it really buys back your freedom.
your freedom to do whatever you wanted to do. Julie decided to get a master’s degree. I decided to buy a ranch. She likes to go to London. I like to smoke meat. But the point is, money is just a tool. can finance all these things. But people are the best versions of themselves when they’re free. If you want to be a good version of yourself,
Find your why and find a way to pay for you pursuing your why in life, whatever that is. And that’s what I think is a wonderful antidote and a wonderful realization that people can have that this is actually possible to do.
Kristen (25:50)
I think that’s such a wonderful note to end on. think that’s so inspirational and I think a lot of people, you’ve given a lot of practical information as well. I think a lot of people kind of have a roadmap based on the things you’ve said. Do you coaching?Mark Borge (26:04)
I do. was actually a trade in coaching. I was part of the entrepreneurs organization. I was on their board of directors for a period of time when I owned myand I was trained in coaching. So Julie’s the counselor, I’m the coach. She probably sees me as a lifetime project as far as counseling is concerned. ⁓ But I very much enjoy interacting, particularly with the younger generation. I was invited by my former school UTA to come and talk and they invite me every year to talk to some of the business students, which I’m happy to do. But a lot of this, what we’re talking about today is what I try to present to even to them.
If I would have known this at a younger age, just think of what we could have applied. Just think of the path that we could have set for ourselves and just think of the hardships that we could have avoided. ⁓ And ⁓ what I tell them, and I’ll share this with you briefly, is
there’s really a five-step program to getting your life back. And the first thing is you apply your time and focus towards knowledge and skill. going to college can be hard.
part
of that, but it’s also learning. Just learning at all. Learning about these exchanges, learning about cost segregation, learning about what you can do in real estate. So step one is apply your time and focus to knowledge and skill, then apply the knowledge to produce income, save for making investments, build wealth of incoming producing assets, and with the income from those assets, buy back your time and focus. So it’s a full circle.
And now what you have is you have money serving you. You’re no longer serving money. You’re no longer a slave to money. And that doesn’t mean you have to have gobs and gobs and gobs of money. You can form a lifestyle and be completely free and not have gobs and gobs and gobs of money. ⁓ Although with inflation, that seems to be getting harder all the time. ⁓ But there’s another couple of quotes I want to share really quick. Is one of them, excuse me, used to be
Kristen (28:06)
OfMark Borge (28:10)
the president of EO is a gentleman by the name of Brian Brault. This is a quote that I find very interesting. It says, how much better would the world be if we applied our entrepreneurial minds, passions, and spirit to the manner in which the world’s problems are solved? So maybe we need to have a mind shift change. ⁓ Albert Einstein said the significant problemsthat we have cannot be solved at the same level of thinking we were at when we created them. and what that suggests to me is that number one, when people have the knowledge and they can apply that and put their minds on a different track, now all of a sudden there’s remedies, there’s real life remedies for the problems that they save. even on a…
larger scale in my opinion and I’m not overly political person but I will say this our problems can’t be fixed through entitlements it must be done through opportunity entitlements have a scarcity mindset opportunities are from a mindset of abundance
So when you live in the world of abundance, you see the possibilities and there’s real hope. There’s real hope for solving these problems. Entitlements are just things that come to me and they stop there, but opportunity has velocity. Velocity to go through me to help other people. And there’s a real quality of life and fulfillment of life when opportunity is going through you. ⁓
Kristen (29:19)
ThankMark Borge (29:36)
The last analogy I’ll make is I see happiness is what happens when good things happen to you, but fulfillment is what happens when good things go through you. And when you pursue fulfillment, happiness is usually thrown in with the deal.Kristen (29:46)
Mmm.I love that. Those
are great quotes to live by. think that’s amazing. Well, tell everybody where to find you and how to reach out to you.
Mark Borge (29:59)
Okay, well, if you want to find me, ⁓ I’m not huge on Facebook, but I have a presence on Facebook. ⁓ I’m very happy to share with people. ⁓ And if you want to reach out to me, ⁓ you can email me.I just, my personal email address is ⁓ [email protected]. If you have a question or something or an idea, ⁓ if I can be useful to other people, I’m happy to do it. ⁓ I’m on LinkedIn. You can reach me through LinkedIn. I don’t spend a lot of time there either. ⁓ Like I said, our attention is focused more on people than it is on networking for business type endeavors these days.
But along the way, you know, I just feel like we’re all here to help each other. And that’s why we’re put here is to help each other. ⁓ if I can be useful, I’m happy to be useful.
Kristen (30:52)
Absolutely.I love that and I do love that about the industry. I feel like a lot of people really do want to help others and yeah, the collaboration over competition
is really inspiring.
Mark Borge (31:11)
Yeah,yeah, and it’s fun too. I’m not trying to paint a picture that it’s all been easy. It hadn’t all been easy, but I have such a tremendous gratitude to live in a country where this is even possible. ⁓ We’re so blessed and we’re so fortunate and I owe a debt of gratitude to the people who purchased that freedom for us.
Kristen (31:14)
Yeah, absolutely.Yeah.
Mark Borge (31:38)
I have such a deep respect for civil servants and for people who have served our country. So whoever’s listening, if you’re a veteran, thank you from the bottom of my heart.Kristen (31:51)
Awesome. Well, thank you so much for being here, Mark.Mark Borge (31:54)
Okay, it’s my privilege.Kristen (31:55)
And thank you everyone for listening. I hope you got a lot of great inspiration maybe looking at your business in a different light. I think there was a lot of great information shared. So hope you have a lot to take away from. We’ll see you back next time. Bye.
