- Willie Mandrell, the owner of The Mandrell Company and founder of Wealth Builder Nation, learned the art of real-estate investing from his grandmother.
- Both Mandrell and his grandmother snowballed initial multifamily purchases into real-estate empires.
- To come up with cash for his first down payment, Mandrell worked a series of odd jobs including stints at Outback Steakhouse, McDonalds, and Marriot.
- Today, Mandrell oversees 40 units in Boston.
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“My grandmother was waiting tables, working nightclubs, doing random jobs, and she stumbled upon it,” he told Business Insider. “Someone had encouraged her to buy a rental property, which was a brownstone at the time.”
In the 1950s, Mandrell’s grandmother purchased a boarding house in the South End of Boston. At that moment, the South End was a neck of the woods synonymous with trouble. Still, as the years passed and she collected rents, her property started to appreciate as an influx of newly found business cropped up in the once desolate neighborhood.
Soon, she was pulling money out of that property to purchase others in the area. The South End was now booming.
“This was a woman — while my grandfather was in the military, working in Boston, with a sixth grade education — able to build a significant amount of wealth for herself through real estate,” he said. “And when my brothers and I came along she had told us all about the business.”
But grandma’s know-how didn’t come for free; Mandrell would have to earn it.
In order to justify his intellectual keep, Mandrell would spend his days sweeping stairs, collecting rents, and vetting apartments. In exchange, he’d receive a top-notch real-estate acumen. Something that proves priceless today.
“She said that this business isn’t difficult,” he said. “It’s one of the oldest businesses in the world.”
Today, Mandrell is sitting atop 40 units and helping others achieve financial freedom through coaching and mentoring. His portfolio is valued in excess of $10 million and is primarily made up of two and three-unit multifamily properties in Boston.
Here’s how he did it.
The first deal
From the get-go, Mandrell knew his real-estate investment strategy of choice would be to buy and hold multifamily properties. He’d seen his grandmother reap the benefits of a similar course of action, and knew he was only one astute purchase away from following in those same footsteps. If he could get that first purchase under his belt, build equity, and leverage the property, he could snowball that initial deal into a formidable empire.
And that’s exactly what he did.
“So the reason I liked buy and hold is because you were truly building longterm wealth,” he said. “And I bought, I ended up listening to her. I bought my first two family. I think I was 23 years old.”
Although Mandrell’s grandmother had helped him with a portion of the down payment for his first property, it was by no means easy to scrounge up the rest of the cash. In order to meet the rest of the requirement, Mandrell worked odd jobs at Outback Steakhouse, McDonald’s, and Marriott. Everyday was a grind.
But soon, his hard work paid off; he was the proud owner of a two-family property.
“So it didn’t take me long after getting in to realize that she was completely right,” he said. “My mortgage was 2,500 bucks. And I was getting about $1750 from the unit downstairs, living up in the upper unit.”
About 70% of Mandrell’s mortgage, taxes, and insurance were being paid off by his tenant, while he covered the rest of the expenses and benefitted from the appreciation.
As Mandrell slowly paid down his outstanding debt and built equity, the urge to leverage his investment became increasingly hard to ignore.
Soon, he’d pull cash out, plow that capital into a new property, and repeat the process.
Mandrell’s grandmother boiled down her investment calculations to income and expenses. Back in the 1950’s, that was all that mattered. If a property was bringing in $1,000 and she had a $600 mortgage, she’d pocket $400 per month, while (hopefully) the property appreciated. If the numbers worked, she was interested. If not, no dice. Simple as that.
Although Mandrell’s buy criteria is more advanced today, those main principles never left him.
“What I’m looking for is something that I can add significant value to,” he said.
While some may see a leaking roof, poor foundation, outdated heating/cooling systems, drafty windows, and dilapidated insulation and run the other way, Mandrell sees opportunity. Put briefly, he’s looking for a depressed situation and a motivated seller. If all goes well, he’ll be able to pick the property up at a discount.
In doing so, not only will it help the seller get out of a sticky situation, but it will also leave Mandrell with a prime opportunity to build long-term wealth and improve the quality of the neighborhood. Also, once repairs are complete, the property will have built-in equity from the get-go.
Think of it like this. Mandrell provided a simple example.
Purchase price – $500,000 for a three family property
Repairs – $250,000
Financing, holding, legal costs – $50,000 (approximately)
All in costs – $800,000
Appraisal – $1,000,000
Starting equity – $200,000
Now, not only can Mandrell fully benefit from the appreciation of the property, but he can also leverage that equity and plow it into a new property. It’s how he built his real-estate empire, and how he’s still tackling the space today — and that’s not even counting rental income.
As a general rule of thumb, Mandrell likes to have two rents (or units) cover all of the expenses associated with a three unit property. That way, he’s pocketing another unit’s rent (usually about $700) as pure profit.
“That’s the power and the beauty of this business of leverage … it’s the same thing that my grandmother did, you know?” he said.