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How I Bought a 56-Unit Apartment Complex as an Active Duty Marine (Now Pays Me $3,500/Month) · The Active Duty Passive Income Podcast

0:00
Speaker: Hey everybody, this is Marcian Sitch, and I'm going to tell you a very interesting story today about how a single commercial deal, my first apartment complex, makes me$3,500 every single month.
0:10
Speaker: So I'm sitting here in my office looking at my bank account at least once a day, and I still can't believe it's sometimes$3,500 hits my personal bank account like clockwork every single month for years now.
0:25
Speaker: And this is from one apartment complex I bought when I was an active duty Marine in, oh, and by the way, the same apartment complex puts$7,000 like clockwork every single month.
0:36
Speaker: Tax deferred into my parents' personal bank account.
0:39
Speaker: So a combined total of over 10,000, 10 and a half thousand dollars every single month.
0:46
Speaker: That's net because the property actually makes somewhere around$55,000 every single month in revenue from all the rent, collections and fees and so on and so forth.
0:56
Speaker: But here's what nobody tells you about that first commercial deal.
1:01
Speaker: It's not really about the money, it's about the momentum and the moment.
1:06
Speaker: So the momentum you build after as a result of that first success and then the moment you realize that everything you thought you knew about wealth was wrong.
1:14
Speaker: In case this is your first time tuning in, I'm Marcion Sitch, founder of Active Duty Passive Income, or A DPI, as we lovingly call it for short.
1:21
Speaker: And this is my story about our first commercial deal.
1:23
Speaker: Okay?
1:23
Speaker: This is an apartment complex, a 56 unit deal outside of Indianapolis.
1:28
Speaker: And it didn't just change my bank account, it changed my entire understanding of what's possible.
1:34
Speaker: Now, let me take you back to 2017 as a marine helicopter pilot.
1:39
Speaker: I was, I think I just turned first Lieutenant.
1:42
Speaker: I just pinned on First Lieutenant.
1:43
Speaker: I was married, first kid on the way, and I already started looking into this stuff and I'm doing what every single military member does.
1:51
Speaker: I'm staring at the military pay chart calculating when I'll make captain, and when that next a hundred dollars, you know, cost of living raise will go up, or when the next two year mark happens that, and then it goes up.
2:03
Speaker: And when just every single sell, as my eyes dart up and down, you know, from, from left to right and up, like, ooh, what is my paycheck gonna be in the near future?
2:13
Speaker: And I remember this moment of, of panic almost, maybe anxiety, and it wasn't from, you know, flying a 1980s aircraft, or I'm wiggling sticks on this.
2:24
Speaker: Giant 99 and a half foot, CH 53 echo.
2:27
Speaker: That gets cannibalized'cause the supply chain sucks.
2:30
Speaker: And maintenance is just trying to do what they can and the pilots are trying to get the hours they can.
2:35
Speaker: Um, I mean, I'm not gonna lie, that did cause me anxiety, but at this moment it wasn't flying the 53 that gave me anxiety.
2:43
Speaker: It was feeling trapped inside of that military pay chart, looking at those cells and knowing that this is my income, and feeling like that was it.
2:54
Speaker: This was the best I was gonna do.
2:56
Speaker: And quite frankly, I remember walking down Tecumsah Court at the Naval Academy thinking about the military pay chart because I had, that was the first time I saw it when I started researching.
3:06
Speaker: 'cause prior to that, like prior to being a senior at the Naval Academy at Firstie, I never really thought about it.
3:11
Speaker: And then I realized like, oh my gosh, that is my paycheck.
4:55
Speaker: That is what I spent four years at the Naval Academy doing to achieve, and don't get me wrong.
5:02
Speaker: This is gonna sound ungrateful for a second.
5:04
Speaker: Don't get me wrong, I was pumped about it.
5:06
Speaker: I went to college for free.
5:07
Speaker: I got world class education for free, and then I got to do things that people dream about.
5:14
Speaker: But I'm gonna be frank right now, I couldn't help but feel that eventually, probably soon after, you know, passing flight school, getting into a squadron, that I was gonna want more.
5:27
Speaker: And I already knew that.
5:29
Speaker: I didn't know how, I didn't know what that meant.
5:30
Speaker: I didn't know why, but something told me that there was more to life than the military.
5:37
Speaker: I am incredibly grateful for the military.
5:39
Speaker: I'm inspired by what the military does for our country and its history.
5:43
Speaker: And, um, I am, I am a, an adopted patriot, if you will.
5:48
Speaker: I'm a third generation immigrant, so I'm pumped about, about the service and about being at the Naval Academy, about being a Marine Corps officer.
5:56
Speaker: Uh.
5:57
Speaker: But I did feel trapped in the system as soon as I realized I was in a system where my paycheck was capped, and it was, quite frankly, probably to a certain degree, frowned upon to talk about other streams of income, at least in my circles.
6:11
Speaker: So for whatever reason, I at that moment.
6:14
Speaker: Still back at the Naval Academy and especially when I was at my squadron staring at the military pay chart again, I felt trapped in a system where my income was completely controlled by someone else.
6:23
Speaker: That's when I had the conversation, uh, that changed everything.
6:27
Speaker: Another investor told me about multi-family properties, not houses, apartment buildings, and I started buying books about this and he said something that broke my brain.
6:35
Speaker: The bank will lend you 80% of the money to buy a business that other people pay off for you.
6:42
Speaker: I, I thought he was lying.
6:44
Speaker: At first.
6:44
Speaker: I was like, first of all, that sounds like a gimmick.
6:46
Speaker: What the, what the heck do you mean?
6:49
Speaker: Right?
6:49
Speaker: But I started researching and what I found was that commercial real estate isn't really real estate.
6:53
Speaker: It's a business.
6:54
Speaker: And so it's business ownership.
6:57
Speaker: You're buying a business that happens to be housed in a building, right?
7:01
Speaker: It happens to be of the real estate variety, as I say.
7:04
Speaker: So I found a 56 unit apartment complex.
7:08
Speaker: Just outside of Indianapolis initially, we tried to get so many different ones and we failed miserably.
7:13
Speaker: We were dragged across the mud for six months on one deal.
7:16
Speaker: Nothing ever, ever worked out.
7:17
Speaker: I, I, uh, made a lot of mistakes, right?
7:20
Speaker: 'cause I didn't have an organization of military members that I could like, rely on to help me, teach me, mentor me, guide me.
7:27
Speaker: I had books, which helped a lot.
7:29
Speaker: I had a podcast, which helped a lot.
7:30
Speaker: Every single commute.
7:31
Speaker: I turned my car into the Automobile University podcasts and books, baby.
7:36
Speaker: And.
7:37
Speaker: We finally found a deal, and I'll be honest, I probably overpaid for this deal.
7:40
Speaker: I definitely did.
7:41
Speaker: I'm pretty sure the broker lied to us and told us that there was like nine people putting in offers on this thing.
7:47
Speaker: So we, so we actually paid more than it was even asking, like if you, like, I don't think anybody does that these days in commercial real estate.
7:54
Speaker: Uh, but guess what?
7:56
Speaker: It was 2.6 million for 56 units.
8:00
Speaker: Honestly, looking back.
8:03
Speaker: Now we're almost 10 years later.
8:05
Speaker: That was an incredible purchase.
8:07
Speaker: Real estate loves time.
8:09
Speaker: And looking back, that was the best decision of my life.
8:11
Speaker: I had no business buying it.
8:13
Speaker: I was a helicopter pilot, not a real estate mogul, but here's what I learned.
8:18
Speaker: You don't need to be an expert.
8:20
Speaker: You need to be coachable and willing to build a team.
8:24
Speaker: I found an incredible, uh, mortgage broker, lending broker, if you wanna call'em that.
8:29
Speaker: That helped me and my parents write up a narrative.
8:31
Speaker: And scrape our net worth together to qualify for a$2.6 million property.
8:37
Speaker: The loan on that was 1.9595$1.95 million, and we did everything we could to figure it out.
8:47
Speaker: The numbers were simple to a degree, but they were simple because I read what the seller gave me and I believed it.
8:56
Speaker: That's a story for another day.
8:58
Speaker: The property was generating probably half of what it is now.
9:01
Speaker: I think it's probably in the low$30,000 a month.
9:05
Speaker: Right.
9:06
Speaker: In revenue.
9:07
Speaker: Whereas now it's$55,000 a month after all expenses, mortgages, taxes, insurance, property management.
9:14
Speaker: It started making us money.
9:15
Speaker: Right.
9:16
Speaker: But then what I realized was that the property manager that I hired.
9:22
Speaker: Was not really the best and I had to fire them, and then I had to hire another manager.
9:28
Speaker: And then after a little bit of time, I was actually able to turn on the spigot and it started making my parents, because they were my investors, I had to put them as a priority.
9:37
Speaker: They got the preferred returns before I got to see anything because I only brought sweat equity.
9:41
Speaker: I did not bring in the money.
9:44
Speaker: That's when I started paying them.
9:46
Speaker: And so that net operating income.
9:48
Speaker: Minus, then subtract the mortgage.
9:51
Speaker: I'm not gonna get into the numbers too much, right?
9:53
Speaker: But there's like the revenue minus the expenses to run the business.
9:56
Speaker: Then you have, that's the net operating income.
9:58
Speaker: Then you have to subtract the mortgage, and then what was left was essentially cash flow.
10:02
Speaker: And so that's where I started paying them$5,000 every single month.
10:06
Speaker: And that changed their life, right?
10:08
Speaker: That was already a signi.
10:09
Speaker: I don't know about you guys, what your background is, what your family's like, you know, financial situation is, but that was pretty incredible for my parents.
10:16
Speaker: They saw the light at the end of the tunnel.
10:19
Speaker: But here's where it gets interesting.
10:20
Speaker: In commercial real estate, the value isn't based on, on what like similar properties sold for.
10:25
Speaker: It's based on how much money the property makes.
10:28
Speaker: It's pure business math, like the value of the business is relative to how much money it makes, either the revenue or the profit.
10:35
Speaker: In this case, with commercial real estate, it's really based off of the profit.
10:38
Speaker: So when we improved the operations, raise the rents.
10:42
Speaker: I mean, initially it was only by 50 bucks, then by a hundred bucks.
10:45
Speaker: Now the rents are close to double what they were when we bought it and we reduced expenses.
10:52
Speaker: Something absolutely magical happened, and my dad still calls it magic.
10:56
Speaker: He's a nuclear physicist for crying out loud meltdown expert at Chernobyl.
10:59
Speaker: Like he, he understands math, but he's still fascinated by this.
11:03
Speaker: We didn't just increase our monthly cash flow, we increase the value of the entire property by millions.
11:10
Speaker: That property is now worth close to 6 million, so literally more than doubled the value of when we bought it.
11:16
Speaker: Every month we get cashflow now me,$3,500, my parents$7,000 for the same deal that they invested with me.
11:26
Speaker: But the real lesson wasn't buying the real estate.
11:29
Speaker: I was buying freedom, cashflow in our pockets every single month.
11:33
Speaker: Millions of dollars of net worth growth because we were slowly over time improving the the operation slowly over time, raising rents.
11:39
Speaker: Sometimes it wasn't even because we did something, but because inflation happened, we had to raise rents.
11:44
Speaker: So we were actually beating the government at its game, as I like to say.
11:48
Speaker: And for all of those that are maybe like, wait a second.
11:51
Speaker: Sounds like you had an easy, easy start.
11:52
Speaker: You brought your parents in on this.
11:54
Speaker: Let me just take a minute and say, that is bs.
11:57
Speaker: If you guys know my parents, especially my dad, uh, spending money, investing money in something he does not understand is not something he does.
12:08
Speaker: Okay.
12:10
Speaker: Uh, it probably, I don't know, but it might have been easier if I had the kind of support that we now have created in A DP.
12:16
Speaker: I probably would've been easier for me to raise money from other investors.
12:19
Speaker: Right.
12:20
Speaker: But I was very dead set on helping my family, my parents in particular,'cause I was the oldest of seven children and all of their money, they invested into what's called educational IRAs, five 20 nines for the rest of my siblings.
12:32
Speaker: I told them like, look, I love my siblings to death, but they can figure out college on their own.
12:37
Speaker: You guys will not be able to visit your grandchildren in the future if you do not invest in your future, if you do not plan on a retirement or a pension.
12:42
Speaker: 'cause they had nothing else planned.
12:44
Speaker: And so the amount of pressure that comes with bringing friends and family on, especially when you're a newbie to this is real.
12:53
Speaker: So I'm telling you, it was not the easy way out to bring them in.
12:57
Speaker: It was my.
12:58
Speaker: It was the perfect route because it fit what I needed at that time, but it also helped my parents and then it created momentum and reputation that I was able to use for later deals and I was able to syndicate and start raising, um, I believe the next deal.
13:12
Speaker: I had 12 investors on it and that type of momentum kept building and that's what was incredible.
13:18
Speaker: Was it by the way, at the time of this recording yesterday, I called one of my investors that's been on two deals of mine now after two.
13:27
Speaker: 10, 15 minutes of talking, explaining this deal off the cuff, not showing him any numbers yet.
13:33
Speaker: He said he was in for 500 to$700,000.
13:37
Speaker: That's how the momentum is built since then, right?
13:39
Speaker: That was the amount we, we, we needed for the down payment for our first property.
13:43
Speaker: This dude is ready to invest in the next deal, almost sight unseen because of the reputation that has been built.
13:52
Speaker: I will say, if you trust yourself.
13:55
Speaker: To never give up.
13:56
Speaker: I'm not saying know everything, but to never give up and do right by your investors, whether you're friends or family or people you barely even know.
14:02
Speaker: Then do not feel bad about bringing other people's money in because if you want to go from a state of not, you know, maybe not having a lot of wealth to accelerating the speed at which you have a massive amount of wealth and income, you have to get good at the art of.
14:17
Speaker: Other people's money or leveraging other people's money.
14:19
Speaker: So the bank and other investors, you bring them together and they will lift you up.
14:24
Speaker: Rising tide lifts all ships in this case.
14:27
Speaker: So sitting here now, I realized that that deal taught me three things that changed how I think about everything first.
14:33
Speaker: Wealth isn't about working hard.
14:37
Speaker: It's about understanding, leverage other people's money, other people's time, other people's ex expertise like property managers and contractors.
14:46
Speaker: Second, the biggest risk isn't losing money.
14:49
Speaker: It's staying trapped in a system where someone else controls your income ceiling, period.
14:53
Speaker: That was not for me and I realized that early on, me and my wife Kaja had massive dreams and I just did not see that happening.
15:01
Speaker: And not to sound cheesy, but Yolo, you only live once and I that, to me, that became a very real thing and it was difficult.
15:10
Speaker: Up until recently for me to think about it that way.
15:11
Speaker: 'cause I think always long term I'll sacrifice almost anything today for a better outcome tomorrow.
15:17
Speaker: Whereas my wife brought a beautiful element into this where she wants to live her best life today.
15:21
Speaker: 'cause she says that tomorrow is not certain.
15:24
Speaker: And that balance was incredible.
15:26
Speaker: And we, you know, we started, when we started dating, it was all about, um, travel and experiencing new things and we carried that on into our family and now with our three crazy boys and, um, that, that.
15:39
Speaker: That's how we live our life.
15:41
Speaker: And so we didn't want to feel trapped.
15:43
Speaker: We, with every single new child that came into this world, we realized how precious this one life was.
15:50
Speaker: I know that sounds cheesy, but we're never gonna be able to relive it, and so we want to make the most of it.
15:56
Speaker: Third, here's a third thing.
15:58
Speaker: When you change your life, you have a responsibility to help others do the same.
16:03
Speaker: That's why A DPI exists.
16:05
Speaker: I.
16:07
Speaker: Want to pay it forward.
16:08
Speaker: But also selfishly, I knew that if I created a community where I was building in public and I was doing what I was, you know, talking about right now in public, that what would happen was that would create incredible pressure on me.
16:23
Speaker: When I was in flight school, I would go to Books Chamilian and ask my friends to come study with me because I did not want to disappoint them.
16:29
Speaker: Peer pressure was a real thing for me.
16:31
Speaker: Peer pressure is one of the best coaches you can create, and so I would create fake.
16:34
Speaker: Peer pressure, and in this case, I would tell a bunch of military members, when I started A DPI, Hey, this is what I'm gonna do, or this is what I did and I needed to show them proof.
16:44
Speaker: And that's, that created an, I created my own coach, essentially.
16:51
Speaker: So that$3,500 a month isn't just money.
16:56
Speaker: It's proof that a system we are, we're taught.
17:00
Speaker: Hard work.
17:00
Speaker: Save money.
17:01
Speaker: Retired 65 or 59 and a half, whatever isn't the only way.
17:04
Speaker: And for military families who sacrifice so much, we deserve better options.
17:08
Speaker: If you're listening to this and thinking, oh, that sounds impossible.
17:12
Speaker: I get it.
17:13
Speaker: I get it.
17:13
Speaker: I really do.
17:14
Speaker: I thought the same, but the math doesn't lie.
17:17
Speaker: The opportunities are real and your military training has prepared you for this.
17:21
Speaker: Better than you realize.
17:23
Speaker: Next episode, I'm going to break down exactly how to analyze your first commercial deal, even if you've never seen a financial statement in your life, because the biggest barrier isn't money or experience.
17:33
Speaker: It's believing that it's possible.
17:37
Speaker: See you guys in the next episode.