139. Federal Government Contracting to Commercial Real Estate with Martin Saenz

Hey, welcome back to the Average Joe Finances podcast, everybody. I'm your host, Mike Cavaggioni, and today's guest is Martin Saenz. He's with Bequest. I'm super excited to talk to him and share what he's doing and share his story. Hey Martin, thanks for joining me and welcome to the show.

Mike, thanks for having me on, sir.

Yeah, absolutely. To start things off, I have a very important question for you, and it's the same question we ask everybody that comes on this show, and we wanna know more about you. So if you could share a little bit about your story tell us who you are, what Bequest is, and who is Martin Saenz?

Sure. I'm like, unlike a lot of individuals out there, went to college, got a four year degree, went to business school thereafter, and really was looking for that build into corporate America safe, secure job. The whole thing Robert Kiyosaki talks about and Rich Dad. And what I found was corporate America was not what I thought it was gonna be. And it was a lot of politics, a lot of negativity, a lot of people stepping over each other, or at least that was the experience I had or how I perceived it. But either way I only had a few years of that of the good life in me and decided to leave corporate America and my wife and I started. A company outta the basement of our home in 2004, 2005. And that was a federal government contracting company primarily selling museum exhibit products to the federal government, mostly D.O.D.. And we just spent a number of years building up that business. Started buying commercial real estate in 2009 as a landlord and we sold the company in 2013, and I started buying mortgage notes from that point.

Wow. Okay. So you hit a whole bunch of wickets all at once. I'm sitting here trying to scribble these notes as fast as I can while you're talking. But yeah so you got into the whole corporate world, right? You went to school and you're like, I'm gonna go get that safe, high paying job because I worked hard and that's what I'm gonna do. And then realized that, hey this isn't really my cup of tea. This isn't the flavor I was looking for. And it was, running into it was how very political it was and how we all know how corporate America's structured, right? And how you have to fight to get up the food chain. And it, it appears that was not what you wanted to do. You were more on entrepreneurial mindset. And so you started your own business. But the Federal contracting thing's always been something that's been very interesting to me. I got to talk to somebody in depth with this at a conference I was at about a month and a half ago, and it was just very interesting how that whole process works and one, how simple it could be. If you actually put a little effort into it there, there's a lot of opportunity there as well. But by doing this, I guess that's how, is that how you were able to raise the capital that you needed to get into commercial real estate?

Yeah, so actually I didn't raise any capital to get into commercial real estate. What my wife and I did is we bootstrapped for the first three years, getting our company off the ground and it was a lot painful times financially and as well as just stress and all the other things that come with financial hardship. And, but the thing is, when we launched the company, we made a decision. To sell to the federal government on a prime level, and we would not accept sub work or, tier two or tier three work where we were working for a prime. Because when you do that you take crumbs essentially and you take jobs that the prime doesn't want. And so we decided we wanted that customer to be our customer, and that's the federal government. So we got a contract with the Pentagon long term, and we've done a number of work, number of jobs, exhibit projects for the Pentagon and what we found is. Through, once we made it over that three year hump, we started executing our contracts. We started receiving lump sums of monies to us. And we invested all those moneys into real estate. And we didn't buy a boat or a car or, fancy this or that. Went and rolled it all into investments and we were following, the Kiyosaki model, who our mentor was that time.

Buy something that's going to cash flow and pay you back. So buy those cash flow assets. Now by doing that though, so you got into commercial real estate, you said back in 2009, right? So you like in the middle of the crisis that was going on in real estate. Now do you find that this was a significant buying opportunity for you because of what had just happened? Were you guys like picking up properties, pennies on the dollar? Like how did that look?

Yeah, I think it looked more, our focus was in buying some commercial buildings from landlords that were retiring. And they were willing to sell with seller financing and low down payments in exchange for taking a seller note where they could receive an annuity play for themselves. So where they could have an assurance that for the next 20 years, 15 years, or what have you, they're gonna receive monthly income from myself. This is gonna fuel their retirement. And so that was a target of mine to focus on that type of scenario versus parameters with a particular type of real estate asset. So we bought both residential and commercial as a result.

So I was actually, I was gonna ask that, so you said, you were buying these properties from retiring landlords which works out really well at, when you're able to get these properties seller financed. One, because there's not much that you have to put into it yourself going into that. But two, the benefit to the person that's selling it to you is now they're getting this guaranteed check, for the next 20 years or so, and they don't have to worry about the tenants toilets or termites. The three Ts.

Yeah.

So now, but with that said, you said you got into both residential and commercial, were there other things like like actual commercial properties strip malls or anything like that? Triple net lease properties, anything like that? Or was it strictly like multi-family commercial real estate.

It was mainly office and industrial space.

Okay.

Yeah that was in the Washington DC area.

Yeah!. Nice.

That was the main focus on the Virginia side. And but what had happened is even though we turned the corner financially with our small business we found it to be just very stressful. Seven days a week, you're constantly on, constantly traveling around to various military installations and it worn us and we started having a family. So in 2013, we sold the company and I was looking for less, I was looking for a new opportunity that wasn't so taxing, that involved more freedom of time and passive income, and that's how I fell upon mortgage note investing.

Yeah. So tell me what that was like. So when you made that transition, so you sold your business, you got into mortgage note investing, but you had already started buying real estate at the time, right? So that was back in 2009. So over the next four years, you're purchasing real estate, then you sell your business in 2013 and got into mortgage note investing. So what made you, instead of going like all in on the commercial real estate side, what made you start looking at note investing as well.

Yeah, so what I realized is that purchasing, residential, commercial real estate is a great annuity play. You're building something for yourself in the future that you're gonna eventually pay off. There's depreciation, offsetting and, appreciation and some other benefits, but it didn't provide the level of cash flow that I was seeking to, to meet my financial aspirations. So I was looking for something stronger. In terms of monthly passive income. So that's how I landed on Mortgage Note investing. And I knew that in conjunction with Landlording would get me to where I was looking to go.

Okay. So that's very interesting. So how does Mortgage Note investing, how is that cash flowing higher than, let's say an apartment complex?

Yeah, absolutely. What the business model is this so we go out, we purchase pools of mortgages from banks or other hedge funds that are distressed. So that's how the primary model outta the gate. So if someone owed homeowner owed a hundred thousand on their mortgage and they hadn't made a payment four or five years, we could buy that mortgage for, let's say, at the time, 20 cents on the dollar. So $20,000, and then we could get with the homeowner and then we would modify, do a loan modification at par. For that for that mortgage loan. And the whole idea was that to help avoid foreclosure and displacement of the family, we would do everything in our power to go and work out a loan modification. They would keep them in their home and then create a win-win for us, and that it would create a 20 or 30 year cash flow stream from myself at the time. And then now our company that we run.

Yeah. Wow. That's fantastic. Yeah, when I was sitting here thinking about, okay, how does, how is this gonna cash flow more than a multifamily asset when you're buying these notes? But when you sit here and you think about, you're literally getting these mortgages for pennies on the dollar versus what you're paying for a, commercial multi-family property. You go buy a hundred thousand dollars mortgage at $20,000. That's pretty good. And so there's a couple good things about this too, because now you're in a situation where you're actually able to help these people that are in a distressed situation too, and I don't think people like really think too much about that side of it. And you're not only you able to build something that's beneficial to yourself financially, but at the same time, you're financially helping out some people that are in some pretty tough situations. And by doing that, it kind. It alleviates a lot of that negative connotations on real estate investors. But this is the side that people don't see too much of and I like to highlight things like that when it gets brought up because these are the things that people need to see that real estate investors do. And it's not just about, Going out and investing and making a penny for yourself. It's also about the service that you provide to other people right away when you're talking about, Hey, we go back and we try to work out a loan modification to make this work for them so they're not getting foreclosed on and losing their home. That right there speaks volumes to, what you're doing. Just in general, right? Because you could easily buy that mortgage and let that thing fall out and now boom, you just acquired another property because they foreclosed, right? And your focus is to help them not get to that point. So I just wanna say I appreciate that side of things, Martin. So that's pretty awesome.

Yeah you have a lot of flexibility with when you acquire a mortgage. You assume all the rights and responsibilities of the original lender and you can take that and you can understand what the homeowner, where they are today, what they can afford, and give them a plan that's sustainable. And when you do that, when you show that level of compassion and that and you build those deep rooted relationships, you actually find that you're providing that service, but you're also increasing the likelihood that they maintain their payments on time. Because of that relationship that's built and whereas they don't have that other relationship with other lenders or creditors that they owe money with.

Yeah, that's a great point. That really is. So now other side of that too the beneficial side to you as an investor, right now, you're not dealing with those three T's when it comes to that property, cuz you're just holding the note, right? So they're not paying rent to you, they're paying their mortgage payment. They are responsible for everything that they do within that home, right? When you think about it, that's a great way to make a really good return. Without having to worry about some of that CapEX that you worry about in the multifamily space right?

Yeah, absolutely. Deferred maintenance, with landlord moratoriums, the list goes on. We don't have a lot of those challenges on our side. Now. We have other regulatory challenges. We wanna make sure we're in compliance. We're registered with the states, we need to be registered in. So there's a lot that we do adhere to from a compliance standpoint because there are a lot of nuances with the industry. But then at the end of the day, if you're set up like a business and you're doing everything that you are supposed to be doing and you're treating people fairly, and then you're running a good business and things will go well for you

Yeah, I love that. So now, on your own personal journey for you and your family, once you had started having children and everything, that's what put things into perspective for you that you said, Hey, I need to figure out a way to increase my cash flow and be home more and sell this business with the government contracting. How much of an impact did having a family. When you start having children, how much of an impact did that have on your decision to make that shift.

There was really three factors at that point. One was I got burnt out. When you're dealing with the government it's , very easy to get burnt out.

Oh, I know there's,

Yeah, there's. There's you're never answering to one person. You're always answering. It seems like there's 20 people and then, and everyone has their own opinion, their own feedback or what have you. So that kind of, that's taxing on you. So I wanted to move away from that. Then we, started having a family, so I wanted to be there more. And my wife wanted to stay home, which, she, she did from the point of selling the business. And the other thing is we, I wanted to do something where I felt like I was more of service to more people and I found that in mortgage note investing, when I bought my first pool of 10 mortgages and I was able to do some loan modifications, I think with four of the 10 and right away. And I was able to talk to them and I was able to help another couple that got a divorce and they just, they both wanted to be out of the property cuz it was stressful on them and They signed over the property to me and I was able to resell it for a profit. And so I was, I just found that I could be a problem solver and be of service that way and so I fell in love with the industry from that point.

Yeah, and I love what you said there too about, you found by doing this that you are a problem solver, right? And a lot of people don't. Again this is another side of real estate investors that you don't really see too much of because that's not what's portrayed all the time, right? But you are literally out there solving problems for people. And in doing so, taking on that burden yourself, that's where you know you're getting your profit from because you're solving problems. And I had an episode that just recently came out with Brandon Turner, and he said something about that as well. He said, you get paid by the level of the problems that you solved or your pay is commensurate with the level of the problems that you solve. And that's something that's just stuck in the back of my head now because, you know when you take that time and you're trying to help other people, but you're solving their problems it's how much effort are you putting into that you know that's gonna get, that's gonna give you that return. Your ROI is gonna be based off of how much you help other people by solving their problems. Absolutely love that. Now you've like running in all different gamuts of real estate, right? From the apartment complex side, right? The commercial side, like industry. And now with note investing, but I would, I want to ask you out of the three of those, which one is more enjoyable to you?

Yeah I would just have to say mortgage note investing has been my passion. So I've written three books on mortgage note investing and one book on cash flow investing. And what I learned is that the industry is very fragmented and a lot of people have a lot of different practices and there's a lot of hedge funds out there that just buy mortgages just to foreclose on the properties. So that's like their whole thing is just to get it to the auction block as quick as possible. And When I was putting systems together over the years I realized there was four phases to note investing, one being sourcing, then due diligence, then asset management and portfolio management. So I started to get into System building and I started to express those systems in those books I've written, and then I started getting speaking at various industry conferences and I found a new level of service. So I was first serving the homeowners, which I'm still, we're still doing today. We have a few thousand mortgages we own. And then I was serving the community of people that wanted to learn more about this industry from the perspective of how I do things and how our company does things. And then 2020, we opened up our first income fund It pays investors out monthly, passive income on, at 9% annually. And so I started building relationships with the investor community where people were desperate for more passive income in their life. So I feel like this, the journey of service has been there. So I don't think of it as one asset class versus the other. I just think of it, the progression of things.

Yeah, that's a great point. And As you progress as well. So there's also those different phases where, you know, when you started this off to now where you've written books about it and you speak about it and you teach other people, you're creating like another section of problem solvers, right? You're creating another group of problem solvers that are going out there and helping people, the same way that you did. So again, that's another act of service right there as well by showing other people how to do it. So that's fantastic. So actually, can you tell me what's the name of your books?

Yeah. Node Investing made easier. Note Real Estate Node Investing Mentorship, Node Investing Fundamentals, which really speaks to the small business owner, Cash Flow Dojo, and way back I wrote Secrets to Winning Government Contracts. So I like putting my ideas and business philosophies and practices down on paper. I haven't been able to write a book in a few years cause we're blowing up at the scenes. I, with humility we are like with inflation, I think inflation's just driving more need for passive income our team we're hiring constantly. We have 20 plus employees and we're gonna probably be double that size in a year or so. I've just been focused on managing that growth, which is a really beautiful thing.

Yeah. That's awesome. So not only that, but now you're creating jobs, right? For for other people. Yeah. That's awesome, man.

Good paying jobs.

Yeah, definitely. Got the names of your books as well, so that's awesome. And the fact that you put this information out there and you make it so much easier for people to go out there and figure out how to do this on their own as well. Yeah definitely go check out Martin's books. Awesome. I'd like to transition this into something that we call the final round where this is, I'm gonna ask you kinda four hard hitting questions. We'll, really three hard hitting questions and one opinionated question. But this is to give the audience a general idea of who Martin is when he's in a tough situation or how you handle certain things. So if you're ready to go, we'll get this party started.

Yeah, absolutely. Let's go.

All right here's the first one, and it's a doozy. All right. What's the biggest mistake you've ever made in real estate?

Yeah, so in 2011, we operated the company out of the building that we owned. And across the street there was an entire block that was for sale. It was probably a good two acres and it had five, a 5,000 square foot building along with a work shed and just some other uses. And I just would stare at that space. And it was only going for about a million dollars at the time. And I was just like, I can envision just industrial equipment and machinery that was occupying the space and some commercial landscaping operation there. I was too scared to pull the trigger and or raise capital or I just thought the deal was too big for me at the time. And so I passed on it. And someone else purchased it and did the exact same business model that I was fantasizing about. And so I had to live by, live at looking across the street at that person, living my vision, if you will, . Average Joe Finances: Yeah. Oh man, what a situation, right? Because it's especially tough when you see something that you wanna do and then you get that fear that sets in and you say, Oh, I'll hold off and I'll wait. And then somebody else like sweeps in and makes it happen. A lot of people face that all the time, this analysis paralysis and so it's good to know that you know it happens to everybody, and for those that are listening right now, take that, take what Martin just said and realize that if there's something you're thinking about doing, just go out there and do it right. Because these are the things that, you miss these opportunities. So thank you for sharing that with us. So the next question. So just for clarification there I did I didn't know about partnering with investors. I didn't. I knew, but I didn't do it. And so I wanted to do everything myself. And so if I didn't have the down payment myself, I didn't feel comfortable that I could go through and with this deal and put it all. Put it all to work. But go ahead. Sorry.

Yeah, that, No, that's another piece of that too. The education and the networking piece, so if you would've known that, you would've, realized that you had another opportunity, another way to make that happen. So that's awesome. So again, thank you so much for sharing that. Alright, so the next question, Martin, is what is something that you've learned that you wish you knew when you first got started?

Yeah. This is something I learned in 2013 that I wish I would've had more awareness of when we launched the government contracting company. And that is invest in assets that produce cash flow and that you have some sense of control over. My wife and I we worked for active income, so we performed on a job and got paid, performed on a job, and got paid. Now we did used the money for good and we bought real estate assets with the money. But I really should have been looking to invest in assets that produced passive monthly income. And it wasn't until I started doing that in 2013 that I started to realize what true freedom rested. And that's with monthly passing.

Yeah. That's a great point. And it's something that I think a lot of people wind up learning a little later as they get started. But, especially in today's market right now with the way things are, cash flow is king, right? It's one of those things that's what you wanna go after. I appreciate appreciation, but at the same time right now the future can be a little uncertain at times, right? So having something that's gonna cash flow.

Model most people live by is, put as much into the 401k as you can or invest with a financial planner that's gonna build some lump sum for you. And then at the end of the day, whatever day that is, you hope that, that a lump sum amount is gonna be as valuable as you perceived it to be. And then you have the challenge of how to convert that from a lump sum into something that is predictable and consistently paid to you on a monthly basis. You hope to not burn through the stash before your time is expired. And that's how most people do. And that's a strategy of hope in my opinion.

No, Martin, I appreciate you bringing it to that side as well. Cause I was keeping it like solely on the real estate side, but at the same time the typical. Blue collar worker that's going to work and putting money away in their 401k and saying, Okay, I'm gonna make sure I save up enough to retire at the ripe old age of a or ripe young age of 65. Cause that's, everybody thinks that's young. Really, 65. That's, is that really when you wanna start living your life? But anyway you need to make sure that you have enough in there that it's gonna pay you over the rest of your life. And people are living longer and. And, a lot of times people find they, they get to the end of that road and they're like, I'm ready to retire. And they're like, I've got enough money to live for five years.

36% of people that make over 200 K are living paycheck to paycheck. So it's not, I and I talk to investors every day, blue collar, white collar. There's people that are living with incorrect data. And they're smart people all the way to whatever. They're living with a bad blueprint

Yeah, no, absolutely. It's more money, more problems, right? So a lot of times people can't they can't differentiate that when they get a pay raise or they get a new higher paying job, they're just like, Okay, cool. I make this much now. This is how much I can spend. And they don't realize they're not saving that extra money. They're not putting that money away or investing into cash flowing assets that are gonna help them, in the future. Not only in the future, but, I, I think most people should try. If you are working in a job where you're making a certain amount of money, you should be investing as much as you can to get to the point where your investments, will pay what you, your job pays you right? Then you can officially walk away. You can get yourself to that point where you're financially independent and walk away and go live that life that you wanna live. I think that's super important. So this kind of like ties into what the next question is and especially, for the newer folks that are looking to get started and everything, but do you have any tips or tricks that you would recommend to someone that is just getting started today?

Yeah. First thing is put a financial statement together for yourself and make it a weekly habit, if not daily to review that financial statement. Self-awareness where you are today is so critically important to understand and absorb in before you do anything.

Yeah. Wow. That's, that's a great tip to start off. You should know where you're starting at, right? So you know what your end goal needs to be. I think that's super important. Okay. Now I will preface this question with, besides your own, cause you've written for yourself, right? But do you have a favorite business investing or real estate related book or podcast, or, both?

Yeah, so I'll go with favorite podcast. I like Joe Brown with Hairy Financial. And then I also like Nick from Reventure Consulting more on the real estate side. I enjoy both of those two podcasts greatly. And as far as the favorite book I'll go with my all time favorite, and that's Cash Flow Quadrant from Kiyosaki. I've read that a number of times and I still get lots of nuggets from it.

All right. Some fantastic recommendations. I wrote down those two podcasts. I'm gonna check those ones out too. Cash Flow Quadrant is a must read as well. Kiyosaki, he writes some good books when it comes to trying to figure out how to create passive cash flow, not just passive cash flow, but just create cash flow in general and how to make it happen, right? And invest your money in assets that are going to pay you, put your dollars to work. Don't work for your dollars. So I love it. Now that is it for the final round, but I do have one more question for you, Martin. And this is the most important question of all, because for the people that are listening right now, they said, I really like Martin's story, how he built up from when he started his own government contracting business to getting into commercial real estate, to now doing this note investing. And there's some people here that are. I'm interested in that and I wanna learn more. So if you could, can you share more information or where can people find more information about you? Do you have a website, social media, Anything that they could follow if they wanna learn more about you or bequest.

Yeah, you can go to bqfunds.com, bqfunds.com or you can send me an email martin@bqfunds.com. It doesn't even have to be related to investing with us. It can just be a general question. I'm always here. I'm happy to help. I think we're all a community of individuals and families that are just trying to do better for ourselves and the families we support. If someone has something and I can provide service or an answer of some kind, then I'll be glad to do that.

All right, Martin, that's awesome. Thank you so much. And again, thank you so much for taking the time to talk with me and coming on the show today. I really appreciate it.

Thanks a lot, Mike.

All right. Hey, and to my listeners, thank you so much for joining me and our special guest, Martin Saenz, on the Average Joe Finances Podcast. Go leave us a five star review and tell us what you liked about today's episode with Martin Aloha from Hawaii and have a great rest of your day.