Matt Faircloth was an engineer with a Fortune 500 company who left to become a full-time real estate investor. He’s the cofounder of the Derosa Group, along with his wife Liz, a prolific educator and contributor on Bigger Pockets and the author of Raising Private Capital – Building Your Real Estate Portfolio Using Other People’s Money.

Matt and Mark sit down in today’s episode and discuss stepping outside of your comfort zone, the current state of the market, and how to grow your investor base. Be sure to check out Matt’s YouTube channel below.

Derosa Group YouTube Channel

What You’ll Learn In Today’s Episode:

  • Matt started out with a house-hack, lived on a budget, invested in real estate, and held onto his day job for a couple of years. It’s an origin story we hear over and over again from successful real estate investors. That combo funded Matt’s early real estate investments, and those investments allowed him to go full-time into real estate. If you do those four things, house-hack, cut your expenses, invest in real estate, and keep your day job (at least for a little bit), it catapults your chances of success.

  • Matt drew some great parallels between the 2008 recession and today. Investors weren’t really sure what just happened, what the ramifications were going to be, and a lot of investors sat on the sidelines waiting to see what was going to happen next. It took a while for the real estate market to fully react back then, and the full effects of our pandemic today may have yet to be fully realized.

  • Matt has built a powerful thought leadership platform by documenting his growth as it happened and focused on content designed to serve others, not himself. If you can create content designed to serve your investors, you too will see your business grow.

Ideas Worth Sharing:

“A house hack is, far-and-away, the best way to get involved in real estate investing.” – Matt Faircloth

“Not everybody was really sure what happened, we were all just sitting and waiting.” – Matt Faircloth

“If your willing to do it, 100% education, 100% not self-serving, people see that and are willing to approach you.” – Matt Faircloth

“Getting pulled in a bunch of different directions pretty much makes you half-ass everything you’re in the middle of.” – Matt Faircloth

Resources In Today’s Episode:

Books Mentioned In Today’s Podcast

Enjoy the show? Use the Links Below to Subscribe:

 

Transcript

 

Mark: Today’s guest was an engineer with a Fortune 500 company who left to become a full-time real estate investor. He’s the co-founder of the DeRosa group, along with his wife, Liz, a prolific educator and contributor on bigger pockets and the author of Raising Private Capital, building your real estate portfolio using other people’s money. I’d like to welcome Matt Faircloth.

Matt: Thank you so much, Mark. It’s an honor to be here.

Mark: Great to have you. I’ve been watching your videos where you’re usually at a white board for a very long time, and I’ve learned a ton from those. Thanks for doing that.

Matt: That’s if you’re doing video, but that’s the white board right there.

Mark: I see it. Excellent. I know this is the path you’ve gone down before on other podcasts, but since you’re like me, you had a life prior to real estate. Just want to ask what made you decide to make that shift and then how did you do that?

Matt: Sure. We can take another twist on it too in that, because I think that what people lose on other shows when they ask that question is, you got to make it relatable. And we’re at a point now where it may be hard to relate to where we are as a company. I’ve got a YouTube channel, we’ve got 800 units under management, soon to be 1150 under management. And so, we’re growing quickly and I don’t want to lose sight of where I came from and how folks that are listening that are maybe just getting started or looking to raise their game or whatever can take wherever they are to the next level.

And I want to go to the next level for who I am. And so, for how folks can get to the next level too. What I did. I just chose to change my lifestyle up a little bit. When I first started investing and I did what they talk about on Bigger Pockets is a house hack. I was way younger. I’m 44 now. I probably wouldn’t be pulling this off today, but I was 27 at the time, I think.

And I bought a single-family home and rented out two of those bedrooms to two buddies of mine. And this is after reading Rich Dad Poor Dad and blowing my own mind. And I think for folks that are exploring real estate investing, they don’t need to be told about Rich Dad Poor Dad.

They’re probably listening to your show because they read Rich Dad Poor Dad. And exploring real estate investing because something triggered that, maybe there is another way to live life and another way to make money, but now they’re here listening. And so, the biggest question folks have is how do you get started?

I think a house hack is how I got started and I firmly believe that that’s the way that if you’re under the age of 35 and if you’re married with no kids or whatever it is, or if you can find a way to make it work, a house hack is far the best way to get involved in real estate investing tenfold.

Mark: Agreed. It’s a no brainer. I start with the house hack as well. Were you married at the time?

Matt: No. I had a girlfriend, my lovely wife Liz at the time was my girlfriend and she got me to read Rich Dad Poor Dad. I just turn my mind to this possibility, like, oh my God, this is amazing. So, I searched around and the landlord in the house I was living in put the house up for sale and I had to move because I didn’t have the money to buy that house. So, I contacted the realtor that put my landlord’s house up for sale.

And I was like, “Hey, I don’t want to buy this place, but can you help me find another one?” So, he and I got together and he helped me find this three-bedroom, two bath house. And my two roommates from a place in Manayunk didn’t have a place to go either. So, they were like, “Matt where are we going?’ And I’m like, “I don’t know, I’ll save you, I’ll go buy a house and we’ll all live together and in a house.”

And I bought a home and it just so happened. I’d love to say that it worked out this way, but it just so happened that the rent, these guys were paying at my other rental property that I rented them that their rent was just above what the mortgage was in this new property that I bought.

And it was a similar structure house with more amenities, central air, dishwasher, nice yard, that kind of thing. They were like, yeah, this is cool. We can also walk to bars here. Because in your twenties, that’s the parameter, like how close is the local pub.

Mark: Stumble home.

Matt: Yeah. Right. A home away from home. They moved in with me and they were both paying me $500 a piece per month. And my mortgage was 940 bucks.

Mark: Amazing.

Matt: I was making 60 bucks a month, living there for free, had a good day job, like pulling down nice salary. So, 26 years old, 27 years old, no living expenses with a good salary.

Mark: That’s fantastic. And that’s in Philadelphia, right?

Matt: This second house was just North of Philly in a little town. You would win the spelling bee if you could spell it. It’s called Conshohocken just North of Philadelphia. For a couple of years now that was my first rental. It opened up my mind to the possibility of real estate investing and just alternative, making a few shifts on what I was willing to do in my life.

Like, Hey, I’ll have these two roommates live with me. ‘Cause I could have afforded to buy the house by myself and just live there on my own. I could have swung that, but I didn’t. I had two buddies live with me and because of that, I was able to pay off 20 grand in student loans, $10,000 in credit cards in two years.

I paid off on my bad debt only because I read Rich Dad Poor Dad and learned about bad debt. Luckily, if I had not read Rich Dad Poor dad, that money would have simply gone to the local pub and would have just become a bar tab? All that extra money I was making

Mark: Or you’d be saving up for that shiny car.

Matt: Absolutely. I would have been like, oh, I could do a car upgrade or I can save a few bucks and I can buy myself an even bigger house and live on my own. But no, my girlfriend now wife chose to do a lot of things to live below our means, which has made all the difference for us.

Mark: Great. Yes. Similar to me Is yeah. Getting into that first house hack and just experiencing, it was the change in my mindset caused that shift to recognizing the power and value of real estate.

Matt: Here’s the biggest part about it, Mark. It’s about acting into your comfort zone, acting like beyond your comfort zone. This is a great book called The Way of the Superior Man. And the way the superior man talks about acting a little bit outside your comfort zone. Maybe not so much to where you’re really putting yourself in danger. But if you just go a little bit outside your comfort zone, it’s where you’re a little bit afraid in most circumstances.

Mark: Stretch.

Matt: You’re stretching. So, me buying a home and having two of my buddies move in with me was total stretch and totally felt really scary to me, but I did it. I made it work. And then you take a few more steps that feel a little scary or whatever. Life’s not supposed to be comfortable. It’s supposed to be a little–

Mark: –baby steps. You weren’t starting off with 150-unit property.

Matt: No.

Mark: You were buying a house?

Matt: No, I had not taken the guru class they told me to start out real estate, investing, buying 150-unit apartment building. Unfortunately, that guru is still out there preaching that, but that’s not the path that we took.

Mark: Right. And what did you do once you recognized how great this thing is, what did you do next? What was your second property?

Matt: My second property, we started shopping. We took a few, not like, run to the back of the room things. We joined a local REIA, took a couple of classes through them from other landlords. A couple hundred bucks. They we’re just teaching us how to do what they did and stuff like that.

Mark: Sure.

Matt: And one of the landlords gave us a strategy on finding deals. And this is again, early t2000’s dating myself. So, we went and got ourselves, the local newspaper, which younger folks like me were like what’s that, is that your newspaper? Is that what you use to light a campfire?

No, no. We went and found ourselves a newspaper and we looked at the classifieds and we started calling for rent ads. Saying, Hey I see you have it listed for rent. Are you interested in selling us? I see you have it listed for rent. And did a little stick and like, we’re local buyers, whatever.

And we called like 50 people and we got laughed at, hung up on, quoted ridiculous prices. And finally, we came up on this financial planner and him and his CPA buddy had some extra money, bought this duplex in downtown Philadelphia. And this little Irish lady tenant was just eating their lunch, man. I still remember her name.

I can’t say it on the air, but she was absolutely eating these two alive, every trick in the trade that she had and just screaming at them on the phone or whatever. And they were just done in this duplex. And they had one of the units up for rent. That was the one that I called them on. And the other unit, this Irish woman was just smoking these two guys.

Mark: Really.

Matt: And so, she was just deciding when she wanted to pay her rent and just ripping off to them every day and everything like that. So, they were just like, I just got to stick to my day job. This is ridiculous. So, they sold it to us for literally a small mark-up above what they paid for it a couple of years before.

Mark: Oh, nice. So, you started in the mid 2000’s. How did you fare in 2008? So, you had a little bit of a portfolio or possibly a large portfolio?

Matt: That was our duplex. So, when Liz and I were dating, we bought that property.

Mark: Okay.

Matt: And like dating with my girlfriend and buying rental properties, probably don’t you recommend that. But we did that. I went to her dad Salvador. 6 foot, 2, Salvador from Brooklyn and asked her dad if he would loan us the money to buy that rental property. And he agreed to it. So, he lent us 30 grands to buy our first duplex. My first real estate deal was the house I lived in. My second real estate deal that I didn’t live in, used private money, use my father in law.

Mark: Okay, good. That helps.

Matt: So, he put up 30 grand, and this is back in the day when you can invest with like 5% down, you can get a first mortgage, second mortgage.

Mark: Sure.

Matt: It’s well, just the name of your show, but the real estate market was Wild Wild West, it was crazy.

Mark: Yes. A lot of that stuff adjusted after the 2009 downturn. I remember being in a bar, talking to some guy probably in 2006, who was a mortgage broker. And he was just telling about how fast he was just giving people loans and how sloppy their due diligence was and bragging about it. I’m like, this is insane.

Matt: And you wonder, did you see The Big Short?

Mark: Yes.

Matt: Where he’s talking, I think it’s an exotic dancer. He’s talking to her and she’s talking about how she owns like five houses or something like that. She’s selling her five houses and then he’s like, well, “You got to sell all your real estate.” And she goes, “The condos too?” ‘Cause apparently she owns condos on top of that, on top of the houses or whatever.

Mark: The one complaint I have about The Big Short because I loved it is that they acted like this was his secret. Like he was the only guy aware that disaster was coming. I think every rational person saw this.

Matt: I remember talking about that. I remember being in rooms and in REIA rooms in like 2007, ‘6 and ‘7 just being like, when is it going to crash?

Mark: There’s no way this ends well.

Matt: When is this going to crash? That was what everybody was talking about is when. When is the carousel going to stop? And then it did, we all saw it coming. I think you’re right. It wasn’t just Steve Carell that saw it coming. It was everybody saw it coming. So anyway, we fared well because we sold that duplex. We bought it in ’04 and then we sold it in ’06 I think. We did fine on that. Sold my single family did fine on that too.

And then during the crash, by that point, Liz and I had gotten married in ’05. And we decided, again, lifestyle decisions. We decided to do this wacky thing that America has lost the idea of how to do. And that’s called living off of one income living below your means off of one family income. And by not buying the most expensive house you can afford. We bought a little row home and just hunkered down in there, no kids and lived off of her salary while I quit my job and invest in when I started up our investment company.

Mark: Okay. And what year did you start the investment company?

Matt: 2005.

Mark: 2005. Okay.

Matt: That’s when we got married.

Mark: Oh cool. ‘Cause I think it’s interesting now because we’re now at the next down cycle in the economy and it has some correlations, it’s obviously different in a lot of ways, but a lot of just what happens economically is going to be similar. And I remember one of the things I think I had maybe eight or 10 multifamily properties is that I assumed it was going to be shorter than it was. I watched that first 0 months of slide and I’m like, okay, we should be coming out of this thing pretty soon.

Matt: We didn’t really come out. It’s slid from I think the bubble burst in like October of ’07, I think it’s been a while. I think it was like ‘7, ‘8 kind of thing is when what really hit the fan and we were in fallout mode and that feels like we are right now. Not everybody was really sure what had just happened or what the ramifications are going to be.

So, we’re all just sitting and waiting. It sounds very similar for what changes were going to come down the pipeline and then the foreclosures came on and everything like that. So, the thing is it takes a while for foreclosure to work its way through the system.

Mark: It seem like that first year, 2007 to ‘8 was all foreclosures. And then I had the privilege of buying a property, being an escrow and having just removed contingencies on a 16 unit building in LA in October of ’08 and then Lehman Brothers crashed, collapsed, followed by Bear Stearns. And like the week after we removed contingencies. But I think that was the next big shoe to drop was the collapse of major Wall Street institutions.

Matt: I got to Google when that was, but it feels like all these awful things happen in October.

Mark: Yeah. Right.

Matt: If you look, you’re old enough to remember, what was it, black Monday or something like that. Do you remember that? It was like years and years ago and like the ’80’s or whatever, but historically the Stock Markets crash.

Mark: Oh yeah.

Matt: It’s going to do it. It happens in October.

Mark: It happens in October. Right?

Matt: It does. It must be a bad luck month, I guess. I don’t know. But anyway, we just held our breath. I had some fix and flips going on at that time that I just converted into rentals. I was like, okay, I’ve got this four-bedroom, three baths with central air and granite countertops and beautiful hardwood floors that should sell for 160 grand. It’s pretty quiet out there. Nobody’s buying.

So I’ll put it on the market to lease it for 1500 bucks a month. So I did, I leased four houses that I had that were supposed to be up for sale and I just leased them out and just made a little bit cash flow on them and then systematically sold them off, in 2000 late 2016, ’17, ’18 way later than that.

So, it took a while for prices to get back up to where they were pre-crash. I remember that was a milestone, people were like prices are where they were pre-crash. And I think people started talking about the next crash when prices finally recovered but it took like eight years.

Mark: It took a long time from valley to peak.

Matt: To climb back out.

Mark: That’s great. That did take a while to play itself out. And I think we had the double dip back in ’11, but it was a great experience. You’ve obviously written a book on raising private capital, how did that evolution occur? Like what were the most effective techniques that you found for raising capital?

Matt: In the beginning, it was just personal conversations with individuals. And then I started putting it out on social media and eventually started my YouTube channel and I’m not afraid to say I got lucky. I caught bigger pockets at the right time when they were looking for authors and I was willing to hustle and work my tail off for them to help them write blogs, write articles and do video productions for them and stuff like that.

I didn’t take a nickel from them in exchange for that. They just put my name, hey, this guy wrote an article. If you want to call him. And that’s, what’s great about producing content for circles like that. If you’re willing to do it a hundred percent education, a hundred percent, not self-serving people see that and they’re willing to approach you.

And so, when we started doing that, that really opened things up to do a lot more deals from a capital standpoint. And we slowly worked our way up and did larger and larger deals and documented the whole thing as we were doing it through articles.

At one point, I bought an 18 unit. I wrote an article and did a video about how I bought this 18 unit and put it on bigger pockets and it did really well. And so, I just kept documenting my success and my growth, in some ways therapeutic for me. And in other ways, good for folks to learn from as well.

Mark: Now, if you’re enjoying the show, please do us an easy favor and hit the subscribe button. As a listener I always wonder why podcast hosts are always begging me to subscribe and rate them. Well, now that I’m on the other side, I see why. It allows other listeners to find you in an era of unprecedented hype over real estate investing. My goal is to be a truth teller. Real estate is not as easy as it’s made out to be, but you can do it. If you can get past the hype and get to the truth.

My aim is for this show to help with that. And if you’d like to learn more about who we are and what we do at Quantum Capital, please visit our website at quantumcapitalinc.com where you can find podcast episodes, multifamily resources, and learn about opportunities to invest with us. Anyway, let’s get back to the show.

Mark: Yes. I think that’s key that you put stuff out there with no strings attached. I don’t know. Maybe it’s just me, but I have this sort of skepticism of a lot of people out there in the media like what’s the sales pitch behind all of this. If you’re a practitioner and you’re good and you’ve got experience and you’re willing to just share that knowledge like yourself.

Matt: I think that comes back. Listen, the way they all know that real estate investors, aren’t doing this, for a hobby, I’m not doing this for fun. I am doing this to make money, but I’m happy to share the journey of what I’m learning and I’m not pitching anything, not selling anything. I’m just happy to just share the experience.

And I know that in me doing that, I get to help somebody else that maybe is getting going, or maybe need some inspiration, maybe needs an idea, happy to help them that way. And also, I know that at some times it does come back to me as a potential partner potential investor. So, I’m happy to do it for those reasons.

Mark: Sure. And you’re sharing your passion, something you’re excited about.

Matt: Yes. Well that’s what I do. It’s great to talk about your passions.

Mark: Exactly.

Matt: I did. I’ll be awful to talk about something I know nothing about. That would be terrible.

Mark: So, what are you doing now that we’re in the middle of this pandemic?

Matt: Well, for a while I sat around and play with my kids a lot and tried to hold the fort down and everything. But since we’re a little bit unlocked, we are looking for deals. I’ve got a new one under contract in North Carolina, which we love. We’re going to North Carolina. This is a big one, Mark. It’s a 336-unit complex under contract there.

Mark: Really.

Matt: Yes, we’re really excited about it. And we’re about halfway through the raise. We just got started with the raise. We’re about halfway through and we are just looking forward to carrying that one forward. And I think there’s going to be a lot of opportunities to buy properties at less than what they were for sale for pre- COVID. This property was for sale for about 15% more than what we have it under contract for pre-COVID.

Mark: Okay.

Matt: So, we got to post-COVID discount in that. I’m not a crash predictor, I’m a, soften it up. I think it’s going to get softer. A lot of folks are going to get on their heels. And because of this uncertainty we’re facing, I think is going to be a lot less people in the market.

So, I think it’s going to be less competition for buyers. And I think that we’re going to be, as we feel this thing out, we’re going to have to be willing to pivot and change our marketing and tenants and changed the way that we position properties and everything like that. But as long as debt holds up and you can continue to borrow money, I think the market will keep going. That’s my 2 cents on it.

Mark: And I think the Fed has learned a lot from 2008. I think, as you mentioned, when the 2008 crash happened, debt evaporated, and it was very difficult to get for a long time. And they put measures in place in the wake of that for the next one. And we’re now in that, and now debt is available, which is different.

Matt: The bank jumped on this thing. When COVID first came out, I was getting calls from lenders saying, “Are you okay? Do you need anything?” Offering me mortgage forbearance. I wasn’t asking and everything like that, but they’re like, “Hey, do you want forbearance? Do you need any help?” I’ll take it and I’ll take what you can give me depending on the terms. But yeah, I’ve found that the banks actually were very willing to cooperate because they didn’t want to see another ’08 happen.

And I think that when ’08 happened, the banks may kind of got caught and then didn’t have any outlets. Didn’t have any things to do with all this bad debt on their books. So, they had to just drop it and let it go. But I don’t think that they’re in that position today.

Mark: Agreed.

Matt: This is more of an income crisis than a debt crisis. COVID and this recession I believe it to be an income based recession. The last recession was a debt based recession.

Mark: That’s a great observation. That it’s the incomes that are plummeting and causing the problems.

Matt: You’ve got a stop in the economy, that’s why you got 20% unemployment rate we’re boosting up unemployment benefits for people and all that because we just need money to stay in the economy to keep things moving in cycling. And that’s why luckily enough, a lot of our folks are continuing to work.

They’re continuing to stay out there on the streets is because we’re at least propping up the economy that we can hopefully ride this thing out, through keeping income, coming in to get through it. If that income dries up, or if that income stops, then I am concerned about where this thing goes, because you can’t just cut the economy in half and expect everything to keep going.

Mark: I know. It’s so hard to predict. So unknowable, I think what’s it going to look like six months from now to a year from now because there’s a lot. And the other thing, just to comment on buying in today’s environment, I agree there’s fewer buyers out there, but my experience is of every 10 properties that I look at nine of them are obnoxiously overpriced, you know, going for 2019 pricing. And then there’s one that’s distressed. There are so many overpriced properties out there right now, but then there’s a few sellers who are in legitimate distress and those prices are down.

Matt: You know what the Mark, I think that, first of all, I like to joke. I think that most brokers didn’t get the word about COVID and didn’t get the word about the stresses on the economy and everything like that, because they’re still putting properties out at pre-COVID prices and talking about $50 value add projects and you can raise the rent 50 bucks. It’s a big value add.

Anyway, I do think that there are folks that were in distress or needed to sell or were thinking about selling pre-COVID and COVID is just the straw that broke that camel’s back. They just said fine, that’s it. I’ll sell it. And I’ll give you a good number. And I think they were hoping to get a better number when they were looking to sell pre-COVID. But now that COVID is here, they’re willing to be more realistic.

But as you said, I think most properties that are for sale are overpriced, but I’m starting to see more reasonable deals come across just from sellers that are looking to be reasonable, not folks that are broken upside down, because you’re just not going to see that the banks aren’t going to be putting REO’s and bank foreclosures on the market yet because they don’t have ownership of these things. The courts are closed. You can’t get something through court in most States or most States opened up their courts a month or two ago. Foreclosures aren’t even moving.

Mark: And maybe there’s been a shift that initially sellers thought, oh, this is going to be a three or four month thing that if I hold out, I can go back to my pricing. And now it’s clear that we’re in a second wave and this is going to take longer than we thought.

Matt: They’ll have a rude awakening. Eventually those sellers that are thinking, they’re just going to wait this thing out. I don’t think it’s going to bounce back up to where it was even though what’s interesting is debt is still crazy cheap. Debts cheaper than what it was pre-COVID. I just got quoted 2.75 on a deal. You believe it?

Mark: Is that an agency?

Matt: Agency. Yes. It’s Freddie Mac 2.75 on this product they have called the Freddie floater. It floats above LIBOR which LIBOR is 0.16 right now. And the Freddie floater just floats right above LIBOR, and not on a monthly basis. And you can refi out of it pretty affordably.

Mark: Great. So, you first started in Philadelphia and you just mentioned that you’re buying something in North Carolina. How have you gone about choosing your markets? Where are you? What is it that attracted you to North Carolina?

Matt: North Carolina’s business friendly. There’s still a lot of land that can be built out for expansion and growth of the economy. So, you’ve got these economic hubs, Raleigh, Charlotte, Greensboro, Winston-Salem, Fayetteville, they’re big cities. Some of those are the biggest cities in the tertiary markets or whatever, but still you’ve got a lot of room for expansion just outside those cities, those cities are little hubs surrounded by lots of green fields. Even Raleigh and those areas still have lots of green fields.

Mark: The academic triangle there.

Matt: Yes. There’s the Research Triangle. And then there’s the Piedmont. There’s a couple of triangles there. There’s the Research Triangle, there’s the Piedmont Triangles, but we liked North Carolina for that. And a lot of companies are considering or have already looked to move there and so there’s growth. And most importantly, above all the State of North Carolina is extremely friendly place to do business as a company because they really stay out of your way.

Their taxes are affordable and the regulations are very light loaded and stuff like that. So, we like North Carolina as a place to invest because we see a lot of growth coming there. And also, more and more things, a lot of migration from the Northeast is going to North Carolina for folks that don’t know where to go all the way down to Florida. They’re moving to North Carolina.

Mark: That’s interesting. That’s been happening for like a decade that everyone who lived in the Northeast seems to be drifting South. Maybe it’s the baby boomers, just looking for warmer temperatures

Matt: For a lot of reasons, it’d be like you said, warmer temperatures that the schools are favorable. The real estate taxes are favorable.

Mark: And the taxes.

Matt: A lot of things are favorable there. And unfortunately, what happens in markets like that, you have more people move in. There tends to be a shift in mindset or shift in need for essential services. And so, taxes are going to go up. It’s going to get more expensive, a place to live, but for now it’s extremely attractive. And I think it will be for the foreseeable future. So, we love North Carolina and we will be buying a lot more there.

Mark: Cool. And where else are your portfolio? Do you have other States or markets that you’re in?

Matt: We’re in Kentucky? We like Lexington, Kentucky. That’s one of my favorite markets.

Mark: Interesting.

Matt: It’s a small city. It’s not, millions of millions of people. It’s a couple of hundred thousand people, so it’s not going to just blow out and be high rises on every block, but there’s certain factors. And also, the biggest thing that we consider when we buy in a market is job diversity.

Mark: Sure.

Matt: Like for markets that have a little bit of this, a little of that, a little bit of this, a little bit of that. And Lexington has a lot of different diversity of jobs. So that’s why we love it there too.

Mark: For a long time, it’s been, one of the rules of investing is finding a diverse economic base. And now it seems like the add on to that is tech, most cities that you want to go in, it seems like tech is such a huge part of our future. You want to find those tech cities as well.

Matt: Yes.

Mark: Aside from that. So that’s interesting your strategy, what’s the profile of the deals that you try to target.

Matt: We look for properties that have been mismanaged, have a little bit of hair on them. That are in distress in some way, they just need some tweaks and twists and turns and you’ve got an owner that doesn’t care about them anymore. Hasn’t been running them very well or has gotten tired and there’s meat on the bone.

And we look for deals that we can get in and through some creativity, spike, rental income, but also get creative and drop expenses too. So, for things like water conservation programs on the expense side, on the income side, putting in like a company to do like a global cable contract with the local Cable provider.

Mark: Moving on, is there a failure or mistake that you made early on that you later have found that is key to your success?

Matt: It’s something that I have learnt. I thought I’ve made plenty of failures and mistakes. I’ll give you a failure that I made, which is trying to do everything myself. In my first couple of fixes and flips I tried to GC them myself and try to deal with the contractors on my own. It just went really poorly because I’m not a good guy to deal with contractors. I need somebody in an intermediary to deal with them and handle the details and stuff like that. That was mistake number one.

And mistake number two is probably my biggest one is that I’ve tried to go in too many different directions in one time. Then there were times where I had like buying rental, had six fix and flips going on also trying to do a wholesale deal. Also trying to write a book, also do a podcast and stuff like that.

And getting pulled in a bunch of different directions pretty much makes you half-ass everything you’re in the middle of. And so, I found that by staying focused, the folks I look up to in this business that I really admire the Joe Fairless’ of the world. Joe’s not doing six fix and flips and buying apartment buildings.

And also, he’s doing his marketing for his podcast and buying apartment complexes. That’s it, maybe a book, every here and again, but that’s it. He’s not going to wholesale a single family and you can make a lot of money doing that, he’s going to say no to most of those opportunities when they show up.

Mark: There’s that Warren buffet quote ‘The difference between the successful and the super successful is the super successful say no to almost everything’. I’m guilty of the same thing. What’s a trait that’s served you best both in real estate and in life?

Matt: Positive mental attitude all day long. And this is like in dark times, Mark. I mean, we will figure it out. I’ve said it through tears. Like we will figure this thing out. It will work. It’s okay. I’ll make it work. I will keep trying until it does. And guess what it always does if I don’t quit, I know that I’ll find a way to figure it out.

Mark: How do you Maintain that positive mental attitude?

Matt: Sometimes it’s tough. I get support from my family on that. It’s also partly in my blood. Do you ever take StrengthsFinder?

Mark: StrengthsFinder? No.

Matt: Oh man, you should. It was a book released by Gallup. And it’s an assessment you take and it just determines your strength and there’s like 70 different human strengths you can have and StrengthsFinder, you take the assessment. It tells you if you’re like your top five or eight. There are different ways you can break down what you pay for and everything like that. But my number one, strength is positivity.

And so that’s just who I am now. Other people have found that being a cynic works for them or have found that being a collaborator or whatever, but just for me, my core is positivity. So, it’s in me already and it’s hard to do sometimes, but I’ve also found Mark that it just works. And so, I know that in really, really hard times if I just stay positive. I’ll normally work my way through it because I’m 44 years old. I know that I’ve been doing this all my whole life. Things will eventually work their way out.

Mark: It feels like it’s a commitment. Like at some point you’re going to say, I am committed to being positive and tough minded and optimistic. You mentioned that, for some people it’s fashionable. The comedy world and comedians love being cynical. You see them adopt that sort of attitude and they get a lot of comedy off of it. And it is funny, but I feel like you have to make the commitment that whether things are terrible or whether things are great, you’re going to have the same mindset and you’re going to stick to it.

Matt: I think that the difference, if you look at the stand-up comics and the comics in the comedy world that have done really well, and I love comedy too, I grew up watching Comedy Central back in the day and stuff like that. And watching the show that you’re working on and stuff like that.

And I’ve found that comics that have done well, they look at the world from a cynical perspective, but they look at themselves from a positive perspective. Those that are pointing at themselves with those cynic and kind of like, man, why would I do that? You still got to believe in yourself. Or you can be a light-hearted and a little bit of like an armchair critic of the world. But I don’t think it serves to do that about yourself.

Mark: No. It feels like it’s a legitimate comic strategy. If you’re going to get into the business and everybody needs to craft their own point of view where they get their comedy from. And that’s a legitimate one. There’s a lot of people who are really funny. Larry David, I love, but in a lot of those people in real life, they’re not like that at all. This is a character that they play.

Matt: Oh, he’s in character. I don’t think Larry David or Jerry Seinfeld really are as self-depriving as they appear in real life and on their shows, they absolutely hate themselves. But in real life, I don’t think you can get to that level and feel that way about you, but you got to get the people love that. And people gravitate to that. Don’t take yourself so seriously mentality.

Mark: Are you ready for our question round?

Matt: Bring it on.

Podcast

Resources

Strategy

Portfolio

Parker Heights

Parker Heights

East Riverside SubmarketLocated just minutes from the Austin Central Business District, Oracle's new campus, and the...

Register to Access Deals

Enter your information below for access to our exclusive investor portal and to receive updates on any upcoming deals.

Thank you, we'll be contacting you shortly!

Pin It on Pinterest

Share This

Share This

Share this post with your friends!