Podcast 126: Building Passive Income after the Housing Crash, Cancer, and a Divorce with Matt Motil

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22 flips currently in progress. 134 flips completed. 18 rentals properties.
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Dr. Matt Motil has had a lot of reasons to be mad at life. During the housing crash in Arizona, he lost his life savings, battled cancer at 30, and got a divorce, in part due to health problems with his son. Despite many setbacks, Matt did not give up. He kept investing in real estate until he was able to build enough passive income to quit his career. On this episode of the InvestFourMore Real Estate Podcast, Matt and I talk all about what he has been through and how he found success with rental properties.

Click on the green button below to listen to Matt’s story

How did Matt get started in real estate?

Matt grew up in a family of contractors, and he ended up becoming a union contractor at the age of 18. Matt was making almost $20 per hour straight out of high school. Even though he was making good money, he knew he wanted something more out of life. Matt went to school for engineering and while getting a degree, managed a rental property for his parents while living in it. Matt ended up getting a job as an engineer traveling all over the country. He also started to buy real estate and “flip and live,” as he calls it. He would buy a house to live in and fix it up over a year or two.

How to flip houses with little money.

How did Matt build up his life savings only to lose it all?

Matt worked full-time as an engineer but continued to slowly flip houses he lived in. He was transferred to Phoenix for work, where he bought and sold more houses, eventually getting to a point where he had $200,000 in equity. His wife and he decided to build their dream house for around $600,000, and they put all of their money into it. As soon as construction was completed, the housing crash hit, and their house plummeted in value. Houses similar to theirs were selling for $200,000 or less! Matt could not even find a renter because there was an estimated 80,000 vacant houses in the area and not enough people to fill them. Matt ended up losing the house and all of his money he had worked so hard for. However, he did not give up on real estate!

When will there be another housing market crash?

How did Matt change the way he invested in real estate?

Matt ended up getting a divorce and moving to Cleveland just before losing his house and life savings. He also had a bout with cancer along the way. In Cleveland, Matt bought another house before losing his Phoenix house. He got a great deal on the house in Cleveland, but the market dropped there as well. Matt ended up renting out the house in Cleveland and renting another house to live in. Matt made money on his rental this time, and the passive income lit a spark in him. Matt then met his current wife—who was also interested in rental properties—and they started to build a portfolio together.

Matt and his wife bought as many rentals as they could in each of their names using hard money in order to put less down. After running out of conventional mortgages, Matt started using private money to buy more and more rentals. Eventually, Matt realized he was making enough money from rentals to replace his income. Matt ended up losing his job and was just fine with it because he could move into real estate full-time.

How to become a full-time real estate investor.

How can you contact Matt?

Matt has helped a lot of people buy rentals in the Cleveland area. He admits prices have been increasing, but there are still many cash-flow opportunities around. Matt also have a podcast, CashFlowKing and has written a book, Man on Fire. Matt has a new book coming out soon, and you can learn more about him at https://www.drmattmotil.com/.

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I just received my 200th review on Amazon for my book Build a Rental Property Empire: The no-nonsense book on finding deals, financing the right way, and managing wisely. Thank you to everyone who has purchased a copy and taken the time to leave a review!

EPISODE 126 

[INTRODUCTION] 

[0:00:13.9] MF: Welcome to the Invest Four More Real Estate Podcast. My name is Mark Ferguson and I am your host. I am a house flipper. I flip 10 to 15 houses a year, I own 13 rental properties, with a goal to buy 100 by 2023. I’m also a real estate agent. I’ve been licensed since ’01, I run a team of nine and we sell close to 200 houses a year.  

So on this show, we like to interview house flippers, landlords and the best real estate agents in the business. So stay tuned for some great shows, if you want more information on my rentals, on the numbers, how I buy properties, check out investfourmore.com. 

[INTERVIEW] 

[0:00:58.1] MFHey everyone. It’s Mark Ferguson with Invest Four More. Welcome to another podcast on the Invest Four More Real Estate Show. Today, I’ve got a very cool guest, Dr. Matt Motil, who has a Cash Flow King Podcast. He’s focusing on buy and hold investing right now. He’s done wholesaling, does a lot of seller financing. Very active in the real estate world. 

I’m excited to talk to Matt and see what he’s got going on and see what we can learn from him. Matt, how are you doing today? 

[0:01:25.7] MM: Good Mark. Thanks for having me on the show. 

[0:01:27.9] MF: I appreciate it. I always start everybody out with how you first got started in real estate. I know you have a construction background. Were you always interested in real estate or did that come later in life? How did that all come about? 

[0:01:42.8] MM: It was relatively early. My parents, dad was in construction and so we bounced around project to project. He would chase the big jobs across the country kind of a thing. We moved a lot. The idea of being a little nomadic was just how we were raised. 

When I went to college, I read Rich Dad Poor Dad, I was probably about 19 when I read that book. I kind of say that that’s the gateway drug to start in real estate investing for a lot of people. Even though it’s not necessarily a real estate investing book per se, that was the red pill that opened my eyes that I was like, “Wow, there’s a whole different world in terms of wealth creation and that kind of thing that I really haven’t been exposed to up to that point.” 

I really start to get my hands on any information I could get after that about what it would take to get into the real estate game somehow, and much information as I could. As a 19-year-old kid it’s like what’s legit, what’s not. 

I really didn’t have a lot of money, so I wasn’t in a position to buy a bunch of programs or take somebody’s course or things of that nature. I just absorbed all the free concept I could. I started doing property management when I was 20. Just fell into it. My parents bought a house, they moved away, and my brother and I moved into it as a rental and we moved fraternity brothers into it as like a college rental property which was right off campus in Toledo, Ohio. 

Later on, I would look back at that and be like, “Wow, I was basically just managing that rental property.” Then pretty soon right after I graduated from college, I bought my first house and started open houses. This is in the early 2000s. Then we got into rentals right around the time the market crash out of necessity. In 2015 was able to quit the construction straight fulltime and go to real estate fulltime; use it on the backbone of my rentals. 

[0:03:43.3] MF: Cool. As far as your construction, you were a Union Labor, right? Did you start that right after college? Is that what your career was at that time? 

[0:03:51.9] MM: I joined the Labor Union right out of high school. When I was 18, I joined the Labor Union Local 500 in Toledo, Ohio. I was working on some birch projects. That was really what motivated me to go to college, because I saw these guys I was working with that were just busted and broken and very cynical. 

I was like, “Man, I don’t know that I can do this for the rest of my life.” I was already accepted in school, but it was one of the things because a lot of the guys that were on the crew were people that had gone to school and they were making so much money in the trades that they had never – they had quit to just pursue a career in the trade. 

For me as an 18-year-old, I was like, “Okay, do I go to school? Do I get a degree? Do I stay out here in the workforce?” Because at the time, I wanted to say it sort of been the late 90s. I want to say minimum wage was still under 6 bucks an hour, and here I was making I think my wage as a Union Laborer was like 19 to 80 an hour. 

I’d never made more money in my life. It was very tempting to say, “Okay, maybe I’ll just do this and make a career out of it. Or at least for a little while.” But ultimately, made the decision to go to school. I was accepted to school for engineering and eventually finished an engineering degree, and then entered the workforce as an engineer and then worked my way back into construction about a year after I graduated from school, like a project engineer working on the management side of big construction projects. 

[0:05:23.5] MF: Wow. Okay. You’ve been all over the place for construction. I’ve done a little bit of construction in my life, but how much do you think that helps you as far as real estate having that construction background? 

[0:05:37.2] MM: I think from a standpoint of, if you want to be a real estate investor, then you need to have someone in your team, whether it’s you or somebody else that really understands the rehab side. Growing up in construction, having that background, even though I might not necessarily know all the ins and outs of everything involved with all the little parts and pieces of stuff, you have a very good understanding of how much work can somebody do in a shift in like a day, and being able to put estimates together and things of that nature is – I mean, it’s priceless. 

Like I said, this is something that you personally need to be able to do, not necessarily, but somebody has got to be able to do it if you want to be successful in the investment space. Because it doesn’t matter what if you’re booking houses, or you’re looking at rentals, or you’re looking at wholesaling, nothing really comes to you as an investor “turnkey.” 

I mean, we always have to put something into it. Your ability to figure that out and then manage that process is really crucial. For me personally, I think it was huge on the one side, because I can go in to any property and in 20 minutes I have an estimate that’s plus or minus a couple hundred bucks, a couple thousand bucks of where other contractors are going to be when they go in to price it up. I think that makes me pretty competitive when I know my numbers really well. 

On the other side when I first starting out, because I had some handyman skills and I had the general knowledge of stuff, I did way more work myself than I should have. It took me a long time, because I’m stubborn, so it took me a long time to get over that and be like, “Hey, your time is better spent not swinging the hammer or pushing the drill or swinging the paintbrush.” But for me personally, that was my thing was – I think that helped me to say, “Hey, let’s take the leap.” 

Because I was like, “I know how to do all this, so it won’t be that big of a deal.” Then when you first start out and you don’t have any money, your labor is free if you want it to be. I think it helped me get in the game. 

[0:07:49.7] MF: That’s really interesting. When I was – probably back in 2006, I decided the best thing I could do was flip the house myself, meaning do all the rehab myself. It was the biggest mistake I ever made in my life. It was just miserable. I was there for six months replacing windows, doors, kitchen’s desk, and I didn’t have the experience you had to do it either, so the work wasn’t as good. 

I learned, yes, from there and on, it’s just nice to have that understanding and background of what it takes to fix the house. But I don’t ever want to do it again, that’s for sure. My time is spent so much better managing things than actually doing the work. 

[0:08:26.8] MM: Yeah. The thing is too, what I learned the hard way too is like you go in with that attitude of, “Oh, I got this.” Then you realize pretty quickly, “I just screwed that up. Okay, let me hire the professional and bring them in.” Then when they come in, you play that game of like, “Oh, my God. Who did that?” You go, “I don’t know. It was like this when I bought it,” or whatever. 

Then it cost you two or three times what it would’ve cost if you just hired the right guy to begin with. The good and bad of that is like I say this all the time, that’s like paying the tuition of the school of hardknox, right? The only way to learn is to get that experience. Sometimes that tuition is expensive, and it is what it is. But yeah, it’s funny. 

I’ve gotten to the point now where I know my limitations well enough to say, “All right.” More and more as I realize how much value my time has, I do less and less. 

[0:09:27.8] MF: Right. Yup. Same here. Yeah, I’m still glad I did that, but it taught me a lot about what not to do, in my business too. Yup, definitely learned a lot from some of the biggest mistakes you make in life. Like you said, sometimes it cost money, but usually in the end it’s worth it if you can learn from them and not just leave the business altogether. Very cool. 

I liked what you said too about knowing how to estimate costs and work with contractors, because that’s one thing I see too is a lot of people is they come into the industry and maybe they hire the first general contractor they find and they’re charging them 80, a 100 bucks an hour for work. In this business, you can’t make money hiring the most expensive guys who will work with homeowners and doing basement remodels where people don’t know a thing should cost. 

One of the biggest advantages I think I have than others who have been in the business a long time is finding those affordable contractors, making sure they’re doing what they’re supposed to be doing, keeping them in check. It sounds like that’s something that you really value in your business as well. 

[0:10:33.1] MM: Yeah, for sure. I mean, anybody can sell you a $50,000 kitchen. I want the guy that’s going to sell me a $7,000 kitchen that looks like a $50,000 kitchen and he’s happy about it, because I’m going to keep him busy and that kind of thing. 

[0:10:50.8] MF: Yup, exactly. Cool. You said you got off college, you started flipping houses right away. How did that go – I mean, were you successful flipping from the get-go? Did you have some hiccups? How was the flips? 

[0:11:05.8] MM: It was funny, because I did it really as like a side hustle. My primary focus was always on my career as a engineer, and because that was really how I was raised was like that you went to school, you paid a lot of money, you got this fancy piece of paper on the wall. That’s what you should be doing. That’s your main focus. That’s your job. 

I didn’t have a lot of money and my parents really pushed me – When I got out of school, I was traveling around the world as a field engineer in the heat training industry. My degree was actually a mechanical engineering, so I was doing heat treating of steel as a field engineer. I would travel to sites and I would set up equipment and I would test equipment and all that kind of stuff. 

As a young single guy, like that’s cool, because the company is paying you decent money and you really – when you’re on the road, you don’t spend a dime. The problem was I never knew when I was leaving, I never knew when I was coming home, but my bank account was getting really big, but I was never home to even spend any of my money. 

It was like this weird thing, and eventually about a year in I was like, you know, I just was sleeping on the bed. I just was out make plans with my friends. Because people would ask you, “Hey, two weeks from now we’re going to go out and do this. Do you want to go?” I’d be like, “Well, I don’t know. I don’t know if I’d be in town.” 

It was okay in the beginning, but after a while it was like, “Okay, you guys aren’t paying me enough for me to basically absolve my entire life to the company,” especially like 21, 22 years old. When I transitioned from that career back in the construction as an engineer, I really wanted to be home every night and do that whole thing. 

I didn’t have a whole lot of money saved up to where I could just go in and start a side business. What I did was I realized, if I bought a house FHA, I want to put 3.5% down. I think I bought my first house for like 2,200 bucks I think it was. 

Then the lender credits even paid a little bit of my closing cost, even though I don’t think they can even technically do that these days. But this was pre-Frank Dodd and [inaudible 0:13:22.2] all that kind of stuff. So I think I wrote a check for $1,800 bucks and I bought my first house. It was in suburbs of St. Louis. 

It needed work, but I needed a place to live. So I did what I think a lot of people in the industry called live and flip. I live and flipped a bunch of house. So I’d buy it, I’d actually live there and then nights and weekends that was my hobby, because I needed something to do anyway, so I would just work on the house; repaint, new flooring, kitchen, bath. I’d just do it all. 

Then when I was done, it was like, “All right, I’m bored. Let’s sell it. Move on to the next one.” Realized that after I did the first one – I mean, I fell into it, because I didn’t really intend to flip it. It just worked out that way, because right when I got the work done, I was transferred from St. Louis to Phoenix. 

I put my house in the market and I got the realtor came in was like, “Well, I think you can get this much for it.” I was like, “Really? I only owned for four months.” She goes, “Yeah. It’s beautiful and all this work has been done and blah, blah, blah.” I was like, “Wow. Awesome.” 

Then I took all that money and rolled it into the first house I bought in Phoenix and just did it all over again. Just kept doing that, road the market all the way up to the tippy top in Phoenix, and then watched it completely fall apart and lost everything when the market crashed. 

It was painful, because that market still hasn’t recovered from where it was in 2006, 2007. Sad. But that was how I got into flipping, because I would just live in something and do all the work. YouTube wasn’t what it is today back then. It’s like I want to rip out this or redo this. I was like, “I could find a video online for that that would give me enough idea of what I would do.” I would just get home from work and open a beer and start swinging the hammer. 

[0:15:23.6] MF: Nice. Yeah, that is unlucky that you got transferred to Phoenix, because like you said, that is one of if not the hardest hit areas in the crash. Yeah, if you would’ve been transferred to – or a state in St. Louis, you probably would’ve been fine. You would’ve had some crash, but nothing – not quite as easy. 

[0:15:40.6] MM: Yea. We would have profiting. That market just didn’t get – I mean, when Phoenix got hammered. That was my first attempt at being a landlord, because I – The market had peaked and we sold a house literally right at the peak of the market. Had we known – had I known what was going on, I wouldn’t have – I would’ve rent i. 

I mean, hindsight is 20/20. If I would’ve known better, I would’ve taken that money and – because at that point, I think I had probably like a 180 – almost $200,000 in equity that I just made on a house. Because the market was insane out there, it was literally going vertical. I rolled it all into a new build construction, because we were going to set up roots, where and I have kids and blah, blah, blah, blah, blah. 

At the peak of the market my house was right about 600k, and when it bottomed out, the houses next door to me were selling for 175, 180. I had already moved back to Cleveland at this – I had moved back Ohio and we had two mortgages and we had attempted to rent the house out in Phoenix, and then our tenant had moved out and not told us and weren’t getting any rent now. 

At that point in time, we tried to get an agent to help us rent it again and our agent was like, “Hey, Matt. I don’t know how to break it to you, but there is almost 80,000 vacant homes in the valley right now.” I was like, “You got to be kidding me.” He goes, “Yeah.” People know that there is just many vacant homes, so you’ll get a renter, but they’re really not going to pay you anything. 

They’ll tell you, “Hey, we’ll live in your house so that nobody breaks in and steals all your stuff. But we don’t really want to pay you anything to live there.” It was totally a renter market from the standpoint that people were offering me like 300, 400 bucks for a 3,000 square foot house. We couldn’t afford that obviously. 

We did ended in more foreclosure and that hurt. But time heals all wounds in those types of scenarios. It is what it is. The painful thing was the equity lost. I mean, we rolled – like I said, we rolled probably about $200,000 into the down payment of that property, because nobody was telling me not to do that. Obviously, I would never do that again, especially knowing what happened after we had signed and moved in and we saw the market, then take a turn. 

We realized that we had really made a bad decision. The good thing is and this is what I tell people all the time is like especially when people are out there going, “How do I get started? How do I know who I should trust for information and things like that?” It’s like people that have been through it, I’ll never make that mistake again. 

Then people tell me all the time they’re like, “Well, I think the market is going to crash.” It might, but if you set yourself up the right way you can make money when the market is hot, you can make the money when the market is cold. It doesn’t really matter. The risk is dramatically mitigated if you could see what’s coming. 

Really the only way to see what’s coming is either have a mentor that’s been through it, or to have gone through it yourself. Going through that experience was priceless, even though it was very expensive and painful at the time. 

[0:19:06.2] MF: Right. You have another lesson you had to pay for. 

[0:19:09.9] MM: That was an expensive lesson. 

[0:19:12.8] MF: How did you change your strategy after that? You said you went more into rentals instead of flipping. Did you do that back in Ohio? 

[0:19:20.2] MM: Yeah. I moved back to – my oldest had some medical stuff when we were living in Phoenix. We moved back to Cleveland to be close to the Cleveland clinic and Rainbow Babies and Children’s Hospital and stuff like that. After the doctors in Phoenix based up and said, “Hey, we don’t really know how to help you.” 

Luckily, because we are moving so far away and it was – we got a company to hire us and then relocate us to Cleveland, we were able to pick up a second mortgage, because we had rented out the house. I mean, timing was great with how that worked out, even though the tenant bailed on us and whatnot. I mean, we were able to get a – buy a house in Cleveland and all that kind of stuff. 

Then my wife and I ended up getting divorced. Just wasn’t a good fit. Bad relationship. We had been through a lot of stuff with my son and it just takes full on that kind of thing. When we got divorced, I couldn’t afford house payment. We were a single income family. I was paying a ton of money in alimony and child support and with mortgage payment and all that kind of stuff is what it was. I was like, “Man, I don’t know what I can do.” 

Even though we had bought – we had low-balled the price of the house, because we knew what was going on in Phoenix, we were like, “Well, I’m going to drop this price like 30, 40 grand.” The market in Cleveland still dropped probably another 10 to 20,000 below where we bought in our house. At that point, we weren’t really upside-down, but I was still going to have to write a check to get out of it. I was like, “Well, maybe I’ll just rent this.” 

I took a stab at being a landlord again and it worked out much better this time, and just started putting the pieces back together again, not just in my investing world, but in my personal life, in my family life and everything. I had gone through cancer when I was 30. It was like there’s a whole really hitting rock-bottom right around that time of, okay now I got to figure out how to make it happen again. 

It was good and it was also really scary and all that kind of stuff all happened in the same time. Best thing that ever happened to me, but also at the time I felt like it was the worst. 

[0:21:34.7] MF: I know. That’s a lot to go through. Yeah, the crash, personal issues. But you made it through and that’s impressive. You rented that house, how did you keep building and moving to more rentals? 

[0:21:50.6] MM: Well, when we started doing – I rented that house out and then I actually turned into a renter myself, because it just made sense with my financial situation and paying what I was paying for alimony and child support and all that kind of stuff, and I was still on the same fixed income as a salaried employee that I was on before. 

Once I turn that house into a rental, and then I went into – I rented the house from a family friend, who their mother had just died. The house was vacant and it was then like a C-class neighborhood. They said, “Hey, we know you’re just getting back on your feet. We don’t want this house to sit vacant. If you’d be cool with it, we’d let you live here for free for a few months until we sell it. This way there’s somebody here. People that are in the neighborhood see that somebody is living there. It’s going to keep the cupboard intact, so like nobody is going to break in and steal the appliances with a copper pipe and that kind of stuff.” 

I was like, “Wow. Yeah, great.” I really understood the value for the very first time of the passive income, because I still was obviously paying the mortgage on the house that I had, but the rent was significantly more than what I was paying, and I didn’t have any rent on the other side of it. 

It was like I had this big swing all of a sudden of passive income that really helped not only pay my bills, but also get my feet set on the right path. To me, that was – I can’t thank that family enough for giving me the opportunity, because it really did help me out a ton. 

It was also a big mindset shift, because I had read about it. I mean, you can read all kinds of stuff. But knowledge without action is useless. Me seeing it firsthand in my own real life of when I was sitting there going, “Man, I’m struggling. I don’t know how I’m going to make all these work.” Then all of a sudden, it was this huge cash flow swing, and I really wasn’t doing anything to get it. 

I went, “Okay, now I truly understand the value of the passive cash flow that comes from the real estate investing.” At the time, all I knew was rentals and now obviously, I do a lot on the note side too. It’s like, “Man, this is where it’s at.” I mean, obviously you’re not hitting your homeruns like you are flipping houses, but you start to build up a little over time and you start to stack those units, and the next thing you know you’ve got a pretty nice chunk of money coming in without really a whole lot of effort on your side, which is a beautiful thing. 

Going from, “Okay, I got this first rental. Now what do I do?” Was I bounced around a little bit and I ended up meeting my wife that I’m married to now at the gym and I had done a couple different construction projects and not. I decided to rent a place in like an AB part of town that was like six-tenth of a mile from the project that I was going to be on, which is really like – anybody that’s listening that – who’s been in construction or knows any that’s ever been in construction, like you live in one central spot wherever you live and then the jobs just – it’s wherever the job is. It’s where you go. 

You might have a job that’s 20 minutes from your house, you might have a job an hour and a half from your house. You never really know where the next project is going to be. To have a big opportunity to get assigned to a job right around the time that I was moving anyway, to where I can pick my living location and it was like right down the street from the job site, and I was going to be there for two years. That’s a construction manager’s dream. 

Settled in. I rented a condo and settled in. Got a gym membership and just started checking out the local stuff on that part of town. Ended up meeting my wife at the gym, which was cool. We started dating and she’s like, “Where do you live?” I’m like, “I live over here and into the condo and I rent.” She’s like, “Oh, you’re renting.” I’m like, “Yeah.” 

I said, “But I own – I’ve got a house down here on this part of town which is a really nice area.” I said, “But it’s a rental.” She’s like, “Oh, tell me about that.” She’s like, “I always wanted to get into rentals.” My ears kind of burst out. I was like, “Really?” 

We talked a lot about that when we were first dating. She was like, “Yeah, when I bought this house, there was a division putting – somebody doing the work, not me. Making it nice, turning it into a rental and then moving into something different.” It was like, “Wow, this is cool. This is totally what I did.” We had a lot to talk about in that kind of thing. 

That’s really what ended up happening. We go married and I completely got at that house, and it’s still a rental in our portfolio today. We ended up moving into different houses, and then together my wife and I have built our portfolio. But we started out using hard money. That’s a long circulus path of getting that around to answer your question. But we started out using hard money. 

Me being a numbers guy, I could see the value in a hard money lender if you do it the right way. I mean, obviously people can get burned big time if they don’t know what they’re doing using hard money. But we did our first few deals with hard money lenders, and we both had really good credit at that time. 

I mean, I had recovered from the deed in foreclosure from years before, so we were able to get it – buy a deal with hard money, rehab it, put tenants into it, and then six months or afterwards we would go to the bank and refund the deal with a conventional loan, a lot of times pull equity out of it, so put more money back into our pockets, then paid off the hard money person. Just kept around doing that path. 

At the time, the government had the 4 property cap. Now they’ve redone it towards 10 now, which is awesome. But at the time, I could only have four loans, and she can only have four loans and we both have a mortgage on the primary residences that we had moved out of, and then my wife had done the title on our second home under hers. 

She shad two mortgages already, so she only could have two more before the government at the time cut her off and said, “No, you can’t do this anymore.” We had to get creative on, okay now what do you – when you both capped out, the government says, “We won’t give you any more money.” What do you do next? You can either quit or you figure it out. But that’s how we got started. We were basically flipping properties to our self using hard money. 

[0:28:19.5] MF: Nice. That’s a great strategy. I’ve talked about that before, just being able to – whether it’s hard money or private money, renovate, rent a property, get a long-term loan in place. It’s a really great way to get into rentals without putting that 20%, or 25% down that most people don’t have. It really is – I’ve had that same problem with my properties, the 10-rule and four-rule. I found an amazing local lender who I work with now who has no limit on that. That’s how I got around it. But how did you end up getting more loans? 

[0:28:53.0] MM: Well, we’ve eventually gone that route too. We do a lot of stuff these days with private lenders. We just bought six units last week, and we bought it with no money out of pocket, all private-financed. We do a lot of stuff with private lenders. Same kind of strategy, the only difference is hard money is more expensive than private money obviously. But we’re still looking at the restructuring debt and paying off people whenever they want to get paid off. 

We try to make it a win-win for our private lenders. But we started going commercial financing at first, because we didn’t really – we didn’t have the local bank contacts and relationships at that point, and I really didn’t know that they even existed. I think the thing that really – there is no right or wrong. It’s just you got to take action in one direction and then someday you might realize, “Oh, I could’ve done this better or cheaper or faster.” I’m just like, “Yeah, you did it. You did something and that’s okay to do.” 

We got hooked up with some commercial lenders that would do blanket loans. We could roll five or six properties into one commercial loan and restructure the debt, then go back and hit the reset button on the personal side to where we could go back in and continue to do more deals and restructure them using conventional and residential loans and having this one blanket loan that we could add properties too, or pull properties out of depending on what our needs were. 

We started going down that route. Obviously it’s not as good rates in terms on as it’s going on the commercial side as they are on the residential side. Having that private – not private, you know the local community bank relationship is huge, because they can give you a lot of time residential rates and terms. As long as the properties are cash flowing, you’ve got the debt service, which is easy to do for us here in the Midwest. They really don’t care how many loans they give you, as long as it’s performing and you’ve got the reserve they want to see. 

[0:30:55.2] MF: Exactly. Speaking of that, how has the market been in Cleveland? Has it gone up at all lately? 

[0:31:01.3] MM: We have seen it go up in certain parts of town. I mean, there are other parts of town that are still rough areas that I don’t personally go in or invest in or recommend that anybody goes into.  But some of the really nice, nice areas that you can really get nice returns then are starting to see steady increases to the point where it’s harder and harder to get the deals as easy as it used to be. 

A couple of years ago, the prices were still a little low and the rents were still very high and stable. It’s always going to be a stable rental market here in Cleveland. There’s just such a big blue collar demographic that has grown up renters that will always be renters and they just – 

When I was a realtor – Not a realtor anymore, but when I was, that was one of the biggest ways I ever get buyers is I would sit down with people and I would talk about where they want to rent and how much money they made, how much they were looking to spend on rent and just in these conversations you’d be like, “Well, you make a lot of money and you have a down payment. Why would you rent instead of buy?” “I don’t think I can quality.” “Oh, well let me get you pre-approved. Here is a contact for three lenders. Go get a pre-approval and they’ll go help you buy a house instead.” 

I would put renters to buyers all the time, because it’s just a mentality thing. They just don’t think they can. But you have that mindset here in the Midwest. It bodes well for landlords, because there is just tons and tons of people that want to rent. But we’re starting to steadily see some of these price points go up to the point where it’s like, you got stuff that’s on the market, that hits the MLS and you go, “Who’s buying this?” 

Unless you’re going to buy and live in one-half and rent out the other, that’s like a cash-flowing personal residence, they’re starting to price themselves out in the market a little bit. For investors, there is more value for the people that are out there really finding the deals for sure. 

[0:33:01.7] MF: We’ve seen the same thing here. Well, Colorado has gone crazy, whereas buying rentals for a 100,000 three years ago, four years ago and now they’re all over 200,000 for the same houses. They don’t cash flow anymore. That’s the problem. 

[0:33:14.4] MM: Yeah, it’s dramatically different. I mean, I’m talking about places that a couple years ago were $65,000, $85,000. There is a difference right. Yeah, we haven’t seen double price points, but it makes a difference when especially, because when we first started out when I was a realtor, I built my list, my buyer’s list. I built my buyer’s list as a realtor. 

I was just flinging property as a real estate agent. I would find yield on MLS, now I would just send them to a list and say, “Hey, who wants me to be your buyer’s agent. Here is this awesome deal.” I would calculate ROI numbers and cash on cash returns and all that kind of stuff. 

People really get spoiled, and I’ve got a lot of investors on my list that are like, “Well, man I don’t really want to fasten anything, plus I can get 15% or 18%.” I’m sitting there going – Most investors think that those numbers are like not even legit. When I send out a deal anymore and it’s close to 20% return, they think I’m – they think it’s in a bad part of town. It must be too risky, because nobody is out there really making those kind of numbers. 

We can get that here in decent areas with decent property, but people don’t believe it. It’s just funny to me that I’ve got people that are so – I don’t know what the right word is, but they’re so conditioned to seeing those kinds of return that now when I send out something and it’s like 12%, 13%, 14% return they go, “Yeah, I’m really going to hold out for something higher.” It’s like, “Okay.” In the meantime, your money is sitting in the bank making 0.025%. But good strategy. Sounds good. 

[0:34:59.0] MF: All right. Take us back a little bit. I know we’ve gone on some circles in different places here. But how did you go from your career to full-time investing? What was that process like? 

[0:35:12.3] MM: Well, you know it’s interesting because probably around the summer, this beginning of 2015 we had started to stack enough units to where we saw like – we’re getting quite a bit of money in passive income and it was great. My wife was, at the time, she was an assistant manager at a cancer unit as a nurse and she was making good money and I was senior project manager in construction. 

I mean, she was making great money and I was making two times what she was making. Combined, our house with income was really nice. Probably three times the average of the neighborhood that we lived in at Cleveland. We had some leverage there obviously with our incomes to do some things of that nature. But probably around the summer when we got – we bought a duplex and at that point, we realized that our passive had surpassed our normal monthly budget for expenses. 

It was pretty awesome. We knew that going into that deal. We said, “Hey, if this cash flows where we think it’s going to be this – we’re going to hit financial freedom.” We had never taken money out of the business. We had never pulled money out of the rental side and used it to pay bills or pay off things or whatever. We always just let the money roll and we would just use to buy more deals. 

At that point in time in the summer of 2015, I was like, “You know what? We could literally quit both of our jobs, and the passive income to pay all of our bills and we could literally do nothing if we wanted to. Now neither one of us were wired that way. I’ll get to this, but at one point I did try that and it lasted about a week. Then my wife was like, “You got to go do something. You’re not going to sit on the couch forever and you got a lot of things to do and stuff that you—” 

When you’re super busy you think of all these things that you’re missing out on. Then when you get just lots and lots of time to do all those things you go, “Okay, this isn’t as cool as I thought it was, or the novelty where it’s awfully fast.” 

But I guess so for me, to answer your question, around the summer of 2015 was when I was like, “Okay, I can really see myself doing this full-time.” It’s funny, because you don’t know what you don’t know. At the time, all I wanted to do was quit my job in construction, manage my rental portfolio, like be my own property manager and just add more units. 

I wanted to add more units, I wanted to property – be the manager of my own property, deal with my tenants and place tenants and all that kind of stuff, and that was this vision that I had. We got a little frustrated in the fall of 2015 working with realtors, because they just don’t – they don’t have the speed that a lot of investors need. 

Plus, I don’t think a lot of investors really truly understand how much they use and abuse agents too. I think looking back on it, because once I got my real estate license, I did have some investors that really ran me through their ringer and I was like, “This is what I did to all these other people.” You don’t really realize it at the time. 

When you send a list of 15 properties you’re like, “I want to offer all 15 of these.” You think you’re doing an agent a huge favor because you’re going to buy stuff, and in the meantime you get two of those and they’ve had to write up 13 offers that they didn’t get. These are like ridiculous offers and they’re going to make like 800 bucks on a deal. 

It’s a huge waste of time for them, but you don’t see that through your lens, right? I decided I’m going to go get a real estate license. I had already signed up to classes full-time – I’m sorry, nights and weekends after New Year’s. When we hit that financial freedom number, when we got that last unit added in and it was like, “Okay, we could literally quit,” my attitude at work dramatically changed. 

I wasn’t the greatest employee to begin with, because I always ambitious visions and dreams that were way beyond what I was doing for somebody else. But at this point it was like, I don’t need this paycheck anymore. I went from an okay employee to a really bad employee. I started saying no a lot. 

People don’t like that hearing your employee say no. I didn’t last a whole lot longer. New Year’s eve of 2015 I was like, “Oh.” I remember driving home, because I had about a 45-minute commute. I was driving home and I called my wife and I said well, “I was right,” because I told her when I left work that day. Because New Year’s eve was a Friday. I said, “Who in the world has people come in to work on a Friday and it’s New Year’s eve?” 

I said, “You know what? I’d bet you they’ll fire me today.” She’s like, “Shut up.” I said, “No, seriously. It’s the last day of the year. If I come back on Tuesday, because Monday is the holiday because of New Year. If I come back on Tuesday, now they got to pay me for next year and I’ll get a W2 the following year.” I’m like, “If they were going to let me go, today is the day to do it.” 

I said, “I bet you I’d get there and there’s a phone in the office and I’m there just to be let go.” Because the writing was on the wall. It had been like these for months, and I had only worked there for about six months. They had recruited me and I was just an awful fit from the get-go. 

I had made it very clear like I was teaching classes, I was still teaching college at the time. They had recruited me to take over for a guy that was going to retire in about a year. The thing was the guy hadn’t expressed his desire to retire and he had no desire to retire. Here they brought me and to basically replace this dude who wasn’t leaving. 

We ended up having conversations soon after I got there where I was basically for all sense and purposes like, “So when are you retiring?” He’s like, “I’m not retiring.” I’m like, “Oh. Okay.” He goes, “Yeah, I was really surprised that they hired another senior PM, because I really didn’t feel like we needed somebody.” Me being just transparent I’m like, “Well, I was told you were retiring.” He’s like, “Really?” 

It was like, we sat across from a table of each other. The light bulb went off at the same time where I was like, “Wow, they brought in to replace this guy and he doesn’t know he’s being replaced.” He thought the same thing, “Wow. They brought this guy in to replace me and I’m not ready to retire.” 

Then it became his job to basically get rid of me, and he was the head of the division. It was just this awful contentious relationship from the get-go and miserable work environment to say the least. On my way home I told my wife, I said, “You know what, Amie?” I said, “I think I’m done.” She said, “What do you mean?” I said, “I think I’m done in construction.” I said, “I’ve been in a square peg and a round hole for at least at this point it was about 15 years or 16 years.” And I said, “I feel like enough is enough. We’re to the point where we don’t need the income.” 

I mean, obviously the income is great. But we don’t need it. Our rentals are paying all of our bills. You know what I said, “Here’s what we’ve been able to do with both of us working full-time jobs.” In construction, I mean it’s not a 40-hour work week. It’s more like a 60, 65, 70-hour work week. I said, “What if I was able to focus on this full-time?” 

She’s like, “Well, we really wanted to be in a different place financially.” We ended more saved, is what she was getting at. I said, “You know what, if the timing is right,” I said, “What if I switched my real estate classes to full-time instead of part-time?” I’m cranking out two, three weeks and if we need to, I can sell a house here or there. 

This is totally me being naïve of what it takes to be a realtor of, “You know, if we need a couple extra bucks, I’m just going to go sell a house.” Like deals just fall out of the sky for realtors. That’s what we did. We made the decision that we would take  the leap and I would never go back to being an employee in the construction industry, or at least we gave it a try. That was really how things ramped up for us was I took that leap and ultimately realized I really didn’t need a real estate licensed. 

I came full circle to that later on. But I tried to make it as a realtor, because I sold a house and it just happens. I started buying Zillow leads, which were awful. But I did get a lead off of Zillow and these people, like be on couple were looking at – I mean, the average house pricing in Cleveland is 150k, and these people were looking at like $6, $700,000 houses and I’d got them off a Zillow lead. 

I was like, “Oh, my God. Zillow leads are like gold. I’m going to triple down on Zillow leads.” I started spending $1,500 bucks a month on Zillow marketing and just trying – Then I realized, “Wow, this commission would be what I used to make in a month in construction.” Maybe there’s more to being a realtor than I thought there was. 

Maybe I’ll try to be a realtor and I’ll just grow the portfolio through our real estate commission and do it that way, which was funny. Then I ultimately realized I really didn’t like being a real estate agent, and it’s a grind. 

Then I decided doing, I’ll grow a team, I’ll build a team. I’ve tried that for a while. Then ultimately, I ended up circling back to investing. The thing is like, for everybody listening in this now or in the future, it’s so important to understand your purpose and your why, because if I had that – if I had to had that clearer in my head, then all of these things that were like the shiny object syndrome, shiny penny that had come across my path, I would’ve been like, “No, my main focus is this and this is why I’m doing it.” 

Every time there’s an opportunity I was like, “Yeah, let’s try it.” It was a lot of changing directions. It was a lot of spinning of the wheels. We survived the first year of the foray as a real estate entrepreneur as I would call it, to the point where I’m no longer licensed. I gave that up. Now we run a real estate firm here in Cleveland. We have a team and we’re just a 100% investments. 

Predominantly at this point just are looking to grow our real estate portfolio, which is exactly what I wanted to do two and a half years ago when I sat at my desk as a construction manager and I was like, “Someday, I just want to grow my real estate portfolio.” Here I am back in that same boat. 

We’ve had a ton of experiences, some wins and losses along the way, but I think you go through that to better understand who we are, what you really truly want to make informed decisions, because you can’t make informed decisions without the practical application side. 

[0:46:13.4] MF: Right. That’s a crazy story too. Yeah, I’ve been an agent for many years and like part of it, did not like part of it. The part that really was good for me was when I was listing REOs and foreclosures for banks, where we had systems and I wasn’t dealing with emotions and people. Yeah, besides that I let my team sell houses and I stay away from it and focus on the investing. 

[0:46:36.3] MM: Well, that’s what I had started to do. Then we started doing some wholesaling stuff in Ohio. It’s a very anti-wholesaling state. You got to be very careful as to how you do it. We got a lot of lawyers involved, to make sure that we were doing it the right way. We always want it to be a bump board and make sure that we weren’t going to ever get ourselves in a bad situation. 

Or being a licensed agent, we want to make sure we weren’t getting our broker involved or in trouble, and that we’ve always tried to be above board. Eventually when we got out of the wholesaling, like in the pure sense of wholesaling it was like, “You know what, we’re not even using this real estate lesson.” I’m paying to maintain it and there’s all these fiduciary responsibility. 

I was like, “You know, let’s just get rid of it, because it’s not worth it.” At the end of the day, we’re really not making our money wholesaling or making our money – I mean, in essence we’re wholesale to ourselves, but there’s nothing wrong or illegal about that. That was the right move for us at that time. 

[0:47:37.7] MF: Nice. Matt, we’ve talked a lot of different things. Really cool hearing your story. I know you’re doing some other stuff right now. What’s your focus right now as far as – I know you’re still trying to build the cash flow, but you got your own podcast and some other things going on, so tell us about that. 

[0:47:53.9] MM: Yeah. I’ve got a real estate podcast called the Cash Flow King. It’s predominantly about passive residual income. We do talk about other stuff too on there, and we’ve had a couple guests. We were going to try to ramp up the guests on there, so we should have you come on the show and talk about what you do too. 

We’ve got the Cash Flow King podcast. We’re starting a new podcast that is just launching here in the next couple weeks. We’ll get in everything. We’re starting to do preliminary interviews before we launch it on iTunes and stuff. I don’t want to tell too much about it, but it’s going to be more entrepreneurial-focused. It’s not specific to real estate in general. It’s most just a general entrepreneur podcast, which I think is really cool. 

It’s going to be a 100% interview-based, which I think will be fun I’ve got a lot of friends that are on the entrepreneur space. We’ll give them the ability to showcase what they do. I think there’s a really cool – the niche is really going to be on mindset, so it’s going to be on this what does it take to be successful in the entrepreneur space? What do you need to do if you’re starting out and all that kind of stuff? 

We’ve got that coming out. I got a couple of bestselling books. One is made on fire. You can get it at madeonfirebooks.com. We give it for free. Just ask you to pay a couple bucks for shipping. We send it to – it’s kind of my story. A lot of it parts and pieces will sound familiar if you read the book for what we just talked about today. 

But it does talk a lot about the transition from me being a full-time employee using real estate to be able to live my lifestyle the way I want to set it up and all that kind of stuff. That’s on there, madeonfirebook.com. 

Then we’re working on a new project, we’re going to call the REI Playbook, which is going to be a collection of other investors and it’s going to be interview-based and really kind of – we’re going to break it down into categories. Part one is going to be wholesaling, part two is going to be flipping, part three is going to be note investing. 

We’ll just go through and then have collections each person, each author would be a real estate entrepreneur doing what they do and be able to tell their story as to here are some of the tricks and tips that I use to grow my business and be successful. Hopefully we’ve got that coming out, I would say first quarter of this year at this point. It probably takes two to three months to put that project together and published. That’s something to keep an eye out for and sure to think. 

Really other than that, I mean we’re just – we’re always doing deals. We closed three deals last week. Just added six more units. We’ve got four deals on the board that we’re closing this week, and we do it all with – really for the most part, we do it all with private lenders. 

We’re working on putting together a fund, but until then it’s just one off people that contact us and say, “Hey, I want to get into real estate investing, but I don’t really want to be a landlord.” We’re like, “Great. We’ll take your money. We’ll secure it with the real estate. We’ll pay you a great return. It’s a win-win for everybody and it feels down that way.” 

It’s been a really nice fit on – it helps us go to portfolio and it helps other people win from the standpoint, and a lot of people that were attracting and people that were just like me. They have jobs. They are doing fulltime. They’ve got money. They don’t really have time to be active investors in the rental side, but they can park 40, 50, 60k, 100k, 200k with us and we can pay them whatever the deal yields. Typically it’s anywhere from – a movement paying anywhere from 8% to 15% recently on deals. 

It’s a huge win for them. It helps to grow their cash flow. Then we didn’t have some people that had really nice connections that have started to raise money on their end to just basically lend to us on our end, they make the spread. We’ve had five people so far this year be able to quit work, while either doing deals with us, being active investors or as note investors. It’s really exciting. 

We threw out a number just recently and said, “I want to help a 100,000 people fire their boss forever.” It’s a big number and I have no idea how that’s going to work yet, or what I need to do to make that go happen. But so far, we’re at five. 

We’ll get there, but it’s exciting. It’s exciting to be able to say, this person had no idea how they were going to make that transition happen. They knew they wanted it and we got involved and they were able to put a plan in place and work the plan to the point where they were able to quit and move. If they wanted to, do their own thing now. It’s really exciting to be a part of that. 

At the end of the day, I think most entrepreneurs would care more about contribution than they care about income. Being able to be a part of that for somebody else is so rewarding. It’s been exciting. 

[0:52:43.7] MF: Nice. Nice. Well, Matt thank you so much for being on the show. I think that’s all I had to go over. Anything else you want to add before we head out of here? 

[0:52:49.9] MM: No. I appreciate you having me on the show. It’s been awesome. 

[0:52:54.4] MF: Cool. No, thank you. I learned a lot. You’ve been through quite a bit yourself and it’s great to see you learn like you said and have some expensive lessons, but they still helped you move forward in life and keep going. Yeah, thank you so much for being on the show. Yeah, we’ll definitely have to keep in touch and I’d love to be on your podcast too. 

[0:53:12.0] MM: For sure. Yeah, we’ll definitely set that up. 

[0:53:14.6] MF: All right. Have a great rest of your week here. Then we’ll be in touch. 

[0:53:18.2] MM: Awesome. Thank you. 

[END] 

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