Matt Picheny is a real estate investor, Tony award winner, and author of the #1 best-selling book, Backstage Guide to Real Estate. He is focused on developing passive income streams that enable investors to write their own story and choose how they want to spend their time.
Here’s some of the topics we covered:
- Value Add
- Passive Investments
- Mentorship To Get You Going
- Learning From Watching Other Operators
- First Try Denials
- Trading Less Of Your Time For Money
To find out more about partnering or investing in a multifamily deal: Text Partner to 72345 or email Partner@RodKhleif.com
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Full Transcript Below
Intro
Hi. My name is Rod Khleif and I’m the host of “The Lifetime Cash Flow Through Real Estate Investing” podcast. And every week I interview Multifamily Rock Stars and we talk about how they built incredible wealth for themselves and their families through multifamily properties. So hit the “Like” and “Subscribe” buttons to get notified every Monday when a new episode comes out. Let’s get to it.
Rod
Welcome to another edition of “How to Build Lifetime Cash Flow Through Real Estate Investing”. I’m Rod Khleif, and I’m absolutely thrilled that you’re here. And I am super excited about today’s interview with my good friend Matt Picheny. Now, Matt has been on the show before. He was on the show in November of 2019. I can’t believe how long it’s been, but he is a freaking rock star. So he’s invested in over 8000 apartments across the country. He’s won two Tony Awards for producing Broadway shows, co-producing them with his wife. He’s written a best-selling book, which we’re going to talk about, which is called “Backstage Guide to Real Estate”. So super excited to have you back, brother.
Matt
Oh, it’s a pleasure. Thanks, Rod.
Rod
Absolutely. So listen, I know it’s been so long since we talked that I actually want you to tell my listeners again, you know, who you are, where you came from. Just do a much better job than I did of introducing you and, you know, tell us your story in your own words.
Matt
Sure. Well, I grew up in Orlando, Florida, and as I was growing up, I got involved in theater, acting. And actually, my first paying gig was working at Walt Disney World. When I was 11 years old, I worked at Walt Disney World doing some acting and singing and dancing in front of the Castle, right, at the Magic Kingdom. Ever since then, I’ve always been involved in theater. And then I moved to New York City after I graduated from high school to pursue a career in theater. Did that professionally for five years, I performed in 15 different professional productions across the United States and started tinkering around with computers in between acting gigs. Instead of working as a waiter, as most people do. And I started off as a waiter, I started being able to do computer projects. This was back in the mid-90s. So the early days of the Internet and HTML and all that kind of thing. And so I was doing that and had an opportunity to start my own boutique agency. So I had my own boutique agency in New York City during the big Dotcom heydays doing digital marketing projects for people. And 2001 came along and the Dotcom bubble burst and all of my clients were going out of business or not spending any money on digital marketing activities. And my business was imploding. It just was getting decimated. And as luck would have it, at that time, my landlord, where I was living called me up and told me that I had 90 days to get out of my apartment. So that was a really tough time for me. But in those 90 days, I managed to get a job. I got a job at Showtime, the cable television channel. They were a client of mine, so they offered me a position in-house. And I was looking to rent an apartment on the Upper West Side of Manhattan where I lived. But my sister was living much further uptown in an area called Washington Heights, about 30 minutes further north and not where I wanted to live. But she saw an ad on a bulletin board for an apartment to buy. So I bought a co-op apartment. And a little over two years later, I sold that apartment, and I saw my initial investment, my initial equity in the deal more than quadruple in value.
Rod
Wow.
Matt
Yeah. And that was the big aha moment for me. I was like, wow, there’s really something to this real estate thing. And how can I do that again?
Rod
What year was this? Forgive me, when was this?
Matt
I’m thinking it was 2004.
Rod
Oh, yeah. Pre-crash.
Matt
But in that single real estate transaction, I made more money than I was making in my yearly salary.
Rod
Right.
Matt
So I really wanted to figure out, how can I do that again? And so I ended up then using the proceeds from that sale to buy in the part of town that I wanted to live in on the Upper West Side and was looking for a place to buy. And I ended up with something to invest in. So I ended up buying a piece of land in Connecticut and built a house there. And it was for me going to be something where I would live there part-time, you know, a place to get out of the craziness of living in New York City. But I also met my wife while the house was being built, actually, just as we were finishing it up. And her family has a place in Connecticut as well, on the other side of the state. And as circumstances would have it, ended up being that the house that I built became a full-time rental. A vacation, like a short-term rental but it was rented full year-round. I would rent it out. And that’s what set me on the path to where I am today, Rod. I learned so much, I mean, I learned what real estate is really made of, literally from the ground up. I bought a lot and we, like, knocked trees down and built a hole and poured a foundation. And I also learned how to deal with, you know, leases and tenants and learn the really fun stuff, like accounting and depreciation. Really a lot of the fundamentals of the business I learned from that one single-family, and then it grew from there, you know. I did it as a hobby for ten years, real estate, and then you know, started going into it full-time a little over six years ago.
Rod
Okay, so it’s six years. Only been six years. You’ve done it full-time. Wow. So did you ever develop or is it all been to buy you know more value add opportunities?
Matt
In the multifamily, I’ve really been doing two things. One is passive investments, and then the other one is investments that I’m a general partner in. So on the passive investment side, I have invested in some ground-up development, but I haven’t done that from a general partner perspective. It’s something that I’m looking to do.
Rod
Me, too. Yeah. Okay. So I know that initially, you got mentorship and help to get going. Can you speak to the value of that for someone that might be listening, that wants to get into this business? I mean, you know, I’ve got my warrior mentorship program, which I’m super, super proud of, but forgetting just me, mentorship in general. Can you speak to that and how you benefited?
Matt
Sure. Listen, I was very apprehensive when it comes to mentorship. You know, you’ve got these gurus or cults of personality. Some people like that. Some people don’t. I was kind of in the middle but very wary of it. Right?
Rod
Right.
Matt
And very dubious.
Rod
Right.
Matt
I found a mentor. Right. We’re not going to name names, but, you know, somebody who is notable out there. And I did a lot of research. And so, I mean, look, Rod, I know your program. I know your people. You are very, very good. There are people out there who are, quite honestly, charlatans. Right? So you have to be careful if you’re getting involved in a program. But if you do that due diligence and you can find a group, that’s great. I don’t think I would have gotten as far as I have without a group, without that mentorship. It allows you to collapse time frames because you can learn from people who’ve been down that road before. Right. Somebody who’s, you know like, if you’re going to hike Mount Kilimanjaro as an example, you’re not just going to go, oh, let me just throw on a backpack.
Rod
Throw on a backpack.
Matt
No. You’re going to get some guides who know, you know, hey, watch out, there’s a loose rock over there. Or, you know, you need to practice this thing. You need to condition yourself. Right. All of those things that need to get done. And through joining one of these groups, and again, I have no affiliation to one versus another, right. I think you have to be very careful with who you’re dealing with. But if you get in with the right people and the right group, it can catapult your career much faster than trying to go at it alone. And so it’s really important.
Rod
I love that you said collapse time. And really, that’s what it is. You’re paying for speed. That’s the bottom line. And then we tell, you know, prospective students that you’re paying for speed. You can do it on your own in, you know, seven, eight years, whatever. With us, literally, you can do it in a couple. And so it really does help. And the group component is absolutely enormous. And all I can do is speak to my warrior group. But, you know, we’re well over 55,000 units owned, which is just, you know, really incredible in my warriors. In fact, I’m sure it’s quite frankly, probably a lot more than that. That’s all we know about. We need to actually really go into an inventory and find out because I think it might blow my mind. But, you know, that whole group dynamic is so powerful. You know, you’re encouraging each other, you’re holding each other accountable, you’re pushing each other, you’re praising each other. It’s just really an incredible thing. And when you see it in action, it’s like a kind of living, breathing organism. And that’s one of the things I really love about it. So let me ask you this. You talked about you now, your aha moment when you saw that quadrupling of real estate. What future opportunities are you looking for yourself? Are you talking about maybe developing, maybe building some multifamily? Does anything else come to mind when I ask that question?
Matt
There are two things that I’m looking at in the future. I will continue to do the B and C-class value add type of work that I have been doing and repositioning. But I’m very interested in A-class and ground-up development because I think with the way things are going, with the compression between the asset classes, you’re not getting as wide of a spread between the A and the B, the B and the C. It seems to make a lot of sense. And then at that point, if you’re buying A-class, well, how much more expensive is it to actually just go ahead and build it from the ground-up? And right now, where we are in the real estate cycle, I think it’s a good time. You know, there are times when it’s probably not really good to be in ground-up development when you can buy properties for a penny on the dollar, like you know, back in 2009. Right. Or 2010. But based on where we are, it seems to make a lot of sense to me. That’s why I’ve been investing heavily from a passive perspective to learn. You know, when I started investing in multifamily, it took me a couple of years to get my first deal. And while I was doing that, I was investing passively in deals and I was learning from other operators by watching how they were doing things, how they were communicating with their investors, and when they were faced with challenges, the way that they were getting past those.
Rod
Yeah, no, that’s fantastic. I will tell you guys, you know, if you’re accredited as it relates to me, it’s a fantastic way to see behind the scenes, to see behind the curtain. You know, a good operator will take time to help educate their passive investors if they’re interested, like we’ll do webinars, things like that. And, you know, we’ve got some exciting stuff that we are in best and final on. So if you’re accredited, text the word “PARTNER” to “72345” and get into our portal so you’re, you know, first to hear about it if it pops up because, you know, we do have a couple of exciting things that we could end up with. Who knows? It’s a crazy market right now, but who knows? So let me ask you this. You know, it’s not all roses and rainbows. You know, we all have setbacks on these journeys. Can you talk about a doozy, you know a time you got your nose bloodied in the multifamily business specifically. I’m sure, you know, we’ve all got examples throughout our entire lives, but does anything come to mind when I ask that question?
Matt
Well, you know, in my book, I talk about I share these 18 different Keystone concepts that I’ve learned. Like, one of them is like, don’t be afraid of gurus. Like we talked about. There are a few different ones about the team building and relationships like you’re talking about earlier as well. But Keystone concept number three is about being persistent. And for me, it took me two years to get my first deal, my first real estate deal to Syndicate. Right. And that felt like I was constantly getting hit, like almost the image of like a boxer with one of those speed bags.
Rod
You’re the bag, right. Yeah.
Matt
I was the bag. My head is the bag, you know. Luckily, in the program I was in, I had a coach who was there to help encourage me, or I might have given up. I think that it takes a while to develop relationships with people and to really understand the business. And really it is a relationship business and develops the relationship and the trust with those brokers and property managers. I mean, the first deal that I did was 132 units. It was a $10 million property, you know. And how is the real estate broker? You know, I lived in Boston at the time. I live in New York now, but I was in Boston. The first deal that I bought was 132 unit property. It was a $10 million property. And I was living in Boston at the time. I live in New York now. But if you go to an agent, a real estate agent, or a real estate broker and you tell them, hey, I’m going to buy a $10 million property, they’re not just going to sell it to you. They want to know that you can close on the deal. And so, you know, I did feel a lot like I was getting rejected and getting rejected but eventually building those relationships up with brokers and property managers, so they felt that they could trust me, that I could close a deal.
Rod
Right.
Matt
And so that was a lot of the sort of like adversity that I had at the beginning of everything.
Rod
Got you. So let me ask you this. Is it just you? Did you have a partner on that first deal? Talk about your team, you know, if you have one.
Matt
I do.
Rod
Okay.
Matt
Yeah. So I do have a team. I have a couple of general partners that I tend to work with a lot. Now, we don’t have our own company together. We each have our own entities. But a lot of times we like to join forces with one another. Sometimes I’ll do a deal without them, they’ll do a deal without me. But we tend to work really well together. And so that’s part of the team is the general partners. And then, you know, the other part that I consider my team is, you know, I’ve got a great tax adviser. I’ve got great attorneys, I’ve got great property managers, I’ve got a great company that does cost segregation. Right. All that other sort of extended team.
Rod
Right.
Matt
But I’ve never done a deal, Rod, without at least one other partner in the general partner perspective. And I think we need that. We need to lean on one another and we can push and pull and collaborate and have different ideas and different viewpoints to get to an ultimate goal that I think, you know, the sum is better than the– but look, I know you’re a big fan of Masterminds, right?
Rod
Yes. Sure.
Matt
I mean, it’s not as big as a mastermind, but it is a melding of two minds or more.
Rod
Sure it is. Sure it is. Yes.
Matt
And there are unbelievable benefits from that.
Rod
Of course. Yeah. Do you find yourself wearing all the hats? Do you find yourself spending more time in a particular part of the business? You know, obviously, there are underwriting deals, there’s due diligence, there’s asset management, there are investor relations. You know, do you find yourself migrating to different pieces of that more, and if so, which ones?
Matt
So the beginning, I was doing everything. I was doing smaller deals, and I was doing everything. And I think I’m pretty good at most of it. But in working with these other partners that I talked about, I found that I tend to gravitate towards certain things more and they’ve gravitated towards other things more. So it’s actually been very nice from a complementary skill set perspective. I have a background as a PMI-certified project management professional. That’s what I did in New York. So I’m really good at managing people and budgets and timelines. So when it comes to asset management, I’m usually quite involved. But within that asset management, I tend to work more on marketing. I worked in digital marketing for so many years.
Rod
Sure.
Matt
Pricing of the units and interior upgrades. One of my partners has a construction background. He does a lot of the exterior upgrades. And we have another guy, another partner. There are three of us who tend to work really well with one another. And he’s a numbers guy. He was an actuary. And look, I can look at the numbers and I do, but this guy really enjoys going through every single light item on the general ledger. I mean, that’s like excites him, and it’s not the most exciting thing for me. So I’ll let him do that. We all do the capital raising, we all do investor relations with our own investors. But I’ll tell you, I mean, the things that I really am enjoying now more and more are working with investors, finding out what they’re looking to do, and helping them find the path to whatever their story, you know. The tagline of my book is “produce passive income, write your own story and direct your dollars towards positive change”, and really helping them figure out what is their story, what do they want to do with their lives? And how can I help get them there through the production of passive income so that they’re no longer trading their time for money or trading less of their time for money? And that’s something that’s really exciting for me.
Rod
Sure. I know you’ve got a giving heart, you know. This is not a promotion for you. This is, you truly want to help. And that’s one of the things I love about you, man. And one of the reasons I invited you to my mastermind, “The Multifamily Boardroom” because I know that about you. So let me ask you this. You know, I’ve got a lot of aspiring multifamily investors that listen to the show, that they’re in a W-2. It may be a high-paying W-2, but they know they want more out of life. What words of wisdom would you share with that demographic?
Matt
If you’re aspiring to get involved in the multifamily world it really is all about relationships. And I can’t think of a better way to do that. I know the way that I did it was through joining a group and getting a mentor, you know. And even if it’s not in a group, someone who’s been there before, who knows the ropes, who can show you the ropes. That’s super important. And building those relationships. I have not gotten a single deal, a single real estate deal as a syndication that I got because we came in with the best and highest offer. That has never happened to me. There’s always been some sort of extenuating circumstance with a relationship, a thing, a little thing here, a little thing there that has set us apart. And you know what? I talk about it in my book. There have been things in my life that have also done that before as well. I mean, I don’t think that just works for real estate, but being able to set yourself a little bit apart and develop those deep relationships. And then also another thing I got from being an actor is that persistence. And I mentioned that earlier, you know. As an actor, I went for audition after audition after audition, rejection, rejection, rejection, rejection. And the same thing is going to happen in real estate, especially multifamily, the way the market is right now. You’re not going to get every deal. It took me two years to get my first deal. I analyzed over 100. And I’m not talking about like, oh, it came across my desk. I’m talking about I did a full underwriting on over 100 properties before I got my first deal. And if you have that persistence and you get with a group of people, you can accelerate. You can do well. And look, now I have a very good– I’m not driving around in a Maserati or anything, but I have a nice, good business. You can do it. It can be done. I don’t think you have to be a rocket scientist, but I think it does take persistence, and it does take having the ability to build relationships to one extent or another.
Rod
Well, you could certainly buy a fleet of Maserati, but you’re smart enough not to waste your money on one. But, you know, let me ask you this question, a couple of questions. What do you think is the best advice you’ve ever gotten? And it doesn’t have to be real estate specific?
Matt
Yeah, I’ve never been asked that question before. I think two things mindset-wise that have come across since I got involved in the multifamily world are about surrounding— I’m sure you’ve heard this one. You become the people that you hang out with, the five people that you surround yourself with the most. That actually has rubbed off on me a lot because I didn’t start trying to hang out with other multifamily investors, and that did rub off on me a lot. And the other thing is just the scarcity versus abundance mentality. I really came from a place of scarcity. I think a lot of people do. And the more and more I’ve opened myself up to just being– and I’m not really one of these total Kumbaya, kind of feel-good guys, but I really have tried to embrace this abundance mindset. And that’s like, you know a lot of what I’m trying to do is just add value, whether that’s through my book or my blog post or whatever, just give value out to people, let them know about real estate, tell people what’s out there. I don’t charge for any of that stuff and try to just give. And the more that I give, the more I seem to get back. It’s kind of weird how it works that way, but it’s like a boomerang. You throw it out in the universe and it comes back. And so those are two mindset things shifts that have happened to me in the past six years that have been very impactful.
Rod
Yeah. They’ve heard that on the show many, many times. What you give, you get. And so it’s wonderful to have someone just unilaterally say it because it absolutely is the truth. So let me ask you this. Knowing what you know about this business, if you went back to when you first started, is there anything you would change? Is there anything you do differently? Is there anything you’d be more aggressive with or less aggressive with or answer it any way you like?
Matt
There are sort of two things for me when we talk about this business. I mean, there was a time when I went– and I have an answer for both. There was a time when I went full-time, and then there was a time when I started dabbling. Right. Had I known now what I knew then when I first started dabbling, I would have made sure that I got more and different education because then I would have invested a lot more in better deals. You know, looking back at it, the place that I built in Connecticut was really not a good decision because at that time in the market, I could have bought for pennies on the dollar. Instead, here I am building new construction. Now, I don’t regret it. I don’t live my life with regrets. Overall, it was a good thing. It set me on the path to where I am now. I learned a ton, but if I had the education, it would have prevented that. And I’m not talking about education. Going to College education, I did that, and that’s great. And there’s nothing wrong with that. But education on multifamily. So that’s number one. And then number two, I think, you know, once I started doing this full-time, you know, it’s weird because hindsight is 2020 and in the past six years, the market has just gone up and up. So had I known then what I know now would have bought everything in sight. I’m not recommending that to people because I know Rod, you, and I have talked about this recently. The market looks frothy, right? Now, there are deals to be found. You just have to be cautious. You have to underwrite cautiously and move forward with a bit of caution. But there’s still a deal. I’m doing deals. You’re doing deals. There are still deals to be done.
Rod
Right.
Matt
But if I had known then what I know now, I would have bought everything in sight.
Rod
Yes, the same. Same. Okay. You know, you’ve got project management experience, which obviously, a degree in it and title in it, which obviously is incredible for asset management. But, you know, I think the fact that you were an actor, do you feel like that skill set played a big role in your success in multifamily because of your ability to influence based on that? I’m just curious.
Matt
I think that the acting gave me confidence.
Rod
Interesting. Okay.
Matt
Influence. I’m not sure about influence, but confidence enough to be able to go into a room of brokers for the first time without– it took me a while to get good at it and talk with them and try to act like I knew what I was doing. I mean, I did know what I was doing. I never lied and I never misrepresented myself. But just to be comfortable being uncomfortable. Right. They talk about comfort zone and being outside of your comfort zone. Acting made me feel comfortable outside of my comfort zone and also allowed me to realize, hey, a rejection is not anything to take personally.
Rod
Right.
Matt
When I was an actor, my goal was never to get the role. My goal was to get a callback. And just for anyone who doesn’t know acting, usually, you go in, you audition, and then if you’re good and they think you might be right for the part, you get a callback. At a later date, you come back in and audition further, and then they give the role to somebody because I knew that if I got to the callback, I did well and that there were so many circumstances beyond my control. Let’s say I’m auditioning, I’m short and I look young, okay. And so back then, I look like I was a teenager. So maybe I would be auditioning for the part of someone’s son, and they decide to cast a blonde woman and a blonde man for the husband and father. And here I am, the son with dark hair. Doesn’t make sense. So maybe my acting was great, but I just didn’t look right for the part. And so the same thing happens with the real estate. As long as I can make it into invest in the final round, I feel good. If someone else is going in with an all-cash offer, there’s not much else I can do about that. I don’t have $10 million sitting around in cash. So for me, it’s about you know, presenting yourself well and just being persistent. Don’t take it personally and keep going.
Rod
Love it. Well, guys, his book again is titled “Backstage Guide to Real Estate”, and I encourage you to get it. It’s an awesome book. And Matt, it is wonderful to see you, my friend, and I’m sure I’ll see you at the next boardroom event, but I appreciate you and thank you for coming on and sharing more wisdom again.
Matt
Rod, it’s my pleasure. Thanks for having me back on.
Rod
Absolutely.
Outro
Rod, I know a lot of our listeners are wanting to take their multifamily investing business to the next level. Now, I know you’ve been hard at work helping our Warrior students do just that, using our “ACT” methodology, which is Awareness, Close, and Transform. Can you explain to the listeners how they can get our help?
Rod
You bet. Guys, we’ve been going nonstop for three years building an amazing community of like-minded people. And our coaching students, which we call our Warriors, have had extraordinary results. They’ve purchased thousands and thousands of units, and last year we did over 1000 units with our students. And we’re looking to grow this group and take it to the next level. We’re looking for people who want to follow a proven framework that’s really step by step and then leverage our systems and network to raise equity, to find and close deals, and to build partnerships nationwide. Now, our Warrior community is finding success in any market cycle. So if you’re interested in finding out more about how you can become more of our incredible network and take advantage of the incredible opportunities that are coming very soon, apply to work with us at “MentorWithRod.com” or text “CRUSH” to “72345” and we’ll set up a call so you can check us out and we can check you out. That’s “MentorWithRod.com” or text “CRUSH” to “72345”.
