After years of trial and error in real estate, Matt Porcaro discovered a game-changing government-backed renovation loan that revolutionized his investment approach. With just a modest down payment, he transformed a duplex property, generating $130k in equity and $2k monthly passive income within 8 months. Inspired by his success, Matt founded a community centered on this unique loan strategy, dubbed “The 203k WayTM”. Through his platform, Matt has empowered countless aspiring investors to acquire their first cash-flowing, high-equity properties with minimal upfront investment. Beyond immediate financial gains, Matt’s method serves as a gateway to sustained success in real estate, propelling his students’ careers to new heights.
Here’s some of the topics we covered:
- From Broke To Expert Real Estate Investor
- Demystifying the FHA 203k Loan
- How Long Must You Occupy the Property Post-Loan?
- Navigating Fannie/FHA Regulations
- Inside the FHA 203k Loan Process
- Overcoming Obstacles in This Real Estate Niche
- The Four Plex Secret Hack
- Essential Advice for Aspiring Real Estate Investors
- Maximizing the Potential of 203k Loans
To find out more about partnering or investing in a multifamily deal: Text Partner to 72345 or email Partner@RodKhleif.com
For more about Rod and his real estate investing journey go to www.rodkhleif.com
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Full Transcript Below
00:00:00:01 – 00:00:16:15
Rod
Welcome to another edition of Life Time Cash Flow Through Real Estate Investing. I’m Radcliffe and I am thrilled that you’re here. We’re going to a lot of fun today. Off topic today. We’re not going to talk about multifamily. We’re going to talk about house hacking. And I’ve got Matt Porcaro here and Matt is an expert in the two or three key way.
00:00:16:22 – 00:00:23:05
Rod
I think that’s the name of your company. But anyway, so we’re going have a lot of fun today and talk about house hacking. Welcome to the show, brother.
00:00:23:07 – 00:00:29:24
Matt
Thanks for having me. Rod Yeah, that’s big fan of you for a long time and you’re one of the OGs in the space, so it’s kind of an opportunity to be here.
00:00:29:24 – 00:00:37:17
Rod
Kind of you to say that, Well, why don’t you give us your story, man? Let’s all starts with the story. Why? Why? Why? Real estate? Where’d you come from? Yeah.
00:00:37:17 – 00:01:02:28
Matt
And so absolutely so I’m the guy that always knew that there had to be a better way just with everything in life. Right? But couldn’t find it. I grew up in a blue collar environment, and where? New York. Long Island, New York. Okay, so, you know, my dad has had his own business and money from a very young age was the root of all evil, evil stress fights.
00:01:03:02 – 00:01:18:27
Matt
You know, they didn’t hide money problems for me. I love my parents, but like I was exposed from a very young age. So from a very young age, I was always like, there’s got to be a better way. My parents always told me that, too. Now to them it was go to school, get a good job, go to college, and.
00:01:19:00 – 00:01:19:18
Rod
Get a pension.
00:01:19:21 – 00:01:39:12
Matt
Yeah, get, get up, get it, get it, get a paycheck every week. Because to them, that consistency was the dream, right? So I did that. I did that. I wasn’t the best student by any means. But I remember like I remember thinking about what I wanted to do for college and went to my guidance counselor and, you know, she’s like, What are you thinking about doing?
00:01:39:12 – 00:01:51:09
Matt
I’m like, What makes the most money in four years? Because I knew I was going to be a dad. I wasn’t savvy enough to be a doctor or a lawyer or anything like that. I was like, What’s the highest paying degree in four years? She’s like all the engineering things. I was like, Okay, I’m pretty good at science.
00:01:51:09 – 00:02:10:04
Matt
Let’s do engineering. So I went to school for electrical engineering, graduated in four years by the skin of my teeth, went started working in New York City. Very lucky you got hired right away, but also right away realized that this isn’t really the answer either. And it was actually working in New York City when I was walking to lunch one day.
00:02:10:06 – 00:02:30:00
Matt
And, you know, in New York City, you got the guys that sell the books on the street, right? Like used books. Everyone’s got a hustle in New York City. So I’m on my way going to like five guys or something. And I saw Rich Dad, poor Dad on the table. And as we all know, that book and I always heard about it, always heard about, you know, and I’m like, hey, whatever.
00:02:30:01 – 00:02:44:23
Matt
And and I saw that in like a couple of the other books like Cash Flow Quadrant and all the other ones. I just kind of grabbed the bunch. I was like, Hey, how much for? I’ll give me five bucks now. Five bucks completely changed my life as it does for many people. I like to say it’s like taking the red pill because it really exposes you.
00:02:44:23 – 00:03:03:09
Matt
Especially a kid like me grew up super blue collar, like the word investing never came up in my in my household. So this was a turn a new leaf for me. So kind of pushed me down the rabbit hole. I tried a bunch of different strategies but really couldn’t crack it. In New York. Obviously very high cost of living area was really hard to find anything.
00:03:03:13 – 00:03:05:00
Rod
You were in the city.
00:03:05:02 – 00:03:22:01
Matt
So I grew up in Long Island, but yeah, I was working in the city and commuting, you know, commuting back and forth. But, you know, Long Island, too, is pretty crazy. Yeah. Yeah. No. So the idea of buying real estate, you know, I tried to have my own businesses of like, you know, whatever, email marketing, like all e-commerce, whatever you could think.
00:03:22:01 – 00:03:38:10
Matt
I’ve tried a bunch of different strategies. Real estate I’ve read in the book is like the best asset class. But to me, I was like, I couldn’t imagine owning multiple houses, albeit one I tried for. I tried a lot of different strategies, tried wholesaling, tried like flipping houses with no money in New York, financing New York State. Yeah.
00:03:38:10 – 00:04:04:07
Matt
Just like, you know, tried some course it just tried the things and really nothing really was able to pan out for me. I didn’t have much money, you know, I didn’t have much money to market. I was basically using all my disposable income from my W2 to try to get into it. Anyway. You know, long story short, I joined a local real estate investment association, and the lady that ran it is this name is name Melissa, and she was a super mom, ran the RIA, had, you know, 500 properties, whatever.
00:04:04:07 – 00:04:17:27
Matt
And I grabbed her and I pulled it to the side one day and I was like, Hey, listen, Melissa, I’ve been at this for a while. Like, do you know, like, maybe like New York’s different, right? You know, everyone thinks they’re New York, they’re their markets different. So I said, you know, this market’s different. Like what? What? You know, what can I do here?
00:04:18:02 – 00:04:39:16
Matt
That’ll work. And she’s like, Listen, I’ve never done this before, but there’s a loan product called the FHA two or three K loan. And in all the years I was studying and reading up on stuff, this is the first time I ever heard about it. And she said it is a FHA loan, so it requires you to live in the property, but it allows you to purchase a property for only three and a half percent down.
00:04:39:16 – 00:05:02:10
Matt
And what’s cool about the two or three K is it wraps in the renovation budget into your mortgage so you can purchase the house, plus wrapping the renovation costs into the house and basically do a BR strategy. So she said for new investors, for someone that’s looking to get into the game, it’s it’s like a cheat code. So if I could go back in time and do it over, I would have started with this because it would leverage my money very quickly.
00:05:02:12 – 00:05:06:06
Matt
So that’s essentially the first time I learned about it and the rest was history.
00:05:06:06 – 00:05:07:01
Rod
When was that?
00:05:07:03 – 00:05:09:18
Matt
That was back in 2015.
00:05:09:21 – 00:05:34:29
Rod
Okay. Yeah. Okay. Well, let’s drill down on it a little bit because, you know, it’s a fantastic way for somebody to get started in this business. And, you know, obviously I deal in multifamily and the people that typically sit in that couch start with single family, end up in multifamily or buy a house, they buy a plex and then they then, you know, the name of the game is go bigger and and and but it’s a fantastic place to start.
00:05:35:01 – 00:05:58:09
Rod
So talk about a little more detail. 3% down. Yeah, it’s been so long since I’ve dealt with this, but I dealt with it a lot. I sold a few hundred houses to two or three key buyers when I had 500 houses in Denver at one time. Right. And so you talk about some of the parameters. What’s the minimum credit score you need?
00:05:58:16 – 00:06:08:08
Rod
Talk about it. Can you borrow any of the down payment? Can it be gifted? I mean, I remember back then you could gifted. I’m just trying to think in my head because I mean, so long. But yeah, talk about a little more detail.
00:06:08:14 – 00:06:31:02
Matt
Yeah. So remember, like the FHA products are there to instill the ability to buy homes even for people that, you know, maybe don’t have stimulate homeownership. It’s it’s to stimulate homeownership which is important. Right. And the two or three K version again is just allows you to purchase as is properties and be able to renovate them. Right. So to your point, yeah, it’s a low it’s low barrier of entry.
00:06:31:02 – 00:06:42:23
Matt
It’s pretty much the lowest barrier of entry mortgage out there, three and a half percent down is all you need to put down. Your credit score needs to be 580, you know. Yeah. That’s not bad at No. 580. So again you know if you’re you.
00:06:42:23 – 00:06:46:03
Rod
Can’t have any foreclosures or bankruptcies but yeah, yeah exactly.
00:06:46:03 – 00:06:53:25
Matt
I mean, you know two years of consistent income, right? They like, you know, I wouldn’t say 1099 is ruled out, but they like, you know, the cushy, the cushier the better on the.
00:06:53:27 – 00:06:55:09
Rod
What’s the debt to income requirement.
00:06:55:09 – 00:06:57:01
Matt
50%, roughly 50%.
00:06:57:01 – 00:07:03:23
Rod
So at 50% to the total debt. Total debt, 50% debt. Correct. Including your new mortgage payment on the house.
00:07:03:23 – 00:07:20:23
Matt
Exactly. The gross income. Yeah. And again, so lowest barrier of entry of any mortgage class out there. It’s very forgiving in in that world. You brought up a great point with the down with the down payment stuff. And so there’s ways you can actually yeah, of course you can get a gift on the down payment.
00:07:20:23 – 00:07:21:18
Rod
From a family member.
00:07:21:19 – 00:07:44:09
Matt
From a family member. Yup. And one of the cool things is the seller, the seller concession. Right. So 6% they’ll give you of the purchase price. So, you know, when I did my first deal, right, I bought a duplex. So I found out about house hacking almost by accident because what happened was, even in New York, even, you know, I had a decent salary as an engineer working in the city.
00:07:44:11 – 00:08:00:12
Matt
I bought a crack house, literal crack house, duplex. I mean, it was literally nobody would touch it. Everyone said it was a knock down, but it was the only thing I could afford. And I actually didn’t even think I could afford it on paper. My lender actually told me he’s like, Well, listen, this is illegal to family. I said, Okay, what does that mean?
00:08:00:12 – 00:08:13:10
Matt
He said, We can forecast the future rental income of the other unit and were able to take that and increase your debt to income ratio. So now you have essentially a $2,000 a month raise on your monthly income.
00:08:13:10 – 00:08:31:22
Rod
So I have a question about this because actually Matt and I argued about this because back then to use a rental income for a second, third or fourth unit in a residential multifamily for you can go up to a four plex. There had to be an existing lease and you could use 75% lease. So what you’re saying, it doesn’t have to be leased.
00:08:31:22 – 00:08:35:05
Rod
So he said he said it doesn’t either. Okay, Now that’s new because it didn’t used to be.
00:08:35:05 – 00:08:35:19
Matt
Like market.
00:08:35:19 – 00:08:37:03
Rod
Rent. Yeah, it didn’t used to be like that.
00:08:37:03 – 00:08:46:21
Matt
Okay. wow. Yeah. No, that’s, that’s cool to know. And yes, so it goes off of market, Right. Okay. And you know, it’s based on the appraiser and they’ll take you know, they don’t take the full amount 75.
00:08:46:21 – 00:08:47:24
Rod
Or 75%.
00:08:47:26 – 00:09:10:03
Matt
But that was enough to get me over because I wasn’t able to afford it on my own. I picked up the property for 270,000 and it was $80,000, like full gotten renovation. Wow. Right. So it was all into the property for 350,000. I only put 9500 bucks down on that. And actually any of the brainiacs that do math quick in their head, they’re like 9500 is not three and a half percent is actually close to like two and a half.
00:09:10:05 – 00:09:31:15
Matt
What happened in my case was I went to the closing table and I got a full sellers concession because I found a good deal, which is in the heart of all of this. Finding good deals is that’s what we did. I was doing a value add and I was looking at it through the eyes of an investor. So what happened was as I went to the closing table and they actually wrote me a check back, I had the three and a half percent, but they wrote me a check back at closing, so I was actually able to put less.
00:09:31:17 – 00:09:50:20
Rod
They promised it that they never permitted that either. That’s new to you. You could have seller concessions, but it was sure as hell wasn’t 6%, 3% or something. Yeah, but, but so now that concession has to be for a reason. Correct there. No, absolutely not. They can just give you a 6%. Yeah. So literally someone could buy an asset.
00:09:50:23 – 00:09:52:00
Rod
Really? No money out of pocket.
00:09:52:03 – 00:09:56:17
Matt
Well, so that was kind of a little bit of a you know, they definitely want you to.
00:09:56:20 – 00:09:57:19
Rod
They want some money out of pocket.
00:09:57:19 – 00:10:15:09
Matt
They want some money out of pocket. Yeah. You know, obviously you can get it gifted. That’s one way to do it. Right. In the Fannie Mae space of Fannie Mae just entered the mix, too. So it typically used to only be FHA was the only player in the in the game that would allow you to buy up to a four unit property with only low down payment, three and a half percent down.
00:10:15:09 – 00:10:22:26
Matt
Fannie Mae, just as of November of last year, entered the mix. And now they’re allowing you to buy up to a four unit property with only 5% down.
00:10:22:26 – 00:10:24:26
Rod
But are they going to wrap in the renovation?
00:10:25:01 – 00:10:47:28
Matt
Yes, they do that also, it’s called a home style loan. Yeah, I’m actually doing a home style in my own house right now. No kidding. Yeah, my forever home. Okay, So but basically, it’s it’s a great vehicle no matter which way you look at it. And the Fannie Mae now entering the mix, they have the ability to you can get a gift of equity from the seller.
00:10:48:01 – 00:11:04:08
Matt
So I have a guy doing a deal right now. He’s very close with the with the seller, not very close. And that, like, it has to be an arm’s length transaction. It can’t be like, Right. But he knows the guy. He was his neighbor, whatever he’s buying the house from him and he’s willing to give him a full gift of equity in covering the whole down payment.
00:11:04:08 – 00:11:09:08
Matt
So he has no money out of pocket to buy a duplex down in Texas with this new Fannie Mae product.
00:11:09:08 – 00:11:14:16
Rod
Wow. Which is, guys, we can go we can negotiate that all day long. Yeah. Somebody if somebody they.
00:11:14:16 – 00:11:17:06
Matt
Just need to give a letter. Yeah, a letter that they’re given that to him.
00:11:17:06 – 00:11:35:05
Rod
Yeah. If somebody is is really desperate to sell you’ve got a tough asset and, and, and you just tell them, listen, I’ll do this, but you’re going to have to gift me the down payment back. Right. And, you know, I could see how this could really work. Well direct to sell way. And there’s no broker involved. They’re not paying a commission 100%.
00:11:35:05 – 00:11:47:09
Rod
So if if you go direct to seller and you’re saving them, the commission say, listen, you’re saving the commission, but I need you to give me the equity to get this deal done. And it can be everything closing costs. Everything. yeah. No. Yeah.
00:11:47:11 – 00:12:09:13
Matt
Everyone that I work with, nobody pays closing costs on these rhino. So the rhino is obviously the double the portion that really makes the shine, right? Because if you buy, you buy a distressed asset, you have more you have more, more leverage in the deal. What’s crazy about the FHA 203k is they allow you to get 110% loan to value of the RV so you can over leverage it.
00:12:09:13 – 00:12:15:13
Matt
Now I wouldn’t advise that, but they will give you over. They will let you over leverage the property.
00:12:15:13 – 00:12:21:11
Rod
So okay, I need to understand that because does that does that reduce the the three and a half percent down payment? How does that.
00:12:21:11 – 00:12:38:22
Matt
Work? Well, so all it means is that if you let’s say, for example, if you if you if your loan amounts or if your property is going to be worth 500,000 when you’re done renovating it. Right, they’ll give you a loan of 550,000 on that property because they know that you’re going to renovate it. And remember, it’s an owner occupant loan.
00:12:38:22 – 00:12:41:08
Matt
So that’s why they’re giving you those really favorable terms.
00:12:41:08 – 00:12:43:02
Rod
You still have to come up with the down payment. But yeah.
00:12:43:09 – 00:12:45:04
Matt
The down payment would still just be three and a half.
00:12:45:05 – 00:12:47:23
Rod
So this is just extra fix up money.
00:12:47:25 – 00:13:07:01
Matt
Yeah. Or yeah, or whatever. What we were actually doing during the pandemic when a lot of people weren’t able to close on their properties because appraisals weren’t hitting right. We were flipping their, their loans to two or three K limited, which are like a streamline that used to be called the two or three K streamline. It’s a minimum $5,000 you need to have for the renovation.
00:13:07:01 – 00:13:22:29
Matt
So basically what they would do is if someone that was their appraisal wasn’t coming through, we’d flip it to a two or three K loan and they would get an extra 10% loan to value. So that would push them over. We’d give them, you know, say, $5,000, just go get new appliances and a new fresh coat of paint.
00:13:23:02 – 00:13:38:27
Matt
And that would get them over the closing table when their appraisal didn’t go through. interest. So it’s an Yeah. So it’s another really little interesting interesting thing there. But again, you know the thing whole thing with me is buying a good deal. And I looked at it through the eyes of an investor because when you look at it through the eyes of an investor, you know, with what I did that night, if you.
00:13:38:27 – 00:13:41:03
Rod
Leave it much of the emotion out of it as you can.
00:13:41:03 – 00:13:58:29
Matt
Yeah, right. And I looked at I want it to be all in I was all in on my first property for, you know, 75% loan to value built $130,000 in equity in six months with 9500 bucks plus that property was cash loan me $2,000. I still have it. So cash flows, whereas a million a month in Long Island, New York.
00:13:58:29 – 00:14:00:00
Rod
Long Island, Yeah.
00:14:00:02 – 00:14:13:08
Matt
So it’s a cash cow for me. But, you know, my, our, we always talk like returns and especially in the multifamily game, like cash on cash return and a Y stuff like that. My cash on cash return in the first year was like 1200 percent or something crazy.
00:14:13:09 – 00:14:17:06
Rod
Sure, sure. Which you can do when you move in, but of course, you.
00:14:17:08 – 00:14:17:28
Matt
Know you can.
00:14:17:28 – 00:14:18:16
Rod
Do that my way.
00:14:18:16 – 00:14:28:23
Matt
But for me it was the springboard that got me in. And once I had that, not only did I have a great asset that was feeding me, I had more capital that I was tapping to get into the flipping game. And so.
00:14:28:24 – 00:14:30:13
Rod
Just got to flip now to Yeah.
00:14:30:14 – 00:14:45:12
Matt
Yeah. So I was, I was flipping, I slowed down on that right now, renovating my own house right now. But ultimately it’s what got me into the game, doing more, the better strategy and but most importantly gave me a track record because all of a sudden lenders were willing to talk to me.
00:14:45:13 – 00:14:46:04
Rod
Yeah.
00:14:46:06 – 00:14:53:27
Matt
Realtors were willing to talk to me. So it gave me the leverage that I needed to get into a game that I was really struggling to find a way and interesting.
00:14:54:00 – 00:15:12:17
Rod
So I know you can’t, like, flip these things. What’s the what do you advise people, you know, when they when they move in, you know, and you can’t don’t play with this guys don’t like turn the utilities in your name and go talk to some neighbors and then never move in this. That’s called bank fraud, right? Yeah. You know, we don’t want to see your face in the paper.
00:15:12:17 – 00:15:16:22
Rod
Yeah, but how long do you realistically have to live in one of these properties?
00:15:16:22 – 00:15:20:07
Matt
Yeah, so it’s a year. So on FHA, it’s a year from the closing date.
00:15:20:07 – 00:15:20:22
Rod
Okay.
00:15:20:22 – 00:15:40:28
Matt
So in my case. Right. It took me eight months to renovate fully, and then I actually refinanced out into conventional immediately because I got rid of the mortgage insurance. yeah. Mortgage insurance. That that extra little vig that you pay to the FHA for being a subprime. That’s funny, right? But I refinanced out the rate, dropped a little bit at the time.
00:15:40:28 – 00:15:58:26
Matt
I think I had like a 6.5 when I walked in and it got down to a five and a half or something. So so I got a little boost in cash flow, got out of that. And, you know, ultimately I was able to leverage against that and pull four for my flipping for my flipping side. But I was only really there for a very short time.
00:15:58:26 – 00:16:21:28
Matt
I had then just gotten engaged with my now wife and, you know, it was it was the vehicle that got me in. And when you say like, it’s not something to repeat, as long as you follow the rules to the game and you’re not being egregious with it, as you just said. Yeah, you could repeat it now, up until literally November of last year, you could only have one FHA under your name at any given time.
00:16:22:00 – 00:16:30:09
Matt
So you would have to refinance out. You’d have to do the borrower strategy to make it happen. Fannie’s different Fannie Mae allows 11 loans under your name.
00:16:30:11 – 00:16:32:10
Rod
How long do you have to own it was Fannie. Do you know.
00:16:32:12 – 00:16:37:27
Matt
It’s it’s a looser guideline but here you just you have to sign an affidavit saying that is your.
00:16:37:27 – 00:16:39:02
Rod
Primary, right? Yeah. Yeah.
00:16:39:03 – 00:16:55:01
Matt
Now, again, don’t play with it. But I have plenty of people that, you know, I’m doing I’ve done multiple of these renovation loans and these house hacks were, you know, bought lives in one unit, rented out the other, taking advantage of these renovation loans to build the equity for US equity into the house. I’m doing it in my own house right now.
00:16:55:04 – 00:17:12:13
Matt
To your point, earlier, I got that off market, got a great deal forcing it almost a half million in equity on that thing. But yeah, it’s as long as you as long as you you you move out of the really the rule is you have to make sure that the debt service is covered on the on the, on the previous property.
00:17:12:13 – 00:17:15:29
Matt
So if you had a if you if you move into a private sector debt.
00:17:16:01 – 00:17:16:15
Rod
Yeah.
00:17:16:18 – 00:17:27:14
Matt
So if you had a triplex you’d have to get your lease agreement set up with that and then let the lender know that you’re planning on moving to the next one. And then you have someone that’s intended to be your new lesser on that empty unit.
00:17:27:14 – 00:17:37:25
Rod
How much how much of the let’s see, you have that triplex. Yeah. And you get at least to do they only use 75% of the lease amount to qualify you for the next one. Yeah.
00:17:37:26 – 00:17:52:09
Matt
On that. And then they are flexible with that. It really depends on the lender. Right At the end of the day, like, you know, straight up best piece of advice I could give on this is, is you have to work with a lender that understands this. Yeah. Because most lenders do not 90% of them 99% of them don’t.
00:17:52:09 – 00:17:54:01
Matt
Or they’ll pretend to understand. They really do.
00:17:54:01 – 00:18:10:05
Rod
Yeah. Just like realtors. Yeah, they can take your multifamily listing and they haven’t got a clue what to do. Exactly. Exactly. Take your business. But you screw it up if you don’t have somebody knows what they’re doing. You know, I’m kind of surprised. You’re an engineer, brother. You’re very outgoing and guy. Usually engineers are introverted and they’re not very.
00:18:10:05 – 00:18:34:20
Matt
So very recently I sailed that off into the sunset. Yeah, it was a long time. I had you know, I had the opportunity to work for some great companies, some big companies. And it was it became later in the in my career that I was kind of just consulting. And then very recently I kind of got off of it now full time real estate and I realized that, yeah, pretty quickly, being in the game.
00:18:34:22 – 00:18:43:08
Rod
I would guess that I would not have guessed. Yeah. You know, if I was going to pick something for you and your history, it would sail those, you know, market, right? But not engineer, which is.
00:18:43:08 – 00:19:02:25
Matt
More of what I love and I love, you know, more than anything. I love just being a connector and a people person in real estate is, is you know, is the most people person thing out there. I think a lot of people don’t realize that. But yeah, so that was kind of it was also my calling. Listen, I was very appreciative of my engineering career because it’s what enabled me to get into the game.
00:19:03:01 – 00:19:17:18
Matt
You know, when I read Rich Dad, Poor Dad. It was funny just talking to someone about this, like, you know, Rich dad, poor dad. He’s like, basically WTO is evil, right? Right. So I like, read that book and I remember like, screw the man, I’m going to go off on my own. And like, I really I was like, angry at my job for a while.
00:19:17:19 – 00:19:35:03
Matt
But then I realized that my job was my jobs. And my my jobs were the reasons that I was able to buy real estate in the beginning made me financeable. Sure. And it got it got my leg in the door. Yeah. So I always tell people, don’t quit your day job right away because it’s the it’s the avenue that’s going to get you in for the lowest amount.
00:19:35:03 – 00:19:50:02
Rod
Right now I get students that ask me, you know, should I quit this and do multifamily in my watershed, do it full time. I’m like, No, not unless you’ve got a nest egg or you have some other source of income. You need another because not not just not just to qualify, but there’s something called fear. And fear paralyzes.
00:19:50:03 – 00:20:05:03
Rod
And if you haven’t got you know, if you haven’t got deals coming in or money happening right away, fear will lock you down. So you know that that income prevents that from happening. And you can do your you know, you can do what you do on the side. You can do what I do on the side. Just have to go do it.
00:20:05:05 – 00:20:11:21
Rod
Now, I know you have a program. It’s called the two or three K way where you help people do this and get their first property. What’s the website for that.
00:20:11:24 – 00:20:28:10
Matt
Yes. So the 203k Wacom you know, obviously if people want to work with me it’s the two or three K wacom slash apply. But you know, I have a Facebook group, you know, when I first started this it was answering. Nobody talks about the two or three K right. It’s real estate investing is best kept secret for beginners.
00:20:28:10 – 00:20:49:17
Matt
I’m not fully hands down. I think the lenders and the real estate agents have been gatekeeping it for years just because it’s a little more work for them, even though it’s better for the borrower. And that’s the reality of it. And that’s why I started this platform, because I had done it successfully. I had helped a couple of my friends, couple of family members do it successfully, and more and more people were asking me about how the heck did you do this?
00:20:49:17 – 00:21:02:29
Matt
Like such a little out of pocket like I was, you know, I was only 26, 27 years old at the time and already had a little real estate portfolio building. So it was answering a lot of the same questions on bigger pockets and stuff. And I just realized there was such a need for it and no one was talking about it.
00:21:02:29 – 00:21:18:12
Matt
I mean, when I got into it, you know, mine was a rocky road, but, you know, being in it, I am the part of the engineer side I do have is the analysis paralysis. I do overanalyze everything that is the engineer in me. So for someone that’s trying to get into the game is really hard for me to figure it out.
00:21:18:12 – 00:21:36:14
Matt
What’s what was great and was almost a blessing with the two or three K was that because there was no information on it? It just forced me to put my head down and figure it out and I learned it so well that I said to my wife one day I remember sitting on the couch and being like, Hey, do you think if I like, started posting videos about this process, people would watch it?
00:21:36:14 – 00:21:54:11
Matt
She’s like, No, but do it anyway. So but, but I mean, suffice to say it grew tremendously over the years, and it’s been really rewarding to help people that were in the same situation as me looking to get their first house. Want to get to be a real estate investor. Kind of felt like they were a little bit of a slave to their W-2.
00:21:54:13 – 00:22:10:26
Rod
It’s a great way to start. It’s a great way to get into real estate. You know, if the missus will allow you to move in or the. Mr. allow you to move into something that you may not want as your forever home, but just to get started. Yeah, I think it’s a fantastic way to get going. Now, you did say that, that there are gatekeepers because it’s a little harder.
00:22:10:26 – 00:22:28:10
Rod
It’s quite a bit harder because you’ve got it. You’ve got to get the bids together for the renovation and all that stuff. So it’s a lot more work for for the mortgage person than than a typical FHA loan. Yeah, about the renovation but yeah, but it’s not really more work for the realtor. But the realtor maybe it is actually.
00:22:28:13 – 00:22:41:24
Matt
Yeah. Well, you know, you know what happened in the last couple of years, especially on the buyers. I mean, we got all this crazy stuff going on in our station, like the buyer’s agents, you know, you know, and during the pandemic, it kind of turned into like, give me your highest and best offer. And they’d like, throw the grenade in the room and cover their ears and.
00:22:41:26 – 00:22:43:15
Rod
Right, right.
00:22:43:18 – 00:23:00:08
Matt
So like anything that they feel like would stand in the way is something that they’d be afraid of. And it’s not really again, it’s a disservice to the borrower. We’re seeing, you know, the millennial generation, my generation. Right. Like, you know, they’re having trouble having the ability to own a home to be period.
00:23:00:08 – 00:23:00:28
Rod
Period. Yeah.
00:23:00:29 – 00:23:17:27
Matt
And and to to think that they’re going to have all the money out of pocket to renovate. I mean, I’m doing a renovation right now on my own house. Again, we’re using the tool. We’re we’re using the home style. The Fannie Mae, which is the exact same thing really in terms of process, but it enabled even me. I’m like, why am I going to use my own money out of pocket?
00:23:18:00 – 00:23:34:02
Matt
And, you know, I’m using a little bit out of pocket. Sure. Like to, you know, fill in the blanks. But why am I going to I don’t why am I going to not use the bank’s money and finance it over 30 years at a really you know, at a low rate, even though everyone thinks that rates are high right now at a low rate compared to credit cards.
00:23:34:02 – 00:23:49:22
Rod
Well, let me tell you something. You know, let’s talk about rates for a second. When I got in this business, you weren’t even a twinkle in your dad. So this is 1978. Sure. And interest rates were 18%. Yeah. Yeah. And I remember doing back flips when they hit seven. And we’re not even Yeah, we’re maybe at seven now, but Yeah.
00:23:49:26 – 00:23:58:24
Rod
Yeah. And I think they’re going to go down a little bit. But listen, who knows, They may stay, they may stay here. There’s going to be some carnage in my business in the multifamily space, which is.
00:23:58:25 – 00:23:59:29
Matt
A lot coming in. Yeah.
00:24:00:01 – 00:24:33:29
Rod
Which is exciting as hell. Yes, but but, you know, housing is is is, is there’s a huge pent up demand. So it’s even harder for, you know, people to get their first place. And this is a fantastic strategy to get in your first place and get started, you know, and realize that you can do it. Yeah. You know, and that’s why I didn’t have a problem bringing you here, because this is like the you know, for candidly in my opinion, this is like the springboard into what I do with multifamily, because everybody that sits in that couch there that’s got thousands of doors or even hundreds of doors started with a house or a duplex
00:24:33:29 – 00:24:48:00
Rod
or a triplex and I mean very few exceptions. And so the the big hurdle is just getting started 100%. And that’s why, you know, I think what you’re doing is a fantasy stick away for someone just to get started and not be afraid of the word real estate. Yeah, no, and.
00:24:48:07 – 00:25:02:10
Matt
I appreciate that. Yeah, I kind of felt like it was like flipping a house and being a landlord with training wheels on. Yeah, because the banks paperwork and stuff that there’s really there to protect you, Right? I came from the construction industry and, you know, when you talked about getting contractor bids and stuff like that, it’s good practice.
00:25:02:10 – 00:25:20:14
Matt
That’s how you should run a renovation all the time, right? You should get multiple bids, you should level the bids, make sure you’re comparing apples to apples. You should make sure they’re licensed and insured and they’re you know, they’re they have the right credit lines and everything like that. So it it really just it to me, again, it was it was more than anything.
00:25:20:14 – 00:25:31:20
Matt
Obviously, the returns were great, but it really just gave me the confidence to be like, hey, in one deal, I’m a landlord, I’m a flipper, I’m a, you know, renovator strategy guy renovator. Yeah.
00:25:31:23 – 00:25:47:06
Rod
Let me ask you this. Yeah. Do they put any guardrails in place? Because a lot of people haven’t got a frickin clue how to do a renovation. Yeah. Are there. Is there any. I mean, I know your program, I’m sure helps with this. I would guess it does, but are there any guardrails that fit FHA or Fannie Mae put in place?
00:25:47:13 – 00:25:56:13
Matt
Yeah, So, you know, like something like they have. So there’s a couple of things. So on the two or three K loan side, there is someone that has to be on the on the deal called a two or three K consultant.
00:25:56:16 – 00:25:56:28
Rod
Okay.
00:25:57:00 – 00:26:08:11
Matt
They’re like a home inspector. Okay. I call them like the referee of the loan. They’re not going to manage it for you, but they’re going to call the balls and strikes. And part of their job is to look at a renovation estimate and be like.
00:26:08:13 – 00:26:09:16
Rod
This is this is all yeah.
00:26:09:17 – 00:26:25:06
Matt
This is like, this is too low or and they make them break it out by line item. You know what they want. So the best process to do this and just a quick little hack for anyone that wants to do this. Number one, you get the best lender you can for this, right? I’ve been able to build a great network of lenders.
00:26:25:08 – 00:26:46:21
Matt
The 203k Wacom slash lender. You just fill in some information, it’ll put you in contact with one of my preferred lender partners that are experienced with this. You just need them to be experienced, sure, but you get pre-approved at the lender, you find a deal, you get into contract on it. The first thing you need to do is go to that two or three K consultant because that two or three K consultant is going to help you build the scope of work.
00:26:46:23 – 00:27:03:02
Matt
They’re going to tell you what needs to be done. So because you could buy a property in any condition, right? Like it could be it could be literally a foundation on the ground. Right. As long as there’s some existing structure. Yeah. No, there’s no really limit. You know, your limit is based on the loan limit, FHA loan limit, which are pretty forgiving.
00:27:03:02 – 00:27:03:27
Matt
And let’s talk about those.
00:27:03:27 – 00:27:06:23
Rod
Let’s just finish your thought in the. Yeah.
00:27:06:24 – 00:27:23:02
Matt
Yeah. So, so you bring in the two or three K consultant they will build you something called a schedule of repairs and that’s a line item scope of work. Right. Which gives you a rough idea on kind of feasibly what your renovation is going to be. They’ll give you a rough estimate. Now what you do and again, this is exactly how it works.
00:27:23:02 – 00:27:25:23
Rod
So they can do a home inspection and they come up with this thing. Yep.
00:27:25:24 – 00:27:26:14
Matt
And they put together.
00:27:26:14 – 00:27:28:07
Rod
For you, Move on. What do they charge?
00:27:28:09 – 00:27:41:21
Matt
So it’s it’s like two the initial is like a regular home inspections like five or 600 bucks. Okay. And then then what happens is after you close, they’re your draw specialists. So as you complete the renovation, the money goes into escrow at closing.
00:27:41:21 – 00:27:44:28
Rod
So they do the inspections before you can pull your money out.
00:27:45:00 – 00:27:56:05
Matt
Correct? Yeah. So it’s pay as you go. Yeah. You can get a little at closing. That’s a common misconception. The contractor get some startup capital at closing and then as they go through and then every time they come out, it’s like about 200 bucks. But that’s all.
00:27:56:05 – 00:28:03:09
Rod
Rappaport Do they? Do they? I’m sorry. I’m getting a little micro here. Do they like it? Do they evaluate the contractors, make sure they’re insured, licensed to.
00:28:03:12 – 00:28:14:20
Matt
You, that the bank will do that? The bank does, Yeah. The bank will do that. And again, nothing. You know, they just license insured a little. You know, make sure you have again, these are things you should be doing with your tractor and don’t use your Aunt Sally’s handyman. Yeah.
00:28:14:21 – 00:28:27:01
Rod
That’s why I asked you if there were guardrails, because a lot of people would know this. A lot of people get their asses handed to them. So this is really great in that regard because it because you’ve got people making sure you don’t screw up. Yeah. So. So that’s why I asked the question there.
00:28:27:04 – 00:28:36:24
Matt
It’s there to help you out and then automatically on all these loans a 10% contingencies built in. Okay so whether you use it or not, it’s built in. If you don’t use it, it goes back to the principal on the loan.
00:28:36:24 – 00:28:37:09
Rod
Gotcha.
00:28:37:09 – 00:28:39:24
Matt
And that’s it. But everyone usually uses.
00:28:39:25 – 00:29:03:03
Rod
Yeah, yeah, yeah. Because construction, you know, I just realized I needed a refrigerator. Yeah, yeah, yeah. Okay. Yeah. Love it. So. So what? You know, with a seller, what is a typical timeline for one of these things? I’m assuming you close. Yeah, of course you close. Money goes in escrow to fund the fix up, and then you’re using this consultant you call the consultant.
00:29:03:03 – 00:29:19:12
Rod
Say, Yeah, we got to this point and you know, you’re staging because you have what’s called draws, you know, where you’re able to inseam in our space, in the multifamily space, you draw money from the lender, you have to show the work has been done. So the consultant does the inspection so that you can have that money released to the contractor.
00:29:19:15 – 00:29:30:26
Rod
And so what’s well, I guess the timeline is irrelevant because it could take months after you close. Does is the closing does the closing typically take longer in one of these loans?
00:29:30:28 – 00:29:41:22
Matt
So that’s really where it comes in. And that’s what I what I specialize in. Right. So because I know how to build this thing from the beginning to the end, now that’s where the PTSD comes from on some real estate agencies because they got with people that.
00:29:41:22 – 00:29:42:11
Rod
Just didn’t.
00:29:42:11 – 00:29:57:03
Matt
Know what it’s like doing with this loan is like anything with great power comes great responsibility. It’s a powerful loan. Think about the amount of leverage they’re giving you for it in exchange for three and a half percent. They’re giving you all the money to purchase an asset, plus all the renovation budget, plus 10% contingency on top of it.
00:29:57:03 – 00:30:08:14
Matt
Right. So, you know, they’re giving you a ton of leverage. So the thing is, is they want to have your ducks in a row and everything like that. My first two or three K took about 120 days to close.
00:30:08:14 – 00:30:09:11
Rod
Wow.
00:30:09:14 – 00:30:12:16
Matt
Now, why months? Because my lender had no idea what they were doing.
00:30:12:16 – 00:30:13:13
Rod
Okay. Okay.
00:30:13:19 – 00:30:26:07
Matt
Now, me and my wife, we just bought our own forever home, you know, big 200, $300,000 renovation, you know, $615,000 deal. And we closed in 38 days.
00:30:26:10 – 00:30:26:27
Rod
No.
00:30:27:00 – 00:30:32:25
Matt
Because it’s just about if you know it, it’s not any more complicated. It’s a couple more pieces of documentation.
00:30:32:25 – 00:30:37:20
Rod
You got to check off all the boxes and have your paperwork in order. Yeah. And that’s what you help people do. Yeah.
00:30:37:27 – 00:30:53:01
Matt
And when you know, and people always say, like, you know, because. Because when I tell, you know, people in my community to go make offers on things and people say, it’s an FHA, it’s you can I just say number one, especially now with Fannie Mae entering the mix, conventional is entering the mix. Some say you’re putting renovation financing.
00:30:53:07 – 00:31:07:23
Matt
But here’s the cool thing. You could write in your offer, taking as is no inspection contingency willing to waive appraisal because I told you about the appraisal thing. The appraisal is based off of the RV. The appraisal doesn’t become an issue close in 45 days. It’s a strong offer in a market like this.
00:31:07:23 – 00:31:08:25
Rod
Wow, that’s cool.
00:31:08:25 – 00:31:24:20
Matt
So we’re able to do that and that’s what gives you that leverage in. And the other thing too, is that compared to, you know, I call it the Goldilocks zone, right? So you’re able to really serve, you know, 90% of the people in my community are still getting their deals from MLS. I hugely promote off market. That’s how I bought my own house.
00:31:24:20 – 00:31:41:16
Matt
Sure. And we got a killer deal on it. But there’s you know, when you look on the MLS, you know, on a thick for someone like a fiction flipper like me, I look on the MLS, I’m like, there’s no margin in this deal. There’s no way I can even come close. And then a retail buyer can’t buy it because it’s not financeable, right?
00:31:41:18 – 00:31:43:05
Matt
What you have with the data.
00:31:43:08 – 00:31:49:06
Rod
I mean, if it’s trashed. Yeah, well great. Because which is the sweet spot. So you want, you want properties. Yeah. You want.
00:31:49:06 – 00:31:49:18
Matt
To force the.
00:31:49:18 – 00:31:53:23
Rod
Equity and that’s something. I must finish your thought then. I’ve got a situation I want to ask. No.
00:31:53:23 – 00:32:12:02
Matt
So what basically what happens is, is you’re able to hang out what I call the Goldilocks zone, Right? Not too hot, you know, not competing with the retail buyers, but not really speeding with this with the flippers and the wholesalers. So, you know, and again, for such a low out of pocket, you know, such you know, no one’s really ever lost on this that people that I help and you know Yeah.
00:32:12:05 – 00:32:28:13
Matt
No but the idea is like you know you put three and a half percent down the, you know, the average appreciation rate of U.S. housing in the last 30 or 40 years is three or 4% a year. So it’s so little out of pocket. So even if it’s just something, as you said, to get started.
00:32:28:15 – 00:32:29:09
Rod
You get it.
00:32:29:11 – 00:32:37:24
Matt
Yet you can get into this and, you know, get a return pretty quickly, but most importantly, get you into the game. And and that’s, you know, so.
00:32:37:26 – 00:32:56:05
Rod
Here’s the caveat. Yeah. Okay. Those are you listening. You got to have some vision because what you’re going to be buying is what scares most buyers away. Okay? You got to be able to see the finished product and it may be a shit show when you’re first looking at it, you’re like, my God, this is terrible. There’s crap everywhere.
00:32:56:05 – 00:33:13:28
Rod
There’s holes in the walls, whatever. You got to be able to see through that. Have some vision. so. So just realize that you’re going to be looking at stuff a lot of people don’t want anything to do with. And but. But I love the fact that they give you these guardrails to protect you with your with your contractors.
00:33:13:28 – 00:33:27:24
Rod
And and that’s a fantastic program. I’m really, really impressed. And so you know, I so what are what are what’s the most challenging part of the whole thing doing this? What do you think is the most challenging part?
00:33:27:24 – 00:33:44:08
Matt
Sure. So, you know, for me, on the investing side, right, Because the whole thing is like, you know, the people that typically come to me, they want to be real estate investors long term, right? They want to use this as a vehicle to house act, start on multiple units and everything like that. So it’s like anything else finding the deal.
00:33:44:09 – 00:33:45:09
Matt
Right. You got to.
00:33:45:12 – 00:33:45:20
Rod
That’s the.
00:33:45:20 – 00:34:01:20
Matt
Hardest part. You got to place a lot of offers. And but again, you know, when I was placing 100 offers to find a deal, when I was flipping this, you know, you place ten, you know, me and my wife, we placed it was our 11th offer things pencil out a little better. So, you know, finding the deal, of course, and being patient with that.
00:34:01:20 – 00:34:26:09
Rod
But you’re not going have as much competition because these properties need work. No. And they’re going to scare the average, you know, details, girls. So it shouldn’t be a sexist here, but they’re going to they’re going to they’re going to scare the average or emotional buyer. I’m going to get some heat for that, too, probably. But they’re going to you know, that that wants the white picket fence, the beautiful kitchen with the perfect stuff and all that stuff.
00:34:26:12 – 00:34:33:15
Rod
So, again, have vision, guys. That’s all I’m going to tell you here, because this is an extraordinary program to get started. Yeah.
00:34:33:17 – 00:34:52:14
Matt
And one of the things, too, and I just just to highlight that because it’s a it’s a really another cool, cool aspect of this loan, especially if you’re buying the multifamily and you’re having your tenants basically pay your mortgage, right? They have it built into the loan, they have it. It’s an option. You can choose to choose to do it, but they know because people think, okay, well, how am I going to live through a renovation?
00:34:52:17 – 00:34:54:09
Matt
And you don’t they’re not expecting you.
00:34:54:09 – 00:34:56:20
Rod
To sell it. So you don’t have to move until it’s done?
00:34:56:20 – 00:35:13:19
Matt
No, not at all. And what they have is they give you the option to into it’s now up to the first nine months mortgage payments into the loan so you don’t have to pay out of pocket for a property that you’re renovating well again it will increase your principal again. That’s why I talk about buying good deals. Right?
00:35:13:23 – 00:35:17:26
Matt
Because it will affect that. But sure, you know, it’s it’s built in such a way that.
00:35:17:26 – 00:35:32:23
Rod
Nine months of of afloat. So you can still be renting somewhere else. You’re not you’re not getting killed. That’s beautiful, man. That is freaking beautiful. What are the limits? What are the limits on a single family duplex? Triplex. Sure. I know it’s geographic, but just. Yes.
00:35:32:25 – 00:35:48:15
Matt
Yeah. So, you know, in New York near me, they’re they’re you know, they’re pretty high, right? There’s the high cost of living areas, which are, you know, you’re California, New York, California. And those are like they started I think it’s at 1.1, 1.2 million. And then a four plex is like 2.4.
00:35:48:20 – 00:35:49:24
Rod
Which.
00:35:49:27 – 00:35:52:26
Matt
Now it does come down considerably in some of the I mean, it’s just so.
00:35:52:26 – 00:35:59:00
Rod
Funny to hear that because I just remember it was a couple hundred grand when I was, Jesus, I’m.
00:35:59:03 – 00:36:28:15
Matt
Yeah, I mean, I have a I have a guy, you know, one of my you know, one of my community members, one of the guys I walk through this process. He bought a triplex in New York just north of New York City, picked it up for about 800,000 and put about, you know, 180,000 into it. He’s pretty is a loan for 1 million got a full 6% seller’s concession came out with 35,000 out of pocket and he has a $1 million asset in New York just outside of New York City and he already has 400 400 K equity on the deal of of 35 grand.
00:36:28:15 – 00:36:29:03
Rod
Fantastic.
00:36:29:03 – 00:36:34:22
Matt
So the leverage again is so high. And yeah, and these high cost of living states, like in areas they know that it’s going to be a little.
00:36:34:22 – 00:36:36:22
Rod
More what would it be here in Florida for example.
00:36:36:24 – 00:36:47:26
Matt
So don’t want to be it’s like I think single families like closer they all just a lot of the limits just went up considerably from there Pretty good Yeah I think like 500 K 600 K.
00:36:47:27 – 00:36:48:26
Rod
Okay.
00:36:48:29 – 00:37:03:25
Matt
You know and then Fannie Mae and FHA kind of have different limits. It depends on the market. Always Google, FHA or Fannie Mae loan limits in your market. Yeah. Yeah. And it can vary in certain areas but you know they’re pretty favorable. Yeah you know there’s a couple. Margaret really.
00:37:03:25 – 00:37:05:15
Rod
Holistic really is probably what they are.
00:37:05:16 – 00:37:08:18
Matt
They’re realistic. Yeah they do a good job. It’s not like they’re cutting you out on that.
00:37:08:18 – 00:37:34:20
Rod
Okay. Okay. Okay. So yeah, I mean, this is a fantastic springboard to what I do, you know, because it demystifies the whole real estate. my God. You know, I don’t own a home. I don’t own anything. And it gives you an opportunity to get started. So I’m going to encourage you, you know, if you can find a fixer upper, frickin buy the damn thing and use it two over three k, you know, have Matt guide you through the process and and get your first property under your belt.
00:37:34:22 – 00:37:42:26
Rod
You know, find out. Plex. Fantastic. Way to start. Now you have to go duplex try plex for plex. You go higher than that. It’s doesn’t work.
00:37:42:28 – 00:37:45:19
Matt
You know here’s a cool thing. If I can interrupt so.
00:37:45:20 – 00:37:47:02
Rod
Well, Fannie might go more.
00:37:47:05 – 00:37:56:21
Matt
Know they’re up to four. But what you can do is you have the renovation. So what I’ve had a couple of people do is they take a five plex, a six plex, convert it down.
00:37:56:23 – 00:37:58:24
Rod
Bring it down to a four. that’s smart.
00:37:58:26 – 00:38:03:22
Matt
Because now you’re getting there’s nothing out there that’s going to allow you to put three and a half percent down on the 6.0.
00:38:03:24 – 00:38:09:14
Rod
So what are you talking about? He’s talking about find a six plex and convert to one bedrooms into a two bedroom. Right?
00:38:09:14 – 00:38:24:16
Matt
Exactly. And so 111 of the guys I one of the guys I helped bought a five plex in Albany and converted that fifth unit down to a four unit and made that a duplex. He still made the same amount of cash flow well at a lower interest rate with only 17 grand now.
00:38:24:17 – 00:38:26:10
Rod
Yeah. Yeah. Fant that’s slick.
00:38:26:10 – 00:38:40:09
Matt
That’s a cool little. I wanted to throw that in there because you’re the multi guy. That’s a cool head. You’re fishing and fishing. And again, if you’re willing to live in the property for a quick break, well, that’s the key. That’s. Yeah, but you could you could fish in those five six unit environments and sure could get down.
00:38:40:10 – 00:38:44:01
Matt
You can easily mixed use as well. Mixed use is allowed on these. Really. Yeah.
00:38:44:04 – 00:38:50:03
Rod
So what he means mixed use is you know, maybe there’s a storefront Now would you keep the storefront you could keep.
00:38:50:03 – 00:39:09:04
Matt
Yeah. So, so that the only rule with it is that you can’t use the renovation budget to renovate the store for storefront. You can, you could renovate like you could white box it type thing, but you could get it set up utilities and stuff, but you can’t like, you know, build a store out with it. But the only rule with that is 51% or the majority of the.
00:39:09:04 – 00:39:15:27
Rod
Has to be residential needs to be residential. Yeah. Yeah, we’ve done it. that’s cool. You get an old property, like you said, so many of those up by you and.
00:39:16:00 – 00:39:16:17
Matt
Jersey, New.
00:39:16:17 – 00:39:38:13
Rod
York, they got all over every corner. It’s got a little store and then they got, you know, residential behind it and stuff on top of it. Yeah. Yeah. very cool. So, you know, I have a lot of aspiring real estate people. I mean, they listen to this show and they know they need to go do something, give them some encouragement.
00:39:38:16 – 00:39:56:26
Matt
The thing as the engineer with the analysis paralysis was and the guy that always was looking for a better way, as I spent a lot of time thinking that there was going to be some some epiphany that was going to some come from some book or there was some secret or there were some, just one more book or one more course or one more.
00:39:56:29 – 00:40:24:08
Matt
And it’s so cliche, but one of my favorite quotes of all time is, you know, Marcus, it really is, you know, a rough idea of it is the obstacle is the way. And like the thing in front of you is the direction you need to be going in. And I learned that. And I still to this day, don’t know if if if Melissa didn’t tell me about that two or three K and if people were talking about the two or three K, I don’t know if I would have done it.
00:40:24:08 – 00:40:40:26
Matt
I don’t know if I would have read up on it. And so I almost felt that the the lack of information on it was enough for me because I trusted her a lot. So I was like, I was like, this is my only option. And I, you know, my my whole platform is called the two or three K way because that was the way that I got into real estate investing.
00:40:40:26 – 00:40:56:10
Matt
Everyone gets in a different way, but that two or three K alone was got me in the way. But it was a blessing because it forced me to just focus on one step in front of me every time. I couldn’t think about what could go wrong down the line. So it’s really just ripping the Band-Aid and and going in.
00:40:56:10 – 00:41:21:21
Matt
And I know it’s so scary to think and I know I understand. And, you know, I work with people that are in that aspiring real estate investor do not have a deal yet, haven’t even bought a house yet in many cases. And even just the act of buying a house is scary for them. But again, with something like this, you know, it is it is built in such a way and especially if you follow it when I tell you to do, it’s built in such a way that it really kind of it puts the bumpers on, right?
00:41:21:22 – 00:41:38:13
Matt
You make sure that you do it so you trust the process and just know that in this day and age, man, you know, my belief is like the way that the housing market’s heading, like home ownership is becoming less and less attainable for the middle class. It’s a it’s a it’s a sad reality. But you got to get into something.
00:41:38:13 – 00:41:41:27
Rod
You got to get going and get going. Now, I don’t care can wait.
00:41:41:27 – 00:41:42:15
Matt
Exactly.
00:41:42:15 – 00:41:54:22
Rod
Because it isn’t going down. It’s not, especially with this incredible housing crunch. We won’t even talk about the 11 or 17 million people have crossed the border recently that need a place to live. I mean, it’s it’s getting insane.
00:41:54:22 – 00:42:01:10
Matt
You know. It is. And to the point of that, like, one of the things I tell people, too, is, you know, you know, you always hear, landlords are evil and.
00:42:01:13 – 00:42:04:01
Rod
You know, I get that. He every single street, every single.
00:42:04:01 – 00:42:15:00
Matt
As we all do. Right. But truly, housing is a problem in this country. And you can be part of the solution by house hacking. Yeah by using this aid use are becoming huge.
00:42:15:05 – 00:42:15:09
Rod
yeah.
00:42:15:09 – 00:42:16:13
Matt
Two separate dwellings. Yes.
00:42:16:13 – 00:42:17:02
Rod
Right about that.
00:42:17:02 – 00:42:40:21
Matt
So accessory dwelling units is a lot of the government’s answer to solving the you know, solving the housing crisis, you know, So they allow you they’re basically doing sweeping, sweeping, you know, rezoning of all single family homes across the U.S. and doing it in New York. They’re doing in all these places. Everyone says it would never happen. And they’re allowing you to put in a sensory unit.
00:42:40:21 – 00:42:46:09
Matt
Now, it’s not like a separate duplex, separate like, you know, complete unit. But it allows you, you know, in.
00:42:46:09 – 00:42:49:29
Rod
California, you see those little things you can use. Yes.
00:42:50:01 – 00:43:09:03
Matt
You and what’s crazy now you have the prefab homes and stuff with a two or three K or home style. You can use the budget to buy a prefab home, you know, And you see like on Lowe’s, they send like they sell those mini homes. You can go on Lowe’s and use the renovation budget to buy a $20,000 shell and put it in your backyard as long as your local zoning works for it.
00:43:09:03 – 00:43:09:22
Rod
Holy crap.
00:43:09:24 – 00:43:14:00
Matt
So you’re so so you could do that, number one. And number two, if you really want to solve this.
00:43:14:02 – 00:43:25:21
Rod
hold on, hold on. Yeah, that’s that’s a that’s a that’s a big one. So you can use the renovation budget to throw a second unit on in your backyard or whatever. If you’ve got enough land and it’s own property.
00:43:25:21 – 00:43:45:27
Matt
And the White House literally put out FHA has been putting out like 80 use and co-living, which is another big thing, another version of house asking renting out by the bedroom. Right. They they are saying they’re promoting this is the solution and they’re pushing it Now listen the suburban homebuyer, you know, they just moved into the suburbs.
00:43:46:00 – 00:43:47:06
Rod
You know, it hurt.
00:43:47:06 – 00:44:15:10
Matt
You know, of course, you don’t want overcrowding in the suburbs. But at the same time, I do understand that that the housing is a problem and you are solving a big issue for people. You’re giving them some affordable housing and you’re helping yourself out. It really is the best solution you can. You could be a landlord, you can make some money, you could set yourself up in your family financially while also using these new I mean, in New York, they’re giving you $150,000 grant on like a separate loan that they’re giving to you to build these to use.
00:44:15:10 – 00:44:34:28
Matt
No kid. Yeah. So, like you, it’s a problem and you could take advantage of it. Now, who knows how long they’re going to push? Yeah. You know, so it’s a great opportunity for that. But to use are becoming big. So you have that, you know, and you have, you know, the Co-Living model, which is another model where you can, you know, you basically rent out by the room and solve the issue again.
00:44:34:28 – 00:44:49:16
Matt
But you could use these renovation loans to set up a property to do that. Now, obviously, you know, that’s a special case. If you want to do that, especially you’re living there, you want to do that. But it’s like people are creating like little, little frat houses and and people are loving it. People actually, it’s a solution for people.
00:44:49:16 – 00:44:58:24
Rod
Yeah. No, I, I, I don’t get me started down that path. There’s a reason New York’s broken. trust thousand dollars. So I mean.
00:44:58:29 – 00:44:59:29
Matt
I invest there, but I don’t.
00:44:59:29 – 00:45:23:13
Rod
Want to take advantage of it, though. For Christ’s sake. Take it. Take advantage. Exactly. Exactly. Well, listen, his websites the 203k way forward slash apply to to check out his stuff. And I’ve never done that before, but I believe in this. So that’s why I, I appreciate that with you. You appreciate that. I really think this is a great way for someone to get started if they’re fearful and they don’t want to jump into multifamily.
00:45:23:13 – 00:45:38:00
Rod
Start here, man. Get it, Get out. Get a little place yourself, move in it, make sure everybody is on board and okay with, you know, not having exactly that white picket fence yet. Right. What a great way to get started. So I appreciate you coming in, brother. Thanks. Great to meet you.
00:45:38:00 – 00:45:39:28
Matt
I appreciate. Great to meet you. Thanks for having me, man.
00:45:39:28 – 00:45:40:03
Rod
Yeah.
