Pros and Cons of Rehabbing and Flipping – Matty Aitchison | PREI 056
Matty Aitchison is a millennial entrepreneur, real estate investor, and wealth building evangelist who has had great success following his turbulent start. Ranked in the Wall Street Journal’s Top 1000 for real estate teams nationwide, Matt has personally flipped over 100 houses in 5 years, and now passionately mentor others on their journey of unlocking a rich and fulfilling life.
Listen in as Matty and I discuss the pros and cons of rehabbing and flipping properties.
If you missed last week’s episode, be sure to listen to The Four Real Estate Market Cycles.
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Pros and Cons of Rehabbing and Flipping – Matty Aitchison
It’s my pleasure to welcome Matty Aitchison to the show. Matty is a millennial entrepreneur, real estate investor and wealth-building evangelist who has had great success following his turbulent start. Ranked in the Wall Street Journal’s Top 1000 for real estate teams nationwide, Matty has personally flipped over 100 houses in five years and now passionately mentors others on their journey of unlocking a rich and fulfilling life.
Matty, welcome to the show.
It’s a pleasure to be here, Marco. Thanks for having me, man.
My pleasure to have you on the show. You have an interesting background. You’re a relatively young guy. If I’m not mistaken, I think you’re in your late 20s, is that true?
Again, another millennial. I think you’re the second or third millennial I’ve had on the show here in the recent past. You guys not only intrigue me, but you guys inspire me. You have an interesting background, Matty. Why don’t we start off by you telling us about yourself and your background?
I’m from Sacramento, California and born and raised here. I was heavily into sports. It’s funny, a lot of people ask me, “How did you get into real estate investing?” I go back to when I was twelve, thirteen, fourteen. My mom, who was always worked in corporate America her whole life, was going to those guru flipper seminars and she would take me with her. At a young age I was exposed to this idea of real estate investing being this vehicle for wealth building and had the ability to put no cap on your income. You had the freedom to be your own boss. You could add value to communities and people in that space. It had always been in the back of my head.
I actually got into trouble a little bit in school, as most teens often do, and I was expelled from high school. I went on to go to UC Santa Barbara for college. In my first year in college, I actually got arrested for the exact same thing that got me expelled from high school. That was my fork in the road, my “oh shiz” moment, I like to call it of thinking, “Man, what am I doing with my life?” The direction that I said I wanted to go in was not being backed up by my actions. My video and the things that I was doing was not matching my audio and the things that I was saying and telling people that I wanted to accomplish. I had a big reflection time at that point in my life.
I remember my dad actually spoke some great wisdom to me at that point in my life where I could have gone in a really wrong direction. He said, “Your rear view mirror is there for a reason and I want you to look at this as an opportunity to say your past doesn’t have to equal your future.” I decided to keep my focus on the windshield and the vision but also kept in mind the rear view mirror, keeping me aware of what was behind me but what led me to where I was currently at. I decided to start living an intentional life. I really started pouring into myself with personal development.
I wanted to be an entrepreneur. I graduated from UC Santa Barbara and decided to start my real estate team that we had operating in a traditional space. At the same time I started investing in real estate and realized how passionate I was with real estate investing. That led me to start in a construction company; so building up this ecosystem of real estate that fed and cross-pollinated one another but also allowed me to play in my passion zone.
That’s what’s lead me here today, is real estate investing and wealth building and focusing on not only how I can create a legacy of wealth for myself, create opportunity for those around me. Really becoming more of a coach and mentor now with passing that on to others who may be a little bit lost or not have a clear vision of what they can create in their life. That’s what has inspired me to go down the current path that I’m on right now.
What a great story. Brilliant words of wisdom from your dad. That put you back on the right track because you knew where you were going because you were able to look in that rear view mirror and see where you were coming from.
I think a lot of people feel like their past defines where they are able to go moving forward. If all we did was focus on the rear view mirror, not only would we crash, but we’d lose sight of everything that’s in front of us. I didn’t want that to be me. I didn’t want to be a statistic. I wanted to not only prove others wrong, but I wanted to prove myself right, that I knew I could accomplish what I wanted to accomplish and then some. When he said that how you respond to this mistake, because at the end of the day we’re all human beings, we all make mistakes, it’s not going to be the last one I make. But how I respond to those mistakes, life is 10% of what happens to us and 90% of how we respond to that.
When I started wrapping my head around that, I realized I had a lot of growth, first and foremost, that I needed to do in order to become the person that would attract those things into my life that I said I wanted. Having someone like that in my life was very influential at the time that I needed it most. Not a lot of people have that in their life. That’s why I’m so passionate about openly speaking about this stuff and sharing it as much as possible. Because you never know who’s going to take that one little bit of advice you get and run with it and it’s going to change the course of their life. I’m a perfect example of that.
I like what Tony Robbins says. He says, “Your destiny is shaped in your moments of decision.” We’ve got to constantly think about the decisions we make and how that’s going to change the trajectory of where we’re going.” You’re a great example of that.
I appreciate that. I’m trying to be a constant role model, first and foremost, for my daughter and my family and then obviously other people that are paying attention to and watching what I’m doing. The person that I was at that point in time was embarrassing to me. I didn’t want to leave that kind of legacy behind. It was time to make some changes and it’s led me down this beautiful journey and personal growth, and more importantly, being intentional about how I can not only build my own wealth in this process but help other people do the same for themselves.
Powerful. Now, did I hear correctly? I think I read this somewhere or I heard it somewhere, that you made $100,000 on your very first deal. Is that true? Is that possible?
I did, man. Those are so few and far between. I didn’t realize how lucky I’d gotten when I actually did it. Yes, I did. I netted over $100,000 on my very first flip. It was from a bandit sign in a neighborhood. After hundreds of nasty phone calls of telling me to take it down and who the heck am I to pollute their neighborhood with that garbage up on the telephone pole. I will tell you what, all those nasty calls were well worth it when I landed that first deal. That was really what catapulted me on my journey of using real estate flipping as a vehicle for opening up doors in other areas of wealth creation.
Just out of curiosity, because I’m sure some of the listeners are wondering where that was and what was the condition of the situation of that deal, meaning was it a distress seller that was going through foreclosure? Just give us a little bit about that deal so we know what it is.
It was. Obviously you don’t know what you don’t know until you know it. I didn’t know a whole lot of how to be a real estate investor, how to negotiate and how to know whether it’s a home-run or if it’s a base hit. When I ran into it, I got a call from a gentleman. He was wanting to sell his mom’s house and his mom was a hoarder. She had I think over 60 stray cats coming in and out of her house at one time. You can imagine walking into that house, the smell just smacking you upside the head. At the end of the day, that opportunity that I provided them was a total win-win. He wanted to move his mom out of that house due to her health and some other family reasons, within 48 hours. I had never come across a deal like that again where someone literally said, “I’m so motivated, I want to have this done in 48 hours.”
I went over there. Before I could even get a price out, he basically just said, “You give me this and I’ll take it and we’ll close escrow.” I didn’t have a chance to underwrite it yet. We were onsite. He said, “You give me $75,000 for it, it’s yours. We want to take our stuff, pack up and leave. If you can close escrow within seven days, you got a deal.” I went back and underwrote the deal, ran it by a few mentors being that I didn’t know a lot about what I was getting myself into yet. It ended up being a house that I put about $30,000 in. I got it for $75,000, put in about $30,000 and I ended up selling it for $212,000 or $215,000.
Wow, talk about a deal on a silver platter.
Like I said, those ones don’t come around often. I wish they did. At the end of the day, that was my, I don’t want to say my destiny or my fate to get that deal, but I felt like that was a sign from the universe for me to say, “You need to explore this as a path of creating more wealth and financial freedom for yourself.” The really cool thing was being able to see how happy that family was to get this problematic property off of their plate. For some people, that was a really low offer. That was one of the situations where I didn’t even negotiate that. It was just thrown on my plate. Those are really rare. Whenever I am negotiating for fix and flip deals, I’m always looking for that win-win where it makes sense, it’s ethical, there’s high integrity in it. Those types of opportunities don’t come around often. Looking back, I’m extremely grateful for that.
That’s so important. The deal has to be a win-win or a win-win-win because everybody has to walk away from that transaction feeling like they got something out of it. If they don’t, then probably someone took advantage of another person. Real estate investors and particularly real estate flippers are looked down upon by so many people because they think that they are taking advantage of the other person, that they’re ripping them off and stealing what is theirs, like their equity. The reality is there are just a lot of people that have life situations, financial situations where they don’t need to milk every dime out of that property. They’re happy to walk away with a little bit of a profit or a breakeven or just to get a hassle off of their back. For them, it’s a good thing, just like in your example here. For you, it was a good thing.
That’s a great point. I think a lot of people in the real estate investing space are, as investors or even buy and hold, are looked down upon somewhat in a negative light. I will tell you, that stigma at the end of the day is often earned. There’s a lot of people that do take advantage of others and they do it to make a quick buck. That was one thing, going into this, that I learned from some of my mentors. You always operate with a high level of integrity, a high level of ethics. There’s always that win-win. You don’t step over someone to make a dollar.
For me, this is my personal strategy, this is my personal brand. How I wanted to design it was something that was made up of those foundational pillars of integrity and ethics and finding that win-win. There’s been times where I’ve passed on deals that didn’t have that silver lining for both parties. It’s one of those things that I’m constantly looking at that from all angles because I’m going to be in this game for a very long time. One, I want to be able to sleep at night. Two, I want to make sure that anybody that I am doing business with, I am helping them, not taking advantage of them. Because that is something that a lot of people do in the real estate investing space. I’m a big, big proponent of always looking for that win-win for other people.
A lot of the times with real estate investors too, if you’re buying from the courthouse steps or you’re buying foreclosure, there isn’t another person on the other side of the deal that their livelihood is on the line for. Those are great negotiating opportunities to get something from a bank or an asset manager, something along those lines. But when it comes to true human beings, at the end of the day this is a human to human transaction. As much as it’s just numbers for us and it’s black and white and it’s not as much emotion, on the other side, these are distressed families, distressed situations. Keeping that high level of integrity in the forefront of when you negotiate is absolutely imperative. I talk about that often with the people that I mentor and coach.
Brilliant. Matty, I’m probably going to title this show The Pros and Cons of Rehabbing and Flipping. Our listeners know that this show is Passive Real Estate Investing. I categorize real estate into two basic categories, active and passive. Passive being you’re purchasing rent-ready or turnkey investment properties so there’s very little work to be done. Meaning that it’s all on the front-end. It’s really the financing, your due diligence, the inspections and that kind of stuff. You’re not rolling up your sleeves, picking up tools and getting your hands dirty doing rehabbing, finding distressed properties or dealing with distressed sellers. There’s two caps here. There’s the passive real estate investing and there’s active real estate investing. Where you’re coming from is the space of finding these deals, these distressed properties or distressed seller situations, fixing them up and then you’re either flipping them or you’re keeping some of them for yourself.
What I want to do is talk about the pros and cons of rehabbing and flipping, because I know some of our clients have asked us about it or they’re talking to us about it. They’re asking us if we can help them do that or where they can turn to for more information or to investigate it or maybe to get some mentoring or coaching because they do want to try it. They have the time or they have the thick skin and they want to take the risk. Having said all of that, let’s start off by describing, in your opinion, what all the pros are and what the cons are of rehabbing and flipping property.
In regards to it being active, at the end of the day, anything can truly become passive. I look at real estate investing for the flipping space, it’s a model. With the right model and the right systems and the right leverage or people, it can be a passive income stream. If I look at my business, while I am passionate and I love being in the art of the deal and finding the deals and negotiating that win-win with myself and sellers, I’m only one hire away from replacing myself and making my flipping business a passive income stream for me. Any opportunity in business, at the end of the day, that has models, systems and the right people in it, can become a passive income stream for you. I like to at least preface that, first and foremost. Also, the pro of real estate flipping is it truly allows you to create the income that will in turn provide you the opportunity to go out and buy income streams. That’s why I love the strategy of flip one, buy one, or flip two, buy one or depending on what your potential model is. You’re the one who can design it. Flip five, buy one. Use flipping as a vehicle to create enough income to go out and buy assets that will pay you a passive income. That’s why I really enjoy real estate flipping.
One, because I enjoy finding the opportunity to help families in tough situations. I love rehabbing a house that has been a total eye sore for a neighborhood and it brings up the value in the neighborhood and gets everybody fired up on having a new family come in and contribute to the neighborhood. Those are all great benefits. I love the design aspect of it, which is really, really fun. I love the team aspect of it too because there’s a lot of moving pieces to it where you can run it as a one-man show and wear multiple hats, which is great. At the same time, having a team around you makes it one, a little bit passive and two, you can focus on the areas that you are most passionate in in that entire process.
At the same time, real estate flipping, like you said con-wise, there are some, I would say, challenges or things that need to be taken into account and overcome, which is things like having the right people on the bus with you and making sure that you have the right team around you. Secondly, contractors is always a big conversation with the people that I coach and mentor in my mastermind group. Finding those people to really plug into the system that you have can be a challenge. The team aspect of it can be a great benefit if you have the right people on and can make it passive for you.
On the contrary, it can also be a major headache and require you to wear a lot of different hats, and like you said, roll up your sleeves and have to do a lot of the work. Depending on what you’re netting at the end of the day on the flip and how many hours and time and energy you’re putting into that, you can calculate what your hourly rate is. Sometimes, I’ve seen people actually have a negative hourly rate based on what they made and how much time they put into it. You got to make sure you have the right systems and models and mentorship and people in your world to make this a truly lucrative vehicle. Oftentimes, you can’t squeeze water out of a rock. If you don’t have the right formula for it, it can be a very challenging thing.
Secondly, on the passive income side of it, with rentals there’s a lot of tax advantages and there’s a lot of other advantages that go along with it. Real estate flipping necessarily doesn’t have that same benefit. I do always like to look at it in a way that it generates enough cash for me to go out and buy one of those opportunities. The wealthiest people that I have been able to research and study, they don’t go create income streams, they go buy and income streams. This is my vehicle that allows me to go out and do that.
You’ve packed a lot into the last couple of minutes there. Let me see how much I can remember and comment on here.
I went on a little bit. You get me fired up on something I’m passionate about, I’ll go for days.
I’m glad you’ve laid it all out there. There’s some other things too that I want to throw out on the table here as well. I certainly agree with you with the concept of anybody who’s doing this, if they flip two, keep one or flip three or flip four and keep one, that’s the way to do it. I like to call it chunks of cash and streams of cash or cashflow. You can label it however you want. Regardless of whether you are saving money or you have a side business or you have multiple businesses or two jobs, ultimately you want to accumulate enough cash to convert into streams of income or cashflow. Ultimately, that’s what you’re doing. You’re really just taking rehabbing and turning it into a job, a business, for some people it’s a hobby, but that’s not the end goal. You’re not necessarily rehabbing and flipping properties for the sake of creating these piles of cash. You want to create cashflow and that leads to ultimately financial freedom. That’s really the end goal, is it not?
Absolutely. At the end of the day, real estate flipping for the majority of people, it’s a vertical income stream. If I decided to run off to Mexico tomorrow for two months, if I go away, my flipping business slows down or it stops. Unless you have the team and the leverage around you, it’s considered a vertical income stream. I do use this vertical income stream as an opportunity for me to go out and buy horizontal income streams, which is the passive income opportunities, where if I decide to run to Mexico tomorrow I am able to continue collecting a monthly cash flow from it. My goal is, and one thing that I coach and train and teach a lot of people on, is the idea that your vertical income can allow you the opportunity to go build wealth through buying assets that will pay you an income.
The goal, is to be a hundred percenter. The hundred percenter equals true financial freedom. What I mean by that is when I buy enough rental properties to where 100% of my passive income from those properties covers 100% of my living expenses, then I am financially free. I can decide that $5,000 a month of rental income covers $5,000 a month of all of my expenses, mortgage, groceries, childcare, whatever it may be. $5,000 covers $5,000, then I can go run off to Mexico for that month and I am out of the rat race. That’s why I love flipping, is because it gives me the opportunity to keep chipping away at that goal and to keep chipping away towards financial freedom and remove myself from those day to day activities that vertically require me to be involved.
It’s one way to help fast track that process because you’re limited by your capital and your credit, primarily capital and credit to accumulate those income-producing properties. This is a way for you to just accelerate that process, by creating that cashflow. Again, I’m not minimizing it in any way, but I just call it another business. It doesn’t matter whether you’re rehabbing or doing something else. If you can create additional cash flow to reinvest into income-producing assets, you’re achieving the same end goal. There’s all these house flipping shows on TV, on TLC, HGTV, and whatnot. I think in many ways, those shows are doing a disservice to people because they watch those and they get excited. There’s a lot of Hollywood in that. I have a very good friend who’s actually recording thirteen episodes of a new show that’s coming out, as if we need another house flipping show. That’s going to be live next spring and it’s just yet another house flipping show.
I think a lot of people are sold the sexy part of this business but they don’t get to see some of the downsides. I think the risk is there’s the potential to lose money. I’m doing what you’re doing. I’m acquiring some distressed properties and rehabbing them and then keeping some and flipping some. I’ll make money on more of those deals than I’ll lose, but I have lost money on some of the flips that I’ve done. That’s just the nature of the beast because you don’t know if there’s a major foundation issue when you’re going in sometimes or some other hidden problem with the roof. You thought it was good but it’s not. That’s an extra $5,000, $6,000, $7,000 out of your pocket. There is that risk. Then there’s another risk that I’ll just throw out on the table, and I call it stress. For some people, flipping homes is just too stressful and time-consuming. That’s why they opt to go with the passive route. What are your comments about the potential to lose money and the stress factor?
I’ve lost on two deals out of the 100 plus that I’ve done. Those were potentially unforeseen things that as much due diligence as I could have done, not necessarily foreseeable. Sometimes there is that risk of getting into a deal where you can lose money. I do tell people at the end of the day, “There’s definitely the potential of that happening.” There’s many things though that you can do in order to minimize or eliminate that risk. A few of those things that immediately come to mind for me are one, mentorship. It’s such a big thing. Don’t think that you know it all. Surrounding yourself with other people who have done it, who are more experienced, who can give you a second set of eyes. I joint ventured on my first ten plus deals in order to get that education and to understand how to do it the right way, how to do it at a high level. I gave a way a little bit of money, but it also was the price of an education that shortened that learning curve for me significantly. Mentorship is a big one.
Two, if you understand how to underwrite a deal properly. I’m conservative on my underwriting. For example, I don’t want to be the highest ARV comp, after repair value, I don’t want my comp to be the highest. I want it to be the middle range of all the comps that are in the market, but I want it to be the best product. I’ll be conservative on what I’m going to put it back at the market at. I will overestimate what my construction costs are going to be. So I’ll leave myself some room there because that’s where a lot of people end up blowing their budget as well and losing money. I also am aggressive on the amount of time that I think it’s going to take to sell. I add in an additional month or two for potential holding cost over what the average days on market are for a particular house in that neighborhood that I’m flipping. I am just making sure that when I run those numbers, I’ll actually add a 5% or 10% miscellaneous buffer to make sure that I am protecting myself. You may miss out on a few deals that way, but you will also ensure that you don’t lose on more deals than the ones that you went on. That’s really helped me make sure that I am able to insulate my business and minimize the risk.
I completely agree. When I rehabbed my first couple of properties, I jumped in with the aid of a real estate agent that I was working with at the time. I had some people on my team because I was introduced to a general contractor, who brought in all the subcontractors. I didn’t have to worry about that piece. I was working with a real estate agent who showed me around. I didn’t have any rehabbing experience. I shouldn’t say any, I had very little. I made a lot of mistakes. I agree with you that there’s a lot of value in partnering with someone who has done it before, that can show you how to do it, the right and the wrong, what to avoid, how to find the deals and all that good stuff. It’ll shortcut your learning curve. It’ll shortcut your path to success. Whether it’s a coach, a mentor, some sort of educational program, whatever it’s going to take, it’s better to educate yourself and do it with someone or with someone’s competent material so you know what you’re doing. Because let’s face it, a lot of people make mistakes.
You’re going to, especially in this game. You just can’t account for everything. Same thing as on a rental, real estate, we always say every deal is an ordeal. It’s true. There will always be something new that comes up. I’ve had a crummy month of random things coming up on files that have totally thrown a wrench on my plans that I didn’t necessarily account for. But because of some of the buffers and some of the things that I’ve used to build a moat and protect my opportunities of the flips that I have, I’m able to make sure that I’m not losing my butt on those.
You got to surround yourself with the right people, the right resources and make sure that you have the right skills and knowledge. Because what you see on TV is not the truth. It’s fun to watch, but you look at the numbers that they’re sharing, there are so many other things on a spreadsheet that need to be taken into account for with cost of money and days on market. There are so many fees and things that aren’t accounted for on those shows and that they don’t show you and that are just purely scripted obviously, for the drama and excitement of TV, like what you said of Hollywood-ing it up. At the end of the day, you do some of the things that you and I just talked about and that will give you the best chance to win, by stepping into this arena.
Before we leave the pros and cons thing here, I’m going to throw out a few more things. I think the biggest driving motivator is the potential to make a good profit. I think that’s why a lot of people want to flip houses, is because they hear these great stories of people making $10,000, $20,000 on a flip or if you’re in California, it could be $50,000, $100,000 on a flip. That gets people’s attention. Your ears perk up. But there is the potential to lose money too. If you learn what you’re doing and you get good at it and you have the right team, I think you can be successful far more than you’re a failure. There’s two intangibles as far as pros or benefits. People who do take the time, the effort and the risk to do this really go through a personal development phase. There’s the time and the money but you gain valuable experience from flipping a house, don’t you think?
Absolutely. One, you learn a lot about yourself. As much as I would love to say it’s not a stressful industry, there will be times where you second guess yourself, you question yourself. The growth, not only from a skill-building standpoint of understanding the industry and how to navigate it at a high level will come out of that, but you’ll also have a newfound confidence of how you learn how to problem solve, build relationships with your team, how you communicate and the scripting.
There are so many other things outside of just the monetary compensation you collect at the end of closing a flip. There are many other benefits from a personal development standpoint that I can say are priceless, as cliché as that may sound, in what you learn and who you become in that process. To truly understand the numbers of how to make money in real estate, that is something that few and far between know. If you can really pour into yourself and understand that at a high level, not only are you empowering yourself to build well in the process but shift your mindset of how can I not only go from being the quarterback or the operator to becoming the coach and the mentor for other people. And that’s the kind of stuff that gets me fired up.
There’s a lot there. There’s negotiating skills, there’s delegating tasks, managing your time, holding people accountable, and then you learn about construction and real estate to boot. It’s a people business. There are a lot of benefits that you’re going to get out of it if you want to do it. I learned long time ago from an author, real estate guru, Robert Allen, that when it comes to real estate, there are three basic parts to it. There’s finding properties, there’s funding those properties, and then farming those properties. Farming meaning how do you harvest the profits from each deal. Let’s just touch upon those three categories real quick. In terms of finding the deals, and you don’t need to go into a lot of detail about this because I know we could have a whole show on just finding deals. Because you could talk about bandit signs and auctions and wholesalers and all that stuff. But where do you find your deals? In your opinion, what do you find are the best sources for finding those deals?
My best sources are having consistent direct mail campaign. That always keeps the phone ringing, which is great. The second is my website, MyFastCashSale.com, which is basically my lead capture site for motivated sellers online who are looking to get a fast cash offer on their property. There are plenty of different companies that can build you a little website or you can customize and create your own. That generates some consistent traffic through pay per click, SEO, and other different channels of driving traffic to that.
Then the other one are pure networking opportunities. Basically alliances with attorneys, divorce probate, estate planning, alliances with, like you said, wholesalers. The networking aspect of it and making sure that you have your line fishing in a couple of different ponds is important. You don’t want to just rely on one stream to bring it in. Those would be my top three, would be direct mail and my website, and then the other ones trickle in from the network and the resources that I’ve built up over time.
What about funding these, are you using hard money to pay for the acquisition? Are you funding it with your own cash?
I’m actually funding most of them with no money in of my own. I have a private lender. That’s a cool story of how I met this private lender. I ended up meeting them from one of my mailers. They got my mailer on one of their rentals that they were looking to sell, ended up hitting it off with them. Long story short, they ended up selling nineteen of their rentals through my traditional real estate company and freeing up a bunch of liquid cash so they could become my private lender. They’re my private lender. I have a couple of million with them. Based on their first position loan, I leverage other people’s money for the second. I would say about 80%, 85% of my properties, I have no money in on them.
Do you ever use hard money?
I do not. I did for my first two deals, just to get things going because I didn’t have a private lender and I didn’t have a lot of cash myself. But hard money lending is a great option for many people to get financing for their flips.
The LTV on hard money is about 70%, 75% I believe. You’re still going to be required to come to the table with some cash out-of-pocket, so it’s not like it’s a no-money down type of venture.
I do want to add, for people that do say, “I don’t know if I have 25% or 30% to bring to the table and then potentially construction costs on top of that.” What I would say was if you really, truly found a great deal, my first mentor always said, “You find the deal and the money will follow.” That sounds a little woo-woo cliché, but at the end of the day if it really is a good deal and there’s enough margin in it, people will fund your deal if you have the right conversation with the right person and you address the right questions and answers that they are seeking to make sure that they feel protected and insulated in that investment opportunity.
Secondly, the 20-30% that you may not have, it’s not that hard to go out and find someone who’s willing to invest $20,000 or $30,000 or $40,000 or $50,000. You can give them a great return that is 10-12. If you need to do a little profit sharing with them, so be it. There are many ways to structure a deal. I know a lot of people, me included, when I was first starting, thinking that financing was going to be what kept me from getting started. I am here to tell you that with the right conversation and the right creative structure in your conversations, that you will be able to fund your deals if they are a deal.
Matty, where are your deals? You’re in California, right?
I am in California. We’re in Sacramento. I flip basically anywhere. The furthest property I flipped is about three hours from me. Wherever the deal makes sense, I will go. However, I like to flip the tri-county area around my hub and my main point of choosing to make sure that I have the ability to check up and manage and oversee those properties accordingly. Through some of the things that we’re doing, we’re going to be expanding outside of the state.
These are obviously retail flips, meaning you’re selling them to homeowners, not to investors?
Correct. Some of them, depending on the price point, are going to investors though.
The ones you keep, you self-manage or you’re outsourcing that to property management?
I self-manage. I have an amazing admin staff who takes care of that. That’s something where to a lot of people I do recommend outsourcing it just because if you’re not in the industry and understand the ins and outs of it on a daily basis and how challenging it can be, it’s a big undertaking. But my lovely staff handles all that for me. I’m very grateful that they’re able to do that. But for most people, the best option is to outsource it to somebody else who is the expert in that space, like yourself, that can make sure that the income that they’re collecting and the asset they’re buying is being managed at its highest and best.
Before we wrap up here today, two questions. First, is there anything else you want to add to anything we’ve covered today that would be useful for our listening audience, knowing that they’re primarily passive real estate investors but some of them might be interested in trying out or becoming an active real estate investor, whether it’s a hobby or a business. Is there any kind of advice or guidance you can give them?
We talk a lot about this in my mastermind group. We have a group called the 6 Figure Flipper, which basically helps people oversee the true process of becoming a six-figure flipper, whether that’s one flip a year or twenty flips a year. One of the things that I constantly am talking about is this whole wealth equation of how you go out and create wealth is using what we talked about, the vertical income to go buy income streams for you. By doing that, a lot of people say, “I’m going to draw a line in the sand and when I get to that side of the line, then I’m going to start.” What I like to challenge people on is procrastination is the single biggest wealth killer. By the time you’re 35 you say, “When I get to 40, I’ll start,” or “When I’m 50 and I retire, then I’ll start doing it.”
The challenge is to start it today. There’s a very simple wealth equation, that is smart choices, small smart choices times consistency. If you make smart choices consistently times time, over a long period of time, you are going to get wealthy and that will slowly compound and grow. Don’t have the microwave mind set where you want that instant result. Go into it more with the crockpot mentality of knowing that this is a long term game and a lot of ground can be covered in one year, two years, ten years, and twenty years. Keep that in mind as you go on your wealth-building journey. Whichever vehicle you do choose, just make sure that you have the right knowledge, you have the right team, and most importantly that you have the right you and the right mind set. Because you got to have the right person like yourself to run the plan and the model for the plan and the model to work.
Very well said. Procrastination is such a killer. Doing nothing by definition is still doing something. It’s a choice. You’ve chosen not to do something to move you forward. I don’t know if you touched upon this at the very beginning, but I’d like to wrap up by a comment you had made. I heard you on another podcast, and I didn’t finish listening to it, but you were talking about teaching your kids about real estate investing. This is something I’m actively doing right now with my nine-year-old daughter. I’ve taught her to play Monopoly, so she’s really into that. We’ve got the cashflow board games. My next move is to put her on an airplane and take her out to Kansas City and show her some of the properties that we’re rehabbing out there. Ultimately, they’ll probably be hers so I figured I’d better start indoctrinating her on how rent is paid and collected and who lives there and all that stuff. Tell me about your philosophy and what you’re doing with teaching kids.
It’s a missing conversation. I don’t know if your parents had it with you. For your guests who are listening to this interview right now, I don’t know if their families had it for them. But for most people in the wealth-building space, it’s a missing conversation. If it is something that you are truly committed to doing, why would you not want to empower your kids to truly understand how to take that baton and run with it when it’s their turn to create it for themselves and to run with what you have created for your family?
In order to truly pass on generational wealth, I want you to think of the idea that you’re a quarterback. We can use Aaron Rodgers for example. Aaron Rodgers is a professional. He’s a highly skilled quarterback. He knows all the plays. He knows the ins and outs of how to navigate the industry and the field. I want you to think of your kids as the receivers. If your kids didn’t know how to run the plays and they didn’t know how to navigate the landscape and, when they caught the pass, where to run or what to do with it, then you’re setting your kids up for failure. It doesn’t matter how great Aaron Rodgers is, if they can’t catch the pass or they don’t know what to do with the pass when they get it, then nothing is going to be accomplished in that.
In order to empower your children and your family and the future generations of people around you to take that wealth and really not only do great things with it but also to make sure that it doesn’t destroy them, you need to become the coach. That’s where I’ve really tried to drill down into a lot of people’s heads, including myself. I just turned twenty-eight and I’m on this journey. I plan to be on it for a really long time. As I continue to learn, the best way for me to serve myself and those around me is to become the coach and empower them to do it for themselves, their families. Or when I decide to hand it off to my children, that they know what to do with it and they can use that wealth that I’ve created to do great things, to have a purpose behind it and to really just be empowered to take it to that next level without being unequipped to make the right moves.
That’s such a great analogy. I love that. I might have to borrow that analogy.
Have at it.
Matty, tell our listeners how they can find you and get more information, because this was just a good introduction but I know there’s so much more to it.
I have obviously my podcast, Millionaire Mindcast, where I study millionaires on their wealth-building journey and extract some of the great information. A lot of this stuff, I’m just shepherding information beyond to share with other people. You can find that on iTunes. I’m on Facebook, @MattyAitchison or I have Snapchat, @MattyAitchison.
A lot of people that are interested in flipping on the contrary, I have a mastermind group, SixFigureFlipper.com. We’re about to launch another mastermind group of very reasonable discounted price from the massive $2,000, $5,000, $10,000, $20,000 courses. I just want to get this information out there and empower other people to build wealth for themselves through mentorship and surrounding yourself with other people in that same journey. If anybody’s interested, feel free to check out SixFigureFlipper.com. That’s how you can connect with me.
Matty, thank you so much for your time. We’ll certainly be talking here in the future because I would like to check out your program.
Sounds great. It’s been a pleasure. Thanks for having me on.
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