How to Quit Your W2 Job and Become a Full-Time Real Estate Investor

Ashley:
This is Real Estate Rookie episode 347. My name is Ashley Kehr and I’m here with my co-host Tony J. Robinson.

Tony:
And welcome to the Real Estate Rookie Podcast where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And today we’ve got an amazing guest, Matt Marcelissen. Matt is a funny guy, great at telling the stories. And you’ll hear the ups, the downs, the ins, the outs, the lefts, the rights of his journey building out his portfolio. And we talk a little bit about the end of whether or not Matt should quit his day job and do this real estate thing full time.

Ashley:
We actually found Matt and met him in the Real Estate Rookie Facebook group. So if you are not a member, please join. And this is where Matt had asked for advice on whether he should quit his job or not. There’s hundreds of comments of people giving their advice on there. And ultimately we decided to drag Matt onto the show to talk about his story and where he’s at now with 11 units and making that decision. So we read the Facebook post, we kind of go into background of why he’s thinking he should make that decision, and then we go into his story and what has brought him to that point today. But Matt is very captivating when telling his stories and you won’t believe some of the stuff that has happened to him while he has a full-time W2 job and managing these properties that he has done. So definitely take a listen. And don’t forget, if you also want to be a guest on the show and you want to captivate our audience with your real estate stories, successes and failures, you can apply at biggerpockets.com/guest.

Tony:
And last thing, if you guys are a part of the Rookie audience and you haven’t yet left us an honest rating review on Apple Podcasts, please do. Again, the more reviews we get, the more folks you’re able to reach. And when we can reach folks, we tend to have a pretty positive impact like Matt. So I just want to give a shout at to someone by the username of KDemsky79. KDemsky left us a 5-star review saying, “I love this podcast because it gives me the inspiration to pursue my real estate investing dreams, good spread of expert guest and rookie’s telling their stories.” So again, guys, leave that rating review on whatever platform it is you listen to the Real Estate Rookie Podcast.

Ashley:
And before we get into the show, just a little side note when we are recording this, this is Halloween, so I do make a couple references to Halloween in the story, even though this is December that this is airing, but I just wanted to make that little note for you guys.
Well Matthew, so we found you in the Real Estate Rookie Facebook group. I’m going to share your posts with everyone right now if that’s okay.

Matthew:
For sure.

Ashley:
Okay. So I was scrolling, scrolling, scrolling as most of us do. But it was in the Real Estate Rookie Facebook post or group, and I came across this post and it said, “I need some guidance BP fam. Since I bought my first fourplex in 2021, I’ve scaled to four properties and 11 doors. I’m at a point in my real estate investing career where I’m considering stepping away from my W2 job. I’m a consultant and it takes a lot of my time. By the end of the day and the week, I’m exhausted and don’t have time to be proactive in real estate like I should be. I only have energy to work in the business, not on the business.”
“Below are examples of tasks I just don’t have time to do, not working, securing private money from friends, family, mailers, other marketing, deal analysis, portfolio design. While I am grateful for the paycheck, the opportunity cost is high and I’m not sure how I can grow my real estate investing business. I think if I had the capacity to put as much work into my real estate business as I do my W2, I could knock it out of the park. Did you all have a similar decision in your career? If so, how did you navigate it?”
First of all, Matthew, how did I do impersonating your voice? Was that spot on?

Matthew:
That was spot on. Spot on. Exactly the same. Good job.

Ashley:
So Matthew, tell us a little bit about why you decided to put this post in the Real Estate Rookie Facebook group.

Matthew:
Oh, man. So I had been toying with this idea for quite a while and it was actually on my to-do list for two whole weeks, which is a very long time for something to stay on my to-do list. And it was to reach out to the BP family and see if anyone has been in a similar position, which I know that other people have.
I know I’ll get into the backstory in a little bit, but during the second half of this year, I really felt myself being really stretched thin. So I was converting an LTR to an STR. No one really talks about the boxes on the podcast and the mess that I creates and how long it takes to really set one up, make the post on Airbnb and get the tenants in there. I was doing property management for my fourplex and my other triplex. I have a long-term far away STR in central Texas. And with my day job, while trying to run this budding real estate profile, I just found myself without time. So I would work during the day, very intensive. I would be so brain-dead at the end of the day that I couldn’t even put two sentences together. I would just turn off my Zoom, go make dinner, go to the gym, and that was it.
During the weekends I couldn’t hang out with any friends setting up the STRs, working in my business to where I’m constantly exhausted. Ran out of friend time. I actually had to start integrating my social time with the gym and running. So I’m like, “Hey friend, if you want to see me, let’s go for a walk together instead of let’s go out and grab some drinks.” So I felt that-

Ashley:
That actually sounds like a healthy friendship relationship though, going for a run instead of going for drinks.

Matthew:
No, and I actually love it and my friends love it. And it’s a really great time, but I just feel that I need help, I’m at this crux and that’s why I reached out.

Ashley:
Well, we’re definitely glad that you did because I think this is something very important to talk about as to when is the time to leave your job to go full-time real estate investing. And so Tony and I have different experiences. Even today I still get a W2 paycheck. I get $1 deposited each week into my bank account, but I get my health insurance paid for. I still do bare minimum work for another investor to get health insurance covered. So that’s always been a big thing for me, is if I completely go full-time real estate investing and don’t do work for anybody else, it’s just for me, getting my health insurance paid for. And right now, this has worked really well. It doesn’t take a lot of my time, but there’s so many components. So let’s break down first as to why haven’t you just quit. What are some of your holdbacks?

Matthew:
Oh, why I haven’t. It’s the security, right? I went to college, I was trained to go out and get a W2 and work for someone else and grow that career. And so we get used to that security, especially if we have one that is on the higher end of the pay scale. If we can be defensive with our spending and we can save those funds to buy more real estate, it’s really worked well for me as I transitioned from living paycheck to paycheck six years ago to being able to be proactive and put myself on a budget and save money. It’s just that security blanket. But as the progression happens in real estate, it is that need to being like, “Okay, it’s time to go. It’s time to fly. When is that time?”

Ashley:
Let’s talk a little bit about that progression.

Matthew:
Okay.

Ashley:
Let’s go back to the beginning of that timeframe. How did you start into real estate and why has that kind of path brought you to this decision that you have to make?

Matthew:
Perfect. So I would say that my journey began back in 2017. And back at that time I was super cool, fun max. I was making six figures, but I was living paycheck to paycheck, and that was completely by life design that I chose. No one else chose it for me. So I chose the $2,000 a month luxury apartment in the best part of Houston. Since I’m a car guy, I chose the competition package M3 that I love, and I drove and made all the fun noises and sounds with. I would go out to happy hours, I’d go on the weekend, I would go shopping. I would have a credit card bill of five grand a month with nothing to show for it. And I really didn’t think anything of it because I was able to sustain that. I was like, “I could actually pay that entire credit card bill with one paycheck. It’s not a problem. I don’t have to carry a balance. There’s nothing to see here.”
And then that all changed when I was at work one day and I received notice that the company that I was working for was being bought. And because I am in HR, I’ve designed layoffs and I know that when companies merge, they look at the redundancies. I just knew in my heart of hearts I was like, “You know what, Matt? You are not going to have an HR job on the other side of this.” So I sat there and it’s kind of like when everything just goes blurry and you’re sitting with yourself and everything pauses. I looked at my bank account and I looked at my spending. I had fewer than two months of reserves for Maddie Inc at that time, and it completely freaked me out. And I was like, “What am I doing? Why don’t I have savings? Why aren’t you being more proactive?”
So after work that day, I got in my beloved M3, drove to the dealership, walked in, and I said, “Get me out of this car.” And so five hours later, I got in a car that was a little different and I cut my payment in half.

Ashley:
I mean, that takes a lot to be able to take that step backwards. You work so hard, you have these dreams of the car that you want, the house you want to actually take that action of walking into the dealership and trading it in and getting into something that’s, I’m assuming if it’s half your payment, it’s a lesser model.

Tony:
Madam, I’m curious, man. I think there’s a lot of people who are living paycheck to paycheck even with big incomes per se, right? But they’re still low paycheck to paycheck. You drilled down this a little bit, but I don’t know, man, I guess there’s so many people who have that same experience but never actually pull the trigger on making that lifestyle change. So how did you make that fear real enough to you to actually facilitate that action? And what would your advice be to someone that’s in that same situation that’s maybe struggling with pulling back that lifestyle creep?

Matthew:
I would say don’t let yourself be fooled into thinking that you work hard and you deserve it. And yes, we all have to live and we want nice things, but there’s a time and place to buy something that makes you happy. And so, instead of spending your active income on something that’s going to depreciate so badly, why don’t you wait until you can buy an asset and have that asset pay for it instead? And you can do that later.
And so another example I have of that is at the same time Hurricane Harvey came through Houston and my luxury apartment flooded, and I used that opportunity to go to the leasing office and I said, “Hey, what’s the cheapest thing you have in here? All your amenities don’t work, so I really need it cheap.” And so they let me sign a lease for 1,200. So within the first week, I was able to start saving more than a thousand dollars of giving myself an pay increase, right? But it wasn’t going to fix that inherent spending habit that I had. I was swiping at everything, but I wasn’t connecting the dots that I had to pay for it at the end of the day.
So me knowing myself, I created myself an accountability spending spreadsheet where every day at the end of the day, I would have to go and record the vendor, how much, and why I bought it. And so it really made me pause at the register like, “Hey, when I record this later today, am I going to feel good about the expense or am I going to feel bad?” And that’s what really helped me keep the credit card around two grand, which was much better than the five.

Tony:
And Matt, the reason I wanted to highlight this is because I think for so many Rookie that are listening, it’s easy to get caught up in the hype of, “Oh man, he’s got four properties, 11 doors, and he’s thinking about quitting his day job,” but they gloss over all of the sacrifice that went into putting you in this position. Giving up the luxury apartment, giving up the luxury car, getting yourself on a budget, saving month after month. Those are the things that people oftentimes miss when they see the success at the end. And they’re comparing themselves to the final version of Matt and not the version of Matt that went on this journey. So after you traded in the car, you bummed down your living expenses, what’s the path that kind of gets you towards real estate?

Matthew:
Right. So I had always had an interest in real estate. And after I graduated college, I actually got my salesperson’s license in Texas. So I went and got that reactivated. That’s also when I found BiggerPockets. I just started consuming content as often as I could, at the gym, on my walks. I would listen to five podcasts a day, writing down everything. I remember the first time I heard ARV and I was like, “Oh,” I stopped running and wrote that down. Really didn’t know what it meant at the time, but I was going to go back and research it.
Once I learned about all these different concepts, I settled on flipping. And I settled on flipping because I wanted to make sure I had that cash at the end of the day because I felt like I wasn’t in it and enough to do other things like wholesaling or things like having a buy and hold at the time. And so not really knowing anything about flipping, I looked up how to analyze a deal. I built my own deal analyzer in Excel. And I really believe I don’t learn well from other people’s products, so I knew that if I built the Excel analyzer myself, I would know what that formula was behind that cell so when I went through it, I really knew what the numbers meant.
And then I also set up an auto search on the MLS. You can Google like, what are the 50 terms that you can look through the private remarks that signal a distress buyer. And those were things like estate sale, foreclosure, fixer upper. And every day those would come in my inbox, I would analyze them. And then on the weekends back in 2017, when you could do this, wait until the weekend to go view them.
And then, because I really didn’t know what success looked like with a finished flip, I would not only look at the really bad houses, but I would actually go look at the flipped product and I would walk through there and go, “This looks cool. Why?” Or, “I think this is going to sit awhile because this is horrible.” And so I could kind of get a knack of what flipping looked like when it was finished properly, and then I could track the days on market and see if it sold. So that’s kind of how I got into the groove.
And then during this time, I had to really practice mindset as well because I was brand new into this game. I was seeing all these flipped properties and I really had to overcome the scarcity versus abundance because I would go visit a flip and I’d be like, “Everyone’s flipping. The game is over. There’s no properties to buy.” And then I would have to say, “Matt, calm down. Cool your jets. Investors can’t be everywhere. There are 10,000 properties that close on MLS every month in Houston. Calm down. There’s properties for everyone.”
So through this process, we’re getting into the fall of ’17, I’m starting to save money. My hunch was right. There will be no job at the other side of this, which is scheduled to close in the spring of ’18. But I continue to save money. By the spring. I have 30K saved up. I feel comfortable making offers. And then I just start letting the offers fly. And I write really embarrassing offers, like the ones that made me cringe when I pressed send. And then I would call for a follow-up, and of course they wouldn’t want to counter, but I just knew eventually that I was really going to be able to land one.
So I did land an estate sale in that summer, which was fantastic, because during this time we were scheduled to close in April, but the company came to me and they said, “Hey Matt, even though we don’t have a job for you, can you stay behind and help us close down the Houston office?” And I said, “Absolutely.” I’m never one to turn down a good time for a couple of reasons. One, I wanted the paycheck for a little longer, and two, I was going to collect experiences doing something I hadn’t done in HR that I could take with me to my next company. So I just thought it was a win all around. So as we’re going through-

Ashley:
So If I close down the office, does that mean you have to fire everyone?

Matthew:
A lot, like so many. And one of the things that has helped me transition into being a really good landlord is that I’ve had those difficult conversations. I can set those expectations.

Ashley:
Oh my gosh, what a learning experience.

Matthew:
Yeah. So over 300 individuals during the course of the summer.

Tony:
You had to let go of 300 people?

Matthew:
Yes.

Tony:
No way. That is insane, man. So in my W2 job, I was in people management, but I was on the management side on the HR side. And I’ve definitely had to fire people in my role. But dude, it would be like one or two people maybe at a time. But 300, that’s insane.
But before we keep going, Matt, because you said something incredibly important that I want to make sure that we don’t gloss over here, but you gave like a mini masterclass on how to get good at analyzing properties as a flip. You said the first thing you did was you set up searches on Zillow, Redfin, wherever, for all of these different phrases that people should be looking for, foreclosure, fix and flip, damage, needs repair, TLC. There’s all these phrases you see for properties that can be flipped.
Then you said you analyze all those properties, right? So you got really good at knowing what kind of, again, repairs might go into it and what the potential profits might be. And then you walked some of the properties that had already been flipped to give you a good sense of what you might need to do for your property. And then you watched those properties that you walked to see what they actually sold for. So you were able to put together a really clear picture on the condition of those properties before they start, what the final condition needed to be, and then what those houses were actually selling for. And the fact that you knew that there’s like 10,000 houses being sold per month in your city, it’s crazy. I don’t know that from my markets, but it proves that you took the time to really drill down and know your market. And again, I think those are the steps that people don’t take that separates those who are successful from those that aren’t.

Matthew:
Exactly. And I’m super risk-averse, so I knew that if I could qualify for a conventional 5% down, house that I could live in after I flipped it, that was safer than getting a hard money loan for my first time and having rent plus a hard money loan. So to me, it seems less risky. Also too, I love grandma specials, and this trust sale was a grandma special. And I just call those, they’re the houses that are probably foundationally okay in terms of their big systems. They’ve been maintained with their HVAC and their roof and their other systems. They’re just really sad on the inside. And all I wanted to do was take that sadness and make it amazing so I could sell. And I found you could put your money towards the cosmetics instead of the big bucket items that we always don’t like to pay for.

Ashley:
That’s cool. I just bought my first property that wasn’t a state sale too, and it was an older gentleman, never married, never had kids. You go through the house and all the stuff is in there before they actually have the estate sale, and it is so sad and stuff. But then it was really sweet. His sister was the trustee of the estate and she was the one that handled the sale of the property to me. And on the day that we closed, when I went into the property, there was a beautiful bouquet of sunflowers and a little note and just saying her brother had such this vision for the house and she’d love to see it when I’m all done with it and everything like that. And it’s just like, “God, I was just going to turn into this simple rental property, but God, maybe now I need to actually do something amazing.” I’m like, “No, no, no. Focus, focus, focus.”

Matthew:
Focus.

Ashley:
But yeah, the way you buy different properties, it’s just like that experience of dealing with the seller. Things like that, it is crazy how evergreen experience can be so different doing those transactions. So since that property, what has happened since then and bring us to date?

Matthew:
Oh yeah. So, so much has happened and it’s traumatic, so I’ll try to make it as least traumatic as possible. But while this was happening-

Ashley:
It’s Halloween. Bring the drama.

Matthew:
Bring the drama. So as this was happening, on the work front, I guess I was doing a really good job because what I wanted to do with these individuals who were losing their job was treat them with dignity and respect and make sure that they felt like the new company respected them as they went to their next chapter of their lives. And apparently, I did a really good job at this because the company actually found me a job. They didn’t lay me off. So they said, “Hey Matt, we found you a job, but it’s in Dallas.” So again, I don’t want to say no. Who knows what’s going to happen? I accept the job in Dallas. The flip goes through without a problem, except it takes a little longer to sell. I end up moving to Dallas while the flip is still on the market in Houston. We’re getting into December. I used all of my savings. I had a lending tree loan to pay for the repairs. So I was just sitting there just waiting for it to sell and it finally sold. And so I was super excited with that.
And so once I had the proof of concept of yes, I nailed my first flip, not nailed, but I was pretty successful, I wanted to do it again in Dallas, but I had no idea what the market looked like. Since I had my license, I joined the Dallas MLS, and then I just started analyzing different neighborhoods and I would look at the cheapest price per square foot and the highest price per square foot and see if there was enough space between me improving it and making a profit. I would even double check the school districts because in Texas they get their funding from the tax base, from the houses. So even being zoned to a different school could throw off your numbers being on the wrong side of the street, so I really wanted to confirm that.
So in May of 2019, I actually went under contract on my second flip. I was too slow and it went pending, and I was really upset. So I called the agent and I said, “Hey, agent, do you have a backup contract?’ And she said no. And I was like, “Well, let’s work out one.” And so I was super excited and I always recommend to anyone to always ask if there’s a backup contract. And if not, negotiate that contract because one of the great things about it is if that first contract terminates for any reason, you’ve already negotiated that contract with the seller and yours comes into play like that. And that’s how I got two of my four properties.

Ashley:
Yeah, it’s kind of explained that process. So you talked about you’re just notifying the agent saying, “Do you have a backup contract?” Maybe just explain exactly what that is and how are you making yourself competitive that you think that they’re going to actually take your backup offer instead of going back out onto the market?

Matthew:
Perfect. So in Texas, you can negotiate a backup offer just like you would the very first active offer. So you’re negotiating the price and the terms and the option period, earnest money, any sort of concessions. So you have to be as enticing or aggressive as you would be if this were just that regular first offer. The great thing about it is that you sign it, it goes to the title company, you send your earnest and your option money. And then if that contract comes into play by termination of the first one, then you’ve already negotiated everything. And sellers like to do this as well because they like to have the power during that first contract that, “Hey, if they ask for too many things during the option period, we have this guy, Matt, in the back wing over here waiting to buy it.” So it gives them a leg up as well.

Tony:
That’s great. I’ve actually never done it that way. I’ve talked to agents like, “Hey, if things fall out, let me be your first guy.” And my second property, that’s how it happened where I was second in line, but I didn’t sign a purchase agreement. I didn’t send any money into escrow. So that’s a totally different way of solidifying that offer behind them. And if your offer’s better, it almost incentivizes the seller in a way to find reasons to poke holes and what the buyer’s asking for.

Matthew:
It did. And it was. I made sure of it just because I kind of had a feeling where I needed to be from the agent because I went to the open house, I built that rapport. I called her, I was checking in and she was like, “Matt, they’re getting cold feet. They haven’t done their inspection yet.” And I’m like, “Fantastic. Let’s hope they don’t.” So it really helps if you build that rapport with the agent just so then they may keep you top of mind if you do need to negotiate a backup buffer.

Tony:
So Matt, once you close on this property in late 2019, does it go as smoothly as the first one? Are you replicating that same success? Or walk us through how this next flip turned out for you.

Matthew:
Tony, you’re foreshadowing because it absolutely did not. This was probably the hardest time in real estate that I’ve ever had. So it starts off smoothly. It’s okay. I’m in my apartment in Dallas checking on the flip. And then I get a call or email while I’m at work. Everything dramatic happens at work for some reason. And it’s from my contractor and he said, “Matt, after much thought, I’ve decided to walk away from your flip. It’s too much work for me. I’ll make sure you get back your money.” And my heart sank because I knew I had paid him $20,000 in advance. And I just knew in my heart of hearts that I was not going to see that money again.
And so it was a huge lesson for me that we preach all the time about not getting ahead of your contractors. And the reason why I felt comfortable doing it is I went with a really reputable company in Houston that only works with investors, only fixes flips. They don’t work with any residential people. So that was my state of mind when hiring this guy. And so I looked at the bank account and I said, “I don’t have enough money to hire another GC. I barely have enough money to order all the things that need to be done to finish the flip.” I would say it was about 80% done. So I take a mattress-

Tony:
But Matt, sorry, did you get the money back from the… Did you get the 20K back? Or did he keep-

Matthew:
No, I didn’t. He did a lot of song and dance and he kind of just disappeared. And I actually, right before statute and limitations ran out, I was able to serve him, but then something else happened and it never went forward. And I just kind of used that as a huge learning lesson of-

Tony:
It’s tough, man. I just want to… And Ash, I’m curious what your feedback is on this as well. But for me, when I work with the contractor for the first time, I usually try and back load that last payment. So I’ll do… I don’t know. I think my last contract with new contractors, it was like, “I’ll give you 10% upfront, 15% after you finish demo, another 15% after you finish, I don’t know, rough plumbing or electrical or whatever it is. And then the last 20% is once the job is actually completed.” Is your schedule something similar to that as when you’re working with a new contractor?

Ashley:
Right now all I’m doing is I’m being invoiced based on what is completed. So no money upfront. And then right now my contractor’s doing every two weeks he’ll invoice me. He’s a GC, but he does some of the work himself. But the painter just finished, so I just got the invoice for the painter and things like that. But we just do it that way and that’s kind of easiest for us. And I’ve been working with just one contractor recently.

Tony:
And it’s easier, I think, once you’ve built a relationship. Like my guy Nacho and Joshua Tree, we don’t even sign any contract with him. Nacho is like a second father to me and Sarah at this point. So we trust him with our lives. But if it’s a new contract, we typically set it up that way. So Matt, sorry to hear that he runs off with your 20K, but yeah, I guess from that moment, how do you get this job finished?

Matthew:
There’s really only one option. I took one of my mattresses and moved it into the bedroom of my unfinished flip and I YouTubed my way through the finishing of that second flip. And so I would order the materials, I had to reorder the doors even though I already gave the contractor money for the doors, ordering the baseboards, the cabinets, the countertops. The big stuff I did have to contract out. I can’t install marble countertops. But the carpentry work. I was like, “How do I install baseboards? Okay, got it.” So you get a nail gun. And I just remember going to the baseboard being like boom, and then wiping a tear away and then boom and then wiping. I just thought my world was over and I thought I was really dumb for trying to be super cool and I did one flip and I was awesome and I apparently wasn’t.
And so that took me until December of 2019 is when I finally finished the flip and I was super proud of it and it was gorgeous, and I was just like, “Man, I’m going to live in this house now because I earned it.” It was insane. So as we know, COVID happened in March of 2020, things started to slow down. There was a lot of uncertainty. And I had a lot of PTSD. I really didn’t listen to a podcast for a while. I was happy being in my house, but then I got bored and I got inspired. So I picked up Set for Life by Scott Trench and we talk about living beneath your means, and I’m like, “Oh yeah, I remember that.” And talking about how regular people can build wealth by house hacking, and I’m like, “Ooh, tell me more. Let’s learn about this house hacking thing.”
So I remember I was sunbathing in my backyard, minding my own COVID business, and I read this and I was like, “I’m selling my house. Why am I living in this house? It costs one paycheck to run. Yes, it’s gorgeous. Yes, I love living in it. I feel super cool because I did all the work myself, but this is not going to help me get to where I need to go.” So I ordered a for sale sign from my broker. I ordered the photographer. I put it online by the weekend. I had 15 showings, three full price offers, and I sold the house.

Tony:
Dude, I love hearing when folks DIY. I’m a real estate investor, but I’m not the DIY guy. I’ll hang a light fixture, I’ll swap out some light switches, but baseboards, carpentry, that stuff I’m not that good at. But kudos to you, man, for buckling down and doing the work that needed to be done to be able to get that deal across the finish line.
So the second flip eventually has a happy ending, which is good. And I’m assuming, Matt, were you able to sell that one for a profit?

Matthew:
I was. So what was so crazy about this story too is after I sold it, I was like through the option period, I’m like, “I think they’re actually not going to terminate the contract” and I was like, “Oh no, I need somewhere to live. And also I need somewhere to store my stuff because I have 2,000 square feet of furniture now that I’ve collected.” And so I put my stuff in storage. I found a corporate unit in Dallas because I didn’t know when I was going to have to go back to the office.
And so the profit on that one was 55 grand even with the 20K hit from the contractor. I remember going to the corporate apartment, I’m around all of these weird objects because none of them are mine. I’m sitting at my laptop and I’m pressing refresh on my bank account waiting for the wire to hit. I know, don’t laugh. It’s kind of silly. But to me it represented my hard work on that flip, but it also had my cash from my first flip in there as well. So my bank account was super, super tiny and I was like, “Oh my gosh, what’s going on?’ And then when I refreshed that afternoon and it was there, I felt this proudness and happiness and I was like, “Man, I went from having less than fewer than two months of reserves to 50 months of living reserves in two years.” And it was just a really cool experience that I was very proud about.

Ashley:
Yeah. That is such a monumental moment. That is definitely 100% something to be proud about for sure.

Matthew:
Yeah, it was, sure. And then that kicked off my summer of couch-surfing as I like to call it. So I got sick of living in the corporate Airbnb, so to speak. I knew we weren’t going back to the office anytime soon so I just started, “Hey friend, I’m coming to Austin, I’m going to stay with you for a while.” I wanted to go live with my mom. She loved it. She cooked for me. We binge on Netflix. It was a really cool summer stay with friends in Houston. And I had it in my mind that I really needed a fourplex FHA. And the reason why I wanted it is I wanted to lever as many units I can while still getting a regular loan. I wanted FHA because I wanted the 3.5% down, not the 25% down.
And then, so that was my new mission in life. I went and go. I looked at all the fourplexes in Houston. I didn’t even care if it was an hour away because Houston is an hour away from Houston because it’s so large. And so I found one right by the airport. And so I got out of the car and I was like, “Well, I’m not scared to get out of the car. That’s a good first step up.” And then I look up and I see the planes passing overhead. I’m not kidding, 700 feet. It’s on the final approach. The flaps are out. You can see the Qantas and the Emirates and the Lufthansa, In Spirit, and then you hope the Spirit doesn’t land on your house because you know, their Spirit. But it was that close, and so I was like, “You know what? I’m going to go ahead and make an offer on this thing.”
So I made an offer, it was listed for 450,000. I went in at 405,000 with… I had love to do my 5K kicker at closing just because it’s fun to bring less cash. They counted at 410,000 and then we were under contract. And I was like, “Man, this is super exciting. This is super easy. All of my real estate stuff that’s hard is over and it’s going to be smooth sailing.” Well, because this is the Halloween episode and we’re bringing the drama, this is where stuff starts to get a little bit crazy.
So I schedule the inspection. I haven’t been in these units yet because you know, really don’t get to view them until you’re under a contract. So we start with the first unit, A1. I go in perfectly fine. Two story townhouse, they’re side by each, looks great. Going to the second one, more of the same. There’s nothing really wrong with it. Going to the third one, there’s no floor, so there’s no carpet, there’s no doors on the cabinets, there’s no air vent covers. I’m like, “Okay, well we’re going to have to get this fixed if it’s going to go FHA, but no big deal.”
Then we go into the fourth one. And so I knock on the door. From the information that I have, I’m expecting a 30 something female. And it’s an old lady and she’s like, “Hello?” And I’m like, “Yes, I’m here to inspect the property.” And she’s like, “Okay, I’m expecting you.” I walk in, I get hit with this smell that smells of decay. It’s 90 degrees, they’re not using the AC. This is June in Houston, 2021. I take a look around, I notice these pots and pans. I’m like, “This is bizarre decor” until I realize that they’re full of water because water is dripping from the ceiling. We go into the kitchen, there’s little baby cockroaches running everywhere. And the old lady is like, “Well, you can’t go upstairs yet because my daughter’s getting ready.” Man, I was like, “Okay, ma’am, we’ll just inspect the downstairs.”
So then after a while, she calls me over and she’s like, “You’re going to do a really good job with this real estate thing. Is it okay if I bless you and bless the house?” And again, I’m not going to say no, it could be fun. So she blesses me. She blesses the house. And then at this point I’m thinking, “There may be something going on with the lady.” I said, “Do you mind if I go upstairs and just take a look around? And if your daughter’s up there, I’ll just knock before I go in.” So we go upstairs, we confirm there’s no one up there. The doors are all wilted because it was so humid in the place.

Tony:
Well, hold on. There’s no one up there? As in the daughter-

Matthew:
No.

Tony:
… wasn’t even upstairs? Okay.

Matthew:
She was not there. So we go into the bathroom, the toilet doesn’t flush, the shower doesn’t work. It’s the only shower in the place. I’m pretty concerned. Smart Matt decides to flush the toilet that doesn’t work. All I hear is screaming from downstairs from the lady, “Oh my god, there’s water coming through the ceiling.” I’m like, “Okay, well that’s broken too.” And so I have this moment of, “Matt, what are you doing? This is really dumb. You need to run.” And then my inspector, as if he read my mind, goes, “Matt, do you want me to continue with the inspection?” And I’m like, “Yes, let’s do it. What’s the worst?” So he finishes. I get back in the car, I exhale. And I call the agent and I’m like, “Hey, good news, bad news. Good news, I want to continue. The bad news, we have a lot of work to do and the sellers need to get onboard if this is going to qualify for an FHA.” So we fixed the things that we think need to be fixed for an FHA loan, the lender-

Ashley:
How did you negotiate that with the sellers? Did they pay for it? Did you come off the purchase price? How did that work out?

Matthew:
They did. So my amendment was actually pretty aggressive. I increased my concession to 10K. I asked for all of the stuff to be fixed on their dime during escrow. I even put in there because I didn’t know who the old lady was yet, I had a feeling it was the tenant’s mom. I said that that unit needed to be… They needed to deliver a notice of non-renewal within 30 days of us going under contract because she was on month to month tenancy. So I knew that I wasn’t stuck with that tenant, but I didn’t know if they were going to leave. And then if they weren’t going to leave, I asked for three months of rent from them just in case they didn’t leave, which they agreed to, which was fantastic. So they agreed to that.

Ashley:
Which was probably held in escrow?

Matthew:
It actually wasn’t. So I was listening to the latest podcast that just came out and you talked about holding those funds in escrow, and I just added them to the amendment. So I was getting those funds regardless, which was probably-

Ashley:
Oh yeah, great idea.

Matthew:
… a little better for me on the edge.

Ashley:
Yeah.

Matthew:
So then we order the appraisal. So if we go back to summer of ’21, everyone and their cat was refining. I was locked in at 2.6. Everyone else was like, “Yes,” which those days were gone. So sad. But I was locked. No one would take the job because the appraiser would rather get the house in the suburbs that looked like the other houses and they could get the appraisal done within two seconds. So the lender was like, “Matt, we have to up the offering to 2K” and I’m like, “2K for an appraisal. Guess that’s what we got to do.” And so we finally got the appraisal, they did it. It came back. I’m looking for the value. I’m like, “Please come back at 410,000.” It comes back as cannot be determined, tear down status.” So then my lender-

Ashley:
[inaudible 00:39:15].

Matthew:
… my lender calls me and he’s like, “Matt, what kind of property do you have me typed up? Tear down status? This is unbelievable.” And I’m like, “Hey, there’s something wrong with this appraiser.” I sent him all of the pictures from the repairs and from my inspection, and he’s like, “Yeah, there’s something wrong.” So we get in touch with the lender’s boss, the appraisal management company. They convinced the appraiser to come back out, reinspect the property. He gives it a value of the magical 410,000 that we need, but we needed to fix a couple more things. So we go ahead-

Tony:
I just want to pause for a second because I’ve actually never heard of an appraiser saying that a property need to be torn down. I didn’t even know that that was an option.

Matthew:
It was wild. I was just reading the thing. The lender had never heard of it. The lender’s boss hadn’t. The appraisal management company thought it was odd too. So we send the appraisal-

Tony:
And he was still going to charge you 2,000 bucks for telling you just to tear the thing down.

Matthew:
I was like, “Come on now. You can’t break my heart and charge me two kids at the same time.”

Tony:
That’s crazy.

Matthew:
Yeah, it was insane. So we got the appraiser back out there. It comes back at 410,000. We do-

Ashley:
And was it the same one or someone else from the company?

Matthew:
It was. So every one of my experiences with an appraiser is they send the same one back out. I had a similar experience. I was mentoring a friend through his first FHA fourplex and it didn’t meet the self-sufficiency clause, so I had to write a whole thing about that, so they sent the appraiser back out to fix that. But yeah, it’s always been the same in my experience.
And so we finally do the fixes, we send it to underwriting. And then underwriting comes back after we made the fixes and says, “You know what? We actually found more you need to fix. The initial report says that they couldn’t get the heater to work in one of the units, so you need to send the inspector back out there after you can show us that you’ve certified the HVAC for the heat to work.” And I was like, “Okay, fine.”
So we do that, it goes back through underwriting. We’ve blown through two different close dates so far. So found the property in May, under contact in June or in July, goes through underwriting again, comes back out. But wait, they found more to fix. The heater’s fixed, but now they don’t like the fact that there’s cutouts behind the valves and the tubs for the access panels from prior leaks, and all four units had this. And so they said they could not fund the property because of the holes in the bathrooms. And at this point, the listing agent and the sellers, they’re on me, they’re like, “Matt, we’ve been really patient with you.” And I felt bad because they were so nice and they were helping me through the process and they were fixing things for me, and I wasn’t holding up my end of the bargain by bringing the cash and getting this thing closed.
So what do I do is I look up the CEO of my lender, I found his name, I guessed what his email is, and I put everyone on an email chain saying, “Hey, Mr. CEO, my name’s Matt. This is my loan number. These are the issues that we are having. Here’s the timeline. I would really love this loan to close. What do I need to do? I’d also like my appraisal fee refunded.” And so I actually get an email back from him the next day. They work on it, and we were closed and funded within a couple days, which is crazy.

Ashley:
Oh my gosh.

Tony:
No way. I mean, it’s-

Ashley:
Wow. That’s so cool.

Tony:
It’s so crazy because I… And just to clarify, when Matt’s using the term underwriting, he’s talking about underwriting with the lender, right?

Matthew:
Right.

Tony:
So the lender has to underwrite the file to make sure that it’s a loanable product or whatever it is.

Ashley:
And that person is different than your loan officer. It’s someone separate.

Tony:
Yeah.

Ashley:
Your loan officer is your advocate, really. And then there’s the person in underwriting, yeah.

Tony:
Was it the same? Actually, I don’t know this. Was it the same underwriter looking at the file each time or was it just going back to the underwriting department? Because I would find it really interesting if it was the same underwriter and they just kept looking at the same file trying to find something different. But if it was going back to a different person, that might make a little bit more sense. But either way, Matt, I think your step of ringing the alarm and trying to get all the troops aligned here, it’s a step that a lot of folks can take. And obviously when you’re working with the bank or a loan, like a lending company that’s a little bit smaller, that’s probably easier to do. Harder to email the CEO of Bank of America. But if you’re going to a local lender, it’s a little bit easier.

Ashley:
I manage a property for another investor, and yesterday we had an incident where there was some water leaking in one of the roofs and we just had it replaced last year. And the roofing company, we called the guy that had the project manager for who had done the roof for us and been our point of contact and he’s like, “Well, I’m not in the office, you’ll have to call somebody else.” And so we called the office phone, nobody’s answered. Try again, nobody answers. So I send a text message to the property owner and he has a very well established name in the town and I said, “Can you just reach out to him real quick? We can’t get ahold of anyone at his company or anything.” And so I think he just forwarded my text, which I knew he would do it that way. And within two minutes, Daryl’s cell phone ran and the guy called and he was just like, starts the conversation off. “I don’t know why Ashley had to call and blah blah and say stuff,” but it worked. It worked.

Tony:
Right, yeah. It solved the problem.

Ashley:
I was like, “I don’t care if you don’t like me now because I did that, but that’s what I had to do.” And it’s kind of like the book of like, Who Not How. It’s, you know?

Matthew:
Exactly.

Ashley:
I was just going to say like, okay, lets kind of bring it to date as to what your financial position is right now, what your portfolio looks like, what’s your cashflow, what’s your W2 income? And then we can kind of wrap this whole thing up and maybe by the end of the day, you’re quitting your job.

Matthew:
Oh, that would be great. Okay. Let’s get us there. So now with the four units, the fourplexes doing its thing, I’m in my current house hack, another triplex, et cetera, so I always like to look at my net. So everyone loves to spend on gross, but we’re taxed so heavily as W2. I’ve always just accounted it as, what am I taking home at the end of the day?
So as a nice round number, we’re going to call that 10 grand. And so I still have taught myself to live on half. So five is for spending, five is for my buy more real estate. And then my passive or my real estate income is sitting at 4,000 a month. And so that is kind of the spending money that I have now. So with a portfolio that is around 2.2 with 700 in equity, I have my, “oh no” fund or my buy more real estate fund, however you want to look at it. At around 75K, my business bank accounts at 20, I feel like yes, I would take a hit and yes, I would have to really watch my spending and that opportunity cost of letting my passive cashflow build on my business bank account is that worth being able to tackle all those things that I don’t have time to do with designing my portfolio to be able to network and meet with the credit unions, get the business line of credit, being able to go to more real estate events.
And then also start my coaching, which I’m really passionate about, is when I went to the real estate event in Houston this past weekend, I love being able to talk to the newbies and kind of get them to find out why they haven’t taken that first step and kind of coach them. So spending time coaching would also be a passion of mine. And then also improving me a really sad social media. So if we go look at my videos of my progress of week over week, it’s just me holding a camera going, “Okay, this is what I’ve done.” So it’s just having that, but I don’t have time for now.

Tony:
Matt. I just want to share a little bit about my story in hopes that it might give you some insight. So for me, very similar kind of journey. I climbed the corporate ladder, had a very healthy six figure job, and I ended up losing my job right at the end of 2020. I had this decision to make of, “Do I try and go back out into the workforce or do I double down on this real estate side hustle that I’ve been kind of cultivating over the last couple of years?”
Sitting down with my wife, we came to the agreement that we would give ourselves 12 months. And we had enough money saved up to last us a while longer than 12 months. So I was like, worst case scenario, we burn through some of our savings. 12 months later, I go back and I get another job. And I’m fairly confident I could go out and get another high six figure paying job that I had before. So we buckled down for 12 months and do that.
The amount of energy that we were able to put into our business during those 12 months, it was insane, the amount of growth we were able to achieve. And it never would’ve happened had I had that day job. Now, this isn’t me encouraging you necessarily to quit your job. But just at least asking the question of, how much runway do I have? And if the worst case scenario is that I give myself 12 months to really build this thing out, and at the end of that 12 months I just have to go out and get another job like the one that I already have, is that really a bad thing? At least I have 12 months to prove to myself that now’s not the right time or prove to myself that now is the right time. So that was my experience, man. And I’m incredibly grateful that I had those 12 months because it showed me that I could be an entrepreneur.

Matthew:
Nope, I love it. I love the fact that you gave yourself the 12-month runway and it’s not a decision that’s forever. And so when we initially look at this jump, especially because there’s so many people telling us not to do it, it seems like it’s a one-time thing and you have to do it forever. But if it doesn’t work out after that allowed time, then you can always go back and get another job. So I really love that perspective.

Tony:
I was just going to say… Sorry, last thing. We’re in 2023, so I’m three years into leaving my job. And dude, even today, if my business is completely crumbled today, I’m still confident I could go out today and probably still get a job that’s going to pay me six figures. So there’s really no downside because once you’ve built those skills in the workplace, you’re always going to have them, right? And you just go back out into the workforce and find that next job. But on the flip side, most people never have the courage to test out, “Can I do this by myself? Can I stand on my own two feet? Can I build value in the marketplace on my own and let my value be tied to what I can do and not what a company thinks that I’m worth?”

Ashley:
Matthew, so I have a couple of questions for you, I guess. And the first one is based off of your and Tony’s conversation, is would you easily be able to get another job or even get your same job back if you did decide to quit?

Matthew:
Yes, I am fairly confident that I could find another six figure job if I decided to quit, yeah.

Ashley:
Okay. And then in your position, would you be able to find part-time work? So you’re a consultant. Would you be able to work for another employer who it’s only part-time? Or would you be able to maybe your own agency where you even posted on Upwork or Fiverr and people could just hire you on demand if need be?

Matthew:
Yep. I’m pretty sure I could do that too.

Ashley:
Yeah. So I think that you have those options, definitely it could ease the pain or the stress and anxiety and the risk of fully quitting, is that you have those other options to actually bring in that income.
One thing that I would definitely do before you do quit your job is to get another bank loan.

Matthew:
Got it.

Ashley:
Go and purchase another property while you have that W2 income. One thing that I would like is, if you were still going to work a little bit as a consultant, if you could get a part-time job, because that W2 income is going to be way more valuable for loans than going out on your own and creating your own little business where yes, you’re bringing an income, but a lot of times banks will want to see two years of tax returns for that business that you have created on your own. But if you’re going out and you’re getting hard money and you’re going to do flips and you have private money and you’re not even worried about doing bank financing anymore, then that kind of rules that out for you.

Matthew:
No, that makes sense. I do like the idea of the one more bank loan. Well, I’m easily bankable before going rogue, right?

Ashley:
Yeah. The next thing I would look at as to what you make per an hour, and then I would make a list of tasks that you could easily outsource.

Matthew:
Okay.

Ashley:
Okay? So right now for my property management company, I have two VAs working for me completing tasks. And I pay each of them $10 per hour. Let’s say for example, you make $30 per hour. Are there things that they could do that would take things off of your plate that you could train them to do? And the training will take time. So maybe this is where you take your two weeks vacation to train some VAs and you work your hour while they’re working their hour and you still net $20? Because your time is more valuable doing your consulting work than doing tasks where a VA could do it.
So we had a guest on, and I can’t remember her name or what episode it was, it was probably a year or two ago, where while she was at work, she had a VA that just found deals for her, did deal sourcing all day long.

Matthew:
Awesome.

Ashley:
And it was probably around the same $10 an hour she paid her and she went to her W2 job and made more money and that easily covered paying the VA to do all of that. And then at home at night, she would do the little pieces of stuff that a virtual assistant couldn’t do.

Tony:
Yeah, the episode you’re talking about Ash, our participant in the chat, I think it was Maria Acosta. And actually no, Maria, yeah, she’s a stud when it comes to using her team. Avery Carl, she’s well known in the BiggerPockets ecosystem as well. She’s got a really dialed in virtual assistant team.
I actually just read a book and it kind of ties into what you were talking about, Ashley, about what is that pay rate that you should look for. The book is called Buy Back Your Time by Dan Martell. Buy Back Your Time by Dan Martell. Really incredible book. He’s a super successful tech entrepreneur. But in that book he talks about your buyback rate. And I think he sets it to like, if you can outsource something for 1/4 of what your own hourly rate is, you should always outsource that. It’s a no-brainer if it’s 1/4.

Matthew:
I love that.

Tony:
Anything above that, maybe there’s a little bit more flexibility. But if you make 30 bucks an hour or call it 40 bucks an hour and you can outsource something for 10, do it every single time because the value you can go and create at that 40 bucks per hour is going to far exceed that.

Ashley:
And your VA might actually do something better than you do too. Mine find things, like little things that I wouldn’t even think of as a third party, someone looking from the outside. And when I give them, “Here’s the scope of work of what I want you to do for this process, the SOP,” they’ll actually poke holes in it. “Well, when I did this, it goes to this,” and then I’ll be like, “God, okay, let me rework it here, or whatever.” But they follow it to a T and it’s done way better and way more efficient than if I was actually going and doing any of these tasks myself anyways too.

Tony:
I think one thing to add onto what you said, Ash, I love the idea of the part-time work. I guess like an ancillary piece to that is, are there additional services that you can provide to other real estate investors? Like if you’re doing property management for yourself right now, can you take on maybe a few property management clients for other owners? So now you’ve got an additional source of revenue there.
If you flipped houses, I don’t know, let’s say you’re really good at finding deals, can you wholesale maybe one or two deals every quarter to other real estate investors? Olivia Tati, who is on one of our recent episodes, she quit her job as an engineer at Chevron. She had a really healthy six figure salary, but she didn’t just rely on her rental income. She started a design business that helps other real estate investors designed their Airbnbs, and that’s a good portion of her rental income. So just the question of like, are there other services that you can provide that build on the skillset you already have to help other real estate investors so it’s still related to the core of what you’re trying to do?

Matthew:
Right. No, that makes great sense.

Ashley:
So my vote is no, don’t completely quit your W2 job. That’s my vote. I say go down to part-time.

Tony:
Yeah, I’m a bit of a risk-taker. So if I’m Matt, dude, if you’ve got the runway, again, I feel like that value that I got from being able to go full time, it was really impactful for me, man. But obviously at the end of the day, you got to make the choice that’s right for you. I would hate for you to quit your job and come back and say, “Tony, I quit my job and my life is falling apart.” So make the call that’s right for you.

Ashley:
“I should have taken Ashley’s advice, but…” No, I think this is awesome that you are considering it. And hopefully you’re able to take some of our advice and find a plan that works for you. And the best thing is, even though you have this decision weighing over you, there are so many millions of people that wish they were in this position where they could make this decision. So I mean, Matt, congratulations on how far you have come and to be able to be at this point in your life, it’s truly remarkable.

Matthew:
No, thank you so much. And yeah, the decision is not lost on me that it’s a privilege to be here to be able to say, “You know what? I don’t need this anymore. I’m going to go follow my passion.” And I know that not everyone has that, so I’m very excited to be here at this point in my life and be at this crossroads and I’m very much like, “Okay, I’m like Tony, but no, maybe I’m more like Ashley.” And if you go and read the comments from the posts, it is like, “What are you thinking? You need to keep your job. This economy is crazy.” And then the other camp is just like, “Do it. Follow your heart.” And so it’s just two different camps and there’s not exactly one right answer. So it’s very exciting, and I definitely gained some insights by talking to you guys about it.

Ashley:
Yeah, I think you’re in a really great position where no matter what path you take, that there are a lot of safety nets either way for you. So Matt, before we wrap this up, do you have any other questions for us?

Matthew:
No, you guys answered it. Really what I wanted to know, I wanted to know was on your mind about have you been in this before? How would you address it? If you were me, what would you do? So I feel like this is a very good discussion for me to have at this point. And I will be making my decision I think over the next couple of months, once I get that one more loan in my name per Ashley’s advice. Then hopefully I’ll be able to continue to share my story and help others and we’ll see where this journey takes me.

Ashley:
Yeah, it would be awesome to have you back just to do part of our intro to another episode or on a Rookie Reply or something, just to have you back. Leave us a voicemail of what has happened and what you decided and what you did and keep it updated, yeah.

Matthew:
That would be awesome.

Ashley:
Well, Matt, thank you so much for joining us. Can you let everyone know where they can find out more information about you and watch you revamp your Instagram?

Matthew:
For sure. So my Instagram is my last name. So first you have to learn how to spell it and then I’m easy to find. It’s M-A-R-C-E-L-I-S-S-E-N. That is my Instagram and I’m most active there.

Ashley:
Okay, awesome. Well, thank you so much for joining us. I’m Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson and we will be back with another episode. We’ll see you guys then.