Retired in His Mid-40s Using the Perfect “Small” Rental Property Formula

How does a 9th-grade dropout end up retiring early in his 40s with over 50 rental properties that generate the highest possible cash flow? And we’re not talking about big properties—no apartment buildings or commercial real estate. This investor built the perfect rental property portfolio from duplexes and triplexes—small multifamily properties that any new investor can buy. Instead of taking his energy and buying larger properties, he reinvested in the ones he had, which made him even more money, allowing him to scale faster. Matt (the Lumberjack Landlord) and his wife have self-managed over 100 rental units, meaning all that cash flow goes to them. Using his “acquire, stabilize, optimize” formula, Matt’s rentals make hundreds more in cash flow per unit than other properties. This has allowed him to retire in his 40s, all while supporting his family of six. Today, he’s showing you how you can make the most from your rental properties, too. Simple utility changes, smart renovations for higher rents, cheap (and efficient) upgrades, and more can put hundreds of dollars back in your pocket every month. Plus, he shares how to keep your best tenants, even during tough economic times. If Matt could do it all while working 60+ hour weeks, why can’t you? In This Episode We Cover How to make the most cash flow possible by self-managing your rentals Bigger isn’t better: Why Matt exclusively buys small multifamily properties The “formula” for the rental portfolio that can retire you in your 40s How to afford your first rental property even if you’re low on cash Why every investor should talk to local banks first about financing their rentals Easy ways to keep your best tenants even when the economy gets shaky Would you live in a jail? Why Matt’s tenants pay to get put behind bars And So Much More! Check out more resources from this show on ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠BiggerPockets.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.biggerpockets.com/blog/real-estate-1208 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠[email protected]⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Dave Meyer?

  If this investor can self-manage 150 units, you can manage one, or five, or 10. Today, the lumberjack landlord is here sharing how he's built a life-changing portfolio out of duplexes and triplexes, all with low vacancy and almost no tenant headaches.

• 0:23Dave Meyer?

  Hey, everyone. Welcome to the BiggerPockets Podcast. I'm Dave Meyer, Head of Real Estate Investing at BiggerPockets. Our guest today is Matt, the lumberjack landlord. Matt has built himself a really impressive portfolio that allowed him to retire early from a tech career last year, but he didn't do it by scaling to bigger multifamily properties. He owns more than 50 different properties, almost all of them duplexes and triplexes. In this episode, he's going to share a few of the systems he's created to increase his time freedom, even while consistently adding more units. These include low-cost renovation ideas that can reduce your heat and water bills as much as 20% every month, how working with

• 1:04Dave Meyer?

  local banks to lock in favorable financing that big national lenders just can't compete with, and stick around to hear his latest really awesome fun project, converting a local jail into housing units. Let's bring on Matt. Matt, welcome to the BiggerPockets Podcast. Thanks for being here.

• 1:22Speaker 01

  Thanks so much for having me. I would light if I was telling you it wasn't a dream coming true to finally be here. Very awesome and fresh off of BPCon, which was absolutely spectacular.

• 1:32Dave Meyer?

  Love hearing that.

• 1:33Speaker 01

  It was awesome.

• 1:33Dave Meyer?

  So much fun. Yeah. So thanks for coming to BPCon, and thank you for being here. We're excited that you're here. Maybe just start by giving us a little bit of background. How did you find yourself in real estate investing? Like, where were you in life when you first started getting into it?

• 1:49Speaker 01

  Yeah, so me, in a short description is I'm a ninth grade dropout. So any room I walk into, everyone's more educated than I am. Dropped out, started working every job I could and then eventually got into software, worked my way up through a company and lost all my money in the stock market explosion in 2000, 2001.

• 2:08Dave Meyer?

  Wow.

• 2:09Speaker 01

  Lost it all then. And it was every, literally every dime I had.

• 2:12Dave Meyer?

  Oh God.

• 2:12Speaker 01

  Then I started doing research on what assets can I buy that actually give me a return on my capital, but they also give me cash flow. You know, it's a pretty short list of things that appreciate and give you cash flow. There's a limited number of stocks that do that, you know, with paying dividends. There's a bunch of different little niches out there, but I looked at it and then I said, all right, well, what do other wealthy people do? And then I looked and 90% of millionaires became that through real estate. And so I started buying in oh, three. And the first place I bought, I was doing house hacking before anyone knew what that was. Called a mortgage broker and I said, hey, this is a house that I want to buy. And he goes, all right, well, here's all the information I need. I get him all the information. He looks at it and goes, you don't qualify.

• 2:55Dave Meyer?

  Even in 2003, they were saying you don't qualify?

• 2:57Speaker 01

  Yeah.

• 2:58Dave Meyer?

  That's pretty rough because they were giving anyone a mortgage that.

• 3:01Speaker 01

  I found the only mortgage broker on the planet that didn't do ninja loans, apparently.

• 3:06Dave Meyer?

  You might have.

• 3:08Speaker 01

  So he says, yeah, you just don't qualify. And I said, well, what have you seen other people do? And he just said, get a roommate on a lease. He goes, I'll count that income towards your income and you'll be able to afford the place that you're looking for. If you get at least a thousand bucks a month. So I went on the search, sent a bunch of people, acquaintances, hey, want to be a roommate? And found one. And so that was it. The rest was history. I bought my first place and I house hacked it. That was the only way that I could afford it.

• 3:34Dave Meyer?

  Awesome. Well, good for you. I mean, it sounds like you overcame a lot of pretty challenging situations very, very early in your career.

• 3:41Speaker 01

  Yeah.

• 3:41Dave Meyer?

  But maybe catch us up. So where are you today?

• 3:44Speaker 01

  So today we are 53 buildings, 150 plus units and about 400 tenants. But we really specialize in small multifamily, two, three, four unit stuff because bigger isn't always better.

• 3:57Dave Meyer?

  What is it that you like about that asset class more than wanting to go into commercial or any other asset class?

• 4:05Speaker 01

  What really attracted me to them was, as you know, with larger commercial properties or properties that are five units or greater. The value of the property fluctuates based on the amount of rents essentially collected. And so you can do a value add, you can make it a much nicer place and then you can get more money for the rents. And then that means that the property is worth that much more money. On the residential side, four unit units and less, you're, you don't have that option. It's really much more driven based on what the last thing like it sold for. So the idea was creating something that I call a rent box, which is understanding 17 crucial categories across the entire spectrum that tells me this is what a unit is renting for. Therefore, this is what my unit is worth.

• 4:49Speaker 01

  So it was then targeting and finding every type of asset, two, three and four units as they come on the market. Are they well under market rents? Are they well cared for buildings? I don't want turnkey because there's no value opportunity there. But that was the challenge. The challenge was how do we grow a portfolio, not at a certain pace, but at a certain point where every deal that we do is a great deal.

• 5:16Dave Meyer?

  I love that. Yeah. So it's not a door count. You never were like, I need to get to 150 doors. If you listen to the show, you know, I hate door count. I think it's the silliest metric. So it sounds like you essentially created your own algorithm for lack of better word, right? Like you're going through these 17 variables you're evaluating. Can you share some of them with us?

• 5:34Speaker 01

  Sure. So it is, you know, whether the unit is been redone or not, to what grade has it been redone? Right? Have they just done painting? Okay. Have they done painting and trim work? Have they done painting, trim work, doors and kitchen? Have they redone a bathroom? Have they redone the floors? Have they redone the roof? What's going on with the basement? Then it's, you know, things like location, because I can't change that. So I don't want things in a D zone, but I'll buy a D property in a B zone, because I can make that D property a B property in a B zone, and now it's worth something.

• 6:07Dave Meyer?

  I love this approach. I feel like, you know, a lot of people like to label themselves as I'm a two unit investor. I'm a this kind of investor. I think most people are just kind of. Opportunistic within their own niche. And it sounds like that's kind of what you're doing. It's like you don't have some pie in the sky thing, but anytime something comes across your desk that fits your buy box and you feel good about, you're going to do it. And you can do that because you spent so much time and effort refining a buy box that you know you can execute well. And that sort of fits into the lifestyle and financial goals that you're looking for.

• 6:43Speaker 01

  Yeah, definable, repeatable, executable. I can define it, I can repeat it, and I can execute on it, whatever the plan is, whether it's large reno or small reno or light reno.

• 6:52Dave Meyer?

  It's an amazing approach to real estate. I, you know, we all joke, everyone calls this boring. It's not boring. This is, this is the way to go. This is, this is just the right way to approach real estate. I'm sorry, I, I invest in syndications and do some of this other stuff, but like my core is just buying these duplexes, buying triplexes. This is a really good risk adjusted way to approach real estate. So I couldn't agree more there. But I want to hear a little bit more about how you manage these properties because this is a lot, 150 units. You do this by yourself. So I'd love your input on that, but we got to take a quick break. We'll be right back. Running your real estate business doesn't have to feel like juggling five different tools.

• 7:35Dave Meyer?

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• 8:11Dave Meyer?

  Most investors only think about insurance when something goes wrong. A tenant injury, storm damage, loss of rent. Then suddenly, the cheapest policy doesn't feel like the best one anymore. That's why a lot of BiggerPockets investors use steadily for landlord insurance, designed specifically for rental properties. Whether you own one property or a growing portfolio, they make it simple to get covered properly. And BiggerPockets Pro members get an extra 5% off their landlord insurance premiums. Visit biggerpockets.com/landlordinsurance to get a quote today.

• 8:45Henry Washington?

  Here's a strategy that most W2 employees have never heard of. Normally, if you want to write off a rental property against your regular income, you need real estate professional status. That means tracking hundreds of hours a year. Rent2Retirement just launched a program that skips all of that. It's called the STR loophole tenant placement program. Here's how it works. You buy one of Rent2Retirement's Class A new construction investment properties. You set up an Airbnb listing and self-manage it for the remainder of the year. Rent2Retirement then rents the home as a short-term rental to establish it as an STR for the year. No furnishing required, making this the easy button to save five or six figures in taxes this year.

• 9:27Henry Washington?

  And because you're the sole manager, there's no hourly minimum to meet. That lets you use a cost segregation study to accelerate the depreciation and potentially write off over $100,000 against your income, even on your first rental. Add in cash back up to 13% of the home price, which exceeds $60,000 on some properties. With this massive cash back incentive, investors are seeing total returns up to 126%. New construction, A-class properties, and inventory is limited. Learn more at biggerpockets.com/retirement or text REI to 33777. Again, text REI to 33777.

• 10:09Henry Washington?

  Quick word about a new pro perk you'll want to know about. Aven. If you're a homeowner, there's a good chance you're sitting on equity that you're not using. The problem is tapping into that usually means a cash out refi, a traditional second mortgage, or weeks of paperwork just to get approved. Aven built something different. It's a credit card, but it's backed by your home equity. So you get a lot of the rate benefits of a HELOC with the flexibility of a card you can use anywhere. Rates are typically well below a standard credit card. Approval is fast and mostly online, and you can use it for anything. A renovation, paying down high interest debt, or just have more breathing room in your budget. And if you're a BiggerPockets Pro member, there's an extra reason to check it out. Get approved for the Aven card and you'll get a $400 statement credit after spending $400 on your Aven card.

• 10:55Henry Washington?

  Enough to cover your entire annual Pro membership. Head over to aven.com/biggerpockets to see if you qualify. Aven Financial, NMLS #2042345. Cards issued per 202 license from Visa USA, Inc. by Coastal Community Bank. NMLS #462289. Member FDIC. Equal housing lender. Subject to approval. Terms apply. Visit aven.com for details.

• 11:12Speaker 03

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• 11:45Dave Meyer?

  Welcome back to the BiggerPockets Podcast. I'm here with Matt Hawkins, talking about how he scaled using a repeatable formula that honestly, most people listening to this show could realistically achieve. He's now sitting at 53 properties, over 150 units, and you manage these by yourself, right?

• 12:03Speaker 01

  Yeah, you know, essentially, it's myself, my wife. So up until only three or four years ago, about four years ago, I did everything. But I was also working a 60-hour-a-week job as a software executive. When somebody says they don't have time, listen, I built my 150 Unit portfolio while I had a full-time executive job.

• 12:24Dave Meyer?

  It's definitely possible. You can do it.

• 12:25Speaker 01

  It's a thing. It's definitely, I'm not the only one in the world that can do it. Like, everybody can do what I did. It's just a matter of where I think a lot of people struggle is systems and processes and being an executive in a software company. We have systems and processes. Everything we do is systematic. It's got steps to it. And so that's, you know, having that career and being kind of a company fixer is where my skillset was able to shine through. Because we'd encounter a problem and then we would understand, how do we address this more quickly? Continue to give a great experience to the, to the end user, which is the tenant. And then allow ourselves to grow. So very often people do the growth and then figure out systems after.

• 13:08Speaker 01

  If you figure out the systems beforehand, then it allows you to grow to a level that you'll never, that you never thought you could grow to. Cause it just snaps in.

• 13:17Dave Meyer?

  Yep.

• 13:18Speaker 01

  It's just adding another piece to it. It's really powerful. So I self-managed until we were 120 units. I self-managed.

• 13:26Dave Meyer?

  Wow. Okay. That must've been crazy.

• 13:28Speaker 01

  It was nuts. There was always something to fix, always something to do. But the idea was when we would, when we would acquire an asset, we'd spend some of the money in that first year to make sure that that asset became stabilized. That's really the framework that, you know, I essentially invented for myself, which was, you know, acquire, stabilize and then optimize. Very often landlords get all psyched about acquiring. And then they forget about stabilization because they're already on to the next deal. And then almost no one optimizes. Almost no one.

• 13:58Dave Meyer?

  Yeah, that's so true. So when you say stabilize, I just want to make sure the audience all understands. That means you're taking a property, C-class, B-class property, whatever, and investing right up front. To, one, improve, I guess, systems, make upgrades, probably drive up rents, ensure a better tenant experience, but also.

• 14:18Dave Meyer?

  Front loading some of the work so there's less maintenance repairs, right?

• 14:23Speaker 01

  Yeah, our introductory letter to tenants when we acquire a building is, hey, we're really excited to be your landlords. Don't be nervous. We're not raising your rent, but we do have some questions for you. We'd like to understand two or three things that you were asking the previous landlord for that he never took care of for you. We recognize that we do things a little bit differently than they do them. So we'd like to understand what those things are to see what we might be able to do for you to get those things taken care of. It's the fastest way to unearth issues in the building. It's the fastest way to make the tenant happy. We're making a deposit into the tenant recognizing that they need to know. We're not here just to raise your rent. We're not here to evict you. We're here to partner with you on the new asset that we have, but it's your job just as much as it is ours to take care of it.

• 15:06Speaker 01

  So we tell them, if you see a leak, if you hear a leak, any of those things, please call our emergency numbers. We like to say, fire, flood, gas, blood, pick up the phone, give us a call. So in managing it that way, you know, we've fully automated our entire process. So now my phone doesn't even ring when we get an emergency call. And the way that we've kind of built this framework, it's all procedure, it's all process, it's all standardized. So that way they get a quick return phone call, things are addressed quickly and they get a much better, a much better experience than they would for most people.

• 15:41Dave Meyer?

  I absolutely love that. I just think this is the kind of mutual benefit investing that we talk about on the show. Like you are benefiting from this because you have an asset that's going to be stabilized. People are going to take care of it. They're going to like living there. You're going to have lower vacancy. You're going to have lower repairs. So much good stuff and the tenant loves living that like you're providing a service to your community, to your tenants that they are going to like. I think this is just the right mindset for how to have a sustainable portfolio. You do have to come out of pocket a little more upfront, but it, I promise you, ask any experienced investor. It is a worthwhile ROI over the long run and you also just get to provide great housing to your tenants.

• 16:24Dave Meyer?

  But how, Matt, do you underwrite this? Because I think that's something people get hung up on is if you're buying, let's just throw out numbers and just make them up. $400,000 duplex, whatever. You know, you're going to have to put 100 grand down if you're putting 25% down. Then you spend 30 grand, 40 grand renovating this. It makes your cash flow probably look negative, at least for the first couple of years or the first year. So how do you like think about this from a math and underwriting perspective to make it make sense to you? And make sure that you are still getting the kind of deal that you want to add to your portfolio?

• 17:01Speaker 01

  Sure. So for the first 13 years, I did nine house hacks in 13 years.

• 17:06Dave Meyer?

  Wow.

• 17:06Speaker 01

  Nine times would move in, do all the work that I could possibly do. Get one side done, get it rented out, then move over to another side that wasn't done. Live in that, get that done, and then rent that out. But I was buying the next place, but I would do a cash out refi. Because now the value of the property is far exceeded what it was because I added all that value. And then after I did that the first four or five times, I then started hiring contractors that could do the work a whole lot faster and gave me a better turnaround and not living so much in construction mess. But as I'm underwriting deals now today, the idea is we've done this a number of different ways. I think what's really interesting is, is you know, in the land of Burg, you know, I was doing it before you had no B and Rs. And that was the lifestyle.

• 17:50Speaker 01

  But what we basically did to help get deals done there was we would go in, we would get everything priced out, understanding exactly what things we had to upgrade, not want to upgrade. There are the things that actually drive getting you more value and more rents and more perceived value by a potential tenant than things that don't. The roof can't leak.

• 18:10Dave Meyer?

  The heat's gotta work.

• 18:12Speaker 01

  Yeah, the heat's gotta work. But outside of that, what are the things that we can do to make it a better experience for them? You know, we can use better cabinets. We can use better appliances that don't break as often. We can change out the light setups. You know, we change out light setups in a lot of our apartments for 1,000 or 1,200 bucks. And everybody walks in and instead of seeing, you know, that light from Home Depot that we've all seen 1,000 times. With the, with the metal tip, instead of seeing that, you're seeing actually a nice light layout where it's actually like they took care of what this looked like.

• 18:44Dave Meyer?

  Are you saying that you have to put out a competitive product in the market to be successful?

• 18:49Speaker 01

  Amazing, right? But that's the best part is you can actually put something out that is rehabbed, not as nice as brand new, but close enough where even if you're taking a 20% discount over new, you're getting a 20% premium over existing.

• 19:04Dave Meyer?

  Yeah, exactly. I, I think so many folks in, in real estate get caught up on doing things cheap and it is, it's penny wise and pound foolish. It's, you are trying to save money upfront and you are not thinking about, everyone notices that when you're a tenant and you walk into that, you notice it. And especially in the environment where we're going into now, where it's not as easy to get tenants as it was a couple of years ago, you have to think about how you stack up against your competition. Like you can't just throw anything up on Zillow right now and expect to get rent or rent growth in the same way. And so these kinds of little things, it's, it's not even that much money. It's 50 bucks here, it's a hundred bucks there, usually on a rental unit that, you

• 19:48Dave Meyer?

  know, that you should invest because this is an investment. That's the whole definition. You should put that money in upfront when you can, because it's going to get you higher rents, it's going to get you great tenants and it's going to improve the value of your property as well. So I, I just really want to emphasize how important this is to everyone listening right now.

• 20:07Speaker 01

  I agree. I think, you know, as, as people look at it, I think as they look at their asset, because this is what this is, it's an asset. I think that when you're able to understand where the improvement should be made, what's going to get you a return and get you a better tenant, these are, you know, essentially the, the, the path to where you're going to bring your successful business. If you ever had to sell, do you want to sell a house that has a bunch of issues? Or do you want to sell a house that's pretty much turnkey?

• 20:33Dave Meyer?

  Yeah.

• 20:33Speaker 01

  I don't buy turnkey because there's no money to be made there, or not enough money to be made there.

• 20:38Dave Meyer?

  Right.

• 20:38Speaker 01

  My returns are quadruple what turnkey is. I'll do the extra work.

• 20:42Dave Meyer?

  I want to shift gears a little bit, Matt, because we talked a little bit about stabilizing, but you also mentioned optimizing, which I think is always important. But right now, in the more expensive market, I see a lot of investors sort of turning their attention. Less towards acquisition and more is towards optimization. So tell us a little bit about what you mean by optimizing and if you have any processes or systems, our audience should know about that.

• 21:06Speaker 01

  Sure. I mean, the first thing is, you know, if you look at the maintenance snowball, as you increase number of properties, the reoccurring problems that you don't take care of will slow you down from being able to acquire additional assets. They'll do that by two things. One, time, and two, money. Because you're constantly throwing money at not fixing the problem the right way. It's better to bite the bullet, make the repair, make the repair the right way, and then close the chapter on that repair. So you can then move on to the next. So one of the things in optimizing the business is get all the rats taken care of. Get all the reoccurring issues that are constantly coming up. Address those, fortify the house, get it ready.

• 21:49Speaker 01

  Make sure that all of the ongoing stuff is no longer an ongoing thing. Cause that's going to slow you down from acquiring additional assets. Other ways to optimize properties on an individual basis. Make sure that heating systems are clean. So they're running as efficiently as possible. Make sure that you put yourself through the process of evaluating, I'm going to say it, toilets. I'm a toilet, I'm a toilet dork.

• 22:13Dave Meyer?

  It's always about toilets.

• 22:15Speaker 01

  Yes. You know, who cares about them? Guys that own a fourplex that has two bathrooms per unit. That's eight toilets and every single time it flushes, it's a 3.6 gallon blush.

• 22:27Dave Meyer?

  Yeah, but you could have half that.

• 22:29Speaker 01

  I'm using a toilet that's a one, two.

• 22:31Dave Meyer?

  Yeah. Oh, a third of that. That's even better. Yeah.

• 22:35Speaker 01

  But if you look at a typical building, right? And if you figure like, and this is how dorky it gets. If you figure number of flushes, and then this is what the number is, you could literally be saving a hundred to $200 a month in water and sewer fees.

• 22:48Dave Meyer?

  Unbelievable.

• 22:48Speaker 01

  That's money that ends up at the bottom line at the end of the year. And all it took was an evaluation of that being made aware of the problem and then swapping out the toilet, which is a couple hundred dollar expense, which largely per toilet pays for itself within a year. And then you're making that much more profit moving on. So very often people are looking for that, what's my next deal? What's my next deal? What's my next deal? I've got good news. You probably have 10 deals that you already have or five deals you already have, where if you just optimize them, you'd create a whole nother house plus of revenue.

• 23:20Dave Meyer?

  Wow, that's such an awesome tip. I've never heard that before. And yeah, I, I'll be honest with you. I don't know how much my water bills have gone up. It's probably a lot and I'm not paying attention to it. You know, it's like, I've been, I've been certainly noticed how much my insurance bills have gone up and my tax bills have gone up. And maybe that's sort of blinded me to some of the other expenses because I'm mad about the other ones. But clearly you're showing that these kinds of tweaks, especially if you're buying regular old properties, the difference between making $200 more a month is the difference between like a decent cash on cash return and a really good one. Like that actually does matter. So it's kind of attention to detail, Matt, I think is, is

• 24:01Dave Meyer?

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• 25:27Dave Meyer?

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• 28:22Dave Meyer?

  Welcome back to the BiggerPockets Podcast. I'm here with Matt Hawkins talking about managing, optimizing your portfolio. Before the break, Matt gave us an awesome tip about checking out your water bill and just having, I'm sure Matt, it's more even just about the mindset of just like looking for those things. It's not water in particular, but just sort of leaving no stone unturned and figuring out how you can optimize and make more money, still providing the same good tenant experience. You know, like there's no downside to doing something like that. I personally, I don't think vacancy is going to go up like crazy in the next couple of years, but you know, every day now you hear more about layoffs and it's kind of hard to not think like, oh, are vacancies going to go up? You know, rent's going to grow.

• 29:04Dave Meyer?

  So I believe that as you grow in your investing career, you go from thinking about acquiring And raising rent to just realizing like if you could just keep people in the tenant units and happy like that's so much of the game. So do you have any advice for our audience on reducing vacancy or minimalizing it?

• 29:23Speaker 01

  Yeah, so I think it's really a few things. One thing is, you know, Dion talks when he talks about his binder strategy, getting tenants to ask for a rent increase. I mean, yes. That's part of it. But the other key too is is that you also get to that point where it's almost unavoidable, right? They're not making enough money. They they've been a tenant for a number of years. Every single time you talk to them about anything money, they start to they start to tweak a little bit. And you just say, listen, I can appreciate that what your budget is, but you need to appreciate that all of my expenses over the last six years, they are all up. You know, we used to pay when we had this size portfolio just five years or four or five years ago, you know, we used to pay maybe forty to fifty thousand dollars a year in water. Now we pay thirty to forty thousand a quarter.

• 30:09Speaker 01

  That's how much that's gone up.

• 30:10Dave Meyer?

  Yeah.

• 30:11Speaker 01

  So, you know, as we're looking at managing, again, managing the asset, whether it's, you know, the water bills and that sort of thing, but other things that you can do to optimize, if you're paying for heat, you need to get the utilities out of your name. You need to, whether it's, you know, flow metering, one of those different types of features that you add, or adding even another heating system, or adding mini splits, those are really popular in most of the country. There's those types of things, always looking for solutions to how you can reduce cost. And that is, you know, if you're paying for heat, add more insulation in the attic cap space.

• 30:45Dave Meyer?

  Yep.

• 30:46Speaker 01

  That's a, that's a great example. You know, things like if you've got a drafty window, a couple drafty windows, change out the couple drafty windows and use that as the start to, hey, we're going to really improve the property down that path. If you've got first floor units and you've got a basement, making sure that you're insulating the bottom of that floor and that you're putting plastic on it, you know, to actually keep the moisture there down in the basements, if you're in New England or Chicago type, where you have those big huge basements that get freezing cold. So there's all these things where if you start to look at the house as a system, you know, it's an asset, but there's a system within the house. You can start to pick off one thing after another where you say, I was paying for heat, but now my heat bill is 15% less. I was paying for water, but now my water is 15 or 20% less.

• 31:32Speaker 01

  You know, I was paying for electricity, but you know, because these are the types in their units, now I'm paying 15 or 20% less. Well, what does that mean? At the end of the year, that means you're making 15 or 20% more on your asset than you were making before. It's that returning right to your pocket. And I like to say it comes home.

• 31:51Speaker 01

  But that's the key for people is making sure to optimize the asset more than just get the next deal, because the people that usually blow up in a, in a bad way in the real estate investment path are the ones that continue to add, add, add, add, and they never actually get them right.

• 32:08Dave Meyer?

  Yeah, you're going a mile wide and an inch deep instead of the opposite of just like trying to be really good at every deal that you own. I mean, I think that's a fantastic approach and it's just, it, it's the right mindset. And you've been talking about it in terms of financial return. I just want to also say it's the right mindset for longevity, because that's how you win in real estate is you stay in the game. And this is a great way to stay in the game. And I get it, you know, when you're first starting out, you may not have a lot of capital to be able to invest right away. But looking for these opportunities and weighing, there's math you could do. Weigh, weigh the opportunity of optimizing versus going out and buying the next deal. Or maybe you're in a house

• 32:52Dave Meyer?

  hack and you need to wait a year to, to move into the next one. If you save up a little bit of money, think about how you can optimize your deal, the current deals that you have in the meantime, while you're waiting to go buy that next deal. It's a mindset that I think really is about, you know, it's what you would do for your own home, right? Like, it's just like you, if you want to live in this home for the next 20 years, you would make these kinds of upgrades. You would do these kinds of things. You should be thinking about your rental properties in the exact same way.

• 33:19Speaker 01

  Yeah.

• 33:20Dave Meyer?

  Well, Matt, I could talk to you about this all day. So we're going to have to have you come back. But you said you were renovating a jail and I've been thinking about that for this entire episode. And so now I need to ask you about what is going on there.

• 33:31Speaker 01

  Yeah. Um, you know, as you get a bigger portfolio, it allows you to take a little more chances. And so, you know, as you find these weird assets, which is, uh, one of the towns that I invest in, they had a police station slash jail. Um, that they were decommissioning or had been decommissioned. They'd move into their new building. This thing had been vacant for years. I approached the city. They said, well, there's a process. They had to put it out for bid and all this other stuff. And they do all that. And I said, that's fine. I'm still going to win the property. But the amount of square footage that I was able to buy, it is 8,000 square foot jail police station.

• 34:07Dave Meyer?

  I can't even imagine.

• 34:08Speaker 01

  Yeah.

• 34:08Dave Meyer?

  What you like, are you in demo yet? Like, how far along are you into this?

• 34:12Speaker 01

  We'll be live within 60 days.

• 34:14Dave Meyer?

  I am so curious what that renovation process was like. Was it very different from a regular home?

• 34:20Speaker 01

  Well, so what we did was we kept the jail cells.

• 34:22Dave Meyer?

  Really?

• 34:23Speaker 01

  Cause we're actually, yeah, not even joking. We kept the jail cells because part of our concept was doing a, uh, community play area where younger kids can come, you know, lots of single moms and grandparents watching kids. We wanted to do something very affordable where they could bring their kids, come and play, but also get some food from a cold kitchen next door. So we, yeah, we, we're working with partnering with the right and partnering, meaning that they're going to own the business, but we just want to work with them and say, we want our business to benefit yours. And so we left all the jail cells in the back of the building. And so kids will be able to go eat in a jail cell after they finish playing and get some food. Um, they'll be able to go eat in a jail cell.

• 35:04Dave Meyer?

  Are the bars still up or is it?

• 35:05Speaker 01

  They are. They are. They are. Yeah. Yep. They are.

• 35:09Dave Meyer?

  Man, I gotta come see this one time. I would love to see it. It's awesome. That's very fun. Very cool. What, what other, uh, projects are you up to these days?

• 35:19Speaker 01

  I mean, the jail, we're trying to finish that off. We've got, you know, we're really, we really care a lot about veterans. And so, um, one of the things that just chaps me is listening to people and how badly we need veteran housing. And then they don't build any, they don't build any, they don't create any rents. They don't do any, they don't have a commercial project that they at least use some of the building, uh, for disabled vets. So anytime we buy a building that has first floor exposure that's in a downtown corridor, we always go to the town, ask for a variance to do at least a couple of units. We always ask for more, but we know that we're not going to get approved. So we just try and get approved for some. So adding some disabled vet housing is really big for us. Um, because we want to give back to, to, to those that fight for us and fight for, fight for our country.

• 36:03Dave Meyer?

  Amazing.

• 36:04Speaker 01

  Um, so that's a big part. And then the, the other side of it really is. Really just trying to spend more time with investors and trying to teach them, you know, it's not get rich quick, it's get rich for sure. It takes a decade or two. And when you do it, you'll be in a position that you can really, truly live whatever life you want to live on the other side. And that's, that's what we want to spend our time focused on doing now.

• 36:28Dave Meyer?

  Well, Matt, thank you for being here, man. I just really appreciate your whole mindset about real estate. I think that you have a very good approach to this, figuring out what you want, the kind of lifestyle you want, buying the right kind of deals, not getting caught up in the hype, creating mutual benefit for you and your tenants, giving back to your community and vets, like it's such a cool way of being an entrepreneur. Really have a lot of respect for the way that you're doing it. So thank you for sharing your story and for coming on the show.

• 36:56Speaker 01

  Ah, my pleasure. It was a blast, just like I expected it to be. So I appreciate the time, Dave.

• 37:00Dave Meyer?

  Yeah, we'll have to have you back. I have way more questions about optimizing your portfolio. So Matt, you're gonna, we're gonna, we're gonna call you again soon.

• 37:08Speaker 01

  Look forward to it.

• 37:08Dave Meyer?

  All right. And thank you all so much for listening to this episode of the podcast. If you, like me, think Matt has a great story, really inspiring for a lot of people who want to get into real estate investing, make sure to share this episode with them. Thanks again, we'll see you next time.

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