Real Estate Millionaires: How We Did It

0:00All right, folks, as you know, the three amigos all are currently enjoying the retired or at least semi retired life. Yes, Matt is still in the throes of managing his units and projects. So let's let's not call him retired. Let's call him semi retired. But Dion's living the lazy landlord life on on repeat. And I might be in between the two because yes, I do produce 15 hours of content a week. So it's fair to say that I have at least a part time job. But I thought we would go around here and talk about the five big steps we each made on our journey to financial freedom. I suspect a lot of them will be very unique. So you might get 15 different things. But Dion, this is your topic. We'll let you let you start. What was the first step in your journey? My first step was a day that I hope everybody has. It's when we wake up and realize we have to think about money. For me, it didn't happen until I was 40. Before 40 money was something that my job would take care of. I would just work. I would get a pension. I would get a paycheck.

1:02And at 40, I realized if I don't think about money, my money's never going to work for me. Love that. Matt, when was the first step in your journey to financial freedom? Well, I mean, when I was a teenager, I was doing sports cards because I was I was doing homeschooling. So I was doing sports cards then and realized very early on when I worked for other people and I did it for myself. I liked a lot more working for myself. Boss was a total asshole, but knew how to deal with them. It was kind of kind of appropriate, but that was kind of it for me. And so, you know, kind of you can't make a lot of money when you first start a business. Right? It's a thousand hours, you know, a week. It's all the money. Everything that you make goes back into it. So I defined that the best way for me to do it was it would be a W2 employee. And also started business. And so I mean, I started, you know, I started trying to learn about real estate.

2:09Family wasn't real estate. I didn't want to go that route. So I went to tech route. And then I was just like, you know what? That's not the, I enjoy it. I'm good at it. Much like you I built product lines. That was all fun. I made a lot of money doing it, but recognize that, you know, during the right after the dot com bomb. And you start watching all those rolling layoffs happen like you and I weren't an executive management at that point. We were individual contributors. And so the one thing that you learn very quickly then is number one. It's revenue based usually. And number two, yeah, right. Mostly sometimes it's also like, I just got to fire this guy freaking hate him. And sometimes it's that. And sometimes I was on that list. But what I realized was I saw people crying packing their offices. Yeah. We were in tech in the early 2000s. And after they had done all that hiring for Y2K and all that prep. And then all the business dried up for all the movement around Y2K and then you know the market seized up. Well, you know what?

3:11Individual contributors were getting lanced. I mean, literally it was like, I remember one week, you know, 17% gone. And then literally we get an announcement four weeks later, we're going to we're going to make another massive layoff, right? Yeah, really. Yeah. That's where the moment was for me where I was just like, I can't, I can't live my life always looking over my shoulder. And depending on the fact that I'm the number one guy in sales, I can't, I can't let that be my only option. Yeah, I love that. Yeah, my first step actually, you know, not quite as old as Dion, but didn't really hit me until I was 30. I mean, as a teenager, I always wanted to be rich, but honestly, I didn't know what rich meant. I mean, wrench meant, you know, a Ferrari like Magnum PI for whatever reason I wanted a gold coin in a Rolex watch. That was my simple mind of being rich, right? I didn't have any context. Nobody. And by the way, nobody had a Ferrari, nobody had a Rolex, nobody had a gold coin around me. These are just things as a teenage boy that I said I wanted and would be rich one day. But for me, it actually happened at 30. And obviously it was the dot com blow up. But, you know, before that, I was gambling.

4:18I turned seven grand into almost 200 without really knowing what I was doing. Obviously, I lost 80% of that. And that started my real estate journey. And again, I do think now, if I would have spent as much time learning the market, I could have done okay there. But again, my PTSD from that massive loss, just for whatever reason said I wasn't going to go there. I do think there's lots of ways that you can make money and stock dollar cost average and index funds and all of those things. But I chose to jump into a new asset class, get a really laser focused buy box and just know that better than anybody else. That was my first step into getting wealthy was actually losing 80% of what I had. So that's number one for me. What about number two, Dion? For me, it was choosing a strategy based on my options. Right. I was already, I said I was already 40. So I didn't have the time for compound interest to do its magic. Right. If you the stats have been shown, if you invest, it's like $200 a month from age of 20 to 40 and then stop you have $1.8 million when you're 65 and you started investing $1,000 a month at 40.

5:26You'll have $1.3 million at the age of 65. So my time horizon has already gone and I didn't have a high income. I was making $17 an hour at the CDL school when I decided, okay, I lost the law enforcement pension to 2008. I lost the Marine Corps pension to Desert Storm. I've got to start putting my money to work where I'm going to get to the point where I can't work. My kids are going to have to take care of me. Yeah, for them, for me, would have been not good. Yeah. And I realized I have to live somewhere. So I was my original plan was I could just move from my house by another house rent this house out live there for a few years by another house lived there for a few years because with a low income. There's first time home buyer programs. There's owner occupied loans. I hadn't I didn't even think of small multi-family. I didn't think about it. If I can get a few properties, I mean, this is literally like I saw into the future when I found the one rental at a time book. If I could have four, my retirement would be better. That's yeah, that was mine as well. And that was my strategy choice was step two. There you go. All right, Matt. What was number two for you?

6:28Living expenses. So, you know, I've got a job now and when you know before I'd get the job, I mean, I was making five dollars and 25 cents an hour working for a video store and after taxes, my income was $167 a week. Ouch. That's not good. No, it's not good at all. And I'm like, cool. So I can eat, but I probably don't have a place to live or I can have a place to live and I just can't eat. I'm not willing to give up the not eating thing. So, what ended up happening was as I was, you know, was working there and I was just like, you know, it was in my late teens, you know, kind of and I realized I was making more money from selling cards. You know, that I was working at the video store, but I still had to have something. But then when I kind of, you know, back to what we were talking about before jumped into tech. And then I was like, this is great. And I'm finally making money. And then I was like, how much is a place to rent? This is ridiculous. And so I started reaching out all my buddies. I was like, hey, do you have a room that you want to rent out? Do you have a room? And one of my buddies goes, yeah, I go perfect.

7:34So, yeah, I was like for 250 bucks a month. I went, moved in with him. Then the job improved, the income improved. And then it finally got to the point where I was like, I can't spend like 23 hundred bucks a month to live in a, you know, closer to work by myself. This doesn't work. And so that's where the house hack began as I saved up enough money because I wasn't much of a spender. Save up enough money. Got a deba, got a down payment and bought and bought a condo. Yeah, yeah, that was your first one. Orable idea. But it's all you could do. It's all you could do at that point. I mean, it was a little bit stupid. Maybe it was on the water in Boston, but whatever. Okay. All right. Well, that's interesting. My second step on the journey was, okay, I'm going to do real estate. I don't know anything. I spend a year every Sunday. I still remember every Sunday for 52 weeks, Olivia and I would drive around the Bay Area. And you can call me stupid. It's fair. I earn it. The Bay Area doesn't cash flow. It doesn't cash flow today. It didn't cash flow in 2001. It's an appreciating market.

8:38But I didn't know that at the time. Right. I didn't know that. But what that year taught me was it taught me how important a buy box was and to kind of run the numbers. And because I was local, we were seeing a lot of properties. Right. Ultimately, you guys know I choose Fresno, which is two and a half hours away. But that year investment in seeing and touching and feeling and leases and, you know, understanding what rents are and looking at negative cash flow. It was all helpful. I do wish I got six months smarter. Right. Maybe I should have stopped after six months instead of a year. But that discipline I got, you know, carried me through step two. And then it made once I found Fresno just so ridiculously fast. Right. We were, we were in escrow 30 days after we, we kind of started plotting around because we had that discipline. So. All right. Number three, Neon. For me, number three is the most painful. I had to fail and self educate. Right. I, I, 13 week bootcamp to become a Marine six month academy to become a cop.

9:44You know, years of experience to become a good truck driver and years to become a teacher. Right. And I thought I'll just replace my income and, and have a better future with zero education. No podcast, no audiobooks, no exposure to other investors, no YouTube university, no one rents a lot of time community in the school system where you're not, you're surrounded by people who are trying to do the same thing. People who've done the same thing. People are sharing people who hold you accountable. None of that existed. So my first year I failed. I failed because I wanted to keep buying single family houses because it's what I understood. And in the market I invested in Washington where there is no are there is also no single family houses that cash flow is a rental. Unless you've owned them for decades or there's a value add you do a bird you do a, you know, add something to it. Sure, but I'm not doing that was working full time raising three kids. So I had to sit down and go, okay, I failed. And this is the only luck that's in my story. I was lucky that the 2008 housing crash had made my house worth more or worth my debt was more than it was worth. I couldn't give it away.

10:47You couldn't give it away. I had failed so epically rented to a friend who had moved out rented it to someone else wasn't paying me. He was doing it better than me. And I wanted to quit. So I had to fail that bad to then sit down and go, I can't give the house away. I can't do bankruptcy because I might go back to law enforcement. I don't know yet. I don't know if I ever would have anyway. And then I thought, okay, I'm the problem. And so I started, look, I finally opened the rich dad poor dad book had been sitting on my shelf for five years that I talk like a snob and said, yeah, that's the guy with the rich dad and the poor dad. I never opened it. I found you on bigger pockets writing writing. Yeah, it was not writing. Yeah. And other people in the communities like that. And I educated myself in a realist, oh, small multi-family works, house acting is still an option. I don't have to work until I die. And so it was failure and self education was step number three. Nice. Matt, step number three on your journey. I think it was 2000 and five or probably 2006 maybe no 2005. Yeah, 2005 and and you know,

11:52came to the epiphany that I needed a place to live and I didn't want to be paying a bunch of money for myself. And I was tired of throwing money away from rent. And so I was like, I'm going to buy a place. And then I got the sobering news when I called the mortgage broker where he literally laughed out loud on the phone. And I was like, like, am I being pumped? You want to button this place, do you? I do. That's funny. With that income. Uh huh. Yeah. Yeah, that's the second work. And I was like, well, how would one do it? How would one do it? And he goes, I mean, he goes, you had to increase your income. I go, sure, let me just walk into my bosses like my turn to be smart. Why don't I just walk it by bosses off and go, sorry, you're going to need to pay me five grade a month more. Yeah. I was like, it's not going to work. And so he said, he said, you know, you could always get a roommate and I go, uh, I don't want to live with anybody. How does that work? And he goes, well, just get a roommate and get them to sign a lease. And he goes and then I can count that income. So it was a math problem, right? Right. I can count that income towards your income. And now you're good. And I was like,

12:57Oh, that's, that's pretty cool. I think that might work. So send out a message to all my friends to answer back. One of them I wouldn't live with if you paid me. So I picked the other kid. Yeah, pick it up. It's more guy. Yeah, pick the other kid. And we worked out a deal. I got a lease signed before I even owned the place. I got a lease signed. I got a lease signed over to him. And, uh, and send it to the banker. The banker goes, Hey, got you approved. I was like, shut up. And that was the big epiphany. And that was kind of step three was house hack. And so I house act and that's, that's what started the journey. Because I didn't get into it thinking be a real estate investor. Yeah. And you ended up doing eight of them, right? Was that the record eight for you? Yeah, we did. So I did nine and 13 years. Yeah. Yeah. Yeah. House hacking is definitely something I would look into if I just started all over again. Yeah. Yeah. I should have started it 20 instead of 30. Um, but yeah, my, my third step was actually the Bruce Norse event, right? So, you know, you fast forward. So it was oh five probably maybe late oh five early oh six.

14:06Six houses in a duplex. We have eight units. And this guy puts out a message that a California crash is coming. And you guys got to remember it was only like five years ago that I lost 80% of my wealth. So like that caught my attention. Like, honey, I don't know what this guy is going to say, but I'm going to this event. Yes, it's going to cost me 300 bucks or 299 or whatever. I am going because I don't want to be a, you know, a failure again. And I really didn't feel like a failure. I lost that 80% of my families because again, 200 grand or 197 was more money than my parents had ever had. And I was, I don't know, I was 29 maybe. And I was already light years ahead of them. And then I lost 80% of it. So again, I felt like I let my wife down and I let my daughter down and let you know my grand. I mean, I was just beating myself up. I mean, I'm going to be this thing. I'm now a millionaire, at least on paper. And I'm like, I can't have a California crash. A California crash would be really bad. I kind of two for two.

15:09So I go to the event. I'm a data nerd and a math guy. But I didn't understand anything Bruce Norris said and he must have had 300 slides. He's a slide guy. I had the only thing I circled in my notebook that I looked at the next day was the affordability index. Because that was the whole thing that he basically said that California is so unaffordable. Now it has it's going to blow up. So I didn't know what the affordability index was. You know, some quick web searches and whatnot. And ultimately found that Fresno, I think was sitting at 13 maybe 14 the lowest ever. And I did not have to think twice. This is something we don't get a lot of credit for or I don't get a lot of credit for. But we just did four or five years of building this eight unit portfolio. And I I listed it all like one at a time like sold, sold, sold, sold, sold. And then we went to 80 units and sure enough, the last one closed right before the, you know, the explosion. And you guys can go look up Norris drive, right? We sold it for 267. It retrains at like 75 or 77 or some crazy.

16:16So yeah, paying to go to an event and then taking massive action. In perfect, because I didn't know if he was right. But I just knew I knew I didn't want to let my family down again. So that was number three for me. Idea number four. Number four for me is four words. And it is my favorite of the all five. Like I've had the hardest one. But this is my favorite because this is these are the four words other people don't want to do other investors don't even want to do this. And then these four words is why it worked for me. Do the boring thing. And I started investing and I got my legs under me and I was like, oh, I'm house hacking do flex now. I have my house is a rental. I've bought another duplex. What's the birth strategy? What's this flipping things? What's wholesaling? What's buy and what's storage? Like all of the shiny objects popped up in front of me just like they do all of the people that I'm talking to today when I'm saying what you're doing is working. Why are you looking for something new? I don't get that. And so I did the boring thing in 2021 when we were making videos I kept saying I have saved this unbelievable amount of money in the bank to me when I was making $17.

17:21No, I had $250,000 in the bank and I said, I want to buy a million dollar for flex. I have 25% down from my next goal. And it's 2021 I bought a duplex because it was the next best boring deal that popped up. And then I bought a duplex and then I bought a clone. Nothing that I bought has been exciting. Nothing has been this creative. Out of the box type of thing. Do the boring thing to have the life that is absolutely not boring. No, that is such a big one for me because you know I'm lucky that it's my superpower and I'm already excited to do the boring thing tomorrow. It's just on my brain works. But having done like 30 portfolio reviews in the last six months more than half of them got lazy or distracted five years in. They're like, Hey Michael, I proved this work and I did it seven times. You know what? I got bored of making money. I'm going to go try something else. I'm like, just do like, are you allergic to money? What are you doing? Right? You're risking your entire portfolio to try something else goes your board. Who cares? It's never wrong to make money. All right. Matt, what's number four for you?

18:23Rinse and repeat saw how it worked. Saw that the house hacking worked when I said, I was paying my 2400 or $2600 a month mortgage payment every single month and my roommate was paying me a thousand bucks. I'm living here for $700, $800 cheaper than we're then living in a lousier place with no view with nothing going for it. You know, now I get to it was kind of a cool building or a bunch of you know a bunch of NFL athletes and things like that. It's kind of cool just as a kid like I'm 24 years old at that point just walking through the hallway and seeing those guys. But yeah, so it was a great experience, but yeah, had a lot of fun or 26 to think, but yeah, had a lot of fun walking through there and really it was just rinse and repeat. And so it was like, okay, if I can do this on this scale. Then it's like nine and now we need to start looking for an area look for an area in Massachusetts looked at all the laws hated the laws largely most of the people were garbage. Like that we're in the towns that I was looking at where it was just going to be like constant trash renting the apartment.

19:28You know where I'm seeing you know you so often you're seeing things on the sidewalks and you're seeing things in yards and you're just like yeah like this place is a dump like I don't want to live here. And so just within said started looking at everything and said I have the chance to invest in New Hampshire, Massachusetts or Maine. And Maine and Massachusetts are you know running the race to the dumbest state in the country so didn't want to participate and New Hampshire is on the opposite end of that you know where we're we're rose amongst the thorns. We believe in liberty and we believe in low taxes and so everyone's like yeah you got high property taxes. Yeah with no income tax and no sales tax promise. You do it okay. We're doing just fine. So so that's what happened. So I looked at I then I started finding an area found an area and did a couple buildings there and was like this isn't the area this isn't going to work. Yeah. Um changed areas and then find myself in where I've been for the last and investing for the last uh 20 years I've been investing in this area for about 20 years.

20:33And that's where we're at we're in this area we've been here on you know towards the coast for 20 years and yeah the portfolios pretty healthy. There you go. My number four was and I didn't know it at the time I was just doing it because I felt like I was a way to give back and that was I was documenting our story. Deon and obviously started with bigger pockets. I was asked to be a featured blog writer did that for 18 months. But I also created a website. It's no longer exists but it was called wealth building pro people tell me that there's images or copy out there. I have no idea. But if you want basically I just documented the stuff we bought during the you know the GFC right and I and instead of giving addresses I called them all kind of cute names like the Roach House and the bubble gum house and just all these other things. But yeah we were I was just documenting it and then like the fourth fifth or sixth article that I put out I had a buddy at work I was at HP at the time and he goes do you need any money. I'm like what do you mean do I need any money. Like I see what you're doing I see what you're doing out there you know I'm earning 0% or less than 1% in the bank.

21:39What what what can we do if if you know I wanted to help you. So long story short I figured out what you know private capital was and I paid him 12% 12% interest. He did the entire purchase price for three or four deals and I just had to do the repair so you know we ultimately go on and you know raise three four five million bucks. And paying 12% interest that's how good the deals were at the time so yeah so documenting the story and now obviously it went for bigger pockets and a website to YouTube and you know X and all these other things but. Yeah it's amazing what happens when you document your story and your consistent documenting that the amount of money that comes in just one last thing so I start this YouTube thing in 2018. And you know we start doing flips and again I was doing my flips with my own money and then people came to me and goes hey Mike do you need some money I'm like sure but I'm not paying 12% so we ended up doing something I called a six and 20 so I paid 6% interest only and they gave them 20% of the profit.

22:39And again they did the entire they funded the entire deal so again I was just basically managing my teams and deliveries so it it was a lot of fun so number four documenting all right let's wrap it up number five deal. Yeah so the last one for me I did two videos on my channel recently one that you know I usually get one to 2000 views one got 9000 one's got over 5000 over 5000 one was that I retired on accident and so my fifth step was the accident. My goal was like I said at the beginning of the video I don't want my kids to have to take care of me when I'm old so if I have a few rentals my retirement would be better. And around 2020 2021 I had a conversation with you guys where you you did a deep portfolio dive looked at all the debt look at the equity looked at the cash flow and basically I was looking for what I'm doing wrong. And and then I did a video at seven o'clock on a Sunday after working a shift so that one of the employees wouldn't have to work overtime on the weekend looking at how much money I make per hour and it's like it's like it literally dawned on me.

23:46I don't have to work so it wasn't any point up until then it wasn't actually the goal to retire early I even said I'm probably not going to retire late I like my job too much. Yeah I remember I remember that yeah I remember that. And so that was the fifth step was changing the goal instead of having a better old age had freedom until old age that was huge. Yeah that mindset shift is important I hope everybody gets the opportunity to do that so that's a good one. All right Matt bring us home for you what was number five. Number five for me was you know basically recognizing that the longer that you do something the better you get at it and so it realized that for me in my sales career realize that for me in my management career and executive career. And so the idea was how often do you find somebody that gets something and then they're just like hmm can I do anymore. Okay more often than you would care to admit I see it all the time and I'm like okay go out in the parking lot get yourself in the head a couple times for the one object and come back and see how you feel about it.

24:53The crazy thing is is that I built up the sewer power being able to do this I spent thousands of hours learning understanding mastering and so I realized that I could go do something else or I could take all the things that I learned and go from great to elite. And that's the jump that happened I went from great to elite and I was no longer paying retail for rehabs I wasn't rehab guy now I was a developer I was developing properties because I could see more than just. The sheet rock in the flooring it was developing properties you know getting the most out of them adding on on sweets whatever had to happen to actually maximize that property that's what I was able to do at that point because of all the things that I figured out I could look at any property and within 10 minutes I could tell you. This is exactly the path that this one needs to go and that's what makes you a much better buyer. You can unearth value where the greatest deals I ever did in my career I bought a deal for 227,000 dollars because the agent had had 27 offers didn't know that it was a high density land.

25:59So now I can sell that piece of land for about a million bucks because it allows for high density so what I would tell people is get better at it get elite branch out within the same things that are in that same vein don't go from long term to mid term to short term no that's not what I'm saying I'm saying look at the asset as you're getting it and best understand the assets so you can immediately assess and and essentially diagnose and prescribe exactly what has to happen with that property because now I'm going to get a lot of money. Because now when a duplex comes along depending on the type of makeup that it is I know right away OK I can make like 75 grand doing that project I can make 75 grand is going to cost me about 100 my rents are going to make me about a thousand bucks a month or 1500 bucks a month and yet it's a good deal or no I'm going to pass because I got other stuff I've got going on. So it's really making sure that you take the extra time to not go off and chase other butterflies but to get focused become elite at that thing and then and then you're in a place where it doesn't matter what the market does it doesn't matter what happens all these you know external factors I don't need to outrun the bear I only need to outrun you.

27:11Yeah love that so my fifth one kind of reps is all up for me is you know in 2018 you know lose the job figured out you know I I now look back on 2018 because I made a decision to you know I shouldn't say I Olivia and I made a decision to kind of sit down and enjoy the view right we've been working for 25 years to build this portfolio and not really taking a penny out of it I think we did a couple of things those last two years but nothing major. So we told each other that you know we were going to write size to portfolio you know get the debt structure right and then just enjoy life for a little while and what that led for me was that first video on the couch where I said I'm going to try to you know do something that impacts 50 years after I'm dead and gone and you know thankfully that's still the North star I often beat myself up you know like why aren't you trying to be a billionaire or you know maybe instead of a billionaire a hundred million or what not and I I just keep coming around to you know you got a good life.

28:11You know why mess it up and you know thankfully you to be allows me with very little commitment to help tens of thousands of people a day so you know that's enough for me to feel like I'm still contributing I'm still meaningful I'm still adding value to the world so that's my fifth one. Do you want to do any closing thoughts or anything else you want to add to your story I'm actually curious. Everybody watching we talked about five stages of kind of what beginning to getting to where we are what's stage are you in and how is it different from what we talked about I would like to hear that in the comments me too there's no in the comments below Matt any questions or closing thoughts from you. I think people give up too easily I think they need to get better focus. I think you just stick it out anything worth doing is hard and and I think that people once they've gotten the slightest glimmer of a win think that they've won that's not it you know success as a journey not a destination right so treat it as such where can they find you Matt lumberjack landlord YouTube and Instagram but we got we have our final list of things for our CEO.

29:32And it is only about six hours worth of work so after I get off this phone call and run to a block today they better be done. There you go. DM working they find you they can find me in school and Dion talk financial freedom every Tuesday six PM Pacific I do a workshop last night we analyze to deal and sometimes we will look at rental listings and make improvements that I pretty much learned this strategy from Matt to cover that and I really like to talk about that. I really look forward to working with people I think that the school community is great because you try to website I try to website Matt we all tried the mighty networks course yeah they're all productive we it's okay here's 10 grand let me put it to work on putting this together for people. I know the more user friendly now in school yes it's not exactly like Facebook but it's so it's pretty close social media that people just jump in and handle it naturally yeah yeah turn off the good it turned out to be a very good choice so I'm glad we're ready to take care of a great week take care family.