Matthew Porcaro is an electrical engineer / project manager by day but a savvy real estate investor by night. Like me, he comes from a blue-collar upbringing and now focuses on investing in Long Island, NY and knows a thing or two about utilizing the 203k loan for real estate investing.
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- Investing as an Electrical Engineer / Project Manager
- Steve Larson the Capitalist PIG (capitalist swag)
- Blue-collar upbringing
- Working with your dad as a silent partner
- Find a mentor – Ask GOOD questions
- Build Relationships that push you
- The 203k loan defined
- What is a 203k Consultant?
- The FHA Guidelines
- Your first deal will produce unknown momentum
Connect with Matthew:
Links mentioned in this episode:
- Real Estate Investing for The W2 Employee Facebook Group
- Join the W2 Capitalist Mastermind
Episode’s raw transcript
[00:00:01] Hey, what’s up, everybody? My name is Jay Helms and I’m the founder of this podcast and movement known as the W2 Capitalist. Today I have amazing guest with us, Matthew Porcaro. I got that right.
[00:00:15] Matthew and I have been trying to connect for a while and I was just joking with him for the record button. Probably need to start off every episode by apologizing to our guests because I’ve had to reschedule. We do have three little germ factories that we absolutely love. Run around our house are all under five right now.
[00:00:35] So there’s there’s, you know, everybody who’s actually been sick this week. So Wednesday. So that time of the year. Yeah. Yeah, it is. It is. And you know. I know. And we don’t necessarily. So we’re in Pensacola, Florida. And we get these crazy temperature swings right where it didn’t change 30 to 40 degrees in one day. And it happens quite frequently. It helps boost the economy around here, I guess, with tourist seasons gone.
[00:01:09] Used all the doctors and whatnot. Video it, but you’re up in New York and you are coming to us from the two or three K way, which is a topic I’m interested in the two or three K. Something I’ve never used before. But I know you obviously are right. You’ve got a book out FHA on your loan.
[00:01:32] Every new real estate investor needs to know about, which I wish I knew about before started because I didn’t. But a little personal thing about you. You’re in New York. You’re in New York City, right? That’s the skyline munya.
[00:01:45] Yep. Yep, it is. I’m right outside of it. Right in Queens. Yeah, but I’m looking at Manhattan. Mm hmm.
[00:01:49] It’s a beautiful, beautiful view out your window. I don’t use the video on this, but I guess the losers will.
[00:02:00] Will not. But you have your. For some reason in my notes here says you’re recently married. That right?
[00:02:06] Yeah, somewhat last two years. OK.
[00:02:09] We actually just just celebrated our second anniversary on November 11th.
[00:02:14] So a couple of threats. And man, it’s you. So you learned to say, yes, ma’am, and all that good stuff.
[00:02:20] Yeah. Absolutely. It wasn’t the first thing I said. You know, we were really traditional with everything.
[00:02:27] You know, we didn’t really move in together. You know, we got married. So I’m pretty old school. We moved in together.
[00:02:34] And, you know, I always tell everyone that, you know, they said, how is it living together?
[00:02:39] I say, ask, ask Michelle, as you know, I guess, Nancy, she’s a pleasure. Everything. Yes. She’s a pleasure to be around.
[00:02:47] I’m maybe not so much, especially recently. You know, I’ve been working from home a lot.
[00:02:54] I leave in the morning and you’re here and I’m home and you’re here.
[00:03:00] You’re always.
[00:03:02] So you might need to find a break from that. It is an adjustment period. And I did actually quite the opposite. I went from working from home for the last 10 years into an office setting just six months ago, which I’m still doing, which is part of the reason why we do these so early in the morning. So it doesn’t, you know, like the sun’s up where you’re at. It’s definitely not out where I’m at.
[00:03:26] All right. Hey, man, it’s good. And you know, I’m early. It doesn’t bother me, but no, it’s great. I’m glad that you do it right. That’s the whole point of this podcast, right? W2 capital is. We got a we got a grind on the off hours and that’s we do all about.
[00:03:39] We do. And speaking of W2, so your W-2 is electrical engineer slash project manager by trade. Right. We’re just talking about that. Just.
[00:03:48] Yes, sir. So, yeah. So I basically grew up in the construction business. You know, my dad is a general contractor. You know, small, small shop. You know, just him and my mom basically running the thing and him and a young guy. So then I went to college. I went for electrical engineering, thought I was going to do something cool like defense contracting and build like airplanes and fighter jets and put the control systems in there and stuff. And I went to, ah, career fairs at my college and everyone that was hiring was a construction company. I never thought I would do that. You know, growing up, it’s like you don’t want to do what your dad does and, you know, to a fault, you know, you’re in that like age when you’re in your teens. And, you know, I was working with them every summer. Right.
[00:04:38] So, you know, I don’t want to do this, too. Right.
[00:04:43] And lo and behold, lo and behold, the thing I went into was construction in New York City, which, you know, luckily has a lot of work that’s been going on. So I yeah, I went into electrical construction and that’s what I’ve been doing ever since I graduated.
[00:05:01] Yeah, but I imagine you made your dad proud. Right. Following his footsteps, so to speak. And I say that tongue in cheek, because I think my biggest I’m sure I’ve let my father down a lot. But think you almost spit coffee out. But he did. I think the biggest let down he is he’s now a retired fireman, served for 30 something. That’s amazing. Cool. And I think he he always tried to get me a very light handed push me in that direction. And I think the biggest letdown, as I was like when I was told, was that I don’t have the stomach for it. Yeah. I can’t see what you guys see in you guys do. Yeah. And I just don’t think so anyway.
[00:05:46] But I’m sure I listen. You know, I. You know, what you’re doing now is incredible. And it’s. Why so thank you.
[00:05:54] You say he’s an old school guy. Right now I feel you on the on the investment track and.
[00:06:01] You know. Course, he’s one of these guys who never, never had a credit card. I don’t think he has a checking account, pays for everything in cash. You’ll drive around town. Yeah. A home cash is my dad. Yeah. He’s he’s sitting on some money that I’m trying to help him use, you know. Right. Retirement years. But I want to be respectful of that. If you want to jump on, you can jump on. But I know his answer.
[00:06:32] Yeah. Throw it out there. You’re doing you’re doing your duty. That’s it. I got a quick note to move on. So.
[00:06:38] Oh, but so you live in New York or Queens area. Where do you invest? You invest in New York as well. Yeah. So.
[00:06:47] There’s a there’s a suburb of New York City, which is Long Island.
[00:06:53] Sure, a lot of your listeners are familiar from there. It’s a little bubble. It could be its own state, very competitive. One of the it is in some ways, right? Yeah, it’s it’s it’s one of the highest taxes and property taxes in the nation. Yes. Top three. Something like that. So a very competitive market. But that’s where I grew up about an hour outside of where I am right now. So I’ve been investing in New York since twenty fifteen and looking to continue there. You know, like kind of like I said before, you know. I never thought I would get into construction. And, you know, rapping back into it, I’m like, OK. You know, my dad was never a.
[00:07:38] You know, my dad’s blue collar like your dad. You know what I mean? Just never. You know, he’s a great, great contractor.
[00:07:47] But, you know, business wise, it’s tough. You know, he was never you know, he’s good at building. He wasn’t always good at like being the, you know, the analytical mind and like doing all the paperwork.
[00:07:59] And business is a great tradesman, but not so sharp on the business part.
[00:08:03] Right. Right. And my mom really filled in the blanks there. But, you know, that’s part of my story. And why I got into this was I saw a lot of the struggle growing up of owning your own business, a contracting business. And then, you know, over time, like getting squeezed by people now that, you know, contracting is such a low barrier of entry. Sure. You know that dealing with contractors and you know what? You get out there, you have a guy like my dad is super old school. He just turned 70. We were just actually in Mexico for his 70th birthday. He didn’t want to he didn’t want to go like we were saying. You want to go to the motherland, go back to Italy. And he was like, yeah, maybe. But I want to go to Riviera Maya at the Hard Rock and to go to an all inclusive and just drink tequila on the beach with a cigar.
[00:08:51] So that’s what we did for a week.
[00:08:53] And it was not a bad not a bad birth. What do you got any age? Exactly.
[00:08:59] Exactly. So it was cool. And that’s what he likes. So but, you know, and really what I what I saw was like, listen, you know, I have this construction background, which for a lot of people is a struggle. Right. In this industry. And then, you know. But then I’m bringing to the table like.
[00:09:16] Finding the deals, dealing with the financing, all that stuff, so you can just focus on doing the work and running the work. And you know, we’ve been a team actually, you know, in this real estate thing. And it’s something it’s you know, of course, you never know what what way you’re gonna go in life. But, you know, it was an interesting way and how we’re keeping, you know, keeping a relationship, keeping close and everything like that and doing business together, which is really cool.
[00:09:44] So before I forget, you have a pretty cool hat on. By the way, tell me about that capital pig with a big old piece of ham on it.
[00:09:55] I mean, yeah, that’s a pretty. It’s really funny. I put it on and I didn’t put it on.
[00:10:02] I realized, you know, your show is called, you know, your whole community is called WTU Capitalist. And I wear that. I wear this had all the time. This is a hat from a guy named Steve Larsen. Steve garcin is a big marketing guy. He’s he’s like big with like promoting your product and like, you know, promoting, you know, helping people build their business when they’re experts on a topic. Right.
[00:10:27] So he I think I don’t know the whole story behind it, but basically, you know, someone maybe like said something that he’s, you know, acting like a capitalist pig or something like that. And like, hell, yeah, I am. I’m a capitalist big. That’s what I do. He’s like, you know, I create money, but I also create jobs and I create I pay other people’s bills and stuff like that. So I think it’s kind of like a tongue in cheek thing. Yeah, I love it. My last name, Porcaro, actually means pig farmer in Italian.
[00:10:58] Ok. So it was it was a combination of two things.
[00:11:02] I have an affinity toward pigs and pork and like you. Yeah. But he’s got.
[00:11:10] Yeah. No exactly. I love to eat only you know. I know it was it you know I always wondered why I really love bacon and area.
[00:11:17] It’s in the name and it’s my genetics man.
[00:11:20] I’m meant to eat this stuff. So yeah, it was a cool combination of stuff. You know, you look him up. I think it’s called capitalism swag dot com. And I don’t actually really know, Steve. So it’s a shameless plug for him. But oh, no, I love the concept. And, you know, you know, I don’t want to get into politics too much at all on this show. But it was very funny. Recently, I was wearing this hat and I walked through a a Bernie rally and. I’m sorry, Sanders. Yeah, it was weird. I was getting a lot of weird looks and scowls from people. And I don’t think people knew what I was really wearing. But it was just like a funny thing. I had no idea what where I was going. I’m like, oh, you know, this is where I’m at, right? Right. They’re very anti capitalism.
[00:12:08] Who knows what they’re protesting about.
[00:12:10] Yeah. Yeah. Oh, it’s funny. I just I it was just a funny timing thing. But Yemen, it’s it’s a good it’s a good gig.
[00:12:18] The. And the reason I bring that part of the reason I do think is really cool hat. I’m going to look up, try to find one. But the REHA here in Pensacola. And Matt Robinson, who leads that up, he’s gonna kill me if he hears this. And here that I call it. Because he doesn’t consider it a reha. But he it’s pig. Professional Investors Guild is what I’ll call his war in. He’s got a banner. He always puts up capitalist pig. Oh, yeah. I just thought it was a good, good connection. But I like the hat. I may make it one of those hats.
[00:12:53] Yeah. Yes. D-S.D. A cool guy. He’s got a lot of cool content about like promoting your brand and stuff like that.
[00:12:59] Very cool. So let’s talk about the two or three K right loan. And I’m going to let you dive into this because I’ve never used it, but I’ve heard about it. I know friends who have done it. But before we do that. Tell me why you are the expert to lead us down this conversation.
[00:13:17] Mm hmm. So, man, why am I the expert? Well, I think it’s just the passion. Number one. And I’ll I’ll give you a little backdrop on why it’s a passion for me.
[00:13:28] So similar to your story, similar to many people’s stories growing up. I, you know, again, worked in a you know, where my family was blue collar, you know, investing stuff like that was like never.
[00:13:45] And that was that’s what a rich man’s game. Right. Exactly right. So invent the idea of investing, the idea of buying multiple houses. I mean, that was just outlandish. Right. So growing up, you know, the grass is greener for my dad. He’s like, you know, you don’t want your own business. You want to work for someone. You want to get a good job. Yeah. You know, a good nine to five. Have you have a paycheck every week? That’s the dream, right? So I think it’s hung. You know, a lot of them did. Right. You know, a lot of them kind of come from that background.
[00:14:21] Listen to different times, though. You know, it’s not it’s not. They were giving us bad advice. I’ve actually had this discussion with somebody else about, you know, when our kids and when you guys start having kids, you’ll start thinking this way, too. But if I start teaching them how to invest. Now, let’s talk about what happens in 30 years down the road. Is it still going to be a good vehicle for them? Or is it or am I gonna be the old man who I’m using air quotes that he’s never gonna listen, there’s no right. Yes, this actually does, though. I told him he was asking what is a podcast? I was like, you know, you listen to talk shows when I am radio. This is a talk show, but it’s on a different media. Right. And he got it.
[00:15:07] Okay. Yeah, it’s a great way. I never, never listened to it that way.
[00:15:10] You know, I don’t even have a cell phone. Beck. That’s not true. He has a flip phone. Oh, cool. Fancy. Yeah, but. And this is what happens. I go off on these tangents and I forget what I was going to say.
[00:15:25] No worries. Yeah. No, I think, again, like, you know, the idea is just really that, you know, our our fathers and that generation just it was their sole investment.
[00:15:37] They saw investing and all that kind of stuff, you know, owning your own business. You know, owning your own business.
[00:15:42] My dad was it was a was a challenge and something I didn’t want to do. Right. Cause he saw the bad side of it. Right.
[00:15:49] A lot of businesses fail. Now, lo and behold, he’s been doing it for 30 something years. Knock on wood still has the business to this day. So he’s surviving. Many businesses don’t be surviving. And he’s but we’ve seen a lot of up and downs. And so, you know, I wanted to avoid that volatility. That was something growing up that left a lasting impression on me. Right. It’s funny because, you know, we had lots of good times and lots of bad times, too. And of course, when you’re an impressionable young kid, you remember the bad times and you wonder like, you know, hey, why are we like, you know, starve in this month and can’t pay the bills and everything like that? Then like this kid’s dad down the block is fine because he works for someone. Right. So so that was always instilled in me. So, you know, fast forward. I go to college, you know, when I’m looking for for things to go to school, I was very money or money driven, right? Yeah. And almost to a fault. Right.
[00:16:48] And I went to my guidance counselor. Like, what’s where can I make the most money? Right.
[00:16:54] And, you know, my guidance counselors like, hey, you’re really good at physics.
[00:16:58] You really good at science, try engineering.
[00:17:01] They get paid the most at a college more than anyone else. Right. After four years. Right. I hate it. I wasn’t really a school guy. Right. I didn’t want to be in school long term. How can I get in there for four years and get out and get paid the most?
[00:17:13] So. Engineering was it. So that’s what I did. And it was tough, man. It was tough as hell. Electrical engineering degree is no joke. I didn’t know what I was doing, but I got through kind of that person. And I’ll tell you a little bit more about it. You’ll see that with my two or three K story. But I’m kind of a person. Just whatever I got to do, I’ll do it. All right. And I’ll just get through. Even if it’s by the skin of my teeth, I make it happen. So while I’m there, I started interning and I’m working. And this is like really my first experience of, like, working corporate America. Right. Working for the man. And I think it was like first. The first.
[00:17:52] First year of my internship, I’m like, this is how you get rich. Like, I just just kind of put it into I’m like, there’s no way this isn’t like this isn’t how you yell make money, but this is how you get rich.
[00:18:06] And I was walking down the street one day and I heard Rich Dad, Poor Dad was a great book. And there was a guy selling books on the street. And he and the rich that poured that book was there and I bought it. Read it. Right. So freaking cliche at this point, everyone. But that book does a lot of good stuff for a lot of people. And I read a lot of lives. Mine does. It does. And I read it and I was like, oh, OK.
[00:18:33] But at the end of it, I was like, yeah, but I can’t buy multiple things at real estate. Let me, like, start my own business. So that started me down this whole career of like trying to my own like my own side gigs write, my own side hustles, tried everything, you know, from trading stocks to creating might like selling affiliate offers and creating doing email campaigns, all kinds of Internet ways to make money. Right. But then real estate just always seems so far like in the F.
[00:19:02] Like I feel like you’re telling my story. But yeah, you know what?
[00:19:05] Like one of the cool things about getting on these podcasts and stuff and talking with a lot of people now that I’ve been involved in the community a lot more with this two or three K thing is like everyone comes from kind of the same background.
[00:19:17] And it’s fun. And that’s and that’s awesome. And it’s cool to know that I’m not the only one. You know what I mean? It was like, you know, because I I like to say all the time, like this entrepreneurship thing and real estate. It’s a lonely game and no one understands. Like you said before, your dad doesn’t understand it. You know what I mean? Like, my dad still kind of doesn’t understand it. Right. So my wife doesn’t understand it. You know, it’s it’s hard to do this stuff. And, you know, this is why things like this podcast in their community that you have on Facebook are huge, because you need to be around people like that because they’re the ones that are gonna push you through it. But so where was I?
[00:19:53] So basically, I I didn’t really think too much about real estate, but tried a bunch of things, tried to make money. Then listen to a podcast. And it was thought there was some guy talking about how you can buy real estate with no credit and no money. And I was like, hmm, that’s crazy how I thought it was for like you said, like old rich dudes, right? Yeah. You know, old, you know, trust fund guys that have a ton of money that are the only people in the world that can buy multiple houses. Me, I’m like, I can’t buy one house screw like especially in my market, man. Average house prices like five hundred K. So I’m like, there’s no way I’m buying a house, you know, anytime soon. This me when I was somewhat twenty three years old. So I look into it and that’s when I discovered wholesaling as we know it. Right. And so that for me was like, oh man, it was like a huge like Eye-Opener. I was like, oh, OK. Like for most people. And I went all in on it and started like buying courses and buying books. And I kind of went down that rabbit hole and tried everything and did the signs and the direct mail did.
[00:21:03] Oh, man. Everything you could think of that involves wholesaling made Web sites, tried to drive traffic, spent a lot of time, a lot of money. Unfortunately, for whatever reason, I didn’t get anything done. Get out some Kohli’s, some warm leads, but nothing ever transpired. I don’t know if it’s because my market was so competitive. I don’t know if it’s because, you know, some of the rules and regulations here in New York with wholesaling. It seemed like everyone that was wholesaling had a realtor’s license.
[00:21:35] So I just couldn’t crack it, man. And it sucked because I really saw that I was really sold on this real estate thing. And I felt like I just had put so much time and effort into it. And I signed up for a bunch of mentorship programs. You know, one I paid a whole lot of money for, which was a wholesaling one. It was trash. That one was that won’t really hurt me.
[00:21:57] And, you know, it was a rumor. Yeah. I don’t know if I’m going to blast the guy on the show, but if you want me to I mean, you tell me afterwards if you’re. Yeah.
[00:22:08] Now it was crap. So, you know, that was a big one. And then there was one. There was my local area and there was another one. And you know, me and my dad. I was like, all right, let’s do this one together, dad. Like, you know, she kind of sold us on that. She’s the president of my local Reha.
[00:22:25] She kind of sold us on like, OK, well, maybe I felt like all the challenges were like within my market. Like our market is just really tough. Still is. And maybe, like, she’ll shed some light on it. You know, she sold us on the fact, like, listen, you have one of the biggest, you know, parts in the puzzle, which is you guys understand construction. So we did and we jumped in it. And, you know, we went to the first couple of courses, me mostly. You know, my dad was like kind of a silent partner in it. And we’re learning the same crap that I’ve learned from every book. And like, you know, finding deals, you know, find MRV minded and times it by 70 percent minus the rehab. Like just like a lot of cliche stuff like, man, what the hell? So this is a long story and I’m going to call and, you know, bring it all together right here.
[00:23:11] But basically, I pulled her name is Melissa and she’s still the president of Russia. And she I brought her to the side. One day I was able to get her to the side for a little bit.
[00:23:22] I’m like, Melissa, you’re extremely successful. She’s she’s an all star. I mean, she runs multiple businesses, has a couple hundred units, maybe even thousand at this point, has like seven kids. I think the president of Russia. She’s like a super woman. Right. And good.
[00:23:40] So let’s end there. So she’s a super woman. Yeah, absolutely.
[00:23:43] Doing all that plus me and, you know, being a monster investor. Right. So I’m like, what would you like? You know, I’m at the time, whatever, 24 years old, I got some money in the bank, a couple grand. You know, I’m. What would you do if you were me? Right. I have tried wholesaling. I try. She’s like, well, listen, I’ve never done it. But there’s a thing out there called a two or three kilo renovation loan.
[00:24:10] And what you could do is you’re you can buy distressed property for only 3.5 percent down. You have to live in it, but you only got to live in it really for a year. And then. So we basically do live in flip and move out and repeat the process.
[00:24:24] And I said, huh? OK. I’ve been trying to crack real estate for three years.
[00:24:31] No one’s mentioned this before. She’s like, yeah, it’s there’s some red tape and there’s some things with it. But I know this is this is what people are doing right now. And with what money you have and the position you’re in, this is your best bet.
[00:24:43] So basically, I went home, researched the crap out of this. Lo and behold, there’s really no info on it. The two or three K is, like I said, you know, kind of the best kept secret in real estate. And the reason being is there is red tape and there is work that goes into it. And what I found out the hard way is, you know, there are people out there that that are pros at this and you have to find them.
[00:25:11] The issue is they’re they’re hard to find. And if you don’t know what you’re doing, you’re going to fall into the trap that I did. So fast forward some time worked out very busy. I had another side business that actually was going really well and I was saving. Right. I was just taking it away. Getting ready to get engaged. Right. Saving for a ring.
[00:25:32] All that stuff. And I was going to my 9:00 to 5:00 job, you know, every day. And I was driving home. It was just a random thing pops into my head. My head’s always moving. And I’m like, you know, I’m sipping my Starbucks on my drive back to work. And I’m like, you know, I got some money in my account. Right. I think I was like, finally for the first time in my life, like five figures at my bank. All right. So I had about 10 grand and I was like, what can I do with this?
[00:25:58] Like like I should be invest like this shouldn’t be sitting in the bank account and.
[00:26:04] I got. I got back to my I got back to my office and I’m like, you know, I got it. Let me find out about this two or three key things. So I called the only mortgage broker that I knew who was a family friend. Fast talking guy. Typical New York salesmen broker guy. Right. So I call him up and I’m like, do you guys do that? Two or three K?
[00:26:23] Thanks again, man. We do that. It’s definitely the best thing. Like all that. Be perfect for you, bro. Let’s jump on it. Let’s do it. Let’s do it. And I’m like, OK. OK. Yeah. He’s like, semi this. I mean this. I mean this. So like, he’s a family friend.
[00:26:39] Known him a long time as my cousin’s best friend growing up. So he’s always been around and like I trust. Right. I think anyone else and I think this was a pivotal moment because anyone else, any other mortgage broker that was asking me for all this information, I probably just wasn’t giving it to them. I would doubt. But I’m I’m happy he did push me and he took everything down. And then he’s like, I need your socializing. Why? He’s like, well, I’m just gonna do a credible.
[00:27:03] And I was like, OK, so don’t worry.
[00:27:06] Don’t worry. And we did it. He’s like, all right, I’m going to get you preapproved for this bollo bar. He’s like, all right. So this is where I search for properties. And he sent me a bunch of links. He’s like, go look at some properties. And within an hour, he’s sending me properties. Right. I had been looking for properties for a while. Right. But what I like to tell people all the time, my following is like unless you’re making offers, you’re not looking. You’re not looking for properties. People love to tell me all the time. I can’t find deals in my market. OK. How many offers did you place this week? Well, none. OK. So you’re not looking. You’re rousing yours. You’re flicking so low. And you’re looking at you’re looking at asking price. And you’re taking that as as truth. Which is baloney. But I won’t get to. Right. But anyway. So he’s like, listen, you’ve got to start looking at these properties, making some offers. So one of the cool things I learned about the two or three K is that you’re able to bid on properties that are distressed. So let me dial it back really quick, because I don’t think I got into this much. And explain that to 0 three K right to a three K loan is an FHA loan. Right. So it allows you to put down a minimum of three point five percent of your purchase price plus the rehab costs. Now, that’s what you can do with the two or three K loan, the two or three K loan. You’re able to estimate and forecast what the renovation is going to be to get your property up to snuff of where you want it to be.
[00:28:28] And you’re able to wrap that into your mortgage. So. So I’ll give you an example, obviously, with my deal. So what ended up happening was I was looking for different properties and that the best way to leverage the two or three K loan if you’re looking to live in the property, which you have to and kind of make some cash flow and house Hacket Right. Is you want to look for small multi families. So what I did. Now there wasn’t many in my market there. One came online very quickly after I got started. And there’s a cool thing about the two or three K loan that are about some of these Fannie Mae foreclosures that they have out there is that they give first time home buyers and owner occupants a first look, period. So when a federal foreclosure goes up on the market, there’s like a 10 to 20 day grace period where only owner occupied people only like first time homebuyers, people using FHA loans, renovation loans are able to bid on the property and the banks have to entertain any reasonable offer. So it’s a way the government. Yeah. It’s a cool program and it’s a way to kind of instead of just had these investors over and over again. It’s kind of the whole the whole point of this FHA two or three K loan was the FHA is the FHA is response to trying to get some of these like distressed foreclosures off the market. Right. Right. No. In my market, buying a house move in ready is tough as a millennial. It just is. There’s a five hundred K is the average price in the market. Right.
[00:30:03] So you don’t make that now. Come on.
[00:30:06] Yeah, man, it’s brutal, right? I don’t care who you are saving up 100k for a downpayment. Brutal grace. And so, you know, this isn’t a bill. This is this was a cool thing for me because I’m like, wow. Now I could buy something that’s distressed a little bit on foreclosures, which typically foreclosures are only cash only. But they will entertain renovation loans because the point of the renovation loan is it’s not like a bank loan where they’re going to do an inspection and they’re going to look and say, hey, this is an inhabitable. What they’re going to do is they’re gonna do an inspection with someone who’s called a two or three K consultant and they’re going to walk through and they’ll say this is what it’s going to cost to get it up to snuff and make it habitable. And then you wrap that into the loan.
[00:30:50] So fast forward a little bit. I found a duplex.
[00:30:53] I found a two family pretty close to where I wanted to be, very close between my work and my home that were. Live and. I went over there and he’s like, yeah, this looks great. This is B cash cow. f40 was cheap, right? I really couldn’t afford anything, anything too crazy because, you know, I was I was, you know, at the time, just a single single income. Right. Yeah. And you know, I was looking at the bottom of the barrel, man. And this one, was it locked into the house? I was able to get in there very quick. It got on the market. I was. And it was a piece of junk. And there was it was I found out it was a previous drug home like crack house kind of thing. They were selling drugs out of the front window.
[00:31:38] Everybody needs one of those in their portfolio. So they sure do. Man, it’s a good learning experience. Son was a meth house, so I wouldn’t crack, but, you know, meth.
[00:31:46] That’s scary because there’s like a whole remediation process and stuff that you probably. Right. Oh, we tore it down. Oh, OK. So this one wasn’t quite that.
[00:31:57] But, you know, there was you know, there is a guy squatting in there and he was using the bathroom even though the plumbing wasn’t working. Sure. Though, you walked in there and just greeted by beautiful smells and I’m in there. I’m like, hell no. And then I have this. Mortgage brokers, like, you gotta do what? You gotta do it. My dad’s like, it’s not that bad of work. You know? Oh, look at that. Just like I’m gonna like spend will. All I have on this on this thing, on this dump is we can. Yeah. So what I did though is I. So the way that one of the one of the first ways that you really leverage is to O3 K loan is look at it through the eyes of an investor. Right.
[00:32:34] So the crazy thing about it, two or three K loan is if you’re just doing it, it’s it’s still a great vehicle if you’re just a first time homebuyer looking to buy a fixer upper. Right. It’s a great way to use it. The FHA loan actually lets you finance this. One of the only ones is crazy. They let you finance renovation plus purchase price. One hundred ten percent.
[00:32:58] It’s a little scary. So it can be scary. But they. But so.
[00:33:03] So. So you can like make it your own. Right. Like make yet how exactly you want it. If you’re not looking to make it in an investment, you’re just looking to get in there and, you know, make it your own house. Which is perfectly fine. But what I did was I’m like, OK, this is what I’m looking for. I’m looking for two things. When I’m done with the rehab, am I going to have enough to refinance out or am I going to have some equity on there that I could take out later? The second thing is I want to make sure that cash flows if and when I move out. Number one, where will I be with with with me living in there for that year? OK. And then number two, when I move out. How much is it going to cash flow? So I did the math on it. And this is the math. So I picked up the property for two seventy.
[00:33:47] All right. We got we brought that we brought a couple of contractors and my dad’s a contractor, but he wasn’t able to be the contractor on the loan because conflict of interest. He’s my dad. We were living in the under the same roof at the time as the business. So it was just the whole thing which we found out during the loan process.
[00:34:05] But, you know, now, do you can you when you have a 2 3 loan. Sorry. Interruption. No. When you have two three came home. Can you two. And this may vary from wouldn’t vary from state to state because it’s a federal program. Right. So the are you allowed to use your own general contractors or do you have to pick from a select list. The bank says, OK. These are two or three approved contracts.
[00:34:32] So one of the one of the biggest mis information’s out there about this loan is that there’s such thing as a two or three K contractor. Not a thing. There’s people you have to get. The bank.
[00:34:45] So there’s FHA guidelines, FHA 2 or 3 guidelines that are federal. Right there, Blanket, the lender is able to add a rider on it and they’re able to put in their own qualifications. So I can’t speak for every lender. My lender required them to show they’re obviously full licenses. How long they’ve been in business. You know, kind of fill out like a little statement. Make sure all their licenses are up to date. Everything licenses, insurance. That should be what everyone goes for, number one. Second thing is they check like what your financial back is. Are you? You know, they they check your credit line, stuff like that. You have a credit line to get started with material and stuff. All very important things. One of the things, you know, I obviously have a lot of people in my community now that are interested in this loan. And they come up to me and they’re like contractors say that two or three ks a pain in the butt. And, you know, they don’t give you money upfront. And, you know, I can’t get started without a deposit. I’m like, if your guy can’t ramp up five grand. He’s not the contractor you want to you.
[00:35:48] Exactly. I was not a fly by night guy. He’s taking your deposit. You think any contractor that’s taking your deposit and needs that to start up is actually using it? He’s using it to pay, isn’t it? He’s using. Yeah, man. Listen, I’m not even up front. I know my dad did it at times because I’m like, listen, I get it.
[00:36:10] But the reality of it is for this type of project, that’s not who you’re looking for. So, yeah, there’s a couple of tips that I learned on how to on how to get the best two or three contractors, which all kind of wrap everything up with. But yeah, there’s no two or three K approved contract. They have to be approved, but there’s no like set list. So the so I think just getting back to the numbers on the property, so I picked it up for two seventy. We estimated it was going to be about eighty thousand. So I put eighty thousand additional onto the loan. So it was all in for three fifty three fifty was my loan amount. Purchase price plus rehab. I did some marvie, I did some research and I looked at what was going around and I figured I could get probably for 80. When I was done doing the rehab on this I was going full, got rehab. You know, we had to rip everything down to the studs. It was a big, big rehab. That’s kind of where the construction part came in with me. It was nice. It wasn’t as intimidating. Most people would have never picked up this property. It might still be on the market. It was. But we knew what we needed to do. There were some structural work involved, stuff like that.
[00:37:22] But yeah, lo and behold, you know, I got into it. There was a lot of issues on the way. The biggest thing that I want people to know, if they’re interested in this two or three K loan is that your lender will make or break this entire process.
[00:37:40] Here’s the thing about mortgage brokers.
[00:37:42] They all want your business. You got to pay their bills. Kind of similar to the contract. Right. Without you signing your loan. They don’t put food on their table. Right. So they are going to say they can do two or three K loans because they want your business. The reality of it is, is if you don’t know this thing backwards and forwards you it will crash and burn because there is a lot of paperwork. It doesn’t necessarily need to fall on the borrower. It didn’t have to fall on me, but in my situation, it did. So I’m happy that I used. His name’s E.J.. I’m happy I used him for this loan because he was a family friend. And because of that, he got it through literally at the end of this. We were four months into it, took four months to close. And it shouldn’t average is on this loan where people that do is 45 to 60 days. Like anywhere else. But he had to go. He actually got fired from the company that he got. He was writing the loan through. He had to go and plead with them to get this through because the seller was about to back out. The bank was back to about about to back out. He went there, begged and pleaded with them to close this loan. He’s like, I don’t want my cousins to come beat me up because I I you know, I made Matt loses money, so.
[00:39:02] So, yeah. So when all was said and done after concession. So I had the seller pay for closing costs. They actually covered in a little bit and then some after all the financing was done. It’s not people ask me all the time, oh, you didn’t put 3.5 percent down with ninety five hundred bucks. It was ninety five hundred bucks, which is what I put down with concessions and everything kind of. I kind of put down less than 3.5 percent, which was pretty cool. And so ninety five hundred down. We put we put eighty thousand into it. If it after eight months it went a little longer than it should have. After eight months it I got it reappraised immediately for. Four hundred eighty thousand, which is awesome. So I made one hundred thirty K in equity in one shot and then very shortly after we got engaged. Me and my wife. So we moved in together, start planning for the wedding and move back home. And we I rented both units out and I knew that I knew that both units would rent for about twenty four hundred a month. Now they’re both at twenty five hundred a month. So I have five thousand a month income and then the expenses are three thousand. So I’m cash flow in two thousand a month on my property right now. So in ninety five hundred bucks I turn that into a one hundred. It’s actually just reappraised for five ten. So you know one hundred sixty thousand in equity and two thousand a month where with rental income and the right.
[00:40:33] And where this really where I want to wrap everything up with this is this whole thing catapulted my real estate career.
[00:40:41] Sure. Without this property I had no way of breaking into it. Right. All the doors opened after this. And the reason being is because I was I was instead of the guy that was going to the reha meetings and stuff, that was like, I didn’t have a deal. I was in a steel club. All right. There’s a big gap between people that have never done a deal and then the people that have done deals.
[00:41:04] And I was the guy with the deal now. So now all the sudden, hard money lenders are coming my way. Right. They’re offering me their deals. And there’s so many of them now. You know, realtors are like, oh, you did a deal. OK. Well, this is what I have in my pipeline. It opens all the doors. Getting that first one is so important. And the other thing that it did for me was I have equity in that that I now use to buy more property. Without that, I had nothing. Right now I tap into seventy thousand. Any chance I need to buy new property? And I rolled into my second property very quickly after that. So I struggled for so many years. And the reason that I know again, long winded answer, but the reason why I’m an expert in this is because I took it upon myself when I was done with this whole rehab. Right. I’m looking around. I’m smelling the new paint on the walls. And I’m like, man, I don’t know why more people don’t know about this. It drives me not like this is this is how you should this is how people should start. Like this is the way. Like, I tried everything and nothing worked.
[00:42:08] And this was finally the one that that that came to fruition. And I was like, I gotta let more people know about this. And so over time, I started, you know, answering, you know, I’m a member of bigger pockets. And, you know, friends of mine were like, how the hell did you buy a house?
[00:42:25] Like how you have a rental property? You know, I was twenty six with a. I was a landlord, you know, at twenty six, which is rare, I guess, to toot my own horn, you know. And that was not a landlord when I was twenty six. Yeah. You don’t want to want to be. Yeah. Yeah you do. Yeah. Exactly. And and and I was you know people ask me all the time how to do it, how to do it, how to do it.
[00:42:48] So I saw there was a need. And that’s how I started the two or three K way. And what’s been awesome about this is because I started this. I’ve connected with so many two or three K professionals and I’ve connected with the lenders that do these day in and day out. I’ve connected with two or three K consultants that told me, Oh, Matt, why the hell didn’t you just call your two or three K consultant in the beginning?
[00:43:11] Because they would tell you who’s going to know the best lenders in your county. Then the two or three K consultant in the county who’s going to know the best? Two or three K qualified contractors? Other than two or three K consultant. Right. Makes us.
[00:43:24] So a lot of stuff that I’m now giving the information to my followers and my community is like, OK, here’s everything I did. Here’s what I did wrong. Here’s what not to do. Here’s how to do it the right way. And I tell people start to finish really how to do this whole thing. And yeah, it’s it’s it’s a really it’s it’s it’s definitely the FHA and real estate’s best kept secret. You know, it’s not for everyone. You know, people come to me all the time. They’re like, how do I do it? Two or three k if I have no income or no job? I said, don’t do it.
[00:44:00] Sorry, I’m not cancer. Right? I’m not I’m not your messiah, man. I can’t.
[00:44:05] Listen, this isn’t one of those strategies. No money, no credit. You need decent credit. Feeny, crazy good credit. It’s an FHA loan. No, you need a minimum of six hundred. Yeah, that’s not much. You need two years of stable income. All right. You need a debt to income ratio like 50 percent, whatever it is, 60 percent between you and a partner or whatever else that is. Know very minimum level of qualifications. But, you know, you need to be like, you know, a member of society, a taxpayer.
[00:44:32] And, you know, these are things that you have. But listen, anyone could save up a 3.5 percent down payment. I’d like to say that all the time. And if you can’t, real estate’s not for you. It’s just not if you. Get disciplined on saving three point five percent. Whatever market you’re in. That’s an on average save in 20 percent of your income for a couple months, right? Twenty four, you know, six months to a year.
[00:44:56] One of the big one of the best quotes I’ve seen out there and I’m going to butcher this is that, you know, if you have you know. If you can’t manage a thousand dollars. What makes you think I manage a hundred thousand? All right. So, yeah. And that’s a that’s my story, I’m sure.
[00:45:12] And that’s the two or three K-Y. I know that what you said. Sorry if I ramble too much, everyone, but it’s a great story, very in-depth. But I appreciate everyone listening.
[00:45:22] Is a story. So house hacking with a two UK loan is something definitely to look into. Unless you know you’re married and got a couple kids and your wife says no. Yet she she is the voice of reason. So I do. I do. Listen to her. I will say this, though, and you brought up a good point with the banks. You know, the question isn’t if you’re you know, when people start going to interview banks. The question isn’t, do you offer two or three car loan? It’s tell me about your two or three K experience Rango letting go. I actually. The house we’re in now. I attempted to get a 2 3k loan for it. And right out the gate, the the loan originators said, oh, I was like nuff said. Let’s move on to the next topic. I’m not you know, I went with them. They did fine. But we do not do that. Two or three. Okay. OK. Yes. And then the other thing you mentioned that you’ve got to live in the property for at least a year. I think you’re the guy who who can correct me. Right. You have to have the intention. To live in it for a year, I think. And there is some gray area there I’ve heard I’ve heard of people buying like fourplex is go through the remodeling process and it took them a year to get the fourth unit, which they were going to live in livable. So they had the intent to live in it. But in the meantime, it took them a year to get it up to go in. So they qualify that that checkbox, right? Yes. We had the intent to live here. The rehab just took over. Now they went without a year of having it produce any kind of income. Yeah, right. So that was a horrible thing. But they were able to to not have to. Well, let me back up. They were able to fulfill that obligation without having to actually move in and move out. Right.
[00:47:19] So listen, there’s some gray area. People do it. I’m not saying I’m not suggesting you do that. I’m not suggesting we go out there and do it. Red flag all come up. You got all the rules.
[00:47:31] Follow the rules. You know, people ask me all the time, do I have to live in the property? Yes. If you if you willingly go in having absolutely no intention on living in that property, at least for the year, let’s let’s. Mortgage fraud.
[00:47:45] Honestly. Right.
[00:47:47] You know, at the end of the day, you know, this isn’t something to repeat. You know, you can. But what I kind of said before is it opens so many doors. Right. I didn’t have to repeat it. I don’t want to do it two or three K every time. It’s a lot of work, but I’d rather go to a hard money lender, get them to cover 90 percent of the acquisition costs. Right.
[00:48:07] You know their equity from your my ass. All right. It’s fast closing in 10 days.
[00:48:13] You know what I mean? As opposed to four months. I don’t want to have to get my contract there. Right. You know, paper, all the paperwork done and everything like that. So, you know, people ask a lot of questions like that all the time. And yeah, it’s plenty doable. You know it within that year. Listen, it’s I I boil it back down to sacrifice. Right. This is not your property you’re going to live in forever. This is a financial decision. How serious for me. I was very serious about getting started in this game. I was going to do whatever I had to do. I don’t look it and I’m tainted by it now. And me and my wife talk about it. It’s like I don’t look at property as like a home anymore. I look at everything strictly as investing. And, you know, it’s funny because, you know, we’re looking to move out of this apartment.
[00:48:57] You know, sooner than later, you start having kids, man, that’ll change. Shoot. Grounded on that. Right. And it’s like, you know, every property is an investment. Right.
[00:49:05] That’s a really good job of keeping me straight on that. Yes. House is an example of that.
[00:49:10] Right. And I know it’s there, but right now I’m in full investor mode. And it’s like one of those things that I was I was full on. And, you know, that’s really what I’m promoting is listen. Using the two or three K to the maximum advantage of what it gives you. Right. You could buy up to a four unit. Right. You could buy up to a four unit.
[00:49:28] So that means you could either house hack live for free. You know, I have a guy that follows me and he’s someone I mentor. And he bought a tri plex. Right. So he’s actually living for free. Plus getting.
[00:49:40] Cash-flow lunchbox, yeah, a little bit on top, right? So and he’s got the equity in it, so it’s like, you know, I try to tell people like I made like five thousand percent or a Y in the last two years and no one really believes me. Yeah. You know. You know, I do face I do like some Instagram promos and stuff. And like, you know, people just comment, you know, b._s. Yeah. The actual word. And like, you know, and it’s funny because I agree, if a people told me not, I wouldn’t believe it either. But it’s one of those things where if you maximize it to to its fullest, fullest potential, it really can kick off and catapult your career like it did for me.
[00:50:16] Yeah. So, Matt, I’ve got to wrap up here. I’ve actually got to go get showered and shaved while not shaving.
[00:50:24] I was going to say don’t shave. That’s not accurate. Yeah, I did turn it up a little bit last week.
[00:50:30] It’s driving me nuts. But anyway, I gotta go get ready to go to work. So take us out of here. Let it let people know how they can get in touch with you and find out more about the two or three K way.
[00:50:39] Cool. So I’m most active on Instagram. It’s my Instagram handle is the 2 0 3 K. That’s the first thing. I also have a web site where I promote my book and a lender finder tool.
[00:50:56] So basically what I wanted to do was, you know, kind of like you said before, not yet. Those lenders that are like, oh, well, you know, I don’t do that. You want to find the best lenders? I have a tool that’s like a one click tool. It grabs all the data online of basically everything is public information with two or three K. So what you’re able to do is click one button, pick your pick your market and it tells you who did the most two or three KS this year in your market so that you can go ahead and just call them and know that their experience with it and you can get that over at 2 0 3 k secrets dot com.
[00:51:29] Perfect. I’ll make links to all that the show notes. I have enjoyed it. I’ve learned a lot this more. Actually, I’m sitting here trying to figure out how I can convince my wife that we need to move into a fourplex.
[00:51:43] Oh, yeah, man, it’s doable. It’s you know, at least it’s got to be big fourplex with you. Yeah.
[00:51:53] Or almost busting at the seams. Now what we’ve got going on. So anyway, another conversation for another time. She’ll probably bust in my office. What are you talking about?
[00:52:04] I heard you say I heard you said move without moving.
[00:52:08] Does it matter? I appreciate it, buddy. I will catch up with you sometime soon. I’ve enjoyed it. Hopefully we can do it again. Cool, J. It’s been a pleasure. Thank you so much, man. See you.