His Tenant Stole the Building and Leased it to Someone Else!!!

Welcome to another episode of the Owner Meeting Podcast by Multifamily Strategy. I'm Christian Osgood, your channel host today, joined by two of my favorite real estate investors of all time. Completely different strategies and goals across the board. Unbelievable success. Dion McNeely, who just got off the keynote for the BiggerPockets convention in Vegas. Matt Hawkins, who I finally get to meet in person and have on the channel. He is the guy I go to when I get stuck on anything real estate. Massive investor, huge portfolio. Let's get rolling. Welcome to the channel.

So originally, when I wanted to buy real estate, I was actually not trying to reach financial freedom. I was not trying to retire early. I thought if I owned some rentals, if I bought one every couple of years, in 10 years I would have 5. And when I get too old to work, my biggest fear was becoming a financial burden to my kids. And I thought if I had 5 rentals and so-so security, if I worked into my 70s, my kids would be fine. It made a lot more money than I was expecting. So after a decade of investing, I walked away from a job that I love because time freedom is amazing.

What have you done with the time freedom, by the way?

Scuba diving, chasing good weather and great water. Portugal, Thailand, Colombia, going back to Thailand, probably going to Scotland next summer. Oh, that was a lot of travel. I'm trying to share the information. I wrote a book. It took 2 months and locked myself in an office and wrote a book called Financial Freedom for the Lazy Person. Because a lot of people are lazy like me. I don't want a big portfolio. I just wanted a few rentals. I ended up retiring in 2022 with 8 rental properties that produce about $240,000 in profit a year and take me 2 hours a month to manage even while traveling.

That sounds actually amazing as someone who works far too much. Yeah. So try water vacation, travel Portugal. Sounds awful. No one would want to do that. Who would want that? Matt, how about you? You have a little bit larger portfolio, a little bit different strategy. What was the original goal and where are you at today?

Yeah, so, um, was in the stock market in the 2000s, you know, when, when the dot-com bomb hit, um, blew up my portfolio. Portfolio went from, uh, $38,000, which I'd saved in my early 20s, to disappearing. Oh, literally disappearing, when it going down to just a few thousand bucks. Recognized, uh, I didn't want to ever do that again, so I wasn't going to ever rely on Wall Street to figure it out for me. I wasn't going to live in Manhattan, so I wasn't going to be part of any of those, uh, posh get-togethers. Um, you know, where they're all— where they all know what's going to happen before it happens. So not being on the inside, I would look for something that would not only pay me but also appreciate while it paid me. And really, the only thing that I could find that would actually fit that to a T, which was a physical asset, was real estate. And so, uh, then started my journey of— I was young, I was 23, I didn't have a place to live, I was renting, and I just said, I gotta buy a place. And then just and go from there. And I reached out to a mortgage broker and he said, you don't qualify. What are you doing? You don't qualify for this. I said, but I have a good job and I make good money. He goes, you still don't qualify. And I said, so what have you seen work in the past? He goes, you could get a roommate. And I go, how's getting a roommate going to help me? He said, well, he'll pay you rent. And I go, yeah, but you don't count that. He goes, if you have a lease, I do. Well, then there we go. That sounds like that's going to be the ticket. So I sent a message to a bunch of my friends, said, who wants to live in a really cool place? And, uh, got a couple answers back. And the one guy that I would never live with, uh, I picked the other guy. Um, but he signed a lease, and, you know, with that lease and the $1,000 a month that he was going to pay in rent, uh, I actually qualified. I then qualified for the unit and moved in, and that was the— that was the start. And I was house hacking before house hacking was house hacking.

So there we go. Yeah, before BiggerPockets branded it as, as their own.

Yes, yes.

It turns out you've Having a roommate to help you offset the rent is, uh, not a completely original idea. Yeah, but it can help you get a property financed. Now, you did that— how many times did you say you did that?

9 times in the next 13 years.

And you moved into every single one of these?

Every single one.

That is wild.

9 and 13. So we moved— we— I moved, uh, 5 times in 6 years with no wife, and then 4 times in 7 years with a wife.

Wow.

Now, how did she feel about that?

I didn't ask.

The only correct.

We did it.

That was it.

There we go.

She'd show up and she's like, who are you? Who's living here? I was like, oh, that's the new tenants. We need to go to our next place. Um, honestly, what happened was, is she— I was putting her through college. So I just said, yeah, I just said, if, if I'm going to be able to afford like paying the bills and paying for food and paying for electricity and all the things that we need, You know, we need to be able to keep the nut small.

Yeah.

And so that means moving into a place and I would never buy anything that wasn't value-add. And so it would— anything that we move into would have significant value-add. And we lived in construction zones for usually the first 6 months that we lived anyplace and then did some final tidying projects. And then as soon as we hit the year or going just into the year mark, we would get it reappraised and pull out any cash that we could pull out so we could afford the down payment for the next property. But then we would start shopping for the next property. Post that one for rent, get that rented, and we would have some other place that we could move into by the time it was rented.

All right, so a lot of sacrifice on the front end is what I'm hearing.

Tons, tons, tons.

Where did that put you today?

Uh, today that puts me at 53 buildings, uh, 150-something units, 400 tenants, and, uh, retired at 46 because I've got good friends like Dion that, uh, harassed me until I quit.

There you go.

So yeah, he's like, you got to retire now. And I was like, Listen, if you're bored, just come and visit me. Like, but no, it was great. It was great, um, you know, having other guys, you know, One Rental at a Time with Zub, um, and, and Dion both retiring before me. Uh, there's Michael Zuber, by the way, for those who don't know from One Rental at a Time. Yep. So all those guys retiring just before me, it was, it, uh, it gave us, gave me more play time, but we just had to get some stuff in order personally. My daughter had gotten cancer, and so she delayed my retirement 18 months, which is fine. I've forgiven her over it because— well, kind of you— she agreed that she would live, so that worked good. But yeah, that's how we find ourselves here today, which is at BPCon, you know, Dion being the keynote speaker and just did a phenomenal job. And it was an awesome thing to watch Dion being the keynote of BiggerPockets.

One of the interesting things, and I actually love this, compared to a lot of the other speakers, you actually have relatively a small portfolio. Your cash flow is awesome.

Per unit.

I mean, just absolutely phenomenal. Did you ever think when you were just buying one rental every 1 or 2 years that this would result in you being the keynote of one of the bigger real estate conferences of the entire year?

No, not at all.

I anticipated that answer.

BiggerPockets went through a bell curve of— they grew and they became the biggest podcast on real estate in the world, basically. And they started a lot of the Guests were bigger is better, 4,000 units, syndications, become a broker, become an agent. And I follow Coach Carson, you know, the Small and Mighty Investor. Yeah. And I didn't— I never wanted the big portfolio. I didn't even start thinking about money until I was 40. Like, at 40, I found myself a single parent with 3 kids, found out about $89,000 in bad debt in my name I didn't know existed until the divorce. And started thinking about investing finally. And so my goal was just to get a few rentals to have that better retirement so I don't become a financial burden to the kids. Like, that was the original goal. Well, there are people out there who just want financial freedom. And so my kind of a few years into it, I started thinking, I don't want a huge portfolio. What I want is the right amount of cash flow from the least amount of units. Right? I have 18 units. I'm probably going to be buying a property this year. This is the best— this buyer's market. I'm excited about buying in a buyer's market. The first one I've seen, and I'm not sure I want the 18 that I have. Eventually I might offload 1 or 2, lose some debt, increase the cash flow, less things to do with. I see guys like Matt that have 150 units plus, and I watch him like a hawk. I'm like, how does he—

like a Hawkins?

With like a Hawkins. We can say your name now.

I'm a dad now. I'm a dad now. I can do dad jokes.

That's nice.

But most importantly, he's retired. So now we don't have to just call you Lumberjack. You're actually the man, the myth, the legend, Matthew Hawkins.

True.

So the systems that Matt puts in place to be able to self-manage BRRRRs, flips, rehabs, sell for 1031, to be able to not lose your sanity and run a portfolio. I've incorporated a lot of Matt's strategies in my small portfolio. How I deal with tenants, how I did my BRRRR, the only one I'll ever do. If I have to rehab a kitchen, I reach out to Matt because the systems that it takes to run the huge portfolio make the small one, like I said, take me 2 hours a month. I'm used to working 60, 70 hours a week. So to go to 2 hours a month, I used to be exhausted all the time. I haven't been tired in 3 years.

That is amazing. And hard to fathom. I can't imagine.

Exactly.

This is not a podcast about Christian, but I have no idea what that would feel like.

Exactly.

No concept. Matthew, with your size portfolio, how many hours does it actually take you to run 150 units? You have zero partners.

Yeah, we have so zero partners, just myself and my wife. You know, we've got one employee and he is really the property manager. And then we have just all the systems and processes in place where I can run my entire business right from my phone. But you saw it at BiggerPockets. I wasn't constantly jumping out into the hallway and having to take phone calls. The business runs pretty well, you know, but the, the real key to it is doing rehabs. So the rehabs are what take the time, the rehabs are what take the resources. Managing the existing 150 or so units, not that much time, you know, a few hours a week, not a real big deal. And in fact, for me, it's even less because I've got a PM.. And so I just basically look at notes in the system that he puts in the system and realize, okay, we gotta make a change here. We gotta make a pivot here. But that's all pretty minimal. The big stuff comes and that's what frees me up to do the big audacious, ridiculous things like converting a jail into an indoor kids' playground.

That is such a cool project.

It's fun. It's fun. But you know, it's being able to do cool stuff like that. And it's funny too, cuz it's like, you know, a lot of investors out there think, oh, I can't learn from a guy who's smaller than me. Just portfolio size anyway. And the interesting thing is, is I learned a ton of stuff from Dion all the time. Like the fact, just the cool, calm approach that he takes, and the, the fact that he does a phenomenal job at purposefully making time count and making time available. I mean, that's a lesson that everyone can learn from. Everybody needs to be more in the moment where they are and find a way to minimize the amount of work, effort, and energy. Now, you can't start out there. You have to put more work in. It's a, it's a climb, it's a journey. But after 10 years, most people's lives, the size portfolios that they're going to choose to have, they can have Dion's life.

That's actually one thing that I wish more people would say is those first, especially those first, I would say probably 5 years, but then again, I haven't been playing the game as long as you do. But those first 5 years, you do in fact have to work at it, whether it's I mean, you've had all sorts of jobs, Dion. Like, you have put in hours and work and life experience. You had an earned income to get you into all these duplexes where you weren't raising capital. You've had massive career. You had really cool jobs.

I did. I was blessed.

Yeah. But I see young people, especially on my YouTube channel, because I'm creative finance. So like, people are like, oh, you can buy stuff with no money. This is great. I can do this with— people come in and they think, hey, I can just skip working. And I see that happen again and again and again. And those are the same people who I see filing bankruptcies. They're the same people I saw syndicating 3 years ago. It's like, where did they go?

That's right.

Yeah, they disappeared. Where did all these syndication courses go? Huh? Turns out it's not free money and you can't just only do deals and just hope that the money comes. You have to work. Dion, you're retired on not that many rentals, so you call yourself the lazy investor, but How much work did it take you on the front end before you got to be the lazy investor?

So my book, which is available on Amazon, Financial Freedom for the Lazy Person. Fantastic book. I brand myself the lazy person. Thank you. People want passive income. The IRS calls it passive income. So the category of owning rentals is called passive income. They want iron lung passive income. They can lay down, don't have to breathe for themselves, and money comes in. That's not what owning rentals is. Owning rentals is very close to passive. Couple hours a month, couple hours a week. Acquiring rentals is life-consuming for 5 to 10 years. Every second you're not at work, or if you're at work and you have the ability, you're checking deals, you're making offers, you're touring properties, you're networking and connecting with other investors. So those 10 years to reach financial freedom— no vacation for 8 years, 19- and 17-year-old Jeeps, had to have 2 so one would run well enough to get me to work didn't eat out hardly at all. My time was spent work, kids, investing. And that was the priority order. That investing— there was no Dion time. There was no Netflix. We didn't have cable. We didn't have— we had internet for gaming because I played World of Warcraft as a side hustle to sell things online. So my gaming turned into monetized activity.

How much do you make on that, by the way?

Side note, so worst months, probably $200 or $300. Best months, $1,000 to $1,400. Oh, so it got, it got harder and harder over the time because larger websites just turned into big mills for the things that I was doing. Gotcha. So it tapered off right around the rental started tapering up.

I was going to say, that's like, there's like a free rental unit though, you know, like a bonus, bonus month rent.

That's great. And, uh, so if people are willing to put in those 5 to 10 years where you have no life Mm-hmm. You have the rest of your life. Yeah, it's amazing.

Yeah, it's true. I love that. So if you're trying to get started, there will be some sacrifice.

Yeah, it's going to suck.

And then it doesn't suck.

Which doesn't suck.

You guys have reached the point where it stops sucking. It sounds like it's true.

And the most important thing, once you reach the it doesn't suck anymore, turn around, put your hand out, look for the people that are starting or midway and try to drag them along with you.

Yeah, it was one of those things where, you know, with, uh, with One Rental at a Time, with Mike Zuber, and with Dion and myself, you know, you don't need the money. We do it because we're trying to help people. We just don't need the money. So it's one of those things where we enjoy it, we get a kick out of it. You know, for me, I much rather do somebody else's— I'd much rather be a part of somebody else's first, fifth, or tenth than my 115th. I mean, been there, done that, got the t-shirt. It's nice and it's fun, but I'd much rather do a deal and help somebody else with a deal and get a deal done. And so that's been some of the most fun stuff, helping out— I helped out a 24-year-old buy a quad, helped a 27-year-old buy a duplex and do it with less than $10,000 down in a pretty expensive market. How to negotiate the deal and how to then get a return on that capital. And then, You know, in working with one, he bought a fourplex for $8,814 out of pocket.

That was it.

Wow. Lived there, made $1,300 a month living there, made $1,300 a month. And so set him up for life. He's set up for life. One building, set up for life.

Those are the cool— 'cause that's not gonna be every deal you do and you shouldn't— No, of course. Too many people hear these podcasts and they go like, oh, well, I'm gonna go find that one deal that sets me up for life. I have of everyone in Multifamily Strategy, I have like one mentee who did one deal and he's like, I'm cash flowing $7,000 a month. I think that's like, so basically free. That almost never happens.

Yeah. One thing I like to say because it really hurts Matt's brain, which is always hard to do. Matt has a smart brain, but it's fun when you do it. I only bought— I only purchased 8 properties. It's 18 units on 8 properties. 3 of those purchases were break-even deals. And Matt's little eye twitches every time I say it. I was— I didn't care if I made money the first year. I have a lot of boxes more than Matt. I want it side by side because it's less noise complaints. There's no tenants above or below. I want garages, preferably in the middle if possible. I want pet-friendly fenced yards. I want washer dryer hookups. I want a decent neighborhood, not in a good school district, in a red county, in a blue state. Like, if it checks those boxes, I would almost buy an alligator and just to watch Mike's eye twitch. But I haven't. I don't know if I would like property that loses money.

For those who don't know, alligator is property that loses money day one, right?

Yeah, I'm tempted to do it just to watch how Zuber reacts, but I would never do that. I want it break even or better. And that includes the break even means I'm setting aside the money for future repairs, maintenance, and vacancy. So don't take a loss. But yeah, and then you add time. A couple of years later, those properties are producing almost $1,000 a unit because I'm in a high cost of living area. That's a targeted high cost of living area on purpose. I don't pull the money out. I've never— so you guys have done so much more than me. I've never done a HELOC. Cash-out refinance, never sold for a 1031, never had a partner like you guys are doing the real estate world. I was like, I'm going to carve out this part of the pie and own my life. Like there's a huge pie in real estate. I just need my piece.

Yep.

Yeah.

I mean, to Dion's point, you know, it was one of those things where, you know, for me, I wanted to grow it big enough because I knew I was having kids come along the way. So I've got a 7-year-old, a 6-year-old, a 4-year-old, and a girl who's about to turn 2. And so being at that stage of life, I knew that I had 15 years of expenses for the, for the oldest one, and I had 20 years of expenses for the youngest one. And that's where we're at right now. But it's get— it gets even worse, you know, earlier on in the cycle when those kids haven't arrived yet, but we know that we're going to have those kids. Yeah. And so just looking at it, it's like you've got to have a significant— I mean, if you want to choose that life, you want a significant amount of finance there to be able to do it. And so that's why for us, it was, you know, for myself and my wife Ashley, it was growing it as big as we wanted to grow it, so long as we were only doing great deals. Yeah. And, you know, this was one of the things that I had actually learned from Dion was, you know, he would buy a break-even deal. And for me, I wouldn't buy a break-even deal if it was break-even out of the gate. It was one of those things where it gave me perspective to say, you know what though, if these rents are so undervalued and they're so underpriced. And that's why the person's pricing the asset at what they're pricing it at. Mm-hmm. If I know my rent box, which is something that I've, that I've come up with, if I know my rent box and I've qualified that what the actual area rent is for that asset specifically, well, now I feel totally safe and secure buying something that breaks even or even loses a little bit of money in the first 6 months. It's fine. Because we have examples where we've done this. We bought a property for $750,000. We were able to seller finance. We did $75,000 down. We have a balance of $675,000 with the property taxes. It's about $4,800 a month or so. Yeah. And the rents were right around $5,000 a month. So it was, it was technically a bad deal. The issue is, is that I knew that those units weren't worth $1,100 or $1,200. I knew they were worth $2,000 a month. They were that far underpriced. So when we get up to $8,000 a month, All of that's going to go right to the bottom line, which means I'm going to make $3,000 a month on a $75,000 investment, which means I'm going to have a 50% return year 2 on my capital. It means I'm going to pay myself back for the deposit within 2 years. Like, who doesn't sign up for deals like that just because it doesn't hit one metric in the beginning? I think that's a mistake that a lot of people make, is it doesn't hit one metric in the beginning, and it's a close metric. It's something that's not that far off. It's a few hundred dollar difference. So, uh, so that's, you know, one of the areas that, you know, Deanna helped me out where it wasn't like looking at it so finitely and saying, doesn't make money, doesn't matter. It doesn't make money. It was so close. And it was one of those, what, but Matt, what can you do with it? And that's, that was the question, the conversation we would have. But what can you do with it? And it was like, yeah, you know what? I know what the rents are. I know they're $2,000 a month.

And now officially every socialist in the chat has now heard, wait, he brought the rent from $1,000 to $2,000? This son of a bitch.

Absolutely.

I'm the worst person in the world.

Worse than that is because every spouse in the chat just heard that men who forget birthdays and anniversaries and your friends' names can rattle off the numbers, the cash flow on a chronological order based on how the deal was going to go and not even hesitate, blink, or slow down enough for people to follow. But I mean, it's amazing.

Yeah. Yeah.

Numbers are— numbers are so beautiful.

I love numbers. Oh, I love it. All right. Well, Dion, you said something earlier in passing. You said, hey, blue states, red areas in blue states. Let's talk really quick. Red versus blue, because you have an odd take on this. Uh, New Hampshire is red, right?

Yeah, red governors.

Red governor.

Okay. We, we don't— I don't care how people vote presidentially. I only care how they vote locally. So I want to— I want red-governed states because— and states specifically with high property taxes and, uh, and no sales tax and no income tax.

Yeah, I'm in a very high Property tax state. Why high property taxes?

The reason why high property tax is because if you are not getting paid your rent, you can't pay your taxes. I, as the state, know this. And so I'm going to make sure that I have put my fingers on—

You want to be— you want to be the big revenue stream for the state.

You want to be aligned with the state and its goals, because its goal is that they take those and then they actually will do more services with them. Well, that's the beautiful thing, is I know going into anything that I have the court on my side. Because they are not going to let me do arbitrary things. They're not going to let me do illegal things, but they are going to have a simple system and process that if I adhere to the rules and laws and follow the process, you've gotten your due process. You're out now because you haven't paid. And that's what, that's what I care about, because my evictions last 30 to 36, 38 days, and blue states very often can be 3 months, 4 months, 6 months.

Etc.

So if you're very good in Washington, you can do it in 90 days if you're, if you're a pro. Yeah.

Red county, blue state. I'm in Washington. Red counties. My Tesla had 4 evictions. I think the longest one was almost 2 months. Yeah.

Wow. That's really good.

That's so good. 21 to 30 days because Thurston County is a red county and it's a high-tax state. They know their taxes are dependent on the landlords getting paid. So, I mean, to flip the script, a lot of landlords want a red state because it's landlord-friendly. You don't have as much rent control. Your evictions are faster. Squatter rights are all—

Nonexistent.

Yeah. Okay.

So you're not paying, you may leave.

If you're buying a 40-unit. Yeah. Do you want to be talking to the owner or do you want to be one of 50 people talking to the owner?

See, that I absolutely agree with. You've never heard of a Texan trying to invest in Washington State. But everyone in Washington's like, oh yeah, Texas, Tennessee, Florida, your actual competition pool. If you're the one who's willing to put up with the extra pain, it's like any business. If you're willing, if it's harder to get into, it's usually a better business to be good at. You have a bigger economic moat around blue states and being a good landlord in a blue state.

So Grant Cardone said it in episode 250 on BiggerPockets. He talked about the blue state— you numbers people, they have the restrictions. It takes longer to get permits done. It's more expensive to build. The tenants have more rights. So there's a lot less investors. I don't know that any of my properties were purchased with an above asking price offer because they just don't have competition. I have a solid offer with a letter from my lender saying, hey, this is most likely to close. We've already done 5 deals with this person or whatever. So I want less competition. But Washington State just introduced rent control. You lived in Washington. Yep. Rent control sucks, right?

Oh, if you're the tenant.

Yeah, if you're the tenant. See, you're aware rent control in Washington state is making me $138,000 more than I was going to make if it didn't pass. I'm okay with making money. I feel really bad for the tenants. I voted against it. I sent in a little clip video saying, hey, look, this is how much money it's going to make me. This is what it's going to do to tenants. It's going to make more tenants homeless. It's going to jack up the rent. It's been proven state after state after state. Yes, any socialist in the in the chat, you can leave now. So it's been proven. Yeah. So I, yeah, I would like to own in Gary, Indiana with Millennial Mike, invest at a distance and have, you know, a red state with landlord-friendly stuff. I'll put, because I have the small portfolio, if I had 150 units, I don't know if I'd want to be in Washington, but with 18, I live in one, 17 rented out. Yeah, I've had almost zero issues. Agreed. Uh, massive, massive cash flow. Because rents get pushed up because of stupid laws. Yep. The demand is huge for housing, right? Because people want to live there, which is crazy to me, right? So I want to be in a blue state, but I would not own in King County or in the city limits of Tacoma because the blue areas in a blue state, the actual laws compound too much for me to even handle one rental. Yeah. So I'm in those red counties in a blue state, which almost every blue— California has— my brother invests in Kern County. And he's killing it. Super easy to own there and cash flow deals. Yeah. And so that's one of the things I have a list of things I do backwards.

That's one of them. Yeah. Well, and it makes sense in Texas, there's a lot of properties that I've purchased that rents are like $550 and market rent is $1,300. Like you can more than double the rents because someone's owned it for 60, 70 years. They barely increase the rent. You know, it's been their family for two generations and they don't move the rent. You put rent control in where you're going to fall behind. Washington State, it's 7% plus whatever the inflation index is. So you're between 7% and 10% that you can raise rent, which is still pretty high. It is. Pretty much what happens is what we've seen in every single market that's tried it. 7% is going to be what people are raising on average for the next several years, which is a huge increase in rent and way more than the national average. That's right. So you see rents spike. And yes, I was going to sell down in Washington because I live in Texas. I like investing in my backyard. And then they announced, hey, rent control is a thing. I was like, well, camp here for at least 3 years.

So imagine being one of those owners who never interacts with somebody who points out how amazing rent control is for the landlord and the people that are like, oh, rent control is passing. I need to offload my rentals. I need to turn my rentals into short-term. I need to create more work for myself. I need to do something instead of just sitting back and going, wow, I was going to do no rent increase this year. I sent all my tenants an email saying there is no rent increase in 2025 because we did a binder strategy last year. We raised the rents at tenants' request.. And because it passed, the second half of the email was, unless this bill passes, then there's a 7% increase this year and next year, which is where that money comes from that I wasn't going to make.

Yeah. Oh, that's absolutely wild. All right. As we wrap up in time here, most painful investing experience each of you have had. The biggest thing that I can do on the Owner Meeting Podcast is help people not lose money. That is the most painful part. I've shared multiple ones. My current pain point is I bought one alligator because the pricing was amazing. Today, still bleeds $8,300 a month. That's $100,000 a year. I have to feed the beast until we finish lease-up, which is going really slow in agriculture land in the middle of tariffs and all sorts of political stuff that's not great for agriculture. So that was my current biggest problem is $100,000 a year of like don't buy things that don't make money. Matt, most expensive mistake that you have made in your investing career that someone could avoid?

Follow your tenant rental rules to a T. When you become the shoulder to cry on, when you become the, hey, just help me out this one time, and you know, or you're just, I'm just gonna get a really bad relationship and I need a place to rent. They get me every time, every time. It's, you know, I've done over my 24-year career, I have done, uh, let's see, I've done 15 non-COVID evictions, 15 non-COVID evictions in 24 years. And every single one of those that I evicted was somebody that I did a special favor for, helping them out with something. And you know what, you want to be A lot more landlords have a lot bigger hearts than people think. And that's exactly where we get screwed because every time, honestly, those 15 units and the bills that they left behind, that totals probably $125,000 to $150,000 that I lost because I helped somebody that needed it.

And I was going to say, whenever you give these concessions to tenants, almost every single time you open the door and there's dog poop just like kneaded into the carpets, there's leaks, they've smoked in the unit.

It's absolutely—

it is always It's the same thing with any product. Like, you offer a discount, those are the people who are going to want a refund. It is without fail across all business. I— our policy in our company is always be kind, never be nice. As soon as you're nice as a landlord, you're instantly, instantly screwed.

It's true. Yeah, that was another thing that I learned from Dion. You know, Dion was, uh, what— just the math, the calculus behind his concept was, hey, if, if I let you pay a week late, now you only have 3 weeks to come up with next month's rent. And I just never looked at it that way. I was just like, I mean, time to buckle down, pucker up, buttercup. Like, you better find a way. Yeah. But the, the logic behind his math is exactly right. It's, you know, you're putting them in a position to fail. They don't look at it that way. They're looking for the favor. They want the help. But you say, if I do that, there's no way you're going to hit next month, and we're not going to get on you paying you know, on the 10th and then on the 13th and then on the 17th and then on the 23rd and then whoops, I missed a month.

And it's like, yeah, you're evicted. We're helping you get behind, which is not what we want to do.

Don't want to help you get behind.

Exactly. Any time a tenant reaches out with the reason why they don't want to pay, I point out 3 things. First, it's in the lease. You can pay late. This is how the late fees work. Second, the math of time. If you come a week late, you only have 3 weeks for next month. Normally it takes the average person 4 weeks to get their rent together. And the third thing is If it's due on the 1st, late on the 5th, on the 6th. So this is the tenant asking for it to be late on the 6th. I tell the tenant, as a favor to you, I'm going to serve you an eviction paper because there is rent relief programs out there that will not talk to you until you have those papers in your hand. So because I've had many tenants reach out and ask, hey, I've got this thing going on, and if a tenant had like a death in the family, sure, I can be flexible and I can understand. But if it's just like, I don't have enough money to either pay my cell phone, my car bill, my internet, my electric, and maybe the landlord will let me slide. Yeah, the list of things I've had that conversation and I've not had a tenant make a late payment. Wow. Because they go, oh, it's in the lease, I'm allowed to. I set myself up for failure and I'm going to get eviction. Like, this guy's not playing. Yeah, but I do it in a way where I say it's a favor to you.

I rarely ever get logic to actually work when I explain things to people, but I'm Well, you hear that that's working.

When it is, I'm going to give you the eviction papers. I don't care if their logic works.

They catch up. I do like that. Yes.

Track.

There we go. In case you're not following my logic, also, you will be evicted if you don't take help. And that is an advantage of blue states, too. You do actually have typically more programs available. So when you start this process, there's more exit ramps for them to get help and other assistance.

What's really interesting in a lot of those cases, you know, in New Hampshire, you know, it's one of those things where a lot of people, you know, in the '80s, you heard a lot about the welfare office and even a little bit in the '90s. But in 2000 to 2010, 2020s, no one ever talks about the welfare. No one ever talks about like city welfare. City welfare is still a program. It's still there. They're still there to help bail people out. We've seen people leverage that and exercise that. And quite frankly, the turnaround is pretty good because it's not like it used to be where they had, you know, 97 people lined up to try and get welfare. Like now it's more logical. And quite frankly, they have a, you know, welfare has come a long way where they, the, a lot of these welfare agents actually have pretty good criteria for being able to help you, which just blew me away. I was like, you're not just going to give them the money? They're like, no. I said, thank God. She's like, she's like, she's like, yeah, we have these lists of accountability steps, and if they haven't done them, they're not going to get the money. And I was like, this is awesome. So what's— I've actually sent people there to say, have a conversation with them, and they're going to expect things from you, but have a conversation with them, and you will likely still get your bills paid if you can show them that it really is a one-time struggle and not an ongoing issue because you're bad with money.

Dion, how about you? Biggest, biggest financial mistake?

My biggest financial mistake, and I try to share this as often as possible, is that everybody that's watching currently or in future land, I give you permission to be a landlord today because that was my mistake. I had a bad debt-to-income ratio, right? I started at 40, single parent, 3 kids, $89,000 in debt I didn't know about, not making much. I started teaching CDL drivers for $17 an hour, and I thought to get around my debt-to-income ratio— the lender told me if I had rental income on my tax returns, I'd be able to buy rentals. So I moved from my house into an apartment to rent the house out. So I wasn't like buying a rental. I would have felt like a landlord. But since I moved out of my house and rented it out, I thought I was just dipping my toes in. Yeah, well, since I'm not a real landlord, I couldn't trust a stranger.

So I rented to a friend. Oh, this always ends well. It's great.

Without fail.

Let me help you. And then, you know, it's a friend. So who wants a contract between buddies? So I didn't have a lease.

Who needs paperwork?

Smart.

Yeah. And banks love that too.

He was a single parent. He was a single parent. So this is in my first year of investing. It's been a decade since I've had a late or missing rent payment. But in that first year, wow, rent became late, late became never. So when I went to the house to talk to him, He didn't live there. He had moved out, rented the house to somebody else with a lease. So he was doing it better than me and he was making money. So I went through an almost eviction with that tenant. They ended up willingly moving out. I didn't know about cash for keys at the time, but I probably would have done that. I lost like $6,000 that year. But the biggest mistake was a real landlord would find a lease, screen tenants, not rent to a friend. I rent to friends now. I've got a nephew, guy that worked with me renting from me, my son. Um, because once I owned rentals for a while and I had my systems in place and I have my leases and everybody's— everybody hears, I treat everyone exactly the same. You might get the friends and family discount to move in with the deposit or the whatever, right? I'm human about it. But math of time, if you ever need to pay the rent late, sure, here's how the late fees work. Here's how the— yeah, the— you only have 3 weeks left to put it together, and here's how the eviction papers work because I want to help you. I would evict my son if rent was late because I'd want to help him. And so it's never even been a conversation. That's—

it's just still so crazy. You told me the story before, and it's like, the fact that your friend would— I get sometimes people stop paying, like sometimes people just get shitty, but subleasing and taking a profit to not pay you and then be like, oh yeah, we're buddies, like, that's just like—

so here's the part of the story that neither of you have heard. Oh, I don't think you've heard this.

There we go. Everyone pay attention.

He's still one of my closest 5 to 7 friends. That's why. It's not his fault. It was my fault. I set it up. Take the house. This will be the rent. Just pay it. No lease. I mean, yeah, it was a horrible decision. But it was my fault.

100%.

So there was a couple of years there where there was some friction. But currently, I still— I just helped the guy move. He bought a house a year ago, I think. And I helped him move in. Like, we're still friends. That was my fault. I don't hold a grudge on that. I'll hold a grudge on some other things. You talk in the movie theater, I'm going to jail. But that I was able to get around.

Huh.

Oh, that's, uh, I might be moving to the West Coast and moving to one of Dion's units.

I know, I was just gonna say, I, I think, uh, there we go. Better than the house hack, move in with Dion. Exactly. Sublease your— you know, I'm kidding. Exactly. A friend of mine in Seattle, uh, Laker, she had, uh, she had some crazy bonus guests. They went ahead and moved into her Airbnb, set up a stripper pole, and started filming OnlyFans. And she had to go. And that's King County. You went through that. So her newfound friends, uh, she went through the ringer getting rid of them. They were not pre-existing friends.

They were, uh, random—

what I'm—

adult content creators. I'm impressed with the BiggerPockets convention because Leka talked about having a body in her property for 7 years and then discovered and no one asked about it. They were like, oh, that's just normal. That's part of real estate. We don't even need the story. I want the story, but I wasn't going to ask there. Yeah. Yeah.

She said a while ago that that's the— that's blue parts of a blue state. That's— you will see that more often there. I've, I've seen some crazy stuff in Texas, but nothing, nothing like what we see in Washington. Yeah. If you put in King County. So I bought one deal in King County. 7-unit building in Tukwila. That's about 10 minutes from the SeaTac Airport. And the second you renovate a unit and put a lockbox on the door, the homeless just magically know, "Hey, lockbox, move in." Pick the lock, break in. And when they move in, 'cause they know the, and this was like 2021, so this is like prime, can't get rid of people. They move in, they break in with furniture, they hang pictures, put their toiletries in.

Interesting.

And if the police— this could be a day in. You call the police, they show up. Oh, I've been here for months. Oh, civil issue, evict them. Horrible. Oh, horrible. Which is my frustration with blue states. Now, you may be on to something here with red areas of blue states. That was my big reason for making the business switch to Texas. I had other reasons for Texas, but that was my big thing with switching red is—

I'm like, I don't deal with that. So I also have— I was in law enforcement for 8 years, and this is how one of my closest friends, like Matt, is Millennial Mike. I love Mike. Close as we are. And, uh, he's a current state trooper SWAT team guy, and this was a recommendation from him, uh, create a lease for one of your close friends who will play with you if you need to play. That that's their place. Put the power in their name. So if you're doing a long rehab or you have a long vacancy or something, put protections in place. I go, I put in Wi-Fi and I put in cameras if I'm going to have a vacancy, and I'll take a video and date timestamp the video. So if the cops show up and I go, look, this is Tuesday, this is when it was empty, this is what I'm doing. So there's a lot of steps that you can take. But knowing that you're in a place where they are, the cops can't help— I was a cop, you'd show up, Nope, that's a civil matter. If you can't prove and they can't prove, I can't decide. Interesting.

Yep.

That's horrible.

Yeah.

Yep. In Texas, I'm paid, get out. Yep.

Bye. Yeah, exactly. Exactly. And that's— and even for us, it's like the, you know, cops in our areas are fantastic. They'll just say, really? Really? Yeah. Really?

Yeah.

We're gonna give you 15 minutes, get your stuff.

No, that's nice.

They give them 15 minutes. A lot of times we'll give them 15 minutes and they will get them out, and, and then you don't even have to go to court. And it's just like— and then, because the cop will come over and say, hey, uh, I can get them out, but you're gonna have to make yourself available the next 7 days so they can get their stuff. And he— and then it's like— and then like, oh, well, just give us the code and we'll come back and we'll get our stuff. No, no. Yeah, I was born at— yeah, I was born at light night. Not last night. We're not repeating this whole mess next week. Um, but a lot of times, and then after the 7 days is over, my favorite part is when they, you know, couldn't find you or couldn't reach out to you and blah, blah, blah, blah, blah, and then you just get to throw all their stuff out. That's my favorite part. Yeah, you know, and that works out pretty well. But yeah, it depends on the market that you're obviously investing in of what you're going to get from a response, because I get the police in the blue states that do what they do, and I get the police in the red states that do what they do because they have backing in that red state. And in the blue state, they just don't often— don't have that backing from superiors to say, yeah, go do your job.

And their job is to enforce the law. And so if your laws are bogus, then they're saying, you know, exactly right, you got it, you got to do your job. Exactly right. I like, I like officers who do their job, so that's— they're doing the right thing.

But same page, same page.

It gets very frustrating. I'll have a lot of, a lot of officers with a lot of situations, or they hop on the phone, they're like, look, we get it and we agree And I vote on these things, but can't help you. Yeah. Bummer. Huge bummer. Okay, let's enter part 2 of the podcast. Let's talk market. Okay. So lots of thoughts, lots of YouTube channels. Of course, we always have our online doom and gloom people who have been saying for the last, you know, 58 years, it's crashing. Don't do it. Yeah, I don't know if you guys have noticed this, but I've seen like 7, short-form things from Grant Cardone being like, the market's coming down, it's all over. And then like the next video I see from him, guys, we're entering the biggest boom I've ever— I don't even know what that guy thinks.

Grant just made a cool shift on talking about Matt's 4-3-2-1 method, use an FHA loan, buy a small multifamily, which it used to be Grant would say, if it ain't 16 units, then 32.

Yeah, then he moved.

Don't talk to me. And now it's, oh, get into a small multifamily. I'm like, oh, that guy's—

he's coming around. Yeah, he is coming around. He was like, oh, it's all multiples of 16 until Suddenly it only took 4 years.

But yeah, I mean, suffice to say, I'm like, you know, I'm scrolling because obviously I think Grant's super entertaining. He's a brilliant guy, obviously super wealthy, builds great companies. So I'm scrolling through and I see that and he's talking about exactly what I talked about. I had a video on it 4 years ago and I was like, this is a strategy. If you're brand new, 4-3-2-1 strategy, you cannot beat the 4-3-2-1 if you do it just, just one time, which is you buy a quad, but you can do it with 5% down, own a rock, a year later you're refinancing it. If the rates have gone down or they're flat, you're refinancing it. Maybe you do, maybe you don't. But then you're buying your next, again, a 3-unit at 5% down. And then you can do that with a duplex and then a single-family home. And then your 4-3-2-1 could be done. Maybe it is, maybe it isn't. But when I saw Grant pitching that, I was just, I was beside my, I was like, this is the exact opposite of when I was, you know, going big and saying, I want to get that next level. A lot of times guys just go bigger. And so they'll do the assets that you do, like the massive, you know, 60 to 150 units. Unit stuff. But for me, I wanted to be very, very liquid, and I knew I could do that with small multifamily. But watching him talk about that out of nowhere completely blew my mind because it was completely contrary to what he's preached for 5 years. Yes, the exact opposite. And now I'm like, wow. But the best part is, is that, you know, he'll be known as the inventor of the 4-3-2-1 method.

I will say this, of everything that he has in his gifting, his ability to to say whatever he wants to say with complete confidence. It could be something totally different tomorrow, but he will believe it 100%.

Yep. Yep. He's Jim Carrey.

This pen is blue. So as actual investors in red states and blue states on the East Coast, on the West Coast, in the center of the— I mean, we cover, we pretty much cover all the markets for the most part, all of your different type. I mean, guess none of us are in like Ohio. We're not like Midwest, but outside of that, pretty good representation here. What do we think is coming in the future? Let's say right now, where are we in our market cycle today and where do we think we're going to be over the next few years?

Dion. So personally, the way I look at this is I want to own Class C properties. So just really quick for anybody who doesn't have it, Class A is luxury gated community, doorman, you know, million plus in a bad market. Even Class B can be a gated community. It's your McMansions, your big, bigger houses. Class C is your working class. I have teachers, cops, military, the working people living there. Class D is a war zone. So I target Class C. So I want a market where— or properties in a market where if there's an economic downturn, a recession, a stock market crash, anything, there's more demand on my properties because people in an A or B can downgrade to save money. So it'd be more demand. I want to be a bit out from major cities because remote work is more of an option now than any point in our lives. So people don't have to live where the work is, but they don't want to drive too far. They might have to go to the office once or twice a week. So I'm targeting properties a little bit further out as far as time goes, 45 minutes to an hour out. Where is my perfect ring around Tacoma or the larger work area to you, to wherever you're investing? Because that pushes up rents but not prices because remote workers, right, and it might stabilize. But right now, remote workers want to be out of the city. They want more space. They can move from a $3,000 apartment in the city, come out to my place, a $2,000 2-bedroom, saving money, and it's a better deal for them. And I could— it pushes rents up, but it doesn't push up price. Yeah, because the remote workers are afraid that in a year or two they might get called back to the office and they don't want to own. So I'm in a market where rents have been pushed up, prices haven't. And then I'm watching AI. I think AI over the next 5 to 10 years, as jobs go away— I'm not a fan of it, but I think the Section 8 program is going to grow. So I have about a third Section 8, a third military, a third working or retired, and I expect more Section 8 tenant demand in the future.

Definitely going to touch on this.

Stage 1, then stage 2 is UBI. I think we'll have universal basic income on at least a small scale. In some states it's been attempted in some areas. I think we'll see a broader version of that when AI isn't— and when AI starts actually taking more and more jobs. And I want to own the properties that UBI would pay for. So I'll have more demand from Section 8, more demand from people that were making a lot of money, and more demand from UBI. So Scott Trench's book from BiggerPockets, Set for Life. The model for me is Set for Life on that methodology.

Okay, I like it. Matt, what do you think's coming down the pike?

So, you know, obviously real estate's hyperlocal, but I think that we're going to see a lot more joblessness. You know, I think we're well into the 5s for unemployment next year, you know, maybe and possibly even 6. But I think we're heading down a tough road where there's going to have to be some recovery from it. But we're paying— quite frankly, we're paying the invoice over the— from over the last 4 years, we're paying that invoice. So I invest in B and C because I know that I'm going to get A's to downgrade to B's, but they're too snooty to downgrade to a C. So I want that A tenant that will be willing to go down to a B. Then I've got B's that will trade down to C's because they need to try and save money and they just can't make it work, but they're not going to go to a D, they're going to go to a C. And then the D's are always trying to get out of D and they're always trying to get up to C. So C solves itself. So I just want a little bit of, you know, having the size portfolio we have, we can't go all C, we can't go all of any one thing. So that's why we have B and C. And then the other thing that we like to do is we like to do B. We— what we, what we say is we like the area of the town to be one letter grade better than the actual unit itself. So we like to do B quality product in A areas or A areas. We like to do B quality product. So we might be in an A area where there's a bunch of gated communities around and there's other really nice places around and tree-lined streets and all this cool architecture. That's all awesome. But we're not going to do an A-class project there. We're not going to tear anything down and build something new. You know, we might gut and rehab, but we're not going to do new builds. And that's largely to get an A, you have to be a new build. You have to be a new build in a high-end area or a newer build in a high-end area very often, unless you're talking about multimillion-dollar homes where it's just like no one's going to rent that home Anyway, unless they're an executive. So we like to be in Bs and Cs. That way the As can trade down, the Bs can trade down, and the Cs can trade up and down, and the Ds can trade up. So we like to be right there in the middle. I, you know, A is dangerous to own, you know, because there's always— it's like Vegas, there's always the next newest, most beautiful hotel being done, and then everybody goes there, and then you're old news, and then you're off $150 a night. So that's why we like that kind of, uh, middling strategy.

Yeah, well, in any market pullback, you mean? Correct. Anyone who lives in an A can live in a B. Yep. It's fine. It's just fine. Sure. Anyone in a B can live in a C. That makes— you really don't want to live in a D property. You really don't want to live in a D property.

You certainly don't want to live in a D area. Yeah. And that's really the issue is that most D properties are in D areas. But if I'm buying a D property in a C area, then I'm going to make it a B home product. But, you know, And that's where, again, just kind of this overall strategy, it is, you know, Dion talked about it in his, in his BiggerPockets talk, one of the three that he had this weekend or this week. But he was exactly dead on, which is, as we look at our markets, what we need to make sure is, is that we have essentially our criteria that we're leveraging, and that we know that that criteria works. So knowing that it's, you know, no second floor units for Dion, and I know his list, and, you know, clotheslines and washer dryer in the units. And, you know, no, not nothing one on top of the other. You want a yard, you want, you know, you want parking, not a garage, but a carport. What else am I missing?

But that's a lot of it.

Do you know what's almost everything?

The pet-friendly fenced yard, not in a good school district, not in a good school district. Yeah. And so it's like those strategies, they, they work because very often the reduction in rents that you're seeing and when you see rent going down. Yeah. And he called it out this weekend, they're not going down in Bs and Cs. Yeah, they can't go down in Ds. They can't go down anymore in Ds, but they're not going down in B and C. They might see a little bit of a touch, but most of the, most of the, of the lack or most of the reduction in price is A. Yeah, because the newest property just came out and they just took a hit.

You know, it's funny, everyone answers that question. Here's a good operator, answers it the same way. I asked both of you what's coming in the market and you both essentially went to This is why I don't care what's happening in the market because my strategy is completely immune to it. It's evergreen investing.

Yeah.

It's like, oh yeah, joblessness will go down. And also, I don't care. And that tends to be the answer I get every time you get a great operator. When I ask someone who's just— they're a buyer or they're a capital raiser, you go into the market and they have a million opinions of, well, this is going to happen. I think we're going to see this much inflation and rents are going to do this. That's actually— I love that answer. It's like, okay, well, The market's going to do what it's going to do. And regardless of where we are in a market cycle, we're going to invest in a way that's going to be as immune to that as possible. Because I don't think any of us want to build our business again twice.

It's—

No, once was good enough. There's a lot of stories out there of like, oh yeah, I lost all my business and now I'm building it back. I'm like, I don't, I don't want to have one of those YouTube channels of—

It's funny.

It's actually the Build It Back channel.

Yeah. Why I do content is because I don't want to do this twice. Right. So I went from really bad position you were struggling in the beginning. You lost money in stocks. And yeah, and I had the emotional roller coaster of going to financial freedom and retiring early. Right. It's amazing. Would be great to do that twice, to feel that twice. But I'm not stupid and give everything away and start over, right?

Yeah.

But every time we meet somebody like at this event, there was Alex and Jill.

Sure.

That are on like their— they just bought a new house hack. They've got a couple of other rentals and you're watching them progress. I get to feel it all again. Like, that's why I'm out here talking to people trying to say, hey, there's another way. You don't have to work until you die.

Mm-hmm. Yep. Well, that's the— to be fair, like, I do a lot of coaching for free. I do a lot of coaching at profit. I do a ton of free stuff. But like, paid or free, it is the most rewarding thing in the world when you get to get— I got a tag. I showed you one of the texts, like, when we're sitting at the table. Someone's like, hey, I made a boatload of money on this deal. It was like a life-changing amount of money for them.

Absolutely.

Hundreds and hundreds of thousands of dollars. And they're like, hey, I That one video and that one mentorship class, that call made me buy this one deal. That's the most rewarding piece of making it. And I'm not where you guys are yet. I'm not retired. I haven't done the— I'm not the end of the road. I've got a couple of years to catch up here.

But you're sharing the journey along the way, right?

But it's sharing the journey with more people is legitimately— it makes it so much more fun. Doing this alone, business in general is a lonely, lonely sport. There is—

your family will pretty much not be interested in anything you're doing until you're successful. Yes. Then they're in line, hand out.

Oh, it's true.

Yes.

Yeah.

May I have some?

No. Most of, most of my friends just slowly stopped talking to me. And it was worse the more successful that I got in business. The larger we got, the less interested they were in hanging out.

Yep.

It's not even we're talking about business. It's just, there's like, we have less things in common now. So having community and other people who are like, it's kind of like any sport, or yet very much so, you collect cards. Dion has— Dion is a collector. You have some cool, cool paraphernalia. I've seen some of your, some of your toys. But like, when you're a nerd, and you like stuff, it's fun to meet with other nerds. And as real estate guys and business guys, it is a privilege to get to meet with other nerds and nerd out about the thing that we love doing.

Well, On that note, last night—

so thank you, nerds, for watching.

We were all at dinner last night and everybody was enjoying and it was all a bunch of investors. And then me and Christian got onto the topic of certain books that we enjoy and the rest of the table disappeared to us. Yes, it was a 20-minute conversation of us going down the rabbit hole of that.

And that—

were you still there? No, I mean, I just watched. I was just watching you guys gaze into each other's eyes and wondering if it was going to make it to another level. I was just like, you know, your wife's right there. Like, I mean, just take it. I mean, we are at a table in a restaurant, but no, it all worked out. Yeah, we were able to not be escorted out by the police, so that worked out.

Yeah, it's good. Texting Dion, uh, yeah, Amazon links under the table.

Yes, he was.

Got my order in. Oh, there we go. Yeah, Dion's being introduced to Brandon Sanderson. So for those who, uh, don't care about fantasy, uh, you will after reading.

The person who doesn't read has no advantage over the person who cannot read.

Yes, that's true, that's true. And somehow it's worked out because the only thing I know how to read is a P&L.

I was gonna say, uh, this guy's financially literate.

It's gone okay. But yeah, I mean, I think the other You know, it's funny because, you know, you guys are voracious readers. I think that's the right word.

Um, I wouldn't know because you guys—

it is worse, you guys are the better readers. Um, but, um, you know, I think it's interesting because, you know, again, it just shows personality type, right? Um, I— you could not pay me enough money to sit in a room and read a book. I would be like— it would be like straitjacket time. Like, get me out of the room.

But comparing Hot Wheel cars or cards.

Absolutely. All day long. Yeah, all day long. And that's the thing is that's where you find your niche. And what's really cool is what most people don't realize is that those skills translate in the game. They translate in the real estate game and you find out what you're really good at, what you really enjoy, what you don't really enjoy. You know, fantasy comes into play a lot with tenants that are behind on their rent. I think they're going to catch up. That's a fantasy in almost every case, you know. But yeah, it's a great journey. But like we were talking about earlier, you know, doing somebody's first or fifth or 10th is way more fun than doing our, you know, even Dion with his 10th or 20th. Because, you know, I mean, you're at 8 now, right? 8 properties.

Never sold anything. It's not something I might— I'm probably going to sell one next year. Yeah. Just because the— not to name anybody by names, but the permit office in Port Orchard, Washington.

Gary.

I'm just kidding. I have no idea what his name is.

Yeah. No, if it's actually Gary, I'd picture this. I try not to be political on here, and so I'm politically neutral in this story. Okay. I put up a Marine Corps flag. The color resembles a Trump flag. So the literal blue-haired nose septum piercing person starts digging through records back to the 1940s to find permit violations or anything that's changed and attacks me. And I'm a year into fighting them. And basically it was— it resolved because I got a firm for like 7 grand. This is what it cost me to the firm to write up the report that everything they asked for was ridiculous. They've done 500 reviews in this county. No one's ever asked for a wind shear study, a geo study underneath existing foundation. And then basically the other things they said, the variance isn't enough of a change. Call them idiots. And I think it resolved. Me calling them idiots wasn't good enough. Yeah, but, you know, the paid geo survey people and got construction. There's two different types of architects. Saved me. Yeah, but I'm ready to sell that property. But if anybody's looking, one, Port Orchard is great to live in.

Port Orchard is fantastic. Beautiful.

I walk down, take a ferry to Seattle, have lunch on the waterfront.

For the two years I was a broker, that was like almost all my deals were Port Orchard. I should have— if I knew you, I would have, I would have had you buy that fourplex. So the fourplex for $400,000, I would have bought it. Yeah. They, they house hacked it and then sold it for $1 million.

Oh, that is what happened. 2 years later, it might be the one that I sell. I bought it for $4 million. I'm going to sell it for $7.5 million or $8 million. So it's soft.

It's just a duplex. I did that. I did that deal. And then that was— I was like, why am I brokering these? I need to buy all of these. That was my— that was the turning point for me when I sold that deal and I was like, why am I doing this?

Yeah, that's the question I ask the most people at BPCon.

Yes.

So the people attending to view I— great questions for me, great interaction. Like, almost everybody I met was great except for the person who stole my mic. She was great, but she doesn't even know. But I talked to the vendors, the brokers, the agents, and everything, and every single one of them— I asked them, why don't you invest? And everyone had a litany of excuses. And that's where you were, and you saw the light bulb. Good job for flipping the switch.

You need to have— I, I—

personal opinion—

you need to have some moment where your bullshit meter you hit that bullshit meter in whatever you're doing where the pain point is enough to quit what you're doing and you're comfortable doing. It is that, that 9 to 5 thing. I mean, that is a, that is a religion. It's, it is so hard.

It's tough to give up on that predictability, but it's so hard, you know, within, um, I thought Dean was doing it to prove a point to me, like, told you you shouldn't have come, you know, um, because we're sitting there standing in front of people and talking to them and there's just like Great. Well, what do you do? I'm in property management. Property manager 1, property manager 2. Do you own any property? One guy owns a condo. He's an accidental landlord. And then the other one doesn't own anything. And they're in their 40s and 50s. What are you waiting for, guys? And then it was— we were talking to somebody that was deeming themselves an investor agent. Mm-hmm. I find that to be a really cute idea. You think that you're going to help investors and— oh, great. How many investments do you own? Oh, I don't own any. Why are you talking to me? This is ridiculous. Like, you can't be an investor agent and not actually have an investment and actually know how they work or run.

Now, there are people who actually love brokerage and they own rentals, and they're— those are exclusively the guys I work with. They usually own a ton of rentals. They're great. But there's too many brokers who are like, I'm doing this for the money so that I can one day buy rentals. And I hear it all the time. And How many rentals do they end up owning at 50?

Maybe one. Justin Camber said it brilliantly last night.

We asked basically— love that guy, I've had him on the podcast—

and somebody asked him, how many agents do you have and how many of them invest? He didn't even have to think. He's 100%. It's the criteria. You have to own rentals, then you can be an agent with him.

Definitely genius.

Genius. I mean, that's the, that's the crew that you need to be looking for. You know, one of the things that I was talking to, uh, a real estate agent trainer, and so she, she trains hundreds and hundreds of agents And I said, what percentage of the most? She goes, I don't know, 5% or something like that. And I said, isn't that silly? Don't you think that if I as an investor was looking for a new agent in a given area, the only question that I train my people to say is, do you own any investments yourself? And when they say no, I tell them find another agent. So I know that they're going to have to find a 1 in 20 agent. They're going to have to find— they're going to have to go through 20 agents likely to before— and 20 conversations before they find somebody who actually owns some of their own stuff. And then Are they sitting there complaining about it all the time because they suck at managing it, or are they actually good at what they do? So I told her, I said, what you need to do is you need to be getting a lot more people to take my course and understand what investors are actually looking for and they care about. If you did that— and real estate agents that are watching this, if you would just spend a couple of grand, you would be eons past 99% of the agents out there and get investors Forget about investors like me. Most guys my size, we have a team. Dion doesn't have a real team.

Dion is like, hey, anti-team.

Yeah, he's like, hey, I saw this listing and I saw that you listed it and I want to, I want to go have, I want to see a walkthrough, I want to go do that. They have no idea that what you do is— and but then Dion's loyal and we're loyal. And so if somebody brings us a deal, we always say we dance with the one who brung us. If you brought the deal, we do the deal with you, period, end of story. We never just bring it to our team of brokers. We actually do the deal with you. Yeah, but the issue is, is that not nearly enough agents are worthy of having potential new investor clients trying to buy with them because they don't know the first thing about investment. They, they couldn't begin to tell you if— I literally had somebody say to me, I think this is a great rental. And so I just heard enough of her stupidity over the rest of that walk. And I said, tell me why. Well, you know, it's in a great area, you know, I mean, you've got good schools. And they said, great, tell me why I would want to buy this. I mean, great area, you know, you've got really good schools. And I was like, yeah, I heard that. Did I mention the schools? Yeah, exactly. Did I mention great area? You know, yeah, I got it, but why? Well, I just think, I just think it's a great house. Yeah, but just so you know, I'm not trying to be a jerk, but you've given me nothing. I ran the numbers based on what I saw in the expenses because you wouldn't hand me, you wouldn't hand me the listing sheet until I showed up. I'm looking at this and you're about $50,000 overpriced just based on the numbers that you presented me. If you want anybody to even look at this deal, the only thing that you can hope for is that some really bad investor has a really bad agent and buys this deal. That's the only option that you have to sell this property. So I think very often, I think that real estate agents spend far too much time learning how to dial the phone, learning how to convince somebody to buy. Really? You think I need that? I don't need any of that. What I need you to do is do your job and give me all the data and information that I need. And if you do that, I'll buy you. And it's a very easy process. You have to convince me, find me a deal that fits my criteria, and I'll buy it. Mm-hmm. I don't understand why they— that's the lazy method. Why they haven't gravitated towards that, I don't know.

It's why so many agents don't like to work with investors, because we have criteria.

Absolutely.

We don't, we don't fall in love with the house and want to buy the house based on pain.

Exactly.

Criteria.

Disgusting criteria. I wanted to sell you on a dream in a petri dish. Yeah, exactly.

I want to, I want to, I want to touch your feelings.

Yeah, do math and make numbers. What is this?

So it's funny because my agent, the, my top broker now, he used to mow my lawn. He used to be my boy. Swear to God, used to be my lawn boy. He was my lawn boy, went away to college, got his degree in economics, then finished, got out, and he goes, I'm gonna get into real estate. And I go, You just finished a 4-year degree in economics, minoring in business. What is wrong with you? You could have been a broker day one. Yep. And he goes, I wanted to get the edge on the economic side. He goes, and I think understanding the economy, understanding how the economy works, I think I can be better prepared than most other brokers. I said, yeah, fair enough. And then I watched him and I said, we would work with— work together, work together, work together, work together. And after a year and a half, we did our first deal together, and now he's my primary agent. I have done 27 transactions with him. Wow, 27 transactions with him. Yep.

Well, that's good. He can pay back the student loan.

Hell yeah. Yeah, you can pay back one of those student loans, pay back them student loans and buy a house.

Yeah, there we go.

But that's the nice thing for him, you know, it's over a million dollars from one customer, and I didn't stop him from getting any other customers. He did 99 sides in a year with no team, with just one assistant. So, you know, yeah. Wow. Kudos to agents that want to work, that want to work smarter, not harder. I mean, he did. He does. He works really hard, but he did 99 sides and I'm thrilled, you know, thrilled to have him as my broker. He just— I never did more than 10 with him in a year, in a 12-month period. And so, you know, I was 10% of his business, which is nice, but he had other investors that also bought. And, you know, that meant that 30, 40 units that he sold were through investors. Like, that's the way to do it.

By the way, agents, that's your only goal, in my opinion. Yeah. And I did well as an agent for the short time that I did it. But your only goal is to get 10 guys like Matt. Oh my goodness. That's all you need. Yeah, that's all you need to do is you just need to be excellent and loyal to a few really good investors. And if you can work those relationships, you're done. You just mentioned like, oh yeah, well, the biggest year was, you know, I did 10 transactions. That's a ton of volume.

Yeah, I mean, well, I mean, those 10 deals, you know, the average—

10 people, 10 deals, 100 transactions.

That was probably—

Killer.

It was probably a couple hundred thousand bucks worth of commissions. Yeah, at least, if not a quarter million bucks worth of commissions, which we are happy that they get.

Loved it because we're closing on a deal we want.

Yeah, yeah. Yes. Well, the best part is, is that I hear from him 3 times. You know, he knows who my— he knows who, you know, when we're going to inspect, and he knows when we need to close. And so I literally hear, hey, sign this, fill this out, show up here.

Okay, well, and you get some of— you get some of these people in your book. Yeah, you get tons of transactions. Like, if you got me in your book of business in Texas, I'm good for probably $15, $20 million of transaction volume. Exactly. You'll make significant money if you're one of the— like, there's 3 brokers. All of them are in their late 20s. They're young guys. They're super hungry. Yep. They work for bigger players, but I like them better than their bosses. Yep. They're tons of drive, and they're smart. They're great negotiators. And I text any of these guys, like, hey, did we— Check the laundry room for this. Yes. 12 seconds later. Sure. I'll get that answer for you. Sure. 2 minutes later, I've obtained the answer. This is what you do. Here's how you're going to present. Like, right. Which it sounds like that'd be a pain in the ass job. Then you look at how much they get paid for not having to deal with the rest of the building and like, oh, you get a few clients like this. You don't need to do that much work.

The other thing too is, you know, so, you know, we're all buying real estate. And so somebody, you know, finds a deal, they create a deal. Deal, right? And so that's what happens first. What the first thing that happens is an agent creates an opportunity. Well, I don't need you for MLS stuff. Why would I need you for that?

I can read, barely. I was going to say, the non-book guy, right?

Exactly. But I can read. I can read MLS. I can, I can read all the listing service, service. But that, that's the key though, is that this is what a lot of these agents don't understand, is that if you take a course, you get equipped, and you can qualify the how good a deal is, then you know that when you get one of those, how do you become part of that investor's team? How does someone become a part of your, you know, 8-building team, my 53-building team, your 300-unit team? How do they become part of that team? By bringing me a deal that I'm going to close, and then I'll let you bring me another one. And what's the problem for you? You get paid. What you're getting is a guaranteed closer. And if you can qualify the deal on your own, you're significantly in front of 99% of other agents. And it just blows my mind that agents will not put in that work, that they'd much rather go to some other jackass seminar about cold calling.

That's the key as an investor, is you have to listen to your agent and think, okay, what are they presenting me? Curb appeal, right? Good school district, nice area, you know. No, tell me based on the math, right? It might not be a great numbers game, but also here's the things that would help limit tenant turnover. Here's, here's what the seller wants. You know, maybe they need a place to live, maybe they need something. They bring you the information that actually matters to the investor. Absolutely. You work with—

absolutely. Yeah. Yep.

You're welcome. Now, both of you guys had mentioned this, and so I did a video, and I apologize, YouTube. I've done 2 videos this year where the title was definitely clickbait, and I apologize for that. I try not to do that. I try not to do that. But then you guys don't watch my videos. So one of them that happened to get a lot of views was, is Section 8 going away? And I think I said it more like I think it was like a big cancel sign through— Section 8 is all dying.

Yeah, I remember.

And the content of said video was, no, it's spread. I don't see it going away. Um, that being said, there is a lot of talk, a lot of talk on the internet of what is happening to Section 8. What is the administration going to do? What are the effects going to be? Both of you guys have nodded along when Dion's like, oh yeah, I know that Section 8, I think it's going to expand. I think it's going to get bigger. That, that has been counter to a lot of the news circuit. So why do you believe that Section 8 will expand over the next few years? What does it actually look like in your portfolio?

Can you imagine the moronic level of intellect that it takes to say a billionaire real estate investor who worked their way into the presidency is going to do away with a social program that pays landlords? That's how stupid that is. Second, I don't think people realize—

can I get a hallelujah?

Yeah, thank you.

I don't think people realize how divided in the middle we are. Yeah, uh, people say the Republicans own this or the Republicans own that. Yeah, by a seat. It's not like there's 90 and 10. Right, exactly. It's 51-49. Yeah. Like it's by a seat. And so the vice president ends up making some tiebreakers, right, to get that voted through. And so I think if we're in— we have an 80-20 experience. Yeah. If we go 80 red, 20 blue, we're going to be gun-toting rednecks, right? But if we go 50/50 or 40/30, none of those programs go away.

Yep, I think that's the case. I think that, I think that that's what the market's going to be. I think that there are going to be some places are going to have to do UBI. I think that white-collar— what's really funny is, is we've actually brought in a lot more, uh, mechanics, plumbers, electrician, um, journeymen, apprentices. We brought in a lot more tenants like that then we have white-collar jobs. I think the white-collar guys are going to be in the most trouble. I think they're—

I think—

and a lot of times, you know, they need $250,000 salaries to afford the house that they're going to have, and they're going to lose at least one of those salaries, if not two. And then somebody is going to be looking for something else. So we love— we love what we call workforce housing, which is helping out the actual workforce.

We love that stuff. And I 100% agree with this analysis. I do think we're going to see expansion of these programs before we see reduction of them. Yep. And it's from both sides, right? We have a president who is pro real estate and social programs. Traditionally, you think of Dems for that. So when you see a change in office, I think it's going to expand. You see the current administration, I think it's going to expand. I think everyone is, everyone on both sides is pro subsidizing housing right now.

So here's the warning. Diversification matters in tenant type. I'm not a fan of saying I'm a Section 8 landlord, so I only own a Section 8.

Oh, no, no, no, no, no, no, no.

So I do a third Section 8, a third military, a third working or retired. Yeah. Matt has expanded to a little bit more Section 8. You got kicked in the teeth because you did an Emergency Rental Assistance program. I did. I recommend unless your portfolio is your size and you can handle 15 units becoming a guaranteed eviction in 12 months. Agreed. I wouldn't touch it. Yep. I'll do Section 8 in the county where it's nice to work with. Thurston County, Washington is great. Pierce County, Washington, I won't do it there.

Yep.

So you got to know your local county. But then I don't want too many from any program because Yes. Yes, we can guess and say with conviction, I guarantee it ain't going away, but it could. There could be a base realignment and closure meeting, a BRAC meeting, and Joint Base Lewis-McChord could be gone and all the military is gone. So I don't want all military and I don't want all contractors from—

absolutely.

I wouldn't want all Boeing employees. I wouldn't want all Amazon employees. I wouldn't want anything from one sector. Right. But a diversified tenant base. Absolutely. Is a swan account. You sleep well at night because, you know, yes, I could be impacted by about a third.

One of my favorite things that I did in my portfolio, and it started out accidentally, but we have Studios, 1s, 2s, 3s, 4s. I have 55 up, I have light tech, so I have rent-restricted properties. So if you're like, hey, I make this little, I'm like, we have amazing properties that are much, much, much, much nicer than what you could get market rate. It's available almost 100% move-in rate. If they qualify, we will find a house for them. You're above 55. Hey, I got a place for you that has a bunch of amenities. We have to host events there as part of our contract. So I have to bring food in for them. We have to— this is legitimately in our land use restriction for LIHTC for this property. We are required to host bingo night or an ice cream social. Okay. Once a month, every single month. But there's things like this in our program. We're like, hey, we can— we have the right housing for people. So if we receive an applicant I can almost guarantee you in Stephenville, Texas, I have housing for them. Studio 1, 2, 3, 4. And so all of the leads, everyone in my system, I'm like, we have housing for everyone. And it makes us immune. We have the fastest growing college in the US right now. Tarleton State University is number 1 in growth rate, not number of students, but it is blowing up.

Yeah.

I am not going 100% student housing. I'm taking 1 25-plex and we're converting from standard markets to student housing.

Yep. That is the mission. That's exactly right. I think that's the right way to do it. You know, diversification within your tenant pool. So we have diversification of assets. So when people say, are you diversified? Yes, I diversified assets and I diversified tenant pool. That's how I diversified. I didn't want to diversify any other way.

Yep. That's a great way to do it. Yeah. I, at some point I will probably leave Washington State because I'm just too far from that market. If my family moves from there, I just don't want to come and visit all the time. It's cold, it's wet, it's— politically unfriendly.

The, uh, it's amazing in Washington for the summer and the fall, but man, Thailand in the winter is a good solution.

I can imagine Texas and all the time is a great solution. It is, it's good, especially if you like 100-degree weather, which I happen to actually enjoy.

Texas is like the Australia of the U.S.

Everything's trying to take you out. That is, that is unfortunately true. Animals, poisons, snakes, spiders, scorpions, bats. Texas is so great to live in that everything lives there. Yeah, even the diversity in roadkill. I'm like, wow, I didn't realize half of these creatures existed. By the way, coming from Washington is completely unrelated, but if you've never seen an armadillo, that is a wild ant. It's crazy, right? I'm like, I can't believe this is an organism. That is a crazy thing.

Yep, the bulletproof tank with a bulletproof tail.

Yeah, uh, not car-proof. You see a lot of those on the side. You do.

Wild stuff.

They move too slow. Let's end here. Final topic. You mentioned AI in real estate. This is something that I think is a big, big trend. Massive. Well, you mentioned AI actually in the market in general and job displacement. It's going to play a huge role in real estate. I'm actually astounded with how much I ended up using it as someone who I still like to underwrite deals on my phone calculator. I love going through the actual math. I don't want systems. Correct. I want to know my numbers and I remember my numbers. I did not think I would adopt AI like we have, and I use it every day, every day, all the time. You take an operating, an offering memorandum, plug it in there, summarize this for me. What is it missing? What are my next steps on this thing? Like, it will give you, it will do all the thinking for you in a deal.

It's amazing. The thing I'm using AI for the most, because I don't think AI is going to replace landlords. Landlords who use AI are going to replace landlords who don't. So I used to— yeah, I agree with that. I learned this from Matt, the Lumberjack Landlord's course. I would do a listing and I would speak from an owner's perspective. I would say, uh, age of building, square footage, parking, all of that kind of stuff. I would tick off all the things that matter to me as an owner. What am I looking for? Tenants don't give a crap, wouldn't have a lot of demand. So I took Matt's course. Matt talks about, well, what are the things in the area? So when I have a rental pop-up, great course, I would be on Google and I would go, I would go to Google and I would say, okay, within 3 miles, you know, things I'm looking for— petting zoos, I'm looking for parks, I'm looking for hiking and trails and lakes and rivers and all the things in Washington that people are there for. And then I would bullet point those in my listing and then I would have so much freaking demand. Thanks, Matt, that I couldn't filter through to the people that I wanted to rent. I had so many great applicants. That was 2 hours the first year I was doing that. Yeah, it's about 2 years ago I started doing that. Yeah. In the last year with ChatGPT, I go, I own a rental at 123 Main Street. Please tell me things that tenants might be interested within 3 miles. Bullet points, copy paste, edit a little bit like 30 seconds and my listing is up and tons of demand. So thanks for the education. Of course. And I appreciate AI for that use for me. I'm sure there's a ton more uses that we can do, but that's what I'm using it for mostly because I have lots of partnerships.

I do an exorbitant amount of legal, especially on some of these light tech deals where you're going to— some of them have been syndicated structures, some have creative finance involved. Involved. So it's like, okay, we got creativity, we got like 15 investors. Some of the legal docs come out, they're 100 pages. Yeah, yeah. And, and you just plug it right in and just go, summarize this and what is missing. And I will send stuff back to my lawyer. There's one thing that saved us like a quarter million dollars where I'm like, never would have thought to look for this. Legal didn't think to look for this. AI is just like, hey, did you guys think about this? It's like, oh No, we didn't. No, we did not. No, we did not. No one thought of that. Yeah, that's an obscure clause. Yeah. On those, on those LURAs, the land use restrictions on LIHTC. Sure. I didn't realize that we had a— there was one sentence in one page about, oh, by the way, when we did the extension for this, we added a requirement for an afterschool program. The prior owner wasn't doing it. We were out of compliance on this. It did not fall into my due diligence or underwriting at all. And you go through AI and it goes like, hey, here's what you have to do. And I'm like, well, I'll be darned. We have, we have some more work to do, friends. This is what does this cost? It turns out we found a great nonprofit. It's almost, almost cost nothing. And we offered an amazing amenity. So it worked out. But these little things like you could have deal breakers hiding in contracts. And AI will just go like, boom, here's what you didn't think of. It's the most amazing money-saving, time-saving thing I've ever experienced.

It is. I think people need to learn that it exists. I think they need to learn how to use but I think that they also need to not get lazy. They need to understand that they still have to learn how to be investors.

So as we wrap up, this is what I look forward to. Yes. Normally we do livestreams. Yes, we'll edit out a little bit. But your content, you cut out shorts and there are some amazing shorts in this, this interview that you can flip it beautifully, take out of context.

I'm looking forward to that. In fact, I will probably only clip out of context.

Yes, I'm super excited. Excited about that.

Yeah, exactly. What should we do in it to help the, uh, the economy and provide affordable— double the rent. Yeah, I'm just gonna put them out in order. It's gonna be great. So guys, the takeaway: Matt wants to double your rent. Uh, Dion only likes blue states, uh, and blue politics. He just loves it.

Yeah.

No, this was so fun having you guys on. I've never met you in person, which, uh, Matt is— Matt is my mentor who I've never met, so this is a— this is a big deal for me. Having you guys in one room is exciting. This is really fun. I want to do this forever. So there's a huge privilege. How do people find you two online, starting with Matt?

So Lumberjack Landlord, YouTube and Instagram, and we're just about to kick off another boot camp. We like to do these one-to-millions where we actually have 15 people that literally get the experience of a boot camp where every single week for 2 hours we spend time talking about deals, talking about the market, talking about what they're going through, because that's what matters. You know, very often people make it about them. The instructors make it about them. It's not about me. It's about what are you going through right then and there? What are you going through right now that I can help you fix the problem? Because I've done this for 20 years. So I do a live stream every Thursday night, 9 PM Eastern time, uh, on The Lumberjack Landlord on YouTube, and, uh, have amazing guests like you two every once in a while.

Appreciate that. And I can say for a fact, amazing course, boot camp. I've had so many people— I've even within my course, if people have gone through your boot camp, like, oh, I've learned all this stuff. I So much of that bleeds into the stuff that we do over here. Amazing, amazing program. Tons of experience. You are the one I go to when I get stuck. It's like, okay, Matt's probably been through it. He is an amazing teacher.

I've been honored and blessed to teach some of your course, and it's, uh, your students are spectacular. I mean, they are really hungry. They really want to learn. Like, it's a lot. It's a lot of fun watching all the gears turn and all the smoke sometimes cover the screen with how much thinking is happening on the other side. So it's a lot of fun. And, you know, so yeah, it's a lot of fun to be a part of that.

So I appreciate it. Thank you so much, Dion. Where do people— you just came out with the book and it's fantastic. Yeah. And for the lazy landlord, it's bigger than I expected the book to be because I'm so lazy. I wanted to do it once and done.

It's thick enough to get everything in there. So you can find me at DionTalkFinancialFreedom.com. Freedom on YouTube. Yeah. And on Amazon, the book is Financial Freedom for the Lazy Person. Every Tuesday at 4 PM Pacific, I do a video, a live stream like this that I'm doing now that lasts as long as the questions do.

There we go, guys. I will drop a link to that book below in the show notes as well. Guys, thank you for joining the channel. This was super fun. We'll do this again next time we're in Vegas.

Yes, sounds great.