The Simple Systems Behind a 150-Unit Rental Portfolio (8-Hour Workweeks!)

0:00Imagine waking up to discover that the wealth you spent years building is gone. That's exactly what happened to Matt. Well, the dot-com crash wiped out his 100 % stock portfolio overnight. He was left asking, what now? How do you rebuild from zero? For Matt, the answer was real estate. But to keep his dream of early retirement alive, he'd have to make up for lost time. And he did. One property snowballed into a few. A few turned into dozens. And today, Matt, known as the lumberjack landlord, is retired in his 40s with more than 150 rental units. Many investors spend a lifetime getting to where Matt is.

0:44So what's his big secret? In this episode, he's going to share his exact playbook for scaling with small multifamily, including the systems and processes he uses to self-manage his really large rental portfolio, and he does it in just eight hours a week. So whether you're starting small, starting late, or starting over, Matt is proof that financial freedom is never too far out of reach. And if you mimic what he did, it's probably much closer than you think.

1:19Hey everyone, I'm Dave Meyer, joined as always by my co-host, Henry Washington. Our guest on the show today is Matt, the lumberjack landlord who self-manages a rental property portfolio in New Hampshire. Let's bring him on. Matt, welcome back to the BiggerPockets podcast. It's great to have you here again. Super excited to be back. And now we brought friends. What's up, buddy? Yeah, this is going to be great. I'm glad we're all here together. Matt, you had a very fun first episode here on BiggerPockets podcast. But for people who didn't catch that one, maybe just give us a little bit of your background, who you are, How you got into real estate?

1:55You know, I lost my money in the dot-com bomb in the early 2000s. For a 20-year-old, I'd saved up a lot of money. I'd saved up like$27 ,000 at 20. Damn. You know, that was a lot of money. And it was because I lived on almost nothing. And all I did was tuck it away and put the money away. And so I did that. And I was rewarded with two companies that got hush numbers. And then one was found for fraud. And I watched my$27 ,000 largely evaporate. Man. You know, then started the search for what's the next thing I'm going to do. And, you know, where can you get an asset that you can also live in? It also pays you to live in it.

2:33And by the way, it also appreciates over time as well. I can't think of anything else like that. I did nine house hacks in 13 years. Then my wife finally said no more. So you weren't doing real estate. You were just like house hacking, but you were working. Yeah. I worked a W2 job until two years ago when I retired. That's awesome. I could have retired 10 years ago, but it was how big did I want to make this? And so I said, you know, I'm in the prime earning years of my career. I was in my late thirties, early forties. I'd gotten to the executive level. And so I said, you know what, let's just keep on rolling.

3:07And so that's what I did. But now fast forward, we range between kind of 52 and 55 buildings. What I like to say is over the last three years, we've been a net ad investor, meaning that we always are trading out of assets, but we always add more. Why haven't you bought bigger commercial or anything like that? I think we all see how commercial is going for all the big boys. It's really tough to re-steer a battleship of 180 units versus a building that's no longer working anymore that might be 3, 4, 6, 10 or 2, 4, 6, 10. If I don't like an asset, how hard is it for me to sell that? I can sell it like that.

3:48I can wholesale it off if I want to, or I can call a broker. I can get it on. And it's something that most likely with Fannie Freddie, it's easier now than it's ever been for people to do owner-rock deals. You can get 5 % money on a three unit or 5 % money on a four unit. I was not that lucky. I was having to put 20 % down moving into those things. One of the cool parts about real estate is you can invest to your level of risk tolerance. And everybody's risk tolerance is different. I have a very similar risk tolerance to you. It sounds like I play in the single and small multifamily space. There are some warm, fuzzy reasons why I play in that space, but there's really a managing risk factor about why I play in that space.

4:31Because A, I don't want to raise a bunch of people's capital because I would lose sleep. That's just not, I just can't. Thinking about that gives me stress. And so I can use my own money or maybe one private lender, you know, to do a deal. I'll have multiple exit strategies on a deal because I'm going to buy a really good deal and being able to pivot is important. But I think people talk about, you know, investing to your risk tolerance when you're like researching and getting started. But then once you get in, that kind of goes away and everybody's like more, do more, buy more, do the bigger.

5:06It's the same level of effort for bigger than it is for smaller. You should do bigger, right? Like the voice of the investor changes than when you got started. And I kind of got caught up in that. And we've made some pivots since then. And I've sold some assets and I'm, I'm, I'm in a much happier place with a, uh, a more manageable size portfolio that has options instead of, you know, large scale multifamily. You got, you got one, you got one exit, buddy. You got to get that thing to perform or you're in trouble. The cool thing is, is that with small multifamily and Henry, you know, especially a duplex, I can put that on a market.

5:43It can be an investor. It can be a house hacker. It can be like a mother-in-law. It can be multi-generational. It can be, it can be all of these things. Right. And so when you look at the grand scheme of things, people say, Oh, real estate isn't liquid. Oh yeah. Put a duplex on the market well-priced and see how fast it lasts. Right. Even now, even in a sell market, no problem. We're going to do a 1031 and I've been shopping and there have been in the last 40 days, there have been 40 buildings go on market and 37 are under contract. Guess what the other three are? Overpriced. I just put a duplex on the market.

6:15I got six offers. Yeah. First weekend. Yeah. I think that small multifamily and that doesn't mean buying in bad areas. My focus is still buying in B and C class areas and making A and B class product. That's the goal. The other thing that residential doesn't have when we're talking about risk is, and I think what most syndicators who are losing their shirts right now, I think what a lot of people got wrong is they misunderstood supply risk. Like everyone's like, oh, the debt's better. But with small multifamily, with residential, the idea that a builder is going to come in and totally change how much supplies in your market, it's just not a risk.

6:53Like it's not going to happen. in multifamily. If builders all of a sudden get excited about your market, you have no control over what other people are doing. They could all start building right next to you and totally diminish the value of your product. You're dead on. I mean, in my market, there are 700 new apartments coming online in the next two years. And this is an area of about 70 ,000 people. That is a lot of supply. And so the cool thing is, is we're going to leave it to all those guys to fight it out and fight over the nice shiny quarters. And the people that are 800 credit scores. I'm just taking the people that need a place to live that are working for a living that I can rent out for less than what they can rent out because my debt is much different than theirs.

7:36So people should be excited. Yeah. The first five years is awful. The next five years, it gets a little bit better. The next five years, you really start to getting to enjoy the fruits of your labor over a 10 year period. You really start to see significant returns in a normal market. All right. Well, clearly Matt has proven that you can scale successfully with just using residential, small multifamily, single family homes. Clearly Henry has too, that you can absolutely do this, but I want to learn exactly how you're doing this, Matt, because that's a lot of units that you're managing. And I'm sure audience would love to learn how you're doing it.

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11:44Welcome back to the BiggerPockets podcast. I'm here with Henry and the lumberjack landlord talking about how he has scaled up very successfully just using residential real estate. Matt, how do you do it? You self-manage, right? All 150-ish units you got? Yep. Yeah, we self-manage. So the first 120, I managed while I had a career in tech. And when you say we... My wife and I. Okay. Yeah. Just the two of you. Wow. How on earth did you do that? Systems and processes. They can completely change the complexion of your business. So for us, everything was very templatized. Our kitchens, our colors, our management process, our application process, our go-to-market process on a unit, how we draft our ads, how we screen tenants.

12:34Everything became very templatized, which meant for us, it was very, very easy to scale because now it just wasn't about acquiring another asset or another building and then saying, we better figure all this out. No, it was acquiring the asset and acquiring the building. And I use asset and building interchangeably. But it was about acquiring it and then saying, all right, we just snap it in. Here's our processes. Here's all the things that we do when we buy something. Here's all the things that we do when we're getting something to bring to market. And now that's something that we can do in 15 to 30 days after acquisition if, for example, we're buying something that's vacant.

13:11Right. For the person that's listening who wants to manage their properties on their own and start to build some of these systems and processes, but they have no idea where to start. How do you figure out where to start and what's the difference between a system and a process? So this is what I spend my time teaching. What I spend my time teaching is essentially how we've automated our business. And here's how we've done it. Something silly, we actually print magnets and put them on two or three different places in the apartment. And we just say, hey, if you ever have an issue, just reach out to that number.

13:44And then anytime that there's a problem, they can send a text message to that or they can call that transcription. We actually have it go into an email where there's a group of three of us that see it and somebody gets to it and forwards it onto the contractor or says or I say, hey, this, you know, this one's yours. You take it. That's it. So we all have phones. I run my entire company from this. I am an elite email forwarder. Elite. And that's the thing is it's all there. People might need to be taken through that. And that's what I kind of, that's what I spend my time teaching people is here's the, here's exactly how you do what I've done.

14:19But it's building those systems and building those processes and taking all of those steps. And it puts people on the right path to imagine having that framework. That framework didn't exist 24 years ago when I started. What I like about what you just said is a you were using tools that didn't cost any money yep and b it wasn't over automation i think when people start implementing systems and processes they want to make it as like overly automated as they can but what i've learned is that if the system slash process is too overbearing I will avoid it and do it the manual way. Yes. And so like I need a system up and to a point like like I like that you it just transcribes it and then I get an email and then I have to forward it.

15:10And so what I want people to hear from this is like design the system that you would use. Not this not the most perfect automated system. Design the system up until the point that you're comfortable with it. You're not trying to eliminate everything and everybody. You're just trying to eliminate the parts that you suck at or that you hate. I'm trying to bridge the gap for where my skills, talents, and abilities drop off. Perfect. That's what I'm trying to do. I have to say though, Matt, you must be good at time management too, because like I worked full time and was self-managing, I don't know, 10 units at a time.

15:46And I felt busy as hell. Like, I don't know. I just was constantly doing stuff. So like, how do you do it? because that's one example, right? That's maintenance. But then you're leasing, you're managing rehab. So your skill must be somewhat in time management because that's a lot of stuff to do in one day. Yeah, it is. I mean, I think it's, you know, I won't take credit for it. It's really something that Steve Jobs and Elon Musk do really well. They have the top three things on their list that have to get done every day. And then the rest of them can potentially be done tomorrow. So I make sure that every single day I get the three things done that I need to get done that have to get done.

16:22And then the next day, Hopefully I don't have three brand new things. There's some stuff that might be on the list that can bubble up that I can get and rip through. But the other thing too is, is that recognizing that my other option is working 10 hours in some soulless job while I'm making some other man's dream come true. I'm not, I don't really like that. That doesn't sound wonderful to me. What sounds wonderful to me is that I get all the fruits of my labor and that my family gets that and that we then get to help others accomplish that same task. So time management, I certainly think is a piece of it.

16:51But again, if you can deduce running this entire business essentially down to having great contractors that listen that you pay on time. That's like 90 % of it in my opinion. Knowing that they're going to do it. Right. Well, here's the thing. How many people, and I would be willing to bet, I'd love to see this in the chat because I will go back and review the chat. How many people don't inspect when the job's done? They just pay the bill. A lot of people do. But see, this is what I mean about time management. You're running around of 50 properties inspecting properties. On all of these amazing devices is a high def camera.

17:27Oh, okay. So you're virtual inspecting. Yep. And I'm either doing it live on a video or I'm saying, hey, just send me 10 pictures. Because what happens with that email or that video, I can get to that at 9, 10, 11 o 'clock at night. I can get there. And so how much time am I spending every single day? Not hours. The only time I'm spending that kind of time is when we're doing a multimillion dollar big, big project down to studs. And we're basically going through, yeah, nine contractors to do something big project. How many hours a week do you think you work? On the actual management of existing assets, probably six to eight hours a week, I would say.

18:09Total? Yeah. Dude. Yeah. Man. Had to become a lead at something. I'm that good. So I think the key for it, again, I think the big thing that people miss out is they feel like they can't ever see that result coming for them because they see what they're going through at 10 units. I promise you there's not that much big of a difference between 10 and 50. There just isn't. I mean, honestly, the reason 10 was a lot or whatever it was is just because I was trying to fix things myself. I think I wasn't forwarding stuff. I should have just been forwarding emails. Listen, the first 50, I did all of that on and I get that.

18:46Yeah. That's an expanding problem, right? You can't accelerate through growth when you have one set of hands for throughput. One thing I've learned across all levels of property, so A class, B class, C class, whether you're paying$500 a month rent or$3 ,500 a month rent, There are bad tenants in both classes. So do you have some golden rules for tenant selection or some systems or processes in tenant selection that help you stay on top of being very good at selecting good tenants? So I hired an agent. I hired her for not a high amount of money, like in the$30 range. I said, this is how I want my unit shown.

19:29But I provided copy, which is the actual ad. I provided the pictures. I paid for those. She was no money out of pocket. Her job was to follow my three criteria for bringing in great tenants. And that is this. We do not have an application fee. I like that. Even though it does cost you money to run their background check, you eat that. At the end, it does. But I don't do it in the beginning. Because in the beginning, I say, I want three things from you in the beginning. I want a pay stub. You just need proof of payment of your last three payments to your landlord. If they pay on the 6th, the 9th, and the 15th, they're probably not somebody I want when it's due on the 1st.

20:01And then I just want a screenshot of their credit score with their name on it. Who am I to say which credit scoring model's correct? Vantage 3, Vantage 10, Experian 4. Like, it doesn't matter to me. Just show me a picture of the credit score with your name on it. And that's all I need to get you a spot in the arena to get a chance to actually rent this apartment from me. And that helps us drive significant traffic to our units. I probably get two to three X. In fact, we've done studies in Zillow and we get on average 250 to 300 % more traffic to our properties than other properties because of our process.

20:41I love this idea. I did the same thing where it's basically like I'm only going to charge you when I get charged essentially, which is like they charge you whatever it is, 40 bucks to go run a background check and anything. It's like until then, I'm going to evaluate everything else about your application. that way if you're not a good fit you you're not incurring any costs i'm not incurring any cost but at the point where i need to pay 40 bucks you pay 40 bucks i'm not making any money off of this like that's the fair way to do it absolutely i have friends who rent and they just apply for all these apartments get rejected it sucks it's it's bullshit honestly to like have to go out and get rejected 10 times you're up 400 bucks because you just like even if you're a good candidate Maybe you just got in too late.

21:25Like, it's just, it's nonsense. The people I really, really hate when landlords try and make money off rental applications fee, it drives me insane. Well, you see it. Like in a lot of the cities, they're the ones that are most guilty in where they do that churn. And it's disgusting how much money they make on the churn. Yeah. It's, you know, they're like, well, hey, I can afford to do a lower priced unit because I'm getting 5 ,000 bucks in fees when all these people are applying. It's disgusting. It is. It totally is. We don't do it that way. I agree. We legitimately want somebody to find a house with us.

21:57That's legitimately what we want to do. That is the only sentiment to have if you're getting into this industry. Yes. Like the idea to just profit off churn is ridiculous. You should earn money by providing a service. That is the industry, right? Like if you are just making money off application fees, you're providing nothing. You are just leeching money from other people. It's messed up. Absolutely right. All right. So much good stuff here from Matt, but we got to take one more quick break. We'll be right back.

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