From a $35,000 Salary to Quitting with 11 Rentals

21:05Tony J. Robinson:And Matt, you talked about that being a loan requirement that they wanted to see a signed lease. And I think loan requirements are something that rookies need to pay more attention to because they can and will dictate how you execute different plans for different properties. And one thing we didn't touch on, but I'm hoping you can give us some clarity on here, Matt. But why were you kind of focused on only staying at each property for one year? What was driving that timeline of 12 months? Prison, mostly. Mortgage fraud. Mortgage fraud. Yeah, not committing mortgage fraud would be why. So, yeah, I mean, we would have loved to move faster.

21:43But, I mean, honestly, like it was all good timing. I mean, it was one of those things like we're moving into the house. We don't have a ton of money anyway. So it's okay, we're going to redo this carpet once we have some money to do that. And then we're going to redo this when we have money for that. So by the time we got to that year, we were basically finishing up the house anyway. So then it's like, okay, now it's time to move out and rent it out. And it ended up being a year. There was one property and it was our own fault. We had thought we had been a year and we were not. So underwriting caught that.

22:17We were at 11 months and the loan fell through. So we ended up not being able to close on a property because of that. But typically your lender will know when to be asking those questions too, or they should be. But we knew as well. So yeah, got to be a year unless there's extenuating circumstances that you need to move otherwise for. But we were just bouncing around the same neighborhood.

22:39Tony J. Robinson:And just to clarify what Matt is saying about mortgage fraud, but when you buy a property and use a loan that's designated for primary residence purposes. You have to stay there for most loan products for at least 12 months to satisfy the requirements of that loan and do it at any time less than that is where you can kind of find yourself in hot water. So thank you for clarifying that, Matt. So you guys just go like, you know, pedal to the metal, a million miles an hour, knocking out these properties every year for five years. And then you land in the property that you're at now, which it seems you guys are kind of settled into.

23:12Tony J. Robinson:Does your portfolio stop growing at that point? Or what's the next move to keep scaling the portfolio up? To be honest, like we had planned to do this 10 times, like our goal was 10 times in 10 years, max out the conventional loans that we can have and then, you know, settle. But we ended up getting a really good deal on this acreage that we're on now is the ideal location. The house was needing a lot of work. We've we've poured years of time into this house to make it where it is We actually just finished a bathroom renovation this last week upstairs. But we wanted this house. So we decided, you know, it's time and we're going to stay.

23:49So we also were at a point where we had, you know, cash flow from properties that was sufficient enough to start putting 20 % down. So we used savings for that. We also found other ways, like as we renovated our primary residence here, like I bought this house for$180 ,000. And we have put like 60 grand into it over the last five years, six years since we've been here. And it's worth about a half a million now. So we pulled out a HELOC, a home equity line of credit. And we've used that HELOC to help fund other deals for down payments, renovations, closing costs and stuff too. And then we'll just pay back off the HELOC after we start getting profit from that property and then recycle and reuse.

24:36So yeah, finding other ways and then using money from our other deals to fund them.

24:42Ashley Kehr:Matt, Tony and I just finished recording an episode where we talked about reasons you should invest in real estate. And one of those was just the equity that is built up in the property over time. So for example, you bought your first property 10 years ago. What has that impact on your wealth building been like to see these properties that you bought for X amount, the tenants to pay down all of these mortgages. And today you just have all of this equity available. And have you, you know, you talked about the HELOC that you just put on your primary residence, but have you gone back and refinanced and tapped into any of that equity or taken a HELOC there?

25:24Ashley Kehr:Or have you just let this equity like sit and grow to build your wealth? Our goal has been to kind of keep it 50-50 or less as far as at least 50 % equity to debt. So I don't want to have more debt than equity. So we did do a cash out refi on one of our properties using a DSCR loan. And I mean, I don't know, new investors, it's basically like a loan for investors using potential profits from a property to approve you. other than your income for those of us without real jobs. But I did a cash out refi, had bought this property for 160, turned it into a short-term rental, and a year later did a cash out refi for 300 on it.

26:17And then honestly, just use that to pay back off the HELOC because my interest rate on that was about 9.5 % at the time. So trying to get some of those high interest loans paid off, And especially HELOC, I'd rather have it looped up into a conventional loan than be borrowing on that. But otherwise, no, I mean, we've just really tried to put our sweat equity into it, build it through sweat equity, through appreciation. And that's how we built our wealth through it and have more equity than debt now, for sure.

26:49Ashley Kehr:Matt, what does the strategy breakup look like as far as how many long-term or short-term rentals that you have? We started with long term because that's what we knew from what our, you know, my in-laws did. And short term just was not like, you know, the Airbnb boom hadn't happened yet. So I wasn't too knowledgeable about it. It was actually through listening to other like social media, I'll call them influencers. I think I bring up his name probably on every interview, but Michael Elefante. He's my like, my, my, the guy that really influenced me. If you guys have met or know who he is, a lot of people in the space do.

27:29But he had been working at Domino's and then working or Dunkin' Donuts, I think, and his wife was at Domino's. And they liquidated their 401k. They got into short-term rentals. They were living in a conversion van, traveling around the country, going to different national parks. I'm like, man, he was able to do that with just a few properties. And here I am with five, six properties and not even halfway there. Like what, what do like, maybe we should just try this out. So we got into the short term rental space locally. Because, you know, my thought wasn't people want a vacation to Des Moines, Iowa, but I like to be hands on, I want to renovate this property myself.

28:09So let's buy a house downtown Des Moines, near shops, restaurants, event venue stuff. stuff. We did some market research with ARDNA and found that there were... It was like 70 % of properties could only sleep up to 6 people or 7 people in Des Moines. So we bought a house that could sleep 10. And we got into it. And short-term rentals just dramatically changed the game for us with cash flow. I mean, we bought this house for$160K. And we did the thrift store stuff. Our thought was, let's experience this. Let's see how it goes and then invest in a vacation market. But it ended up doing so much better than we thought.

28:52We did$70 ,000 on that house the first year. We were cash flowing$2 ,500 a month. So we bought another house in Des Moines for$165 ,000 and that house did$92 ,000 last year. We've got another one that we just bought this last year for$225 ,000 that'll do over$100 ,000 this year. I call it an accommodation location, not a vacation destination. But that's kind of what our niche has been. But we're definitely more STR focused right now. And that's what got us into it was just listening to other people talk about it. I mean, you guys both know it's not passive like long-term rentals are, but the cash flow is four to six times greater.

29:35So that's ultimately what helped me leave my job a lot faster too. So that's kind of how we decided to transition into them was just listening to other people talk about how great they were.

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34:29Tony J. Robinson:All right, we're back here with Matt. So Matt, you talked about the transition to short-term and man, the numbers you were throwing out doing 100 plus K on a$200 ,000 property, like those are some fantastic numbers. Absolutely. But let's talk about the actual transition, because you said you were working, again, to use your words, a quote unquote dead end job. At what point did you realize, I think I can actually make the leap? Yeah. So, I mean, over the years, like I stayed in cellular retail sales. So I worked with Sprint. I worked my way up to like a district manager role, but it was with a third party company.

35:03So I think I was making like 50K. I ended up getting a training job with a third party for Apple where I go around and train people on iPhones. And then my last job, I was actually an account manager with Google. And I really enjoyed that. It was, again, like a third party company. You know, a lot of employees or people that work with Google are not working directly for them. And that was me. So my salary, I was like mid-60s. We were happy, though. And, you know, the cost of living out here is very affordable. So it was easy to live on. But our goal throughout this time had always been not necessarily a house number, a number of properties.

35:44It was have our cash flow consistently surpassing the salary that we brought in from my job. And my salary went up over the years. And it just, I don't know, kind of grayed a little bit for us. And Tony, you're going to get a really big head for this because I'm going to give you props. But I say this in all of my other interviews. The breaking point for me for why we finally decided to make the leap was actually going to your short-term rental summit in Newport Beach, California. Hey, I was there too. Yeah, yeah. So I had been watching these Real Estate Robinson people. And I'm like, man, these guys are cool.

36:27I need to figure out how to do what they're doing. And I'm going to go to their conference. So I took my wife and my in-laws actually went out to Newport and attended your SDR summit. And we had one short-term rental at that time. And we had just gone under contract with our second short-term rental. And at that time, our cash flow from our properties was greater than my salary. Just barely, but it was enough to live on. and it was just i mean honestly through listening to some of the different speakers there but then talking and networking with people um i i wish i could give him credit and i wish i knew his name but i talked to this one guy who he had made the leap and was doing real estate full-time and and i'm talking with him and he's like so what's what's preventing you from leaving and i'm like well i just you know thinking about maybe just just getting you know a couple more properties and then really feeling safer.

37:24And he's like, dude, the amount of freedom that you have from just leaving and how much more effort you'll put into your business and how much greater your business is going to do by not giving 50 % of your effort to your job and then 50 % to real estate. He's like, you are just going to... This trigger in your brain will be like, okay, this is my only source of income. This is what needs to do well and your business is going to do better. And then he says to me, you know, what would happen, you know, if you, if you don't succeed, um, then you'll end up right back to where you are now. And I'm like, dang, like that's, so I needed proof of income to close on this property.

38:04It was a conventional loan. Um, so I actually, I waited until, uh, we were in the closing office, uh, right after we closed on our second short-term rental, I was in the parking lot and that's when I called my boss and put in my two weeks notice. So yeah. So thank you, Tony, for putting that together so that could happen. Yeah.

38:21Ashley Kehr:I know. I just love it, too, that that was from Tony's conference, too.

38:25Tony J. Robinson:Yeah. And, you know, Matt, I appreciate the kind words, but I think the power of events like that is it's not always what's being shared on stage, but it is those moments in between sessions where you're networking and you're talking to people and you're hearing their stories and they can ask you that one insightful question that changes everything for you. And we've heard that story time and time again from events that we host, BPCon, about, man, I just met someone. We had this conversation, and my entire perspective shifted in a way that I could have never imagined. So for all the rookies that are listening, take Matt's story and get out and go to an event.

39:05Tony J. Robinson:BPCon is coming up, and obviously Ash and I are a little bit biased, but we think it's one of the best real estate events that's happening. but aside from all the amazing speakers, it's moments like what Matt just talked about of being able to not just listening to a podcast and hearing someone's story, but sitting down next to someone, shaking their hands, having a drink and hearing their story face-to-face. I'm telling you, it motivates you in a way that's so hard to even articulate clearly. So Matt, dude, that's gotta be one of the coldest, like I'm quitting my job stories that I've heard. I signed the doc for this deal, then I called and quit my job, man.

39:45Tony J. Robinson:So I love hearing that. And last thing I'll say, I think you hit exactly what I wanted to say as well. It's like the worst case scenario is that it doesn't work for you. And you just go back to a job that you already had or some similar job. And I think that when we can frame the decision to go full time or stay at our job with that perspective, it makes it a whole heck of a lot less scary. Because you're like, I'm already living my worst case scenario right now, right? Working this job. So it can only go up from here, man. So congratulations, brother. What an amazing story. Yeah. Yeah. No, I appreciate it.

40:19Yeah. Once you experience it as, you know, Tony, I mean, knowing, you know, your story from hearing it a couple of times too, it's like once you, once you get over the fear factor and actually experience the freedom of doing your own thing, it's not something that you ever want to have to go back to. So those early morning conference calls, those late night meetings, you know, for deadlines of things like, man, like just experiencing that, you know, people say, well, you're not financially free. Like you still have to work a little bit. It's like, yeah, but I work on my time, on my terms, where I want to and with you I want to.

40:56And that's that's what it's all about.

40:58Ashley Kehr:Matt, I guess the last piece to kind of touch on here is the actual operations of your businesses. Who is handling the day to day? Do you take it on yourself? your wife? Are you using a property manager? Give us a little insight into the day-to-day of your real estate investments. As of right now, we're blessed to have everything relatively local to us. All of our properties are within about a half an hour. We did have a short-term rental that we owned for about five weeks down on South Potter Island that we sold for a good profit and ended up just not doing that because the market shifted. But otherwise, we bought local.

41:33I've got a fourplex that's two and a half hours away, but it's all long-term, So it's pretty hands off. We self-manage. I mean, we've done everything on our own. We've had some opportunities for joint ventures and stuff and some syndication offers as well. But like we just like my goal isn't money. It's my time. And we're at a place where we're very blessed financially. Like, you know, we never thought we'd be in this financial situation. It's been fantastic. But that wasn't our goal. It was to have the ability to wake up and spend my day with my kids and not need to put in 40, 50 hours for somebody else.

42:10So we self-manage right now and we keep our portfolio around the 10 to 11 properties because it's manageable, especially with 7 of them, 8 of them being long-term rental and only 3 short-term. The short-term take the most time, but I use Hospitable as my property management software, which has been great. They help automate a lot. So I mean, typically, I don't know. I mean, it just it varies. You get you guys know, but like two to five hours a week, you know, managing the day to day. We have cleaners for all of our properties. And then I've got companies or individuals that'll call for HVAC or plumbing, you know, electrical stuff.

42:52So we'll still do some of the things ourselves. Like we had a water issue with some drainage not going away from the house at one of our short-term rentals. Carpet got a little bit wet with some flash flooding we had. And we were out there, my wife and I with shovels yesterday, digging it away from the house and adding drainage tile and stuff. But like we enjoy that stuff though. Like we brought our kids with us and we homeschool. So it's like here's just, you know, here's your learning for the day. You can learn how to properly drain a house because the previous owners did not. So, you know, it's stuff like that.

43:22But yeah, I mean, we travel a lot. We spend our winters down on South Potter Island and homeschool down there and try to take a good vacation every couple of months. And it works out. I mean, some weeks are busier than others, but we manage them all on our own. Yeah.

43:41Ashley Kehr:Well, Matt, thank you so much for joining us today. where can people reach you and find out more information about your real estate journey? Yeah, social media. I go by the handle rental cash flow or just search up Matt Kruger. Rental cash flow was available when I started social media. So that was just, you know, that's what stuck. But rental cash flow, Matt Kruger on all platforms. So yeah, that's where you'll find me. Well, we really appreciate you taking the time to share your journey with the rookie investors. Thank you so much. I'm Ashley. He's Tony. And we'll see you guys on the next episode of Real Estate Rookie.

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