Seth: Hey folks, how's it going? This is Seth Williams. You're listening to the REtipster podcast. This is episode 188.

Today, I'm really excited because I get to talk to Marco Santarelli. Marco is someone I really look up to in the real estate industry. This guy has been in the business for a long time. He's seen a lot of things. He's done some big deals. I've heard Marco present a couple of times at REWBCON and every time he talks, I walk away with some big aha moments that help me understand the real estate market better. This guy is like a walking encyclopedia of knowledge.

And Marco is an investor, an author, a two-time Inc. 1000 entrepreneur. He runs Norada Real Estate Investments, a company that helps investors achieve financial freedom through smart turnkey real estate opportunities. And today, he's going to share his wisdom and experience with us.

Marco, thanks so much for being here. How are you doing?

Marco: I'm good, Seth. How are you?

Seth: I'm very good. So yeah, I wasn't joking when I said I was excited to talk to you because I've watched you and respected you for a long time. And I think people are going to learn a lot from whatever we talk about here. So maybe we can just kind of start where a lot of these conversations start.

If somebody has not heard of you, tell me a little bit about your journey. Like when did you get into real estate investing? How long have you been at it? What drew you into the niche of real estate that you're currently in?

Marco: Well, the short story is basically this. I fell in love with investing in real estate when I was a teenager. It's a weird thing to say, but I just looked around and I realized I wanted to be financially free. I called it being “rich” back then, but not really understanding what rich meant and what being wealthy meant and all that kind of stuff.

But ultimately, I just wanted to live life on my own terms and have time freedom. So for me, that was just being rich.

But today I look back and I realize, okay, I just want to be financially free. And that gives me the time freedom. But I discovered that as a teenager. And then, when I turned 18, I bought my first rental property. And it's a pretty young age for becoming a real estate investor. But I knew what I wanted. I just had to wait till I could qualify for financing.

So I had to be an adult. And that means I had to be 18. So I started when I was 18 years old. But yeah, that's how I got started in real estate. Slow at first. Then I bought a second property. I got my real estate license and started selling real estate to better understand it and to make money because every real estate agent thinks that they can make a lot of money through real estate commissions. So that was kind of the path I was taking at the time.

And that didn't last for too long because I hated being a chauffeur and carting people around in the backseat of my car, showing them houses. But I've always had a love for business, entrepreneurship, and investing. And everything I've done since then through an interesting winding journey of successes and failures have been through businesses, entrepreneurship, investing in anything and everything from oil and gas to crypto to cannabis to real estate, you name it. I just found out over the years where my strengths and interests lie. And I just started to focus more and more on that.

And so I love business. I love real estate. I love technology and technology-based businesses. And I love passive income and something that real estate is great for in terms of providing us passive income, tax benefits, and the ability to not only preserve our wealth, but to grow it over time. And that's why I focus on those two things.

And really, if you step back and you look at my journey, it was all about building businesses, scalable and viable businesses to generate income and take that income and invest it into income-producing assets and business, other business ventures. So you just kind of stack on your successes and leverage the income and the profit you make from your businesses into growing it into more profitable business ventures.

And that’s what I’ve done over the years. It’s just building on one success after another. Not all of them are successes. I've had failures too.

Seth: You've had failures. No way. That's impossible.

Marco: If you don't have failures. I don't see how you could be successful.

Seth: Yeah. I think, Seth Godin said if failure isn't an option, then neither is success. Something to that effect.

Marco: Yeah. I think it's something to that effect. I've heard it said that you can learn at least 10 times more from a failure than you can from a success.

Seth: Yeah.

Marco: There's not a lot you can get from a success other than just knowing exactly what you should be repeating and continuing to keep having that success. But when you have a failure, you can look at everything that has gone wrong and what was going right and learn how to change what you're doing, your systems, your processes, whatever it may be, your marketing, your operations and do things better.

So there's far more to be learned by a failure. In fact, if you have a failure and you walk away, not learning anything from it, you've actually completely failed. Because a failure can be a success by learning lessons from the failure in order to know what to do and what not to do the next time.

Seth: Well, I appreciate you talking about that and just mentioning failures because that's something that I feel like nobody talks about in these interviews. So I'm curious, what is an example of a failure you've had and what happened to make it fall apart? What were some of the lessons you learned from whatever that was?

Marco: Well, there's probably many. The first one that popped into my mind was back in the dot-com days. So let's just talk about that. It's not necessarily real estate-related, but it's just being an entrepreneur and wanting to build something and make money or be profitable or be rich.

So back in the late 1990s, in the dot-com era, when everybody was trying to make a fortune with the dawn of the internet and where that was going, that was the new frontier. Two business partners and I got together to form a dot-com business. It was actually the offshoot of a brick-and-mortar business, an online business, a publishing business. And so we wanted to create the Costco for the club industry.

When I say club, I mean golf clubs, country clubs, even city clubs and whatnot. They buy everything from toilet paper to tractors, food and beverage, you name it. Like, if you go to a country club or any kind of golf club, anything and everything that's there is something that they have to purchase.

And so my cousin, he had this media business and he published a magazine to the industry. And so we decided to launch a dot-com business. So we started raising capital from venture capital lenders or investors in Northern California, we ultimately raised a total of $9.5 million. And we built this company up to 105 employees.

And operationally, it was doing well. But from a marketing and sales perspective, it was failing. We weren't generating enough revenue and profit to keep the business going, to sustain it for a long period of time. Which was typically not a problem back in those days. Because if you had essentially a dot-com business, venture capitalists would continue to fund your ventures until you got profitable or you went public or you had some sort of exit or liquidity event, which made it profitable for everybody.

Well, that's the path we were on. We were on the path to an IPO, to taking the company public, and then everybody would have an exit. Long story short, the stock market crashed. And at that point, everybody got cold feet. So all the investors, as in the venture or capital investors, they basically put brakes on providing any more funding. And so we had no more funding. We had a burn rate of over $100,000 a month and we didn't have the capital to keep going and sustain the business.

So, ultimately, we just had to fold the business. We had to close shop and we laid off all 105 people. I was the third employee. I was the partner and I was the third last to leave. So it was kind of a sad last few months, if you will, just having to let everybody go.

Anyway, that's a failure, but it was a good idea. It was just too early. It was too much, too soon, too early. And if we had started six months earlier, we probably would have gotten to that publicly traded level of having an IPO and offering, and just been sitting on a whole bunch of cash because of the liquidity event from that. Or at least in part, because you can't sell all your shares right away.

But it was a failure, not because of something we did wrong. It's a failure because of poor timing, a stock market crash, and maybe it was a great idea, but just too soon.

Seth: Yeah. So it seems llike,in terms of like a lesson, it's almost like there was no lesson because you couldn't have known that, it wasn't really your fault. It's not like you made a mistake. Is that the universe was not working well with you at that point in time, right? Or was there something you could have done differently with the limited knowledge you had back then?

Marco: Well, there's always something to learn if you dig deep enough.

Number one, the importance of timing. If you have a good idea, you have to make sure that you're entering the market and executing on your marketing plan and whatever your strategic plan is at the right time and executing fast enough and hitting your milestones soon enough.

Because if you don't do that, that six months’ difference, from starting six months earlier and being able to hit our milestones, our target dates for taking the company public six months sooner, made all the difference from making no money and losing money to having made millions of dollars. Timing is so critical in a lot of ventures.

Two, it makes you look at the importance of revenue and the importance of profitability. If you have revenue but no profit, you don't have a sustainable business. You won't be able to survive for very long because you're going to be burning whatever you have in your coffers, your bank account. So you have to consider revenue, but you have to consider profitability. You have to consider your expenses. You have to consider what your profit margins are and how soon you can get to profitability.

Because if you don't have a profitable business, it's not sustainable. If it's not sustainable, you'll never get to a viable business where you have all the systems and operations and procedures in place to continue running that business and actually walk away with it and let the business keep running without you being there.

So you start to look at these things in terms of timelines.

Seth: Yeah, that's the tricky balance with business. On one extreme, you could say, I just want to do good for the world and money doesn't matter. But you can't do that. You got to think about the revenue and the profitability.

But, I don't know, it's kind of like it loses its soul when you don't actually have a greater purpose or mission behind it. But finding that sweet spot where you're doing good for the world and you're making good money from it, that's kind of like the Holy Grail everybody's looking for. It's not always easy to find that.

Marco: No, it's true. And you're talking about purpose, and it's good to have purpose in a business.

Today, with the business ventures that I'm involved in and with several of my business partners, purpose is a central focus. We give back. In some of our companies, some of our businesses, we give back 10%. We contribute or donate 10% of the profit to charitable nonprofit ventures.

And the one specifically that my partners are building that I'm involved in is called Impact Others. And it actually has a website called impactothers.com. And we have people making donations as little as $25.

But what we're doing is we have projects all around the world where we're providing communities, needy communities, with clean, drinkable water, often from wells that they don't have. Like they just don't have water. You know, water is a struggle, basic thing. But clean, drinkable water, food on a daily basis, training the locals in entrepreneurship so they can be self-sustaining, learn how to run a small solopreneur business and be sustainable. So now they can feed themselves and their families. Schooling, like education for the children in the community and make that a sustainable part of it.

And so these projects can be anywhere from $20,000 to $100,000. And so, the donations that we bring in just go to funding those projects. And we put each project on the website so they can see, oh, here, this one's in Ghana or this one's in Pakistan or in India. And this is a $50,000 project. And here's what we're building out. So that's the purpose. Like, that's the give back part of it all.

Seth: It's awesome. I'll link to impactothers.com in the show notes, retipster.com/188, if anybody wants to check that out.

So Marco, the things that you've talked about the past couple of years at REWBCON is why you are bullish on real estate. And in other words, like things are looking up. It's going well. It's going to keep going well.

I'm curious why, because that's something I think I needed to hear a lot last year. And you gave really good sound reasons for that. It's something a lot of people are constantly wondering about. Like, is the bottom going to fall out next year? Is it all going to go horribly wrong? So what are your reasons for why things are looking up?

Marco: Well, there's a lot to say about that.

Seth: Try to summarize in 30 seconds if you can.

Marco: Yeah.

Seth: I'm just kidding.

Marco: Yeah, I'll try not to be long-winded, but we can kind of do a little bit of a deep dive in two or three of those areas.

Basically, it's this. It's if you consider what Jon Gray said, who's the president of Blackstone, very smart guy. I mean, he's the guy who started Invitation Homes back in 2012. And they've just been one of the largest, if not the largest purchaser of single-family homes in and around the United States for the longest time. Very, very smart guy. He's probably got a net worth of $7 billion, according to Bloomberg. So he's not a schlep. He's a very successful person.

And Blackstone, as a company, brings in between $100 and $200 billion of capital a year, if not more. They bring in a lot of money. So they put that money to work. And a lot of what they've been focused on is residential real estate And back in January of 2022, in the Wall Street Journal, he said, never in his 30-year career has he seen real estate fundamentals as strong as they were two years ago, like two years ago around this time. And that's pretty much still true to this day.

So Jon, at the Blackstone earnings call they had in late January of this year, he basically said that the overall backdrop in the U.S. is a housing shortage. And that's namely in the single-family space, like the residential but single-family space. And that's the area that they've been focused on for a long, long time. And these guys spend lots of time and they put a lot of resources and people and money into doing research around the country and figuring out what the heck is going on.

So this kind of spills over into the multifamily space like duplexes, triplexes, fourplexes and even small-to medium-sized apartment buildings, which is kind of where Blackstone is moving towards. It's not just single-family homes, but in the duplex, fourplex and small apartment space, because there's such a lack of inventory for residential real estate. That kind of sets the stage of what is going on.

But at the core of it, it's really about fundamentals, like the macroeconomics of it. And that's just supply and demand, economics 101. When you look at our existing housing supply, what inventory is available, the inventory that's available right now is floating somewhere around 1 to 1.1 million units.

Now, that sounds like a lot, but that is actually almost at the historic low. Because if you go back to 1982, the historical average of our existing housing supply is about 2.2 million units. That's how many units we need per year to supply the existing demand for sales and new households, new household formations in the country because of organic growth and immigration.

And if we don't have 2.2 million units, and you'll see different numbers on this, you'll see 2.5, 2.7. The point is still the same. If we don't have that number of household units per year, then we're in a deficit. And that just means that each and every year we are getting further and further behind in terms of how much housing we actually need.

So this is a perpetual problem where we have housing demand exceeding the existing supply. Now, granted, it's improved over the last two, three years, because builders have just hit the gas pedal and started to create more and more new housing construction, like new housing units, which is great. It's helped.

But if you look at housing inventory from the oversupply or undersupply perspective, and you look at what's for sale, what's for rent, how many permits are being pulled versus how much new housing stock is actually being built by builders, you actually get a more interesting number. You will see that housing is actually undersupplied right now by about 2.1 million units.

So that is a pretty serious problem. Having higher mortgage rates as of late over the last year adds fuel to that fire, that problem, because it lowers affordability. Fewer people can qualify for housing to buy their own place. They're forced into the rental pool, which is not a bad problem if you are a real estate investor and you own a portfolio or you're building a portfolio, great. That pushes rental prices up, which lowers affordability for renters.

But it's good for you as an investor because it means more rent, more revenue, more profit from your real estate portfolio. It also pushes real estate prices up, which is price appreciation, which means your properties are actually valued at larger amounts, like larger dollars. So when you're on that side of the fence or on that side of the equation, it's better for you, but it still creates a problem.

So with these higher mortgage rates, they've been squeezing the market and squeezing people out of the buying pool and into the rental pool, which means that it's helpful because it lowers demand for housing, which is already constrained. But we're still seeing a downward trend in terms of housing inventory. That's a bad thing.

But that is turning around. Mortgage rates are coming down. They will continue to come down slowly over time. We will ultimately see this problem resolve itself based on current trends by about 2030. So we're still about six to eight years away before we see an equalization or normalization in the market. But that's subject to change too. There's a lot of factors that can come into play in terms of mortgage rates, people's credit, the amount of debt they carry, meaning how affordable, how well they can afford housing.

But the point of all that is this, lack of supply, strong demand, it's creating constraint in the market. So if you're a real estate investor, it's great for you. And this is why I'm bullish because we do have a lot of opportunity in the housing space, whether you're a builder, an investor, a flipper, whatever it might be.

So I can pause there. There's a couple other reasons I'm bullish, but fundamentally speaking, that's the big one.

Seth: So on that, a lot of people in our audience are land investors and many of them, the way that they work with land is they buy larger parcels of land and then subdivide them to create more parcels that they can then be built upon. It kind of goes hand in hand with the housing market and how much building is going on.

But I'm curious for like developers and subdividers and people like this who help create new inventory, what would be some warning signs to see on the horizon, whether it's one year or five years or 10 years from now? Like, what can we be looking at to say, this may be coming to an end pretty soon. Maybe we should slow up or we should stop working so hard as trying to create new inventory. Any ideas what the warning signs would be?

Marco: Are they subdividing the land to create buildable lots?

Seth: Usually, yeah.

Marco: So this is for residential?

Seth: Yeah. I mean, sometimes it's a major subdivide, where they take a big parcel and turn it into hundreds of smaller ones. Other ttimes,it's taking like a 40-acre parcel and turning it into four 10-acre parcels. But usually the idea is that something will be built there in the near future.

Marco: The best thing you could do as a real estate investor in general (it doesn't matter whether you're involved in land or not; it's irrelevant) but stay focused on housing trends.

In fact, that is so important to me. I actually spent five figures for the domain name housingtrends.com. That's how important it is to me. I'm actually building a site that's going to help land developers, land investors, residential investors. I'm building a tool. There'll be free content, but it's subscription-based tool that provide all kinds of data and analytics for people looking at what's going on in a state, a metro area, a subdivision, a zip code or a street. So you can see where supply and demand sits and pricing trends and all that kind of stuff.

So what I'm trying to say is you've got to stay focused on trends. If you stay focused on trends, you'll know what's going on. And trends can be price trends, sales trends, and a good one for land investors, land speculators, land flippers, or land developers are the number of permits being pulled by builders in an area.

If builders are not pulling permits or making permit applications, that's telling you that demand is waning or demand has gone away. But if builders are moving in into an area and they're pulling permits and they're wanting to build, they're planning to build in the next 6 to 12 months because they're pulling permits, that's a good sign. It just means that there's going to be demand for land and buildable lots and whatnot.

And you could position yourself to potentially sell that land to more of the smaller boutique builders, not just the D.R. Hortons or the Stanley Martins of the world. But you can look at the custom home builders or the small boutique builders because they don't want to buy land and put it on their books. They want to build a house on a parcel of land that's either pre-sold to a buyer or that they're going to buy at the last minute to build a house that they just sold to a buyer that wants to build it in the area.

So now they've got the buyer, they've got the deposit, they've got everything they need. They just have to lock down the land that they're going to be building on. So that's kind of a strategy.

Seth: I remember when I was building my storage facility, that was one thing I looked at kind of for a different purpose, but just to make sure there's no competitors being built at the same time I was building mine. I called the township and asked to see any permits they might have. And it was kind of a process. I'd put in a FOIA request and pay money and all this stuff.

So, how do you do that at scale? And is there some website that shows you all the permits being pulled and how much does that cost and how much is too much or not enough?

And even just in general, like your REWBCON presentation, there's so much information you look at to stay on top of these trends. Like, where do you even begin? What do you look at and how do you make sense of these trends?

Marco: Permanent information, it depends on the county. I mean, it's county by county. A lot of it is available at the county level. Sometimes it requires manual work, but that type of information is free.

But there are content aggregators. I can't name one off the top of my head. The data I buy is kind of from a private institution. It's very expensive data but they already aggregated the information from other sources. I don't know what all the other sources are, but I will say this: you could do a Google search and find information about permits being pulled.

I’m not sure what you would type in, like new building permit applications, new building permit trends, you'll probably go down a rabbit hole. You'll probably start to find some some websites and articles that provide that type of information. I think Zillow or Redfin or maybe Realtor.com has that information or had it at one time. They actually published existing home inventory and new home inventory. And then tied to that, they had building permit applications.

I will say this. I know the information is out there and it's available and it's probably available from multiple sites. It's just a matter of some Google searches to find it. But that information is available. I know I've seen it on many websites.

Seth: I know on Land ID, you can see where the developments are and who the developers are. I don't know if that's like building permits per se, but you can at least get an idea of, like, who's building in what areas of the city, that kind of thing.

Marco: Yeah. I know that information is available because the data service that I subscribe to, which is over $3,000 a month (it's not cheap), provides that information on a community basis, like down to the community level. So you can see who's pulling the permits and how many are being pulled, right down to the community level.

So that information exists. I know it's out there. It's just how it's presented or packaged.

Seth: So this other data that you look at for your REWBCON presentation, like understanding the current inventory throughout the country. How much stuff have you looked at to come up with that? Is there some website you're following or something, or does it just take you hundreds of hours to pull that information together?

Marco: No, there's all kinds of websites out there.

And again, it goes back to doing Google searches, but every website out there has similar information, but also different information. And sometimes it's the same data, but they present it differently.

Like Neighborhood Scout is a website that I helped shape. I have no interest in it. I'm not an owner. It got bought out by CoreLogic. So Neighborhood Scout is one. Then there are chunks of information available from Zillow, Redfin, Realtor.com. They aggregate a bunch of information. John Burns Real Estate Consulting has some information on their social media platform.

Seth: I'm linking to all this stuff in the show notes again for all the listeners out there.

Marco: Yeah, Altos, A-L-T-O-S. Altos Research is also a good site. They have a lot of good information and they pull from all the MLS sources around the country.

Seth: Nice.

Marco: Not the actual data. Well, they pull data, but they pull the trends from that data. The government websites aggregates all the statistics.

Datausa.io is another one. The National Association of Realtors has tons of information. Harvard. It publishes a lot of great information as well.

Seth: So that's the kind of stuff you look at when you're trying to make sense of what's going on nationwide?

Marco: Yeah, that's some of it. Believe me, there's tons of it. ApartmentLlist.com used to publish rent-based data. U.S. Bureau of Labor Statistics. That's the one I was thinking of. So U.S. Bureau of Labor Statistics has mountains, mountains of data. So it takes a little effort to kind of weed through it. That's another one. So that's BLS.gov, the Bureau of Labor Statistics.

Statista is kind of a mess of information, but you can find some very interesting research and insight there.

The Milken Institute used to publish information. I don't know if they still do, but they used to publish a lot of information. There are so many others.

Like, I mean, Google's almost your best friend. And just typing in search phrases that are clear and specific, and it'll just take you to a whole bunch of places that you can go down rapidly.

Seth: Yeah, I've heard of some of those. I have not heard of all of them, but that's great info to start with.

That's a funny thing with the Google. It's almost kind of like a forum sometimes where it's like, this is good info, but like, how do you really know when it's the best or the right info or if that person really knows what they're talking about? So it's helpful to hear from you the specific places you check out.

Marco: Yeah, those are many of them.

And then there's a bunch of them that are paid subscriptions. Like you won't get any kind of information, but they’re warehouses of massive data, like they have an unbelievable amount of data on every single property in the country. It's just a crazy aggregate.

And those are the people that I'm talking to in order to build the website. I ultimately want to build that housingtrends.com. I'm going to license the data and then use that data to create the maps and analytics and trends and reporting and stuff that I want to provide to real investors, ultimately.

I mean, that's more of a pet project for me. It's not something I need to do. I just don't have the time for it.

Seth: No, that sounds super valuable.

Marco: I want to do it just as a pet project.

Seth: Man, that's awesome.

So like, are there any particular challenges you see investors facing today or that they will face in the next few years? And how do you think they're going to overcome those?

Marco: Yeah. One challenge is just the lack of available inventory.

If you roll back to pre-COVID, it wasn't that difficult. It was getting more difficult to find inventory, but it wasn't that difficult. But then things got tighter and tighter and inventory kept dropping while demand continued to increase. So one challenge is finding enough inventory for your purposes.

But as I mentioned to you before, and something I said in my keynote presentation at the conference, is when I get asked the question, “Is now a good time to be buying real estate?” And my answer to that is yes, it's always a good time to be buying real estate.

And it's not because it's not a question of when; it's a question of where. There are always opportunities. The United States is made up of over 500 metropolitan statistical areas, and they're all broken up into sub-markets and then areas and then neighborhoods and communities and whatnot. So there's something going on everywhere all the time.

And so there are always opportunities. It's just a matter of, where is their inventory? Where do the numbers make sense? And where can you find a deal that will make sense—carry itself, has positive cash flow, has growth potential, is in a market that has stability, is in a market that has jobs and ideally job growth, and a market that has population growth. If you have those two things, you've really licked 70% of your decisions.

And then as long as you're in a good community, like a neighborhood, like what I'll classify as a B, B-plus, A-minus type of neighborhood, you've probably mitigated 80% of your investment risk. When you you have those factors in play, don't start with the property. Start with the market and the neighborhood.

The market is the most important deciding factor in where to look. The neighborhood is where you mitigate your risk because you want a strong rental pool. You want high desirability in that neighborhood. You want the numbers to make sense. You want it to be, relatively speaking, low crime, a desirable area. And then you look at the property, the condition of the property, and the numbers on the property. A lot of investors actually do it backwards.

They start with the property and then really kind of neglect the neighborhood or don't pay a lot of attention to the neighborhood. And the market is kind of an afterthought. So top-down approach.

Seth: That makes a ton of sense. So if you were talking to 18-year-old Marco today, if he were to come into the future and sit in your office right now, are there like top one or two or three markets you would tell yourself to go look at right now?

And why is that? Like, are there any specific places that you know off the top of your head? Yeah, this is a good market because of this. And this is how I know that because I went to this website and it told me this.

Marco: If you're asking me about the best markets or the top markets to invest in, first of all, you have to understand that my company, Norada Real Estate Investments, is in 25 markets. So when I try to narrow those 25 markets down to three, I can pick any three and they're all fine. They're all good, but for different reasons. Some are more prone to appreciation potential. Some markets are better suited for cash flow and cash-on-cash return.

And so when we're talking to an investor or when an investor is talking to an investment counselor at our company, we're going to ask questions and figure out what's most important to them. Is it the cash flow? Is it the immediate returns, cash-on-cash? Or is it price growth or appreciation potential in the years to come? Are they short-term, long-term investors? We'll kind of figure out where their head's at and what their investment goals are.

So I can answer that question basically in different ways, depending on what you're looking for.

Seth: Is your housing trends software going to do that? Like ask questions? Like, do you care more about appreciation or cash flow? And based on those answers, here you go, look at these markets. Is that kind of where that would be going?

Marco: It won't ask you the questions, but it'll answer the questions. That's part of the reason why I want to do it is just to help people zero in on starting with this country that's massive, that has 500 MSAs, and then zero down on markets that make sense.

So when we look at the markets right now, you can look at the top markets in the country and about 80% or 81% of them, we would rank as either in normal home market conditions, like supply and demand and sales are normal. It's basically normal inventory, normal sales cycle, normal everything. They're either normal, strong, or very strong.

Most markets today are back into the normal state. They used to be strong or very strong in terms of sales, the number of sales, sales briskness, the lack of inventory, price appreciation trends. That's what we saw for years, especially over COVID.

Like COVID, 2020 and 2021 were crazy years. We saw an average of about 20% appreciation on a nationwide basis, two years in a row. And that's just unsustainable and crazy when you stop to think about it. Things have normalized since then, obviously. But today, most of the markets, about 80% of them, are what we would classify normal or strong.

And so right now, from a sales perspective, like market conditions, Charlotte, is what we would call a strong market. Although I don't recommend anything in California, LA and Riverside are relatively strong in terms of property sales, but most of the country has a normal market. And a lot of the markets that we've been focused on are the Midwest, pockets of the Northeast, a good portion of the Southeast, heavily into Florida. To a lesser degree now, Texas, just because prices have appreciated so much relative to rents.

But the Midwest, Indianapolis is a perennial market. Kansas City, Missouri is a perennial market for us and great for investors. We've been in Kansas City for almost 20 years straight now. It's just a perennial market for us.

We're in many markets within Florida, in and out of markets like Jacksonville, Cape Coral, that whole southwestern corridor. To a lesser degree, Orlando. Can't get anything in Atlanta right now. Memphis, Tennessee is a strong market for us as well; we have a lot of inventory so we've we're in and out of that market when we get inventory. But we're always bullish for the Memphis area.

Seth: When you're deciding on these markets, do you have a checklist of, “We got to get answers to these 10 questions and this will tell us yes or no to this market because of this.” Do you have something like that?

Marco: It's basically this. Is there inventory in the market? Do the numbers make sense in the market? A lot of people refer to it as the price, like the rent-to-value ratio or the price to rent ratio. If you can't buy, San Francisco won't make sense. Why buy a one-bedroom place for a million dollars that you can only rent for about $4,000? That 0.4% rent ratio, it's not going to work. It won't cash flow. Like you'll be upside down.

And then you also have kind of higher risk of downside side price declines rather than upside. If you look at a market like Kansas City, Missouri, or Memphis, or some of the Ohio markets that we're in, you can get $150,000 property. Like a single-family, three-bedroom detached home for, I'm talking between 100,000 and 200,000, but call it 150,000, that will rent for $1,300 or $1,400 a month. The numbers work. It will cash flow. It will carry itself. It's in a good neighborhood. It's in a relatively strong market. It's not like a great market for strong price appreciation looking into the future, but it's a market that will do well. It'll carry itself.

So we look for good markets. Where there's inventory, the numbers make sense at the metro level. There's job stability, ideally job growth, population growth, ideally. If it's a flat market, that's fine because you're going to be in a desirable neighborhood.

You want a property that is either new, like- new construction, or like new, meaning there's no deferred maintenance. It's what we call turnkey inventory, turnkey real estate. So it's new or like-new. So no deferred maintenance.

Like I said before, the numbers make sense. It's got a rate of return. Turn it's in a good area good neighborhood. That's a very important thing. I would say a B-plus type of neighborhood, bread and butter, it's a cross between white collar and blue collar employees, large rental pool, low crime, good not great but good schools.

That's kind of your middle of the bell curve type of area, so the bread and butter communities, which are, for me, B, B-plus, A-minus graded neighborhoods. They don't have to be premium areas, luxury areas, and they don't have to be in war zones. You want to stay away from that.

I'm not a big fan of like the low, lower-middle income areas like the C-class neighborhoods. They look good on paper and they can do well, it's just I find that, over time, they can be expensive because of the high cost of the turnovers and the damage that could be done or left behind by by tenants. It's just you're dealing with a different demographic, a different class of tenants, so for me I like being in those B-class neighborhoods. So that's kind of the checklist.

And then of course, if you're not self-managing, having a great full service professional property management company—not an individual, but a professional company, a management company that manages your properties. You could self-manage. It's not a problem. You can do that.

So that would be the checklist. And that's exactly what we walk investors through.

Seth: Yeah. So when you sell a turnkey rental, do you have a property manager picked out already that kind of meets that criteria? Because I know that's a common issue I hear from a lot of people, and I’ve experienced it myself, where some property managers are terrible. So how do you make sure you get a good one?

Marco: Yeah. So being a turnkey property provider, we provide everything for the investor and, at no cost, we don't charge for our service.

So we've got an inventory of properties in 25 markets. The management is tied in with it, but you don't have to use that property manager. You can use any property manager you want. You can self-manage it if you want. We just provide it for you, someone or a company that we work with, that we've vetted, that we know we can provide the financing and everything else.

But with the property management company, again, like I emphasize, full-service professional management, a lot of property management companies go off of reputation, meaning that you want to look into their track record and reputation. And that's not that hard to find. You'll find all kinds of information online as well as reviews. You can also ask them for references. Of course, they're going to give you their best references, but nonetheless, it's good to know.

Talk to the team, talk to more than one person, interview more than one person from the company. Talk to the owner if you can, talk to the leasing agent, talk to the maintenance coordinator. Just get a feel for how their systems and operations are and what kind of operating procedures they have in place. Because it's kind of like a marriage, they want to work with you ideally and you want to work with them, but you want to make sure it's the right fit, and you want to understand how they work, what they can and can't do.

Seth: And just one last question. So I heard you say a few times, you got to make sure that there's inventory in the market. So what do you mean by that? What is enough inventory? Is there a certain ratio or number you're looking for to be like, okay, that is officially enough. Now I can go there versus that's not enough.

Marco: It's not a number, exactly. It's really just if that market checks the boxes in terms of the rent-to-price ratio, meaning that there are areas within that market where the numbers will work.

You can't get something that will make sense. Cash flow has a positive cap rate, the cash-on-cash return. You want to make sure that there's enough available inventory for sale that you can actually pick something or find something. Because if something goes on for sale in that market, in the bread and butter communities, and there are five offers the day it's listed, you're going to have a hell of a time getting a property there. It’s a numbers game. You'll ultimately get something.

But if you're competing, if inventory is low, there's not a lot for sale and you're competing against a lot of people who are wanting to buy whatever comes up for sale, it's going to be a difficult market to try and get something with the numbers that you want to get them at. You may be forced to pay over the fair market value, and that's only okay if the number still makes sense and it's a market that presents strong appreciation potential. Because if you have to pay a little bit over market, that market will quickly catch up to what you've overpaid if you're paying over fair market value.

So it's not necessarily a bad thing, but it's easier to work in a market where there is lots of available inventory, which is why we like places like Memphis, Tennessee, Kansas City, Missouri, Indianapolis, pockets in the Northeast, for example, some of the secondary markets in Pennsylvania, the Ohio markets like Cleveland, Cincinnati, to a much lesser degree, Akron and Toledo. But there's definitely inventory in those markets.

Seth: Yeah. Like you said earlier, it's not like you're getting on Zillow, looking in Cleveland and say, okay, good. There's 400 properties. I'm all set. It's more about, I'm going to crunch the numbers on a number of properties, see if the numbers work. If they work, if I can actually get this property, that's how I know there's inventory. It's not necessarily about the number of properties on the market. Is that accurate?

Marco: Yeah. Another way of saying that is if I can't find properties that make sense for me, the numbers work, it's in the right areas, it's available for sale, I can make an offer and I have a good chance of getting it or buying it, or if it's new construction, of course, getting it from a builder, then yeah, then inventory is going to be tight.

And there are degrees of tightness. How difficult is it going to be to get that ideal property that you want to add to your portfolio?

Seth: That's a good distinction to make. Because in the land business, a lot of parallels there in terms of choosing market and figuring out what is the sold to for sale ratio and how many days on the market are these properties there.

But in order to even go there, you need to already have some assumptions made about how much am I going to be offering for these properties? What's my plan for them? Am I going to be improving them in some way or not? Because that totally can change the course of what's acceptable for you or not. So it's kind of a holistic thing that you gotta take several different things into account.

But I want to switch gears just a little bit, talk about kind of your personal experience and advice for investors. Cause I know you've been in this business for a long time. You've seen a lot of things, you've talked to a lot of people and I know you've even done these kind of interviews quite a bit on podcasts and you've got your own podcast.

And I'm curious, when you get interviewed like this, or when you listen to other interviews and conversations about this business, what's something you think people talk about too much? And what's one thing you think they don't talk about enough?

Marco: Oh, wow. Never been asked that before. That's an interesting question.

What do they talk too much about? I don't know if there's any one thing that's too much, but a common question is like, what are the hot markets?

Seth: That seems to be what I asked you about.

Marco: Yeah. People who are not really well-seasoned will always ask, well, what's the hot market? My response is, how do you define a hot market? What's hot to you? Is it price growth, rent growth, sales activity, available inventory?

The thing that all the investors are talking about what's hot today in terms of investor interest, what are they tweeting about versus something else. Define a hot market? Hot in terms of cash flow, hot in terms of appreciation, that can mean different things to different people. And so I see that being kicked around a lot.

Sometimes people refer to it as best, not necessarily the hot market, but what's the best market. That's what's talked about a lot because obviously that's what people are interested in. Where should I be investing? What's the best market that I should be investing in right now?

Seth: I've heard it said that for every complex question, there is an answer that is clear, simple, and wrong. So I think maybe that's what's going on is people just don't want to think too hard about it. They want you to just give them an easy button and they'll realize the complexity involved and understand some of this stuff.

Marco: A hundred percent. Yeah, everybody wants the easy button. That's probably the thing, I think, has been talked about the most or too much. What was the other part of your question?

Seth: What's one thing you don't think they talk about enough?

Marco: Maybe it's some of the things we talked about, just the fundamentals and the principles, like what should I focus on? What is my checklist? How should I be approaching real estate investing?

Like, for me I have all these rules like, and one of them is like taking a top-down approach. Don't be presented a whole bunch of properties and evaluate the property. And then look at other factors around it, more big picture, start with the market. I call it the funnel approach. Start with the metro area, the markets within it, the neighborhoods, and then the property. And then you build your team around you, your property manager, your lender, etc.

Taking that top-down approach will assure that you have a high degree of success.

Seth: What is something that you hear novice real estate investors or critics of real estate investing complain about that makes you roll your eyes?

Marco: Damn, that's a good question. I wish I had known these questions beforehand.

Seth: My goal was to stump you.

Marco: I think the biggest thing that makes me cringe is what I call real estate speculators. They think they're investors, but they're not. They're gamblers. And they speculate on the market. And that’s their sole focus.

My pseudo-cousin is an example of this. He's just been lucky or fortunate because he's been in markets that have just been experiencing hypergrowth. So he's done well from an equity perspective, but not from a cash flow perspective. And it's just investing in the so-called hot markets, markets that are experiencing strong growth and price appreciation.

But if that's your sole focus and you've got blinders on, you're not considering all the other factors that you should be considering, then I refer to you as a real estate speculator, not a real estate investor.

A real estate investor is focused on sustainability and cash flow. So they've got the cash flow. They've got cash flow to carry the property in the short term and forever, but they know that they're in markets that have growth and appreciation potential. So they're going to make out well in the years to come.

That's investing smart and strategically rather than just focused on rolling the dice at a craps table and saying, “Yeah, you know what, I should be able to flip this house in a year and make 50 grand on it,” or something like that if they wanted to sell it.

So that's a mistake a lot of investors make, but especially made in the early 2000s, like leading up to 2006 and the housing crash. That's where a lot of mistakes were made and a lot of investors were left with their shorts down when the water went down because they couldn't carry the property. They bought a property, went up fast in value, and then the market turned and then that equity disappeared and dried. Then they were upside down. They owed more than the house was worth, what they could sell it for, and they couldn't carry it.

If they were able to keep that property and carry it for the next three, four years, they would have made out okay. They would have come out on the other side whole and then would have made gains in terms of appreciation from that point forward. But because they had negative cash flow, they couldn't afford to keep it. They couldn't carry it. And they were forced to sell, liquidate, foreclose, or file bankruptcy.

Seth: Now that you've gotten this far in your business and your career, you're successful. I don't know what your PFS looks like, but I presume you've made plenty of money in your career. You're in a place where a lot of people would dream of being.

And now that you're on this side of the fence, what's something that really is everything you thought it would be? And then, what are some dreams that you had early on that turned out to be maybe false hopes or just harsh realities of the business?

Marco: Well, I guess the more success you gain and the more financial freedom you have, the more things you can do that are more fun projects.

Like we were talking about this before with with Broadway, it just gives you the freedom and flexibility to do other things. Some of them being passion projects or investments that are beyond what you started with. For me, it was business and real estate. And then that ventured out into me creating Norada Capital.

Norada Capital Management is my private equity firm, but it's an investment fund. So investors are investing every day, but certainly every week, to make 12% and 15% gains. And we arbitrage that capital and I can build things, build business ventures and projects and whatnot that I want to do. Not that I need to do, but that I enjoy, understand, have fun and can make more money and then contribute back to impact others, for example, or other purpose-based projects or purpose-based endeavors.

I think the first goal for a lot of people probably should be to be financially independent, which means that you've got your monthly expenses covered. And beyond that when you 2-5x that income, if you need $5,000 a month to live and cover everything and be okay, like completely sustainable, then you should look at at least 2x-ing that, get to $10,000 a month. Now you're financially free.

When you're 2x or 3x, you're financially free. When you cover your nut at $5,000 a month, you're financially independent. You can get to 2x to 3x that. That's financial freedom. And if you get 5x to 10x that, that's when I consider a person to be truly wealthy. Now you shouldn't have very many concerns at all.

And you have a lot of time freedom to be able to do what you want, when you want, with who you want, how you want. And you can make a real difference. You can do things that can change the world, impact the world.

Which is like what we're doing with our Aspire tour events every month in different cities around the country. We bring in up to 4,000 or more people at each event. It's crazy. We're just providing people with all kinds of incredible content and education to build themselves personally, financially, and otherwise.

Seth: You've got a lot going on. You do all kinds of stuff, don't you? How do you juggle all this? How do you keep it all straight in your head?

Marco: A team. You can't just do it all by yourself. You have to hire the right people to help. You have to have the right partners and then the right team of people to help you execute and build.

You come up with the ideas and the vision. You build the right team around you to make it happen. And then you bring on the team, whether they're employees or contractors or outside staff or whatever it may be. You bring in the people that can execute and fulfill that vision.

Seth: How much of this stuff would you say runs without you? Like you could literally die tomorrow and this stuff would keep going without you. Is any of it like that? Or do you have to like kind of check in every week or every month or something? How much involvement is required from you at this point?

Marco: I'd say 80% of it is sustainable. The other 20%, either I need to be involved or I choose to be involved. And it's usually both. Usually those are tied together.

I don't want to let go completely. I don't want to be a control freak. I want to have some level of control and I want to know what's going on and be able to conduct and direct what's going on. So I want to feel that I have some level of impact and control over it, but I don't want to be micromanaging or a control freak and directing everything because then there's no point in having a team.

Seth: Yeah. To some extent, it's almost like if you don't want to play any role in it, then why is it there at all, you know? Like, why don't you shut the whole thing down? So there kind of has to be that balance of, you're sort of there but it doesn't need you necessarily to exist.

Marco: That, actually, is ideal. Building a real estate portfolio is a great example of this. If you can build a real estate portfolio that is profitable, cash flows, is sustainable, and doesn't require your time and attention on a daily weekly or monthly basis (especially if you have a manager managing it like a management company), then you can go on a vacation for a year. You can disappear for a year and come back a year later and everything should be running smoothly.

You might have someone as a backup in case your team or your property managers need to contact someone and you choose to make yourself not available. At least give someone the knowledge and authority to make decisions on your behalf while you're away. And under that scenario, theoretically, you could disappear for an entire year and come back and everything should be just as good, if not better, than when you left.

Seth: So this is kind of a random thing, but I noticed as I was preparing for this interview, I saw you had posted something on LinkedIn or Twitter or something. There was this quote that said, “You don't have to be extreme. You just have to be consistent.”

And I think I know why you feel this way. The statement makes perfect sense to me, but I'm curious if there are any situations in life where you do have to be extreme or when your life or career really does boil down to one key moment.

If so, what situations do you think that would be true?

Marco: You need to be extreme when you are required to hustle to get something launched.

I like to use the analogy of a rocket getting off the launch pad. When you first launch a rocket, it requires a lot of fuel and energy to get it moving. When you watch a rocket lift off, it moves up slowly off that launch pad. It looks like it's almost not even moving, but you're burning the most amount of fuel at that point in time to get it off the launch pad.

And then slowly, as you keep pushing it and burning that fuel and putting a lot of energy into it, it starts to move and accelerate faster and faster, until you ultimately are going hundreds of miles an hour. And then ultimately, you get into orbit, where it requires the least amount of energy. But now you're in orbit and you've built this thing. You've launched the rocket. You've got this thing going.

So that's when you have to be really aggressive and be hard and strong.

You know, it makes me think of David Goggins. He would say… He's one of the guys we have at our events each month at Aspire.

Seth: Oh, cool.

Marco: He just broke his leg. Well, not on purpose, but I was just looking at his cast.

Seth; Are you sure he didn't do it on purpose? Seems like he would do that kind of thing.

Marco: Well, it was a choice, but he had to get his leg fixed and they had to break his bone in order to fix it. So the pictures weren't pretty. But the guy’s a machine.

Seth: Does this stem from his experience in the Navy SEALs when he messed up his knee and had to tread water or something like that? Any correlation?

Marco: Yeah. He's had knee damage for a long time.

But one thing I like quoting him on is he would say, “Stay hard, mother*****r.” You can finish that sentence. But you do in the beginning. You need to stay hard and aggressive and not let up. You need to push with all your might and energy to get that rocket off the launch pad, because if you can do that, then the longer you go, the easier it becomes, the more sustainable and profitable your ventures are.

The first property you buy is going to be the hardest one. It’s got the steepest learning curve. It's going to be the most unnerving and stressful. The second one will be a little bit less. So the third one will be much easier. The fourth one will be even easier than that.

So you've got to push hard and build that momentum. And then, as you go, you'll realize, oh, damn, this wasn't so hard. You know, when you look back, it shouldn't have been as stressful as I'd let it be.

Seth: So this is the Aspire Tour. Is that right? I think I found that on Instagram.

Marco: Well, the website is Aspire with an A, AspireTour.com. A-S-P-I-R-E, Aspire. You know, like I aspire to be something bigger, better, greater than I am.

Seth: Yeah. Got that. Sweet. Yeah. I'll put that in the show notes too. It sounds fascinating.

Marco: So we usually post two or three months in advance on the website. Like we'll always add cities. We might have four or five of them there. The closest we just finished was Denver two days ago. It was Dallas before that. LA and then Dallas before that. The next one closest to you is probably New York.

Seth: Okay.

Marco: Maybe there's another closer market. But we just signed the agreement about a month ago for Madison Square Garden for July 20th.

Seth: Wow. Wait, what role do you play in this? Did you start this or are you a co-founder?

Marco: Yeah, I'm a co-founder. I'm essentially a one-third partner. So I have two partners building out Aspire and our money is mastermind and our real estate mastermind, which is called Level Up Real Estate.

The Aspire event is really to get 2,000, 3,000, 4,000, 5,000 people in a room and just feed them tons of great information, content, value, personal development, business development, entrepreneurship, real estate education, and entertainment all in one full day. And then from there, if they love what they learn, they love what they see, we give them the opportunity to attend our master classes, our mastermind. They can go further down the rabbit hole with us, but they're going to get a ton of value and entertainment at the Aspire event.

Seth: Yeah, that's awesome. I'm looking at it now, there's a lot of big names that have been involved with that, so that sounds pretty cool. I'd have to check that out.

Marco: Yeah, if you, as my friend, want to attend any of them, just let me know. I'll give you VIP access as my guest.

Seth: I appreciate that. It's very, very kind of you. Yeah. I'll let you know if I'm ever able to fit that in.

I know we're coming up on our time limit here. One last thing I just wanted to mention, this is something a lot of people might not know about you. I know we kind of mentioned a little bit earlier, but you are a Broadway producer and co-producer, right? Your productions include, correct me if I'm wrong, A Beautiful Noise, Broadway Vacation, Harmony, Joy, The Devil Wears Prada, and Here Lies Love, among others. Is that right? And how did you get into that work and why?

Marco: Yeah, those are six of them. I think I'm involved in about 11 or 12 of them. We just had opening night last month for The Notebook, based on the movie and the book, which was phenomenal. I highly recommend The Notebook. It's such a great production.

And then if you remember the band The Who with Pete Townsend, so they have all kinds of great songs. But Tommy was one of the characters in one of their songs that you remember, Pinball. But anyway, we just opened up Tommy a couple of weeks ago. We had opening night for that. And that's a great, great production as well.

Seth: And you actually like one of the financiers of this, like you invest in the production and pay for it to get up and running. Is that right?

Marco: Yeah. I'm one of the co-producers. So, you have three levels, if you want, from an investment perspective in Broadway productions. And I'm talking in general terms, generally speaking, you have the lead producers, who are typically the general partners. Like if you had a real estate syndication, you have the GPs and LPs. So the GPs are typically the lead producers that could be one person or two or three individuals. And they're usually the ones that bring it all together, make the story come together, bring in the initial team to get that production off the ground.

Then they will bring in the investment capital needed through co-producers, which are often associates and people that they know in the industry and whatnot. And so the co-producers typically come in with bigger numbers as an investment and they're usually the people listed above the title. So you'll have the title like, Sister Act is another production that I’m in. You'll see Sister Act or Broadway Vacation, or The Devil Wears Prada, and above that you'll see a small batch of names. Those are the co-producers. And then, right above the co-producers you'll see one two or three names and those are the lead producers.

And then anybody else that could potentially be making an investment or just simply referred to as investors, they don't show up anywhere, but they've got a piece of the production in terms of an investment perspective.

Seth: So how much does it cost to, for you to do that kind of thing? Like per production? And what kind of return would you normally expect out of that kind of thing?

Marco: Well, it's an interesting question. You're actually asking me two fun fact questions. To invest in Broadway, it depends on the production, the amount of capital being raised, and the lead producers.

Some Broadway productions, off Broadway or smaller productions, can be $3-5 million total capital raise. Most of them are between $10 and $20 million. The larger ones, like the much larger expensive ones, can be $30 million-plus, but most of the productions I'm involved in are like $15 to $25 million.

The investment will depend on, again, the lead producer in the production, but the minimum investment is typically between $50,000 and $100,000. And then there's often no cap. It's just until they fulfill their capital raise. But I don't go in for $50,000. Like if I'm going to be involved, it'll be six figures. My largest one was seven figures as an investment.

So it took me a while to get my head wrapped around that years ago. Because if you're coming from the real estate space, an investment in a film or a Broadway or theatrical production does not make sense to you if you've got the mindset of a real estate investor. Because you don't get returns right away.

Your first goal, first of all, if you're going to write a check, you write the check as if you're never going to see that check again. The risk is pretty high, like about seven out of 10 productions will lose money. You won't recoup your investment. You'll lose money on it. Two out of 10, you should recoup your investment and maybe make some money.

And then it's to be determined how long you're going to make a return because it really comes down to how long that production's running. And then about one out of 10 will be like a Wicked or Hamilton or Phantom of the Opera or something like that, where it'll just run for years until you just want to shut it down. And those are big moneymakers. So those could be astronomical, like they'll just print money for years.

But it is a high level of risk. And you have to know that going in not every production makes money, a lot of them will lose money. But the rates of return can be anywhere from negative to zero to 10% to 30% on your money. And then the ones that run for years on end can be a lot more than that; they can 2x, 3x, 4x, 5x your initial investment.

Seth: So like, what's your track record? I don't know if you're open to sharing that, but like, do you lose money a lot? And if so, why do you keep doing this? Is it just fun for you?

Marco: Well, it is fun. It's sexy. It's entertaining. I like the arts. I support the arts. I love theater. I fell in love with musicals and theater long, long ago when I first saw Phantom of the Opera almost 30 years ago.

Seth: Did you see it in Toronto?

Marco: No, good guess, though. But it was actually in Calgary. The first time I saw it was Calgary, Canada. And then I saw it again in New York. And then I saw it again in Orange County, California.

I know one of the Phantom singers who played at the opera. We had him sing at Aspire actually a few times as entertainment right after lunch as people were coming back from their lunch. Yeah.

So it's a fun industry. You definitely will have your losses and successes. You should never invest in theatrical productions or Broadway if you're only planning to invest in one production because odds are stacked against you to not recoup your investment. So you have to go wide, not just deep in one.

Seth: Marco, thank you again so much for spending your time with me. I know we're at our time limit here. If people want to work with you in any way, I know you've got several websites. I'll link to all of them in the show notes. Again, retipster.com/188. But if there's one particular place you would drive them to, where would that be?

Marco: Probably just my personal website because I link to Norada Real Estate. I link to Norada Capital. I link to all the things I'm doing from there. So it's just my name, MarcoSantarelli.com. Just my full name, MarcoSantarelli.com.

And just as a side note, my Instagram, I couldn't get Marco Santarelli, so it had to be MarcoGSantarelli, my middle initial. But yeah, you can follow me on Instagram as well at MarcoGSantarelli.

Seth: Thanks again, Marco. Appreciate it. And hopefully we'll talk again soon.

Marco: Thank you so much, Seth. This has been fun. I appreciate your time today.

Seth: Hey, everybody, how's it going? This is Seth Williams, and you're listening to the REtipster Podcast.

This is episode 178. And today I'm talking with my friend, Matt Theriault. So Matt is somebody I've followed for a long time since before I got into the blogging and YouTubing world myself.

And I remember back when YouTube was still a relatively new thing and I would look for real estate investing videos on YouTube and I would always see Matt's videos. And I appreciated them because they were really well thought through. They made me you think critically about real estate investing as a profession and how to deal with problems and think outside the box. And these things weren't surface level. They were pretty deep. And as a fairly deep guy myself, I appreciated his approach and his teaching style.

So today, I get to talk with Matt about his story and where his real estate investing and content creation journey has taken him and where he's trying to steer his ship in this ever-changing business environment we're all finding ourselves in.

So Matt, welcome to the show. How are you doing?

Matt: Thanks, Seth. I appreciate it. I had no idea that the history went back that far, but it's good to know.

Seth: Yeah, man. I'm sure you've had an impact on a lot of people through Epic Real Estate and just, I mean, I don't know how many millions of views you probably have on your videos, but you've been doing this for longer than most, right?

Matt: Yeah. As far as I know, I think I'm the longest-running real estate investing podcast that's still going. So we started in 2009. I think the only person that was there before me, and he had like 10 different podcasts, was Jason Hartman, but a little bit more like higher level type.

But as far as the how-to and the nitty-gritty and strategy and technique and tactics and stuff like that, I think, yeah, the longest one.

Seth: Yeah. So I don't think I've ever even heard the actual origin story of how you got into real estate and what your journey looked like. like and even like the how and the why behind why you started Epic Real Estate Investing. Can you just like give me the backstory on how that all started?

Mat: Yeah. And thanks for asking. It's been a long time since I've been asked. When I got out of the Marine Corps, I spent the next 14 or 15 years of my life in the music business.

Seth: Oh, really?

Matt: And I did really well for myself.

Seth: What did you do in the music business?

Matt: I had a small hip-hop label, but we had major label distribution. It just happened. I was really blessed and fortunate that people liked what I did and they're willing to pay money for it. It’s very different than how real estate started because there were no goals. There was no discipline. There was just waking up and doing what I loved and I was just really fortunate.

And then, when the digital download came along, it just kind of killed the music. When you make all your money selling CDs and records, you know, it made it kind of tough. And I would say in about six quick months, I had no idea what was happening. I mean, in hindsight, it's crystal clear. But at the time, had no idea and went out of business in like six very fast months, like on the emergence of Napster.

You know, the whole underground music scene, whether it was underground hip-hop or underground rock or underground dance, they embraced that digital download, the technology, far before the mainstream population even knew what it was. So if you fell into one of those genres, then you got wiped out before anyone else even knew what a download was.

Seth: Are there any well-known artists that you signed that I could search for and find?

Matt: Right. Signed? Not really. I mean, Michael Myers was my only artist, but kind of what we did that was a claim to fame was two things.

We made records specifically for disc jockeys, like the battle hip-hop DJs. So we made those instrumental records with all the little scratchy sounds and stuff like that on them.

So we did that and then… As far as I know I'm the first one that did this, but at the time, dance music compilations were really big but then they would like center on a DJ who was like the actual artist or the star of the thing, and then they would mix their music and so they're mixed like legal mixtapes. If you remember what a mixtape was, I don't know how old you are, Seth. But I used to sell those in high school.

Seth: Okay, nice.

Matt: Did you ever have a cassette player? Are you that old?

Seth: Oh, yeah. Yeah, for sure.

Matt: Okay. I kind of lost track of where that technology started and stopped.

Seth: All my childhood, it was tapes.

Matt: Very good. And so I just took that same idea from the dance music industry and went over to hip-hop. And so I had the Beat Junkies, their compilation on my label. And they're still going as far as I know today. And they all went off to do other things. And then they all came back together. And they all kind of operate individually and as a group.

And then on our compilations you know I was able to work with you know Jurassic 5 and Eminem and Mos Def, and so all the kind of, not necessarily your mainstrea, I guess. Eminem is mainstream now but he wasn't at the time, no one knew who he was. But I got to work with a lot of artists but never really had anybody signed to me except the one, Michael Myers and another guy named Akbar. But anyway.

Seth: Wow, nice.

Matt: Once we decided that, I don't know how I'm gonna make my way in entertainment because I didn't necessarily have the talent myself. I was a little bit more of the executive type and you know, I produced a lot. But it turned into a, all of a sudden, only the people with the deepest of pockets were going to stick around.

And so I just had to find and do something else. And I went and bagged groceries. I was 34 years old and I was bagging groceries because I didn't know how to do anything else. I didn't have any certifications or degrees or anything. I didn't know what to do, but I had to eat.

Seth: Was that like a low point for you? Like, did you get depressed or anything? I mean, that's a huge fall, right?

Matt: For sure. I mean, when you're in your hometown and you're bagging groceries at the local grocery store and your high school girlfriend comes through the line, you're like a paper plastic man. You know what I mean?

Seth: Ouch.

Matt: That one hurt that day for sure. But yeah, you know, 34 years old and taking my lunch breaks with 16 year olds was kind of very humbling, for sure. And so did a lot of complaining, you know, blaming everybody and everything for my situation. Life was unfair and poor me for about six months and I finally realized, wow, if I don't do something, this might be my future and I don't want that.

And I became kind of close with the grocery store manager who was also 34 years old. Coincidentally, you know, he was managing the place and I was pushing the shopping carts. He was only two years away. This was the big eye opener. And this is like kind of really like the launching ground and the foundation of everything I'm about today.

And he'd been there for 18 years. He started there bagging groceries just like me, but he started when he was 16. He was two years away from being there 20 years. And he was going to be able to withdraw, I think, 70% of his pension. For indefinitely. I mean, he stayed there for 30, he could get a hundred percent, but he was going to go ahead and take that then.

But he pulled me aside and he showed me, and he used to have a photo album. Do you know what photo albums are?

Seth: Oh yeah.

Matt: Okay. All right. It's funny. I have assistants and interns. They have no idea what I'm talking about sometimes. And that makes me feel really old. I must be kind of out of touch with the young ones too.

I told one that I was the other day, I was like, yeah, I used to sell compact discs. And she was like, what's that? I said, you know, CDs. She goes, oh, I didn't know that's what that stood for.

Seth: You know, I actually had a moment like this last year. I was talking to somebody, I think he was like 23 or something. And I don't know how this came up, but we mentioned Ricky Martin. Like, I remember back in high school when Ricky Martin was a big deal?

This kid's like, who's Ricky Martin? What are you talking about? I was like, are you serious? No way. But I guess it kind of made sense. I mean, he hasn't been a big deal for a long time.

Matt: For a very long time. That's right. So he had showed me a photo album and he had like, I don't know, it was three or four multiple angles of it, but lots of pictures. But of three or four different apartment buildings he had been able to amass along the way while he worked at the grocery store.

And he shared with me how the passive income from his apartment buildings will surpass the pension that he's going to receive. And so he was retired at the age of 38.

And he told me these words. And these words, I've said them a million times. If you've listened to the show, you've heard them at least 10 times. But he shared these words with me. And it's just been the foundation of my whole existence ever since when he said, “You know, Matt. If you really want your money back, if you really miss your money,” and I really did because, you know, I made my million before I was 30 years old. And he said, “real estate is the final frontier where the average person has a legitimate shot at creating real wealth.”

And I was like, the final frontier? This is the last one? He says, “Yeah, unless you can know you've got an amazing three pointer and can jump three feet or, you know, swing a baseball bat better than anybody or whatever.”

But he basically just kind of broke it down. You've got to be super talented. Or you have to have an amazing business idea. You have to be an inventor. You got to be a writer. You got to be a composer. You got to have a gift for sports. But for the average person, real estate is where their best shot is at getting wealthy.

And I was like, wow, at this point in my life, I feel far below average. So who am I to aspire above average? So I took it on and I did what I thought the logical thing to do was I went out and got my my real estate license.

And I did okay. You know, I got rookie of the year in my office the first year and then it just kind of settled down. And I lived in an area where I was very blessed. It was the million-dollar homes. So I only had to sell one of those things every other month to make a really, really good living.

And, but there was one Saturday where I was meeting with a client and I had two good clients, really good clients. They just did repeat business. They gave me business over and over and over again. I didn't have to work for it. Once that relationship was established. They just gave it to me.

And there was a Saturday. I was all dressed up in a suit and tie. I remember it specifically as in Palos Verdes, California, at the top of the hill of Palos Verdes. And I was in a suit and tie at 10:30 in the morning. They were supposed to be there. They didn't show up until about 11. And they came in, they signed all the paperwork. I had all their papers out and everything, coffee and snacks and everything for them to sign the paper. They were closing a bunch of deals.

And they came in 20 minutes late in jeans and a T-shirt, signed all the documents and took off for the day. And then I was left there to finish up the paperwork. And then I had to go hold their properties open. And I was like, you know what? Real estate's been good to me. But if this is where the money's at, I'm sitting on the wrong side of the desk.

And so that was like my breaking point where I was like, okay, no longer am I going to represent other people in their sales and their transactions. I'm going to act on my own behalf. I'm going to buy and sell myself. But I had no idea how to do it.

So I went and made a huge investment, like so many people do in their investing education. I think I paid $22,000. And back then, my family thought I was absolutely insane. That was unheard of. I remember my grandma, she's like, well, you're going to get like a degree or something, right? A certificate? And I was like, no.

She goes, well, do they have a good job placement program? I remember her asking me all these questions. And I was like, no, I'm going to go be my own boss. I'm going to do this all by myself.

So that's how that transition started. That's how I got into real estate. It really was for the money, but then it really became that whole moment of this guy, the grocery store manager. He was able to recreate in parallel to his day job's pension an income that far exceeded it and did it inside of 18 years.

And most people strive for 40 years and can't do that through the traditional means. I was like, you know what? No one ever taught this to me. This is a brand new thing, idea to me. And gosh, if I didn't just luckily end up bagging groceries, I still might not ever know. So I was like, okay, this is what I'm going to do. And that kind of became my, I mean, sure, I got into real estate for the money, but then it became a little bit of a passion of mine to actually share what I had learned.

Seth: Yeah, it's interesting. You talk about what if you had never started bagging groceries and had that revelation and heard all that? It makes me wonder, I have a feeling a lot of people are in that situation and hear about it, but they just kind of blow it off or dismiss it. Or it's like, no, it's not real.

And man, I even think about myself, like how many business ideas have I heard about that maybe were real, but I just blew it off and dismissed it. And it's a good reminder. Like it comes down to action, but I guess also being able to tell, okay, this is a real legitimate thing versus now this is not worth my time.

Matt: Yeah. But this guy, I had evidence staring me right in the face.

Seth: Yeah. I'm sure that helped.

Matt: And he was my age and he was done and I was just starting over. And that was, it really hit me emotionally.

Seth: For sure. So did you start trying to get apartment buildings like he did? Or did you go after houses? You're like, what was your first step after you paid 22 grand?

Matt: As much money as I made in real estate, I spent it as fast as I made it. So I didn't have any capital and having, you know, left the music business, I had to file bankruptcy there. And, you know, my wife left me with all of her debt and, you know, she didn't like it that I didn't have a job anymore, basically. And I was no longer a celebrity, a music celebrity.

So I was really drawn. I got really lucky. The program I chose... It's not around anymore, but it was kind of like a buffet. You got to learn whatever you wanted to learn. It was a two-year program. You go out to Glendale, Arizona and, you just kind of walked up and down the halls and okay, they got wholesaling over here and they got short sales over there. And then there's legal strategies here. And I just kind of walked up and down.

And so I was really drawn to the creative acquisitions class. And because I had to go there because that's what my resources allowed me to do. And I just really embraced that and got really good at it. And went into single-family houses and buying stuff subject to and seller financing and built a portfolio, got it to over 350 units at one time.

I was completely unlendable from a bank standards the whole time. And that's what I was able to build just with that. And then when I started getting money, I was like, well, why would I go to a bank? I don't need their money. I know how to do this myself. So it was really a blessing to be able to start with really no money at all.

Seth: Wow. So you bought a lot of these properties or maybe all of them with owner financing where the person sold them to you on installments?

Matt: It was either owner financing, subject to, private money, a combination of the three. So those are my three main tools.

Seth: Okay. Gotcha. Like a hard money lender or you had a rich uncle who would partner with you or something?

Matt: Friends and family. Friends and family. Yep.

Seth: Cool.

And just people that I I would meet. I met a lot of people at my RIA clubs. What's funny about RIA clubs is that, when you're going in there as a newbie, you're like kind of in awe. I haven't been to one in a while, but there were like 100 people every time I went.

And I just look at all these people like, oh, my God, these people are all real estate experts. Look at all this stuff that they're doing and blah, blah, blah. And then once you do one deal and you tell somebody about it, all of a sudden the crowd starts to gather. And all of a sudden, you find yourself holding court explaining how you did this one deal. And then you realize nobody in there knows what they're doing.

Becoming an expert attracts money, buyers, sellers, partners, investors.And so once you do a few deals, you become the de facto expert because no one else has done just a couple of deals. And what that does is it attracts a lot of money. It attracts buyers, attracts sellers, it attracts partners, it attracts investors.

And, you know, a lot of those people have money and they want to put it to work, but they don't know how. So they cling onto the people that are actually doing it. So that's, that was a big launching ground too, as far as the private money goes.

Seth: Wow. So just out of curiosity, the owner owner financing piece, what percentage of your deals would you say you got that way versus subject to or private money?

Matt: They almost all started with seller financing. So I would say probably 70%, 75% of them were all seller financing.

Seth: Okay. What was a typical structure? How would you explain it to them or get people to go along with that versus just wanting cash? Like what was their motivation for saying, yeah, I'll do that?

Matt: Good question. Beause when I first started doing it and I see a lot of people do still do this today is when I first heard about how, in seller financing, the seller could step in and be the bank, I was like, that got me all revved up and raring to go. So I would just go to my sales appointments and present that right away. And lots of rejection when you do it that way.

And then over time, I started to learn that, okay, so there's this other guy down there a couple couple of years later, he said, you know, Matt, we buy, we're real estate investors. We buy properties in one of two ways. It's either our price in the seller's terms or the seller's price in our terms. You only need to get control of one of them. And, what you need to understand is, it's easier to go for the terms because the seller doesn't really understand anything but price.

So that was the big pivotal moment for me when he said, when you go in, you have to talk price because that's all they understand. They didn't go to some educational program and learn how to sell creatively.

So when you walk in and they're in some sort of distress and you start presenting all these creative things, you sound like a scammer. You sound like someone's trying to steal their property. You sound like they're trying to pull the wool over someone's eyes and doing something that's illegal.

So you just always have to go through the price. And then, if you reach an impasse when discussing price, then you go, well, I might be able to give you a little bit more. If I could give you some money now and the rest later, how much do you actually need right now?

And that was always the transition. And I still use that exact line today. And once they give you an answer, now you've dialed in, you've closed for the down payment, so to speak. Now you just have to decide how you're going to pay the balance. And that's typically in payments.

Seth: Yeah. So is there some kind of, you know, once you get to that point where you wrote the subject of payments, that kind of thing. Is there a standard set of terms that you default to? Like five years, this percent interest, this down payment, or is it like there is no standard? You just figure out what they want and tailor it to that?

Matt: So my default, my go-to, like I always want them to tell me what they want, right? But if you ask them what they want, they don't have an answer. So you have to kind of feed it to them and let them and help them figure it out.

But it'll always be, once they give me the down payment, I'll say, okay, well, you know, most people that everyone else I work with, but they allow me to pay the balance in 300 equal monthly payments. Are you okay with that? And they almost never are. Oh, no, that's too long. It's 27 years. I'll be dead by then. I've heard that a million times.

And I was like, okay, well, how many payments would be acceptable? And now I can go from there. But I planted the anchor with 300, which I wouldn't get, I think it's 27-something years. And I also didn't, if I say 300 equal monthly payments, I'm also starting at zero interest too.

Seth: Do you say that or is that just kind of the underlying assumption?

Matt: No, just 300 equal monthly payments until the balance is paid off. So I didn't introduce interest at all.

Seth: As far as the down payment, is that just whatever they say they need now or do you have a standard down payment that you try to shoot for?

Matt: As little as possible always, right? You always want as long a time as possible and as little down money as possible. And if they say they need a half, then it's like, okay, well, what are the payments going to be? And what is that ROI going to calculate to? And now that gives me a number of what, how much I can go pay a private money person for. You know what I mean?

So that's how I do it. If they wanted a big, giant chunk of money down, then my payments are going to be really small and drawn out.

Seth: Sure.

Matt: And it's like, well, if that's too small, well, I'd be happy to raise them up for you, but what can you do for me on the down payment? And so it would just be like this little seesaw balancing act until we met someplace where it was a good deal for both of us.

Seth: Of all of these people that you've talked to with seller financing, I mean, obviously it sounds like it's worked out plenty of times, but what percentage of the time is it just like, no, we're not doing seller financing versus, yeah, we'll consider that.

Matt: I wish I was tracking that. I've gotten to the point where I just don't pay attention to the no's. I'm just looking for the yes-es. Most people don't like the payments idea. I just don't have a number. I mean, it's obviously just buying properties at a discount, period. Or it’s going to be a low number, right? I mean, one out of 10, you are knocking it out of the park.

Seth: The reason I asked that percentage of people to say yes to that is because I've heard people say that when they're trying to go down this self-financing path, it's usually like 20% to 25% of people will say yes, and the rest are just no. But that probably has a lot to do with other factors too. Like how well they're explaining it and how flexible they're willing to be on the terms and all this stuff. So I was just curious if you had any wild guess.

Matt: I would imagine my conversion rate is better than most just because I break it down. Like I don't say, well, how about you carry back the financing for me? Or I want you to do a seller carryback, or why don't I take over your payment subject too?

But I'll just say, hey, how much money do you need right now? Great, then I'll give you the rest later. Is that okay? So I remove all the jargon from it. So it is easy to understand.

So I think my conversion rate is probably better than most.

Seth: Yeah, that's actually huge. Being able to speak it in ways that are easy for an eighth grader to understand. There's a lot of people that can't do that. I feel like the smarter you get, the harder it is for people to be relatable like that.

I was just talking to somebody yesterday who was going on and on about all this stuff. I just didn't understand what he was talking about and it really hurt our communication. I feel very disconnected from what he was trying to explain to me. So yeah, it's a good, good point.

Matt: It's so true. I mean, and I've gone through where I didn't know anything and I was successful. And then I started to know a little bit of something and started to feel like I might have been a little too big for my britches and would get in my own way. And then I had to just dumb myself down again.

And, you know, when I have clients come through now with our program, they're all nervous and scared. And I said, good, don't let that go. Hold on to that for as long as you possibly can, because it's when you're the least threatening when you're the most dangerous. And so I've learned to actually play that role now.

Seth: Interesting. So of those three, seller financing, subject to, and private money, is your preference to go with seller financing?

Matt: Seller financing is always the preferred option for deals.

Seth: Like if you could always have your pick, is that what you would go with?

Matt: Always, always. As long as it cash flows and it produces an ROI, I'd rather do that every single time. I mean, I wish I would have gotten a few more loans when the rates were down at 2.5%, 3%. I wouldn't mind some more of those. But yeah, the seller financing is always the way to go for me

Seth: Yeah. So did you always stick to residential units or did you ever do anything else or how'd that go?

Matt: I dabbled in three different apartment buildings in Memphis and I screwed all three of those up.

Seth: What went wrong?

Matt: I got them really, really cheap. They needed a lot of rehab and managing a big rehab from Los Angeles and going halfway across the country to Memphis. I just couldn't keep my eye on the prize, you know what I mean? So I delegated too much. Didn't even delegate. I abdicated.

I said, here's the money, go fix it. And then I just trusted that it would get done. And it didn't. And so I would never do that again. But I did it three times, like all within the same year. And I said, okay, let's stop doing that.

Seth: Of those houses that you bought with seller financing, you're subject to private money. Were these ever requiring like full rehabs where you had to get a general contractor and fix the whole thing up because it was a piece of junk? Or were they just kind of ready to go where they didn't take a lot of work?

Matt: Both, but mostly needed rehab.

Seth: Okay.

Matt: Most of the time, if it needed too much rehab, it turned into a wholesale flip for me. So my intent was always to hold the property until I decided that I didn't want to. And usually one of the deciding factors is if it needed too much rehab.

Seth: And one more question about that seller financing. So under what conditions, if you got down that track of the seller seriously considering this, under what conditions would you say, no, like this isn't going to work? Is it just if it didn't cashflow, or was there like a minimum amount of cashflow you needed? Or like, if they wanted a balloon in three years, was that a deal killer? What did the box have to look like for it to work?

Matt: First and foremost, it had to cash flow. That was a must. If I'm not making a giant equity position or if I'm not making a stream of income, it's not a deal for me. So that's the first thing.

Second thing, if I'm going to hold on to it, then I have to have property management in the area that can get the property to perform. That's going to be more vital to your success than anything else, in my opinion, is having good property management that can screen tenants and can collect money and keep the maintenance down low and all that.

So that was always those two things—you know, those were the deal breakers.

Now, when it goes from there, it's a give and take on what the equity position is and what the cash flow position is.

Here's a good example. I mean, I'm always looking for the cash flow, right? But when I moved here to Vegas, I got a couple properties here that don't really cash flow at all. But they are the nicest properties in my portfolio.

And from what I've learned over the years in managing property managers that are managing my properties is that sometimes the nicer houses with the lower ROI are a better experience than when you go into a lower income area that has an amazing ROI. At the end of the day, what actually performs in real life is typically the nicer properties.

So I made that shift about four or five years ago and started really just focusing on much nicer properties and okay, like I don't need the cashflow to live. So cashflow hasn't been that much of a focus, although it's important. I don't want to carry a bunch of negative stuff, but that's just kind of an example of that.

There's so many variables and there's kind of a wide spectrum and it kind of depends on what does the deal present. And then second thing is what do you actually need at that time? Do I need cash to replenish my marketing budget or make payroll or am I cool there? And I can just keep adding to my portfolio and adding cash flow.

Seth: Another question I had was on the cash flow piece. Was there any kind of ratio either back then or now with the nicer properties you have where it's like, if I've got this much equity tied up in it, it needs to make this much per month in cash flow?

Like if you've got a million dollar property making you 25 bucks a month, I'm assuming that's probably the juice isn't worth the squeeze. So like, is there a minimum threshold?

Matt: I didn't have a strict box, no. But kind of what I would go for if I could get somewhere between a 10% and 15% cash-on-cash return, then I knew I could borrow the down payment and pay somewhere between six and eight and create an infinite return. So that was kind of like my minimum income.

Even though it wasn't written down anywhere that in my mindset, I was like, gosh, if I can get between 10% and 15% cash-on-cash, then I know I can pay somewhere between 6% and 8% for the private money and my private money pool would be more than happy with that. Because I only need 10 grand here and 50 grand there for those down payments.

Seth: Yeah. It sounds like you're clearly not afraid of hard work. Trying to think of, why do you think you were able to do so well and continue to do so well and all the different things?

I mean, you've succeeded in multiple domains, you know, the music business, real estate, education. Like, why is that? Why doesn't everybody succeed like this, like you do? Is it because you're not afraid to get on the phone and just talk to people and wheel and deal and negotiate, whereas other people might be scared or timid or shy? What do you think your unfair advantage is?

Matt: I think I'm very clear. I don't want to struggle, right? I don't want to just get by. I don't want to be mediocre. So that's inside of me. So I want more than average, first.

And I think second is if I don't go get it, who else will? I think those are probably the two things. Like no one's going to do it for me. And apparently today that does make me a little bit of an anomaly.

It seems like you pay attention to social media and you start reading the comments underneath. It's just like, wow. You know, one of the big comments that I heard, things I see all the time and hear all the time is when I talk about rental property and people say, yeah, but then you got to deal with tenants.

I was like, okay, so here's the trade off. I can spend four hours a month managing my property managers and deal with a bad tenant every once in a while. Or I can report to a boss for the next 40 years. You're telling me that sounds better? Because I feel that mindset a lot out there. Like that's the trade-off. Like you're going to say, no, real estate sucks. You're a loser and you're a con man and blah, blah, blah. And you're an idiot and you're irresponsible. And how dare you teach this to people? Because everyone's going to lose.

I'm just like, wow, is that really, that's really what people's mindset is when it comes to income property. They think they're going to mess up with every single tenant's going to be terrible for them.

And then they think, oh, there's the other one. If the water heater goes out, there goes your whole years of cash flow. Like I hear that all the time. And that's a reason not to do it. I was like, yeah, but I got the appreciation. I got the depreciation. And the tenant is still buying the property for me. And then whatever improvements go on, I just adjust my cost basis.

And it's beautiful. There's no other investment class that allows you to do all this stuff. And people hear just one thing and they're like, oh, no. And they walk away with the wrong lesson. And that's a shame.

Seth: Yeah, that is a shame. Well, I'm actually curious. So when you rewind the clock from when you're 34 and you're bagging groceries, to then you make this decision, you get your education, you start going down the real estate track as an investor, not just an agent. So how long did it take you from the day you started doing that to the point where you had more than enough properties to give you the cash flow to give you a much better life? I get that's kind of an open-ended question.

Matt: No, it's fine. Just under four years, about three and a half years.

Seth: Okay. So I guess you were working as an agent as you were buying these properties and building up that cash flow?

Matt: No, those two things did not run parallel for more than six months. So I was exclusively an agent, did not own anything. And then I made the transition. I started owning and I stopped being an agent altogether.

Seth: Okay. So during that runway up to that four-year period, were you still bagging groceries to live off of that? Or how were you supporting yourself?

Matt: Kind of what I said. I did the marketing. I did almost all networking, though. I mean, it was almost all face-to-face. And I mean, I didn't know people would respond to postcards back then. I thought that was ridiculous. Who would send that trash?

God, if I only knew then what I know now, I would have sent twice. I would have gone overboard on postcards back then. I had no idea they were working so well. But my intent was always to hold the property. But I ended up flipping a lot.

Seth: Oh, I see.

Matt: Did you know Matt Owens over at Owens Capital Group?

Seth: I don't think I do.

Matt: He's in Redondo Beach. And he had a big turnkey operation before I even knew what turnkey was. And I would go out to all the REIA groups. I would go to the Chamber of Commerce and all the little networking parties and I would sell his properties for him.

I got by doing that and he paid me 3,500 bucks for every turnkey property. And so I just went out and looked for busy professionals and brought them to his doorstep and I got commissions for that. So that paid a lot of bills for a long time.

Seth: So you got up to 300 units at some point, and then did you you decide to like start selling those off? And at what point did you decide, Hey, I should get into the education part of this business and do that. What made you realize early on that you'd be good at that?

Matt: All right. So that's a good question. I had no intention of ever becoming an educator in the beginning. I went to a rah-rah seminar. I was in one of those little pyramid multi-level marketing things for men.

And they were just like, well, loaded you up with all the personal development stuff. And they'd always have speakers. And there was one guy there. And this is right when I was just getting started in real estate.

And he said, you know, the wealthiest people in the world, they have one thing in common. How they make all their money is they get really good at something and then create multiple streams of income from that one thing that they're really good at.

And he says, most of the time, it ends up as being a consultant, a teacher, a tutor, or something like that. And so I heard that. Oh, okay. Well, maybe I'll teach one day. Let me get some more transactions under my belt. Maybe that's a possibility.

And I've always been the perennial opportunity seeker. And I got invited to this one thing. And this was when I was brand new. The internet was brand new. And someone went to this little workshop on membership websites. I was so blown away because I was receiving passive income from real estate. And now I want to diversify and get passive income from another source.

And so now I kind of put those two things together and went, well, maybe I could put some little videos together, put them inside this membership website, have another stream of passive income. So that's how it really started; it was the desire for another stream of passive income.

So we did that. And, you know, I sold it for, I think a hundred bucks a month or something like that. And we had probably a hundred people in there. And so that was kind of like, okay, well, hey, that's money. I don't really have to work on it. It's all automated, they can watch the videos.

And one day I walked into the house and Mercedes said, hey, I got you a coaching client. I was like, what's a coaching client? What do I have to do? And I said, I don't want to do that. I just want this passive income thing. I don't want to talk to people. I just want this to be this passive thing.

She said, well, he's already wired the money, so you've got to do it.

And so that was kind of where it started and he turned out to be wildly successful, that very first client. And I think I got kind of hooked on living vicariously through him and recognizing something I knew had value to other people besides myself.

And then we put out and sent out a little email, hey, who else wants to do this? And gosh, that was when you could send out an email and he had 30 new clients by noon. And that's kind of how it started.

Seth: I'm actually curious, how do you split your time between this education side and then the actual transacting of real estate deals yourself? I know this is something everybody who's a real estate investor and teaches about that has to figure out how to balance.

Is there some kind of organized structure where it's like, okay, I'm going to spend this day doing this and these other days doing this, or does it just kind of change from week to week? How do you make that happen?

Matt: Yeah, that was a big, big problem in the beginning because I would sell this thing that was like for 12 weeks, an hour of a phone call a week for 12 weeks. And then guess what happens when you get to 40 clients. Like that's all you do all day long and there is no time for anything else. I was like, okay, this is insanity.

I remember the year, it was 2014 or 2015. I would give all that money back to have that year back because all I did was stay on the phone for these little consultations. But what I did is I moved everything to a group structure. And so on Thursdays, there's a group call.

So it originally started off, I just work an hour a week now and service the same people and get the same results. And then I gave them access to me via the free app on your phone, Voxer. If they had deals to look at and they needed explaining of complex things, then they would come to the group call and I would do it then.

But if they had a quick question or two that I could just answer really quickly and get them going again, then that's what they would use Voxer for.

And that changed everything. All of a sudden, it became almost a lifestyle business. And now I had six and a half days a week now open to continue my real estate investing.

Seth: That's a great idea. Yeah, it makes sense to batch things like that. Is that still how it works today, that kind of group format?

Matt: Yeah. I mean, Thursdays are dedicated to my coaching. So there's like a few calls now that I do on Thursdays, depending on what experience level that the student is in. And then, yeah, the other six days are freed open for me to take the real estate calls.

Seth: Do people ever give you crap about being an educator at all? Like if you can really do this…

Matt: I’m just gonna say yes, I don't know what people give me crap all the time.

Seth: I mean, is that like a thing that you ever encounter?

Matt: The new word I keep hearing is grifter. Go ahead.

Seth: I mean, is that a thing you ever encounter where people like almost looked at you with a skeptical eye? Like, OK, how are you trying to scam me or something? You're not real because you're teaching stuff instead of doing it. Or is that a you ever deal with that or not really?

Matt: Yeah, it comes up particularly in the comments. Right. I do remember the day where someone said just another stinking guru. And I was like, guru? Is that what I am? Like, all of a sudden, it was like the first time anyone ever called me a guru.

And I was like, oh, wow, that's weird. I didn't know I was a guru. I thought I was just kind of, you know, helping people and being a facilitator of this online education. I didn't realize I was a guru.

But you get that. But weirdly, I've had people come through here. And after we've had some time together, I said, you know, Matt, I'm glad I came here and I'm glad I chose you. But, you know, I was actually more skeptical that I couldn't find anything negative about you on the iternet. I would rather have found something, maybe one or two people that kind of had an issue.

And so I've had it both ways, you know, to where people, they have negative things to say and there's nothing negative about me that has been said. Who knows?

Seth: Yeah.

Matt: If that's who they are, then they're just not the right fit to work together.

Seth: Sure. Yeah, I was listening to this interview between Jordan Peterson and Oliver Anthony. You know who he is, Oliver Anthony?

Matt: Oh, he's the singer guy, the country guy, right?

Seth: Yeah, he kind of just came out of nowhere. Yeah, so he put a video on YouTube and it blew up. Now he's got all these opportunities coming his way.

And as Jordan Peterson was interviewing Oliver Anthony, Oliver was saying like, yeah, I don't really want to sell out or I don't want to just sign this huge record deal. Almost like it was a questionably immoral judgment to do that, to just take a bunch of money and do that.

But Jordan Peterson had some kind of interesting thoughts on that. He was saying, you know, a lot of people who criticize others for selling out are people who have never really had the opportunity to sell out because they don't really have the opportunity. So they kind of look down on other people who do.

And also like, if you do take those opportunities to get more exposure, spread your message, and seen by more people, inevitably, you're going to get a lot more feedback, which is going to give you more information on how you can be doing things different and better as opposed to just working in a silo and just putting your head down and doing your own thing.

So there's actually a lot of upside to getting bigger, so to speak. And I know it's not necessarily this evil move or selfish move to do that, even though there might be obviously self-interest in that. There's a lot of good things that can come from leveraging the internet and getting your message out there.

So i thought that was interesting.

Matt: That's a pretty common viewpoint, I'm not surprised Oliver Anthony had that position. That's a pretty common viewpoint inside the music industry, because it's such an artsy thing that people feel once you do it for money you lose your your edge, you lose the artistic aspect of it. So I had that, I experienced that all the time in the music business. It was tough to work with people that weren't motivated by money. It's like you're a brilliant artist, I want you to be on my label. What do I got to do to to lure you over here so I can work with you?

And I think there's a lot of me that way as well early on. But I think the older you get, you realize how society works, you know, and the way that money serves our society. There's nothing that replaces it the way that it serves us. It puts food in our stomach. It puts the roof over our head, the clothes on our back. It pays the hospital bills. And it allows us to do all of those things for the people that we love. And if you don't have money, you can't do that.

So I think the older I get, the more I think you have an obligation to make as much money as you possibly can. If you want to really live a fulfilling life in a society that we live on this planet, because that's just how society works and you don't need money to be happy for sure. Like I've never wanted to debate people on that because that's kind of silly debate in my opinion, but boy, life is a whole lot better when you got it. I'd rather be sad with money than sad without it.

Seth: Yeah. No, I hear you. I'm with you. So you were talking earlier about, you wish you knew that like postcards worked as well as they did and that kind of thing. Maybe, I wonder, when you think of all the stuff you've learned in all the businesses you've taken part in, is there a most important lesson you've learned that you wish you knew when you started that you know now?

Matt: Gosh, there's a few of them, but the one thing that comes to mind right away, and I was just at a Christmas party. And they asked like if you could go back and tell your younger self—one of the questions, the table topics, that they surrounded on the table was—if you go back and give one piece of advice to your younger self what would it be?

And immediately it came to me was don't be afraid of the zeros. Meaning, it takes no more work to flip a hundred-thousand dollar house than it does a million-dollar house.

And in the beginning, being from Los Angeles and, you know, I think the median price in Los Angeles at that time was $350,000, $400,000, something like that. But when I made my first trip to Memphis and saw that houses were 50 grand, I got so excited and my confidence just went through the roof. And that's when I really started to succeed.

But looking back, I could have done the exact same thing in Los Angeles with the exact same work, the exact same processes, the exact same steps, the exact same conversations, everything, and made 10 times the money.

So I would go back in and that would be one thing. One lesson was like, just don't be afraid of the zeros. That's because as a big thing, a big number attached to it doesn't make it more difficult or scarier.

Seth: Why do you think we are more afraid of the zeros? Like, I think I am to some extent. And you're right. I mean, I don't know why. It doesn't make a logical sense. I don't know if I'm thinking somehow there's a bigger consequence if I screw this up versus a small deal when, either way, I'd be kind of screwed. So I don't know. But what do you think is going on with people's heads?

Matt: There's one paradigm shift that I had that really kind of changed everything for me. And it just removed that fear altogether. In fact, it almost reversed it. It’s when you don't have any money, you think that's the hard part, right? You think, like, I got to want to put an offer on a million-dollar house, where would I possibly get that money?

Even if they said, here's a 5% down payment and I still need 50 grand to make that happen, right? So that will hold a lot of people back from even writing an offer, let alone getting into the deal.

But the operative word being “deal,” if that 50 grand down is going to produce 100 grand profit, then you must put it under contract or else that 100 grand profit won't be yours.

And it's not difficult. Like an example I always use when I'm speaking to a group live is that “I have a dollar in my hand. Give me 50 cents and I'll give you the dollar.” That would be no problem for everyone to do. People do that trade all day long. Right? And so that kind of connects. So that's how you kind of look at a deal is that I have 50 cents that's worth a dollar to somebody.

And if you have that, then you want to get as much control as many of those as possible. And the same thing will go is like I have a hundred dollar bill, do you have 50 bucks, so that you'll trade me for it. Now we just added some more zeros to that and the answer is still a resounding hell yeah. And if it was a million bucks and do you have 500,000 for it, it'll be like, no, but I’m gonna go find it because that's a quick half a million dollars I could make right now. So that was a huge paradigm shift that has me no longer afraid of the zeros.

Then also, when you start playing that way, you start to recognize, wow, it's actually a lot easier to raise a couple million bucks than it is 50,000. If the exchange is there, right, if the dynamic of the deal is still there, it's much easier to find that money because for $50,000, someone's going to get 10% on that in return. And they're like, eh, that's like no money. It's probably even worth writing up the paperwork and signing the docs.

But hey, if I could put a million bucks out there and I can get 10% on it, then now you capture actually not necessarily more people's attention, but you get more serious attention and consideration from the people you do share it with.

Seth: Oh, that's a great illustration. I love that.

It sounds like things have gone resoundingly well for you as a real estate investor. Have things ever not gone well? Like have you had any horror stories or deals that fell apart or things gone really, really bad or anything like that?

Matt: Well, all of my multifamily ventures have really gone bad and I tried to do them from afar and they were major. I just bit off more than I could chew. They were big projects.

Seth: Does that mean like you lost money on them or something, or it was just a waste of time or how'd they go bad?

Matt: The one I got out by the skin of my teeth and broke even and was able to get all of my investors their money back. And I actually had to sell that with seller financing just to, so I could at least get my price. So that was okay.

Another one, yeah, I probably lost about 50 grand of my own money. But then there's another at the same time, and these three all happened relatively in the same time in relatively the same area.

Then there was another thing. I just bought this building. It's 50 doors and it's just a brick building and they were all gutted. Like every single unit had to be redone. And I got that for $1,000 a door. And I was like, well, hell yeah, just take it. We'll figure out what to do with it later. And I held onto that for a year and just paid the property tax.

And I'm finally just like, you know what? I'm never going to get to this. And now I've got these open wounds from these last two multifamilies. And I sold that one for $2,000 a door.

So that was actually a great day. But I haven't ventured back into multifamily since. But those were my disasters. And I'll do it again. But now that I'm local here in Vegas, I just told Mercedes last night, I was like, I want to get a multiunit here. We've got to start looking for multiunits here.

Seth: Cool.I mean, you got into buying houses. It was pre-2008, right?

Matt: It was right at 2008, 2007. I got the bug in 2006 when prices and the market were really flourishing. And then that's kind of when I was getting trained and educated.

Matt: Okay. And fortunately, I didn't lose a whole bunch of money like everybody else did around me. And so when the prices came down, now I was armed and ready to go.

Seth: I mean, if you were trying to do that exact same thing, buying those first 300 units or however many you got in those four years, do you think that'd be a lot harder to do right now in this environment in terms of getting people to do seller financing or getting lower prices and that kind of thing? How much of that success do you think was tied to just the time of which you were doing it?

Matt: Well, there was a lot more desperation. So if there's a lot more distress in the market, that makes it a little easier. And the other big difference from then between now is there are just a lot more houses than there were people. So that made it easier.

But, you know, life comes along and kicks everybody in the teeth every once in a while. And it doesn't matter where they're from or what demographic or how much they make a year. So us as real estate investors that exchange equity for peace of mind, there's people every single day that need peace of mind. And they're going to turn to their property for that financial relief and they need it fast and a real estate agent can't handle it. And so I don't think it's remarkably different or more difficult.

Seth: We talked a little bit about some of the harder deals you've done where you didn't come out ahead necessarily. Are there any astoundingly amazing deals that were just grand slams? What do those look like?

Matt: I think my grand slams came at the beginning of COVID, when everyone was kind of like, I mean, the very, very beginning when everyone was kind of panicking, they thought the economy was going to collapse and everyone was predicting the real estate market was going to crash.

And I was able to scoop up quite a bit of properties from people who had just bought turnkeys. I've got all of those with just seller financing. People just want to be out of it. And then we know what happened over the next two or three years as they all doubled and tripled in price in some places.

So that was a whole slew of grand slams just at the time where I was, I just want more cash flow. And if I'm going to get it with seller financing, I don't have to put a bunch of money down and I don't have to get a bank finance. I was like, I'll take them all. Yeah, let's go. This ain't going to last forever.

And so those were my, those were my really, really big wins. Otherwise everything has just been, you know, nice little single-family purchases.

Seth: Yeah. It's interesting. I kind of see with high interest rates, certain sectors of the real estate market slowing down a lot. And I just get excited when I see that stuff.

Are you kind of like that too? Like if people are freaked out, like it was three months after the pandemic hit, when it was like a huge depression for a really short period of time. I mean, that was a cause to get excited. There were tons of of opportunity there.

But it just makes me wonder, is there ever a time when it's appropriate to be scared? Like, oh, things are getting a little too crazy. Watch out.

Matt: Well, I think to justify it, to be really scared, we need a crystal ball because we don't really know what's going to happen next. If you look at right now and I get a lot of disagreement with this, but here's my theory about right now.

There's several dynamics at play that were different from 2008. And everyone says, oh, it's going to be 2008. It's a cycle. It's going to happen all over again.

I was like, well, if it does happen, it's not going to be for the same reason. And it's not going to be for a reason that we've ever experienced before, because the supply and demand has gone to such an imbalance that there's more people at home buying age. Like the millennials are now intersecting with the first time home buyer age. We have more demand for housing than any time in the history of this country. And we're also coming off of a 10-year deficit in building, so right there prices can only go one direction.

The second thing would be the interest rates obviously affect affordability and how available money is, but the prices keep going up. So although a lot of people are hurting, there's a lot of people that are still doing just fine and buying what's left because the inventory is so low.

I think now after the Fed's last little signal and they did not raise rates and then they suggested that they're going to lower them two times in 2024. And just based off of that news, we've seen the biggest decline in mortgage rates in a four-week period than we've seen since 2000, whatever. It's like the fastest drop in 20 years.

And so rates have already come down almost a full point than they were just five weeks ago. And if that's just before they even brought the rates back, so the Fed brings those rates down again, we hit 6.5%, 6%, I think a new bottom has been established and you'll see a bunch more people just because there are that many people to to dive right back in.

And I think that's going to happen in the spring. It's an election year. And the current administration doesn't want to sit there and debate and have to defend their position on the economy if the economy is going good. So I think they're going to do whatever they can to boost the economy.

And I think at that time, because of the supply and demand imbalance, right now, houses are probably as cheap as they're going to be for a very, very long time.

Seth: Well, given that and the whole crystal ball thing, are there any particular pockets of opportunity you think exists right now, just given where things are at?

Matt: I think the pocket of opportunity exists with single-family homes. If you look at Blackrock, it’s on track to own 60% of all single-family homes by 2030. Blackstone just raised, I think it's $40 billion, might be $30 billion, whichever. It doesn't really matter. I guess every billion is just another billion. But they just raised that to compete with Blackrock.

Weirdly that there are ones named Blackrock and ones named Blackstone, but they just did that. And then just two weeks ago, there's a giant press release from Jeff Bezos. Just came out of retirement and started a single-family fund.

Seth: Oh, really? I didn't hear about that.

Matt: So the race is on for single families right now. And I think, you know, as the expression goes, a rising tide lifts all boats.

The opportunity is to own or control as many single families as you possibly can right now. Because over the next few years, if all of those are institutionally owned, those that are privately owned are going to be at a premium.

That's kind of where I think the opportunity is right now.

Seth: Interesting. No, I hadn't even heard about that. I don't really follow the single-family home space that much, which is weird for a real estate investing person, but that's just not my area of focus.

So it's a good lesson in how to stay ahead of things, depending on whatever your strategy or your niche is. Information is powerful. Just being aware of that stuff and what's going on, that can educate your moves in a lot of ways.

Matt: Yep. I mean, do you remember the name Lee? Lee Iacocca?

Seth: Oh, yeah. Was he with Chrysler or something?

Matt: Yeah, he's the one who went in and saved Chrysler. And all he did was look at this type of information and look at demographics and look at where the population is aging. And he just based it off the Baby Boomers.

And when he did that, the Baby Boomers were starting their families. And he's like, okay, so what does this massive portion of our population, what do they need? Well, they need something to transport their families. And he essentially invented the minivan. And so he made that whole decision and it turned out to be a genius move and it brought Chrysler back to life just based off of looking at demographics.

And if you go back and the baby boomers had the same impact on when they were teenagers on Levi Strauss and on the Mustang, and then they had the same impact on Gerber baby food when they were born.

And so we've already seen that happen. And now we have this other bigger bubble, bigger population in a shorter timeframe that were born, being the millennials. They're going to go through and have all the same impact on all the same industries that the Baby Boomers did.

And one of those industries is housing. And right now they've just reached home buying age.

And there was just an article, I think it was in Business Insider last week, because the conception was millennials don't really want to be owners. They just want to rent. They want to be mobile. They want to be loose. And so they've kind of hit the home buying age a little later later because they have totally flipped.

Bank of America just did a whole new poll, new survey on it. And I was like, 70% of all millennials think that's their only chance to ever be wealthy is by buying real estate, but they're scared to death that they're not going to be able to. So I think when these rates come down, there's going to be a frenzy for them to try and get theirs.

Seth: Now that whole thing about Lee Iacocca and just like understanding the general populace and what they may or may not need. Like, how do you do that with confidence? Like what if you made the minivan and it just didn't work? What if that was just a miss, a misunderstanding?

I mean, I feel like we all look at him like a genius because it worked out, but I don't know. What if you made some other kind of weird car that people didn't buy? It's obvious in hindsight, you know?

Matt: Yep. But I mean, it's kind of like when you look at a human's basic needs, if you invest in a human's basic needs, a human's desire for water and food is not going to go away. So that could be a good investment. And the same thing with shelter, unless, you know, just kind of sleeping under the stars actually comes into fashion. And that's never been a thing. We've always had a roof over our heads.

If you're going to make a prediction, I think that's probably the safest prediction you could make. And if you look at Baby Boomers now, they're having a big impact on health care and retirement homes and vacations. And because now they're at an age where that's what they need. And they're having that big an impact on that whole industry. And this is going to happen all over again.

Seth: Have you seen the stuff about how birth rates are plummeting in most first world countries?

Matt: Yep.

Seth: So do you think that plays any role in this? Like, I've even thought about this with self-storage. Like, so it's going great today. But what if the population drops and a bunch of people just don't need storage anymore or whatever it is? I think the U S is in a better position because a lot of people want to emigrate here, which can make up for that loss.

But do you think that has anything, or worth looking at that in any way for the future?

Matt: I mean, I'm going to say absolutely yes. But there is a caveat that I have for it is there is enough people that have already been born to support the housing industry for at least the next 10 years, right? For at least that, probably well into the 20 years. And that's if we didn't add any more people.

But the Census Bureau came out with their report showing that we're having a million new immigrants a year, as you just mentioned. So there's a million new people. And that brings our birth rate slightly above the replenishment value. Forget what the number, I think it's like 1.8 babies average per family to maintain. But with the immigration, integration, it puts us at 1.9 and a half or something, just slightly over.

So as long as that policy remains in place, then I think real estate in any capacity is probably job security for quite a while.

Seth: how do you know all this stuff? Is it like a website you're going to, where it's like, hey tell me stuff I didn't know as a real estate investor? Is it like a ChatGPT thing or how do you stay on top of all these stats?

Matt: It's probably mostly because of the YouTube channel. I got to keep making stuff that's relevant. So I got a bunch of Google news alerts on and I'm always reading and like, what's the interesting thing to talk about today? And so I learned a lot, just kind of de facto being a content creator.

Seth: Well, when you and I were talking earlier this week, we were talking a little bit about AI. What role do you think AI is going to play in the lives of real estate investors in the years to come? Like, do you think it's going to cause a cataclysmic shift in anything or is it just kind of a fun little thing that's going to be around?

Matt: Well, fortunately… Each little AI bot out there doesn't need a house to own, right? So it's this intelligence that doesn't need shelter.

Gosh, you know what? I don't even know if I can make a prediction because it looks like all the experts that were creating AI predicted incorrectly. Have you heard that?

Seth: What were they predicting that wasn't right?

Matt: Well, they were predicting that AI was going to gobble up all the low-paying, menial jobs first. And they thought when it gets to more creative stuff and the stuff where you really need critical thinking and like that, that's probably going to be last in the food chain for AI to go ahead and take over.

But it actually started the exact opposite. It started taking over art. It started taking over music. It started taking over all the critical thing in writing and stuff like that. And, you know, the assembly job, assembly line jobs that we thought was going to take over, those seem to be all be pretty safe right now.

I use AI, like I use the ChatGPT thing almost every single day, probably for 40% of my day. I'm on it because it's so helpful and I'm so much more productive. But where their ideas of that advancement is going, I don't know.

I just saw this reel on the hologram. So they've had these holograms that they could actually literally, you would mistake them for people and they could cast them out anywhere. They've had that for years. The CIA has had this for years. And I don't know if this is true because it was on a reel, but they're pretty good at faking that stuff. But I was just blown away on that technology. And like TVs are just going to go away. Everything's just going to be a hologram show that sits on your desk. And if you don't like it there, you can pick it up and put it over here. And so wait until we have this little hologram sitting on our desk and there's AI attached to it.

Like, I guess, that could be the future, but I don't know what their capabilities are.

Seth: Have you used the ChatGPT Plus app, like the voice thing where you can have a verbal conversation with it?

Matt: I have not. No.

Seth: Dude, you have got to try it. It's nuts.

Matt: Is that on the App Store?

Seth: Yeah. So if you got ChatGPT Plus, do you have that?

Matt: I do, yeah.

Seth: So if you get the app from the App Store and just download the thing and sign in. So right down where you would normally type out your prompt, there's a little set of headphones. And you tap that and you can just start talking to it.

And, um, the voice that comes back to you is stunningly real. It's crazy. It's like, it has like breaths and it says like, um, and like, and he says things that a person would say. And it's like the most realistic thing I've ever heard. And I've heard from people who are using this to practice their calls with motivated sellers. Like they tell ChatGPT to pretend to be a motivated seller and ask challenging questions back.

And I tried this the other day and it was weird. I almost was like getting nervous talking to this chat bot. It's like, you know, starting to sweat a little bit. I was like, wait a minute. This is just a machine. It's okay. Relax, Seth.

But if you're somebody who is a verbal auditory processor and you like to just talk your thoughts instead of writing them out, it's gold. It's an amazing resource.

Matt: I have the app down on my phone. I don't even play though with the voice commands on my phone either though.

Seth: So I don't usually do it either. Like I actually prefer to type stuff out cause I can say what I actually mean. I just think better that way. But yeah, there's a lot of times, especially if you're like driving or something and you just, you just want to be able to talk it out with somebody and it's really good at that.

Matt: No. Interesting. I'm going to check that out.

Seth: Yeah. Well, it's made me think, I mean, if it can talk that real to me and make me feel like I'm talking to a real person, imagine what that means for phone calls and call centers. And I mean, any kind of customer service where people need human contact. I mean, it's not that big of a stretch for this to replace that now, or even like texting and chat bots and all this stuff. Like, I know that stuff exists already, but I feel like that's going to take huge leaps forward.

Matt: Well, I mean, just at the Google conference four years ago, there's a YouTube video. I remember AI calling up and making an appointment for a hairdresser, right? And it had the little breaths. It had a little chuckle. Ha ha, that was a good one or something like that. And so that was four years ago.

So yeah, I mean, I'm sure it's already here. We just don't know which app it exists in at the moment.

Seth: So is there anything you still want to do in your real estate investing career that you haven't done yet? Like do you have any big audacious goals where it's like, yeah, I got to do that, but you haven't been there yet?

Matt: I want more houses. The pandemic wasn't great for my education business. And when you're a live event business and they shut down live events, it kind of kills the business model. And so I sold a lot of my real estate, a lot of units to keep that whole education platform running.

I guess the biggest thing is for me to replenish everything that I sold. And it's focus number one at the moment over the next three or four months, because I think as soon as the rates go down, the prices are going to go up and it's going to be even more difficult to find.

Seth: When you're out finding new houses to buy these days, I don't know how much you're actually buying houses right now, but are you using direct mail? What's your way to find those deals?

Matt: I just released a video on exactly how I'm doing this.

Seth: Oh, cool.

Matt: So it’s on YouTube on the channel.

Seth: I'll find that and I'll link to it and I'll put it in the show notes.

Matt: Okay, cool. First, you have to know, yeah it is direct mail, but it's a very different type of direct mail. And a lot of people don't think direct mail is working and the reason it's not working is because you have thousands, hundreds of thousands of people sending the same direct mail pieces to the same people. And I've been in the appointments and I've seen stacks of postcards on people's desks, like all the letters and correspondence they've received from investors that are trying to get a deal.

And so what's required is first, you got to know who you're looking at or looking to. The second thing is how you got to personalize that communication. You have to get noticed and recognized in that person's mailbox above and beyond what everyone else is selling.

So rather than sending the same thing everybody's sending, you have to send something that nobody is sending.

And so I've gone to a few different direct mail houses that aren't real estate mail houses. And, you know, they send things in bulk that look like birthday cards and special packages and stuff like this and other direct mail stuff, but not necessarily real estate-related. Sure, it costs more, but I don't have to send out as much because it gets recognized, it gets noticed.

And then the message within, this is where I've been using ChatGPT to death because I've got this long, lengthy prompt of what's the ideal thing to say. And this is, in a nutshell, the ideal thing to say to an out-of-state owner of a vacant house that has a tax lien on it, to create a letter or a sequence of correspondence through different mediums. Creating a campaign, so to speak, that's speaking directly to that person's issue. Like that was the only letter I sent out this month was to this person. And that's the experience that they get.

And so that's working really, really well. And I put the step-by-step process on how how to do that.

Doing that and then also the other part where the stats are, and you've probably seen these stats before, the sales stats. But most sales or deals don't happen until after your fifth contact, right? And then most people will quit after their fourth, which is really remarkable because they're three feet from gold and most people quit.

And so I think with the direct mail, how I generate the interest, that works. But how I actually close the deals is with my follow-up sequence that you have to follow up and you have to leverage as many different types of communication and correspondence as you can for that follow-up. And that's what that whole video entails.

But between those two things is, uh, it's working really well. That's still working for me.

Seth: This is the best real estate lead generation strategy for 2024? Is that the one?

Matt: Yeah, that one. Yes.

Seth: Anybody listening to this, go to retipster.com/178. It's in the show notes and I'll have a link to that video here. Or you can just go to Matt's channel, Epic Real Estate on YouTube, and you'll find it there too. But that sounds awesome.

So it makes me wonder if you're able to send out a lot less mail, let's say I've got a list of, I don't know, 5,000 people and I've established, okay, I only have to send out a thousand now because this is going to work a lot better.

Do you have some logic you go through to figure out, okay, these are the 20% that are the lowest hanging fruit, and these are going to be the easiest ones to get. So I should go to these ones, not those other 4,000. Or is it just pick a random thousand from that 5,000 list and go with that?

Matt: Good question. So there's kind of two ways I go about it.

The first way is I try to stack as many of these distressed factors on top of each other as possible. So as I was just saying, if I'm going to send a letter to an absentee owner of a vacant house that has a tax lien on it, that's like three factors of distress.

They're an absentee owner, which means they might be a frustrated landlord. They have a vacant house that's not producing income. And they have a tax lien on it, which is a symptom of potential financial distress.

So I can do that. And so that would produce a certain size list. And then if I added one more thing, I was like, and also it was showing foreclosure activity. If I add that one more factor, then the list gets dramatically smaller, right? And so by adding those factors, that kind of reduces the size of your mailing list just by doing that.

But once you add too many, I mean, you're starting to get these small little micro lists of 20 houses here and 15 houses there and 30 houses with that one. So that's one way. If you can find the right combination that gives you what your number is according to whatever your monthly budget is going to be.

The second one is I use DealEngineer. It's kind of like PropStream, I guess. It has all the data and everything, but it has the predictive analytics. So it has all the same property data that every other software basically has. They pull in their data feeds and there are these aggregators, right?

So it has all the property data, but with the AI, they've been able to add people's data to it as well. And it does these predictive analytics by researching, you know, 40 years of properties sold off the market. What did the people have in common? Not just what did the properties have in common?

So it'll go deep. It's very intrusive. What magazine were they reading? What were their neighbors doing? And who was their neighbor? What was the school system experiencing at the time? What was the crime rate at the time? So it takes all of these different things. And I think it has their credit reports and everything.

And so it takes all of these information points and it creates a predictive score or a sellability score. And then I use that to sort as well. So I kind of go back and forth and create these different lists.

Seth: You go back and forth between PropStream and DealEngineer. Are those the two websites you're using to do this?

Matt: I use primarily DealEngineer and I use this other thing called Seller Sniper. DealEngineer gives me all the data that PropStream has. So I can reduce my list in one of two ways: by either just the factors and see how many that gives me or I can just use the AI and reduce it that way.

Seth: Does DealEngineer actually generate the lists for you as well or does it just tell you this is what these people look like, these things in common?

Matt: Yeah it'll it can generate the list for you because it has a score between between zero and 1000. So anything above 500 is, is at least two times more likely to sell than the stuff below 500. So there, that'll fix and clear up a whole bunch and clear out all the people that aren't going to sell to you at discount right away, just by doing that single one.

Seth: And how long have you been using DealEngineer? Have you used it long enough to know like, yeah, this works, this gets consistent results?

Matt: I'm going on almost two years now.

Seth: Oh, that sounds pretty sweet. I got to check that out.

Matt: I think they have a land thing thing too. I didn't pay for the land plugin, but they have a land upgrade.

Seth: I'm sure I and many others will check that out.

Matt: I think what really makes the marketing work is not necessarily the list and not necessarily what you're sending, but it's like a combination of all of them. So if you can find somebody that has a problem that would be open to sell in their house to solve that problem. That's first of all.

Second of all is standing out in a sea of marketing messages out there. So you got to stand out. If you make it personal and then if you're consistent and then you follow up, I think they all work if you have those elements in your marketing.

Seth: Yeah, I think I have some trust issues with some of these data services because I know kind of, not entirely, but kind of what goes on under the hood. Like there are some counties out there that are just super rural and remote where like the data just doesn't get updated for years on end or at least every quarter. Like, it's just not current.

Whereas in California, it's about as good as it ever gets. I mean it's like almost perfect data they just do such a good job there. I think that's where it all started. ut you know if you go to some place in Timbuktu or North Minnesota, it's like the the data either isn't there or it's going to be really old and these data services aren't going to tell you that.

So, I don't know, it just bugs me because I see them advertised like, yeah we'll show you delinquent tax data and this and that. But I know they don't actually have that data in a lot of counties. And they're not going to tell me when they don't.

But you work in like Las Vegas and more populated markets, right? So you probably don't run into that too much.

Matt: Yeah. So yeah, you're 100% right. I mean, totally.

And then even the data, even if it is updated, and I learned this as a real estate agent, is that that data is entered by someone that's working at minimum wage and who’s just sitting there watching the clock and can't wait to go home. So mistakes get made and they get made frequently, right? So there's that aspect as well.

But, you know, is it is it better than no data at all? That's kind of the question you can ask yourself.

Seth: Well, especially if you've used it and seen it work repeatedly in a certain market. I think that's all I need to know. I mean, you're golden right there.

Matt: Yeah, it's I mean, it's a better starting point than just, you know, sending a letter to every single house in your city.

Seth: Yeah, absolutely.

Matt: And if you did that, you'd need a pretty large budget. If you had the budget, it probably wouldn't be a bad strategy anyway. But if you don't have an unlimited budget, you've got to reduce it and get your list smaller in some way.

And so we just use the tools that give that to us. I subscribe to probably five different of those services. So they have their little strengths and weaknesses on each one of them.

Seth: Yeah, it's nice to have access to a few of them, especially when you know where certain ones shine because you can kind of pick and choose.

Awesome. Well, Matt, I totally appreciate you taking the time to talk to me today. It's been great having you on to close this out.

I've got a few final questions that don't have so much to do with real estate. It's more just to understand you as a person.

So first question, curious to hear your answer to this, because I don't get the sense that you have a lot of fears, but what is your biggest fear?

Matt: It's so interesting that you just asked me that question because I was asked that question when I was teaching a class, I was representing somebody else at the time.

I wasn't selling anything of my own in 2009 and they had asked me what do I fear, just what you asked me. And it was that it came out so spontaneously, that I won't be able to buy enough.

Seth: Like buy enough houses?

Matt: Yeah I wouldn't be able to buy enough. And I fear that right now.

Seth: What's enough? I mean, it's interesting to hear you say that. I mean, you strike me as somebody who you're not going to go starving anytime soon. I mean, are you afraid you're going to lose the roof over your head? Why is that fear even there?

Matt: Well, I know that the more that I control, the more that'll be there. I mean, the more that I'll gain from it. And I'm concerned a little bit about the value of the dollar and inflation. And if something were to happen to that, you want income-producing assets that represent a human being's essential need, like housing.

So if the dollar collapses, my house is not worth nothing. It might be worth zero dollars, but it'll be worth chickens and eggs and pelts. You know what I mean? Like whatever we're going to use it for currency next.

And if it goes to a digital currency, or if it goes just to a different currency altogether, or if the yuan comes in and all of a sudden that's our currency, whatever it could happen, the real estate is going to maintain value. You are just going to be paid in a different currency.

And so I guess that's maybe a little bit of a doomsday prepping type thing as well.

Seth: Yeah, that's what a lot of fears are, is doomsday stuff. It's not really rational, but we have those fears anyway. I got plenty of myself.

But that makes me wonder, what if you weren't allowed to buy real estate anymore? Like you can invest in anything else, but you can't do real estate. What do you think you would default to?

Matt: I've become pretty good at marketing. So rather than build something new or invest in something new, I think I would become, I don't know, I guess the simplest term is an affiliate marketer.

So that way, I could be very flexible and mobile and could point my marketing machine at whatever the trend was.

Seth: Yeah, you'd be great at that. Totally.

Matt: Yeah, I think I would do that.

Seth: So what are you most proud of?

Matt: I'm most proud of that I've built this platform that my 12-year-old won't have to take the long route to learn everything that I've learned. And I like that. And I've been able to help a lot of people who have been able to piggyback with their kids off of what I've built as well. And, uh, that's pretty awesome.

Seth: Cool, man. Last question here. So suppose you just had a hundred million dollars wired to your bank account. You don't have to worry about money anymore. You're also not allowed to continue on your current career path. So no more real estate, no more education, none of that.

What would you do for the rest of your life?

Matt: You know, I just have to say the first thing that came to mind, because that's what I've always wanted to be since I was a kid, is I always wanted to be a dolphin trainer at SeaWorld. So I think, I know that's a little bit like, a lot more information has come out about the humanity of, or the inhumanity, according to the animals we hold captive at our amusement parks.

But I think it would be some sort of like a marine biologist or researcher or something like that. One of my favorite shows is with Jeremy Wade on the Animal Channel. And just for him to be able to travel the world to these amazing places and go fishing. Something equivalent to that. I don't like to fish too much, but something equivalent to that is probably what I would do.

Seth: It's great, man. So if people want to find out more about you, what's the best place to go? What website or YouTube channel or what should they do?

Matt: Yeah. Epicrealestate.com will lead to everything that we do. So if you can find your way there, then pick your pleasure from there.

Seth: Cool. And I'll include links to that and Matt's YouTube channel and podcast in the show notes. Again, retipster.com/178.

Thanks everybody for listening. And if you're still here, go ahead and text the word FREE, F-R-E-E, to the number 33777. You can stay up to date on all the stuff going on in the REtipster world.

Thanks again for listening. Thanks, Matt. I'll talk to you next time.

Matt: Thanks, Seth.