BiggerPockets Money Podcast - 425: Financially Free in 4 Years by Making One VERY Smart Money Move

Episode Date: June 30, 2023

If you make the right money moves, financial freedom is only a few years away. You can’t spend your entire paycheck on travel, trips, high rent, or entertainment if you want to retire early and have true time freedom. Matt Amabilerealized this earlier than most. At twenty-two years old, Matt wasn’t making much at his job, and living in an expensive area didn’t help. His goal was simple: live for free so he could pocket most of his take-home pay. What happened was even better than he would have expected. With one property purchase, Matt eliminated his rent expense and created a $1,600-a-month passive income stream. This first venture into real estate was challenging, to say the least. From shady contractors to fist fights in a four-unit, a renovation timeline that went much longer than expected, and lockdowns making even simple tasks impossible, Matt hoped the reward was worth the risk on his first property. Spoiler alert: it definitely was. Now, financially free at twenty-six, Matt works when he wants, where he wants, making $6,000 per month in passive income. He did all this in just four years, starting with $10,000, making a median salary. If Matt can do it, with zero experience in real estate investing, what’s stopping you from doing the same? In This Episode We Cover The most underrated real estate strategy that helps you reach financial freedom FAST The 203(k) loan explained and using it to make MASSIVE equity gains on a property Sacrificing luxuries and keeping your expenses low so you can retire early  Real estate partnerships and how to buy properties when you don’t have any money  The “BRRRR on training wheels” that new real estate investors should try Job hopping and how Matt tripled his salary in under five years And So Much More! Links from the Show BiggerPockets Money Facebook Group BiggerPockets Forums Finance Review Guest Onboarding Find Investor-Friendly Lenders Join BiggerPockets for FREE Scott's Instagram Connect with James BiggerPockets Watch James on the “On The Market” YouTube Channel Listen to The “On The Market” Podcast: Spotify, Apple Podcasts, BiggerPockets Grab Scott’s Book, “Set for Life” Listen to All Your Favorite BiggerPockets Podcasts in One Place Apply to Be a Guest on The Money Show Podcast Talent Search! Money Moment Click here to check the full show notes: https://www.biggerpockets.com/blog/money-425   Interested in learning more about today's sponsors or becoming a BiggerPockets partner yourself? Email us: [e-mail] Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast where we interview Matt Amabil and talk about house hacking with a 203K loan and journeying towards FI in your 20s. Hello, hello, hello. My name is Scott Trench. And with me today is my co-host James Dainerd from our sister podcast on the market. James and I are here to make financial independence less scary, less just for somebody else to introduce you to every money story because we truly believe financial freedom is attainable for everyone, no matter where or when you're starting.

Whether you want to retire early and travel the world, go on and make big time investments in assets like real estate or start your own business will help you reach financial goals and get money out of the way so you can launch yourself towards your dreams. All right. We have a new segment of the show called The Money Moments, where we share a money hack, tip, or trick to help you on your financial journey. And today's Money Moment is, if you're thinking about taking a vacation, plan ahead and book your flights at the appropriately timed moments in advance.

So, for example, flights are generally the most inexpensive between four months and three weeks before your departure date. So book in that time period. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your tax refund can make the biggest impact. Because the goal isn't just to look backward. It's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier.

It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves an needle. Achieve your financial goals for good with Monarch, the all-in-one tool.

that makes money management simple. Use the code Pockets at monarch.com for half off your first year. That's 50% off at monarch.com code pockets. I love Matt, said no one ever. Nobody starts a business thinking, you know what would make this more fun? Calculating quarterly estimated taxes. But somehow every small business owner ends up doing it.

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Audible has been a core part of my routine for more than a decade. I started listening years ago to make better use of drive time and workouts, and it stuck. At this point, I've logged over 229 audiobook completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Leaner Stronger for Fitness, The Anxious Generation for Parenting Perspective and several Arthur Brooks' audiobooks that have been excellent for mental well-being. What makes Audible so powerful as its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across business, health, parenting, and more.

All accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at Audible. dot com slash BP money. Matt Amabil is a 20-something year old with a house hack and a rental portfolio. He created a goal to reach $5,000 in mostly passive income so that he could look, travel the world to live life on his terms. Matt has now surpassed that goal and is looking to expand even more. Matt, welcome to the Bigger Pockets Money Podcast. We're so happy to have you. Scott and James, thanks for having me. I'm so happy to be here. Well, Matt, to start, can you tell us a little bit about yourself and your

relationship with money growing up? Yeah. So I would say my big journey starts off in college. But if I jumped it all the way back to when I was like five years old, I saved up around $100 from a lot of money, like $10 from my grandma, $20 from my other grandma. And once I hit $100, I thought $100 was the biggest I could count to. So I thought that that was the most money I would ever get. So from that point, once I found out $100 wasn't the max, I was kind of like obsessed with money. always thought about money. Then we jump all the way forward to college where I was going to be

spending a lot of money to be going to school. Luckily, I ended up getting some financial help, scholarships through academics and was able to go to college for free. I went to community college for two years, got some more academic scholarships to go to Rutgers University for free. Then I came out of school. I was making $55,000 a year, not really a ton of money in the New York City area. Went on a European trip. I went out to Europe for around a month. I spent around $5,000 when I was over in Europe. And then once I got back from Europe, I was like, if I could just create $5,000 a month somehow, I could probably do this for a good amount of time on my own and go and travel Europe for the rest of my life realistically if I wanted to or for however long I wanted to do that.

So then life started and I started working $55,000 a year, sleeping on my cousin's couch so I could save some money. And there comes a point where my girlfriend breaks up with me. I'm sleeping on my cousin's couch to save money and my life is kind of just like it's staring back to me. Like you're not making good money. You're sleeping on a couch. How are you going to get another girlfriend, like everything was a mess. So I decided I was going to get off that couch, started learning about personal finance, read rich dad, poor dad, a bunch of different books. One of them written by you, Scott. And then from there, bought a house hack from that house hack, started partnering, buying more real estate, got to $6,000 in passive income, quit my job,

went and traveled the world, and started a podcast and started hanging out and doing my thing now. So that's where I'm at from five years old to 26 years old. So, Matt, when you were living on the couch, which I love that story. I definitely have my own couch surfing story. And you're kind of figuring out life, you know, when you're trying to live passively, like, you know, you had this amazing Europe trip. You wanted to make $5 grand a month to pay for your lifestyle. It sounds like you like to travel, enjoy life.

What made you pick real estate with all the different avenues out there that someone can pick at that time, right? like what what made you think of real estate first right so so basically what it was is i googled the top personal finance books found rich dad poor dad and the thing that attracted me most to real estate was the predictability of the dividend that i would be receiving from real estate and just the financial sensibility of being able to get my rent fully paid for by my first building that i buy have all of that paid for. That saves me, well, at that time, it saves me $400 because I was paying that to sleep on a couch. But realistically, it saves me around $1,500 a month if I can get my rent paid for. So that was my first thing. And then I was like, if I can make even more cash flow off of that,

like the numbers on these four unit, three unit, two unit properties are pretty predictable and pretty easy to look at the expenses as well. So just for the dollars I was able to put in with that first three and a half percent down loan, that was my highest cash on cash return that would have been possible for me. So it just made a lot of financial sense. Matt, just real quick. So like, that's a huge statement you just said, right? You're new into real estate. You're new into investing. You're trying to live passively. And then you made the decision based on cash on cash return, which some people don't even get to those kind of analytics or even think that way for years being in real estate. They're just like on a mission. So like what made you? What made you?

you get to think of it that way too because that's a huge realization for people like how do you maximize your cash on cash return make it stretch but as a younger guy what were you 25 at the time roughly uh buying my first property i was 22 22 right and that's what i bought mine too um what made that like how did that click for you because that's a huge switch to turn on yeah so i think i've always had this idea of i'm not going to try and reinvent the wheel i'm going to follow the people that have done it, follow their path, see what they say. If I want to be in the position that someone else is in, I'm just going to do what they tell me to do. So that's when I started reading all these books. That was the Rich Dad, Poor Dad, the Craig Curlop's book, Rental Property Investing by

Brandon Turner, every single financial freedom through real estate investing. Scott's book set for life, like all of these different books that told me, are the metrics you should focus on to find a good property. So then it was just rinse and repeat, practice, do your work, put in the reps, do your property analysis. I was probably analyzing like 30 properties a day up until like 1 a.m. in my cousin's living room using his computer because I didn't have a laptop myself, like running all this analysis to try and find properties. And, you know, it's really just following the people who have done what I want to do. So let's focus in on that first deal. Right. So you're 20.

you're making $55,000 a year. How much do you save up? What is the, how do you find this deal? You kind of hinted through all these analyses. How long did it take? And yeah, let's let's, let's hear about it. Yeah. So it took tons of analysis. There were tons and tons of properties in the area that I was looking to buy. So I was in Hoboken, New Jersey at this time. And I was looking to buy in Newark, New Jersey, which you probably know isn't like a super great. And what year is this? This, so this is 20, 2020. 2020, okay. Yep, March of 2020 around that timeline.

So I'm looking for my first property there and I'm going to like this area in Newark because there's high cash flow there. It made financial sense because I would be able to live free and clear, wouldn't have to pay for a mortgage, wouldn't have to pay for anything. It's free rent. And that's what meant the most to me at that time. That's like the bottom ring of Maslow's hierarchy. that I could fulfill for myself.

So that's basically what I was looking for, couldn't find anything that I actually wanted to pull the trigger on. And then I started looking for, I actually took your method, Scott, right? So I used this performance-based job, job hopping method. And I started looking for other jobs where I could increase my income and move out of the area. Luckily, I found a job near my parents' house.

And at that same exact time, as I'm going back to my parents' house, my dad says, hey, one of my buddies from high school, who's a realtor in this area, found a four unit. It's foreclosed. So I go to this four unit, which I'm in right now, it's my house hack. And I take a look at this place. I have no idea how to run renovation budgets. I don't know what any of that looks like. I just know that the numbers were working stupid well.

And if this thing was fully rented out at least at that time, this thing was. was going to gross around. I think the numbers were right around $3,000 while I'm still living in one of the apartments. And the purchase price, the asking price was $125,000. And what market is this? So this is in Phillipsburg, New Jersey. This is northwest New Jersey, right on the border of Pennsylvania. Right next to Philadelphia? Not next to Philadelphia. It's about an hour north of Philadelphia. Okay. So it's a pretty, pretty cleaned up area. It's about an. hour drive to New York City, a little more rural out here, not as packed together. But so it was offered at, it was up at $125,000.

And the numbers just, I knew my numbers. I knew what made sense. And I made an offer at $155,000 because everybody was saying, all the people that I followed at that time said, if the numbers make sense, you can make offers that are higher than the asking price if the numbers are there. So I made a $30,000 over asking price offer as my first property and it didn't get accepted. And then like two months later, they end up coming back to me. This is a foreclosed property.

So the bank comes back to me and ask me if I still want the property. And this is the middle of the pandemic. So this is actually right before the pandemic. So I said March of 2020, that's actually right when I got in contract on the property. So I was looking and making offers on this property right around the December timeline, December January, exactly when I put the offer and I don't remember. So then they come back to me. They say we're good to go. And if you want this property, you can have it.

And I said, yeah, I'll take it. So we went in contract at $155,000. Pandemic hits. All this stuff starts going crazy. it actually ended up taking us three months to close on this property. The bank was going to back out. During this time, I talked the bank down on the property another $20,000 right around. So I pulled out, I talked them down to $145,000 and I had them give me a $10,000 seller credit, which FHA, the max was only like $7,000 that they could give me. So that's what they end up being able to give me. And so, but then it was like this whole process of figuring out how much of a renovation this thing actually was. So it was a condemned property.

It's a four unit property. The whole thing had to be re-gutted. I don't even, I like to say like I don't even know how to realistically like swing a hammer. I don't know how to do all this work. And I ended up getting a bunch of guys to come out. And it ends up being a $120,000 job to get this thing done. So I start running the numbers. Even with the renovation.

So 203K loan is how I finance this. And with a 203K loan, you are able to add in your renovation cost to your actual purchase price of the property. And they couple the renovation costs and the purchase price of the property into your full loan amount. So you only have to put down 3.5% on that total amount. So of this $130, we'll call it $130,000 purchase price plus the $120,000 renovation, it ended up actually, it was $145 purchase price plus the $120,000 renovation. It ends up being $265,000 that I needed to close on this property. And so I only had to bring around, I think it was like, it ended up coming out to $25,000 that I had to bring to the table because of all these different fees that you run into with FHA inspectors coming out. You have a 203K inspector.

You have an inspector for the bank that has to come out. And they build an entire scope of work for you. So you don't build the scope of work. There is, I like to call the 203K like a loan on training wheels. Like you get to do this entire renovation burr with someone from the bank coming out and showing you like walking through the property and saying this is where you. You're you're going to need to get done. And this is what the prices should come in around. Then you go out and you get quotes from all these contractors, bring them back to this 203K consultant is what it's called.

And you go over this with the consultant. Then if the consultant okay is it, you go back to the bank and then the bank approves it from the consultant. And throughout the entire renovation period, the consultant is coming out, checking on renovations, making sure everything is done properly. the bank is holding back certain percentages from the contractors to keep the contractors in the deal. What was the ARV of the house hack? So the house valued at $400,000 after it was done and my all-in loan on it was $262,000.

Awesome. Home run. Love it. Math works. Math does work. That's what it's all about. Hey, Matt, I have a couple questions. Well, first, I love your story, right?

because that is how you change everything in life. I did the same thing. I bought my first home house hacking. I wanted to save money. I went for the big value increase because I wanted to change and have impact on my life immediately. And a lot of people kind of do the slow roll, but you want that big equity gain or big cash flow that you're talking about. But when you get into that, I remember back when I was 22, it was like, how do you

figure out how to get into that property without 20% down? How do you figure out how to buy that fixer with the loan? And so when you were going through that process, right, you were working 55 grand a year. You went and got pre-qualified. Who educated you about the 203K loan? And was there any other products that you looked at? And then you made the decision with the 203K and to kind of narrow down because I know when I did mine, the 203K loan just wouldn't quite work for what I was trying to accomplish because the closing timeline was too fast. And so I did, I had to make out kind of make my own version where I had to bring in some private capital and blend it all together.

but it was the same concept. A construction loan fixed the property and then I had to stabilize it. But sometimes that doesn't work for every scenario. So how did you pick the 203K loan? And was there any other options that you kind of looked at that you just kind of eliminated for certain reasons? So I knew that the 203K loan was going to be realistically. It was the biggest bang for my buck if I wanted.

As far as a cash on cash return was going for me. And at that time, I had limited capital. So I had to maximize that cash on cash return. like we talked about earlier. But I found that 203K loan. It immediately, like, it was like magnetized, like directly to it when I was reading rental property investing by Brandon Turner. He's got all the different financing types that you can go through.

He's even got private capital in there, all these different techniques. So I saw that loan and I was like, that is going to be, I'm going to be able to get an equity gain in this thing and it's going to cash flow and my cash on cash return is going to be pretty stupid on this thing. And then I went to, even like on the financing side, I didn't have all the capital to bring to the table. I said I needed $25,000. So for me to close on this property, I had $10,000 in savings that I used. I borrowed $8,000 from my dad.

He gifted me $8,000. I actually told him he could have 25% equity in the property. And then I bought him out of that 25% equity six months later. I paid him back $12,000. So he got a 50% return on his money. And then there was another 7K that I had to bring to the table to close on it. So my dad, I got, I had 10 in savings. My dad gave me seven and I had to bring another eight to the table to close on this thing.

And I had actually read about using the Roth IRA and pulling out of your Roth IRA to a penalty free and being able to use that as capital for your first real estate purchase. So I did that. And crazy enough, COVID hits. like a week and a half later after I pull out of my Roth IRA and all the stocks tanked. So it was like a perfect storm of me being able to use that capital. Yeah, and I love that part of your story. I heard that that, you know, you brought in because the biggest thing with these 203K loans or what you did was to build your career, right? And you had to borrow money essentially for equity or 50 percent. And people are like, oh, you can't pay a lender 50 percent on their money. That's, that's absurd.

but you can because it changes everything. And it's like not, don't get trapped on the cost of the money or what it just whatever it takes to get you into that deal and is the end result going to change your life. And so it's that that not being afraid to pay 50% for that extra capital you need, I think is is something that's really important because people get that they get that paralysis analysis or analysis paralysis where they can't because I can't pay that much, but you can as long as the structure works. Well, James, think about also how many people would.

But like, let's be clear here, Matt is buying a $125,000 condemned quadplex in rural New Jersey, which I didn't know existed until this podcast. Go figure. And, you know, a lot of people, I think, are doing something similar on a nice fixed-up property and a nice part of town with their parents giving them a little bit of the deal there and not house hacking. And there's a huge difference in my mind between those two approaches, right? It's one thing to go all in on this bet early in life on a house hack, which I completely agree with. I've done, I did almost identical thing here, except I didn't use the 203K loan in my personal life,

versus using this amount of leverage and borrowing for that down payment on the family home that's already all fixed up. So I just want to throw that caveat in there. Like, I completely agree with you. And I think you agree as well. In the context of a house hack bet, this all makes sense. If you're buying your first house and it was ready to go, you'd be, you'd be weighing over your ski. reason you be hating life right now. Right. And what I would like to throw out is like that debt wasn't really structured that way for me to pay it out. Because I, as I mentioned, like, I told my dad he could

have 25% equity in the property. And for me, it was like, this makes sense. Like in the position that I'm in right now, if somebody came to me, it was like, hey, can I have $8,000 for 25% equity in my property? I would like throw it away like nothing. At that time, I thought it was. getting a killer deal because my dad like put down half for my brother's property and he got 50% and I was like, you know, I'm getting the killer deal because this thing is is going to cash flow so much. So then at that point, I was like, you were getting a killer deal. That was a good. Right. Yeah. And I was like, I want to, but then I was like, I want to get 100% cash flow on this property. This is my first property. Like the FHA or the 203K loan, three and a half percent down,

any loan that you could get 5% or under. That's a huge asset to have. And you don't come. by those types of loans that often. So you have to, I wanted to take full advantage of that to get the biggest bang for my buck. I like your dad's style. He doesn't give out free money. He's a true hard money guy. I like, I like, I want half the deal. Here you go. I want half the deal or 50% return. My kind of guy. He's good. He's good. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more

importantly, where your tax refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code Pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place.

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consult, I guess the 203K consultant specifically on this property? I am not familiar with this process at all. And it seems like a very, very powerful tool for folks that are just getting started with their first large remodel house hack style. Yeah. And that is why I do refer to this as like a burr training wheels option. because one, the bank isn't going to allow you to buy this property if it doesn't make sense. And two, they're making sure it makes sense by sending out this 203K consultant to work for you.

So how it works is you apply for the loan and they start like a typical loan. Do you have to be an owner occupant? Yes. So it's the same as FHA. It's owner occupant for the 203K loan. It's owner occupant for one year. Okay. So then you go in, you apply for the loan and they come out and they send a 203K consultant

now. And now this is for renovations over $20,000. If it's under $20,000, you could do something called a 203K streamline, which means you bring in your own contractors. You could even realistically be the contractor as long as you have a contractor's license on that loan. and then you can basically they'll give you $20,000 or under, and you can hand that money out as it seems anything over that because it's a first time home buyer's loan.

The bank wants to make sure that you are properly managing your money. So the 203K consultant, again, will come out to the property. They will look at it, take a first look and say, it's going to need this, this, this, this, and this. They give you an entire scope of work. and then they give you about what it should cost. You go out get other quotes from contractors. They bring it back. Basically underwrite the entire list of the scope of work.

And now this 203K consultant, you have about five visits throughout the entire process of your renovation. So whenever a contractor wants a draw, they have to request a draw from the bank. then the 203K consultant will come out. And if the contractor says, I did the walls, I did the floor, and I did the roof, the 203K consultant is going to look at the roof, he's going to say, all right, the roof looks pretty good. Everything looks good here. The floor looks like it needs some trim on it and the walls are only 50% done.

There's only 50% paint. So what he'll do is he'll mark down each of these things. walls, 50% done. Floors, 90% done, roof, 100% done. And then that amount will get paid out to the contractor minus 10%. So again, the bank holds back 10% every single time to keep the contractor honest and keep them locked into staying with you on the deal. James, this sounds better than what you do.

Yeah, I mean, that's a lot of work. And I love this program because, you know, someone like Matt, a brand new investor or someone like all of us when we're first getting in real estate, it's always what is a deal? And then how do you actually fix it to get there? And a lot of people can buy the wrong thing. And then the rehab budget goes way out of control. And it was just, it could have been a great buy for a lot of different people, but not for

that specific person. But with the 203 contractor, you know, so you have a list of contractors you have to go through, right? Which is actually great for a brand new investor because you're always looking for new resources. What was their pricing like? Because we've, we've actually sent arc lines up through there. And then they want us to help with the renovation because that's part of our brokerage services. But these contractors aren't on my list, right? They're just not guys that I use. What is their experience? What is their pricing? And then another thing, do they lock the bid prior

to you closing or is this done after post closing? Because that can affect the numbers. You know, like with you, you had to borrow your other half the down to get into the deal. So if that went over budget, that could be very detrimental. So what's that process and how do people protect themselves to make sure they don't get themselves in that situation? Right. So yeah, everything is locked in prior to, prior to closing on the property, prior to the loan. The contractor has to be locked in.

But the contractors are just everyday licensed contractors. I could go to my guy that I use for every project now. use him. I could go to the guy down the street. I could just Google contractors and have every, I could come out and get 10 different quotes from 10 different guys, as long as they're licensed, because the bank will check and make sure that they're a license. And that's why, like, coming into my story, I learned a lesson real quick. I went with the cheapest contractor. And so I got one quote. So I had, I had three contractors come out and quote me. I got one quote at, um, one quote at a hundred forty five thousand, which for me, it just didn't work. But in hindsight, I should have gone with this guy because he's a

great contractor. I got another quote for right around $100,000. And then another quote for $120,000 or $115,000. And I ended up going with the cheapest guy. Luckily, the bank throws on a contingency reserve as well. So it ended up being the hundred, they throw on like a, I think the guy's was like $103,000. And they threw on a contingency of around 15%. So that's where the $120,000 in renovations come from. And I take the cheapest guy. And this guy's working on my dad's, my brother's, 203K loan as well right now.

My brother did a 203K streamline. And this guy just goes missing, walks the job. And I had already locked in with this guy about to close on the loan. And I told the bank, I was like, the contractor's gone. Like, he's not working on my dad's property. I need another person. So that's when I ended up going to this other guy who was 100 and, like 17,000, something

like that. And, you know, the, the dollars just ended up being enough to make that project go through. So we ended up closing on that loan. But yeah, to answer the question, everyday contractors. So that is a big process for me. And that helped me realize, like, the guys that I really want to bring in. And then like this whole thing starts. My project starts three months late.

COVID's going on. There's all these different problems with materials. So things are increasing. There was one point where someone broke into my property and one of my contractors fought them. And so they had to go to the guy who broke into my property sued my contractor. So that issue's happening. And the town's coming after me because there's all these issues with like,

like the contractor coming. And then one of my, one of the other guys working there ends up having to go to court to get deported. So it's like a whole mess. And this thing took a year and a half to get done. I had a deck. I built a deck three times. Fully up. Built this staircase.

You got to take it down. It's not done properly. I was like, guys, we've got to do this. I don't know how to do this. I really don't know how to do this. but we got to do it right. And built it again. Put more nails in it.

That's what they did. They put more nails in wood. And we had to tear it down. So then I built my own like structural. I actually built the architectural design for the this starr set. And I brought in another guy that I found in town. I was like, I need you to build this because that was the last part of my project to finalize this thing

and get it passed from the town. So I could get people in here and then get it passed by the bank. So that's when things get a little dicey. Oh, now they get dicey. Put more nails in it. That's the solution to everything. More paint, more nails. You're good.

Yeah. Yeah. But so the beauty, the beauty about this. And I do think that COVID, COVID kind of saved the beginning of my investing career. Because I think I wouldn't have liked real estate as much at this point because I was a year and a half in with no tenants. But I did get to take advantage of COVID forbearer. So I didn't have to pay any of that.

And that was really just me paying attention to the market. I didn't have to pay any of these loans. I didn't have to do anything until I actually got tenants into my property. Matt, I love that story because it actually is therapy for me because we all deal with these same things. It doesn't matter how long you've been doing it for. You get the guy that needs to bang more nails. They build it wrong. That's pretty mentally draining, right?

And in the fact that it took a year and a half, you know, that you usually comes with the territory. People forget. Like, if you buy the cheapest thing, best deal out there, there's a reason it's that way, right? It comes with all, you know, it comes with a list of problems. But if you can hang in there, that's really where you can turn your whole portfolio around because the equity gains are so massive. And you just have to mentally prepare for it. But as a new investor, that is, that is, it's wearing. It's taxing, right? And you got that pressure of staying in budget and servicing that. loan that whole time. So like what did you do to a get the project through? But also how did you service the debt? Were you able to live in that during that time? You know, a year and a half that's,

you know, if you can't get cash flow in, that's coming out of your pocket and you were at a 55 grand a year job at that point. So how did you deal with that? That's a huge like liquidity crunches are big deals on new investors. Right. So that's that's where I was saying the COVID saved me because they put COVID forbearance out there. So this was a year and a half of this project, and I didn't have to put a dime out of my pocket towards the debt service. I actually finished the renovation, got people in and had no debt service on this for like two months,

three months, four months, four months. So I was like cash flowing like four grand a month at that point with no debt service on this. And then once you got to that point, because I did the forbearance and it didn't affect my credit at all. That's why I did this because of the special COVID forbearance, I was able to modify my loan.

So that modification actually took my loan from a like a 3.2% down to like a 2.6%. And they took off like an extra $50,000 that I would have paid and they moved it to the back end of the loan and put it out of zero percent interest. And they started me over at. So that took a year and a half. They started this entire loan over on a new 30 year basis, which like, that's why I say, like, COVID saved me and it made me not hate real estate because I didn't have to pay this debt service the entire time that this was running.

Wait, wait. So can you, let's just dive one more layer deep in there. So you have 50. So you had, I'm running the math here. You had a $120,000 FHA loan when you purchased the property. $262,000. was the exact loan amount that I got. And that was a combination of FHA and 203K to build up to that loan amount.

And then you were able to get COVID hits weeks after you close. Right. You go into forbearance. You're able to keep your job throughout all this? Keep my job. I actually used, that's what I was saying earlier. I use your method job hopping. I increased my income from, I started at $55,000.

And in a year and a half, I was up to $150,000. So I was making good money. Okay. And what did you do there before we go back to the side tangent I'm already on? I was working in sales. Logistics technology sales. Okay. So you took a sales job.

You increased your annualized income from 55 to $150,000 while simultaneously completing this very smooth rehab process that you just outlined for us. Yeah, really, really easy rehab. Yeah. And then in the summer of 2021, you're able to refinance essentially. And that puts 50,000. So walk us through the technical terms here for how this refinance works. I'm very interested to hear about this.

Yeah. So it wasn't even a refinance. It's because I did this COVID forbearance. It was basically like I don't. So I could have serviced the debt, but it was basically like if you're coming into any financial troubles. And in my head, I was like, this is a, this is a huge financial trouble because I have this new property and there's nobody renting it. And I can't seem to figure out how to get this thing, get this thing like. done and renovated. So it took, you know, that that year and a half. And so basically they just,

the bank says, because of COVID, like the government said, you don't have to pay. So they were like, just you don't have to pay us for this time. And there was a COVID forbearance amount that just kept building and building and building and building like this is the amount that you haven't paid. And then so then at the end of this process, there was an option to basically make it like a refinance, right? But not a cash out, just a term. Okay. So this is this 50 grand or so is just the total amount of forbearance, inclusive of principal interest taxes and insurance on your payments. Yep. Understood. And then that just gets tacked. And then this all just gets refinanced into one big lump new 30 year mortgage at 2.6%, which is a huge gift. And that's where you're at right now.

You have this 2.6% interest rate mortgage and this fully renovated property that went from condemned to rentable and profitable. Yes. Very, very much so. Yeah. Awesome. And now our story ends, right? You have moved some tenants in and it's all smooth sailing from there. Or is there more to the story? You know, now it's, it's pretty beautiful, man. I live here. I make, you know, I get to live here for free. My debt service every month, taxes, insurance, and the water bill. So full expenses on this thing are $2,207 a month, $2,200 a month. And the other three apartments rent for $3,800. So it cash flows me right around $1,600. You know, you take out any other expenses. But luckily, the whole place is brand new. So I don't really run into many expenses. I get to live here for free. And on weekends, I Airbnb my

apartment and it rents for like $400. And I go out and like I'll go down to the beach or something like that. But so it does pretty well for me. I've had tenants come out. I've had some issues with the town where they want me to do little repairs here and there. But, you know, everything has been pretty good since I got this thing up and running. I mean, this is like a story of relentlessness, though.

Like, okay, I'm living on a couch. I got 55 grand. I got to figure I had to get the money. Then I'm going to go, what deal works for me? So I got to buy the biggest fixer I can find, biggest equity position. hiring the contractors going way over, having handled that service and then finagling a loa. It's just like this is the true story of real estate investing. And it's about working backwards and figuring it out.

And so I really do love this story. This is my kind of story. I remember going through the exact same things when I was 22. And the fact that you were able to do that and put yourself in a position with a 2.75% right now fixed is, unreal, right? And it's about taking that first step and just getting it done. That first property will change everything for people. Yeah, it really was that relentlessness that you were saying, like on this whiteboard that I have behind me, this was at my mom's house when I wasn't living here when I was doing this renovation. And I had the cash flow calculation written on this whiteboard.

And at the bottom, it had my cash flow. I was, I was thinking it was going to be around $900 to $1,000 a month and I was going to get to live for free. And I had under that, I had written, this is why you're doing this. And it was like every day, I had to wake up, know that this thing was such a big problem. I had to go tackle. But there was a reason that I was doing it. And, you know, it kept me in and it taught me a lot. Matt, I have one last question before you here before we wrap up, which is, you mentioned at the beginning of the show that your girlfriend broke up with you because you were sleeping on your cousin's couch. Has all of your success in real estate. translated to newfound success in your love life personally.

So that's funny because I, you know, I like to hang out with people. But I kind of have gotten into this zone where it's like what I'm creating for myself right now is just like I'm going out there. I need all the time that I have all the time and focus that I have to build my brand, build myself, build my life up to what it can be and what I want it to be. I meet people along the way. I go out and travel. I traveled for another six months after I quit my job.

So right now it's me and my dog traveling. We have fun. We meet people along the way and we do our thing. Love it. My, I just, again, I see my story reflected in your first house hack here. And my wife likes to tell people that when we first started dating and when she first moved into my house, we did not have heat at the time because I was like, heat is for the tenants. Good luck.

Good luck to you on that front. Yeah. Yeah, I appreciate. And it is, right? It's all about that financial basis. If somebody wants to reach financial freedom right now, if you just decrease the financial basis that you need to be at to reach financial freedom, if you go from needing $10,000 to $5,000 and you create the $5,000, all right, well, now you just gain 40 hours back in your week.

Now you can put 40 hours towards finding other better investments, and you can rocket shift off from there and increase even more income. So that's I, anyone who's young and has a low amount of responsibility and you could live pretty well below your means, I would do it, build that passive income up and then use all the new time that you have leveraged that to build up tons more assets and increase your passive income from there. It's about doing whatever it takes, right? And I remember when we did our first house hack, then I sold it for another house, sold it for another house, but it turned out we were low and funds because I kept trading up my properties. I had to move in with my mom for a year.

This is like eight years ago. But it was like what we had to do. It was me, a two-year-old and a brand-new baby in my wife, and we're living in the basement for a year and a half. And it was brutal, but it changed everything. So just hanging in there, do whatever it takes and it can make big, big impact. Yeah. Yeah, I appreciate that. That puts a new perspective on things too, man. you did what it takes. Love it. Well, Matt, where can people find out more about you? Instagram is a good spot.

I also have a podcast, Financial Freedom Fast podcast, on Apple and Spotify, and yeah, Facebook too. Facebook, Matt Amabil, M-A-T-A-M-A-B-I-L-E. Awesome. And what's that Instagram handle

for those who are looking to follow you? It's at Matt Amabil, M-A-T-A-B-I-L-E. Awesome. Well, we really appreciate you coming out on the show and sharing your story. Congratulations on the... the awesome outcome for the house hack. And we wish you the best of luck going forward. Appreciate you, Scott. Thanks, James as well.

Good meeting you, man. All right. That was Matt Amabil. And what a wild house hack story. I don't think, I think that's one of the craziest renovations from a first time investor I've heard. What did you think, James? I loved it. He's a doer, right? Part of this whole financial freedom journey is just stumbling along, putting your mind to it, and just taking, not taking no for an answer. And that's what his whole story is. So I really enjoyed it. I love relentlessness. I love when people push to, to really change their life. Yeah. I think what's cool is, you know, he read all these books, you know, did all these different stories. Like my house hack, right, from 10, almost 10 years in that. Gosh, now, my first one, right? You know, I bought a with a home

path loan with a FHA, 5% down $12,000 into $240,000 purchase price property. I did not use any of these things. Like, that's no longer available. He took kind of that example and others and said, okay, how can I spend that with in a 2020 timeframe with a FHA and 203K loan in this area and make that work with a massive renovation? And that specific tactic can no longer work in today's environment or will be much harder, right? There will need to be a new creative twist to Matt's story with the next house hacker that's getting started in 2023. And that's what this is all about. And everybody is going to be pioneering the path with their entry into real estate in every circumstance, right, if they're going to hit a home run. But I love the fact that it did

end up working out for him in the end. A lot of luck involved in making that work, just like a lot of luck involved in my first property. I don't know. I can't speak for you, but perhaps there was some luck in your first one as well. Yeah, I've had good luck and bad luck over the years, and it just kind of depends on market conditions. But yeah, definitely I was very lucky when I got mine too. I bought it at the right time and it exploded. And so it worked. We'd love to hear more successful house hacking stories out there. And so if you've got one, share them in the BiggerPockets money, Facebook group at Facebook.com slash groups slash BP money or give us an application to come on of the money show at Biggerpockets.com slash guest. All right, James, should we get out of here?

Let's do it. We got a Sunday day to go enjoy. From this episode of the Bigger Pockets Money podcast and in the words of Mindy Jensen, I am Scott Trench and he is James Dainard and we are saying must be off, little moths. If you enjoyed today's episode, please give us a five-star review on Spotify or Apple. And if you're looking for even more money content, feel free to visit our YouTube channel at YouTube.com slash Bigger Pockets Money. Bigger Pockets Money was created by Mindy Jensen and Scott Trench, produced by Kaelan Bennett, editing by Exodus Media.

copywriting by Nate Weintraub. Lastly, a big thank you to the Bigger Pockets team for making this show possible.