Epic Real Estate Investing - 5 Things Matt Theriault Wishes He Knew Before He Started Holding Houses | HTH 005 | 468

Episode Date: September 12, 2018

You're either making money or you're getting an education! In this episode, Matt Theriault breaks down this quote into the 5 biggest lessons he wishes he knew before he started holding houses. Learn about his half-million dollar mistake, the advantages of a hedge fund, the importance of forward thinking and entrepreneurial spirit, and much more! Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, Matt here. I got a great show for you today. As Matt Andrews shared the five things he wished he knew prior to holding houses, I'm going to share my five this week. So I hope you enjoy the show. If you want to do deals, you want to build wealth. Stay tuned here. We're here six days a week. If you'd like to go fast, I invite you to go to R-E-I-A-S dot com. Enjoy the show.

This is Terio Media. Don't wait for appreciation to be. To buy real estate, buy for cash flow, and wait. In other words, Hold That House! Your host's Matt Andrews and Matt Terrio. Yeah. Flipping houses, it can make you rich.

Yes, and holding them will make you wealthy. This is the Hold That House show. I am Matt Terrio, and over there is Mr. Matt Andrews. What's happening, people? And before we begin, we've got a free gift for you. go to hold thathouse.com and download the four hour work month. Yes, you heard me right. Work four hours a month.

That can be your reality as long as you follow the ten commandments to managing property managers. Really the key ingredient to financial independence through real estate. The key ingredient that no one's really telling you about. And you can get that for free. We're going to tell you about it. We're going to tell you about it for free. And you can get it at hold that house.com.

All righty. So, Matt, we got a lot of great feedback off of last week's episode. We did. A lot of people, I think, enjoyed hearing everything I used to mess up when I first started in real estate investing. Yeah, it's funny how people are so attracted to the bad stories. It was one of the most popular episodes yet. It was all the stupid things that I did when I first started as an investor. Thanks, guys. So we thought, hey, you know what? People liked hearing the stupid stuff that I did when I first started in real estate so much. They'd probably really enjoy hearing the stupid things that Matt Terrio did when he first started in real estate.

And I bet I've done more stupid things than you. We'll have to have to make a list. later and just compare them. I don't know, man. I'm pretty good. It's like that thing that you think you're having a bad day. Exactly. Well, the key guys, and you know, in everything we're talking about here, and the reason why we're telling you our mistakes is because, like Matt said in an earlier podcast, you know, you either learn, what was it?

You're either making money or you're getting an education. You're making money or getting an education, you know. And so these things that we learned, as we look back now after years and years of successful investing, these mistakes that we made when we first started, And these things we wish that someone had told us back then, many of them are the same things that all of you went through when you first started in real estate. Many of them, for some of you that are kind of real estate, you know, the real estate startup phase right now,

many of them are the things that you might be going through right now, or maybe there are things that you're about to go through that because you're listening to this podcast, we can help you avoid. So, you know, Matt Terry and I both now are the first to say, I don't know. Please explain that to me. Yes. and go find somebody who can help us with that or go find somebody we can outsource it too.

You guys should do the same thing. So I'm pretty pumped to hear the things that you wish you'd known when you started investing because I'm going to learn from this too. So this is great. You know, after listening to the last episode, Matt, I was, I started to think, and as educators, I mean, we teach people how to invest. We coach people. We have those side businesses. And frequently we come across, like, things like you should never pay for real estate investing education. It should be free.

you can find that anywhere. Sure. How do you sleep at night, charging what you charge, all those types of things. And, you know, probably the, there's a very famous dad out there. Probably the cream of the crop when it comes to the price point of investing education. It means above six figures if you were to take his full program. Wow. Yeah, it's pretty amazing.

And people just like, you're ridiculous. You're such an idiot for paying that. And I just, I think about the educations that I've learned out. outside of the classroom were far more expensive than the ones that I paid for and was proactive about. Yes. You know what I mean? Absolutely. And so the first mistake is, and this was about a half a million dollar lesson.

This is Rich Dad Poor Dad Education five times. And that was, I wish someone would have told me to diversify my property managers. I, it's a lesson that I should have learned when I came out of the music business. I had one music distributor. And when the digital download came along, wiped out the whole CD market and essentially wiped out that distributor, I didn't have distribution for my music anymore. You had all your eggs in that one master. Exactly.

It was a single point of failure in my business. And I should have carried that lesson over sooner. And I wish someone would have told me about it to eliminate all single points of failure in your real estate business as well. And specifically with the property management. I had over, let's see, I had, I think 20 of my own properties, but then I had 60 of my clients' properties of which I had guaranteed rents for the year on those 60 properties. And when that property manager went down, I was stuck. And that turned out, I wrote a lot of

checks over the next four or five months trying to find a solution for that property manager. And yeah, that was probably right around $300, $350,000. And that was a couple years ago. And I'm still paying for it a little bit. Like, we're not totally out of the woods. There's still checks that we that come up that oh yeah that was from that I guess we have to write that and just the long distance far reaching reverberation of that sure like it really I mean it put it what it should have put me out of business how I got through I don't know so had you had you been diversified at that point had you had another manager in that same area it still would have been tough but you could have transitioned a lot easier over to that as it was you had to basically

build again from the ground up I had to start again yeah but But with the almost like 80 properties between mine and my clients, we already owned them all. They were already had tenants in place. And yeah, that was a tough one. And you were the guy that chose that property manager. You were running those investments for those 80 other units. Exactly. And I had guaranteed rents.

So the stress on top of that, not just losing the rents for your personal properties, but just those other owners coming down in you, I'm sure, right? That's why I like talking to another investor because you get it. Yeah. Like you can just, I mean, you weren't there and you already know what it could have possibly been like. Sure. So that would be one is to eliminate all single points of failure in your business. So I am spread out over multiple markets now.

I have multiple property managers in each market. I have single families. I have duplexes, fourplexes. I have multifamilies. So I'm diversified in my property types. And, yeah, and I continue to look for other places. Like, you know, if this thing went down today, what would my business look like tomorrow? And if the answer to that question ever scares me, it's time for me to put some work into shelter myself.

Yeah. You know, it makes me think of like, you know, in like theater, there's always an understudy, right? Because what if the main person goes down? Like, you know, like on, I want to go to see Spider-Man on Broadway. I heard that's amazing, right? So I want to go see Spider-Man. What if there was only one dude playing Spider-Man? Right.

And he fell from the scaffolding and broke his leg. Well, guess what? Yeah. That show closes down for three months. will not go on. It does not go on until Spider-Man's leg heals. And as a real person, it would take longer than the real Spider-Man, right? So that shuts down.

Same kind of thing for you. When that property manager shut down, I mean, you had to go into action mode and the scramble mode, really. That's never where you want to be as a real estate investor and scramble mode making emotional decisions. Right. Yeah. And a good question that someone, actually, I heard in an interview with Mark Cuban.

he had said a good powerful question to ask yourself about your business. This would go for any business is if you were your competition, how would you put yourself out of business? That's a great question. Yeah. And you start looking at all the weak points in your business. And so we've sealed up a lot of those spots because of that expensive education. That's a valuable lesson.

I hope you guys are taking notes on that because just that one point is huge, no matter what business you're in, but especially in real estate investing. Right. For sure. So that's one. Eliminate all single points of faith. Diversify property management specifically. Number two is, I wish someone would have told me that it takes no more effort to do a $500,000 deal than it does a $50,000 deal.

Because the same amount of effort on one or the other actually produces a very different result in your bottom line. So you have to do 10 times as many as the small deals to make as much money as you can on that big one. And, you know, I think I really could have collapsed some timeframes and got to where I was even faster than then I did get there because I did get there relatively fast. And I have to keep on reminding myself of that. And even like today, I'm like, okay, $500,000 deals are kind of an everyday thing. Well, it's no more difficult to do a $5 million deal. Yeah.

It's a $500,000. Sure. Right? Same length of transaction. Yeah. We do. We get caught up on the numbers, especially when we're first getting started in real estate. You know, we just assume, we just think, well, a half a million dollar property must be harder to flip or must be harder to.

purchase than a $50,000 property. Well, it's not. And it can take the same amount of time and produce way bigger dividends. So, yeah, that's definitely a trap. We get all focused on the numbers instead of the process it takes to achieve a transaction. Yeah. I think that's really, really good advice. And it just kind of depends where your money mindset is and what you think you're worthy of.

Yeah. So you placed a limit on yourself. Exactly. You said, hey, I can't do that level of deal because I can't. Right. And now I've just... That's not even logical. No, it's not.

And I've just opened up a hedge fund, and this is a $5 million hedge fund. So now I've stretched myself. And so now I'm like, okay, so what about the $50 million? You're right? So that's the next one. You know, someone like, and you put in perspective, someone like a Donald Trump or a Bill Gates, they're looking at you like, what's a $50 million deal? Right.

Right. It's nothing to them. That's probably their $50,000 deal to us, you know? It's like it's not that big of a deal. So please stand by. We've got overhead to pay. We'll be right back. When you go to work for your money, does it return the favor?

If not, no worries. You do not have a money problem. You merely have an idea problem. We're turnkey allies.com. And we'd like to share a new idea with you around income real estate that can transform your financial future and accelerate its arrival. Go to turnkeyallies.com and download a free investors package. Turnkeyallies.com. You do not have a money problem, nearly an idea problem.

Turnkeyallies.com. More ideas, less worry. And speaking of hedge fund, that is something that I wish someone would have told me about earlier. I knew kind of a little bit about it. I knew it was very expensive to set up, but I didn't really understand the benefits that it would give me for my business. And it's really simplified so many different aspects. That's great. It's simplified bookkeeping.

It's simplified doing new deals, like not having to open a new LLC, every single time you do a deal or every time you have a partnership or anytime someone wants to lend you money, anytime someone wants to invest money with you. Like, it's so much easier for all of that to happen. And when you do that stuff outside of a hedge fund and you have multiple partners, and I've had, I think, seven, eight LLCs over the last couple years with multiple investment partners. It's, I mean, it's just a bookkeeping nightmare, first of all. And then it's just like, okay, that guy's interest rate is this and his interest rate is that.

and his payments do then and his payments do then. And then this deal is going over here. It's just like, it was so confusing. And it was really difficult to scale and to get up there. And when I was stuck in this $50,000 deal mode and you're doing a lot of deals and now you've got it spread out amongst multiple entities with multiple partners and multiple structures, you know, that was really that, yeah, I wish someone would have told me about this hedge fund thing. Right.

And that's allowed you because I've watched your business and I've seen, all the investors that you offer opportunities to. I know you don't just offer those opportunities to anybody, but you work with a lot of investors now that you really qualify and you let in on the opportunity that you've created. You wouldn't have been able to do that before. It would have been, like you said, a separate LLC for every single one. It's almost like the difference between taking a great product that you made

and trying to go sell it on the street corner one at a time or putting it on Amazon and selling thousands at a time. You know, the platform changes the game, and that allowed you to work with way more people, still deliver to them what they wanted, but do it in a much more simplified way, right? Right, absolutely. Awesome.

I love it. Totally. And speaking of that, here's another thing I wish someone would have told me about, and this sounds so boring, and this is so easy to skip over. Even if someone did tell you about it, you might think. It's probably the most important thing you'll say that, yeah. It is getting a bookkeeper from day one. Yeah.

I spent so much money going back to unscrew everything and to untangle everything. Putting out bank statements, trying to figure out what was what. Yeah, bank statements and receipts and five. and, yeah, bookkeeper from day one. If you have just one property, you need a bookkeeper. Yeah. You just really do. Yeah.

And that's not hard to find if you know, if you just know where to look. Oh my God, they're $8, $9 an hour for that size. To do a decent job on it too. For do a decent job. And give them your personal stuff too. Yeah. You know, go ahead and have them open your mail up twice a month. Have them write out the checks for you.

And then you just come through and sign them and get them all done. That's alleviates so much anguish and so much. not necessarily stress during the month, but stress on the day that you have to do it. Just mental bandwidth in general. It's like that massive pile of laundry you have every month. You know, you've got to do the bills. And I would, when you start building your real estate portfolio, there, you want to keep a record of everything for sure. There are so many benefits from a tax perspective that you can carry forward into other areas of your life that you're going to flat out miss out on and end up paying.

Uncle Sam more than you have to. Sure. And I'm not down for that program. Absolutely. I'll pay my share, but I'm not going to pay more than I have to. And that goes back to what I said on one of the previous episodes. I think it was last week that, you know, hire out the stuff that you don't have to do. Right.

Yeah, you could sit there and write checks. You could sit there and, you know, keep the books and do all that. Maybe you have that ability. Maybe you don't. Even if you do, it may not be the best idea for your time to do that, to spend your time that way, right? Especially when you can hire somebody for not that much money to do it professionally and have it done. So it's just off your mind. And what are you able to do with that extra energy, that extra bandwidth?

Well, you're able to go out and make more deals. Yes. Find more properties that you can buy and hold and, you know, cash flow on. The highest and best use of your time. Exactly. Right. Absolutely. So what was that?

That's number three or four? I have a few down here and a few more to go. You made a few mistakes back then. I did. I did. Here's another big one was, well, you kind of talked about this last week and I'm just going to concur, is you don't have to do it all yourself. Yeah.

Right. Identify what it is that you do. best and hire out the rest. I think that was a really great advice for me. And it took me, even after I got the advice, it took me a long time to implement. Right. And that's ego, too. Because nobody can do something as good as I can, right?

And that's kind of what we think sometimes. Well, you know what? If they can do it half as good as you and still get it done, and you don't have to think about it? It's still a good idea, right? You'd almost think like we do the same thing during the day. Yeah, exactly. We're on the same amount.

Exactly. I mean, even if it's not as half as good as you do it, but it actually got done. Got done. Yes. And you didn't. and you didn't have anything to do with it actively. Right. That's a win. Right.

Absolutely. I agree. So that's a biggie. Other one is when I was going through property specifically and even on the market scale is to go deep before going wide. You buy a property and I was so eager to build my portfolio quickly. I was so after reading Rich Dad Poor Dad, I wanted to get out of the rat race. I need some more cash flow. I got to get another property.

Keep getting the cash flow up, up, up. And to get it to exceed my monthly expenses. and I could be out of the cash flow. So that was a race for me. And I got there quickly, but I had to do a lot of retracking, retracing my steps. I had to do a lot of going back

and maintenance and fixing things. It's kind of like the spinning the plate thing. You know, like, you know, one plate is dying. You got to go back before you can add another plate and properties are kind of like that.

Yeah. But I find that the more time and more cautious I am on that property in the beginning, the longer that plate, is going to spin. Sure.

You know, without my attention. And that's tough because it'll feel like you're breaking your momentum sometimes, right? Yes, yes. But really,

and it'll feel like, oh, I got to keep moving. I got to keep getting this other property, this other property. But if you're doing it, if your process is wrong, you've got to do what you did,

it's going to cost you more time in the long run anyway. Exactly. Yeah. Which you said last week, do it right the first time. Absolutely. Yeah. That's a lesson I lost a lot of money learning.

Yeah, I think we both have. And that would go to the next level of that, that question or that idea is to go wide or to go deep in the markets also before going wide. Because as I was expanding and diversifying and trying to eliminate all single points of failure, I did a little too quickly. And because I wanted to move quickly,

I made some hasty decisions that, in hindsight, weren't the best decisions. And those were expensive decisions. Hiring bad property managers is one of them. You know, it's like, well, this guy's cool. He drinks the same beer I do. We laugh at the same jokes. We actually rooting for the same team. You know, I can hang out with this guy.

He's hired. This would be a good friend. Yes. Not necessarily a property manager. Exactly. I want to hang on with this person as a friend. Remember the difference between that people. Right.

Right. And then like with my cash flow savvy business, my turnkey business is when I'm giving that contractor and that property manager new projects, let them finish that one or two before you give them two or three more. And, you know, we unfairly, not knowingly, but unfairly, like kind of overloaded some of our managers and our contractors. And, you know, we put them through some tough times as well. just because we were trying to go fast.

Right. You know, we didn't. So thank God we've got that figured out. Yeah. But that was a biggie. What we're talking, you're talking about, don't be everyone's best friend. Yeah.

So I have something kind of related to that. That was hard for me to learn. Yeah. Yeah. Definitely. And what was kind of closely related to that idea for me, and I worded a little differently, is understand that not everyone thinks like you do,

especially when you start venturing out to other parts of the country that you're not familiar with, that you're not from, you don't know the actual culture, You don't know the way of living goes there. I mean, I live in a little bubble here in Los Angeles, and I've lived here my entire life. And when I started doing business in the South,

like, things don't move as fast down there as they do here. And some parts up north, too. Right. Okay. That remains to be seen. We'll go. But thanks for the notice. Just the idea of I sent you an email this morning.

Did you get it done yet? And he goes, well, you just sent it to me this morning. That's like, I know, but it's been like six hours. like, you just sent it. I'll get to it probably in a day or so. You know? He's working at a different pace. A lot of those types of conversations. Another thing that I realized was not everybody is as entrepreneurial as we are. Right. Not everybody is as forward thinking about the future business as we are. And there's a lot of people out there that are hard on their times or down on their luck.

And they're very transactionally focused. Yeah. Let me get the most out of this deal I can. I'll worry about the next one later. Yeah. They're thinking about today only. They're thinking about today only. And a lot of the professional partners that we've teamed up with were very transactional related.

They were not business related. They were not future related. They were not, you know, they kind of killed the golden goose in some respects. And I couldn't understand that. Right. And they won't help you build it the right way if they don't think forward. You know, because I mean, if I was a property manager and you were coming to me saying, hey, I sell properties to investors all over the world.

And we're looking at your market. We're looking at you to be our exclusive property manager here. I would do whatever I need to do. That's a no-brainer for you. Right. But not everybody thinks like we do. Not everyone thinks like that. Right.

I would work for the first couple months making no money, making sure my systems were set so that we could keep doing business together for 10 years. That's what I would think, right? But that's because we have that entrepreneurial mindset and not everyone, like you said, has that. Right. Absolutely. Absolutely. Absolutely.

I mean, everybody would be a business. owner if that was the norm. Very true. Right. Very true. Okay. So that was another biggie. Um, it was another. Okay. Last one I got right here. Being intentional about creating your network. You know, um, we've all heard the expression. You are the result of the

five people you spend most of your time with, right? And, you know, you can kind of start looking around your friends. I was like, well, okay, I guess I'm screwed because those three guys are total dead beats. But I like them. I love them. I think back to my friends in college. I'm like, whoa. I'm glad I made it. Exactly. Just snuck by. And if you're listening to you now, I'm not talking about you.

You're the one friend I'm not talking about it. Yeah, exactly. So once I started, it kind of took that expression or that quote to heart and started being intentional about not necessarily getting rid of my friends, but being intentional about adding new friends. And we talked about this before, also about getting around the doors. Yeah. The people that are actually doing it.

Sure. And people that are doing it better than you are. Right. And people are doing more than you are. That right there, and even specifically a mentor, always being on the lookout for a mentor. And that right there, your environment and your mentor, your leadership can propel you forward faster than anything else can. Yeah. And so now I'm very intentional about that.

That's a great lesson. That's how you and I met. We met in a mastermind group. Absolutely. And the mastermind group isn't cheap. No. Right? No, it's not.

And I saw that, you know, when you search out those types of groups and if they are expensive, I'm a moment. to the idea that the more expensive, the better. Because it weeds people out. It weeds people out. And you get the doors in there. You get the people that are going to get the elite. The action takers and the people there. So I'm constantly on the lookout for that now.

Absolutely. And, you know, I first approached you because I had seen your business. And I know you'd kind of seen what I was doing too, but we hadn't spoke before. But I saw some things you were doing. And I'm like, you know what? Matt Terrio is better than me at this and this and this. He's really, really good at this stuff. and I identified a couple of things

that I thought you were really good at that I wasn't that good at and you know when you meet somebody like that especially in the business situation there's two ways to go right you know there you either look at somebody who's better you feel or perceive at least

that's ahead of you in some way or shape or form and you say you say well that guy's better than me I don't like him and I'm out of here right or I resent him or whatever it is right right or it is we all feel that probably in a lot of different situations right

and might not even know it and might not even know of it Right. But if you train yourself to see the opportunities, what I saw when I met you was, you know, Matt's really good at this and this. I want to go talk to him because I want to know how he does that. And hopefully I'm doing something better than him that I can share with him so that we can have like this cool, like, you know, back and forth. And we did. Right. And so that's, I mean, that's how this podcast started. Right. Sure. We started because we were talking about things we were doing and said, you know what? We should really make a podcast about, you know, buy and hold real estate because that's what we're all about. We're all about the cash flow. But when you meet somebody like that, guys, there's two ways to. to go. You know, you either resent them because you think they're better than you at something, or you say, hey, this guy is better than me at this. I want to get around him. I want to be around him more. And I want some of that to rub off on me. Yeah. You know, and I truly believe the statement that, you know, we're the same person five years from now as we are today, except for the books that we

read and the people that we meet. I completely believe that's true, you know, and I think, I forget what, that's from an old school book. I think it's Buckminster Fuller, Buckie. Oh, is it? Okay. Yeah. Yeah. And it's totally true. I mean, because it's all about what we put in our heads and there's no way to cut the learning curve down than getting with people who are where you want to be, right? And that's how we met each other. And that's how we've learned everything in real estate now instead of hitting our head up against the wall doing the things that we just listed, right? For sure. For sure. Well, thanks, man. I didn't even know that. So cool. Learn something every day. Yeah, man. Yeah. Well, I secretly thought the same thing about you. I got to figure out that

that dude does because that's really cool. Exactly. We'll talk about that and some other podcast. I'm sure we will. All righty. So, well, that's it for today. Flipping houses can make you rich. Holding them will make you wealthy. We'll be back next week. And until then, remember, don't wait to buy real estate, buy real estate, and wait.

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