The Science of Flipping - The Power of an FHA 203K Loan | Matt Porcaro

Episode Date: April 5, 2024

Welcome back to the Science of Flipping Podcast, where we dive into the strategies and secrets behind successful real estate investing. In this episode, we're joined by Matt Porcaro, a young real estate investor who's made a massive impact in the industry through his innovative use of the FHA 203K loan. Dubbed real estate's best-kept secret, Matt shares how this loan program can transform the way we approach investing and homeownership. Matt Porcaro's innovative use of the FHA 203K loan offers a new path to real estate investing that challenges traditional methods. By sharing his experience and knowledge, Matt hopes to inspire new and seasoned investors to explore this underutilized tool for building wealth through real estate.---Sign up for Property Leads - www.propertyleads.com/flip---Connect with Matt!Instagram - @the203kwayWebsite - www.the203kway.com

All right, Science Flipping Podcast listeners, as always, this episode is brought to you by Rocketly.ai. If you're looking for a seller lead generating system that has automation in AI bot and has sellers coming to you, then Rocketly.ai is your choice. Make sure you head over to the website, fill out an application and schedule a demo now to see the power of Rocketly.ai. investing, and just real estate as a whole already at such a young age. Matt Procaro is here. What's up, bro? What's going on, man? Thanks for having me. I'm excited about this one. This is going to be something that is so niche relative to what a lot of the guests we talk about real estate

investing. You've not just discovered something, but you've discovered how to make it, I don't know, national, public. You've discovered how to share something that such few amount of people have any amount of knowledge of, including yours truly, which is the 203k loan. Yes. Yep.

Real estate's best kept secret, as I always call it. Well, damn it. Let's blow this thing up and let's make sure you are the man. You have the 203k way, which is essentially a program where people can get to you and ask you questions and understand how to utilize this loan, right? So the whole platform,

I built everything on Instagram, but the 203kway.com, you know, is more information on there about how I do things, how I help people. I have a whole community that I built really to help people with this because I had no information when I got into this about this loan product and really how to use it specifically as a real estate investor specifically like get into the game um but yeah the 203kway.com um or even your instagram what's your instagram at the 203kway there you go to matt porcaro but the 203kway as well so uh I just I dedicated when I first started this I said I want to make sure that I have all the information out there about this that I never had. So. Yeah. So you're not only the president, you're also a client. Yeah. So you yourself have used the 203k a lot worse. Yeah. You know, really the long and short of it was that I was trying to get into real estate investing

for a very long time in New York, really high cost of living, really expensive market. And I read Rich Dad, Poor Dad, which I called taking the red pill because, you know, I grew up in an environment working class. You know, my parents told me to go to college, get a degree and go work nine to five. They had their own business. So like that actually like a like a consistent paycheck every month was that was what they wanted, right? The grass is always greener type of thing. So I did that and I did it and jumped into it and then realized immediately that this is not what I like or enjoy. And then also realized that that's also not how people get rich. So when I read Rich Dad Poor Dad, I read about real estate and I thought real estate sounds

amazing. But in New York, I was like, I don't think I could buy my own house, let alone multiple houses. So the 203k and finding out about this was a culmination of me kind of researching and finding my way to break into the game for such a long time. And I really almost found it out by accident, but it's ultimately will leverage me into the game with very little out of pocket, but created six figures of equity and net worth on my first deal let's go well so let's get to the the strong point of the 203k loan what exactly is it like why what exactly is it and who really is the best use case for it yeah so the fha 203k loan is an fha loan so if anyone's familiar with the fha loan, it's, you know, it's a government backed loan product that, you know, allows people that are just starting out to buy a house with very little out of pocket, right? Three and a half percent. The 203k version is a version that allows you to wrap renovation costs into the mortgage.

So it was, you know, meant to kind of get the zombie homes off the street and, you know, give people the ability to not only buy a house, but renovate it and fix it up and make it the way they want. One of the cool things about it is that it also allows you to buy up to a four unit property. So you can buy a multifamily property. And this is really big with the house hacking community, right? Yeah. So obviously, housing costs are the number one cost for anybody, right? Like your rent or your mortgage payment is usually the biggest cost. So house hacking has become very popular where you rent out portions of your house to cover your mortgage. Or if you're, you know, you really get a good deal, pay for more N plus cashflow while you're living in the property. Yeah. So the 203k really just

pours gasoline on that, on the house house hacking method because not only are you able to buy a multi-family property but you're also able to fix it up build you know some equity into the deal which is what i did um and take that equity to go repeat the process take that money back out and go buy more multi-family real estate so it is like house hacking on steroids i mean it's like the burr method and house act in your own home in your own home with only three and a half percent down so you know i love the burr method right because as an investor i'm buying a rental true rental that i'm not gonna live in right alabama and throughout florida and whatever sure so i love the model and the reason why i love the

model is because essentially at the end of the day first you have the option to have no money left in it right you you do it you do good enough rehab you refi all the money out that you already have in it the the like cherry on top in the good old days which is only about a year and a half ago is you could actually even get cash out refi you could actually get cash in your pocket yeah when the loans were a little bit nicer to us now that all may come back here you know in the next year or two but the burn mild for a real estate investor is like to me at least it is the perfect model because you don't leave in if you do it right you don't leave any money left in now even if you have to leave a couple dollars

your roi on that model meaning i'm always looking for a 20 return return. So that means if I leave 10 grand in, I want to make sure I get that 10 grand back out as whole within five years. And that's a very similar model to what we're talking about here, where you're basically going all in on your personal home, renovating it, updating it, making it pimped out. and you have very little money left in the deal because they finance it all yeah I mean this is insanity so when you talk about like return right so to put it into perspective on my first by both my first house I bought a crack house duplex in New York okay um it was a real story yeah it's a real story. It was literally a crack house. Nobody wanted to touch it with a 10-foot pole, but it was kind of the only thing I could afford,

even in the New York market. I still had to scrape the bottom of the barrel. And I was using the bank's money, and it was very low risk for me. I only had to put $9,500 down on this two-family, right? And how much was the purchase price? So the purchase was $270, and I put $80 into it to renovate it, so I was all in for $350, but only $9,500 out of pocket for that. You had $10,000. Let's call it $10,000 into this property, and you renovated it.

It was a full crack house. I mean, this is like the end-all, be-all for real estate. If people are watching this at justincolby.tv or listening to it on Apple or Spotify, like everyone should be looking into this. Like if you are sitting here, I have friends that literally last night text me like, I really want to buy a new home. Yeah. But the homes I want that are already pimped out look beautiful.

They're the ones I can't get there with the loan rates right now exactly so what would you tell them go find it not find the neighborhood not the nicest one bingo and go renovate it yourself yes it takes time this isn't listen we can paint the perfect picture but it takes time right like this isn't but you're going to be into it for a fraction. I mean, legitimately a fraction of what you would be in if you bought the already done model. You're using other people's money, which is real estate investing 101, right? And in addition to, like you said, buy the ugliest house on the nicest block. And most of the thing, like when you're a

real estate investor, you're just starting out, you're looking you're watching the tv shows and hgtv and you're like you want to flip a house whatever you look at a house and you're like oh all right well i have to purchase it i have to put 20 25 down and then i have to come out then i have to finance the renovation portion of in there looking at hundreds of thousands of dollars and that was what i was struggling with i was like how the hell does anybody do this you know i, I was 20 something years old. Like I had, you know, again, 10, 15 grand, that was it. And that took me a long time to save up, right? Like this, that was like the most money I had ever had in my bank account. So, you know, when you look at ROI and using the bank's money, remember, this is a government backed loan product, and this is a way to launch you into the game. Now, you know, we could talk

more about like how to repeat it and kind of stuff like that. But ultimately what it did for me was it just leveraged me in really quickly because off of that $9,500, again, we'll call it $10,000. The $10,000, in the first year, I built $150,000 in equity into the property. And then I rented out both units after I moved out a year later. And it's still to this day cash flows me like $2,000 a month $2,500 a month so when you look at like when you when you say like you look at a you know for example if you're looking for a deal right you're like I want to make a 12% cash on cash return right that's a respectable return right on a property right my cash on cash return with that 203k property was like 600% I

was just like I don't want to say infinite, but it's like, God, at that point you're like. It's like not even in the same. No, you can't find that anywhere. It's not even the same universe. You know, it's funny. I use the analogy like in our world of real estate, a lot of people talk about like a three X return on investment, right? Like if you're going to go market, you want to get a three X return on your investment and things of that nature, right? This would be like, you can't even compare the two. When you take our normal world and you say, hey, great, you want a three extra turn?

I'm getting a 600 extra turn. Like you say, why aren't more people doing this? Now, the caveat is, is more traditionally for a home you're going to live in, right? This is the BRRRR model, but owner-occupied BRRRR model, right? House hacking. So there's a trade-off with everything, obviously, right? The reason they're giving you the very low down payment, the reason they're giving you the lowest possible interest rate

that you can get at whatever it is at the moment that you get it is because owner occupancy to a bank is the most stable, you know, you know, stable asset class. Right. So, but you're able to do this to leverage yourself into the game. And it's not a first time home buyer loan. Like if you're really, like you were saying, like with your friends, if they're willing to go move into another property, it just is owner occupancy. It's not exactly first time home buyer. Now, obviously, you know, it works well for that. It's, you know, it's also for the person that already has like a consistent income, right? Nine to five person, someone that's already working that maybe wants to escape it kind of like I did. This is your way into it with very little out of pocket and then reap the benefits very quickly. Because what I did was once I had

that equity, not to mention the equity, but also the experience of like doing it, you know, the track record. I was able to show my deal to private money lenders and to agents and be like, wow, this guy's a player. And the bankability, I mean, so I call it bankability, but yeah, that's big. I talk about that a lot. I don't think people realize what that means. Like when you build, when you increase your network worth 200 grand, like, you know, people are struggling, like, oh, I can't find good financing for these. When you go to the bank and the bank runs your numbers and they, they see what you have on your asset, you know, on your

asset schedule. And they see that you have like hundreds of thousands of dollars in equity. They know that you're good for it. That if they really had to like come down on you, you got some assets. So they're more willing to be more flexible with you so one of the biggest things that i was so surprised about when i got that first deal was how much one deal changes your opportunity changes how people talk to you like i was you know i'm electrical engineer by trade like you go to a party you talk to people like oh what do you do for work you know i'm an accountant i'm an electrical engineer by trade like you go to a party you talk to people like what do you do for work you know I'm an accountant I'm an electrical engineer and you know you go to a party and then you then you talk to people and you're like oh what do you do I like oh I invest in real estate you

immediately become the most interesting person in the room now so I'm watching this might not be want that but it's just a crazy thing to think about that like the opportunity that comes your way and it only took one like I remember thinking like oh I only did one like I'm nobody sure but that one the distance between someone that's never done it to the someone that has is massive so when you do that you've accomplished yourself you've proven yourself that you can do it and then you just ride that wave in that momentum and that was about that one got you into a room that I'm sitting in. Right.

Gets you into another room I'm sitting in. And then all the people that I'm with. Because you're one. Yeah. People want to go, you know, I use the analogy, swallow an elephant, right? Like they want to go get the whole thing right now, all of it at once. Take one bite at a time. Just like every human puts on pants one leg at a time.

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i live in miami we're in miami you just flew your happy ass from new york down to miami to rock this podcast i'm super excited we're gonna go grab some food here shortly if you have time yeah of course um i have the flexibility to live anywhere i want i love my my life. You know my family. You've met my wife and daughter, the whole thing. And I hope to meet your family here soon. Soon, it will happen. I'm very aware. You just had your second child recently, and I'm about to have my second.

Changes the game a little. It does, big time. I do get that. If I wanted to move somewhere, let's just take Scottsdale, Arizona. What if I wanted to move back to Scottsdale? I have a permanent residence here. I own it. I have a permanent residence here. I own it.

I have a loan on it. Yep. I have a million dollars of equity on it, right? Does that and the home I'm going to want is in the millions, right? Is there a price point that this loan won't work for? If I already have a home, am I not allowed to use this? And let's just use me as the example because now i'm like maybe this is a move yeah so um and i'm not there's not working the the system like i would

move i would make this next thing a permanent home right the guidelines are very black and white i mean you know at the end of the day to answer a bunch of the questions, right? You know, first off, it is based off of national and local loan limits for Fannie Mae FHA, right? So those you can Google, you look up FHA loan limits or Fannie Mae loan limits in Scottsdale or in Arizona, wherever you're looking to move, and you'll see that they're there. Now, you'll be surprised. Often people are very surprised that, you know, it's a lot higher than you think. For example, where I'm at in New York, a single family home, the FHA loan limit I think is like $1.4 million or something right now. So there is a baseline.

Obviously, you're looking at some sweet pads. But remember, that's the loan limit. Now, what's not to say that you being a great deal finder yourself, you find a deal that you know the ARV is going to be 2.4, but you pick it up for 1.4 or 100, or I mean a million, and you're putting 400 grand into it, it's going to be worth 2 and change. It only goes, the loan limit they give you is based on- It's not the value of the home, it's the loan limit. Correct.

That's the highest loan you can get. So it doesn't mean I have to buy a home that is only worth 1.4 right and so yeah and so long as you qualify for it is is the big thing too um you know if you and then again if you're going into the new residence they're going to ask and you plan to keep your miami residence they're just going to say okay what are you doing with the miami residence are you renting it out what are you like if you're if you're covering or if you could afford both that's it's doable too it is a doc loan right so they are looking at your income sure and your debts and what that dti ratio is they look at a 50 debt to income ratio that's really what they judge you off of so that's your maximum right so whatever your income is versus your debts you want to be your

gross income um needs to be 50 percent so do they, would I have to have my personal residence in Miami already rented out before I made the move? So there's a couple of different loan products that exist and they have different requirements. FHA is the stricter one. Sure. Fannie Mae has a product called the Homestyle. I'm actually doing it on my own home right now. So I practice what I preach, man. We're going to use the Homestyle loan. We're renovating our own house. That's another example. We picked it up for 615 we're putting about two three two three hundred into it but it's going to be worth like one three when we're done so we're building almost a half a million equity finance your purchase and rehab on that as well yeah absolutely

so again getting the worst so my neighborhood i literally was just messing around the other day so i go and buy the 800,000 but let's just say i even have to add square footage does it allow for that everything all you could really no addition cost as long as let's just use the example it's 1.4 just like new york just to keep the example yep as long as i'm all in for the loan at 1.4 or less it doesn't matter additions add a thousand square feet add a pool yeah whatever we added 800 square feet to my house say that i can i can add a pool if it didn't have a pool so great question great question fha the 203k fha um is a little more

strict they're not really that strict really just has to be integral to the house itself so it needs to be you know you could renovate you could get nice finishes you could get like you could have a pool and i can redo a pool you could redo a pool now the home style loan which is fannie mae's product which is the conventional product is a lot more flexible you can build a pool pool house uh basketball court whatever it's kind of just gives you carte blanche now they will so obviously there's the loan limit but what they really uh look at for for you at for your average buyer is they look at what the ARV of the property is going to be. And they give you up to 100% of that on the home style. On the FHA 203K, this is pretty wild.

They'll finance 110% of the ARV. So they'll actually let you over leverage it by 10 um obviously not something i am a big fan of as a real estate investor like i don't feel like you should over leverage story before with uh 2006 seven yeah yeah you do but i think i think the reason that fha probably does it is because again they know that you're renovating it for your own home and they probably again it's the owner occupancy so they're're assuming you're gonna be there for a little. Yeah, they assume you're gonna be there for a little while. So like if you're willing to over leverage it,

if you're there in 10 years, the appreciation is gonna make up for it and you'll be fine. Interesting. This is an interesting thing. And I would tell you most investors should be looking like, so ironically, as someone who's a full-time real estate investor, I'm not a big advocate of buying your own home.

Yeah, a lot of people aren't. Yeah. And this kind of changes that for me because I think like an investor. So I moved to Miami from Scottsdale and we did buy a home because my wife wanted to own the home here. Yeah. Fair. But I still look at it as an investment tool because what I just told you, I probably have

roughly a million dollars. That equity is only useful to me if I go use it. But I have roughly a million dollars worth of equity in this home. But bankability too, right? It gives me bankability. So in the sense of, hey, we might move somewhere. I want to buy a rental. I want to buy this flip.

I can go get that money out of my home and use it as a tool as a real estate investor. But this, what we're talking about, actually kind of spins my concept in my head saying, well, maybe everyone should actually buy a home because they have an opportunity to be a real estate investor while doing it. And it doesn't have to be permanent.

This loan, you don't go to jail if you leave the home in two years like you did yeah um you know it allows you to become an actual real estate investor even buying your own home and then i would make an argument everyone should because if you're adding the value just like a flipper or a burr again a burr yeah i want to add so much value i have equity and then when you have equity you have the bankability and then you can go rinse and repeat this model essentially forever depending upon your lifestyle right i say that this is like the new american dream right we can't trip and fall into a house anymore like we could like society could 60 years ago right right or 2005 yeah right you have a you have a pulse and you got a loan approved um that was me by the way i literally yeah i got a six percent hundred

percent finance deal top of the market brand new build they didn't care i just like submitted my social security and they're like yeah you, you're fully approved. Six percent interest. I was like, this is wild. And to that point, right? Like you talk about like the assets versus liabilities. And there's that like common thing that Robert Kiyosaki said is like, you know, your own home is is a liability. It's not an asset. It's other homes that become assets. Your rental properties are assets. But your own home is a liability because typically for most people, their own home is they go in and they spend a ton of money to, you know, maintain it and landscape it and repair it. And like over the course of 30 years, it's not a true investment. You're not making money on it. Now, like appreciation will go up. But again, I think his point is when you add up all the expenses and you add up like the interest

that you pay over it on 30 years, you ever look at it, you add up all the expenses and you add up like the interest that you pay over it on 30 years, you ever look at it, you know what, obviously a truth in lending statement is, right? So when you, when you take out a 30 year mortgage on a $500,000 property over the course of 30 years, you're actually paying over double of that 500 grand. So in what universe is that a good investment, right? You paid a million dollars to make 500,000, right? Now, of course it'll appreciate a little bit, but okay, good investment? Right. You paid a million dollars to make 500,000. Right. Right. Now, of course, it'll appreciate a little bit, but OK, maybe you break even with this method with building, you know, again, it's it's value add investing. Right. It's the BRRRR strategy. It's a way to force yourself into some equity and basically just like press the fast forward

button on the process. And that gives you that leverage and that creates it into a true investment. Now to make things even better, again, you can buy a multifamily or even now, just as of like really last year, they're letting you forecast the future rental income or letting you use the rental income of accessory units. Like down here in Miami, they have like casitas, like little mother-in-law suites, right? Typically, they wouldn't use that rental income to qualify you. So you're able to take that rental income and really offset your mortgage or if not cover it all in these higher cost of living areas. And one cool thing to know is that for every $1,500 in rent that you'd be getting from either,

you know, there's ADUs, accessory dwelling dwelling units which are becoming huge right now because there's such a such a lack of housing in the u.s right now adus are sweeping across the nation so if you're saying to yourself oh i can't buy a multi-family i live in an area that's only in single family homes well you could just plop down a casino i mean you could even buy one of those like amazon houses those pre-built prefab houses and drop it in your backyard the 203k will finance that you're just blowing i mean the whole amazon housing thing it's amazon's just gonna own the world at some yeah they will this is getting insane yeah yeah so like you could buy it you could buy a prefab house obviously you have to like you know finish it and do some like stuff

inside but like it's a pre-built structure that you drop in your backyard, as long as your zoning allows it, you can get the rental income from that qualify yourself for more. Again, now that's a true investment. You're how you're making money off your own home. And that's an investment. And that's where you're basically beating the system. When I say like, the American dreams new, like this is the new American dream, right? When my family came over from, you know, like Italy and, you know, from, you know, from Ireland, right? And they moved to New York City. They all house hacked. Yeah. It was called like, this is how we're going to afford to live in New York City. They had multifamily properties. They lived in these tenements. They all pitched in. One of them in the family was the lucky one that had the note and they took all and they all

combine their rent together that was how people that immigrants came over to the united states that's how they were able to afford it and that's how a lot of people do it you see it you still see it to this day immigrant families come in and they share housing house hacking is like the most american thing you could do in my opinion young kid i mean i don't know and i know you coach a lot of people for this but i would even say if you're a young kid and what i mean young you know 20 to 30 yeah if you're in your 20s going to college just out of college this is the move go buy a home in house using this loan this would be everything now you might need can can you do like co-signatures co-signers on it you know because yeah of course 21 you may not have the dti kind of ratio and all that other

stuff but yeah then you get all your friends to pay you rent you effectively are living for free you're actually paying down your home mortgage which we know the first five to seven years is heavily interest rate bill anyways yeah they're all paying that down you now have your very first investment it is a 21 year old 25 year old 30 year old that essentially you're going to have the bankability from having all this equity that all your friends just paid you down right you have a party house that you're going to love anyways you're going to be with your friends all the time anyways you now actually have your very first investment that could make you a millionaire before you're 30, depending upon where you buy it. This is like the, I keep saying no brainer to me because I'm even sitting here just thinking like, instead of giving my kid a fund or a college fund or whatever,

you go buy her a house to do this with and actually help her understand the value of money, help her understand business. And if for sure, get her understand the value of money, help her understand business, and if for sure get her into the real estate game. It's, it's free money that everyone could take advantage of. Right. And it's, it's, you know, I'm not the biggest fan of the government by any means, but I think it's one program that they really did get pretty right. And, um, just with like anything else, like you said, it takes effort. Now, you know, um, what's the quote, like to the Victor gets the spoils or whatever it is. Like, listen, you, you, like, you're not going to get something for nothing. Right. Do you have to live in the home while it's being

renovated? No. So you don't have to actually like physically occupy it. So what happened in my case, right. Um, you know, I bought the property. It was an eight-month renovation. So the requirement is you have to be, you have to intend to be there as your primary residence for a year after the closing date. Okay. So what happened was the renovation took me eight months. Now, in my position, I was lucky enough. I was able to live with my family at the time.

So I didn't have to pay for two, like a mortgage and rent at the same time. However, they have it built into the loan because they know- Oh, you had eight months of living living with their family yeah but but one of the cool things and one of the cool features is like they understand that you might be paying housing for another place while this is being renovated so they give you the option to wrap up to now they just change it up to nine months of the mortgage into a night of your mortgage payments into the loan so now you don't you can buy the property not pay out of pocket for it while it's being renovated then when you then

when you're done you can go in and then start making the payments so i feel like this is going to make me want to move every two years it's listen and i'll just build a portfolio yeah for the rest of my life and i'll just need to sell my wife on this idea yeah but honey we're gonna have you know 42 million dollar homes across the country and we're out and the coolest thing about it is again just very recent so here's the thing right obviously we know what's going on with the market right everything's changing everything's getting more and more expensive it's getting harder and harder for millennials to buy a house um let alone renovate it um we saw it was all in the news like there was a big downturn in the in the amount of mortgages being endorsed right it was like an all-time low or the lowest in 18 years whatever it was right and people were just not buying homes yeah they thought that

jacking the interest rates they thought would you know know, help it, but it didn't actually, people were just like, well, we can't afford anything. And sellers are like, we can't go anywhere. Right. So it, it did the opposite, like, you know, value state up. So FHA and Fannie Mae, even though they're government backed entities, they're still entities and they still need to make money. And what happened was that they were, had to go back to the drawing board and be like, well, how else are we going to continue to make these programs more feasible, more attractive? Because we got to do something because we're not bringing in any business. We have no mortgages being endorsed.

So they made a lot of changes recently. Fannie Mae, typically FHA was the only product that you could buy a four unit up to a four unit property with only three and a half percent down or a low down payment if you own or occupy it, right? With Fannie Mae, you could buy a quadplex, but you would have to put 25% down, even if you lived there. Fannie Mae changed it where now you can buy up to a four unit property for only 5% down. And one of the big issues people were finding with FHA, we were just talking about it with one of the guys over here about the self-sufficiency test, right? FHA has this thing where like, if the property doesn't pay, it makes sense. I mean, it's common sense, but FHA had this test where if the other three units

that if you're living in a quadplex, if the other three units couldn't cover at least 75% of the mortgage, they wouldn't give you the loan. And it knocked down a lot of people's opportunities to buy quadplexes. It also exists with triplexes, same kind of deal. Fannie Mae stepped into the mix. They don't have that same requirement. So as long as your income can do it and you're able to factor in that future rental income, you can do this now and then fannie may unlike fha fannie may allows you to repeat the process they allow you to have up to 11 of these in your name at any given time where fha only allowed one what so i can have 11 of these yes including your what is the length what is the length of like having to move? Or how quickly can I buy it, live in it?

A year. So every year I could move my happy ass for the next 11 years. As long as you follow the guidelines on what you're doing, you have something that's going to cover the debt on the previous property, and you qualify income-wise, and you're moving in earnest into the next property, absolutely. Sanity to me. Yeah, and five percent down

every time like you so i know people right now are probably feeling the same way i'm feeling the best place for them to inquire more is just go hit you up on instagram instagram yeah now is there any place that they can like apply or is there something that they can because i know i'm sitting here and I get the privilege of essentially asking the questions I want to know. Yeah. But I'm sure these watchers and the listeners are like, Matt, how do I know more?

How do I learn more? So Instagram? Yep. 203 K way? The 203 K way on Instagram. I've been posting consistently every day for six years on there. And again, when I built this,

all I wanted to do was, I got done with that first deal. And I just remember sitting in that property, being done with the renovation, smelling the paint on the walls, smelling the new floors, like looking around and just being like, how the hell do not more people know about this? Right. Why did this take me so long to even know it existed? And mind you, like my it wasn't a walk in the park for me because I didn't have someone like me that knew about it to walk me through it. I kind of had to just figure it out on my own, which I'm glad I did. Right. Cause it taught me so much about it. Um, so when I created my whole platform, the two or three K way, I just wanted to let everybody

know about it. So my Instagram, um, you know, my YouTube, I have all the information you could ever want or know step by step. Um, you know, obviously people, I have all the information you could ever want or know step by step. You know, obviously people are like, OK, listen, I get it, Matt. I understand it. I want to do it, but I just want to do it and get it right the first time. Make sure I slam dunk it. So I do work with people, right, one on one. And I coach people through it and, you know, guarantee that we walk you through the process to get you six figures of equity, get you cash flowing day one. Right. Using this strategy. So you could go to the 203kway.com slash apply to apply to work with me. It's not for everybody. You just have to make sure that you're the right fit for us to work together. But that's an option

as well. What, so when, I mean, I just want to not be totally selfish with the questions I want to keep doing. I always say like the questions that you have are probably the questions that everyone else has on this, not many people know about it yeah and that's kind of the benefit I have going on podcasts and stuff like this is like you know people are like oh what do you want to talk about I'm like you're interested in it just ask yeah because there's so much to know and there's so much I could tell but the questions that are obvious to you are probably what everyone else is thinking well I think the obvious thing for any person looking to be a true real estate investor would be i would encourage everyone to you can do it on a single family home but i would probably go to a duplex triplex or quadplex 100 i would really encourage

that i'm kind of asking questions like hey if i were ever to move with this probably be a better strategy for me and now how's the everything that we're seeing with loans right interest rates going up whatever which is not even that bad that's not people are making it way more than it needs to be my 203k the first one i did i got like six and a half percent what are what are rates look like now for a 203 it's the same as fha so yeah it's it's an fha loan now there's a lot of lenders out there that don't do this or they'll claim to do it or they'll say don't do it with you is because you can help navigate them where to go right so here's what i'll tell everyone listening to this everyone watching this on on youtube make sure to reach out to matt like i if i were to use this i would be calling

him saying hey where do i go what do i do what lenders do i do what app do i need to fill out like the questions i'm having is like how far down the path do i need to go before i start the process right do i need to just go get the approval first yep or do i need to go before I start the process? Right. Do I need to just go get the approval first or do I need to go find a house first and then go make sure I get approved? Do I want to have an offer in on a house? Where do people start? The first thing to do is work with a lender that knows how to do these. Now, luckily over the years, I've been able to build relationships with lenders that do this. They do it nationally. I call them my preferred lender partners. I'm not a loan officer, I'm not a real estate agent. I'm just a big fan and proponent of this process.

You're a spokesperson. I am, I really am. I'm like the unofficial 203 influencer. I was just gonna say, you guys better get this guy a sponsorship or something because this guy's pushing way over here. I don't need to be on any government payrolls. But I've been able to build that.

And for every lender out there that will tell you, oh, it's too much of a pain. It's just, you know, I always make the analogy. If you have a Porsche, right, and you have to get the oil changed or something, your tires rotated, you don't bring it to a Honda dealership. Right, right. Now, the Honda mechanic could probably do it. But, like, why would you? He's going to fumble over it. He's going to make mistakes.

He's going to, you know, really just give you a problem with your asset. Right. So, um, the two Oh three K way.com slash lender, you go there, fill out a quick form, say what market you're in, what you're, you know, little couple other questions. We'll put you in contact with a lender that's in your market that specializes in these loans and does them day in day out you know one of the cool things too is like you could wrap in like damn near all your closing costs like all my students all the people i work with like when i say three and a half percent down i get three and a half percent down so anyone that's quick with math right when i said 9500 bucks on a 350 000 loan that was my first deal yeah anyone that does math and is like you know not one of me but people that are done quick with math they'll be like well that's that's actually

like 2.5 percent or 2.7 percent how'd you what's that i got a full six percent seller's concession back at closing so you could get six percent back at closing month with fha of the purchase price my six percent seller's concession over paid my closing costs. So I got a check back at closing. I was actually supposed to lay out like another couple grand. Instead, that money came back to me. So my net out was $9,500. Because you're able, again, when you find a good deal, you do all this stuff. You could wrap in all your closing costs.

So the principles are still the same, though. Find a good deal. Find the worst home in the best neighborhood. It comes down to the same principles I would teach as a real estate investor. A hundred percent. Find the right deal. Now the caveat, you're going to live in this one, but find the best deal for you at the best price. And then the same thing, figure out where the end value is going to be. Make sure you are well under that. I would make the argument. You want to be at 50% of the end value. Yeah. So if you buy a million dollar home, you better hope that is 2 million by the end of it, that's the right type of deal. They're going to finance up to 1.4 million in the

New York area, who knows around the country. You still have to use investing principles. 100%. That's the key. That's why I love this so much is if you're listening or watching this, you already have enough understanding of investing principles you're interested in investing right you're gonna help them take that everyone reach out to Matt to a takeaway but like because they need to learn more they need to have someone like you to coach them through this process like I've done this 16 years I'm still gonna call you and say hey dude I think I'm gonna do this thing yeah help me make sure I'm buying the right type of home

I'm getting the credits I need that I'm getting them max. The tenants and the foundations of real estate investing are the same, but it's the nuance of the loan itself and how it operates is where I come in and specialize in. Cause I know how to pull every lever in the process, right? I've helped hundreds of people do this. And like, I know where to push the button, where to pull to get the most, keep as much money in your pocket as possible, where to, where to leverage and pull the most out. The other cool thing, like we're talking about finding a good deal

and that's obviously the most important part of any real estate investing endeavor, right? The coolest thing about this is because you're putting so little out of pocket, because you're paying such a lower interest rate than a typical investor using like a DSCR loan or something like that or an end buyer, the deals pencil out easier.

Like, you know, I call it the Goldilocks zone. You're basically playing in this, in this, in this part of the market where like you can buy, you can afford more than like a flipper or a wholesaler, but you're not playing with the retail buyers because retail buyers are looking for move and ready stuff. That's going to pass inspection. Right. You can go on the MLS and everything that's in as is condition and stuff stuff they say like cash only like you can purchase all of that yeah the the really the only thing with the condition is it needs to be some existing structure of some kind it doesn't have to be there's no such thing as a too too you know too messed up of a property there's also no such thing as like too nice of a property yeah you could

move into a you could get a house that's move ready totally financeable but if you want to renovate the kitchens and bathrooms and as long as it you know the loan to value works out you could do that too it has all the principles and like i was just thinking like the only caveat is if you wanted the aesthetic that that doesn't count within the load meaning you know when i bought my home here miami so we took out all the lawn we put in turf we put in pavers yeah that's aesthetic they're not going to wrap that in the load because they will on a home style they will for sure 100 yep yeah yeah that's interesting because i'm just thinking about like homes that i would like maybe i want to remodel the inside that's the obvious. But what about the backyards and like making them look better because they're just, or they didn't do anything to it.

Yeah. I mean, you could do all that. And then Fannie Mae also, mind you, has two other products that you don't have to occupy the property. Fannie Mae home style loan, you can get a 10% down second home loan. So as long as you live there, some portion of the year follows like the second home standards, right? You have to live live i don't know what the exact number is yeah you could buy it and renovate it with only 10 down and then they have an investment product where you can go and buy another property um only put 15 down but they give you the purchase price plus the renovation airbnbs now you know that's usually like a hard money lender in my space. You're talking about it as a flipper, as a burr guy.

I buy it. I remodel it. My lender makes me put 10% down. They will refi me out of the remodel. Now, in my space, I actually have to pay the first draw. They reimburse me. Yeah. You're paying points up front, stuff like that.

Is it the same thing in these type of loans where you're paying the contractor the first 20 or 30 or 40 50 grand then the lender reimbursed or is it no you don't have to pay out of pocket for your interest the check goes directly to the contractor this i mean listen we only have so much damn time but i can pepper you for hours yeah so because again if you're watching this if you're listening this i would make the argument if you're in your 20s at all if even 30s or more it doesn't really matter yeah but this is your way in to my world to the real estate investing world without necessarily making it a business per se but you're getting your foot in the door the amount you would learn by just doing this and buying your own home i mean you've really changed how i view buying a home because

it becomes an investment tool because you get the bankability you get the equity you're not coming out a lot cash the reason why i like the burr is if you do it right your money's all out you don't need to have any money into that thing right yeah i mean listen three and a half percent of your own money in your own personal home that you've created 30% more value, 40% more value. Like that's a no brainer on your return on investment. What's the, what's like the average appreciation rate right now in the U S do you know what it is? I think it's like somewhere around five or 6% five years a year. So think about this. If you renovate your house, you're the new top of market. No matter where you are in the country,

you renovate it. You are the new comp. You are in the new standard. Okay. So you're already at the top of the market. So that alone, when you get your appraisal, you're going to get a bump because your new finishes, you're brand new. So right off the cuff, let's just say on the low end, you're making 10% of equity. If you even like, don't even plan to be a real estate investor, you're just setting the comp right now you also appreciate it five percent a year let's call it five percent five six percent right you doubled your down payment by the time you're done with your renovation like i have a guy that's doing a big renovation right now it took him a long time year and a half it's a million

plus dollar property big renovation his equity has gone up like a hundred thousand dollars in the time it's taken him to renovate the property he's not even in it yet and he's already made a a respectable year's salary in equity just by owning it off of i mean this was a million dollar property he only only put 35 grand down three and a half percent. So he is so wild. Yeah. Yeah. Triplex in New York. And it's again, so like you're, you can't, I just say like, this is not an FTC thing to say, but like literally like every person I've worked with, like never loses. You're putting so little down. If you follow my strategy and you work with the right people obviously that like know what they're doing yeah it's you can't lose on it's three and a half percent it depreciates way you have an asset it's a real estate there's the benefit of having an

we're going to go make of course in the game of real estate testing that's guys make sure you go follow matt porcaro he is my good friend um i'm gonna be peppering him with questions at lunch yeah but uh 203k way on instagram yep uh youtube yep follow him but apply like get engaged with them like don't do this alone that's the one thing i would say because i'm not if i decide to do this i'm not going to do it alone yeah i'm going to be peppering you with questions yeah it's all about building that foundation from the get-go as long as you do that it's it's really hard to fail on this uh this is phenomenal yeah man this is phenomenal thanks for coming by thanks for having me all right y'all i'll see you guys on the next episode of the science flipping peace out