Welcome to the Diary of an Apartment Investor podcast. I'm your host, Brian Brisco, with
Four Oaks Capital. And I'm very excited for today's show. This is one of our ask the expert
episodes. We have two absolutely amazing people on the line.
We've got a guy with a ton of experience in the multifamily and real estate in general,
Matt Faircloth. So Matt has been a full-time investor for 15 years. In that time, he successfully
completed projects involving dozens of fix and flips, office buildings, single-family
homes, and apartment buildings. He started with a $30,000 private loan, and has now completed
over $40 million in transactions using private money. He's a regular contributor and podcast
guest on BiggerPockets.com, has an active YouTube channel dedicated to educating investors,
and is the author of the Amazon bestseller Raising Private Capital, How to Build Your
Real Estate Empire With Other People's Money.
That said, Matt, welcome to the show.
Thank you. Thank you. Thank you, Brian. Great to be here. Thanks for having me.
Yeah. So I usually read one book a month on multifamily, and your book was the one that
I read in May. And I tell you, I absolutely love it. I think it was full of actionable
information in there. I think it's something that anybody can pick up. It doesn't matter
what level people are at. We've raised $4 million in the last year, and I had a lot
of takeaway items from that. So that's a great book. Thanks for writing it. Thanks for putting
it out there.
You're welcome. Thank you for reading it. And I know you told me you just wrote a review
on it, so I appreciate you doing that. For anybody else that read it, please take a moment
to write a review on Amazon because it really helps propagate the message from the book
and helps make people aware of it. And it was a pleasure to write, and so thank you
for your compliment.
Yeah. And it was a five star review. No arm twisting or anything like that.
No.
Sincerely, it was a great book. So very happy to help promote that any way I can.
I've been following you for a while. I got to tell you, you've got a very impressive
group. You've got a lot of stuff going on. So if you would please, why don't you take
a minute to tell us a little bit about your background and your history up until the point
where you decided to do apartments. I know there was a lot of fix and flips and other
things in there, but-
Sure. We've always worked on opportunity. We're just real estate opportunists as a company
over the last 15 years. And we tried a few different things, levels of real estate that
worked at our capacity at the time. We're not this company that just took a weekend
course on buying apartment buildings and decided to become apartment building experts after
the weekend was over or anything like that.
We've been doing a lot of residential stuff. We've done a lot of flips. And that really
just has to do with the market. A lot of flips that we did were in the run up to the crash.
And then in the rebuild, after the crash, a lot of the flips that we did and we were
successful with were then in that. So we've always been, just call it just playing the
market that we're in because a good friend told me years ago, "You can't change the market.
You can only hope but to participate in it." And so at the time, and at our capacity, fix
and flips and small residential deals made sense.
And as our capacity changed, and as our knowledge base and as our team changed, and as our capacity
for raising capital changed, we've slowly grown bigger and bigger into apartment buildings.
So it's just a natural migration that way. But we've been in deals that worked for us
at the time. And I still own a lot of that stuff that we bought in 2005, '06, '07 pre-crash
and own a lot of things that we bought right after the crash too.
Well, that's a lot of experience. I think a lot of people in the business now haven't
experienced a crash and don't have the same lessons learned.
They are now.
Yeah. We're going through a little hiccup. I'm not sure if I'm going to call it a crash
yet. I think we need another year or two to really decide that one.
Yeah. The other shoe hasn't dropped for just yet, but we'll see.
So let's address that. How are you doing things differently right now in this COVID environment?
Well, COVID changed a lot of things, of course. And I think that it exposed that a lot of
folks that invest in real estate up until COVID were playing the rise, meaning they
were like, "I'm going to buy an apartment building and it's not going to make any sense
or make any money at all when I buy it. But what I'm going to do, is I'm going to renovate
it and I'm going to raise rents and I'm going to play a rising economy by raising rents
and encouraging people to pay me more money for this property mainly because it's got
new countertops and stainless steel appliances." Which by the way, this isn't a new game. That's
a game that I think was playing in 2005, '06, '07, is renovation to play, appreciation.
And that's been going on up until COVID hit.
I can't speak for other real estate investors. And I think there's other folks that are still
out there trying to play the renovate to ride the appreciation tiger themselves. And that's
just never been a game DeRosa has played. We have been, always will be, a cashflow company.
And so we invest for cashflow. We invest for dividends. We invest for yield now. And so
I've rarely done a deal to bet on the coming because my crystal ball is broken. I'm just
not a hundred percent sure what's in pre COVID because we just never knew what was going
to happen.
So we would just invest for what was going to happen then. And so we've always invested
for cashflow and the COVID has caused us to even further push into deals that just make
sense at acquisition. So a deal we have under contract in North Carolina, in Winston Salem,
right now produces great cashflow day of closing. And we're only going to increase that cash
flow, but I'm not going to cross my fingers and hope that it cashflows or put a bunch
of supplemental capital into the deal so I can pay investors pref and cross my fingers
and hope that the market forgives.
And I was talking to another investor the other day and he said that a growing market
forgives a lot of mistakes. Which is good. But the whole US has been growing for a very
long period of time in real estate values and in rental values and everything like that.
And I think we're going to see a lot of mistakes get exposed as the market... I think more
likely you're right. The market is more likely going to level off versus crash or anything
like that. But I think that we're going to see a leveling out, which is going to change
strategies and maybe push people more towards cashflow.
I think so some of the hot areas of the US, you almost don't cash flow. I was born and
raised in Salt Lake City, and the first place that I started looking for multifamily was
Salt Lake City. And I had to use a 5%, 6% appreciation year on year, just for the deals
to pencil. And they had been getting that for the previous years, but you just can't
count on that. And I wish I had a crystal ball. Yours is broken. At least you have a
broken one, but without that crystal ball, it's really hard to bank on that. So, I appreciate
that. I think that's a very solid investment strategy. You invest for cashflow and if it's
cash flowing on day one, you're going to be okay.
If you don't mind, what's your motivation for investing in apartments, in real estate
in general? What is your big burning why behind it?
To make lots of money. No, not. It's not. No. I think if your motivation is to make
money... I talk to so many people and their motivation, I can tell, is to make money or
because they hate their job. Number one, if you're investing because you hate your job,
just go get a new job, because real estate investing is a big fat job too. Or can be.
And, and secondly, money is only a vehicle. It's not the why. So for us, for my wife and
I, our why, and I wish this DeRosa sign behind me had it written on there, but it doesn't,
it's to transform lives through real estate. We believe that real estate investing can
create transformation for the people that live in it, for the people that work for it
and the people that invest in it. And so we're all about creating a better life for people
through our business. That's what we do. And that's why I do what I do, because I think
that we can leave a real impact on people if we run a business that's beyond profit.
Yeah. And you know what? I was following your YouTube channel long before we met for the
first time. But you put a lot of free content out there. And I think that's a testament
to what you just said is, you're looking to help other people change their lives. And
just putting all that free content, and it's a very good channel. And I love how you break
a lot of things down, almost Barney style. So anyway, I really, really appreciate that
and appreciate what you do. So, if you would, please, could you give us a rundown of either
one of the deals you've done or the typical type of projects you guys are doing right
now?
Again, not pounding my chest because this is a large deal for us too, but it's a 336
unit in North Carolina, with your typical bidding process, best and final and everything
like that to get the deal. But because of COVID, we got a 12% discount off of... The
owner had it under contract before COVID. Lined up to go to closing. Buyer backs out
because COVID hits. And the buyer was going to use something called bridge financing,
which is where you get really high loan to value in your purchase price, 100% of construction.
Bridge financing is a phenomenal way to finance a deal, but bridge financing has pretty much
dried up. So that borrower could not do a bridge anymore, so they canceled the deal.
And so, there are deals to be had. And the seller is motivated. They're ending one partnership
and starting another one. So they need to sell to close out their books and to close
out this partnership they have. And so they're motivated. And so the purchase price is not
good. It's great. And we're super excited about the deal, about the location. I think
that, given COVID, that we should all look for a location. We should try and get better
locations geographically because of COVID. North Carolina, one of the best states to
invest in from what I think, anyway. I'm biased because we already own there, but it's got
a great market.
The next thing for DeRosa is where I think that real estate is going to start going and
where I think that specifically passive investors are going to start going, and that is a blended
fund. I think that the days of folks saying, "Okay, here's the property I'm buying. If
you want to invest, we're going to invest in this property, 123 Main Street and we're
going to sure cross our fingers and hope our business plan works. Off we go. In and up
market, that's okay. Because likely all those properties are going to do well.
But with COVID and with the potential recession and with everything else that's in the pipeline,
diversification makes more sense, and exposure to opportunities makes more sense too. And
so we're going to be building a diversified fund that invests in, not just different deals,
but different deals, different operators and different asset classes. And so we're going
to build the diversified fund that's going to produce, at or better rates of return.
But because the diversification that we do, we're going to be able to offer other benefits
to investors, including pass through tax benefits, but also liquidity.
And, when can you invest in a syndication and have your cash be liquid still? Through
liquidity, we can offer the opportunity for investors to get in and get out. So, that's
something we're building. We're in the middle of building that diversified fund, which I'm
super excited to launch when we do, probably towards the end of the year. But that's next
for DeRosa.
And then I really want to start flying our transforming lives flag a little more about
how what we do can really, really benefit the rebuilding of America and the benefiting
of people's lives. And we really want to take that public beyond the typical circles that
the three of us swim in, more national, and more national marketing, more bigger brand
advertising to try and expose a lot of America to alternative investments.
I hope that helps. And I can say, all the people on my real estate team, none of them
were employees and they all had their own businesses, and we just formed a collaborative.
But I think that it takes a certain level of tenacity, a certain level of facing adversity
and problems and being willing to stay in it and not quit. I think that's just required
for this business because this business can be like strapping yourself to a rhinoceros.
It just doesn't want you sometimes sitting on it, so it likes to try and buck and everything
like that. So there can be rough days in real estate.
Yeah. I'll throw my two cents in and I've got this plastered all over my wall. I'll
show it for the camera so you can see it. Hustle. So my big burning why is similar to
yours. I've been in the military and it's not an easy life for families. And I want
to be able to maintain the same standard of living and get out of the military so I can
spend that time with my kids. So I've got that big burning why. And I remind myself
of it. I've got a countdown. I think my last day in uniform is going to be August 5th next
year. So, today, that is 371 days away. So I've got that countdown. I got my big burning
why, and on my wall it says, 'Hustle. Verb. The most important word ever." So, I've got
a definite timeline. I've got a big burning why, and I got constant reminders that I need
to keep hustling to make that come to fruition. And that helps with tenacity.
I love that. I love that banner. That's so cool.
So my attorney actually sent it to me, my SEC attorney. So I saw that and I'm like,
"You know what? That is absolutely perfect."
We're about out of time guys, but I appreciate both of you guys for coming on the show. I
appreciate the value you brought. And Katie, I really, really appreciate your situation,
what you've done. And I think being a military wife is probably the hardest job in the world.
And you handle it with grace and a lot of thinking outside the box to get things done.
Matt, I've been a fan of yours for several years, so, appreciate you coming on this show.
So one question for both of you, and Matt, you go first, how can our listeners get in
touch with you?
Sure. They just go to DeRosagroup.com, D-E-R-O-S-A group.com. On that website they can buy a
copy of my book. They can hear more about investing with us. If they're accredited investors,
they can get in touch with a lot of our education outlets, including my YouTube channel and
my wife's Real Estate InvestHer show at DeRosagroup.com.
All right, perfect. And that'll be in the show notes. Hey, once again. Thanks guys for
coming on the show. Really appreciate the time that we spent together today.
Thanks, Brian.
All right. And that's a wrap.