Financially Free in 4 Years by Making One VERY Smart Money Move

Scott:
Welcome to the BiggerPockets Money Podcast, where we interview Matt Amabile and talk about house hacking with a 203(k) loan and journeying towards PHI in your 20s. Hello, hello, hello. My name is Scott Trench and with me today is my co-host, James Dainard from our sister podcast, On the Market. James and I are here to make financial independence less scary, less just for somebody else, to introduce you to every money story, because we truly believe financial freedom is attainable for everyone, no matter where or when you’re starting.

James:
Whether you want to retire early and travel the world, go on and make big time investments in assets like real estate or start your own business, we’ll help you reach financial goals and get money out of the way so you can launch yourself towards your dreams.

Scott:
All right. We have a new segment of the show called The Money Moments, where we share a money hack, tip or trick to help you on your financial journey. And today’s money moment is, if you’re thinking about taking a vacation, plan ahead and book your flights at the appropriately timed moments in advance. So, for example, flights are generally the most inexpensive between four months and three weeks before your departure date. So, book in that time period. Matt Amabile is a 20-something-year-old with a house hack and a rental portfolio. He created a goal to reach $5,000 in mostly passive income so that he could travel the world to live life on his terms. Matt has now surpassed that goal and is looking to expand even more. Matt, welcome to the BiggerPockets Money Podcast. We’re so happy to have you.

Matthew:
Scott and James, thanks for having me. I’m so happy to be here.

Scott:
Well, Matt, to start, can you tell us a little bit about yourself and your relationship with money growing up?

Matthew:
Yeah. So, I would say my big journey starts off in college, but if I jumped it all the way back to when I was five years old, I saved up around $100 from a lot of money, like $10 from my grandma, $20 from my other grandma. And once I hit $100, I thought 100 was the biggest I could count to. So, I thought that that was the most money I would ever get. So, from that point, once I found out $100 wasn’t the max, I was obsessed with money. I always thought about money. Then we jump all the way forward to college, where I was going to be spending a lot of money to be going to school. Luckily, I ended up getting some financial help, scholarships through academics, and was able to go to college for free. I went to community college for two years, got some more academic scholarships to go to Rutgers University for free, then I came out of school.
I was making $55,000 a year, not really a ton of money in the New York City area. Went on a European trip. I went out to Europe for around a month. I spent around $5,000 when I was over in Europe. And then once I got back from Europe, I was like, if I could just create $5,000 a month somehow, I could probably do this for a good amount of time on my own, and go and travel Europe for the rest of my life realistically if I wanted to or for however long I wanted to do that. So, then life started, and I started working $55,000 a year, sleeping on my cousin’s couch so I could save some money. And there comes a point where my girlfriend breaks up with me, I’m sleeping on my cousin’s couch to save money, and my life, it’s staring back at me. You’re not making good money, you’re sleeping on a couch, how you going to get another girlfriend? Everything was a mess.
So, I decided I was going to get off that couch. Started learning about personal finance, read Rich Dad Poor Dad, bunch of different books, one of them written by you, Scott. And then from there, bought a house hack from that house hack, started partnering, buying more real estate. Got to $6,000 in passive income, quit my job, went and traveled the world. And started a podcast, and started hanging out and doing my thing now. So, that’s where I’m at from five years old to 26 years old.

James:
So, Matt, when you were living on the couch, which I love that story, I definitely have my own couch-surfing story, and you’re figuring out life. When you’re trying to live passively, you had this amazing Europe trip, you wanted to make five grand a month to pay for your lifestyle. It sounds like you like to travel, enjoy life. What made you pick real estate with all the different avenues out there that someone can pick at that time? What made you think of real estate first?

Matthew:
Right. So, basically, what it was is I googled the top personal finance books, found Rich Dad Poor Dad. And the thing that attracted me most to real estate was the predictability of the dividend that I would be receiving from real estate. And just the financial sensibility of being able to get my rent fully paid for by my first building that I buy, have all of that paid for. That saves me, well, at that time it saves me $400, because I was paying that to sleep on a couch. But realistically, it saves me around $1,500 a month if I can get my rent paid for. So, that was my first thing. And then I was like, if I can make even more cash flow off of that, the numbers on these four-unit, three-unit, two-unit properties are pretty predictable and pretty easy to look at the expenses as well. So, just for the dollars I was able to put in with that first 3.5% down loan, that was my highest cash on cash return that would’ve been possible for me. So, it just made a lot of financial sense.

James:
Hey, Matt, just real quick, so that’s a huge statement you just said. You’re new into real estate, you’re new into investing, you’re trying to live passively, and then you made the decision based on cash on and cash return, which some people don’t even get to those kind of analytics or even think that way for years being in real estate. They’re just on a mission. So, what made you get to think of it that way too, because that’s a huge realization for people, how do you maximize your cash on cash return, make it stretch? But as a younger guy, were you 25 at the time, roughly?

Matthew:
Buying my first property, I was 22.

James:
22, and that’s when I bought mine too. How did that click for you, because that’s a huge switch to turn on?

Matthew:
Yeah. So, I think I’ve always had this idea of I’m not going to try and reinvent the wheel. I’m going to follow the people that have done it, follow their path, see what they say. If I want to be in the position that someone else is in, I’m just going to do what they tell me to do. So, that’s when I started reading all these books. That was the Rich Dad Poor Dad, Craig Curelop’s book, Rental Property Investing by Brandon Turner, Financial Freedom through Real Estate investing, Scott’s book, Set for Life. All of these different books that told me, here are the metrics you should focus on to find a good property. So, then it was just rinse and repeat, practice, do your work, put in the reps, do your property analysis. I was probably analyzing 30 properties a day up until 1:00 AM in cousin’s living room using his computer, because I didn’t have a laptop myself. Running all this analysis to try and find properties, and it’s really just following the people who have done what I want to do.

Scott:
So, let’s focus in on that first deal. So, you’re 22, you’re making $55,000 a year. How much do you save up? How do you find this deal? You hinted through all these analyses. How long did it take? Let’s hear about it.

Matthew:
Yeah. So, it took tons of analysis. There were tons and tons of properties in the area that I was looking to buy. So, I was in Hoboken, New Jersey at this time and I was looking to buy in Newark, New Jersey, which you probably know isn’t a super great-

Scott:
In what year is?

Matthew:
So, this is 2020.

Scott:
2020, okay.

Matthew:
Yep. March of 2020, around that timeline. So, I’m looking for my first property there. And I’m going to this area in Newark because there’s high cash flow there. It made financial sense, because I would be able to live free and clear, wouldn’t have to pay for a mortgage, wouldn’t have to pay for anything. It’s free rent. And that’s what meant the most to me at that time. That’s like the bottom ring of Maslow’s hierarchy that I could fulfill for myself. So, that’s basically what I was looking for. Couldn’t find anything that I actually wanted to pull the trigger on. I actually took your method, Scott. So, I used this performance based job hopping method, and I started looking for other jobs where I could increase my income and move out of the area. Luckily, I found a job near my parents’ house. And at that same exact time as I’m going back to my parents’ house, my dad says, “Hey, one of my buddies from high school who’s a realtor in this area found a four unit, it’s foreclosed.”
So, I go to this four unit, which I’m in right now, it’s my house hack and I take a look at this place. I have no idea how to run renovation budgets. I don’t know what any of that looks like. I just know that the numbers were working stupid well. And if this thing was fully rented out, at least at that time, this thing was going to gross around. I think the numbers were right around $3,000 while I’m still living in one of the apartments. And the asking price was $125,000.

Scott:
And what market is this?

Matthew:
So, this is in Phillipsburg, New Jersey. This is Northwest New Jersey, right on the border of Pennsylvania.

Scott:
Right next to Philadelphia?

Matthew:
Not next to Philadelphia. It’s about an hour north of Philadelphia. So, it’s a pretty cleaned up area. It’s about an hour drive to New York City, a little more rural out here, not as packed together. So, it was up at $125,000. And I knew my numbers, I knew what made sense and I made an offer at $155,000, because everybody was saying, all the people that I followed at that time said if the numbers makes sense, you can make offers that are higher than the asking price if the numbers are there. So, I made a $30,000 over asking price offer as my first property and it didn’t get accepted. And then two months later, they end up coming back to me. This is a foreclosed property. So, the bank comes back to me and asks me if I still want the property.

Scott:
And this is the middle of the pandemic?

Matthew:
So, this is actually right before the pandemic. So, I said March of 2020, that’s actually right when I got in contract on the property. So, I was looking and making offers on this property right around the December timeline, December, January. Exactly when I put the offer in, I don’t remember. So, then they come back to me, they say, “We’re good to go and if you want this property you can have it.” And I said, “Yeah, I’ll take it.” So, we went and contracted $155,000, pandemic hits, all this stuff starts going crazy. It actually ended up taking us three months to close on this property. The bank was going to back out. During this time, I talked the bank down on the property another $20,000 right around. So, I talked them down to $145,000 and I had them give me a $10,000 seller credit, which FHA the max was only $7,000 that they could give me. So, that’s what they ended up being able to give me.
But then it was like this whole process of figuring out how much of a renovation this thing actually was. So, it was a condemned property, it’s a four unit property. The whole thing had to be re-gutted. I like to say I don’t even know how to realistically swing a hammer. I don’t know how to do all this work. And I ended up getting a bunch of guys to come out. And it ends up being $120,000 job to get this thing done. So, I start running the numbers. Even with the renovation, so 203(k) loan is how I finance this. And with a 203(k) loan, you are able to add in your renovation costs to your actual purchase price of the property. And they couple the renovation costs and the purchase price of the property into your full loan amount. So, you only have to put down three and a half percent on that total amount.
So, of this 130, we’ll call it $130,000 purchase price plus the $120,000 renovation, actually, it was 145 purchase price plus the 120,000 renovation, ends up being 265,000 that I needed to close on this property. And so, I only had to bring around, I think it was like it ended up coming out to $25,000 that I had to bring to the table because of all these different fees that you run into with FHA inspectors coming out, you have a 203(k) inspector, you have an inspector for the bank that has to come out. And they build an entire scope of work for you. So, you don’t build the scope of work. I like to call the 203(k) a loan on training wheels. You get to do this entire renovation burr with someone from the bank coming out and showing you, walking through the property and saying this is what you’re going to need to get done and this is what the prices should come in around.
Then you go out and you get quotes from all these contractors, bring them back to this 203(k) consultant, is what it’s called. And you go over this with the consultant. Then if the consultant okays it, you go back to the bank and then the bank approves it from the consultant. And throughout the entire renovation period, the consultant is coming out, checking on renovations, making sure everything is done properly. The bank is holding back certain percentages from the contractors to keep the contractors in the deal.

Scott:
What was the ARV of the house hack?

Matthew:
So, the house valued at $400,000 after it was done. And my all-in loan on it was 262,000 bucks.

Scott:
Awesome. Home run. Love it.

James:
Math works.

Matthew:
Math does work. It’s what it’s all about.

James:
Hey, Matt, I have a couple questions. And well, first, I love your story, because that is how you change everything in life. I did the same thing. I bought my first home house hacking, I wanted to save money, I went for the big value increase because I wanted to change and have impact on my life immediately. And a lot of people do the slow roll, but you want that big equity gain or big cashflow that you’re talking about. But when you get into that, I remember back when I was 22, it was like, how do you figure out how to get into that property without 20% down? How do you figure out how to buy that fixer with the loan? And so, when you were going through that process, you were working 55 grand a year, you went and got pre-qualified. Who educated you about the 203(k) loan?
And was there any other products that you looked at and then you made the decision with the 203(k) and to narrow down. Because I know when I did mine, the 203(k) loan just wouldn’t quite work for what I was trying to accomplish, because the closing timeline was too fast. And so, I had to make my own version where I had to bring in some private capital and blend it all together, but it was the same concept, a construction loan, fix the property and then I had to stabilize it. But sometimes that doesn’t work for every scenario. So, how did you pick the 203(k) loan and was there any other options that you looked at that you just eliminated for certain reasons?

Matthew:
So, I knew that the 203(k) loan was going to be, realistically, it was the biggest bang for my buck if I wanted, as far as a cash on cash return was going for me. And at that time I had limited capital, so I had to maximize that cash on cash return, like we talked about earlier. But I found that 203(k) loan, it immediately, it was magnetized directly to it when I was reading Rental Property Investing by Brandon Turner. He’s got all the different financing types that you can go through. He’s even got private capital in there, all these different techniques. So, I saw that loan and I was like, I’m going to be able to get an equity gain in this thing and it’s going to cashflow, and my cash on cash return is going to be pretty stupid on this thing.
Even on the financing side, I didn’t have all the capital to bring to the table. I said I needed 25,000. So, for me to close on this property, I had 10,000 in savings that I used. I borrowed $8,000 from my dad. He gifted me 8,000. I actually told him he could have 25% equity in the property. And then I bought him out of that 25% equity six months later. I paid him back 12K. So, he got a 50% return on his money. And then there was another 7K that I had to bring to the table to close on it. So, I had 10 in savings, my dad gave me seven and I had to bring another eight to the table to close on this thing.
And I had actually read about using the Roth IRA and pulling out of your Roth IRA penalty free and being able to use that as capital for your first real estate purchase. So, I did that and crazy enough, COVID hits a week and a half later after I pull out of my Roth IRA and all the stocks tanked. So, it was a perfect storm of me being able to use that capital.

James:
And I love that part of your story. I heard that you brought in… Because the biggest thing with these 203(k) loans or what you did, was to build your career. And you had to borrow money essentially for equity or 50% and people are like, “Oh, you can’t pay a lender 50% on their money. That’s absurd.” But you can, because it changes everything. And it’s like, don’t get trapped on the cost of the money or whatever it takes to get you into that deal and is the end result going to change your life. And so, it’s that not being afraid to pay 50% for that extra capital you need, I think is something that’s really important. Because people, they get that analysis paralysis, because I can’t pay that much. But you can as long as the structure works.

Scott:
Well, James, think about also how many people, let’s be clear here, Matt is buying $125,000 condemned quadplex in rural New Jersey, which I didn’t know existed until this podcast. Go figure. And a lot of people I think are doing something similar on a nice fixed up property in a nice part of town, with their parents giving them a little bit of the deal there and not house hacking. And there’s a huge difference in my mind between those two approaches. It’s one thing to go all in on this bet early in life on a house hack, which I completely agree with. I did almost identical thing here, except I didn’t use the 203(k) loan in my personal life.
Versus using this amount of leverage and borrowing for that down payment on the family home that’s already all fixed up. So, I just want to throw that caveat in there. I completely agree with you and I think you agree as well. In the context of a house hack bet, this all makes sense. If you’re buying your first house and it was ready to go, you’d be way in over your skis and you’d be hating life right now.

Matthew:
Right. And what I would like to throw out is that debt wasn’t really structured that way for me to pay it out, because as I mentioned, I told my dad he could have 25% equity in the property. And for me, it was like this makes sense. In the position that I’m in right now, if somebody came to me and was like, “Hey, can I have $8,000 for 25% equity in my property?” I would throw it away like nothing. At that time I thought I was getting a killer deal, because my dad put down half for my brother’s property and he got 50%. And I was like, I’m getting the killer deal, because this thing is going to cash flow so much. So, then at that point I was like-

Scott:
You were getting a killer deal. That was a good deal.

Matthew:
And I was like, I want to, but then I was like, I want to get 100% cash flow on this property. This is my first property. The FHA or the 203(k) loan, three and a half percent down. Any loan that you could get 5% or under, that’s a huge asset to have. And you don’t come by those types of loans that often. So, I wanted to take full advantage of that to get the biggest bang for my buck.

James:
I like your dad’s style. He doesn’t give out free money. He’s a true hard money guy. I want half the deal, here you go. I want half the deal or 50% return. My kind of guy.

Matthew:
He’s good, he’s good.

Scott:
So, can you just give us another layer of depth on the process of working with the FHA, I guess the 203(k) consultant specifically on this property? I am not familiar with this process at all. And it seems like a very, very powerful tool for folks that are just getting started with their first large remodel, house hack style.

Matthew:
Yeah. And that is why I do refer to this as a burr training wheels option. Because one, the bank isn’t going to allow you to buy this property if it doesn’t make sense. And two, they’re making sure it makes sense by sending out this 203(k) consultant to work for you. So, how it works is you apply for the loan and they start like a typical loan.

Scott:
Do you have to be an owner occupant?

Matthew:
Yes. So, it’s the same as FHA, it’s owner occupant. For the 203(k) loan, it’s owner occupant for one year. So, the you go in, you apply for the loan and they come out and they send a 203(k) consultant now. And now this is for renovations over $20,000. If it’s under $20,000, you could do something called a 203(k) streamline, which means you bring in your own contractors. You could even realistically be the contractor, as long as you have a contractor’s license on that loan. And then you can… Basically, they’ll give you $20,000 or under and you can hand that money out as it seems. Anything over that, because it’s a first time home buyer’s loan, the bank wants to make sure that you are properly managing your money. So, the 203(k) consultant, again, will come out to the property. They will look at it, take a first look and say it’s going to need this, this, this, this and this.
They give you an entire scope of work and then they give you about what it should cost. You go out, get other quotes from contractors. They bring it back. Basically, underwrite the entire list of the scope of work. And now this 203(k) consultant, you have about five visits throughout the entire process of your renovation. So, whenever a contractor wants a draw, they have to request a draw from the bank, then the 203(k) consultant will come out. And if the contractor says, “I did the walls, I did the floor and I did the roof,” the 203(k) consultant is going to look at the roof. He’s going to say, “All right, the roof looks pretty good, everything looks good here.
The floor looks like it needs some trim on it, and the walls are only 50% done, there’s only 50% paint.” So, what he’ll do is he’ll mark down each of these things, walls, 50% done. Floors, 90% done. Roof, 100& done. And then that amount will get paid out to the contractor minus 10%. So, again, the bank holds back 10% every single time to keep the contractor honest and keep them locked into staying with you on the deal.

Scott:
James, this sounds better than what you do.

James:
Yeah, I mean that’s a lot of work. And I love this program, because someone like Matt, a brand new investor or someone like all of us when we’re first getting in real estate, it’s always what is a deal and then how do you actually fix it to get there. And a lot of people can buy the wrong thing and then the rehab budget goes way out of control. And it could have been a great buy for a lot of different people, but not for that specific person. But with the 203 contractor, so you have a list of contractors you have to go through, which is actually great for a brand new investor because you’re always looking for new resources. What was their pricing like?
Because we’ve actually sent our clients up through there and then they want us to help with the renovation, because that’s part of our brokerage services. But these contractors aren’t on my list. They’re just not guys that I use. What is their experience? What is their pricing? And then another thing, do they lock the bid prior to you closing or is this done after post-closing? Because that can affect the numbers. Like with you, you had to borrow your other half the down to get into the deal. So, if that went over budget, that could be very detrimental. So, what’s that process and how do people protect themselves to make sure they don’t get themself in that situation?

Matthew:
Right. So, yeah, everything is locked in prior to closing on the property, prior to the loan. The contractor has to be locked in. But the contractors are just every day licensed contractors. I could go to my guy that I use for every project now, use him. I could go to the guy down the street. I could just Google contractors. And I could come out and get 10 different quotes from 10 different guys, as long as they’re licensed, because the bank will check and make sure that they’re licensed. And that’s why coming into my story, I learned a lesson real quick. I went with the cheapest contractor. So, I got one quote. So, I had three contractors come out and quote me. I got one quote at 145,000, which for me it just didn’t work. But in hindsight, I should have gone with this guy, because he’s a great contractor.
I got another quote for right around $100,000 dollars, and then another quote for $120,000 or $115,000. And I ended up going with the cheapest guy. Luckily, the bank throws on a contingency reserve as well. So, it ended up being the 100. They throw on, I think the guy’s quote was like 103,000 and they threw on a contingency of around 15%. So, that’s where the $120,000 in renovations come from. And I take the cheapest guy. And this guy’s working on my dad’s, my brother’s 203(k) loan as well right now. My brother did a 203(k) streamline and this guy just goes missing, walks the job. And I had already locked in with this guy, about to close on the loan. And I told the bank, I was like, “The contractor’s gone. He’s not working on my dad’s property. I need another person.”
So, that’s when I ended up going to this other guy who was 100 and like 17,000, something like that. And the dollars just ended up being enough to make that project go through. So, we ended up closing on that loan. But to answer the question, everyday contractors, so that is a big process for me and that helped me realize the guys that I really want to bring in. And then this whole thing starts, my project starts three months late, COVID’s going on, there’s all these different problems with materials, so things are increasing. There was one point where someone broke into my property and one of my contractors fought them. And so, the guy who broke into my property sued my contractor. So, that issue’s happening. And the town’s coming after me, because there’s all these issues with the contractor coming.
And then one of the other guys working there ends up having to go to court to get deported. So, it’s like a whole mess. And this thing took a year and a half to get done. I had a deck. I built a deck three times fully up, built this staircase, you got to take it down, it’s not done properly. Brought it, I was like, guys, we got to do this right. I don’t know how to do this. I really don’t know how to do this, but we got to do it right, and built it again.

James:
Put more nails in it.

Matthew:
That’s what they did, they put more nails in wood and we had to tear it down. So, then I built my own structural… I actually built the architectural design for this stair set and I brought in another guy that I found in town. I was like, I need you to build this, because that was the last part of my project to finalize this thing and get it passed from the town, so I could get people in here and then get it passed by the bank. So, that’s when things get a little dicey.

Scott:
Oh, now they get dicey.

James:
Put more nails in it. That’s the solution to everything. More paint, more nails, you’re good.

Matthew:
Yeah. So, the beauty about this, and I do think that COVID saved the beginning of my investing career, because I think I wouldn’t have liked real estate as much at this point because I was a year and a half in with no tenants. But I did get to take advantage of COVID forbearance, so I didn’t have to pay any of that. And that was really just me paying attention to the market. I didn’t have to pay any of these loans. I didn’t have to do anything until I actually got tenants into my property.

James:
Matt, I love that story, because it actually is therapy for me because we all deal with these same things. It doesn’t matter how long you’ve been doing it for, you get the guy that needs to bang more dales, they build it wrong. That’s pretty mentally draining. And the fact that it took a year and a half, that usually comes with the territory, people forget. If you buy the cheapest thing, best deal out there, there’s a reason it’s that way. It comes with a list of problems. But if you can hang in there, that’s really where you can turn your whole portfolio around, because the equity gains are so massive and you just have to mentally prepare for it. But as a new investor, that it’s wearing, it’s taxing, and you got that pressure of staying in budget and servicing that loan that whole time.
So, what did you do to, A, get the project through, but also how did you service the debt? Were you able to live in that during that time? A year and a half, if you can’t get cashflow in, that’s coming out of your pocket and you were at a 55 grand a year job at that point. So, how did you deal with that? Liquidity crunches are big deals on new investors.

Matthew:
Right. So, that’s where I was saying the COVID saved me, because they put COVID forbearance out there. So, this was a year and a half of this project and I didn’t have to put a dime out of my pocket towards the debt service. I actually finished the renovation, got people in and had no debt service on this for two months, three months, four months. So, I was cash flowing four grand a month at that point with no debt service on this. And then once you got to that point, because I did the forbearance and it didn’t affect my credit at all, that’s why I did this because of the special COVID forbearance, I was able to modify my loan.
So, that modification actually took my loan from a 3.2% down to a 2.6%. And they took off an extra $50,000 that I would’ve paid. And they moved it to the backend of the loan and put it at a 0% interest. And they started me over at. So, that took a year and a half. They started this entire loan over on a new 30-year basis, which that’s why I say COVID saved me and it made me not hate real estate, because I didn’t have to pay this debt service the entire time that this was running.

Scott:
Wait, wait, so let’s just dive one more layer deep in there. I’m running the math here. You had $120,000 FHA loan when you purchased the property?

Matthew:
$262,000 was the exact loan amount that I got.

Scott:
And that was a combination of FHA and 203(k) to build up to that loan amount. And then COVID hits weeks after you close, you go into forbearance, you’re able to keep your job throughout all this?

Matthew:
Kept my job. That’s what I was saying earlier, I used your method, job hopping. I increased my income. I started at 55,000 and in a year and a half I was up to 150 grand. So, I was making good money.

Scott:
Okay. And what did you do there, before we go back to the side tangent I’m already on?

Matthew:
I was working in sales, logistics technology sales.

Scott:
Okay. So, you took a sales job, you increased your annualized income from 55 to $150,000, while simultaneously completing this very smooth rehab process that you just outlined for us.

Matthew:
Yeah, really, really easy rehab.

Scott:
And then in the summer of 2021, you’re able to refinance essentially, and that puts 50 thou… Walk us through the technical terms here for how this refinance works. I’m very interested to hear about this.

Matthew:
So, it wasn’t even a refinance. Because I did this COVID forbearance, so I could have serviced the debt, but it was basically like if you’re coming into any financial troubles, then in my head I was like, this is a huge financial trouble because I have this new property and there’s nobody renting it. And I can’t seem to figure out how to get this thing done and renovated. So, it took that year and a half. And so, basically, the bank says, because of COVID, like the government said, you don’t have to pay. So, they were like, you don’t have to pay us for this time. And there was a COVID forbearance amount that just kept building, and building, and building and building, this is the amount that you haven’t paid. So, then at the end of this process, there was an option to basically make it like a refinance, but not a cash out, just a term.

Scott:
So, this 50 grand or so is just the total amount of forbearance, inclusive of in principal interest, taxes, insurance on your payments?

Matthew:
Yep.

Scott:
Understood. And then this all just gets refinanced into one big lump new 30 year mortgage at 2.6%, which is a huge gift. And that’s where you’re at right now. You have this 2.6% interest rate mortgage and this fully renovated property that went from condemned to rentable and profitable.

Matthew:
Yes, very much so.

Scott:
Awesome. And now our story ends. You have moved some tenants in and it’s all smooth sailing from there or is there more to the story?

Matthew:
Now, it’s pretty beautiful, man. I live here. I get to live here for free. My debt service every month, taxes, insurance, and the water bill, so full expenses on this thing are $2,207 a month, $2,200 a month, and the other three apartments rent for 3,800 bucks. So, it cash flows me right around 1,600 bucks. You take out any other expenses. But luckily the whole place is brand new, so I don’t really run into many expenses. I get to live here for free and on weekends I Airbnb my apartment, and it rents for 400 bucks. And I go out and I’ll go down to the beach or something like that. So, it does pretty well for me. I’ve had tenants come out, I’ve had some issues with the town where they want me to do little repairs here and there, but everything has been pretty good since I got this thing up and running.

James:
I mean, this is a story of relentlessness though. Like, okay, I’m living on a couch, I got 55 grand, I got to figure out how to get the money, then I’m going to go what deal works for me. So, I got to buy the biggest fixer I can find, biggest equity position, hiring the contractors, going way over, haven’t handled that service and then finagling a loan. This is the true story of real estate investing and it’s about working backwards in figuring it out. And so, I really do love this story. This is my kind of story. I remember going through the exact same things when I was 22. And the fact that you were able to do that and put yourself in a position with a 2.75% rate now fixed, is unreal. And it is about taking that first step and just getting it done. That first property will change everything for people.

Matthew:
Yeah. It really was that relentlessness that you were saying. On this whiteboard that I have behind me, this was at my mom’s house when I wasn’t living here, when I was doing this renovation. And I had the cashflow calculation written on this whiteboard and at the bottom it had my cashflow. I was thinking it was going to be around 900 to $1,000 a month and I was going to get to live for free. And I had under that, I had written, this is why you’re doing this. And it was like every day I had to wake up, know that this thing was such a big problem I had to go tackle, but there was a reason that I was doing it, and it kept me in and it taught me a lot.

Scott:
Matt, I have one last question for you here before we wrap up, which is you mentioned at the beginning of the show that your girlfriend broke up with you because you were sleeping on your cousin’s couch. Has all of your success in real estate translated to newfound success in your love life, personally?

Matthew:
So, that’s funny, because I like to hang out with people. But I have gotten into this zone where it’s like, what I’m creating for myself right now is just like I’m going out there. I need all the time that I have, all the time and focus that I have to build my brand, build myself, build my life up to what it can be and what I want it to be. I meet people along the way. I go out and travel. I traveled for another six months after I quit my job, so right now it’s me and my dog traveling. We have fun, we meet people along the way and we do our thing.

Scott:
Love it. Again, I see my story reflected in your first house hack here. And my wife likes to tell people that when we first started dating and when she first moved into my house, we did not have heat at the time. Because I was like, heat is for the tenants. Good luck. Good luck to you on that front.

Matthew:
Yeah, I appreciate. And it is, it’s all about that financial basis. If somebody wants to reach financial freedom right now, if you just decrease the financial basis that you need to be at to reach financial freedom. If you go from needing 10,000 to 5,000 and you create the 5,000, all right, well, now you just gained 40 hours back in your week. Now you can put 40 hours towards finding other better investments and you can rocket ship off from there and increase even more income. So, anyone who’s young and has a low amount of responsibility and you could live pretty well below your means, I would do it. Build that passive income up and then use all the new time that you have, leverage that to build up tons more assets and increase your passive income from there.

James:
It’s about doing whatever it takes. And I remember when we did our first house hack, then I sold it for another house, sold it for another house, but it turned out we were low on funds because I kept trading up my properties. I had to move in with my mom for a year. This is like eight years ago, but it was what we had to do. It was me, a two year old, and a brand new baby and my wife and we’re living in the basement for a year and a half. And it was brutal, but it changed everything. So, just hanging in there, do whatever it takes and it can make big impact.

Matthew:
Yeah, yeah. I appreciate that. That puts a new perspective on things too, man. You did what it takes.

Scott:
Love it. Well, Matt, where can people find out more about you?

Matthew:
Instagram is a good spot. I also have a podcast, Financial Freedom Fast Podcast on Apple and Spotify, and Facebook too. Facebook, Matt Amabile, M-A-T-T A-M-A-B-I-L-E.

Scott:
Awesome. And what’s that Instagram handle for those who are looking to follow you?

Matthew:
It’s @MattAmabile, M-A-T-T A-M-A-B-I-L-E.

Scott:
Awesome. Well, we really appreciate you coming out on the show and sharing your story. Congratulations on the awesome outcome for the house hack and we wish you the best of luck going forward.

Matthew:
Appreciate you, Scott. Thanks, James, as well.

James:
Good meeting you, man.

Scott:
All right. That was Matt Amabile. And what a wild house hack story. I think that’s one of the craziest renovations from a first time investor I’ve heard. What did you think, James?

James:
I loved it. He’s a doer. Part of this whole financial freedom journey is just stumbling along, putting your mind to it and not taking no for an answer. And that’s what his whole story is. So, I really enjoyed it. I love relentlessness. I love when people push to really change their life.

Scott:
Yeah. I think what’s cool is he read all these books, did all these different stories. My house hack from almost 10 years now, gosh, now my first one, I bought with a HomePath loan, with a FHA 5% down, $12,000 into $240,000 purchase price property. I did not use any of these things. That’s no longer available. He took that example and others and said, okay, how can I spend that within a 2020 timeframe, with a FHA and 203(k) loan in this area and make that work with a massive renovation? And that specific tactic can no longer work in today’s environment or it’ll be much harder. There will need to be a new creative twist to Matt’s story with the next house hacker that’s getting started in 2023. And that’s what this is all about.
And everybody’s going to be pioneering the path with their entry into real estate, in every circumstance if they’re going to hit a home run. But I love the fact that it did end up working out for him in the end. A lot of luck involved in making that work, just like a lot of luck involved in my first property. I don’t know, I can’t speak for you, but perhaps there was some luck in your first one as well.

James:
Yeah. I’ve had good luck and bad luck over the years and it just depends on market conditions. But definitely, I was very lucky when I got mine too. I bought it at the right time and it exploded, and so it worked.

Scott:
Would love to hear more successful house hacking stories out there. And so, if you’ve got one, share them in the BiggerPockets Money Facebook group at facebook.com/groups/bpmoney, or give us an application to come on the Money Show at biggerpockets.com/guest. All right, James, should we get out of here?

James:
Let’s do it. We got a sunny day to go enjoy.

Scott:
From this episode of the BiggerPockets Money Podcast and in the words of Mindy Jensen, I am Scott Trench and he is James Dainard, and we are saying, must be off, little moths. If you enjoyed today’s episode, please give us a five star review on Spotify or Apple. And if you’re looking for even more money content, feel free to visit our YouTube channel at youtube.com/biggerpocketsmoney.

Speaker 4:
BiggerPockets Money was created by Mindy Jensen and Scott Trench, produced by Kalyn Bennett, editing by Exodus Media, copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.