Niche Down and Get Creative with Agent and Investor Matt Davies — Script

This is a Full Episode transcription from Episode 31 of Life Worth Chasing, you’ll find the timestamps next to the speaker.

You can find show notes: https://medium.com/p/93771eb37a69

Niche Down and Get Creative with Agent and Investor Matt Davies

Chase Maher: [00:00:00] All right, homies back again. Another one, we got my good friend Matt Davies, one of the top real estate agents in San Diego. He’s in investment minded agent. We talk about highest and best use of land development deals, how he finds his deals, how he’s scored a triplex from a hedge fund and did the bird model on it and turn it into a little mini hotel.

Air B and B, what his plans for the future are, and we get super technical on some development and building terms and how it all works and how it all gets together. So if you’re an agent or anybody that’s looking to get into development, or you’re looking to work on Airbnb, or you’re just looking to start building generational wealth from your active income, this is an episode for you.

So welcome to the show, Matt Davies. So Matt, I wanted to bring you on the show actually asked you a couple months ago. We never got around to it. So I’m super stoked to have you on now, and it’s probably even a better time to have you on now because you’ve done a couple more deals since then. Gain even more experience, and we’ve actually become even closer friends.

So I think the chemistry will be a little bit better than a, it would have been a couple months ago. I always ask everybody so we can straight hear it from you. Tell the listeners a little bit about you know, who you are, what you do, so they can sort of understand who they’re hearing from. Got it.

Matt Davies: [00:01:16] Yeah. Thanks for having me on the podcast. Super excited to be here. My name is Matt Davies. I’m a local broker, San Diego, and this is my fifth year in real estate. Before real estate, I was in medical device sales for that. I went to school for music and traveled around with a band playing trumpet.

Kinda fell into doing real estate and got really interested early on in the investing side of it as well. So listen to a lot of bigger pockets, podcasts and stuff like that. When I started out early on, it’s always been kind of, my ship’s been pointed towards doing more investment stuff. So I’ve, I’ve recently started doing that.

Um, I do about this year, I’ve done 34 sides in real estate sales, which is cool. And I’ve used the majority of that to fund real estate investment stuff and trying to be a little creative, which is been really fun from a tax perspective, mortgage perspective and construction and remodeling and just, you know, multifaceted.

So that’s kind of my, you know. Made a box.

Chase Maher: [00:02:12] Yeah, man. And I’m really impressed because you sorta run like your own solo team. You’re not one of those people that is trying to build a big team and. Act like you’re some, you know, super advanced powerhouse agent team. You focus on your niche, you’re the best at it, and you actually focus in like a general geographic area and you probably do more multifamily development deals than anybody in that area.

Can you tell me a little bit about how you sort of zeroed in on niching down? Cause I think any entrepreneur, whether you’re in real estate or not, can benefit from whatever your answer is of like why you sort of chose to do that.

Matt Davies: [00:02:48] That’s a great question. And it took a few years to figure out, but um, in a 100% agreement with you, there’s way more.

They say the riches are in the niches. Right? And doubling down on, on an area and kind of throwing your, your, I mean, I think about it like visually, right? It’s like you’re throwing a stake in the ground and you’re like, this land is my land. Right, which is what I’ve done with North park. I kind of stumbled into the area.

I didn’t even like it at first, but I got some momentum and I just kind of started saying, I specialize in . Right. I remember there’s one distinct time where someone, I lost a listing to someone cause they said they were an area specialist, like the, the seller told me, well we want someone who’s a neighborhood specialist.

I was like, w w what does that do? They have a pin that says neighborhood specialist that was given to them by the neighborhood or something. So I, I, I kinda like took that one to heart. Yeah. I’ve been able to get a lot better results going deep, not wide. One key ingredient of that is going deep on the data.

You can’t be a Jack of all trades and a master of none. I mean, you simply can’t be a specialist in everything, right? New agents do. Investors are like, Oh yeah, I do multifamily and luxury and single family houses and flips and all that stuff. So I’ve kind of chosen like, this is what I do. And then there’s everything else.

And you know, maybe I can handle some of it, but I’m really focused on this so.

Chase Maher: [00:04:09] Yeah, I mean, I see you do, you know I’ve seen you do a couple of deals in orange County, a couple of deals over here, some residential stuff, but for the most part, what I know you for is just double ended. Another 18 unit development deal.

Just did another 24 unit development deal. Talk. How, I mean, you’ve told me a little bit about how you picked it, but start telling me sort of like the research behind it, like how much do you study behind the scenes about these development projects? And then we can sort of segue into, now you’re starting to take your commission earnings and do your own deals.

Matt Davies: [00:04:42] Sure. Yeah. So how I kind of stumbled into, it was interesting. I was working at this restaurant before I was in real estate, and I, I actually going to got into real estate because there was a bunch of these guys that were hanging around having two hour long lunches and driving range rovers. And I’m like, what?

What is it that you guys do? Right? So I sat down with a couple of them, I won’t name their names here, I think that’s something who they were, but they’re still active guys and they’re good guys and they’re like, you know, we’re, we’re real estate brokers, and I kind of figured out how to compensation structure works and whatnot.

At the same time I was doing that. I was working at this restaurant in the Hoya and I was meeting all these people that were pretty high power, and I didn’t know exactly what they did. Lots of wealth is created in real estate, obviously. So when you go where there’s rich people, there’s almost, you know, without fail going to be people in real estate around.

So there was someone that I met there and he was a real estate developer and his son wanted to get into a real estate, you know, development deal in North park. So I kind of sot. It has an opportunity to go, you know, sell a property, making a commission. So obviously new in the business, I’m not going to let somebody buy something that’s not a good deal.

Right? So I went really deep on learning the code, and I found kind of resources, and I talked to people and I looked up the zoning and, and kind of started to familiarize myself with a zoning map. Where’s the good zones? You know? And then I started to think critically, I’m going to find a development deal.

Um, I’m going to be looking for small houses on big lots, right? Because the, the way that I can make a win win scenario is probably through going to someone and saying, Hey, how about if I pay you more than your house is worse? Right? Cause it’s not worth it. The zoning’s not worth it to the little lady that’s lived there for 75 years, cause she’s just got a really big backyard and that’s cool.

But there’s also an apartment complex next door to her. So I started seeking out these things, kind of, I’m not a big technology guy to be honest. I started kind of like hand curating these things. And naturally when you’re not a big technology guy, you have to pick a small sample set. So I picked university Avenue to Oakland Boulevard to part Boulevard to like boundary, which, which is just kind of a box in in North park that has really favorable zoning.

They used to call it apartment village actually, and I started mailing these people. I started calling these people that started door-knocking on these people. I started looking at the tax rules and seeing it there, absentee owners. I started looking what they paid for them, what their tax basis is, what kind of mortgage they had, had they a refinance there recently.

How many existing units are on the property. And I just kind of started carving out like my targets, right? So I sent some mail to someone. This is like my first deal back to what we were kind of talking to my purse real estate diploma deal, and I got in contact with somebody who wanted to raise money for a development deal.

I said, okay, well yeah, my clients are developers. You know, it’s probably not gonna work. We’d be interested in just like a straight out sale. And it took some massaging, but you know, a lot of in person meetings and we eventually came to terms on a price. So this was also my first over a million dollar deal.

So he came to 1.1 million and it’s cool because that’s being built right now. It’s almost actually done. It’s 18 units, 60 feet high, and nobody knows what what the hell happened, right? Because like, Holy smokes, like nobody realized that you could do that on these, on these lots. I learned a lot by being a fly on the wall.

In a lot of different conversations where there was like an architect or a structural engineer or a developer or a finance guy or something. For some reason, I was just on the call or in the in the room. So then I started hearing all the complex problems or actually maybe simple problems that are seemingly complex that everybody’s running into on these things.

So I kind of became. Valuable because I, I’d had this unique perspective that not everybody else gets into. You know, if you’re developing, you want to build something, probably gonna have a mentor. However, you’re probably going to, I’ve come across a bunch of stuff and it have to figure it out yourself.

So I watched like five different guys figuring five different problems out at the same time. So the next one came up. I said, Oh, you just do this. So people could start calling me, started calling me like, Hey Matt, how do you figure this out? And all sudden, I’m kind of like a development consultant.

More than I am like a broker. And then people started calling and saying, Hey, what’s this word? What can you do on this? And I have like a little bit of knowledge about it. Well, I know a lot about little, but I know within that a lot that I know about a little, I know a little bit about a lot.

Does that make sense? Yeah, it was backwards.

Chase Maher: [00:09:08] Yeah, totally. It almost sounds like, you know, you went from being an agent because the money was there. Then you realize like the niche was there in the development deals in this one area. Then you build a ton of relationships with architects and other brokers and consultants and private money people, and now fast forward.

Like I recognize you as somebody who. Dominates that space over there. You have a lot of great contacts, you have a lot of knowledge, and now you’re starting to actually get your feet wet and do your own deals. So talk about like how did that leap happen from being one of the top agents in the area?

Definitely the top agent in that specific area. Learning from all these people, learning from their mistakes, and then now you’re starting to do your own deals. Like what was that scary like? How did you sort of get past the, the first couple hiccups or where most people would get stuck in 20 years later, they never done their own deal.

Matt Davies: [00:09:56] Totally. Yeah. And I guess it’d be pick a specific enough niche. It’s pretty easy to dominate it, right? Like if you picked something really small and specific, you’re like, Oh, I did three, I did three deals. I’m the man. Yeah. So I sold, you know, several of these like over and over again, and, and my, me getting into investing in these.

Kind of was a buyer. I always wanted to, but it was a byproduct of me selling these things to people. And then, I mean, I really originally wanted got into this because I wanted to sell somebody. I want to find undeveloped plan, get the listing, double end it, and then have the builder build it, you know, build five units, and then I sell five units, right?

So one listing turns into seven. You know, just, it just made sense to me from a efficiency standpoint. For sure. What ended up happening instead of that was I’d sell them a really good deal. It was very buildable, and then the market was kind of like climbing like this, and I still do believe it is kind of like this, maybe not at such a slant, but they would just say, well, you know, if we can sell it and make 300 grand, they’re like, then.

Let’s just sell it, right? So we buy something and we put conceptual design on it and basically handhold somebody and spoon feed them and, and kind of come up with a design. And I had an architect that I was working with that would kind of help with that and explaining that. So what I would do is I train a lot and then I kind of do the mental chomping on it too.

Show people what the highest and best use is. So if someone says, Oh, you could build 10 lot 10 you know, townhouses on this, I say, well, no, you can’t. Because you know, each garage two car garage is 20 feet wide and you’ve got to have a one foot wall in between each of those. So there’s 22 so if you draw it out and you have 140 foot wide lot, and you want to put 10 garages like this, 10 times 20 is 200 feet, right?

So there’s, there’s all these kind of like feasibility things. And if you say, okay, there’s a five foot setback, and then there’s a 10 foot setback here. So you’re actually working within this, and you can really, feasibly, they only do four or five. So was saving my clients from one over pain when we were buying this thing because they think, Oh, you don’t 10 town homes.

And I know there’s physically not enough space here. Like, sure. The zoning allows you to build that many units, but you can’t physically put them like on a site map. So. I want to unpack that for anybody listening right now. I imagine you have like a small house on a large lot in a very condensed area, and typically that lot will be rezoned so that you can add an apartment building or, or split up the lot multiple times or add a bunch of townhouses.

Chase Maher: [00:12:25] And what Matt’s talking about here is just because the zoning says, you know, one unit per 2000 square feet and it’s a 10,000 square foot lot doesn’t mean you can put five units on it. You have setbacks. Certain amount of feet from the next lot. You have different zoning metrics where things can only be but so high.

They can only be but so long. And so Matt’s really figured out this niche and understood and become the consultant. He’s become the expert. Any entrepreneur listening, the more you become the expert in your field, the more you’ll get referrals, the more you’ll get looked after. He’s really figured it out the niche to where now he is made the name for himself and he’s saving people and making people a lot of money.

Matt Davies: [00:13:04] Yeah. So there’s, it’s funny, like what you said, there’s, there’s not, there’s like economic parameters on these things too. Like if you want to go, I said, Oh, well you can build a a hundred feet high, right? And it’s like, well, if you want to build a hundred feet high. You have to do what’s called like, well, one of the solutions, one of the ways to do it is like steel, right?

One, it’s like a type one, a construction, which is like fire resistant, which is like podiums. So it’s like concrete on top of the concrete, on top of concrete, on top of concrete, because you can only go up to like, or stories with wood framing. So as you go vertical, things get exponentially more expensive.

And just because you can doesn’t mean you should. You know, which is kind of a funny thing. So there’s all these kind of like little metrics that are kind of steering you towards something. If somebody says, Oh, I want to do this, you know, Oh, I want to build a townhomes. Is it? Okay, well, are you excited about the tenure builder liability that you’re going to have when you sell that?

Oh no, I didn’t even think about that. So there’s all these different metrics and, and it’s kind of one of these interesting thing I’m running into a lot actually in this will segue us into our. And then we’ll talking about the deal that I did recently. There’s a lot of things that you need to know about a little bit, and a lot of these, like, like a lender, just for example, like a realtor and an escrow officer and a title officer and a lender, like they all got to work together to make this thing work right?

And sometimes they’re not on the all on the same page, so it’s even harder when you’re an investor. Because you gotta get a contractor on the same page. You got to get a real turn on the same page. You got to get, Mmm. Like an architect, a structural engineer. You got to know a little bit about all these things so that you can prevent yourself from saying, well, why?

Why are you doing it this way? Because the architect doesn’t really care how you’re build it per se. He just says, this is what it is, and here’s the structural calcs. Yes, this will take this load and the builder, the guy that’s actually going to go bring this into reality, says, okay, well you can take this down six inches.

It’ll save you $700,000. You know, but the architect doesn’t know anything about that, which is, it’s just crazy to me because all these people within the same field kind of just stay in their own lane. And a lot of them are, you know, a lot of them are kind of like the analytical brain and aren’t great at communication with other people.

So w which is where people like you and I come together to kind of conduct the circus and hopefully. Put together a deal that’s going to be fruitful and you know, financeable and stuff like that. So I made a bunch of money for a bunch of people and I said, shit, why don’t I do this myself?

Chase Maher: [00:15:34] Oh yeah.

Oh no, you’re clearly good at it. And I appreciate all the super technical stuff. And you know, if you want to, uh, check out Matt’s Instagram or reach out to him for even more technical stuff, I’m sure he’ll be happy to do that. But for the sake of the show and the listeners, I want to sort of segue into like, how are you sort of.

Targeting and finding these deals.

Matt Davies: [00:15:56] I’m just looking at a lot of data and not in a way that is really detail oriented. Well, it’s not really like seeking an objective. I’m not saying, okay, I’m going to mail all the absentee owners in its place. Like I’m making my own custom lists on my parameters.

So for example, I’m going to say where to find that 7,000 square foot lot, cause that’s what I want in this area on a map. With this zone that’s flat, that has alley access. So I’m really kind of picking a hundred, you know, that doesn’t have a lot of, uh, square footage. And I’m not saying, I just looked from the aerial view on Google maps and I’m like, that’s worth looking at.

You know, there’s old gross roof on that thing. Maybe I can get a deal on it. So I’m just kind of curating these things myself and just kind of really looking at my targets and then I kind of attack them five different ways instead of just. Calling a list from a title rep, which is not a bad idea, but it’s more targeted.

Chase Maher: [00:16:54] So you’re sort of stacking curated lists with specific data that you know will be somebody that’s more likely to fit, like their lot is to more likely get what you’re looking for.

Matt Davies: [00:17:07] The other thing I do is I just drive up and down the streets. I really, I drive a lot and when I talk to my phone, I just, I literally, I walk the neighborhoods, I drive the neighborhoods.

People must think I’m trying to case the place because I’m like looking at him like. Very observant. You know, if there’s a pod that gets dropped or something, I’m like, what’s going on over there? Right. I see a pot and I’m like, damn it. The deal is done.

Chase Maher: [00:17:30] Yeah. I love that. I love that. So speaking of walking up and down the street, I know you were surfing a little bit on a, on Google street and looking at tax records and stuff.

Tell me how you came across this home run of a triplex that you bought recently and now it’s a. Dominating Airbnb, little mini hotel for you.

Matt Davies: [00:17:49] Yeah, yeah. I’m sure my neighbor would love to hear you say it’s a mini hotel. So I was doing second, I was talking about, I made like a Curie list and actually kind of had my assistant curating this list.

I taught her what I was looking for. I said, you know, small house, big lot in the zone, you know, so here’s the zoning map and the zoning. It goes up and down and sideways and backwards. So there’s a little bit of rhyme and reason to it, but not much. Not to memorize it. So I had to go look it up and I said, okay, give me every, like, when did they buy it?

What did they buy it for? What’s their name? What’s their mortgage amount? You know, just a couple of, kind of like key indicators, right? Like is it in an LLC? Is it like, so I can look at like. Owner’s name. And if they have an age, you know it’s on the entity. You can see their age. Cause if they’re 90 you know they’re there days away from, you know, potentially being an urgent need to sell their house.

You know, you never want to get that all you fall. Things happen really quick. So I looked, I got this list that she made for me and I looked at it and I’m looking at, this mortgage is like $147 million mortgage on this, like duplex. I’m like, okay, here’s, when I look at D, I compiled data and you look at data and something sticks out, right?

It’s an outlier. So what the hell is this? So if I look at a $147 million mortgage on a property, I know that it’s probably owned by a real estate fund. If it’s owned by a real estate fund, they’re either going to buy it and hold it, or they’re going to sell it, right? Fix it, sell it. So I drove by it and it’s like covered in like, there’s crazy shit.

And. They don’t it like four months. Okay. Know, parked my car. I get out, I kind of look at it, and there’s all these crazy notices from some weird guy, like all over the place that say, you know, do not enter. So there’s a holdover tenant and uh, he’s being evicted and there’s a sheriff lock out.

So I go on corporation Wiki or something like that, find out the name of the fund that owns it. I call them and I’m like, Hey, can I talk to your acquisitions guy? Right. And I didn’t know, but a bunch of my, like colleagues were running after this thing and nobody ever told me about it. And I just totally got lucky.

And, uh, it was also in, my wife was like nine months pregnant and so I saw that they bought on the pork out of foreclosure. Well they bought at the courthouse steps for $629,000 and I was like, Holy smokes. Right. Cause I know what it is. It’s a very standard size, lot size and zoning and it’s in a great area.

And the last one I sold that was just like that sold for 1.3 million. So I call this guy that talks to the acquisitions manager. I get, I get them on the phone, whatever. I say, Hey, are you interested in selling that property? Like will you sell it to me as is? And he’s pretty much business as usual.

He’s like, well, let me get you a number. Yeah. So we shuffled some papers around and he comes back and he goes, seven 50 now or eight 50 after I fix it. And I’m like. In that moment, in that split moment, and I was prospecting for listings, like I was really prospecting for listings or opportunities to sell my guys.

I go, I buy it now, right? There’s like, all right. Whatever, and it’s like, and he’s like, well there’s no, there’s no commission in this, so you’ve got to add on on top. I’m like, no, that’s fine. I’ll buy it. I’m going to buy it. Right. And I literally like know he said seven 50 I’m like, I’ll buy it.

Right? Cause the last one I told 1.3 so I kind of like very quickly move. Getting an offer together and you know, have his person represent me or whatever, and I get the thing under contract. my wife is like nine months pregnant, right. So I tied up, there’s some drama, you know, like there’s always drama.

Some of the guys that are going after it, find out that I have it and you know, they’d tell the guy that I’m trying to wholesale it, which I wasn’t. Right. I would

have anyways, my wife has our kid. And then like 10 days later I close on it. So I bought it and I was calling hard money lenders and I was like, Hey, will you give me a loan? And they’re like, yo, like what is it? And they’re like, I’m like, it’s this. And they’re like, how much like equity are you going to put in?

And I’m like, none. And why is that? Because it’s worth like way more than I bought. I’m buying a store. And they’re like, and I showed them like, Oh, okay. So I talked to a few guys and, uh, you know, bad deal, decent deal, decent deal. I just took a decent deal from my good friend and client.

Chase Maher: [00:22:22] Decent deal. It was a pretty good deal. You got from the

Matt Davies: [00:22:27] no, no, no. Well, yeah, no, I got a really good rep. well, that was, that’s another good piece of it. I could have haggled a little bit on my hard money terms, but no. My buddy who like gave me the loan, like he’s never beat me up on commission and he’s, you know, so I’m like, lik man, I’m like, I don’t really care.

Like I’m buying this thing. I got a good deal anyway. And with 100% equity. So like, I literally bought my first semester property with no money down, no money down, and a great area source, state yourself and tell. Tell me a little bit about like, what did you want to do with the deal initially and how did that sort of change.

So I spent, I just, I’m S I’m a really, I’m a closet analytical person. Like I’m very analytical and one thing that I’m with is like technology, cause I’ve just decided not to go down the rabbit hole. Cause when I go down the rabbit hole it’s like see you in two weeks, you know, like I just go deep dive.

So I went deep dive on this with like what was my strategy going to be because sold several of these to people and we didn’t do a damn thing and put a new rendering of something and sold it for 1.3 million. So I said well. That’s all the thing right now for 1.3 million and I, you know, make half a million dollars, I’m going to a pretty massive tax liability, you know?

And I have a client that, and we’ve been drinking beer and talking a lot about taxes, and he’d kind of been teaching me stuff and it’s something that I, I haven’t Doug deep into. So it was really fresh in my mind. I was like, well, how can I avoid paying taxes as well? Know, you can. You can tend to be, you can hold it as a longterm, whole new hin, 10 31 exchange at some point in the future.

Right. So by the way, when I bought this thing, I bought it like site on scene on the inside. So it was two units, and then it ended up actually being like a third bootleg, which was pretty rad. You know, there’s a one car garage. It was already like set up as, as a little granny flat. So I thought I was getting two units and I realized I was getting three and I was like, just elated.

Right. So first, like somebody offered me like 900 for an escrow and I was like, no, I like it. That’s cool offer and stuff, but they’re going gonna have to pay tax on 150 like a ton of tax. So I closed on it with the intent of fixing up the structure a little bit, like spending a little bit of money on it and then setting up an Airbnb cause I Airbnb my apartment and saved every, with my, with my now wife, when we were dating, we’d go like how sit for parents and watch their dogs when they’re out of town.

And we’d Airbnb our house and every penny we made from Airbnb, we’d put into a separate bank account. And that’s how we saved our money to buy our first house. You know, also with like a personal residence. I’m familiar enough with it. People are really into it and they’re raving fans about it. So like, let’s do this.

So it’ll be fun. It’s right next to the Lafayette hotel. It’s in an area that’s kind of closed, so downtown, so. I intended to put, you know, X amount of dollars into it. I ended up putting more than double that into it. Yellow first deal, everybody, you’re going to spend more, it’s going to take longer, right?

Pretty. Pretty general. So let’s fast forward now you, you refinanced it, right? Yeah. So that was another, that was a big thing that I kind of preplanned in the beginning. The way the note was going to be recorded, because I knew I could get an appraisal for an, I’ll be really concise with this. I knew I could get an appraisal for around one, two, and three as a duplex, like one, one, one, two, one, three.

It’s very, you know, subjective. So I have my buddy give me like a little bit more. So I had a mortgage amount, uh, like 800 . And then I put cash on top of that. do it. So my not in, it was just like my cash and. I kept the mortgage amount. I like 800 because I know that for investment real estate investments, to get the best terms, you’re going to need to have 30% equity.

So they recently changed the lending guidelines. We used to have to wait 12 months to get what’s called new value, where you fix the property up because they just look at the property tax roll in. Let’s see that you purchased it for seven 50 and say, I’m not going to give you a loan for 800 on it.

You just bought it four months ago. So they changed the guidelines so. Now if you do substantial work to it and somebody appraises it for this, you can get along for new value. However, if I just bought a cash and my guy didn’t like originate a note, I would have to pay extra on my mortgage or like take out, you know, cause it’d be a cashout refi.

So I just wiped out my hard money loan with a refinance cause it appraised for like 1.2 1.1 0.2 like 1.19 or something like that. So I had. 30% I had seven 30% equity in it from the value that I built. And I just, I bought it. Right. So, um, talked to a bunch of different lenders, you know, one lenders like we can’t do it.

big guy like knows what he’s doing, originates probably $100 million of loans plus plus plus every year. He’s like, you can’t do it because this, and like he wasn’t up on his guidelines. So it’s like a lot of researching, a lot of talking to people. And I set this up as deferred interest payments too from my buddy who gave me the deal.

So. I was never like late on on payments, which is another qualifier that, so I was talking to harmony guy and like a traditional mortgage guy, because the harmony guy was going to originate my, my acquisition funds and then the traditional finance guy was going to wipe that out and put like longterm amortizing debt on it.

So orchestrating those two things and understanding those things so that I started from the beginning. Mmm. Structuring it correctly was like, I mean, I was on pins and needles the whole time, you know, cause I didn’t want to sell it right away. No. Hey, no. 30 40% tax on that money come, money comes, money goes, you know.

Chase Maher: [00:28:15] Right? So you refinanced it, got a lower, lower a rate, lower payments, and now you’re running it as an Airbnb. So like share with us some of the sort of things you’re learning from running like this three separate unit little, I’m going to call it like a little mini boutique hotel kind of set up, like what are you learning from that?

What’s working for you, what’s not working for you, and are you going to do it again?

Matt Davies: [00:28:39] Yeah, absolutely. So my out of the gate realizations is the smaller units are better for a couple of reasons. They’re low impact in the neighborhood. Your neighbors are not going to whine and complain about someone, you know, like a couple that’s going to come and like drink wine and hang out and then like, you know, pass out or like they’re coming in town for to see a band or something like that.

It’s just. When you have the bigger ones. So I have a three bed, two bath. I have a studio, a one bed, one bath. The studio is, I call it the boom boom room, but it’s actually tiny living in North park. It’s like the coolest one, and always rented. It’s super cheap. I probably make like 2,500 bucks a month in total on it.

And I would rent it longterm for like 1400 or 1300 it’s cheaper to clean. You know, my cleaning on that. It’s like 40 bucks. And the ladies super happy cause she can turn it over in 30 minutes, you know? So it’s kind of like a win, win situation for everybody. In terms of the neighborhood impact cleaning, lady management of it, just, you know, dealing with issues, it’s just easy.

The bigger one is like, you’re going to want to come at a higher price. And just like in real estate sales, the higher the price, the smaller the buyer pool. So the higher the person in your rental, the smaller the people that can afford it. And in turn, that’s going to lead to more vacancy and vacancy is not good.

So you have to lower the price. So I’m renting my three bed, two bath for whenever I can, because right now I’m in the phase of collecting reviews. You know, I’m now a super host, so every time something happens at the very beginning, I was. Go on every day and observing and watching and talking to the cleaning ladies.

We got our, our little like maid’s closet all dialed in with labels and stuff like that, just so that everything is like a well oiled machine. So I started figuring out like certain things, like somebody wouldn’t get this or, so I’d just go to like the pain point and I’d solve that and then I, I’d be like, okay, everybody keeps asking me for early check-in.

Oh my gosh. So annoying. So I just put an absolutely no early check in. I’m sorry. You know, like it’s just a rule. So like read the rules. It’s not like I’m a Dick, but I don’t have time for that. You know, I had some lady last night, they couldn’t figure out how to, it’s just, it’s funny now having like 60 70 people, guests that have come through somebody like, where’s the wifi?

And I’m like, I don’t know. All 75 people figure it out. Like, I mean, I’ll tell you what it is. I’m not, it’s a waste of time to be like vindictive about that. But it’s funny that people have stupid questions. So some woman was like, speak to me in Spanish last night. She couldn’t figure out the checking instructions.

I’m like, everybody else figured it out. You, you just can’t fix stupid dealing with the general public. So it’s called button. Yes, I would do it again.

Chase Maher: [00:31:16] That was going to be the next question. Like would you do it again? Because let me ask you this. If you rented all three units longterm, what was your gross be?

Matt Davies: [00:31:25] I think my gross would be like, probably like 6,900 bucks and my mortgage is 5,400 gotcha. And so what’s your gross? Oh, with the Airbnb. So far, like slow winter months since I’ve been doing it. My gross, it’s like 10,500 and then I’ll probably be 15 grand in the summer. Right. I think, yeah, potentially even more.

I think one of my other friends since like come January, it’s going to be way easier. There’s going to be a lot better. So I’m at like 93, 94% occupancy and um, I’m being really active about lowering my prices and checking out my competition. And it’s always sparkling clean. Like I’m doing a good job.

Right? I’m being on top of it. So I think it’s a lot of work, but. Another reason why you want to, as a real estate professional, there’s something in the tax code. Maybe I’m not even educated enough to speak on this yet, that with my tax guy today, and he said, if you are a real estate professional, AKA you work.

You know, 720 hours or something a year in real estate, you can depreciate, I think this is it. Like you can accelerate depreciation on short term capital improvements, something like that. Along those lines. Okay. I don’t have a management company doing it, like I’m managing it, but really the cleaning ladies are managing it on my case.

Take the trash and do this, do that. So I think it’s a really good. Cog in a investment strategy that I’m kind of formulating, which is buy something, buy a really deep discount deal. I mean, when you come across as good ones, cause some of ’em, you know there’s, there’s a five, six, seven, 8% returning them and you just sell him, get rid of them.

You know, it’s a condo, it’s, it’s whatever, just like, sorry, good. But if you get a really, really good one and you don’t want to like pay the big tax on it and you don’t need the money from it right now. Hold it long term, longterm defined as a year and a day, and then start looking for replacement properties and then sell it and 10 31 exchange the proceeds, you know, as brokers, we can sell it ourselves and save a commission listing side commission.

You could even double ended and save you for more, but then you can roll that into up to three properties. Right? Or you can take some boots, right? Like take some profit from it. So I am kind of doing a Gannon on another property. It was with my tax guy and he was like, you should really just hold this one again too, for like a year and a day because you’re going to just, you just going to get smoked.

I’m like, taxes. The other great thing about holding property longterm is depreciation. as real estate professional, you can use depreciation too. Offset your tax liability from earning commission checks and it’s, you know, like you’re showing a big loss. And it’s totally legal, like it’s in the tax code.

It’s one of the benefits of owning real estate. you just can’t do that if you’re flipping, you know, like if you’re flipping, you’re, you’re paying ordinary income, you know, it’s short term capital gains. So preservation of money or preservation of like deal, like what do you do? You know, what’s your longterm strategy?

So I want some strategies, Paul, three, four, $500,000 out of this deal, and then split that into two. You know, and, and try and do the same thing somewhere else. And in the meantime, build my skillset on ground up construction. Other opportunities. Look for really good deals because I could put something in escrow for a long period of time or something and then quick sell this thing.

Or I could do a reverse exchange into something that I found that’s amazing. Start kind of like, you know, they call it swap to drop, right? You just swap and properties never really pay in your long term capital gains. You’re paying it and, and then the thing that’s beautiful about that is if you’ve got a property and all of a sudden you have.

You know, $1 million of equity or $2 million of equity, you can refinance it, take, you know, 70% loan out on it. And when you refinance it, and this is how rich people get rich, this is a wealthy people get wealthy, not rich, rich. And there’s wealthy, right? Wealthy people refinance their investments and.

If you’re refinancing your investments that is not taxable income. Take out 1 million bucks that is not a taxable income. And then you still have the principal meeting paid down by your are your tenants. I actually want to get into commercial stuff, you know, five plus. Because the debt is much more favorable, cheaper interest rates, and you can do more of it.

Chase Maher: [00:35:31] You don’t get capped out on like how many loans you can do under your name. Matt Davies. So for sure, man, I think w w we have similar goals in that respect. So as we’re sort of wrapping up here, I’d love to hear like what your direction is of being an agent and being an investor moving forward.

Now that you’ve gotten your feet wet more than once, like how are you going to balance that? What’s your strategy there?

Matt Davies: [00:35:53] Yeah. And I’ve been, you know, year end coming up and spending a lot of time kind of thinking and reflecting on that. And we should totally get together and kind of talk about where we’re pointing our ships.

Cause you’re like minded guy. you know, a lot of my old friends are, it’s, it’s like can’t have conversation with people that are, yeah. Not doing stuff like this. You know, you can’t have relevant conversations with people. They’re doing it. So I’ve seen a few people go full time into. Investing, and then you get into this place where you have to buy and you have to sell in order to like make profits.

And I really like the way that things have unfolded for me because I started. You know, as an agent and like that’s how I make money and that’s what I do. And it also sharpens, it gives me, you know, the fly on the wall and I get to see a lot of deals, walk a lot of deals. So a lot of deals track a lot of deals.

I work in real estate all day, every day. So I mean, my main focus is like, I’m a broker, right? But I’m going to start doing more. I always want to have one like investment project, like under construction or going on or kind of like an underlying strategy, but it’s being implemented because. You know, until you own real estate or you know, you buy your own house or you do some stuff, you don’t, you have a, you don’t have the perspective until you do it.

So it makes me better as a broker to continue to broker. Right? Wow. Buying investments, selling investments, flipping stuff, holding stuff, longterm managing Airbnb. And that was one of the cool things that I’ve encouraged other people to do is the things that you do, try and get your compound interest on your experiences from them.

You know, because my experience with this one deal, aye, I sourced the deal up. I found it. I did the acquisition for myself. I figured out the financing. I figured out the takeout. Um, I mean, the, the swapping out the financing, I’ve learned invaluable lessons about Airbnb management. You know, there’s a lot of minutia in that, but all those things, now I’m.

There’s less thought than these. They go in them in order for me to deploy that strategy. So I’ve learned a strategy and um, I feel more confident now. I can move on to like higher level. Strategies and thoughts. So I’m going to continue to broker. That’s my main thing. 75% of my efforts always going to be looking for good deals.

I’m always a buyer know.

Chase Maher: [00:38:13] Yeah. So to me, if I sort of like recap, that is you have realized, and I think it’s very smart, you realize that your one thing, your cash machine, which is brokering deals. Is your main thing, and that’s where your focus needs to be day in and day out. But you’re sort of keeping like that third eye open for opportunities like this triplex.

Uh, and like the next dry Plex that you bought, you’re sort of keeping this third eye opened that when the right deal comes across your play and you don’t have too many other. You know, personal deals in the works, you’re going to take it, you’re going to knock it down and you’re going to figure out what’s the best use of it, just like your development deals.

And then how can you make that turn it into more and more and more. And I think we’ll come see a day eventually, Matt, where you’re probably not a broker anymore. You’ve probably got so many properties and you’re just doing this full time. But. I think it’s really smart. It’s sort of similar with how I’m 100% full time wholesaling properties and then the slam dunk deals, I’ll flip them, are the slam dunk deals.

I’ll buy them as a rental, and then how can I parlay those into other deals? So really cool stuff, man. I think that. That’s a a really great mindset to have. So I want to ask you, in terms of like resources or guides or books or podcasts, is there anything that you sort of consume or have read a few times that’s like really sort of helped you shift your mindset in a way that the listeners could benefit from?

Matt Davies: [00:39:36] Well, the first thing that comes to my mind is like, I’ve learned more about like mortgage and finance, drinking beers with people that I have from any like books, you know, drinking beers. And I could, yeah, I can really have that to like proximity, being in proximity with people. I am an avid reader, you know, like I like to.

I haven’t done it in years, but I, I listened to a lot of bigger pockets, podcasts and I, I think it helps you put your brain in a or any real estate or finance podcast, put your brain into like the way you need to start thinking and the analyzing and looking at things from multiple angles, um, directions.

The other thing that I like we didn’t mentioned about my, my buy and hold was like a really favorable zoning. Like, like property. And it’s a really good lot. So I have multiple exit strategies. I could sell it on a, you know, inflated cap rate to someone that wants to turnkey Airbnb investment. Or I could sell it to an apartment developer, or I could sell it to an apartment developer that just wants to land bank, something that’s going to carry itself and then develop it when he gets there.

So. When I look at stuff I like multiple, like I don’t want to buy something in like spring Valley or whatever cause I don’t want to be stuck with it and I don’t want to go there every day. I want to have properties that are, have multiple exit strategies if possible, and they’re like really good deals.

Just cause being, you know, some doing another deal. Right now I’m getting more conservative on things and I’m also getting a better grasp on like what things truly cost and how long they truly take. Get out of 30 episodes we’ve done so far. I’ve, I’ve asked everybody the same question. Everybody has a podcast or a book.

Chase Maher: [00:41:11] You’re the first person to say, you know what? Like, I’m a little bit different. I like sort of networking with people that are experts in their fields and sort of, you know, taking some information for them over a couple of beers. So I appreciate you being honest about that. We already talked a little bit about like where you’re going in the future and, and how you want to take your investment strategies.

So before. I let you off the hook and, uh, asks you where people can find out more about you. If you, if somebody is listening right now and let’s say they’re a real estate agent and they want to get more involved in investing, what’s the number one actionable tip that you would give them?

Matt Davies: [00:41:42] You know what I would say to that response, looking back in my life, and I’ve been doing a lot of kind of like reflections past couple months, months, w you know, across the board, life is about like the go for it moments.

There’s moments in life where you just got to shut up. Just go for it. You gotta jump off the cliff and figure out the parachute on the way down. And I think people misinterpreted that. And so I’ll elaborate a little bit more. Step two . Do as much research and sharpening the saw to reduce your risk.

So I’m not saying get into stupid things and like just go get a hard money loan and buy a property. I’m saying at some point you’ve got to jump off the cliff. You know, at some point you got to say, you know, you’ve got to go from the student to being the teacher. You just have to take it action.

You know, everybody’s first time at everything sucks, right? So. You just got to start doing it, you know, and you’ve got to kind of fake it till you make it. People like kind of hate on that term. you got to go sh you got to show up, stand up tall and just go do it. Like knock on the door. Who call that person?

And just like picking your skin and like, I come from Irish background, so it’s kinda like, Oh, it’s cold. Let’s make a colder, you know? Or like, it’s just, it’s really like rough and tumble, kind of like, you know, you turn 18, they’re like, well, get the fuck out of my house. Um, sorry. I don’t know.

Chase Maher: [00:43:09] Nah, you custom away bro. But I feel you man. Just go get dirty. Go get your feet wet. Go take that risk, but make it calculated. Do the research. Yeah.

Matt Davies: [00:43:17] Don’t be a pansy about it. You know? Like you gotta just do it. Step up.

Chase Maher: [00:43:22] Yeah, I hear ya. What’s the best way for somebody to all like follow you or reach out to you?

Matt Davies: [00:43:27] You can follow me on Instagram at Matt dot. Davies dot S D or you can call me. Text me. Eight, five, eight, five, two, five, three one, three, one. I’m one of the few people that puts their phone number like on their signs and stuff. Uh, I, I’m actually bombed cause there’s a lot of robo calls these days.

That’s not for me putting them on the sign. But I do like when I pick up my phone calls, how I build my business too. Yeah. Pick up your phone, talk to people, return it. So. Yeah. Call me whenever.

Chase Maher: [00:43:56] We’ll link Matt’s Instagram in the show notes. We probably won’t put his phone number in there, so if you really want to call him, you’ll just have to rewind and listen to that.

But we’ll, and Matt, I appreciate it, man. Thanks for coming on.

Matt Davies: [00:44:07] Yeah, I appreciate you having me. Thanks guys.