Listen to hear Matt Picheny discuss how to live in one state and purchase investment real estate in a completely separate multifamily market. Matt lives in Boston, started as an actor, started his own company, worked on major advertising projects for companies such as Verizon, IBM and Coca-Cola. Matt is an investor in over 4,000 units and has a heart for giving back to the next guy!

Table of Contents:

• A People Person With a Heart for Helping Others
• Transitioning From Corporate Madison Avenue World to Multifamily Market
• The Different Planning Aspects Involved
• Always a Soft Spot for Kansas
• A Non Recourse Fannie Mae Loan
• Three Things You Need to Bring to a Deal
• How COVID Impacted the Broadway Shows
• Where the Investors Came From
• Establish Pre-existing Relationships First
• A Certain Number of Assets Under Management
• How to Reach Matt Picheny

A People Person With a Heart for Helping Others

Darin: A little background on Matt Picheny before we start. Matt lives in Boston. He had several career paths before getting into real estate, including being an actor, starting his own company, working in large-scale media companies, managing very large projects. He is a people person. At the same time, he is a details-oriented guy with a couple of real estate certificates from Boston University.

He is an investor in over 4000 units. He's purchased land, he's purchased single family, he's syndicated large scale multifamily. He has even co-produced a couple of Broadway plays. This guy has a heart for helping others, both through charities and through helping the newbie real estate investor.

Darin: This is audio-only, but if you could see Matt's office right now, you guys would be jealous. I can look at him, but we're not recording the video, but he is outside in Boston. He's got the kids swing set behind him and he is enjoying the outdoors in the northeast. Matt, really appreciate you coming on.

Just a little intro in terms of how Matt and I know each other. Matt and I met through a Multifamily Mentorship group that we're both a part of. When he joined, he actually reached out to me through a private Facebook group. We had a great long conversation over the phone.

When he came into Dallas, we had a networking event and we had some beers and got to hang out. He's just a great guy, and he's got a lot to share.

Meeting Different People in the Multifamily Market

Darin: One of the things that I'm excited for you to share, Matt, is you're located in Boston. You've actually purchased assets outside of your state.

That's one of the things that I definitely want you to be sharing with the group as we go forward. With that, I don't want to spend a ton of time on your background because I've already given a little bit of it. How many properties and the total number of units are you invested in?

Matt: At this point, I'm invested in over 4000 units, 75% of those, I'm invested in as a passive investor. Darin, you and I met each other a few years ago, as you mentioned, through a mentorship group. It's been really wonderful, actually, to see both of us continue to grow our careers and our portfolios over time.

Through being in that group, I've been able to meet a lot of different people who are syndicating deals. I've invested in a lot of them? The other 25% of my portfolio are deals that I either own completely, just by myself or those are deals that I've syndicated myself. I'm one of the sponsors, or the lead sponsor on, and have many investors involved in those projects with me.

Darin: You said 25%, so about 1000 units you've either purchased individually or syndicated?

Matt: We're getting close to 1000. A little shy of that.

Darin: Awesome. Where do you live?

Matt: I live in Boston, Massachusetts, and I own absolutely zero properties in the state of Massachusetts.

Darin: Why is that?

Matt: The numbers just don't make sense here. They don't. I've been looking. I actually had a 1031 exchange to do, about a little over a year ago now.

Looking Outside Your Market

Matt: About 18 months ago, I did a 1031, and it's a complicated story, but there was an air rights. I had some air rights that I was selling. So instead of paying the taxes on it, it made more sense to do a 1031 exchange. Which, as you know, is where I could move that money into another property.

Therefore, I wouldn't have to pay the capital gains because I'm reinvesting it right away. I was looking for something to do in Boston. This is the area that I live in and I would love something in my backyard. I looked up to about an hour away by car, at many different opportunities. I just couldn't find anything that makes sense.

I ended up buying a six-unit in the middle of Kansas City because I know that area, I have other units, properties in that area. There was something that came across my desk, and the numbers made sense. They just don't make sense up here.

Darin: I used to live in Connecticut, and I'm familiar with that area. I was not in real estate at the time, but from living up there all growing up. I went to school, University of Rhode Island, so I'm familiar with it. I know it's really costly up there. Everything is expensive.

I can understand why you would want to look outside your market, and I want to get into that a little bit. But before we do, I don't know your background. Help me understand, what were you into? What kind of business were you doing before you got into real estate before we met?

Matt: I grew up in Florida, and I moved to New York City.

Working the Way up the Corporate Ladder

Darin: Where in Florida?

Matt: The Orlando area. I moved to New York City to pursue a career in theater. I went to a musical theater conservatory in Manhattan, graduated from that, and was a professional actor for five years.

Then I moved from that. I started tinkering around with computers. This was in the mid-90s. I ended up having an opportunity doing some freelance work. Then I ended up growing that business out of my little one-bedroom apartment in Manhattan to the point where I couldn't fit any more desks in my little apartment.

I had to get an office space and was running a boutique digital marketing firm in New York for about five years. Unfortunately, the dot com bubble burst, and then the nail in the coffin for my company was the terrorist attacks of 9/11. I had an opportunity to go in house with a client of mine, which was Showtime, the cable television channel.

I worked there for almost five years. Then I segued from there into working at these big large traditional advertising agencies in New York City. Worked in advertising agencies for a little over 16 years, just working my way up the corporate ladder. I was a project manager, making sure things got done on time, on budget, and at the highest quality possible.

Learned marketing through osmosis from being involved in all these big high profile projects. I ended up climbing that corporate ladder. Towards the end of my career, I was managing teams for very large projects. Teams of 100 people or more, working on massive endeavors for Procter and Gamble, and Verizon, Coca Cola. A Lot of these large corporate entities.

Transitioning From Corporate Madison Avenue World to Multifamily Market

Matt: During that time, as a hobby, or as a side hustle, as the kids are calling it nowadays, I started doing real estate. It was something that was fun, that was interesting to me. It was a way to diversify all the money I was putting into the stock market through my 401K.

I just wanted to put money in something else, other than just that. Then I ended up getting married, and we had a child. My wife got an opportunity out of the blue. A really cool opportunity for her that would require us to move down to Miami, Florida. I thought, well, I'm not a huge fan of Miami, but there are worse places we could go.

We moved down to Florida, close to my parents, who still lived in my hometown of Orlando. That's when I transitioned from the corporate Madison Avenue world that I was in, into doing the real estate full time. I had been doing it part-time before as a hobby, but this was the time I transitioned. That was just about five years ago now, and I said “I'm going to go do this full time."

Darin: There's a lot there. You have an interesting background.

Matt: Yes, that's why I'm writing a book about it.

Darin: We'll get to that. That's incredible, you're writing a book. I know this is a real estate show, but I'm interested. So, acting. What did you do? Were you on any TV shows, movies? What was your big claim to fame?

Matt: My biggest, widest thing that anyone would have seen was when I was actually 12 years old.

Mowgli from The Jungle

Matt: I worked at Disney World, and I was on television in the Easter parade. When I got a little older, when I was 16, I started working there full time.

I was Mowgli from The Jungle Book, I actually still have a recording of it. My kids get a kick out of it. Me, dressed as Mowgli dancing around with a wig and a loincloth. Doing cartwheels and front handsprings down Main Street, USA at Walt Disney World.

That's probably the widest-reaching audience thing that I did. I was in a number of student films, I was actually in a music video at one point that was on MTV.

But I was covered from head to toe in red stocking-like material. Are you familiar with the artist, Keith Haring?

I love Keith Haring, he's a great artist. He was a protégé of Andy Warhol. Keith Haring was a big artist in New York City in the ’80s, and a lot of his stuff is now getting more and more into pop culture. I actually have a shirt of his that UNIQLO sells. They're selling shirts with his artwork on it and stuff.

Anyway, this was a song that was written about him. He's known for these characters that he would draw. This was the director's interpretation of the characters. You can't really see my face, although, if you know me, you can see me under this red stocking.

You can see my face kind of, but otherwise, you wouldn't recognize me. I did mainly theater and was mainly a stage actor. Did a lot of musical theater productions across the United States. I've actually performed in every major city in the continental US.

The Ability to Go Into the Unknown

Matt: It was a lot of fun, I had a great time doing it. I don't miss doing it at all. It was a blast. I'm involved now in theater by helping support different shows that I feel strongly about. I don't know if I'll ever be on the stage again, but it was a blast. I really loved doing it.

Darin: Look, there's acting, you see people on TV and you just think they have overnight success. It's a hard grind to actually build it up and make it. To spend five years slugging away, both in theater and other avenues. It just says a lot about you.

Then from there you went and started your own company out of your apartment. Some of those things parallel into real estate. There's a certain amount of risk in taking action that has to take place. There are a lot of people that are interested in real estate. There's a lot of people that will actually take the next step and start reading about real estate or listening to podcasts.

But actually stepping your foot out, and taking a chance, you have to have the ability to go into the unknown a little bit. In acting, you had to do that. Then starting your own company is a risk. And then you went and worked for some great companies, so you got to see how the big boys do it also.

You took all that experience and brought that to real estate, so that's pretty awesome. Tell me about the first deal that you did from out of state. Were you still living in Miami, or had you moved to Boston at this stage?

The First Investment in the Multifamily Market

Matt: Interestingly enough, the first investment real estate transaction that I did was an out of state transaction. I'll explain why. I lived in New York City, I owned the apartment I was living in. It was a coop. I had already lived in one coop first and then sold that, and upgraded to a little bit of a better location.

I’d done a couple of real estate transactions and I was interested in doing more real estate. It's kind of a long story, but I ended up with an opportunity to purchase some land in Connecticut. Actually in North West Connecticut, in Litchfield County.

Darin: What town? Because I grew up in Brookfield.

Matt: Goshen. It's adjacent to Litchfield. It is a beautiful lakefront community. I don't want to get too much into the story, but a really good friend of mine, her father was a realtor. He had shown me the property because I was building a website for him, and then the area. Then I saw that he had some lots for sale.

I ended up buying a vacant lot and actually building a house there. Again, it's a whole, very long, very interesting story. But that was the first thing that I ever purchased as an investment. That was a two-hour drive from my home in New York. This was in Connecticut, so out of state? I learned a lot of lessons from that experience.

Darin: What kind of lessons did you learn? Give us the top two or three. We don't have time for the book yet. We do want to read the book when it comes out.

The Different Planning Aspects Involved

Matt: It's in there. I just learned about building a house, I had never built a house before and I bought a raw piece of land. Just everything that you can imagine that's involved with drawing the plans. Then seeing how everything's getting put together with the electrical systems and the plumbing systems, framing and roof, and foundations, and fixtures. There are just so many different things that go into it.

Things I think a lot of people, including myself at the time, just completely took for granted. I had already purchased two homes at that point. Not that I owned, but I owned one, sold it, and moved, but I never realized they’re already constructed. I never realized all the different planning aspects that were involved in it.

The other thing that I really learned was exactly what not to do if you're looking to generate. The goal on this was not to generate income, the goal on this was, I lived in Manhattan. And I wanted to be able to get out of the concrete jungle from time to time, and go escape.

Darin: It was more like a second home for you at first?

Matt: Initially, yes. The thought was, I bought this land. I was like, this will be a great investment. I had made a killing on my first real estate investment in New York. Now, I'm a real estate genius, which I really wasn't.

I just had some good tailwinds behind me, which was another thing I learned. Anyway, I bought this piece of land and was like, "Oh, I'll sell it in a couple of years. It'll be double value, or maybe I'll build on it one day."

Darin: Did you make money on it?

Stepping Out and Taking Action

Matt: When I eventually really sold it? No, but I didn't lose money either. I had a tremendous amount of things that I learned so much from, it's unbelievable. It's what set me on this path that I'm on now. I didn't lose money. If I sat down with a forensic accountant, and we went through everything, I think I did make money.

Because of the tax benefits that I had for over five years, plus, I got to enjoy the house from time to time. There were a lot of benefits in it, besides just the dollar value. If you look at what I paid for it, and then what I got at the end, it's about a breakeven.

Darin: That's important, though. We talked just a little bit ago, about having to finally step out and take action, and then take a risk. You did that by buying land. Then wanting to build what was going to be a second home, but an investment home. I bought a new construction duplex, and that was October of 2017. When I signed the contract, it was going to take a year to build.

After, I was glad that I did it, but I was like, this is just going to take forever to build any wealth. That's when I went looking to go bigger. Then we got involved in the same group and whatnot. People ask me, "Are you bummed out that you did that duplex?"

I'm like, "Yes and no. I'm happy I did it because it got me into the real estate game."

A Better Avenue to Invest in the Multifamily Market

Darin: I had wanted to be in real estate. Like a lot of people, I was just hamstrung and just couldn't take action. I'm glad I did it because it got me in. But I for sure think that the syndication, the larger-scale properties, are a much better avenue for me to invest in going forward.

But part of it is mindset, too. Some people can't go right there. For us, we both dipped our toe in it, doing something different, and then found our way. Like you, I'm glad that I did it because it forced me, and it got me on the journey.

Matt: If I can add on to that, I think there are two mindset jumps that tend to be difficult for most people, myself included. The first one is the location, and the second one is size. A lot of people don't or are uncomfortable investing outside of their own backyard. Now, I run a meetup group here in Massachusetts and we've had this topic a couple of times now.

It's always very popular when we talk about investing out of state, and I have a panel of people who've invested out of state. I'll be the moderator and ask them all kinds of different questions, and then we open it up for people. But it always gets a tremendous amount of turnout. Then the other thing is size.

I talk with people all the time, they're like, "I think I need to do a duplex or a four-unit first." I always say, "Anything that you can do is great, I encourage you to do a duplex or a four-unit. Just realize, you don't have to start there, you can start with 100 unit property."

Two Mindset Shifts to Get Over With When Venturing Into Multifamily Market

Matt: You need to have somebody with experience teaming up with you on that because it's your first time doing it, but you don't have to start small. Actually, the difference between doing a two-unit and doing a 100 unit, there are some big differences there.

Going from, as you know, four units or less is set up one type of way, especially with the financing. Then five units or more, it's set up in a different format. Those are two mindset shifts that people, myself included, needed to get over to be able to get involved in the syndication game.

Darin: That's a great point and you put that very well. Now, talk about one of the larger deals that you did. I know you did 100 plus unit deal in Kansas, and you're living in Boston. Talk about how that came about. How'd you decide Kansas as a market? From there, how'd you build a team and build credibility with the brokers locally in that market?

Matt: There is a popular podcast that probably some of your listeners listen to. One of the hosts is known for saying, "Live where you want to live and invest where the numbers make sense." It's The Real Estate Guys. Robert Helms is known for saying that. He says that quite often.

The numbers didn't make sense for me at the time. I had already moved down to Miami. And I had gotten involved in that syndication group that you're talking about, the mentoring group. I had been, to actually, one of The Real Estate Guys' conferences. That's how I found out about the mentor group that I joined that you're part of.

Always a Soft Spot for Kansas

Darin: We're both part of the Brad Sumrok group out of Dallas. That group is in Dallas. How did you pick Kansas?

Matt: What happened was, I started looking, and I didn't start looking in Kansas City. I actually started looking in Ohio where my cousin lives. Where I had done some flips. I was also looking in Miami. The numbers and the scale just weren't making sense in both locations, I was looking for a third location.

I mentioned earlier in our discussion today, I used to be an actor. I had performed all over the country. One of the places I have performed was Kansas City. I actually spent an entire summer in Kansas City in my 20’s doing a couple of shows. At the time, I was very naive and didn't think much of Kansas City before I went there. I thought I was going to have a very boring summer.

I was really blown away with the fact that the city was so metropolitan, I had a blast. One of the best summers of my life, I always had a soft spot in my heart for Kansas City. I started looking at different markets, and also one of my dearest friends, who was a roommate of mine in college. He moved to Kansas City with his wife, with his family, his wife and daughter.

Darin: Is he still living there?

Matt: Interestingly enough, no. Now, he lives outside of Nashville, but five years ago, he was there. I started reaching out to some local brokers in that area. I’d already done this twice now. I had done it in Ohio and I had done it in Florida, so I was pretty comfortable with it.

A Solid Multifamily Market

Matt: I've had some experience doing this. Figuring out how to find the brokers, reaching out to them, and talking with them on the phone. At that point, I had also invested in a number of syndications. So I felt very comfortable with what I was doing and had a little bit of a resume.

Matt: Started to get to know the players in the area and started making trips out to Kansas City. At first, I started looking at deals. I had looked at the fundamentals of the multifamily market. It's a good multifamily market, it's not amazing, it's not Dallas, but it's a solid multifamily market. I went out there and started to get to know the property managers and get to know the brokers.

It took me a couple of years of going out there and developing those relationships, but I ended up finally getting a deal out there. After looking at literally hundreds of deals, and putting out several offers, I finally ended up with one. So it was great.

Darin: You said a lot of things there. In the beginning, when you were doing it in Miami and Ohio, reaching out to the brokers and everything was new. You didn't have experience, you didn't have a resume, you probably didn't have the confidence level you had.

But then you had built that up over time. When you started to go out to the Kansas City market, you were confident that you were a guy that they need to pay attention to. And you felt confident that you could build that credibility.

Matt: I wasn't so scared anymore. Honestly, the first couple of times I sat down with a broker, I think I put on my best poker face.

Going Through Your First Multifamily Market Syndication

Matt: Tried to act like I knew what I was doing, but I was really scared and I didn't know what I was doing. Maybe that showed, but eventually, over time I got comfortable with it.

Darin: People have asked me, "Going through your first syndication, what was the scariest part?" I was like, "It was all scary." Until you do it.  The first time you call the broker, it's scary, the first time you go on the property tour, it's scary. And the first time you put an offer in is scary. But then you build confidence and that sounds like that's what you did.

You said that it took you a couple of years to get your first deal. Some people, they think that it just comes overnight, success. There's a lot of getting out there and building relationships that happen behind the scenes before the deals actually come.

Matt: I agree with that. It ties into what you were saying earlier. I think you mentioned something about the actors, and you hear all these overnight successes. But then when you peel back those layers, no, it was not an overnight success. They had been doing this for a very long time. It's the same thing, I think, just anywhere and in life.

You work in things, you practice, you get better, you get more comfortable. Sure, there are those anomalies. There are those people who decided they want to syndicate a deal. The first deal they look at, they put in an LOI and they get it, but I think those are one in a million. Normally, for most people, it takes time.

Reasons Why You’re Going to Want a Partner

Darin: Did you end up partnering with somebody who had experience on that 100 plus unit deal in Kansas City?

Matt: I sure did. I don't know if I could have done it without that partner, I've enjoyed working with that partner. I've continued to work with him on a number of different deals.

Darin: Who'd you work with? Who's your partner?

Matt: A guy named Justin Martinez. Justin's great. We have a wonderful working relationship together. There's a couple of different reasons why you're going to want to use a partner on something like this. The first thing that comes to mind for me is getting that loan. Now, I had been a KP on a deal, on 168 unit property. I already had my Fannie card, as they say, the credentials with Fannie.

Darin: What is a KP, for people that don't know what that is?

Matt: A KP is a key principle. Pretty much the gold standard on loans from these multifamily, the ones that a lot of people like to do are our agency loans. Those are loans that are going to be backed by either Fannie Mae or Freddie Mac. I've already done an agency loan.

There are ways around that, but I'm not a mortgage guy. I'm not a mortgage broker. You could talk with one about that in more detail. Basically, if you’ve already done a Fannie or Freddie loan, you can get another one of the same size.

If you've never done one before, like me going after 10. This was a $10 million acquisition. I never would have qualified for that loan if I had done it on my own, without having been a KP.

A Non Recourse Fannie Mae Loan

Matt: Now, I had been a KP on another deal, 168 units. Some people say it's like getting your Fannie card. It's like getting a card to a country club. You're in the group, if you will.

Darin: You're a known entity within their database. They can look at you. You're part of another deal that's performing well. It lowers the risk for them doing business on another deal with you.

Matt: You've explained that much better than I did. That's 100% correct. Maybe I would have qualified for the loan. But having Justin on my team as a co-sponsor with me, we were able to leverage his resume and his experience. At the time, he had somewhere between eight to 10 deals done, where they were performing well.

Fannie could actually look at it and be like, "Okay, well, this Justin guy is doing it. Look how all of his deals are performing." It bolstered that. Getting back to the key principle, so a key principle is someone who can sign on a deal, which I did. Now, I was not a sponsor on that deal. It was a non-recourse Fannie Mae loan. As a key principle, I am donating, or utilizing my net worth and my liquidity to go with the sponsorship’s team net worth and liquidity.

To help them qualify for the loan, and I'm signing on those documents. Now it's a non-recourse loan. So if the deal doesn't perform, because of natural circumstances, they can't come after me and take my home. But there are specific clauses that they call, it's a slang term. They call it 'bad boy carve-outs'.

Bad Boy Carve-Outs

Darin: There are clauses in these contracts that state that if the deal goes south for natural causes, nothing wrong, just the business plan didn't work, the lender cannot come after you personally.

They can foreclose on that property, but they can't come after you and take your home or your car, things of that nature. But those bad boys carve-outs state that if something's done in a fraudulent manner like you lied on your application or you're embezzling money or something of that nature, then they can come after you personally.

As a key principle, as long as you feel comfortable with that sponsorship team like they're not going to do things that are illegal and fraudulent, you can sign on these deals. Let them leverage your balance sheet to qualify for the loan, and you sign on the documents. Then you're a signer on the document. That's called a key principle. That helps you for qualifications for further loans that you may be seeking.

Darin: Here's a question. You've got your partner, and you mentioned that he already had eight to 10 deals. Why would he ever want to partner with you? Not saying you're not a nice guy. You are a very great guy, but you were a newbie. You haven't done large syndication.

The reason why I asked this question is because I've talked to a lot of people that have that mindset that they're not worthy to partner with another experienced guy. Why would they want to partner with a newbie? Help explain why somebody like Justin, who had eight to 10 deals, decided to say yes.

Bring Value to the Partnership

Matt: Justin and I got to know each other over time, and I think that was a key factor in the decision making. There's the other aspect, which is, "Hey, why wouldn't he want another deal? He's going to derive income from that if the deal is successful." But more than that, Justin really wanted to work with me and I really wanted to work with him.

He was a coach in that program that we're in, so I had gotten to know him. We had looked at deals together a number of times, and we were very much of the same mindset. Went about analyzing deals in the same way. I've had people who've asked me to partner with them on deals and I enjoy partnering with people on deals.

But I've had people who've asked me, who I don't feel comfortable with the underwriting. Those people, in particular, were not in this mentorship group that you and I are in, I just didn't feel comfortable. I felt like their underwriting was a bit aggressive, and I liked them as people. But I just didn't feel comfortable bringing a deal like that, putting my name on that deal because I felt like it was a little aggressive.

Justin and I have been approaching things in the same way. I think he liked working with me. I think I brought value to the partnership, as did he, and that we complemented each other very well. As an experienced sponsor, I'm pretty experienced now myself. If I meet somebody, and we look at things the same way and we agree on an approach on a property. I would love to co-sponsor with people.

The Multifamily Market as a Team Sport

Matt: I like working with teams. There are advantages to not being an island onto yourself. I think the multifamily market is a team sport. There are many different people who could bring different skills to the table. For all of those reasons, it makes sense. Then, there's also the point of where I think Justin just enjoys helping people, too. He makes money out of the deal, too, but he's genuine.

He has been able to get to a point where he is pretty much self-sufficient just doing the real estate stuff and he's enjoyed it. And he wants to be able to help other people who are looking to do that. I got to know Justin over about a year and a half to two years, so he knew who I was. He knew what my work ethic was. So I think he felt like it would be a great partnership.

Darin: A few things there. One is relationship. You want a partner. It doesn't matter if you're dealing with another experienced guy or somebody on your level. You want to work with people that you like, you trust and you have to build those relationships. Secondly, you didn't mention this, but I'm guessing that Justin wasn't even looking in Kansas City. Maybe I'm wrong, but he probably was not focused on that market.

So you did all the legwork in building the relationships with the brokers, the property management companies, et cetera. Breaking into that market, finding the deal, underwriting the deal, and then you go to the experienced guy and he reviews it. He discusses it with you, he gets excited and now he's part of the deal, you've done all the legwork.

Three Things You Need to Bring to a Deal

Darin: That's the value that you brought. Then he brings the resume and the experience.

Matt: Exactly. When people who are first looking at getting involved in syndication as a sponsor ask me about this, I basically tell them. There are three things that you need to bring to a deal, one of three things, which is either the money. You need to raise $2 million of equity in a deal and you have $2 million. You're like, "I'm going to fund this entire deal." Great. You're good. If you're independently wealthy, that's one way to break in. Another way would be to have the experience. Then the third way is to find the deal.

That's exactly what I did, I found the deal. In terms of capital raising, I was able to raise a good amount of capital. I put my own money in the deal and all of that stuff too, but it was really about finding the deal. I'm the deal guy, and Justin was the experienced guy. Then we work together on raising that capital.

Darin: We talked a little bit about the KP thing. In the space that we're in, I've heard it over and over again, you can buy your own deal. You could be KP and then you can syndicate a deal, or you could be a passive investor in a deal. Then you could become a KP and then you can become a syndicator.

Having gone down that path, I did the same thing as you. I did seven passive deals and I had one deal I did as a KP and then I syndicated a deal.

Partner With a Guy Who Has the Fannie or Freddie Card

Darin: After the fact, I look back on it, and I'm like, "You know what? If you're going to partner with somebody who has massive experience anyway, that guy or girl has the Fannie or Freddie card."

I would say to people that don't have the abundance of capital. You don't have to become a KP before syndicating. You just have to partner with somebody that has already a lot of experience with Fannie and Freddie. Because they have the experience, you collectively as the general partnership group, will be fine.

Matt: I think that's right.

Darin: I'm going to switch gears a little bit. You mentioned you're an actor. You didn't mention it yet on this call, but I know that your wife has produced a Broadway show and you helped with that. It makes a little more sense now knowing that you actually went to school for acting.

You were an actor for five years. I was always curious as to how you got involved with that. But explain the Broadway show that your wife is involved with, and what your role is in with that. Now that we're in the middle of COVID, how COVID has impacted that business.

Matt: I met my wife years after I had been involved in theater. I'm a huge fan of theater and music. I'm a big, big, big fan of music. I love going to see shows and live concerts, more like rock type stuff. That's always been interesting to me.

When I first met my wife, Erica, I found that it was very interesting that she was involved in the theater full time.

Working on Broadway Shows

Matt: She found it interesting that I had that background but wasn't involved in it anymore. We had that same language, I understood what was going on and things and we ended up knowing a lot of the same people. We ended up having worked at the same place at the same time but had never met.

She is eight years younger than me, so at the time she was in high school and I was just freshly out of college. It's probably good that we didn't meet back then. She was interning at the same place where I was doing a show, she had actually seen the show, but we never met each other. It was just a funny thing. Erica is involved in the management side of the theater. She initially wanted to be a performer.

When she went to college, she realized that maybe performing wasn't her thing, she was really good at the business aspects of it. She has had a career doing that mainly on Broadway and worked on most of the big Broadway shows. She's worked on a lot of them and has a lot of experience working in different roles. She did marketing, she did company management, which is like the property manager if you will on a real estate deal.

Erica and I got married. She had already produced an off-Broadway show that she fell in love with, and she helped bring that to Broadway. It was nominated for a Tony. Unfortunately, it didn't win, but it was a great, great show. She had done some other stuff off-Broadway and whatnot. And she had opportunities to get involved in Broadway shows.

The Multifamily Market Is Like a Broadway Show Stuff

Matt: Now, they're very, very risky from a financial perspective. But if you get a show like a Phantom of the Opera that runs for years and years and years, it can be very lucrative as well. Most shows lose money. She was very selective about the show she got involved in.

I started getting involved in shows with her, and we started investing in shows. Not large amounts of money, but not small either and we started investing. We had shows that didn't do well, that we thought would make sense. It was not something that we did every year. Maybe we'd do it every other year. It depended on the project and who was involved in the project.

Darin: How are these shows funded? Is it similar to syndication where you said that you had invested?

Matt: It is. It's basically like a 506C is how they're usually set up. You need to be an accredited investor. They don't really advertise for them and they raise capital for them. It's got the same PPM and subscription documents, which was really interesting. When I started getting involved in the syndication role on the real estate side, I'm like, "Oh, this is just like a Broadway show stuff." I had already done the Broadway stuff a little bit.

We’re fortunate where we invested in one particular show that was a massive hit. We invested in that one as well as some others. I had been involved with her on some of the other ones, too. There was another one that we got involved in on the GP side, but we got involved in Moulin Rouge, both Erica and I.

How COVID Impacted the Broadway Shows

Matt: We're both billed as co-producers on that show. We've been involved in that. We were also involved in David Byrne's, American Utopia. We also have co-producer credits on that, that was on Broadway.

That was a huge success, that was a limited run, and David Byrne was the lead singer for Talking Heads. It was an awesome show, it was really great. It’s pretty risky we thought but we really liked it. The returns on it were fantastic, and it was actually going back to Broadway this fall but because of COVID, it's not.

Moulin Rouge was doing really well. We had hopes that it would get nominated maybe for some Tony Awards. Financially it was right on track with where we thought it would be. Then March came and the COVID thing came now. The Byrne show had already closed. It was fine and it will reopen at another date and time to be determined.

The Moulin Rouge one was a little problematic because it was still running, so they had to stop it. All of Broadway stopped in March. They have canceled all the shows at the time that we're recording this podcast through the end of the year. There are thoughts that it will hopefully open up in the spring, maybe in March or April but nobody really knows. We have to see how this COVID thing goes.

A lot of the Broadway shows right now have some business interruption insurance, which is hopefully making them be okay. Some of them are going to close and not be able to reopen. I don't have insight into the financials of the ones that I'm not involved in.

Keeping Good Reserves

Matt: Hopefully they have some sort of business interruption insurance and hopefully it's enough to carry them through. Right now, while the shows are not happening, the costs are very low. There's no salaries and things that need to get paid for the actors, and all the different people involved.

But there is rent. The way that most of these were set up, there's a base rent and then there are theater owners. Because that's different from the producers. Once in a while you'll have a theater owner who is also a producer, most of the time, the theater owner is separate.

So they'll take a percentage of the box office as part of their rent, but they have a minimum rent. Right now a lot of the shows are paying a minimum rent or negotiate. They are negotiating that with the different theater owners on a one by one basis, but there are costs that are being incurred. They're not at the scale of when the show's actually running.

Moulin Rouge did very well at the beginning. It was very popular and the ticket sales were really good. Our property management, the general manager, but just like property management in real estate. He was very wise in terms of keeping good reserves and things like that.

Depending on how long this thing goes, the intention is certainly that we'll start the show back up. It'll almost be as if there was just a really long pause. But unfortunately, a lot of the new shows that were just starting are not going to be able to come back. It's a real shame.

Darin: A few things there, one it's obvious that you're passionate about theater, about acting, about these shows.

The Types of Impact That COVID Has

Darin: You also have a passion towards real estate. It's also interesting how these deals are funded. How these shows come about are through syndication similar to what you're doing on the real estate side. You have two completely different industries, but part of the funding process is very similar. The other thing is, I drive by the movie theaters and we all know we drive by the movie theaters and they're all closed.

I was listening to a podcast, the producer was like, "Look, we've spent four years putting this film together. It was supposed to come out this summer, and now we're having to push it another year." Those types of impact that COVID is having. I just don't think about all those different businesses that are impacted in that way. It's really a shame.

Matt: To jump on that, my wife, she runs her 9:00 to 5:00, or it's really not 9:00 to 5:00. She works a lot of evening hours because it's the theater. Here in Boston, she runs the Emerson Colonial Theater, which is a big theater in downtown. A lot of shows before Broadway will go here first, and then they go to Broadway.

Both Moulin Rouge and David Byrne's American Utopia were both here before they went to Broadway. She gets to be very involved in them.

There's a new Broadway show that was supposed to be coming here, and it's going to be cool whenever it comes. I can't talk much about it, but it's a really cool idea. They ended up having to cancel it being even here because they need to do workshops and rehearse and write.

Where the Investors Came From

Matt: Finish writing it and all of that kind of stuff they're unable to do right now. That thing's on pause. I wonder what Broadway is going to look like for the next couple of years. The same thing with movies and entertainment in general, because there's been a pause in the development of things. It's like with the movies. The stuff that's already in the can, as they say, can be released later. There's no new stuff being shot right now, at least I don't think a lot.

Darin: Why do I even ask you about all this? This is a real estate show. The reason I want to talk about Matt a little bit was what Matt is passionate about. If people want to invest with you, I believe they want to know the person. It's not just about the deal, it's about who you're doing business with. If you passively invest in a deal, you're most likely going to be in that deal for three, four, five, six, seven years.

Typically a five-year business plan, maybe you get out in three years, maybe six or seven. But understanding a little bit more about a sponsor, and about the person who's leading the charge is important. It's important to me, so I want to bring that out to listeners. With that, help us understand where did you find most of the passive investors that have invested in your deals?

Are they friends and colleagues from prior businesses? You mentioned you have a Meetup group in Boston, are they from the Meetup group in Boston? Are they from the multifamily mentorship group that we're both part of here in Dallas? Where did most of the investors come from?

The Most Important Thing Is the Person Who’s Running the Deal

Matt: I agree with you, I have a lot of people who are in my Meetup group here, who will come to me. "Well, what do you think about this deal? Can I get your advice? Do you think this is a good deal?" Someone else's deal that they're syndicating. The first question I ask them is, "How do you know this person?" Sometimes they're like, "Oh, I just met them on Facebook last week."

I'm like, "Okay, well, don't invest in that deal. You don't know this person." I think that you need to know the person. The most important thing is, I think the person who's running the deal. I've invested in deals that have gone south. The ones that have had really good sponsors have been able to do okay. Get themselves out of it and I haven't lost money.

But I've had other deals that should have been great and had bad sponsorship and they got mediocre results. Just because we've had such a good economy behind us for the past five, 10 years that sponsor is really important. Now, the way that I've gotten investors, the way it started for me was with my friends and family circle.

Having lived in New York City for 25 years and having worked, climbing that corporate ladder in digital marketing and just being a social guy. I've met a number of people, and I put them all in my database when I moved to Miami and sent them all an email. I said, "Hey, I'm going to start sending you updates on my real estate stuff."

Shifting to Multifamily Market Requires a Tough Skin

Darin: You let them know. Before you had a deal, you kind of prepped them. "Hey, I'm shifting focus to real estate and I'm going to keep you guys updated."

Matt: And a whole ton of them unsubscribed right away which was fine, "No thanks Matt." Which is fine. Again, you got to have a tough skin for this. The one thing that I can say I took from the acting business was, I was a working actor. I did pretty well. But the only reason why I was good as I went on like a gazillion auditions.

I would just go out on audition after audition and get rejected and rejected and I don't care. It got to a point where I was like," All right, fine. They don't want me, on to the next one." That was how I felt like this, "If they're not interested, that's fine. It's totally fine. This is random and I'm reaching out to them."

My first deal that I did was syndicated all on my end. I would say like 90% of it was friends and family, people that I knew. People that I had done a deal with in the past, had worked with in the past at an agency or something like that.

About 10% was from that mentorship group. Justin was involved in it as well, and he had people from the mentorship group. He had his own database and stuff like that. Then as things have evolved, I've gotten to know more people. Now I have people from the local Massachusetts area that I've gotten to know over time.

Establish Pre-existing Relationships First

Matt: Usually they don't invest in the first deal or two. They say, "Hey, I want to start seeing your deals," but they don't invest right away. They get to know me over time, they get to see my deals over time and then they feel comfortable. Then now there are people that have heard me like maybe someone will hear me on your podcast.

I've had people hear me on other podcasts and reach out to me, and then I've gotten to know them. Then I'll put them on my investor database, because I do 506B so I have to have a pre-existing relationship with somebody. Get to know them and understand what they're about and what their experience is before I can invite them to be part of any deals that I might be doing.

Darin: That completely makes sense. What I found is the friends and family side of things, there's a little bit more education. It's like, "Hey, Darin, I like you. I like your deal. But I don't know anything, I don't really understand this thing. Can you help me understand it?"

The people that are already in have invested in the multifamily market before it's like, "Hey, I like you, I like to deal but I've got five other deals in my inbox." Which one, why yours over the others? It is less time spent on real estate versus the stock market and there's less time, "How does this multifamily market thing work?" It's more this deal versus that deal. Would you agree with that?

Matt: I would agree with that.

Darin: To get to where you are today, you've had to sacrifice some things. Talk about some of the sacrifices you've made along the way.

A False Sense of Stability

Darin: Both chasing your dream as an actor, climbing the corporate ladder and getting into real estate. There are certain sacrifices that you have to make to achieve certain goals.

Matt: No one's ever asked me that before. I'm trying to wrap my head around it as I'm speaking.

Darin: Or think about time, think about money, think about relationships.

Matt: A lot of those things have not been sacrifices. But what I will say was a couple of things. In terms of my previous careers, there were sacrifices that came with being able to climb that corporate ladder. Moving into the stuff that I do right now has allowed me to actually have less sacrifices. The only thing I've had to sacrifice is, I'm going to say, false sense of stability.

Before when I had a 9:00 to 5:00 job, I had, "Okay. This is my salary and this is how much I get paid, and this is what's happening." Now, the stability around that is really very false. Right now, when I have a lot of friends that are still in that business and COVID is now come. A lot of people are not spending money on marketing right now, so a lot of them have lost jobs.

Also even before the COVID thing, which is hopefully a once-off Black Swan event. I was working at a company several years ago and I was brought on to create their digital department, I created it. We won this big award from one of the trade publications. We were named comeback agency of the year. We're doing awesome, and we were owned by a parent company. There was a holding company that owned us.

A Sacrifice in Jumping Into the Unknown

In their infinite wisdom, they felt that they wanted to merge us with another company that they owned in New York. Because it would save them money in terms of overhead. They did that. In that, I was first given a retention bonus if I would stay. Then once the dust cleared and the power struggle was done, we saw who was in charge of the new agency that was formed by combining these two agencies.

I was out of a job because there were two people. They had a head of digital, I was a head of digital. The other head of digital was great, and she just knew them better, because she had been working with them for years. So I lost my job even though I had been doing a great job. But for me, there was a sacrifice in having that known quantity and jumping into this unknown.

Luckily I had been investing in Broadway shows and also in other real estate stuff enough. I had passive income coming in, which allowed me to make that leap. But the work that I do now, I still work hard, I still work long hours. I do have to sacrifice a little bit in terms of like, I have to get on a plane now and then go to properties and do property tours and things like that.

But I'm able to time-shift the work that I do. I could work early in the morning, I can work at night, but I can change that around. I'm available to spend time with my two very young children.

Darin: You could move your office to the outdoors.

Something That Seems Like a Bad Thing Could Be Shifting Things in Your Favor

Matt: I can move my office to the outdoors. I have two of them running around just like little princesses, running around our house right now. My wife is a saint and taking care of them, but we're able to time shift. During this whole COVID thing, I'm Mr. Mom for half of the day so that my wife can do her work for half of the day and then we switch.

Then usually at night, both of us are finishing up all the other stuff we weren't able to get to. Because we only had half of a day. But even before this, once in a while, the older one I took her out of preschool one day, just for fun. This was just before last summer. We went to this place that's like ice cream and games and all kinds of stuff. Do good, fun family bonding stuff that I'm able to do now.

When we still lived in New York and I was still working in the corporate, digital advertising agency, I worked crazy long hours. If we had a business pitch, I wouldn't be home for a week or two while we're working on that. Lots of late nights and things like that. Shifting into this was a little bit of sacrifice financially also, at first a little bit, but I had the passive income. I've now been doing this for about five years now, so I've built up that passive income and it's been good.

Darin: Sometimes, something that seems like a bad thing, like you lost your job, it could be scary and just seem like the world's caving in on you, actually could turn out for the good.

A Certain Number of Assets Under Management

Matt: I ended up getting a much better job after that, so it all worked out.

Darin: You've done a ton and you've accomplished a ton. What's your stretch goal? What's next for you?

Matt: I have some financial metrics that I'm working to hit on the passive income side, and then on the active side. I'm continuing to look at deals. I don't have a certain door number or a certain number of properties or property values. I'm just looking for good opportunities to get involved with.

Darin: That makes sense. The other thing is before we started talking you mentioned that you're writing a book. You also talked about a Meetup group that you started in the Massachusetts area. It's obvious to me that you're a guy that wants to give back, and teach others and help others. When I ask you about the stretch goal, some people do have that.

I want to be at a certain number of doors or a certain number of assets under management. But it sounds to me like, you want to continue to progress financially but you also are focused on trying to help others.

Matt: Beyond the things that you mentioned and helping others in real estate. One of the things that I'm a big proponent is, I'm on this young leaders committee. Something like this for a charity local here that's helping solve the homelessness crisis in Boston. It's completely all about giving back. I've been involved in that. Helping them raise funds, and get the word out about the great work that they're doing. I've always been someone who tries to help.

The Whole Mission With Real Estate and Multifamily Market

Matt: My whole mission with the real estate that I do is to try and help improve the lives of people. Both the residents of the apartments that we own and also the investors. It's all about trying to create improvement. Trying to leave the world a little bit of a better place than then when I first got here. The book that I'm writing, the goal is to have it ready by the end of the year. It's about my journey.

I've never written a book before, and so it is quite an exercise and quite an undertaking, but it's been really good. I've been working on that a lot. I'm hoping that that information through telling my story and having really good lessons in there that I learned that I can pass those on to people who are looking to passively invest in deals. Or maybe people who are looking to actively invest.

I think a lot of people who are looking to actively invest may already know some of those lessons. But I'm hoping that I'm presenting it in an entertaining way and an insightful manner. That's what I try to do with the Meetup. I always have great guests to come in and talk. Once in awhile, I'll get up on stage and share information.

It's really about getting people together and getting people to know one another. I started doing this thing at the beginning of them now, I do a shout out at the beginning. I'm like, "Oh this one just did…" Before it wasn't like that. Now we're constantly getting over 100 people. Sometimes we'll have over 200 people.

Darin: That's a great size Meetup.

Doing Deals Together and Being Successful Together

Matt: We've got this whole floor of a restaurant, we've got the whole bar, and there’s a stage and a microphone. It took us a while to find a great venue, but I finally found one. We've been there for a while now. It's taken time to grow the mass that we have, but we get people together. Now I'm like, "Oh, this one just did a deal and this one just partnered together on a deal."

The whole point of it was, we're not selling any mentorship kind of thing. It's about people who are interested in real estate getting together, sharing ideas and partnering together to do deals.

Nothing gives me greater joy besides my family than seeing people that I've met, that have gotten together, done a deal together, and are being successful together. That really lights me up.

Darin: What's the name of the meetup group if people are listening from your area?

Matt: It's best to just reach out to me directly. I can get you on the mailing list because it's a mouthful. It's the Multifamily Investors Network of Massachusetts.

Darin: If people want to reach out to you Matt, how do they get in touch with you?

Matt: It's mjppg.com. That's my website and you can also email me directly, at Matt@mjppg.com. I love talking with people about real estate, whether you own zero doors or a million, feel free to reach out.

Darin: Matt, I really appreciate you coming on the show. Listeners, I hope you've enjoyed that one. Look, you can start from anywhere in any industry and this guy just showed it. Until next week, signing off.

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