Are you looking to raise private capital? Matt Faircloth currently owns over 1,350 multifamily units.  Matt studied Engineering at Virginia Tech and went into sales after college.  He loves working with and helping people and loves the creativity of working real estate deals.  And he advises others to focus on your zone of genius.  He wrote the book "Raising Private Capital" to help others find capital for deals small, large, and everything in between!

Listen to learn more about how Matt Faircloth has helped others raise private capital for their deals!

Table of Contents:

• Where To Listen To The Podcast
• Focus On Your Zone of Genius
• The Borrower Strategy
• The Best Piggy Bank the Zone of Genius Ever Invented
• The Zone of Genius Is an Assembler of Opportunities
• The Zone of Genius and Creativity
• A Better Way of Doing Things
• The New Members of the Zone of Genius
• Dealing With Your Life Cards
• How To Reach Matt Faircloth

Focus On Your Zone of Genius

Darin: Matt Faircloth lives in Pennsylvania with his wife and two young children. He studied engineering at Virginia Tech and then went into sales. Matt loves working with people and he advises that everyone focus on their zone of genius. He wrote the book Raising Private Capital to provide a resource and help others learn how to do what he did. He’s got tips for small deals, large deals, and everything in between.

This is actually the first time that Matt and I are talking to each other, but I know of Matt from social media. I also read his book. We'll talk about his book, Raising Private Capital. I did see on Facebook today that he and his wife are celebrating their anniversary, 16 years. Congratulations!

Matt: Thank you.

Darin: I appreciate you spending time with us today. First question I ask is how many properties and how many units are you invested in?

Matt: We currently hold around 1,350 doors of mostly multifamily and also an office complex. I just counted how many offices are in that building. That's where we are, unit count-wise. Property-wise, that's like seven assets that are the smallest. The largest one is a 336-unit in North Carolina, the smallest one is a four-family. It's three apartments and a storefront. Full range. We've done a lot of everything in between, too.

Darin: How did you actually get into real estate? What was your background beforehand? Why did you do it?

A Magnet School

Matt: I didn't know what I wanted to be when I grew up. That even went back into my teens. When I was growing up, I knew I was good at math and science. I went to a math and science-oriented high school. It was a magnet school. People are like, "Oh, you're good at math and science, you should be an engineer."

I said, "Okay, that's what I'll do. I'm 16 years old and I have no idea what I'll do with myself, so I'll just do what the grown-ups say. They want me to go be an engineer, so that's what I'll do." I got into Virginia Tech because I'd applied there. That's where one of my dad's friends went to college. He was a heavy pusher of the Hokies on me, so I took it.

Darin: Good engineering school.

Matt: Great engineering school. Lot of fun, lot of camaraderie, lot of social scenes. I wouldn't have changed a minute of it. Had a great time and got a great degree. But when I graduated, I still didn't know what an engineer did. I just knew that it involved a lot of math and a lot of science, because that's what I took. Thermo, and physics, and different levels of calculus you can think of. When I saw what an engineer did, and meeting field engineers that were these guys in factories. Or gals in factories that were just talking about how things get designed, and efficiencies and operational stuff. Like, "I don't want to do that though." It didn't speak to me.

I Found Myself in the Zone of Genius

Matt: I developed a love of people and a personality that really was very extroverted and stuff like that through college. So I took a job in sales. I was in technical sales for years. Got very good at it, traveled around a bit, and found myself in Philadelphia. I met my girlfriend, now wife, who put Rich Dad Poor Dad in my hand.

Darin: That book has started out so many people.

Matt: He was on the Bigger Pockets podcasts and Brandon Turner said that to him. It was like, "I have no idea how many entrepreneurs you created or people who quit their job because of your book." Most people I know, that's how they got started. They read Rich Dad Poor Dad, it changed their mindset on everything. Then they quit their job because they couldn't go back to work after reading that book.

Darin: So at that point, you're in technical sales and you meet your girlfriend, now wife. How did you end up deciding to do real estate?

Matt: Rich Dad Poor Dad, Robert Kiyosaki talks a lot about investing. He's a big real estate guy, so that got us into real estate. We started attending a lot of local REA meetings, took a few classes and stuff like that. I went that path while we were dating. Started buying rental properties while we were dating. That was a road that Liz and I went down, which was great. We're glad we did that. By the time we had a few properties lined up and I was living in one of our rentals, a few of my friends were paying me rent for the house I lived in.

The Zone of Genius for a Startup Real Estate Business

Matt: Then when we got married, we figured out that it would be a risk for me to quit my job at Ingersoll Rand. It is where I worked to go and start up our company, to start up a real estate investing business full time. I decided that was a risk I wanted to take, and I did, and it worked out. That was 2005.

Darin: Your book, Raising Private Capital, I've read other books that are on syndication financing and whatnot. You covered that in the book. One of the things that was interesting was, it sounded like you started out in smaller deals, then you learned and grew. Then the financing sources changed as you went to different deals. You talked about all those different levels. This book can really help somebody right from the get go, getting into a duplex versus just being focused on large-scale syndication.

Matt: It was intended to do that. In this day and age, people are forgetting that there are other types of real estate you can own besides an apartment building. That's all anybody ever wants to buy right now. It’s, "I want to buy a multifamily." Well, you can actually buy single families, you can buy midsize stuff. It doesn't have to be a 200-unit apartment complex. Apartment complexes are complex. Little single family homes and onesie, twosie deals are way more simple.

You don't have a bunch of investors on board with you, you can just borrow the money, as I talked about in the book. Smaller real estate is a great way to get going. I have friends that do very well that have never syndicated.

The Borrower Strategy

Matt: They have over 200 units, and they just use the BRRRR strategy over and over again. And they do very well for themselves without ever having to sell any equity, without ever having to get that diluted. This is a real path to financial success in real estate that doesn't involve multifamily or self-storage or mobile home parks.

Darin: That's a point. There are listeners that are just looking to get started and trying to figure it out. Then there are listeners that are in the deal and they want to ramp up. I know a lot of syndicators that have done 1,000, 2,000, 3,000 units. It's important to understand, everybody has a different mindset. Everybody has a different comfort level of how they can get in the game. For me, my first deal was a new construction duplex. Then the next deal was a 76-unit town home community.

But you know, I don't think I could have gone right. My mind wasn't there to go right to the 76-unit. Doing the duplex taught me a lot and then helped me move on. I put together a lot of notes on your book. We're not going to cover it all, but let me hit on some points. One, you talked about capital preservation. A lot of investors, one of their top things is that they don't want to lose money. Talk about that and why you think real estate is a good area for capital preservation.

Matt: It's interesting because people forget that, and I'm talking about people like deal providers. The language of Raising Private Capital is a deal provider and a cash provider. Deal providers, meaning the person that's out there finding opportunities, they need capital from cash providers to invest in.

Why People Invest in the Zone of Genius

Matt: You forget why people invest. A lot of people invest not necessarily so they can make a 15% IRR, so they can make all this cash flow, so they can make this and that. That has nothing to do with those things. It has to do with, I need to put my cash somewhere else besides Wall Street, because I already have a bunch of money in Wall Street. I want to get true diversification. A, I'm worried about inflation. B, about the cost of a gallon of milk becoming a lot more next year than it is today, or a gallon of gas.

The way around these things is to buy assets, buying assets outside of Wall Street. It's Robert Kiyosaki 101. Assets produce cash flow and real estate is one of the best assets you can pick up out there. That's why we got involved in real estate,

It's one of the best asset classes you can invest in because of the tax advantages. Because you can leverage it, because of all the different benefits that it has. That's why it's a great asset.

I love explaining that to our passive investors when they come in, it’s about the ideal. You've probably heard that one. I-D-E-A-L, which is interest that you can write off. D for depreciation, E for expenses on the property. A, that it appreciates and you can write it off or you can use L for leverage to take on debt to buy it. So, it is ideal. I love explaining that to passive investors that don't understand the business yet, to go through it with them.

Leverage and Depreciation

Darin: You hit on two points that are different from, say, investing in the stock market that have huge advantages. One is leverage and two is depreciation. Depreciation is not a cash expense, but you get to have a write off for it. A lot of people end up having a loss when they actually had positive cash flow.

Matt: What other investment is there where you can tell the IRS you lost money? You tell the IRS you lost money, and then you legally made money. What else is out there like that? Nothing I've ever seen. Now, there's this oil and gas, other stuff that are more complex that has tax leverage to it. Don't get me wrong. That is there elsewhere. But it's still pretty cool. That you can do that.

Darin: It's phenomenal.

Matt: That I can borrow it against the hard asset, the sticks and bricks to buy.

Darin: Some people don't understand the benefit of that. If you're buying a stock, you're buying an Amazon stock and you put $50,000 or $10,000 into the stock, in order for it to have 100% return, that $50,000 has to turn into $100,000. But on these real estate deals, if you have 70 or 80% leverage, all of the gain goes back to the equity owners. So you just pay back the loan, you're getting appreciation on basically the loaned amount. That's all going back to the equity owner. You don't have to double the value of the property to get a double in your investment.

What’s Great About the Zone of Genius

Matt: That's what's great about it, in buying stock and things like that. Bitcoin moves up 25% in a day, but it could also drop. Real estate will not. It does not fluctuate like paper assets do because it's hard to trade it. That's one of the reasons why you can borrow against it. The value of real estate, even though you see it go up or down, it's fairly fixed compared to other asset classes. That is because it's hard to trade.

You can't just sell real estate in a day, you can't sell real estate in two days or a week. It takes probably two to three months to trade real estate. When you do that, it takes the emotion out of it and it takes the panic sale, or the it's going to go up, or it's going to go down, out of real estate. It normalizes the price a lot more than other asset classes have normalization of price.

Darin: If you think back at what happened in 2020 with COVID, there was two or three weeks where the stock market was just tanking every day. But all my real estate transactions, I don't have a ticker symbol. I didn't see the valuation going down, I knew we were going to have some challenges and whatnot.

Matt: There's no panic button. You can't push a panic button on real estate and then dump sell it. I know people whose closings got thrown out the window because of COVID. A lot of bad things had happened, but they were short-lived and they damaged things differently than the stock market crash did in a sell like that. That just can't happen in real estate, which is what's great.

What Creates Leverage

Matt: That's what creates leverage. That stability in valuation is why banks are willing to put money on it. Because they can collateralize it and know that it's not going to just get cut in half in price in a day.

Darin: Another thing you talked about in the book is when you're going out, talking to investors in whatever type of transaction, whether it's a smaller deal or a larger deal, people don't realize the money that they have available to them as investors. Talk about where do people find capital that they didn't know they had, that they can leverage.

Matt: That's one of the best things, probably one of my joys in what I do. I offer to people levels of possibility that they didn't realize were there. A lot of times people want to invest with us. We get, "I want to put some cash to work." It's almost always in hard cash. They may have had a windfall or maybe have been really smart to be able to save it up. Whatever happened, they've got something they want to put to work.

In Raising Private Capital, I talked about the three sources of capital, which are cash, real estate equity, and then retirement accounts. A lot of America's homes are paid off, 30% of America's primary residences. Not secondary residences, not rental properties, but 30% of America's single family homes are owned free and clear. That's thanks to baby boomers being fiscally responsible for those that did. For those that have been really diligent about paying their home mortgage off. Or listened to Dave Ramsey, and just got themselves out of personal debt. A lot of homes are free and clear.

The Best Piggy Bank the Zone of Genius Ever Invented

Matt: That free and clear home could be leveraged on a two and a half percent HELOC right now. Home equity line of credit, and then that two and a half percent money cost of capital could get put into something yielding 9, 10, 11%. The homeowner gets to make all that yield spread.

It's the best piggy bank ever invented, borrowing in a home equity line like that. Maybe only second to a whole life insurance policy. But it's one of those great ways for people to leverage something that they've paid down and built and make a great yield spread for themselves.

Darin: Let's talk about that just a little bit because that's one of the financial things that's talked about a lot. Pay down your house, don't have a mortgage.

Matt: It's difficult with different parties where they go and they'll burn the mortgage.

Darin: There's a thought process out there that that's the smart thing to do. Then there are other people, and you're one of them. They believe, "There's all this dead equity in your home that you can leverage." What you mentioned was, if you took out a home equity line at two and a half percent. A lot of the multifamily deals I see are 7, 8% cash flow and mid-teens total return overall.

But, even if you've got a 5% cashflow, you're doubling the cashflow. Pay off the interest on the mortgage, and then you have two assets. That's part of where people don't understand, now they have two assets. Let's say the original home was a million dollars. Over the next five years it goes up a hundred thousand.

Multiple Assets Working in the Zone of Genius

Darin: You're still going to make that a hundred thousand whether you have that HELOC and you own another investment or not. So now you've got multiple assets working for you instead of one. That's the part that people have a hard time grasping because it's also about people telling you, like, "That's risky." Those people that are giving you that advice are the ones that haven't done it.

Matt: They don't know what real risk is.

Risk is not the potential to lose, risk is the unknown thing that you didn't think of that blindsided you. Risk is the person who's been working at a job 15 years then getting laid off. That's 55 years old, that's risk.

Darin: People think it's just bad luck. But I agree, you get into your 40s and 50s. Your salary is at risk to the younger guys coming in.

Matt: Back to your point about the HELOC. I've had many people that come, "I've got a HELOC or some equity in my home. Can I invest in one of your syndications?" I typically discuss that with them in a lot of detail before I allow them to do it, and here's why. Syndications are not guaranteed to pay that monthly payment. They endeavor to make that monthly pref, but the property, no. There are syndicates out there that are going to pay you that pref no matter what because they don't want to look bad. Or they don't want you to see what's going on behind the curtain.

Darin: They over raise and start paying right away.

A Common Thing Outside the Zone of Genius

Matt: That's a common thing. As they over raise enough capital, they can just ride the storm and pay you your money. Pay you your pref forever and ever, because they've raised enough capital. They can do that, but we don't do that at DeRosa. We pay the pref truly out of cash flow from the property. If the property's not cash flowing, we don't pay a pref. So there's no guarantee you're going to get it. Now, you think that there is, but there's not.

What I recommend people do with the HELOC that they have is to put that money into secondary debt to go and take. Yes, you got debt, that HELOC is a debt instrument on your home. You're borrowing that money. I would go and take and recycle it back into another debt instrument. Let's call it hard money. I have a HELOC on my home right now, for a 100K. And I have that 100K lent to somebody at 12% plus three points. I made three points on our origination, so the 100K, I made $3,000 for originating the loan, I make $1000 a month in interest payments. They pay me $1000 a month in interest and they're glad to do it. This is a phenomenal deal.

Darin: You're having to pay $250, so you're making $750.

Matt: That's right, $750 a month cashflow. This is just how much I love the game. I don't take that $750 and put it in my pocket. You know what I do with it? I take it and I pay my HELOC down with it. So when they send me the thousand, I take the entire thousand.

A Nominal Shift

Matt: Then I burn down my HELOC, so that my HELOC, my monthly interest payment becomes less and less every month. It's such a nominal shift, it only saves me an extra five bucks. But it's only because I love the whole game of compounding interest and creating exponential returns that I'm doing it that way. Now, people are like, "You're jacking that poor borrower." No, he got a mobile. The loan is on an enormous mobile home park that he got a seller financing on.

He came in with 10% capital out of his own pocket and he got the other 10% from me and a few other private lenders. So he is glad to pay me $1000 a month because he's making quite a bit more than that. The park, when he bought it for the price he bought it from, will likely double in value after he's done the work that he's doing to the property. So it's a win-win. A bank wouldn't have touched the deal, but it's one of those great arrangements.

The reason why I like that arrangement is because he's under contract through a loan agreement to make me a monthly payment. I've got to make a monthly payment, too. If you invest with a syndication, they don't have to make you monthly. They might pay you once a quarter if the deal's profitable. But then you're going to have to pay that interest yourself, and I hate negative cash flow. No matter how much money I have, I don't want to do deals that take money into my pocket every month.

A Zone of Genius Payment Concept

Matt: I want to do deals that put money in my pocket, even if it's a little bit. So, I like that monthly payment concept, because if I've got to make a monthly payment. I want to get a monthly payment.

Darin: One of the things you said is having the discussion with the investor and understanding your financial situation. Some people are like, "That positive cash flow is very important. I need to know that if I move this stuff, pull out a home equity line. I'm going to put it into something that's going to give me that monthly positive cashflow."

Matt: You want to make sure that it's coming from what you can do.

Darin: Other people may be, "Look, I like the idea of having a bigger return and this really isn't a big piece of my portfolio. So I think it makes sense to do a syndication."

Matt: I've had people tell me that.

Darin: I might have a few months that I'm out of cashflow, but then all of a sudden I get distribution after three months or six months. That pays it back and I'm fine with that.

Matt: There's people that are crazy negative cash flow zealous like I am. They are going to be like, "You're telling me all I got to pay is 250 a month to maintain this loan here. I can take that money and put it into your deal. And I can put a 100K in and probably make a lot more than 250 a month. Where do I sign?" Because they've got plenty of cash flow personally.

The Zone of Genius Is an Assembler of Opportunities

Matt: Now, they're probably looking at it the right way, but I just got Kiyosaki in my brain. That negative cash flow, I can't do it. But for them, and if I explain it to them properly and they get it, then they're willing to do it. They've got plenty of cash reserves and everything like that, they're happy to do that. To have the HELOC invest in the syndication, maintain the monthly payments when there's not a pref paid. Then when the pref gets paid, use it as a catch-up. There's plenty of folks that are doing that. It's a great arrangement, too.

Darin: Talk about assembler of opportunities. Especially when you get into syndication, you're raising money from other people, some people get scared. They get scared, and they're focusing on themselves. Their deal and they need to get their deal done. Instead of talk about how you view it from an opportunity guy.

Matt: I look at it as an opportunity. What we provide as deal providers is a true opportunity to people that don't have the time, the resources. They don’t have the wherewith, the contacts, the knowledge, the cajones. Whatever you want to put in there to get out and find their own multifamily deal. They've tried.

Most of the passives that I talked about are calling us because, "You guys figured out some sort of secret equation. I keep trying to file my own deals and it ain't working out. Now I'm out of time and I just don't want to use my time anymore to find opportunities. I'd rather just invest with an operator that's doing well, and that's you guys."

Putting Money On a Pedestal

Matt: In a lot of ways, that's what comes up. But the people that are worried about asking for money or, "I've got money from my deal. How am I going to get it?" You're putting the money up on a pedestal. Those people, that's what they're doing. You're putting the money where it's up on a shrine over here from the investor.

It becomes this thing that if you see it of more value than what you're bringing to the equation, you're going to have a hard time raising money. The way I view it and the way I talk about it in Raising Private Capital is an equal relationship. What we bring as the deal providers are the deal. But that's leveraged upon my industry experience that I know how to make that deal come to profit.

A deal without profit is nothing, it's just a money pit.

I know how to turn that deal into profit through education, through network, through mentorships that I've gotten. Now I know how to turn a deal into profit. Not everybody knows how to do that. I've got banking relationships, broker relationships, property management relationships, industry experience, a long list of contacts. Those make all the things that I have that are non-monetary. But not everybody has those things.

The biggest thing I have is time. It's the one limited resource in the whole wide world. It is the one thing we only get so much of in our lives. Almost every investor that shows up to me says, "I sure wish I could invest in real estate, too, but I just don't have the time. Well, I do. I've built time in my business."

Analysis Paralysis is Not Welcome in the Zone of Genius

Darin: It's not just time, but you also have to be an action taker. There's a lot of people that they spend ton of time analyzing deals.

Matt: They do, paralysis by analysis.

Darin: They can't pull the trigger.

Matt: I'll turn myself in. When I first got going, I took a lot of action, but I also wasn't focused. Maybe let's have fun with this. I think it's time, it's action, that's not just underwrite a bunch of deals. Also, it's focus. I'll throw those three things in to be successful. Those are the success recipes for the successful deal provider. You and I are writing Raising Private Capital book two right now. This is the sequel.

These are the three things that have to go into a successful deal provider. The reason why I say focused is because I was that person. Monday, I'm out looking at raw land deals. Tuesday I'm looking at a potential wholesale that shows up for me to wholesale the deal to somebody else. Wednesday, I'm looking at a fix and flip. Thursday, I'm looking at a small multifamily apartment building. Friday, I'm back looking at the land deal again, realizing why it's going to fall apart.

I had a lot of fun and met a lot of people. But I also got nothing done because I wasn't focused. I took a lot of action, went a lot of different directions. Focus, like Sam Zell, the guy who owns a bajillion apartment building units, don't know how many fix and flips he's ever done. Probably not that many. He probably just stuck into multifamily, became a freight train in that direction and absorbed as many as he could.

The Zone of Genius Offers Solutions Others Couldn’t

Darin: Did you read his book.

Matt: Not yet.

Darin: It was good. He really prides his success on being creative. He'd find deals that other people couldn't find a solution for. He would find a solution for it and get in at a good price. They would make good money and form a win-win for the seller and the buyer.

Matt: There's a lot of creative financing. I've done all kinds of creative stuff, everything from basic stuff, like holding paper. We just did a deal in July. We’ve bought the LLC. We didn't buy the building, we didn't buy the property, we bought the LLC that owned the property.

Darin: I've heard of that before and I've heard of a pro and a con. The pro being, you're not going to have the step-up in valuation on the property taxes.

Matt: I'd have to go find it. I don't if can find it. I'll give you all the pros because we just did it. I know the cons, too. We'll talk about those as well. I wouldn't do it with anybody, I wouldn't use it with everybody. But if we can get into the cons, like you said, no step up valuation on real estate taxes. I don't have to go find a loan, because when I'm buying the LLC, I'm buying the debt that's attached to that LLC. So I bought it with good debt in place. I'm buying something that's already been established, a cash flowing LLC and everything like that. We protected ourselves, too. But the con, what con were you going to say, because I've got the big one.

Undisclosed Liabilities

Darin: I had another syndication that said they did that and there were a lot of undisclosed liabilities with the LLC. When they got into it and they were the new owners, they all of a sudden found out they were liable for all this other stuff that they had no idea about.

Matt: That's like if you're buying an LLC, you're buying that LLC's paper trail. You're buying everything that's ever done. Any slip and fall, any lawsuit for anything that's ever happened ever in the world. Lawsuits that haven't yet or lawsuits for activities that have happened in the past. That's why you don't see this done all the time. But in this instance, it made sense. Here's my silver bullet. The seller is our property manager.

Darin: You knew them very well.

Matt: They ain't going nowhere. They're a big company, a multimillion dollar company that can afford to pay claims. If you're going to buy an LLC, what we did was, we put an indemnification clause in our contract that said they had to indemnify us against lawsuits up to a certain period of time from closing. It was years. Multiple years in time.

You've got to make sure they've got the pockets to indemnify you against something significant. Because you get a $5,000 lawsuit on a big apartment building. There’s worse problems. But somebody shows up with a big six-figure lawsuit. You've got to make sure that the seller has the pockets to indemnify you, to step in and defend you. You could also reach back to their insurance company. I's dotted and T's crossed.

The Zone of Genius and Creativity

Matt: We had a relationship with this person. We'd certainly not do this with somebody off the street. But going back, there are a billion ways. That's the thing I love about real estate. I'm the creative type and I like to just let my creative juices flow. That's what's great about real estate, it's not a cut and dry, plain Jane transaction. There's a lot of creativity that comes into the real estate world.

Darin: Which is weird. I've only been in the real estate world for about 3 or 4 years. People talk about real estate being creative. I'm like, "Really? It's numbers and it's just that." But people will look at deals differently. They look at, "Okay, hey, I'm going to change this property in this way," and another buying group may look at it completely different. This is what I want to focus on. There is definitely creativity in it, and figuring out the right loan, and the exit strategy.

You mentioned automating your business. There's some people that want to scale their business. So automation is a key area that they can focus on. Talk about some areas where you automated and it helped you.

Matt: This book, I don't want to say it's fallen out of favor, but it doesn't meet a lot of today's new entrepreneur. I say this with love, but a lot of our millennial friends out there, it doesn't match a lot of their desires. That book is called the E-Myth. My wife and I built our company based on the E-Myth. It's still a great book.

Who Not How

Matt: The reason why a lot of people don't like it, or it's not being applied as much as it should be, is that the E-Myth calls out that you're supposed to do all the jobs in your company yourself before you go and sub out or automate these things. Just put the hat on, try it, figure out the role, and then build a protocol around it. Either hire it out, or try and eliminate it all together, or do something to optimize that position. Just because not everybody's as zealous as you and I are, they don't want to do everything there is to do in their company before they push it off to automation or hiring things out.

Darin: There's a lot of people that have the viewpoint of Who Not How.

Matt: Great book.

Darin: Who should you hire? A lot of people are leveraging a lot of VAs to do tasks that would bog them down so they can focus on higher return opportunities.

Matt: But let's underline the last thing you just said. That's so they can focus on higher returning activities. The E-Myth talks about understanding the books of your company enough so that you can hand off to a bookkeeper with a well-written protocol. So that you can get out and be the entrepreneur, which is focusing on growth, fixing problems, and growing your company. That's what you're really all about.

There's some people that are automating so they don't have to work. They’re automating so they can just be lazy and not do anything. I believe in automation so I can live in my core genius, to speak in the Dan Sullivan's strategic coach language. God-given talent, what I'm put on earth to do, my purpose.

Live In the Zone of Genius Through Automation

Matt: If I can live further into that because of automation, then I'm going to live a more successful, more fruitful, more profitable, more enjoyable life by doing what I enjoy doing. Not so that I can sit on the beach and drink Mai Tais or not work or whatever it may be. There is a not working myth that's prevalent with the FIRE movement and everybody else that's out there in the world. There is a desire at some point to not have to work at all.

I'd rather work as much as I'd like to, but only do my core genius. I'll put in as many hours a week as I choose to put in if it's in something that I'm great at, not something that I hate. People confuse that. They just don't want to do what they hate, what they'd rather do is something they're great at, they don't want to work. What productive people really want is to do something that I'm here to do.

I'll gladly talk about all the automation we've done, too, and I can talk you through that. I'm sorry if I'm tangenting.

Darin: It's great, because just the word retirement. You mentioned whole life policies and leveraging that. I had a life insurance guy, I set one up a few years ago. He's like, "When do you want to retire?" And I'm like, "You know what, with this multifamily thing, with this real estate thing, I don't really want to." Maybe I'm just going to be doing bigger deals and maybe fewer deals. But why not keep your brain working, and why not help other people grow their wealth?

Teach People Your Core Zone of Genius

Darin: Teach other people how to do it, whatever floats your boat and whatever gets you charged up. Your core genius that you talked about.

Matt: I don't know any happy retired people. I know a lot of retired people. But the ones that I know are not happy because you lose purpose that way. Unless you've got a real big purpose you can put yourself back into, once you retire, whatever that is. Your kids, your grandkids family, woodworking, watercolors, whatever it is, if you can get fulfillment from those things, perhaps. But the problem that a lot of retired people have is they end up unfulfilled.

It's awful, people don't want to say this, but there is opportunity for joy fulfillment from work. And it's okay. If you're operating in your purpose and your core genius, whatever that is, then you will get fulfillment from it. It's okay that you are. I don't know if we're meant as a species to not work, to not be doing anything. Your body thinks, "Okay. time to die now." Like, "I'll just fold up." I'm not being utilized anymore. I will take this empty shell of skin and put it away, not required anymore.

Darin: The concepts of financial freedom and time freedom are just bantered about. That's what a lot of people are chasing. But we got off a little bit on a tangent. It's important that you do those things so that you could spend time on the stuff that you really want to. Hopefully part of that is giving back, to helping others learn from your success.

Matt: Throw the rope down. You reached the mountains top, throw the rope down.

The Making of the Book, Raising Private Capital

Darin: Talk about why'd you write the book? Writing a book is a lot of work. It's a lot of time, it's a lot of effort.

Matt: I'm laughing because I had no idea how hard it was going to be when I did it. Bigger Pockets was like, "You want to write a book?" Like, "Yes, I'll write a book. That'd be great. How hard could that be?" I used to write, I still do sometimes, write articles for them. They're just a great company to work with. But I had done a lot of stuff with them in the past. They're like, "We'd really like to write something." It's like, "All right, I'll write a book." Raising Private Capital is the topic that came up.

By the way, when you write a book, the name of the book is the last thing that happens. For the longest time, that was just called Matt's Book. Then when we finally went down, the whole thing was drafted, that's when Raising Private Capital, the name, came to the top. I wanted to call it Real Estate Rainmaker. But they were like, yes, "John Grisham wrote a book called The Rainmaker, that's a New York Times's best seller. You'll be lost in the noise of that."

So, we didn't call it Rainmaker, which was a good idea. But I chose to do it, aside from they thought it'd be a good idea. When I first got going, I figured a lot of these things out. In 2005, there was not a book about how to raise money from your friends. There were the antiquated books written in the 80s on how to invest in real estate.

A Better Way of Doing Things

Matt: There was nothing really modern on how to grow and scale a reasonable size real estate company that was chocked full of somebody's personal stories. I wrote the book that I would've liked to have read when I first got going. Because I wanted to help the female and male version of Matt that's out there that just quit their job.

Darin: Just getting started.

Matt: That wants a better way, that wants to learn how to do things. Wants to learn how to climb the mountain top like I did, and wants to grab the rope that I'm throwing down here with the book. I'm not done climbing yet. I've got a lot more climbing I want to do. But I still want to help people that are on their way up. Additionally, I believe that our financial system has been broken for a long time.

It's not designed to make Americans wealthy anymore, it's designed for fees and financial planners. Sorry guys, I'm just the messenger here, but that's just where our financial system is.

We need other means for Americans to reach their financial goals, and to reach their retirement goals. To be able to retire with a reasonable amount of money set aside so they don’t have to work. Or they, at least, work a little bit less if they don't want to. Have something to hand down to their kids aside from a bunch of debt and broken dreams. To hand something real in generational wealth, down to their kids.

I believe in entrepreneurship, real estate investing, and other outlets besides real estate investing. Things that are not Wall Street related, that are main street related, and investing in things that are around the corner from where you live.

Making a Difference in the Zone of Genius

Matt: I believe that's the real financial future. What we do and what my book teaches other people how to do is making a real difference. If you look back, if you've got the video going back behind me on my company logo, it says transforming lives through real estate. I really believe that what we do helps people change their lives.

The fiscal lives for our investors, the quality of life for our tenants, the purpose for the people that work for us, all those things. All in one big enchilada called transforming lives through real estate. That's really why I wrote the book, because I can create that. I can help people do that, too.

Darin: That's admirable and it's real. When I first got involved, I went and had a bunch of Starbucks meetings with a bunch of different syndicators. It was like, "Is this real?" I couldn't believe how open people were like, "My net worth was 500,000 and now it's five million." Or another guy coming in, "Hey, guess how much my net worth is?"

I'm like, I knew he was successful, so I guess a big number eight, nine million. He's like, "Over 11 million." It’s just people, not rock stars. These are people that have invested in multifamily. They took a chance, and then they learned, and they learned how to go bigger. Partner with more people, and surround themselves with other people that are successful. Talk about the people that you hang out with and that you learned from.

Matt: You never want to be the most successful person in the room, I learned that. I was that for a while, the most successful person in the room.

The Zone of Genius Have Rooms For Successful People

Matt: I learned to find rooms of men and women that were way more successful than me. That's where I've done the most growing. My wife and I both joined an organization called GoBundance, which is a high-net worth men's and women's organization. I tend to gravitate towards people that are a little bit off the beaten path. Let's say, people that have learned, observed the masses, and do the opposite. Like, if all the fish are swimming to the left, might want to try swimming to the right, kind of things. I've learned, as I can, to surround.

I have people that I just hang out with. But the people I really learned from, that I try and surround myself as best I can, are people that have tried on different things. Risk takers that are willing to keep banging their head on the wall of success until they can get through. I do my best to surround myself by people like that. While I also throw the rope down to people that I want to help pull up as many people as I can, up to my level and beyond.

Darin: It goes both ways. You're helping the next guy, and then hopefully you're putting yourself out there where you can learn from others. You said you joined GoBundance, a high net-worth individual group. There's all kinds of different mastermind groups out there that you can get involved with. Many times, it's a financial investment to get involved with one of these groups?

Matt: They almost always are, because that's the way you make sure people are serious.

The Cost of One Idea

Darin: They're accountable. They pay money, they're going to take some action, hopefully. Now you're surrounded with other people that have done things bigger than what you've done. One idea can way overpay for whatever it costs to join.

Matt: People don't realize that. "Why would I pay $10,000, $20,000, whatever, to people to be a part of a mastermind or whatever?" You don't realize, with one change of mindset, if it can increase your cash flow by that much per month, or increase your net worth by a 100X of that number.

Darin: But is it guaranteed?

Matt: No.

Darin: That's the thing. There's some people that want that guarantee.

Matt: But, what is guaranteed in life? Death and taxes, that's about it. But I can tell you by the track record, for something like GoBundance, whatever mastermind you refer to, give a few people that are members of it and they'll tell you. "Yes, listen. This ain't going to be easy. But if you apply the principles you get here and work really hard, you'll get 10 to 50X success of what your investment is."

That's all I need to hear. Okay. "So you mean if I work it, it'll work for me? Okay. I'm in." But guaranteed, that means, "So I don't have to work. I don't have to do anything. You'll just do it all for me and if it doesn't work out because I didn't try very hard, you'll give me my money back."

Darin: There's some people that ask me about multifamily mentorship groups, and if they have that kind of attitude.

The New Members of the Zone of Genius

Darin: The best way I could describe it is when I see a bunch of new members come in, I liken it to the 80/20 rule. "In your past life, in your jobs and careers, do you rise up to the top 20%? Do you find a way, and you kick, fight, and scratch? Then you're going to do the same thing and you'll figure it out and you'll be successful. But if you just want it handed to you, save your money and don't do it. Because it's not going to be just handed to you."

Matt: There's good ones or bad ones out there. There's good masterminds, bad masterminds. There are people that are doing masterminds so they can get a big check. They're doing masterminds because they want to throw the rope down and make a difference. Don't get me wrong. Not every mastermind that's high dollar like that is worth every penny. But once you find one and you're willing to hustle, push, and drive through it to create the value and implement the lessons, then it's really on you.

People don't want to hear that. At the beginning of a lot of these things, you hear people say, "20% of you are actually going to do something with this education." How crazy would that be if my eight-year-old at the beginning of school, if his second-grade teacher stood up in front of the room and said, "Listen, 20% of you are actually going to pay attention and listen and apply what I'm teaching right now. The other 80% of you are going to learn what I'm teaching you a couple of years from now when you're playing catch up in fifth grade."

The Real Probability

Darin: They don't typically say that today at the young ages.

Matt: I've heard teachers say that. My father-in-law was a teacher for 40 years. He said, "You used to walk in the room and hope that you were able to make a difference in every child's life in that room, all 30 of them. He said, "What I came to realize after about 10 years, if I could touch the lives of one to two of the 30, then that was about right. That's what real probability was." Isn't that awful? But that's just the way it is.

But, that's all got to do with effort and with the teacher appearing when the student's ready and inside as well. If you're that person in the room, do your best to be in the 20 percentile. By hustling, applying, listening, asking questions, and putting your hand in the air, trying to get as much, squeeze as much as you can out of those experiences.

Darin: I just ordered a book. I remember there was a tagline on it. It was recommended by somebody. The tagline was, "Anyone can do it, but most won't." That's what we're talking about. There's so much out there to teach people, but most people won't do it. You talked about throwing a rope down and making a difference, you have done a lot of different things.

We talked a lot about your book. You also have a YouTube channel. Talk about all the different components. That's an effort, social media. Those are efforts to throw a rope down and educate somebody that hasn't done it before. Some people don't throw that line down, but you do. You throw it out and in a lot of different areas.

More A+ People in the Zone of Genius

Matt: I'd like to be doing more of it. I'd like to be transitioning to more, as our company continues to elevate. I've got more A+ people around me so I'm not washing the bottles in my company anymore. There's a lot of CEOs, like, "I am the chief executive and janitor and bottle washer." Luckily I've been able to give a lot of that stuff up that I'm not great at. As I grow, I'd like to do more giving back, which will probably mean, things like education. I'd love to go to a local community college and just teach a class of college kids, about entrepreneurship. Real battle-scar story-level entrepreneurship lessons.

That's on my couple of year list that I'd like to do. But we do a lot of charitable donations, my wife and I. We have a division of our company called DeRosa Gives where we do company-based donations. I do YouTube. A lot of what I put on YouTube is stuff that could be charged for, but it's out there for free. You've just got to watch a five-second commercial, hit the skip ad button, then you can watch the education we have there. We give a lot of what we do away. It's because we love it. We want to help people. My wife, I should mention The Real Estate Investher, which is about documenting, highlighting, and empowering the journey of the real estate female. She does a lot of giving back and throwing a rope down on her side, too.

Darin: What's the next big stretch goal for you?

Great Environment and Great Investments

Matt: I'd like to increase our unit count. Not just because I want to pound my chest like King Kong or anything like that, but because I believe that we make a difference. Our properties rarely have lots of move outs. If our vision is implemented properly, we have some of the stickiest properties that are out there that people just don't want to move from. I want to acquire more so I can create great living environments and great investments for our investor base. Probably, I got two, maybe three more books in the hopper. I got one of the works right now. The second book's always a lot easier than the first book.

Darin: It was a lot of work, but it didn't scare you away.

Matt: No.

Darin: You want to do another one?

Matt: I enjoyed it. Well, there were days where I hated that book, but most days I loved it and I'm grateful that I did it. I put a lot of my soul into it. My wife and I have a few more that we're working on right now.

Darin: Unit count 1350 now. What's the number you're shooting for and by when?

Matt: We'd like to be at 5,000 in the next five years. Smart, organic growth, not too fast growth. We'd like to get into new construction. We can get really creative and come up with some unique living spaces that are fun and next level with the future.

Darin: What markets do you focus on?

Matt: We're in North Carolina, Kentucky, and Pennsylvania. I also own one at New Jersey, but we're not looking to buy anymore here. Some certain parts of Pennsylvania are our target markets for the foreseeable future.

We Can Go as Far as We Can See

Darin: When you first started doing small real estate deals, did you ever think that you were going to have a goal of having 5,000 apartment units?

Matt: I probably could say that and say, "Oh, yes. Absolutely." I didn't know that was possible. It's hard to think about what your realm of possibility was back then. What I think possible now is probably not even true versus where I think that I might get to 10, 15, 20 years from now.

There's only a horizon that we can see ahead in our lives of what we believe is possible. If you were to ask Winston Churchill at 10 years old where he thought he would be when he was 40, the realm of possibility of what he saw for his life is probably only out to a certain horizon.

Darin: I would agree with that. The other thing I would say, the difference between people that have achieved great success and huge goals is that they took action and achieved whatever their horizon was back then. Then once they got there, they pushed the horizon out further to a new goal.

Matt: At some point they realized they could have been a different person earlier in life. Winston Churchill maybe wasn't the person at 10 years old that he was later in life. But at some point, I made the decision, and I was not always like this. At 10 years old, I didn't know I would be doing what I'm doing now. That I would be an entrepreneur trying to build and create this thing that's larger than me.

Dealing With Your Life Cards

Matt: At some point, I decided I'm going to take this life card I've been dealt. I'm going to take it for a whirl, and try as hard as I can. Do my absolute best, believe in myself, and not allow setbacks, not to call setbacks failures, and to not quit, to just keep going. Many times, I've had my teeth kicked in. I've been knocked down. I got back up. It's when I made the decision to do those things, to push as hard as I can, grow as hard as I can that that possibility horizon I'm referring to got a lot wider all of a sudden.

I'm like, "Well, I guess I could do that. I could buy a 200-unit apartment building. Oh, I just bought a 200 unit. I guess I could scale to a thousand if I wanted to." Then I've done that, and we're over a thousand now. It's like, "I can see where 5,000 sits from where I'm standing." Do I see where 50,000 like Sam Zell level is from where I'm standing? Is that inside my possible horizon? No, not yet.

But it could be if I grow and expand to that point. It's not my desire right now. But I'm going to keep doing, keep taking action, doing my best, and keep looking to become a higher version of myself, each day and each year. Let's see where it goes from there. That's the best I can do.

People forget that. They want to just do one deal and smack it, they want to hit a grand slam home run their first swing at the ball. What they don't realize, the Major League Baseball players strike out 70% of the time.

Throw the Rope Down

Darin: The other thing I would say is, when you were first starting out, you were probably focused on Liz. You were probably focused on building the wealth for you and Liz and your family? Then as you became more successful, you started throwing the rope down. Right now, there's listeners thinking they just want to get their first deal to build the wealth of their family. But they can't see down the path that they actually have the opportunity to throw the rope down to other people two, three, four years from now, and teach them.

Matt: You know what? I'll go even better. Everybody's got the chance to throw the rope down. Liz and I are started doing that a long time ago just because that's who Liz and I are. We just want to help people. That's the reason why I'm doing this. Not so I can have a Lamborghini, or a better car, or a better house, or not work, or an airplane. It's so I can live a great prosperous life, but also help as many people as I can. Make the lives of other people as best as I can.

Liz and I, we've always been throwing down the rope. Two or three weeks after we got married, hurricane Katrina came through New Orleans and ravaged New Orleans. We went to New Orleans for a week, right after we got married. We're two broke 20-somethings. We went and found a way to go to New Orleans for a whole week. Just covered ourselves in spackle every day, spackling up people's houses in the St. Bernard Parish.

Family Is Everything

Matt: Everybody's got a chance to throw the rope down. Whether you've got the opportunity to write a big check, to give some of your time, or just give some attention to someone who needs it. We've all got something to give. I encourage everybody to give. Give what you can. It doesn't always have to be a check. Give what you got.

Darin: What do you like to do outside of work?

Matt: I used to make wine. I'd like to get back into that, but I moved to a new home. In my new home, I don't have neighbors that are into making wine. I used to have wine-making neighbors where I lived in New Jersey, but we moved to Pennsylvania. I've yet to meet good wine making people, so I'd like to get back into that. That was my hobby for years. I do a lot of physical stuff like taking care of my body, running, biking. Also, I do a lot of outdoorsy stuff with my family. I ski in the wintertime.

Darin: Where do you ski, up in Vermont?

Matt: We live in Pennsylvania, so we go to like little goosebump mountains.

Darin: I grew up in Connecticut and we would go up to Vermont.

Matt: You go to the good spots, yes.

Darin: They're great mountains, but it's cold and it's typically manmade, snow a lot. They're just blowing on you going up the chair lift, versus going to Colorado, Utah, you get spoiled.

Where Skiing Is Real

Matt: I've been out there, too. I've skied a few spots in Colorado, I've skied Canada, too. It's incredible. That's where skiing is real, but it's good enough. I'm trying to get my son into it. But the bottom line, I spend a lot of time with my family, my kids. I've got a seven-year-old and a four-year-old. I called him eight earlier, because he turns eight in a month and he's already rounding himself up to eight. When you ask my seven-year-old how old he is, his full sentence is I'm seven, almost eight. One of my biggest hobbies is spending time with my kids.

Darin: If somebody wants to reach out to you, what's the best way to do it?

Matt: Everything is on my website. The book that we talked about, any type of education that we offer, links to my YouTube, links to my wife's podcast. It’s all there at derosagroup.com.

Darin: Matt, appreciate you spending the time. Listeners, I hope you enjoyed that one. Until next week, signing off.

How To Reach Matt Faircloth

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