Adventures in Real Estate Investing from a Mortgage Broker with Matt Gouge

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All right, and I thought of us Let's hit the road to family freedom.

Well, Matt Gouge Welcome to the road to family freedom.

Thanks for having me, Neil.

Absolutely. So before we dig into the world of residential mortgages and investment properties, and all that I have to, I'd like you to share the story of how you left your cushy state job in this with the state of California, you know, with a job and a pension and benefits and a regular salary to go to work for commission only as a mortgage broker.

Yeah, it you know, it's funny. I have a friend of mine in Reno, who is basically going through what you went through. He was working he'd been working for the state of Nevada for years. Yours cushy state job probably a little more traveled than he wanted to do, had two girls, you know, two twin girls recently, and then just decided, you know what, I want to become a mortgage broker and he did it, he's doing it, I don't know how it's, I have to touch base with him. And I'll have to share this episode with him. Because I think he'd probably enjoy it. But so many people that we talked to, you know, we often talk about this show of, you know, not allowing your W two job to be a single point of failure. And that's why we always encourage people to go out and find additional streams of income, build those extra streams of income. But the other great point that you bring up is that job satisfaction is so huge, I mean, people work sucks, you know, I mean, it really, let's, you know, let's be honest, there's a few people out there probably who absolutely love what they do, and they love getting up in the morning, they love going to work. But a lot of the time, your satisfaction is going to be based on the amount of growth that you can do, if it's not a job you love, and the people you work with, and whether or not it engages you. So I have my applause to you for recognizing having that self awareness to go. I can't do this for another 20 years, you know, and taking the risk and burning the boats and then getting out there.

Yeah, well, some advice I heard recently from one of our previous guests at bare gardener, Scott Crone. And he said, You know, when you're going into any deal, and any big life changes, think about what the worst case scenario is going to be, what the most likely scenario is going to be and the best case scenario. And if you can live with the worst case scenario, then move move forward, then, you know, it's you can live with the worst case scenario, and it's just so many people get paralyzed by fear of the unknown and jump in making that leap and burning the boats like you did.

Yeah, for sure. For sure. There's, there's a lot of people that, you know, I'm of the belief now that if there's something that calls me and, and excites me, I'm gonna give it a shot. Worst case scenario, I can frickin drive Uber, I could do whatever I need to do to pay the bills. And after investing in real estate, I've got enough of a passive income where, you know, I could go back to Top Ramen, I'm not that far removed from living a pretty simple lifestyle, which I actually still do. We could get to that later.

Okay, so let's talk about I want to get into the mortgage stuff. But I want to sort of first talk about your journey as a real estate investor. Sure. What was the Can you tell us a little bit about that first investment property that you bought?

No, it's fine. That's great. You know, I have kind of a similar story not quite as a happy ending as yours. With my first my first home purchase here in Las Vegas and assume yours was in Sacramento. You're correct. Yeah. Two markets that just absolutely got their teeth kicked in by the great recession. So you were able just to clarify, you were able to get into that for zero down. It was 100% hard percent finance,

I wouldn't recommend that path or my pass. But it brings up a great point. And you mentioned earlier and when people are looking at a primary residence to keep their eye on the future about what is this, you know, and I talked about the three immutable laws of real estate investing a lot which is buy a property for cash flow. And if you're buying a property that you know, as a primary residence, keep an eye on okay, if I were to turn this into a rental someday, will it cash flow to buy with long term low leverage debt? So don't do like I did, and don't do like you did and do 100 100% leverage, you know, you were you were fortunate the early get the loan modification which you know, allows you to stay in the property and then have enough reserves, six months reserves, and now you know, most banks are not going to most lenders not going to give you a loan without having six months reserves in the bank. But if you do that time We'll take care of the rest. You know, you have a property that was once worth, you know, it was one point worth $180,000. And now you said it's worth what? 460? Yeah, somewhat range. Now, again, you know that ROI is probably not great. If you if you annualize it, but it's also cash flowing, it's continuing to appreciate the loan is continue to go down. That rate is locked in for 30 years. That's why I love real estate.

Right, right. Yeah, for a number of reasons, like you said, over time, as real estate appreciates, and the loan gets paid down. You build wealth. And for a property like that, that's in a good neighborhood, and has tenants that are amazing, just Venmo, you the full rent on the first of every single month, it's $25,000 a year in added net worth, at very, very little work. It's it's about as passive as it gets.

Now, do you do you have have you expanded your portfolio? Do you have more rental properties? And just that one?

roots. Yeah, we have I I've heard of it. I think yeah, I think we actually my wife actually may have a relative that lives in Marysville.

We invest long distance and knock on wood. So far, it's been successful. We interviewed a guy by the name of Anton Martel, from Martel turnkey on episode 67. And he has some great advice on building a team to invest long distance. And, you know, he really breaks it down and and, you know, we're sort of in the same boat. We did it before we talked to Antwan, but I had, we had boots on the ground, I had a friend had already invested in the area we were looking in, he had a team, he had a property manager, a contractor, a real estate agent, and and honestly, all we did was just latch on to them. And but it makes a huge difference to have somebody who lives in the area knows the market knows that this is a good neighborhood, but go two streets over and it's not so good. Right?

I would say the answer is yes. And we've we've, we've interviewed Allie Boone a couple of times, Episode 65. And then I think we did interview her once before and earlier, and she's actually she's based in Southern California, she's kind of a turnkey, almost like a turnkey broker. But she's, she knows her stuff when it comes to working with out of state, you know, investors and things like that. And she talked a lot about one, every property manager, eventually, almost every property manager eventually goes crazy. So always have a second property manager in your back pocket always be networking for other property managers in area because there's something about property managers where they, sometimes they're really good in the beginning. But once they start to scale, they don't scale well. And you know, they're great at 200 properties, but then they get to 400 properties and and they're not good business people. They're not good at delegating, they are not good at building systems and things start to fall through the cracks. And if like you just discovered, you're that one person who's earning them 8% a month on a $900 a month, red

770 dollar check.

You know, and and, you know, you're not going to be high on their list. So, so yes, if you are able to buy at scale, if you're able to buy, you know, you know, I would almost say focus on trying to get eight to 10. In an area, it's 10 units, you know, even if you have to do multifamily small multifamily like that, to make yourself a little bit bigger fish to an out of, you know, out of state property manager that that would be what I recommend.

Yeah, one follow up question to that too, because I have, I have clients that come to me, and they asked me, even if they're not investing in California, and I am only licensed in California, they just want to chat and get some advice. And I had somebody recently asked me, he thought he wanted to diversify, he wanted to have one in Florida, one in Alabama, I thought that was a really bad idea, I think you probably agree. And it's that same reason where you're gonna be such a small fish to these five different companies that you're gonna not gonna have any sort of leverage.

Yeah, I recommend a highly recommend if people are investing at a higher level, if they're investing in syndications, like apartment communities, self storage, where we invest, mobile, home parks, office buildings, things like that, then yes, I recommend people diversify across asset class, operator and geography. You know, when you're dealing with 100 to $200,000 house, that's bringing in, you know, maybe grossing $2,000 a month, you know, $1,000 900, then yeah, I think you're better off really focusing on a market. And, and starting to, you know, focus on finding a good market, that's where the population is growing, where there's jobs, and then just, you know, build up a nice portfolio in that market. And then if you want to expand, you know, if it's something you enjoy, then you want to find another market to diversify. Or a lot of times, what I recommend people do is like, you know, you've got all this income coming in, start, like really diversifying into passive real estate, find a syndication, find a way to invest in a 300 unit, apartment building or up 80,000 square foot self storage facility, you know, start diversifying that way? Oh, cool.

Good advice.

All right. So so long distance investing is not currently for you. It's not something that you're, you know, you're comfortable doing had that little adventure. That's good. You know, it's good to it's good to take your lumps and not have it bankrupt you.

Education for sure.

Yep. Yep.

I know, you're a full time mortgage guy, and you've got a whole business that obviously takes up most of your time. How much time would you say you're having to spend on just the rental property investment, the way it's currently running, it's probably an hour a month. And it's exactly how I want it. And that's how, you know, for anybody else who's got a job or a career, that's their main source, you know, eventually, I build towards this not being my main source. And if I've got, you know, 10x, what I have in real estate today, you know, there can be more time allocated to kind of maximizing returns and stuff on it. But But for now, as I'm, as I'm building a business, the last thing I want to do is take away from my $500 an hour activities and figure out how to save $14, with a plumber, whatever, whatever that that time would be spent doing. Right. And so property management in Marysville is great, the stuff that I've got in my neighborhood, self managing, but again, it's you know, a minus b plus neighborhood where I'm pretty proud of myself, Neal, I fixed a hot water heater. And I don't pretend to be the type of landlord that likes to do this type of stuff. But I just like, I'll go take a look. And at first I told my wife, I'm like, I don't know anything about electrical, and it's just an electric water heater, I went over there and kind of poked around and took something off. And I found there was a fuse, that just looked like it was fall like it was disintegrating, and shut off all the power, took the fuse out, went to Home Depot found a new fuse, put in boom, you hear the hot water heater going again. So I'm pretty proud of myself. But you know, that's a one and three year occurrence. For the most part, I'm getting reports from the property manager, they know that up to a certain dollar amount, they just, you know, fix it. And then if it's a higher dollar amount, they're going to call me and I get really detailed reports the end of the month, and that's probably half of my time is just going through that and making sure that there's no funny business going on. I've got, you know, fairly lucky during the pandemic, that I've got tenants that are able to pay and I've had the conversation, my property manager of, you know, we want to work with people make sure that we're at least having open communication on it. I think we've only got one tenant who is not even that they're unable to pay. They're just choosing not to so we'll get into that.

Yeah, it happens. It happens especially you start getting, you know, eight to 10 units and just human nature, you know, law of averages takes over Brett but it's it's beneficial that you've got multiple units, you're not just one single unit and you know, so if you've got a vacancy, you've got somebody not paying, then you're not you know You haven't lost all your cash flow.

Right? Right. And that's, that's one thing too when I talk to folks and you know, they've got advice from different places, and they say, Oh, you know, you invest as well and to talk to me about mortgages, that some of the advice that they're getting, which I think is true, is, you know, single family goes vacant, or you've got a tenant who's not paying, and you're having issues with your getting zero against your mortgage, if you've got a four unit, and three are paying, and you've just got one that you're having issues with, you know, that's, that's still paying my full mortgage, and I could probably, bat five out of eight on those two in Marysville, and still breakeven, obviously, I want to do better than break even better, you know, it's not gonna not gonna hurt me if we've got a couple that we're dealing with at any given time.

I think so. Yeah.

A lesson learned for me, I bought a condo in Vegas to live in back in Oh, five February of oh five, I was one year old condo that had doubled in value in one year. First warning sign there, bought with 10% down adjustable rate mortgage, and bought it for 205 at one point, it went all the way up to it was worth at 1.2 75 and I'm you know, living high on the hog and going god this is just unreal, you know, making so much money. At one point, it was worth about 60 and I finally short sold it for 100 and I felt lucky to get out of it. 100 I got out with nothing, I had a $5,000 promissory note that I had to be paid off in five years that at 0% interest, you know, so it was basically just but looking back, I was wise to get rid of that. But looking back, I should have bought every condo in that community at $60,000. You know, but you're so you know, I didn't understand it at the time. Everyone's scared of real estate and, and you're thinking God, this is just it's the end of the world. It's never coming back. And that's my advice to people who you know, there's the the saying, you know, when there's when there's blood on the street, buy property, you know, or when when people are fearful be greedy when people are greedy, be fearful. And so many people right now in real estate are I would say be cautious. It's the market is is red hot right now. But if you're sitting around waiting and waiting and waiting and thinking that at some point the markets gonna crash and then you will feel comfortable buying a property. The answer is you won't because you won't have been through the process of buying a property and having to pay that mortgage and wondering if the rent checks gonna come in. You'll be too fearful to do it. So I always recommend people listen, just find a way to buy a property with those three immutable laws. Real Estate Investing where it's not going to bankrupt you, if things don't go quite right, you will learn, you'll get more comfortable with it, and then start really paying attention to the market and find out where you know where you should invest and things like that. It just the waiting, ready, ready, you know, Ready, aim, aim, aim. Aim is just a syndrome that so many people get into.

Yeah, I mean, it's it's literally, you know, every single week me talking to clients that the Monday real estate investing meeting I used to go to, and you know, the same people for years and years and years talking, talking, talking, talking. And listen, I did a bunch of that, too. So so I'm not pointing the finger saying, Hey, I'm saying don't do what I did. And as much as Alabama hurt, I wish I would have done sooner. And I wish I would have got all those lessons out of the way. Because it didn't stop me from going out and buying more, I just took my lumps in realized I did this, this and this wrong, I've learned that I'm going to do it better. And in 19, I wasn't sure still the first you know, four Plex, I was really unsure. And now looking back like Gosh, I wish I did about 10 of them. I end up doing too. I'm glad I did, too. But I think that that's something that's really important to scream from the rooftops, if we could, that inaction is never going to be a winning formula. And a lot of people are going to look back and go, gosh, I wish I would have I mean, like you said Be cautious. And get into a deal. Alabama was small enough where no matter what, it wasn't going to bankrupt me. And people could probably find deals where it's like, you're not gonna go out buy a 16 unit apartment building. But if you buy a single family, and you get a three and a quarter on an investment loan on a 30 year fixed, and you have an idea what the rents are, the rents go down 20%, the thing that depreciates in value, whatever the worst case scenario is for you, if that's not going to kill you, then give it a shot. And very worst case scenario, you know, your breakeven or lose 100 bucks a month, and you learn a lot from it. And I think that, you know, more often than not all the stuff you learned is going to far outweigh any negative. And you know, that comes with that warning like you attached to it, you know, don't go out and just buy the buy or buy something humongous. It's way out of your wheelhouse or comfort zone. Because you know that I've seen disasters happen there.

Yeah. Well, and you know, you did you end up selling the Alabama property.

Yeah, I did, I must have been the middle of last year. And for me, I gave somebody a great deal on it. And I think properly managed, it could do, okay, I just didn't have the bandwidth to care about it. And it was just something that was just taking up space in my head where, you know, I wasn't focused on what I need to focus on, because a break in, or vandalism or this, like, that kind of stuff was just, you know, a lot of that could have been avoided, though, honestly, I mean, I talked to a real estate agent after I was in the deal. And the real estate agent said, Pat, if you were to talk to me, I would have said 70,000 looks attractive, but spend 100 and go over, you know, six blocks on the other side of the freeway, and you'll have a far better tenant, far better schools, you know, rent will almost make up for the numbers are almost the same. But you know, I didn't do any of that stuff. So I learned a lot, right, and maybe over the next 20 years, all that knowledge that I learned will make me 10x what I spent on that education, I mean, shoot, people are spending money on college applications, over zoom, they're getting a lot, a lot less education than I got in the real world banging my head,

Well, and people also need to realize as well as that there's, there's still a housing shortage in most of the country. builders are still very cautious everything from apartment communities to single family builders. They're, they're not they haven't ramped up, they still haven't. And so there is, you know, I want to tell you a supply and demand, there's a high demand for housing, a lot more Millennials are now getting on their feet financially, and they're looking to buy their first house. And so supply unless supply significantly increases, then chances are demand is going to continue to outstrip supply and the prices are going to keep going up.

Yeah, and there's there's some cool stats, I'm gonna make a video shortly. Barry Habib is a is a mortgage guy who puts out really good content. And, you know, looking at stats, like you said, millennials, between the ages 34 and 36, is when you know, stats show that people are buying the first house, they're forming families, their buying houses, the the birth rates that coincide with people turning 34 to 36, in these next three years, is just like a straight up trajectory. So there's more demand coming. It's not slowing down. And like you said, builders aren't building fast enough. There's no, like, quick fix. There's no there's no fixed insight for the supply versus demand inequality. And so, you know, yeah, I've got I've got some investor friends, and I've got people that I've talked to that, you know, those that are forecasting 810 percent price appreciation this year, might see that this year might see that again next year. And so sitting on the sidelines, waiting for some magic correction, just because you feel like it'd be sweet to get a deal. I wouldn't bank on that.

All right. Well, my goodness, we, you know, I brought you on here to talk about mortgages and and all that talk or get mortgages, mortgage is easy. Yeah. But I do want to talk about that. So, for somebody who doesn't maybe understand, you know, what a mortgage broker is, what's the difference between, you know, the loan officer that I'm talking to at Bank of America, Wells Fargo, and a mortgage broker, like yourself?

Okay. Yeah, the quick 32nd, you know, between Bank of America loan officer, somebody who's maybe captive at a certain company, and a mortgage broker is that B evey loan officer works for B evey has a specific box of what VA wants in a loan. And if they can fit it in the box, then they submit it to be evey, and they do a loan, as a mortgage broker, you come to me and you say, hey, I want to put 25% down, I've got a 780 credit score, and I've got you who I say, United wholesale, mortgage is the best place to send your loan, that's where I'm gonna send it. The next borrower comes along and says, you know, I've had some challenges, my credits only 630, I'm gonna do an FHA loan, about three and a half percent down, okay, great, I've got a great lender for you. And this is where I'm going to send that loan. And so as a broker, and I started off as a direct lender, so I worked for a company where every single loan I did went to that company. And what I saw on the broker channel that brought me over, and what I like about it, is that I'm able to take different clients with different needs, and place them with different mortgage companies, because truth be told, different mortgage companies have different appetites for different borrowers, some lenders are going to say, we're going to price it super competitive for this specific type of borrower and they can't discriminate and say, Hey, we want only great credit scores 20% down, but what they can do is tweak their pricing. And by tweaking their pricing, there's they're opening up the floodgates send me all the kneels of the world who have perfect credit, and I'm just guessing we all know how your credit is. But you know, and so then other companies say, Listen, I want to serve the communities that are that are putting down three and a half percent and, and have challenged credit and whatnot. And so our pricing is super committed, they're great. I'm gonna send all those folks there. And so I can, you know, best serve the consumer, in my opinion, and, and brokers will say, you know, fastest, easiest, most efficient way to do a mortgage with a broker. But that's, that's, that's what I see. And that's the main difference, too, is is coming from a place where I was, quote, unquote, captive, you know, as a insurance agent. Same thing, if you work for a company that doesn't underwrite certain types of fire insurance policies, can't do it. If you're an insurance broker, you say, Oh, I can broker that to them or I can send that to them. Because they do the California fair plan, or whatever it is, in their world, I'm guessing I'm probably speaking stuff. That's not true about insurance. So forgive me insurance agent friends of mine. But, you know, I tried to make an analogy that worked. And hopefully, hopefully it was close. Gotcha.

So and then how are you typically compensated you compensated with, you know, the closing costs, and the fees that are associated with or is there was there more to it than that

a mortgage broker gets gets paid directly from the lender, and I get paid directly from the lender based on the loan size. So back in the heyday, and oh, six, when people thought that, you know, mortgage brokers and anybody in the mortgage industry was, you know, a lie and cheat and snake, they could adjust their comp and put you in a worst loan and get paid more, all the regulations has happened, my only incentive, and anybody in mortgage for that matter, the only incentive is to put you in the best loan, so that you refer all your friends and family. And so no matter where I placed you, no matter what kind of loan I give you, I'm getting paid based on the loan amount. So I'm just trying to find you the best loan and whether I send it to this company or that company, that company, as a broker, I've got to set my comp the same at all of them. So I'm getting paid wherever my comp is set a certain percent from that lender, a flat fee, a flat percent, based on loan amount. And it's funny, because I've had a lot of conversations recently, where I'm talking people into getting a smaller loan, and they're like, well, I don't know, when I'm set, listen, the bigger the loan, the more I get paid. So when I tell you that it's probably a better idea to go smaller, trust that I have your best interest in mind, because I'm getting paid less for that smaller loan. But that's, that's how the compensation part works.

Gotcha. You know, when you sit down with somebody who says, You know, I think I want to buy a rental property, what are some of the first questions, you're going to ask them on how to, you know, game planning, how to get them into the right mortgage?

All second, a lot of what you're saying, which is that, you know, once you when you are thinking about buying an investment property, be absolutely your, your mortgage, your lender is on your team, and they're a second set of eyes, that are going to often help you avoid making a big mistake, they're gonna have underwriters who are digging into this property, probably a lot more than you did. So be honest with people exactly what you plan to do, and how you plan to do it. So many people are like, well, I'm going to buy this property, and you know, but I got to borrow $50,000 from my mom, and I'm not going to tell them, I'm not going to tell the lender about that I'm going to try and sneak it in, don't just like be honest, tell them what you want to do how you plan to do it. And chances are, they're gonna be able to say, Hey, listen, that's not going to work. But here's how we could maybe make that work. And it's maybe going to be a, maybe the down payment is going to be a little bit larger. Or maybe they're going to say alright, you know, take that money in and let it season for 60 days. So it you know, it doesn't show up on the bank account as as, as borrowed funds and things like that. So,

what would you say is our common sticking points for potential borrowers that tend to trip them up when they're applying for a mortgage?

was all great. That's all great. Alright, so last question that we're, I think we're going to start asking this of everyone, if you had $50,000, that you needed to invest within 90 days, where would you put it? And what kind of return would you be expecting to get?

probably biased towards residential real estate, because I know it better than other stuff. But that's, that's where I would park it for sure. You know, whatever you could afford, you know, with $50,000. Probably a maybe a duplex. Yeah, but and into a rental property that would earn you at least 8% cash on cash.

Yeah. And in my experience, I'm looking, you know, b minus neighborhoods where, you know, Alabama was a D plus, neighborhood where I live in might be plus, somewhere somewhere in between this.

Gotcha. Okay, great, great answer. Well, Matt gooshie, thank you so much for sharing with us today. You've got the YouTube channel. Can you tell us a little bit about that and how people can find you there?

tell you what this podcast is also, you know, some selfish part of it for me, as well as because we get I get to have conversations with people who are top performers in whatever niche we're interviewing them about. And I learned a ton. So it's, you know, no, I also get to, you know, provide a place for people to come and learn, but I learned myself, so I totally get what you're trying to do.

Win Win, buddy.

Yep. Well, Matt, thanks so much for sharing with us today.

We'll see you soon. All right, pleasure. Thanks, man.