Mathew Owens is a CPA and the owner of OCG Properties, which helps clients attain financial freedom by providing support, education, and cash flow real estate investment opportunities. In this episode, Mathew tells us what up-and-coming commercial real estate investors need to know in order to scale their businesses, and the biggest mistakes he typically sees new investors make.
Mathew Owens | Real Estate Background
- CPA and owner of OCG Properties, which helps clients attain financial freedom by providing support, education, and cash flow real estate investment opportunities.
- Portfolio:
- Mobile home parks
- Buy-and-hold short-term rentals
- Debt fund
- Marijuana fund
- LP in diversified investments across multiple asset classes
- Based in: Garden Grove, CA
- Say hi to him at:
- Best Ever Book: Think and Grow Rich by Napoleon Hill
Click here to know more about our sponsors:
TRANSCRIPT
Slocomb Reed: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed and I'm here with Matthew Owens. Matthew is joining us from Garden Grove, California. He is a CPA, as well as the owner of OCG Properties. He also lends capital to flippers, holds houses, syndicates and operates multifamily, and owns a CFO services company. As well, he teaches a six-month real estate course. His current real estate portfolio consists of mobile home parks, a marijuana fund, multifamily buy and hold short-term rentals, and a debt fund. He's also involved as an LP in a diversified portfolio of investments. Matthew, can you tell us a little bit more about your background and what you're currently focused on?
Matthew Owens: Yeah, no problem at all. So thanks for having me. I really appreciate it, I love the Best Ever audience, and the entire conference every year, I love going. I started out working at a CPA firm; was bored out of my mind, of course, doing taxes and audit and that kind of thing, and I made the genius move to jump into real estate in 2006. So I was a real estate genius about a year and a half before I had my ass handed to me and punched in the face real hard by the crash. Since then, we've flipped over 1,000 houses now, we have over 35 million lent out to flippers in different markets around the country... We do a lot of value-add multifamily and syndications, we have a nonprofit organization that teaches financial education and real estate education... We do a lot of different capital raising; we raised over $150 million for different real estate investments since I started, and we just love doing real estate. I help a lot of different investors with tax mitigation strategies, and those types of things.
I started a CFO services and bookkeeping company because operators of different syndications were coming to me raising capital with no books in place yet. So I realized that is the big crutch for a lot of real estate investors and entrepreneurs, of course, having their stuff handed to them.
So we do a lot all around real estate. I love doing this stuff, and most importantly, I have a seven-year-old and a four-year-old, and coach of two basketball teams for my son, and soccer team, coaching my daughter, and things like that... So it's a lot more fun being a real estate investor, of course, than doing taxes and audit, and that minutia that you have to deal with every year. So that's a little bit about me, man.
Slocomb Reed: Nice. You still have, you said, a CFO services company. How much time do you spend in that arena?
Matthew Owens: Very little. A lot of my businesses actually have been set up very passively for me, just because I want to spend the time with the kids and be able to actually go and hang out with them as much as I possibly can. And the CFO services company we have set up where we have outside people that work for us consistently, helping these specific real estate owners and flippers and syndicators and operators actually get their books straight, and have proper reporting, so that that way they can actually have everything at their fingertips, know exactly where their cash flow is at all times... And it's probably one of the hardest things I think as a flipper owner-operator, is making sure you're not juggling money between projects, making sure you have budget versus actual all lined up perfectly, and know what you're doing there. A lot of people think, "Oh, I've gotta go find deals. I need to go through and make sure I have enough deal flow." Yeah, that's great, it's super-important too, but if you don't have the right infrastructure in place, if you don't have the right accounting side, if you don't know tax and legal structures, you don't know how to raise capital, you don't know how the processes and procedures go for real estate, you're dead in the water before you start. So that's why we started this whole thing, and started our real estate of course to teach people the infrastructure that goes into this stuff... Because just like any business owner, I struggle with that, even though I'm a CPA as well. In the very beginning I thought I was a good business owner because my books were done. And you're like, "Wait a minute, there's marketing, there's human resources, there's accounting, there's tax and legal structures, there's so many facets of running a business..." And most people don't teach those types of things, and understand them from an operations perspective. They're not taught out there to the general real estate investor. So we started doing that, and really helping people giving a good base, a good foundation for being a real estate investor in the first place.
Slocomb Reed: As an apartment owner, operator, I resonate with what you're saying about the bookkeeping and those other services, for sure.
You're wearing quite a few hats right now... Let me ask - you've been in real estate for going on 16-17 years now; you stayed in through at least one recession, it sounds like... So we're recording in mid-to-late January 2023. Your investing activity and in that regard your lending activity when it comes to lending to other investors - where are you focusing, heading into 2023?
Matthew Owens: Really what it comes down to in 2023 - whenever there's market volatility, you see changes in the market out there. One of the things that I learned during the last crash is stay calm, focus on your processes and procedures, focus on the infrastructure of your overall investments. Because when things crash, or things change in a market - we've seen major interest rate changes, the lending market has changed quite a bit right now, you see a lot less fix and flippers being able to find good deals... Some of the buying and selling side has shifted into the buyers' favor in a lot of these ways. So making sure that you have proper margins on your deals, and the right structure in place for each one of your individual projects, making sure if you're investing in multifamily deals, that you are really paying attention to that lending side. And if you're doing short-term debt and refinancing, for example, down the line, after you've done your value-add, you buffer in some of those potential increases in future interest rates.
Now, we've seen some evening out of the market right now, of course, on the lending side, but I'm focused a lot more on buying really quality assets and focusing on the underwriting and detail on all of the assets I buy to mitigate risk. I think we should be in a real good focus on mitigating risks in this market, and being able to make sure you're buying the right types of assets, as well as the underwriting needs to really perform. So you're in this weird area where you have sellers and buyers just not meeting eye to eye. The sellers haven't seen or haven't gotten through their head that things change. Affordability is at one of the worst levels we've ever seen throughout history right now, so it's important to be able to understand that when you're looking at your comps, when you're looking at what things are going to trade for. So it should have multiple exit strategies, whenever you're looking at your investments. It should cash flow amazing. So if you have to hold it long-term, then you're good, even on your fix and flip deals; on the multifamily side, you should be able to withstand a 20% potential drop in rents, or some major adjustments that could happen there, as well as a potential increase in additional future interest rates, and things like that. And finding good markets that have a massive demand, that are a little bit less insulated from major volatility. You see Florida not having as much volatility because of the population increase. You see Texas having a population increase as well; you see specific markets that are a little bit more insulated, because every market is different.
So really doing your due diligence on the market, your due diligence on your deals and the underwriting is where I'm focusing quite a bit in my portfolio. We're still buying, we're still investing in a lot of different stuff, but it needs to be very strategic, it needs to have better margins, to counterbalance some of that risk we're seeing in the market. So I think that should be everyone's focus, is risk mitigation, better deals, making sure that you're counterbalancing some of the major risks out there that we're seeing because of the shift in the market.
Slocomb Reed: Matthew, tell us more about your strategy right now. You said that we should all be focusing on acquiring the right types of assets, the right asset classes. For you with your own investing activity, which asset classes are you focused on, and what is your strategy right now?
Matthew Owens: So I think one of the most important things to focus on is a diversified portfolio. So I invest passively and as a GP member in a lot of different types of assets. So I invest in single family, I invest in debt, I invest in multifamily, I invest in a marijuana fund, I even have some Bitcoin mining funds and things like that... I'm trying to diversify in multiple asset classes, multiple markets in the country, multiple operators... And then I also have multiple income streams. I have my real estate course, I have CFO Services, I have my fix and flip business, I have my buy and hold business, I raise capital for different syndications, and be a GP on that side... So it's a matter of diversification, and making sure that you're not in any one asset class, and making sure that you're protected there with that diversification with regard to your specific niche.
And we specialize in all these things. I really like short-term debt, I do a lot of different short-term fix and flip debt, because I'm in and out quickly. Six, eight months on a fix and flip type project, sometimes three months... You counterbalance that downside risk. So in 2008, when I took that massive punch in the face, I realized very quickly, be in and out of these deals quickly, and make sure that you are protected. So for example, in '08, it took from 2007, all the way to 2012, for example, to get to the bottom, where you had a slow progression down. Now, we've had a big progression down this time, because of the major change in affordability that was super-fast within a number of months because of those rate changes... So it's important to make sure you know what your new numbers are when you're investing in these, but realize, don't panic. Normally, it takes a long period of time for real estate to play out this way. Focus on seller finance strategies if you can't get rid of a house. That's how we got rid of houses back in the day in 2008 and 2009 through '12, when we were still fixing and flipping houses - we would do seller finance strategies; we would sell properties to people's IRAs, 401-K's, we would go through and sell properties internationally as well to different investors and help them with 1031 exchange transactions... Basically, put properties on a silver platter. How can you add value in this type of environment?
So we would go through and buy them, renovate them, tenant them... Get a whole outline on every single major system that's in place in that asset, as well as side by side pictures of every item in the inspection report done, so that that way, we were adding value, saying "You don't want to do the work on these properties, you want to have a turnkey portfolio, you want to make sure that management is set up, you can trust the numbers? Here's a perfect silver platter house, or here's silver platter investments on the debt side as well, that you can actually bring to the table for different investors." So focusing on value-add is really where I'm at in every aspect, whether that's single family, whether that's promissory notes, whether that's syndications, whether that's our other service-based companies or education companies - it's all a matter of value-adding in all these ways.
So I'm focusing on all of these strategies, and still working through them. And still working through changes in the market, just being a lot more careful, making sure my margins are better on my deals and things like that, before pulling that trigger. So that's really where my primary focus is, and I think it's important for all the listeners to really actually focus on that risk mitigation side and keep moving forward, keep buying deals. It's going to be one of the best times ever to buy if things are changing massively. 2008 when everything crashed, I was buying $100,000 houses for 30k with seller financing, and three grand down, and things like that, from banks. So as things change, it becomes a very exciting time.
I think going forward, we're going to see a lot of different defaults from multifamily borrowers and multifamily operators that bought wrong in 2019 through 2020 or '22, in the early parts of '22, before the rates changed, where they're not going to be able to refinance. So you're going to be able to be captain saver bro over here, and helping them actually bringing equity to the table on those projects and picking up some great deals.
I also think there's a lot of people in the single family space sitting on really cheap debt, that also bought wrong, or bought at the top of the market, and now they can't liquidate that and get their capital back, so there's a massive opportunity for subject-to deals and actually getting that financing and keeping that 3% 4% interest rate in place on a lot of these rental properties or homeowners that want to sell their property but can't get out of it because they got realtor fees, closing costs, maybe some repairs and fix-up costs, and things like that, that they've got to deal with. So I think those opportunities in the multifamily and the subject-to space is going to be really interesting moving forward in 2023 and on. So my primary focus is "How do I capitalize on the changes that are happening in the market? How do I mitigate risk, and again, diversify my income sources?"
Break: [00:14:48.28]
Slocomb Reed: Matthew, let's shift the conversation a bit here and focus on the services you provide, the value you add to aspiring up and coming real estate investors. There are a lot of things that you teach, it sounds like there are some services that you provide to investors like that. When it comes to investors in the first few years of their real estate investing trajectory where they have experienced some success and are starting to scale their operations, their portfolio, the number of projects they are taking on at a time, what are the biggest concerns, issues, problems that you've seen with people in that space? And what is the advice that you have for helping them address those issues?
Matthew Owens: Good question. So the first thing that I think is super-important - it obviously depends on the asset class; if you're talking about fix and flip investors versus multifamily investors, there's some difference. In both of those spaces it's learning how to raise private capital, so that you have enough money for your deals. It's also making sure that you're buffering all your numbers, knowing how to really underwrite your numbers in detail on both of those asset classes, so that that way you can focus and be able to not lose money when things change. For example, during 2020 you saw a major change happen in renovation costs, right? When everything crashed, supply chain issues, things like that - making sure you have your buffer room, and you know exactly how to vet all of your team members, to have good contractors, understand your numbers in detail is key... But also, a lot of new investors or people that are just getting started and maybe getting some traction, they have problem with deal flow. So understanding the marketing strategies and the exact processes to get that in is key.
A lot of investors come in and they find deals and they're like, "Oh, great, we're starting to get deals in, we're starting to get things closed", and they need to focus on the efficiency aspect of that. You might get the phone to ring, but do you know exactly how to break that down so that that way you're out there on that appointment as soon as possible, you're out there talking to those multifamily brokers and getting those deals actually closed, and actually getting the most out of your marketing budget in the first place? Are you actually out there understanding the step by step process that you should do, so you don't get taken advantage of by contractors across the board, and stolen from, and know how to deal with the right quality control? That you know how to actually go out and deal with realtors and know if they have a good marketing strategy on the back end, and they understand what they're doing when they're selling your asset for you? Or do you have your own database as well that you can do nurturing and lead nurturing for, both on the sales side of assets, as well as the capital raising side? You should be having different lead nurturing systems in place to take advantage of your databases, and building your database so that you can have all the resources you need for this business.
So resources are key. If you don't have enough capital investors, you're dead in the water; you're not going to be able to scale on the fix and flip side or the multifamily side unless you have the right capital investors in place. So focusing on the right systems and tools to raise that capital.
But it's also - like I was saying, people don't teach about the other foundational issues that come with running a business as a whole. Do you understand the human resources side? Do you understand sales and marketing? Do you understand tax and legal structures, and how to help other investors invest their retirement vehicles into real estate, whether that's self-directed IRAs, or 401-Ks? Do you know how to market properly to find deals?
So these are the types of specifics that you need to have the right knowledge base an investor needs to have in order to actually be successful long-term. And these are the things you learn in the beginning that you're like, "Oh, man, I've really got to know this stuff", and you don't in the beginning; you just make mistakes or lose money, unless you've got the right mentors and the right team to help you with that infrastructure in place.
And it comes down to also financial education as well. Do you know how to - not only for your personal business and your personal books and financial situation, but the business financial situation as a whole, do you know how to do proper cash flow management? Do you know how to actually budget for yourself? A lot of private investors, I see this all the time, come in and they start needing extra money for their deals, because they didn't put that renovation buffer aside, they didn't put the interest buffer aside like they should for their projects, and they start taking it out of their own personal accounts, and juggling money, which then puts them in a really bad spot, because they are not able to actually fund their projects, and then they can't live. And that's the number one thing - they start making major mistakes, because you're in a lot of pain over here on the personal side, not being able to pay your bills, and do that type of stuff. So understanding these detailed infrastructures, the step by step processes that need to go into running a true business is key to being able to be successful. And the biggest mistakes I see is not having those in place, not having the right capital raising processes in place, and the right marketing systems in place, and then not having the proper quality control in place for all of your different team members.
So many people don't understand how to vet the team member in the first place. Whenever I start managing -- I deal with property managers in different markets all the time. So having an interview questionnaire that you go through with all these different property managers is very important; understanding their processes and procedures. Because I swear, every time I go to a new market - and I do this nationwide, in multiple markets. There's a few markets I don't play in, but if I do this, I go through five managers usually before I find that good one, and that's with the proper interview questions, because they can all talk a good game. But can the managers actually perform on operations? They might be great at filling units, but they might be horrible at service calls and tenant communication and tenant retention, or great at certain aspects, but bad at accounting, and proper investor control, and proper investor communication.
So understanding what it takes to find the right team members is the utmost important, because you're only as good as the team members; you shouldn't be managing your own assets and your own properties yourself, unless you're at the asset management side over here, and you have another manager in place. You shouldn't be trying to sell all your own properties. You need to bring in the right people on your team, even if it's an internal team member or an internal realtor that can sell your assets; finding the right attributes for each one of those team members from contractors, property managers, realtors, inspectors, closing title companies, lenders - all those people have different attributes that you need to make sure as a real estate investor that you're really proficient in, and your team is - I'll call it Johnny-on-the-spot with their specific section of the process. And you only know that process and what they should be doing if you're able to document step by step by step each section of each one of your team members process, and then put the right people in place to manage them correctly... Because you don't need to be the person that's managing each one of these team members; you should be finding someone else that's really good at managing other people and understanding "What quality control can I put in place for my realtors? What quality control can I put in place for my managers and contractors and the lenders involved?"
So those are the things, the main problems that I see out there where people are making mistakes, losing money, or having issues scaling and getting to that next level.
Slocomb Reed: That makes a lot of sense. Matthew, are you ready for the Best Ever lightning round?
Matthew Owens: Yes, sir.
Slocomb Reed: What is the Best Ever book you've recently read?
Matthew Owens: So there's a few books. So I think one of the most important books you could read as an entrepreneur and implement is called Traction by Gino Wickman. That was a life-changing book for me and my company, where it gives you the entrepreneur operating system. So that helps you be able to document every step of your process, make sure your team has the right goals, you're hitting the right metrics; that book is absolutely money.
I also like Think and Grow Rich, because the more you think about it, when you sit down and you think about what you need to implement, and you actually write everything down and sit there and think, you really do grow rich at that point. So it's a real true book. So those two books I think are some of the utmost importance. Also, the Creature From Jekyll Island, The Second Look at the Federal Reserve - that book brings out the conspiracy theories in you, but it definitely is crazy when you want to go down that rabbit hole.
Slocomb Reed: Matthew, what is your Best Ever way to give back?
Matthew Owens: I love teaching. I love helping other people and teaching other people these things. I give away a lot of free time to people just to help them as much as I possibly can, and help them to not take those big hits that I took so many times. And really, a lot of it comes down to helping them with their mindset, because now, when I take a hit, it just comes off my shoulder; it's a mindset thing. Keep your head up. You find the opportunity ahead of you when you actually keep your head up when you take those hits. And you'll take those hits; every single real estate investor does. You've got to earn your stripes. So keeping your head up along the way, and trying to help people and paying it forward as best you can has been one of the best things that I think I can help other people with.
Slocomb Reed: In your real estate investing career, outside of starting in 2006, what is the biggest mistake you've made and the Best Ever lesson that resulted from it?
Matthew Owens: I think the biggest mistake I made is actually selling over 1,000 houses. So I should have just kept them all; it was just a different way to think. And instead of saying, "Oh my goodness, I need to sell these properties to build capital up so that I can invest it passively", there's an easier way to do it. Just raise the capital for it and hold them all yourself instead. I would have been 10 times wealthier than I am right now if I would have held all of these properties instead of thinking, "Oh, I've gotta sell it because I need the cash in." It's the most inefficient way to build your wealth. You let the market do it for; you let the Federal Reserve keep printing money and take advantage of that debt that gets decimated when there's inflation in place. And those rents slowly rise over time, the value rises over time with inflation... And then it also decimates that debt and really is one of the biggest wealth building tools there is, is that long term steady growth of that asset and the decimation of that debt. So selling 1,000 houses got to be it; even though I became a specialist, you learn your lessons the hard way. I wish I would have held everything.
Slocomb Reed: And Matthew, what is your Best Ever advice?
Matthew Owens: So I think the Best Ever advice is jump in. Learn the strategies. Because at the end of the day, you can't be free, unless you build assets to create cash flow for you, without you doing the work anymore into the future. So when I quit my CPA firm job, I had just read Rich Dad Poor Dad, and of course, you learn a lot of lessons about the different business segments that you can be in - self-employed, the business owner, the investor, as well as the employed person, the employee. And you realize that you're always going to be trading time for money, and you're going to be a slave to that your whole life if you don't build these assets. Now, spend your time building assets like this; learn these strategies. It's literally the only way to be free. And I'm not talking just real estate; you can actually build businesses and learn how to make that passive as well, and set up the right business systems so that you don't have to do all the work. And you can go coach your kids' basketball teams, and hang out with the family, and do the things you love.
So whether you're building a business, whether you're investing in real estate, learn how to build these cash flow streams, so that you can actually be free and have time freedom. That's true wealth. Time freedom is true wealth. Not cash flow, not big bank account, or a lot of equity out there. The cash flow and the time freedom is really what the key is to building your long-term wealth.
Slocomb Reed: Last question - where can people get in touch with you?
Matthew Owens: You can email me at mpo [at] OCGproperties.com. Or go to our website, we have a couple of them: OCGproperties.com or OCGcapital.org. We do lending, we have our course, we basically do the CFO services, as well as lots of different real estate investments, and help investors invest in all these different strategies. So that's the best way to reach me, and let me know if we can help.
Slocomb Reed: That link is in the show notes. Matthew, thank you. Best Ever listeners, thank you as well for tuning in. If you've gained value from this episode, please do subscribe to our show, leave us a five star review and share this episode with a friend you know we can add value to through the conversation we've had today. Thank you, and have a Best Ever day.
Website disclaimer
This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.
The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.
No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.
Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.
Oral Disclaimer
The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.
