Build Wealth Early: Rental Property Investor’s Path

Build Wealth Early: Rental Property Investor’s Path

Matt McCertie transformed his financial future by embracing real estate investing. He left a stable corporate job years ahead of schedule, building a portfolio of over 50 properties. His journey shows how strategic rental property ownership can lead to early financial freedom.

From Corporate Grind to Early Retirement

Fifteen years ago, Matt McCertie, armed with an MBA, was on the typical corporate career path. He saw a long road to retirement, about 30 years away. Dissatisfied with this timeline, Matt created a business plan for real estate investing. He bought his first rental property, then a few more. When his corporate job’s stability wavered, he already had a backup income stream. This allowed him to transition fully into real estate investing and grow his portfolio significantly.

The Power of a Business Plan

Matt emphasizes the importance of a business plan, a concept often overlooked in real estate. He believes writing down his goals and strategy helped him commit to his vision. “Once you put that onto paper, there’s something that happens between your brain, your nervous system, everything where you are actually committing to this,” he explained. This structured approach, even if imperfect initially, provides clarity and direction.

First Deal: A Value-Add Strategy

Matt’s first property was a three-bedroom, one-and-a-half-bath house in Cedar Rapids, Iowa. He purchased it for $92,000 in 2013. Today, similar homes in the area are valued around $225,000 to $250,000. The house needed about $15,000 in work, which included sweat equity from Matt and his then-fiancée. They converted it into a four-bedroom, two-bath home, significantly adding value. They managed to get a tenant in place by January 1st, shortly after closing in December and getting married in January.

A key lesson from his first deal involved a sewer line issue. “I did not scope the sewer line,” Matt admitted. He discovered Orangeburg sewer pipes, a material used in the 1960s that had deteriorated. Dealing with a collapsed sewer line during his honeymoon taught him the importance of thorough due diligence, like inspecting sewer lines on every future deal.

Scaling Up Through Saving and Smart Financing

After his first property, Matt continued working his W2 job while saving aggressively. He and his wife lived frugally to accelerate his goal of leaving corporate America. In 2014, they bought two more single-family homes. By 2015, they scaled up significantly, acquiring four duplexes and three more single-family houses.

Part of this expansion was supported by life insurance money from the passing of his wife’s mother. They also found a more aggressive local credit union that offered better financing options. This allowed them to purchase the four duplexes simultaneously, a much larger investment than before. “It starts snowballing where it becomes instead of hundreds of dollars, it becomes thousands of dollars,” Matt noted about the increased income.

Leaving Corporate: A Calculated Leap

Matt’s goal was to achieve a certain level of passive income to replace his W2 salary. He aimed for about $500 per month in cash flow per property. By 2017, with around 20 properties, he was generating approximately $10,000 per month in cash flow. Coincidentally, his corporate job ended when the company relocated his position, providing him with severance pay that aligned with his planned departure.

The transition was still unnerving. “It still felt raw and weird,” he said, reflecting on the American education system’s focus on traditional employment rather than entrepreneurship. He realized the income from his properties covered living expenses, allowing him to reinvest profits and continue growing his portfolio.

Acquiring Portfolios for Accelerated Growth

In 2018, Matt shifted his strategy to acquiring larger packages of properties. He purchased 10 single-family homes listed on the MLS for $1.14 million. He used cross-collateralization and his real estate agent commission to cover most of the 20% down payment, bringing only about $100,000 in cash to the closing. Some of these properties have since doubled in value.

This strategy involved slightly lower cash flow per unit ($350-$400) compared to his earlier value-add deals, but it allowed for faster scaling. “You make more if you dive deep into one property, if you’re going to do value add. But sometimes when you want to scale, like Matt’s talking about, you have to give up some of the immediate upside,” explained host Dave Meyer.

Managing this influx of properties presented an operational challenge, especially as his son was born around the same time. This led Matt to hire his first property manager. After trying a couple of external firms with limited success, he eventually brought a property manager in-house, which he found to be the ideal solution for managing his growing portfolio.

Expanding into New Markets and Asset Classes

Since 2018, Matt has continued to grow his real estate holdings. He explored mobile home parks, acquiring two in 2020 and 2021. In 2023, he purchased another large package: 22 houses in Cedar Rapids for $2.2 million. He again used creative financing, cross-collateralizing a mobile home park and his agent commission, requiring only about $35,000 in cash at closing.

This deal was driven by equity gains rather than immediate cash flow, with the purchase price to appraisal value difference estimated at $1 million. The opportunity arose when a client he had previously worked with decided to sell a package of properties through another agent. The market in Iowa had a slight lull, causing some sellers to panic when their properties didn’t sell immediately.

Current Portfolio and Future Outlook

Today, Matt’s portfolio includes approximately 50 buildings, comprising single-family homes and duplexes totaling 60 units, along with about 90 mobile home lots and space for an additional 100 lots in his mobile home parks. He recently authored a book, “Cornfed Millionaire: Playing Upon All these Farmers in Iowa,” aimed at sharing his knowledge on buying one-to-four-unit properties.

Matt’s journey from a corporate employee to a successful real estate investor with over 50 properties highlights the potential for wealth creation through dedicated real estate investing. His story emphasizes strategic planning, value-add opportunities, smart financing, and scaling through efficient operations. For those looking to build wealth and achieve financial independence earlier than traditional retirement timelines, Matt’s experience offers a compelling blueprint.

Source: The “Escape Corporate” Rental Property Plan to Retire Early (30s/40s) (YouTube)