Mat Pezon - Chemical Engineer Turned Full-Time Investor
LISTEN TO THE FULL EPISODE ON:
Mat worked as a chemical engineer for 12 years before recently becoming a full-time real estate investor in 2022. He got a Master's degree in International Management at IE Business School in Madrid, Spain. While working his regular job, Mat would spend his nights and weekends looking for foreclosures, learning and asking questions about real estate investing, and working on his personal finances. He and his wife have now been purchasing rental properties since 2014 in the Allentown, PA in the greater Lehigh Valley area. Outside of work, Mat enjoys spending time with family, playing the guitar and violin, and maintaining his Spanish language skills.
In this episode hosted by Mike Swenson, we discussed:
- How Mat found real estate when decided to go back to Spain to learn business
- Learning how to get started in real estate by getting involved with groups of investors and consuming real estate podcasts
- Focusing on personal finances to line everything up for his first property
- Understanding what's higher and lower interest rate and what loans you can keep while saving for a down payment
- Buying a property, adding value, refinancing, getting the capital back out, and repeat for the next property
- How you could add value not only in properties but also in people
- The transition from self-managing up to 20 units to transitioning to third-party management
- How Mat's cash flow exceeded his W2 income
- Applying his knowledge from the corporate world and chemical engineering to scale their systems and process
Timestamps:
0:00 - Intro to Mat's Career
1:32 - How a Chemical Engineer Turned Out to be a Real Estate Investor
4:21 - Making the Leap to Full-Time Real Estate
6:17 - Working on Personal Finances
9:26 - The Value Add Strategy
13:00 - Implementing the Right Strategy
16:59 - The Tipping Point to 100% on Real Estate
20:29 - Mat's Next Steps on his Real Estate Career
23:34 - How to Find Mat
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Minnesota Real Estate
Read the full transcript here:
Mike Swenson
Welcome to The Real freedom show where we inspire you to pursue your passion to gain time and financial freedom through opportunities in real estate. I'm your host, Mike Swenson. Let's get some real freedom together
Mike Swenson
Hello, everybody, welcome to another episode of Real freedom talking about real estate leveraged freedom, how you can utilise real estate to build the life that you want, whether it's actively right away full time, whether it's passively and transitioning to real estate, however, that looks and so today, we've got an awesome story. I think so many times people feel like I have to be in real estate full time to really experience the benefit. And today's guest, Matt Pease on is here, and his background is actually a chemical engineer, he got a master's degree in Spain, and now you buy homes in and around Allentown, Pennsylvania. And so for people listening, I think it's really important to hear, you're just a normal guy, obviously, we'll talk about why you pursued real estate coming from being a chemical engineer. If you can do it, they can do it too. And so we're going to talk about how you've built this strategy wise, lessons you've learned for people listening, really tune in and pick up from Matt, how he's been able to be successful coming from chemical engineering, and you can do it too. So welcome to the show, we're so excited to have you.
Mat Pezon
Thanks for having me share a little bit about your background, and how a chemical engineer with a master's degree in Spain turns out to be a real estate investor, I come from a long line of engineers and my family, I think I'm the fourth generation or was and I went to college for chemical engineering here locally in the Lehigh Valley, Pennsylvania. And that's what I wanted to do. And when I graduated college, I went to work for a large chemical company in this area, it was right after the Great Recession, jobs were really tough to come by. And I got one. And I felt very fortunate for that this is 2010. And I started off, it wasn't going well. And I'll cut to the chase. But my manager at the time told me he was the worst employee that he ever had. And so this is my first job out of college. It just crushed me. And you know, I was thinking myself, man, you know, if, if, if it's so hard to get a job, and this is what I actually it's actually like when I get in the door, you know, maybe I need to look around for other options, because and I did the corporate thing for 12 years after that. So it didn't, it didn't deter me, at least initially. But I realised I might need to have another plan B. In case if in the depths of the you know, the aftermath of the Great Recession, I'm let go. And I had all these student loans, I needed to figure it out. So that's, that's what got me looking. I wanted to go back to Spain, because I studied internationally, and I wanted to learn business. And I thought, you know, maybe I could learn this business thing. And so it was actually overseas in Madrid that I found real estate investing when I was studying debt and bonds. And we can unpack that a bit. But I understood the debt side, and I knew probably from the first month when I got back to the States, I was gonna buy real estate. And that for me was how I could eventually get out of the corporate world of being kind of at the employers mercy. And if if your boss, your one boss thinks that you didn't do a good job, even if you did, you could be on the chopping block next. So that that was my motivation.
Mike Swenson
I've talked about this before you're in a safe, stable environment until you're not and that decision can happen quickly. Or you can see the writing on the wall or something changes in your current job. And so in your shoes, you talked about your first job in 2010. And making that transition and 22 to now being full time it was a process. I always just like to make the joke, you know, how do you eat an elephant, one bite at a time you didn't start deciding to invest in real estate and jumped in full time, you are balancing a couple of things. And now you've had the opportunity to go in full time. But it takes a little bit of time. And you've got to build that up. And I tell people it's kind of like pushing a snowball down a hill, it takes a little bit of time. But once it gets going that momentum picks up. And so it's all about you got to get started, get that momentum going. So that you have more freedom of choice down the road. So talk about kind of your start into real estate when you moved back deciding what to invest in how to put those things together. Because yeah, you're working your job full time. I think a lot of people listening to this can relate. I'm working full time I want to get into real estate, I don't know how to start. So share us your journey of how that got started.
Mat Pezon
When I came back to the States. I was working again for for actually for that same large employer took an increased salary, new role. And I was going out on evenings weekends and going around with a group of investors that were looking at the time that were foreclosures available. But it doesn't have to be that because the market shifts it could be properties on the market, but I was I found a group of people that were doing what I wanted to do. I met them I was learning from them asking questions and I kept showing up when a lot of my friends at the time were going out on Friday nights and things I was going to bed early waking up at 6am to go look at properties on Saturday mornings and just learning Asking questions. So getting involved with a group of people, or either a mastermind or networking groups, events, people in your local market that are doing it, that was, that was critical for me. And then retaining my job I was learning on the side, I consumed probably 600 episodes of BiggerPockets podcasts and other podcasts like that.
Mike Swenson
And I was just, I was routed around at the time. So I mean, obviously, you know, real freedom would have been would have been the key one, but you got to you got to deal with what's available at the time.
Mat Pezon
So at the time, that's I read probably 150 books on the various topics. So learning, finance, learning, property management, learning all these things, it was just education and finding that group of people in my market that I could trust,
Mike Swenson
and I heard this stat somewhere where I think it's like the average person spends 300 to 500 hours, learning about investing in real estate before they finally jump in. So I think the key for a lot of people, though, is there's that time you have to make the leap, and we talk about that a lot. It's the reason why in the real freedom logo, I have the guy jumping off a house, because you got to make that leap at some point. We can learn, we can learn, we can learn we can study the theory, run the numbers, but you got to be able to make that first step and make that leap. So you're educating yourself. You're learning a lot about it. And then how did that first leap work for you?
Mat Pezon
After I had a group of people I was learning and reading, I was working on my personal finances. So I was getting my credit in order making sure that I had cash savings, I had good employment, and I was retaining that employment because I was focused on how am I going to get the money to do this. So the people that I was around would teach me the how or how do we repair things, find contractors, managers by refinance my car at the time, I had paid it off, and I took out the cash for my car that I then used as a down payment. I took out a couple of personal loans that had low interest rates at the time, and I just said, Okay, I need this cash, I can pay back over time with my income, I understood debt to income ratios, and what underwriters would approve, and I focus on my personal finances.
Mike Swenson
Yeah, I think there's a lot of wisdom there too. Because if you're gonna get a loan from somebody, you've got to be Loanable. You had to push those chips into the middle a little bit there, you had to take that risk to go from no car payment to a car payment to take out those personal loans because you're lining everything up to be able to go in on that first property. Well, that's right.
Mat Pezon
And I, I actually worked the first three years before I did my MBA, I worked extra, I found other jobs and things I cut my expenses drastically. And I just ploughed it into paying off my student loans. So I had like 40 grand in student loans. I paid it off in three years. But then I felt weird because I was taking on more debt to now buy these homes. And I was thinking to myself, why didn't I just keep that cash, I could have started sooner, but you live in you learn. And if you understand how banking works, I wouldn't have had to pay those loans back I could have started buying right away. So understanding what's higher interest rate and lower interest rate, what loans you can keep while saving for a down payment was key for me
Mike Swenson
My first flip the proceeds we made from that is what paid off my student loans been able to utilise real estate to help get me out of debt. That was the key stepping stone for me because I think I was paying 300 bucks. 350 bucks. Now this was 1518 years ago. So different time different amount of student loan debt. But yeah, being able to utilise real estate to pay off debt is key.
Mat Pezon
Yeah, I would have done it a little differently looking back and I like what you did, I probably would have taken a page out of your book if I knew how
Mike Swenson
I had the benefit of home equity line of credit that I borrowed from family members. And so that was really the start for me. It's about figuring out how to get that first one. And I think for some people, either Yeah, your your options are either you save up your own money, or you find a way to get that money, right. Those are really the two choices. Either you have the money or you find the money. And so it's all about getting started. Because then once appreciation happens once you start to pay down the loans, you're getting more freedom of how you can move things around and leverage the assets that you have to go get more assets. But really at the beginning, it's all about how do you get that first one going, you've got to get started.
Mat Pezon
So true. And it was it was always about freedom for me. And it was about freedom from getting away from that job and just getting started. And I did have to take that leap of faith and buy that property and taking action is key.
Mike Swenson
So now you got started with foreclosures. So talk a little bit about the strategy there. What are you looking for? What was it about the properties that you were most interested in wanted to move forward with? Was it just about price was it about location, that sort of thing? What was your buy box as you're looking to grow?
Mat Pezon
The model was and is what value can I add? So it was properties that needed repair that I could buy them at a discount because of the situation. In this case it was foreclosures but there are still properties that need repair all over the place that getting started today I could I could do and so I would repair these properties and make sure that I was able to buy them at a discount because I was doing that work and putting in that sweat equity that I wanted to paint and repair them and I did some work myself on the first three to five homes and my girlfriend wife now we paint on weekends and do these different things and add that value. So it was all about adding value buying a property where we could improve it, and and then look to refinance and get our capital back out so that we could do it again for the next property. And we did that successfully many, many times by solving real estate problems.
Mike Swenson
And that's how we were able to scale you know, having worked with investors, myself as an agent, the value add component is key. Now, some people want things more turnkey. At that point, though, when you're looking for more turnkey, you're, you're probably doing it because you don't want to go through the hassle of the fix. But at the same time, that's also hedging your bet for the future. Because if I don't add value to that property, I'm putting myself at more risk not to say you can't stomach it. But when I add value, and rent it out and receive that cash flow. Now, if the market changes, at least you've added value, and if you go to sell, you might be able to make more or like you did do a cash out refi. That's really the momentum builder is the potential they put your money in, get your money back out, and then go to the next one. And so for people listening, there is a nuance to that strategy there. That's why the value add is so important because you're getting your money back after you've added the value with some sort of cash out refi.
Mat Pezon
Oh, that's right. And initially, it was properties where I would add value, but later I transitioned to adding value to people. And so there would be sellers that maybe they didn't have a distressed property, but they had a distressed situation. And so I was able to renovate that situation and transitioning from renovating properties to renovating whatever the circumstance was for the seller, and that that's what I transitioned to later was whatever they were going through whether they were behind on their mortgage behind on taxes, tenant issues, whatever the situation was, I would take that on and solve it for them create that value. And then in exchange, they were willing to pay me for that service in the form of a lower price.
Mike Swenson
Real estate is not for the faint of heart. And it's not for everybody. And so for some people, like you said there's issues challenges, stress, some people can handle the stress, some people can't handle the stress, don't want the stress. Some people are gifted houses, maybe a family member dies, maybe there's a situation. And so you coming in as somebody looking to buy a home, you're a problem solver. Here's somebody that's coming to help, and you're just figuring out at what price does that help to solve your problem? And if that works for them and works for you great, if not, okay, maybe that's not the person that you want to work with at that particular time. So I love that adding value to people piece.
Mat Pezon
That's right, because there were a lot of foreclosures, and then all of a sudden there weren't. And so it was easier to find properties. And then it wasn't and it's not as easy today. So finding other situations to resolve ended up being the direction that that my company took.
Mike Swenson
So now with the properties that you're running across, what percentage are you deciding you are going to keep what percentage? are you deciding to maybe just fix up and sell? Or how do you go through that decision making process to decide what strategy should I implement? Sometimes the property speaks to you based on what you buy it for what you can put into it and what you could sell it for or what rents you could get. So in some ways, it's kind of the property in the situation will tell you the right strategy. So how do you figure out what strategy you're going to implement on the properties you run across?
Mat Pezon
That's a great question. Usually, for us, we look to buy and hold. We're not we're generally not flipping or wholesaling. That's not to say that we haven't flipped a property or two here and there. But it's really not a core business model that we have. So we'll market to properties, we'll send direct mail, and the recipients of the mail are the people that we'd like to buy from. So we've kind of already identified those areas, and we reach out to the people that we'd like to buy from in rental areas. So we've kind of honed in on what we want to do and why we have a team in place for for management, we know the contractors that work on those properties. So we only really reach out to the people we know that we'd like to buy from we do get web leads now that are kind of all over the place. And depending on the situation, if it's too far removed from our management operations or something else, we have repaired and sold the properties that are really out of our our core areas. But it's it's more uncommon for that.
Mike Swenson
So now you are doing your own management of the properties. Did that start that way? Or did that develop over time as you got to a certain size or as your business kind of evolved? How did that work out? When
Mat Pezon
we started, I was actually self managing up to about 20 units. At that point, we started transitioning off to third party management I just I refer to them as our because it's just I'm so close with them. They really take control of the properties and they're kind of like the lifeblood of what our businesses that interaction with the customer. So they do. It's a third party management company that that is basically running all the backend stuff. I focus on new sales, new opportunities, our processes, and onboarding and then they really take it from there. Once we close on board. I let them run with with the backend stuff. So I can focus on new deals.
Mike Swenson
I love stating our because they are a part of your team. When when you're doing real estate, you need to build a team. It's your acquisition team, whether that's an agent, whether that's you yourself finding it, whether it's wholesalers, other brokers, you've kind of got your acquisition team and then yeah, you've got your maintenance team. And for some people starting out, they might want to do all that stuff themselves. I was on figure it out. For some people, it's like, do you want to have to learn that too, in addition to what you're already doing? And for some people, they might say, No, I don't want to take the time to learn, I'd rather leverage through a third party company, because there is a tonne of value there when you have a solid property manager that gives you time back. And yes, they charge money. But if they're doing it, well, you're getting value for the money that you're paying them in the form of the assets being maintained well, and you get that time to go pursue other things.
Mat Pezon
Well, that's right. And when I was working full time, and trying to find new deals, it was everything that I could do to really to get to that freedom number, I needed to focus on acquisitions. And so I realised that around 20 units that my time was ending up focusing more on, you know, repairs, and toilets and everything else. And I wasn't having the time for the acquisitions, because I was focused on you know, which renewal was coming up and having that conversation and urgent repairs, weakened calls, and I wasn't able to, to grow the acquisition side. So I realised pretty quickly that I needed to find a trusted partner, and they still do over 90% of the management today. And so it was critical to find a good property management for scale and growth, if that's what the listeners want to do.
Mike Swenson
So you mentioned you're in the Lehigh Valley area. So for those people that don't know how large of an area is that from one of your properties to another, how far away are we talking here in terms of what you're purchasing?
Mat Pezon
It's maximum one hour, the Lehigh Valley is about, it's two counties, it's about 650 700,000 people in total, and then the surrounding counties with Berks County, it's about a million and a half. And if you look at some of the surrounding counties, it's just just across the border from New Jersey, it's really close to New York and Philly. So we've done well with a lot of people fleeing those areas, and coming here due to lower cost of living and stuff.
Mike Swenson
So we'll talk about how, as you were building and growing this real estate business, that tipping point to now where you're at the point where you're all in 100% on real estate versus being a chemical engineer
Mat Pezon
That was 10 years in the in the making, so I'll keep it as consultant hated, it was a very calculated process, because as an engineer, I'm risk averse. You know, I put the safety factor on the safety factor, right? So I'm not the like, burn the boats jump in type of guy. So. So for me, it was about okay, well, I'm going to continue to accumulate properties. I looked at okay, what's the cash flow from these rentals? How much is it going to take to achieve in the cashflow, the rentals my current w two income? And then I really wanted to triple that before I said, Well, I think I'm okay. And then after COVID, we saw a lot of appreciation in the market. And I realised, wow, you know, I could sell to single family homes. And the tipping point for me was when I realised I could sell two single family homes out of my whole portfolio. And it would be my annual salary in what the equity was that I got. And I thought, You know what, while the banks love the stability and everything else, eventually there was there was enough liquidity as a cushion. There was a big enough balance sheet where I just realised, wow, you know, there's the opportunity cost of staying was too high, versus going out on my own. But it was hard to do. I remember I told my boss and I just felt my heart sank because it was I was closing a chapter I felt nervous. I wasn't happy, I was somewhat scared. But right move. So it was just that slow, consistent grind over many, many years, almost 10 years of of buying rentals on nights and weekends, too, and letting appreciation happen to the point where between cash flow and appreciation, I vastly exceeded my w two income. And that was when I probably waited too long. But that was a decision that I made.
Mike Swenson
Was this something in terms of your side business with real estate? Is this something that you actively shared with your employer and friends and family? Was it like, oh, yeah, Matt, we've we know now it's time or is it? Oh, you just kind of been doing that on the side and still showing up and doing your job? And and how much were those two worlds kind of mixed in terms of your transition?
Mat Pezon
They weren't mixed. When I was earlier in my career, I would talk about it. And I saw that people thought, well, you know, Matt, he's kind of doing this real estate thing, he's probably not going to be a long term employee for us. And so when I changed companies, I was six years, the first employer six years, the next employer, and I didn't really talk about it at all, because frankly, people have a lot of hobbies and other things they do. And you know, I didn't know everyone's you know, what they do with their family members on weekends or whatever, it really wasn't my business. And I realised it's not really their business. A lot of people like to go to football games, or baseball games, or play music or whatever. And I just bought real estate. And so it wasn't really their business. I got great reviews at work. I exceeded expectations on the rankings for many years in a row. And you know, it was my hobby. So I didn't mix. I didn't mix and I kept it to myself, because that was my hobby.
Mike Swenson
Every employer is different. Every situation is different. You don't necessarily want them to think, oh, I don't want to promote Matt or I don't want to recommend Matt for this because this is only a placeholder for him because he's doing that real estate thing you've got they'll be smart enough to know how are they going to perceive that for some people? Yeah, it might be I love what I'm doing here. I'm going to give you everything that I've got. And I'm doing this on the side. I've seen people with that. But for your situation, it was like you said, some people are doing their hobbies on the weekend, your hobby just happened to be real estate investing and your portfolio?
Mat Pezon
That's exactly right. It was a hobby for me that I that became then my full time vocation.
Mike Swenson
Talk a little bit about next steps for you. What are you looking to do now that this transition happened within the last year? So what are you looking to do now that you're in real estate full time,
Mat Pezon
I have been really focusing on scaling our systems and processes. With my assistant we've built hundreds of documents of this is what you do in this situation, this situation, our onboarding, our employee knowledge assessments, and really building out the framework for an enterprise. It because I want to be able to point to a document that says do this, do this, do this and create procedures, just like I had in the corporate world, in the corporate world, and chemical engineering, there needed to be a process and inspection process and procedure because things could go wrong quickly, if if if processes weren't followed, inspections weren't done, right. And so I took that mentality. And I think that anyone listening could take what they learn in a corporate job, look at how the company is run, whether it's HR, accounting, legal, anything that you do an operation sales and break it down to those processes and procedures. And that's what we're doing right now. And really focusing on educating our team, training our team and building those processes out. So that's been a six to nine month process, and to really create that, but we're almost done. And now it's execution time,
Mike Swenson
I love engineers coming over into the real estate space, because it's very much like that you think a certain way, you act a certain way. And you're just now taking the transferable skills. And I think that's the beauty of people coming from other industries into real estate. Yeah, you're just taking the best of what you do the things you're most excited and passionate about, and applying it into the real estate space. And so for you, it's scaling systems operations. And now we do that in real estate, and you're taking all of your past work experience and pouring it into real estate. And now it's just a different industry, but you're using all of that experience you had in your past coming into real estate.
Mat Pezon
That's right. You don't have to be an engineer or any type of background to do this business. But what I found the strength that I was able to leverage was I understand what rules that there are and there's there's rules in the engineering world, you know, gravity, throw something up, it comes down, like you can apply those rules. And if you understand what they are, you can get an outcome and I speak Spanish, I did my MBA in Spanish in Spain. And there's rules and if you follow the language, the linguistics you know, noun, verb, you can communicate, you can say whatever you want, but you have to know what the rules are. It's the same in real estate or in music, I played the violin. And it's the same thing. You can play whatever notes you want, as long as it's within that key. It's the same in real estate. If you know the rules, you can play by the rules. And when you just have to know the rules. That's why education was so important to me.
Mike Swenson
Have you ever heard the phrase, you're the average of the top five people that you hang around? Well, real estate agents, I'm excited to increase your five with you. We're launching the real freedom investor agent tribe, to help you get educated and connect with others to build your real estate investing journey, and also to help you along the way as you're working with real estate investors, so come check it out on our website, real freedom.com Go to the store, we have a membership. We have a mastermind group and private coaching to help you stay accountable to your real estate investing goals and to make sure that you connect with like minded people to Accelerate Your Progress and to cheer you on along the way. Check it out real freedom.com Click on the store. Well Matt, for people that want to learn more about you reach out to you offline. How can they do that? A great
Mat Pezon
way to do it is on our website, our email addresses there. You can look me up on social media send a message you can send me an email my email is Matt at peace on properties.com Once he and Matt and and yeah, I'd love to connect and share what I've learned. I've learned a lot from others along the way and I'm happy to reciprocate.
Mike Swenson
Well. Thank you, Matt, so much for coming on and sharing your story and best of luck to you. This is really just the beginning now that you're here full time and so excited to see what you do in the future.
Mat Pezon
Thanks so much for having me and I appreciate the opportunity
