April 26, 2021

JF2428: Mistakes Do Not Signify the End of Your Career Defining Journey with Matthew Tortoriello

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Matthew started his real estate journey at 16 when he purchased a two-family home with his grandmother’s money. Four years later, he bought another property that was a challenge to manage. That experience taught him a lot of lessons that he applied later in his career.

With two other partners, he acquired a two-family house that he managed and renovated. After buying several more units, getting a construction license, and founding a property management agency, they were still looking for new opportunities. That’s when Matthew met a new investor and future partner who helped them take the business to a new level.

Matthew Tortoriello Real Estate Background:

  • Full-time real estate investor and property manager
  • 25+ years of real estate experience
  • Portfolio consists of 250 units, flipped 100, & wholesaled over 200
  • Based in Springfield, Mass
  • Say hi to him at: www.yellowbrick.org 
  • Best Ever Book: Recession Proof RE Investing

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Best Ever Tweet:

“Don’t focus on learning everything because you’ll never learn everything. You’ll learn a lot along the way” – Matthew Tortoriello.


Ash Patel: Hello, Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m here today with our guest, Matt Tortoriello. Matt is joining us from Springfield, Massachusetts. Matt, how are you today?

Matthew Tortoriello: Good, Ash. Thanks for having me on.

Ash Patel: Thanks for being a guest here. Matt is a full-time real estate investor and landlord that has over 25 years of real estate experience. Matt’s portfolio consists of 250 units, and he has flipped and wholesaled over 300 units. Matt, before we get started, can you tell us a little bit more about your background and what you’re focused on now?

Matthew Tortoriello: Sure. I actually started when I was 16 years old. I got a duplex working with my grandmother as a hard money lender, and I flipped it a couple of years later, had a little profit. Then about 12 years ago, I was still interested in real estate, but didn’t really know where to go, and I kind of started with my best friend Kevin. We started buying in Springfield, Massachusetts, basically a whole bunch of foreclosures, just fixing them up, renting them out, building a team around it, making all these different mistakes, and learning as we go, and just kept going.

Ash Patel: Man, how did you get the real estate bug at 16 years old? You were in high school, right?

Matthew Tortoriello: Actually, no. I was in college. I graduated high school very early, so I started college when I was 15. I went to a small college out in Great Barrington, Massachusetts. There was even a 12-year old at my college… So it’s kind of a crazy and interesting in college.

Ash Patel: Let me revise the question. How did you get the real estate bug when you were in college with all those distractions around you?

Matthew Tortoriello: Well, my dad owned a restaurant, so I always had an entrepreneurial mind… I always saw him working really hard, so I was always looking for what could be different. Someone referred me to check out Rich Dad, Poor Dad, which everyone talks about that book… It was very inspirational, but I was lacking a lot of knowledge from it. Then I started going to landlord meetups out in Pittsfield, Massachusetts, and met a bunch of landlords and started asking them a million questions, and they were all like, “Wow, who’s this little 16-year old asking all these great questions.” Some of them took me under their wing, they taught me a few things, and I learned from there. I made a bunch of mistakes, but mostly a success.

Ash Patel: Alright, I’m blown away… You were doing extra reading in college?

Matthew Tortoriello: Oh, yeah.

Ash Patel: And then you went out and spoke to a number of real estate people to further your knowledge in real estate. What did you go to college for? What did you want to do?

Matthew Tortoriello: Pre-med. I minored in business a little bit. I originally was also focused a little on Chinese. I was learning more about the culture and stuff like that. The way I learned early on was I needed to go to school for my passion and not for a job. So whatever intrigued me, I was like, “I want to learn that.” That’s how it all kind of segued in.

Ash Patel: Okay, so you weren’t passionate about pre-med, or were you?

Matthew Tortoriello: I was. That’s why I was going; I was passionate. My brother was born with a brain tumor, so that led me into learning more about science and stuff like that. He’s my young brother… After going to the hospital, talking to the doctors there, and kind of finding out more about it, I just dug in and started getting in anatomy, physiology books, oncology books, and just kind of researching, and so that’s my passion there. The same thing with real estate; whenever I find something I have any kind of interest in, I just start digging it.

Ash Patel: Okay, a great source of inspiration. At some point, did the real estate inclination starts to outweigh the pre-med?

Matthew Tortoriello: It did. After the first two-family in Pittsfield, I definitely got the bug and it seemed like it really worked. So I was like, “What can I do next?” I made the mistake of trying to do distance. I bought a four-family out in Saginaw, Michigan, and lost everything. I got robbed by a property manager. It became vacant, it was more than 50% vacant, so therefore my insurance company refused to cover any loss. They had stolen everything, I had to foreclose on it…

I made a lot of mistakes and learn from that, but I kept researching and reading. I got a short-term job in the meantime, and then basically in 12 years, it just happened that the stars aligned and I got back in with my best friend Kevin. Whatever it takes, we’re going to make this work. And here we are.

Ash Patel: After 12 years? What happened in those 12 years?

Matthew Tortoriello: 12 years from 2008?

Ash Patel: Well, you reconnected with your best friend, you said after 12 years… Oh, from your childhood on?

Matthew Tortoriello: 12 years, from 2008 to now.

Ash Patel: Okay. What was the journey of those last 12 years?

Matthew Tortoriello: Well, the journey was we started with a two-family house. We bought it, did the BRRRR strategy before the BRRRR strategy was coined. We kept flipping that money into another two-family, a three-family. We worked with a couple of local realtors, finding any REOs that we could at the time. We were doing tons of short sales. I was doing gymnastics at the time, I wanted to learn the backflip, so I met this other investor who had just sold a bunch of property in New Mexico. He was intrigued by my interest and passion that he basically jumped on board and brought a bunch of money. So now we just kept expanding, because we had a lot more capital, and we just kept putting offers in. I think we were putting out over 100 offers a week for a while. A lot of them started coming back, so we were like closing, closing, closing.

Then I got my GC license, my lead license, my asbestos license… I’m like “Crap, I’ve got to figure out how to work with all these different contractors and managing contractors.” Now we had a bunch of tenants, “Crap, we need to figure out building a team around the tenants”, because we couldn’t find a good management company in the area. So we just started working long hours, and probably didn’t do it the right way. We should have had a plan before. But we figured it out, and we have a phenomenal team these days. We’re ready for the next correction so that we can even grow farther, faster.

Ash Patel: Okay, so we’ve established you’re one of those rare people that actually have more than 24 hours in every day.

Matthew Tortoriello: I try to. Yes.

Ash Patel: Okay, let’s bring it back to college. Did you diverge from your pre-med path at some point?

Matthew Tortoriello: I did. Honestly, I started meeting with a bunch of doctors out at Dana-Farber in Boston. My brother was going out there constantly. I started interviewing the doctors, asking them about their life, asking about what they invested in, all that kind of stuff. I found out that most of them didn’t have a family life, they weren’t happy, they wished they had just stuck with research and not focusing on ecology or neurosurgery. I kind of got a little disillusioned that this wasn’t the path for me, because these were people that I wanted to aspire to be and they weren’t happy. And yet, I had met all these landlords and investors and stuff, and they were super happy. Tons of free time and constantly with their family. I’m like, “Okay, wait a minute. Let me look over here more.” So I kind of started shifting my focus more to real estate and stopped focusing on the college aspect.

Ash Patel: Interesting. So now you’re all-in on real estate and backflips. Did you change your major to business or real estate?

Matthew Tortoriello: Nope. I finished four years and then just couldn’t continue on for my masters. I just decided to just focus on real estate and started growing from there.

Ash Patel: So Matt, by the time he graduated college, how many deals had you done?

Matthew Tortoriello: I had done four. Four deals by the time I graduated college. I was around 18 years old and I’d done a few deals then. Then I took a little time off while trying to figure things out, and I had that bad deal in Michigan.

Ash Patel: Okay. Were those four buy and holds?

Matthew Tortoriello: They were short-term buy and hold. Yes, they were buy and holds. They were planned to be buy and holds, but at the time it made sense for me to sell them. So I sold them, made some cash, and then, unfortunately, I put it all into this Michigan property and it didn’t work out.

Ash Patel: Let’s hear about that. You know we’re diving into that one now… You already teased us about that, so let’s go.

Matthew Tortoriello: Sure. I was researching different markets and I wasn’t finding a lot of deals in my area. So I’m like, “Oh, I can do this from a distance.” I flew out there and I met a local property manager that was also a realtor. I talked to him and he showed me a couple of properties. I found this beautiful, newer construction four-family that was mostly tenanted at the time. I had met with a couple of other people to kind of get things going. He said he’d managed it for me and I’m like, “Great.” I signed the paperwork, did most [unintelligible [00:09:11].29] back home, signed a few more paperwork for the closing, and I was all excited. I was learning trying to manage a property manager from afar. I kept asking all these questions, but was not getting answers.

It turns out he just up and left and had stolen some money from me, so I had to scramble to find another property manager. I went to one of those big companies; some are like “Great, a better company. They’ll be safer.” Well, they didn’t focus on the property, and they let it sit vacant for a long time. Then eventually at some point — I don’t know what exactly happened, but maybe the last tenant left and stole the furnaces, the toilets… Literally, the kitchen sink. So I tried to file an insurance claim and they denied my claim, because it was more than 50% vacant for three months. So I had to foreclose on myself, I got foreclosed on, and tried to do the best I could with the bank to [unintelligible [00:10:01].14] they pretty much ended up foreclosing on me. I had to take a little time off, trying to regroup and figure out what I did wrong, what I could have done better. That led eventually into 2008.

Ash Patel: Okay, so knowing you for the last six minutes, I’m assuming you now decided you’re going to start a property management company. Is that a wild guess — did I hit it?

Matthew Tortoriello: That is correct. You are right.

Ash Patel: Alright. So you saw how there were no good property management options out there. Now you collected yourself, your mindset is “Okay, I’m going to fix this problem that exists.” Am I still on track?

Matthew Tortoriello: You are on track.

Ash Patel: Alright, take it from there.

Matthew Tortoriello: We found, in our area — there were a lot of great guys out there, but didn’t meet the needs that we saw that were needed in the area, didn’t have that attention to detail. So Kevin and I started building a team around that. It wasn’t for property management for other people. At first, it was all about just for us, because we were going a mile a minute, we were buying so much property and we didn’t have the capacity to start taking other people on and having to deal with owners. We were already dealing with a bunch of tenants. So we were just focusing on that.

But about a year and a half ago, things are leveling off, we’re not buying as much property right now. So we opened our doors to property management, and now are starting to actually work with some local investors from out in Boston, we’re doing some commercial property management as well with a couple of people… So we’ve started expanding that.

Ash Patel: Alright. Matt, how many years ago was it that this property got foreclosed on?

Matthew Tortoriello: The property got foreclosed on now that would have been about 15 years ago.

Ash Patel: Okay. What was your next acquisition after that foreclosure, and where did the funding come from?

Matthew Tortoriello: It was a two-family on Union Street in Springfield. We bought it for $70,000. I worked with a hard money lender that Kevin had met from Boston. He funded 90% of the purchase price, as well as most of the rehab. I think it was 15% and three points, so it was kind of steep at the time. Then Kevin and I had a little bit of fun saved up, so we use that, and then it was mostly me doing a lot of the work. Kevin had a job at the time as a used car salesman and I didn’t  have a job. So I was like, “I’ll do all the [unintelligible [00:12:19].05] the floors. I will roll the sheetrock, mudding, sanding etc.” We just kind of worked late hours together, and Kevin would, after work, we’d knock it out. We got everything done in about a month and a half, had it rented out pretty much almost instantaneously, and we started the refinance, paid off the hard money lender, pocketed an extra 30,000 that we then leveraged into the next two-family.

Break: [00:12:44][00:14:46]

Ash Patel: Through no fault of your own, you got kicked in the teeth, but here you are, a college grad, you’re riding this up wave of making money off real estate, and all of a sudden your world comes crashing down. So you picked yourself back up, and at any point, did you think you would just go work for somebody and get a job? Or were you all-in on real estate?

Matthew Tortoriello: I was all-in. We had a lot of ups and downs throughout the years, but not once have I thought of ever actually looking back and trying to get a job. If everything crashed tomorrow and I lost everything, I would find and start another company. I’d probably do real estate because I love real estate, but I would start any other company. I love being an entrepreneur, I love being self-employed and a business owner… So I think that’s definitely something I would still focus on.

Ash Patel: Very inspiring. Alright, so you’ve made the 30 grand and now your next deal was… Did you say a two-family or four-family?

Matthew Tortoriello: It was another two-family.

Ash Patel: Another two-family. Okay. And that, I’m assuming, went smooth?

Matthew Tortoriello: I think we underestimated the rehab by about $10,000. The main stack was actually cracked, which we couldn’t see because it was behind the walls. It was cast iron, so we had to bring it up to code. We had to take it out, put PBS back in, and have it all replumbed, which costs about $10,000 that I wasn’t anticipating. But we still turned a profit on that, and now leveraged that and bought a four-family on Belmont. That was the next one.

Ash Patel: Okay. And that was a win as well?

Matthew Tortoriello: That was also a win. We owned that for nine years and then sold it for a crazy profit.

Ash Patel: Okay. Now I’ve known you for about 12 minutes, and I know that this isn’t enough. You’ve got three wins and in your mind, you’re thinking “How do I supercharge this business model?” Am I correct?

Matthew Tortoriello: Yes.

Ash Patel: Okay, let’s keep going through the journey.

Matthew Tortoriello: Basically, that’s around the time we met with that investor in gymnastics class. That was kind of the next step to supercharge, “We need more capital to be able to put more offers out.” We’re putting more offers out, but some them were coming back and I had to deny the offers because I didn’t have enough capital. That was when he came in. He brought in about another million dollars and we were able to basically leverage that with all these deals. At that time, there were short sales like crazy, so we were just putting offers out and we were finding maybe a month or two later that those short sales were coming back. Some took six months to close, but either way, it was just all about how many offers can we put out. At one point, I was looking at maybe 10 to 12 properties a day, just driving out, looking at the properties, writing up scopes, figuring out what we should bid on it, and really just kind of kept going with that with this one realtor who was just amazing; she just took me and drove me everywhere. We were working Saturdays and Sundays; it was non-stop, so it was awesome.

Ash Patel: How did you find this investor? And then more importantly, how did you convince them to give you essentially a million-dollar line of credit?

Matthew Tortoriello: It was actually in gymnastics class. I’m just a very open guy, I’m an open book. I like talking about what I’m doing. We were at gymnastics class, he was there, I just started talking about what I was doing that day, and how I was renovating this house. “Oh, we just bought this.” And he’s like, “Really, I’d like to hear more.” So he invited me over to jump on his trampoline. So I went over there and we were flipping on his trampoline. We just started shootin’ the s**t about everything and one thing led to another. He’s like, “I’d like to invest with you.” So I’m like, “Okay, let’s figure out how that would work.” I dropped an operating agreement and he became an actual… Not just a line of credit, but he was a partner. He kind of invested in as a partner.

Ash Patel: Was he hands-on at all or just passive?

Matthew Tortoriello: Originally, he was passive. So once again, making a lot of mistakes. We had another person at the time that was kind of helping. It turned out he was actually stealing money from us. We found out that a little bit later. This investor became a little bit more active at that time, because he wanted to correct himself. He actually became more active, and we all kind of worked a little bit more diligently after we got rid of that person, and moved from there.

Ash Patel: Not to change the subject… Did you finally learn how to do a backflip or no?

Matthew Tortoriello: Oh, yes.

Ash Patel: Perfect.

Matthew Tortoriello: Round off, back handspring, back tuck… Oh, yeah.

Ash Patel: Awesome. Okay, so now you’re turning and burning with this partner investor. What systems do you have in place to allow you to do all of this?

Matthew Tortoriello: We have 25 employees. We have an on-staff electrician, an on-staff plumber, HVAC techs. We use a couple of different systems and software. We have Rent Manager as our accounting/property management software, which has been phenomenal. If there was one thing we should have started right from the beginning, I’d have really good property management software. Early on we were using spreadsheets and QuickBooks. Oh my god, I wish we had done that just from the beginning; great property manager software. There’s a lot of them out there, Rent Manager was ours, and it’s been phenomenal for us. We use Asana project management software, so that we can work in-house with everyone. We also use Google Docs consistently, and do have outside spreadsheets for a lot of different things with vendors.

We’ve been working a lot with Home Depot. A lot of people don’t know this, but they bought this company called MarginPoint which is inventory management software. We basically have our own warehouse. It used to be called the optics program through Home Depot. So they have a mini Home Depot in our warehouse. We have about 200 SKUs of common items that our maintenance guys use. So when my maintenance guys come in, I delegate the work orders, they then go into our warehouse, use their phones to check out all the different stuff, and then they go right out into the field. They’re not going to Home Depot, Rockies, or any of these stores where they have to spend an hour in line or wherever. They can really grab the stuff from here, and when it gets low in inventory, it sends a signal to Home Depot that we’re below the min, set up an order, send me a text to confirm, I confirm, they drop it off, we restock our shelves.

Ash Patel: You just blew me away. That’s a lot of systems. Let’s rewind to when you’re ramping up. What kind of growing pains did you have and what systems did you implement at that time?

Matthew Tortoriello: One of the biggest things at first was we were working with a lot of subcontractors and managing subs. What I found was, it was easier for me to actually have employees, just because of the laws and stuff like that, what you can and can’t tell a sub to do versus an employee. So early on, it was getting some good staff and learning to manage the staff, because that wasn’t something I had a background in doing. Then t was having them check in and using a timesheet software to just track all that, so that they’re actually following all the work orders, you’re making sure you’re getting stuff done.

I think we also have to make sure we were calling up our tenants, because one of the other issues that we were having was we were running around so much that we would find that work orders weren’t getting always completed. Maybe they mudded the wall, but they haven’t gotten it sanded and painted. And then we were just like, “Oh, we got to get this done.” It was just a little too sporadic. So it was more about having someone in the back end, making sure we’re following up, making sure the work orders were all getting completed, making sure we had documentation.

Especially in Massachusetts, it’s a very tenant-friendly state. We need to document everything. “I want before and after photos.” So it was also putting all that together, which is where Rent Manager really helped… Because they can have a tablet, they could take a picture, upload it to the work order, it’d be on our server-side and the back end, so we can all see that. Then Kevin or I would report, we had all that history, all the work orders, all the pictures, and could kind of present that to the judge so they understand that we were doing the right thing.

Ash Patel: Matt, what’s an example of something you can’t tell a sub that you could tell your employee?

Matthew Tortoriello: Well, you can’t tell them how to do something. You can tell you what you want to do, but you can’t tell them how, essentially, that’s kind of the big difference. Because if you start telling them how do you stop, essentially the way in Massachusetts –I’m not sure in other states– from an insurance perspective they’re looked at as an employee. So now you have to actually [unintelligible [22:41] general liability and stuff like that. I have to say that they’re my employee, so therefore I have to pay on top of that. Even though they might have insurance, it might not be covered based on the way I was transacting with them. As well as they’re 100% dedicated to me all the time, they don’t have other clients. That can also be construed that they’re really an employee and not a subcontractor, so I can’t really 1099 them. I’ve got to make sure that I’m following all the rules, otherwise, it can bite me.

Ash Patel: That’s interesting. I’m going to go out on a limb and I think that’s a law unique to your area, and maybe some more other states. But very interesting. Alright, so now you’re turning and burning. And again, you’re not done, you’re going to supercharge it again. What’s the next step?

Matthew Tortoriello: At this point, maybe about four and a half years ago, we partnered with another gentleman. He’s been doing it all by himself; he was looking for someone to build systems and that’s what we do. That’s what we specialized in. So we teamed up with him to start buying more foreclosure properties. At that time, there were so many foreclosures going on, auctions… So we built a system where we created some software where we were scrubbing all the different websites for auctions. Because Massachusetts is a non-judicial state, whereas Connecticut’s judicial, so we were able to pull all that information together.

Ash Patel: What does that mean? What’s the difference?

Matthew Tortoriello: Oh, so a judicial state is they ask you to go in front of the judge to be foreclosed. Whereas in a nonjudicial, they have certain paperwork they have to do, but they don’t have to go in front of the judge. Like right now, with the moratorium and everything, a judicial state, if it’s gone through the judge, it’s clear. You have a clear title, you don’t have any concerns. Whereas right now, if you were getting foreclosed in Massachusetts, there are so many loopholes that can happen, especially with the moratorium, that you want to make sure you have a clear title, because it doesn’t go through a judge. You just got to make sure everything’s covered. That’s some of the biggest differences.

Ash Patel: What’s your bottleneck right now? Is it deal flow? Is it capital? Is it employees? Subs?

Matthew Tortoriello: Subs, definitely. I’m finding that there’s a lot of people… My subs I do have, a lot of their employees aren’t coming back to work. Maybe they’re collecting unemployment. That’s been a big issue, especially during COVID. The other thing I find is the capital’s not so much of a problem, it is the deal flow, because foreclosure auction was a large portion of our acquisitions. We’ve been shifting into buying more tax lien certificates, tax deed states, we’ve been also buying non-performing notes… We’re working on negotiating one right now, a big package. Then we’re shifting into commercial, which is one of the deals we just locked into the other day, which I’m really excited about.

Ash Patel: Tell me about that.

Matthew Tortoriello: So it’s a shopping plaza in East Longmeadow. They haven’t been run very well. There’s a lot of deferred maintenance, roof, siding, leaks everywhere. But it has some good tenants in there and the location is perfect. We were actually going to the auction, willing to bid at 2.6 million, and we got it for 2.2, so a win. Once we reposition everything and get all the tenants in there, the value should be about 4.5 to 5 million. And we’re probably gonna have to put in another $300,000 in rehab.

Ash Patel: What makes this a perfect location?

Matthew Tortoriello:  Well, it’s, it’s right near a great rotary in East Longmeadow. East Longmeadow has also lots of job growth. There’s high net worth in that area as well. There’s tons of traffic going through as well, so you have a lot of good storefront traffic… and it’s just an up-and-coming market.

Ash Patel: Matt, you said there are some good tenants there. What are those good tenants?

Matthew Tortoriello: We’ve got a bakery that’s doing really well, a nail salon, a beauty salon, there’s a really nice restaurant that’s there, a jeweler that’s been there for about 30 years, and one of the anchor stores is this cafe that has seven other shops all around the area. That one brings, honestly, probably the most traffic. I was there over the weekend with my fiancee and there were just so many people flooding to that one spot.

Ash Patel: What’s your plan on improving it?

Matthew Tortoriello: Well, the first thing is obviously fixing all the deferred maintenance. I want to get the roof done, we’re going to be upgrading all the air handlers, there is an issue with a couple of units where they’re splitting electricity, so we want to sub-meter it out. We’re going to upgrade the facade. It’s very dated. There’s a building right next to it that’s been updated, and ours sticks out like a sore thumb. I want to clean off that facade, there are some pillars, I want to put these stone pillars to really draw the eye there. There are these old awnings that hide half the windows for the front sore, I want those gone. I want brand new signs for all the businesses that match these other signs. And just really draw the attention for all the traffic that drive through. Nobody would want to go there, it just looks rundown.

Ash Patel: Is there any vacancy there now?

Matthew Tortoriello: There are a couple of vacancies. There are actually two buildings; second floor, both buildings, there are some office spaces that they were renting out to a couple of law firms and I think one was a bank. They all vacated, so we’re talking to a local commercial realtor; we’re going to do these micro offices which have been really phenomenal in our area. They’ve been going really well. You can get like $25 to $30 per square foot. So, I’m looking to do that.

Break: [00:27:58][00:28:39]

Ash Patel: Are you geared more towards commercial in the future now that you saw what you can accomplish with it?

Matthew Tortoriello: Well, the bank that foreclosed on this one happens to have these three medical offices that are right around the corner in Longmeadow, even a nicer area…So we are having to talk to them a little bit about it. Yeah, we’re a little intrigued about it.

Ash Patel: I understand you’re new with commercial, but from what you’ve seen, how do you compare residential to commercial in terms of managing, investing, landlording?

Matthew Tortoriello: I definitely see a little bit of lower return. A lot of our stuff has generally been in C plus and B plus areas. You can get a good return on investment with residential. But there is a lot more hands-on. So far, what I’m seeing – and also talking to some of my friends that also got shifted into commercial – a lot of these are going to be triple net leases, so it’s a lot less hands-off. We’re mostly there to keep the common area and the cam areas in good shape and the general structure of the building, the envelope so to speak.

What I love about commercial is that value is based on the income approach, not the market approach. Therefore, I can force appreciation very easily by, like I said, with this one property, basically getting a couple of good tenants in there and improving some of the facades, I’m able to increase all the rents. That right there is what’s going to increase the value of that property. I don’t have to wait are a whole bunch of other houses to sell and bring up the market.

Ash Patel: Now, you mentioned the return is lower. Are you talking about cash flow or internal rate of return? But what if you factor in the sale? Because you’re going to make over a million dollars on this sale if you were to sell it after you improve it. So overall IRR, commercial versus residential?

Matthew Tortoriello: From my perspective, yeah, it would be higher if you do an IRR. You’re correct. But the cash on cash turn, I’m seeing it is a little bit lower, at least at this point.

Ash Patel: So you’re not convinced to go into non-residential commercial just yet?

Matthew Tortoriello: We want to go into it a little bit. I need to learn it first; so this is the first foray into it. We’ll see, maybe we’ll put both feet in once we get into it.

Ash Patel: Okay. The reason I harp on that is I’m a full-time non-residential, commercial investor. Another thing that I love about it is you deal with business owners, versus residential tenants, and you often deal with people who improve their space versus destroy it.

Matthew Tortoriello: I completely agree.

Ash Patel: So what’s next? You’ve got the commercial going on… I want to back up a little bit. You said your bottleneck was dealing with subs and getting enough good help. I’m going to, again, venture to guess after we’ve now known each other about 25 minutes, you started some kind of contracting company where you get to control subs and hire subs… Is that right?

Matthew Tortoriello: We have a construction company.

Ash Patel: Okay. Alright. Tell me about that. Do you lend out your subs to other jobs, other landlords?

Matthew Tortoriello: As we started doing a little bit of project management, we did start expanding a little bit into that. We have an on-staff electrician and he has also his apprentice, as well as we have a master plumber and she has an apprentice… So at this point, because that’s one of the bottlenecks with most of my friends and colleagues out there, so today, we’re actually out installing a brand new intercom in a seven-unit building for a guy. So as my guy has downtime, generally, I prioritize our stuff first and my clients for the property management. But I have picked up a few — actually, Home Depot has also been throwing us work. There’s a church conversion out in Pittsfield that we just put a bid on, that is converting to a 48-unit complex. So Home Depot, because we have very good ties with them, with all the others, they’ve actually asked me to bid on the electrical work.

Ash Patel: That’s great. You seem to make this look easy. But I know it’s not. What advice would you give people that are in the beginning stages where they maybe have one, two, or three properties under their belt and they want to supercharge their business as you did? What advice would you give that person that’s starting out?

Matthew Tortoriello: I would think that the first thing, like I was saying a little bit earlier, was getting good property management. That basically comes down to having good systems. The only way to really scale is that you need systems to be able to go, because you only have so much time. Yeah, maybe I have a little bit more than 24 hours sometimes, but for the most part, I’m still only one guy. And even if I hire a couple of other people, they need to have systems, and you have to also learn to be able to delegate and accept that — that’s one of the hardest things, was accepting that I’m not always going to get 100%. I know I’ll go crazy with everything doing what I want to do, but I need to accept that these people are going to help me grow, and they’ll get me to get 80% of what I could accomplish. That now allows me, if I had that person doing 80%, that personally 80%, now that I’m only able to do this, it allows me to scale that way. So I think learning to delegate and having good systems in place is key.

Ash Patel: Matt, where does your capital come from today? Is it all internal that’s recycled? Or do you still have the same investors? Or do you have additional investors?

Matthew Tortoriello: For the most part, it’s the same investors at this time that we’ve had, the same people. A lot of it has been, as we’ve grown, we’ve put lines of credit and built, stuff like that. Just like we were talking about the commercial, one of the ways we’re looking at doing it – we don’t want to pull out all that equity, we’ll probably fix the property up, have it reappraised, and then what I’d like to do is put a line of credit on the difference, so that we’ll have another million-plus to play with it for another deal.

Ash Patel: And is there a certain percentage return that you can assure your re-investors, or — what’s that conversation like? If somebody comes to you, what kind of return can you promise them?

Matthew Tortoriello: We’re not working with outside investors, but these investors that we have are actually partners.

Ash Patel: Okay, so they partner on specific deals with you.

Matthew Tortoriello: Correct.

Ash Patel: Okay. And are most of them passive, or are some of them active?

Matthew Tortoriello: There’s only two, and they’re active.

Ash Patel: Are you looking for additional investors?

Matthew Tortoriello: At this time, we’re not. Maybe if we expand more into the commercial realm, as the deals get bigger, that might be something we’re going to look into. But at this point, we have enough capital to have our hands in.

Ash Patel: The reason I asked that, Matt, was I wondered if from your earlier experience talking with all of those doctors and saw that they don’t have time for investing, maybe they don’t make the greatest decisions on investing because of that… I wonder if you saw a niche there where you could present opportunities to very busy medical professionals that don’t have — oh, you’re laughing. Okay, come on, tell me.

Matthew Tortoriello: There’s a group of doctors that I’ve been talking with. They’re two doctors and two dentists. That’s exactly what we’re talking about. They’ve been reaching out to me and I’m working on helping them potentially buy an industrial building.

Ash Patel: How would that work? They came to you, they wanted to buy industrial and you’re going to essentially source and manage it?

Matthew Tortoriello: Well, I do have my brokerage as well, so of course, I’ve got a real estate license too, just because why not?

Ash Patel: Why not?

Matthew Tortoriello: Essentially, through a connection – someone reached out to me with a kind of a pocket listing or something… They had been talking to me for the last year. So I thought about them; it wasn’t something that I was interested in. So essentially, the way it would work, at least at this point in time, is I would refer them to it and I would basically get a small part of the pie of ownership. Then they asked me possibly to manage it as well. I would add it into the management portfolio, and I guess, a little piece of the pie.

Ash Patel: That’s a great win-win. You also mentioned earlier that you are expecting a downturn in the economy. How are you positioning yourself for that?

Matthew Tortoriello: Right now we’re focusing on making sure we tighten up our ship with any loose ends. We’ve been selling off some of our more troubling properties. We did have up to 500 units, we’re now down to 250. We’ve gotten rid of some, paid off some debt, as well as passing capital on the side. The other thing – we’re making sure we’re reaching out to banks and getting as many lines of credits signed up and ready to go for what we see is hopefully a buying opportunity.

Ash Patel: Where do you see your business in five years?

Matthew Tortoriello: Right now I’m really intrigued and excited about the commercial stuff. I’d love to hear more from you at some point time. But maybe 20% of our portfolio more into commercial, and I’m hoping to buy more residential as well. I do love more B classes, I’d like to get into apartment complexes. Harold Grinspoon was an inspiration for me. He actually lives in Longmeadow. I’m not sure if you know Harold at all.

Ash Patel: I don’t, but I’ll look him up.

Matthew Tortoriello: Aspen Square Management, the largest privately-owned residential company in the United States. I think he’s got like 40-something-thousand units.

Ash Patel: Wow, interesting.

Matthew Tortoriello: That’s amazing.

Ash Patel: Man, I’ve got to circle back again on another question… You were jaded on remotely managing that property that ended up foreclosed on. How are you feeling about that now? Are you okay with remotely managing properties, or is everything within a driving vicinity of where you live?

Matthew Tortoriello: I’ve been expanding a little bit into that, dabbling my toe in the water, so to speak. I have done some turnkey investing. I found some stuff in Memphis, Tennessee, I’m looking into Gary, Indiana, and a couple of other markets that I’ve been researching. I’m finding good turnkey operators that have phenomenal systems, and focusing a little bit on the returns, but it’s about people there, what systems they have and what team they have, and if I feel comfortable with them.

Ash Patel: Okay. So you know how to grow capital. Why are you investing in other people’s deals?

Matthew Tortoriello: It’s more of a hobby. It’s fun. I like going with it and also helping a couple of my friends — there is a little mastermind that we grew, so it was part of that.

Ash Patel: That’s great. So Matt, what an incredible interview… What’s your best real estate investing advice ever?

Matthew Tortoriello: Build systems and learn to delegate.

Ash Patel: Matt, are you ready for the Best Ever lightning round?

Matthew Tortoriello: Sure.

Ash Patel: Let’s do it. Matt, what’s the Best Ever book you recently read?

Matthew Tortoriello: The Best Ever book I recently read was Recession Proof Investing by Jay Scott.

Ash Patel: What was your biggest takeaway from that?

Matthew Tortoriello: Understanding market cycles and really understanding lines, so you can position yourself, especially in an inefficient market like real estate, way ahead of time, and really profit from the downturn.

Ash Patel: Fantastic. Matt, what’s the Best Ever way you like to give back?

Matthew Tortoriello: Well, we actually have a YouTube channel and our Tiktok. We basically go live multiple times a day, we go live at our foreclosure auctions. We teach others what we’re doing and show them our mistakes on our YouTube videos and try to help them learn from everything we’ve done over the years.

Ash Patel: That’s great. And Matt, how can the Best Ever listeners reach out to you?

Matthew Tortoriello: Well, we have a great YouTube channel called Two Guys Take on Real Estate, as well as the same on Tiktok. They can definitely reach us there and that’s the best way.

Ash Patel: Matt, thank you so much for being on the show today. You’ve given us incredible advice, taking us along on your journey from pre-med to getting the real estate bug. You’ve built this incredible enterprise with some hard lessons learned along the way. Again, I can’t thank you enough for sharing your time with us. Have a Best Ever day, and Best Ever listeners, thanks for joining us on today’s episode.

Matthew Tortoriello: Thank you, Ash.

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