July 14, 2021

JF2507: Financial Freedom by Age 33 with Matt Drouin

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Matt Drouin had an “aha” moment when he decided he was simply not going to participate in the college/debt/job cycle. He started with a 4-unit house hack and ultimately hit financial independence by age 33. Matt talks about how reaching his financial goal didn’t give him the euphoria he thought it would, and how he reinvented himself using the 10x rule.


Matt Drouin (Drew-in) Real Estate Background:


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Theo Hicks: Hello, Best Ever listeners, and welcome to the Best Real Estate Investing Advice Ever Show. I’m Theo Hicks and today, we’ll be speaking with Matt Drouin. Matt, how are you doing today?

Matt Drouin: Awesome, Theo. How about yourself?

Theo Hicks: I’m doing well, thanks for asking, and thanks for joining me today. Looking forward to our conversation. So a little bit about Matt — he is a partner the OakGrove companies and has 14 years of real estate experience. OakGrove currently owns 117 units of residential and commercial properties. He is based in Rochester, New York, and you can learn more about his company at http://www.oakgrovecompanies.com/.

So Matt, do you mind telling us some more about your background and what you’re focused on today?

Matt Drouin: Yeah, so a little bit about my background is I started in real estate when I was 21-22 years old. I really started by accident, because I had graduated college and it was in 2006, there really wasn’t a lot of companies out there looking to hire kids with liberal arts degrees with no experience at that point in time. So the best job I really could find was as a bank teller part-time at Chase Bank, and I lasted in that position for about two months. And I was just complaining to my dad, constantly. He happened to be a real estate agent at the time, and he extended the opportunity to me, “If you get your real estate license, I’ll teach you the business. I’m not going to give you any business, I’m going to show you the ropes and you can build your own business with me as your mentor.” So that’s how I got started.

And fast-forwarding through there, I was not a great residential real estate agent. I really didn’t have the work ethic at the time to build a business from scratch. But some things happened in terms of in my 20s, as that I lost both my mother and father due to health reasons, and it really gave me, being the heirs to their quote-unquote “estate”, looking up to my parents and seeing that they had nothing really when they passed away, and I saw them scrambling their entire life and trying to squirrel enough money to put away for retirement. And also, they really weren’t as present as they would like to have been during my childhood.

I remember a lot of times when I was in band or in chorus, looking out into the audience, looking for my parents to be there, and they weren’t there; not because they didn’t want to be there, it’s because they had work. My mother was a dialysis nurse, she worked oftentimes double shifts. My dad was working for Genesee Brewery during the day, and he was showing houses at night and on weekends.

And it really didn’t hit me until those moments when I lost my parents when they were young and I was young, that I really had to take charge of my life and put it in a different direction. And I wasn’t about to participate in this system that Americans are sort of groomed into participating in, which is go to college, get in debt, work a full-time job and then contribute to your 401(k) or IRA.

So I started off with my first deal – it was a house hack, it was a four-family property. It was thanks to my dad, he was pushing me out of the house, I had some commission put away about 16,000 bucks that I’d saved all of it because I was working part-time at a liquor store and I didn’t have rent to pay to my dad, which I was very thankful for. So I used that to purchase a four-family, owner-occupied it.

And really the magic moment was two weeks after closing, I magically had $1,800 in rent checks in my mailbox, and I realize how hard I had to work in order to earn $1,800 in real estate commissions. And I knew this was something that I had to scale and really could contribute to my dream of becoming financially independent by the time I turned 40.

Well, I thought about this really ambitious goal every single day over a 13 year period. And by the time I was 33, I looked at my cash flow, I looked at the investments I had accumulated over that time—I know I’m like really glossing over a lot of the details here, but I realized that I’d hit that number. I didn’t have to work as a realtor anymore. I had enough cash flow to not only support myself and my wife, but also to put away money too, and grow the business, and I had this really painful process of reinventing myself that I had to go through… Because I had hit this goal that I thought about every single day, and I didn’t have something else in mind with it. So I began investing a lot in myself, a lot of self-help books, revisiting ones that I had already read before, and listening to guys like you and Joe Fairless and looking for new inspiration in my life and what my new target was going to be… And I decided that I wanted to get into larger types of real estate deals and do more transformative development projects; I always been envious of developers. So I put myself on the path to go in that direction and pretty much put myself back into real estate school and do development projects on my own behalf.

And since then, myself and my partner, David Martin, who we teamed up two years ago with different backgrounds in real estate, but he was more on the operations side and leasing side, I was more on the sales side of things… And we started focusing on doing historic adaptive reuse projects where we take old vacant buildings and reposition them and breathe new life into them and reactivate them. And hopefully, we benefit all the stakeholders; not just us, but our tenants, our neighbors, and the community at large. So that’s really what we’ve been focusing on for the past couple years.

Break: [05:52] to [07:54]

Theo Hicks: Matt, thank you so much for going into such great detail on your background. Definitely a couple of follow-up questions. One thing you mentioned that I don’t think I’ve heard before… So you talked about how you set that financial independence goal to be achieved by the age of 40, and then you hit that number at 33. Most people, they think about that achieving financial independence, it’s over, they’re done, they’ve made it, it’s a relief… Whereas you talked about how it was actually a challenge, and you needed to reinvent yourself. Maybe walk us through that a little bit more, because again, most people that haven’t achieved financial independence might be kind of confused.

Matt Drouin: Yeah. I was thoroughly confused myself. I thought I would have a euphoria at that point in time. I think that one of the things is that—I don’t know if you’ve seen the movie The Hobbit, but every single installment that movie came out, I was anticipating it coming out, I saw it, and a third movie came out and I saw that, and that I had the post-Hobbit blues. So this is kind of like what I mean by that, is that you think of something every single day…

One of the American entrepreneurs that I looked up to is Ray Kroc, a person that we know of as founding the modern McDonald’s as we know it. And he says, “A man is what he thinks about every single day.” So I really wasn’t lining something else up for myself, and I struggled with depression, I slipped back into old habits of alcoholism, stuff that I struggled with before, because I was depressed. And I picked up a book called The 10X Rule by Grant Cardone, and it really helped me think about the next chapter of my life and what I was going to do.

So at that point in time, I never wanted to go through that painful process of reinventing myself again, so I decided to pick a ridiculous goal, and also one that is going to survive long past my death, so that I don’t have to actually revisit the scenario again.

Theo Hicks: That’s super interesting. That’s a very unique take on the 10X Rule, so yeah, thank you so much for sharing that, Matt. So let’s talk about the development deals with your business partner. So you reinvented yourself, you transitioned to developing old vacant buildings and revitalizing them, as you said. So once you’ve made that decision, you’ve gotten educated, how did you find your business partner? And then why did you choose to do that particular type of development?

Matt Drouin: So the first question, how I found my business partner – I was up to 117 units, I had a really cobbled together type of management structure. I was showing the apartments and commercial units on my own, I had some people that would help me with leasing, they were sort of ad hoc, I had a few different maintenance companies who was handling maintenance, and it was too much, I couldn’t focus on the growth. I was busy, but I wasn’t really moving the needle forward.

So I put an ad out there for a property management position. I had three final interviews set up. I brought in a friend of mine, who’s also a mentor of mine, to give me a second pair of eyes in this, because I was by myself. I needed a second set of eyes to kind of help me and mentor me through this really big deal, which was hiring a first employee.

And after we got through those three interviews, he was like, “You know what, all three of those people would probably be good. I’d favorite one over the other. But if you really want to take your business from level one to level two, then you can hire any one of these people, right? If you want to take your business from level one to level five, I have somebody you should really talk to. They don’t want a job, they are interested in the same things that you’re doing. So let’s get together for lunch and talk to him.”

So that’s how I met David, and we sort of had this Yin Yang thing. He’s very, very anal-retentive; very, very focused on details. I’m more of like the cowboy, and I’ve gotten myself in trouble a lot just by basically just making decisions from intuition and gut alone. So we had this sort of relationship on that level from different innate skill sets. And also, he had an interest in development, and he also shares the same values that I do in terms of how we should value our tenant relationships and relationships with other people, and how we should do business. So that’s kind of how the marriage was kicked off. And then what was your second question, Theo?

Theo Hicks: Why did you select the business model of developing old vacant homes, as opposed to say buying land and develop A-Class apartment or something?

Matt Drouin: Okay, I have always gravitated towards historic properties. And Rochester, New York – this city was just absolutely booming around the turn of the century, and also in the mid-1800s, so the architectural history and value in our city is just so immense. And frankly, I’ve just never had an attraction to this newer construction buildings. I want my buildings to look pretty and old. I’ve traveled to Europe a lot, so I’ve really appreciated historic value. And because Rochester is a rust belt city, we’ve had an old manufacturing industry through Kodak and Bausch & Lomb and Xerox that sort of left, and we’ve been left with a lot of underutilized, undervalued assets that we can purchase for substantially less than replacement cost. So those are the two things behind those ones.

So one of it is business-related, with purchasing at discount to replacement costs, but also secondly, it’s just innately just from our interest in old, pretty buildings.

Theo Hicks: Okay, Matt, what is your best real estate investing advice ever?

Matt Drouin: My best real estate investing advice ever—this especially goes for people that are looking to get into the business… My dad used to tell me, “If you can’t manage $5, you can’t manage $5 million.” So if you’re looking to get started, make sure to look at your own personal income expenses before you start gravitating towards real estate. A lot of people gravitate towards real estate investing because it’s going to solve some type of problem for them, or it’s going to be their salvation. So when I’m coaching and mentoring new investors, I always tell them to look at themselves first.

Theo Hicks: Okay, Matt, are you ready for the Best Ever Lightning Round?

Theo Hicks: Absolutely.

Theo Hicks: Perfect. First, a quick word from our sponsor.

Break: [13:46] to [15:49]

Theo Hicks: Okay, Matt, what is the best ever book you’ve recently read?

Matt Drouin: Best Ever book is Am I Being Too Subtle? by Sam Zell, is the one I most recently read. One that I always go back to though is The Snowball, which is the biography of Warren Buffett.

Theo Hicks: If your business were to collapse today, what would you do next?

Matt Drouin: I’m obsessed with real estate; I would rebuild the business over again, no questions. Absolutely.

Theo Hicks: Tell us about a time that you lost money on a deal, how much money you lost and then what lessons you learned.

Theo Hicks: Oh, boy. Okay, so there was a 9-unit package of properties. It was three two-family houses right next door to each other, along with a three-family house. It was right on adjacent parcel. I purchased it with hard money, and I did a bunch of improvements to the property, and then I did a cash out refi. And I basically had a—it wasn’t a cash out refi, It was called a cash-in refi. The value of the properties was less than what I had to get out of it, so I had to put in $110,000 worth of my own cash.

What I had learned from that experience is I looked at this and evaluated it on a capitalization rate basis from an appraisal standpoint, at the end of my value-added strategy, instead of looking at it on sales comps on these properties. And that’s where I got bit in the butt, was I didn’t do that. So that’s what I would do differently, is that — yeah, if you get a package of properties, even if they’re all next door to each other, if they’re on separate tax parcels, your appraiser is going to use sales comparables, not the income capitalization approach.

Theo Hicks: And then on the flip side, tell us about the best ever deal you’ve done.

Matt Drouin: The best ever deal I did was actually just most recently – it was an old office building that I purchased between 3-4 years ago; it was a million-dollar property, I raised $300,000 to purchase the property, $200,000 downpayment, and then $100,000 in operating capital, as well as some smart capital improvements. And I was able to increase rents and normalize expenses over that three-year period. And I was able to increase the value from $1 million to $1.4 million, and I was able to cash out refi, pay my investors back. And now I have an asset that cash flow is between $40,000 to $50,000 a year, and that pays for my daughter’s future college education on one deal. And financially, that was a great deal.

Secondly, it taught me the value of going bigger. You’ve done a few deals, small multifamily, like where I started… Think about commercial; I think it’s a much better way to scale your business and your net worth and cash flow.

Theo Hicks: What is the best ever way you like to give back?

Matt Drouin: Best Ever way I like to get back is — Rochester, New York, we’ve had a lot of booming real estate developments that have happened, we’re very excited, but we still suffer from abject poverty, which really stems from the racial wealth gap. A lot of the non-profits that I contribute to, not only my financial resources and time, are dedicated towards helping reverse the racial wealth gap through building generational wealth, and one of the best ways to do that is in real estate… So that’s where a lot of my efforts are dedicated towards, giving back.

Theo Hicks: And then lastly, what is the best ever place to reach you?

Matt Drouin: Go to my website, oakgrovecompanies.com/. I’m on all social media platforms, so you can reach me really anywhere, whether it’s Facebook, Instagram, LinkedIn, I even have a TikTok account now. So I’m everywhere and you can reach me wherever. And also I love to talk real estate. So if you’re looking to talk shop or want me to be a sounding board, I’m happy to help. Reach out anytime.

Theo Hicks: Perfect, Matt. Well, thank you so much for joining us today and providing us with your best ever advice, taking us from your journey from 21-year-old recent college graduate, working as a bank teller, to achieving your financial independence goal at 33, to having to reinvent yourself again, and then transitioning into development type deals with the old vacant buildings in Rochester.

I really liked your perspective on setting this goal that’s so ridiculous that it kind of goes past your death. So you don’t ever get that point where you have what you call “the post-accomplishment blues” from focusing on something every single day, and then that’s your identity, and then once you’ve achieved that, then it’s kind of like, “Well, now what am I supposed to do?” and if there is no answer to that question, then, as you mentioned, you can slip back into old habits. So I really liked that perspective.

We talked about how you found your business partner. That actually started off by you attempting to hire someone else, and then your mentor helping you through the process said, “Hey, if you want to actually scale immensely, I have someone you can talk to” and you realized that this individual and you had complementary skill sets. He was interested in development, and then you guys had these same values as well.

We also talked about why you chose the old vacant historical buildings – because you have always gravitated towards historic buildings, and really appreciated the architectural history in Rochester… And also from a money perspective, you were able to buy these types of properties below replacement costs in the area.

Lastly, your best ever advice, a saying from your dad, “If you cannot manage $5, you cannot manage $5 million”, and to making sure you have a grip on your personal expenses first, before you start managing large dollar amounts, especially managing large dollar amounts for other people.

So Matt, thank you so much again for joining us. Best Ever listeners, as always, thank you for listening, have a best ever day and we’ll talk to you tomorrow.

Matt Drouin: Thanks, Theo.

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