Property profit with purpose
Property investors often face prejudices about how they make their profits. Many think of them as being careless and taking advantage of others to get high financial returns. However, many prejudices fade once you take a closer look. Once they have secured their own income and are financially stable, many property investors want to give back, and share their knowledge and expertise to increase their sphere of impact.
Matt Aitchison, investor from northern California, is a six-figure flipper. He buys properties at a great discount, refurbishes, and resells them for a profit.
His mom sparked his interest in real estate, taking him to real estate seminars from an early age onwards. Ironically, she never became an investor herself, but Matt started reading all the books she bought. He developed a burning desire to get into real estate investing, because it promised financial freedom, flexibility, the ability to work with- and impact people.
At the beginning, he was very money motivated. He had understood that he could only help others, once he had greater financial freedom himself. He looked at the world’s wealthiest and most successful people, and realised that about a third of them had accumulated 50% or more of their wealth by investing in real estate. Real estate investment is great vehicle to achieve both financial and lifestyle goals.
Millennials have a strong drive to give back
Once he was more established, he started to focus more on ways in which he could give back. As many others, he was conscious of the fact that money doesn’t buy happiness, but making an impact in the lives of others does.
He added a twist to the traditional fix and flip model and is working with distressed homeowners, who are facing financial hardships or quickly need to sell a property. Unlike others in this field, Matt’s team does their best to provide the owners with choices. ‘Instead of saying “I’m going to buy your house. Here’s my cash offer. Take it or leave it.”, we are providing them with multiple options, which they can compare with each other and chose the one that makes most sense for the situation they are in. They still have the option to make a small profit or they avoid more catastrophic financial hardship’, says Matt.
Lack of financial education is the biggest problem
He describes his clients as good people who have either encountered some tough times, impacting their financial situation, or a sudden event forced them to sell their property. There is a lack of financial education and financial understanding. The education system fails to equip the public with the tools and resources, and all too often people never learn how to be responsible with their finances so that they can create a nest egg. Matt is currently setting up a NPO (Not for Profit Organisation), which will be called either “Home is Where the Heart Is” or “Homes for Hope”. It aims at providing families in need with resources, counseling and potentially also financial support to help them to get back on track with their mortgage payments. The emphasis is on changing the mindset before anything else, as Matt argues that people, who have won the lottery or others who walk into insane amounts of money, often end up back where they started. In order for him to “rehabilitate” some of these people, he wants to make sure that he is not only giving them the vehicle to stay in their home, but that he is also giving them the longevity to sustain living in that house. The NPO gives them a second chance. In certain cases, the NPO could also help families financially, as previously mentioned, by paying six months rent for them as a one-off offer.
As a next step, they could allocate some of the net profits at the end of the year to invite other people to join the NPO. Matt believes that the act of “helping” is very community orientated, as the community always wants to help if they have the awareness and get the chance to do it.
Matt’s hottest finance tips
Matt’s philosophy is: “Flip a few and buy rental.” Currently he has 14 rental properties, which give him a great amount of passive income. His favourite deals are when he pays 4% for the mortgage and gets a 13% yield from the rental property he buys. In two years, he wants to have a passive income of 20 K per month. He will be 30 years old by then.
Matt’s most important rule is the 100% mindset rule. That means, his monthly passive cash flow covers 100% of his living expenses, which includes insurance, groceries, date nights with his wife, mortgage, car, gasoline, etc. He never uses more than his passive cash flow is worth and anything above that is “icing on the cake”, according to Matt.
His top tip is to start with the question “How much do I need to live on?”. Then one can define how much they would like to add, but a 100%-er mindset is key. “Once you know what that finish line is, then you can start working backwards and craft a plan and a tangible road map for getting there”, says Matt.