Real Estate's Best Kept Secret: How the 203K Loan Turns a $9,500 Investment Into $180K of Equity | Matt Porcaro

Summary

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The MORE Show: Real Estate's Best Kept Secret—How the 203K Loan Turns a $9,500 Investment Into $180K of Equity

Podcast: The MORE Show
Host: Justin Colby
Guest: Matt Porcaro ("203K Way Genius")
Date: May 1, 2026

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Episode Overview

In this episode, Justin Colby sits down with Matt Porcaro to demystify what he calls real estate’s "best kept secret": the 203K loan. They break down how this FHA-backed renovation loan can transform as little as $9,500 into six-figure equity, why most investors and homebuyers never hear about it, and how newly expanded ADU (Accessory Dwelling Unit) guidelines are poised to unlock even more hidden opportunities.

Colby and Porcaro walk through Matt’s own deals, dig into the mechanics, eligibility, and potential pitfalls of 203K loans, and explain how both investors and homebuyers can leverage these tools to maximize returns, build passive income and—even in tight markets with low inventory—create the home and wealth they want.

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Key Discussion Points & Insights

1. The 203K Loan—What Is It and Why Is It Overlooked?

• Definition: FHA-backed loan that wraps renovation costs, closing costs, and even mortgage payments into a single mortgage.
• Biggest Advantages:
  • 3.5% down payment, low barriers to entry.
  • Can finance both purchase price and renovation.
  • Closing costs and up to 12 months’ mortgage payments can be wrapped in.
• Porcaro’s Inspiration: Stumbled upon the loan in NY’s tough market—no education available and "no one ever once mentioned the 203K, ever" (Matt, 01:44).
• Why so hidden?
  • Real estate agents and lenders avoid it due to added steps and no increased commission.
  • "It literally would keep me up at night... How the hell do more people not know about this?" (Matt, 27:40)

2. Matt's First Deal: Turning $9,500 Into $180K+ of Equity ([04:05-06:49])

• Deal Breakdown:
  • Purchased a dilapidated duplex for $270K.
  • Added $80K in renovations (all rolled into mortgage).
  • Out-of-pocket: $9,500.
  • Appraised value after eight months: $520K.
  • Gained $180,000+ in equity while living for free.
• Accelerated House Hacking: This is house hacking "on steroids" (Justin, 07:08).

Notable Quote

• "I researched real estate for four years... No one ever once mentioned the 203K ever." — Matt, 01:44

3. Why House Hacking with 203K is a Game Changer ([07:08-09:58])

• Problem with Typical House Hacks:
  • Most are cash-strapped after down payment and can’t handle repairs/tenant turnover.
• 203K Solution:
  • Build in renovation costs and forced appreciation—faster access to equity.
  • "With my deals, I don’t wait for appreciation. I force the appreciation right away." (Matt, 09:30)
  • Ability to refi into conventional loans in as soon as six months, eliminating mortgage insurance.

4. Rules, Requirements, and Best Approaches ([10:12-12:20; 25:12-26:34])

• Eligibility: Must be owner-occupant for at least one year.
• Best Use: Multi-family (duplex, triplex, quadplex) or properties with ADUs.
• Basic Requirements:
  • 580+ credit score (better rates above 600).
  • Two years of consistent income (W2 or business owners with tax return proof).
  • Debt-to-income (DTI) up to 50%.
• "Never, ever, ever buy your forever home as your first home. Get that multi-unit property, build equity. If you do nothing else... you have a million-dollar asset in 30 years that you never paid into except that initial $20,000." (Matt, 23:31)

5. The ADU Explosion and New Lending Changes ([11:06-16:52])

• New Guidelines: Now, you can count accessory units—not just legal duplex/tri/quadplexes—for projected rental income when qualifying for loans.
• Market Impact: Vastly increases the number of eligible properties ("hidden duplexes"), especially critical in low-inventory markets.
• California as 'Ground Zero': "There's literally duplexes and triplexes sitting on Zillow right now that you can house hack as a triplex. The bank looks at it as a duplex." (Matt, 13:02)
• Equity Arbitrage: Cost to add square footage via ADU is far less than market value—use bank money to create instant equity.

6. Renovating Your Own Home? Yes, You Can Refi Into a 203K ([18:03-22:31])

• Scenario: Already own? Can refinance into a 203K to add square footage, build ADUs, modernize.
• Borrowing Power: Can finance up to 110% of after-repair value (ARV).
• Use Cases: "I want a new kitchen," "I want a new pool," "pop the top"—no need to find a new house in a tough, expensive market.

Notable Quote

• "Make the house you want. If you want to build an ADU, you can do it." (Matt, 21:23)

7. Why Agents and Lenders Don’t Push It—And Why They Should ([26:54–34:07])

• Inertia & Misinformation: Most agents/lenders say “too much paperwork” or “not worth it,” but that’s only from their perspective.
• Untapped Opportunity:
  • Stand out by offering 203K expertise.
  • Helps buyers create their dream home within budget and minimal cash outlay.
  • "If you have an opportunity where they could do this and not come out of pocket... you just won their business." (Matt, 33:13)
• Listing Side: Use 203K to market dated, "ugly" homes to owner-occupants at ARV, not just flippers.

8. The Pitch: How Agents Should Use This ([35:17-37:26])

• For Buyers: "If we open it up to fixer-uppers, I know some programs where we can get you into the house, do all renovations, wrap the costs in—and you don't have to come out of pocket." (Matt, 36:04)
• For Sellers: "We can get you top dollar for your property—we’ll sell what it could be to owner-occupants using a renovation loan" (Matt, 38:13).

Notable Quote

• "If you can make the same payment you would normally, but get all the money you need to renovate it the way you want, would you be open to that?" (Matt, 36:44)

9. Market Trends & Broader Implications ([39:25–42:44])

• Low Inventory + High Rates: 203K and ADU strategies give buyers, sellers, and investors leverage in a tough market.
• Equity, Cash Flow, and Passive Wealth: Forces appreciation and cash flow, builds long-term wealth, and provides flexibility (e.g., rent out ADUs for Airbnb).
• No Need to Wait for the Market: "We could fight what's happening, wait for rates to come down... or look at the opportunity and make the best out of it." (Matt, 42:13)

10. Resources & Where to Learn More

• Matt's Community:
  • The203KWay.com
  • Instagram: @the203kway
  • Facebook Group, YouTube Channel: "The 203K Way"
  • The MORE Club: time4more.com/prelaunch

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Memorable Moments & Quotes

• "How the hell do more people not know about this?" — Matt, 27:40
• "This puts [house hacking] on steroids." — Justin, 07:08
• "You can actually over-leverage it by 10%... They’re building these quick ADUs, renting them for a fortune, and it cost less than any other asset class." — Matt, 18:39–19:36
• “Make the house you want. No house is going to be what you want anyway.” — Matt, 21:23
• "If you do nothing else...you have a million dollar asset in 30 years that you never paid into except that initial $20,000." — Matt, 23:31
• "If we open it up to fixer-uppers, I know some programs where we can get you into the house, do all renovations, wrap the costs in—and you don't have to come out of pocket." — Matt, 36:04

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Key Timestamps

• [03:16] – Intro to the 203K loan, how Matt discovered it
• [04:05] – Matt’s first 203K deal and numbers
• [07:08] – House hacking on steroids; pitfalls of typical strategy
• [09:52] – Forced appreciation with 203K/Burr strategy
• [11:06] – ADUs: How the rules have changed and expanded the options
• [13:22] – Inventory breakdown—quadplex scarcity & hidden duplexes
• [18:03] – Using a 203K to refinance your current home
• [21:41] – Personal story: Buying, rehabbing, and building equity
• [23:31] – The real math of first homes for long-term wealth
• [25:12] – 203K qualification requirements (credit, income, DTI)
• [26:54] – Why most people don’t know about 203K; agent/lender limitations
• [35:17] – How agents should position 203K loans to buyers
• [38:13] – 203K loans for listing agents and maximizing seller value
• [39:25] – Macro trends: Low inventory, high rates, and the need for ADU/203K strategies
• [42:13] – Mindset: Don’t wait for the market—make your own opportunity

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Final Takeaway

The 203K loan, along with the explosion of permissible ADUs, represents one of real estate's smartest—and most underleveraged—wealth-building tools for first-time buyers, house hackers, agents, and even established investors. The biggest hurdle is awareness and education, not regulation or complexity. Leverage the secrets, expand your strategy, and turn a small investment into generational wealth.

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Follow Up & Further Learning:

• Connect with Matt (@the203kway) or explore the 203K Way community.
• Explore MORE Club’s educational community at time4more.com/prelaunch.

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Transcript

[A]

Ugh.

[B]

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[C]

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[A]

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[C]

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[A]

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[C]

Prices and participation may vary. Prices may be higher for delivery. I do it. Finish it. Even through the bumps and bruises, I'll never forget to this day. Renovation nightmares. And we've all been there, right? I just was smelling the new paint on the walls. I finally got the final inspection and I'm just like. I look at the floors, I like just do a turnaround. I'm like how the hell do more people not know about this? I researched real estate for four years before I ever took action. Listening to podcasts, reading books and courses, meetups. And no one ever once mentioned the 203k ever. Foreign

[A]

what is up? The more Show Family we are back with our third episode ever again transitioning from the science of flipping. Now the more show maximizing opportunities in real estate. My guests each and every week will bring you the heat when it comes to what kind of opportunities are out there. So this episode is a course brought to you by time for more.com forward/pre launch. If you want to be a part of a club that shows you all the opportunities, whether it be storage or apartments or 2 or 3k or land. Whatever it is, get into this club. We are giving it to you for free as we are pre launching the club is typically $3,600. Go to time4more.com forward/pre launch now my guest here today is another genius. Someone who finds opportunities where no one else can see. My guy, Matt Porcaro 203K Way Genius is here what's up, dude?

[C]

What's up, dude?

[A]

That was a, that was a mouthful. I had to get all that out.

[C]

I love it.

[A]

And hopefully I got it.

[C]

I love it. Yeah, I love it.

[A]

Well, thank you for coming down to the studio again. This is now your second time on the podcast. This time now is obviously the More show. Matt Porcaro, 203k loans. Where do people, like, where do people. Why do people want to look into them? What are they about? Who benefits from these loans?

[C]

Yes, it's real estate's best kept secret. Right. They're FHA products. Right. So it's a government backed financing program that allows you to wrap the renovation costs into the mortgage.

[A]

Yeah.

[C]

So I found out about it by accident because there was a ton of, there was a lack of inventory in New York. I couldn't, I couldn't really find anything that I could afford. I was struggling to find a house. I didn't have a lot of money. And I found out by accident from someone in my local real estate investment association and she told me, hey, listen, you don't own a house yet. You can get three and a half percent down, buy the house, get all the money to purchase, all the money to renovate, wrap in the closing costs, and you can actually wrap up to the first 12 months mortgage payments while you're renovating it.

[A]

So you're in. Hold on for clarification. You are literally into this. For how much?

[C]

9,500 bucks was my first deal.

[A]

Yeah. Percentage basis, 3%, 3 and a half percent of I.

[C]

So I. So the first house I bought was a, like a crack house duplex.

[A]

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[C]

The only thing I could afford on Long island, actually I couldn't even afford it on its own. It had an extra unit, which I didn't know about. With FHA loans, when you're an owner occupant, Right. So this is for owner occupants and this is the way to start. But other units, we're allowed to forecast that future rental income on the property, on your income. So it basically gave me a $2,000 a month raise so I could afford more. I was basically only pre approved for about like 270,000. But when I added that other unit, which was about $2,500 a month, it boosted me up to 350. So I purchased the house, 270,000 wrapped, $80,000 of renovation costs, plus I got all the closing costs wrapped in. And this first six months of mortgage payments wrapped in while I was renovating.

[A]

So what's your total loan?

[C]

350.

[A]

Okay. So you take the 270 purchase plus the 80 grand or so. Some change.

[C]

Yeah.

[A]

And that's your total loan when you're paying it off and whatever.

[C]

Yeah. So I went into it with the idea that I wanted to be a real estate investor. Right. So I looked at it and I'm like, okay, I'll be all in for 350. And at the end, I knew it would be worth somewhere in the fours. So I'm like, okay, if I'm only coming out with this, and I do that and I go through all my bumps and bruises on going through a renovation. This is the first time I ever done it.

[A]

Yeah.

[C]

But I always have my eye on the prize. On like, this could really set me up.

[A]

Yeah.

[C]

And it was the only thing. Again, out of desperation. It was the only thing I could do. I didn't have a lot of money. We were like, there was not a lot of money, not a lot of inventory in New York. Everything was super expensive. Even, like, I had a decent job. I was working my W2 job at the time, and it ended up actually reappraising for 520.

[A]

No kidding.

[C]

So I built over $180,000 in equity.

[A]

How long was the time?

[C]

Eight months. And I lived in one unit basically for free.

[A]

I mean, this deal, people talk about house hacking, right? They're like, oh, okay, buy a duplex or a triplex and you live in a unit and great. I mean, I think it's great. This puts that on Steroids.

[C]

You took the words out of my mouth. That's what I tell people all the time. House hacking, I think is the best way to get into real estate investing, right. For people that don't know what house hacking is, you, to your point, you buy a single multi unit property, which we could talk more about that with the new ADU concept and accessory dwelling units, because that opened up a whole new horizon. Let's go in 2025, 2026. But you do that like, let's just say a lot of people, they'll buy a quadplex, right? And they put a little amount of money down, they buy a move in ready quadplex, which there's not a lot of them that exist in the first place on the market, right? So they get into it, it's moving ready. They think they get tenants now they're like, they put all their money into the down payment. Cause they're using an FHA product, right? Three and a half percent down. So the little bit they saved that 15, 20, $30,000 is all they really had most of the times. And they want to be a real estate investor, but they get into this quadplex and then what happens in a quad? What happens in three other units? People break.

[A]

Shit, yeah.

[C]

Tenants and like things break. And now you see it all the time. I mean I saw it like all the time on biggerpockets. People like wanted to get into house hacking. I bought a house and we didn't realize how much work it was going to be. And the tenants, and now they're running up all their credit cards. And the whole point of why people do this is because they want to invest in real estate, right? You don't want to stop at one, you don't want it to hamstring you, right. But I feel like a lot of these like multi unit move in ready house hacks can hamstring you because if you don't have any equity there, you don't have anything left over.

[A]

Yeah.

[C]

What's your trajectory to get into the next deal? And that's what was amazing about mine. Once I finished, I built 180,000 in equity, right. I immediately took that, got a home equity line of credit on it. Use that for my flips.

[A]

And then so you could reef. So the 2 or 3k loan got you to the place of renovation, gaining the equity and then you could refi out of that is as quick as eight months.

[C]

Yeah, six months.

[A]

Six months, yeah.

[C]

So I refi into conventional. I built 20 something percent equity, refi'd into Conventional. So I removed the mortgage insurance. Right. So mortgage insurance for anybody that doesn't know what it is. Right. It's. I always say it's your ticket to low down payment loans. Right. If you want to be part of the low down payment loan club, you all pay insurance. FHA doesn't write loans. The bank writes loans. FHA insures the loans.

[A]

That's right.

[C]

So you're paying a couple extra hundred bucks a month to be part of that. Hey, I don't have to put $150,000 down on the house. Right. Which I think is a very good trade off. But when you build in that equity, again, contrary to just your regular everyday house hacker that's going and buying a quadplex, they have to wait for appreciation to happen. With my deals, I don't wait for appreciation to happen. I force the appreciation right away.

[A]

Yeah.

[C]

So that I can immediately exit. And it's basically the Burr strategy with your own houses, which is what I did.

[A]

And I love the Burr strategy, but this is even better because you get to live in it. So most people that would want to use this, first of all, you want to be an investor, but you also need to be the occupant. That's the only strategy. Right. Like, don't you have to actually live in the property?

[C]

Yeah. So the rule is, you know, it has to be your primary residence for up to a year after closing.

[A]

So then most people that do this, you could do it on a single family property. But you, and I would probably suggest do a duplex or a triplex or a quadplex. Do anything residential, not five doors or more, but like do a duplex more than a single family home. You can use a single family home. But wouldn't that make more sense? Like if you want to be a real investor, then you want to have longevity in your investments. This is just insane. I want to lean into this because you already got my mind thinking about the whole ADU stuff. This is a big thing in Jersey, San Diego, New York. It's not quite catching up everywhere. But here in Miami, they, they, they're called different efficiencies, but. Efficiencies, yeah.

[C]

Mother in law Sweets.

[A]

Yeah, that's right. Talk. How can you use it for that?

[C]

So about a year and a half ago, fha, Fannie Mae, Freddie Mac, all the government sponsored sponsors, entities that do the home buying programs, all agreed that housing is an issue in the United States. Affordable housing. Right. So how, you know, what are ways that we can combat this without the government saying, hey, we have to build houses. Right. So ADUs have been around for a while. Right. Granny suites, we've heard them called, Mother in law suites, casitas, accessory dwelling units, whatever. And with like the FHA loan, for example. Right. I talked to you about, we can forecast the future income of those other units to help you afford more and ultimately subsidize your mortgage payment. So it's a smart financial decision too, if, when you're just starting out, you know, you're younger, maybe you don't have kids yet, or you're just starting your family, like, hey, it's a great way. Hey, I cover most of my mortgage payment or, you know, my. I was living for $400 a month in New York and Long island, living in a $600,000 house, like, it's unheard of. So up until that point, it had to be a, like, legal duplex, triplex, or quadplex to include that potential rental income.

[A]

Got it.

[C]

Right. About a year change or go. So this is brand new fha, Fannie Mae, Freddie Mac all said that any accessory separate living unit, that's common and customary to the area, which is everywhere, by the way.

[A]

Yeah.

[C]

You can also forecast the rental income of an accessory unit, just like you would a duplex, triplex, or quadplex. So what does that actually mean? If you go on Zillow right now and you look for quad plexes in any part of the country. Yeah, right. Like the first thing, people come to me like, I want a house act, but there's no multi families in my market.

[A]

Or they're all crazy, crazy price. Yeah, yeah.

[C]

You virtually. I call my hidden duplexes. You virtually. There's, there's literally duplexes and triplexes sitting on Zillow right now that you can house hack as a triplex. The bank looks at it as a duplex. Right. And you don't have the competition anymore because people don't even know it exists.

[A]

Yeah.

[C]

So now what we're seeing is now you're opening up. You're like, I've done, I've done the math. Quadplexes amount for about a quarter of 1% of the entire residential housing market. Okay. Like, like nothing now with these new ADU laws.

[A]

Yeah.

[C]

You're virtually opening up to almost every single family house.

[A]

We have a mutual friend in boardroom, Kevin. This is his game and.

[C]

Yes. Yeah, right.

[A]

This is his entire world as a builder.

[C]

Yeah.

[A]

Right. Can you. Not of curiosity, is you're directly from Long Island. Is Long island allow this? Is it, like, are people leaning into this More now investors. Are they actually taking the time to buy the lot, understanding that the lot could fit in adu? Are they looking at it that way yet? Because that's how Kevin runs it, and he's crushing.

[C]

Yeah.

[A]

Are they looking at it in the same way in Long island or in the greater New York area that you're seeing?

[C]

So I've been following the ADU narrative for probably a decade. Like, I've known about it for a long time.

[A]

Yeah.

[C]

And it's. It took some time to get some legs. California is basically ground zero for it, and that's where Kevin's doing a lot of his ADU builds. If you asked me three years ago if I'd want to invest in California, I'd say you're out of your mind.

[A]

Yeah.

[C]

Real estate, of course.

[A]

It's just like anything. Yeah.

[C]

Right. It's just. But the ADU boom out there is crazy, crazy California, basically. There's a couple of them. Don't exactly quote me on this, but pretty much the whole statewide everything zone to accept an ADU and a junior adu, they call, like, every single family house. There's no exception. Like, if you could fit it, you can get it, and that. You don't have to go through any hoops. It's actually, like, pretty expedited. But in some cases, you're allowed to put up to 10 units on a single family plot. And that's what a lot of these guys and gals in the ADU space are doing in California.

[A]

Wow.

[C]

Heavy. Now, what I like to spe. Like, what I like to talk about and specialize in more is what are the houses that already accept an ADU layout? Right. While ADU builds are good from an investor standpoint, it's crushing right now in California, it's opened a whole new floodgate. And I nerd out about this, but the reason it's happening is because private equity is starting to see the margins on ADUs. So what does this all mean? Local governments don't, like, they don't want to overcrowd the suburbs. I understand that. Right. Like, I don't. They don't want to shove tons of people in every house, but on the flip side, they don't have enough housing for people. So what's the answer? Right. What happens to the Amazon worker that's single dude, doesn't need a luxury apartment, doesn't need a house. Right. It seems like everything that's going up is either luxury apartments.

[A]

Right.

[C]

Or.

[A]

Or a big house.

[C]

Right.

[A]

But.

[C]

But like. But nobody's Building like affordable starter homes. If you're a builder, the profit margins are in mansions. Yeah, that's what we're seeing in New York. So private equity is seeing that there's a real need for it, Seeing the profit margins on these ADUs. Yeah, right. Like I know you did, you did podcast with Kevin and like it's crazy. Like the ADU space is crazy. But at the end of the day, what do these local governments want? Right.

[A]

Money, taxes.

[C]

So the sooner they're realizing that they can make more money from it, the private equity firms are going to be lobbying the politicians.

[A]

Yeah.

[C]

And that's. We're seeing it happen everywhere. They have ADU laws in, in Florida. They're lobbying them. Once that starts to happen, it's going to be more widely accepted because from a national level it's being pushed and it's super lucrative. But what I was alluding to before with the ADUs is the beauty of it is if you're just starting out too. Right. Kevin is doing brand new builds and across the country in New York, people aren't doing separate ADU builds, but we are doing basement apartments, split level home conversions, garage conversions. If there's already a space that exists, that's the sweet spot. Because you don't have to reinvent the wheel. It's usually already set up so that you can accommodate it and you actually don't have to spend a lot of money.

[A]

If you already own your home and you want to do a 2 or 3K loan. So you already have a, whatever conventional or FHA or whatever you might have, can you convert or refinance into a 2 or 3K loan?

[C]

Yeah.

[A]

Wow.

[C]

So that's what we're seeing a lot in California.

[A]

Okay.

[C]

Right. Usually when people want to pull out equity from their house, there's banks. Look at loan to value. Right. So banks traditionally, even on your own home, will only lend up to 80% total. So if you have a mortgage at 75%, all that's left is 5%. Even though you have $300,000 of equity with a home equity loan or home equity line of credit or something like that, you're only able to access up to 80%, sometimes 90. But then they're going to kill you on rates.

[A]

Right.

[C]

Paying 8, 10% and then it's interest only and balloons and stuff like that.

[A]

Right.

[C]

The 203k is a 30 year fixed. You can refinance with those to build ADUs, add dormers, add square foot, whatever you want to do. But the beauty of the 203k is you could leverage up to 110% of the ARV of the property, so you can actually over leverage it by 10%. Now, obviously, U.S. being investors, we wouldn't want to do that, but people in California are doing it because if you look at the 1% rule, remember the 1% rule that like everyone used to, if you look at the 1% rule in ADU, build is to $200,000, but they're making $3,000 a month.

[A]

You get your 1%, it crushes your 1% rule.

[C]

And now that's what everyone's seeing and doing is they're building these quick ADUs, they're renting them for a fortune. They're getting the rent, it's in demand, and it costed you way less than anything else that any other investor is getting in any other asset class right now, I think.

[A]

So if you're sitting here and you're living in a home that you're like, I can't afford a new home. Like, this is why this is so right now, this moment of the world in economy. You and I were talking last night at dinner, like, if me and my wife were to sell, there's no, my next home is double, if not triple the price of my current home. There's no like, middle ground between where my home's at and the next one. So you're like, okay, well, I can't necessarily go to the triple the price. Right. And what do I do? Well, this is the option that you can say, okay, well, I want a new kitchen. Well, now you can get one. I want to add square foot. Now you can. I want a vaulted ceiling versus flat. Like, you can do all this. You just refine to this and essentially you can get 105 or 110% of the value. Again, I wouldn't suggest anyone getting 110%.

[C]

Right.

[A]

Just for basic principles. But it's there.

[C]

Yeah, it's. We're seeing it a lot with. Because what's like, what's like the common, the common narrative right now is a lot of people refi during the pandemic to 3% rates. Right. And they're like, they don't want to get out of their 3% mortgage, but here we are six years out.

[A]

Yeah.

[C]

And people feel like they're. It's like almost became a prison sentence.

[A]

Yeah.

[C]

We talk to a lot of buyers all the time where they don't want to give it up, but they have three kids and they bought a starter home.

[A]

Right. Right.

[C]

And I'm like, what's your alternative? Like, and then also like you said, now you got to sell that and go find something else. You know, the market's all over the place in the country, but in most, you know, like, main areas in the United States right now, real estate's still competitive. Real estate's still very. There's a lot of competition and like, you're going to get into a bidding war and you're going to overpay for something. Why not make the house you want?

[A]

Yeah.

[C]

Because no house is going to be what you want it to be anyway. Right. Make the house you want. If you want to build an ad, you, you can do it. Right. If. And then, you know, look at your, look at the economics in your market. Right. I tell people this all the time in New York. Right. If you're renovating your house. We did it for my, my own home. Like, so I did. I practice what I preach.

[A]

Yeah.

[C]

This for my forever home. Right. We bought it for 600,000 off market, thanks to you. You convinced me to buy my, my own house. Yeah. Off market. Which was really cool. I kind of fell into the trap. It was, you remember? I like fell into the real estate investor flipper.

[A]

Yeah.

[C]

But then when it came time to buy my own house, I fell into like the open house trap and chasing. And I was like, you were like, dude, just go off market. And we picked it up from an old lady. Was about to go into a retirement home. They were about to list it for 750. We got it for 615. Because they didn't want to. Here was the thing.

[A]

Speed and convenience.

[C]

Yeah. They didn't want to. They didn't want to. They didn't want to deal with, you know, with realtors. They didn't. There was repairs that needed to happen to the property. I'm like, listen, I'm buying with a renovation loan. You don't have to do anything with it anyway. So aside from that, thank you for that. I wouldn't be in my house without you.

[A]

Yeah.

[C]

And. But the, the point I'm getting to is we completely redeveloped that house. I mean, we gutted it, knocked down most of it pretty much and rebuilt the thing. We added about a thousand square foot to it. We added a thousand square feet at about 250 a square foot.

[A]

Right.

[C]

Which is pretty good. Like it depends on where you are. Are in the market.

[A]

New York.

[C]

That's. Yeah.

[A]

Right. Price.

[C]

But in New York, newly renovated houses are selling for 550 a square foot.

[A]

Right.

[C]

So you're netting I call it equity arbitrage. Right? Like you're putting in. It costs you 250 to build square footage. You're using the bank's money to do it, you're not using your own money to do it. And you're, you're getting that equity on the back end, plus you're getting the house you want. Like me and my wife picked every single thing we wanted. There was no house that we would have ever been able to pick that

[A]

would have gotten every.

[C]

I could have bought something moving, ready. It's not like I didn't. But I'm tainted in the fact that even my own primary residence I can't look at as not an investment. Like it has to be an investment too.

[A]

We all do that and we all do it.

[C]

It makes it, you know, it was like, you know, point of contention sometimes with my wife, you know, understandably, like I would call it a deal, I would catch myself calling it a deal, our deal, not it's our house, but. And she's right, but it's still an asset, right? It's still something that you have to look at. And I, that's the essence of what I preach with anybody is as a first time homebuyer, never, ever, ever, ever buy your forever home as your first home. Get that multi unit property, build equity. Put your, if you do nothing else but buy a duplex for three and a half percent down, you put $20,000 down. You live in one unit, you rent out the other. You basically barely ever pay the mortgage. Yeah, you renovate it, you build some equity, you accelerate that equity, you live in it for a couple of years, you move out and you rent out both units. And let's just say it breaks even. In a place like New York that's appreciating 5 to 10% a year. If you do nothing else, you have a million dollar asset in 30 years that you never paid into except that initial $20,000. Find me a 401k, find me a mutual fund. Find me any type of investment where you pay into it once and you liquidate in 30 years at a million dollars.

[A]

What is, so what are their criteria? Right? So whether it be credit score, debt to income ratio, let's just say someone lives in their home as an example and they're like, I really want a pool. Right? Nowadays pools are like 100 grand. It's insane.

[C]

Yeah, yeah.

[A]

So I want a pool. So what are the things that they need to consider if they're living in the home? They're like, I want A pool or I want to pop the top and develop up right. Or whatever. Whatever it is. What are those things?

[C]

Yes, all these loans, they're. They're 30 year fixed mortgage. They're more. Right. They're like owner occupant mortgages. So they base it off your income. Like they base it off. It's like a regular FHA loan. It's same style. 580 credit score. B in the sixes is lower your credit score the more you get hit with rate. 2 years of consistent income. Business owners can do it. Like I'm not W2. Like we, we deal with business owners all the time. You just have to.

[A]

So you can do a stated loan and the whole thing or bank statement loan or what?

[C]

Not bank statement, but what you showing your taxes and everything. And you know, we work with the accountants and like when you're ready to buy a house, usually you let your accountant know and they'll show more. And you know, we're not doing it forever. But it's like, hey, if you want a ticket to the best ride in town.

[A]

Yeah.

[C]

You gotta, you gotta pay, you gotta pay the admission fee. Right? Like, you know, we, we joke about it all the time. Like you want to not pay taxes plus get the best housing products that the United States has to offer. Like you can't have your cake and eat it too. But anyway, suffice to say it's, you know, it's. It's two years consistent income. 580 credit score, you know, be in the sixes and, and that's it. And it goes off of your DTI, right? 50 DTI like that to income. Like that's how they, they look at what your monthly nut is. And your gross income needs to be, you know, under half of your mortgage payment or whatever. 50%, your mortgage payment has to be 50% of your gross.

[A]

What do you think that the audience as a whole is either not knowing. Most people probably don't know about this.

[C]

No.

[A]

What are some of the things that like they're not familiar with it. It. Maybe they would hear it and they say that's not true. What, what myths might be out there that maybe they heard of a 203K and they're like, no, you can't really do that.

[C]

This used to legitimately it sounds like, it sounds funny, but it literally would keep me up at night. I'll never forget doing that first deal, right. And I took my bumps and bruises. Like a lot of people don't talk about this. And there's like, I Had to fumble my way through it.

[A]

Sure.

[C]

There wasn't a lot of information on it. No. I googled it. Like, nobody talks about this, but I knew that, like I said, out of desperation, this was the only thing I could do. It was like, if this wasn't it, I was never buying real estate. Like, this was my only crack at it. I had to buy something that was super undervalued because it was a trash bin.

[A]

Yeah.

[C]

And I. I didn't have a lot of money to do it. It's like, if this works, this is the only thing that I have a chance at. But we'll. But I do it. Finish it.

[A]

Yeah.

[C]

Even through the bumps and bruises, I'll never forget to this day. Like, renovation, you know, nightmares. And we've all been there, right? And I just was smelling the new paint on the walls. I finally got the final inspection, and I'm just like. I look at the floors, I, like, just do a turnaround. I'm like, how the hell do more people not know about this? Why? I researched real estate for four years before I ever took action. Listening to podcasts, like reading books and courses and meetups, and no one ever once mentioned the 203k ever. And I again, I found this lady, Melissa, who, when we were in New York, thought that was a really cool full circle moment. Melissa runs the local RIA and where we're at in Long Island. And she brought it up to me. She's like, listen, I've never personally done it, but there's this thing called the 203k loan. And if I can go back in time, that would be the way I started. And she planted that seed. Fast forward, here we are 10 years later. It's still. It kept me up for. For years. Why do more people not know about this? And I think I have the answer. Real estate agents and lenders, right? Someone wants to buy a house.

[A]

Yeah.

[C]

Who's the first person they go to? Real estate agent.

[A]

Yeah.

[C]

Right. There's getting all their home buying knowledge from a real estate agent. Okay. Real estate agents, look at. They work on commission. They want the fat. Whether. Whether we want to say it or not, you know, they're in their buyer's best interest. They want to get you to the closing table.

[A]

Yeah.

[C]

Right. They will sometimes, you know, slither their way through the transaction, make you overpay, make you take concessions you shouldn't take just because they want you to get to the closing deal. I understand. You got to feed your family.

[A]

Yeah.

[C]

The 2 or 3K obviously adds a couple of steps to the process. Right. You're bringing on a contractor, you're creating a scope of work. Right. You're getting.

[A]

This is all part of the buying process.

[C]

Right. Got it. So you purchase like you get a property under contract. Instead of going and getting an inspection, you bring in a 2 or 3K consultant or, or inspector.

[A]

Got it.

[C]

They go in, they inspect the property, but then they build out a scope of work. Right. Which every con, every construction project has. But it's funny because the common thing is, oh, 203ks are too much paperwork or they're too much of a pain in the ass or they're not worth it. Yeah. Maybe not worth it to the agent because the agent doesn't make any more money. They make money on the purchase of the sale.

[A]

Right.

[C]

Not on the edit renovation.

[A]

They actually have to do more work in part of the deal.

[C]

Right. So in their defense, why would they want. So the first thing. Oh, they're a pain in the ass. So people, I created the 203k way, which is my online community. Right.

[A]

Where can, where can people go to go find 2 or 3K way Instagram?

[C]

The 203K way. That's where I do everything. The 203K way.com But Instagram's my jam. I have a Facebook group. You search up the 203k way anywhere, have a YouTube channel. But the reason I did this was because people were coming to me and asking me about it like on bigger pockets and forums and like online groups and stuff. Because anytime once In a while, 2 or 3k questions would come up.

[A]

Yeah.

[C]

And I'd answer them. And it just, I realized, you know, constantly answering the same questions because so many people were going to their agents, going to their lenders and they found out about it some way. They found out about it. Right. And they would just be shot down. And they were in the, they're in the exact same situation that I was.

[A]

Yeah.

[C]

I want to buy a multi unit property. I want to renovate. I want to get into real estate investing. I'm struggling to find something I can afford in my market. I heard about this thing, I could buy a fixer upper. I'm open to it. Right. I'm open to doing the work and putting some elbow grease on these deals to make it work. I'm desperate. So they come to me because they're like, I, I, this is so good. But lenders are telling me it's too much of a pain in the ass. Agents are telling me too much of It. It's too much of a pain in the ass. And I'm sitting there and I'm like, number one agents, the agents that we work with now like that. You implement this into your business. You're a superhero.

[A]

Yeah.

[C]

Instead of ignoring the. The obvious need, now you're offering something else that nobody else is.

[A]

Well, because there's no agent. The challenge for agents right now is people don't want the inventory that's out there. There's not a lot of inventory. And the inventory that is out there is dated and older and not what people really want. Right. So now if you're an agent says, we need to buy it, but we need to buy with the 2 or 3K, because now you can get the new kitchen you want. You can add the pool that's not currently there. You can all these, like. Every agent who understands this should lean into it. I mean, I'm literally. After our conversation last night, we talked about, like, there's no bridge between my home and the next home. It's crazy. Part of that is like, things like pools in Florida are important.

[C]

Yeah.

[A]

Like those are expensive. To be able to go out and to go buy a home, that's like, I don't really love it, but I have the opportunity to say, let me call Matt right now and let's go get this loan.

[C]

You. It changes the whole conversation. When you go to your buyer and the buyer's already frustrated. Right. Because they can't find anything that they want. Like, they're maybe priced out. They're usually always priced out of the neighborhood they want to be in.

[A]

Right? That's right.

[C]

So if you as an agent could go to them and tell them, hey, listen, what if I told you, like, let's shop the neighborhood. What if I told you, like, let's open it up to fixer uppers. If I can get you all the financing you need to buy the house and do all the renovations you need to it nothing out of your pocket. And you're pretty much going to make the same mortgage payment every month that you would for something move in. Ready. Would you be open to that? 99% of people are going to say yes.

[A]

Yeah.

[C]

Whether they do it or not. Now you just won their business because no other agent is saying that. They didn't even know they're thinking they walk into a house. I always tell agents, like, it's not about what they're telling you. It's the conversation they're having in their head or with each other. Right. You. They. They told you they have 200 grand in the bank. Right. They're well off. And you go in there just assuming that they're going to, oh, they got some money, they're going to do renovations. Maybe they don't want to. Maybe that whole thing is they're putting their down payment down and then that extra cushion is like what they want for their vacation or their kids or their college or whatever.

[A]

Right.

[C]

If you have an opportunity where they could do this and not come out of pocket with anything additional. And actually like, the beauty of these, of these programs too is like, it's very easy to wrap in closing costs because you can get seller's concession very easily because you're going off of the after renovated value appraisal is never an issue.

[A]

Yeah.

[C]

Because you're not appraising based on the current value, you're appraising based on the future value. So you can wrap in closing costs. You can wrap in again up to the first six months. Mortgage people are like, what do I do? I don't, you know, if I buy this house, how am I going to

[A]

afford to rent money?

[C]

How am I going to afford to rent and live there? Well, they thought about that. This is your primary. You can wrap up to the first 12 months payments into the loan.

[A]

Because I was at. That was my next question. Is the person who's about to go buy a home, they're gonna renovate it. So they probably can't live there. They can choose to try to. Not ideal.

[C]

Right.

[A]

But then they gotta go rent somewhere.

[C]

Yeah.

[A]

So they can build up to 12 months.

[C]

Yeah. Yeah. Now it tax on just like the renovation budget does. Right. So it's like the loan and it could, you know. Yeah, the loan amount's bigger. But again, like I always tell people, like, your payment's gonna go up a couple hundred bucks a month, but what's the alternative? You're paying two places. Yeah. And you're spending $60,000 out of pocket.

[A]

Right.

[C]

Keep that in the deal. Again, you're renovating. Use that future equity today. Right. You're doing the work. Reward yourself today for the work. You're doing $400 more a month, but keeping 60 grand in your pocket. Put that 60 grand in an investment.

[A]

Help agents sell this right. Now, I think, I think the people first of all, go find Matt, go the 203k way on Instagram, all over. Go to the website, go to the Facebook groups. 203, the 203K way. But I think what would be really helpful, not just telling the homeowners that are listening to this, try to help agents have a pitch for this. So what do you tell them to do?

[C]

It should come up on every first buyer's call, buyer consult, and every listing consult, too. Right. Again, on the buy side. Hey, what are you looking for? Where's the environments? Okay, awesome. So there's a couple different ways we can help you. What have you been struggling with? Oh, a bunch of things need work. Like, identify what their wants and needs are. Right. It's not for everybody.

[A]

Right.

[C]

But if in many cases, again, they're usually trying to get into a neighborhood that's a little bit out of their range or, you know, for the schools or whatever. Listen, you know, what if I told you, you know, if we. If we open it up to potentially looking for fixer uppers, I know some programs where we can get you into the house. We could do all the renovation. You could wrap in all the renovation costs. You know, I'm connected with the lenders that do it, the contractors that do it, everything. We could set it all up for you. Would you be open to also exploring fixer uppers if you didn't have to pay anything out of pocket for the renovation? Again, no.1 huge sales pitch. You don't have to come out of

[A]

pocket for the renovation. That alone. Homeowners go, like, I mean, I can.

[C]

If you can make the same payment you would normally, but get all the money you need to renovate it the way you want, would you be open to that?

[A]

Any agent tells me that I'm going to go house shopping.

[C]

Game, hook, line, sinker. And we'd say, like, you know, Zillow leads are a thing in the business. Right? And like, you're calling Zillow and these people are talking to, like, eight people. They're getting bombarded. Our agents that do it, they. They bring it up on the first conversation because you're just literally bringing up something that they've never heard of before. Now, the beauty in all of it is probably 95% of them won't even end up doing it. But at least you brought to them something new that won the business, right?

[A]

Now you got the business. And even if you buy a normal home with a normal loan, the agent got the business.

[C]

Yeah. Now, on the flip side on listings, because every agent wants listings, really. Right. Or it helps you win. Listings now, you know, move in ready house. $2 million. Like, no, is it? But Granny's, you know, Granny the boomer who's been there for 30 years, hasn't updated it in 30 years. Maybe she's a little self conscious about or I always say never call your baby, never call anyone's baby ugly. Yeah, don't, don't call the house ugly. But you know, ask like, hey, is there any repairs and any blah, blah, blah. Well listen, how about this? Obviously you might get some flippers giving you cash offers. You know, we're going to, we're going to get you top dollar. The way we're going to do this is there's actually some programs we're connected with the lenders. There's a lot of buyers out there that we're connected with that they're just looking for the area, they really want to be here and they don't care about the condition of the property because they're using a mortgage where they can buy the property. And as is condition, that's the beauty of this. It doesn't matter. There could be violations, it could be a foreclosure, falling down, no windows, no roof, whatever. You could buy it in any condition. So you tell them, you know, we can actually get you top dollar for your house because we're going to sell what it's going to be to the, to the end user, owner, occupant family buyers that are just trying to get into this neighborhood. So you're afraid that you know the house, like, oh, I got to fix up a couple of things before I list it. No, we, we've had, we've had a couple of people. We have an agent the other day that just won a listing that way. The, the, the seller ghosted him for like two weeks and he, he's like, hey, listen, I think I know a way, I know of a way we can get you top dollar for your property. I know you were concerned about the condition. You'd be getting a lot of like lowball investor offers. And he won the listing that way just by bringing that up. Now again, beauty of it, funny part is it didn't go to, it didn't go to a 200k buyer. It didn't, but it got his foot in the door. So it's an incredible tool to have in your arsenal, especially when the competition is only getting more fierce.

[A]

Yeah, right.

[C]

You know, AI is coming into the mix. Like you have to be creative in this game right now because the traditional cookie cutter way of doing real estate is going extinct a little bit.

[A]

Right? Well, there's no inventory, the interest rates are higher than what people want. I mean, there's just the economics of the world right now.

[C]

Right.

[A]

And it's simple Supply and demand.

[C]

Right.

[A]

And so you're forcing the opportunity to have demand because now you're solving for how it gets the valuation, whether it be adu, which I love. I love both of these topics. If I'm an investor or even a homeowner who's coming down on tough times or needs to move their family in, build the adu, get the loan to build the adu. If I'm an agent, I think you need to be screaming from the mountaintops to every agent. Right. Again. Even getting the listings with Granny's home, that's all original, built in 65 and all the original stuff, I can go get you top value because I work with the lenders that get after repair value. So after someone comes in and replaces your pink tile, Granny, I can get that $800,000.

[C]

I'm not selling to the flipper. I'm selling your house to the end user.

[A]

That's right.

[C]

Which no one's going to pay more than the end user.

[A]

I mean, this is, I think is something that is huge. Again, this is what this whole show is about. Where's the opportunity in the marketplace? That's it.

[C]

Yeah, it's, it's like you said, like

[A]

the fact that homeowners who own a home who aren't like, they do want to upgrade but they don't know where to go, there's no inventory or like me, it's, it's literally a six million dollar home.

[C]

Yeah.

[A]

Okay, well then why don't I make the home I want?

[C]

Right. And, and that's, and that's we're seeing it. We dealt with some weird times in like, you know, during the pandemic. And everyone still has a recency bias with, with what the market was doing then, you know, 50 offers on every house and highest and best. And like the market obviously has shifted tremendously. Right. It's not just you get a listing and you're immediately printing money. It's going back to, you know, dog eat dog times. And this is just another thing to put into the puzzle. But like, you know, something as simple as, like you said, if you're building out a unit, if you're renovating your house, if you're a new buyer, hey, rates are high. Buy a multi unit. Right. Like you don't have to have someone like, okay, like I don't want to live with, what's your alternative? Right. Like my parents had a basement apartment in their house for years.

[A]

Yeah.

[C]

And it wasn't called house hacking. They didn't want to be investors. They Just couldn't afford to live on Long Island.

[A]

Yeah.

[C]

As many people can't. But they lived and worked there and they had to find out a way. Now, as we got older, me and my brothers got older, obviously, like, people didn't live there anymore. And we had the whole house.

[A]

Yeah.

[C]

You grow into it. Like, you can fight. We could fight what's happening. Right. And we could wait for rates to come down, which is, you know, as, you know, a loser's game. Right. You could wait for markets to soften up, or you could look at the opportunity and make the best out of it. And I'd argue that it's with these new guidelines with fha, Fannie Mae and like, the ADU stuff. Like, it's more lucrative than ever.

[A]

Well, you can pay home off faster getting an adu. You short. You do Airbnb the ADU if you need to. Like, there's just so much opportunity here.

[C]

Right.

[A]

Well, dude, this is something we gotta keep talking about in the club.

[C]

Yeah.

[A]

So the More Club. If you are not part of the More Club, go to the time time fourmore.com forward/pre launch. It'll be free for life if you join right now. As you hear this, Matt and I will be talking more about this in the club. You'll hear about all the different opportunities. Again, the 203k way on Instagram, there's a Facebook group and he will be in the club itself. So go register now. Time4more.com forward/pre launch. You will have it for free. It's usually $3,600 a year once we launch this thing. I appreciate you being on.

[C]

You're the man. Thank you. This is awesome. As always.

[A]

If you think someone needs to hear from Matt, make sure to reach out to him. Make sure to share this episode. We'll see you on the next episode of the More Show. Peace.

[B]

This is the new Weight Watchers. Built for real life and real results no matter what mode you're in. Maddie went all in for her big day and lost 33 pounds. Emily lost 85 pounds and hit her goal while still living her life. Weight Watchers gave me the tools and I feel amazing. Join the millions of members and lose weight with the number one doctor recommended weight loss program lose [e-mail] at six months, participants in the clinical trial of Weight Watchers program lost an average of £12.

[C]

If you like the show, please take a moment to rate, review and subscribe. It really does help the show to grow. Thank you for listening.