Season 1,

98: How to Lose Money on Your First Fix and Flip with Matt Faircloth

January 02, 2018

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Matt Faircloth, Co-founder & President of the DeRosa Group, is a seasoned real estate investor, licensed broker, and developer. Matt, along with his wife Liz, started investing in real estate in 2004 with the purchase of a duplex outside of Philadelphia with a $30,000 private loan. They founded DeRosa Group in 2005 and has since grown the company to owning and managing over 165 units of residential and commercial assets throughout the Greater Philadelphia area. DeRosa has completed $15 million in real estate transactions involving private capital including fix and flips, single family home rentals, mixed use buildings, apartment buildings, office buildings, and tax lien investments.

Time Stamped Show Notes

[2:40] Reality tv is not that real, and fix and flip shows show it easier and more simple than it really is.

[5:48] On his way to the gym, Matt always saw a house and thought someone should do something with it until he decided he’ll be that someone.

[6:40] Started looking into it and found the owner’s name, with help from a title company. He found a number to call and a 75 year old man answered who happened to be the grandson of the owner.

[8:20] An arrangement was made between the the owner’s son and his cousin, where he lived for free, just paying the taxes. When they both died, the family left didn’t know about that deal.

[9:24] The descendants where living in a house they didn’t own and didn’t take care of it. Since the grandson was the legal heir of the house, Matt arranged to buy it form him in 2006.

[11:30] The real estate taxes hadn’t been paid for about two years. A 3rd party investor, a law firm, had paid them and promptly sued Matt after he bought the house. He paid them $15,000 to settle.

[12:38] Matt learned the hard way that not all lawyers are created equal.

[13:36] In all, he paid $75,000 for the house and a developer offered him $90,000 to tear it down and build a new house. He declined.

[14:24] Taking the decision to fix it himself, he hired a crew to clean it out and renovate it. Though the house was functionally obsolete and had almost no foundation.

[15:40] After putting a new roof, Matt couldn’t simply walk away. But finding the renovation wasn’t going to cut it, he had to tear it down.

[17:00] He was connected to a builder to have a new house built. After selling it, in total, he lost around $35,000.

[19:40] It took Matt 5 years to be able to talk about this. It was too shameful for him.

[22:40] Failing Forward Segment

  • Why did this failure experience happen to you? – “Because I didn’t ask for help. Because I didn’t just take a step back and look at the whole. I didn’t begin with the end in mind.”
  • What is the single most important lesson you learned from this? – “Begin with the end in mind and ask for help. And being diligent.”
  • How do you protect yourself from failing in this way again? “I’m more conservative of what I get myself into. I’m way more cautious.”
  • Who do you turn to when you need help? – “The person I’m gonna ask for help is someone who’s done already successfully what it is that I’m trying to do.”
  • What advice would you give to someone in a similar position? – “You can’t predict the market. Things change. Today’s real estate market, like in November 2017 will be much different than November 2018.”

[27:14] Matt’s final thought: “You have to keep emotions out of things in order to move forward and not fear  shutting something down just because of the time/money invested in that.”

[30:00] Find more about Matt Faircloth at his YouTube channel Derosa Group. His is the new real estate reality tv.

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