Hello my friends. Welcome back to Passive Real Estate Investing where we dive into the world of real estate investing among other related topics. To help you with your real estate investing journey, today we’re doing something a little different. We’re going to take a trip down memory lane and showcase an important episode from the past on what we call our throwback Thursday episode. Now, whether you’ve been with us since the beginning, which goes back to 2015, or you’re tuning in for the first time, this episode is a must listen, we are revisiting one of our more popular episodes from the past, and believe me, what we discussed back then, whether it’s six months ago or six years ago, is just as relevant today. So sit back, relax, and let’s rewind the clock for this great episode. Enjoy.
I am Melissa Nash, and I’ve been behind the scenes here at Norada for over a decade as a senior investment counselor, helping investors like you figure out where to buy, how to buy, and how to build that desired passive income portfolio so that you can create more financial freedom. And I’m not just here talking the talk. I’ve built my own seven figure portfolio of single family rentals, raised four kids while doing it. And yes, I am that mom teaching my kids how to run cash flow numbers at the dinner table. I am all about freedom, generational wealth, and showing busy people how to build real estate empires from anywhere.
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Throwback Thursday Episode (The episode originally took place in the year 2024)
This episode is part of our Throwback Series and may include references to older content such as web classes, events, promotions, or links that are no longer active or available. While the conversation and insights still hold value, please note that some information may be outdated.
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Now, today’s episode is a treat. If you’ve been listening for a while, you’ll probably recognize my guest’s voice. He’s a lender who has helped me buy my very first property, and now he is here today. He is someone who I trust, respect, and honestly, I just love talking to him about wealth building. He’s one of the most experienced investor lenders in the biz, and someone I am very lucky to call a friend. Welcome to the show, Aaron Chapman.
Melissa, what is happening?
Nothing much. I’m just excited to get into it with you today. Where are you at? I, I see you’re kind of sitting in a cabin.
I’m at my place in Missouri, so I’m in the office part of it. So there’s two cabins on the place. One used to be a church back in the, I guess it was probably used to the church in the early late 19 hundreds. And so the pastor moved it here, was an 18 hundreds cabin. Same with this one. This was his paint studio. The other was the little chapel. I took the chapel and turned it into my living quarters. And then this is my office. So now we have brick and mortar in the state. Well login, if you will. And I lease it back to the firm for business. So in reality, this was a, a force to have it to keep business going. But with me acquiring it and leasing it back, now I get a revenue off it that pays for it. So now I have seven acres in the Ozarks, two cabins, a kickass deck, and, you know, deer stands. And a bridge. And a waterfall. And it doesn’t cost me anything. Well, it does. Oh my gosh. Update it. But they cover the paint
<Laugh>. Yep. And it was, it was all a write off at the end of the day.
All of it, everything’s a write off. I get to have a really cool place to work to hang out. And what’s really interesting about this place, since my, I, I live in Pacific time now in Arizona, ’cause it doesn’t switch, right? Sometimes Pacific, sometimes it’s mountain. And right now it’s central time. I’m two hours off. So I work longer here, but I feel like I get more rest even though I’m doing more work just because of the environment.
Well, you know, there’s a reason why people go to the mountains and to get away from it all and listen to nature and just, there’s something that it does for your soul. I mean, I could say the same about the ocean, just hearing that peace and quiet. Absolutely. I can see that.
Yeah. I enjoy going to sometimes big cities when I travel just to invite to, to, you know, experience the culture and the, the diverse stuff that’s happening right there within the city. All the food and all the, all the events and whatever. But it’s draining. I come back tired, more tired from those than by going to Alaska and hunting moose for 10 days. And you’re constantly, every day you’re, when you, when you harvest and you’re, you’re basically de-boning and skinning and packing all that out, that’s 1500 pounds you’re packing out for miles doing every day. And it’s the most exhausting, fun to come back rejuvenate. So it’s interesting what you just referenced with respect to getting outdoors. You get outdoors, get in the woods, you know, get in the hills, get in these cabins, changes everything for me. So that’s why I gotta be here as often as I can.
Well I think you, you just explained there’s mental exhaustion and there’s physical exhaustion, right? Mm-Hmm <affirmative>. And I think that you are, you’re getting a release from the mental exhaustion. The physical is okay. Our bodies can be conditioned for that, but I don’t know if our minds can always be conditioned for the mental part.
Well, your body can be worn down from the physical part, but your mind still be very alert where your mind, when it’s worn down, your body’s worn down. When I got in the industry, I started off in, you know, cattle ranching as a kid on, we had about 500 head of cattle we ran every year. Then from there it was working in the oil fields of Wyoming, then driving truck and hauling freight and running heavy equipment. Then I ended up in the mines of New Mexico, and then I force got my way into this industry. And this was literally the, it’s the hardest thing for you to do. ’cause You have to think, I think as Wallace Waddle said, that concentrated thought is the hardest work for Inman to be able to do. So, since you’re always thinking in engineering, trying to be ahead of the market and deal with all the competitors that wonder undercut, and try and be somebody that’s more than just, here’s my rate and here’s my cost and I’ll close on time, which is the barrier to entry. It is extremely exhausting. It’s mentally and physically exhausting. It actually takes a bigger toll on me physically than any amount of work I’ve ever done.
Well, that makes so much sense. And here’s the thing, you just led into the perfect segue, Erin, because this is why I love talking to you. Every time I talk to you and I’ve known you for, I mean, probably almost 10 years, I always feel invigorated because we’re not just talking about blah, blah, blah, interest rates, da da da, you know, we go deeper than that. I mean, you, you help me get into my very first property because you kind of gave me the financial courage, the mindset, courage. Because a lot of investors, you know, we can sit there and we can go into analysis paralysis. So we can go, oh, the market’s this, the interest rates this, and you know, I’ve gotta get a property manager this, and, you know, we can get all that information and all that data. But there’s a lot with our minds that really takes that breakthrough moment to go, Hey, let’s push all of this other stuff aside.
We, we did the education. We, we, we know what our plan is. But now that mindset of it, and I think right now, Erin, people can really use your voice because I know I can, there’s a lot of noise out there right now. We’ve got a lot of, you know, recession rumors, potential rate drops, stock market tariffs. And I know, I know the investor’s mindset because I hear them every single day. It’s overwhelming. So, Erin, let’s get into it. What would you say to the investor who’s right now sitting on the sidelines, kind of freaking out, they wanna hide under the covers. What should people be doing right now? Everyone’s kind of freezing. What what should we do?
Well, I think the biggest fear a person has that, I don’t know what order we’re gonna go in here, but the biggest person, person, the fears that that overtake people are, are themselves the voice in their head. What we have is the ability to negotiate with ourselves. And we can negotiate with ourselves better than anybody else because we know ourselves better. We know what excuses we’ll accept. We know what cautions we will be. We will be wary of, we know what things to say to keep us from doing something. What we’re not really good at is finding the things that will, in that will encourage us to do something. We need the external encouragement. We don’t have, we’re not good at, we’re not very good at internal encouragement. We need external encouragement. And so what you have a, a friend of mine Annie Ash, I don’t know if you know who she is but she she, I heard her on a podcast or somewhere and she’s a very good friend of mine.
And I heard her say to somebody, it’s interesting how we never overthink to the positive. And that is a monster problem with people is the overthinking. And when they do overthink, they create this narrative in their head. You know, and I’ve, I’ve dealt with times of, of having that that that kind of an emotional freak out and everybody’s been there. And you have to talk yourself down. Sometimes you’re in a spot where you have to just literally, there’s nobody else to go to. You have to talk to yourself about it. You’re in isolation. And that’s really tough for some people to do. They get in this spiral, that one thought begets another thought, gets another thought. And all you’re doing is thinking about the worst case scenario. And then you create the worst case scenario to ensure that you are accurate in your thinking.
But if we can create the best case scenario and work towards that, we can be accurate in our thinking there. The problem is we need other people to help us get there. So that’s the goal that I have, is to create that voice like you just referenced, as the, as the one to give confidence to get into the market and start making things happen. ’cause We’re worried about these things, right? I’ve heard people talk about, man, there’s one guy, I actually heard him on the podcast saying, I’ve been watching the market since 2008 and I’ve been trying to buy the dip and I’ve never been successful. Well, if he bought in 2008, where would he be today? Look, we, the market’s more than tripled since then, no matter what’s happened in the swings. And he’s lamenting on the fact he’s never had an opportunity to buy the dip.
‘Cause There’s never a dip. There was never a dip. So what it was is he was already in the dip and it continues to go up from there. So people are really, really, they have a false sense of what they should be waiting for. So with the interest rates and the recession and what we, what are we waiting for? There’s a lot of people asking me. It’s like, so when’s, how do I time the market? And they’re failing to understand it’s not the timing, the market is the time in the market. The longer you’re in it, the more it just, it, it creates that wealth that you’re looking for. Just like that guy, if you got in, in 2008 and was patient and was a consistent investor, where would he be? You know, tens of millions of dollars maybe, or at least hundreds of thousands of dollars.
Now he’s sitting on the same amount of capital or a little bit more. He is grown it ’cause of savings, but it’s not grown much. And the other thing that people fail to understand is while you’re sitting on that capital, it’s not just growing, it’s actually shrinking. No matter how much you you put away, it’s shrinking because of inflation. The inflation is what’s eroding our dollars value. That’s why our houses are so damned expensive. That’s why eggs are so expensive. Why everything is so expensive, the amount of money in, in circulation. So when you’re waiting for the interest rates to go down and walking away from great deals that you should be getting into, all you’re gonna do is, let’s say if the interest rates do go down, you finally go into it. You went into a lower interest rate environment, which will now also be a higher price environment.
And you’ve canceled yourself out. You’ve literally accomplished nothing by waiting other than stifling your growth because you waited to get in the market. That being the situation, I have a lot of investors I’m working with now to just help them to understand what drives interest rates. It’s not the fed, there’s an influence there. It’s not the tenure, it’s just a lightly correlated instrument that’s very similar in timeframe. And it’s not the stock market. We’ve proven just with this last week’s history, everybody’s saying, well the stock market’s crashing, so rates will go down. They’ve all been screaming it. Every lender, every freaking guru, every newscaster’s screaming the, the stock market’s gonna crash. Trump’s gonna stock crash, the stock market rates are gonna go down because traditionally, and they’re not wrong with this, stocks will leave the stock market or money will leave the stock market and go into bonds.
And then the bonds will get better and the rates will go down. But I’ve been watching and I’ve been screaming, we’re not going to see that because there’s a barrier in the stock in the, the mortgage backed securities bond market that we’re already sitting on that’s already peaked value. And so we hit that and we backed off of it. So when the stocks are crashing, the bonds were crashing at the same time and people are like, I don’t understand why. Well I’ve been screaming it for two freaking years. If a person’s not listening to me, they don’t understand why it just did that. The people who’ve been listening to me, they’re like, oh, makes sense. Aaron said that. ’cause Every time they hit this barrier, which is the same value of that security that was established in 2008 when they started quantitative easing at the end of that year, we’ve hit it.
We’re at the lowest rates we’re gonna see. So since we’re there, I’m telling you investors, now’s the time to buy. We’re at those lowest rates you’re going to see. But it’s also not so low that it’s going to influence the price. So we’re at, in my opinion, the best price we can be, the lowest rates we’ll see, which is not low enough to stimulate the market. ’cause People think we should go to 5%, which we won’t, unless it’s like huge action from a federal reserve scenario. The feds would’ve to create trillions of dollars again outta thin air and shove it into the markets, create more inflation, devalue our dollar, put, devalue our dollar, and push our prices up. Again. That’s what has to happen. I doubt we will see that it would be irresponsible for that to happen. So I’m gonna guess they won’t.
And since if that does not happen, we’re at that lower rate point. We’re at an equilibrium in the price at that point. Buying now. Now when a person’s like, what are they getting excited about with buying the debt service coverage ratio loan has been around for a while. It comes in and out of availability because of what’s happening in the market. And when you’re talking about the debt service coverage ratio, meaning how much income do you have coming in and how much of that income or rent is paying the payment principal interest, taxes and insurance. If it’s equal one to one, we can get you a loan sometimes even below that, but equal. And if it’s above that, the rents are above what your principal interest, taxes and insurance payment is, it just gets better and easier for you. We have been, we’ve had lender or investors screaming for decades.
Why can’t I have a single member LLC and get a 30 year fixed? Well, because we don’t lend to LLCs. Fannie and Freddie never lent to LLCs. Fannie and Freddie were created and backed up by the government to create housing places where people will live, not to create your business, but because of demand. They at least we’ll do 10 finance properties. But where we sit today, there’s enough pool of capital to draw in investors. ’cause We have enough history watching how investors work. I’ve been doing this since 97. I’ve been working with investors since oh three when the stock market, when the markets crashed in oh eight, nobody wanted to lend to investors. There was me and two other mortgage guys out there. Well, one’s a woman and one’s a guy. And we fought together. The three of us, even though we’re competitors, to build a market that would feel fund investors to buy investment properties.
We fought that out. Nobody else, it was us three. Now everybody who says they’re an investor lender are driving on the payment that we laid from 2009 up until today. We fought that out. We dealt with government crap, we dealt with banks, we dealt with people that wanted to fire us. We dealt with audits and we carved that out for people. But what we’ve been able with all that history is prove to the investment world, or at least the, the the market in Wall Street that you can trust the real estate investor, you can see that they’re actually making their payments. They’re the strongest and the best bet in housing. So when you’re investing money into a real estate investor, as for a loan, you can have more assurance of getting paid back than people buying a house to live in. As proven by the current, the FHA statistics, 14% of FHA loans are in some sort of form of default, but not the real estate investor world. So that’s why they created the DSCR Now, now at the DSCR, we have been able to, as cross country, get more aggressive. And I’ve been working with these guys and they’ve brought me in to look at a lot of that stuff and it’s been really, really cool to see what they’ve been able to put together that they’ve been aggressive in creating one that we can do 30 or fixed to a single member LLC with interest rates, very similar to what conventional loans are for a person, but getting it in their personal name.
Wow, <laugh>, I, I don’t even know where to start arid. There was so much there to unpack. This is an amazing time to invest as it’s always been an amazing time to invest because the numbers don’t lie. At the end of the day, the math is the math. And if something looks good on paper and you can make more money than your money sitting in a savings account or a high yield savings account, if you can make those numbers make sense, then why are we waiting? Why wouldn’t we invest? Right? I mean, is that, is that the summary?
That’s, yeah. I mean you can’t summarize it any better. The problem is, is what people are using as a measuring stick for what is a good return. You have this, there’s a spreadsheet floating around the industry. Everybody loves to freaking use that turns different colors when you put putting, putting numbers in it. And when you get a red, you don’t buy it When you get a yellow, you might be cautious in it, you get a green, you buy it. But it’s all based on cashflow, not based on anything else. And people completely ignore that amortization of the loan, getting financing on the property, being to buy it with somebody else’s money and have somebody else use it and pay it back. That alone at an 80% loan to value will give you a 10.6% increase on your investment every single year. Anywhere from 10 to 13% you will make just by them paying off the loan.
That’s zero cash coming into your pocket. That calculator, because that being out there has walked a lot of people away from even recognizing they had a great deal in front of them. Secondly, if that house at two at 80% loan to value, do the numbers guys just pick a number outta your, outta the hair and do 80% of that and then take that 80% that that home value and, and factor it growing at two and a half percent per year. Say if it’s a a $200,000 house, be 5,000 a year. And then take that, that two point a half percent, that five grand and divide that into your down payment plus closing costs. You’ll see you’re making more than 10% on your money. So just by the house in increasing in value by two point a half percent minimum amount, you’re seeing another 10%. Literally somebody paying off your mortgage and your house appreciating by 2.5%, you’re at 20 plus percent return on your investment.
How many people walked away from a deal? Because their cash flow is only like, you know, 50 bucks for the first year. You should kick yourself. You should kick yourself hard. And the person that created that, that calculator should have their whoop. ’cause They steered people incorrectly from, from great investments. The other thing that they’re not thinking about is the, is the the depreciation of the home. There’s a lot of people that buy high end homes 500,000 and above as an investor that don’t cash flow because the depreciation will offset so much of their income that it’s well worth it. The other thing, because we’re looking at potentially the bonus depreciation, again with the, with with the new administration, the other thing they’re not looking at is the regular tax de deductions they get. And then also the fact that we get to raise the rents.
We get to, we, I mean look at all the benefits that are going in there. And if you do get cashflow and it’s minimal, then you raise those rents, that cashflow will compound. So when people start asking me how do I, how do I start looking at this? You have to look very broadly. So I’m creating a whole new calculator for people so they can see it all and see what’s happening with that. And then, you know, when it comes to the interest rates, it really doesn’t matter, guys. I know we’re waiting to try, like maybe we’ll get the lower at some point, who cares? It really doesn’t matter. If you can form an LLC go into contract, buy that home, keep it in the LLC with our transaction that we’re doing. It doesn’t even appear on your credit, doesn’t count as your Fannie Freddy 10.
And you stack those up in LLCs. And also people are like, well, LLCs are expensive. I made a deal with a national law firm that also has a c an an accounting firm attached to it. National law firm and national accounting firm that will do unlimited LLCs for you after your fourth lll c So you charge, they’ll charge you a flat fee to do four LLCs. And I will explain to you how you need all these LLCs and how to set them up to be successful in real estate investing and finance. The rest of ’em are free. So you can buy in 50 states and be 50 LLCs per state and you only paid for four. So we’re doing everything we can to ensure they set up an actual business, not just buy a house and let it try in cash flow and actual real estate investment business. And I’m gonna teach you how to be, be able to lend to yourself hard money, grow your portfolio in two different ways, and then take our capital to pay yourself back and grow your portfolio. Even double, triple, quadruple times.
Again. Aaron <laugh>, that was so much information I’m trying to dissect where to jump in at it. And one of the biggest things that I would call it an excuse from an investor is I cannot tell you how many people I talk to on the phone and the first thing they say is, oh, well I haven’t set up my LLC yet, or I’m afraid of this or I’m afraid of that, or somebody’s gonna sue me. And I’m always like, look, that’s an excuse because we can take care of that. Even when we were doing most conventional loans, we could still move the title over to an LLC at that point. However, the DSCR loan is so popular right now because it’s literally almost the same interest rate as a conventional right now. But then you can just put the property straight into the LLC immediately before you close.
So you’re, you’re saving yourself a step there. But it’s still an excuse for people. It’s, it’s a thing that you can do and we can add it very easily. We’ve got plenty of people that can help. You can do it. I can give people advice where to go, how to do it. You can do it after you have a property under escrow. You can literally sign up and get an LLC. I’ve been doing ’em outta Wyoming for years and years and I can literally get it done in 24 hours. So it, it’s an amazing thing that we need to teach people how to use. But it’s been an excuse for people. So now we’re taking out the excuse and saying, hey, we will help you. We will give you the direction, we will get you to the people who are the attorneys and the CPAs.
We’ve got that covered. We know the system for that. And then we can say, okay, we’ve got the loan for you. These are your options. And again, as you’ve been talking about the DSCR loan, the last couple loans that I’ve done, ’cause yes I’m an investor and I’m walking the talk and I’m buying properties. The last four actually that we did were with A-D-S-C-R loan. Now you’re talking about the LLC benefit of it, which is really awesome. But honestly for me it’s been easy. It’s the easiest loan. Like when I get a conventional loan, I’m literally like, okay, they’re gonna take my blood. I have to give them like all these things. And it literally takes me like two full days to try to track down this and track down that and then wait for approval and the underwriter comes back and they’re like, Hey, we need these 20 things and these DSCR loans.
I was like wait a minute. We just got the clear to close. Like how fast was that? So I think the ease for the investor as we’re talking about everything that you believe in, everything I believe in is helping the investor build a business, set it up the right way and then we have to teach them how to scale and grow. And if they can save themselves time and have these systems and the business set up and they don’t feel like they have to give blood every time they go to a lender and apply for a loan. I mean that honestly was everything for me. I was like, I just saved myself, you know, 24 hours worth of time that I normally put in just because I have so much as a self-employed person in a large portfolio. So for me the DSCR loan is also a business strategy. So do you have any thoughts on that or what you’ve seen people be able to do with the DSCR in that regard?
Well that’s kind of the whole point in we have that initial conversation with them is to start creating the business strategy associated with that in the DSCR loan is how they finance as a result of creating the proper business strategy. And it’s also literally takes the paperwork nightmare and cuts out probably three quarters of it. ’cause You just have to show you have the assets to buy it. We run credit to make sure your credit worthy person, right, we start it with it with a soft credit quote pull credit pull as well, which people still for some reason are just so concerned about somebody pulling their credit. And then you’ve got the just have to get the right LLC paperwork, which our attorneys just know what to get. It gets your EIN gets you set up. You, you can go with your banks and get accounts.
People are worried when they say my my LL C’s not set up yet. I know a lot of ’em are worried that they just don’t have credit with their LLC. You don’t need it. You could literally go into contract form the LLC while it’s in contract. We change, you change the contract or get an addendum to show it’s going to the LLC and we ch we change your loan paperwork in process and close it to the LLC. It’s, it’s absolutely amazing. So when somebody asks do, do you have ownership interest in a finance property? Well no, you don’t. Your LLC does. You personally do not. Now I love to do it a little bit different. I like to use my family trust that owns the LLCs. I like to buy houses cash when I can negotiate, all that kind of stuff. But I don’t pay cash for the house.
I go into, into contract with one of the LLCs to buy the house and then the other LLC that holds my cash will wire the money to title with a promissory note and a deed of trust. That way there’s a lien on the property immediately. And then when I go to get the refinance done on that, then I go basically owe myself the money or owe my other LLC the money. So when we get the refinance done, it pays that loan back to the other LLC. Then I never, ever, did I touch the house? Never was it not encumbered. There’s never not a lien on it. And I got a rate and term refinance, not a cash out refinance. The rate was lower, the costs are lower and it just worked out better all the way around. And I paid myself interest because I had a six month loan on it that had 10 or 12%.
So now I’m growing revenue over here. I’m growing revenue over here. I’m expanding my ownership. And what’s crazy is you watch, you start explaining that to most lenders, their head explos, you can’t do that. It’s impossible to do that. I do it all day long. I personally do it. I buy my houses that way. I buy houses that my family stays in. I rent from myself, my family rents. I put all my vehicles in LLCs owned by my trust. I rent the vehicles, I own nothing but I control it all that’s within, within the confines or at least the assets of the family. That’s where I’m trying to take every single real estate investor to guide you to the people that can set that up where you don’t have to think about it. I sit awake at night and think about this crap and connect with the people that can think about it.
So you don’t have to, you come in, you say this is what I want. We take you down the path, step after step after step. The thing that I really, really cannot stand that what’s gonna keep me in the industry forever. ’cause When I go to the grave, I’m coming in hot. It’s to defend and protect people from the ones that want to take from ’em. There’s a lot of law firms out there. They’ll call and say, I’m a real estate investment law firm. And they will sell them this big monster $15,000 package with, with irrevocable trusts and C Corps outta Wyoming and series LLCs. Completely unnecessary. ’cause You can’t get financing in that world. Nobody’s gonna finance all that because you’ve literally locked up your finances so well and put such a massive wall and barrier around it, which is a great instrument. But now nobody can do anything for you either.
So you need to have the assets first before you have the structure. So we wanna get the structure to get you walking, well really qual crawling, then walking, then running before you get on a jet and protect it all that way. So let us help you, let us take you step by step. ’cause Like Melissa said, we will get you on the, on the auto bind and get you become a serious investor. If you just take the step to contact us, let us talk you through it and put you into that position where you have the confidence, you know the people and you’ll be protected along the way. Now you’re still the CEO of your real estate investment business. You still have to make the right decisions. You still have to be okay with what decisions are made. You still have to be knowledgeable about it, but we’ll at least connect you in all the ways for you to make those decisions.
And you know, Erin, one thing that I’m thinking about is the client that I work with the most is there are the investors who are new that have never invested before and then they’re the investors who are building their portfolio. So they’re scaling and they’re growing. And I always think about them and what they need and where that step one is. And I go back to kind of what I said earlier. When I first started investing and I had that first conversation with you, I didn’t know all the answers. I didn’t know what was possible. I didn’t know what could be done or what couldn’t be done. The only reason why I’ve been able to grow my portfolio as big as I have is number one, I took action but with the encouragement of those who could help me do it. And so whenever I’m talking to somebody on the phone, I always tell them, I’ve been saying this forever, the first step you have to talk to a lender.
I don’t care if you’re looking to buy next week or in a year or in two years because for me, I go back to when I first got started and that was really the clarity and the confidence that I needed. And it wasn’t like, oh, talk to a lender and they’re gonna run your credit immediately and you have to all of a sudden buy a property. It was so much more than that. And, and again, it has to be the right lender like yourself who is a strategist and can see that bigger picture. And you know, success leaves clues. You are the person that is talking to successful investors. I am the person that is talking to successful investors. So the question that I love for people to ask me, and I’m gonna ask this to you Erin, but one thing that I love and I wish more investors would ask me this is where are successful investors investing right now? To me that is the number one question because what are other successful people doing? So why wouldn’t you want to know that? Because I see that big picture. I talk to, you know, hundreds of people and I know I see it in my data, I hear it, I get the feedback. I’m an investor. I talk to people like you. I I am out there getting that information real time. So the question to you, Erin, is what are successful investors doing right now to succeed and take action with real estate?
So I might surprise you with the answer, maybe I won’t. Maybe you already know how I’m thinking on this particular thing. Successful investors are investing in themselves and in their team period. People think, okay, where’s the, where’s the magic bullet? Where, where’s the, what’s the cheat code? What’s the best market? It’s not about those things. It’s knowing what to do or at least learning what to do and then who, knowing who to get the information from and putting those people on your team. We have the banking industry has done an amazing job at getting people to think that they need to search for the cheapest rate and the cheapest cost. Now you want to get somebody competitive, but that not should not be what it is because then you get, you get caught up in the banking industry and they’re gonna force you into a refinance model that you can constantly become churned and become their slave.
Now I’ll share that with you personally if you wanna understand that. But what I mean by this is, I’m gonna take you to a kind of a different twist of a story here. A different example. So when my son got outta high school, he got an opportunity because of my mom’s my mom’s husband David got him a a opportunity to work at FedEx at the Phoenix Airport in what they call the sort. The trucks will come in, they’ll sort the packages, put’em in different bins, put ’em on planes to go to different parts of the country. When he came to me about that, I said, you have the greatest opportunity in a, in an employment thing that’s than what’s ever happened in history. He goes, what do you mean with FedEx? I’m like, no, the time that you’re at right now.
‘Cause When I came outta high school, there was at least 20 guys that were applying for the exact same job and they all knew how to work. ’cause We all came out of, off of, off of farms and cattle ranches. These guys, they knew what it was to get up really early and work your guts out. So there, there was a hard, it was hard to pick which employee. He went in there and I said, here’s all you need to do. You need to go to your, your employer and say, what’s gonna make me the best at what I do and have the greatest opportunity to move up? And what do I do when there’s nothing to do? You figure those out and you will climb the ladder quickly because the other people will not be doing that within just a number of weeks.
He went from just a guy on the sort to one of the guys loading the bins from getting the bins prepared to get load from there to being on the loading team to their burning the equipment, loading these big old bins onto airplanes, to then running the crews, loading the planes, to then getting a job externally hauling the freight. He has done nothing but climb, climb, climb, climb, climb. Now he’s over at the airport in Springfield, Missouri and he’s got a job, almost the most irreplaceable job in the area because he has done this a done these, these tasks. He’s taken the steps, taken the time to understand what he needs to do and he did it like clockwork. Well he goes back now and again to Phoenix just to go see his old boss and one of who’s still on the sort the same, some from like eight years ago.
‘Cause They’re not motivated to move. So they have excuses as to why, oh, maybe he got a leg or no, he worked his guts out. So the starting real estate investor, you mentioned the newbies. If you guys formed your alliances with the right people, Melissa, myself, others, my our attorneys, the people that know how to help get you there and take action even though it might be fearful upfront, understand where we’re taking you and then do it again and again. Again, there’ll be people that have been doing real estate investing kind of in quotes, real estate investing for the last 10 years that you’ll surpass them quickly because they’re still being caught up in the same stupid attitude of, I’m trying to time the market and I gotta find the cheapest rate and I’m gonna call all these lenders. I’m gonna go online. I’m gonna spend my weeks looking for this before I lock in and end up blowing a deal because I can’t find the perfect thing.
‘Cause They’re not, they’re looking incorrectly. Understanding what you need, setting your baselines, getting your team together, aligning with those people. And as long as you have a great team and understand you’re the CEO of an investment firm, you don’t go and just go buy, get somebody to put on your your board that’s gonna be, that’s gonna take minimum wage. You want people that, that are worth what they bring to the table that will bring the data. And you know, when you’re talking to me as a lender, I don’t only get paid to do the loan, but what we bring you with the experience from doing this for 27 years, there’s no way you can pay me for the experience. I have to charge you thousands of dollars an hour from the, from all the angles that I understand real estate investing. You would pay me a fortune to get the information I give you. Really just to get loans closed. You’re getting a lot of data for free from both of us. So that’s where I say a person needs that is going to be the most successful is one, getting off their and forming the right team and just staying on track and quit getting dis and don’t get distracted.
Right. Well I’m thinking of the quote, I think it was Wayne Gretzky said, you miss every shot that you don’t take. Mm-Hmm <affirmative> And I think back to that when I got started was I am so grateful that I did that. I’m so grateful that I stepped outside that box because that first property, yeah, today it’s actually one of my highest cash flowing properties. But beside that, it gave me the courage to continue to grow. It gave me the confidence that I needed to go, okay, this is doable. And by the way, this property ha was not perfect and it never has been perfect. I had a squatter in the property when I first bought it, and I tell this story to people and I go, I’m almost grateful that happened early on because again, it gave me the experience to go, okay, how do I fix this?
Did the property manager help me quickly and efficiently? I found that that information very early on, I was forced to because it happened like right after I bought it. And so I realized that yeah, that team actually, the property manager jumped on it immediately. They took care of it for me. I didn’t have to spend any time doing it. Yeah, I had to pay a little bit for it, but that lesson was so valuable and it just really reiterated teamwork and the confidence to keep going. And you know, since that first property I’ve gone on to buy a lot more properties and also having the strategies in place. If I didn’t do cash out refinances, if I didn’t do 10 31 exchanges, if I didn’t do cost segregations, I would not be where I am today with this portfolio. But it all goes back to that first property because as a new investor they hear all these big things, right? And oh, you can do this and you can do that. And, and I have to set up 20 LLCs and it can be very intimidating. So we have to break it down to that very first step and that very first step is taking action. You learn by doing. So right now today, if you could tell your younger self <laugh>, Aaron Chapman, who’s starting to invest all over again, especially in a market like this, what would you say to him?
I’d probably say exactly what I was just saying. Find the right people to interact with. Get around those people. Spend your time around them. Bring them into your team and focus on what they brought, what they bring to the table. Focus on their experience. Don’t focus on what you read on the internet because you know, most of the people that are keyboard warriors, they’re giving you advice that they’ve never practically applied. And that’s what’s really amazing to me is how many people advise because their advising is what they’re getting paid, not they’re doing out there in the market. The more people that give advice as far as like, are monetizing their advice, it’s amazing how little they’re making in the practical sense of it. But they’re making a great amount in in what they, what they’re giving out to you. Let’s think about David Ramsey for a lot of, for a minute, everybody on David Ramsey.
Brilliant man, because he talks about how to, to do things like that’s very, very, very elementary when it comes to finances, not about leverage. You know, he, he, he craps on leverage as far as real estate loans and pay, pay your loans off forward. When it comes to the leverage on real estate, it’s the greatest thing you can ever do. What’s interesting, I know people that know him personally, that are, that are actually family members of his, they say he, he leverages like crazy. He’s got all this stuff built away. We talk about it, but he doesn’t share that because he’s not talking to us. He’s talking to the 90% out there. So when you talk about him, he makes his money off things he does not do because he is advising people that will not understand what we’re doing here. So when you’re talking to people that some many times will advise in ways that they don’t understand, just like a, like in a teacher, you know, somebody in the education world, they educate you on theory.
They don’t educate you on practical application. It doesn’t happen. You get a college degree in somebody’s theoretical idea of life, nothing they’ve ever applied. So in that respect, come to people that are doing it every day. They’re helping you do it every, they’ll guide you every day. I don’t get paid until you get paid, period. So it behooves me that you are successful if I just close lo one loan for you and it all goes to hell, that doesn’t help me at all. I need you to get to 12. When you get to 12, we’ve done something special and you’re not gonna get to 12 if it sucked between 1, 2, 4, 5, and seven. You gotta get to 12 and I am hell bent to get you to 12.
Amazing Erin. So, so many amazing golden nuggets here. And you know what, I get to hear this all the time, but I think we have our check-in talks at least every couple of weeks. And I’m still investing. I literally am closing on a property here pretty soon. I have learned to shut down the noise and to stop with the headlines and I focus back on the math and the numbers and I go, does this property cash flow today? Right now in the market, I’m locking into a 30 year loan. Is my money doing more for me than it would be if it was sitting in a high yield savings or a regular, you know, Wells Fargo account earning 0.000, nothing. We know inflation is real, we know inflation is going up. So that doesn’t even come into the calculator that I use. I know we’ve talked about inflation a lot and you have a tool for that. So let’s just wrap that up and tell people about that tool that you have.
Still have that up. You can go to the, go to your app store. It should be on the Apple. They just relaunch the one in Android ’cause it got messed up. It’s the QJO investment tool, which stands for the Quit Jerking Off investment tool. And what you’re able to do in the, in the mortgage amortization calculator is type in your down payment, your purchase price and your interest rate and, and also you can put additional payment. I don’t recommend doing that unless you just wanna play with it, never pay additional. And then you can go up into the upper right hand corner, you’ll calculate your payment upper right hand corner. You click on that and use a calendar icon to scroll 30 years ahead and you’ll see what you paid in, in interest. So on 160,000 loan in today’s dollars today’s interest rates, you’ll pay about 400, $2,000 in principle and interest.
That’s where the average person, your David Ramsey, I would be like, oh, I need to pay extra on my mortgage, takes my cash flows and pay it off. I’m telling you, don’t think that way because what happens is the dollar’s losing value every single month with inflation. And when you recalculate the value of every time the dollar leaves your hands compared to the day you borrowed it to buy the asset, you’re paying back less than what you borrowed. In this example, it’s about 154,000. You borrowed 160, you paid 402, but the value of those was 154. So get the calculator, reach out to me at aaronchapman.com and let’s, let’s talk about it in greater detail.
Amazing. Thank you so much, Aaron. It was a pleasure. And I know I’m gonna have you back on here because I have a well I was gonna blow the secret. I don’t know if I should. There, there’s a reason why you’re gonna be coming back. You have something that will be coming out. Should we tease them with it or do you wanna say what it is?
We got a book coming out in just a couple of months. Just finished all the artwork. The artwork is extensive. I’ll just give you the title. It’s Red and Economics. If you wanna read the forward, you can go right to my website under the books tab. You can read the forward and, and see some of the artwork. The artwork is crazy.
It is really cool. I checked it out already. I am so excited. I get an advanced copy, don’t I?
Yes, you do. Signed by myself. And so, and the, and the guy who wrote The Forward, Robert Allen wrote The Forward, that’s like The Godfather to All You People. And Dolph Deus wrote my, afterword, I’ll get you signatures from both.
When we bring you back on to talk about the book more, we should do some type of a giveaway for our listeners. Maybe we’ll make it some type of a contest or we’ll just do a random drawing or we’ll do something kind of cool with that or a special promo. How about that?
We’ll do something awesome.
<Laugh> amazing. Thank you. Thank you, Erin, today. I appreciated it and I know that our listeners appreciate it as well. You are a, a voice of reason for us in these times, and you have been for a really long time because I know you’ve been on this podcast many, many times. Many. So thank you again. Thank you. We definitely appreciate it.
<Laugh>. Appreciate Melissa, thank you.
I hope you enjoyed this week’s throwback Thursday episode. If you haven’t already, remember to subscribe so you don’t miss out on a single episode. If you have a question about real estate investing or finance, simply go to passiverealestateinvesting.com and click the Ask Marco button. . I read all of them, I reply to many of them, and sometimes I cover them on the show, and I’m gonna try and do more of that. So, I am going to encourage you to go to passiverealestateinvesting.com and submit your question for Ask Marco. Lastly, help us share the show with other like-minded people that you know who can benefit from it as well. Just visit us on your platform. Most of you are on iTunes and leave us a rating and review. I would greatly appreciate it. I read them all and I will thank you in advance. And that is it for today. Thanks for listening. I will see you on our next episode.
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