De l'échec des entreprises à acheter 20 maisons par mois | Immobilier

Ceci est le podcast BiggerPockets 325.

Aaron: Eh bien, nous avons examiné la situation sur la base du rendement annualisé au lieu d’un individu, ce qui nous a également aidés à être moins émotifs à l’égard des gagnants et des perdants. Comme si je gagnais de l'argent sur neuf maisons sur dix. Je prends une défaite sur un sur dix. »

Vous écoutez une radio BiggerPockets. Simplifier l'immobilier pour les petits et grands investisseurs. Si vous êtes ici pour en savoir plus sur l'investissement immobilier sans tout le battage publicitaire, vous êtes au bon endroit. Restez à l'écoute et assurez-vous de rejoindre les millions d'autres personnes qui ont bénéficié de BiggerPockets.com, votre site d'investissements immobiliers en ligne.

Brandon: Qu'est-ce qui se passe tout le monde? Il s’agit de Brandon Turner, hôte du podcast BiggerPockets. Ici, avec mon coanimateur David ‘The Man’ Greene. Qu'est-ce qu'il y a l'homme? Comment vas-tu?

David: Qu'est-ce qui se passe avec toi, mec? C'est une très bonne journée. Nous avons vraiment de très bons invités et je pense que cet épisode est probablement l’un des domaines de connaissance de l’éducation le plus semblable à celui que nous avons connu depuis très longtemps.

Brandon: Mec, c'est bon, c'est bon. Histoire vraie, notre invité d’aujourd’hui, nous vous présentons Aaron dans quelques minutes, mais Aaron était en fait… Nous avons enregistré cette interview comme il ya quelques semaines. J'enregistre cette introduction quelques semaines plus tard. La raison pour laquelle c'est important, c'est parce qu'Aaron et moi venons de passer du temps après cette interview, mais avant cette interview, c'est vraiment déroutant. Mais au fond, Aaron et moi venons de passer une soirée incroyable à Hawaii. Vous avez dû vérifier cette chose. Allez, allez sur mon compte @BeardyBrandon, regardez la vidéo que je viens de poster sur Kiawe Outdoors, passez à la caisse… Ils sont également sur Instagram, @kiawe_outdoors.

Fondamentalement, nous avons fait cela comme avec un truc de feu en cuisinant avec Aaron et Josh Dorkin, fondateur de BiggerPockets.com. C'était la nuit la plus incroyable. Quoi qu'il en soit, Aaron, vous allez en entendre parler aujourd'hui. Il ressemble littéralement à l'homme le plus intéressant du monde. Mais si vous voulez voir des images étonnantes de notre événement, comme nous l’avons aimé, sur la plage ou près de la plage de Maui, avec littéralement comme du venaison, des ananas et des raisins fumés suspendus au-dessus du feu. C'était stupide, c'était incroyable. Vérifiez cela. Mais oui, c'est ce que j'ai fait et j'aimerais que vous soyez ici. Kiawe Outdoor est le nom de la société si vous voulez voir une sorte de ce qu’ils font et vous pouvez consulter mon Instagram pour cela.

Quoi qu'il en soit, assez parlé du passé. Parlons de l'avenir. Le spectacle d’aujourd’hui, nous avons un spectacle incroyablement bon aujourd’hui. Des bombes de connaissances larguées par quelqu'un à qui vous avez raison, plus tard dans la série, David, vous avez dit qu'Aaron est en fait l'homme le plus intéressant du monde et qu'il aime littéralement avoir sa propre bière.

Comme s'il était littéralement probablement le meilleur, comme l'un des meilleurs investisseurs que j'ai jamais rencontré de toute ma vie. Nous allons entendre comment il a commencé, comment il a développé son activité immobilière de rien en un tas de transactions pour lui donner soudainement des millions de dollars à investir, puis en perdre un tas et le récupérer ensuite. C'est comme l'histoire montante et descendante, une leçon incroyable. Je veux dire qu'il achetait comme des dizaines et qu'il achète des dizaines de maisons par mois, c'est remarquable. Oui, vous allez adorer ça les gars.

D'accord et avant que nous passions à l'entretien avec Aaron, hey David, vous en parlez dans votre livre sur l'investissement immobilier à longue distance, selon lequel Internet a totalement changé le jeu en matière d'achat et de vente de maisons, n'est-ce pas? Je sais que c'est une grande partie de ce livre. Notre parrain aujourd'hui en est un parfait exemple. FundRise est l'avenir de l'investissement immobilier. Vraiment, comme leurs logiciels suppriment constamment les intermédiaires et les anciennes inefficiences du marché, vous permettant, l'investisseur individuel, de partager une appréciation à long terme et des flux de trésorerie.

FundRise ouvre l'accès à des transactions privées de haute qualité et à fort potentiel provenant d'immeubles en hauteur et à des appartements multifamiliaux. Chaque transaction est soigneusement contrôlée et gérée activement par l’équipe de professionnels de l’immobilier de FundRise. C’est le type d’investissement qui était auparavant réservé aux grandes institutions, mais vous pouvez désormais intervenir directement depuis votre ordinateur portable. Vous pensez probablement comment puis-je garder un œil sur ma propriété également? FundRise vous a couvert. Leurs rapports en temps réel vous permettent de savoir exactement comment vos projets avancent. Essayez-le avec cette offre d'une durée limitée. Visitez FundRise.com/BiggerPockets et obtenez les trois premiers mois d'abandon des frais. C'est vrai, pas de frais, c'est beaucoup. Encore une fois, allez à FundRise, FundRise.com/BiggerPockets pour commencer maintenant. Vérifiez certainement, les gars, FundRise. Cela dit, il est temps de passer au spectacle d’aujourd’hui. Mais avant de passer à l’entrevue, je ne veux pas oublier le petit conseil d’aujourd’hui.

David: Conseil rapide.

Brandon: Bon, le petit conseil d’aujourd’hui est simple. Nous avons une application, une application BiggerPockets, et elle est gratuite. Vous pouvez le télécharger. Vérifiez-le. Il s’agit de l’application mobile BiggerPockets disponible sur iPhone et Android et nous ajoutons régulièrement de nouvelles fonctionnalités tout le temps. Comme de meilleures fonctions de recherche, une liste d’événements locaux où vous pouvez discuter d’un accord avec d’autres investisseurs, et Cetera. Il y a un tas de trucs cool. De plus, si vous êtes un utilisateur Android, consultez l'application des outils BiggerPockets où vous pouvez utiliser les calculatrices BiggerPockets pour analyser certaines offres. Des trucs super cool. Cela dit, je pense que c’est suffisant pour le conseil rapide d’aujourd’hui. Je pense vraiment que nous devrions simplement nous lancer dans l'interview car celle-ci est longue et de bonne qualité aujourd'hui.

David: Assurez-vous de rester jusqu'à la fin, car cela devient un spectacle puissant.

Brandon: Oui c'est vrai. Ça va de mieux en mieux et de mieux en mieux, tout au long du spectacle. C'est comme un bon vin, non que je sache vraiment ce qu'est le bon vin comparé au vin ordinaire, mais vous savez…

David: Mon amitié avec vous est comme un bon vin.

Brandon: Est-ce un compliment?

David: Oui. C'est comme amer et méchant au début et avec le temps ça devient sucré, ça sent le vinaigre et la pourriture.

Brandon: D'accord. Sur ce, passons au spectacle avec Aaron Amuchastegui. Bien, Aaron, bienvenue dans le podcast BiggerPockets. Mec, c'est vraiment bien de t'avoir aujourd'hui.

Aaron: Je suis excité de parler avec vous les gars. C'est toujours amusant de pouvoir discuter avec vous et aujourd'hui, nous pouvons peut-être creuser un peu et plonger un peu plus profondément.

Brandon: Oui oui. Eh bien, chaque fois que je parle de vous, je parle beaucoup de vous, ce qui est bizarre, mais comme à chaque fois, je dis toujours qu'Aaron est comme l'une de mes personnes préférées, tout comme sur la planète. Comme j'aime vraiment juste toi et tout ce que tu fais. Mais je ne connais pas votre histoire sur la façon dont vous êtes arrivé là où vous êtes aujourd'hui. Je veux dire, comme pour raconter une histoire vraie, Aaron, moi et David étions à Austin il y a quelques mois et ils ont juste décidé d'avoir une célébrité, pas une célébrité, mais nous appellerons cela un tournoi de poker, non? En fait, j'ai fait mieux que prévu. J'ai passé un bon moment à jouer et David s'est bien débrouillé, mais Aaron entre, comme quoi, le poker? Comment faisons-nous cela? Juste comme nettoie. Je veux dire, il a juste dominé toute l'équipe. Je veux dire, tu as la première place, tu as gagné des trucs sympas et de toute façon, c'est Aaron en un mot. Nous pouvons mettre fin à l'entretien juste ici. C'est ça.

Aaron: C'était une soirée amusante. Nous jouions au poker aux petites heures du matin et j'ai gagné un voyage aux Fidji et toutes sortes de choses.

Brandon: Oui.

Aaron: Mais tu étais l'action, qu'il était le meilleur. Chaque fois que tu es entré et que tu t'es levé et que tout le monde est comme, mec, c'était une nuit inoubliable.

Brandon: Je suis comme la valeur de divertissement, le clown de cirque, et vous êtes comme le gars qui entre, vous êtes, je ne sais pas, Edward Norton dans Rounders. Quoi qu'il en soit, d'accord, parlons de l'immobilier ou du moins de votre histoire, car encore une fois, je ne sais rien de vous. Comme si j'en avais presque l'impression, car depuis deux ans que je vous connais, je n'ai pas délibérément creusé dans votre histoire, car j'attendais ce jour pour la poser.

David: Wow, c'est la dédicace au podcast juste là.

Brandon: C'est vrai. À dessein, je n'aime pas écouter un podcast que vous avez fait ou quoi que ce soit parce que je veux le savoir par moi-même. Aaron, allons-y. Comment êtes-vous entré dans l'immobilier? Présentez-nous votre histoire d’où vous venez et comment vous êtes entré dans ce secteur de l’immobilier.

Aaron: C'est beaucoup de pression d'aujourd'hui est le grand jour.

Brandon: Aujourd'hui c'est le grand jour.

Aaron: Comme deux ans maintenant. Je sais qu'il y a des tonnes d'auditeurs de BiggerPockets, je ne veux pas décevoir, mais je ne veux pas faire Brandon Turner pour le moment. Mon histoire immobilière est drôle. J'ai beaucoup d'histoires de vie différentes. J'ai vécu de nombreuses expériences de vie folles qui, en elles-mêmes, deviennent assez amusantes. Mais comme nous nous concentrons sur l'immobilier, oui, je pense que c'est une histoire assez claire. J'ai grandi dans une petite ville du sud de l'Oregon et mon père était un constructeur de maisons sur mesure, non? Nous avons grandi autour de l'immobilier dans ce sens. Il a fait quelques petites choses de développement, construit des maisons. Mes premiers emplois ont été réalisés sur ses chantiers, où les ouvriers, les ouvriers de la construction, ont appris à le faire.

L'un des intérêts de mon enfance, c'était l'idée que le logement sur piste était mauvais. Les maisons personnalisées où le seul moyen de le faire. Encore une fois, très petite ville. Mais j’ai aussi vu les hauts et les bas de cette entreprise comme un esprit d’entreprise, car mon père était cet entrepreneur. Je savais que je voulais me lancer un jour dans la construction et l'immobilier, alors que nous essayons de comprendre ce que c'était. Toutes sortes d’expériences de vie de ce genre… Je suis allée à l’université de l’Oregon pour étudier l’architecture, et quelques choses qui m’ont fait perdre quelques années. Quelques années plus tard, je suis allé à l'école à Cal Poly San Luis Obispo pour étudier la gestion de la construction. Mon plan à l'époque était de pouvoir obtenir un diplôme universitaire dans quelques années et d'aider mes camarades. papa dirige son entreprise.

Il venait juste de faire sa proposition pour un hôpital. Il a construit le dernier hôpital de la ville et sa proposition a été refusée parce qu'il n'avait pas le bon diplôme car il avait grandi sans diplôme et que c'était… Puis, comme, oh, nous devons obtenir un diplôme. C'est-à-dire que j'irai obtenir un diplôme, je reviendrai pour diriger votre entreprise. L’un des défauts de cette histoire, c’est que je n’ai jamais vraiment quitté Klamath Falls, dans l’Oregon, qui compte 17 000 habitants, des hivers très froids. Je suis arrivé dans le sud de la Californie et c'était comme le pays du lait et du miel. Il faisait 70 degrés et il faisait beau tout le temps. Alors que j'allais à l'école à San Luis Obispo, j'ai vu ces gens qui voudraient acheter ces condos. 400 000 $ de condos ou d’enfants y vivraient pendant leurs études. Ils les réparent et les retournent en quelque sorte quand ils sont partis.

C'était un rêve que je voulais faire. J'aime toujours, hé, emménageons dans une maison et essayons de la retourner. Mais c'était à cette époque folle sur le marché du logement, 2003, 2004, 2005, comme le pic absolu. Mon prix était déjà hors marché, mais lorsque j'ai obtenu mon diplôme à Cal Poly U, c'était le meilleur moment pour obtenir un diplôme en gestion de la construction. Constructeurs de maisons, nous sommes comme diriger le monde. J'avais remporté deux ou trois championnats nationaux en construction résidentielle et j'étais comme la seule personne aux États-Unis à l'avoir fait deux fois et tout ce genre de choses. C'était vraiment, vraiment cool. Je dois parler à toutes ces grandes entreprises de construction de maisons. À l’époque, c’était les maisons Pulte et Ryan, qui ont fini par être embauchées par un petit constructeur privé pour les aider à gérer ce type d’opérations dans une région proche de Santa Barbara, en Californie. Quand j’ai obtenu mon diplôme en 2005, c’était comme une attente vraiment injuste de ce que serait la vie.

Brandon: Oui.

Aaron: Parce que nous construisions des maisons aussi vite que possible. Ils vendaient aussi vite que nous pouvons les mettre. Nous jouions au golf deux ou trois jours par semaine. Comme faire six chiffres comme fraîchement sorti du collège. C'était totalement irréaliste, non? Ensuite, le krach du marché s'est produit. En 2007, il a commencé à ralentir. Oh, attendez, cela a vraiment ralenti et le constructeur de maisons pour lequel je travaillais a été mis à pied comme 70 personnes. Nous étions cinq et nous avons été transférés au bureau de Sacramento. Je ne savais même pas que l'accident se produisait, car à Santa Barbara, je n'en avais pas l'impression. Tout était encore sympa et bourdonnait. Mais s'est levé à Sacramento, vu comme cette vague de saisies. Nous passions tout le temps du golf à aimer faire ce travail manuel pour essayer de réparer nos maisons, faire ces exercices bancaires.

Parallèlement, nous avons continué à essayer de créer différentes entreprises. Nous essayions d'acheter comme des REO, ces flips sur la MLS, car nous avons constaté qu'il n'y avait qu'une tonne de saisies. Vous conduisez dans une rue et il y aurait une douzaine de maisons avec des mauvaises herbes de six pieds de haut mais nous ne pouvions pas entrer et comprendre le marché REO. Nous écrivions des offres et chaque fois que nous les écrivions, nous avons été battus de 1000 dollars ou nous avions un jour de retard. Nous ne connaissions pas les personnes que nous étions censés connaître. Il était presque impossible d'entrer par effraction parce qu'ils savaient savoir à qui ils allaient vendre. Nous avons essayé ces différentes entreprises. Un des gars avec qui j'ai travaillé à l'époque a eu l'idée de nous laisser essayer les marches du palais de justice.

Il m'a envoyé la feuille et a déclaré: «Voici cette offre d'ouverture. Allons voir ce qui pourrait se passer sur les marches du palais de justice. »Nous ne savions rien à ce sujet. Nous ne savions pas comment cela fonctionnerait. Il n'y avait pas comme les cours à prendre, il n'y avait pas de leçons à faire. Je suis allé faire des recherches et j'ai passé la journée suivante au palais de justice. Comme examiner ces documents judiciaires, comme ces documents de prêt, comment serait-il si nous achetions cette maison? Nous avons fini par aller aux enchères comme une semaine plus tard. J'étais comme, je pense savoir comment ça marche en lisant les documents de prêt. Je pense que nous serons prêts.

Nous sommes arrivés à environ 125 000 $ en chèques. Il y avait trois types là aux enchères et il fait l'offre. Il dit que la première offre est comme quelque chose de 120 000 $. Les trois gars qui étaient là pour soumissionner n'ont rien dit. Un des types avec qui je travaillais et avec qui je travaillais a dit: "Excusez-moi, nous voulons faire une offre." Le commissaire-priseur va dire: "D'accord, penny plus." "Oui, penny plus." Nous avons acheté cette maison et nous sommes comme, 'Whoa, nous avons acheté notre première maison. C’est fou. »Mais les trois autres types qui ont misé sur place tout de suite ont répondu:« Oh. »Oh, mon Dieu, nous avions déjà si peur de pouvoir acheter la mauvaise maison. Il y a quatre histoires parce qu'elles ne vous disent pas les adresses et quand les gars qui le faisaient ont commencé à se moquer de nous et ne l'ont pas acheté, nous nous sommes dit, oh mon Dieu, qu'est-ce que nous avons fait de mal? Ensuite, nous avons commencé à remplir le reçu avec ce type et à devenir un de mes amis à l’époque. C’était un ordinateur portable sur une poubelle et il vous remettait ce reçu jaune en papier.

Il y écrit la vente et le nombre de chèques que vous lui donnez. Je dis: «Eh bien, allez-vous y mettre l’adresse de la maison? Parce que ces gars-là… Il va, «Tu n’as pas acheté une maison. Je ne peux pas mettre d'adresse ici. Vous avez acheté un document de prêt, non? Cela dépend de ce qui est légal et de tout le reste. »Alors nous étions, oh mon Dieu, avons-nous réellement acheté la maison? Comme bien comment ça marche ensuite? Est-ce que nous allons obtenir l'acte. C'était une chose très effrayante. Notre histoire courte a été quelques semaines plus tard l'acte nous a été envoyé. Nous l'avons enregistré, nous avons fini par posséder la maison libre et claire. Nous avons obligé la dame à déménager assez rapidement. Nous avons reçu plusieurs offres sur cette maison tout de suite car il s’agissait d’un marché immobilier fou et nos premières marches comme des marches de palais de justice s’écartaient des courses et nous étions comme, wow, c’était facile.

Puis nous sommes retournés et comme le mois suivant, nous sommes allés aux enchères comme tous les jours et aucune des maisons sur lesquelles nous avons essayé de soumissionner ne s'est même présentée aux enchères. Nous conduisions des maisons, des maisons de compensation, nous nous présentions aux enchères sans obtenir une seule maison. Si nous n'avions pas acheté cette première maison, nous n'aurions jamais trouvé cela comme une entreprise. Nous aurions perdu une semaine ou deux. Mais nous avons eu super, super chanceux la première fois, c'était la chance de ce débutant fou. Nous l’avons fait ensuite pendant cinq ou six mois et nous avons commencé à changer de maison. J’ai imaginé un système et un moyen de suivre tout cela, car il comporte de nombreuses étapes différentes.

Septembre 2009 était mon grand genre de moment Aha. Ma fille Charlotte est née six semaines plus tôt, non? Ce qui pour nous était… Ma première fille est née à sa date prévue. Charlotte est née six semaines plus tôt. Elle était dans l'incubateur. J'étais assise à la regarder alors qu'elle avait tous ces écrans et tout dessus et j'étais terrifiée. À l'époque, ma femme était serveuse au casino local. Elle travaillait, elle était serveuse la nuit et je travaillais le jour. J'allais au travail, je rentrais à la maison, elle me tendait le bébé, elle allait au travail le soir pendant sa grossesse. J'avais vraiment l'impression, wow, c'est de ma faute. Si j'avais mieux pourvu à ma famille, si je travaillais plus fort que ma fille ne serait pas dans cet incubateur en ce moment. J'ai dit, vous savez quoi, il est temps.

Il est temps pour moi de quitter enfin mon travail avec ces gars-là et d'essayer de démarrer une entreprise. J'ai mis mon avis de quitter mon emploi parce que nous allions créer notre propre entreprise et que mon père était prêt à être mon premier investisseur et que j'avais six semaines d'économies. En six semaines, je conduisais des maisons tous les jours. J'allais faire une offre, je composais le soir, je travaillais jour et nuit et je n'avais pas une seule maison et c'était comme avant le 1er janvier 2010. J'ai dit à Kaleena que nous n'avions plus d'argent. Si je ne trouve pas de maison cette semaine, je vais devoir demander de récupérer mon ancien travail ou faire autre chose. Comme si c'était ce sentiment fou et juste remercier Dieu comme, nous avons été totalement bénis. La semaine prochaine,

le moratoire sur les saisies qui a eu lieu a été levé. Nous avons acheté deux maisons cette semaine-là et nous sommes ensuite allés à la course. Nous avons fini par être assez bons et un mois ou deux plus tard, mon père avait envoyé un courrier électronique à un ami et lui avait dit: «Hé, regarde ce que mon fils a fait pour moi. Il a eu une maison pour moi qui rapporte bien. »Puis un type m'a appelé, qui est devenu un de mes partenaires plus tard et il a dit:« Hé, je gère un fonds d’actions de sociétés fermées à Lake Tahoe. Nous aimerions vous parler des affaires que vous faites. ’Je suis allé là-bas pour aller leur parler et à ce moment-là, personne ne faisait de saisie. Ce n'était pas une grosse affaire. Il y avait littéralement trois personnes aux enchères qui le faisaient. Eh bien, peut-être qu’il y en avait déjà cinq ou six, mais peu de gens essaient encore d’acheter une centaine de maisons.

Je suis allé voir ces gars pendant la journée et ils m'ont posé toutes ces questions. Je n'étais qu'un jeune garçon qui tentait d'obtenir un prêt d'environ 200 000 $. À la fin, ils ont dit et ils ont commencé à se regarder et à hocher la tête et il a dit: «Je suis partant.» Ils ont dit: «Si vous voulez 200 000 $, nous ne sommes pas l’équipe. Mais si vous voulez essayer de construire cela rapidement et de faire quelque chose, l'un des gars dit: «Je gagne des millions». L'autre type dit: «Je gagne des millions». Tout d'un coup, j'ai eu ceci Des fonds d’actions comme trois mois après avoir inventé mon entreprise, puis la vie a pris son envol pour devenir un peu ce que je suis maintenant. Il y a beaucoup de hauts et de bas, mais c'est comme ça que je suis entré dans les saisies et que je l'ai retourné pour le construire.

Brandon: J'aime ça. Je veux dire beaucoup de choses que je veux sortir de là. Tout d’abord, je pense que c’est drôle que le premier contrat vous ait eu un peu de chance. Avez-vous une idée de pourquoi ce tout premier, pourquoi les autres gars n'ont-ils pas soumissionné? Comme pourquoi est-ce que ça a atterri dans ta vie? Savez-vous aujourd'hui?

Aaron: Oui. À l'époque, il y avait tellement de transactions et si peu de gens le faisaient. C'était comme un rendement de 20%, mais ils ne feraient que 25%.

Brandon: D'accord.

Aaron: C’était comme… Juste pour eux, pour nous c’était comme une bonne affaire et pour eux c’était trop maigre, car ils savaient qu’ils allaient encore acheter quatre ou cinq maisons ce jour-là et qu’ils allaient beaucoup mieux ou peut-être parce était occupé.

Brandon: D'accord. Aujourd'hui, nous parlons beaucoup, je veux dire, évidemment, de votre histoire, et de ce que je sais de vous, cela tourne beaucoup autour des enchères de forclusion, de la part des ventes et de choses comme ça ou du moins, comme les marches du palais de justice, etc. cette chose. Quoi qu'il en soit, pouvez-vous prendre quelques minutes pour expliquer à ceux qui n'ont aucune idée du processus de verrouillage? Je sais que chaque État est différent un peu, mais comment cela fonctionne-t-il généralement? Au fur et à mesure que nous avançons dans l’entretien d’aujourd’hui, nous aurons beaucoup plus de clarté pour tout le monde, comme de quoi parlons-nous? Que veulent dire ces termes?

Aaron: Oui. J'aime dire les étapes du palais de justice parce que le visuel est très différent. Mais pour nous, ce que cela signifie, si quelqu'un arrête de payer son hypothèque, il commence à recevoir ces avis et chaque État est différent. Dans des États comme le Texas, le délai est de 30 jours. "Hé, vous êtes en retard de 30 jours. si vous ne le payez pas, nous le vendrons. ’En Californie, il est 90 ans, il ya toutes ces choses différentes. Quelqu'un arrête de payer son hypothèque et on lui envoie un avis disant: "Hé, vous avez tant de jours pour le payer ou vous allez être évincé." Ce que beaucoup de gens voient, ce sont les REO, comme les maisons appartenant à des banques sur le marché. Celles-ci deviennent la propriété d’une banque si personne n’a enchéri lors de la vente de forclusion, non? Ce qui se passera, c’est ensuite que la vente sera saisie et que le prêteur à ce moment-là aura la possibilité, si vous deviez 100 000 $ sur votre maison, de commencer à miser à 100 000 $ s’ils le souhaitent et que vous pourriez commencer à enchérir à partir de là. Ou bien le prêteur pourrait, à tout moment, décider simplement de dire que nous allons le radier et d’ouvrir la soumission à 25 000 $ ou 50 000 $.

Ils ouvrent les enchères. Si personne ne fait une offre, dites alors que le produit est retourné à la banque, c’est-à-dire quand il devient REO, ils engagent un agent immobilier pour le lister et il est inscrit sur la MLS. Si quelqu'un enchérit et décide de l'acheter, vous lui payez alors les chèques de banque et vous lui signez ces chèques de banque. Si vous construisez 100 000 dollars, vous leur donnez 100 000 dollars en chèques de banque. Vous leur dites à qui vous allez écrire ce reçu, ils vous envoient un acte dans quelques semaines. Avant cela, vous deviez rechercher le titre, c’est toutes ces choses. Il est supposé être invisible. Vous n'êtes pas censé aller voir la maison à l'avance. Vous devez faire votre propre recherche de titre pour vous assurer que vous achetez la bonne chose. Ce que je veux dire par là, c'est dans des endroits comme la Californie et les gens ont deux prêts sur une maison. Ils pourraient obtenir un premier 300 000 $ et un deuxième 200 000 $, car ils ne pourraient pas obtenir un prêt de 500 000 $. Une banque est la première, une banque est la seconde.

Brandon: D'accord.

Aaron: Si vous achetez ce premier prêt à la vente de forclusion, vous possédez la maison libre et claire. Si vous achetez ce deuxième prêt lors de la vente de forclusion, vous devez toujours payer le premier. Cela devient une très grande différence.

Brandon: Oui. D'accord. Quelqu'un est évincé ou il a cessé de payer son hypothèque et ensuite il va aux marches du palais de justice et, comme dans certains endroits, était-il littéralement dans les marches du palais de justice de votre région?

Aaron: Oui.

Brandon: Ok, le mien aussi.

Aaron: Oui, littéralement sur les marches du palais de justice.

Brandon: Oui, le mien aussi. Littéralement, ils se tiennent sur les marches du palais de justice. Je n’ai signé qu’une transaction, mais j’ai acheté la mienne parce que le gars a cessé de payer son hypothèque puis s’est présentée à la vente aux enchères et à la vente aux enchères… Une dame qui travaille dans le comté est un de mes amis. Elle a juste dit: «Hé, je veux juste vous faire savoir qu’une propriété est répertoriée et que vous voudriez, je pense. Tu devrais venir vérifier. ’Je suis allé là-bas, personne n’a soumissionné. Même chose, personne n'a enchéri. À cause de cela, l'offre d'ouverture était ce qui était dû. C'était comme 15 100 $ et quelque chose de dollars. J'ai misé un dollar et j'ai eu la chose. Nous avons des histoires similaires, mais c’est le seul accord que j’ai jamais fait au palais de justice parce que j’ai toujours paniqué. Vous avez mentionné que vous ne pouvez pas vraiment voir à l'intérieur de la propriété.

Vous n'êtes pas censé voir à l'intérieur de la propriété avant de l'acheter. Comment le sais-tu? Si vous allez acheter cette propriété aux enchères et je suppose que vous achetez réellement ce qui constitue un acte de confiance, alors vous pouvez… Ensuite, vous êtes propriétaire de la propriété, non? Est-ce que ça fonctionne légalement?

Aaron: Tant que… Ils utilisent en quelque sorte cela comme un terme légal: “Hé, il n’ya aucune garantie ou restriction. Si vous achetez le premier, ce qu'ils vous envoient est un acte, alors vous allez à la maison.

Brandon: OK OK. Vous achetez cette maison mais vous ne pouvez pas voir à l'intérieur. Comment surmontez-vous cela si vous essayez d'acheter aux enchères?

Aaron: Vous faites beaucoup de choses différentes pour la recherche. La vente aux enchères est un jeu à gros chiffres. Ce que nous avons appris, c’est que si dix maisons sont programmées aux enchères aujourd’hui, l’une d’elles pourrait être mise en vente. C'était l'une des choses difficiles que nous avons apprises. Nous en recherchions un et c’est un véhicule qui n’est pas vendu et qui nous rendrait tellement confus. C'est devenu que vous deviez vraiment tout regarder. Si c'était le cas, vous ne voulez acheter que des maisons qui ont été construites au cours des 10 dernières années. Vous devez regarder toutes les maisons construites au cours des 10 dernières années et être prêt à en acheter une. Vous ne pouvez pas vraiment choisir. Ce n'est pas très facile. Votre histoire, vous avez fait. Ma première histoire je l'ai fait. Très rarement, j'ai eu du succès à la cueillette des cerises autre que celle.

C'est une de ces choses qui représente une activité à haut risque et très rentable. Il y a des barrières à l'entrée et vous essayez ensuite d'atténuer les risques du mieux que vous pouvez. Au minimum, vous conduisez à la maison et allez la voir de l'extérieur. Parfois, il y a des signes que c'est vacant. Même si vous n'êtes pas censé aller frapper à la porte, vous verrez également d'autres personnes conduire une vente aux enchères. Ils montent et ils regardent par les fenêtres. Vous pouvez demander aux voisins, vous pouvez frapper à la porte et demander au voisin du type: «Hé, est-ce que quelqu'un vit là-bas? J'ai frappé à la porte et ils n'ont pas répondu. Etaient-ils partis? Vous essayez de trouver tout ce que vous pouvez. S'il s'agit d'une maison vacante en très bon état, le risque est évidemment moindre que s'il s'agit d'une maison occupée avec des pitbulls qui aboient à la porte lorsque vous frappez dessus.

Tout d'abord, vous essayez d'évaluer l'occupation et la qualité de la maison depuis la rue. Vous pouvez également voir à quoi ressemble le toit, quelle est la cour, différentes choses qui vous donnent un indice. Si la pelouse est vraiment belle, alors vous pouvez probablement vous attendre à ce que la cuisine soit vraiment belle. S'il y a des jouets et des objets partout dans la cour et que ceux-ci n'ont pas été tondus depuis un moment, vous présumerez qu'ils ne s'occupent pas non plus de l'intérieur. Différentes choses que vous faites. Nous conduisons toutes les maisons et nous évaluons le risque en fonction de cela. Nous découvrons autant que possible nos voisins, en voyant ce que nous pouvons. Nous faisons des recherches sur les titres de toutes les maisons et nous cherchons vraiment une raison de dire non.

Si nous commençons avec une grande liste, nous la recherchons. Si nous passons devant nous et que parfois il y a ces maisons avec des chiens géants essayant de sauter par-dessus la clôture de la porte à côté. Ok, c'est un peu importe quoi. Aucun prix, je ne veux pas avoir un accord avec ça. Le titre est pareil. Vous commencez à regarder à travers et allez, ça a l'air plutôt bien, ça a l'air bien. Celui-ci peut avoir un privilège fiscal fédéral sur ce qui signifie que je ne pourrai pas le vendre avant quatre mois, je vais donc simplement le retirer de ma liste. Ils cherchaient des raisons de savoir parce que vous commencez avec une grande liste, puis que celle-ci s’écroule puis que vous recherchez la valeur de revente de chacune des propriétés et vous dites: «Bon, que valent chacune d’elles? Pour quoi vont-ils vendre? ’C’est en réalisant des ventes comparables, tout comme ce que vous faites lorsque vous allez retourner une maison.

Vous allez savoir combien ça coûte de le réparer, combien ça coûte, combien vais-je pouvoir le vendre? Ensuite, nous y sommes revenus. Nous trouvons quelle est notre enchère maximum? Si je dis, "Hé, c’est un accord à faible risque. J’ai vu cela, je sais que je peux vendre cette maison, j’en ai vendu trois dans ce quartier, voici mon enchère maximum. »L’objectif est donc que vous obteniez le moins cher. Je n'ai jamais réussi à faire comme à des enchères aveugles où les gens disent: "Hé, envoyez-nous simplement votre meilleure offre." Parce que toutes mes offres sont basées sur le fait que je sais, un sur cinq, je vais me faire avoir. beaucoup moins que cela et cela va compenser mon agressivité envers les autres.

Brandon: Bien. Aaron, laissez-moi vous poser quelques questions et voir ensuite si je peux décompresser et bien comprendre ce que vous nous dites. La première question est combien de maisons en moyenne achetez-vous par mois en ce moment?

Aaron: En ce moment, j'en achète environ 20 par mois.

Brandon: D'accord.

Aaron: Oui.

Brandon: Sur quels états les achetez-vous?

Aaron: J'achète surtout au Texas en ce moment. J'avais l'habitude d'acheter beaucoup en Californie. Quand j'ai commencé en Californie, nous étions trois à enchérir et une centaine de maisons à vendre. Maintenant, dans mes quartiers, il y a une centaine de personnes qui soumissionnent et seules trois maisons vont être vendues. La plupart du marché a été corrigé ici où les saisies… Il reste une opportunité mais pas la même. Au Texas, les options sont un jour par mois. Il y en a beaucoup. Vous pouvez faire beaucoup de préparations, voir tout le même jour, réparties par le même jour. Environ 20 par mois au Texas. La plupart d'entre eux sont en cours de vente aux enchères, certains d'entre eux étant des ventes aux enchères en ligne.

David: D'accord, cela fonctionnait clairement et c'est ce que vous voulez dire quand vous dites que c'est un risque élevé, une récompense élevée. Nous voulons essayer de creuser, A, quelle est la différence entre l'achat d'une saisie immobilière et l'achat d'une maison en dehors de la MLS, c'est-à-dire comment la plupart des gens achètent des maisons ou peut-être à un grossiste? B, que faites-vous pour vous protéger de la partie à haut risque de celle-ci afin de pouvoir capitaliser sur la haute récompense? La première chose que je veux être sûr de bien comprendre est la suivante: quand vous achetez une forclusion, en quoi est-ce différent d’acheter quelque chose sur la MLS? Most of the time when you buy a house, you have got a real estate agent who is walking you through a process that you will probably never even know what they are doing. They are checking the title of the house to make sure that there is no additional liens that you are taking on when you buy the house. They are making sure that the person you are buying it from actually does own it.

You have an opportunity to get inspections on a property to know what kind of condition it is in there so there is going to probably be an appraisal involved if you are using a loan to protect you against paying too much for a house. Well, when you are buying a foreclosure, you do not get any of that. This is kind of like a buy at your own risk type situation. My understanding of what you are telling us is that you are going to go buy basically the title to a home, the right to take that house.

Somebody borrowed money from a bank to live in a house, they stop making the payment, the bank or the lender, whoever it is, is in the process of taking that title back and that is what we call foreclosure. In the middle of that, the bid can either say I am taking the title completely then I will go sell the house on the MLS through real estate agent or they can say I do not want to go through that whole process. While I am doing this, I will sell the right to have this note which would give you the home to the new person, to the highest bidder, which is where you would go to the auction courthouse steps you are talking about and you would actually buy the right to take that house over. Now, if it is occupied by a person, you are buying that problem. You have to now evict them from the house that you then bought. Is that accurate?

Aaron: That is accurate, yes.

David: D'accord. The problem with doing is this is that it happens very quickly and the banks are not going to give you like a contract a group of realtors put together that protects you as a buyer. It is kind of like you can buy the rights to own this house, you can buy the note and then evict the person once you have it, you got to figure everything else out on your own. What are some of the steps that you can tell us about how you do due diligence to make sure the title insurance is good? How do you get an ARV? How do you know what the house is actually going to be worth without an agent telling you? How do you get a rehab bid to know what it is going to cost to fix up? Stuff like that.

Aaron: Oui. It is really all of the same exact steps you do when you are buying it on MLS. They are just shrunk down. Your amount of time you have to do each step has really shrunk down. Then you are going to go to auction and try to buy a house, you are going to be ready to better have a list of 30 or 40. Whereas if you are see one on MLS, you can kind of do your quick search ahead of time and go, hey, as long as X, Y, and Z is true, we can buy it. Same with auction, but because you are trying to do so many in a short amount of time, it is just quicker and with less information. Other big distinction that you have there is on the courthouse steps, you have to show up with cash. If you buy it on MLS, you can actually get a loan to do it, right? Yes, it is a much riskier and quicker process though on MLS.

There is obviously pros and cons to that. We are looking at just the pictures or just with the neighbor tells us and the age of the house. Say, okay, this one was built in the last ten years. The outside looks okay, the neighbor did not see anything. I am going to assume that I need new appliances, new flooring and new painting. That is going to be $8,000, that is as scientific as your construction guess gets. If you also see from the outside there is dry rot, you go okay maybe there is going to be some dry rot, assuming an additional couple of thousand. If it is vacant and you might see that there is no HVAC system out there. All you can do is what you can see and get from a neighbor and come up with your guess. If the neighbors are like, you know what, they did a like a garage sale a couple of weeks ago and people were actually leaving with appliances or they were leaving with cabinets, that is a big clue.

We have had plenty of houses like that that we had got, were gutted to the studs. Copper is taken even for just the recycling value and the metal. You are going to take what you know and do a guess. You know that 75% of the time you are right. Sometimes you are going to open that door, walk in the house and there is nothing to be done. The last tenant left. They swept it, they cleaned it, they got their deposit back and now you can put it on the market today and sometimes it is a rep. Whereas if you buy it on MLS, you could get that home inspection. You could actually… If you are buying on MLS, I would recommend you send a general contractor for your home inspection, get a full quote.

What is this thing going to cost? Have him say he is going to do it. That takes… That is where the risk goes down with MLS. When I comp houses, I comp at the same way an agent would. When we first started doing this, I had agents comp the houses for me. They would send me over CMAs and the deal was if they helped me buy the house, I would have them list the house. Later, my wife became my listing agent so she had agents that worked for her and they would do the comp but it is that same process. You are just trying to find what that house would sell for. Two of my little things that I always do, I try to focus on house that were built like the last 10 to 15 years.

The biggest reason for that is that is a new home building neighborhood that there is usually a model match. I try to just put the best value on the model matches. I mean there is all sorts of different kinds of skills and CMAs but I am really trying to see here is the house that was the same exact floor plan that sold for $200,000. It has a really nice kitchen though so I am going to need a really nice kitchen to sell for $200,000 worth. It has a pool though and mine does not have a pool. I need to deduct some money. At all possible, same plan comps because you also see some plans that just sell for more than others because they are a great design. Then title reviews, the best way to do it is you go to the courthouse and you start looking up the name and the address and to see what is recorded against that name. It is a long process when you first start doing it. There is lots of probably classes out there and ways to do it but we go to the courthouse, we look up records, we look up do they owe taxes on it, that sort of stuff.

Brandon: D'accord. Let us say you buy a property at auction, and I want to go back to your story here in a minute, but like let us say you buy this property at the courthouse steps and it has got a tenant in there, because that happens sometimes. First of all, will you do that? Would you buy a house with a tenant in there and then what do you do when you get… Or not even a tenant, right? It is the homeowner, right? Because the homeowner sometimes still lives there and I cannot imagine they are always happy about losing their home, right?

Aaron: Oui. There are so many scenarios that happen. The first hundred houses I did, I only did vacant houses. I only did vacant houses that I thought were in good condition. One is I did not want to have to deal with the moral dilemma that happens with occupied houses. It is a frust… Like it is much easier to see an abandoned house that somebody already left than buy that because there is no stigma. I mean, maybe there is a stigma but my brain it was I am not the one doing this, it was empty. When an occupant gets in there, man, there are some moral and emotional dilemmas that happen and the best thing that that I could do is go listen to people, try to figure out the story and try to find the best outcome.

There is times when it was real common, people would be saying, ‘Hey, you got to give me cash for keys to leave or it is going to take you 90 days to evict me and I am going to take my appliances and this.’ There is these harsh negotiation. Sometimes you hear somebody and they would say, ‘I am a tenant. I did not know. I just moved in. I just moved in three days ago.’ Those would be cases where we would put money in the budget whenever we buy an occupied house. If a vacant house, if I am saying hey this is going to cost $10,000. They are going to add at least a few thousand dollars for occupied with the idea that maybe you are going to have to help them move to a new place, maybe you are going to have to deal with a lawsuit, maybe you have to deal with that.

We always try to start with talking to them and seeing like what their plan is, did they know, what do they need to get to the next place? Some people do not need any help, some people need money, some people ask for a ton of money. Some people were like, no, I cannot move and we put like moving vans out there and movers to help them move. Like I have a place but I cannot get there. We started buying and keeping rentals a couple of years ago. Now, when it is occupied, we have this new offer that becomes really exciting for us, to owners or tenants. We can say, ‘Look, if you want, you can stay in the home and rent from us.’ For owners we can tell them now like we bought your house but now you get a… Instead of being like $15,000 behind and your payment, you get to start fresh.

Now, you are going to make a rental payment to us. You can stay in your house forever if you want. Then tenants who just signed a lease, it is really easy to say, ‘Okay, we are going to give you credit for the deposit you gave your last landlord. We are going to give you credit for your last rent and now you are going to rent from us.’ Because that became way less expensive than spending $10,000 to go rehab it, move them out to be able to keep them in there.

Brandon: Now, my worry with that, my thought is like if a tenant, if the person who lived there was not paying their mortgage for whatever reason, what makes you believe that they are going to now suddenly to be able to pay their rent? Like does not that seem like, oh, I am going to be trouble?

Aaron: Oui. You definitely want to talk to them, you definitely want to understand their story and we are going to have times when we are wrong, right? Then we are going to have times when I say, you know what, this person, they told me this, it was that and now they are going to be okay. A lot of what we hear most of the time is I had three months where I did not have a job, I am working now but I am $10,000 behind on my mortgage. I have enough to pay my payment but I do not have enough to pay the three months I missed. Getting that, just reprieve, that fresh start for owners. Maybe I say it is successful three out of four times and one out of four times they are not able to stay. But then by then you actually have a lease though. It is a tenant landlord relationship. It is not the same sort of… It is almost like it is easier if they end up having to get moved out later if they are a tenant than if they are an owner. If they are past owner and they create damage, then people say, ‘Hey, this is a civil concern.’ But if they are a tenant and they create damage, you have grounds to do more.

Brandon: That makes a ton of sense.

David: Another thing, I have heard a lot of people that use that as a reason not to do what you are doing. Well, I do not want to have to evict somebody and it is a pain to evict them. But if you are getting enough equity in that deal, if you are getting enough meat on the bone, that is a small price to pay to make $50,000 to a $100,000, right? Like if you are getting that place for $250,000 and it is worth $350,000 and all you have to do is evict somebody. I mean like that is a really really nice deal and that is what I was trying to encourage people to think about is doing this is harder. It is a little riskier or maybe a lot riskier. It is going to be more labor intensive but that is what you do as a real estate investor to make a lot of money. It is you take on somebody else’s problem and you solve it and you get paid for that.

Aaron: Oui. You just have to… You want to build in like, hey, this is occupied. It is going to take any more work, more effort. I need to make sure that I buy it for less than if it was vacant. Then it also depends on how much money you have to buy, right? If you have enough money to buy one house at auction and your plan is to flip two houses a year, you are going to go buy a house at auction, you are going to flip it over the next six months you are going to buy another one, then you should not buy occupied houses because there is a chance with those occupied houses that it takes a year or two because there is some sort of a major issue that cannot get worked out. It happens sometimes. If you only have enough to buy one stick, with vacant ones, it is one less thing to worry about.

The idea when we are going to auction though, we are hoping that if we buy ten, one or two of them are occupied and seven or eight of them are not. If we did not have the ability to rent it, then I might not be as aggressive in buying occupied houses now because even when years ago when we started occupied houses and every time it was, hey, you cannot stay no matter what, we just need to figure out how to get you to your next stage and start fresh. That was a lot tougher. Like now, now the clear hard I can go, I have got this other opportunity for you, a fresh start. If someone else bought it, you would not have this opportunity.

Brandon: Yes, that is cool. One of the questions I get asked all the time is about, and quite often, because I mean I am fairly outspoken and David as well, but like us being Christians and I know you are the same way, like I get hit up by a lot of other whether a Christian or just spiritual in general, saying, how can you be a landlord? Like how can I be a real estate investor and be religious? How can I serve God and get into real estate? It is interesting like the whole moral like the issue. Can you evict somebody and be a religious person? Can you foreclose on somebody and be a religion… What are your thoughts on that because I know you are as well and we have had these conversations before but like what are your thoughts on that?

Aaron: Yes, there are moral dilemmas with real estate. There is ways that we can offset it and there is ways that we can actually… I also believe that we can do the right thing every time and sometimes the right thing is saying, ‘Hey, you are not paying your rent. This is not the right house for you. You need a fresh start.’ Like, hey, instead of having me evict you, just move out. Like, I will get you a mover, we will do this. I will not go after you. There is all sorts of things. I mean before somebody gets evicted, believe me, there are dozens of conversations that happened first that say, how can I help you because this is not the right fit. The other side of that though is so we had a house that we bought two weeks ago, front of the garage, the garage door was busted out so there is plywood all over the front door. It says ‘Keep Out!’ stamped on it.

Inside is wrecked, it has been vacant for like two years. Teenagers had been partying in there, cops getting called, neighbors on both sides hate that house. We bought it and within a week and a half we had it renovated and we had a tenant move in last Thursday, right? Two weeks after we bought it, a tenant moves into the house and now the two neighbors on either side are like, wow, you have saved our neighborhood. We are so grateful for this because this was this eyesore and now a family is living there, they needed a place to live, they found your place, now we have neighbors. There are so many problems that you can solve in real estate. I have got a set of houses in a small town in that I bought for like $10,000 a piece, right? I thought I was going to make a great deal. Now, I actually do not make any money on those.

They cost me way too much to do it for the amount of rent that is there but it is almost like to service to the community because the people across the street used to complain about how the vacant houses, people were breaking in there, it was a drug haven and now people live there. Even though it is like a break even real estate investment for me, which I do not recommend to go start and do, but it is almost like this other moral give back thing that we do are like. Well, it is good for the community. We are just going to keep that one and keep doing what we are doing.

Brandon: That is cool. David, I am curious to your thoughts as well. I mean like how do you view real estate from a, I do not know if I can call even religious, just like a moral standpoint we could even say because I mean it applies to everybody. Like can you be, I mean how can you be a real estate investor and be moral? Any thoughts on that?

David: Well, I think the dilemma comes from when we are saying to ourselves like am I allowed to do what is in my own best interest at the expense of somebody else? When we look at it from that perspective, you can feel guilty to evict a family, right? If you flip it around and you look at this family and say, why are not they asking themselves why am I staying in a house that I am not paying for or what about a family that really needs a house to live in and they cannot because this other person is staying in there thinking that they should not have to pay.

They were not paying their mortgage. Now, they are not paying the landlord. I do not really feel all that bad about evicting somebody because like Aaron said, they forced me to do it. I tried option A, I tried to option B, I tried option C. In my mind they chose Option D which is obviously very difficult and it is easy for them to blame the greedy investor but I am looking at it like you forced me this hand. Like Aaron said, ‘I do not want to evict you. I never wanted to evict you. I wanted you to do the right thing and leave. I offered to pay you money to leave, I offered to pay for your moving. I offered to help you find something else.’ You said, ‘No, no, no.’

At this point you forced me to be in a position where I am the one who has to be the consequences for your actions and honestly for a lot of people that is the best thing that could happen to them. Maybe they are in that position because they have not had to pay consequences for their actions. Even though it can feel bad to be in that role, sometimes it is like the vegetables that the little kid needs to eat. They do not like how it tastes, but that is what they needed.

Brandon: Oui.

Aaron: I think that dilemma is the same with lots of different parts of real estate though. Like a wholesaler that gets a contract to buy a house from somebody for $100,000 and then sells it to somebody else for $120,000. Like people are like, ‘Well, what about the guy, the person you first bought it from? Like the idea is trying to create these win win wins where everybody wins. The first guy was happy to sell it for $100,000, The wholesaler found a value because someone else willing to pay more. Like there is all sorts of steps in real estate where you are finding value by solving a problem and I believe there are ways to do it where everybody feels like they won and they do not feel like they got screwed.

Brandon: Yes, I have had that conversation numerous times with people about wholesalers, especially, and flippers but wholesalers seem to get the worst wrath for it. It is like you are stealing from that person. Like kind of my argument that I go is like are you mad that the pair of jeans that you just bought for $30 that is from Sears? Are you mad at Sea… Sears is not even how they are running. You went to… and you bought these jeans for $30. Are you mad that they bought them for $20 from the distributor because the distributor just made $10 on that or the distributor paid $10 for it.

You go down the line far enough. Like everything gets added, added amount. Like there is profit for providing value at every step of every transaction in an economy, that is what we are in. Then the question becomes how much, right? Is $5,000 appropriate? If you get a $100,000 fee, is that taking advantage of somebody? $200,000, $1000, like where is the line? I have no idea, but I do not think there is a line but I do not know. Qu'est-ce que tu penses?

Aaron: I think the people that are really anti-real estate guys are probably the same people that are anti, the Jean Company making a profit on these jeans.

Brandon: Oui.

Aaron: They are the same people that are anti that this big business is successful. In business, there is risks.

Brandon: Oui.

Aaron: Like plenty of companies have gone bankrupt this year that are never coming back because they were taking risks, they were making profits before and they are no longer profitable. Sometimes in business, you have these really really good highs and you are making money on deals. The same level, I have the neighborhood. I do not make money on. At the same time, I bought houses, intending to flip them and lost a ton of money. Years where I went broke because there is ups and downs of all of it and I think that the moral argument goes both ways. You get paid for the risk and the problem you are solving and when you stop solving problems, you do not get paid to solve them anymore.

Brandon: Yes, that is great. That is great. Alright, well anyway, I am glad we covered that because I do not think we have ever actually really had that conversation about the moral aspects of real estate on the show in the last 320 something episodes.

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Yes, I want to dive back into your story a little bit when you were telling us about getting started. A few months in, all of a sudden you have got all this money that people wanted to give to start a fund or whatever you said, right? Like can you walk us from that point on up to where you are today?

Aaron: Yes, so I this really unique experience that helped set me up to… It was like the perfect storm, right? I was in the right place, at the right time for so much of it. When I was working as a home builder, we managed these big teams and we would work on land acquisition. What is this going to cost to buy the land? What is it going to cost to develop it? What is it going to cost to build the house? We then had the sales teams that would sell it. We had these customer service teams that would make sure that the buyers were happy and you know this big sequence. Most of the people that I was competing when I first started, they were trying to find houses that they made a 20% pure return on. Annualized return was not even talked about. Nobody cared about making a 10%, a 15%, a 20% annualized return.

They just wanted this pure thing. I said, ‘Hey, I have got this business experience with a real estate development. I am going to take that and apply it to house flipping.’ Which meant instead of buying land, we are buying a house. Instead of figuring out how much the house is going to cost to build, we are figuring out how much it is going to cost to fix up the house. We did have sales teams, we actually also had customer service teams so we were one of the only flippers and sellers that we provided them with a warranty. They could call our customer service teams if there were things like, outlets is not working and stuff like that and they bought a house a year ago, sometimes I had somebody in the neighborhood and we would go fix it.

We offered all sorts of different warranties so we ran it as a home builder and the other side of that too is instead of trying to make 20% of deal, we ran it on an annualized return basis, which that was the idea, the ability for us to be able to buy a lot more houses. Now, when I say fun, it started as several people, several accredited investors investing to an LLC, right? There is all sorts of different structures for that. All sorts of different entities they can use. But in ours, they invested into an LLC, that LLC would then invest into houses. Somebody might own 5% of the fund, somebody might own 20% of the fund. Every house we bought, they would kind of own that percentage but then we would recycle the money.

Everybody would commit, in and they would commit for at least a year. They would put their money in for a year and then it would recycle. Every month more people would pull their money in. After a year, people would have their… Some months we had people pulling their money out. We had some people that always left it in there. But we looked at it on an annualized return basis instead of an individual and then that also helped us to be less emotional about the winners and the losers. Like I make money on nine out of ten houses. I take a loss on one out of ten.

Brandon: Vraiment.

Aaron: Oui. Because of how aggressive we are in, because of how our system is, if I see like, okay, this one is not a winner, let us liquidate it now. Like there is no reason to hold off and go, hey, this one house I need to make sure I break even or make a profit because it is that annual return that you are thinking about. If I am making… Because what also happens when you buy ten, one of them you end up making way more than you thought.

David: Oui.

Aaron: Droite? You get the multiple offers on it right away. I had one that I bought and the day I bought, an agent called me and says, Hey, we were in escrow to buy that as a short sale. Can we buy it? We sold them ten days later. There is lots of different sides of how that works.

David: I think that that is such an important point to just emphasize right now. Because Brandon and I, in the position we are in, we hear a lot of I tried real estate investing in the house of appraised for $10,000 less than I thought and the rehab was $5,000 more than I thought and the rent was $100 a month less. This whole thing sucks. We always focus on that and we just forget conveniently about the time it appraised for $30,000 more than I thought and I got more rent than I thought and my rehab actually went a lot smoother than I was afraid of, right? Like those things happen just as much or more, but you focus on the beats. It is just like poker where were talking about earlier. Everybody remembers the hand they lost that they should have won. Like when Brandon was telling that story, how he moved on. He did it on my money because he caught a card on the freaking river and like Brandon just plays wildly unpredictable poker and like it ended up working out right?

Brandon: It is called skill, David. It is called skill.

David: Oui, exactement.

Brandon: I am like a Ninja, you never know what I am going to do.

David: Ninjas are unpredictable, right? There are not focused or…

Aaron: Poker Ninja.

David: Yes, Poker Ninja. I do not remember every hand I won, right? Or the times where it like, Brandon probably remember, that is how he went. But when you lose, you remember it and your brain has a tendency to do that and I think, Aaron, your philosophy is very wise because you have just accepted psychologically and emotionally ‘I am going to lose money sometimes,’ it is okay because it is a business. Not every player in NFL team drafts works out. Not every employee that a business hire works out. Not every plan somebody had to sell a product works out. Like you could just do this for everything. There is Ford Pintos that are existing in the world and that was a very bad idea, it did not happen. Before they are still making a lot of money, right? They should not stop or not make cars because they had a loss and real estate investing is the same way.

Aaron: Oui. It is totally the same way, you get those. If you were only going to judge it on like one house, then the story changes so much. It was either a really good or really bad. You have got to be able to judge it on the whole cycle of it. One of the things I learned through there that helped take a lot of the emotion out of it that sometimes I need to remind myself is most of the time the first person I got an offer from was my best buyer. There were plenty of times when it was like the first offer came in $20,000 under what I wanted and I am like, ‘No, I am going to hold out and wait for my full price offer.’ Then six months later I am selling it for $10,000 less than that first one.

For me, it was always about quick turns, annualized return that first offer that came in. Try to negotiate that person to the best deal I could for myself and try to sell them the house because prices very seldom become worth more later and the people that… Sometimes a couple of months later, you do get the full price in that but for us it was a cycle, move it quickly and make money when we can and when we know we are going to lose money, like lose money now, sell it now. You can also recycle that money. If you are going to lose $10,000 in 30 days or in six months, it is better to lose it in 30 days so you can make $10,000 the next month.

Brandon: That is such a good point. Alright, you started buying these properties, started ramping up then. I am assuming most of them you were just flipping, right? You were just selling them, fix and flip mostly.

Aaron: Oui.

Brandon: Go ahead.

Aaron: First couple of years was just flipping, investors made giant returns like 30% to 35% annualized returns. It was crazy. My wife built the big brokerage, we build these giant teams.

Brandon: When was this?

Aaron: 2009 was when my daughter was born and I started 2012 was probably our biggest heavy year. Then 2013 is when everything kind of changed and we lost it all.

Brandon: Well, okay, explain that. How did you lose it all?

Aaron: Oui. I had these awesome teams, right? I was running my flipping company like a home builder. I had tons of tons of employees, tons of company cars, tons of employees were medical insurance and every morning we would meet at the office and everybody would get $1 million in cashier’s checks and they drive out to all these different auctions and they would bid. The 2013 was the time when all of these, during 2009 to 2012, we were the people that we are figuring out how to do this business. We were the trailblazers. 2013, you had these giant companies that decided to come into the single family rental market. Invitation home from Blackstone, American Homes but yet all of these companies come in and then I had a chance to work with these companies. When they first came out,

I talked to them a few months before they actually started buying in my town. They were saying, ‘Hey, we are going to put you out of business.’ At that time we were making like $40,000 a month on just the real estate commissions, not even including profits. I was like, man, there is no way. But what I did not understand was the buying power and the strategy of these giant companies and they came in and they bought every house at auction. They bought a lot of them for what they were worth retail, like what we were going to resell them for. They buy every house on MLS. What happened, especially in the northern California market, is they were right. They made a good play. When they buy, they buy tens of thousands of houses. When you buy every house that is on the market for whatever, all of a sudden prices went up 30% to 40%.

They had built in this equity because they bought every… They knew that the home prices were kind of undervalued, they made a big bet on it. Well, for the next six months, I was still going to auction every day and we did not buy any houses and we had all that overhead and it was like spending burning $100,000 a month or more and overhead. By the end of 2013, started looking at the bank account and I was like, oh my gosh, like we cannot do it anymore. We had to close up. I told my wife like we are out of money. It was so crazy because we had gone from like millions of dollars of liquid capital to be in like a few hundred thousand dollars in debt at the end of 2013. It was not because we did bad houses, it was because we unproperly managed our business and our business cash flows.

Brandon: What can you tell us looking back on that experience? First of all, how many were you buying at the peak? Like how many houses were you buying when you were just fully cranking and then…

Aaron: Auction was every day and our biggest month was probably like 50.

Brandon: 50, wow.

Aaron: But those were also average price of like $300,000 or $400,000. Now, we are doing a high volume in Texas but it is an average price of $100,000 a house, much smaller team. At that time in the peak we were it could be $10M to $15M a month.

Brandon: D'accord. Going from that, having these hedge funds come in and I mean it is funny because like we had just started the podcast back when that was really taking off and over the last six to seven years we have been hearing of the hedge funds coming in and then kind of went out. Like it was a thing for a while and then it was not a thing as much. I guess I am wondering like what lessons did you learn from that that you could apply? Like you said you did not buy bad houses, what was the problem and can you talk about that?

Aaron: Oui. I learned a lot. I learned a lot that the only downside with flipping is it is only money if you keep flipping, right? It is like having a job. At that time, I did not buy any rentals. I did not buy any long-term assets. I did not have any protection. I remember going, man, if I would have just figured out a way to keep and refinance a hundred of those thousand houses I flipped, we would be fine forever, but I did not. What I learned is if I ever got another chance again, I was going to focus way more on long-term knowing that flipping money is still vertical income.

If I stop flipping tomorrow, I am not going to make the money next month. That was one big lesson. Another was really be aware of your business cash flow. I think I had big dreams of owning and running this big company in like where the employees would do these big employee events and it was as fun camaraderie.

That was something I really wanted in my life. It was not really practical or needed for the business. I could have done the business I was doing much better. I could have done it much safer. That was when one of those moral dilemma, it was like no, I am not going to lay anybody off, I am not going to lay anybody off and then by the end of it, all of a sudden I was out of money. I am like, oh, they probably would have been better off if I would have laid him off six months ago. I learned to always follow the cash flow my business. We look at profit loss reports now with all of our entities like every couple of weeks and we are really dialing in, are we making money this month or not? How are we doing? Then also knowing that like money can be temporary. When you are doing really good, do safe things, do smart things with the money.

At the time, we were not ready to be that wealthy. We have got really wealthy really quick and so we did not spend it on good things. We spent it on stupid stuff. We were not focused on God, we were focused on ourselves and we think that is part of why it all ended up falling, right? Because instead of like being grateful for the opportunity, it was almost getting cocky. It was getting cocky. We were overly cocky of, hey, when they said, ‘Hey, we are going to put you out a business.’ I did not even think to actually listen to their plan and contemplate it. It was like I am the best of this, I am not worried.

Brandon: Sensationnel. Yes, fascinating. Again, it is another one of those segments. I know I say this on the show a lot but like rewind that last like two or three minutes and listen to that again because that applies to all of us all the time. It makes it really easy to get cocky in a good market, right? What is that famous phrase? Like rising tide lifts all ships.

David: Lifts all ships.

Brandon: Everyone feels really good right now in real estate, especially, right? I am seeing the same things today that we saw back in 2007 where everyone is a genius who buys real estate. Like in 2008, 2009, 2010, 2011 and 2012, 2013, 2014, 2015, we all looked so good, right? But like are we just getting cocky or are we looking at the actual fundamentals of what we are doing right? I am very aware that I have been very lucky to invest in the up chart, as things are going up, but I hope that I have, I do not know what to call it, even fortitude. I hope I am continually asking myself like am I still buying on fundamentals?

Am I still doing the right thing because it is the right thing or because I am resting on my laurels that, oh, I have got this? I am glad you brought that up. One of the best piece of advice I have ever got in real estate when I very first got started, like very first deal and old investor, I do not remember who it was but remember he was really old, like 80’s or 90’s, and he said, ‘If I could give you one piece of advice, it was you can go broke buying good deals.’ I did not understand what he meant when he said that, like it did not really make sense to me but you can go broke buying good deals. Today, I understand a lot more what he means by that. It is basically what you are saying you did not buy the wrong deal, but you still lost everything.

Aaron: Yes, absolutely lost everything.

Brandon: Oui.

Aaron: It was from the other sides of becoming that. The deal is the most important part especially when you are small. You started to scale up and everybody talks scale and big businesses, you got to be careful. You got to be smart with that. If you do not know how to do that, you have got to get a coach to do it. You got to be careful. There is lots of different strategies and things that we used later but it became… We learned a lot about what not to do the first time.

Brandon: Oui.

David: Aaron, from somebody who had huge success, lost it all huger success again, you have been through a couple ups and downs, you have kind of got, even though you have got a baby face, you have got some sage wisdom in there. What advice do you have for newbies who are looking at this journey like, ‘This sounds kind of scary, should I do it?’

Aaron: Oui. I think the newbies that are considering it, it also sounds a little bit of fun and exciting, right? Like I kind of knew I was always intrigued by house flippers. Even when my dad was a home builder, I was really intrigued by that idea. I was intrigued by real estate. I went all in. Sometimes people will say like, ‘Hey, Aaron. I am ready to quit my job but I do not know what I am going to do next.’ Like you did, right? I will tell him, ‘Well, when I quit my job, I knew exactly what I was going to do on Monday.

I knew exactly the work I was going to be doing. I knew the route I was going to be driving houses. I knew the auctions I was going to be going to.’ They are like, ‘I want to be an entrepreneur so I am just going to quit my job and then figure it out.’ I have to remind them a lot, be ready and know what you are going to do next. If you do not know what you are going to do next, do it. I think it is also okay for people to get their feet wet while they are doing other businesses, while they have a normal job. David is one of the best stories of having a job and doing real estate on the side and being able to become a real estate mogul, right?

Brandon: Oui.

Aaron: I think that there are safe ways or not and even though my story could have been very different had another couple of weeks gone by at the very beginning and that I just give credit to God on the way that things worked out, my story was supposed to be this crazier story, but still, it was strategy. I had savings, I had a plan, I knew what I was going to be doing and I knew I was ready to kind of jump all in and when I jumped all in, I had it there. But if people are ready to jump all in, just jump a little bit in and go educate yourself, see deals. You can go attend auctions every day without ever buying a house and learn so much about the process.

Brandon: That is such good advice. I mean like, yes, if you are brand new and getting started, go to an auction, like go to open houses. Like get out there, get your feet wet. It does not mean you have to invest. I always tell people all the time on this, I do webinars every week at BiggerPockets, and I always say like you can start analyzing deals right now. You can start, even if you are not anywhere close to being ready to buy, you can get good at analyzing deals without ever having to commit a single dollar anywhere.

Aaron: Oui.

Brandon: Build your skill.

Aaron: You can go to auction and see what houses sold for. You can go drive by them afterward and see if they were occupied or vacant. You could see what they would have cost. You could follow along on Zillow and two months later, see what they sold for and be able to kind of guess like was it a profitable thing or not? Should I have bought that one? I mean, you can play this game without putting any money in if you are really diligent at it.

Brandon: Yes, that is fantastic. Alright, let us go to the rest of your story. You lost everything and this is like what, 2012, 2013, somewhere in there, right? How did you work? How did you recover and what did you build in its place and then lead that, tag us where you are at today and kind of what you are doing today.

Aaron: Oui. The 2014 was a rough year, right? Like my family was in shambles because we were also feeling the after effects of what happens when you are super cocky and you are not focused on family and you are not focused on spirituality and you are focused on like money and grow. Then also maggots taking away and you are like, oh my gosh. Family was in shambles in 2014. Business was in shambles, trying to find different things. I remember applying for a job to go be a building inspector at the City of Napa, right? I was like I can drive down there for an hour and a half, an hour and a half down and back every day because that is something I need to do, right? I was going to go back to a normal job. Two things that helped me during that time, two books.

One was how they Hal Elrod’s Miracle Morning. He has been on the show a couple times and Tim Ferriss’s 4-Hour Workweek. The Miracle Morning helped me get my spirituality back, like to help root for myself and to get up earlier. The 4-Hour Workweek helped me to take the office work and make it a lot more efficient and start to come up with systems. I started, I had the like a few houses left and it is like get up at four in the morning. My first three hours I would do my office work, doing the 4-Hour Workweek type stuff and then I would go to the houses myself and do the manual labor. Like do the construction services and the request for repairs and all that stuff. That took about a year doing that.

I had one good apartment deal that that we will talk about later. That was a way that I was able to get some income during that time. Then 2015, I bought this apartment complex a couple of years prior, we are going to about it in the Deep Dive, but a guy sent me a thing and said, ‘Hey, there is another apartment going to sale. Would you like to buy this agent out there?’ I saw that it was going, that it was scheduled for foreclosure, and I was like, oh, that is interesting. The title report scheduled for foreclosure. I had the rent rolls, the tax thing, everything like that. I was like, you know what, I am going to fly out to auction.

Maybe I will go buy this apartment at auction. I went out and I flew out to a small town in Texas and went to the auction and the apartment came up for sale and it actually came up for enough money that I had there, but I got cold feet. I was looking at it and I am like, I am here, I am supposed to be here. I am meant for this, and I got cold feet but I had not successfully bought at auction for like a year now, right?

Brandon: Oui.

Aaron: I was second guessing myself in there. I left it and I just thought, never mind, I do not want to buy it. Then the auctioneer was like, ‘Okay.’

Brandon: It reminds me of like, I am going to use an analogy like David does all the time, right? Like it reminds me of like when you fall off a bike, like you really get like fall out of a bike before, right? When you get back on like you are just like so… Like your body is shaky. Like I do not want to it, I do not want to fall again.

Aaron: Absolument. I had not had success in a couple of years. I had success in a couple of years and I was not my best self anymore, right? I was like this is being able to get back on your feet and be confident because auction is supposed to be a fun and exhilarating thing. The cool thing that happened during that auction is, then I kind of sat, second guessing myself, telling myself I was a loser for flying all the way out there and not doing it. This other auctioneer shows up and he starts selling houses and nobody is there. He starts reading off an address and a price and it goes back to seeing houses sell for $30,000 or $40,000 or $50,000 and I am like, this is crazy. No one is here, no one is here in this small town and this guy just sold dozens and dozens of houses.

Then I flew home and I called Kaleena and I am like the craziest thing happened, I did not get the apartment. I chickened out, I did not do it and at that time we needed it, right? Like even the flight out there was like it was a big deal to pay the money to fly out there. I had a line of credit that it was enough to get the houses. I get back home and I go, but you know what? I think there is a chance to re-do auctions out there. The next month for auction, I flew out there three days prior. I drove houses, I drove hundreds of houses. I did title, I comp. I did not have a team anymore. I had one girl that worked at accounting for me. I got ready and I went to auction and I bought three or four houses that first auction day.

Brandon: Where was that at?

Aaron: That was a small town in Texas.

Brandon: D'accord.

Aaron: Bien. When that happened all of a sudden I was like, oh my gosh, I have this chance again. After like a couple of years of prayer and going, if I ever had a chance to do this again, next time I would do X, Y, Z. All of a sudden the flood gates opened up and it was like it was 2009. No one was at auction again, there is all this opportunity. Now, there is a lot of people at auction again in Texas. But when I first got down there in 2015, there was not and it was this kind of free start. That is how I got back into it. The big changes this time is I used the 4-Hour Workweek mentality instead. I use very few employees, lot of systems, a lot of great software we built, stuff to like really make it to where a few people can do a lot of work. Now, for every ten we buy, we will flip two or three and we will keep seven or eight as rentals.

We will use the profit from the flips to run the overhead, to be the equity for the rentals and then we will refinance the rentals. Because it is that one thing I learned when it was all over. If I ever do this again, one I will be better with my money, we are way more giving now, we have way more experiences over things, we homeschool and travel with our kids. Like the way that we had spent our money is so much different than it used to be and then what we do with those assets now is it is try to make sure that we have long term income or we never have that happen again. I believe that rental real estate is a way to set those things up to be okay for life regardless of what happens.

Brandon: That is amazing. I feel like this show could easily become a Joe Rogan style nine hour interview. We can just spend forever on this, but man, we will save that for when we are sitting on my Lanai here in a few weeks and we will chat. Actually, I got kind of a fun plan when you are coming out to Maui, but we will talk more about that when you are out in Maui. Alright, it is time to shift onto the next segment of our show, the Deal Deep Dive.

Hey, it is Brandon. Once again, a quick break from this podcast interview to invite you to this week’s Webinar, 3 Steps to Financial Freedom in 10 years or Less. Like imagine a life where you can work where you want, when you want, how you want, with whom you want, right? For most of the world, that is nothing but a pipe dream but for a real estate investor, it actually is possible if you take the right action. On this webinar, I am going to be unveiling the exact process you need to build a real estate empire to help you achieve that financial independence. We are going to be going through three steps for it. If you can attend, that would be awesome. Again, three steps of financial freedom. Go to BiggerPockets.com/retirewebinar. Again, BiggerPockets.com/retirewebinar to sign up for this webinar. I will see you there.

Brandon: Alright, let us get to the Deal Deep Dive. This is the part of the show where we dive deep into one particular deal that you have done, Aaron. I know you mentioned earlier that you have got one. Why do not we just start at the beginning? I will ask you a series of questions about this. First of all, what is this property we are going to be talking about today?

Aaron: Oui. It was originally a 66 apartment units, two different locations. With one package deal. I bought a 46 unit and a 20 unit from a seller.

David: Ok, génial. How did you find it?

Aaron: It was really funny. I actually bought it back during that time in kind of 2013 when we could not buy houses on the courthouse steps very much anymore. A guy that was involved with one of our investors said, ‘Hey, I have got this set of apartments for sale out in Texas. I want to be able to sell them.’ When I first looked at it, cash flow looked good, his asking price looked pretty good and I had lots of cashier’s checks from these lines of credit. I was like, you know, I can go put some of it over there right now. Yes, that is how I found it.

Brandon: Bien. How much was the property?

Aaron: Maybe that is the best part. I ended up getting a great deal for it. First, it was listed for like $700,000 and for the cash flow that it had, it was like bringing in $8,000 a month in rent. Seemed like it was a pretty good deal. I flew out there to go make the offer on it and the property manager that walked me through the apartment, the first one she takes me to, there is a giant hole in the roof and like a dead possum on the ground. I was like, this is disgusting, right? There is like bars on windows. It was absolute like trash. She showed me and she kept showing me like worse and worse and worse and this is where the meth lab was and all sorts of stuff.

I was like, whoa. I got back in the car, I am like I am never going back to that town. That was like disgusting. I need to go shower. I called the seller and I said, ‘Hey, man. Je suis vraiment désolé. I am sure you are going to get a lot of money for it but I would not be able to offer anywhere close to it. Like my offer would be so bad, it would be insulting. I appreciate looking at it. I flew out here, I was serious, but it is just not going happen.’ He goes, ‘Well, what would you pay for it?’ I went, ‘Well, the most I could pay was like $325,000.’ He had bought it for $1.2M two years prior and I did not want to buy it for $325,000 either. I was only trying to offer. He said, ‘Could you close in three days?’ I was like, oh, okay. Yes, I paid $325 for it. Eventually, it was worth a lot more but it had long ways to go to do that.

David: D'accord. I think you covered how to negotiate it. Before I ask you how you funded it, I want to ask you how did you know the possum was actually dead and not just playing possum?

Aaron: Man, you know what, I am done. Just the assumption that it would play possum somewhere else because this is the place to be hanging out.

David: D'accord. That is a good point. Like this is not where you would want to play possum.

Aaron: Yes, in Santa Barbara.

David: How did you fund this deal?

Aaron: Yes, I had cashier’s checks that were from a line of credit from when I was flipping houses.

Brandon: Bank line of credit you mean? Just like a…

Aaron: It was part of kind of that fun relationship that I had. It was like private equity line of credit. I paid 12% interest for it.

Brandon: D'accord.

Aaron: Which was a high interest rate for it but it was kind of like a no questions asked type of line of credit.

Brandon: D'accord. What did you do with the property then?

Aaron: The first thing I did was I kind of realized and learned that the property manager had been ripping the guy off, right? The reason she showed me the worst house is she did not want him to sell it.

Brandon: Oui.

Aaron: But he kind of told me that. He gave me that advice. He said, ‘Hey, I still think you should make me this offer for $325,000 and I think you should fire because I think what is, she is just screwing me so she did not want you to buy it.’ He gave me that. He is like, ‘But I am still done.’ Talking about win-win. He thanks me for the next couple of years. He thanked me all the time. ‘Thank you for buying that deal to get it off my hands.’

Aaron: He was…

David: This is the world’s best seller that you have to come across.

Aaron: Oh oui. He told me what was going on, he sold it for nothing, still said, ‘Thank you. You saved my life by getting that off my hands.’ I hired another property manager and there was two different complexes. A 20 unit complex and a 46 unit complex. I soon realized that it was going to take a lot more work than I thought and that property manager started going to work though. He got three people to move into the 20… The 20 unit apartment complex was totally vacant. Nobody had lived there in years. We do not have powers on, they did not have meters. First, you went to work over there and he got like three or four tenants to move in to that one. Then he started to clean up the other one and we fixed the gate and we fixed the security and we just started kind of getting rid of the trash and the stuff that happens when a place gets kind of abandoned.

Then near the end of that first year, like six months later, I was short on cash to finish fixing up the 46 unit. Now, the rest of the market had crashed, I did not have any line of credit money left but I was able to sell the 20 unit apartment complex. Essentially, it was worth zero when I bought it. It was like the extra one he threw in. I bought the 46 for $325, he gave me this 20 unit, but I sold the 20 unit for $200,000 just after getting three or four tenants in it. I sold for $200,000, was then able to use that money to go rehab the 46 unit. We put in all new roofs, major rehabs for all of it. Got It up to a 90% occupancy.

David: If this story does not describe Aaron A perfectly, I cannot even keep up with all the different real estate strategies you are using in this. We have not even dug into your like guard possum strategies for keeping out the criminal element surrounding it. Okay, I think you just covered the outcome. Tell us what lessons did you learn from this insane deal?

Aaron: At its peak, once I got to 90% occupied, it appraised for like $900,000. At that time, I refinanced it. I was able to refinance it for more than I had in it. Then I was able to essentially get paid a couple hundred grand, tax free income, right? I paid off what I paid plus the extra money. That was something I had not learned before in real estate. If you find the right value add deals, I think it happens more in commercial because in single family it is tough to get those loans and in commercial it is much easier. You get this opportunity where you can refinance for more than you put in it and that is tax free income, right? You still have to pay it back if you sell it but you do not have to pay taxes on the income now, talk to your CPA, do it now. Make sure you are doing it the right way, do not want to get in trouble.

Brandon: Oui.

Aaron: Then that was at its peak a couple of months or maybe a year later, I thought I was going to run out of cash flow forever but maybe a year later occupancy started going way down. It started to get like 70% occupied, 60% occupied. I ended up selling the deal for like $625,000. I still made money on it, but not as much as I would have it at peak. My bigger lesson with that, this is like a C or a C minus or D Level apartment complex. If you are getting into apartments and you are adventurous, it is a fun way to get into the business because there is not a lot of competition but I learned that these apartments of like the C or D lifestyle, especially really old ones, they kind of have a life cycle. That life cycle is, they get fixed up, they get a lot of attention, it is the new place on the block. It gets a lot of times, it gets up to that 90% occupied and it hits that highest level. That is like what it was when the guy that sold it to me bought it. Then the cycle happens where people start getting used to living there, it is no longer the shiny new thing, and the value starts to go down, right?

Then that value goes down and then all of a sudden it is like in this repair and people have better assets to work on. It had done… When I looked back historically, this department had done that for like over 25 years, right? It was worth a lot, then were not, worth a lot, worth a lot. If you are going to be in the C and D minus, the goal for me should have been to buy it low, fix it. Once I got that 90% occupied instead of trying to focus on horizontal income, sell it. Because its life cycle it going to hit that. I ended up selling it to a guy. He is a real estate developer. Now, he is fixing it up, he is getting it back up. Maybe it is worth $800,000 now to him but I have a tough time seeing those C and D minus level properties actually stay worth a lot. Partially because the price point…

Brandon: Yes, I see that as well. Like I think it is because these properties, like if you do not have a constant pulse on these lower end properties, like the C minus property because I have had them as well. I have a 24 unit in Ohio right now, same way. Like if I take my eye off that ball for like a month, all of a sudden like there is more vacancies and there is a car parked on fire in the parking. It is just like, ‘Oh, I got to go focus on that.’ As soon as I focused on it, boom, shoots right back up again. But it is like a fire, I am going to use another analogy, right? It is like a fir you have to constantly like stoke with like air or it will go out. Go ahead, David, you got one. I know you.

David: It is like a substitute teacher trying to take over a class of like not so great kids and like if you just never take your eye off them at all, they will sit in their chairs. But like the minute you go outside to buy a soda or something, you come back and they are swinging from the ceiling and like they have got pencils shoved up their nose and it is just a complete chaos. I like Aaron’s point about like it is a cycle, right? It is like Brandon surfing. You want to ride that wave and ride at the point where you are like I am losing some momentum. You just fall off on your own so that you do not have a horrific crash and get caught up by or anything.

Aaron: For me, they are not horizontal income, right? C – and D Level apartments, it is not horizontal income that you make while you sleep, it is you have to work hard at it.

Brandon: That you are buying a job.

Aaron: You are buying a job… If the rent is only $450 a month and you have to kick out a tenant, it costs $4,000 to turn that apartment over.

Brandon: Oui.

Aaron: You lose 10 months of rent.

Brandon: You are charging $3,000 a month rent and a nice apartment complex. It is the same turnover costs and you have to evict, it cost you $4,000. Those lower rents that are really high cap rate, turnover costs are what end up killing you.

Brandon: Oui. I always assume like if somebody owned… I own mine from, I live in Hawaii right now, I own this property in Ohio. If somebody was in Ohio, like in that area, they could probably manage my apartment way better than I am doing it. They could probably make way more income because they are local and it would be a job for them. Like when I got started, I bought a small local C class apartment building in my area and that got me out of my job. Like I loved that property, but later on as I got more and got more and more properties, I did not need that job anymore. I sold that property, ended up buying another. Anyway, just lessons learned. Like if you are just getting started with real estate and you are looking to get into apartments, there are probably opportunities if you are willing to be that person who wants to do the work, right? Like if you want to be that person that can be boot and then had that job for a while because it is probably better than your day job, right? Like it does not mean you should not do it. It is just different phases.

Aaron: Yes, there are those value added jobs if you are willing to do it as a job.

Brandon: Oui.

Aaron: Definitely was not make money while you sleep, like newer, higher end rentals are.

David: Well, if anybody is in Ohio and wants to talk about buy my property, I am not opposed to selling it. I have a different phase now. we will see. Alright, moving on. The next segment of our show is the Fire Round.

Brandon: Alright, everybody. We are almost to the Fire Round but I am going to not take a quick break here because I want to talk to you quickly about ironically water and how our sponsor Flo by Moen can help. Look, if you own any kind of property, water damage is actually twice as likely as theft and fire damage combined. This is why the Flo by Moen system is so great. It helps detect small leaks that end up causing big expensive problems. It is basically a whole home water monitoring and leak protection system in just one device. It also detects that the water has been left running or if a pipe is burst. True story, recently on my mobile home park, a pipe burst and I have not gotten the bill for it yet but it is going to cost hundreds of dollars in extra water. Not to mention it could have caused a lot more damage to one of the homes there.

Look, the Flo by Moen System can protect against that. It can even shut off the water to protect your property. Some insurance companies are even giving discounts if you have a Flo by Moen installed. Get this, because you are a BiggerPockets listener and you are awesome, you get 15% off of Flo by Moen. Go to meetflo.com/bp, that is meetflo.com/ bp and use code BP15, that is BP15 for 15% off. Again, go to MeetFlo.com/bp and use code BP15.

It is time for the Fire Round.

Brandon: Alright, time for the world of famous Fire Round. Of course these questions come direct out of the BiggerPockets forums which you can visit at BiggerPockets.com/forums. Hey, we are having a sale on the forums. It used to be free and it is still, what a sale. Alright, number one, Keith from Philadelphia said, ‘I have started research in the online auctions arena, kind of like auction.com, and wanted to know if anyone can share some pros or cons. Is this a good opportunity and what should I watch out for?’

Aaron: That is awesome. Yes, I buy a lot of houses on the online auctions too. One thing you need to know with auction.com is there is also someone on the auction.com team bidding against you and so you will not necessarily be bidding against just other bidders. Whereas the live auction, sometimes a justification is, well I am not the only one bidding on this. There is five people bidding on this so it kind of makes you feel better when you are seeing a bunch of people that want the property. Online auctions could do the same thing where it looks like other people are bidding against you and so you kind of go, oh well I could pay more because other people want it. I would say if you do online auctions before that auction starts, know what your max you are going to pay is and stick with it because there is a hype and excitement with auction like eBay, like oh you won.

Just knowing the people bidding against you, they might be trying to get a reserve amount. The other thing I find is depending on the cities, there is plenty of those auction of those auctions that nobody is bidding on. I still sometimes get to buy a house and I sold it to someone else right after, in a town I do not even live in because I am the only one looking at that auction. I think there is a lot of opportunity online option. Just know your bid price before you start.

Brandon: Bien.

David: Good advice. Number two, ‘I am going to serve as a general contractor on what of my own upcoming rehab and it will be my first time. I have some background in construction, but I realized this is a new skill set. What are the most important lessons you have learned about managing a crew?’

Aaron: Yes, I think if you are going to be your own general contractor, it really depends on the scope. There are, for our quick little turn around, if it is hiring a painter, hiring a flooring company, having some installed appliances, those are easy trades to manage and there is very little liability. If you are a general contractor where you are removing walls, doing structural things, you just want to, first one make sure you have great insurance because if you are a general contractor on a house that you flipped and you flip it up, you will get sued.

We have been sued, we have been named in lawsuits, it will happen. Then just do really really good disclosures. Remodeling vacant houses his way… If they were a general contractor that was working for like personal people before, it is way easier to remodel a vacant house because you do not have your client looking at what you are doing and staying there. You might have some… You will have a lot of cost savings. The other side though too, when I first started, I had a flipping company and I was a general contractor. But my general contractor company did not make money and I was like, I would kind of do that for free in order to share, do the profit slip.

That was not the right way to do it. The reason it was not the right way is because the general contractor actually end up losing a lot of money because of insurance, because of other expenses. Example, you could have the general contractor losing a couple of grand a job but your profit split is over here, it is still is not pure. If you are going to do multiple businesses, multiple entities, a real estate company, a general contractor, make sure they are each profitable on their own. Charge the rates that you would. You will still be more trustworthy than if you hired somebody else. If you are hiring your own company, it is more trustworthy than hiring somebody that you do not know but you should make sure all businesses are profitable.

Brandon: Great, that is a great answer. Next one, this comes from a Brandon Turner in Maui, Hawaii. I am wondering if you can explain to the audience here, I was going to throw this in the show and it did not fit so I am going to throw it here in the Fire Round with my own question. What is the 5-Hour Schoolweek?

Aaron: The 5-Hour Schoolweek, my wife and I, a couple of years ago when we started re-developing our lifestyle and saying, ‘Hey, if we ever did okay again, we were not going to spend money on stupid things. We were going to focus on experiences over things. We pulled our kids out of school, we started traveling with them to do those life experiences. I say, hey, we are doing well right now. Let us do that.’ Using what I learned from Tim Ferriss’s 4-Hour Workweek, we could totally change my business life. I was on stage one day and a lady said, I think David was at that event, a lady said, ‘What do you do for home school? Or what do you do for your kids?’ If you are telling us to not work too much,

what do you do for your kids and the education? I was like, I wonder. That was one of the first plans that what we started.

The 5-Hour Schoolweek in a nutshell is we believe that you can school in one hour a day of focus. You will get the same equivalent if your kid was in eight hour school day and that leaves the rest of the day for life experiences, adventures, local museums, traveling around. We released a book back in November on it. People just kept asking us questions on Facebook. Like, what are you doing? Que faites-vous? Comment est-ce que tu fais ça? I kept telling my wife like, we just need to put it on paper so that way you can send it that way and so that has been super fun. We have got to, we have got a community, we help other people in the same thing. We have got a great book and it is been a fun experience. But it is really like the 4-Hour Workweek mixed with homeschooling, right? How we do that and how we think others could do the same if that is what they wanted do.

Brandon: I love following you guys on social because you are always traveling somewhere and you have got the kids around and I get the stories I have heard you tell about just like, I do not know, like checking into a hotel and having your kids learn like that process. Like it is all education. You are just taking education from sitting in a row and a desk where one teacher is telling 40 people and you are saying let us make education about the real world and let us learn this stuff. I think it is fantastic and I am definitely following in your shoes there some day.

Aaron: Impressionnant.

Brandon: Yes, cool stuff. Bien. David, you want to do the last one last question?

David: Last question. This is from David in Palmdale. ‘I went out driving for dollars and now I have about ten properties that look abandoned. What are the next steps I should take to track down the owners?’

Aaron: Yes, there is lots of technology out there for stuff like this but the simple way that does not cost you any money is first you go and look up your county property records. Most of them are going to be online in Palmdale. I am sure they are online. If it was in Sacramento, I would say Sacramento, County tax bill. I plug in the address, they would tell me the names of the owners. Go to Google, some of those phone numbers, emails, things like that. You can see for free without doing anything. They will usually pitch. There will be three or four phone numbers available. Some of them are wrong, some are not. Just try those phone calls.

There is lots of different websites out there too. When you just search that name and say phone number for this, they will say, ‘Hey, we will sell you this data.’ I think there is lots stuff for that. One of our services in Texas, we have got a company that does that but start with property taxes. Google online, look for name and phone number and find it. Letters are also pretty effective too. If they have moved, the property tax records usually says here is where that other addresses. Letters, but nothing works as well as like a phone call, try to track them down and be able to talk to.

Brandon: Can you tell us real quick. I mean I am totally giving you the full ability to hear the plug. Like what is the company of your owner. Can I have looked at your software and it is amazing and people should be using it. Can you talk about that for a minute?

Aaron: Well, that is awesome. We have got a couple of different companies out in Texas. Now, when I first went to Texas, I was buying lists from another company, the Ronnie’s foreclosure listening service. When George Roddy passed away a couple of years ago, his family reached out to me to ask if I would want to kind of take over that company. At FLS online, we sell foreclosure leads more than anybody else all through the state of Texas. We also have a product called Pathawk.com. If you go to pathhawk.com, you can type in any address and it will tell you who owns it, how much they owe on it, what their address is, what their mailing address is, when they bought it, how much they bought it for. Pretty much give this blueprint. You can type in those ten houses that you are driving for dollars, put an address and know everything about them.

They owe 50 on it, it is worth 100. They bought it 10 years ago, they live over here. You can click a couple buttons too and order a phone number and an email. You can get a phone number, email, call them that way. If you want to do a bigger, broader thing, you could say, ‘Hey, I want all the vacant houses in Palmdale.’ Click a button, it will say, ‘Hey, there is 4,000.’ You can order a phone numbers and emails for those and send them all a blast email, blast text message. Technology super cool. Like that is the product we have. There is tons of products like that out there now that help you do that on a grander scale. I do think the driving for dollars is more accurate though, it is just more tedious. If we say, here is a thousand vacant houses, 900 of them will be vacant, 100 will be errors that the post office gave us.

Brandon: Oui.

Aaron: If you are driving for dollars, you know they are vacant, you know that they are vacant and then you can use the software to track people down.

Brandon: That is fantastic. Oui. You sponsor of one of our shows recently and I think I said in there like we were at this GoBundance event and like we sat down and I was like blown away by this thing. Anyway, nice work on that. I want to continue working with that and I got some plans to use that in my near future here in Maui. We will talk more. Alright, well, that was fantastic. Now, it is time to head to the last segment of the show. Our Famous Four. Let us hear from your Famous Four. Number one, by the way, for those who are not used to the show here, we asked the same four every single week to every guest I think we have ever had on the show. I think we actually started in episode like five but anyway, let us go through it right now. Number one, what is your favorite real estate related book?

Aaron: Well, I would have, if I was going to just be on it, I would have to plug all the BiggerPockets ones and I have got two authors on here. We have got plenty of bigger for BiggerPockets guys. Before I ever knew about BiggerPockets though, Rich Dad Poor Dad was the big one that really helped me try to look at money different. You probably heard that one a lot on here but that is still the epic one. I have read hundreds of real estate books and that applies more to my business than anything else.

David: I have never heard of that book before. Who wrote that?

Aaron: Robert Kiyosaki.

David: Ok, cool. What is your favorite business book?

Aaron: Favorite business book is the 4-Hour Workweek by Tim Ferriss. I think that I went from that strategy working 60 to 80 hours a week. The book helped me see that perspective that, hey, maybe life is not just about that. Maybe there is ways you can accomplish the same thing and then something.

Brandon: Yes, I love that book.

David: I am almost afraid… Go ahead, Brandon.

Brandon: Have you read that? 4-Hour Workweek.

David: 4-Hour Workweek?

Brandon: Oui.

David: I read the first half of it.

Brandon: Got to finish that one.

David: Anyway, okay. That is Brandon’s way of telling me that I working, anybody out there listening.

Brandon: That is exactly what I want. David works…

Aaron: We know David for years. He was working 80 hour weeks and real estate.

Brandon: Yes, yes. David is a machine in a good way.

David: It is hard to hear advice about working a 4 hour week from a person who makes a four hour podcast, that is all. But I know I need to read it. Okay, I am almost afraid to ask this next question because I do not know how long Aaron can talk for about this because he is the most interesting in the world. What are some of your favorite hobbies?

Aaron: On the video we got to talking about my crossbow in the back. I will just talk about a few years ago when my dad passed away, he was a beekeeper. Then for a little while becoming a beekeeper was my hobby and I would go like capture wild hives and go do that. I have got the crossbow where I shoot like dear targets in my backyard. I love golfing though. I mean that is the boring one. My current hobby that is taking up most of my time though is Ironman training and exercise stuff. Scott introduced that a couple of years ago through GoBundance. Some guys there. The cool thing about that is that at least makes me like four months out of my year, I am eating very healthy, I am exercising a lot. I am like really focused on that. When you are getting up early and exercising and eating healthy, the rest of your life kind of gets on, gets awesome. That is my least interesting hobby that has been doing more and more. I do not do too much beekeeping anymore, but if somebody, but if you were nearby and you needed me to go rescue the hive, like I would totally go do it.

David: Do you have any plans to combine your passions for triathlon training and beekeeping?

Aaron: No, I have not. You can work out in the beehive suit or maybe getting chased by bees a little bit would be…

David: That is how you improve your scores in an Iron Man.

Brandon: Oui. You could be like me, I am going to go grab the bees and run into another part of the property without my suit on. Like you will do that as fast as you can, right?

David: That is funny, that is funny. Why is that so funny to me? Picturing you like rapidly trying to transition onto your bike from swimming with like bees chasing you.

Aaron: Yes, and jumping wildly.

Brandon: Have you guys seen the Gif, or Gif as people say, of Oprah releasing the bees on people? It is the funniest thing I have ever seen. Just type into Google later, like ‘Oprah bees’ and you will find this gift, that is the funniest thing I have ever seen. I laugh every time I see it, hysterically. Bien.

Aaron: I Will do that.

Brandon: Yes, it is so good. Yes, by the way, Aaron, I just got my bike yesterday. Like I just ordered a bike. I am also training now for my first triathlon.

Aaron: We are you going to have a coach on the beach with us. We are going to do open water training and like ten mile runs every day when we are there.

Brandon: That is awesome.

Aaron: Viens avec nous.

Brandon: I did not know that. I will totally do that. Alright, I did not know that. That is going to be so much fun. Alright, well, that is all I got. Last question from me, what do you think separates successful real estate investors from those who give up, fail, or never get started?

Aaron: We talked about it a little bit earlier, you have to actually think this is fun and interesting and exciting, right? Another part of it too, for me, I have to fall in love with the problem. Instead of being frustrated, like man every house I am bidding on gets postponed, I am not able to bid on it. Or if I only go to five house, then I go, you have to fall in love with the fact that because there is a problem, there is money to be made and a problem to solve. Or if you get outbid on something, you have to fall in love with that. Or if I have a house that got burned down before I bought, well if this was easy, everyone would do it and I would not have this there.

Falling in love with a problem in real estate and also you cannot use one story and choose it. I have had a couple stories that are so fantastic would make everyone quit their job and become a real estate agent. I have a couple of stories that would make everyone in real estate totally quit, right? You got to focus on the whole. You got to like it, you got to fall in love with the problem and you cannot just look at one deal and make your decision.

Brandon: Yes, fantastic.

David: Yes, it is awesome. Alright, AA, tell us where people can find out more about you?

Aaron: That was such a fun day guys. The people want to learn about Pat Hawk, how to buy foreclosures, data, stuff like that, email me at It is If they want to learn about the 5-Hour School Week, homeschooling, traveling, email me, or really find this on social. Like a friend me asked me questions, I love telling people how to buy foreclosures, I love answering questions on there about that. If you look at our Instagram, you will see pictures of us traveling with our kids, doing crazy stuff, buying houses and having them in the house with us. Yes, fivehourchooweek.com. Find me on social, those two email addresses. I would love to hear from anyone of you to ask whatever questions you think I might be able to help you with.

Brandon: Parfait. Alright, dude. Well, thank you so much for being a part of our show today. This has been fantastic and you did not disappoint. I knew this was going to be an amazing show and it was. Thank you, Aaron.

Aaron: Thanks guys. So much fun.

Brandon: With that, we are going to take off and get out of here. Thank you and I am going to go hang out with Aaron here in Maui next week. You all have a good day. David Greene, do you want to take us out?

David: Absolument. This is David for my friends Aaron Amuchastegiu and Brandon ‘The Poker Ninja Turner,’ Signing off.

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