7 Paths to Financial Independence with Brandon & David PLUS Josh Dorkin Tells Us Where He’s Been!

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Josh: What’s going on everyone this is Josh Dorkin, the former host of the BiggerPockets podcast here with my former cohost, Mr. Brandon Turner. What’s going on Brandon?

Brandon: Eh apparently quite a bit based on the introduction.

Josh: Yes man, well you know for those of you guys who don’t know me. My name is Josh Dorkin. Before we.

Brandon: They don’t care they don’t care. Moving on certain so today’s guest.

Josh: Really? I mean like I have literally been gone for six months and this is how you treat me?

Brandon: You know it’s love.

Josh: This is what people come to expect of you Brendan. Lots of disrespect.

Brandon: Anyway, what’s up so you’re joining us for the first time in six months. I want to hear what’s up.

Josh: Do you care? You obviously not.

Brandon: I do. I know where you’ve been, but I don’t think anyone else does so we want to hear your story.

Josh: Yes, well you know I’m sure everyone else wants to hear my story. You could care less.

Brandon: Yes, you know.

Josh: You care about one thing and one thing only, you.

Brandon: Charlie.

Josh: And the size of your beard.

Brandon: My dog. My beard is growing. It is exceptionally long.

Josh: That thing is disgusting.

Brandon: It’s like a dead animal just glued over here.

Josh: Oh my God. I can’t believe how truly repulsive it has become. Were you like sitting Shiva for me and letting the beard grow. Is that what’s happening here?

Brandon: Pretty much. That’s what I’ve been working on.

Josh: I know you don’t understand the reference, but it’s okay.

Brandon: You know whatever I’m okay with that.

Josh: In mourning. Alright.

Brandon: Anyway anyway.

Josh: Listen guys before we let you listen to today’s show I’ve got a big announcement to make where you know everybody wants to know where I’ve been for the past six months and what the future, what the future looks like.

Brandon: Future.

Josh: For the future.

Brandon: We should get some sound effects.

Josh: For the BiggerPockets podcasts.

Brandon: With some sound effects they are like futuristic.

Josh: Yes yes and then we’d have to pay royalties to somebody.

Brandon: Yes.

Josh: Alright so for those of you guys who don’t know who I am, I am the founder and CEO of BiggerPockets. I was host of the first 250 or so episodes. You know I only did my five plus years of the show so.

Brandon: Yes.

Josh: You know it’s all good. Very few exceptions to the rule there and then last fall something happened and I disappeared for awhile and I’m sure a lot of you guys are wondering what on earth happened so here’s the deal. My daughter had eye surgery and the surgery resulted in some very very serious and major complications that through everything in my life and my family’s life upside down. She’s been recovering ever since and the BiggerPockets audience has been just amazingly supportive so I do want to thank them, but it’s been really really hard on the family.

We’ve gone through some truly truly terrible things and Brandon and the folks at BP have been there for us and had our back and our close friends have. You know I just really didn’t think it was anyone’s business what we were going through and that’s why we just kind of shut down and went private basically so good news is she’s doing amazing.

Brandon: Yes.

Josh: She’s doing amazing and I know you Brandon, you’ve kind of been with us for the ride and have seen the progress and it’s nothing short of a miracle I think.

Brandon: Yes, definitely she’s doing awesome so.

Josh: Yes so you know and we’re all doing considerably better. Oh and I’m pretty traumatized. You know my wife is pretty traumatized, but you know at the end of the day that’s really the power of financial freedom. When the crap hit the fan I was able to stop everything in my life and be there for the single most important thing in my life and that is my family.

Brandon: Yes.

Josh: You know that’s one of our core values at BiggerPockets right is family above all else and for me it’s just so so important and you know I will say you know we went through some grief through the process. You know the power of financial freedom I got to tell you if I was not in the position that I’m in I don’t think I would’ve been able to say to you Brandon that like you know isn’t it great how well things are going. Because most families, most people can’t do that. They can’t just stop or they can’t step away for six months from their job and focus on those things and so I really, I am grateful. I am truly grateful that I am in the position that I’m in and that has allowed us to step in and be there for my family because again I mean we had to pull some strings and do some things that I think the average folks may not have been able to do so.

Brandon: Yes you know.

Josh: You know.

Brandon: I think people oftentimes think of financial freedom as like people want to get rich so that they can go and swim in a you know gold coins like Scrooge McDuck, but like.

Josh: That’s what you do doesn’t it?

Brandon: That pretty much. I have a lot of.

Josh: Yes, I know.

Brandon: Gold coins that I jump in. Like this is really what it’s about right it’s like.

Josh: Yes.

Brandon: Things do happen in life all the time that you have no control over so having financial freedom says, “Hey, I’m going to you know weather those storms and not have to worry about showing up an hour commute to work and you know having a boss yelling at me because I’m not there because I’m at home with my family.” Like yes and I think that perfectly demonstrates it so.

Josh: Yes so those of you guys who’ve thought about it and were wondering about like hey you know financial freedom you know like is it really worth it? Yes, it’s worth it. Trust me. You’re like I mean being able to do that is incredible. Now like no I don’t have a bathtub of gold coins so that would be really really nice. I need to borrow some of yours Brandon, but.

Brandon: Yes you can have a couple.

Josh: You know it just means that you have options right.

Brandon: Yes.

Josh: You have the ability to step back, step away you know while some of these passive sources and other things that you’ve put together are generating income for you.

Brandon: Yes.

Josh: Including like a business, a real estate, and other things like that. Anyway in the process of all this that’s been going on we had other people step in on the podcast and I got to say you know I am one who is not willing, not unwilling to be critical of myself and you know I know what I’m good at. I know what I’m eh. Yes, most things eh, but you know.

Brandon: I didn’t say it, you said it.

Josh: You know I think you and I have had a pretty amazing run here, but I do have to say one of these folks have has really had a great rapport with you and it’s been totally natural man.

Brandon: Yes, I’m assuming you’re talking about Mr. David Greene.

Josh: I don’t know who that is, but.

Brandon: I’m talking about somebody else.

Josh: Yes who I don’t know who he is. No, David yes yes David Greene man. I remember the first time he. I don’t know man I mean we.

Brandon: You guys met over hatred of San Francisco I believe.

Josh: We totally like just got into it right and it was awesome man. I mean I like the guy and he hates you and so what more do we need is a host who can really like go head-to-head with you.

Brandon: There you go you know David. David has really like stepped up. People are really really liking him quite a bit so you know.

Josh: Yes.

Brandon: Good job done.

Josh: Well look yes. Yes we’ve had it luck. We’ve had a ton of positive feedback about him and you. The rapport so I’m doing something. I don’t know if you’re prepared for this.

Brandon: Prepared.

Josh: I don’t know if you even know what we’re doing here, but I wanted to make a special announcement.

Brandon: You’re getting married. Oh my gosh. Congratulations.

Josh: Yes second marriage baby. I got two. No Julie, I love you. You’re my only. No, as of today and I as of today.

Brandon: Today.

Josh: I’m officially going to be stepping down as host of the BiggerPockets podcast and I am going to be anointing. I don’t know do I get to anoint? I feel like the current president. Oh I anoint myself. I anoint.

Brandon: Maybe appoint. Is there a better word then anoint?

Josh: Yes.

Brandon: I like anoint.

Josh: I appoint thee.

Brandon: Okay.

Josh: No and anyway I am going to anoint you Brandon.

Brandon: Me.

Josh: As the new official host of the BiggerPockets podcast with David Greene as your cohost so.

Brandon: Wow. Wow.

Josh: Yes man. You know we’ve always had this weird thing right. I mean like you know Scott was the host and David Meyer was the host and Mindy was a host and Brandon is always like, “Eh, I’m a cohost only.”

Brandon: Well.

Josh: I’m like really?

Brandon: I like new cohost. You know.

Josh: It’s ridiculous. Why because you like to be the Andy Richter to Connan? I mean?

Brandon: No, I’m the Borland.

Josh: What is this?

Brandon: To your Tim Taylor. That’s what it’s been right, which is funny. Did you see—text that picture.

Josh: Yes, that picture is ridiculous.

Brandon: Yes, somebody found a picture. I don’t know somebody sent it to me and it was a picture of Tim Allen and the guy who plays Al Borland on Tool or you know Home Improvement back in the day. Yes, standing next to each other in the same stance that you and I were standing next to each other. Wearing almost the same outfit.

Josh: Right.

Brandon: It was fantastic.

Josh: Yes, that was great.

Brandon: Anyway, anyway.

Josh: That was great. Anyway so.

Brandon: Yes.

Josh: Yes man, I am honored to be here speaking to the host of the BiggerPockets podcast, Brandon Turner.

Brandon: Wow.

Josh: I want all of you guys to jump on Twitter and congratulate Brandon. Jump on the show notes for this show, whatever show we append this to and congratulate him. He deserves it. He’s amazing and you know I mean I don’t know that I’ve known a lot of folks who are as great a teacher as you are.

Brandon: Oh.

Josh: I’m super proud man. I really am and I think the show is going to really truly flourish with you and David and I’m super excited about it and look I mean at the end of the day the reason behind this is so that the show gets the attention that it needs. There is no like oh when’s Josh going to come back? You know, which I know has been like this underpinning, this rumbling right and I can continue to give my daughter and my family the dedication and the focus that we need you know to kind of get through the rest of this mess that we’ve kind of been through. You guys can continue the tradition of you know beating the crap out of each other over the airwaves.

Brandon: Well that is super super cool. Thank you. I don’t even know what to say.

Josh: Thank you.

Brandon: I’m just honored so.

Josh: Yes, say thank you.

Brandon: Thank you. Thank you.

Josh: Say it again.

Brandon: Thank you.

Josh: Say it again because you never say that to me so you know.

Brandon: Thank you Josh Dorkin for everything that you’ve done.

Josh: Okay stop. Alright alright alright you talk too much already man. Let’s get on to this week’s show, which I know you and Dave already recorded.

Brandon: We did. We did because you know we’re over here working while you’re you know playing mini golf.

Josh: Oh is that what I’m doing?

Brandon: I don’t know. You know taking care of family, whatever same thing.

Josh: Yes.

Brandon: Well you are welcome to come back anytime obviously. We’ll keep your seat warm for you and you know.

Josh: It’s still my show, you know.

Brandon: It still is your show you know. You still own this show you know. We’re just, we’re going to keep this nice bench warm for you.

Josh: Oh man. Thank you. Thank you I really appreciate it and I’m you know thank you to all the listeners. Thank you guys for all the support. I’m sure there might be you know a few folks reaching out you know curious. You know we choose to keep private you know what through all the details that we’ve kind of been through and hope everyone will respect that and I’ll be popping in, popping in and out once in a blue moon.

Brandon: Yes.

Josh: Ah so you know maybe one of these days will eh, we’ll chat again.

Brandon:  Because you know what. You know there’s a serious lack of Detroit jokes since you’ve stepped away.

Josh: Oh, come on. Come on really?

Brandon: You know.

Josh: Would you ever in a million years live in that hole? I mean come on?

Brandon: I would not. I am sure people love it. People love Detroit.

Josh: It’s I miss Detroit. I love Detroit and I miss all of you guys and so thank you everybody. Thank you Brandan. Thank you David. You really have been stellar and I really appreciate it and thanks to the BiggerPockets community. Peace out ya’ll.

Brandon: What’s going on everyone. This is Brandon Turner host of today’s BiggerPockets podcast and the apparently now the permanent host of the BiggerPockets podcast here with the new newly appointed, newly anointed I don’t know cohost of the BiggerPockets podcast. You all know him anyway, Mr. David Greene. What’s up buddy?

David: What’s going on? I like that image of being anointed. I pictured like kneeling in front of Josh as he takes his sword and he crosses it on each of my shoulders and gives me my oath. That’s awesome.

Brandon: That’s pretty much exactly what just happened so congrats. Welcome. I’m glad we made this a permanent thing. You know we’ve been talking about this for months and you know Josh is in family mode. Hanging out with the family and the kids and all that and so I’m glad that you could kind of keep his seat warm for these months and people really liked it. I mean almost every day we get emails from people saying David Greene is the man so way to be the man, David Greene.

David: I appreciate that and I appreciate you dubbing me with that nickname as well.

Brandon: Yes.

David: If you like this podcast.

Brandon: David the Man Greene.

David: Keep an eye on it because it is going to get good. Brandon and I are absolutely committed to making this the best podcast on iTunes.

Brandon: We are.

David: We want your feedback. We’re going I mean today’s show we haven’t recorded it yet, but it is going to blow you guys away. I guarantee that you’re going to listen to this and feel like you were just at the front row of your favorite rock band and you got like your socks blown off by how much information we’re going to give you guys.

Brandon: That is that is true so with that let’s get to it. We got seven things to talk about today, but before we hit all seven let’s get to today’s Quick Tip.

David: Quick Tip.

Brandon: Today’s quick tip is brought to you by David the Man Greene. What do you got?

David: Today’s Quick Tip is stop thinking that there is only one way to invest in real estate. There is not. Real estate is an asset class and what makes it so cool is there are so many ways to combine the benefits that real estate investing brings that just about anybody can make money. Brandon and I are going to go over tons of strategies that would allow you to retire early or achieve financial independence through real estate.

In my opinion, you need to be spending just as much time thinking about what strategy works for you as you are looking for that deal that you’re probably not going to buy because you’re not ready anyways. As you listen to this thing absolutely commit yourself to thinking that would work for me. I would do that. That I’m comfortable with that. It would work for my skillset.

It would work for my risk tolerance. It would work for my personality. I could be good at that and then come up with a plan to make that happen. Start working on that plan and you’ll find that once you start that journey you’ll make some corrections along the way, but you’ll be making progress and you’re going to fall in love with this so this is not a one size fits all way of building wealth and building cash flow. There are a ton of ways to do this.

Brandon: Yes.

David: Brandon and I talk about real estate all of the time, but we’ve used two completely different strategies to do what we’re doing, but the principles are the same regardless of how we’re executing them. Learn the principles. Learn the strategies. Learn the techniques and then combine them. I would say it’s kind of like taking all these different ingredients. The ingredients are the same, but you can make a different kind of cake. You can make your own kind of food that you like that’s according to your taste so that is my tip for today. Take that to heart. Talk to people about it and get some progress being made.

Brandon: Nice. Speaking of cake, last night I was at my birthday party so my birthday was you know recording this here in July so it was just on July 9^th and my birthday party with my in-laws, I went to their house last night and my mother-in-law made me a cake. Get this cake okay it was a 12-inch round chocolate chip cookie that was like an inch thick. Amazing chocolate cookie with then like an entire pint of cookie dough ice cream smeared on top. Then another cookie, then another pint of mint chocolate chip ice cream, my second favorite ice cream with another cookie topped with cookie and cream ice cream with another cookie covered in chocolate. That was my birthday cake. That was the best thing I have ever had.

David: Did they call it the Diabetic Delight?

Brandon: No, but that is the new name for it so anyway.

David: That sounds awesome.

Brandon: That was it was really good. I’m still recovering.

David: Great job by the way.

Brandon: Ah anyway yes, enough about cakes. Let’s talk to today’s or hear about today’s show sponsor.

Today’s episode is brought to you by our friends at RealtyShares.com. Yes, I love these guys. RealtyShares is a real estate investing platform that allows accredited investors to invest in pre-vetted real estate deals online. Basically, it’s a way to be a real estate investor without actually being a landlord. As a Realty Shares member you can browse debt and equity investments across a variety of property types and geographic markets. Keep in mind the investments are illiquid and have high degree of risk. Securities offered through North Capital Private Securities member FINRA SIPC. To learn more and to get started with an account go to BiggerPockets.com/RealtyShares. That’s BiggerPockets.com/RealtyShares.

Alright big thanks to our sponsors always. Now we’ve got to get in this thing. Today’s show is actually titled or I guess focused on seven different ways that you can achieve financial freedom or financial independence through real estate so we’re going to go through like this way might work. This way might work. This one and we go through all that. Later on the show we also do our new segment called the deep dive. Where actually we go into we’re going to talk about my deal that I recently did. A lot of you know I was looking for a mobile home park for a long time. I ended up buying one. We’re going to talk all about that. Go really deep into that and then we’re going to do some Fire Round and Famous Four and get out of here. We got a jampacked show for today so without further ado let’s get to it. Seven ways to achieve financial independence with real estate.

Number one. Mr. David Greene would you like to, you want to take the first one or do you want me to take it?

David: No you start. You’re on a good roll here.

Brandon: Alright I am on a good roll. Number one is just plain old and I don’t want to make this sound bad, but plain old cash flow through rental properties. Right we all generally know what that means. You buy some rental properties, maybe like small or most people start small. They buy a single family house and it gives you a little bit of cash flow.

I actually used when I got started this was all I knew. All I thought was cash flow rentals and I really made a very simple formula. I said, “Hey if I can get a hundred dollars per month, a hundred dollars per month per unit that I own then I can kind of work backwards to find out how much you know I need to retire.” That hundred dollars was like after paying out everything including future everything. Right so like you know setting aside money for repairs and vacancy and capital expenditures and all those things, utilities, mortgage.

If I could just have a hundred bucks that I could go spend on whatever I wanted from each unit then I was like well how much do I really need? At the time it was like well I want three grand a month to retire so I went out there and it took me like three – four – five – six years somewhere in there. I’m trying to think of how old I was. Yes, I think I was 27 so it took me like six and a half – seven years and I got 30 units. I was like alright I quit. I got done. Like financial independence just through these single families and then small little multi family properties. Yes, cash flow through rentals. Anything you want to add to that?

David: Well what I love about this is that while it’s probably not the fastest way to grow your wealth it is maybe the easiest with the slowest pace and it allows you the opportunity to learn the most as you go right.

Brandon: Yes.

David: Most of us don’t want to jump on a treadmill that’s already running and trying to get up to speed really quick. You want to start slow, start walking then start jogging then start running and then as you get comfortable you kind of control the pace you go and cash flow through rental properties really lets you do that. You buy your first one, it’s terrifying then you buy your next one it’s a lot less scary. Then you by your third one it’s exciting.

Then you by your fourth one and it’s starting to be like I got this. By the seventh one it’s kind of mundane and you can actually like build systems to make your portfolio bigger without you having to do all of the work. You can build a network of people to find deals for you. Then once you have enough properties with enough cash flow you can hire an acquisition manager to find new properties for you. That’s where I am right now.

Brandon: Nice.

David: Our friend Derek is actually out there looking at properties that other agents are sending me, analyzing them and then bringing the deals to me that he thinks that I should buy. Then he’s managing the rehab. He is getting all of this like the lights turned on, the electricity put in my name. He’s negotiating with contractors for me and he is making sure everything gets done. I have the knowledge.

I just need to pass that on to someone else. I don’t need to be doing the work. If you get really good at this and you grow a big enough portfolio you can start your own property management company or your own construction company then you can make money on the side by having other investors use the people that you’ve created through your own business and you can make money through the companies as well as your own portfolio of real estate. Now this way is probably the slowest to get started, but it’s like the easiest way that I would say and that’s why most people like Brandon and I both start with this method.

Brandon: Yes and you know it’s for a lot of people you can simply start by taking the house you live in, moving to a new house and turn that one into a rental. I don’t know we should actually do a survey at some point, but like I wonder how many people begin that way. It’s probably the vast majority.

David: Yes. I would agree.

Brandon: You buy a house. Yes you’d move for whatever reason you turn it into a rental and the great part of that you don’t have to get a new mortgage. You just get a new house and hey like that’s a good way to sell it to your spouse too right. Like, “Hey honey let’s move to a nicer house. We’ll just turn this into a rental.”

Like one more thing I want to touch on before we move on to the next strategy number two is something David and I talk a lot about. The first deal, yes you should not buy a bad deal. None of us are saying you should buy a bad deal, but the first deal is not going to give you financial freedom. Right the first, the point of the first deal is to get the knowledge, the experience that you need to be able to do more deals and so like I just recommend like go do something.

Like that first one is likely going to be your hardest one because it’s scary to get over that hump of I’m going to actually be a real estate investor so my encouragement to all y’all would be all y’all would be to go out there and just get something done. If that means moving to a new place, if that means just buying a simple little property, even buying a turnkey company from across the world whatever. Actually on turnkey David what do you think of turnkey? I want to know your opinion on it.

David: I’m not a fan.

Brandon: What is it? First of all what is it and then give me your opinion.

David: Buying a turnkey property is buying a house where all of the work has already been done and you don’t have to do anything. The appeal is that it doesn’t take your time and it doesn’t take you learning and it doesn’t have all the scary emotions that go with doing something new and screwing up at it. It’s akin in my mind to going to 711 and buying a soda that’s already been like someone else bought it. Someone else took it out of the packaging. Somebody else made it cold. You walk in it’s super convenient.

You grab it off the shelf, but you’re going to pay three dollars for it as opposed to going to Costco where you have to drive across town, by it in bulk, bring it back to your house, put it in your fridge, remember to grab it when you leave the house, but it’s going to be way cheaper. You might get a 12 pack for that same three dollars. In my opinion turnkey is it’s a viable business model for the right person, which is someone who has so much cash it does not make sense for them to learn how to invest in real estate because they’re doing so well with something else.

Brandon: Yes, yes.

David: They can make more money per hour doing whatever they do and they just need somewhere to invest it so they dump it in turnkey right? My problem is if you’re listening to my voice right now that is not you because you wouldn’t be listening to this podcast or learning how to invest in real estate if you are making that much money right?

Brandon: You might be.

David: What happens is. I guess it’s possible, but for the most part you wouldn’t want to learn how to invest if you could already make so much money doing something else and what happens is rather than extremely wealthy people investing in turnkey it becomes extremely scared people investing in turnkey. They say I don’t want to make a mistake. I want to do turnkey on my first property, but you don’t learn anything about investing other than managing a property. That’s the only part you’re learning and that’s really the easiest part because somebody else should be doing that for you especially if it’s out-of-state. I’m not against turnkey as a general rule. I am against it for the majority of people on BiggerPockets because you’re here to build your wealth not to build this turnkey company’s wealth.

Brandon: Yes, that makes sense. I think I’m a little bit friendlier towards it maybe in that you know my biggest objection to turnkey is I don’t like a lot of turnkey company’s numbers. When I look at their pro formas or their analysis they’re like don’t worry about vacancy. We never have a problem with that. You know like, every property goes vacant once in a while. Don’t worry about repairs we already fixed the property up. Well yes, but you’re still renting to probably lower middle-class people who are going to punch a hole in the door because every lower middle-class person punches a hole in those hollow core doors all the time. Like that stuff still happens all the time so like when I look at a turnkey company and they don’t have anything allocated in their numbers for repairs, vacancy, maintenance, cap X, anything like that and then the deal barely like produces like a 5% or 7% return I’m like you’re going to lose money on that deal.

David: Yes.

Brandon: My problem or my recommendation is if you want to do turnkey, I’m okay with it, do your own math. Nobody else should do your math because like you said you are in charge of your own financial freedom, your own financial future too. Like so do your own math, if it makes sense then you’ll learn how to evaluate the deal and don’t treat it like a an easy way to get involved in real estate. Just treat it like it’s one way to find deals.

David: Yes.

Brandon: This turnkey company is a way to find deals. Run the numbers the same way as if you’ve got a call from somebody you know some motivated seller looking to sell this afternoon because they needed money for their you know whatever. That would be my only recommendation for turnkey is treat it like a normal investment. Don’t think of it as a get rich quick thing.

David: That’s good. Very wise.

Brandon: Thank you. That’s why they call me Brandon Wiseguy Turner.

David: That’s why they call you Brandon Gandalf Turner, Gandalf the Wise.

Brandon: Gandalf the Wise. Alright moving on. Let’s go on to number two. This is a I know a favorite of yours so why don’t you cover this.

David: I.

Brandon: I invented the term. I should just go myself.

David: Oh you invented it.

Brandon: You take it.

David: But I’ve perfected it really. That’s I mean if it wasn’t for me it would have it would still be in its infancy.

Brandon: Yes you matured it.

David: Yes.

Brandon: And you have a book that I don’t know if we can talk about that, but you have a book coming out on this topic.

David: Yes.

Brandon: Next year right.

David: Which makes me not you the expert to talk about this strategy.

Brandon: That’s true you are now the expert anyway what is the strategy? What’s number two?

David: You did birth it. The BRRRR strategy, buy, rehab, rent, refinance, and repeat. This is my favorite way to buy real estate. It is Brandon’s favorite way to buy real estate. In fact it is the most efficient and best way to buy real estate and the genius of Brandon actually came up with this term that we use to describe it.

Brandon: Thank you.

David: But lots of people have been doing this for a very long time. In fact he actually.

Brandon: Yes.

David: Got a Christmas gift from BiggerPockets. It’s a sweater that says, “BRRRR” on it.

Brandon: BRRRR.

David: Which is kind of funny so.

Brandon: That’s pretty awesome.

David: The beauty of BRRRR is that it makes your investing so much more efficient than when you’re just putting a down payment on a property. Now this was that happened in my own life is I would work like an animal 90 hours a week, a hundred hours a week sleeping in my car. My health suffered. I wanted real estate investing success so bad I sacrificed everything on the altar of it.

I could buy two houses a year right. I’d have to put $40 grand as a down payment and then I’d have to go spend $30 grand on the rehab and I’d spend $70 grand on this house that was worth a whole lot more than I paid for it, but my equity was where my value was. The money that I made was sitting in equity in the property. Then I had to go save another $70 grand and buy another house and it was just painstakingly slow trying to do this and you never get that good at something that you don’t do all the time. Right we can agree. Repetition is what creates mastery.

Brandon: Yes.

David: Bruce Lee is known for having this quote that I don’t fear the man that knows 10,000 kicks. I fear the man that has practiced one kick 10,000 times. That’s what makes you a master at something and we want to be master real estate investors. Well once I learned how to BRRRR, I went from buying two houses a year to two houses a month because I could buy a house, fix it up, make it worth more then refinance it and instead of leaving my value in the house’s equity I would pull it out as cash and cash has a higher value than equity does because you can use it to go earn more money.

Now this is when I became a really good investor. I started getting better deals because agents were sending them to me first because I was always closing. I got better deals from my contractors because I’m doing way more business than the next person. I essentially became a turnkey provider, but instead of selling it to other people I was keeping it for myself and growing my own net worth right. Now there’s a lot to talk about when it comes to this.

The thing that I love the most is that most of the money that I make by adding to my net worth comes from buying a fixer upper property, making it worth more than what I spent on it and getting that money back so on my average deals, not my good ones, I’m adding about $25-$30,000 in equity, in some deals I’m adding 50 to 60,000. If I’m just doing that twice a month then I’m adding $25,000 on the low-end. I’m adding $50,000 to my net worth with the same dollar that I keep spending over and over and over.

Brandon: Yes, I love the BRRRR strategy, but can you go through like an example. Like what does that look like? Give us like in a maybe not a hypothetical, but like a deal you recently did or something. What did you buy it for?

David: Totally.

Brandon: You know what did you put into it? Yes. Yes, walk through the BRRRR strategy.

David: First off you have to understand the goal of BRRRR is to buy houses cheaply as you possibly can and make it worth as much as you possibly can and then recover as much of your capital as you possibly can to go reinvest again. Right it’s all about chasing efficiency. Brandon and I on a lot of these shows we talk about strategies, tips, techniques, ways that you can add value to a property right. What I’ll do is I’ll go look for a property that is in the worst shape it can be and whether it’s the physical aspect of it, the tenant in it is causing problems.

The owner need to get rid of it. There’s something about this property that’s not desirable and I will buy it as cheaply as I can’t because it has problems. Often times it needs a rehab. They’re usually fixer upper properties.

Maybe it only has one bathroom. Maybe it only has two bedrooms. Maybe it’s on a huge lot with a tiny little house right. Maybe it’s the smallest house and the ugliest house in a really good neighborhood.

Whatever it is I then apply all the strategies that we talk about at BiggerPockets to make it worth more. I add bedrooms. I had bathrooms. I take the roof off and put a new roof on.

I add a new air conditioner. I rehab the place. If it’s possible to I extend the house out and make it bigger. I buy a 900 square-foot house and I make it a 1600 square-foot house.

Now most people don’t want to do that because you’re just dumping $20 – $30 grand into this property that you’re never going to get back out. When you BRRRR, you can pull your money back out of the deal after you made the house worth more than you increased the rent. On a typical deal I’m looking for a house that’s going to be worth about a $120 grand when I’m done. That’s the ARV, the after repair value and I want to be able to be all in for 75% of whatever that ARV is.

In this case that would be $90 grand so if I can buy it for $60 and add $30 on the rehab, that puts me all in for $90 and if it’s worth $120 I’ll get all that money back when I go refinance it. If I have to spend $70 for the house well that means I can only spend $20 on the rehab. If I get the house for $50 well then I have $40 grand I can spend on the rehab. If I don’t need to spend that much money I’m going to get more money back when I actually refinance it than what I put in. There is not a better feeling than having a house that is completely rehabbed with a new roof, new air conditioner, new everything, not likely to need any repairs or any cap X for a long time that cash flows and you got paid to own it. Someone gave you $10 or $15,000 more than what you spend.

Brandon: Yes.

David: That you can then go put into your next deal and that’s kind of where you like steamroll your income or your net worth. Now the secret is you can’t go by a turnkey property and do this because you’re very rarely ever going to get a good enough deal. Right you got to find something you can add value to. You got to find that 1200 square-foot house that only has two bedrooms and you know I can take a dining room, a utility room, a living room, a carport, something and turn that into a third or a fourth bedroom. I can add another bathroom to this house or ideally like to buy a two – one, you add a master suite to it, you increase the square footage by four or 500 square feet.

You add you turn it into a three – two instead of a two – one and the appraiser comes in and says, “Oh man instead of comping to these $50 – $60,000 properties now you’re comping to these hundred thousand dollar properties because you have this extra space.” I love it because it allows me to take every single trick of the trade that I learned in real estate, make a house worth more than what it should so I’m getting equity and pull my money back out when I’m done so I can go reinvest that later.

Brandon: Yes, so what are some of the challenges that we have with BRRRR investing. I mean obviously you got to be able to afford to buy the house in the first place. Any tricks on doing that?

David: Yes, the biggest challenge I found for most people is that they like the idea of buying a house with a down payment because they don’t need as much cash. It’s easier to save $20 – $30 grand and go put it as a down payment on a property, spend $10 grand to fix it up and now you’re out of money, but you have your house right. That’s the problem though is.

Brandon: Yes.

David: Once you finally get good at investing in real estate is when you’re out of capital and now you can’t really do much so a big challenge is if you’re going to use your own money you got to save your own money and it takes longer. Another challenge would be if you don’t want to use your own money you have to find a partner or you have to take out a hard money loan. The deal usually has to be better to make this work. You got to work a little harder to get more meat on the bone because you’re putting all this cash in up front and if you need a hard money loan to do it you’re going to be charged money on that right. You have to have, the house has to be worth it to have all these extra costs that are going to be thrown on there. You’re also just you’re probably buying a fixer-upper property. That usually why you’re getting such a good deal on it. Now not all the time. Sometimes I find it.

Brandon: Yes.

David: From a wholesaler and it’s in great condition, that’s awesome, but often times that’s not the case. You got to get comfortable running your rehab. You got to get comfortable estimating rehab costs. You’re going to have to do a little bit more work. You got to go to Costco and buy that pack of soda and haul it off to your car and drive it all the way back and I tease Brandon because he is moving to Hawaii and they go to Costco all the time. Like that’s the best place to go shopping, but you got to drive across the freaking islands to get all the way over there right. You got to do more work, but it’s totally worth it in the end.

Brandon: There you go. I love it. Yes and what’s cool also is you can BRRRR. You don’t have to just BRRRR. I mean it’s easier probably if you live next door of the house, but you BRRRR across the country. You live in the San Francisco area, the Bay Area and you are BRRRR-ing in Florida right.

David: Yes.

Brandon: Like you can’t get much farther away than that unless of course you’re in Hawaii trying to BRRRR in you know. Trying to BRRRR in Maine which and Ohio which I’m doing so, yes.

David: Well when people ask me.

Brandon: Anyway.

David: Like what’s your ROI I’ll often say, “Oh I’m at like 75% ROI.” They’re like, “There’s no way. Nobody gets 75%. That’s a lie right?”

I would think the same thing, but when you think about the fact that if you thought the ARV would be $120 and you’re all in for $90 and you thought you were going to get back a 100% of your money. Your ARV comes in at $110 so you’re off by like 10% or 12%. That’s a pretty big mistake. You’re going to leave a little bit of money in the deal, but you’re still cash flowing a couple hundred bucks so if you’re only leaving five or $10,000 in a deal that’s making you four or $500 bucks a month your ROI is incredibly high.

It forces your money to work harder for you. That’s why I am writing the book. That’s why I’m very excited about this topic because I feel like this is where investors should be aiming to get to. It’s not just I want to buy a house or two or three and then I can say I have a couple of doors right. It’s I want to grow my net worth exponentially and I want to grow my cash flow. I want to use the same dollar over and over and over to continue getting good at investing and my belief is if you master the five elements of BRRRR, buying, rehabbing, renting, refinancing, and repeating you will become what I call a black belt real estate investor. If you can master those five elements.

Brandon: Wow.

David: You have mastered investing.

Brandon: One last final note like BRRRR investing is also cool because it’s not just single-family houses. I mean this is like really like we’re borrowing the technique that most apartment complex owners do when they call it repositioning. Like they buy an apartment complex and then they fix it up and then they go refinance it so they can pay off all their investors and now they own this property and they can go do it again and again and again. Like this is a completely scalable model. If you want to do it with single-family great, multifamily great, large multi-great, commercial, industrial, it really kind of works across the board.

David: Yes.

Brandon: In a lot of ways.

David: Great point.

Brandon: Yes, BRRRR investing very cool business model. One last point I’ll make on this one and this is something I teach on the webinar. We do a webinar you know every week and covering different topics, but one of the webinars I do is on the BRRRR strategy and by the way if you guys want to see what this week’s webinar is go to BiggerPockets.com/webinar. Anyway on this I actually talk about how a person could I mean let’s just use some real hypothetical numbers.

You buy a property like David said for $60, you put $30 into it and now again if that doesn’t make sense to you, those numbers because you live in San Francisco, add a zero on if it makes you feel better. Anyway it’s percentage-based so okay you buy it for $60. You put in $30, you’re at $90 and it’s worth $120. You basically have $30,000 of equity at this point. Let’s just say that over the next, you hold it for five years right so if over those five years it’s now worth not $120 that say it’s worth $140. Alright so but you don’t own $90 at it anymore. That’s what your mortgage was. You paid off a little bit now you owe let’s say $85 right so $85 and it’s worth what did I say $140 so now you’re at $50. Is that $55,000? Am I doing that math right? Right? Yes right $55,000 of equity. Now let’s say you sold that property after five years. After realtor fees or whatever you’re left with what $40 grand.

David: Yes.

Brandon: You just made $40,000 so what if and again this might be getting a little bit in the weeds here, but what if you just bought one deal a year. What if every year you bought one BRRRR deal and then next year you bought another one. The year after you buy another and then after year five you just started selling off one every year. Then every year essentially I mean like this is like nice round numbers, but you could be making $40,000 a year every year just buying one rehab like buying one BRRRR property and hanging onto it.

Not counting the cash flow so it’s just another way of looking at it. Something that we talk about is because the BRRRR capitalizes on all four of the wealth generators, which is cash flow, appreciation, the loan getting paid down and tax benefits. You just like really nicely pulls in all of those so anyway BRRRR, very cool and David I’m excited for your book. That still months away, but is going through the publishing process right now so. You heard it all here first. Moving on. Number three will be a little shorter on this one because neither of us do a whole ton of it, but you do a little bit of it. I do a little bit.

David: Yes.

Brandon: We both do a little bit. Alright do want me to take it?

David: Yes, go ahead.

Brandon: Alright number three we’re combining three different things. There’s note investing, lending, and syndication. They’re pretty similar which is why we combined them all together. It’s basically like a super passive way to invest.

If you have a lot of money you can put it into somebody else’s deal. For example, right now my buddy, Ben Leibovitz has been on the show a few times, he’s putting together and then it will be already closed by the time this episode airs, but he’s putting together an apartment complex deal. He is syndicating it. I’m giving him some of my money to go into that deal and I will be a limited partner in his syndication, which means like I’m not on the hook. I’m not running the deal.

I’m not anything. I just have my money invested in it as a very small share owner. I would even have fourth one to this would be crowdfunding. Very similar also like no investing, lending, syndication, crowdfunding. It means you take your money, you give it to somebody else. You did that with Andrew Cushman right a few times?

David: Several times.

Brandon: Yes so like we put our money with other people. They go and do it or you can lend it to somebody else like being a hard money lender or you can buy a note as a we recently talked to Dave VanHorn and he wrote a book called Note Investing. I’m probably going to probably butcher the total name, but like it’s all on note investing and this is the idea right. It’s like you’re basically making your money work for you in the most passive way possible. Anything you want to add?

David: Yes, I would say that when you’re looking at different options it can be overwhelming right, but as a general rule I look at most things in life and real estate investing included as a spectrum so in one end of the spectrum I have lots of work and lots of profit. On the other end of the spectrum I have less profit so there’s less money, but way less work. We all have to figure out where on that spectrum we’re comfortable with. Do I want less work?

Brandon: Yes.

David: Do I want more work and at different times in life that’s going to change right. Maybe you just had a kid and you don’t want to do anything so you want to lend your money to someone else while your raise your child and they grow up, they go into high school and you’re bored and you want to jump back into real estate investing. You want to start doing something like flipping houses, which is what we’re going to talk about next. Flipping is a lot more work in the beginning, but there’s a lot more money. Note investing you might get a little bit less return, but you’re not doing anything.

Brandon: Yes.

David: Lending your money to another investor is the easiest money you’ll ever make. I mean my returns with Andrew Cushman.

Brandon: Yes.

David: Are going to be phenomenal and I do nothing like I gave him money and it’s coming back to me five years later at almost three times how much I gave him. He did all the work. I didn’t have to do anything so it’s that’s what we’re talking about is finding the type of investing that’s going to work for you. If you’re sitting here saying, “Yes, this sounds great. The BRRRR strategy sounds great, but I don’t really want to have to manage a rehab right.” Well do something to earn some cash and then find a way to give it to someone else who does want to go manage a rehab or they are good at what they’re doing. Find out where on that spectrum you’re comfortable sitting.

Stake your claim right there and then just keep amplifying and repeating whatever method that works for and this is a really good one. I mean note investing, I have a couple notes. It’s another I don’t do anything. Every month I get a check that shows up in my account that says here is this money for what they owed me from the mortgage that they paid and if they ever don’t make that payment I can go foreclose on a house that’s probably worth twice as much as what my note balance is for.

My note balance is about 50% more than what I actually paid for the note right. I’m going to make a killing if everything goes wrong. I’m almost hoping that this person stops paying me right so that’s just what I love about it is there is a method that works for everybody and this is going to be the one that works for the people that either have a lot of income and they don’t want to do work or they just feel like they’re never going to really get this down. They don’t want it bad enough, but they still want to invest in real estate because it’s fun and it can make you a lot of money.

Brandon: That’s true. By the way being the guy that always likes to come up with labels for things I actually have a label for this. I call it the scale of passivity. I wrote a blog post on it once. Right so there’s like the scale of more passive, less passive. People love to use that word passive income. I love that term right, but let’s be honest most real estate is not that passive especially in the beginning. You know you by rental property, but I call it still passive because it’s not related to the hours you put in.

David: Yes.

Brandon: Right so I own a rental property. Sometimes I work an hour on that rental property. Sometimes I work 10 hours on that. Hopefully I work like 10 minutes on it is kind of the idea right and overtime it gets more and more passive, but yes notes, lending, syndication, that’s all on the far end of the passivity. Do you have any tips I guess David before we move on like on finding people to invest with. Like there’s a lot of people out there asking for money.

David: Yes.

Brandon: Like how do we vet somebody or feel comfortable with somebody?

David: This is something that I’ve learned a lot about lately as I become a business owner with my real estate team and I’ve been trying to figure out who do I want to hire as an agent, who do I want to be in business with? How do I know if I trust somebody with my money, my time, my energy, my commitment and what I found is that the overwhelming majority of people are who they are and they stay who they are. If I want to know what is Brandon Turner like, I look at the last five – 10 years of Brandan Turner’s life and whatever he did is what he’s going to continue doing. Right.

Brandon: Right.

David: We make small tweaks with the way we do stuff. We might evolve, but we don’t change from one kind of an animal to another. We become a better version or our worst version of that same animal right. The first question I ask when people want to go into business with me is what experience do you have? Have you done this before right?

Because everyone can come out with their hair on fire and say I want your money and I want your money and I want everyone’s money because they want to go learn how to invest in real estate on my buck right. Before I give somebody money I want to know that they know what they’re doing. If they don’t know what they’re doing I want to know that they have already taken the due diligence upon themselves to find another investor that does and brought that person into the deal and it’s coming out of their side right.

Brandon: Yes.

David: If you’ve never done a deal Brendan, but you go find Josh Dorkin who has done a deal, I’m okay in that situation if Josh basically blesses it. That’s kind of what you did with your mobile home park right?

Brandon: Yes.

David: I would have been comfortable investing with you if I was looking for something to invest in because I know you had Ryan involved and Ryan has done this before. That’s what you’re looking for. Like if someone’s already had experience doing it they know what they don’t know. It’s not like you’re brand new and you don’t even know what you don’t know.

That’s the first part. The second part I look for is have they lived their life in a way that showed integrity before this right. If I borrow somebody’s money, which I’ve done before I feel like that’s more valuable than my money. It makes me sick to think about losing someone’s money so when I borrow money from people I’ve told them, “Listen. I understand you don’t really know real estate, that you’re trusting me. You’re not trusting the deal. If I make a bad decision and this deal loses money, I’m still paying you. Like it is not contingent upon the performance of whatever I invest in because you’re trusting me as a person.”

I want to know whoever I’m investing with feels the same way. It would bother them so much to lose my money that they’re going to do whatever they can do to keep it from happening rather than, “Hey David you knew it was a risk. You knew this might not work out right.” Those are probably the top two things that I look for. Do you have anything that you found in your experience as valuable as well?

Brandon: I think that’s really good I mean everything you said there is right on. I would add one, not even a point. I want to ask the question on how you view this because I’ve had this conversation with a lot of people. How much do you do due diligence on a deal that somebody you trust brings you because this is the argument right. Like I can pore through I mean I’ve looked through the like you know the pro forma or whatever you want to call it, all the details of the property and the numbers. I could dive in and spend hours and I have spent hours reading these things, but then again at the end of the day somebody could be making up all those numbers. Yes right.

David: Yes.

Brandon: Like they could have just added zeros wherever they wanted to right? At the end of the day really I’m investing yes in the deals, secured by the deal. I want to know that the fundamentals makes sense, but how much do you actually, how much of it depends on the person. How much depends on the deal in your mind?

David: I’m going to quote two people that I respect a lot when it comes to this. The first and my favorite author is CS Lewis.

Brandon: Okay.

David: He’s a very very smart man right.

Brandon: I love CS Lewis.

David: Awesome that’s probably why we’re friends.

Brandon: Oh way.

David: We like the same people. CS Lewis said almost everything that we believe is not something we’ve experience for ourselves or we have personal intimate knowledge of. It is what someone else has told us right and for anyone who would say, “No no no I only see what I believe right.” He posed a question, “Do you believe China exists?” Like have you ever actually seen China? You’ve seen maps of China. You’ve heard other people talk about China. I’ve never been to China, but other people that I know have been there right so.

Brandon: Yes.

David: I put my faith basically in what other people are saying and if you think you’re not doing that, you’re lying to yourself because all of us in some method are doing that at all times of our life right. I combine that with what David Osborne who we’ve interviewed on the podcast says because he does a lot of investing with other people. In fact his whole business model is basically find talented people who have a good thing going on, partner up with them. Give his resources which could be his money, but it could also be like help that he has. Counsel he can bring in, other experience and let that person run. What he says is, “It’s not always about the investment. It’s more about the operator.”

You bet on the right operator who is operating that business and you’re going to have a good result because the right operator won’t make a bad decision as far as what business begin. If you pick a genius idea, but you have the wrong person running and it’s not going to matter how great it is. They’re going to screw it up right so what I do is I combine those two thoughts and I say, “Okay. There’s I’m reading this pro forma. It looks right, but how do I know the numbers that they’re giving me are correct?” If I’m going to put the time in to making sure that everything that they’re telling me is correct I might as well buy the deal myself because it ceases to be passive income right.

Brandon: Yes.

David: Do I trust the person? They have integrity that they wouldn’t lie on the numbers and are there other people I know that would vouch for that person? That’s the way that I look at it right because I have that theory that rock stars know rock stars and Brandon I know you value your relationship with me and if I said hey this guy says he knows you, he wants to invest in a deal with me or he wants me to invest with him. What do you think? You’re not going to vouch for that guy if you don’t trust him. You might say I can’t say good or bad. I just don’t know right. Because your relationship with me matters to you you’re not going to risk that. That’s what I’m looking for.

Brandon: I love that.

David: I would probably never invest with a complete stranger no matter how good everything looked. There’s got to be someone that I can trust that we both know that will say, “Yes that guy is good.” Or something like I want you to invest with them. It worked good with you. Then maybe I’d consider doing it. That’s basically how I vet people.

Brandon: Yes, that’s solid. That’s really good. Alright, I am not going to add anything to that. I’m just going to move on to the next one because that’s really good.

Anyway so let’s recap real quick where we’re at. First we talked about cash flow through rental properties and then we talked about the BRRRR strategy. Then we talked about note investing or lending or syndication or crowd funding all kind of similar. Fourth let’s talk about flipping a little bit, house flipping because it’s something that we actually probably don’t talk enough about flipping on the podcast because it’s so popular. We tend to focus a lot on the rental side of things, but let’s talk about how I mean we’re talking about financial freedom and then we’re talking about flipping as like a job. I mean it’s a business isn’t it David so why do we have this in here?

David: Well this is why we don’t talk about flipping very often on the podcast because it’s not really investing right. Kind of by definition investment is something you go put your money into and it brings you a return. House flipping is more like you’re working a job. It’s often not your money you’re putting into the deal. It’s somebody else’s and you’re doing a lot of work and it’s a risky job that you might lose money on, but it’s still very labor-intensive. This is on what was your scale of passivity. It’s on.

Brandon: Scale of passivity.

David: It’s on the far end.

Brandon: We should get some music for that.

David: Yes, have like a deep Greek God type voice like the scale of passivity.

Brandon: The scale of passivity.

David: Then I’ll write a post that says the spectrum of passivity and we’ll have like.

Brandon: Aw you would.

David: Yes, I would do. I would perfect your idea so anyways flipping your property is a lot of work if you’re doing the flipping, but like most jobs it can be turned into a business from the beauty and power of leverage. This is what I’m learning in my business working at Keller Williams as a real estate agent. In my first year, I became the top agent. In my second year, my sales were up like 200% from the first year and I’m quickly realizing that I’m doing really good because I’m really good at 20% of the work that needs to be done in this job. The other 80% I’m not very good at and what I’ve done that other agents didn’t do was took a risk and hired people, hired leverage to do the things that I’m not good at that allows me to focus on what I am good at.

People that have done this swear by it. They love it. People that have not, they just don’t understand it and I can sympathize with them. Until you take that leap of faith you don’t understand how game changing this is, but the way that it’s working now, if I continue on this path I will have a whole bunch of agents that are basically working underneath me and I’m making money from the commissions they have because I’ve trained them and taught them and given them systems and models to follow.

All that I’ll be doing is going to listing presentations, taking listings, talking to the clients and then letting all of my buyer’s agents work the buyers. Eventually I’ll hire someone else to replace me and that and I’ll step in the CEO role. Eventually, I’ll find a CEO who’s smarter than me and really wants a job and I’ll pay him a bunch of money and I’ll step out of the job completely. If I hire the right person, my business will grow more than me doing it and now I have a passive business, passive income coming from a business that was a job and I turned it into it. You can do the same thing with flipping houses.

Brandon: Yes.

David: You have to get good at what you’re doing just like I have to get good at being a real estate agent. Then you have to find people that are good at the aspects of the job that you don’t love and then you have to replace yourself slowly with people that are smarter, better, and more driven than even you are to make your business grow. Let me like paint a picture for you so you can see how this would work. Let’s say you by your first property, you flip it.

You make some money and you reinvest that money into the next property. Now you’ve got a system where you are growing your net worth by flipping continual properties. You started off with a $100 grand and then you had a $150. Then you had $200 and every house you flipped before using round numbers, after you flipped 10 houses you’ve turned a $100 grand into what would that be?

$500 grand or maybe a million. My math is not good when I’m talking this fast sorry. You continue doing this and you build up a fund of money that you have. Then you can flip two houses at a time.

Then three houses at a time. Then four houses at a time. Then other people see what you’re doing and they see how well you’re doing and they start pouring money into this. They want to give you money to invest.

They want to be the passive side of it. They want to be the lender. Now you’re flipping five – six – seven houses at a time. Well when you’re doing that you’re managing a lot of rehab crews.

You’re talking with a lot of agents. You’re learning more and more about how houses are sold and what materials cost and how like you can get rehab guys to actually show up to work and swing the hammer like they’re supposed to do. You’re building new skills because your scaling. As this becomes more profitable you’re going to leverage out the parts of the job that you don’t enjoy doing or that someone else can do better.

You’re going to pay a guy to start calling the people in your neighborhood or driving for dollars to find new deals. You’re going to pay somebody to go look for hard money that can finance your deals. You’re going to pay somebody to manage the rehabbers, manage the contractors for you like a project manager. With every hire you make your business should make more money because now you are out there doing the 20% you’re good at and you’re doing a little bit less work. You’re becoming more and more specialized and you’re not hating it because you’re focusing on the stuff you like.

Brandon: Yes.

David: Eventually you step out completely and hire a CEO to run this system that you’ve created. Now this doesn’t happen for most of us because we are too scared to let go. We don’t want to give up the control. We don’t want to have the vision to think about how will this work.

That’s why most people like being an employee. They won’t admit it. They say that they want to be an entrepreneur. They really don’t want that right, but if you have that bone in your body that wants to be the visionary, that wants to be an entrepreneur it is not hard to find people that want to work for you and want to do that job and as long as they’re making as much money as they feel comfortable with that they think they need they’ll continue to do that and I love this idea because once you’ve hired a CEO and you’ve stepped out you own a flip fund that continually makes money, but you don’t do any of the work.

You’ve replaced yourself with different people that do that job better than you were able to do it. That want to it more than you because they’re hungry. They have like young families. They want to pay off their college debt, whatever their big why is, you’re helping them accomplish that and they’re happy to do that job for you. You step out and now you’ve made it passive, which is what we really want. Flipping houses will be tough at first, but it shouldn’t stay that way. It only stays tough if you stop growing.

Brandon: Wow. That was really good. People should like rewind that and listen to it again and again. Like that and this applies to all things right not just like a flipping business. This is like business 201.

I mean this is like advanced stuff maybe, but like they should teach this more often. In fact just this morning I had this conversation with a buddy of mine. He’s a contactor, one of my good friends. He’s a contractor talking about how like it’s tough right now. I mean like he’s making money, but like he’s trying to do 10 different things. He’s the guy that’s out there swinging the hammer on the jobsites, but he’s also there trying to get leads and bids and he’s like I got eight bids out there.

They’re not calling me back and I got to call them today, but then I got to also be working on this project and he’s just overwhelmed. I’m like and I asked him a question that Tim Ferris asked a lot. He said it we talked about it when he was on our podcast, but he talks about it a lot on his show and it’s this simple question of what if it was easy? I asked my buddy that.

I said, “Well what would it look like if your business was easy and fun and light.” Like it just felt really good and we sat there and we actually I went to my whiteboard with my buddy and we sat there and we spec’ed it out. I was like you would have like we basically figured out he’d have like a three person crew of really solid top performers who were really good at construction right. They’re like one lead and two grunts as we’ll call them right.

Then you have another guy who is just in charge of getting leads and working the bids and making sure like basically a sales guy right. Then you have another person that’s in charge of all the business side of things. I mean like the paperwork, taxes, all that. Wait I spec’d it out on this little on our little whiteboard and I’m like, “Now Andy where are you?”

My buddy is Andy. I was like where are you in this picture? You can choose if you want to be one of these guys. If you want to put yourself into the engine like to be the guy work—being the grunt or you want to be the sales guy fine whatever, but like you don’t need to be.

You can hire those roles and so the question he asked me and now I’m going to pose it at you now David is like I don’t have the money to just go and start to hire five people right now. Like I’m barely surviving as it is so how do I get to that easy like what a life could be like. Let’s say I’m a flipper. How do I get to that point where I’ve spec’d out the ideal business model and now I want to get there.

David: You do have the money. You don’t realize that you don’t have the money. You don’t have the money to have what we call fixed costs in business right. The first hire that I had to make in my Keller Williams business was hiring a full-time admin and if I don’t sell any houses I still have to pay that person. That’s a fixed costs.

Brandon: Yes.

David: You want to avoid those as much as you possibly can in a business especially in newer business right. My second hire was another admin right. Those were the first two difficult ones, but once I had two admins I’m doing a lot less work actually managing every deal that comes my way so I’m spending more time looking for the next deal. My income quadruples right.

Then I start hiring people that are not fixed cost. I hire buyers agents to work with my buyers to take that off my plate, but I’m still getting some of the money from those deals. I hire a showing assistant to go show houses to my clients when I have more than one that I can’t go do that for right. They get a percentage of the deals. I’m not giving a fixed cost to that person.

I hire a person to go dial around the neighborhoods and say, “Hey we have a house that we’re going to be selling. Do you know anyone that might want to move into it?” That person gets paid a percentage out of the commission when it closes. If you move it from fixed cost to like performance based cost you can totally afford that. If you find a rehab guy and you’re like look I don’t know if I can pay you this much money, but I can give you this percentage of the deal and he’s willing to do it right. You continue to do that until you have so much business coming in that it’s cheaper to say, “No no I’m going to put you on a salary right.” That’s the economies of scale. That’s kind of how apartment complexes eventually end up making meat. I just had a crazy thought that I want to share.

Brandon: Okay.

David: This is exactly what Josh Dorkin did with BiggerPockets.

Brandon: It’s exactly what Josh Dorkin did.

David: Right and how fitting that we talk about it.

Brandon: Yes.

David: On this pass the baton episode where he was sitting in his basement, pounding away, working like crazy. He’s the vision to build this thing. He’s pushing it forward. This business grew with every hire where he took something off of his shoulders and put it on someone else’s that did it better than him right. This is going to sound like I’m kissing his bearded butt, but I’m not. Brandon Turner is a genius if you guys don’t realize. He acts like a complete goofball, but he is actually really really smart right.

Brandon: Thanks.

David: Brandon helped grow BiggerPockets exponentially faster than Josh could have ever done on his own and he allowed Josh to focus on the stuff he liked right. Like the nitty-gritty details and the big picture stuff where Brandon handled the marketing and the sales and he was kind of the face of the franchise what Josh could operate behind the scene. Josh wasn’t going to write every blog post forever. He started to leverage that out to other people. Josh now he’s not even doing the podcast anymore. Josh owns a business that is going to make him money and he doesn’t have to show up to work every day because he has found other people that could do that job just as good or better than him because he’s the smartest one of all of us right. If it weren’t for BiggerPockets.

Brandon: Yes, I know. That’s true.

David: He is a real estate agent. It can work for anybody who’s trying to do this so when that little voice comes in your head saying, “I don’t want to flip houses. That’s too much work.” You’re thinking too small. Right.

Brandon: Yes.

David: Learn how to flip houses to learn how to do it and then teach somebody else how to do it and slowly slowly back your way out of this business and then you’re going to own you know like you could have a house flipping business and just like having a big portfolio of rental properties you also have a construction company right. They flip your houses for you so you pay cost basically. You don’t pay any extra. You save on your rehabs then you loan them out to other people who need to have their house rehabbed and you’re making money from that too.

Brandon: Yes that’s all really good. You know thank you for calling me a genius. I’ll give you your you know steak dinner later. Alright well yes I mean that’s a really good example though and like again flipping houses can be a great way to do it and you’re involved in real estate and the last point I’ll make and I’m moving on. When you flip houses you have to have a pretty good marketing machine.

Like you have to have a way to generate leads continually so first of all that is a very I don’t want to call it easy, but a very obvious first hire. Is you need somebody that can generate leads. Luckily that person can be paid on a 100% commission. I mean how many people out there are like are BiggerPockets listeners.

How many of you guys right now would love to go work for a more experienced real estate investor as their deal guy if they gave you 20% of every deal they brought in and they gave you exactly what to do. Right like a lot of people would love to do that job and again I’m not saying 20% is the number. I’m just throwing that out there, but like there’s this we have an entire community. We have a million members at BiggerPockets. You’re telling me you can’t find somebody in there that would love to work together because you know that one plus one is way more than two. Anyway find somebody to get you leads that does nothing, but getting leads. Imagine somebody working 30 – 40 hours a week.

David: Yes.

Brandon: Getting the leads. I mean how much time do you and I spend on getting leads every week? Like.

David: No.

Brandon: Like almost none right. Like we barely imagine somebody working 40 hours a week at it like what it would do to your business and I told that same thing to my buddy this morning. Imagine if somebody was spending 40 hours a week getting you contracting you know bids. Out there just hustling that all day long. Like imagine what that would do. Imagine how much you could raise your rates and bring in more money. Same thing who buys the flipping. Anyway there’s that. Go ahead.

David: On the flipside if you’re the person who wants to work with David or the Brandon or the whoever you think is cool and you want to learn from them. If you go ask for a job they’re probably going to be like I can’t take the risk of paying you money. I don’t know if you can perform right.

Brandon: Yes.

David: If you go say I’ll work for free until I make you money and then I just want a percentage of it who would say no to that. If you’re not taking a lot of their time.

Brandon: Yes.

David: Resources, energy, if you’re just like, “Look I’m going to go do this thing for you. I’m going to find you the deal. I’m going to get you all the numbers.” Run it through your machine once you found it and give me a percentage when it comes out. We’re all going to say yes and that’s an awesome way to get yourself in where you want to be. It’s just changing the thinking of what we had from no I’m a W-2 employee and I want a wage and I want to know what to expect and putting the onus on yourself to work a little bit harder. That’s how businesses are built. That’s how businesses grow and that’s how you could fit yourself into that. That whole system.

Brandon: Yes, that’s so true. Yes, we should probably just do a whole entire show just on like like that mindset because this is something that we all struggle with because we all came from W-2 jobs at one point so we’re raised on and our parents all had W-2 jobs generally. Like we were raised on this very different mentality and trying to break away from that and thinking differently, thinking bigger is what’s going to make all the difference and that’s what’s going to give you the financial independence that you want so we got to move on because we got three more to cover.

David: Up next, Brandon, I’m going to let you handle this one because.

Brandon: Yes.

David: You are Mr. Multifamily Investing. Number five is going to be multifamily investing. Tell us a little bit about how this strategy works.

Brandon: Well multi family investing as you all know is buying properties with more than one unit specifically in this case we’re kind of defining it more as larger multi family. Meaning we’re not talking single-family house or duplex or you know triplex – fourplex. That was kind of in your initial number one just cash flow through rentals. This is bigger.

This is the business of owning large real estate deals. You know I’m not the world’s best at this despite what you might think. I own a 24 unit in Ohio. I own a 48 unit out in which is a mobile home park, but they’re basically the same thing out in Bangor, Maine. I am buying another 60 some unit here soon out there, but I absolutely love it.

Here’s what’s fun about it. I bought a $15,000 house a couple of years ago – $15 grand at a foreclosure sale and I bought it. Fixed it up. Rented it out.

Did some Air BNB with it for awhile. Dealt with a nine-month rehab on it. It was a pain. At the end of the day I made like $15 or $20,000. I made a little bit of cash flow. Learned some good lessons.

At the same time, I mean not at the exact same time, but now recently just in January of this year I bought a we’ll say the 24-unit and the mobile home park. I bought both in January of this past year, 2018. Those two deals combined, the 24-unit and the 48-unit took a hundred times less effort – a hundred times less effort than that $15,000 house. Like it’s insane how little that project took me to do and how like anyway it’s stupid.

Like how I wish I would’ve done that earlier and I mean I did buy 24 earlier, but what I did is I stayed small for awhile and I bought some little stuff and that’s fine, but man I love multi family. There’s a few reasons. First of all they are more scalable. I mean how much time does it take to buy 20 single family houses.

You could buy 20-unit apartment complex or a 30 or a 50. Also with apartments there’s a lot of room for what we call forced appreciation, which means if you buy an apartment complex. I mean you can do this with single-family as well it’s just on a much grander scale so you buy a multi family property. Let’s say it’s a we’ll use for easy numbers a hundred unit and you increase the rent $50 a month. $50 a month on average over the course of let’s say a year on a hundred units. What a hundred times 50? Is that $5,000 a month? I’m I doing that right?

David: Yes.

Brandon: One hundred times 50, 5,000 times 12 is $60,000 a year in extra revenue. Now if we, I’m not going to go real in-depth, but basically a multi-family’s property is worth multi family is worth a multiple of how much a profit basically comes in and that’s where we get into cap rates and all that, but basically that could raise the value of that property by $750,000 to a million dollars just by raising the rent $50 bucks a month and if all your expenses stayed the same you could potentially bring in an extra $750 to a million dollars in value off of a $50 rent raise. Imagine if you could lower the rent $50 so this is one thing and we’ll talk about in the Deep Dive a little bit later, the mobile home park that I have. One of the things that’s so powerful about mobile home parks is when we bought the last one and this one we transition tenants over to paying their own water bill. Well that immediately saved like two or three grand a month, which immediately boosted our profit, which immediately made the value of the property worth way way more. There’s a lot of ways to cut costs. A lot of ways to increase income.

David: What if you did both?

Brandon: That’s for all the multi families.

David: You lowered your expenses and you increased your rent.

Brandon: Mind blown. No, that’s really what it’s all about right is the goal is you want to increase your net operating income. Right net operating income is basically your profit not counting the mortgage. Like if we take the total amount of money you brought in, minus all the expenses except for the mortgage whatever your left with to pay the mortgage that’s your net operating income.

You can increase your net operating income, your NOI by either getting more income raising rent or buying a property that’s under rented that you inject the rent up to where it should be or by again decreasing expenses, finding little things to do that you can negotiate like negotiate lower garbage bills, negotiate lower water bills. Put water meters on submeter. Bill back to the tenants water. Renegotiate contracts on whatever.

Anyway all that stuff works together. You can actually increase your cash flow which is great and when you’re cash flow goes up the property value goes up as well so again if your goal was to let’s say make $5,000 a month in cash flow you could potentially do that in one single multi family deal. You could buy a 50 unit that gives you a hundred bucks a month in profit each unit. That’s five grand boom you’re done. You got financial freedom.

David: Now what you’re doing is you’re taking the scale of this like bigger deal even though it’s pretty much the same amount of work and you’re pulling on a humongous freaking lever right. That’s what you’re doing.

Brandon: Yes.

David: Is when you’re increasing your NOI even a little bit it’s like pulling on a huge lever that creates like massive results for you with way less work. Now it’s a different way of thinking. In my opinion it’s because multifamily is not valued the same way as single-family and that throws people off. When you’re buying a single-family house the appraisers are assuming that they’re going to that someone’s buying it to live in it because that’s what the vast majority of people are doing.

You increase this value by increasing it’s like desirability. Like what it looks like right. How much would somebody want to live here, but when you’re buying multifamily you’re increasing its value as a business. It’s very similar to the way that if you were to go by like a McDonald’s or something they value them very similarly. You have to learn a different formula.

Brandon: Yes.

David: And kind of rearrange your brain to think about things differently, but what we’re all trying to do is make money through real estate right. If multifamily is designed to make you money by increasing its ability to run it like a business it’s a much better way to actually accomplish your goal of finding financial freedom then trying to use an asset like single-family housing, which was not designed to make investors money. You kind of hacked it to make that work for us.

Brandon: Yes, that’s true and on that point like multifamilies especially larger ones that they’re designed for investors and there’s two benefits to that. First of all nobody buys a hundred unit and goes yes, I think I’ll just take care of all the plumbing there myself. Like the operations of the property are factored into all your numbers. Like you might when you’re competing with you know another investor in your area you’re competing with somebody potentially on a single-family house let’s say who’s going to do their own management, their own maintenance, their own screening, their own everything so they can pay way more for the property.

When you deal with single-family houses or small multifamily properties it’s hard to be able to add in all those costs of the property management and all the maintenance. It’s not impossible. It’s just hard, but when you’re dealing with the larger multis everybody in the game is all working with the same numbers, the same fact that they all have to pay property management. They all have to pay for the plumber to come on and do the toilets and so you’re not going to accidentally you have to end up working all your nights and weekends fixing you know toilets because you bought a 100 unit.

Like it just it wouldn’t even come up. The second point about the fact that that is the competition you are dealing with again other investor so the price is going to be based on that largely. You’re not dealing with emotional people who are going to pay a hundred grand more just because their husband or wife really really likes the you know cute kitchen. Like if this percentage works for you it’s probably about the same percentage that works for that guy over there so yes there is a ton of competition.

I’m not saying there’s not competition of multi family, but it’s smart competition. It’s analytical competition, which I think is a lot of fun and then if you can find hidden ways to bring up more value. Like you find a property that everybody else looked at it and said, “Eh it’s not good enough for me.” You discovered that the rents were actually $50 lower than what they should be and you can raise the rent now and make the value a million dollars more. Now you come in there and that’s your competitive advantage, you buy it so that would be a number five, multi family investing.

David: Very well said.

Brandon: Yes, should we go on to number six?

David: Yes so this next method is probably my favorite. I know number seven is going to be your favorite. I think these are but two of the best methods that we have in this whole thing. People are you should love this idea right and it’s just a different way of thinking about how to achieve financial independence through real estate. We don’t think about it, but it would work perfectly. Okay so I don’t know which name I should call this strategy. In fact Brandon that should be your homework because you come up with the best names for stuff.

Brandon: Okay, I’ll come up with a name.

David: You come up with something clever for this and then like just give me like a little bit of credit or something.

Brandon: There you go.

David: Lile Junior Credit, but it’s basically the concept of buying one house a year for 15 years and putting it on either a 15 year loan or just paying it off so that it would be paid off in 15 years or if you’re younger you could buy one house a year for 30 years and put it on a 30 year loan. The idea would be you buy a house and you start paying it off and it doesn’t even have to make a ton of money. It just has to at least break even and the next year you buy another house and the next year you buy another house. This example let’s say they’re on 15 year notes so at the end of the 15th year your first house would be completely paid off. You don’t owe anything on it at all right. The second house you bought would be almost paid off. It’s ready to be paid off at the end of that year. Rather than selling it and paying capital gains because the only time you are taxed on your gains is the successful sale of a property. That’s when the government gets involved and that can really hurt. You’re going to pay commissions. You’re going to pay closing costs. You’re going to pay capital gains. You’ll just refinance it again.

Brandon: Yes.

David: You put another 15 year note on it and you pull out as much money as you want to so that it still at least breaks even tax-free and you live on that money for that year. Right so if you’re doing this with properties that are worth $125  – $150,000, when they now imagine the appreciation that you’re going to get over 15 years. The rent will have been going up. The house will have been going up. Then you refinance it. You pull out a hundred grand that you live on for that year tax-free and the loans starts to pay itself off again. Year two, you do that with the next thousand you just got paid off. You get another hundred grand coming back tax-free. Year three, the third house you bought is paid off. You do the same thing again right. You do this for 15 years and you would never have to work again a day in your life. You’re buying one house a year.

Brandon: Yes.

David: That’s all that you’re doing. You’re not doing anything crazy right and you’re never paying taxes again. I love the concept of doing this for people that are like I don’t want to go all in on real estate. I don’t want to go full-time. I don’t want to quit my job right. I like what I’m doing. Imagine combining a pension with like you get to retire with an extra hundred grand a year that you’re getting tax-free.

Brandon: Yes.

David: You will be financially free with very minimal work.

Brandon: Yes, that’s such a cool strategy. I don’t know why I’ve never actually heard anybody talking about quite this way before and what’s cool about it is it kind of it really takes advantage of the you know the four wealth generator we’re talking about right, cash flow, appreciation, loan paydown, and tax benefits. This is all loan paydown. You’re basically saying look if you do nothing, if you got no cash flow at all.

You got no appreciation at all. You got no tax benefits at all. You’re just were bad you know your CPA is horrible and you got no tax benefits for owning this property and you had no cash flow. It doesn’t matter.

At least after 15 years you’ll have a paid off property. You refinance it. Pool your money again and do it again and again. Then every year you’re doing that. It’s similar to what I did you know I’m sure you’ve heard the story you know little Rosie Lou, my little daughter Rosie.

We bought her that fourplex the week she was born. That fourplex like I didn’t even care if it broke even or not. Now luckily this thing makes like a $1,000 a month, which I could spend on living in Hawaii soon. Like this is I put it on a 30 year mortgage, but I set up the automatic payments to go 18 years. In 18 well on Rosie’s basically 18th birthday it will be paid off.

I’m paying a little bit extra principal every single month because in 18 years from now that property should be worth at least $250 if not $350,000. It will be paid off to nothing so at that point we just refinance it. Pull out $250 to $300,000 whatever we can get and now that pays for her entire college education so that teaches a lot to people who are young parents, who have young kids. Buy a house before your kid’s you know fifth birthday and put it on a 15 year mortgage.

It doesn’t have to make money. It doesn’t have it can break even, it doesn’t matter, but in 15 years it’s paid off and we’re just using that. Even better most likely you’re not going to break even. You’ll hopefully will make some cash flow even if it takes a couple years. Hopefully the property will go up in value because you’re buying in a decent enough area and you know appreciation just naturally occurs and you likely are going to be getting tax benefits because you are depreciating the asset as well because you have to. The government tells us to. It’s just it’s amazing so well done. Very good.

David: You’re not just going to pay for her college. You’re going to pay for her college, her car, a down payment for her house.

Brandon: Yes.

David: Your senior trip whatever she wants to go do and she is going to have a bunch of money left over to go buy her first rental property after that’s done right.

Brandon: Yes.

David: That’s from one decision that you made 18 years ago and never did anything other than manage it and you probably have a property manager.

Brandon: I do.

David: If you want.

Brandon: I do.

David: Right?

Brandon: I have apartment manager on that one. I don’t even touch that property at all.

David: There you go.

Brandon: I can say it real quick. I went over there the other day because there’s a garage in the back. There’s this garage that I’ve never seen the inside of it. My maintenance guy had been in there.

It came with the property and I knew it was this jam full of stuff so I went over there. Opened it up. Looked inside and I was like thinking I’m just going to use it for my own storage and so I see all this junk in there and while I’m looking at it, trying to figure out how you know I’m going to have Habitat for Humanity come out and just take all of this stuff. The guy living in the house like that I own, one of the pieces of the fourplex comes over and this fourplex is for separate houses on one lot.

I’m looking at his backyard first of all and it’s just dirt back there. I’m like that’s weird. There used to be a little bit of a yard back there. He comes out and he goes you know hey are you the owner? We met and we talked for a minute and he goes yes, I hope you don’t mind I’m sodding the whole backyard. I just I dug down 6 inches. I got in all the junk. There was all this like glass and stuff. I dug it all out and now we’re bringing in sod next week. I just want a really nice backyard. I hope you don’t mind.

David: Wow.

Brandon: I’m like no I don’t mind. That’s fantastic. Like so not only do I have this asset making me a thousand dollars a month, my own tenant now is improving my property because I fixed that property up with a $120 grand. We BRRRRed it. Bought it. Fixed it up. You know rehabbed it. Rented out. Refinanced it. Got my money back and in that process I made it a really nice cute little property. I attracted really nice high quality tenants. He’s a mailman who is now redoing the yard. Anyway it’s like win-win-win-win-win-win-win and I get to teach Rosie about financial freedom the entire next 18 years. That’s her apartment.

David: What 18-year-old is not going to be excited about investing in real estate when they see how much money they just got.

Brandon: Yes.

David: For nothing. Right.

Brandon: Yes. Yes. Yes.

David: What if he and that’s only one year Brandon. What if you just did that once a year. Every year you bought another property.

Brandon: Yes. Yes.

David: You did the very same thing. If you BRRRRed it you got your money back out right.

Brandon: Yes.

David: How are people not giving everything they have to invest in real estate when it is this powerful. It’s like you planted a seed.

Brandon: Yes.

David: And it grew into a tree and it put off apples every year through cash flow and then at the end of those 18 years if you want you can cut the tree down and sell it for $300,000 right.

Brandon: Yes.

David: Or you could trim you could refinance it like whatever you want to do. This is how real estate works to build wealth and it is so so powerful and that’s why it’s so important that you find the strategy that works for you and start taking action to do something.

Brandon: Yes, I love that so super cool. I’m glad you came up with that. We’ll come up with a good name for it. We’ll call it like stack hacking or something like that, but you know. We’ll get there. Now the stack is actually what number seven is. Let’s move on to that.

David: You already use that word.

Brandon: Yes, number seven let’s talk about the stack. Alright so the stack, you may have seen a video I did a video on YouTube a little while ago about this and I’ve talked about it on the webinar sometimes, but the stack is a way of looking at real estate more than it is a strategy. It’s a way of making it not as complicated. Here’s what it looks like. If you bought a single family house or something small we’ll say.

I don’t care if it’s one—duplex. You buy something small and then the year after that. Like a year later you bought something that was just double that so let’s say year one you buy a single-family. Year two you bought a duplex. Now look the hardest deal was that first one right.

We talked about that earlier. It’s hard to buy the first deal so once you’ve done that now you’re in the game. You’re an investor, you got confidence. You’re ready. Now next year 12 months later you buy a duplex.

That duplex is going to be about as difficult to buy, probably actually easier than that single family was because now you know what you’re doing a little bit. Now the year after that, you buy a fourplex and don’t get too hung up on the numbers here. The point I’m making is what matters more than anything, but you buy a fourplex. The next year now that fourplex you already own a duplex and a single-family so what’s another four units right.

You’re not it’s nothing crazy. It’s easy. I mean at that point you’re like, “Oh yes I got this. I can buy a fourplex.” The year after you buy an eight unit. The year after you by a 16-unit.

The year after you buy a 32-unit so now after we got one. We got two. We got four. We got eight.

We got 16 and we by a 32 so by the end of your six you now have I think that’s like 63 units if I remember if I’m doing my math right. Somewhere in there. You have over 60 units in six years. Now each step of that was just as easy if not easier than the previous steps because you’re scaling up slow and your scaling up smart, but you’re scaling nonetheless which means you’re growing exponentially fast. Imagine you do that one more time.

Year seven you bought a 60 unit apartment complex right. Now all of the sudden you’re over a hundred units and hopefully they’re all making at least a hundred, maybe $200 a month after everything is said and done and profit you’re making well over six figures now in passive income in six or seven years. That’s called a stack and you did it again by just starting with one simple property. That’s why I love the stack. It’s kind of what I did. I mean again the numbers don’t matter that much. The point being grow exponentially not linearly if you want to achieve growth fast. You buy one then get bigger. Maybe it’s a single then a fourplex, then a tenplex, then a 50 unit right. The point being scale up using these stack. Anything you want to add to that?

David: Yes in the one thing that book by Gary Keller. I believe it’s Jay Papasan right?

Brandon: Yes.

David: Jay has also been on the BiggerPockets podcast. You guys should check out the episode.

Brandon: Yes.

David: In chapter two they talk about this concept called geometric progression and that’s what Brendan is describing. They talk about how a one inch domino can1 knock down another domino that’s one and a half times bigger so I a one inch domino can knock down one that’s two and a half inches. That can knock down one that’s three and a quarter and it continues right. By the 17th domino you have a domino big enough to knock down the Leaning Tower of Pisa and I think by the 34th you have a domino that can knock down something the size of Mount Everest. It just.

Brandon: Fancy.

David: Exponentially grows right so what I take from that is that with every step I take in life if I’m not going one and a half times bigger than my last step, I am not pushing to my potential and when you think about several dominoes in a row not pushing to your potential has that huge huge impact on how far you actually get. If you’re buying duplex duplex duplex duplex you’re going to have linear growth right, but when you go two – four – eight – 16 – 32 it becomes massive growth and you’re going to like investing a lot more because like we said earlier the bigger you get, the more you can get yourself out of the size of the business that you don’t like right. For most of us that grow bored.

Brandon: Yes.

David: With the mundane or the routine is because we’re not pushing ourselves to grow so that’s what I love about this stack method, this way of changing your thought from I’ve learned how to do this. I will continue to do it, but I need to push myself to do more. I didn’t work really hard to hit this level and stop. Where can I take this to go bigger? Where can I learn more and keep pushing yourself?

Brandon: Yes, you know that actually relates closely back to what we talked about earlier that $15,000 house I bought. When like what was I doing? Like why did I go back and buy a $15,000 house? Because it was comfortable, because it was easy. Because I mean it was kind of fun and it was a good break in thing like yes, I just bought a $15,000 house right. I didn’t need that – I should have spent that time looking for bigger deals.

Now a lot of people say well I could never afford a 50 – 60 – 80 – hundred unit property so this is stupid right. For like the point being like that first deal gives you the confidence and the credibility to do the second deal. Now the first few deals, the first three years you might be using your own money. By the time you own a fourplex and a duplex and a single-family and maybe you’ve now bought eightplex you can probably bring in partners.

You can raise money. You can do hard money. You can do the BRRRR strategy on a larger scale because you have the credibility to be able to pull those things off and the knowledge and experience. Again that’s why the stack is so powerful is because you’re building all of those things systematically and so those will not be an issue.

Like those it’s funny because those things are not an issue. We talk about this on the podcast I think it was last week. We’re like the only people that complain about the 10 you know I can get more than 10 loans are people who have like one loan. You know like yes the only people who complain and say well what are you going to do when you have 10 loans and you’re just done investing. Nobody has that problem when they have 10 loans.

David: Yes.

Brandon: Because by the time they have 10 loans they know exactly how to get 11 and 12 and 15 because you grow in experience and knowledge. Those are more—that’s just fear talking more than anything.

David: I just read a book called So Good They Can’t Ignore You. Awesome book.

Brandon: I love that.

David: Oh of course you do.

Brandon: Love love love that book.

David: Because Brandon has read every book there is. I finally find one book and he already has read it. Well I don’t remember I wish I could remember the example, but I don’t remember what it was. There was some scientific breakthrough that happened with like a team of scientists in Sweden. Like no one had ever done this in the history of mankind and then there was an American team that had the exact same breakthrough like three months after the Swedish team did, but they were never talking.

Brandon: Yes.

David: To each other. Neither side knew the other side was working on this same problem right and people were saying what are the odds that that could happen and the whole history of the earth that it finally—they finally had this breakthrough at the same time. They didn’t they weren’t sharing information and the author makes a point that that’s what you should have expected because the reason they had this breakthrough was one year earlier there was a different scientific breakthrough that made whatever they were working on possible.

Brandon: Yes.

David: Some piece of equipment was made that allowed them to look deeper into something that led to questions being asked and they well now can we do this right? His point was you can’t see where you’re going. You can usually only see one step ahead of where you are so you’re like standing on this outer cliff and you’re looking and it’s foggy and you can see what’s right in front of you, but until you take that step you don’t know what the next step is going to be. That’s when you’re at your first loan saying, “Well I don’t see how I’m going to ever get more than 10. That’s impossible right.”

Well from where you’re standing of course it is, but that’s why you’re the only person that asked that question because people that have 10 loans have had nine other steps to figure out what they’re going to do so when they hit there that’s barely a speed bump. You’re looking at it like it’s a mountain that you could never pass you know. Get out of your own way a lot of the time. Like all we really have to worry about is what is my what Brandon says my most important next step. What is the next domino that I got to knock over.

When I knock it over I have the capacity to knock over one that’s one and a half times bigger than what I could before and I’ll figure out what’s within my grasp right. Maybe someday we’ll talk about how I became the host of the BiggerPockets podcast and it was from being interviewed on this and after I was interviewed I met Brandon and said, “I’d like to write blog articles.” I was able to knock down that next domino. I did a really good job with blog articles.

They came and said, “David you write really well. Would you like to write a book?” I did a really good job with the book. It’s doing well.

They said, “Would you like to write another book?” I started doing other podcasts to increase my book sales and I got good at speaking on podcasts and so they said, “Hey would you like to come do the podcast right?” It continually grew as each domino knocked the next one down. I did not know I was ever going to end up here and I don’t know where I’m going to end up four or five steps from now.

You know I just got asked to start writing for Forbes that I never thought something like that would happen. They reached out and said, “Hey we’d like you to start writing articles.” What doors is that going to open up for me? That’s what we have to understand is you don’t need to see the whole journey. You just need to know what the next step is and you need to take that step and that will reveal to you what your new options are and you go out after that. The stack is like the best way of describing what you’re doing when you’re doing that right.

Brandon: Wow, that’s really good. Wow, alright. I got nothing to add to that. That was just really good. Congrats on Forbes. That’s cool.

David: Thanks man. I’ll have to talk to you about what I should write because you’ve been doing it for like 10 years.

Brandon: Yes, it’s been a couple, but that’s alright I’m glad you got in. Alright so let’s move on. The next segment of our show is a newer segment, which we’ve been adding in lately and I really really am enjoying it. It’s called the Deep Dive.

Hey everybody I’m really sorry to interrupt the podcast, but I have news that I cannot wait to share. We have just added a significant amount of perk to our pro membership. We’ve negotiated discounts for a variety of services including various discounts on closing costs from several lenders. Monthly savings on land lording tools and even a discount for converting your retirement account to a way to fund your real estate investments. Check out these perks at BiggerPockets.com/Perks/Pro and we’re not done. We’re negotiating even more discounts to make the pro membership even more valuable to you. Alright now back to David and Brandon.

David: Alright. This is the section of the show where we are going to Dive Deep into somebody’s deal and today it is going to be Brandon Turner himself.

Brandon: Who?

David: Brandon the Man so Brandon, last year you talked a lot. In fact it was ad nauseam to the point I was sick of hearing it about how you wanted to buy a mobile home park and that was your only goal for the year. You did so I want to know a little bit about this deal. Let’s start off with how did you find it?

Brandon: Sure, alright so before I actually say exactly how I found it. I actually failed my goal so my goal was to buy one in 2017. Was to buy by the end of the year was to buy a mobile home park and I closed on that one on January 2nd so I missed it by two days of 2018 so I missed it by two days, but you know whatever. No, I got the mobile home park so first of all what was it? How did I find it?

David: Yes, how did you find it?

Brandon: Oh so funny story so I took a trip out to New York City so my buddy Darren Sager who is a BiggerPockets member. He has a local real estate meet up in New York. He flew me out to New York and Heather and Rosie to go to a New York meet up. It was actually really like Rosie got really sick on the flight and threw up all over Heather.

It was really stressful, really stressful trip. The meetup was great. I thought it was fun, but like flying there was just like the most miserable experience of my life. Anyway so I was kicking myself when I was there.

I was like, “Oh I probably just shouldn’t have gone. Like you know like now Rosie is sick.” You know she probably just got like you know flight sick. Anyway that said at the meet up I mentioned to somebody that I was looking you know for a mobile home park cause I mentioned it to everybody.

I’m constantly telling people what I’m looking for and one of the guys in the room. I didn’t realize this until after we closed on it was Ryan Murdoch. Ryan has been on the BiggerPockets podcast before and he’ll probably be on again sometime, but he was in the room and Ryan is a buddy of mine and he got an email a couple of weeks later from somebody that was looking to sell her mobile home park. What did he knew?

Actually another BiggerPockets member and so Ryan put two and two together and was like, “Hey yes let’s do this.” Ryan emailed me. Just kind of like thinking yes Brandon’s not probably interested. What are the chances? He said, “Yes this guy just you know said he wanted to sell it. What do you think?” I ran the numbers quickly and I was like this could be exactly what I want. Like there were certain things I wanted like. I wanted city sewer and water and I wanted at least like around 50 units. This is zoned for 50 and there’s like 48 spaces now and anyway it was pretty much perfect so that’s how I found it. Thank you Ryan Murdoch.

David: Alright and how much did you pay for this puppy?

Brandon: I paid so he was asking I think he was asking 1.2 and we offered I think we offered lower than that somewhere and this kind of goes down in the negotiation part, but after like $800 and he didn’t you know like or $900. Anyway we settled in at 1.1, but with him carrying an 80% seller finance so he was going to carry 80% of it himself. We had to bring 20% down on 1.1.

David: Now why did you go that road rather than using agency debt or some other form of loan to buy this?

Brandon: Yes, mainly because I mean like I think we ended up with a 5% – 25 year mortgage.

David: Wow.

Brandon: Which I would be unlikely to find from a commercial lender. Just all around like it was just so much easier. I love seller financing. I bought my original 24-unit years ago that way. By the way, I’m not going to go real deep right now. We’re not going to talk about why I wanted a mobile home park. I’ll put a link to an article I wrote on why I chose a mobile home park. I’ll put that in the show notes at the show, but anyway I just thought it would be a cool investment to try out. Anyway so yes 1.1 million is what we bought it for. Plus it needed a little bit of rehab.

David: Now were you able to use any of that rehab work to negotiate the price?

Brandon: Yes, actually so in the process of negotiating when I actually flew out there to go look at the property we walked through every unit. A lot of the units were worse than what we expected and they were more vacant. A lot of people left during the period of from the time he offered it for sale to us and actually like getting ready to close like another bunch of people left so we actually negotiate it down I think it was another $80,000 like credit at closing, which was a pretty big chunk which helped us you know rehab all of those units that we weren’t expecting to. Yes, I think it was we did a credit so we had to actually bring even less because of credit and then he was seller financing it anyway so it actually brought it down to almost only 10%. It ended up being like 15% or 14% actually down.

David: That’s awesome.

Brandon: Yes. Yes.

David: Okay and how did you fund this?

Brandon: Alright so a lot of people know that the reason I was working through this mobile home park or trying to buy something is because I had a 1031 exchange. I had sold my 24-unit apartment from in Washington state. Sold the 24-unit. Had to put the money into something.

A 1031 means you have to you have to invest in something else within a certain timeframe so I had to use part of my money to fund it with my 1031 money, but then I also had to raise some money. Now there are some specific legal things that I’m not going to go to in-depth here, but basically you can’t 1031 from one ownership structure to another ownership structure. You can’t do like a personal property into a partnership or this LLC into another LLC. That made a problem is like how do I finance this when I don’t have all the money I need myself, but I can’t bring in partner, make a partnership so we discovered something called a TIC, a tenant in common.

Very probably a horrible way of explaining what a TIC is basically me and the other not partners, whatever you want to call them we each own the mobile home park separately together. That’s like the worst way of explaining what that means, but it basically means we’re not a partnership. We each just own the park or a percentage of the park together, but separately. Anyway a 1031 does apply for a TIC so that’s how we got around that so anyway I brought in so it was Ryan who Ryan Murdoch who found the deal.

He put in a little bit of cash not I didn’t want him to I didn’t need him or want him to put in a ton, but just to have some skin in the game. He put in some and he’s the boots on the ground managing the property. Then I put in some and the remainder we actually raised from a private lender I had used in the past. Her name was Mindy Jensen and her husband Carl. You guys know Mindy because she’s been a host here on the podcast before and she is the host of the BiggerPockets Money podcast. I actually went and talked with Mindy and said her and Carl and hey you guys want to partner or not partner. Do you got on a TIC on a deal and they were like sure. They brought some of the money and then we just split it not quite evenly, but fairly evenly thirds, but not quite that. Yes.

David: We had to learn about that when we all got our real estate licenses.

Brandon: Oh really.

David: The tenants income. It’s a way of holding title. Yes.

Brandon: Yes. Yes.

David: There’s like different ways you can hold title.

Brandon: Yes.

David: That way has certain rules about it that allow you to do exactly what you did. You see a lot of those.

Brandon: They are depth. Yes. There’s some weird things that can come up though. That way there are some things to be aware so don’t just go and throw into a TIC. It’s usually not a good idea.

David: Yes. Did you get legal counsel on that?

Brandon: We did yes.

David: Yes.

Brandon: We had a lawyer that looked over everything and looked at me and yes. Very legal intensive stuff. Not expensive, but just.

David: Smart. Covered your butt. Alright.

Brandon: Smart. That we did.

David: Once you bought it what did you do with it?

Brandon: Nothing no. We went through. We had a lot of vacant units. I think there were 11 out of the 48 so there’s 48 lots zoned for 50, but out of the 48 lots I think there was like three empty or four empty lots and then another like I think it was 10 empty homes like that weren’t even lived in. They were just kind of trashed so for the last what are we at now?

Six months now since closing on it we’ve been just systematically one after another after another I think we’re on like the last one or two homes right now and as we fix them up, we are now selling them on a contract to the tenants who are buying them. They are coming with a down payment and then were putting them on a actual contract so they it’s their home. They’re renting the lot, but it’s actually their house they’re buying from us on a seller financed contract, which is really what drove me to want to try a mobile home park because that’s just kind of a cool way so they take care of their own maintenance, their own repairs. We just own the land. We are officially landlords.

David: Why you just like to be some form of Lord. I can tell.

Brandon: I did, yes.

David: From the way you’re saying that.

Brandon: Lord Brandon.

David: Lord of Land. Alright why would an investor want to own the plot of land and rent out the space as opposed to owning the land and the house.

Brandon: Yes, I mean the real big reasons because mobile homes are obviously people know them as like depreciating things. Like they tend to break down faster over time so if a toilet breaks I got to send let’s say I own the house right. I own the thing and I rent it out as a normal rental. That’s fine, but I rent it out and the toilet breaks. I got to send a plumber over.

My property manager has to send a plumber over. Property manager takes a cut. Plumber is going to charge two or $300. By the time I’m all said and done to fix a flapper inside a toilet is going to cost me $250 bucks. When the tenant has needs a flapper, the tenant goes to Home Depot, picks up a three dollar flapper and puts it in himself.

This way the tenant can own their own home, which is great. They get typically a higher quality tenant because they have like buyer mentality, but they can fix their own stuff when it breaks and I don’t have to. Plus like they don’t move as often because it’s their house. It’s expensive to move a mobile home so they stay there forever. That’s kind of the idea.

David: Is it fair to say that on the scale of passivity this is moving you closer towards passiveness?

Brandon: This is very much moving me towards passiveness.

David: Alright, the next question is normally what was the outcome of this? Sounds like you’re kind of in the process right now so tell me like how far into this process are you and when do you expect to have it turned around?

Brandon: Yes so where are we? What’s the outcome so essentially what we are hoping and let me actually pull up my exact number here. Where did I put my exact number? Okay so conservatively my estimate is like the first year, not making a ton of cash flow.

In fact, we’re putting in most things back into the deal let’s see our after debt cash flow we’re looking $14,000 this year and not a whole ton. Next year 28. The year after 47 then 52. Those are my projections and it should stick in the $50,000-ish range per year.

The property value should climb as well in there and I’m trying to find that on my spreadsheet here. My numbers – I just have a Google slideshow that I put all this together, but anyway it’s going really well. Like every month now if we don’t count the fact that we’re doing rehabs we’re ahead of schedule so the outcome it’s going better than I expected in every way. We’re not taking any money though right now because all the money we get we’re dumping into the rehabs as we get it.

You know there’s two ways of kind of thinking about it. We could be taking cash flow and then just using the rehab money that we had raised, which we raised like an extra $150,000 for rehab or we just put it all in one checking account and we’re just using it all. That’s what we’re doing so. Anyway so when I look at it it’s actually outperforming what I thought it would which is super exciting. Which we’ll yes it’s fun.

David: Alright tell me a little about the lessons that you learned through this process?

Brandon: Good question so earlier we talked about on the show we talked about that setting up your business in a way that like you’re not at the center of it. That’s what was so fun and powerful about this. That’s the biggest lesson I learned was like I used a partner Ryan Murdoch who’s like the boots from the ground. He knows that market like the back of his hand.

He’s a property manager there. He owns a bunch of his own stuff. He’s dealing with the day-to-day. It’s amazing and Ryan if you’re listening to this you are awesome.

Also bringing in somebody else to bring the most of the money, most of the financing also awesome because I didn’t have to bring most of the money so I kind of like coordinate a lot of the big picture stuff and that’s exactly what I want to be so the lesson I learned was that feels really really good and I want to do more of that. I want to bring together smart people and talented people and people with some cash and be the guy at the middle of it. I learned that. I also learned that mobile home parks they’re just they’re awesome. I’m really enjoying them a lot so. There you go.

David: That’s fantastic.

Brandon: That was a Deep Dive. You like that?

David: I don’t think that you can put a price tag on you learning that you want to be the guy that brings everybody together as opposed to just the guy who’s doing the work of the deal. Like who knows.

Brandon: Yes.

David: What doors how to open for you in your life.

Brandon: Yes, it took a long time to get there so. Alright well anyway Deep Dive with Brandon. Alright so we got to be moving on with the show. This is a long show so I’m going to shift gears here and head over to the Fire Round.

It’s time for the Fire Round.

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Alright let’s get to the Fire Round. These questions come direct out of the BiggerPockets forums and we’re going to fire them at one another because we don’t have a guest. David I’ll ask you this one. I live in the DFW area in Texas. I’ve been in Texas 10 years. I see rents are going up and I’d rather not pay rent. I’d rather just have a mortgage. I’m just getting started. I’m looking for a quadplex or a fourplex to hack. I’ll be using an FHA loan. Any advice for me?

David: Absolutely. First piece of advice is get yourself preapproved. You want to know that you can get a loan and you want to know what it’s going to cost you to get that loan before you start looking at properties. If you’re looking to hack a property that means that you’re trying to live there without having to spend much money or no money while you’re in the property.

You’re going to be needing to know what the rents are for the area and that doesn’t help you if you don’t know what your payments are going to be. Find out what you’re preapproved for. Find out what the fourplexes cost within some ballpark figure. Figure out what your mortgage will be then add tax and insurance and your PMI because you’re forgetting an FHA loan.

There’s always PMI’s associated with those. I believe they call it MIP when it’s on a FHA loan. Basically they find out what are your expenses going to be. Then start looking at how do I try to find a property that will cover those expenses? How much do I need to make on every unit in order to live here either for free or for cheap for pretty close to it.

Once you’ve got that done find a realtor who has some kind of experience either working with buyers or working with investors or both and have them start sending you properties to look at that either duplexes, triplexes, or quadplexes if that’s what you want. Some things to be aware of you don’t want to buy every fourplex you see because many times they’re only in areas that are zoned for multifamily and that’s usually the worst part of town. Okay so you have to be careful. It’s awesome to house hack, but that doesn’t mean that every house you see is a good fit for a house hack. Make sure that the demographics are good.

That the crime isn’t very bad. That your tenants aren’t going to be like stopping to pay rent after two months and you’re going to have constant evictions. You want to make sure that you’re in an area that you like and you’re going to be living there so you want to feel comfortable living there. Once you get.

Brandon: Wow.

David: A good idea where you’re going to be buying then ask a realtor to start showing you the different properties. Find the one you like. If you’re using an FHA loan, you don’t have a ton of money because you’re only putting three and a half percent down so you’re probably going to have to try to avoid something that has a really like a like a lot of rehab costs. Just don’t expect a great deal. That’s okay.

You don’t need a great deal if you’re looking to house hack. You have realistic expectations. You don’t have a ton of money to put down. You can’t take a big rehab. It’s okay if you’re paying near market value if you’re house hacking because it’s not necessarily about how cheap you got the house for. It’s about the fact that it’s much better option than renting and paying off someone’s mortgage like you said so. This is my favorite way for new investors to get started investing in real estate. Once you do this you’re going to learn from it. I would try to do the same thing again the next year and the same thing again the next year and the same thing after that.

Brandon: Wow. That was really in depth. That was really good.

David: Alright Brandon.

Brandon: Alright.

David: Top that. Your questions.

Brandon: I will.

David: Should I aggressively pay down the mortgage on my properties or use all my extra income to save for more deals?

Brandon: Well you took a long time to answer so I’m going to answer with one word. It depends. Nice question.

David: That’s two words.

Brandon: Oh you’re right. No, yes okay it depends obviously, but like what’s your goal? Like in the beginning of my business I wanted to cash flow. It’s all I wanted so I wanted more properties and more cash flow. Today I’m shifting a little bit and I wouldn’t mind having more wealth and equity in long-term because I already have enough cash flow to pay my bills so now I’m actually paying off some properties because I want that security. You know if your spouse really wants paid off properties maybe do that.

You know paid off properties gives you less risk, which is great. That’s why Dave Ramsey advises it and I think it’s not a bad idea. If you want more fast growth and you want to be a little more risky then go buy more deals. You just got to that’s why I like self-awareness and knowing what you want is just so important. Like what do you really want? Like what are you trying to do and then do it. There’s no really right or wrong it’s pretty much a depends so depends. Alright speaking of depends, David. Sorry, sorry number three home equity loans a childish middle school humor. Number three home equity loan or home equity line of credit what should I get? I have some equity in my house, what should I get? A home equity loan or a line of credit and what is the difference for those who don’t know?

David: Perfect. No, you got to start answering this question by defining what the two options are so a home equity loan is also called a HELOC. It’s basically a loan that a bank gives you that is supported by the equity in your home. That’s the collateral so it’s like taking out a second mortgage, which they’re comfortable to do if you have enough equity. A regular like loan is a typically first position loan.

If you were to do that you would have to refinance by paying off your first mortgage. Getting a loan that would then give you extra cash and so if you owed $200,000 on your house you might refinance and be able to get a loan for $300,000 in which case you would take $800,000 and put that cash in your pocket to invest with. This question comes up a lot. Should I do the HELOC and borrow against my equity or should I do a complete refinance and get more cash back out?

The reason that the HELOC is usually the better choice is twofold. One when you do a HELOC you typically pay for an appraisal because the bank has to make sure that what you are going to be borrowing against your house is justified by the price of your house. Now that appraisal will exist for the other loan as well, but that is the only loan or sorry the only money that you have to pay on this entire deal is the appraisal for a HELOC. Second reason is with a HELOC you’re only going to pay interest on the money that you are using. It is like having a credit card with a four or 5% interest rate. That’s about where interest rates are right now. They are adjustable.

Brandon: Right.

David: So they’ll change as the fed rate changes, which is coincidentally the only negative side of a HELOC. However you don’t pay to have a line of credit on your credit card at $50,000 or $20,000. You only pay when you actually use the money. That’s why I love the HELOC.

If you don’t have a deal the line of credit sits there and it’s available to you so that when you do have a deal you can access it. It’s typically interest only. You’re paying very little money. You use the HELOC and then you either pay it back off with the cash of whatever you bought. You buy something. You refinance it.

You pay back the HELOC. It’s much cheaper and then the biggest reason is when you’re doing a HELOC because you’re only paying for an appraisal. You don’t have to pay closing costs. Guys these are really big. When you refinance you’re probably going to be depending on the loan size spending between five and a $15,000 in closing costs for your loan.

That it gets tacked on to the loan balance right. When you do a HELOC you are literally avoiding five to $15,000 in most cases of money that you’re spending so. It’s different for everybody. If you’re afraid like hey interest rates might start going up. You might not want an adjustable-rate like a HELOC. You want to pull the money out on a loan and it definitely would only make sense to do that for a big loan balance.

If you want to pull out $500 grand on a refinance and use that to go buy an apartment complex or somewhere that might make sense, but if you’re only pulling out $20 – $30 – $40,000, you’re going to be spending $10 grand in closing cost. That’s literally 25% of what you could be pulling out that you’re wasting closing costs so HELOCs are much cheaper. They’re more efficient. They’re more flexible. Overall they’re like an amazing loan product. I look at it like I’m getting a loan for myself at a really cheap interest rate. I take out HELOCs.

Brandon: Yes.

David: On all of my properties because it is the cheapest way for me to borrow money. If I go and borrow money from a hard money lender or from a private lender or from Brandon, he’s going to charge me a whole lot more than I’m going to charge myself on a HELOC.

Brandon: Yes. That is true. That is true.

David: Alright.

Brandon: Alright wow that was a really yes you’re good at these Fire Round questions. Good job.

David: Fire. Alright last question. I’m looking to find a mentor. Willing to trade my work for your knowledge and expertise. Highly motivated and anxious to learn. I love that Brandon is getting this question not me. How do I find a mentor?

Brandon: I don’t know why you don’t want this question, but okay my first thought is this. A lot of people say this and this is how it comes across and I don’t want to discourage you at all, but a lot of times it comes across like this. People call me up and they want to want to get coffee. They want me to be their mentor and they’re like to teach me every single thing you possibly know and then tell me what to do and I’ll go do it. Then I’m like, “Oh that’s so mentally draining.”

I don’t know what you can do. I don’t know what your skills are. Now you’re putting me to work as a mentor. I have to do all this work so the first thought is be very careful on how you approach people.

Mentorships should be built very very organically and never use the word mentor with somebody. Build a friendship. That’s all it is, build friendship with people who are experienced. That said I love people who are excited about real estate and who are young and up-and-coming and then I can help mentor right. I love that.

I would offer, I guess I would be specific about what work you can do. For example if you come to me and say, “Hey Brandon what you want me to do? I’ll do anything for you.” Again it puts me into like panic.

I don’t know I can’t find anything right. If you’re like, “Hey Brandon, I would like to go door knock all day on Saturday, every Saturday for the next eight weeks. Would that be okay and would you tell me what to say when somebody answers the door and what doors I should knock on.” I’d be like, “Sure why don’t you go look for anything that looks vacant or you know anything that looks nasty. Go knock on their door and just tell them you’re a buyer you’re like.”

Does that make sense like you get very specific and I can answer a very specific question and once you’re doing that for me our friendship is going to naturally develop right. You’re going to stop by my house. I’m going to talk to you. We’re going to become good friends.

How do you find those people initially? Go to real estate meet ups in your area. Go to BiggerPockets.com/Events, E-V-E-N-T-S. You’ll find meet ups in your area all the time and if there isn’t one in your area then go and start one in your area. You can be the hub and what a better way to meet people. I mean there’s not a lot of better ways than that to go and meet influential real estate investor in your area than be the person that organizes events so. There you go. Anything you want to add David?

David: That’s why I’m glad you answered it because you did such a good job and you said is so much nicer.

Brandon: Thanks.

David: What I love about what you said is that you’re actually pointing out that when you say to somebody teach me everything you know. Help me or I’ll do anything. Tell me what to do. You’re actually putting responsibility on somebody else to do something.

Brandon: Yes.

David: That they never asked for. Right. A lot of people get upset like well why is nobody wanting to help me? I’m offering something for free, but no you gave that person a job. You said, “I need you to figure out what I’m supposed to do, how to make me good at it, and if it goes bad you’re going to feel bad because you were the one that told me what to go do.” As opposed to approach them and saying, “I know I can do this. Is there any value in that for you?”

Brandon: Yes.

David: Or tell me a little bit about what struggles you’re having and I’ll see if I can do anything to help. Building a friendship is completely different. The minute you throw that word mentor out there what people hear is you’re looking for something for free. It doesn’t have.

Brandon: Yes.

David: The same ring that it used to.

Brandon: You know a real example of that is a guy named Chris. He’s in my area. I’ve mentioned him before on the podcast, but Chris came to me and we’ve been, we’ve known each other on and off for a little while and he’s got excited about real estate probably because is he’s listening to this podcast right now. What’s up Chris?

He came to me and basically said, “Hey did you need any help producing videos? I’ve got a little bit of a video experience. Do you need any help like filming or whatever?” I’m like yes that would be awesome.

Like and so I hired him like one day a week for like four hours. He comes over and I don’t know if you guys have notice, but like I’ve been increasing my video output on the BiggerPockets YouTube channel like tremendously and having like multiple angles and all the stuff. Because he just shows up and works and I’m even—I even offer. Like I wouldn’t let him do it for free because I felt bad so I’m like paying him to come over and help me and he’s been a tremendous help.

Guess what when he’s sitting across the room from me editing a video he looks over and he’s like, “Hey Brandon how do I get you know private lending?” I’m like, “Yes yes try this and this and this. I was like actually let’s go make a video on it.” We like walk outside and make a video. Right like what do you think he’s doing. I’m being his mentor and like he never brought the word up one time. Completely organic. He offered specifically how to help me and actually just today he told me he got a deal under contract and he got like a duplex under contract in town. Awesome.

David: Not a baby Chris.

Brandon: Yes, he’s doing awesome because and like and often I even did that much. Honestly like I feel like I hardly helped him. Like I feel like I’m taking advantage of him. You know but like I don’t know maybe it was just like the confidence of being around like an experienced investor. Like made him feel comfortable to go make an offer and those couple questions he asked me they were very direct. “I need a private lender. What should I say to this guy? I talked to this guy from BiggerPockets. Here’s what he asked me. What should I tell him?” Those are the things that make the difference in so anyway. That was a long Fire Round. It might be a world record for Fire Round, but hopefully people like that stuff.

David: World record for awesome.

Brandon: There you go. Alright we got to get moving on. We have one more second of the show, which we lovingly refer to as our.

Famous Four

Alrighty thank you Mindy and with that let’s jump in to the Famous Four. These are the same four questions we ask every guest every week. Obviously David and I have been on the show before so we might alter these questions a little bit, but we’ll each kind of answer. David, real estate books are you reading anything new lately?

David: I’m not reading any real estate books right now. I’ve only been reading business books. How about you Brandon?

Brandon: You know I actually am. I actually read two real estate books because I read so many real estate books and today I slowed down on them a lot, but recently I read two different real estate books. First of all there is a book that is coming out actually I think we launched it just a few. Well we’re recording this before the launch, but now it’s already come out. Anyway Matt Faircloth’s book on raising private capital. I’m working through that one and also we have another book that hasn’t been announced yet, but it’s coming out in a few weeks or maybe a month. It’s called Retire Early with Real Estate. It’s all about financial freedom and early retirement by Chad Carson. It’s not out yet, but if you’re listening to this and in the future it probably will be. Anyway both those books are unbelievably good. Those are two real estate books that I’ve been working through.

David: What about business books? Have you been reading any of those?

Brandon: You know one or two hundred. No the other day it was like a couple days before my birthday and I was like I’m going to order myself some birthday gifts so I ordered myself 12 books from Amazon. Anyway the one that I’m currently going through I’m trying to read one at a time, but I never read one book at a time. I’m reading called well it’s called Own the Day I Think. Own the Day, Own Your Life by Aubrey Marcus. I might be butchering that name slightly, but it’s really good so far. I’m really liking it a lot. The other one I’ve been reading actually for like a year now it’s like I pick up a chapter at a time, but I just started again. It’s called 59 seconds and that’s really well as well. It’s like scientific research studies around success. It’s really good. Anyway what about you?

David: I read the book that when we interviewed Paul Thompson he recommended that we read The Big Leap. It might be the only book I’ve ever read that you haven’t. It sounds like.

Brandon: I have never read that.

David: It was a really good book. It’s about the upper limit problem which they define as when well all of us have a thermostat of how much we think we deserve and how much we’re worth. If we get too close.

Brandon: Yes.

David: To crossing that we may subconsciously sabotage ourselves and as you.

Brandon: That’s true.

David: As you’re pushing to get more and more out of yourself and challenging things you never did before like we talked about earlier. You’re trying to go one and a half times bigger with every step you take. You are going to hit your limit and if you’re not prepared for what’s going to happen you’ll end up sabotaging yourself and holding yourself back so. I really like that book and then I also mentioned earlier So Good They Can’t Ignore You.

I just read that one. It’s all about rather than taking approach in life of well I want to follow my dream and it’s the world’s job to make me happy and fund what my dream is. It’s becoming so good at what you do that you can name the terms and conditions of your own life and because you’re so good people have to give it to you and then you can create the life you want based on taking responsibility for becoming like a master craftsman as opposed to the responsibility that it’s other people’s job in the world to help you. That might relate a little bit to our mentor question. It’s two different ways of looking at it.

Brandon: Yes.

David: You know like I am so good at what I do that you want me being your friend and working for you as opposed to it’s my dream to invest in real estate Brandon how can I make that happen?

Brandon: That’s so good. Could not have said it any better myself. There’s one more book I read recently that I want to recommend. It’s really good. It’s called High Performance Habits by Brendan Burchard. Fantastic book as well. I’ve been bragging to everybody about how awesome it is. I don’t know if bragging is our word. I’ve been broadcasting about how good the book is.

David: Oh it’s funny you say that. There’s a realtor with Keller Williams, Laura Fernandez and she’s been bugging me that I need to go read that book. It was actually just this weekend.

Brandon: It’s so good.

David: She was telling me so.

Brandon: That’s funny. Well here’s why it’s so good. Here’s what I love about this book is like a lot of success books are you know personal development books are like you suck. Here’s how to become better. Right.

David: Yes.

Brandon: This book is like you’re already the top of your game right now. Here’s how to make sure you hold that for the next 10 years of your life and it doesn’t consume you. That’s what I love. It was like a different approach of like you’re already awesome. You already do good stuff. You don’t need like wake up early messages necessarily. Even though those are really really good, but like this is like this is exactly what you’re going to do to go from a millionaire to a billionaire. That was what’s cool about it.

David: That’s awesome.

Brandon: Anyway, there we go alright we got to move on. Next question number three.

David: Hobbies.

Brandon: Hobbies what have you been doing for fun lately?

David: Oh I don’t have fun right now. You know I started working out again. That’s been something I’ve been doing and I go running every day now. That’s been pretty good.

Brandon: Nice.

David: How about you though? You probably got way cooler stuff to talk about.

Brandon: I don’t no. I started running also. I ran 7.3 miles on my birthday. That was a record for running. I just as of like 20 minutes ago agreed to run a just while we were recording this.

David: An Iron Man.

Brandon: Yes, and an Iron—a half Iron Man so I’m going to do the ocean side half Iron Man. I’m now telling everybody that so I have to do it. I’m going to do that next April. That will be fun so I got to start training for that and I am at least temporarily—I don’t know how long we’ll stay moving to Hawaii so we bought a property. We’re closing on Monday of this coming week, which when this comes out I’ll already be there. Anyway moving to the island of Maui.

David: You always have to one up me.

Brandon: I’m sorry.

David: I say I started working out and you say I signed up for a half Iron Man. I said, “I go running every day.” You say, “I’m moving to Hawaii.” Awesome.

Brandon: Yes, you know that’s what I’m I bought a little property there. We’re going to do a little house hack actually in Maui so.

David: I’m excited to go with you and check that place out.

Brandon: Drinking my own Kool-Aid. Yes, you’re going to come you’re going to come visit like every weekend.

David: All the time.

Brandon: That’s going to be great. Yes. Maybe not every weekend Heather might get mad at you. David is here again?

David: That’s true.

Brandon: Yes, you know it’s like did we just become best friends?

David: I like that. As long as Rosie is happy I think Heather will be happy. She’s like the gate keeper.

Brandon: Yes.

David: Heads you got to win over. Tough kid, but super cutie man. I love your daughter.

Brandon: She’s a good kid anyway alright last question. What do you think separates successful real estate investors from those who give up, fail, and never get started.

David: You know I’ve changed my opinion on this. I used to say that like the grit, perseverance. It’s not that. I think it’s expectations now.

I think if you walk into this expecting it to be easy or it happens quickly or you hear what Brandon and I are talking and you think you’re going to step in there and do it. You’re going to give up very quickly because you’re going to interpret that like there’s something wrong with you and you’re not good at this. If you walk into it expecting a dogfight you are going to naturally have to persevere through that and then once you get a couple under your belt you realize I made that way harder on myself than it needs to be. It wasn’t that bad. I’m trying to do this with everything in life. You know in the book I’m writing, the BRRRR book I talk a lot about how your expectations need to be when you start something new. I’m going to suck at this. The first time I went snowboarding.

Brandon: Yes.

David: Was miserable. The first time I went surfing with you was freaking exhausting. You can do this with anything. The first time you go in the gym and you haven’t been working out you’re going to be sore and you’re not going to be very strong.

It is only through sticking with something and repeating it that you start to develop any kind of mastery over that thing. That’s when it will become fun right. If my expectations are hey I’m going to start this new thing and it’s going to suck, but if I just keep doing it eventually I will get good. I won’t quit hardly anything.

If your expectations are oh David Greene does this. Brandon does this. I could go do that. You’re going to go try to surf three or four waves. You’re going to hate it. You’re going to think surfing is not for me so that’s what I think. It’s adjusting your expectations to a reasonable level and not letting, not taking it personally if you don’t crush it right away.

Brandon: Wow. That was really good. The only thing I want to add to that is I’m watching you on video right now. I even had to take a picture because you have the total like Mike Tyson face tattoo, but would light on your face.

David: Ah that is funny. I’ll tell you what Brandon you show that picture around town again. Well Brandon and I have actually been recording for so long today that the sun is setting.

Brandon: I know.

David: As we are talking. It’s been like four and a half hours that we’ve been recording stuff here so that’s why I look like.

Brandon: Yes.

David: Mike Tyson.

Brandon: Yes, people won’t know this. This is true. Right now it sounds like this has been one podcast right. You guys are listening to this it’s been one long podcast right, but in reality we actually split this in half.

We recorded for an hour then we stopped and we did a live webinar together to like a thousand people on BiggerPockets and then we continued the second half of this webinar or podcasts so we have been going. Yes, we went for two hours on the webinar. Now almost hour and a half, hour 45 I don’t know on this so. Heather texted me and said, “Dinner’s ready.” Let’s wrap this thing up. My answer is going to be exactly what you just said I think.

I don’t know what you said, but I’m sure it was good. No I actually would say well things that like I noticed people like they have a process. They don’t focus so much on goal. They focus on what can I do now and they’re constantly saying what do I do? Like they take action on these things and there’s people who take action and still suck. It’s like they take the right action right. They like continually asking themselves well how do I get further, how do I get closer to that goal? How do I do better? It’s not just randomly doing jobs and doing work. It’s like how do I do a better job next time? I think that’s a huge component of it. Anyway with that that’s all we got so where can people find out more about us?

David: Yes.

Brandon: Instagram is my jam, @BeardyBrandon, @BeardyBrandon.

David: Same as me. If you know me and I don’t reply to you please don’t take it. I have 425 unread text messages right now that I can’t keep up with, but on Instagram I have two right so use your head of which one you think you’d be a better chance at getting a hold of me and I’m sure it’s very similar for Brandon so. Follow us.

Brandon: Yes.

David: On social media. Comment on the stuff we say. If we see your name show up enough times that’s how you become a friend of somebody, not a mentor and I think that’s the best way to get a hold of people that you want to have a bigger place in life.

Brandon: Yes, very well said and actually I have like 400 unread messages on Instagram, but.

David: You got the text Brandon.

Brandon: I like Instagram.

David: You got to Instagram me.

Brandon: Yes yes there you go. Alright guys thanks so much for showing up today and being a part of this podcast episode. We hope you learned a lot. We hope you are inspired. You’re going to take this and run with it, but that’s it. That’s our show so anything you want to leave us with David?

David: Let us know if you guys like these solo shows. I think that they are great, but we want to make sure that the listeners are getting what they want. Leave us some comments about what you liked, what you didn’t like and make sure you’re subscribing to the podcast. With that being said this is David Greene for Brandon doesn’t know how many words is two Turner signing off.

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