Real Estate Rookie Podcast

Rookie Podcast 27: 5 Doors by Using Seller Financing for the First Time with Aaron Chapman

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Aaron Chapman ran into major obstacles on his first 2 real estate deals… obstacles you might face as you launch your own investing career. Wouldn’t you like to know how to react when you’re turned down for a loan? Today, you’ll learn how!

From a duplex purchase that seemed doomed when he lost his job while in escrow… to a triplex purchase that a bank wouldn’t touch, this Louisville, KY investor breaks down how he reached 5 doors by age 24 – and his exact roadmap to reach financial independence by age 30!

Oh, and don’t miss the story of how Aaron wound up on the show (hint: his fiance is the real MVP!). Before you go, here’s a challenge for you: who in your market would make a great guest for this show? Send them over to biggerpockets.com/guest and we’ll take a look at their application.

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Listen to the Podcast Here

Read the Transcript Here

Ashley:
This is the Real Estate Rookie Show, number 27.

Aaron:
I’m just talking to everybody. If I get a second to talk to you, “Do you know anybody that has any property for sale? Do you do anything with property?” Especially if I can see that they’re construction workers or something like that. That the deals are out there, they just got to be found.

Ashley:
My name is Ashley Kehr, and I am here with my cohost, Felipe Mejia, who did not get burned on this episode, today.

Felipe:
Oh my gosh.

Ashley:
Our guest is Aaron Chapman, and he hints it a little bit, before we started recording that he might just mention something about the biceps, but he didn’t.

Felipe:
But he didn’t, that was like scores, fading away.

Ashley:
He got away free this time. Yeah.

Felipe:
Oh my gosh, I got away scot-free twice in a row actually. So, that's going to be great. But we have a great show today. Aaron Chapman, talks about him and his wife, like double house hacking with their multifamily that they purchased, losing their job in the middle of buying it, and having to put the loan in another person's name. I won't give the secret out yet. And just pushing through those nos to finally get his yes, which ultimately resulted in getting the rental property.

Ashley:
And it's not only just with the financing on that one, you were talking about, where he lost his job, but he also can't get financing on another deal and get seller financing. When the lady originally told him no, he goes back to her with options. And I think that was my favorite part as how he gave her options. And didn't just say, "Hey, sorry, I can't do the deal." Or, "This is my final offer. Take this or leave it."

Felipe:
Yeah. If you’re interested in seller financing, this is definitely the show to listen to. Aaron Chapman, welcome to the show brother. How you doing?

Aaron:
I’m doing good, man. Doing good. How are you guys?

Ashley:
Really good. Can you start off telling us a little bit about yourself and how you got started in real estate?

Aaron:
Yeah. So, I’m 24 years old. I live 10 minutes out of Louisville in Jeffersonville, Indiana. I have two little dogs that I love. And I’m actually about to get married in October to my best friend. So, I’m pretty excited about that.

Ashley:
Congratulations.

Aaron:
Thank you. Yeah. Pretty excited about. I got started in real estate a year ago, is when I closed on our first property, a duplex here in Jeffersonville. And I got started, basically, I found BiggerPockets just by happenstance searching podcasts. And when I did, it was just all downhill from there. As soon as I found it, I was just a running start. I dug right in, got the books. Brandon Turner was like, “Fuck the epiphany,” was the kick I needed to get me where I was going. So yeah, that’s basically how I got started.

Felipe:
Is Brandon Turner, the new Robert Kiyosaki?

Aaron:
I would say he’s right there with Robert Kiyosaki. I read, Rich Dad Poor Dad, when I was 18. A teacher gave it to me. So, that really set me on the course to look for that sort of thing in life and to try to get out of the rat race, but I wasn’t able to actually do it, because I thought you had to have all money and stuff. And then when I was 22, that’s when I found BiggerPockets and that’s what let me know like, “Hey, I can actually do this. I’m capable of this without being rich.”

Ashley:
I don’t know if you guys know this, but our producer, let me in on a little secret that you guys actually have something in common with recording, BiggerPockets Podcast episodes. So, Aaron, your wife or your fiance actually surprised you, correct? For your birthday?

Aaron:
Yes. Best surprise ever.

Ashley:
And submitted the application for this. And Felipe, his wife actually direct message Brandon Turner on Instagram and that’s how he got on because of a [inaudible 00:03:38].

Felipe:
Do you know that story?

Aaron:
I watched that episode. I watched your episode. Yes, I remember that now. I mean, I’ve seen a lot of the episodes, but yeah, I can remember now.

Felipe:
Me and Brandon’s wife share a birthday. So, my wife DMed Brandon and told him if he could have like a 30 minute conversation with me. And he says, typically he doesn’t answer those things at all, but it just his wife had a birthday, I had the same birthday, it just the universe kind of put it together. And it’s funny, because when he called me, I told him, I didn’t think it was him. And I don’t remember if I actually hung up on him or was about to, but he was like, “No, seriously, it’s me. It’s Brandon.” And I was like, “Ah, really funny, like whatever.” And I almost hung up on her.

Aaron:
This is a prank.

Felipe:
But yeah, exactly, exactly. But now it’s really cool that your wife puts you on. So, shout out to the women in our lives that hold it together.

Aaron:
Oh absolutely, couldn’t do without them.

Ashley:
And she even made a video too, because we love the applications with the YouTube video links to get to hear more about this. So yes, she’s awesome.

Felipe:
She only watch it, but she won’t let me see it. She said, “You can’t see it.”

Ashley:
Really? For real?

Felipe:
So, I’m still begging to see it. So, I’m sure it’s great though.

Ashley:
Yeah, maybe after this. Yeah. Yeah. Okay. So, let’s get back into your story. How many units are you at now? And you have something under contract.

Aaron:
Yeah. So, we actually closed on the 16th of July on three units and that completed the five doors. And we've actually got that fully tenanted to now. So, now I'm just looking to buy the next one. I just looked at a fourplex. And then I'm doing some driving for dollars tonight and I'm building out a mailer list using driving for dollars right now.

Felipe:
What is that driving for dollars look like for you, Aaron? What do you do? Give us a little bit of how that mechanics of that work.

Aaron:
Yeah. So, me and my partner, actually partnered on the last deal, the threeplex with a good friend of mine. So, what made him do, is maybe we work together too. So, basically, after work tonight, he gets off at 7:00, I’m going to go meet him. We have a criteria that we use. And then we just go in our neighborhoods, surrounding counties, the area we’re looking to invest, we drive. We look for our criteria, and then we get the address of the property. We do it the hard way, put it in a Google Doc. Then we go home, hop on the county tax assessor website, put the address in, and then we get the owner, skip trace that. And then, we’re building a mailer list that way.

Felipe:
Nice. So, tell us a little bit, dig into your deals, what you do, give us a background on yourself, talk all things real estate in your life. And then we’ll move on.

Aaron:
Yeah. So, the first deal that I did was the duplex. We did that with FHA loan on a house hack, three and a half percent down. And that one actually works out really well. And we also, we rent out a room too. So, we double house hack it. And that's equivalent to about $300 a month in extra income. So, we actually live here for free, just pay our electric and water. And then the second deal that we just did was a threeplex that we found off market. So, that one has been great. We just got that one fully tenanted it out. And so far it's been awesome. I haven't had any trouble or any issues thus far with real estate.

Ashley:
Was your fiance always on board with getting into real estate investing, or is this something you had to slowly convince her on?

Aaron:
Yeah. So, in the beginning she was very skeptical. When I found BiggerPockets, I was just really eating it up and I was trying to get her to get into it. And she’s like, “No.” We’d be in the car driving, I’d stick a podcast on. She was just like, “Please turn that off. I can’t do.” So, then when I got her to listen to a couple of them like, “Hey, we can do this. And this can totally change our lives. And this is powerful.” And she got into it. And she listened to one and she was like, “Wow, you’re right. Let’s do this. I’m with you.” And then she just jumped on and now she’s fully on board, with our budget and savings and where we’re investing our money. And she likes to look at deals, and she sends me deals, and likes to talk real estate as well. So, it’s been really cool having her onboard for sure.

Ashley:
That is awesome, when you finally have that alignment and you have shared the same goals now, and you’re both excited and passionate about real estate. My husband just, I mean, he always supported me. But now like this past winter, he’s finally more interested, and we talk about it a lot, and it’s a lot more fun.

Felipe:
Ashley, did you really give him a choice or was it more like, “Hey, we’re doing this.”

Aaron:
No option.

Ashley:
Oh, I mean, I did. There are times I’m like, “Oh, I bought a property. I forgot to tell you.” Because I’m not a good communicator at all.

Aaron:
Oh wow.

Ashley:
And so, he always has to remind me to do that. But he has his firm. So, he might go and buy equipment or whatever but-

Felipe:
It’s better than coming home with a brand new Gucci bag or something or [crosstalk 00:08:00].

Ashley:
You’re right. Yeah, actually it is.

Aaron:
That’s very true.

Felipe:
I would rather my wife come home with a property than, “Oh, I bought a new Gucci bag or something.”

Ashley:
Yeah, that is true.

Aaron:
$6,000, Louis Vuitton.

Felipe:
Oh God. That’s hilarious.

Ashley:
Yeah. So, what are some of the goals you guys have put together as a couple?

Aaron:
Yeah. So, one of our main goals is to be financially independent by 30. And we look at that as about $10,000 a month in passive cashflow. And we need, so the rough math on that is about 5.5 doors a year at $250 a month to get us to wherever we want to be, from where we are now. So, that’s our main goal. And then, we’re just trying to try and get there, really.

Ashley:
I liked how you guys reverse engineered that. So, you knew what dollar amount you wanted a month and then you broke it down. Can you explain a little more about that, how you figured out exactly what you need to do now to get to that number?

Aaron:
Yeah. So, we of looked at where we want to be by the time we’re 30. I’m 24 and she’s 23. So, we’re like in six years from now or whatever, and that’s now I’m 30, this is where we want to be at. So, how are we going to get there? And then we took a look at our market. And then our market, it’s not hard to hit $250 a door in cashflow. Actually, all of our properties, do more than that. So, we took that number on the low end and said, “Okay, we’ll do this. And then, if we get this many a year, from there in this many years, we’ll be where we want to be. And then we can have the option to step away from our jobs if we want to, or to continue working or however we want to do, but we’ll have the option to be out of the rat race.” Because that’s really our biggest why, is freedom. We want freedom. And that’s what real estate can provide us. So, that’s how we came to that conclusion.

Felipe:
Aaron, let me ask a question off the rails real quick. And this doesn’t follow our show notes or anything like that. What does freedom mean to you as a real estate investor?

Aaron:
Yeah, so freedom to me as a real estate investor is the ability to not have to work for somebody else, if I don’t want to. When I have kids and a family, I want the ability to not have to be on call or go in to work, or if they have a game or something that I want to do with them, a vacation or whatever it may be, I want to have the ability to do that when I want to do it, and not have to listen to anybody else. Just to provide for my family, work 60 hours a week and so on and so forth.

Felipe:
I couldn’t agree more. Me and Ashley both have kids that are young. And if you see our stories and what we do, we spend a lot of time with our family. And we might not drive Lamborghinis. We might not drive really nice Teslas-

Ashley:
Teslas.

Felipe:
… yet. [crosstalk 00:10:33]. But it is really comforting to be able to spend all day, all week, all month, if I want to, with my son because of real estate. Now, I do have those calls. I am, there is some days where I spend all day on real estate and I don’t see my son that whole day, but it is a choice. And that is an amazing feeling, that real estate has given me, where I now have a choice. I can decide, I’m not going to see my son all day today, but I’m doing this to build for the family. Or I’m going to spend all day with my son and I’m going to pay the plumber to fix that because I just don’t feel like it.

Aaron:
Absolutely.

Felipe:
And that’s such an amazing choice and feeling to have. And I know Ashley is the same way. And there’s days where I see her out there grinding on her real estate stuff. And then the other day she was out at the lake with her kids. I went them off with jet skis or something. So, I love being able to have that option. I think you see that vision and I’m so happy that you’re talking about that your wife sees that same vision for you guys, because that’s so, so important. I think that’s great. So, I’m going to move us on a little bit, but I think Ashley first has a question.

Ashley:
Well, I just wanted to add to that. And I think you guys will be able to relate. And I’m thinking a lot about this because I struggle with my why, but is having the choice to do different things. One word that really comes to mind is being spontaneous. I want to be able to say, “Hey, kids, tomorrow going to the cabin,” or anything like that. That’s really what I want to see my life as. And it’s slowly getting there, it’s definitely a lot better than it was two years ago. That’s the word I like to use as spontaneous, so that I can do whatever I want when I want.

Felipe:
Just like she spontaneously brings deals home to her husband. I spontaneously bought a property.

Aaron:
Spontaneously got something. Yeah.

Felipe:
Yeah. I love that.

Aaron:
I think that’s a great way to explain it. That’s awesome. Yeah, so true.

Ashley:
I had to share because I’ve spent so much time thinking.

Aaron:
That’s a good one.

Ashley:
Go ahead Felipe, moves us on.

Felipe:
So, Ashley, let’s interview Ashley, Aaron. Help me interview. I’m just kidding. I’m just kidding. I love Ashley. She’s a great cohost. All right, so let’s move us on Aaron. Do you have a deal in mind that we’re going to talk about, a good rookie deal, that we can get some nuts and bolts on and really add some value to our listeners?

Aaron:
Yeah. So, we can do the one that was just closed on July 16th. [inaudible 00:12:45]

Felipe:
Yeah. Let’s talk about it.

Ashley:
Yeah. Let’s talk about that.

Aaron:
Yeah. Okay. So, like I said, I partnered with that one with one of my really good friends. We've been friends for a long time. We also worked together. So, he actually found the deal, it's in our hometown, which is about 30 minutes north of where I live now. And I said, I'd never invest there, but he still lives there. And he's like, "Would you look at the market?" And I was like, "Yeah, sure." He is going through and he finds his property and he sends it to me. And I'm like, "Whoa, this right off the top, I can tell it." Busted the 1% rule. And I knew that it had good numbers. They were asking 121. It was for sale by owner. And I could tell it was two bed, one bath, three units. And I knew that each one on the low end could rent for $600 to $750. So, I was like, "Okay, this could work."
So, we ran the numbers together and I was showing him how running the numbers work. Because he is getting really into real estate and BiggerPockets himself. So, he's like, "Call them, let's see what we can do." So, I called the owner and she was just an elderly lady that had retired, moving to Florida. She was in her later seventies, her and her husband. And she was just getting rid of everything. They had like 25 properties. So, I called her, I'm like, "Can I come see this please?" And she said, "Yeah, you can come see it tomorrow." I'm like, "Sounds great." So, we go look at it and it's basically turnkey, it doesn't need anything.

Felipe:
Wow.

Aaron:
So, I was very surprised. Yeah. And I’m like, so I took a contract with me and I started negotiating the price, whether she was asking 121. I knew that she was done with it and wanted to get out of it. So, I was like, “What’s your bottom dollar?” And me and him had talked that we wanted to pay 110 for it. So, we get it down to 110 and I’m like, “Okay, let’s close this deal.” So, we go back to her house, we signed the contract. Didn’t have any financing or anything, just put it under contract.
I found the deal, so I was going to find the money next. I called my lender, the one I used on the FHA property. And I'm like, "Hey, can you get me financed?" And he's great about, he has gotten me into like two or three places with pre-approvals. He said, "Yeah, I'll get you financed." Well, come to find out that property is actually, it's a duplex and a single family house, and it's on one parcel. So, it doesn't pass conventional financing. And they were marketing it as trying to get a USDA loan as a four bed, two bath house with the in-law suite. And that's how they had it posted to sell it, which I knew wasn't right, when I looked at it. But they had a split door that goes upstairs and downstairs, and they have a split door in the middle. So, you can open that door, close it.

Ashley:
Was it sub metered or the same meter for that duplex?

Aaron:
Electric separate, water is all one meter. So, my lender was like, "I can't get you financed." He said, "With COVID restrictions, things are tight right now. Maybe previously, I probably could have pushed it through, but now they're not going to do it." So, I'm like, "Crap. Okay." So, he gives me some local banks to call, call local banks. I get offered a 5/1 ARM on it. And I really didn't want to take that loan with a 15 year amortization. And they wanted 30% down, which is I was looking at paying 20% down with about a 4% rate and they wanted over six. So, I was like, "Yeah, this is going to work. It's not the same deal anymore."
So, I called her back. And when we were negotiating, I had mentioned seller financing to her and she said, “No, absolutely not. I won’t do it.” So, I call her back and I’m like, “Here’s what I can do. This is what happened. I can buy the property at $95,000, you drop the price, I’ll buy it on the 5/1 ARM. Or we can do seller financing. We’ll give you $25,000 down and we’ll do 3% for 15 years.” And she said, “Let me call you back. I’m going to talk to my husband.” Calls me back later that day and says, “We’ll do the seller financing deal.”

Ashley:
3%?

Aaron:
3%, yes.

Ashley:
Yeah, no closing cost, straight. That’s awesome. Great job.

Felipe:
Out of the park.

Aaron:
Her stipulation was I had to pay for the lawyer, because she said she wanted a lawyer, her lawyer to do the contract. And I was like, “Fine.” We were going to do that anyways.

Ashley:
And what would that cost, a thousand bucks?

Felipe:
So, many questions that we have now.

Aaron:
It costed $350 for the closing cost and $150 for the title search, so $500.

Felipe:
And then the lawyer fee was how much?

Aaron:
$350, that was it.

Felipe:
Oh wow, that’s amazing.

Aaron:
That was for the contract and everything.

Ashley:
Wow.

Felipe:
So, I like this because you didn’t go back to the seller and say, “Hey, this is what we can do. Take it or leave it.” Or, “This is my only option. This is what I got.” You went back to the seller and put the ball in her court and said, “Hey, these are some options that we can take. I can go the bank route. I can go your route.” And the tax implications that she and yourself just saved by doing seller financing. Now, she gets a check for the next 15 years. You have 15 years, if you want to figure out about maybe refinancing or doing whatever you want to do. It opens up so many more doors to do seller financing when you cut out the bank. And I think if most people… Here’s the thing, I think a lot of people don’t do seller financing.
And Ashley, you can tell me if you think differently. I think a lot of people don’t do seller financing because they are not educated on the outcome of it and how great it is for everyone. I think in a seller financing deal, everyone wins. Now 3%, I don’t know, Aaron, you gave yourself a little bit more than you think. But I still think that-

Aaron:
I just do it out there.

Felipe:
I think it’s a great way.

Aaron:
Okay.

Felipe:
Okay. We’re going to do it.

Aaron:
Now, [inaudible 00:17:41]negotiate. I mean, she asked me what the bank offered me and they said, my banker said, he said anywhere from three to four. So, I was like, “Well, the bank said three to four.” And I was like-

Felipe:
I’ll give you three. But what’s really good is you don’t know this person’s situation. And now you might’ve just relieved some stress for her by saying, “You know what? I’m going to give you this check every single month for the next 15 years.” I mean, that’s great.

Aaron:
Yeah. And she wanted to move to Florida. So, they were already out the door moving to Florida. And they had had the property just sitting, not renting it because they couldn’t manage it anymore. And she was ready to go. She’s like, “Can we close now? I just want to go to Florida and live the rest of my life.” And I’m like, “Yeah, let’s get it done.”

Felipe:
That’s amazing. That’s perfect. What a great option to give, for every seller there’s a buyer, but for every buyer, I also think there’s a seller. And if you can just work it out with, I don’t remember what episode it was on the OG Podcast, but I’ll never forget. I used to be a mover. And I was on a moving job listening to this podcast. And this gentleman told Brandon Turner was like, in every real estate deal, you have to figure out what it is that the seller really wants, because it’s not always the money. Sometimes it’s a clear conscience. Sometimes it’s their kids’ financial education. I mean, it’s always something and it’s not always just monetary money gain, if you will. And I think you might’ve just given this lady what she needed. She just wanted 15 years of a check every single month while she’s, I don’t know, sipping martinis down in Florida or something. So, people listen to that. That’s great.

Ashley:
Did you do anything Aaron, to prove to her or show her that you were financially stable and could make these payments and that you weren’t going to just foreclose on the property and let it run into TMOs?

Aaron:
So, not particularly, I didn’t show her any income or anything. But when I told her we’d put $25,000 down, that made her feel more comfortable. And then if she called me like right now, if she called me, I’d take her call. If she texts me and she has a problem, I’m right there. I do not let her go on out of the…. I don’t want to be out of the circle. I keep her in the know.

Felipe:
And you said she has other properties too.

Aaron:
She sold. She had 25. Her and her husband sold 25. They owned a construction business too. So, they were pretty wealthy people. But yeah. So, I just make sure that I’m jogging on the spot for her. She’s older. She doesn’t understand things. She wanted things done a certain way. I really want to just send her the payment every month, but she refuses and says, “Please just deposit in my bank account.” It’s done. I’m not going to do anything to make her think that I’m not the man for the job.

Ashley:
And that’s not a hard thing to do, is to accommodate those little things at all.

Aaron:
Yeah. And she gave me a great deal. She even let us, we closed on the 16th. She said, “Oh, don’t pay me until September. I’ll give you a month to get tenants.” And super nice people. They’re good, great people. So, I do everything I can to make life easy for her. And I think that went a long way to was just being honest. And always, if she called, I did not push her call off. It didn’t matter what I was doing, I took the call and said, “Hey, what can I do to make this easy for you? I’ll do all the work. Just let me take the deal.”

Felipe:
Except when you’re on the real estate, Ricky Show, right?

Aaron:
Yeah.[crosstalk 00:20:51]. This is pretty important. This is important.

Ashley:
I think that is a really great tip, just highlighting that you’re catering to her needs because it’s not that big of an inconvenience to you at all. And too bad, they already sold those 25 other properties because you probably could have-

Aaron:
I know, I know.

Ashley:
… bagged those deals too.

Aaron:
I asked, I said, “Do you guys have anything left?” And they’re like, “No.” “You have any friends with anything?”

Ashley:
Yeah. Right. Yeah. You got to tell everybody what you’re doing, what you want. Oh, that’s great.

Aaron:
Oh, that’s key, so key. I’ve found so many connections just by doing it, by talking to people.

Felipe:
Aaron, so what happened next?

Aaron:
Okay. So, we got the property. And as soon as we got it the same day, it was turnkey. It was ready to go. So, we spun around and made a listing and put it on Facebook. I use Cozy for most property management applications. So, we throw it on Facebook and we started high. So, we started at 750, which I knew was top end. So, we actually got some kickback off that, people thought it was too overpriced. So, we didn’t get any applications really.
So, we went back to the drawing board and said, "Okay, let's change it up." So, we changed each price for each unit, because there was some nicer unit, and one nicer unit and another nice unit, and a less nice unit. So, we changed up the pricing. And as soon as we did that and posted it back on Facebook, it just went off. Like on a county rentals page, so at Scott County, Indiana, we posted on the rentals page and it took off from there. We had like 40 comments, 50 shares. People blowing me up all day wanting to see it. I did have some trouble with the application process because people didn't want to actually go online and do it. So, but we got it fully tenanted it now.

Ashley:
That weeds out the real applicants though-

Felipe:
Those are the tenants you don’t want anyway.

Ashley:
… whoever isn’t motivated to actually go and fill it out.

Aaron:
Yeah. If you can’t fill out the application online or it’s not working for me, I’m like, “No, it’s definitely working for you. I’ve done it myself. It’s working.”

Ashley:
Yeah. And other people are submitting their application.

Aaron:
Yeah. Yeah. So, we’ve got some great tenants in there and everything’s going good. We’ve had some issues. We did have to replace a fridge. We had to replace a water heater the other day, had to do a little toilet maintenance. But all in all we’re doing well.

Felipe:
Oh Aaron, what’s still left to come? I love if it was just about the refrigerator. I’m sure there’s some more horror stories later.

Aaron:
Yeah, for sure. The guy I partnered with, he’s got some construction background. I do not. So, we did a 50-50 split on that. And he handles the maintenance. I handle the taxes, accounting, finance stuff. So, that’s been great for me because I can’t swing a hammer.

Ashley:
For property management, you're doing it yourself. You're using Cozy. What other systems do you have in place? What do your tenants do when they have that maintenance issue? Are they calling your partner directly? Are they submitting something online? How does that process work?

Aaron:
So, thus far they call or text me or him. He lives 10 minutes away. I live 30 to 40 minutes. So, they call or text him, or they call or text me. And then from there we figure out what’s the best option to get it fixed. We like to take care of it very timely. I know, like on the something that stuck with me from the OG Podcast is, I don’t remember who said it, but he said, “Treat every property like you have or treat every tenant like you only have one and treat every property, like you have a hundred.” And that’s how we’ve been just running our business for the most part. It’s trying to be on it, trying to be the best landlords in town, because we want that name for ourselves.

Ashley:
Do you have all your tenants in place now, what are you cash flowing a month on this property?

Aaron:
So, from that deal, we both make a thousand or we both make $510 a month off that deal.

Ashley:
That’s great. So over $1000, your cash flow.

Aaron:
It’s a $1020 total. Yeah. I mean, it’s crazy that the price on that, is a 47% cash on cash return because we both have about $13,000 in it after everything.

Ashley:
That’s really exciting. Congratulations.

Aaron:
Yeah. Thank you.

Felipe:
It’s interesting, Aaron, a lot of people talk about, “Oh, I can’t find deals in my market or a hundred dollars a door is just impossible to find right now.” And I hear story after story, after story of like what you’re just saying, “I don’t get less than $500 per door on every single one of my rental properties. I’m not going to buy it if I don’t make $500 a door.” So, what you’re saying is, but you’ve created that norm by yourself. And it all started from the beginning. Like the way you structured the deal, the partner, the whole bit is very important all the way to now you’re getting this cash on cash return. You’re getting this cashflow. And it’s really important because you’ve structured everything in that way. So, speaking about this deal, can you give some of our listeners a little wisdom on how maybe they should find a deal like this or how to find a deal like this?

Aaron:
Yeah. So, I would say set your metrics first, set your metrics of what you want and don't bend. Get that metric every time, because the deals are out there, just don't be lazy. You go find them, because they're out there. Hit the MLS. I'm on a realtor drip, drive for dollars, Craigslist, Facebook. I'm on all of them every single day, talking to people. I work in retail. So, if somebody comes in, I've met contractors, I met a hard money lender the other day. I'm just talking to everybody. If I get a second to talk to you, "Do you know anybody has any property for sale? Do you do anything with property?" Especially if I can see that they're construction workers or something like that. That the deals are out there, they just got to be found. So, that would be my suggestion.

Felipe:
That’s a hundred percent, right.

Ashley:
I’m 100% agree. We’re, I said I would hundred percent agree with you, because I’ve actually found a couple of my deals from word of mouth where someone who knew that I invested that approached me with the deals, and I got a great off market deal on two fully rehabbed duplexes.

Aaron:
Oh nice.

Ashley:
So, I think that the networking and telling everyone what you have on the back of my business card, it says, I buy rental properties on the back. And I throw them out everywhere.

Aaron:
Somebody picks it up.

Ashley:
I leave them where I can. If I give them to someone, that it's right there. So yeah, that's great advice for everyone, to just tell everyone what you're doing, what you're looking for in what you want. And it will be amazing the deals that come to you. And even if it's not specifically a deal, it could lead to a contractor or a connection of building your team. So, what's the next step for you? Are you looking to partner on more deals, do stuff by yourself? Are you building a team? What does that look like?

Aaron:
Yeah. So, actually everything. So, just met with a CPA last week to start getting that set up, got a lender who's great. And then I met with a couple of contractors. So, I haven't done any [inaudible 00:27:22]yet. So, I'm really excited about that. I want to do a BRRRR on the next deal, a small multifamily BRRRR, two to four units, rehab it. Actually, the partner that I use on this last deal, he took a HELOC on his property, got a line of credit. So, he got tapped into about 40 grand, and then I've got cash put back as well. So, between the two of us, we're going to step into a deal that way. And we're debating using a hard money lender just to learn the process and then we'll have our money put back if we need it. And just, we're trying to really grow the business, get our name out there.
Like I said, we got the accountant. So, we talked to him about what we needed to do for LLCs and stuff of that nature and got some direction there. And then we got the lawyer we used for the title company as our real estate attorney as well. So yeah, I mean, we’re looking to grow and find deals. We’d like to close on at least 10 doors this year, hopefully could do more, but that’s our minimum goal was 10 doors.

Felipe:
I agree. You’re going to get there and I can already see it. But before we get to our MVP, I did have a question. In our show notes, we have something about you actually lost your job while funding this deal. Can you dig into that a little bit?

Aaron:
So, that was my first deal that me and my fiance did on the house hack duplex that we live in now. So yeah, we searched for six months to find the deal. We found the one that we wanted and we go into closing. We actually lost our real estate agent too, during the process. So, thank God our lender was there, because he held our hands. I was 22, she was 21. We didn't know what we were doing. And then I was an intern and the company I was working for, I was paid, but I was an intern. Actually, started to go under. They laid off 25 people and they shut down their intern program. And they let me know, "Hey, you got two weeks." And it was the last day was the week of my closing.
So, my lender calls me and he’s like, “Hey, I know that you’re about to lose your job. What’s going on? We’re not going to be able to close this loan.” So, but some I’m like, “I want to close this loan. How can we close it? What are we going to do? You let me know.” Actually, there’s an Amazon plant, right by my house, a fulfillment center, and they hire on the spot. So, I went down there and got a job. He’s like, “I need two weeks of paychecks.” I’m like, “Mate, that’s not going to work.”
So, but at the same time my fiance got a promotion. So I said, “Can we put this all in her name?” He said, “Yeah.” So, we rearranged the loan. Another 30 day closing. He said, “Let me call the seller and talk to them.” So, he called the seller and I guess he works a magic, and the seller was like, “Okay, it’s fine.” And we push it back another 30 days, eventually got the loan closed. It was a mess, but we got it done. Yeah.

Ashley:
Yeah, that’s a great lender right there, willing to do that extra bit to help you. Yeah.

Aaron:
He’s the best.

Felipe:
Aaron, it’s about those relationships for sure. But I want people to see that it’s not about giving up. You had plenty of reasons why, “Hey, I lost my job. I can’t get the deal. It’s too much money. The lender…” There’s always a reason why not, but you have to push through those things to make it in real estate. And I’ve yet to hear a story of like, “It was cookie cutter, super easy. I got my property and then I moved on.” There’s always something you have to push through. And I think that’s what really weeds out real estate investors that are going to make it and those that don’t. And I love that you said that, that you lost your job, but you put it in your wife’s name. You went out and got a job at Amazon.
I mean, you did whatever you had to do to fulfill that lender’s requirements, and with a little stroke of luck from the lender. But I would go as far as to say that the lender saw the hustle and grind in you and wanted this for you. I bet that lender just doesn’t do that for anyone. But he saw the drive, the hustle, the can do will do anything attitude that you had. And that’s why he pushed for this loan. Because it’s no skin off of his back.

Ashley:
Yeah. And that you want to buy more properties and he wants to continue that relationship with you.

Aaron:
Yeah. I let him know that too. I said, “I plan on buying more. This isn’t the first one. We’re looking, thinking about now maybe doing another house hack. So yeah, I preach him. If anybody says, “Hey, I’m buying, I’m getting a house or something.” I say, “Go talk to Ken because he’s the man, he took care of me.” If I need anything, I bet I could call him today, and he’d have me a preapproval in the next hour. So he’s-

Felipe:
But it’s that hustle and that grind though. Because I know lenders that are like, “No, sorry, you don’t meet the criteria.” And I’m like, “Okay, great. But can you give me an option of how I can?” I mean, so those are the difference between finding good lenders and those lenders that don’t care. And they’re just going to be like, “Oh, well I can close a hundred of these. I don’t…” So, that relationship that you have with the lender I think is great.
But let’s move on. I’m assuming I might know who your MVP is, but I don’t know. But it’s time for this part of the show where we learn about a key player on your team, an agent, a lender, a handyman, whatever you want to do it. We call this segment of the show, the-

Ashley:
MVP.

Felipe:
… MVP.

Speaker 4:
MVP. MVP.

Felipe:
All right, Aaron, who is the MVP for you?

Aaron:
So, I got to give a shout out to Brandon Turner, because when I found him, it kicked me right over the edge to let me know where to go, when I found BP, Brandon Turner in the podcast. But the MVP so far has been my lender, Ken [Errands 00:32:29] at Republic Mortgage. So, he really, he carried me through it. There were some struggles. And like we talked about, he was there and that's been important to me. But I don't really have a mentor or anything. There's a guy in my market that I met at a meet up who actually, he just linked to me with the CPA and he let me come look at his flip. And he's, I would say probably three, four steps ahead of me. So, it's cool to see him. And I talked to him probably once every other month. So, he's been really, really cool. And then of course my fiance, she's the bomb.com. And then my other family, my mom Is great, everyone is supportive. So yeah, say all that together as a team. Sure.

Ashley:
With a lender, what would be your advice for everyone as to how to find a lender like that? Should they interview, talk to lenders or just so happened that he worked out? Did you do anything specific before working with them?

Aaron:
So, he actually was presented to me from the agent that we worked with that ended up not working out for us. But I just stuck with him because he was better than her at responding and talking and getting things done for us. But I would say, if you’re talking to your lender and they’re not willing to help you when you call or they’re not willing to answer your phone on the weekends, or they’re not willing to go that extra step, that you need to find a new lender. If someone tells you no, go call another one. I called like 30 banks, when I was trying to buy this other property before I got seller financing. Somebody will do it. You’ll find somebody that’ll give you some terms you like eventually.

Ashley:
Yeah. Whether that’s the bank or the seller or money guy.

Aaron:
Just persistence. It’s persistence. Don’t give up.

Felipe:
I think sometimes when people are starting out, they forget that everyone started somewhere and everyone had that first lender believe in them to do that first deal. Right?

Aaron:
Yeah.

Felipe:
So, we all started with one property. And before that we use the lender or we had to find financing somehow. I rarely know anyone that had $200,000 in cash to go buy a property. It’s about building that relationship a hundred percent. So, I agree. I mean, that’s a great MVP. That’s awesome. Let’s move on now to the rookie requests line. You can reach us anytime at +1 8885-ROCKIE, leave us a voicemail and we might use it on the next show. All right, Aaron, are you ready?

Aaron:
I’m ready.

Speaker 5:
Hey, Benny, it’s [inaudible 00:34:49]. I’m calling to ask [inaudible 00:34:53]mechanics behind seller financing, start to finish. If I find a deal that’s off market deal, how would I propose to go about seller financing?

Aaron:
So, first you got to ask the seller if they’re willing to do it. And then you got to negotiate the terms with them. There’s no agent or liaison between you two. So, it’s just going head to head with them and seeing what they’re willing to do, what they’re willing to bend on and what you’re willing to bend on. But after that, you set up on an agreed amount of terms. And then for me, I don’t think you have to use a lawyer. I’m not a hundred percent sure on that, but I wanted to, just to be safe in my contract. So, I called a lawyer who also worked with a title company. And I think it depends on your state if you use a lender or a title company, but he does both.
So, I called him and I’m like, “Hey, this is what I want to do. Can you do this for me?” And he’s like, “Yeah, that’s no problem. Give me a couple of days, I’ll draw the contract up. You guys meet and we’ll sign it. And we’ll go over everything with both parties. And we’ll do the title search for you.” I had never done it before. So, I just told him, I was like, “Hey, I don’t really know how this works, but I hope you’re going to tell me.” So, and then he walked through everything with me. It was so simple. I expected it to be difficult. Like I said, it cost 350 bucks for him to draw the contract. And he went over with both parties. We spent about 30 minutes talking. I made sure everybody was fine with everything. If I had any questions, I asked him and he answered them. That was really it. There wasn’t a whole lot to it.

Ashley:
Yeah. I’ve done a couple seller financing too. And it’s really just drawing up the note and having the terms in there and the payment plan. I mean, it’s really not, I mean, definitely not as intricate as getting a mortgage from the bank.

Aaron:
Oh, absolutely not, so much easier than getting a mortgage. They don’t even know yours, everything.

Ashley:
Right. And most attorneys are able to put this together for you fairly cheaply and easily too.

Aaron:
Absolutely.

Ashley:
And sometimes you might even run into the situation where the seller’s attorney might go ahead and do that. And the seller is paying for it too, if you’re lucky. Okay. Let’s move on to our random questions. Felipe, do you want to take the first question?

Felipe:
Yeah, sure, absolutely. Aaron, so this part we like to ask some industry related questions. It’s to get to know you a little bit better. Can you tell us what your, let’s say what are your two or three, it can be an app, it can be your phone, an Excel sheet, what are the top three things of technology that you use for real estate to help you in your investing?

Aaron:
So, I use Stessa. I don’t know if you guys have ever used it, but I actually found it from the podcast, one of the ads. And it’s great. I’ll link it to my bank accounts. It manages my portfolio. It manages all expenses. I can upload that into an income statement, balance sheet, a tax preparedness kit. And I can also put pictures of receipts. It tracks everything from every account, so I don’t even have to worry about it. So, I love Stessa. I use DealCheck to check deals, because it’s a really quick way just to put them in on your phone. I was using DealMachine for a minute when driving for dollars, but now I’m doing it the hard way, because I didn’t want to pay the money. But it’s a good app. It’s great.

Ashley:
It pulls the information from Zillow, right?

Aaron:
Yeah. I’m pretty sure.

Ashley:
So, if there is information on the property on Zillow, it pulls it into your report automatically when you come to it.

Aaron:
Oh, yeah. DealCheck it’ll come straight through onto DealCheck. I like that app too.

Ashley:
I use that too.

Aaron:
Yeah. That’s great. I’m on my phone a lot. My AirPods are very important because at work I just have an AirPod, and I got you guys going all day or the BiggerPockets Podcast. I listen to the business, the money, listen to all of them.

Ashley:
Great. Yeah. Awesome. Cool.

Aaron:
I constantly have podcasts going too.

Ashley:
So, my question for you is what is one bucket list item you want to cross off, but specific to real estate, is there a kind of strategy you want to get into with real estate or something you want to try doing?

Aaron:
Yeah. So, my end goal is to 1031 exchange all these smaller properties, these small multi-families into larger multifamily deals of like 20 to 50 units. I'd like to know the economies of scale, getting everything under one roof. That's my goal in the end. Yeah, for sure.

Ashley:
Very cool. Felipe, you want to take the next one?

Felipe:
Yeah. For sure. My question would be, Aaron, and we’ve asked this question before and I love asking this question. If you could have a drink with anybody that are alive, real estate, not real estate, who would it be?

Aaron:
That’s a tough one.

Ashley:
Oh, it’s easy. Say Brandon.

Aaron:
I want to say Brandy-

Felipe:
I know you want to.

Aaron:
…. but I don’t want to be cliche. It’s Brandon. Yeah. It is. I didn’t want to be cliche, but it’s Brandon. Yeah.

Felipe:
What would you ask him?

Aaron:
Man, I would just ask him how he got started and his motivation. I mean, there would be a ton of stuff. I’d have to sit down and write a list. Because I would just ask him, I’ll be bombarding him with questions.

Felipe:
Don’t be surprised.

Aaron:
Just talking to him, I mean, he’s a very clever guy and he’s very good at real estate. So, I mean, just talking with him, I think I would learn a ton. So, yeah.

Ashley:
That’s, I struggle with this question. Felipe and I have talked about it before and I could think of people I’d want to talk to. But to make value of their time and to not waste it, I have a hard time thinking of what those questions would be. And not to like poke at what you said, but the first thing you said was how he got started. Like I’m sure if all of us went back, we could listen to all these different podcasts and hear that, but it’s also different coming from him directly face to face. And no matter what he says, you’re going to pull value from it.

Aaron:
That’s what I’m saying. I mean, anything he said, I’ve listened to the podcast where he talks about his story, so I know it. But just the little intricate details that you can’t get out on the podcast and just some different stuff. I mean, anything that’s going to be valuable. So yeah, for sure.

Ashley:
Okay, cool. For the last question, what is one of fear or self doubt that you’ve overcome or are trying to overcome as a real estate investor?

Aaron:
So, I would say my biggest fear is being stuck in the rat race. I don’t want to be stuck in the rat race. I want to get out of it as fast as possible. Not hitting my goals is a fear of mine. I don’t want to look back and say, “Man, I could have done better.” Or sometimes I worry that I’m not working hard enough. So, I’m like, “I could do this or I could do that.” Or look and compare myself to people. And I’m like, “Look at them. I could be there if I would just work harder.” So, I think that’s probably one of my biggest fears is that I’m not doing enough and then I’ll get stuck in the rat race, for sure.

Felipe:
I can understand that, man. I know for me growing up below middle class, I don’t want to say poor because that’s defined differently. But I always tell the story that I always felt like the water was at my throat. Right? If you’re in a pool, like I was never drowning, but I knew at any slip or any strong wave, I’d have to really hold my breath. I mean, real estate has dropped that water more to my waist or my knees. So, I have a little bit more like, “Okay, yeah, let’s get that coffee. Let’s go out to dinner. No worries.”
So, I mean, I get it, man. I sometimes have that fear myself as well like, “Oh my gosh, if I make the wrong move, what can happen?” So, it’s really hard to get out of that mindset. I’d love to read a book on how to get over that, because I feel like sometimes that holds me back. I’ll do two or three flips at a time, but I won’t do seven or eight because I’m scared I’m going to lose it all type of thing. Right? So, I’d love to get over that. If anybody has a book that would help with that, I mean, let me know. I love to read.

Aaron:
Yeah, for sure.

Ashley:
Well, Aaron, can you tell everyone where they can find out some more information about you?

Aaron:
Yeah. So, I’ve never really been a big social media guy, so I’m working on that, right? So, I’m going to try to build out an Instagram or whatever. I’m on Facebook, just Aaron Chapman. And then I’m also, I’m on BiggerPockets as Aaron Chapman as well. I’m in the Real Estate Rookie groups and the official group and a bunch of stuff like that. So, now they’re probably the best place to reach me, for sure.

Ashley:
Before we end it, can you give us one last advice for, I want it to be specific to someone who is your age, maybe they’re starting their life with their spouse. What is one piece of advice you can give them to get into that mindset of growing wealth, getting out of the rat race.

Aaron:
One piece of advice to get out of the rat race, I would say, just look at your life and sit down and say, “Where do I want to be in five years? Where do I want my family to be?” And then sit down and write those goals out and say, “Okay. Well, now how can I achieve those goals?” And then go through, like I hear Brandon saying all the time, a man is like the most important next step, go to that and then just do it. Don’t make it huge. Just make it small and break it down into small chunks and then wipe it out as you go. And you’ll be there before you know it. You’ll be like, “Wow, this is actually working. This is happening.”

Ashley:
And then it gets exciting to think about, once it’s not overwhelming anymore, thinking about that big chunk and you break it down, like you said, into those little chunks, it becomes exciting as you get closer and closer and chip away at it.

Aaron:
Yeah. No, absolutely. I agree.

Ashley:
Well, thank you so much, Aaron, for being on the show today, we had a great time. And we look forward to seeing your journey and how you guys grow. And hopefully, COVID doesn’t cancel your wedding.

Aaron:
Hopefully not.

Ashley:
You’re lucky to have it into October though, at least it wasn’t the spring or summer.

Aaron:
I know. I know. Right. I’m happy about that. So yeah, thanks for having me guys. I appreciate it. It’s been a real honor. So yeah, thanks.

Ashley:
I’m Ashley at Welcome Rentals, and he is Felipe at Felipe Mejia REI. Thank you for joining us. We’ll see you next week.

Watch the Podcast Here

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In This Episode We Cover:

  • His "work backwards" plan for achieving financial freedom ($10k/month) by age 30
  • Aaron’s process for “driving for dollars”
  • Living for free through house hacking
  • Buying a “1% rule” triplex using seller financing
  • How he achieved a 47% cash-on-cash return
  • How he and his fiance adjusted when he lost his job while under contract on his first deal!
  • Getting your spouse or partner interested in investing
  • And SO much more!

Links from the Show

Rookie Deal

  • Seller Finance Duplex
  • Listed Price: $195,000
  • Purchase price: $1,280
  • Rental income: $1,250/month
  • Net Cashflow: $720

Aaron’s MVPs

  • His Lender, Ken Ahrens

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Books Mentioned in this Show:

Connect with Aaron:

Ready to go take action? Every Wednesday, the Real Estate Rookie Podcast will arm you with tips, tools, and inspiration to help you launch your real estate investing career. Hosts Ashley Kehr and F...
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    Zach Lemaster Rental Property Investor from Denver, CO
    Replied 21 days ago
    Loved the podcast! Thanks for sharing!
    Zach Lemaster Rental Property Investor from Denver, CO
    Replied 21 days ago
    Also, just to let you know the youtube link is not working for some reason.
    Dave Visaya Audio Engineer and Investor from Cebu City, Cebu
    Replied 21 days ago
    thanks for letting us know, Zach! It's been updated!