BiggerPockets Real Estate Podcast - 37: Full Time Income, Part Time Lifestyle Real Estate Investing with Aaron Mazzrillo

Episode Date: September 26, 2013

Not all real estate investors need to work 80 hours a week to put food on the table and build their wealth. On today’s episode of the BiggerPockets Podcast we are excited to introduce you to Aaron Mazzrillo, a real estate investor from the Southern California area who makes a great full time living with just 4 to 5 hours of work per day. Aaron’s smart strategies for wholesaling, buy and hold, and flipping are fascinating and will give you an entirely new perspective on building wealth through real estate – while enjoying every moment of it. Read the transcript for episode 37 with Aaron Mazzrillo here In This Show, We Cover How Aaron was able to quit his job through real estate Investing in expensive areas Finding properties through wholesalers Negotiating with sellers and cash buyers Aaron’s exact direct mail strategy Why wholesaling isn’t the best strategy for starting out Advanced methods for structuring no-money down deals How to really determine expenses on a rental Dealing with tenants without losing your mind Starting a real estate mastermind group Links From the Show The New iOS7 BiggerPockets App BiggerPockets Pro  BiggerPockets Book on Estimating Rehab Costs BiggerPockets Book on Flipping Houses Fiverr.com – Get any task done for $5 Tenant Screening: The Ultimate Guide VFlyer.com Books Mentioned in the Show Think and Grow Rich by Napoleon Hill Getting Everything You Can Out of All You’ve Got by Jay Abraham Tweetable Topics Surround yourself with the kind of people you want to become (Tweet This!) When negotiating, focus on explaining the outcome for the seller (Tweet This!) If you can’t afford to keep it vacant – you can’t afford to keep it (Tweet This!) I don’t consider myself a real estate investor…I consider myself a marketer who invests in real estate. (Tweet This!) Connect with Aaron Aaron’s BiggerPockets Profile Learn more about your ad choices. Visit megaphone.fm/adchoices

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slash bigger pockets. That's R-E-S-I-P-L-I dot com slash bigger pockets. This is the Bigger Pockets podcast. Show 37. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online. Hey, what's up everybody? This is Josh Dorkin, your host on the Bigger Pockets podcast alongside my wonderful co-host,

Brandon Turner. Hey, Brandon. Hey, Josh, what's going on? You know, working, working. Just got back from a nice four-day jaunt in New York for a wedding. So that was nice. Nice. I like how you used the word jaunt.

I don't hear that word very often. Well, you know, I like to, I like to, expand my vocabulary. Good job. That was excellent. For those people who don't know what jaunt means, go look in a dictionary. You just made like half of our listeners feel terrible about themselves.

Good job. Oh, you guys. Yeah, so things are good, man. I'm doing well. Had fun traveling. Had fun seeing folks. And, you know, back in the saddle here, cranking away. Just released version 2.0 of the bigger pocket.

It's a mobile app, which is pretty cool for iOS 7. So very excited about that. Yeah, it's fancy and pretty looking like iOS 7 is. It is, it is. Yeah, so anyone who wants to download that, go to biggerpockets.com slash app, and you could download the free BiggerPockets iOS 7 app. And for you Android listeners, so...

Sorry. Yeah, we'll get there. Well, one of these days. we'll have an Android app. We'll do a Kickstarter for that. Yeah, maybe that's what we have to do. But so listen, a few weeks ago, we started doing this quote contest and encourage people to share on Twitter, G-plus, or Facebook, their favorite quote from the show, along with hashtag bigger pockets.

So before we get into the show, we want to announce the winner of the quote contest from last episode. This week's winner was Mark Elgert, and his Twitter account is at B.L. NK 2010, who quoted, don't bet on appreciation from our show 26 at biggerpockets.com slash show 26. So this week we're going to change up the contest award just a little bit and up the ante some. This week we want to encourage you guys

to pick your favorite quote and tweet, Facebook share, or Gplus share it using the hashtag Bigger Pockets for your chance to win six months of a free Bigger Pockets Pro account. So we're given away six months of Bigger Pockets Pro for free to somebody here who has, I guess, our pick of the best quote of the week. That said, a pro account, in case you didn't know, it allows you to post on the marketplace

to use Bigger Pockets Analysis Calculators, get analytics about who's visiting your profile and blog and a whole lot of other cool features like Enhanced Significant. and so on, you can learn a lot more about that at biggerpockets.com slash pro. Moving on to the meat of the show, we've got a really, really good show ahead of you. Today, we, you know, this thing is chock full of excellent, excellent information. And our guest is Aaron Maserillo. Aaron's an investor in the Southern California market, who's done just about everything there is to do in real estate investing.

He was a speaker at the last Bigger Pockets conference last year in 2013 in March, and he was a huge hit. That was 2012 year conference. What year are we now? We're in 13. Holy Moses. Yes, it was in 2012. Don't pay attention to me.

He's just drone on. I'm kidding. I'm so not kidding. All right. So, Aaron was the speaker of the conference last year in 2012. He was still a huge hit back in 2012. And he's also, he's very active on the Bigger Pockets forums, always working to help answer questions on the site. He's usually there pretty much every day.

So definitely check him out. And as a reminder, of course, be sure to come check out the Bigger Pocket show notes at BiggerPockets.com slash show 37, where you can ask Aaron any questions you want or just say hello. Every week, the conversation that takes place on the show notes is really awesome. So definitely go to BiggerPockets slash Show 37, so you can pick Aaron's brain about what he's talking about in the show. And with that, why don't we move forward and get this thing going. Aaron, welcome to the show. Good to have you here.

I'm excited to do this. Awesome. Welcome. Let's jump into it. Josh, would you like to take the first question? Sure. I'll gladly take that, Brandon. Thank you for being so generous.

Yeah, you know, I'm a generous guy. All right, Aaron, seriously. What are you doing, man? What's your strategy? What's your focus? Where are you doing it? Well, I'm in Riverside, California, and my market is an area called the Inland Empire.

So that extends the eastern boundary of Los Angeles, city of Los Angeles. And I go as far east as a city called Moreno Valley, which is just before you hit desert as you head east into California. I really don't go on to Palm Springs or that area. And I really don't go much further south than probably Corona. There's a lot of cities in the Inland Empire south of there, but I've never had much luck down in there.

So just Central Inland Empire, Riverside, California. Buy in wholesale, mostly. My game is cash flow. I like to acquire properties as rentals. So I try to get something in escrow and then immediately something that I'm going to keep and then immediately look for something I can wholesale to use that money as the down payment. And I've been doing that for quite a few years now and it's worked out really well. No, I'm not real familiar with California.

So whereabouts, I mean, where is this in relation to, let's say, Los Angeles? It's east. It's just east of Los Angeles. An hour east, yeah. I can be at LAX in, you know, an hour from my... my house. All right. So, and you're actually finding, I mean, like, people are always coming on the site from Southern California saying, I have to invest out of the area because there's nothing in California you can buy. And you're not finding this to be true. And if you look at those posts,

you'll see I'm the first one to just blast that out of the way. I hammer on people so many, look at those posts, just search that. I hammer on people all the time. Why are you buying in Detroit when you can buy right here in Southern California? Hey, it wasn't me. I didn't rip on Detroit. No to everybody who's pissed at me in Detroit. This is Aaron who made a comment. Hey, if you live in Detroit, great. But if you live in Southern California, why are you looking in Detroit? I don't understand that.

I see it so many times. It just drives me nuts. Well, that's always been my thing. I would say that within every major city, there's probably somewhere within an hour or two you can go to invest. And apparently, they should all come to your backyard. So we'll be sending everyone. You know, there's a guy. There's a guy.

He used to run a real estate. Club here in Southern California. He's retired now, but he used to have a saying, why are you looking across town when you haven't looked in your own backyard? Is that Tony? When you haven't looked across the street. And I believe that. It's true. You can find deals within a half hour of your house no matter where you live. Yeah. Was that Tony? Tony. Tony? Tony. Tony. Tony. Oh, Alvarez? Yeah. No, no. It was a guy named Jack Fullerton, who was really instrumental in me making the right decisions and finding the right people. So shout out to Jack even though he'll never listen.

of this because I don't think he even knows how to use the internet. Nice. Well, yeah, I mean, listen, there's, there's, SoCal, there's tons of opportunity. You just have to know where to look. In fact, Arthur Garcia, who I believe was on podcast 6 at biggerpockets.com slash show 6. That was, that was his focus as well. I'm sure you guys must know each other or something.

It's small town, even though. You know, I know guys who live out here in the Inland Empire, and they're buying and flipping houses in Beverly Hills. So if you're in Southern California, and you can't find a deal, you're just not looking at the right product. Yeah, for sure. Cool, man.

All right, so you're in the Empire. You're doing this buy and hold stuff. Are you a full-time? I'm assuming that's the case. That is yes. I think I have a, I am full-time real estate, but 100% of my income is derived from real estate. But I'm not the typical investor.

lot of these guys are out there and they're working their butt off and, you know, they've essentially created jobs for themselves. And I didn't get in real estate to create a job. There's a saying an entrepreneur will work 16 hour days to figure out how to stop working eight hours a day. And I definitely realized that in the early years. What I did was got QuickBooks and I figured out, I tracked all my expenses down to the penny for a year, everything. And then I divided it by 12 and I figured out, okay, I need to make this much a month to live. And then for the next three years, I went out and just bought enough rental houses to cover that and then some extra. And at that point, I really slowed down a lot and I started doing a lot more fun stuff, the stuff that I wanted to do,

traveling, go on a lot of fishing trips. I train a lot. So I'm in the gym five, six days a week. and I really enjoy myself with the benefits that real estates have provided. So I don't have kids, so there's nobody after me. So all the money I get I can spend on myself. So it's not like I'm building something for other people to pass on to. You're selfish bastard. I am. Yeah, I'm just not done spoiling myself.

I love it. I love it. So, okay, so you are, you are. You've built basically, I mean, it sounds like a pretty nice lifestyle real estate business is what it sounds like. Well, I mean, the perfect example is I went back and forth with Brandon for, I don't know how many emails about, can you do this at nine? Absolutely out of the question. How about 930? Dude, I do not get out of bed before 10 and I have to set my alarm.

Must be rough, Aaron. Must be rough, man. You know, it's lifestyle by design. That's awesome. That's awesome. So what would you say a typical week? I mean, you know, a lot of investors are out there trying to do, you know, 40, 60, 80 hours of real estate work. How much work are you putting in these days?

Maybe four or five hours a day tops, but a lot of that time is, we do marketing. Like a lot of other guys on the site, you'll see the yellow letters and stuff like that. We're involved in the same stuff. When I say, it's just me and my wife. I don't have any other partners at this time. So we do a lot of the marketing. and a lot of the time I spend during the day is just follow-up calls, comping out houses, the rental portfolio.

I actually hired a girl to deal with all that, so I don't have any of the maintenance issues. All those calls go to her. I don't deal with the lease-ups, anything like that. So, you know, I spend a lot of time messing around on Facebook and reading blogs on fishing and things like that. The real estate's... You learn a lot about real estate from those fishing blogs, huh?

Well, you know, the beauty of that is, And this is an interesting story, and it's a great tip for your listeners. Surround yourself with the type of people that you want, like you want to become. So I have found that if you surround yourself with guys who sit on the couch and smoke pot, it's easy to fall in that habit of sitting on the couch, smoking pot, playing video games all day. But if you surround yourself with guys who are going on one week long fishing trips, they're going to pull you up because they want you to go on those, one week long fishing trips as well. So here's a perfect example. A friend and I wanted to go to

Patagonia, and that's the southern part of South America. It's Chile and Argentina. And we're going to go this year. And he flipped me a wholesale deal. He bought two houses for 140 each. He put one on the market for 195, didn't do anything to it, got an offer for 220. The other one he gave to me and said, wholesale this, anything you get out of it will split and we'll use that money to go to Patagonia. And I wholesale it for 10,000, so we each got five grand to cover our trip. He didn't have to do that. He could have listed it, but he wanted to go on that trip with me because I go fly fishing with him all the time.

So he gave me the deal and we're going to go. They won't pull you up. Do you also go skiing in the Alps because I'll put a deal with you? I don't, but I will go with you if you flip me a house. To anybody listening, you want to go on a fun trip, flip on my house. Tip, tip me a house, we can go on a trip. That's great. So speaking of flipping, do you actually do any kind of flipping house flipping or just really wholesale?

Fixing flipping, yeah. You know, in the beginning, I flipped a lot of houses. And that was my main business model. And I bought from wholesalers. I think that's the easiest, in my opinion, in real estate, I've done a lot of different things. I think buying houses from rehivers is, I mean, from wholesalers is the easiest way to get in this business. I think being a rehabber is the easiest part of. real estate because essentially you just have to be a project manager. You can let a wholesaler do all the

marketing, the negotiation, the contracts, the estimation of rehab, the appraisal. They basically tell you bringing this much money, spend this much on rehab and sell it for this and here's your profit. So you can hire a contractor, you can borrow money from a hard money lender, you can hire an agent to sell the house for you. All you have to do is be a project manager. So that's what I did. And now I only rehab and flip houses if there's a substantial profit involved. I have one in escrow now that should net about 60,000, and I did one earlier this year that we brought in about 90,000 from that. So if it's less than 50, I'll probably just wholesale it. And how do you find, I mean, there's a lot of crappy wholesalers out there, right?

I mean, like, I would say vast majority of them. Not the people who listen to this show. No, the people listen to this show. Brandon is not talking about you. I would agree with Brandon. Yeah, there's a lot of bad wholesalers out there. Yeah, of course. So how do you find a good wholesaler? I mean, like, how did you find yours?

You know, reputation, going to a lot of local real estate clubs and talking to you, sorry, I get my calls into my office here. And I couldn't figure out how to shut my phone off. It's all good. I went to a lot of real estate clubs and just listen and talk to people and tried to find the most reputable person I could. And when I found that person and this was, this is a. great tip. Don't do what I did. I met the guy at a luncheon and he said, hey, look, I'm looking to buy a house and I got some cash. So he just wrote down a piece of paper and address and I just said, yeah, it's sold. I didn't comp it. I had no idea what I was giving it to. But I just knew

he had such a good reputation from so many people that said, yeah, this is the guy to go to. He's the best. He's the best buyer in Southern California. And I actually bought that house. I made 26 grand on my first deal. And it took about five weeks. Yeah, reputation. Was that a flip? It sounds like then? Yeah, rehab and flip. And then after that, I just started buying everything from.

And this was in 2006, 2007, when most people were dropping out of the business. And I was still buying and flipping houses. Yeah, yeah, nice. Did you suffer the crash at all then? I mean, like, during that time? It only affected me on a couple of the rentals that I held. I bought two properties and I held on to them. I should have flipped them.

but I was trying to build a portfolio of rental houses. I still have them today, and they do cash flow, but I lost a lot of equity and ended up being upside down in them, but I'm getting good cash flow out of both houses. And that's net. When I talk about cash flow, I'm not talking about mortgage minus rent. The net cash flow on them is it's enough that justifies keeping them,

even though I'm upside down to both of them. Yeah. And we'll definitely touch on the cash flow thing a little bit later. I got that on my agenda to ask you about, because I read some stuff that you had written on the site earlier, So anyway, but before we get, what? Let me just real quick, sorry, Brian, let me talk about one thing that I think it's important, and especially in either a sideways or a down market.

And this is the mistake I made, and it's where I lost a lot of money, is that I bought a product, and I would flip anything from mobile homes to mansions. I've done it all. I was looking at a mobile home, and one of my friends said, don't buy it, don't buy it. I just did one. It was a bad deal. And I had done a bunch of them, and I still, to this day, carry a lot of paper

on mobile homes and it's a great income source. But I bought a mobile home in a senior park in Orange County, which has about $850 a month space rent. And in the declining economy, a lot of seniors, they're invested in the stock market, their dividends go down. I really pigeonholed myself into the narrowest buyer market there is. And because of that, we lost about $20,000 on that mobile home, which is, you know, it's unbelievable, but we were only into the thing for about $40. And we ended up selling it for, I think of like 10 or 15. We really took a bath on the house.

So you're talking about just when you're buying, looking at the demographics of the area potentially, things like, you know, senior mobile parks and that kind of stuff. I just think you can't go wrong with a three-bedroom, one or two-bath single-story house with a two-car garage. You just can't go wrong with that product. It's the most in-demand product in the country. It has the largest number of buyers that want it.

It's easy to rent. It's easy to sell. There's tons of financing for it. So if you're getting started in the business, if you stick with that, you really, you beat, you know, you're 90% ahead of the game. It's the best product to invest in, in my opinion. Yeah, that's good advice. Very, very good advice. Yeah.

All right. So let's start kind of digging in a little bit. And why don't we start a little with wholesaling? So for those people who are listening who don't know what it is really, really quickly, you know, tell us what is a wholesale. What is wholesale? Okay, perfect example. I send you a marketing piece and you responds. So, Joshua, you call me up and say, yeah, I got a house.

And I'm looking for two things. I'm looking for equity and motivation. And you have to have both. If you don't have both, you might have tons of equity, but if you're not motivated, it's not a deal. I can't do anything with you. And you might be super motivated. You could be the most motivated person in the world, but if you'd have no equity, there's nothing I can do.

And I get that a lot from people. They'll go from real estate club to club, dragging around this deal where there's no equity and they're like, well, how do I make a check out of this? And I see that a lot with new people on the site. So look for equity, look for motivation. You get the property under contract and you have an assignable contract. And the way I do that is with a simple clause, which says, buyers vesting to be determined in escrow. That's the clause I use. It's right in my one page contract that I send out. So once we get in escrow, then I might call Brandon up and say, Brandon, I got this deal. I'm asking 150 on it. And actually, I do something

a little different. I say, hey, check out this house. Tell me what you'll pay for it. And a lot of, a lot of buyers don't like that method. They're like, well, you should tell me what you want. And I don't. I said, well, look, here's the house. You tell me what you're paying. A lot of times I get much more than... Well, yeah, that's a great negotiation tactic. And I've done multiple $30, $45,000 wholesale deals because I've done it that way. So I've called Brandon and say, here's the house, go check it out, tell me what you pay for it. And I haven't seen it. I don't go look at it. Some wholesalers do, but I don't, because I figure if Brandon's the one buying it, he's the one who needs to go look at the house.

So he'll go by, he'll look at the house, he'll comp it out. He'll tell me, yeah, this is what I would pay. And then I call up escrow and say, yeah, here's my buyer. So they'll send the grant deed to Joshua with the Brandon's entity as the grantor or grantee. Yeah, grantee. So you're saying you never actually step foot inside these wholesale deals? In the last three, four years, I have done probably 100, how many. houses, if not more, and I have never looked at any of them or gone inside any of them. I never met

any of the sellers. I do it all over the phone. And I'm going to go one step further and say that I've probably written less than five contracts. That blows my mind. Explain that. So with Joshua, we're negotiating for a house. And I say, well, look, I'll give you 100,000 for your house. And he's like, okay, that's fine. And I try not to pay the closing cost. And we used to to always offer, hey, we're going to pay all your closing costs. And then, you know, I realized how much money that was. So we went on to eBay and we bought Monopoly money. And every time I felt the urge to say, well, I'll pay all your closing costs thinking it was going to stitch a deal, I'd slap a couple $500 bills on the table. I'm like, yeah, I'm not going to do that anymore.

So keep some monopoly money on your desk. That's a great tip. Go to eBay, get some monopoly money. Put it on your desk. And when you're talking about those dollar numbers, throw those out. You don't know those type of books? And look at it. It's like, man, do I really want to do that? Do I want to give away all that? So anyways, I would make an agreement with Joshua over the phone. And then I would just email escrow.

Here's the seller. Here's the address. Here's his address. His email, his phone number. These are the terms that we agreed to. She types up the escrow docs and immediately sends them out. Because the escrow documents supersede the contract. We might have a signed contract, but the escrow docs go out differently.

And he signs that. That signed escrow dock is going to be, more important than the contract that we originally signed. Can you explain that in a little more detail? Why is that? Well, yes, the offer is just the instructions for escrow. But it's actually escrow documents that, you know, title's going to use and that they're going to record the deed and stuff like that. So they're more powerful than the offer itself. So I just don't even do it. It's, it's, I don't want to send you an offer and wait for you to

sign it and then send it back to me. Maybe in that time you've gotten two or three more letters, I might have called a couple of people and got high offers. And then you say, well, you know, I'm going to cancel. And now I don't have you an escrow. I have nothing from you. But if I get escrow docs FedExed out to you today, we make an agreement today, and I can get escrow to type that stuff out and FedEx it out today or tomorrow at the latest. And you get that, you sign it, you send it back.

You're an escrow. You're tied up. You're not going to go somewhere else. You're not even going to consider talking other people. What about like the earnest money? Do you have to put like a dollar down like they say or whatever? I've never done an Earth's money deposit. Okay. Interesting.

Yeah. We just wire in the full amount. So, you know, it's funny, even with Oreos, I've never done a bunch of Oreos, I've never done Earth's money deposit Arios. I always tell them, oh, we're just going to wire the full amount in. So we're waiting on escrow to tell us what that is. And it's always like a two or three week delay, and I've always gotten out of putting in an earnest money deposit. All right.

So walk me through this, because, you know, this is something that I haven't heard anyone else doing this. I'm sure plenty of people do, but I just haven't heard it. So you now go, you've, you know, you talk to me and I've got this house that I'm, I'm, you know, I want to unload. And, you know, we agree to 100 grand or whatever it is. And you now go to your escrow company and you have them type up docs. They send that to me. I signed the docs.

I then send those docs back. And then what happens? Like at what point do you start marketing it? How does the process kind of work from the docs? that point. Well, here's probably where I'm different than a lot of other wholesalers as well, too. I basically sell to one guy and he buys everything that I have. And he's a guy who rehabs and flips. He's got a lot of rental properties. And he always pays me a great price. He never complains. And for me, that's the most important. I have the philosophy that I got from the guy that I learned

to do business from is you bought what I bought. They don't call me and complain that there's a failed septic system or whatnot because if I bought the house, I'd have the same problem. So you bought what I bought. And he understands that. So I will, as soon as I get an agreement from you, Joshua, I would immediately email him and tell him, hey, I got this guy. He's on the hook for 100 grand. Again, what would you pay? Yeah, I just say, hey, I got this guy. Here's the address. What would you pay? It's rented. The tenants in there on a month a month, you know, it's not a lease. It's month a month and they pay well. And they're $1,000 a month. And then he'll email me back and say, I could do $120.

on that. I'll call escrow, email escrow and say, here's the buyer, he's in at 120. So he wires in the one, so she types up the grant deed with his entity and then sends the docs out. The seller signs the grant deed, gets it notarized, pays the $10,000,

puts it in the FedEx envelope, sends it all back. She deeds the property to him to my buyer. He's going to wire in the 120 and plus his closing costs and then escrow sends me to check for the $20,000. And how long does his process take?

I try to do all my deals in under 10 days, and that's working days. So I always tell people, I can get you your money in 10 days or less, but that's working days. So it's two weeks. Nice. A little marketing, right? So if I were to, today's Wednesday, if I were to lock something up today, I would try to close by next Friday. I want to do it quick.

You know, you can't steal in slow motion. You got to be fast. So what happens with a newer investor, right? New guy says, oh, I'm listening to Aaron. and this guy knows what he's talking about. Sounds like a great idea. He goes, he ties up a property, does the, you know,

gets the closing docks, gets all that tied up, and then he can't find a buyer. That's a tough one. If you can't find a buyer, then I really think that the property's probably not that good of a deal because there are tons of people out there starving for inventory right now in all markets.

So if you can't find somebody to buy that, it's probably not a great deal, and you need to go back and renegotiate it. and what I would say, and that's happened to me one time, I bought a house, the woman told me it was on a dirt road, she said they were going to pave the road, and when we did some more research called the city up, they said, no, we have no intention of ever paving that road. So I went back to her and said, you know, look, my money lender, the guy who funds me, I'm not a rich guy, I don't have pockets of drags on the ground, he told me the most he'll willing to lend me on this house is this much. So, you know, either you can agree to that and we can get this closed, I'll get you paid. And always focus on when I'm negotiating. I always try to focus on the outcome for the seller. Look, I can stuff your pockets with cash by next Friday if you agree to this. Because here's what we found out.

And if they accept it, then I get a lower price. We go back and try to sell the house again. So do you have any outs then? I mean, you know, if you couldn't find a buyer, you know, how do you renegotiate if the closing docs already signed? I'm a buy and hold guy. and I will rehab and flip. So when I make an offer, I have never an intention now.

That one deal is the only one I think I've ever backed out on, and Bishy did tell me they were planning on paving the road, and the city said no. So that's a pretty legitimate reason not to buy a house. I don't own a house on a dirt road in an urban area. So because I don't have a contract signed, and I just call her up and say, yeah, I changed my mind. I'm out.

I'm not going to close on it, and it's not an issue. Okay. So that works for you. what would you say again back to the new investor who hears about this and wants to try it? I guess it kind of goes back to if it's a deal, then it's going to sell. Yeah, absolutely. And this is really a relationship business. You guys know that.

You're in real estate. A lot of us do business on our word between if you and I, Josh, went out and bought a house. I'm sure we wouldn't go to a lawyer and be like, yeah, we need everything in writing about every possible outcome. We would just have a friendly agreement, maybe shake hands and say, hey, hey, let's buy this house. This is how it's going to work. And I've done that. I have 18, 19 houses that I own with other people.

And some of them have multiple people involved, and we don't have very many written. I think three of them have written agreements. So it's the relationship business. And I work with people that I really trust. I know nobody that I deal with is going to go behind my back and steal a deal from me because they look at all the future opportunities

they're going to lose. And a lot of new people, they get so caught up on the doc, and the out, I need to get out of this, and I don't, you know, what if it doesn't work out? If you make an offer, you should be embarrassed to make that offer. And if you're not, you're probably offering too much. Yeah. Somebody told me that when I first got started, and I never really took it to heart until maybe a couple years ago.

Because, like, yeah, I was, when I would offer on a property, I would get nine out of ten of them that I offered on. And there's something wrong. Yeah, there's something wrong. Great buyer. Yes. Yeah. My agent loved me. But, but, but, agents are bringing, bring it, bring it to Brandon. That dude loves to pay too much.

That's exactly what it was. Yeah, I was paying way too much. And, you know, one of those reasons was because I, I used to underestimate ARV, like, or the repair cost, I guess, was I used to underestimate me repair costs like crazy. So I'd be like, oh, I can get this done for 20 grand. And then by the time it was done, it would end up being 35. And, you know, to a degree, I still do that today. And I'm always way over optimistic. And I have to get multiple, you know, different opinions.

But so do you have any, I guess, suggestions on guys? guys like me. I mean, how do you find out, how do you know the repair costs and how do you know the ARV if you're not even stepping foot in the home? You know, I think it just comes from experience being in the business long enough that, and I've been doing this for about 10 years now. So when you've done enough houses, for me, I can look at the outside of the house. The outside is going to be a pretty good indication of what the inside looks like. If the lawn's dead and burn and there's, you know, dog holes dug everywhere and there's a broken window. The inside is probably trashed even worse. I mean, people generally don't live like Kings inside and live like,

you know, peasants on the outside. So if I look at a house, I look at the square footage, I have a pretty good budget or a pretty good idea of what it's going to take me to rehab and flip a house regardless of the market that I'm in. And again, it's just experience. If you don't understand estimating rehab, go to Home Depot on a Saturday and walk around, talk to people. There's free seminars. They'll teach you this stuff. You know, go in and price out cabinets. I say a great place to start is with your own house. Look at your house, measure the square foot in the bedrooms and figure out what it's going to cost to put carpet in, what it's going to cost to paint, how much a new kitchen in your house would cost. And then figure out, all right,

on my house, a total rehab, it's a thousand square foot and it's going to cost me $25 grand to rehab. So my number is $25 per square foot. So if I use $25 a square foot on this other house, should be a pretty good, you know, within a reason, a good number to work with. Yeah, yeah, that's great. And also, you know, just to give a little plug to the Bigger Pockets book on Estimating Rehab Cost from Jay Scott. It's a great book with lots of information to help out. And maybe you should read it one of these days, Brandon.

Maybe I should read it too. It's BiggerPockets.com slash flipping book, or you can find it on Amazon. We sell it with our Bigger Pockets book on flipping houses. So what about ARV? I mean, determining what it's going to be worth in the end. Are you just doing county rec? I mean, Zillow or, I mean, what are you doing to find out the value? Well, I have access to the MLS.

And being in real estate and a real estate investor and not having access to your multiple listing service, I would say it would be the equivalent of being a plumber, not owning a wrench. You might be able to fix those pipes with your bare hands, but it's not going to be fun. So do you have a license or do you just have people? I am a licensed real estate broker, and I disclose that to all the people I do business with. It's actually on my mailers that I put in there. I'm a broker, but I'm a cash bar.

I'm not looking to list your house. I think I've listed and sold one house that didn't belong to me. Just not a business. You know, as a broker, the one house that I listed and sold, you sit at the closing table, theoretically, and you see a grant deed to a free and clear house go across the table one way and a big pile of cash go across the table the other way. And the end result of that is you get a tiny, tiny check that's taxed at the highest rate. I don't know why anybody would ever want to be a real estate broker.

That's funny. Yeah, that's really good. I mean, people ask that question all the time on the site. Like, should I get my real estate license? Should I not? I would say the vast majority of our guests anyway, say, that you should. And I've said it before.

I think you should. Yeah. I think you should. You're a real estate investor. You're professional. It just adds to the credibility. But, you know, use it smartly. You'd be wise about it.

And there's a lot of other things you can do. When short sales got popular, I jumped in and did a bunch of those because I'm a broker. I was allowed to do that. And I did a bunch of short sales and made a grip of money on it. It was a really fun strategy that we did for a short period of time. But then I heard the FBI started to investigate these people. And that's when we backed office of the, I wrote.

don't really want any part of that. So, you know, I got out of the short sale business. But at the time, it was a very easy way to make some extra money. Yeah, yeah. All right. So motivated sellers. You know, you had mentioned yellow letters. What other techniques do you use?

I've done everything from radio advertisements to signs on the side of the road, bandit signs, door hangers. My truck was all painted up at one time. I've done tons and tons of different strategies. I find that mailing out letters or postcards for me is the easiest way to hit the exact property that I want to buy and not have any, like with internet advertising, perfect example, we used to do spam before spam was illegal and we sent out millions of emails a month. And I averaged, I averaged. And it just said, you know, we hired a guy to do it. and it cost us probably about $4,000 a month to send a million emails a month.

And it would just hit everybody in, I guess they would go by IP address or something. I really know how that works, but he would hit our market. And we'd get about on average 150 leads a month. But there'd be 130 people that were just, you know, mobile homes in parks in the middle of the desert, just real crap, junkie leads. And I didn't want to waste my time pre-screening all those calls. So I do direct marketing for properties that I want to buy. When my phone rings, I know that the seller might not be motivated and there might not be equity,

but essentially that's a house that I would be willing to own because it's a two to four bedroom, 800 to 1,500 square fee. It was built after 1940. It's a single-story house. In California, I know in some of the market like Texas, it's a little bit more difficult to get that data, but I think you can buy that through. There's some people who talk about list servers or list brokers that will sell you the information. And so we market to people that they own the type of property that I want to own.

That's really, really, really good advice. I think, you know, if you stop and ponder it a little bit, you know, is there any better way to target people with the exact specs that you're looking for than direct mail? and I can't think of them. I really can't think of any other way that would potentially be. Yeah, I guess you can do door hangers on those same properties. But otherwise, I mean, that's really about it, isn't it? Well, that's why I really don't consider myself a real estate investor. I consider myself a marketer who invests in real estate because marketing is my job.

I don't sit here all day long working in real estate. I spend the majority of my time working on marketing, trying to write good letters, putting together good copy. I spend a lot of time reading forums that I have to do with real estate copy and reading on bigger pockets. People are sending letters. One of my favorite things is to go to the top right hand corner. And I mentioned that in a lot of posts. Hey, why don't you go to the top right hand corner and search for this? And go and put in yellow letters there.

And you can write a book on the information available on bigger pockets, just on. the content for yellow letters. There's a lot of great information there. Are those motivated sellers calling you right there? That's what I was going to say. His phone doesn't stop. Yeah, that is. That's a 951, so that's a Riverside caller.

It's like this all day, but it's the number of mail, the quantity of mail that we send out keeps the phone ringing. So, all right, so you're sending out yellow letters. I want to go into some detail on this. And we did a lot of this with our podcast with Jerry Puckett. I'm wondering, what are you doing specific? in terms of yellow letter response rate. I mean, are you tracking,

how many letters are you sending out in order to get back a call, and then how many calls do you take in order to make a deal happen? Do you have those numbers? You know, I don't, I used to have, I had a partner before, and he had developed some in-house software,

and it went nuts. It tracked everything down to the hundredth of a cent on what we spent, and that information was really cool to look at, but at the end of the day, I didn't see the grand value in that, knowing that, oh, I need to send 500 letters to get 10 calls to buy one house. I just consistently send at minimum 100 letters a day, and I buy a lot of houses. And I don't think that, you know, if I knew that, well, if I send 100 letters a day, I can buy a house a week.

That's great information. But being a single guy working this business, you know, just me and my wife, and she does answer the phones, I couldn't handle the volume of calls if I got more than what I'm getting now. So sending 200 letters a day is not going to give me any greater return because I can't stick with, I can't keep up with what I have. And I don't want to hire somebody because I don't want to, I don't want a job. I don't want to be responsible for giving somebody else a job. So now I'm not concerned about feeding myself.

Now I'm concerned about feeding this person's family and making sure there's a enough income coming in to take care of them. I don't want that. And I want to be able to leave tomorrow on a trip. If somebody calls you and says, hey, let's go here and I can go. I don't have to worry about it. And that happens quite often in my life where we'll just, a perfect example, as a guy, email me two days ago and said, hey, I found this deal. Let's go to Cabo fly fishing for four days. So I immediately responded, yeah, I'm in. Let's do it. Nice. Sounds good. Now I don't remember the question I just had. Oh, yeah, yeah.

Yeah, yeah, I got it. So early Alzheimer's. You know what the sad part is, is that the faces Joshua makes and look at that people can't see this. Because the video interaction is the best part of this podcast. I know people are missing out here. All right. The question I had was so postcards versus yellow letters and are you doing them yourself? Are you printing them on your little, you know, canon printer you got from Walmart for 30 bucks?

What are you doing? It's a Hewlett-Packard. And I don't stop at Walmart for any. I used to outsource all that stuff when I had another partner, and we were going gangbusters. We had a couple of girls doing all that stuff. And now I scaled back everything. I broke up with that partnership. I basically just fired him because he's a great guy, and I really enjoyed doing business with him, but I got tired of giving away half.

So if I do less work, I can essentially make the same amount of money. keep it all. So I just got in January, actually, I was on vacation in Thailand and India and I was gone for, I was supposed to be gone for four weeks. And about the three and a half week into this, I just decided, I don't think I'm going to go back to the States anytime soon. So I emailed him, I just said, yeah, I'm not coming back for another two weeks. And I stayed longer. And then I came back and I just never went back to the office. I just said, yeah, I'm over it. Dude, let's let's wrap it up. So yeah, we do everything in-house. My wife and I take care of it all. It's really simple. It doesn't take that long to do. I just print out one page.

letters and I think you should do a combination of letters and postcards and there's no magic formula a lot of this is your letter getting to that person on the day they decide to sell because I talked a lot of people that said well I got four letters last week but they called me and it's not because of what my message said or you know sometimes it is but more often not it just happens to be that they got maybe tired of getting letters and they got mine and just said to heck with it I'm over it I want to sell this house so um you should do, the least expensive way to get a lead is through a postcard, obviously. Very inexpensive to mail postcards. You can do a high volume at low cost. So I would recommend starting with

postcards and then when you get leads that come in that you don't convert, switch them up to a more intense letter campaign. So maybe with a one or two-page letter attacking some of those points that they brought up in the conversation you had with them or or just tying it into the original postcard and then maybe send them once a month for four or five months and if you don't convert them at that point then switch them back to your postcard campaign where you're hitting them every six months let me let me cut you off here all right so you had you had mentioned using your letter to to respond to some of their you know counterpoints on on selling to you sounds like you're individualizing those letters then. I mean, are you putting out a hundred letters a week that are completely

individualized like that? Well, there's only so many reasons why people sell. So one is they have a bad tenant. Another one is they rented the property. Well, in their opinion, they are rented it, but they never got any rent to a relative. So they allowed a relative to move in and free load on them. So you might want to write a couple of letters that address those individual situations. Maybe the house needs a ton of repairs. Maybe they've gotten some code enforcement problems. So maybe they're having problems with the neighbors. Whatever the situations are in your market where you hear these things consistently that's allowing you to buy houses, I have a woman, she has a ton of credit card debt, and she wants to sell the rental house to pay off the credit card debt. And the first

thing I threw it was, why don't she just refine? She's like, well, I have this debt, and it's not allowing me. And I'll try to help people out before I move their equity onto my, you know, asset list. So, you know, you might have a letter that's specifically written for people who have a lot of debt. And then you just drop that person's name into a spreadsheet associated with that letter or that motivation. And then you can mail that whole list at one time. So I just use Excel, real simple. We used to have an access database and it tracked all the different campaigns. I just use a simple Excel spreadsheet for my different campaigns.

And you do a mail merge. It's so simple and easy. Anybody can do this. You go on YouTube and watch videos on how to do a mail merge. It's extremely easy to set up a marketing campaign. Yeah, that's right. And in terms of frequency, what are you doing with that? So you'll send out your yellows, your postcards.

How often are you sending? How often are you hitting these people? Postcards, I like to do four times a year. So if you get a list of, say you get a list of 13,000 names, and you mail 1,000 postcards, which would cost you probably about 500 bucks. you mail a thousand postcards a week for 13 weeks, then you can start those people over again. So you can hit them a list of 13 names is good for four hits a year.

And then when they call, if you don't close them, move them to a more intense letter campaign and mail those people once a month. Got it. Got it, got it, got it. And you had mentioned acquisition of these names. So are you buying from the website list source, the website list source or are you using other sources for your lists? I get them from the title company.

So the title company provides me a list. And I don't know if that's available. I think in Texas it's not. You can't get that because it's a non-disclosure state or something like that. But here in California, I can just call up or email the title company and they'll actually send me a list and they can scrub it down pretty good. They can't get you trust deeds. They used to be able to give us that.

So we would ask for a list of names where they hadn't had a trust deed recorded in 10 years, which means they hadn't borrowed any money against the property in 10 years. But we can't get that anymore. However, you still can buy those names from list source. Personally, I found that the two lists, there just wasn't any big difference in the number of return mail between the two. The number of Nixies was pretty consistent regardless of whether I paid for a list or got it for free. and then I use I actually went on Fiverr

I don't know if people use that or not but F-I-V-E-R-R it's just a website where you can hire people to do stuff for you and I hired some guy in Pakistan to create a bunch of SQL queries and so I I installed SQL server on my computer and run a bunch of SQL queries against the list

and I can scrub the list in a couple of minutes so I can scrub a list of 16,000 names in a couple of minutes and it'll spit it out to a list of to be marketed to names. I'm confused. I'm not a techie.

What does that mean? It's just a database. It's just basically you're querying a database and you're saying, hey, give me these criteria. Yeah, yeah. So here's a perfect example. Say you have a mailing address.

So you write a SQL query which would check from repetitive mailing addresses. So if mailing address of line 1A is equal to line 2A through, you know, whatever, or whatever the number is at the end of your list,

then it would move those names to another list, and those would be multiple property owners. So people who own more than one house, you don't want to mail those people. You know, if you hit a guy who's got 10 houses, you don't want to send them 10 letters. Yeah.

Yeah, that makes sense. Yeah. Yeah, I used to use title companies as well when I was an agent in L.A. and it was great. It was easy. It was free. Just tell them what you want,

and they'd provide it for you. Obviously, you know, you don't want to abuse the privilege, but if you're closing deals with them, then, you know, they're more than happy to help you with it. Yeah, absolutely. Again, relationship business. If you're doing business for the people and they like you and, you know, you're putting money in their pocket, they're going to be more than happy to give you a list of names to help you with your business so they can make more money. Absolutely, absolutely. Thinking about wholesaling or flipping your first property, but not sure where to start. The truth is, deals don't just fall into your lap anymore. You need to go out and create opportunities. That's where PropStream comes in. With PropStream, you get instant access to over 160 million properties nationwide.

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re simply dot com slash bigger pockets that's r e s i m p l i dot com slash bigger pockets all right so so wholesaling you know let's let's jump back to it for a second here so do you think new investors should begin with wholesaling, or do you think that there's other strategies they should focus on? Real quick. Brandon, you look really intense. Thank you. Did I say something that you're just like really dwelling on? I can help you out with.

I honestly was. I was, no, I was sitting there thinking. I'm like, I'm like, I wonder, I got to call my title company later. And I know this one lady there. I have a good relationship with her. Like I was totally playing that whole scenario in my mind of what this afternoon is going to look like. Okay, good, good. I know.

This is really good. At least you're getting something out. of this. I will tell you, Aaron, that not a show goes by where Brandon and I have those faces

and where we look at each other. And, you know, we do write notes to each other in between so that we can communicate and not disturb the conversation. But there's always a, wow,

that was great. That was a good idea, kind of moment in every one of these shows. So, sounds like you busted them. Okay. So, no problem.

With wholesale, you asked me about wholesaling. I definitely want to address that. I think, in my opinion, wholesaling is the top of the market. I mean, or the top of the pack. If you're a wholesaler, you have good deal flow, and that's key in this business. A lot of people struggle with deal flow. So they're always like, well, I got this one going, and I'm looking around for something else.

Or if they're trying to make a deal out of something that's obviously not a deal, the only reason why they're doing that is because they don't have enough leads. So they're so focused on something that is not a lead. It's really garbage. And you'll see me post on the site about that sometimes. I don't mean to come off rough. I'm a pretty happy-go-lucky guy. I try to get a lot of comedy into everything.

I'm laughing on my end. So, you know, wholesaling, you have to be an expert in five areas to be a really good wholesaler. marketing, negotiation, contracts, estimating rehab, and appraisal. Because you have to put together a deal. First of all, you have to put together a good marketing piece to get people to call you or to respond to your marketing piece. Then you have to negotiate with the people to be able to buy the property at a deep enough discount to put a spread in there for you and a profit for the person you're selling the house to.

Yeah, I've got to be able to write up the contracts, estimate the rehab so your buyer knows how much they should be spending on the house. and then what the house ultimately is worth, because everything starts with the ARV in this business. Everything starts with the after repair value, and you just deduct from there. So I would never recommend people start as wholesalers, and I think a lot of people say I'm going to be a wholesaler because they have no money, or they feel like it's the easiest way to do the business without getting any liability for themselves. They just see it as a quick way to a check. And there's plenty of people who go out and make money, but I don't think they're going to be able to build a sustainable wholesaling business that's going to produce a good income for them unless they learn all these other five areas that I addressed earlier and learn them well. And that's why I think it's the easiest thing to do.

And I said it before is to be a rehabber. Just go out, be a project manager, get inside on the jobs, learn all about rehab and flipping houses, and then step up to wholesaling. you'll be a much better wholesaler. You'll be able to create much bigger spreads for yourself. You'll pass along great deals to your buyers. And you can cherry pick the houses you want to keep as ones to rehab and flip or as rental properties. And that's exactly what I did. I rehabbed a lot of houses before I stepped into wholesaling.

And I got into wholesaling because we were able to be, we became great marketers. We studied a lot of marketing and a lot of negotiation. And I was able to elevate my deal flow to the level that I could pass along a lot of of houses to other buyers and get checks, but still rehab and flip the really good deals. And I was ultimately trying to build my rental portfolio because I knew as just a wholesaler, it's a job. I had no sustainable income. It was check to check to check, right?

As just a rehabber. You just, you created a job for yourself. All you're doing is going out, you're rehabbing a house, you're working for a payday. But with rental properties, you don't have to do anything to get paid. You don't even have to be in this country. And every first of the month, your bank account will fill right back up and replenish itself. And that was my focus is to get out of the rehabbing, to get into holding the rentals, buy and hold as many houses as I could that would produce enough income for me to live my life on my terms.

And then really enjoy doing the rehab and flipping and the wholesaling. And a lot of times now I'll just pass along a house for $1,000, $2,000, $5,000 check. And I'm okay with that because I don't want to deal with the house and I'll take the payday. Yeah, yeah. That's great. Well, let's move towards the buy and hold and watching the checks come in. What do you look for in a rental? I'm assuming appreciation is not something. You're not a gambler. I'm assuming you're somebody who's looking for a steady flow of cash. Yeah, I want a good rentable house in a working class neighborhood. I find that those people move the last. So a real good blue-collar neighborhood. Those people move the less. They stay long term.

They set up roots. They fill the garage with crap. They get their kids in the local school, and they never go anywhere. So my ideal rental would be a three-bedroom, two-bath, single-story, about 11-200-square-foot on an average-sized lot. And for me, that's probably about 6,000 square feet with a two-car garage in a good school district. I think that's absolutely the best rental house you can own. And the key to that is just getting the good finance. That's really the most important thing is to find the good financing.

Okay. We'll talk about that in a second, how to find the good financing, but do you have any criteria in terms of how much cash flow of properties should have before you buy it or what are you looking for? Well, I'm looking on any cash I have into a deal, I'm looking for a minimum of 20% return on my cash into it, and I prefer it to be closer to 30 as a minimum. and as far as cash flow out of the house, I would like to have, you know, $100 a month minimum net, net, net cash flow.

But for me to get $100 a month, I mean, I really have to be into the house really light or to accept $100 a month. I have to have almost no money into it. And I've actually done a lot of deals where I've been paid to buy the house because of the way we structured the financing. Scott, pretty nice. Can you explain that a little? Yeah.

Here's a perfect example of one of the first deals I did as a buy and hold. I like seller financing. I think if you're not offering seller financing as the first strategy when you have a free and clear house or a house with a really low mortgage, then you're really missing a big opportunity because I own a lot of seller financed houses. This guy had a $120,000 house. He had lost his tenant, had to a victim. Somebody had broken, stole the copper plumbing out of the house.

the lawn went brown because they couldn't turn the water on. So the city started finding him for a bad lawn. He responded to some marketing we sent out. And at that point, he was about ready to let the house go to foreclosure and just get whatever net he would have gotten out of the foreclosure sale because he only owed $35,000 on the house. So what I agreed to do was buy the house for $95,000. And the way I structured is to take over subject to his existing first loan,

He had a $35,000 first on the house that was really old. It was about 15 years old at the time. So that means high amortization, right? There's a lot of that monthly payment going towards principal reduction. So I said, I'll take over your first of $35,000. I can't give you any money today because the house needs a ton of work. And I got to go in and do all that and pay the city fines and deal with all that stuff. So there's going to be no cost to him.

I would pay for everything, but I couldn't give him any money. However, I would protect his equity. I would give him a third position note of $60,000. So I'm basically giving him a retail price. If you figure $120,000 house that needs work and I'm paying $95 for it, I'm like 80 cents on the dollar without repairs being considered. So I'm really giving him a premium price. So I said I'll give you a note for $60,000 on your equity. But because I can't make any payments on that, I really got to get the house fixed up and I'm going to need to borrow money to do that.

I took a $30,000 loan from a private lender, just a friend of mine. I put that person, because that's cash. That's more important than equity, in my opinion. I mean, cash is a real thing. Equity is a myth, right? You can't convert equity to cash unless somebody's willing to do something. So I put a $30,000 second on there. I fixed the house up.

I used the $30 grand for the rehab for the closing cost, and that came to about $20,000. So I got a $10,000 check and closed escrow. and then the seller's equity went into third position and I presented it to him like this. I said, look, as the house sits now, you're making payments about $350 a month on your principal and interest payment. You have taxes, you have insurance,

you have maintenance and landscaping and all this other stuff you're not paying for. It's probably going to cost you somewhere in the neighborhood of $500 a month. But essentially, you have to go out and earn about $600 a month, pay taxes on that, be left with $500 to then hand over to your mortgage your tax, you know, the taxman, the tax collector, the insurance premium, you got to pay all that.

So really by me just taking this house over and protecting your equity, you're getting about a $500 a month net pay raise. And he agreed with that. He's like, yeah, that makes sense. I said, okay, so I don't need to make you payments. You're already getting a $500 month pay raise because you don't have to pay all this other stuff on this vacant house. So let me have a few years to recoup some of my investment that I'm going to put into this house. And he said, okay, what do you want? said, well, I'd like to do five years.

And he said, I can do that. So we went five years, no payments. And then when I did start to pay him, it was going to be $500 a month until paid in full. And his response was, well, I would like to be paid back quicker than that. I said, okay, so for the first five years, I'll give you $500 a month. And then I'll pay you $600 a month until paid. And he's like, yeah, that works for me. So I got the house.

I bought it for essentially $95,000. I took over the first position loan of 35, which was rapidly amortizing down. I borrowed 30 grand for my private lender, recorded that as a second against the house. I used the $30,000 to rehab, fix the house up, bring the house current, pay the code enforcement violations, put $10,000 in my pocket. I rented the house out for about, I think we're at $13.50 a month. It was net, net, net, net cash flow on that house. and had no payments on this third until five years down the road.

And when I do start to pay it, it's going to be principal-only payment. So every payment is 100% principal reduction. So I've done several deals like that, and I really like that strategy. But anything seller-financed, I actually have a house in escrow now. It's a six-unit apartment building here in Riverside that I paid a half million for, and I put 10% down. He's given me 90% financing on it. And that should cash flow about $1,000 a month when we close escrow.

Nice. And you said like net, net, net. How do you figure out like for those people, I mean, because that's a mistake a lot of people do is they take the total income minus the mortgage and that's what they think is their net cashful, but it's really not. So how do you determine it? So you have Vimtim and it's vacancy, insurance, maintenance, taxes and management. So those are your five expenses. And we budget in management, even though I self-manage. What if I want to go to India for six months? Somebody's got to manage the property. So I have that. management number built in there so I could turn it over to a property manager if I wanted to. So I budget in, again, it's taxes, maintenance, vacancy, management insurance, or your five expenses that are associated with a rental house. And they're real expensive. If you're ever looking at a prospectus, you know, somebody's trying to sell you this rental house and they're telling you, all, it's going to cash for $200 a month. Look for the vacancy factor. I guarantee it's not in there. So check and make sure, hey, you know, I'm going to have a vacancy of one month a year, 8.33%, so that's 12 divided by, or one divided by 12 months. One year divided by 12 months. It comes

out to 8.33%. And that's going to eat up your cash flow. Now, you might not have that in your first year. Maybe the tenant stays two or three years, but then they move out. You've got to go in and clean the place and get it re-rented. That might take you two or three months. You've now realized that vacancy factor. Now, what about CAPEX? That's certainly something that people want to plan for. How do you actually plan for expenses like new roofs and boilers and things. So when I buy a house, we go in and do everything up front. So we're going to go in and check the roof and check the water heater. And that's really the one that gets me the most is the water heater or sewer lines.

I always get beaten up by the two of those. So sewer lines, you could go in and scope them out, but I'm not going to spend the money for that. I usually just take the risk. And it does happen. But water heaters, we always check those. Those go, you know, last year was the year of the water heater. I must have replaced five of them.

But we buy scratch and dent. So you get them much cheaper. And I recommend looking for a place in your local economy that sells the scratch and dent water heaters. We certainly don't need a beautiful looking water heater in the garage, right? We just needs to boil water. So, yeah, so up front, we're going to go in and replace everything, fix everything. We do tile floors in all the common area. That's kitchen, hallways, bathrooms, living room, all tile.

And then in the bedroom. We put carpet. So we call that islands of carpet. And the reason why we do that is, you know, maybe the kid in one bedroom destroys the carpet. Well, I can just go by scrap carpet and replace that. And I don't need to do the whole house over. It doesn't all have to match. Bedrooms can have different color of carpet.

So, you know, we do all that. And then off the top, every month off the top, we take 10%. And we put that in a reserve account. I'm probably one of the few people who actually does that. But I have my assistant. She handles all the rent collection. and she does the books. She takes 10%, puts it into a separate account,

and then we use money from that to pay for repairs and pay for the property taxes. Nice. And you do all your own maintenance, or do you hire maintenance guys to do stuff? I have a licensed general contractor, and this is a great tip for anybody on the call. I have an 1-800 number that I use. So the tenants call, the 1-800 number,

I never take that call live. There's no reason why you should ever take a maintenance call live. let's say the house is burning down. Why would they call you? Brandon, do you have a fire truck? Let's say the house has been robbed. Joshua, are you a crime scene investigator? Why?

I play one on the side. I mean, what are we going to do for these people? Yeah, no, no, of course. Call 911. Why are you calling me? The house is on fire. You should not be calling me, right? So I never take maintenance calls live.

There's nothing they need that needs to be, that infects my time that it needs to be done today. So it goes to a 1-800 number, which then gets emailed to my assistant. She listens to the call. She creates a work order, sends that to our general contractor. Then he makes an appointment directly with the tenant. Because I don't want to be involved in that. I don't want to have to be there and show up or orchestrate between these two.

I let him call her and then they figure it out. He goes out and takes care of the problem and then sends me an invoice, and I can pay him via bill pay online. And that's how I'm able to do this and still be on the beach in Thailand for six weeks. Yeah. No, I like about that is you kind of took yourself out of the equation. Like you're not a wheel inside that whole equation. You removed yourself and that's cool.

And that's the goal behind my business is I call it property management from the beach. If I can't do it on the beach, then somebody else should be doing it. So I want to be in another country, you know, on vacation and join myself and not be a slave to my rental properties. I'm not building a job. I'm building, you know, money. I'm building a passive income source, so I don't have to work. And that's why I did it that way. And it works really well.

What about evictions or anything like that? Have you ever had to deal with those? And if so, remotely? I used to do them myself, but I don't do them anymore. I used to do all my evictions. And I don't have that many. And a lot of that comes from just tenant scruly. Now, every once in a while, you'll have a great person who does go bad.

It happens, but, you know, tenant screening, you can really find, you can find the people that'll stay and pay, and they've got the ties to the community. My philosophy is if you can't afford to keep it vacant, you can't afford to keep it, so you shouldn't be trying to hold a rental if you can't afford to keep the property vacant until you find the right person to stay there. And that's a great, you can tweet that one, Brandon. You're right now. Oh, I will. I will. that's awesome. Gotcha. Now that's great. That's great.

Well, listen, we've covered a ton, a ton of stuff. I'm looking at the list of notes that we write before every show, and we've tackled probably 5% of the questions that we wanted to ask. I guess we'll just have to have part two next week. Yeah, exactly. You know, it seems we keep doing this with people. We want to keep getting back to people, and I think at some point soon we will have to

circle back. But before we start to wrap up, we've got a segment of the show that we'd like to call our Fire round. That's our, you gotta do that like the mustard truck, yeah. Fire round! Yeah!

There we go. That's what I'm talking about. Yeah, so fire round is basically, we take questions from the forums, questions that people have asked, and we ask them for you in a format where you, the respondent, needs to answer them hopefully in a concise way.

So not like the time it's taking Josh to explain the fight. You know, it's funny that I've listened to other podcasts and I heard some people respond them like, man, that was a great answer. You know, I wonder how they came up with that so quickly. So I hope I can do as well. Good luck. Brandon's going to kick this off for us. All right.

Number one is, the question is wholesaling illegal? This came from the forum. So somebody said, is wholesaling illegal my lawyer said it was? Yeah, get a new lawyer. It's not illegal. You know, they wholesale food. Everything's wholesale. I think I respond to that one, or maybe I read it,

I thought this is the worst question ever. I'm not even, it doesn't even justify a response. No, wholesaling is not illegal. Everything, everything you buy is at some point wholesale. You know, Walmart buys everything wholesale and sells it to you retail. That wholesaling is not illegal. Good answer. Oh, was there a part two to that question, Brandon?

Oh, no. I mean, I don't know. The basic, the premise was our wholesale was acting as unlicensed agents. That was kind of part two. No, I think an agent is, yeah, that's a good question. An unlicensed agent. You know, they're marketing the thing to be paid a commission. They're representing.

An agent represents a seller. And as a wholesaler, I'm not representing you. I'm agreeing to purchase your property and then contract law allows me to assign that contract. I took legal aspects of real estate when I was just at the local community college here. And I recommend everybody do that. If you're in real estate and you live near a community college, go take some of the classes. There's some really great classes out there. And legal aspects of real estate was one of the ones that I really enjoyed.

But, no, you have the right to assign a contract unless it specifically says it is an not assignable. You can assign it. Okay. There you go. There you go. All right. So here's a negotiation question. Do you ask sellers on the phone, what's the lowest you'll take? All the time. Yeah. I don't know if I would, yeah, I wouldn't phrase it that way. A lot of times I'll say, what's the least amount you'll accept and not lose sleep at night? Or one that I like to do that's really fun is if your house burned down and the insurance company sent to check, what's the smallest or what's the least amount you would accept before you called them up really upset.

There you go. That's good. Nice. All right. Number three, should a new investor wanting to get into wholesaling, you know, you kind of answered this one earlier. Should a new investor get their real estate license? So maybe right away, first thing, should they get their real estate license?

Well, I think you could be involved in an investor and work on that on the side. And, you know, I didn't go out and get my license because I felt like I wanted to be licensed. I live near community college and I wanted to learn about real estate from the government side of it. So I wanted to learn what the government, the state government required me to know as far as real estate. And you'll get that from the community college. Like you can take escrow classes and real estate principles. And they're going to teach you all the laws and rules and things like that related to real estate from being an agent, being a broker. And at one point, I realized, wow, I have enough classes, enough credits. I can be an agent. So I went and got my license.

Did you like that? Do you like that? Yeah, I see the circle hand thing. I start talking. fucking fast. I'm going to get it all in. I'm just going to say it's very excited. And so we have to, we have to get him to wrap it up here. All right, Aaron, do you always know at the start what you're going to do with a property? And do you ever change strategies, say, from buy hole to flip wholesale, so on and so forth, after getting into it? I don't always know, but I do always try to build in multiple exit strategies. So I may have it as a rental, but have enough spread in there that I can wholesale it.

There's always a profit in other rehab and flip it. So that's always a great strategy. But every time the phone rings, I want to own it as a rental. If it doesn't work for me as a rental, like the one I have an escrow now has a pool. I don't want to own a rental with a pool because I don't want the extra liability and I don't want to pay to clean the pool because I know the tenant won't do it, then I could wholesale if I want to, but because there's enough profit in it, I'm going to rehab and flip it. Nice.

Best tip for marketing for a tenant? Marketing for a tenant. I would say use V-Friar. Yeah, V-Friar is the best way. Really? Put it on V-Friar. It hits multiple websites. It's going to hit Padmapper, Craigslist,

truly all these different websites. It's a really nice-looking flyer and put tons of pictures in there. One of the things that I do is when the house is vacant, we go out and we film a video tour of the house. We load that to YouTube. We put a sign in front of the house with a 1-800 number so they can call and get all the information. I never take tenant calls.

they can call the 1-800 number, get all the information, or it has our website on there. So they can go to the website while they're in front of the house, and they can see a video tour where the house looks on the inside. So I would create a website so you could put your own rental houses on there. And that's what we did. Again, it's all about outsourcing it, so we don't have to do it. So who's doing the video tours?

So once we finish rehab in the house, we'll go out and do one video shot of the house and just edited on Movie Maker. I think that's standard on all Windows machines. and so there's no prices or anything like that. It doesn't say it's just a tour of the house. It's uploaded to YouTube. It has the address, but it doesn't have anything that would have to do with security deposit or price because those change.

So anytime the house is available, I can just put a link to that on YouTube and people can click, I mean on Craigslist. I can put that in my ad. Then they can click on that and then get a video tour of the house on YouTube. That's great. Cool. Cool little tip. All right. And how do you find a great realtor?

You know, obviously you're a broker, so yeah. Well, 99% of them out there make the rest of us look bad. That's a tweetable. It's hard to find a good agent. Referral. Really, it's a people business. Get out and start talking to people. The problem with that is you may get somebody who's already entrenched in with an agent.

You don't want to go in and act like a wedge and try to start, you know, dipping into their source of honey. So, you know, get out and just start talking to people. It's really the best way is to get out, talk to people. I have an agent now. He's been sending me leads for years and years and years, and I was writing a lot of offers, and I just met him through that. He would actually respond to the offers that I wrote it.

And so I thought, wow, this is a good guy. He actually responds on, like, a lot of agents. This guy calls me. So he's one to, you know, put in a keeper pile. Yeah. That's awesome. Cool. All right.

We are at the final segment of this podcast today. Something we like to call the famous. Famous for. And that would be famous for. Yeah, famous for. All right, we do this to every guest.

So you know, the girl. You guys can't do that like acapella. Famous for. Oh, you want to hear about that. That would actually really funny. You can hire on Fiverr.

You can hire Barbershop guys. We should, I am back. There you. All right. We'll see if I can do that for next week. All right. So first question is,

what is your favorite real estate book? Without a. doubt, hands down, I've made the most money from the concepts in think and grow rich. Without a doubt, I read that book multiple times. Every time I read it, I go back through and I use a different color highlighter, my book now looks like a kid has gotten a hold of it. It's multiple colors. I read it every year. But then I discovered a millionaire real estate investor. And I think that book is the Think and Grow Rich for Real Estate Investors. And I highly recommend everybody read that book. It's an excellent book.

How about your favorite business book, non-real estate? Favorite business book? No, that's a good question. You know, I just read, oh, you know what? It's, I have it right here. It's get all, let me swing across the room and grab it. All right. It's getting everything you can out of all you've got.

And it's by a guy named Jay Abraham. and he's an old school marketing guy. It's an absolutely, I used to give that book away free to everybody I knew. It's an excellent book. Cool. And we will link to that book in the show notes at biggerpockets.com slash show 37. That's correct. Cool.

That's correct. All right. How about hobbies? Obviously travel and fishing are on your list of hobbies. Anything else? I'm an amateur kickboxer. I do fight. My last fight was at a casino here in California.

I didn't win, but it went all three rounds, and I didn't get knocked down. Nice. Hey, how tall are you? 5.10. You and I should fight at the next Bigger Pockets Conference. Because I don't fight at all. I'm terrible, but I'm like 6'5, so we could have fun. He'll crush you, Brandon.

Yeah, but wouldn't that be fun? I would love to watch. I would put my money on Aaron, and I would just sit and laugh and watch like I'm doing now. All right. Next conference, we're doing it. It's on. All right. Any other hobbies?

You want to? Fly fishing, kickboxing, traveling. Yeah, that's it. Close it. I try to, I'm easily pulled in many directions. There's a lot of people in real estate, I think, can be.

You know, you hear about a new thing. You're like, oh, you're going to do that strategy. And I'm one of those people. I'm easily distracted. My friend has a saying he's like, you know, whenever I'm around, it's like, squirrel! He does that thing else like, squirrel.

We'll be talking about it and I'll just change the stuff. We'll be like squirrel, you know, so yeah, I'm easily distracted by the squirrel. So I tried to focus myself on for exercise at kickbox. My hobby is fly fishing and my income is real estate. And I try not to do anything else. Nice. All right. Final question of the day.

What do you believe sets apart the successful investors from those who, you know, try, but then they give up and fail? Two words, I have it written on the top of my yellow pad on my clipboard that I carry with me all the time, and it's consistent and persistent, well, three words, consistent, persistent action. You just got to keep doing it. You can't give up, and you got to do it over and over and over again. It's like an airplane. An airplane, when it leaves, say it's an airplane flying from L.A. to New York.

It doesn't fly in a straight line. It's constantly adjusting course. It blows off a little bit of direction. and they're constantly adjusting, and ultimately they land in New York. Real estate investing is the same way. You're going to constantly be blown off course, and you just have to keep doing corrections, see what you're doing wrong, tweak stuff, look at other investors, what they're doing, how they're being successful, surround yourself with people that you want to become,

and you will get there, they will bring you up, they'll help you out. Get involved with a mastermind. It doesn't have to be a paid mastermind. get a couple of people together and a scene on bigger pockets some people talked about doing like a Google group, a Google Hangout that's a great idea but get involved

in some kind of a little mastermind where you can talk about stuff and talk about your problems and your successes and and brag yourself up and people will help you out and you can help other people and that's why I'm involved in bigger pockets you know I went and spoke at the conference I didn't get paid nobody got paid

for any of that well I hope nobody got paid because I didn't it was a great conference and I really can't wait for the next one in Vegas because that's what I'm being told at the Golden Nugget. Josh, you want to just go ahead and throw down the dates right now? Since you've preempted me at announcing, listen ladies and gentlemen,

the next conference is not happening. There's no plan yet, but clearly we'll listen to Aaron's vote at the Golden It's off the strip. It's a four It's a great time. The Golden Nugget, Las Vegas.

So look for that. A future podcast, Joshua's going to make that announcement. Clearly, Aaron's not getting paid for any of the golden nugget. He may not even be invited back next time. I might not be in attendance. I might be barred. You know, but Joshua, that was, to be involved in bigger pockets, it's been wonderful. I really enjoy.

I get a lot out of it. I like to contribute. But when you get to meet the people face-to-face, that's the connection. and that really helps out a lot because you put actually a human being behind that and you can talk to them in person. You sit in a bar and talk about the deals. I think we stay awake like one or two in the morning

that night in the hotel and just talking about deals and you get a lot more content and a lot more information when you're in a small group like that. So just get involved in some kind of a little mashmind. Create your own. We meet every Tuesday at a sizzler. And that way we used to do it another restaurant, but us real estate investors were notoriously cheap.

So it would get the bill would get passed down and then you'd end up spending like $75 for a hamburger So because everybody else shortchanged it. So now we needed a sizzler. Everybody pays for their own food and they've got they've got a little private meeting room. So find a sizzling your area and just start marketing. Real estate real estate mentoring meeting your mastermind every Friday at noon. Nice. Nice.

And you know that that's happening on a large scale now in bigger pockets. It's pretty cool to see. We've got meetups in dozens of cities now around the country, and it's all kind of organically happening through the site, through people setting up keyword alerts on the site, and somebody just kind of taking the lead and saying, hey, I want to, you know, I'm in Des Moines. I want to do this. Everybody else in Des Moines jump on. And it happens, and it's fabulous. All right. I'm going to throw it out there right now. The House Avenue is we're waiting on the seller to send the contract back, or another contract, the grant deed. She mailed everything back by the grant deed. I don't know why, but. escrow called her. She said she's going to mail it back. When she sends it back, we get the house all rehabbed. I'll do a meetup at that house when it's ready for sale. There you go. That's awesome. To bring your swimming suit because the pool will be rehabbing you and go swaner.

Nice. Nice. Nice. All right. Well, listen, you guys pay attention, focus and follow Aaron on bigger pockets. And of course, you know, when he announces the pool meetup pool party, you know, jump in and make moves. But otherwise, listen, it's been a pleasure having you on the show. show. I know that got a ton of great advice here, and we really appreciate having you, and look forward to seeing you around the site. Yeah, and I appreciate what you guys do. I mean, this is a bigger pocket. It's an amazing website to go to. You can spend a lot of time on the, and it's spending. You're spending your time, you're investing your time, and you're going to get way more out of that site than any other

site that you go and visit on the website on the internet. I mean, bigger pockets has been phenomenal. I really enjoy it, and I really like the people that I meet there. And I like sharing and helping people out. So, you know, go, go forth and make money. Nice. Nice. And by the way, he is not getting paid for saying that. I'm not going to pay him for anything. That's okay, man. I'm just kidding. Well, thank you. You know, a lot of people help me to get to where I am and it's just part of paying it forward or paying it back or whatever you want to call it. You know, you got to help out the people that are getting in the business because you never know. They might be your next partner. They might bring you the next big, fat deal. You never know. So I'd like to help.

That's what we try and do. And we appreciate you being a part of it. We really do. So thanks again, Aaron. And if you want to go on vacation, to an exotic location, just flip me out. Awesome. Thank you, Aaron.

Hey, you guys. You guys, that was our show with Aaron Mazurillo. We want to thank Aaron again for taking the time. And he certainly did take a lot of our time. It's funny. I could say that. when he's not here to defend himself. We can mock him afterwards.

Yeah. No, it was great. Aaron was awesome. Lots of really, really good advice. So big, big thanks. And again,

do make sure to jump in on the show notes at biggerpockets.com slash show 37. So you can connect with him or just give me a hard time as some people have begun. Somebody called me out for like falling asleep or something

during one of the shows. And, you know, I take umbrage with that. I, you know, we're on camera. We're working this thing. And, you know, we, you know, now granted, sometime my mind wanders off thinking about real estate. Like today, me thinking, I had to call my title company and talk to that. Aaron totally busted you on that. It was awesome.

It was. It was. But anyway, thank you. you guys for listening. We really, really, really do appreciate it. And for those of you who continue to leave us feedback, we take heed to all that. And we try to make the show as good as possible for as many people as possible. Really quickly, if you are a listener, we have now 13,000 average listeners per show. We've got about 400-something reviews on iTunes. So there's like 12,000 plus people who have not yet taken the time to leave us a review.

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We got a lot more great episodes planned ahead for you. So keep listening, keep learning, keep making things happen. We'll see you on Bigger Pockets. Catch you next time. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing without all the hike, you're in the right place. You're to join the millions of others who have benefited from BiggerPockets.com.

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