Epic Real Estate Investing - COVID-19 Don't Stand Still with Aaron Chapman | 967

Episode Date: March 24, 2020

In this Turnkey Tuesday episode, Mercedes, the turnkey girl is joined with Aaron Chapman, a real estate finance expert and a branch manager at SecurityNational Mortgage Company. Mercedes and Aaron discuss the current economical situation caused by the COVID-19 outbreak and what real estate investors should do to overcome this crisis as smoothly as possible. Tune in and find out more! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. So you want to be a real estate investor, but you don't want to do the work. If there were only a way where someone else could do it for you, now there is. Tune in here each and every Tuesday on the Epic Real Estate Investing show for Turnkey Tuesdays with your host, Mercedes-Torres. Hello and welcome, welcome to Turnkey Tuesdays brought to you by Epic Real Estate Investing. My name is Mercedes-Torres, known as the Tauri. turnkey girl, and I'm lucky enough to be partners in crime with Mr. Matt Terrio, the guy who created

the epic real estate empire. I'm lucky enough to teach busy professionals how to create passive income through real estate investing. And this week, I decided to bring on a very special guest. He is a real estate investment finance expert. And you've heard me refer to him on our show, because not only has he become a personal friend of mine, but truly he is a wealth of knowledge and just full of amazing insight and just happens to be an expert and run security financial mortgage.

So ladies and gentlemen, without further ado, I'm going to introduce Mr. Aaron Chapman. Aaron, are you there and can you hear me? I can hear you just fine, Mercedes. Thank you for that very, man, That was an intro that had a lot of energy behind that. I got a rock star here. I'm going to take another shot so I can keep up.

Well, you know, I am known for the energy, but you know, it's innate. Us Puerto Ricans just have it in our blood. And we just have it all the time. I wake up in the morning and I'm like, good morning. And that's like, can you tone it down a bit? No, baby. This is what you marry. I'm with you.

The morning is when I get it done. My eyes nowadays are popping open at 2.30 and 3.30 in the morning, and I'm getting at what my plan is. So when the rest of the world just barely grogly starting to move, I've already got four or five hours on it. 2.30 is a little bit early for me, but, you know, I can do the 5 a.m. 2.30 is a little much. 430 is my standard. But lately 2.30 and 330 has been a reality. I've got so much I've got to get done and I've got to get out of fast. Yeah, I'm willing to bet that it has something to do with the current environment that we're in, because in a matter of days, this COVID-19 and coronavirus has literally, I mean, drastically changed our world and it has affected so many businesses across America. In fact, Aaron, that is one of the main reasons I asked you to come on because I follow you quite a bit, and I just love what you're sharing. and you and I are of the same mentality that when drastic measures happen, there's a reason for it.

I know you and I both believe it. And we somehow seek the opportunity and always look at the brighter side of things. So one of the reasons I brought you on is because as a financial expert, I wanted you to share your take on what's transpiring, the state of affairs, and really the opportunities that it brings. So I'm going to turn it over to you, Aaron. Tell me kind of your take on what this whole coronavirus is doing to our state of affairs as we speak. So with that whole virus thing to begin with, my wife is in the medical industry. She is in the emergency rooms of the hospital here local.

She's a charge nurse. She's a trauma nurse. She's one of the most highly certified nurses within her hospital. And, you know, when all this started to come about, they weren't that worried about it on the hospital side because it wasn't new. This is something that didn't, it wasn't something that it was new data on how to deal with it. But the response of the masses is what has impacted everything. You know, the virus itself, the market, how business is going, that should still be able to go the same way life has always gone. It's just humans have reacted in an extreme manner.

So if you look at everything that's ever occurred in our history, it's because masses have moved one direction or the other and create this massive panic. So where does the opportunity come in this kind of thing? People are drifting all the place, looking for something solid to grab onto. You know, it's like being out on the ocean and you've got waves crashing, a storm is raging.

They're looking for something to anchor to. So the opportunity is for people like yourself and myself and others within the industry to develop that ability, become that anchor. Be that point where people will latch on to and you remind them of the basic principles of business. The basic principles have not changed. Principles always stay the same. Tactics and strategies that will change with your environment. So go back to the basics. And that's what all I'm putting out, the content that I've been lately hitting every couple of days, basic principles and how you treat your business. I've got tons of people freaking out right now,

reaching out to me and saying, what are I going to do if people can't pay their rent? Like, it's happened to people throughout the ages that were landlords that people don't pay their rent. You find a different route to it. One, you should have been building your business up with some pretty good reserves because you get cash flow, right? Always buying these houses without cash flow. If you're buying a house and you're expanding your business into another market and you're put going to your pocket to maintain your business already, you bought the wrong property, right? You're already a poor business person, right? But also, there's going to be a way to handle it.

wait there'll be time enough to resolve the problem the problem happens let's focus on what you're going to do today so that's that's kind of the opportunity i see that we have is continuing to get people back to where they started from and remind them of what they should be doing on a day-to-day basis and it all starts here with the mindset the only same reason i wear the damn hat is so when i put it on every day it puts my mind in the right mindset absolutely no i i couldn't have said it any better than that Aaron. I know we talk about going back to the basics. Let's get specific. Give me three basics that our average listener can go back to if they're in the world of real estate investing and in the world of either buying and holding properties or building their portfolio. Share basics with me.

The number one basic I think that anybody needs to be doing is developing the human capital, right? The people you have around you, your team. That's where you started from. That's why I told everybody. You've got to get your team first. You got to know who you're working with, why you want to work with them. And then you start exploring the nuts and bolts of how they will be working with you. But if you don't have a relationship with them, if you have not cultivated that relationship, you've not maintained that relationship, that's where you failed. Get back hold of the people you're dealing with. Get back hold of the people who are helping you run your business and keep that relationship strong. Find out how are we going to deal with this. If you've got to let, I mean, and your tenant is part of that. Your tenant is part of this group. They're involved in your business. They're your customer. So maybe you got to reach out to them and say, make sure they're doing okay. Check on your tenant. See if they need any help. I'd reach out to mine.

Got a great conversation. If I got to drop 100 bucks or whatever off the rent because of their scenario, then damn it you do it. Because there's a good chance everybody's got 100 or 200 in there. You've got to help that tenant because nobody wants turnover, right? Turnover is a much more expensive than a little bit of a discount. So you hook them up for a little bit. We're all in it together.

So that's the first thing. cultivate the human capital. They're not your damn slave. They're not somebody that you need to be, you'd be digging into their pocket for whatever. You're going to need clemency from somebody possibly. You start by giving it yourself. And if we want to get some real basics, get your ass out and get the damn Bible out. Does that some bit job. Look at all the beatitudes in there. Everything that was in there, you follow those principles. It's amazing how it applies to business quite well. No, I agree. I happen to have done the same exact thing. I reached out. to my tenants. You know, my portfolio is a little large, so I have property management help me with that. And

I am very proactive with my tenants. And I know exactly who is still in the service industry where, you know, they have to provide those that work for, you know, the doctors, those that work for the restaurants that are, you know, still open at, you know, the 24-hour drive-thru. I reached out to those people last because I know that they're not hurting for a job. So, So yeah, no, you're right. Reaching out and doing the basics is really, really important. And ultimately, relationships of everything. We've proven that over and over and over again.

If you're not willing to keep fostering and communicating and building those relationships, and don't point me damn blame. Holy crap, is that just kicking my ass right now? I can't begin to tell you how many people want to get on the phone, have a finger pointed away from them at everybody else. Because, you know, I even had people. I think I talked about it one of the things I sent out. out this last week, people called me up, say, how did you not see this coming? Like, if the

surgeon general of the United Freaking States and the chairman of the Fed did not see this coming, there's no way in hell Aaron Chapman would see this coming. And if I did, if I some chance I did, believe me, we would not be on the phone together. I would not be here. I'd be, I would have my own country somewhere. I'd be running around chasing animals, exotic animals in my loincloth with my pocket knife doing some really crazy crap. Because when you're that rich, that's what you do. Yeah, you know, I always talk about on the podcast, nobody has a crystal ball. And I usually referred to it based off of what the market does. Nobody can predict an epidemic. You know, that's not something that's within our control. So for the most part, I have a conversation

of, look, this is what's happening and let's just make it work. And so this is one of the reasons why I decided to invite you on here because, yeah, we're all faced with something that has transpired completely out of our control. What we can control is what we do and how we handle it. So let's make the best of it to find a way to handle it together. So I'm glad that you mentioned that. So we talked about the relationships. We talk about reaching out to those people.

I want you to tell me a little bit about what's going on in your world for lending. I know that we still, I still have a pipeline that's closing. And that I see is not being affected. our clients are still closing. And I'm seeing rates dwindle a little bit. So talk to that a little bit, Aaron, and tell me what's the market doing right now when it comes to lending?

So we, within my little team, I've got a team of, I guess as of today, I got a team of 20. We just hired two more. And what we're doing is we're just moving the ball as fast as we can to that closing. A lot of people have been locked. A lot of people are getting closed.

but those who, you know, we were waiting to even order an appraisal had some time out. Those locks were not done. And about the sixth of this last month, the market took a major header into the concrete because of, you know, margin calls on Wall Street, the banks that had all that capital that they needed to put in to make those margin calls and others who held, who held certain assets had to sell their bonds. They had to sell treasuries. They had to sell mortgage-backed securities.

And when they did that, our market in that respect, fact plummeted, therefore driving interest rates up significantly damn near overnight. We've seen an unprecedented move in interest rates to the negative. So when we were at in the mid to low fours last month, I'm in mid to low fives and literally overnight. It happened really quickly. But as I'm watching the trades go way by day, you've got to be like a bond trader. I'm watching the money move in and out of the mortgage back securities market, which is where people need to be looking at. the Fed, not the treasuries. It's not tied to that at all. It's tied to mortgage-backed securities. I've got a lot of my listeners right now going to watch the big short. They're supposed to watch it

this last weekend because that tells you where it came from. Well, if you can track it, there's an outfit, there's a website, MortgageNewsdaily.com slash mDS. You got to put the slash MBS as a mortgage-backed security. You've got to change the coupon in there. There's going to be a chart in the middle. You're going to see the UMBS 3.5 pop up. You want to click on that to the UMBS 4.0. That's the closest you'll get to see the trades. And is it trades up, meaning improving more money is flowing into that market, meaning interest rates are going down, supply and demand, right?

It's a commodity. The greater the supply, the lower the cost. What we have right now, with all this pandemonium, we had a lot of supply shrinking, but massive demand. So let's call this the toilet paper index for a second. So what's been the supply of toilet paper lately? Are you asking me? Not in your house.

I'm talking about it. You don't need to walk in the bathroom. No, it's insane how the supply or, you know, we're demanding toilet paper because of this whole ordeal for no reason at all, in my humble opinion. Exactly. So the supply is low, right? They've taken it off the shelves and the demand is high. So what do you think the price of toilet paper is it going on sale? Of course not.

It's skyrocketed. Exactly. So the exact same thing happened with mortgage-backed securities. They sold off those assets to pay those margin calls, right? Therefore, shrinking the supply significantly. But what we have is a whole U.S., I guess the real estate buying area here, I guess everybody within the U.S. that wanted to buy real estate or owned real estate, wanted to refi it or purchase it in

mass quantity. So if the supply shrinks and the demand went up, just like the toilet paper, the price went up, meaning the interest rates went up. So when you look at the demand, what's crazy about the demand side of it, if you look at the U.S. economy and we'll talk about the mortgages being paid, there's over $11 trillion in mortgages in service right now today. So there are some analysts that are looking at this saying, you know, we believe conceivably that there was a half, there was $5 trillion in mortgage demand just because this. decline in rates. Now, $5 trillion in demand. That's how many people want to either refi or purchase. Well, the mortgage industry as a whole. I'm a licensed loan originator. I have my license hung with

this outfit security national. I don't own it. I don't run it. I just run my team within it. And we as an industry, 300,000 licensed loan originators, we're only capable of processing $2 trillion a year in business. But we have $5 trillion in demand. And they want to done this damn month. So think about that. Two trillion possible in a year and they want five trillion done right now. So you can imagine what my phone looks like as far as the calls, the texts, the emails, the incestant just over and over and over again wanting to, where am I at, where am I at, where am I at? I want to lock in these rates and we can't lock in those rates because they suck right now. Yeah. So when you think about all that, in reality, they're not going to give a better rate.

Even if the market improves a little bit, they're not throwing that in quite yet because they got a the demand. They got to slow this down just a little bit. Now, we're going to see those rates come back down to where I'm going to be locking 80 loans in one day. That's how much I've got sitting there waiting to pull the trigger. And I'm going to lock myself in a room. I'm going to have me a big bottle of something and I'm going to clicking away. Yeah. And when you say those rates are going to come down now, Aaron, I know you don't have a crystal ball because yours is in the shop like mine is. But are you feeling that those rates are going to come down like overnight, just like they rose to us overnight? or are you feeling it's going to be a long minute before that those rates hit rock.

Kind of where we sit right now is this is a really weird answer to give because I really wish I could even remotely figure out what it's going to do. But when I'm watching these things trade, I'm watching that where the mortgage back securities are now, we should be going down just because of what's going on. But they're so instable that they're holding off and actually releasing. I think it's going to be a day that they're going to see that those pools maintain their position for a few days. then they're going to publish what would be just a normal publishing day. We're going to click on that and see it.

Oh, crap, and we're just going to attack it. But I think what's going to happen, then we're going to see it reverse again on top of us because there's many people attacking those locks. So I've got not only myself, I got three team members, and I've got the guys at my secondary marketing department within the company monitoring it.

And I said, the second you see anything going to this direction I need it, I need to be notified immediately because I'm going to just block the entire world and focus on just securing rates because if we don't grab it then, I think it's going to spike again on us just because of the demand. Yeah. You know, I was part of the mortgage industry when it all happened in 2007, 2008, and so I know exactly what you're talking about, and you did an excellent job, Aaron, at explaining

what's going on because I couldn't have explained it as great as you have. So thank you for sharing that. So I know that in the world of fear, people just do really stupid things. and it's just the fear that is paralyzing them. And I kind of always say, you know, the one thing that helps overcome fear is just preparation. I always say prepare yourself, whether it's, you know, I don't know, pick up a new language or start your second job now, or not your second job, but start that dream business that you've always wanted to start in this downtime. I've always gone against what the market or what the industry is doing.

I want you to share with me what's the wrong thing to be doing right now? Standing still. So let's think about this. You know, put yourself in a battle, right? And if you got bullets raging all over the place,

the last thing you want to do is stand still. Start moving. And as far as I'm concerned, you move on the offensive. I'm leaning into this. I tell her, but you don't take a step back. You don't get on your heels.

You lean into it. Because one or something that's going to happen, cooler heads will eventually prevail. People will finally settle down like, oh, that was not that big a deal. Oh, I did the wrong stuff. And one that they're going to want to do then is like, oh, we better jump into this before everybody else calms down and start buying some real estate. And anybody who backed off is going to lose their position. I've got tons of people right now.

Maybe I need to wait. I said, no, you're locked. You got a 1% lower rate that I can get anybody else right now move forward. A lot of them are and a lot of them aren't. And they're going to come back and they're going to beg to get back in line and say, I'm sorry, guys. the line's back there. Yeah. I know you were standing here,

but guess what? It's back there now. Yeah. So that's why I'm advising a lot of people you lead in right now. You know, Warren Buffett, he's one of these guys. He's not,

I don't know that he's an overly brilliant man. I think that he is, but he's not overly, he's not superhuman. He says that when it's like this, when there's blood in the streets, is when he gets greedy. So what most people do is like,

I'm going to run away from the blood. He's like, no, I'm stripping down. I'm going to go swimming in that shit. So we've got to think about it that way. Right now it's all over the place. Every time you see people get really, really wealthy and they make huge advances in their life, it's when the rest of the world's falling apart because it's separating you from the rest of the herd.

Get out there. Stay moving. Stay motivated. Don't slow down. Golly, that just kills me. I see people start to pause. You're going to get shot. Go.

Keep on the offensive. That's exactly what I constantly say. you know, when I started investing, I actually started investing during the short sale boom. I was buying properties when everybody was losing their shirt. Why? Because I had prepared and I had positioned myself. Not that I had a crystal ball because I didn't. I was working for a mortgage lending company that was doing subprime loans. I saw the writing on the wall and I prepared. I saved all of my money as much as I could. So when everyone started losing their homes and started doing short sales, I was the girl that was negotiating them and buying them. And that's how I started in the industry

of real estate. But I will say, standing still serves nobody. So absolutely, prepare yourself, jump in. And, you know, on Friday, I had a conversation with somebody that didn't want to lock their loan at five and an eighth. So that's 5.125. And I just had to, to stop the conversation and say, you know, five years ago, the rates were at 12%, you know, maybe not five years ago, it was actually more, it was more like 10 years ago. But at 12%, and now we're at 5 and an 8th. It's like, are you kidding me? You're not going to lock alone because it's 5 and an 8th when maybe the week before last, it was 4 and 3 quarters. So yes, standing still is not going to serve anyone and just staying in action is what's going to make a difference during this really

unprecedented time. So, Aaron, I always learn so much from you. So if there's one thing you want to tell are 450,000 listeners that listen to us every week, what's the one thing you want to say that's going to really make a difference for that today? Well, damn, you only give me one? Yes, because if I let you ramble, you're going to go on with about 10. So maybe one or two. I've got a couple of them here. So number one, I want to piggyback on what you're saying with the rates. Because when you think about this, yes, rates are really, really low.

I mean, there was one day I was able locks and people in, I think, 4% on a 20% down. It was amazing. Then there's, in fact, one of those guys is not, well, I'm not going to get into that. So there is that, right? I personally have, from three years ago, one of mine is 6.99% and I have a refund. I still have it. It's still doing well for me. So our rates are right there in the middle between that.

The lowest I've ever locked in my career and 6.99% I did three years ago from my own personal investment property. So when you think about where we are today in the mid-fives, there's a small 0.000-0-0-0-1% of the population got lower rates and that people didn't get today than all the way back to when the cavemen were lending each other bone tools and you're bitching about it. Jump in. Move freaking forward.

I'm still just boggled by people like, oh, that's such a high rate. The fives, my house, my primary residence is in the fives and I haven't refinanced that thing. No, are you kidding me? The other thing is, is I'm trying to, I'm all about the content you need to drive to people. Huge. And hopefully you're okay with this, but, you know, I have, one of the reasons I was up at two-thirds in the morning this last week is because I was finishing book number seven. I've got four of them right now published. And these are ones where I'm trying to push people to do specific things for their work.

life. They're little books. They're not real big. 30 pages or less because I think that, you know, well, my publisher didn't like the fact that I don't have a spine so you can't put the title right there. I told him you got to have balls to go spineless, man, and that's what we're doing. So the first one is all about getting it right with your head, getting it right with your heart, write it down, and you end up with your ass where you want to end up getting to. So I'm encouraging people to get their hands on that. Gratitude is an economy. It's not some mystical pinata floating around. It's going to give you stuff if you exercise gratitude. This is my big point for everybody. You need to quit jerking off.

Quit wasting time. Seriously, quit it. Then the other is just a really, really kick-ass story as to why I wear the hat. So the main thing is I want people to start getting the best data you can, find the best processes, start following it and don't change it because the situation changes. figure out what you want in life and just focus yourself there, point yourself there, and do not stop. And when you get there, you find something else. Nobody climbing Everest just stops on Everest and kicks back because that big some bitch will kill you. You get down, you find another goal. Awesome. And so, Erin, two things. Where can they get these little mini inspirational stories that you have written? I don't know if they're stories, their actual life, your life personal experience in these books. But where can they get them? So you can go to Amazon right now. You've got to look up the QJO initiative, as in the quit jerking off initiative. You search that in Amazon, it pops up.

You know, they sold out their first order. They ordered a bunch and in four days, they sold them all out, and then they had to take a long time to finally get another stock file. So they're now at cover price right now. We also go to Barnes & Noble. They've got them too. And so my publisher got more put out there. So that's the two places you can get them at the moment.

And like you said, there are personal, it's personal information, things. that I lived through, that I was able to put a life lesson towards and be able to give some to give out. I wrote a big, big book, and I decided rather than releasing one book with one cover that nobody's going to get through, one chapter at a time, wrap it up with a cover and get it out there. And I've got seven written right now. I absolutely love it. Now, I'm still on the bandwagon of Freddie and Fannie as of today, still allows you to purchase up to 10 properties with only 20% down.

And as I say every episode, I don't have a crystal ball. We don't know how long that's going to last. But for you to jump into an investment property at only 20% down with a rate of maybe five, five and a half, it's the opportune time to jump in. So if somebody wanted to apply for one of our loans, Aaron, where would they go to get that ball started? Aaron B. Chapman.com. A-A-A-R-O-N, B-I-Z-N-Boy, C-H-A, P-S-N-P-P-A-N-D-O-N-D-O-N. If you get there and you see a redneck sitting on a portrait at the right spot. Truly, my friends, he does look like a redneck, but self-proclaimed, so I love it. And he embraces it.

And for those of you that just want to reach out to talk about what the market is doing or to get help on your rental, because with our portfolio, trust me, we can all support each other. Feel free to reach out to me. I am Mercedes at Epic Real Estate.com or go to cashflow savvy.com. Download our investors guide to passive income or just reach out to me and schedule a call. I will be more than happy to have a conversation with you about what the heck is going on. So, Aaron, I cannot thank you enough for your wisdom, your time, just your insight about really what's going on with this COVID-19 and how it. it's affecting us. And I just really, really want to thank you from the bottom of our heart, just to have you share your wealth and your wisdom and your knowledge with us. I very much appreciate it.

And I thank you very, very much. I always appreciate the opportunity to hang away to Mercedes. Thank you. You're welcome. Anything you want to add to our listeners? Any last closing words? Yes. One last closing word here, guys. When it comes to that 30-year fixed, that whole situation, there's no better instrument that you can have in your portfolio. You're never paying it back. When we think about the money, you get to raise rents to pace inflation. If all things that's ever happened in the history of our economy, other things have dropped, rents have always gone up.

They may have flatlined over a one-year period between 12 and 13, but they've always gone up. Think about that. You get to raise rents. They don't get to raise the payment on that 30 years. And you're doing it with a deflating instrument. You're paying them back with a dollar. that's losing value. When you add up all the dollars you pay them back with, regardless of what interest drives, you never ever even get a chance to pay back the principal. It's an amazing thing.

Do not discount that. Oh, I love it. Such epic words. Mr. Chapman, thank you very much and have an epic day. Thank you. Do you have doubts about your current plan for retirement actually panning out? Imagine revolutionizing your retirement plan so it pays you right now and in retirement. Change one thing, one time and that revolution can be yours. That's bad news for Wall Street, but great news for you. We're cash flow savvy, and we'd like to offer you free information that will show you how one simple tweak can cause your retirement plan to pay you right now and in retirement. And it's yours for free. For the secret your financial planner doesn't want you to know, go to cashflowsavvy.com. That's cashflow savvy.com.

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