Podcast Appearance: Aaron Nelson on Movers & Shakers with Wheelbarrow Profits

What an honor to be invited to speak with Gino Barbaro and Josh Roosen on the Wheelbarrow Profits Movers & Shakers Podcast! I had an amazing time talking about my journey toward financial freedom, becoming a real estate agent and quitting my W2 job. They called out lots of ways to take action in your life, so I hope you enjoy it and gain some value or new perspective from it.
Movers and Shakers- Episode 16- Aaron Nelson
Video Transcription

Speaker 1: This is Movers and Shakers, where we interview the upcoming generation of make it happen, multifamily investors to share their stories.

Gino Barbaro: Welcome to the Movers and Shakers podcast. My name is Gino Barbaro, co-founder of Jake and Gino, multifamily investor educator, father, mentor. And I am joined by my co-host, my Broseph, Joshua Ryan Roosen, the community director here at Jake and Gino. Mr Josh, how are we doing today?

Joshua Roosen: G father, doing well. The the Jake and Gino team is expanding, we’re making it happen, changing a lot of students’ lives. How are you doing today?

Gino Barbaro: I am doing good. Back to back calls this morning. Ready to go. Like you said, it’s like Groundhog day for me. We get up in the morning, we do something, we figure it out out. Wake up the next day, it’s the same thing. It’s the entrepreneurial life, right? It’s a lot of fun and there’s a lot of figuring out and it’s just like multifamily real estate. We’re playing the long game, right? We’re out there learning and just taking risks and not worrying about what anyone else is saying. Not worrying about the haters, just focusing on what we need to do. Right, Josh?

Joshua Roosen: Absolutely. Showing up every day and focusing on being better than we were yesterday and putting it all on the field, right?

Gino Barbaro: Great. I love that analogy.

Joshua Roosen: Well, today we have a very exciting guest. We have Aaron Nelson. A little bit about Aaron, so he’s the owner of a 30 unit complex in Kansas City, Missouri and several rentals in Tacoma, Washington. Through strategic renovations and repositioning, Aaron has created over $1 million in equity in these properties. Wow. Aaron works as a real estate broker in Western Washington who specializes in helping investors build their real estate portfolios. He holds a doctor of pharmacy from the University of the Pacific and an active pharmacy license in Washington State. Aaron, welcome to the show.

Aaron Nelson: Thanks a lot, Josh. Appreciate it. Glad to be here.

Joshua Roosen: So, Aaron, that’s quite the background here. So I mean, let’s just kind of talk about your story. Why did you go into pharmacy? Why did you transition out of it? How did we get here?

Aaron Nelson: Sure, absolutely. So I went to school to be a pharmacist like you mentioned my bio. I graduated from the University of the Pacific in 2008 and after floating around Southern California for awhile, because I thoroughly believe that at some point in everybody’s life you have to live somewhere that’s warm and near a beach, my wife and I actually decided to move up to … Yeah, there you go, Gino. We decided to move up to Washington and I took a residency program up there. A residency is like a year of post-grad training in the medical world or in the pharmacy world.

And up in Washington we ended up purchasing our first home and that was a cosmetic fixer. It had beautiful 1970s yellow tile in the bathrooms and color crayon on the walls. That was in 2012. And 2012 in Western Washington was right when everything bottomed out and stuff started to go back up again. In this case, this guy had been trying to sell the house the last couple of years and I think he kind of given up. Usually when you go into a house it’s all nicely staged and it looks perfect. But in this case it was just kind of a disaster, but it was all easy cosmetic stuff.

At the time I was working for a large company that ended up going through a massive reorg and several of the people, who I would consider to be my mentors, actually ended up getting laid off. That didn’t really make any sense to me because these were really good people who put their blood, sweat and tears into running an award winning pharmacy department. Many of them had worked for that company for over 20 years and within a matter of like six months, they were all looking for new jobs. And so it was at that moment that I realized there was no such thing as job security in the W2 world.

I started looking for answers. I went on and I started reading financial blogs, like Mr Money Mustache. I started reading books like Rich Dad, Poor Dad, Cashflow Quadrant. And in the span of like two months I knew that I wanted to pursue a financial freedom through real estate investing. But in order to do that, I also knew that I needed to get my financial house in order. At the time we had about $80,000 in student loan debt. And so after a lot of discussion with my wife, we made the decision to go ahead and sell our house, and we moved about 25 minutes to the East. We took $200,000 of equity profit that we had built through all of our cosmetic renovations and the market cycle, tax-free because we had lived in the house for two of the last five years. We bought a home, we paid off all $80,000 of my student loan debt, and we bought our first investment property. Which was a duplex down in Tacoma. That just completely changed our financial lives, and that’s we got in the game.

Gino Barbaro: So Aaron, before I ask any questions, I need to make a few observations here for all the listeners. The first thing is, I agree with Aaron. It took me 46 years, 47 years, to go to a warm climate. If you haven’t done it, you should really try it, because it’s an amazing thing. Josh got out of San Diego. I’m not a grumpy person anymore. I can get up and go to the beach. You know what I mean? It’s nice. It’s nice nine months out of the year and in the winter time we get down into the 60s, so now it’s a little chilly, right? But it’s amazing. So everyone needs to try that.

The second thing is Aaron’s a marketer, because I liked the word “cosmetic fixer upper with yellow tiles.” In other words, it was probably a dump and he turned that into a palace, right? So there’s nothing wrong with that.

The third thing is it’s the home was a “mom and pop,” right? It was a “mom and pop” single family home. That’s who he targeted. And there’s mom and pop multifamily properties. That’s what we talk about. So that’s what you’re looking for. The motivated seller, and they’re in every single market, whether you’re at the top of the market, at the bottom of the market, you’re always looking for those. And this is what I like most about it, he made a painful decision. He didn’t make an emotional decision. He made a logical decision, which the vast majority of people can’t make, is to actually sell his house. That he probably had a lot of memories there. He had a lot of blood, sweat and tears. He changed the toilets. He did the tile work, he fixed the roof himself.

He made that money, he pulled it out, and he got rid of personal debt, bad debt, and he actually bought an asset. And he bought his home on top of that. So, if you’re willing to do that, if you’re willing to make that logical, tough decision early on, that will set you up for the future. Does that really wrap everything up? Encapsulate everything you said from the very beginning? Does that makes sense to everybody?

Joshua Roosen: Yeah. What I’m excited about is I want to hear where the story goes from here. So you get rid of the personal debt, you buy the duplex, then what?

Aaron Nelson: Right. So, for awhile we started just building our portfolio in Tacoma. And now we’ve got several rentals there. We went in, we rehabbed, we bought distressed assets or distressed properties, renovated them, raised the rents and traded value for value. Just like Jake and Gino talk about. And then we refinance some of our money out of it. We eventually we got to the point where we had built up a pretty good portfolio in Tacoma. During one of our quarterly meetings, that my wife and I do together where we look at a real estate portfolio and see how things are performing, we decided: the small multifamily, the two to four unit stuff, is great and it’s a great place to start, but we really wanted to start scaling our portfolio. The other thing we realized that we were really highly reliant on one market. Even though Tacoma’s a great market when you’re getting a ton of rent growth there and you’re getting this kind of appreciation there. At the end of the day it’s just one market. And so we made the decision that we also wanted to diversify from a geographical standpoint. We went out of state and we bought a 30 unit apartment complex in Kansas City, Missouri, as a joint venture with previous clients of mine, Carey and Susanne. They are great people and great investors and I had done a few deals with them before, so I already had a relationship with them and I knew we worked well together – we communicate pretty well together, I understand what their investment philosophy is, etc. So we partnered up as a joint venture, went out and we bought a 30 unit apartment.

Gino Barbaro: When did you get your broker’s license to go into real estate? And when you got that, was your mind always on getting out of pharmacy or just doing it together at the same time?

Aaron Nelson: It was interesting. As we were going through this whole process of buying and selling our home and then eventually getting into investment properties, I realized that a lot of real estate agents have absolutely no clue what it means to invest in real estate. And that’s kind of a sad thing. But they’re really good at marketing, they’re really good at showing homes, they’re good at filling out the contracts. But when it comes to running the actual numbers and understanding what makes it a good buy and hold, or what makes a good fix and flip, there’s a huge gap because that’s a different type of property. It’s a different type of buyer.

So originally I just got my license so that way I could go down and check out the properties myself and I could get access to the MLS. Then I started to realize, I actually really like doing this. I love doing deals, I love helping people. And so I started going to real estate meetups and talk about what I had done, and I would get people who are new investors who would say, “Hey, you know, I’m looking for my first investment property. Would you mind helping me out?” And I believe there are enough deals out there and I can’t buy them all. So I absolutely loved helping them out.

From there, I just started building up a client portfolio and eventually, I got so busy that I had to make a decision. I had to decide: Am I going to continue doing this? Or am I going to just continue with my pharmacy stuff? I decided that I really enjoy real estate. I love being a broker. I love helping people build their financial futures. And so I made the decision to go ahead and transition out of pharmacy.

Gino Barbaro: Is it you made the decision or you and your wife made the decision and how did that conversation go? How did that conversation go?

Aaron Nelson: There was a long conversations about that, but my wife’s an amazing person, and I think she could see that there is a certain fire and a certain passion with me when I would talk about real estate, or when I would help do deals and work with clients. She could just tell that there was a lot of excitement in my voice. For her, it was really important that the family was financially stable. But having done this for a few years prior to actually quitting, I was able to show my track record. We looked at the numbers which I track very consistently. The number of closings. The number of new client leads that I’m getting. My client pipeline. She looked at it and said, “You know what? You’re actually doing pretty good, so why don’t you go ahead and give this a shot?”

And the biggest thing for me was that, I didn’t want to be 80 years old lying on my deathbed, or 90 years old, lying on my deathbed and looking back and saying, “Man, I really wish that I would’ve taken my shot at some point. I really wished that I would’ve tried quitting my W2 job and made the decision to go out and be self employed and be an entrepreneur.” The other great thing was having the Jake and Gino community and being around all of the people in the Jake and Gino community who are real estate entrepreneurs themselves. Some of these people are doing real estate investing full time. Some of them are brokers. They’re all like highly, highly motivated people. I think when you get around a community group like that, when you get around a mastermind group like that, it’s easier because you see other people who are doing it. And Josh, as you and I know, and as Tony Robbins would say, “success leaves clues.” So if you can follow those models then you can be successful as well.

Gino Barbaro: So Aaron, I really want to chunk it down even more because I want to make it more personal for people because they think, “Oh, you know what, Aaron did it, he left his job.” Give us some of the … I’ll give you one of the pros and give us some of the cons also, because one of the pros for you, I remember with the week you left your job, the week after we had spoken and you’re like I went to an investor meeting and somebody who was willing to give me $500,000 for a deal. I had that conversation. I probably never would have had that conversation if I was still doing pharmacy full time.

So, I think one of the pros is you’ll all of a sudden have time to focus on one endeavor and actually go out and network more and really talk real estate. And I guess start identifying as a multifamily investor. Whereas before you had the pharmacy, well, what are you? Are you a pharmacist or are you investor? One or the other. And it’s great because you did the 10% rule where you don’t have to leave your job as soon as you start investing. You can wean yourself off, learn the trade, get in front of the people, learn it, and then when you feel comfortable, that’s when you can cut the cord. So give me some more of the pros of leaving the job, and there’s also cons of leaving the job. So let me hear it both in your example.

Aaron Nelson: Yeah, absolutely. The cons are you’re leaving “safe and secure.” As Robert Kiyosaki says in Rich Dad, Poor Dad, there are different words that describe different people. And when you’re in the E quadrant, which stands for “employee,” it’s it safe and secure because you’ve got that W2 paycheck. Or at least that’s perception, right?

Gino Barbaro: I was going to say that. Yes, you’re perceiving that it’s secure because six years ago somebody was losing their jobs and they get 20 years of their lives. And you know what, all of a sudden you see that. I always said that out the restaurant too. I’m leaving the restaurant. It’s a safe, insecure job, but is it? With Bite Squad and with Uber Eats and with everyone coming into competition and a $15 minimum wage and customer’s moving away and customers dying.

So, I didn’t mean to cut you off. But everybody, if you’re in a W2 job and you think that’s safe and secure, it might be. But by the time you take away your tax base, by the time you take what your cost of living, by the time you take away the inflation we’re talking about and the risk of being automated or the risk of losing your job or whatever. There’s a lot of risk in that. So what Aaron is saying is really important. Take a look at that. That is a con because you are getting paycheck, but you know what, the next downturn you may be the next person that’s getting laid off.

Aaron Nelson: Yeah, absolutely. Some other things that come to mind is it’s typically a lot easier to get a standard 30 year conventional fixed rate mortgage. I have to say that because I’m a real estate broker, and I work with stuff on a daily basis. When you are a W2 employee, the banks or the lenders sometimes will perceive that as more “safe and secure.” It’s still definitely possible to do it and there are lenders out there that if you’re a 1099 employee as a real estate agent, or if you’re making rental income, it is certainly possible. But it is just something to keep in mind, and you may have to build it up … That was actually one of the reasons, one the motivating factors for why I waited a little bit to quit my job because I wanted to have two years of 1099 income that I could show a lender in case I need to get a mortgage.

Another thing one of the big things that trips a lot of people up is healthcare. Usually when you’re in a W2 position, depending on what you’re doing, you will have access to health care either through your employer or through some sort of subsidized plan. We ended up just getting an individual and family plan. It is a little bit more expensive, but you just have to work it in your budget. But healthcare was one of my limiting beliefs. That was one of the things that I always thought, “Gosh, I can’t quit my job because what am I going to do for healthcare?” Well, when we actually looked at the numbers, we’re paying a little bit more than we were previously, but it wasn’t the a huge substantial difference. And I think for the quality of life and the enjoyment that we get from being entrepreneurs and being able to go out and go around dream is definitely worth it.

So those were a few of the cons. Some of the pros, Gino, I think as you alluded to … I love the acronym FOCUS: “Follow One Course Until Successful.” And it’s nearly impossible when you’re working in two different full time jobs, you’ve got two kids, one that’s four years old, one that’s one year old, and then on top of that, and you’re trying to grow a real estate investment portfolio. I mean it’s impossible to just pinpoint and dedicate the amount of time that you really need to be successful. Not just be successful, but to really dig in, and to really grow and be part of that upper 1% of highly successful people in any given industry. There’s just not enough hours in the day. I don’t sleep a lot as it is anyway, but it was very difficult.

I think that having the time to focus, having the time to be able to go to lunch and meet with some potential passive investors is huge. I met with one guy who was a mortgage broker who I had referred a lot of business to and knew that he was potentially interested in passive investing in apartments. Had I never taken the leap, or had I never given myself the time to focus on being a real estate investor and a real estate agent, I probably never would have been able to go meet with him and have those conversations. Your time is the most important resource that you have. You have to be able to use it in a very, very strategic way.

Gino Barbaro: So, explain the feeling when you decided to say goodbye to your job? What’d that feel like?

Aaron Nelson: Oh, it’s definitely scary. I’m not going to lie. I mean, you almost have to be in-human to some extent to not think that that’s scary. But it’s also really exciting. It is a new opportunity, and a new challenge. And I think that most entrepreneurs really thrive off of that, because ultimately, you get the chance to build your own dream. You get the chance to set your own schedule … I’ll tell you, one of the things that I would probably never be able to do if I hadn’t quit my job: We’ve got a trip planned in November to December. We’re headed out and we’re going to go for an entire month down to Florida. We’re going to go stay in Orlando, we’re going get seasons passes to Disney World, hang out, take the kids there and have a blast.

I’ve been able to automate my real estate investment business enough so where I can do that. As an agent stuff kinda slows down a little bit during the holidays, but I’m still going to have the ability to work while I’m out of state. If I was in a W2 job where I have to be in a chair for a certain amount of time every day, or be at a check stand where ever that is, that trip wouldn’t be possible. So again, it’s the flexibility that really excites me to be able to plan my own schedule.

Gino Barbaro: Josh, this is important for all the listeners out there. If you’re thinking or considering about it, write down the pros and write down the cons. Think about it logically. It’s going to be scary because it’s something new. But if your pros outweigh your cons and you have the ability to do it … My thing is when you can get the 65%, 70%, 75% of what income you need, that’s where I think it’s the time to let go. Because if you can focus over the next 12 months on your business, you’re going to get that extra money. You might have to be lean the first year that you’re doing it, but let me tell you over the course of …

I mean, that’s an amazing story. Taking a month off and going down to Disney during the winter time when it’s going to be warm down there, the weather is going to be beautiful. Never would have been able to do that. That is priceless because your children are only young once. You’re only going to be able to do it once and you’re going to look back at it when you’re a 60, 70 years old and you’re like, “Oh, my kids are out of house. I never did something like that.”

So everybody out there, if you’re considering doing it. Aaron didn’t do it recklessly. He’s like, you know what? I bought this property. I’m out of here. He had a plan. He got rid of his debt, he got rid of his house in order. He started educating himself. He started looking at other opportunities. He was radically open minded because he’s like, I’m going to go out of market and everyone says you can’t do that. But I’m going to get educated, learn how to do that. So there’s a lot of steps in this process and he’s outlined a great plan for everybody who’s listening.

I want to get through this 30 unit because I know it was a really awesome deal. There was a lot of pitfall, I remember having calls with you, back and forth, about the due diligence, about the roof, about what’s going on. What was the biggest, scariest part about this whole deal for you as you were going through it?

Aaron Nelson: Up until that time we had never done what I consider to be a “commercial multifamily property.” And when I say commercial multifamily, what I mean is five units or more. We knew the properties are evaluated differently. They’re financed differently. Your due diligence has to be different. There’s different requirements because they’re a commercial building. There’s even different types of contractors you have to hire. And we’d never done that before. So we went out in search of, not just information and education, but also mentorship. There’s a big difference between those two. You can find information just about anywhere. We can get on the internet and get on Biggerpockets. And there’s a lot of great information out there that you can find for free.

But with mentorship, the difference to me is being able to call up Gino and say, “Hey, Gino, can we jump on a call for 30 minutes? We’ve got to put in this letter of intent, and what do you think about it? Let me just make sure that I’m seeing the deal the same way you are.” Or being able to call up Dylan, one of you’re one of your ‘ underwriters, who is just fantastic and does a great job for you, and run a deal by him. I was just on a call with him last week looking at a 62 unit and we had some really good conversations that reaffirmed what I was thinking. And gave me some new perspectives. You don’t get that same level of intense coaching and mentoring unless you’re a part of a community, like Jake and Gino. Or it’s very, very difficult, I should say; not impossible, but it’s challenging.

About the 30 unit: We found this deal through a broker. It was originally listed for about $1.35 million and we actually made an offer on this back in November. We went out a couple of times and toured the market. One of the things that I’ll say, is that if you’re looking to invest out of state, you have got to get boots on the ground. You have to go out there. You have to visit, you have to talk to the brokers, take them to lunch, do whatever you’re got to do and put a name with a face. Because otherwise you’re just one of the many who are calling them off of LoopNet or whatever.

Gino Barbaro: You’re a tire kicker, basically. You need to go out there. That’s an important point. I need to stop for a second. Because if you’re going to be an out of state investor, I’ve done it before. I’ve flown out the Rochester, I’ve flown out to Cleveland, I’ve come down to Jacksonville. Once you meet the broker and you do a property towards you, they know you’re serious. They know if you have your credibility book in hand, you have your business plan in hand, and you have your acquisitions, criteria, and you’re telling them what you want. You’re prepared. You’re going to be 80% to 90% ahead of what the majority of mom and pop investors are. So, I think that’s an important point. Thank you for that.

Aaron Nelson: Yeah, absolutely. So we went and we toured the property in November. We put in an offer and the broker just said, “Look, we’ve got this other offer already in, it’s higher than this one.” And so the seller selected a different offer. So we said “Okay well, that’s fine,” and we moved on. That’s going to happen when you’re investing in multifamily properties. You’re not going to win every bid and you shouldn’t win every bid. Because if you’re winning every bid, that probably means that you’re coming in too high.

Fast forward to January and we got a call from the broker saying, “Hey look guys, the deal has fallen apart, the buyer failed to perform.” They actually never even put in the earnest money, so I don’t know why it took so long for the deal to fall apart. The broker was ticked, the seller was ticked, and they wanted to know, “Hey, are you guys still interested?” So we said “yes.” But now we knew we weren’t really competing against anybody else, so we actually came in even lower. We lowered our offer price and came in and the seller ended up accepting it and we were under contract at $960K.

From there we went in and we started our due diligence. Now keep in mind, the walkthrough was back in November, we started our due diligence process in late January, early February. So when we went in and we started doing all our due diligence onsite again, the first thing that happens is that I start walking through the property. Once I get up to third floor all of the sudden I see this bucket on the floor in the apartment, in the hallway. I look up and sure enough, there’s water that is dripping down into this bucket, and I’m like, “Oh, great, so the roof is shot.”

If you’re doing an initial walk through, you’re not going to necessarily get up on the roof and examine all that stuff. If there’s a crawl space, you’re not necessarily getting down into the crawl space. At least that’s not what we did for our walkthrough. So right away I knew, we’re going to need to make sure that we get the roof taken care of. One thing that we did right is having a bunch of contractors lined up during our due diligence process. I think we ran about 30 contractors through that building, because we were brand new to the market. I didn’t know which contractors were going to give me a ridiculously high bid and which ones would give me the ridiculously low bids but I don’t necessarily want to work with.

We wanted to get three bids for a lot of this stuff, and this was a really, really heavy value-add deal. Our renovation budget for was about $350,000. So we were putting in about $11.5K per unit. Obviously not all of that was going into the units. In this case, a lot of that was HVAC, as we ended up replacing about two thirds of the HVAC. And a brand new roof, which was expensive. Not only did we have to do the full tear off on the flat roof, and put down a new TPO layer, we also had to tear off all the corrugated metal underneath it because it was literally all rusted out. It was almost like powder. It was disgusting. I think you asked, what were some of the challenges and what were some of the scary stuff. Some of the scary stuff was the long list of items that we had to fix on this building in order to get it up into good shape.

But we ended up getting a great price on it. We ended up being able to negotiate the cost of the roof, which was about $85,000 off of the purchase price. We also got a seller credit. One of the reasons that we were able to go in and do a really thorough due diligence was what we learned through the Jake and Gino community; through using your guys’ system and making sure that we were checking everything.

Gino Barbaro: That’s awesome. So Josh, I need to … Before we take a break for sponsors, I really need to really dive down into this because there’s so many things that Aaron did right on this deal. The first thing is he followed through, I mean actually kept in touch with the broker. So when the deal comes back, and a lot of deals do come back, because this first guy probably freaked out and saw a bucket in the hallway and said, I’m not closing this deal. That’s the first thing. The second thing is he had a motivated seller. Mom and pops need to have motivated sellers, because if you have somebody who’s not motivated, you’re going to get a retail deal. You’re not gonna get the deal that has somebody who wants to sell the property, they’re just going to go retail. They’re not going to go wholesale on you.

Staying engaged with the broker is the most important thing that I saw that Aaron did on this deal. And actually what I like about it is I’m sure that he sent over his underwriting and said to the broker, a million three really is hard. This is the lesson for everybody. As the market starts going downhill now, these brokers are still priced these properties unrealistically. A lot of the sellers are going to start getting frustrated because brokers are still going to be overpriced these properties as the market’s resetting. So it’s going to give us the ability to actually work with these motivated sellers. They need to sell. At a million three and you lock in at 800.

Students are always asking me, well, what do you do on a low ball offer? A low ball offer is realistic. If you have your underwriting in place and you send it over and you can substantiate the numbers, you can at least save face with the broker and say, I’m sorry, I can’t pay a million three with all these repairs, and with the cap rate, let’s say being seven and you’re pricing at an a four cap. I just can’t pay that. So there’s a lot of things there that really resonated with me and that really you saved a ton of money on. Let’s just take a quick break for our sponsor. We’ll be right back.

Joshua Roosen: Gino, I know a lot of our listeners are wanting to take their multifamily investing business to the next level. I know that you’ve been hard at work helping Jake and Gino students do just that using our framework. Can you explain to the listeners how they can get our help?

Gino Barbaro: Guys, we’ve been hard at work, growing our community of like minded investors and the results of our members has been nothing short of incredible. We’re looking to grow this amazing group. What we’re looking for is those who want to follow our proprietary framework that we’ve created buy right, manage right and finance right. Leverage our connections, education and mentorship as ways to take your business than the next level.

Joshua Roosen: So if you’re interested in finding out more about how you can become a part of our amazing community, apply to work with us at jakeandgino.com/apply.

Okay. Aaron, before we get into the short answer questions, I’ve got a question for you. So after you repositioned this unit, what do you think the value of that complex will be and what will you be all in it for?

Aaron Nelson: The final purchase price was like $875K and we got a $5K credit, so we’re all in at $870K for purchase. On top of that, we had about a $350,000 renovation budget. We believe that, based on the cap rate and based on the fact that this is now going to be a cash flowing asset, meaning that the cap rate probably isn’t just going to go up but it’s actually going to come down because people generally pay more for stabilized assets…We believe that this property is going to be worth about $1.5M. So there’s definitely some spread there. It may Potentially be worth even more. I’m trying to be a little bit conservative because when I run my numbers, I like to be a little bit more conservative. This is an area where we bought for $29K a door, we’re putting in let’s say $11K a door or $11K and a half a door, and stabilized stuff is selling for over $60-$70K per door. There’s a lot of room for growth. So we bought right, and now we have just got to manage it right as well.

Gino Barbaro: That’s awesome. Congratulations. That is great. Yeah.

Joshua Roosen: Way to go with that. What advice would you have for a listener that’s trying to get into their first multifamily deal?

Aaron Nelson: Well, I think the first thing is to do is to get educated, because if you’re not educated, if you don’t know what you’re doing, if you don’t understand how multifamily property financing works, especially on the commercial side, you’re going to be at a huge disadvantage. And you’re going to be at much higher risk. I think the quote that I heard the other day was, “education is one of the things that you can do to maximize your return and to reduce your risk.” If you’re not investing in your education, you’re going to be at a disadvantage. It’s going to be much more risky for you.

The second thing is to find a mentor. Success leaves clues, right? So if you want to do something, if you want to accomplish something, it’s a lot easier to follow in the footsteps of somebody else who’s been successful doing that same thing, as opposed to trying to reinvent the wheel yourself. That’s just silly. It’s going to take you way longer. You’re probably going to end up getting frustrated and ultimately there’s a decent chance that you’re going to lose money because you’re not going to know what you’re doing. I think those are two huge things.

Then the third thing is just don’t quit! Keep going out there, keep showing up, keep flying into that target market, keep meeting with those brokers. Keep following up with those brokers, keep underwriting deals because it’s a numbers game. You’re going to look at so many deals and if you’ve defined your criteria really well, and if you know what you’re looking for, you’re certainly going to look at fewer deals. You shouldn’t have to look at necessarily a hundred deals just to find one or two, if you’ve really done a good job in defining your criteria. But keep going, keep following through.

Joshua Roosen: Love that. What about your favorite book and why?

Aaron Nelson: Everybody says Rich Dad, Poor Dad, and I think as I alluded to earlier, that was definitely a book that got me started. But I’m actually going to give you a different one, I’ll give you two. So Kiyosaki wrote another book called “Retire Young, Retire Rich.” It has some really good lessons in it. One is using leverage, both from a financial standpoint, and also from a team building standpoint. Gino, you run a fairly good sized organization and you’ve got multi-faceted, multifamily. That’s what you guys preach. But Gino, you yourself, you don’t have time in the day to run every single division of that multifamily company. So you’ve got leverage other people who’ve got great skill sets, who you know, have vetted and are going to be great team members for you. So leveraged from a team building standpoint and then also leverage from a financial standpoint. Obviously that’s why we like buying real estate, that’s why we like buying multifamily assets.

It also talks about just having a strong reliable team who are on the same page with you and think in a similar way, not to think exactly the same, because you don’t want to necessarily get into group think. But people who can be a sounding board and who are onboard with your vision. Those are really, really important lessons.

And then the other book that I’ll mention is “The Book On Rental Property Investing,” by Brandon Turner. The reason I mentioned that is because that was one of the first real estate investing books that I read. That’s what helped me understand what makes a good and hold investment property. That really helped us purchase our first duplex in Tacoma.

Gino Barbaro: So Josh, I jumped in on that entrepreneurial thing. It’s so hard to leverage other people when you first start out because as an entrepreneur you’re the I’m a mentality when you’re small. I’m a do this, I’m a do that. And I think that’s the hardest thing is when you need to start scaling up and start bringing other employees on, because sometimes your ego gets in the way where you think you can do a better job than everybody else. And maybe you can, but I’d rather have somebody do 80% of what I can do, so I can do other things and hire more people on. That’s the biggest struggle for everybody when they start working for themselves.

I had that at the restaurant, that’s why I only had one restaurant, now we have over 1500 units, is because I was the man in the restaurant. Everyone know Gino’s Trattoria and it was really hard to let go of the kitchen and give that to somebody else. I struggled for years and years because I was raised that way from my father. My father worked 30, 40 years ago. You didn’t have to leverage 30, 40 years ago. You could be at one occupation, make a great living, great [inaudible 00:33:27].

But nowadays it’s not possible to do that. It’s not possible to stay in one place and not leverage other people’s abilities. Obviously there’s people that can do a much better job than I can. I’m looking at legal contracts right now, I want to shoot myself. I mean it’s so mind numbing, employee handbooks and all. And if you can find a team member that can really help you with that, I would say go out there and go make it happen and take the risk. And think back, you know what, is it me, is it my ego that’s holding me back? Or can I get somebody to help me out? So that is an excellent point. I love the point you made. Thanks for making that.

Joshua Roosen: Love that. Aaron, what about your best habit for success?

Aaron Nelson: I don’t know if this is my best habit, but one of the things that my wife and I do that has really been great for us is that we actually go on a little mini retreat every year. It could just even be an overnight thing. And we get away and we do goal setting and we talk about the previous year. We goal set and we try to do it in just about every aspect of our lives.

We talk about: Who do we want to be in our community? Who do we want to be in our church? What type of investments do we want to make this year? How many times do we want to try and get together with the neighbors and with friends and family? And we just go and we start mapping out the year. We try to be really, really intentional with our time, because we know that if we aren’t, then life gets in the way, and other stuff will start consuming our time. So that’s been a really great habit that we’ve done the last few years, has been very successful for us.

Gino Barbaro: That’s awesome.

Joshua Roosen: Love that. Gino, this show’s had a ton of golden nuggets. Do you want to sum up some of them for the listeners?

Gino Barbaro: The last thing I’ll say, I mean, everyone who wants to become financially free and wants to leave their job has to go back and really listen to this again. If you have any questions, Aaron’s going to give out his information at the end. You want to reach out to Aaron, that would be awesome. You want to reach out to me and ask me questions because I’ve done that also. It’s not easy, but it’s so fulfilling. It’s so rewarding.

One of the last things that Aaron said that really resonated with me is don’t quit. It is a long game and it’s hard. Patience, persistence, but willing to walk away. And it’s like the farmer that I say, you plant the seed in the spring and you hope you get something in the summertime and that’s what it is with being an entrepreneur. And that’s what it is with going on in your own. And if that seed doesn’t come out in the summer, you do it again next year. That’s how it goes. Some years will be fantastic and some years won’t be as fantastic, but you’re always growing and you’re always learning. And if you can not quit and be persistent, there’s only 4% or 5% of the people out there that follow that mantra and they’re the ones who are successful. So guys, long game, don’t quit. Education times action equals results.

Joshua Roosen: Love that. Aaron, how can the listeners get ahold of you?

Aaron Nelson: Sure, so I’ll give out my email. That’s probably the best way to get ahold of me. It’s aaronnelson034@gmail.com. And then I’ve also got a website that you can go to, and that’s whitecoatre.com.

Joshua Roosen: Awesome. I want to thank Aaron for being an amazing guest on the show and sharing his Mover and Shakers story. Guys, if you want to be the next Movers and Shakers guest, email me, josh@jakeandgino.com. If you liked the show, please leave us a review. And until next time, let’s make it a Movers and Shakers a week. See you, everyone.

Gino Barbaro: Thanks Aaron.

Aaron Nelson: Thanks everybody!

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