Goal Setting & Inflation for Real Estate Investors with Aaron Chapman

Transcript:

Aaron Chapman  0:00  

The best he could find was the value of the decline of the dollar and what the value was in 1930 versus today 2019. He says, What do you think that is like? Hell, I have no frame of reference. I'm guessing it's, it's big. I know what it is. Well, he said in 1934, we could buy it for $1 is the same take $220 today to get the same.

Taylor   0:21  

Welcome to passive wealth strategies for busy professionals. I'm your host Taylor load. today our guest is Aaron Chapman. Aaron is an experienced real estate lender who specializes in working with investors. Today we're going to talk about the power of goal setting long term goal setting and short term goal setting the power of inflation in driving your returns and how that can impact your returns. 

And Aaron's story about how he got from where he came from. Being a lender with with 20 years worth of experience and experiencing multiple market cycles. It's a great discussion. I really enjoyed it. I think you're going to enjoy it as well. Without further ado, here's Aaron Chapman. Aaron, thank you for joining us today.

Aaron Chapman  1:07  

Hey, Taylor, man, I appreciate you being willing to get up early in the morning. it's not been an easy morning, to get up to man. But it's good to be here.

Taylor   1:13  

I've seen you on the video here. there's for folks that are just listening. he's in a looks like 100 year old log cabin. What's the story? Like? How do you know what's the deal there?

Aaron Chapman  1:25  

And yeah, I think this is approaching 100 years old. I believe it was built in the early 1900s like 1920.

Aaron Chapman  1:32  

And they'll this place where I'm at is seven acres of Ozark Mountain property. This is my office here. I've got a cabin next door which used to be an old chapel. that is my trial. I stayed I just barely was able to move into it literally just this last week because I would come out here like once a month and I would stay in hotels. I'm in Branson, Missouri, I'm just outside of Branson, where I'm sitting now. I had contractors working on this is driving me nuts. But how I got here interesting stuff years ago, I was out to dinner with a friend of mine and his wife with my wife and and at the end of the night as he's walking away, he said, Hey, I got something coming up. 

That's really really big. I can't tell you all of it, because it'll change your life. Mike, okay. that's huge. It was just just You got it, you got to trust me, as he walks away, like I'm going to change your life, man. He just kept going. you know, I did I didn't know what that might be on. Then I got a call from some guys from another company that he said, he gave him my name, you know, another lending firm. he had just closed on purchasing in his partner just purchased a big real estate agency. 

That was all realty executives in Arizona, they bought the entire franchise for for Phoenix, he already had a successful commercial real estate business. We just made a deal with this company to be their preferred guys to do all their their lending. They called me up said hey, Joel said that you'd be a good guy for us to try and bring the floor. going through the process of the interviews and background checks. They said, Hey, we want you to come to our corporate headquarters in Sacramento. 

But before you do that you need to write you need to do this. they gave me this five year exercise. I have never been to the goal setting or the vision caster and that kind of stuff. these guys were making me do this. Well, one of the guys is the CEO of their company is one of the owners of a large, pretty heavy coaching firm called the core. one of his partners is within the within the firm. they wrote these books about how to be successful in our industry. 

And part of it was being able to write things down. So I see I'll take them up on that. So what had to start, figured I'd write this whole thing out, but it didn't know how to start for the CEO sent out his five year exercise, which is really kind of a Hey, this is what I want to have done in the next five years, have a lot of bullet points in it. I get it. I mean, it works if whatever you have to do to put that down. But I couldn't. I couldn't get emotionally tied to a bullet point, you know. So I decided to take a twist on this and write myself a letter five years in the future looking backwards. Interestingly enough, this November will be five years. 

And as I wrote that all down, I started off by putting myself in a specific setting, describing the environment, I'm sitting along the trail next to my jeep with my wife around the fire, I get here the stakes hearing in the background, I went to school description, but what I want to accomplish, and interestingly enough looking at that now, a lot of those, all of its been accomplished in different ways, though, I mean, I wrote down a certain volume I wanted to produce, I overdid that, in units of loans closed, not international dollar volume. 

So I blew away past what my goal was because I work with real estate investors mostly. then there's some other things in there just happen to really wild way. I started seeing that occur. So I decided, I'm gonna start writing things down that I want to accomplish. in 2017, I was intent on blowing the doors off of any goal I'd ever set production wise, I want to close 600 transactions in 2017. So I tried that same process of writing it down. So I just closed on some properties in the northern Ozarks of Arkansas, because that was all that's a whole other cool story. But I closed on these two lots. 

And actually, there's some really cool parts that story, but it's going to suck up a lot of time. I just closed on those in December of 2016. It was February of 17. I wanted this goal for the year. So I put myself in a position that thinking okay, I'm going to put myself sitting on my porch, in my rocking chair overlooking the Ozark Mountain landscape, thinking back on 2017, kind of putting myself on that lot. Or I'd maybe have built a house or something. But that's all I described was sitting in my rocking chair on my porch overlooking the Ozark Mountain landscape, looking back on 2017, and the 600 plus transactions that we have closed as a team. 

And I just started describing how we did that. the rest of my day. That was I was writing about. But a few weeks have passed, maybe two. then I get a call from my senior executive VP asking me how important is the state of Missouri to me? My I don't know, let me look. Well, it turned out to be 12% of my production. I said, Well, it looks fairly important. He goes, Yeah, he goes, we got a problem. So what's the problem? That we just lost our brick and mortar in the state? Cool. What do you mean last our brick and mortar he goes, we had one license, the loan originator that lived in the state with licensed his house as our office. 

And now we don't have a licensed office there in the state requires you to have an office there. he'd quit. So now we we lack the ability to continue to do business there. they're going to suspend our licenses in 19 days. Like, crap, man, what are we going to do? He says, well, we're going to put some ads out on Facebook and monsters you we can get now that we know it's important. I'm like, Dude, that doesn't sound very, very impressive. 

You know, if I just solved the problem, though. Sure. What are you going to do? So my sister lives in Missouri, used to work with me back in the country days. Let me just give her a call. Like, do fine. You want to handle it handle it? Perfect. So I just jumped in this because I don't trust these guys. Because it's well, I have to trust them a little bit. But a trust them solve that problem quickly because it wasn't a big issue to them. Right? massive issue to me. I just taken on two new big, big clients in St. Louis. in Kansas City. 

They're sending me a lot of business. So I called my sister up. She answers the phone and said, Hey, you want to get license? You haven't talked to me in six months. all you ask, do you want to get a license? Again? Is that a problem? I need somebody to get licenses state and come work for me. Well, then she paused. I can hear her kind of choked up, her voice cracked. she said

Aaron Chapman  7:37  

I just lost my job. I was cleaning condos for guy and he just sold them. You know, because this is a big vacation town. Because my husband's job is good, but it's not meeting all our needs. I just I in when we're Jim and I were talking about that last night. He said wanted to call your brother. Because in here you are on the phone the next morning. So is that a yes. Because you have to Yes. 

That right past the whole emotional piece of it just went straight towards I've got a mission, right. so then I booked flights and flew out here two days later or three days later is a Thursday. I called her on Monday, came out here on a Thursday. me and my wife and my son went straight to her house rent a car went right to her house TI I pulled up colors that were outside, she comes running out, just come in and see the kids she had two kids that never met before. I don't get dressed in the car, we're going to go look at these places. Because I needed commercial real estate.

Aaron Chapman  8:33  

actually know that let me let me let me backup. I even got ahead right there. So a few went ahead decided to get the licensing piece, right. she went through the whole process of 20 hours of education she had to get ready for this test. In the meantime, you know, we're getting closer to our deadline where our licenses are going to go inactive. then have everybody calling me say Are you ready? You ready gonna get that you get that license done because they're freaking out that a bunch of deals in my hand. then the test day came. I was walking around just pacing like a cage tire waiting for the phone to ring. then finally That afternoon, my phone rang with her number on I was excited. But finally this is done. I answer the phone waiting for the good news. I could hear sobbing on the other end of the line. so my heart sank and I literally just I didn't know what was going to happen there and she starts just apologizing. 

She missed it by one question. So now she had 30 days so she can retake the test. she's apologizing, apologizing, apologizing, it doesn't matter. It's all cool. I've got another plan. She goes What's that? So I'm gonna solve the problem. I'm coming there on Thursday. I'm booking flights now. I need you to find the every place I can write in everything. I can buy that as commercial because I need to move my licenses and five of the states five of the 24 states I'm licensed in require commercial brick and mortar for me to stay active in their state. 

So if this is my home, home office, I have to have that. So I flew out there on Thursday and I I was just saying we drove up to her house. She asked us to come and see the kids like no Get your ass in the car. 

We're going to go look at these places. they showed me the perfect little spot is a little office in a senior center owned by the city that was going to be vacant and they could they could put me in there for very very very low rent like 300 bucks a month like perfect. Let's take it so we'll start making the deal so I went and talked to over the city start making the deal work right. then our way back to her house she goes Jim wanted me to take you by this place. my coat so it pulled up and there's these you pulled up and there's just it look like these two structures kinda you can see covered in vines and vegetation. As we got out of these two old cabins with a deck between them just right off the road. 

And we started walking through them and you know one of the doors was opening was able to get in it and then but we didn't went ahead and called the realtor to come open and both up as we're walking through I just really kind of fell in love this place and I looked at my wife said what do you think she goes by him? So core the realtor and she says I said you think we will get the seller to carry she was never carried before. A lot of people have asked and they won't do it. So what we're going to ask because you don't ask you don't get yeah go ahead picked up the deal. they accepted it then negotiate with us on the price a little bit but they brought it down to about 10,000 from where they had started. when she got the accepted obstacles I cannot believe this that this does not make sense. 

So to do this, it was the children of the guy who put these here back and I think the 60s or 70s he had one was a little chapel This wasn't was a gift shop and they accepted the offer. So we jumped at it. We closed and I flew back home and I came back literally a quick turn and burn came back out here to meet a contractor to see what is it going to take to rehab these places. Right. so I pulled out we I flew in got the rail car crew straight over here called my sister say I'm going to the cabins I got to meet that contractor pulled up walk down from the from the from the road down the steps to the deck by step on the deck I look to the left and on the porch of this cabin was a rocking chair sitting there. I ran over my Kelly I got a rocking chair and I'm kicking back in my rocking chair. then it hit me. 

I pulled out my notepad out of my backpack that I had and I read it where it says I'm sitting in my rocking chair on my porch overlooking the Ozark Mountain landscape thinking back on 2017, those 600 transactions be closed. I am just I was just overwhelmed that goosebumps like holy cow two months in two days earlier, I wrote this down. But I was thinking the Ozark Mountains of Northern Arkansas, not Ozarks of Missouri. We're in southern Missouri in the northern part of the Ozarks. like wow. then my sister pulls up and she's got this really loud voice you're you're not supposed to see that yet. Like How did this get here, because your wife called last week and said in make sure a rocking chairs waiting for him when he gets there. 

So the real lesson that I learned, it's another reinforcement, you write it down, it comes about right. So you have to concentrate your mind. gotta write it down, you got to focus your energy on that. then you gotta share it with people you care about.

Taylor   13:09  

And that care about your wife,

Aaron Chapman  13:10  

exactly, especially your wife. ultimately, they will make things happen that you're not thinking about, you're concentrating on the goal, right. she made sure that that rocking chair was there, and I accomplished what I had written down in a short order. now since then, we've had conversations because you need to stop writing stuff down, continuously starting to joke, because we don't need all this crap right now. 

And because when I get focused on something that just happens, so I encourage a lot of people. So now I have a series of books coming out, there's four of them that are written right now. they, the first one is that story. So I thought I did is I wrote one big book. instead of having one big book, I found that there's a lot of filler. 

When you're doing multiple, when you're doing a book, you're trying to cover a lot of ground. so what I decided to do was cut it up, because it's just you know, Cliff Notes has made a fortune off of taking all the filler books, taking honor pages him down to 15. So that's why I decided like, I'm not going to do anything more than 30 pages. 

But I'm gonna do a bunch of little books and dive deep on the subject. There's only so much you need to give. If you look when you're reading people's stuff, there's so much filler that I got to keep their attention. So four of them are coming out. The first one has to do with that.

Taylor   14:25  

Awesome. Well, that is quite the story. there's a you know, lesson in there for sure. Right, and the goals down and then relentlessly pursuing them and sharing them with others. That's, that's all great. So can you tell us more about your, you know, like to cover your background too. So the listeners know exactly where you're coming from and what you provide for, you know, the real estate investing community?

Aaron Chapman  14:50  

Well, backgrounds a little different, too. So we'll get into the background piece of it, you know, I started off life in you. Right, I left high school as I will graduate halfway through my senior New Year how I get that I have no clue. But, you know, I was able to take off and go to work in the oil fields of Wyoming at 18 years old. then so I was always working in that type of environment. 

I was on the cattle ranches in high school, and then did the oil field thing that I worked in running heavy equipment driving truck, I work in the mines in northern New Mexico. that got shut down, I end up finding myself looking for a job and I had a wife and infant son and there was a day that we were completely broke. I was hunting for this job I went over to a landscape company was getting, you know, putting in for $10 an hour to drive a landscape materials truck and they even shot me down to when I lived there. I had a coupon for I mean, I remember sitting in their parking lot crying because I couldn't. 

That was that was that beat. At that point. I thought I could easily get one because I had such a big resume. But that's what was that was actually my problem. I was to add my qualifications or exceeded anything they were looking for. they knew the second I got another job be added $10 and arrows and stick around for Yeah. so on my way back my wife and give me a coupon for diapers for my infant son. as I'm driving home, my gas light pops on my truck. so I pulled up to a grocery store had a gas station out front, I swiped my debit card, they got declined cash. So I don't know my truck looking for change.

I started walking to the parking lot for about two hours to find an opportunity to get a couple gallons of gas. luckily gas back then because only 98 cents because it was today I'd have been there for like six hours that I went into the grocery store, find the corresponding diapers with that coupon paid for them came out and I ran face to face with a guy I used to work with and the company I ran heavy equipment for. he asked me how things are going I explained he goes Let me take you to dinner. 

They had a gift certificate Red Lobster before gift cards is back in 97 took me my wife to dinner The following night actually. he introduced me to the lending industry. I knew nothing about this. So he introduced me as broke. I met with those guys I kind of put off my hair I cleaned up I went in there as a telemarketer in 1997 over 21 years ago Come December. So that's how I started the industry. now it has evolved from just you know, at the time, it was just taking inbound calls from the advertising for people want to Rifai to eventually in 2003, I figured out the real estate investor that they were out there, it was no longer this emotional battle to get people to try and buy a house and and consume in the perfect house and the perfect street with the perfect kitchen and life will be perfect when you close even though it sucks right now. 

And you deserve this house you can can afford because it's your right as an American, right? Yeah, that was the prevalent thing at that time that led up to the crash. But the real estate investor has is different. they've evolved from a consumer spending money and going into debt to now a business owner. that's what we go into. I help them to take the mindset away from this consumers being sucked into just cash on cash return and cash flow and low interest rates all these things to you're the CEO of a real estate investment business, you're running this organization. anytime you buy property, and you take on those who source it, and acquire it and rehab it and manage it and maintain it, that's your Operations Division that comes free with the acquisition of your deal. But there's no way that's free, because I'm paying, you know, for the for the house, and there's got to be making money there. 

And then I'm paying, you know, eight to 10% on my rents, they're making money there. I'm like, you're going to get that anyway. You know, if you bought a house at market value that a real estate agent listed, that agent gets paid, right?

Aaron Chapman  18:36  

course the agent after you close?

Aaron Chapman  18:39  

Gone, done right? What do you get from an agent after that you get a picture of her damn cat at Christmas time, right? All right. Did that go quiet time around Christmas time he goes, dude, I gotta figure my agent or damn cat right here. So it was a confirmation that that's real. then you know, you gotta go find your own property manager and go through four or five of them and lose money and all the battles and putting anybody in there just so they could say, Hey, we did our job. 

But we deal with the right people. You find the right people to put in your business. All that stuff is handled for you, you've got their experience. You don't have to learn all these things to be able to run your business, they run it for you. that's where the free comes all that experience that comes you ever heard the term good judgment comes from experience and experience comes from bad judgment?

Taylor   19:24  

No, I haven't heard that. But I like it.

Aaron Chapman  19:27  

Yeah, and so it goes to prove that we learned the best we get our ass kicked. That's just how it works. These guys did for dozens of years. they're able to take that and put it to work for you. Because if you're successful in your real estate investing venture, they're successful, right, their business takes off. So on the flip side of that, I tell them, I'm applying for the fractional CFO job. But what I mean by that is, you know, I am here to help you navigate the financial piece of it to be successful in the acquisition, expansion of your real estate business. I will never speculate, never theorize about business.

I'll give them practical data. how I can do that is there's 300,000 people in the United States licensed to do loans, and what they call licensed will an originator. when you look at the statistics, the average person closer between two and three transactions per month. So if you're working with just Joe lender over there, and he closes, say, you know, 50 transactions a year, that's the experience he draws from, to give you practical information to make decisions. Now, last year, I closed 707 for real estate investors the year before 676, you know, it's 2017. But I wrote that down like 600 units, I closed 676, then I've been doing this since 97. 

We know a little bit about the space, I've seen a lot of people fail, I've seen a lot of people make good decisions and they've succeeded. That's where having me and where I put myself as a member, as a member of your board table, a trusted advisor at your board table is the benefit because you can come to me with how do I handle this problem? 

Or what about this particular issue? I think we have to go through the experience of learning how to deal with that I just shared with you how somebody else did. I have to tell everybody, before you close like in one of the big things we run into is they get really excited about real estate. they go off start buying the people that things cash trying to do that first strategy. everybody talking to you are not allowed to close on a cash purchase till I see it. I have to see the paperwork, I have to know the deal before you actually go in and close. in fact, I even tell some Me neither. 

Even though we're on the phone, you gotta promise me you're raising your right hand right now. repeat after me. I will not close unless Aaron Chapman sees the settlement statement. You know, and they still do it. 

Even though I tell them you can't close it, and they still do it. So people need to remember, get your board of advisors and talk to them. Bring them into the deal. Understand it before you close Don't get so excited about the when the cash on cash return look awesome. It's never right. You know, so a lot of the mistakes people make or wonder they're jumping there too fast, or they're trying to time the market today. They're they're kicking it off to a timing, right, either too quick or too slow. The other is, is where they're just looking at the numbers. Well, this pro forma looked awesome. Why is it not looking like the performant. Now that they own the deal, that performance is a guest. 

In fact, I got a close friend of mine who's also a client is a professor of accounting at Kennesaw State University. he says performance Greek for made up there's not a damn bit of is real. Right. So I don't find who you want at your board, then use their pro forma as a way to decide which property you want not to compare people, but between the performers, because none of those performers are accurate. 

But once you decide on the property, then you take that pro forma that you use to the side with, you look at it closely, you want it up and throw it away, because it will serve no purpose after that. Now we get into the real deal. so I asked them, and I'll ask you what is the most valuable part of the real estate transaction? Where where's the most

Taylor   22:54  

from my end, you know, I do syndications with which involves bigger teams. you know, we have various people on the management team all that. So for me, I find the biggest value is in the quality and experience of the management team and the general partnership team.

Aaron Chapman  23:16  

The I can't argue with it all. Because I think that having the right team is number one, to get into the nuts and bolts of the real estate itself. The monetary value, as far as I'm concerned, when you get to the monetary side of it, I would say the ability to leverage it. Not tell everybody leverage is where your is your is your most valuable part of the deal. 

Your ability to leverage, you know, and we're going we're dealing with consumers, right, and we 72% of the US economy is consumption. Right? I think it may be a little bit different than that now, but that was a statistic back in 2018. In fact, in 2018, I've learned that in 2017, that 19 plus percent of the global economy with the US consumer, like 1969 things 19.7 staggering, isn't it? Yeah. 

So what we have to do is we have to take people from becoming a consumer, or they're thinking they're spending money and going into debt, and now believing that they're the CEO of this business, and then understanding that the leverage is the biggest return. Now what I mean by that, is we live in an inflationary environment, correct?

Taylor   24:18  

I know. But I believe it stated by the government as basically being nothing which I also don't believe that statistic.

Aaron Chapman  24:27  

They say it's 2%. Right? Well, they go off of the CPI, which is the corporate, I guess, the core production index, I guess what they call that. so that's a narrow, narrow index of what they're following. They don't put in food, they don't fit put in energy, and they don't put in taxes. Those are not part of that. There's other things they're not factored in. 

There's a couple other little some other monkey math, but the basics are, are this so when was the last time that you went into the grocery store bought the same items? And none of them were on sale? And they went down in price? Yeah, doesn't happen was the last time you paid less per kilowatt hour on you?

Taylor   25:03  

Ever unless I, I don't know, I moved at one point to a very different area that rates might have been lower. But uh

Aaron Chapman  25:10  

yeah, but I mean, right. Right. Right. when you're talking about the cost per gallon use, that doesn't go down, when's the last time your taxes per dollar earned went down, unless you got some tax deductions. It doesn't go down. You know, your whatever you show is actual taxable income that keeps going up? Well, there's a place called shadow stats, calm or shadow statistics. that was actually shared with me by that male professor of a Kennesaw State because you heard me on a podcast to talk about this. 

The Dude, I need you to come speak to my students, then it went from there to now we're working on the curriculum together. some really cool things are being done. But he showed me the shadow stats, and another thing called the chap would index and as this stuff back in, so the government tells us that the cost of living is only increasing by 2%. 

But it's actually between five and 7% per year. So, so we're looking at this, am I okay, so you've got we're in an inflationary environment, we all understand that. So that means we get to raise rent as as, as investors right on the property. Do you know what the national averages as far as only, I guess,

Taylor   26:15  

maybe two and a half percent? I think I saw that somewhere. Maybe? Am I on the mark?

Aaron Chapman  26:22  

Pretty close, the most recent thing I saw was 3.6%. was under there's a lot more than that. So let's just say I mean, so let's just go right in the middle between what you just said and what what I what I recall the next drivers be I don't have that in front. So I'm going off of recollection. So somebody wants to send a message and say Aaron's wrong and he sucks is less than that, or more than that. so let's say 3%. 

So we're talking about $100,000 acquisition, and we're going to go run percent rent to value ratio. So we're going to talk to the non syndicated people, the people just getting started. So 1% raise the value ratio is how much? thousand bucks, right? So what 3% of 1030 bucks. Are you going to do math this morning? That's just the way it's going to work. 30 bucks.

Taylor   27:07  

If I've just handed me $30. Man, I'll take it, but I'm not. Yeah.

Aaron Chapman  27:13  

I could stand to get a bigger okay, right. Why not? But that doesn't 30 bucks doesn't go very far. Right. So 30 bucks, big damn deal. But does it seem plausible that $100,000 rent per month? We you get about $200? Right now? Yeah. Definitely achievable. So but if you raise rent the next year, you're $200 a month at 230. Right? Yes, your cash flow went up? Well, by how much? Did that cash flow go up by what percentage? 15%. Now, exactly right, I said 15% increase in my cash flow. if you were if you were lucky enough to buy in a place where you strategically bought a place you keep raising rents on the regular. Now you got a compound effect of 15 and 15. 15 grows even more, right. But do we get do they get to raise the paint on the 30 year fixed loans, the pace inflation? know, there's they said we're willing to accept the same dollar for the next 30 years, even though the dollar is losing a compound value. you know, when that hit me one day, I'm like, That's amazing. 

You know, and it's just it was one day thinking about this stuff. I'd never heard anybody say this, right? I heard them say do the inflation to limit the debt. But nobody said out that I got the thing of Wait a minute, I get to raise rents. I'm paying them less than less I get to keep the spread. That's absolutely awesome. Now let's think about what the spread is. So as I'm talking about this, on another podcast, the host stops and up three quarters the way through it, he goes, dude, we gotta go back to the inflation thing that you're talking about 10 minutes ago. 

He goes, I'm sorry, I hadn't listened to you for last 10 minutes, I got fascinated by the inflation thing. Like, well, it sounds like I'm at home, right? Because I can start talking and they easy to ignore me. Well, he said that he started doing some quick research and found the best he could find was the value of the decline of the dollar and what the value was in 1930. Versus today. 2019. He says, What do you think that is? Like? Hell, I have no frame of reference. 

I'm guessing it's, it's big. I know what it is. Well, he said in 1934, we could buy it for $1 is the same that takes $220 today to get the same. Like there's no way that's right. He was talking about that we got to thinking about wages. dollar a day wage does not seem like can be that far off in 1930. Right. Today, $220 a day is 57,000 and change per year. That's not far off. You think about that? That seems plausible. Now? Is it 100%? It's hard to find this data and looking around and there's so much paperwork on it from the from the government is so thick, it's hard to figure out what's what we start looking at all that but that seems about right. So okay, let's think about that as a benchmark. So you're a real estate investor taking a 30 year fixed mortgage up, right. 

And you're going to rent your property out and you're going to be found a spot that you can reasonably raise rents at least one half to 2% a year, let's say 3% every other year. Right? So you know, you got some compound effect there. But what exactly is the dollar going to do over that timeframe, the best we can do is let's just say that is the metric will will fly for the next 30 years. So 220% is the loss in 89 years. So it's around up to 90 below conservative, how many of your 30 year fixed mortgage periods will fit in a 90 year window? 333 of them. So we take to 20 divided by three, what do you get?

Aaron Chapman  30:34  

This is going to be the hard one.

Taylor   30:35  

Yeah. 79

Taylor   30:47  

73, right, it's just too early for me to be doing math in my head.

Aaron Chapman  30:52  

Yeah, I had to memorize this crap. Otherwise, we just be sitting here listening to me just mumble. So 220 divided by three is exactly 73.33. So that means the time from the time you close on that that deal, start paying the loan with somebody else's money, the dollar you're paying back with will lose 73.33 times its value over that period. Look at the steep decline that that is. So I'm guessing that somewhere between your 12 and your 14 This is 100% guess on my part, because I've yet to be able to figure out the math is that we're paying it zero back. 

So right now the professor and his students at Kennesaw State University is working on a tool to actually figure this out. Because he and I've been talking about it. So this is what I'm guessing we'll get there he goes, we'll figure it out. so they sent me a tool that broke down the dollars devaluing at five to 7%. Anytime you can type in five or seven, or whatever the rate of inflation is at that time. But the problem is that tool actually just starts a compound decline of the dollar, and it wasn't quite working, because it's taking the smaller, it's a percentage of the smaller dollar value. So it really doesn't, doesn't work out to know you have to figure it back in is the cost of of the living expense eroding the dollar, she started at 100.

And then the cost goes up, therefore the roads at a faster pace than five to 7%. Therefore it's going to wipe out within tender within 12 to 14 years, I think. So we're gonna actually figure that out. I'll be able to publish that to the world when our findings are done, kind of makes me feel like an anthropologist young and go dig up a phone interact, and I've got my college backing me up, I'm going to dig up the real skeletons of the of inflation, and expose this to the world that we're we're the sole asset base, or asset class that takes advantage of inflation show get a 30 year fixed, right, that's some good all the way out for all 30 years, don't pay it off early, because you are you're creating money out of thin air as $1 D values as you get to raise rents and continue to increase your income as you decline what you pay it back with that right there to me is the most powerful instrument ever seen yo yo compound interest is the is the eighth wonder of the world. I think being able to use leverage to offset inflation is even bigger. You know that right? There is like the ninth Wonder of the World, which just has never been discovered until now. Now, I stumbled across this dang thing, and it's amazing. To me, it's exciting when I start talking about I'm sitting in the mic right now

Taylor   33:22  

doesn't going off about I think it's a it's a very important point. you know, the broader society, you hear about this inflation at least a little bit. when you're in the real estate investing circle, but then I'm not super frequently, but it comes up because you we also have the gold bugs that get involved and like to talk about how terrible the dollar is, and fiat currency and all that. But broader society, you know, the broader world talk about income and wealth inequality. there's not even a mention of inflation and the long term effects that inflation has on the average Joe person who maybe their salary of many, many of whom their salary doesn't keep up with inflation. 

So over the course of a career, from when you get started, and in your case, what 18 and in my case, my early 20s, over the course of your career that inflation, if you're not keeping up, really hammers that purchasing power, can can really hammer the purchasing power of your your W two income. So yet another reason people need to be investing in real estate. But it's inflation is definitely something that broader society doesn't talk about at all anymore. It was a topic when Jimmy Carter was in office, right? But since then, nobody it doesn't come up at all. it's not a good thing. it's here to stay for sure. It's not going away.

Aaron Chapman  34:58  

Oh, definitely. Because we used to, you know, we just accepted it backwards gonna deal with inflation. not only we deal with inflation of, you know, the cost of living, but people's expenses as a whole inflate and the fact that you know, when we were younger, you know, and we you know, we start with with no kids, and then you have one kids and twos and threes, and then we have a board. I mean my wife get to discuss having kids start showing up. The cost of life continues to grow., and we add that in with the cost of just living as a whole going up man, it can be it can, it can be tough, be very, very tough. Well, I just tell people, listen, it's going to suck, life is going to get hard what you need to dig in and keep moving forward, you need to have that goal, have to decide what you want. you don't stop till you get there. then when you get there, when you reach your peak when you reach your Everest, don't sit back and don't relax, because that will kill you, you keep moving. 

And then you're going to go right back up and against we got you next to Everest, and then your next one. sometimes you're not going to meet it in the time frame you give us you have to go back down, you know, to recuperate and head right back up that thing you never stop. The second we lay down as a second we die. that's how we have to look at everything's is going to beat you up. It's going to get you there. But eventually you're going to get through this life. In a way I figured Bruce bleeding missing limbs, I'm going to cross my finish line.

And I deal with a lot of people that are so intent on retiring especially early, it's like I'm gonna retire early, I'm gonna retire at 40 years old. I was thinking that at one point I was on track in my 20s and 30s. I got in a motorcycle accident put me in a wheelchair, I had to learn how to walk again, all these things had to restart several times. I decided that point and when I realized that you can never guarantee anything in life, but you, you can guarantee your drive and your ability to move forward. But I'm no longer looking to retire. 

When I come to the grave. I'm coming in hot. I mean, like a meteor hit. I'm gonna dig my own damn hole with my carcass., you know, because I feel that there's more to be accomplished if I just keep moving. I'm not willing to just throw in the towel and quit no matter what I don't care how much money I have. It's not about the money. It's about me adding value to the rest of the world. if it's, you know, starting on my YouTube channel, if it's getting my books out, if it's doing loans, I don't care what it is add some value to somebody other than me because I'm me, I'm the most invaluable person in my life. 

Everybody else needs to be valuable. The goals that I accomplished sitting here today because of other people you know, I wrote it but they made it happen. So I have to just convey to everybody decide what you want. Get the right people around you go freaking get it. when things don't go right, don't flinch about them. Don't point the finger at them point the finger back that you could something you didn't do. I love

Taylor   37:36  

1. I love it. I think we should all try to have that mentality. I mean my great my grandfather passed away earlier this year and he was 92 and they had a wood stove heating their house in the middle of nowhere Pennsylvania living on the farm wood stove, heating the house until January and he was 92 he caught the wood now we can granny got help from some of my uncle's doing it but he would go cut the trees down, cut the wood make the fire every day and he was still working on the farm and he had a pacemaker and you know, all kinds of stuff. 

He had to set limits. He could only his doctor told him he could only work for five minutes and then he did the rest for 15. So I'll tell you what, man, he was working for five minutes and then as soon as that five minutes came he was staring at his watch till he was allowed to work. Yeah. Yeah.

Aaron Chapman  38:26  

Yeah, in his early 70s and he's doing the same thing he will not he is house with power. He will have a truckload of wood every single day during the cooler months. actually one of the four books the third book has a picture of him out there with the chainsaw that he used to use back in the 70s his old steel chainsaw that was that was built in the 1960s it's still originals never been rebuilt. It's still run Wow. He goes out there and he cuts his wood and he eats his house the same thing. 

These guys are going strong. This guy he's gonna you know sometimes I think he's gonna outlive me. I'm right behind me here is nobody though that seems underneath 18 years old that's going into place 100% done. So I do this interesting what you're saying here just ringing with me. You stay active you keep moving. You never stop and then when eventually it's time to stop you'll just stop but you'll have accomplished some things and you've had a pretty out

Taylor   39:17  

there but people will like people will remember you after your gun idea there's a picture somewhere I'm trying to find a copy of it. There's probably five years ago so my grandfather would have been in his late 80s of that was captured of him on a trail cam just a trail cam at one of my uncle's put out his you know spot deer and stuff walking through the woods with a chainsaw in his hand because he's going and cutting down the trees. that is I know, man I know I need to find it. I've asked around and nobody knows where it is. I'll keep up the pursuit but yes, that's the way to live your life no matter what I mean. I don't I don't particularly enjoy going cutting trees down but no matter what you're doing, need to keep

Aaron Chapman  40:01  

dude that's my dams and Dude, that dude sitting on a chainsaw. There was one time I got asked by this youth camp to come in and get web forum and I'm like cool you know how many of you got we got 500 people kids on this youth camp doing this big old big old hike and we want to get into this one campsite and have What did I took down so many trees and we had we had raisers run the trees I'm back injuries are like get them out there and they're chop it up. 

We end up having enough what I could have filled this cabin. I just thought I found a night dead Stan and I was going to work. I love that it's all getting I have a

Taylor   40:31  

blast. We're gonna take a quick break for our sponsor. Okay, Aaron, I have three questions. I asked every interviewee at the end of the show. Are you ready?

Aaron Chapman  40:43  

All right, or away?

Aaron Chapman  40:46  

I may give you the wrong answer.

Taylor   40:48  

There are no wrong answers. So that might be true. First one, what is the best investment you ever made?

Aaron Chapman  40:56  

really was the best investment was in myself sitting down and understand the concept of thinking about it and putting it down on paper and submitting it into the universe. That's the absolute best investment. I have some great investments monetarily that have paid out phenomenally. I had some that paid over 3,000% it was a great investment. But if I didn't have my head, right, and I wasn't in the right place, and I wasn't looking at things pop, I would never have noticed it. I would never bought into that. 

And I didn't have the guts to step into because it was unsure and unfamiliar territory and had the balls to step out there and actually jumped into it. it paid out. Awesome. You know? So that's that's where I think is the best investment for me personally, the second is in my kids. I have a whole ambitious for a whole other podcast. I've got my kids down.

Taylor   41:40  

Nice. Yeah, like you said, I'm sure that's a whole couple hours worth of discussion. On the other side of that, what is the worst investment you ever made?

Aaron Chapman  41:53  

myself

Aaron Chapman  41:55  

seriously, and that I can say all day long is because I chose certain things I thought okay, this is whatever Chapman wants, and I got really, really selfish and all about me. because of that the direction I was heading in life, that it was a it was literally a divine gift of accelerated education. 

I got my ass kicked by that motorcycle accident. I woke up in the hospital, my leg shattered and I learned about me and the direction I was going and that I was actually I was on a self destructive path. it woke me up. I got to see people that surrounded me that people that cared that before that day, I don't know that I cared about them as though the way that I should have and the way I care about them after the fact after I found myself completely relying on them for everything. Wow changed my angle. so I am both my worst and best

Taylor   42:43  

invest. So do you still ride a motorcycle?

Aaron Chapman  42:48  

Not if I want to come home to a wife kids and furniture. But one more time. You know, I went from the street bike that I jumped on you familiar with dirt bikes.

Aaron Chapman  42:59  

Have you ever been on a car?

Aaron Chapman  43:03  

So as a Honda 502 stroke, that thing is a monster. Yeah, well, I jumped on that one to prove I could still ride and I just rode the hell out of that damn thing to be sure. Because when you hit that power button and wants to flip over to lean across the handlebars, and I poured the coal to that thing, just to prove I could do that. wrote it back and give it back to my buddies like I'm done. I know I can do this. Eventually I'll pick up another one. We're in a rural community. But I'm an honor my wife's wishes on this day on cc two

Taylor   43:28  

stroke. Yeah, that does want to flip over when you when you hit the gas I I wrote one very briefly when I was a stupid college student with a couple of nickels to rub together that I shouldn't have spent on it. I wrote one for a month and then I almost got into an accident and I was like, never again, this isn't worth being dead or even injured. You know, I prefer not being not being injured. So yeah.

Aaron Chapman  43:55  

Dude, by the grace of God, am I walking again, I can do things again. I used to be a miracle foreigner and climber and all that kind of thing. I came back from that I went into the hospital hundred 90 pounds 7% body fat at six foot one I rolled out of there. 256 pounds. 

Wow, just a bone bag when I came out of there and having to heal again. by the grace of God, I got my legs back on with nice, I went back into the hills as a technical rescuer for the sheriff's office and getting people out of the worst day of their life. I just retired from that last year. But I wanted to give back with what I still had. But it's I'm in pain all the time. I still hurt all the time. 

And sitting here in pain, and you have to deal with it. You move on. I don't take any of the medication because I don't want my my guts tore up. so you just live you live through it. if I could look back on change, I wished I was not the man that I was at the time. I would have needed that lesson. I absolutely need that lesson. It changed my trajectory. But you know, haven't been the right person? I probably wouldn't have you

Taylor   44:56  

still with us, though. So

Aaron Chapman  44:59  

Oh, leaving it ain't leaving this earth early. You don't send a pickup truck trailer job.

Taylor   45:05  

I like that. So the last question, my favorite one, what is the most important lesson you've learned in investing.

Aaron Chapman  45:14  

Um, sometimes the best deal is not the deal you're looking at. Or another way putting in sometimes the best deal you do is a deal you don't do. So if you feel it all that it's not right, you walk away. But if you feel it's right, you go, you go all in, you jump in there, and you get it done. you are if you're going to run into struggle, you're going to run into problems, you don't

Taylor   45:37  

stop and as a comment on that something we didn't touch on. I'm sure you can talk for hours on this as well. based on the amount of time that you've been in the industry, you watch the experience the run up to the Great Recession, and then the big crash and all the way through. 

So I'm sure there are a lot of very important lessons in that from I don't know whether you are an investor yourself at that point. But you're working with investors and just retail homebuyers there are probably a lot of important things that you observed in there, and the rampant speculation and the enthusiasm and you know, needing to needing to get in.

Aaron Chapman  46:21  

It was absolute pure greed is what it was, you know, and the fact that people decided that they needed to have what they deserved. It was an entitlement, and greed and selfishness that got us where we were. Now when you tell everybody you all deserve this house, and everyone's agree I'm getting that house, you better give it to me. I remember people standing there that didn't qualify for anything that they demanded, you make it happen, because because the government says I deserve this. No, it was frustrating to watch all that go on. 

And now we're starting to see it again. It's not it did the veneer of just the veneer of science society as a whole was only about three days ago. We think, of course, when you started, I mean, you take a natural disaster and Hurricane Katrina, whatever you see people completely flip how they normally be in a short period of time. 

And it doesn't take long. What we're not that many years, you know, 10-11 years away from when the crash really hit for getting back into the same thing again, I cannot believe we're going right back into it. But you know, that's why I love working with real estate investors. They look at the nuts and bolts of this is their money going into this. There's not there's not somebody else's money paying for their house. 

We could talk about that for hours to where can people get in touch with you? Where can they find out about the books when they come out all that good stuff. 

So just go to AaronBChapman.com, you'll see me sitting in front of the cabin with that chair, the actual rocking chair right there where I'm sitting now. that's where it all that where that all starts, you can go to the media page, you'll this podcast will be on there. Eventually, you can go check out any of the books will pop out on there on the media side when they're ready. 

They're in with the publisher. Now I've got a couple of I just actually shot the third cover India the cabin the other day, which I hope it's not too controversial, but you know, it's we'll see how it goes. You got to punch people in the face and sometimes, right. I'm hoping they're gonna be out by the end of the year. if not, then I'll keep going. Yeah,

Taylor   48:25  

let's get them out when they get out and make it happen. Well, thank you for everything today. It's been a great discussion. appreciate your time here on passive wealth strategies. Thanks, everyone, everybody out there tuning in.

I hope you enjoyed the show today. If you are enjoying the show, please leave us a rating and review on iTunes would be a big help helps get the word out to others. If you know someone that could use a little bit more passive wealth in their life, please share the show with them and bring them into our tribe. 

I hope you enjoyed the show. Once again. I hope you have a great rest of your day a week and we will talk to you on the next one.

Transcribed by https://otter.ai

[/bg_collapse]