So a lot of us have heard about buy, fix, and sell.So flipping houses, and that's what's shown a lot on HGTV programs.That's sexy, it's exciting, it's all that kind of good stuff.
However, sometimes it makes sense to flip the house back to yourself and do what's called a burr. And today's special guest, Aaron Taylor, is doing exactly that.He is an experienced real estate investor with a number of flips under his belt.
And now he is transitioning into doing the BRRRR strategy.He's based in a couple of places, Florida and St.Louis, if I'm not mistaken, is that correct?So near Cocoa Beach, Florida, which I'm familiar with, and St.Louis.
And he does deals in both those areas.So Aaron, good to have you on the show.Welcome. Thanks.Thanks for having me.Appreciate it.Yeah.My pleasure.All right.
So first things first, what got you interested in flipping and real estate in general in the first place?
Um, I guess real estate got me, I got interested in real estate back.Uh, like when I got out of college, I worked for architecture firm for about 11 years.
Um, and the, one of the girls that I gave as architect there and she got into flipping and kind of got me into it and started kind of started out from there.So, um,
I've always had an interest in property and I get a real enjoyment out of flipping houses and letting somebody else live in them.I get a lot of gratitude from that.I really enjoy it.
I would imagine.All right.So now you're kind of transitioning from flipping the houses to fixing them up and refinancing them and holding them.So tell me why you've decided to go down that path.
But first of all, maybe define what a BRRRR is for folks that aren't familiar.Most people know what a flip is, but not everybody knows what BRRRR means.
Yeah.So BRRRR is after you get done flipping it, you end up keeping the property.You take out up to 70, 75%. of that back out to yourself, and then you rent the house back out to somebody else.All right.
So yeah, the BRRRR stands for you buy it, then you renovate it, and then you rent it out, and then you refinance it.If you want to throw more R in there, then you repeat the whole process, right?So that's what a BRRRR means.Okay.
Now, why have you decided instead of flipping houses, you want to do this BRRRR strategy with them?
So the BRRRR strategy flips great for cash and money up front.The BRRRR is for your appreciation of the property going forward.And then you can take that money back out of that property at a later date and time for you to use however you see fit.
So I'm doing the BRRRR method more for retirement and doing it that way for capital instead of for capital for projects.
Yeah.So I've never been a flipper per se, Aaron, but I did do creative in and out fast type deals a lot back in the day when I first got into real estate investing, which is similar idea.
You make a nice little pop of cash, you put some effort into a deal, you make some money on that deal, and then off you go to the next deal.And you can make a significant amount with a flip.The challenge is
Once that deal's done, once that money's in your hand, once you've spent it, it's gone.There's no... cash flow, there's none of the other seven profit centers in a real estate deal.You're just got that quick pop of cash.
So now you're starting to think ahead.You're starting to think about that generating passive income, or at least generating cashflow moving ahead, plus all the other mortgage pay down, appreciation, depreciation, all that good stuff.
And the biggest thing for doing, besides the cashflow part, because the cashflow part, it's not really that much.People think Oh, I get a lot of cashflow from your properties.Like you may cashflow three, $400, like for your property, you know?
But if you have 10 or 12 of them, that's a different story, right?But where you make a lot of your money and where you really get the benefit is the accelerated depreciation value that you're allowed to take off your taxes and write off every year.
So that's- Okay, so for folks that aren't familiar with accelerated depreciation, in layman's terms for non-real estate people, what does that mean?
So the depreciation for the house, once you get done flipping it, that you can take off in the first year.So within, when you're flipping your houses, you have depreciation values.You can take off first year, fifth year, seventh year, 25th year.
So you're doing your accelerated appreciation.Anything that's under a certain amount can be pushed towards the front and taken the first year.
So bottom line, that means you can get a big tax discount off your tax bill by doing this properly in your first year.So it's not just direct making money from the cash flow, which as you mentioned, quite often isn't huge.
It adds up over time, but the real bang for the buck short term is lowering your taxes in that first year when you've done a BRRRR.Am I understanding that correctly?
Okay, great.Now, what else do you like about the whole BRRRR strategy compared to just regular flips?
I think it's a good strategy.It's good to have assets, right?Everything that all the money you can take out from your BRRRR is untaxable too, because it's debt. So that's a huge win.So a lot of people realize that.
So for you and for your investor partners, when you refinance that property, so let's just use some basic numbers here.Sure.What price point of properties are you typically getting into?Like how much does a house typically cost?
Maybe let's look in St.Louis, if you're doing these in St.Louis.
Yeah.So it depends.St.Louis is a really different market than Florida.Yeah. Anywhere, like you can pick up a duplex in St.Louis for 80 to 100 grand maybe, depending on where you're buying and everything else like that.
So here we can use, I have a property up there I'm getting ready to, well, renovate later this year.It's a duplex.I paid 35,000 for it, but I bought it at the tax auction, right?So I got a great deal on it. It'll cost $100,000 to renew it.
And then we'll be, the ARV on it is 275 when we're done.
Okay, so for folks that aren't familiar with ARV, that means after repaired value.So you bought it for 35, you're gonna put 100 grand to renovate the property.So now you're into it for 135 total.
And then after it's renovated, when you get the appraiser to come in and say, hey, how much is this thing worth? the after-repaired value, the after-renovated value, you anticipate to be how much?$200,000 and what?$275,000.So you're going to do it for $135,000.
It's going to be worth $275,000.It's worth twice as much as what you will have paid for it all in.
But then you can go to the bank and say, hey, Mr. Bank, I'd like to get a mortgage on this house and they will give you a mortgage up to 75% of that $275,000, which I don't know what that is off the top of my head. 220.
Well, geez, you're good with the math off the top of your head.Okay, so you enter for 135.You get it refinanced for 220.220 minus the 135 is whatever, 85 grand, give or take.Yeah, pretty much.So now you've got 85 grand quote-unquote profit.
Now, typically, if you were just selling that property, you would have what's called capital gains that you'd have to pay taxes on that.
But because you hold onto it, you get to, you're basically kind of borrowing that money from the property so you don't have to pay any taxes on that.Am I understanding that correctly?
Yeah.Yeah.So that's a great way to, you've made money and you don't have to pay the tax on it.
Nice.Nice, nice.I can see why this is starting to sound more appealing for you.
Yeah, right.Yeah, because the other property that I'm working on in Bradenton right now, it was a 3-1.I purchased it for 285.
Sorry, where's Bradenton?
Bradenton, Florida.So that's 45 minutes south of Tampa.So about 15 minutes from St.Pete, pretty much.So we purchased that house for 285. we will put probably about 80 grand into it.
And we'll flip this one, we'll put it on the market for about 475, 485.Nice, yeah.
And why wouldn't you wanna hold on to that one?
I would really love to, and we're gonna kinda explore it at the end once we get done.And maybe making a short-term rental and going that route with it instead of making it a long-term rental because that area is very,
desirable for people coming down from the north, from New York and everywhere else.
And then as a short-term rental, you can charge way more because you're renting it furnished by the night kind of thing, hotel style.So you can charge way more than you'd be able to get for it as a normal long-term rental, right?
Yeah, me and my partners will talk about that and see if they're on board with rolling the dice with it.But I think they should be though, because they'll get a good depreciation off their taxes when we split it.
Yeah, exactly.So it's just a matter of educating them about the big benefits of the BRRRR versus... So it sounds like you're the active partner on that deal.Is that correct?
Yeah, I pretty much do all my own thing with it.I pretty much do all my drawings, all my permitting.I run all my job sites.
That's a big advantage of working all those years with that architecture firm.They got paid to learn there on the job.Smart, smart, smart.
Now, when I was looking over the information you sent ahead of the call, one of the things you said that you do is for lead generation when it comes to deals is driving for dollars.So I just wanted to kind of talk with you a little bit about that.
Maybe explain to us what does driving for dollars mean?
So Giant for Dollars is going around in neighborhoods that you want to invest in after you've done your research and the zip codes you want to invest in.And just driving around and looking for houses that are dilapidated.
run down, like have overgrown grass, things like that.And then you either leave that person a postcard or your business card and try and get their information.So we use a skip tracing software I do called Deal Machine that I use.
And so we skip trace the properties through that and try and contact the owners that way.
Okay, so for folks that aren't familiar with what skip tracing means, what does that mean exactly?So you find an old dumpy house that's looking dilapidated.You can either leave a business card, you can send a postcard, you can knock on the door.
If they're not home, then you want to try and figure out who owns the house.You do this thing called skip tracing.What does that mean exactly?
So yeah, in the program, you can put in the address for the house and you could do a skip trace.
It pulls all the public information for anybody that's owned the property currently and past and provides you addresses, email accounts, and phone numbers.
Nice.I'm up here in Canada.There's so many fricking privacy laws.It's very, very difficult to get that kind of information.So I'm always envious of the Americans that you got so much of that at your fingertips. Yeah, no, that's cool.
Now, how has that worked out for you?Have you found some deals doing the driving for dollars?
I haven't got a deal off of it yet.I talked to a bunch of people and pushed two deals to a couple of other people that I not invest with, but are investors as well.And they bought a couple houses that way.
Very cool.So what do you find most effective for you these days for finding deals?What sounds like you do a variety of different things.
I do.And so I kind of do a lot like I do that.And then I also deal with real estate agents and any of that.
I have a bunch of agents that I talk with, probably probably six different agents that I get information from off deals that they that they know.And then also I work with a broker and anything that she knows she may know for off market deals as well.
So you get the inside scoop on these before they hit the MLS.
Good idea.Good thinking.Now, I understand that you're working with some private money lenders as partners on a couple of different deals.Yeah.Let's kind of take a look at that.
What do the private money lenders, the people that are kind of your money partners, what do they enjoy about investing passively with you?
Why do they like to do that versus leaving their money in the bank or in the stock market or mutual funds or what have you?
Yeah, I get a lot better return than anybody else.I mean, they don't have to do anything either, you know.They're close, they're close, really close friends and I know they invest. and I give them 12% on their private money that they lend me.
So it's better for me to give a bigger chunk of it away, I don't mind, because I'd rather do it that way than have to go through a hard money lender and deal with all of that.
Paying points and all that kind of stuff.
Yeah, it's a lot of paperwork and it's a lot more than... I did this property with a hard money lender and it's a lot more than I anticipated becoming.
with paperwork and fees and upcharges and everything else, I could give away 20% and I could probably still be fine.
Don't tell your private lenders that.
They'll be looking for a raise quickly.Exactly.
So yeah, well, it just goes to show you that hard money, what's called hard money, which in real estate is really where you're going to, you're not going to a bank per se, you're going to a money lender.
In New York, I think they call it a loan shark, but we won't go there, but it's that idea, right?And they charge much higher than bank rates for their money.And it sounds like they also have little sneaky up charges and things like that.
Plus they charge you points upfront, high interest, different fees and whatnot.So like you say, it could really add up very, very quickly to get where you're paying over 20% to borrow money from these guys.
But when you work with private individuals, you can be very generous with them and it still makes a lot more sense for you and allows you to actually make a profit, a better profit on these deals by working with private lenders.
Yeah, definitely work with private money lenders is what I prefer.I'd rather give it to somebody I know and somebody that's willing to invest in me that way.
And most private lenders, that's not their main business.They're working or they're using their retirement funds or whatever it is.And it's not their full-time gig like it is with a hard money lender.
Yeah.Well, Aaron, it sounds like you're up to some really interesting things and congratulations on making that pivot from just doing flips to now that you're looking at
holding onto these properties long-term and helping you and your investor partners get all of the different profit centers from a real estate deal instead of just the, what's called the forced appreciation.It makes a lot of sense to me.
So if people are watching this or listening to this and they want to reach out to you, Aaron, and connect, what's the best way they can do that?
So you can reach me by email.So it's my first and last name.So it's Aaron.Taylor13 at gmail.com. or you can reach out to me on my phone, 321-313-4196.There you go.
Thanks for being on the show, my friend, and sharing your experience.Thank you, sir.I appreciate your time today.I enjoyed being here.All right, everybody, take care, and we'll see you on the next episode.Thank you.
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