Today’s guest is Aaron Chapman, owner of a large mortgage brokerage based out of Phoenix, AZ. In today’s episode, Aaron and Brian are talking about inflation and the true value of the dollar. Aaron shares where the true value of real estate is, and how investors are benefiting from the pace of inflation compared to their spending on fixed loans.
[2:00] Today’s guest is the owner of a large mortgage brokerage in Phoenix, AZ. Aaron’s company does loans for several large turnkey companies and is the unconventional conventional mortgage guy.
[5:40] Aaron is getting ready to launch a YouTube show where the outdoor channel meets the business channel. He hopes to launch it in the next couple of months.
[8:20] The content will be the same type of content he’s giving his clients every day. Where is the property really valuable? It’s not all in the buy, the interest rate, or the cash flow — Aaron says that the real value is in the leverage. His show will allow him to distribute this information to a wider audience more efficiently.
[9:45] Right now Aaron is promoting his business, which is financing loans, houses, and investors. The nugget he wants people to walk away with is to take the time to really think through and understand what you’re getting into. Look into what the real value is, not just what you see in the media.
[10:55] When you step into the world of buying real estate, specifically as an investor, you’re the CEO of your business. If you’re not getting the outcome you want out of your business, you’re responsible. If you can take ownership, it’s amazing how things fall into place.
[14:45] Aaron is an unconventional conventional loan guy. He does conventional loans, but he tries to get his clients out of the box. Conventional loans typically come from someone’s investment capital, and banks take the money out and lend it to investors. The people who contribute their money get a portion of the interest charge as their return on investment. There are rules that govern these loans.
[17:10] Banks often put some of these rules in place to reduce their risk on the investment. What they don’t realize is that having the longest-term, fixed loan you can get has the greatest value of any deal. The investors pay their loans because it’s something other people are paying for.
[20:20] The people who were hit hardest by the market crash in 2008 were the people who were over-leveraging. As an example, Aaron talks about the movie The Big Short. In the movie, over-leveraging happened when people were using cash to pay on empty houses with money they pulled from other properties.
[23:50] These days, people are paying/charging significant rent for small spaces because there’s not enough housing. Building hasn’t expanded at the same rate as the population and the demand for housing is much higher than it was before the market crash.
[25:45] Inflation is one of the most important things to consider as a real estate investor. The core inflation rate is 2%, but this doesn’t consider energy costs, food costs, or taxes. When those things are added back in, the actual rate of inflation is about 5.5%. This benefits the real estate investor because they can raise the rates for rent.
[29:00] If the average rates for rent go up 3%, this will deliver a big increase in your cash flow, which will compound each year. While investors can raise rents to pace inflation, with a fixed loan, you’ll be paying the same dollar amount while you raise your income and keep the spread.
[32:35] Aaron shares some statistics about the value of the dollar today compared to the value of the dollar in 1932. Considering the pace of the dollar and increased income to a renter, it doesn’t necessarily make sense to accelerate your loan payments. It makes the most sense to put the least amount down you can and stretch it as far as you can.
[35:00] Many people are predicting that we are at the height of the market right now. Many real estate investors are making smarter investments now than they were pre-2008; if you have assets that will reasonably remain rented, you will likely be able to adapt during the next market shift.
[37:00] Another way to be prepared for when and if the market crashes is to put the money you don’t need into a reserve each month. If you don’t need it, don’t use it.
[38:45] Many investors get into real estate for retirement, but Aaron is using his real estate career to fuel his life day-to-day. He enjoys sharing his content and knowledge with others; he speaks on podcasts and has started writing books.
[45:45] Aaron knew he was the unconventional loan guy back in 2014. Once his friends offered to help him boost his business, but he would’ve had to conform to their standards. Aaron realized that he was unwilling to compromise himself, and as he went through he was able to discover how he wanted to do things.
[49:10] Authenticity works both ways. We have to be authentic in our business with our clients, but we also have to be authentic to ourselves. When Aaron decided to be authentic to himself, that’s when he noticed his business really started thriving.
[52:15] To reach Aaron, visit the website linked below. If you’re interested in doing business, you can do it all through the website.