My guest today is LEGENDARY. He is crushing it right now in the mortgage industry. He closed over 700 deals last year! Aaron Chapman is one of the best mortgage loan officers, but don’t expect today’s podcast to be a stuffy banking episode. Aaron isn’t your ordinary mortgage broker – his beard is almost two feet long! But it’s not just his appearance that’s different, it’s his whole approach to real estate investing.
Aaron’s created a niche for himself that really sets him above the rest of the mortgage industry. From a real estate investing standpoint it’s really refreshing to see a mortgage broker who really understands us. He understands the mindset of a real estate investor and communicates this understanding to universities, banking firms, even his own clients. He’s creating a whole new community of understanding that’s bound to change the real estate landscape for years to come, and he’s sharing a bit of that experience with us today.
Aaron is working with investors looking to build their own real estate investment firms. He’s serious about his business and willing and able to work with investors who are just as serious about theirs. Tune in now and see why you should be working with Aaron ASAP!
3:10 – Meet the legend: Aaron Chapman
4:45 – Aaron likes to keep our expectations low
6:12 – Aaron got his start as a telemarketer in 1999
8:50 – The aught real estate crash actually inspired Aaron
10:15 – What’s Aaron’s focus in real estate?
12:40 – Aaron starts breaking it down for real estate investors
13:16 – This break down includes a little simple math
16:43 – How can real estate investors pace inflation?
18:15 – Aaron’s got a new definition for Pro Forma
21:00 – The big opportunities that can come with a fixed-rate loan
22:34 – Aaron wants you to think about taxes for a minute
25:50 – Aaron uses his experience to help real estate investors avoid failure
27:30 – What makes Aaron so different from the other guys in suits?
28:51 – What’s the biggest challenge Aaron faced in real estate?
32:15 – Stop talking yourself out of a good idea
33:32 – The biggest lesson Aaron learned
35:35 – Aaron’s favorite motivational quote
36:53 – Aaron recommends his favorite books
38:24 – How is Aaron using mobile apps?
39:37 – Aaron actually gets 8 hours of sleep at night
40:00 – Aaron’s morning routine starts with prayer
46:04 – What is Aaron most grateful for?
46:34 – What gets Aaron out of bed every morning?
49:25 – Get in touch with Aaron at www.aaronbchapman.com
Links and Resources
The Master Key System by Charles Haanel
Outwitting the Devil by Napoleon Hill
Wisdom of Success by Napoleon Hill
Breaking the Habit of Being Yourself by Joe Dispenza
Cory: What’s up my party people? This is Cory Boatright. I am your host and founder of Real Estate Investing Profit Masters. I hope you are having a fantastic, phenomenal, incredible, blessed, grateful day. I am excited. I always am talking to incredible guests and I am not going to disappoint you today. This guy is such a cool dude. He is so successful and such a driver. I have much respect for him in many different ways. I’m talking about none other, the man, the myth, the legend, Aaron Chapman.
He is not your ordinary loan officer although he does loans in Alabama, in Arizona, in California, Louisiana, Iowa, Illinois, Indiana, Michigan, Missouri, Nevada, Tennessee. The list goes on and on and on. He is with SecurityNational Mortgage Company and they are absolutely just crushing it now. The amount of testimonials just on their snmc.com page is just really staggering and rightfully so.
Aaron has come from some really interesting roots. He is going to share some things today that you’re going to really love and the guy has just got a big heart. He’s got just an amazing family. His wife has been with him for 22 years, 4 kids, teaches them about financial education and really does some cool things in their lives, to teach them to be a good steward of what they have. You’re going to love the story today. You’re also going to want to work with Aaron if you have fix and flips, if you have deals you’re working on; he is the man. Make sure that you check out this interview and take some great notes. I think you’re going to absolutely love it.
Also, if you have it, text the word PROFIT to 38470 to download your Ultimate Real Estate Investing Quickstart Guide. That is 38470. Text that right now the word PROFIT to 38470. It will be automagically downloaded to your phone or wherever you’re putting that.
All right. So, without any further ado, Mr. Aaron Chapman.
Aaron, what’s going on, my man?
Aaron: What’s up, Cory? Good to see you, brother.
Cory: Hey, you too, man. Looking good, looking original as always, man. I’m always pumped to talk with you because the things that you’re doing is pretty incredible and I want to go through that right now, but I think that those that cannot see you right now, they may be in a little bit of a shock because you’re not the normal business guy, broker, and not the typical kind of person that people would think like, “Oh, wow, that guy does that much business? He’s that successful?” and I love that about you because you’re so unassuming but yet, all you care about are just results for your customers.
I want to start out by thanking you for being on and taking the time to be on here because I know that you are constantly working to get results for your clients. I’m going to give you a platform to talk about that. I know there’s people listening that definitely, definitely need your service. Why don’t we start out here, Aaron? What is it right now that you’re focusing on in real estate investing, specifically working with real estate investors?
Aaron: Thank you for the introduction. As you said, people will be able to see me, at least a lot of them will be able to see me on this. I come in from an angle that I don’t want people to be ready for what they’re going to see if they’ve never seen me face-to-face when I come to event and speak. When they hear a real estate investment banker is going to show up, they’re thinking the suit, the short hair, they have a certain picture in mind. Then, this guy walks on stage with a braided beard that’s pushing 24 inches long now, black Dickies shirt, jeans, boots, and a camo hat, that’s not what they expect.
My method there is really to bring the expectations very, very low. When people say, “Chapman, you’re the best,” I’m like, “No, no, no. You only tell people I’m mildly entertaining or mildly tolerable. I can live up to that every single time and that way, I can hopefully become the best when you have that low expectation.”
We’ve all seen an awesome movie trailer, right?
Aaron: Then you go to the movie, you pay them, I don’t know, it’s like $10 a ticket now or $15 a ticket, you sit down, you pay for the overpriced popcorn and the drink, and you finally get to the movies, it’s like, “That sucked.” Your expectations were wrong.
I always go into every movie thinking it’s just going to suck and I’m actually pleasantly surprised. When you talk to me, just think I suck beforehand. As long as we’re all agreeing to that, it works out.
Cory: I think the self-deprecation is something that you do as you’re being humble, but I do want to talk about what’s going on in your business right now. What made you want to be involved with real estate investing and in this business right now of what you’re doing? Why don’t you tell everybody what you’re doing right now and how you’re helping investors?
Aaron: What made me want to get into real estate investing is when I got in the industry, I came from the mines in New Mexico in 1997. I’ve heard somebody say, “We’re actually at the CG event together last December,” where the keynote speaker said, “When you get in the mortgage industry, it’s because you can’t get a job anywhere else,” and it was true, I could not find a job, I was laid off in the mines in Northern New Mexico, my wife and son were here in Arizona, and I was looking for jobs and I kept getting denied for being overqualified.
I went to apply for a job as a truck driver at a landscape materials company for $10 an hour and they turned me down. I sat in a parking lot in my pickup, I had a little Isuzu pickup and I was crying in the pickup. I leave to drive home and I had a coupon for diapers with me because we couldn’t afford them and I’d to get diapers for my infant son.
As I’m driving down the road, the light comes on warning me that the gas was low on my truck. I found a grocery store that had a gas station up front, pulled up, slid my debit card—I didn’t have a credit card at the time—and I got a decline. I had no cash.
I started walking in the parking lot. At that time, gas was 80 some cents a gallon if I remember correctly. I walked for a couple hours, found enough change to get a couple of gallons of gas to get home, went inside the grocery store, found the diapers corresponding to the coupon, got my diapers.
As I’m exiting, I come face-to-face with the guy who used to do all the dispatch work and the scheduling at a company I ran heavy equipment for. He asked me how things were and I went ahead and explained it. I was down, I was in bad shape. He said that he was in this thing called the mortgage industry because he had left the whole equipment company thing.
He said he had a gift certificate—it was before gift cards—to Red Lobster and he was going to take me and my wife to dinner the next night. We went to dinner, he explained the industry as best he could because all I understood about mortgage was somebody, an old man, an old lady on the TV show losing the farm, the best thing they […], call the mortgage. That’s all I knew. It was a very, very derogatory word.
He introduced me to some folks, I cut a foot off from my hair, I got some clean clothes, and I started as a telemarketer in 1997. Since then, working in this world, you work with first-time homebuyers and you go into the late 90s, early 2000s where if you want a home bad enough, all you had to do is bitch long enough and you got it for free and you didn’t have to qualify.
I started to understand the real estate investor coming into the market before it basically crashed. It was a whole different conversation. It was no longer emotional. It was very nuts and bolts. Then, the real estate investor coming in after the crash, being able to come in and really clean up a lot of the mess, take advantage of the lower prices, but make housing not completely vaporized. That got me very interested in real estate investment at that point.
I went from there to understanding everything I could about the real estate investor. From 2009 after the crash coming back into this world, just focusing solely on those who are underserved by the banks, the banks being like the Fannie and Freddie, the big banks, Wells, Chase, Bank of America, all those guys, they have proven that you can take a monkey out of a cage, give it a phone in training, it’ll close loans. But, they do not understand the real estate investor.
That’s where I target it because that’s the hardest type of loan to do. Period. Once I understood that, I started really focusing on it. I went from struggling to close 100 transactions a year. Ten loans a month is a big deal in our industry. The average person closes 2½ transactions per month and that’s industry wide. There’s 300,000 of me out there, licensed loan originators.
Last year I closed 707 because I focused. I’ve got a team of 15 and our focus went from, “Hey, I need to do a loan,” to, “We’re talking about a person looking to build a real estate investment firm.” They’re no longer a consumer. Your real estate investor is not a consumer. Consumers’ thinking, “Oh, I’m going to start spending money and going into debt here for this real estate.” A business owner is saying, “I’m going to pay to make a minimal capital investment in my business. I’m going to take on a partner in the form of a loan. That loan is going to provide 80%,” sometimes 85%, 75%, somewhere in there, “the bulk of the capital necessary for starting my business.” What’s interesting is that most partnerships require a percentage of ownership in the business based upon the percentage of capital you injected, correct?
Aaron: If you and I started a business together, let’s just say I made you some homemade pizza like, “Aaron, you got the best pizza I’ve ever had. Start a business, I’ll put up 50% of the capital.” Let’s just say we decide it’s $40,000 to get it going. You put in $20,000, I put in $20,000. How much ownership in the business do you have at that point?
Aaron: 50%. How much do I have?
Aaron: 50%. How much of the voting rights do you have?
Aaron: And I have 50%. How much of the profit do you get?
Aaron: 50%. If it doesn’t go right, though, you get to do 100% of bitching, correct?
Aaron: I’m going to conquer the 100% with excuses. When you put money into a business like that, where is your money at? Where’s your $20,000 the second you put it in there?
Cory: Essentially, it’s at risk.
Aaron: It’s vaporized, it’s spent. We bought sauce, we bought dough making materials, we put a deposit down on a space, all that in that $40,000 is gone. We talked about a cash-on-cash return model a lot in the real estate investment world. That’s a true cash-on-cash return while you put the cash in and I have to sell pizzas to get cash back. If I don’t sell pizzas, all you’re going to get is possibly, you’re going to get a freezer full of dough, full of sauce, and some pepperoni, you’re going to be eating pizza for the rest of your life. But if it works, you start getting some cash until eventually you give you $20,000 back. Now at that point, now you have 50% of a successful business that’s going to continue to pay those dividends, but if it vaporizes and fails, it’s gone.
Now in the real estate investment world, I help real estate investors wrap their head around the fact that you didn’t spend money, you didn’t go into debt, you took on a partner who’s willing to put up the majority of the capital that got zero ownership, they got absolutely none of the profits, they got an agreed-upon amount for 30 years.
Cory: Right, 30 years fixed.
Aaron: You put up 20% of the capital, you take on this partner. Now, you have this asset and you literally take on somebody’s going to pay back your partner for you. Then, they’re going to pay you most of the time of cash flow on top of it. Can we do a quick little bit of math? It’s going to be simple math, it’s math that even I can do.
I had one client one time, I started asking these questions, he’s like, “Whoa, whoa, I’ve got a doctor in mathematics from Dartmouth.” I’m like, “I’m not trying to test you here, dude. This is me meeting you on the same page.” I’ll try and make it simple because I can’t always have a Dartmouth guy on the phone. I have to have people like me on there, too.
So, if you’re buying $100,000 property and putting 20% down, what is the dollar amount of that down payment?
Aaron: $20,000. That means you’re going to be financing 80%, correct?
Aaron: What is 80% of $100,000?
Cory: 80% of $100,000 is $20,000. 80% of $100,000 is $80,000.
Aaron: See? Even a simple math gets tough, right? Because I’m talking to Cory freaking Boatright here. You’re thinking millions all the time. I’m bringing this down four decimal points off of your bank account, I get it.
Cory: 80% of $100,000 is $80,000.
Aaron: Exactly, $80,000. Let’s say you’re going to have a tenant in there paying off your $80,000 because they’re paying the rent. They’re going to pay it off for over 30 years for you, correct?
Aaron: What is $80,000 over 30 years? How much per year?
Cory: If you look without having compound interest and everything else involved…
Aaron: Just the simple $80,000 being paid off over 30 years, how much per year is that equal to? I got the number in my head if you want me to pitch it out there.
Cory: Yeah, go ahead.
Aaron: It’s $2,666.66 per year.
Aaron: You divide that into the 20% you put down, that means somebody’s paying it down by that over the average of 30 years. That means every year, your $20,000 is increasing by 13.33% regardless of cash flow. That’s just from the amortizing the loan for you. Literally, your $20,000 over 30 years becomes $100,000. How many stock accounts are doing that 13.33% of the original amount every year?
Cory: Not very many, man.
Aaron: Not very many. Now, what is happening to the dollar’s value with inflation today?
Cory: Going down.
Aaron: How much?
Cory: That’s a good question.
Aaron: I know I’m hitting you from the side here.
Cory: Dollars, what’s it worth now? Maybe 80 cents, 70 cents?
Aaron: Oh, heck. Less than that. We’re going to go backwards far enough. The government has been saying since the 80s that they’ve kept inflation within a 2% range, the CPI. But if you get into something, look up shadowstats.com as in Shadow Statistics. shadowstats.com will add back in the things that they took out. They put this out at 5%–7% at any given time is where our inflation is at, meaning our dollar is losing on average five cents in value every year.
Cory: Five cents a year. What’s it worth now? What’s one dollar worth now?
Aaron: That’s a question I’m not sure. It’s probably 30 some cents. It has declined so significantly from when they start tracking that.
Cory: Yeah, that’s low.
Aaron: Think about it. It’s a compound effect of 5% since the 80s and it’s probably even further back than that, but that’s just going off since they changed how they’ve come up with the CPI numbers. If we’re losing 5% per year in actual dollar value. Where that is a big deal to us as investors is we can raise rents to pace inflation. The average right now is about 3.6% when you’re considering apartments, single families, and multi-units out there. They’re raising rents on the average across the country about 3.6%.
Let’s just say our investors, yours and mine that we work with, will raise it at 3%. That means it’s a 3% compound growth on the rent amount. It is $1,000 a month. They raise it by 3% per year every year, you’re seeing a compound, but a 30-year fixed note, do they get to raise the payment on you to pace inflation? No, it’s fixed. They agreed to that for 30 years, that means you’re paying them back with the dollar that’s losing 5 cents in value every year at a compound rate.
As you’re paying it back with less and less and less but you’re charging more and more and more for the rent, you, as the investor, keep the spread. Not only are you’re getting 13.33% on the amortization of the note, but then you get the spread on inflation and paying them back literally with nothing by about year 14. That’s before we go into cash flow. You had in cash flow. That’s the cherry on top of the sundae.
Then, we can get into appreciation. We get into massive tax benefits as a real estate investor. It’s no longer a cash-on-cash return that you’re seeking of say 10%–12%. This is hundreds of percent return on your initial investment. You got to look at the way. Too often, many of the investors get sucked into the pro forma analysis. How many times have you had people come to you and say, “I’m looking at this pro forma and it doesn’t look like anything like what I got from the lender”?
Cory: Blue sky. Pro forma is trying to put your best foot forward, but nothing weren’t near the actuals.
Aaron: That’s 100% true in many ways. I’ve got a client who is a professor of accounting at Kennesaw State University. He connected with me because he heard about podcasts that I was on. He’s like, “I need you to come on and talk to my students.” He said that he tells his students that proforma is Greek for made up because that’s what it is. What I tell a lot of my clients, “When you’re looking at a pro forma, you don’t use those to analyze different houses between different sellers. What you do is you figure out as the CEO of your business, who do you want to run your business as the boots on the ground in an area?
Once you determine who you trust, you get all the pro formas from them and use that to analyze which property you would accept from them knowing that their math is all the same for all the houses, it’s just going to help you decide which house. Then, once you’re done picking that house, you take that pro forma and burn it because it’s nowhere applicable anymore because the numbers on there, they are actually extremely low.
They will say that you can expect this cash flow that’s typically high, that part’s high. They’re going to say, “This is what your interest rate is going to be.” That way’s low because they’re always going to show you the best rates never happened the last 10 months. What it really does is it tells you a cash-on-cash return and the cash-on-cash return model that we’ve proven is really erroneous in this world because you didn’t risk the $20,000. You just moved it from a liquid account to a non-liquid asset.
Then will you understand all the other factors that play with real estate investing, the amortization of the loan, how inflation is eliminating the debt for you, the fact that you get to get cash flow on top of all that and then you have to get the tax benefits, and then you get a potential appreciation. It’s hundreds of percent return. The performance completely useless. It is a selection tool only. Once a person wrap their head around that, it changes the dynamics of how they go about investing.
Cory: You got me curious now on the inflation and the first time, it’s 1913 where $100 was the first inflation measurement started. Then, fast forward up till 2019, $100 today is worth $2529.
Aaron: Okay, when you start considering the cost of living, though.
Cory: Cost a living, world inflation that they had. They had a lot of different things, but to your point as well that the feds target at 2% core inflation rate and basically what will happen is that as long as the prices basically increase and rise 2% a year, the economy grows at that rate. Whenever you’re getting a fixed rate, you’re talking about some big opportunities for you as the investor to capitalize on these deals because, (1) you’re having your tenant obviously to make this payment, (2) you’re going to be raising the price every year most likely for the cost of your rents. You get some big upside when you’re working these deals.
Aaron: Exactly, and as you just pointed out, if we go all the way back when they start tracking it, they take how many thousands of dollars? $2200?
Aaron: $2500 the equal 100.
Cory: In 1913. Yes, that’s right.
Aaron: Yeah, it’s basically $25 per year, it would take $25 to equal a dollar back then.
Cory: Yes 25X, crazy.
Aaron: Yeah, that’s very, very interesting. It’s interesting to see that particular thing. Then you go add in taxes. That’s the other thing, guys. Think about the tax implications here. I would love to see the statistics on this, but I’m guessing if a person is active with their capital, it just has to change hands four or five times and taxes evaporate that dollar. It’s no longer in existence after you’ve exchanged hands four or five times, depending on what for. You got payroll taxes, you got income tax, you got sales tax, you got property tax, by the time that it changes hands, not very many times, it’s gone, it went into the system and it has to work its way back out through a government channel.
The other thing you consider when it comes to taxes is a real estate investor, I’ve noticed because of depreciation capability and be able to write off interest, that the more you have in the real estate investment world—you’re creating jobs, you’re creating housing—the less you have to pay in taxes. The uneducated will say, “You guys are evading taxes, you’re not paying your share.” No, it’s actually wrong.
That real estate investor has taken upon themselves to create housing and create jobs, therefore they don’t have to put their money into the tax system because they’re already creating what needs to be created. They have been given the freedom to choose where to put their money instead of those who choose to sit at home, watch TV, and spend it on personal crap, who end up having to pay taxes so they can maintain the infrastructure in the US because they’re not doing what the real estate investor is doing.
They’re not providing jobs and housing. They’re providing for themselves and their own selfish wants. Real estate investors have now created freedom for themselves to decide where their tax dollar goes. That’s a big damn deal to really wrap your head around. You become a real estate investor and then keep that tax dollars, that means you’re trusted to deploy those same funds where it benefits the whole, not just your own selfish self.
Cory: It’s interesting that essentially, what you’re doing is you have created a niche, Aaron, working with real estate investors in the mortgage industry. Most mortgage brokers don’t understand working with real estate investors the way that you do. Not only that. There are people listening now that find they have deals and they need to sell those deals, or they need to buy more properties, or looking to buy more properties, and they have roadblocks that they’re hitting. They have DTI roadblocks, they have how many loans that you can have for certain places that you’re looking at, they look at your credit, and all these other things.
What you’ve been able to do is create a niche where you understand the mindset of a real estate investor, what they go through, what they’re considering. Now, you’ve been able to communicate that with groups of banks that you’ve worked with and groups of people that you work with on these mortgages, that they now also will work with you because you have such a success track record bringing them more and more deals. My guess is you’re doing a lot of deals with some of the same people because you’re building those relationships with them.
Aaron: It’s all about the relationship. How I look at that is if I’ve got a person who’s become the CEO of their real estate investment firm, that first phone call, I’m trying to be the CFO. What I mean by CFO is not so much a guy who’s doing the paperwork. It’s the guy who’s sitting at the board table and having a very solid discussion about what you can do with your finances to be able to acquire that financing and really capitalize on things. It’s an advisor position. Have you heard the term “Good judgment comes from experience and experience comes from bad judgment?”
Aaron: The experience is to me the most thorough instructor but the most expensive and the highest risk. The problem with a person, a real estate investor trying to get all the experience they need to be a good investor is that failure has to happen. I don’t want that. What I can do as I say, “I’ve done thousands of deals for real estate investors, I know where they’ve failed, I know where they’ve succeeded. When you come to me, you call a board meeting, let’s talk about your next idea, and I will tell you who screwed that up and what not to do, but it’s up to you to execute it. You’re the CEO, you make the decision. I can only give you practical data. I will never theorize, I’ll never speculate. If I am theorizing and speculating, I’ll tell you.” There’s pure theory because theory is unproven.
I walked through a meeting one time, there’s three guys sitting at a table talking about time travel. Somebody mentioned, “Well, Einstein proved out with his theory of such-and-such.” I’m like, “He proved what?” He goes, “The time travel.” I’m like, “No, he didn’t.” He goes, “What do you mean? This is Einstein.” I was like, “If he proved it, he must be standing right here telling us he proved it. He didn’t prove it. It was a theory.” Albeit a beautiful theory—everybody’s going to hold Einstein in high regard—it was a theory because it hasn’t proven yet. I will not do that. I will give you actual practical data I’ve seen where that success is. That’s what makes me different in the rest of the world. I am damn interested in the success of my investor partner because it affects us as well.
I was just on the phone with the head of my servicing department. He says, “Of all the loans I’ve done here, there’s only one that has the delinquency on it. It wasn’t even my loan. There’s another guy who left, I just took it over because I was licensed in the state.” Every single one of my investors is paying their bills because they don’t want to lose out on a great opportunity. Once they understand this is a great opportunity, they pay the bill. Like you said, we have a proven track record, it’s always proven because I don’t let people get into stuff that’s going to screw them over because it eventually screws me.
Cory: The relationship is such a core component of this and that’s why you’re able to do 700 deals and the average mortgage broker is able to do 20 deals a year, maybe. Literally, you’re crushing everybody else, you’re doing 30–40 times the average person and that comes from you understanding the mindset and the game of working with real estate investors.
What is it that you’ve dealt with that’s a bit of a challenge? I think people will want to hear that. What is it that you are dealing with that there have been some challenges and how you overcame it? Maybe just one of them that’s real common that investors go, “Oh, yeah. I’ve dealt with mortgage brokers. I’ve dealt with them before. They’re all the same.” What is the challenge that you’ve dealt with recently and you’ve overcame it?
Aaron: Oh, the overwhelming challenge, of course, is getting them to ignore the pro forma, use it as just the tool that it’s there for, but we already addressed that one. The other one we already addressed is spending money and going into debt. They’re so interested in what’s my best interest rate. Let’s talk about that, the rates went up when the Fed Chairman and the Federal Reserve got together and said, “We’re going to do quantitative tightening as of December 2017.”
We got youth. We had a whole generation of people for the last 10 years. They’re used to phenomenal rates. I had a client buy two properties in Memphis, Tennessee. Same rents, same price, same street, same floor plan. The only difference was, one was almost done and the other one had yet to break ground. When we closed the one in December 2017 at 4.75% interest rate 30-year fixed, May of the next year came around and it was now 5.75%. That 1% on that price point was equal to $49 in change difference in cash flow, nearly $50 a month. He is saying, “Hey, I’m losing $600 a year. I’m going to back out the property, too.” I’m like, “Whoa, wait a minute. Why are you backing out?” He goes, “Well, $600 is a big deal. I’m spending the exact same amount of money but I’m getting $600 less return.” I’m like, “Wait a minute. Okay, let’s get back away from the spending money thing. We’ve already determined that’s not it, so let’s go backwards into our mindset. Do you mind if I play CFO for a minute?” He goes, “Sure.”
We come back into the mindset and he got it, but he still had a hard time with it. I said, “Here’s what I need you to do, go talk to your CPA. Ask him what is the difference in the taxes you would pay on the one with the higher cash flow versus the lower cash flow—it’s your tax rate, federal and state—then ask him what is the tax deduction difference you give your property one with the lower interest versus property two with the higher interest with your tax rate federal and state and come back to me.”
By the time he is done working all that out, it started out on the cash flow side as just under $50 a month difference in cash flow. What we have done after his taxes are done, it was $3.55 per month because of the tax deductibility. It gets back to it doesn’t matter, all these things that every other lender is selling is trying to get your butt in the seat, that’s the movie trailer. They want you to come in because they just want to close a deal actually. My job is to help you tear that crap out and put the right wiring in. I tell everybody they need to go listen to Doctor Joe Dispenza, his TEDx in Tacoma, I’m going to send you the link.
Cory: I’ll include it in the show notes, too. I was just saying before you kept going that I’ve had the experience before where they just try to get you to sit down and just get you at the table but they can’t produce anything.
Aaron: Yeah, they can produce a rate and cost which everybody can produce. We all get our money from this place. It’s a matter of how do you build your business. Dispenza talks about in that TED talk, what goes on in your brain when you have an idea and the connection of neurons and how you talk yourself out of a good idea. My whole goal is one, to have everybody watch that two or three times, and then when they’re done, now they understand why we’re told by our religious leaders, by our parents, by our teachers to guard our thoughts. Now that you guard your thoughts, now you have to know why to guard your thoughts, it’s easier to guard them.
The Dispenza thing, as you’re saying is that he showed you how it wires in, what the actual physiological response is—he does it in real time like with an electron microscope—and then once you understand it, you have a better way of controlling those thoughts and then you feed it with good data.
That’s the main thing is not only do I want everybody to understand what’s going on between your ears, but also we want to reinforce it with good information that once you have that great idea, once you understand what you’re doing as a real estate investor, you reinforce it with good information. You got to be cautious of who you listen to. You can’t just run around, listen to everybody who puts in advertising on the Internet. There’s a lot of stuff out there designed just to sell you. We’ve got to be cautious with that because sometimes, we only have one shot at this.
Cory: What’s one big lesson that you’ve learned to get to where you are? It’s so impressive that you’re doing so many more loans, and obviously, a pretty big proponent of that is how you think, some mindset. What’s a lesson that’s got to get you where you are today?
Aaron: Persistence. I answer the phone a lot of times and people would ask me. They call and say, “Hey, how are you doing today?” I’d say, “I’m not running that foot that’s trying to kick my ass today,” which is what it is. Every single day, we’re in danger in getting our ass for that. I think that, that’s the last real form of natural selection left in our environment, the business environment is those who get kicked, get up, and keep running again and those who stay down and lick their wounds.
I’ve noticed that a lot of people, when they take a beating, sometimes they disappear for a while, […] they finally emerge back on the scene trying to get their business built back up. Just keep going. Who cares if you take a beating? We all have to take one. As you’re taking one, remember other people are taking it too because I’m in the same industry with them.
It’s just a matter of whose mind is going to be focused enough. When I realized that, when I came to that conclusion, I actually found that I think differently, I react differently to it, and I don’t even feel them anymore. It could be just a lot of scars on my ass but it really just gets to the point where I don’t feel the beating nearly as bad because I focus on what my goal is. My goal is to stop being an income goal, stop being what is Aaron’s need goal. The goal went to really having to do with other people. As soon as my goal went outward, it just doesn’t stop. It keeps growing.
Cory: This explodes because then you’re serving others, and you’re asking how you can serve. All of that comes back. I’m also a big product of that as well, Aaron, is what can you do to serve others and then that creates some incredible synergy. What’s one of your favorite business or motivational quotes?
Aaron: I always have one on hand. That’s interesting that I don’t have one at the moment. Good question because I have tons of them. I think more than a motivational quote, you have a lot of them that I love that my mind just went blank on that, but I like what Napoleon Hill said in his principles. He actually closes some of his principles with a prayer. Have you ever seen his verbal principles where he goes, “Ask not for more riches but for more wisdom to make wiser use for the riches that he was given at birth, which is the ability to control his mind and to focus on the righteous ends that he has desires”? That’s massive.
We have such great creativity and capability, but the problem is we’re too busy thinking about things, thinking about us, and realizing that we are the greatest asset. The second people get that understanding about us being the asset and that we’ve already been built with everything we need, it’s all there. […] tap into it. It changes you.
Cory: It does, man. Do you have any books that you recommend?
Aaron: Yes. The one that I read all the time every single day is called The Master Key System by Charles F. Haanel. In fact, I have it here.
Cory: Yeah, and along the Audible.
Aaron: As you can see here, I got all flagged up, it had all kinds of mark-up, and see all the underlines in there. This, every single day, is what I read. Napoleon Hill referenced this, written in 1910 as a correspondence course that you need to go through the same lesson every day for a week and then do the exercise every day. Now, notice that has completely changed how I look at things. Other three books that have been absolutely pivotal, Think and Grow Rich, I’m not going to name it because you already should know it, but Napoleon Hill did two other ones, Outwitting the Devil in 2011, have you read that one?
Cory: I have, yeah.
Aaron: And how about The Wisdom of Success, which was the transcription with him and Andrew Carnegie?
Cory: No, I haven’t read that one.
Aaron: That one’s awesome. The Wisdom of Success was phenomenal. Then Dr. Joe Dispenza’s book, which is Breaking the Habit of Being Yourself.
Cory: Yeah. I’m going to put this in the show notes, especially, I got the link for Joe Dispenza’s […] for the TED talk.
Aaron: You got the TED talk for Tacoma?
Cory: Yeah, but I want you to send it over anyway, it’s one that’s on YouTube.
Aaron: Very cool.
Cory: […] has it up, but that’s good. Do you use mobile apps, Aaron?
Aaron: I do have a mobile app and what I do is I have a lot of folks, for right now, the easiest way I do is I have them just text me their phone number and then I just have a mobile app go out, just text me their name or an email address and then I have my assistant send out the mobile app. I’m trying to figure out a better way to do that because usually, I’m sending it out from my speech and not on the podcast.
Cory: Do you use a mobile app in your business on a daily basis?
Aaron: No, not yet. I haven’t gotten to that point yet. I need to get better about a lot of the technology; I’m still hammering. I just literally agreed to a Facebook yesterday. In fact, I wore a suit two weeks ago, I was in Washington meeting with senators and Congresswoman Waters, Chief of Staff, I’ve agreed to a Facebook, I’ve agreed to a few other things from marketing, and I’m actually starting that show I was telling you about. I’m like, “Dude, this is anti-Aaron Chapman. I don’t know if I’m committed to building this business through the roof or I’m going to become the Antichrist. One of the two.”
Cory: Oh, gosh. Do you get eight hours of sleep at night?
Aaron: I do, because I fall asleep I believe at about 9:30 every day, but I do wake up at about 4:30. I try to, lately I’ve been back and forth each side of the country so much lately that it’s hard for me to get up at 4:30 so it’s getting around 5:00, 5:15 now.
Cory: Yeah, there’s a lag there. What do you have as your morning ritual?
Aaron: When I wake up, I immediately go to prayer. I can just share it real quick if we have some time. You’ve heard my story about the practical application of gratitude where there was a point where I had a new employee, she was younger in her early 20s, and when I hired her, I put her just right at a base rate and she was taking on a new role. We had no idea what to pay her at that role because we’re looking to use her to build off of. Then we decided after about 90 days, we’d reevaluate her income. When it got that time to reevaluate, some things went bad with a partnership and I had to really start over. I had a partner that just gutted me and left me. He seemed like he snuck around and tore everything away from me when I wasn’t looking. I had to start over with that.
It went to six months and we finally had that opportunity to sit down and look at that but I was trying to decide what do you pay somebody. If you look basically across business, they say 2% to 3% increase in wages. What I had found was that just wasn’t enough. It seemed almost insulting. I decided at a number and I ran that in. It was over 10%. Then, I was looking at 30% bump in her bonus.
I mentioned that to a friend of mine who was an executive at Expedia. She goes, “Good luck, that doesn’t happen.” Then, I took it to my Executive VP. He’s like, “Ah, we can’t do that.” I said, “What would it take?” He explained what it takes. It took me two weeks to do a ton of research, look at what she had done, and how she’s implemented things that make us more successful, I wrote up this big old narrative, I sent it in.
It came back approved which I was freaking excited about. I couldn’t wait to bring her in and show her what we had accomplished. Sat her down, went over all the things that she has done to create systems and how she had made a difference, and then I told her what we were going to do for her, really excited to see the response. She responded to that with a twisted look on her face. She’s like, “That’s it? I thought you could do better than that.”
Cory, I’ll ask you, what does your gut say in that? How would you respond if there was no […].
Cory: The person is not appreciative. You feel like you got slapped in the face.
Aaron: Exactly. I was so darn angry. I wanted to say, “[…], you don’t get this. In fact, you don’t even get your job. Get the hell out.” I was that mad, but I calmed it down, turn into a coaching moment.
Later that week, I was exiting the freeway coming to the office and there was a homeless guy standing on the side of the off-ramp holding a sign and something about him just really got to me. I […] hiding money in the truck. I always hide money in my vehicles because of what I shared with you earlier about having to walk that parking lot, my cards wouldn’t work. I reached there and I rolled down the window, I held it out. He walked up, accepted the bill, said thank you, and started to walk away. As he opened it up, he turned, he held it up, he looked, he goes, “Are you serious, man?” I’m like, “Yeah, why?” He goes, “This is $20, man.” I’m like, “Yeah, it yours.”
He comes back, he reached out, takes my hand, pulls it towards his chest, bows his head, and says a prayer of thanks to God and asked for a blessing on me. At this time when he’s doing this, I’m getting this overwhelming feeling of guilt that I didn’t have more to give. As he finishes his prayer, he looks up at me with tears streaming down his cheeks and thanked me profusely for changing his life.
Cory: He was so appreciative.
Aaron: Exactly, I would have really given him $10,000 right then if I had that cash on me. By then, the light turns green. And Arizona drivers, being as patient as they are, they’re hitting the horn, I took off and we exchanged “God bless you” as I started to leave. And it hit me. That’s the practical application of gratitude. On one hand, this person over here, I think I gave her nearly a $10,000 a year increase and she spat in my face. I wanted it all back, […] you get nothing. This other guy, $20, I would be willingly giving him the $10,000 for his gratitude.
I learned from that and I had heard Dean Graziosi speak at an event where he said, “You don’t get out of bed without three new things to be grateful for.” After a few weeks, that exercise gets to where you’re going over the same things, but then it hit me one day. There we are. I was taught what I should be doing when it comes to gratitude.
Now, my assistant, Samantha brings me a list of names of the people who were referred to us and who did the referrals. I take that list home with me when I have prayer in the morning, part of that ritual is to ask a prayer of thanks to God for these people He brought in my life, and a blessing upon them and their businesses. Then from there, I go make strong […] coffee, the strongest I can stand, I go sit down at my chair and I start to read. I start with Scripture. Actually, I start with Darren Hardy’s DarrenDaily, then I go to Scripture, then I go to The Master Key System right here, and then I’ll read another book, and then I’ll start to do a workout before I go to the office every single day.
Cory: Wow, it’s pretty powerful. Think about basically starting your day with the mindset of how you can help others.
Cory: People start today with how they can help themselves.
Aaron: Interestingly enough, that gratitude aspect, something I’ve discovered with all the 10 commandments, all the commandments that come through from God, they’re all there to help you. We think that it’s for other people but in reality, it’s all benefiting us. It really boils down to trust. Anything that you violate there is violating the trust with your fellow man. You violate the trust of your fellow man, you have nothing.
Once you realize that, it’s just a road work to make it easier for you to navigate this messed-up environment we live in to make you happier and actually able to make your way through it easier. Then you realize they’re not restrictive. It’s actually a benefit to you and it really almost like the ultimate plan is selfishness. How do you make your life easier? Just do this.
Cory: Yeah. Just open up. What are you most grateful for?
Aaron: People, others, seriously. Everything that I have in my life that is good has to do with somebody else.
Cory: That’s beautiful, man. I love that.
Aaron: Nothing in my life is great if it has to do with me. If it’s all about Aaron, I’m never satisfied, but when I’m interacting with others and when they take their time and their energy to benefit and help me, my life is just exponentially better.
Cory: If you had to summarize it, what gets you out of bed in the morning? What is the thing that really is why is it you do what you do?
Aaron: Because there’s somebody out there that’s potentially will get taken advantage of if I don’t pick up that phone. I can’t have that.
Cory: You want to be the solution provider to help someone and a rescuer from harm’s way.
Aaron: Pretty much. My wife and I served nine years with the sheriff’s office rescue division. There’s been a lot of great opportunities I’ve had, be sent down a 680 foot cliff to retrieve a hung up base jumper. We’ve had people whose plane crashes, we had to recover bodies, unfortunately, for the family and things like that. People roll their vehicles deep in the desert and we had to cut them out of it, things like that. I’d lived a life of physical rescue, now this is more than that when you’re talking about being able to pass on mindset.
Cory: Mental rescue.
Aaron: Oh, yeah. We’re rescuing people from a world of shortsightedness, of being pigeon-holed into a box, of inability to have a future, and also we’re talking about our kids, too. You know darn well what I’m doing with my kids because you’re an integral part of what is going to happen there if something happens to me and my wife. I think we get into that into another podcast but I’m very, very, very worried about what the next generation does.
It was Niall Ferguson, I don’t think that he and I agree 100% on politics but I agree with him on something very significant about our society. Before World War II, every generation seemed to have an unwritten contract with the coming generation to make the world better for you. Then we get to World War II and things changed. After that, when the baby boomers came about, they started slowly, I guess, unknowingly and unwittingly taking from the next generations and now we’re $20 to $30 trillion in debt.
We have gone reverse on our contract. I can’t reverse the entire contract that has been violated but I can reverse it for my kids. I’ve instituted that trust. That also requires that they get involved and they do some things themselves. We’re going to greater detail in the future, but that is another big, big, big thing of mine that I’m working with Professor Abernathy over at Kennesaw State University to teach the next generation. To teach them when they come out of their accounting, the school, and they’re coming here to have that degree, they have to go about it differently than what has been done in the past and we’re trying to change that one person at a time. That’s what gets me out of bed.
Cory: Man, you have a big heart, big mission, and it’s so much bigger than business for you. That’s, I think, one of the reasons why you’re really successful. What’s the way that people can serve you? How can we serve you? What’s the best way to get in touch with you? What is it that you really, really would love to have? How can we help you?
Aaron: aaronbchapman.com is the best way to connect with me because that will always be out there. I also finally was able to purchase aaronchapman.com, I just don’t have it up online yet. The best way to serve me, if you will, is really allow me to serve you. That’s really it. My ability to help you to build your investment business is what I’m about. That’s what I want. Not only to serve you as the individual investor, it serves the home seller, it serves the property manager, it serves the title company, it serves the insurance company, it serves Fannie Mae, Freddie Mac, the general public, the company I hang my license with, SecurityNational Mortgage Company, it serves my staff. That one transaction serves hundreds of people.
I consider myself the hub of that wheel and if one single spoke breaks, the entire wheel’s at risk. My job is to ensure everybody has equal bearing or at least equal load as well as equal benefit. If anybody in that is at risk, I can’t have it. When you ask how does one serve me, it’s really not serving me, it’s how do you help you by allowing me to help you.
Cory: Awesome, Aaron. I appreciate you much for doing this and taking the time. I know you’re busy. We’re going to put all these information in the show notes. You’re going to be getting calls, people that want to work with you, that are tired of hitting brick walls, and the fact that you can be creative. You understand a real estate investor’s mindset. I think it sets you apart in a huge way. Thanks again, man. I appreciate you being on here.
Aaron: Thank you, man. I appreciate you taking the time. I look forward to the next one.
Cory: Awesome. Thanks again for being on Real Estate Investing Profit Masters. Make sure you attend another interview where we’re going to bring incredible guests, just like Aaron, to teach you the best that they have. Bye now.
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