From Struggles to Success: Aaron Chapman’s Journey in Real Estate

Mike Hambright (00:00.668)
Hey everybody, welcome back to the show. I’m here with the one and only Aaron Chapman today, a good friend of mine. And we’re going to be talking about how to make rentals work in this market where interest rates are high. I mean, it’s one of those times where a lot of people that I’ve known are not keeping as many rentals because they can’t make them work. And it’s obviously more challenging, but we’re going to talk about some ways to kind of navigate those waters and get around it today. So Aaron, great to see you, my friend.

Aaron Chapman (00:26.946)
You too, Mike. It’s never often enough that we get to catch up with each other. It’s always someplace in some obscure meeting room on the other side of planet.

Mike Hambright (00:31.057)
Yeah.

Mike Hambright (00:34.568)
Yeah, I I honestly I’ve said this before the reason I do the podcast is to like catch up with You know usually catch up with old friends or you know people that I don’t see often enough and sometimes make some new friends, too But honestly, I’m doing hundreds of podcasts this year and there’s not very many people that I’ve already curated the list like these are the these are the people that I want to interview this year and they’re all people that I’ve known for a while for the most part or somebody I like really want to know that for some reason I just have never spent any time with this person. But anyway

Glad you’re here, always good hanging out with you.

Aaron Chapman (01:07.086)
That’s one thing I could definitely say about the podcast environment. does deepen the connection with people because you have that un… because when we’re at events, there’s always people coming up, right? Everybody’s trying to connect and I get that. But when you’re here, this is to me one of the best opportunities to chat with someone in depth.

Mike Hambright (01:18.93)
Yeah.

Mike Hambright (01:23.388)
Yeah, and I just started doing, I have a podcast studio in my office now. So after being a podcaster for, think I’ve done literally creeping up on 2000 podcasts, I decided to put one in my office as well. Cause I was like, you know what? It’s not going to work for everybody, but I’ve got, you know, and we’ve got a bunch of people that are, that’ll fly in or local folks that are Texas in Texas or whatever. And so those are even better for building relationships just because.

We, honestly, we schedule a little bit more time for them. We hang out a little bit before and after and it’s just, you know, but this is better than nothing. So glad you’re here.

Aaron Chapman (02:02.242)
Right on, well, I’m looking forward to one of those options. So we’ll work that out.

Mike Hambright (02:04.87)
Yeah, let’s go. Hey, you’ve got that option. We’ll do round two in person here in Dallas. So, hey, before we jump in, you are a lender. You’ve been in this space for a long time. There’s nobody that knows better about how real estate investors should be funding their deals or how to fund their deals than you that I know of. And so, but before we get started, give us a backstory a bit. Tell us a little bit about you and how you got to this space.

Aaron Chapman (02:28.43)
Well, one, I appreciate the compliment because it’s been hell to get to a point where a person like yourself would believe that because of what we’ve had to do to help the real estate investor over the years. So how I got in the space, I mean, I’ll go, I have to go back a ways to talk this out. So I got through high school in a rural community in central Utah, worked, my family had a cattle ranch. run about seven, about 500 head a year on just under a thousand acres. And then from there, and to get

through school I cheated my ass off to get that C. I engineered that by learning how to pick locks and find where they hid the tests. Exactly what they say most entrepreneurs are C students so I was an engineered C student because I didn’t want anybody to catch on to what I was doing.

Mike Hambright (03:04.53)
Sounds like an entrepreneur.

Mike Hambright (03:10.972)
Yeah. Let me interject a little bit. My son is a senior in high school and he’s just squeaking by. And my wife is like a student. My wife is like front row of the class and I’m like back row kind of guy. So he’s definitely more in line with me. But it’s been hard because we like I want him to get good grades. But I’m like, you know, on the side we’re like someday he’s going to be running the whole thing, you know. Right.

Aaron Chapman (03:33.998)
mean, all you have to do is learn what you’re teaching him, right? So that is a difficulty that I have as well. Cause I look back on that, I was a back row kind of guy. The only time I got front row was because I was so disruptive. They moved my ass to the front of the class, sat me next to the teacher to stare at the class. So, well, I ended up getting through that. I graduated halfway through my senior year by some crazy, I have no idea how that worked out.

Mike Hambright (03:46.25)
Right, yeah.

Aaron Chapman (03:57.022)
And I went to work in the oil fields of Wyoming, then ran heavy equipment, drove truck. I was a welder. Then I found myself in the mines of northern New Mexico in 1997. So I had my wife and infant son here in Arizona, and I would drive back and forth every 13 shifts. So I’d be 13 shifts on, six shifts off. And that’s how I did that. It was a great job. mean, how often does a person get to go several hundred feet underground and play with explosives, right? That’s what I did.

Mike Hambright (04:23.656)
So what kind of mine, what kind of mines are in northern, you said northern New Mexico? Okay.

Aaron Chapman (04:27.916)
New Mexico. So New Mexico is really heavy in the uranium thing in the 60s and 70s, 50s, 60s, 70s. We were mining what’s called molybdenum. And are you familiar with chromoly?

Mike Hambright (04:40.424)
I mean, like, I remember that phrase on my BMX bike.

Aaron Chapman (04:44.81)
Exactly chromoly steel what they do is you got chromium and molybdenum added to regular steel additives, know iron and and

Carbon then molybdenum and chromium and now you have chromoly. So moly is also in Greece. It’s in a whole bunch of things that people don’t realize and we are mining for this. But we would pull out as you’re pulling that you get get silver and platinum and gold and all these other things from the mine. Well it got to a point where it’s more expensive to get the ore up to the surface than it was what the market was willing to pay for it. So they shut down the project. I went back to Arizona thinking I can get a job anywhere. This can be easy. I had a very very very extensive

resume but everything I applied for I was 23 years old I was getting me this response of overqualified and I didn’t know what that meant you either could do the job or you couldn’t because I didn’t think of it from the business owners perspective then it got to a point that we were destitute enough that I didn’t have enough money in my bank account to get diapers my wife gave me a coupon for free diapers and I went to go do another job interview to haul landscape rock for ten dollars an hour and what response do you think I got from the general manager at

landscape company. Overqualified. So I finally asked this guy, like what the hell does that mean? And he explained it and it made sense but it didn’t change the fact I didn’t have any damn money and I needed a job. So as I’m driving away from there I get in my truck, fire it up and I start to head towards the grocery store with this coupon so I can get these diapers for my kid. We’re on our last one or two of them and then my gas light comes on on my truck.

And I hadn’t driven very far in a gas light and I know I’m about 20 minutes away from my house so I found the first grocery store that had a gas station outside. So I pulled up in front of that pump. I pulled on my debit card. I said a quick prayer. I swiped it. I got a decline. So I rifled through my truck looking for hopefully a lost dollar. I couldn’t find it. I found a couple of pennies or dimes or something. I locked the doors and I started walking that parking lot for seemingly two hours till I found enough change to get two gallons of gas. So I changed that two hours of my life and coined

Aaron Chapman (06:45.966)
coins basically and then I went inside I found those diapers and I tried to get out of there as fast as I could paying for the one thing standing in line with a coupon as I had my head down looking at nobody trying to catch no eye contact I heard my name called and it was a guy I used to work with over a equipment company and he ran the office and I was running the equipment he asked me how things were I did not share with him what I just shared with you but he asked me hey let’s go grab dinner and catch up I’m like I can’t afford dinner man he goes well he goes let me

He I got a gift certificate. I just want to spend some time. So we went to dinner at Red Lobster. And that’s where he shared with me about the mortgage industry. And the only thing I’d ever heard about mortgages was on TV, the old man, the old lady, that’s going to lose their home to this thing called the mortgage. So it’s a very, very negative thing to me. Well, I went in. He introduced me to a branch manager of a broker shop. I cut a foot off of my hair. I shaved. My mom bought me some business-like clothes. And I started as a telemarketer in December of 1997.

So fast forward, built a business. It was going well. You get into 2008. I was working for Countrywide at the time. I ran a team of people. Things were going very, very well for me. I was still doing okay, even in August of 2008 when the whole business was imploding. You had the implodometer happening and I decided I was heavily stressed. was two different jobs at once. was fabricating a…

Mike Hambright (08:00.53)
Yeah.

Aaron Chapman (08:09.07)
spending my evenings fabricating the upper level of a mobile strip club from an English double decker bus. And then I was working during the day. So I jumped on the Harley, it was going to take three days. August 8th of 2008, and I was going to clear my head.

Well, 15 minutes into that ride, there’s a kid in his dad’s truck that took me out at about 50 miles an hour on the freeway. I went flipping into another car. I woke up that night in the hospital after after surgery, multiple broken bones. Apparently I’d laid on the Arizona pavement at 1224 in the afternoon in August and baked a lot of skin burns, road rash and a memory that recycle every three minutes. So when I went into that accident, I had an operating business. I had a net worth of just over three and a half to four million dollars.

I was about 190 pounds and I was an athlete I go rock climbing and mountain biking and things like that I got wheeled out a few weeks later at 156 pounds with a negative net worth of 1.5 million and a memory that recycled every three minutes so coming back into the industry and trying to find my way into is when the real estate investor was coming into Arizona in early 2010 and that’s when I started fighting for those deals and nobody wanted to do them because they were $50,000 loans and they were hard to do

Mike Hambright (09:21.127)
Right.

Aaron Chapman (09:21.986)
because the mortgage industry did not want to write those loans. So I’m fighting my industry. I’m fighting for the business. And I was doing it nobody else wanted to do. And then I ran into two other lenders in the U.S. They were kind of doing the same thing. And we kind of collaborated in a way. We were competitors, but we’re collaborators all at the same time. And me and those two other people, one of them is no longer in the industry, but me and those two other people, we carved a highway through mountain passes and tunnels that nobody else was willing to do. And now there’s other lenders out there pretending to be real estate investor lenders.

that didn’t go through what we went through. They’re riding on our highway. And when you say that I have extensive experiences, yes, because we got the industry to wrap their head around the real estate investor and understand the real estate investor and do loans for the real estate investor on levels they never did before.

Mike Hambright (10:06.906)
Yeah. Dude, I’ve known you for a long time and I’ve never heard that story before. So I appreciate you sharing that with me. I had no idea. Yeah.

Aaron Chapman (10:13.784)
Well, thank you. It’s not a story I share very often until a person asks, hey, what got you here? And I’ve got a book coming out this year. the premise of it is that we retain what causes us pain. And I need to share those stories more because a lot of people look at a person’s success and they say, man, it must be nice. I hate those words because they don’t know what it’s like to wake up in a hospital bed and not know where you are and having to recycle that understanding. And they come back to an obliterated business and start not only from zero but way negative. They don’t know what it’s like to have a

Mike Hambright (10:18.599)
Yeah.

Mike Hambright (10:32.132)
Yeah.

Aaron Chapman (10:43.728)
business partner take everything from you and leave and you start over at zero again in 2015. They don’t know what it’s like to have a kid at home that you can’t even support. You can’t find a job because sometimes they’ve never experienced it yet. if they listen, they pay attention to people that have, they can avoid these things and then accelerate their own life. Me, I’ve accelerated my business every time I’m against something tough. It’s when I accelerate my life. And that’s when I’m trying to explain to everybody. It’s like the pains that you go through is what teaches you where not to step.

Mike Hambright (11:12.624)
No doubt, I just did a show yesterday, actually one of the in-person ones in my office, and we went deep on doing hard things and not giving up. We’re so quick to give up because people have this expectation of.

Aaron Chapman (11:12.846)
impossible.

Mike Hambright (11:28.644)
immediate gratification, right? And it’s like, once you get to the point, as an entrepreneur, really, even if you’re, even if you have a job of just being willing to delay gratification, I mean, that’s how wealth is built, right? And so, and that’s how businesses are built to stand the test of time is get punched in the mouth and get back up again and don’t just quit and be willing to delay gratification into the future and make investments in yourself and your future and your business because they just compound. yeah, man, thanks so much for sharing that.

Aaron Chapman (11:56.0)
It’s not only that, I think on top of that a person needs to be willing to share their failures more. We are so good at wanting to protect and not show our failures. I’m trying to explain to my team, it’s like guys…

Mike Hambright (12:04.711)
Yeah.

Aaron Chapman (12:07.274)
Make mistakes, but make new mistakes. And when you make them, call it out. That’s a landmine that nobody else on the team should step on. If we’ve stepped on it before and somebody steps on it again, it’s because you failed to tell them. So don’t let your first failure create a second failure. Always talk about where the landmines so we can get through those. And I hear what you said about the instant gratification. I had a young employee of mine, and I quote her in the book. She came to me at 18 years old. And she goes, boss, life is hard. I need the cheat code.

Mike Hambright (12:18.758)
Mm-hmm.

Aaron Chapman (12:37.324)
I’m like, you just found it. It’s like, what do you mean? By discovering that life is hard, you understood that you got the cheat code. Now you got to work against the hard stuff. Everybody else is out there hunting the cheat code, thinking that there’s a way to get ahead and they’re never attacking life and moving forward. They’re stuck stagnant. So now that you discovered that, start freaking working.

Mike Hambright (12:43.536)
Hahaha

Mike Hambright (12:57.852)
That’s awesome. Yeah. Yeah. So let’s get into rentals. So how, you know, right now, a lot of people are, you might, deal with guys, my, my, my people that are in my mastermind are probably collectively doing 10,000 deals a year or more. And I, you know, around a lot of people that are doing deals and I know just generally there’s less buy and hold activity going on because prices are up. It’s hard to make them work as rental, harder to make them work as rentals. interest rates are obviously up. And so, so how do you make it make sense?

in this market with interest rates where they are and with values where they are. How do you make rentals work?

Aaron Chapman (13:34.264)
So for the conversation I have with clients and new investors coming in.

They’re looking backwards on the old marketing, the old podcasts that are out, the cash on cash returns and how to, how to calculate that. And that’s where the person should be focused to their energy. And I’m having to wipe that thought of that thinking out, peel their skull open, pull that out, set aside. let’s, put it back together with different principles, principles that will always, that will always stay the same. Just tactics that changes the principles that we retain. Now the cash on cash returns, a great metric. It’s awesome when you get it. The problem with it is there’s too many people make that the

whole deal. That’s the cherry on the Sunday. So we start breaking down what that Sunday really is and what’s that made up of. And it takes me actually we’re gonna go through some math together. I know I didn’t tell you upfront but you have to get your phone. We’re gonna calculate. I’m not expecting you to be perfect. I have this stuff dead cold but I always have people participate with me. Not because I’m testing their math skills and everybody who’s listening do the same thing. Get your phone out and run this so we can understand what we’re talking about. And I want you to feel confident and comfortable with the math so you can say okay wait a minute this does make sense to hold these rentals. Now we’re

talking about say a $200,000 single family that an investor can buy. They’re gonna put 20 % down. They’re gonna have a 30-year fixed interest rate. They’re gonna get say a hundred dollars a month cash flow and be able to see an appreciation of merely two and a half percent. Does anything that I just said to you seem unreasonable?

Mike Hambright (15:03.568)
No, I mean, I think a lot of people would say that that cash flow sounds low, but I know that you’re gonna prove out here. Right.

Aaron Chapman (15:10.158)
We’re going to show otherwise. And I’m going to go really, really conservative with the numbers because I want people to see how valuable this is even though it’s very, very conservative on it. So a $200,000 acquisition with 20 % down will give you how much are you putting down on that.

Mike Hambright (15:27.08)
Say that again, 200,000 and you’re putting 10 % down? Oh, 40 grand?

Aaron Chapman (15:29.326)
200,000 at 20%. 40 grand. So $40,000 is being invested so far. And then let’s say, and I’m going to give you a really, really conservative number on cost, lender fees, title fees, appraisals, taxes, insurance points. Let’s say it’s 10 grand. So 10,000 bucks would put your entire investment of how much? 50,000. So if you’ve got a $200,000 acquisition with 20 % down, what’s your 80 % loan dollar amount?

Mike Hambright (15:48.968)
50.

Mike Hambright (16:00.479)
Aaron Chapman (16:02.638)
So you take your 200,000 subscribers.

Mike Hambright (16:03.218)
You’ve already lost me. And by the way, my calculator is based off of light and I’ve got an, I’m in a dark office so I won’t turn on. I’ve got an excuse.

Aaron Chapman (16:09.774)
We’ll change the question. You got $200,000 acquisition, you put $40,000 down. How much is the loan that you’re going to get?

Mike Hambright (16:21.384)
160

Aaron Chapman (16:22.616)
So $160,000 30-year fixed loan. Okay, so if you did your job right as the CEO of your real estate investment business, and you picked a property and keep it rented the entire time you own it, it’ll appreciate and you can raise rents. Who pays off the $160,000 loan?

Mike Hambright (16:24.977)
Right.

Mike Hambright (16:40.37)
Your tenants do.

Aaron Chapman (16:41.07)
your tenants. So if you take that 160,000 divided by 30, because that’s how long it’s going to take them to pay it off. I tell them people do it this way. It’s the long game. I know there’s an amortization table. We’re doing simple math. You’re going to find that that 10 is going to be averaging over 30 years, giving you $5,333.34 per year. So we disagree with that. Does that sound right to you? Hey, everybody do the math.

Mike Hambright (17:05.032)
I’ll trust your numbers.

Aaron Chapman (17:08.63)
160,000 divided by 30 is $5,333.34. You divide that into your 50,000 that you invested, which is 40,000 down plus costs, that’s equivalent to 10.6 % every single year averaged over 30 years. You’re literally increasing your investment by 10.6 per year just by having somebody pay off the mortgage. And that’s it. That’s no cash flow. That’s no tax benefits. That’s no appreciation. That’s that. So we set that onto the shelf. You already know you’re doing well there just by keeping it rented. Now you’re going to have expenses.

we understand that’s why we said you only have a hundred dollars in cash flow. So let’s say now you’re getting the appreciation on this place. We live in an inflationary environment, right? We’ve seen some places that we’re seeing 30 and 40 percent. We’re not going to look at that. We’ve seen five, six, seven. Let’s say it’s two and a half. I think it’s very reasonable to be able to say that you can average a two and a half percent appreciation every year over a 30 year window. Seem accurate?

Mike Hambright (17:51.335)
No doubt.

Mike Hambright (18:06.556)
for sure. Yeah, that sounds low to me. Conservative,

Aaron Chapman (18:09.068)
So what is two and that’s very conservative. What is two and a half percent of 200,000?

Mike Hambright (18:16.712)
Five

Aaron Chapman (18:17.614)
$5,000, right? That is if you could get just a small appreciation on the house. It’s a compound, too. So that’s just the first. Now it’s 2 1 half percent of the $205,000, right? And 2 and 1 percent of the $211,500. You’ll see how that becomes bigger and bigger and bigger. But that 2 and 1 half percent is equivalent to another 10 % on your $50,000. Now you have 20.6 % before a single dollar has entered your bank account. 20.6%.

Mike Hambright (18:28.348)
right.

Aaron Chapman (18:47.246)
Now we start getting into that cash flow piece, right? Everybody’s like, well, what’s my cash flow? Well, it’s a hundred bucks. It’s a hundred bucks on an $1,800 a month rent. You bought a $200,000 asset, you’re renting it for $1,800 a month, which is low, and you’re making a hundred dollars a month in cash flow. Now we get to raise rents. Now a lot of people are saying, we’re at 5%, we’re 7%, we’re 8%. I’m just saying let’s go three. 3 % per year, what’s 3 % of $1,800?

Mike Hambright (19:13.384)
What is it 60? Okay.

Aaron Chapman (19:15.278)
54 so pretty close. That’s pretty damn good right off top of your head. Most people can’t do that. $54 is not exciting. You as a real estate investor, it’s like man I’m raising my rents by 54 bucks a month. That sucks.

but your tenants not getting excited. They’re not freaking out about the fact that they’re getting an increase of 54 bucks. Like it’s only 54 bucks. My brother-in-law, the arrogant prick, he has to pay an extra 150 on his apartment. Now I get to pound my chest at dinner and say, I’m only paying 54 more. So you keep tenants. So now that $54 is a 54 % increase in your cashflow. Single digit increase in the rents is a double digit increase in the cashflow. And run the numbers out for five, six, seven years.

Then you get to see that cash flow everybody saying they should get year one you get it in year four or five you said wealth is built over time it’s not built day one so now we’ve got that but this is where it gets really really really freaking sexy does the lender get to raise the payment on the loan to pace inflation

Mike Hambright (20:05.832)
For sure, yeah.

Mike Hambright (20:16.667)
Not if it’s fixed.

Aaron Chapman (20:17.934)
Nope, it’s fixed for 30 freaking years. Now what’s happened to the dollar’s value over the last 30 years?

Mike Hambright (20:23.0)
It’s been destroyed.

Aaron Chapman (20:24.716)
been just trashed. Now go back 30 years ago I walked into my very first Taco Bell in 1994 and I could get two crunchy tacos, two bean burritos, and a drink off their value menu for a dollar ninety nine. Do you remember that?

Mike Hambright (20:26.269)
Mm-hmm.

Mike Hambright (20:38.024)
Probably, yeah.

Aaron Chapman (20:39.682)
Yeah, I mean, it was amazing. Under $2, and I got this. Now, I don’t go to freaking talk, but I was in my teens.

Mike Hambright (20:46.598)
I was about to ask you, when’s the last time you went to Taco Bell? It’s been a long time for me, yeah.

Aaron Chapman (20:50.112)
I went there last year for my daughter. drove through. had to go back to the school. There’s a talk right there. She goes, let’s go through the drive through. So we did. And one is she ordered. She ordered two crunchy tacos, two bean burritos, and a drink. Do you know what I paid for that damn thing? Almost $14. It’s $13.80 something. That’s a 750 % swing in the buying power of the dollar for freaking tacos. And the tacos have not gotten better.

Mike Hambright (21:04.52)
wow, yeah wow.

Mike Hambright (21:11.676)
Yeah, you think Aaron, do you think that the quality of the meat has gone up at Taco Bell during that time? Let’s be honest, we all know the answer to that one.

Aaron Chapman (21:16.334)
The quality hasn’t gotten better and the quantity hasn’t expanded, right? They’re not bigger. The nutrition value hasn’t improved. What’s happened is our buying power of that dollar has decreased that much. So when you reapply the buying power of the dollar on a monthly basis for 30 years, that’s 360 months, you will find even though your amortization table says on $160,000 loan at today’s interest rates, you’ll pay $402,000.

Mike Hambright (21:21.978)
Right, it’s probably smaller.

Aaron Chapman (21:45.144)
But recalculating every time the dollar leaves your hand to pay the lender, you’re actually paying $154,000 in actual dollar value. So you’ve given them back less than what you borrowed while you continue to maintain a nearly 30 % increase in your personal growth. We didn’t get into the tax piece of it. So look at what your investment grew to while the bank’s investment declined significantly and you kept the asset.

Mike Hambright (22:04.872)
Yeah, yeah.

Aaron Chapman (22:12.27)
So when people start talking about, the cash on cash return sucks, I’m like, well, can you keep it rented? Will it appreciate? What’s the cash on cash return five years from now? Six years, seven years, four years from now? When the dollar’s declining is you’re raising rents. So when we wrap our head around what makes sense, people start to go, oh, wait a minute. I should be jumping into this. Here’s there’s a lot of people right now that are listening to lenders that have not been in it as long as I have. People have been doing it since, 2015. They’re like, OK, I’m a real estate investor lender now.

Well, the problem with that is, is they are going off of the premise that we live in cycles, that the cycles are gonna turn, it’s gonna come back, and now we’re gonna have the cycle where the rates are gonna go down. I’m having to explain to a lot of people rates are not going to go down. We have to understand what drove rates down to begin with. So my question is to you, Mike, do you know what drove the rates down to those single digits to begin with?

Mike Hambright (23:04.84)
I mean, there’s a lot of reasons why, but it was really just to kind of continue to stimulate the economy and kick the can down the road, which is kind of what’s got us to this point.

Aaron Chapman (23:13.774)
So up until 2008, if you watch the big short, they had created these more of these private labeled securities, mortgage backed securities to stimulate the investment of capital going into the bond market. when you hit the 1970s, Rennery had was taking a look at things from more of a global scale that the bond market was not doing a whole lot of volume. It was pretty boring. And then he discovered, wait a minute, we look at these community banks, they’re taking in all these deposits and they’re lending it out at rates of like 18%. But they’re paying their deposit

pausers say 3 to 4 % of their checking, 5 to 6 on savings, and 8 9 % or say 8 % on the CD, but they’re keeping the spread. So how do we do that on a global scale? So they convinced people to invest in this pool of money that they would lend out.

Gloat nationally and they would keep this massive spread. They’re making five six seven percent after all is done They’re making more money than what was being they were retaining more money as that as an organization than what was happening in the stock market So it got to be this big thing then it gets to a point where people are staying in their houses too long So how do we get people to borrow more money? We’ll get more creative on the loans we offer then you get the no income no asset loans and they know no ratio loans and you you’ll get investors quote unquote investors just people buying house was zero down

and no income qualifying. Then the music stopped and it came crashing down.

You have August of actually November 2008, Ben Bernanke and Hank Paulson. Hank Paulson was the secretary of the treasury. Ben Bernanke was the chairman of the Fed. They got together and said, we’re going to do quantitative easing. So we’re going to take trillions of dollars from the US Treasury, run it through the Federal Reserve, and invest in these pools ourselves, because we’re not getting money going in there. And the second they announced it, I’m going do a share screen here. Let’s see if I can do this.

Aaron Chapman (25:04.31)
me maybe.

Mike Hambright (25:05.594)
I’m not sure I’ve never shared on this.

Aaron Chapman (25:08.578)
Yep, it’s gonna let me.

So here we go. So I’m going to try and use this as an illustration. So way back in 2008, they got together and they said, we’re going to do this quantitative easing situation. I’m going try and expand this where it can make more sense to you guys. And this shows you the market. This is the mortgage-backed security as it trades itself. And this is August 20th.

November 25th, 2008. It’s not going to reflect properly here because it’s shown in weeks. November 25th, 2008 is represented by this bottom yellow line here I’m highlighting. So what happened there is they announced quantitative easing that day. They didn’t do it, they just announced it and tons of money floated into the market.

This whole block here, right here, that I’ve shaded represents that day’s worth of trading from the open to the close. That’s how much money flooded into that security that day. Now, this yellow, this orangish colored line I have represented here, that represents the day the Fed actually started quantitative easing. So look at how much money flowed in there from the day they announced it to the day that they started putting money in. So when the Fed started putting money into the market, it started driving that market up.

So as the market goes up, this shows money going into it. As money goes in, rates go down. So it’s showing it’s a supply. As the supply goes up, the cost goes down. So it’s like you and me, Mike, if we walked into an auction and there was one item that we both wanted, and it turns out 100 people showed up for that same item, and everybody’s bidding on it, how expensive is that item?

Mike Hambright (26:48.776)
It’s driving it up. Right?

Aaron Chapman (26:49.934)
through the freaking roof. But if we walk in there, just the two of us, and there is 30 of those items, do you think it’s going to be really expensive to buy that item?

Nope, they’ll probably give us a couple of them to take with us so they can get out of their inventory. So that’s the same thing with mortgages. As the supply of money goes up, the cost of it goes down. As you can see, this represents $8.9 trillion from this moment here all the way to here. The Federal Reserve shoved that money in on top of other investors. Now it’s interesting when the Federal Reserve right here says we’re going to do quantitative tightening, what happened to the direction of the security?

Mike Hambright (27:01.362)
Right.

Mike Hambright (27:28.306)
Yeah, I drove it down.

Aaron Chapman (27:29.358)
you just completely fell off and it drove down to a point.

where it found its bottom or the bottom value of that security before people start investing back into it. But what’s interesting is I didn’t have the shaded before I was trying to figure out where it was going to land. It hit up here at the top of that date where they were where they ended trading of the day of the announced quantitative easing came back out of it. It went back to this bottom point. But then a bullshit report on jobs came out when our in 2023 that made it look like the economy was doing awesome. So money left here. And then there was a report that came out how those jobs those job numbers

for fictitious, fired right back up and where did it hit? The bottom of that point where the day they announced quantitative easing, came back down to that same level, then ramped back up until the Fed lowered interest rates. This is when the Fed lower rates were peaked out at the day they announced, at the end of the trading day where they announced quantitative easing, that same value, and where it would go, right back down to that same point that I’m showing before. I’m literally watching these points all the time.

Mike Hambright (28:22.792)
Hmm.

Aaron Chapman (28:29.998)
watching where the market’s trading, understanding what’s driving it. And this is my belief and I’ve been proving it since back here. I actually started charting this out way back in early 2023 as to where do I think rates are going to land. And every time this is their barrier, the day they announced quantitative easing, the value of the security does not go beyond that.

For it to get above that and push up in these upper levels, we have to have a promise of significant capital going into this market for anybody to buy into it beyond that. So if they’re not going to buy into it above this level, our rates are not going to go lower than they did in mid September 2024. They’re just not going to. And if they’re not going to do that, an investor has to get right with the fact that they are going to see interest rates probably trading in this range.

right here, which means anywhere from say 6.875 to 8%. That’s what they’re going to see for a 30 or fixed going forward. So.

what a person needs to wrap their head around. If that’s what’s going to be, then how do I go about buying a house? Well, understand that an interest rate is only something that you use to figure out what your costs are. And if you know your costs are set now going forward, we know taxes, the insurance will adjust. Then you could reasonably predict at what point are you going to be reaching that cash flow you want to see with a 3 % increase, what’s your two and a half percent every year going to yield. Then you track it and you’re to see that you’re making more than two and a half percent, which is equal more than 10%.

of your investment and then if you’re if you’re able to raise rents by more than 3 % your cash flow is going to compound and never

Aaron Chapman (30:05.352)
ever pay the mortgage off any faster than what the bank is willing to accept, which is 30 years. This whole thing of debt snowball, this whole thing of pay extra, pay it like a 15 year is a complete inaccuracy for the real estate investor. It was designed for the person that can’t maintain their own business, their own cashflow is designed by the banks to make the interest rates the most important thing because if it is, you will keep refinancing and refinancing and refinancing. You’ll stay into a slave position.

Have you looked at a 30-year amortization table? What’s the first five years look like? All interest. You know what the, how, when you look back historically, what’s the average, how much time transpires before the average person refinances their primary residence?

Mike Hambright (30:37.938)
Yeah

it’s all interest.

Mike Hambright (30:52.488)
I don’t know, but probably four five years is my guess. Yeah.

Aaron Chapman (30:55.778)
you’re dead on every four or five years. So let me share an example with you. And this is why you just don’t get caught up in what’s the interest rates and should I refi.

I had a client come to me with a $120,000 mortgage that he had had for four and half, just over four years, or coming up on four years. He said his, his banker retired. His dad is no, had passed, but his dad always said refinance if the rates go down to a certain point, his banker said refinance if the rates go to a certain point. Since those guys were gone, he called me cause he had, you know, heard of me on podcasts and whatever. I said, well, how much cash do you want out and where do you want to invest your money? He goes, I just want to get the lower rate. Well, I explained to him, that’s not a smart move.

and we started looking at it, well he had paid $37,000 in change up to that point in payments over 47 months. But his balance had only dropped by just over $6,000. He had paid the 48th payment before we funded. That brought his total payments over $38,000 and his balance down by about $6,400. Then when we refinanced, those costs were just over $6,000. Where did he put those costs?

Mike Hambright (31:45.99)
Mm, yep.

Aaron Chapman (32:04.418)
You add them back into the mortgage, right? It’s like everybody does. His mortgage was within $102 of the original balance, and he restarted that interest heavy period. He paid out $32,000 in interest just to start over again. Do you think the banks won, or did he win in that environment?

Mike Hambright (32:19.56)
Yeah, wow.

Mike Hambright (32:23.208)
It wasn’t him.

Aaron Chapman (32:24.942)
We as humans are so caught up in staring at the rates that we have become a slave to the banking industry. They’ve already got plenty of slaves. They don’t need us real estate investors to play the slavery game. Let the rest of them get caught up into the crap. So if you’re jumping onto the phone as a real estate investor and say, I’m going to spend the next three days shopping rates and pit these guys against each other, you have now put yourself in a slave position. You are now just like everybody else. You’re not an investor. You’re an opportunivore. And you need to quit it.

You need to stop listening to the David Ramsey’s and the Suzie Armands of the world. Not because they’re not smart people. Not because they don’t have their audience. They’re brilliant people. They have an audience that needs them. You don’t.

Mike Hambright (32:53.897)
Yeah.

Aaron Chapman (33:08.686)
You need to understand what makes real estate investment valuable. You need to understand what is your total value that’s coming back to you, not just your cash flow, and not worry about what the interest rates are doing. There’s too many people that are so interested in timing the market. And they’re sitting back like a star football player, sitting on the sidelines, holding their helmet, waiting for that perfect opportunity to jump on the field and get on the highlight reel. The only people on the highlight reel have their ass on the field already.

And the people waiting for that perfect timing, if the rates do drop, what are they going to do? They’re going to rush the field. What’s going to happen to the price of the houses? Right? You get 1 % drop in interest rate equals a 12 % increase in the price of housing. You’re not winning by waiting for the rates to go down. You’re winning by getting it while nobody else is on the field trying to take it.

And then when those prices go up, what happens to you? You’re not at a 2 and 1 percent appreciation. Now you just saw 12 % appreciation in one year, and you already had the asset. And it doesn’t matter what the rate did, because if the rate stayed the same, your tenant’s paying it. You’re writing it off on your taxes if you did. Getting wrapped up in the interest rates and these lenders that want to say, we’re cheaper on the rate, well, what else are you doing for me?

They don’t understand how to make you successful as an investor. They don’t understand that you need to be setting up an LLC as your own personal lender, an LLC to hold your real estate. Lend yourself the money when you pay cash. And then you get a rate and term refinance to pay that down. I’m not going to go through the mechanics of that. They got to call me, and I’ll walk them through it because I do it every damn day.

Mike Hambright (34:35.215)
Yeah, yeah, it’s interesting. I’ve thought about this a lot. I’ve talked about this a lot lately is I have a rental portfolio in Dallas, single family, do a bunch of multifamily stuff too, but the single family side and the reality is is I had a mentor when I first started, you most of my rentals I bought 2008 to 2012 or 13 and he said in Texas, you should never account on

appreciation, it’s going to be 2 3 percent a year. So you really got to focus on cash flow. And to be honest, these things have never cash flowed as much as I’d hoped they have, but the appreciation has been absolutely insane. And so I think, you know, having that long-term horizon on, I’m not going to get hung up on the cash flow today, but I know the value of these things is going to increase my net worth. It’s not just appreciation, it’s principal pay down, it’s all things you talked about, principal pay down.

tax benefits, like all those things, rent increases over a long period of time. I actually did a couple of case studies for a presentation I was doing a few months back and I didn’t even know, we’ve kind of tracked rent rolls, like my wife tracks, she’s our CFO, so we’ve got so much information. And I went back and like, what did I buy the house for? I pulled up QuickBooks.

Each of our rentals is in its own class. So I kind of pulled up the financials since we bought it. So let’s just say over, you know, 13, 12, 13, 14 years and just looked at the increases in rent, which are like some of the rents have more than doubled. And of course the market value has gone up like.

ridiculously right and then the current value of those if you ran the ARV or just look at the kind of the tax values the Zilla values like all those values has just like gone up incredibly and so at the end of the day

Mike Hambright (36:23.056)
the wealth building is powerful, even though the cash flow has never been as great as I would like. Of course, I’ve also never refinanced them either, exactly what you just said. I’ve just let them pay down and, you know, do I wish I had refinanced them when it was 3%, 3.5%, like maybe, but I didn’t. And so, you know, there’s pros and cons of each of those options, but yeah, playing the long-term game is powerful.

Aaron Chapman (36:46.446)
in refinancing when is the 3 % it’s I mean I always tell me refinance when you’re pulling cash you don’t need the cash don’t refinance I care what the rates are now it’s very alluring to do a 3 % or three and half percent interest rate or something because it feels sexy that I can put that shit on my my grip my headstone I can say I got 3 % because nobody we’re never gonna see it again

Mike Hambright (36:52.348)
Right.

Yeah.

Mike Hambright (37:01.938)
Right.

We’re never gonna see that again.

Aaron Chapman (37:05.966)
And it need people to really wrap their head around it. It’s not going to happen. Anybody who’s telling you otherwise, it’s feeding you hope. And hope is not the greatest business strategy. You need to take advantage of what’s sitting in front of you and the fact that so many people are sitting on the sidelines not trying to compete with you at the deal you’re staring at.

Mike Hambright (37:13.82)
Yeah.

Mike Hambright (37:21.52)
Yeah, yeah. Aaron, I think we could probably do a multi-part podcast. We might have to do that. So if folks wanted to learn more about you, you obviously help a lot of real estate investors get financing and get 30-year fixed rate loans for their rental portfolio. How do they connect with you?

Aaron Chapman (37:37.218)
go to Aaron Chapman dot com. It’s going to stay under construction right now because I moved firms had to change my licensing. It’s right now under construction, but it still works. You still click on the media tab, watch podcasts or whatever. have a YouTube channel. You look me up. There’s only one bearded redneck lender out there doing it. I show you what’s happening in the market real time and how things are affecting interest rates and really our anticipation for and reminding you that it doesn’t matter. So and then you can when you go to Aaron Chapman dot com, you click on the apply now button or there’s a click here.

to go where you can apply which takes you another site where can apply. Other thing is we’re come back on because I got this coming out in the near future. This is the the dummy jacket while they’re working on it but

Mike Hambright (38:13.906)
Yeah.

Mike Hambright (38:17.778)
For those that are just listening and didn’t see you hold up the book there, tell us the name of the book.

Aaron Chapman (38:22.456)
Book is Read in Economics. is unsuccessful success by taking the beaten path. And what I mean by the beaten path is not the path that everybody takes that you can easily see. It’s the beaten path by the one that gives you a beaten, because you’ve got to take beatens to become successful. You don’t get your ass kicked. You’re not doing anything.

Mike Hambright (38:25.106)
Love it.

Mike Hambright (38:41.244)
Yeah, awesome, awesome. Well, thanks for joining us today.

Aaron Chapman (38:44.384)
I appreciate you brother, it’s always good to see you.

Mike Hambright (38:46.224)
Always good to see you and everybody hope you got some good value today on you know, it just takes time to build wealth. It’s not gonna happen overnight, but I can tell you it’s a real thing over a long period of time and if it was easy, everybody would do it. So some of the stuff is hard and you just have to kind of buckle down and bet on yourself and bet on the long run. So appreciate you guys for joining us today. We’ll see you on the next show.