Subscribe via:
Show Summary
In this episode of the Real Estate Pro Show, host Erika interviews Aaron White, a real estate investor and realtor who shares his unique journey into the world of real estate. Aaron discusses his initial challenges, evolving investment strategies, and the importance of networking. He highlights current market trends in Houston, the significance of having a long-term vision, and his focus on multifamily investments in tertiary markets. The conversation emphasizes the value of education, planning, and building a supportive network in the real estate industry.
Resources and Links from this show:
-
Listen to the Audio Version of this Episode
Investor Fuel Show Transcript:
Aaron White (00:00)
Yeah, so I think we’re seeing one of the best buying opportunities in Houston that I have seen since I’ve been here in 2014, right? In terms of purchase prices, the ability to negotiate even a little bit, this is by far the best market. And we’re not talking huge, huge discounts on turnkey properties, right? Turnkey properties on average, like a good discount here in Houston is five to 7 % off the list price. It’s not like crazy, crazy low, right?But nonetheless, in Houston, normally there are no discounts. Oftentimes, the normal market here is to go above asking, right? And we’re very close to asking price in the market. So on the buying side, it’s a great opportunity, whether it’s single family or multi-family, and we help clients find both, right? It really boils down to what is their end goal, right? A good deal is not a end goal, right? And I always try to understand what is the metric you’re looking for?
cash on cash return? Is it know cap rates? Is it a specific dollar number by a specific time you want to reach? And how do you plan on getting that goal? Then it makes it much easier for me to go out and find those properties and bring them to my clients.
Erika (02:47)
Hey everyone, welcome to the Real Estate Pro Show. I’m your host, Erika, and today I’m thrilled to be joined by Aaron White. He’s carved out a unique path in real estate and investing. Aaron, I’m so glad to have you here.Aaron White (03:02)
Glad to be here, Erika. Yep, thanks for having me.Erika (03:05)
Yeah, so let’s dive on in Aaron for our listeners who don’t know your story yet. Can you give us the rundown? How did you get started in the real estate world?Aaron White (03:16)
Yeah, it wasn’t by choice actually. It was more by force. ⁓ I guess we bought our first house to live in in 2008. It was April of 2008. If you remember in May, Obama had announced that they were going to give 10 grand to anyone who buys a house and was like, looks like there’s blood in the water.Our house had lost 70 % of its value within 12 months of when we bought it. Of course, the weight was rough. Fortunately, we didn’t need to move, but in 2014, we did need to move. I just had a new job in Houston. so we moved from Georgia to Houston and we couldn’t sell it, right? So we ended up renting it out because at least the rent was covering the mortgage by $100 a month.
We took the first tenant that applied. I wrote every rule in the book of what not to do on rental properties. ⁓ The first tenant was a nightmare. It was still today the worst and most expensive tenant I’ve had.
And ⁓ they trashed the place. And anyways, when I fixed it up, realized, two years later I fixed it up and I realized, hey, rents have gone up. I can afford this bad tenant once every two years. Maybe I can actually make money through rental property investing. And the light bulb kind of went on, right? And I realized I was completely uneducated. And fortunately, I had a really long commute back and forth from work. So I started listening to all sorts of podcasts, reading all sorts of books, different things like that.
and ⁓ got inspired, right? And so ⁓ in 2018, ⁓ my wife lost a bet. She read Ridge Dead Poor Dad and ended up getting into really looking for more rental properties. So we did our first burr. I found the ugliest house I could find. A lot of smoke in the walls, everything like that. Got into different active investing strategies, one so forth.
They were quite time consuming as an employee, right? And I got wore out. Uh, essentially I realized like, Hey, this is cool. You can actually do the things in the podcast. You can actually find the hard money lenders. You can actually close deals like this and have equity on, you know, day one when you buy this. But, uh, I was looking for something more passive cause I was a W two employee and I read the book in 2018, the book on rental property investing by Brandon Turner as well. And I loved how he talks in that book. There’s a lot of.
stuff in that book but the one of the things in that book is he talks about a rental strategy for somebody who makes good money as W-2 and you can make good money as a W-2 or you can make money through active real estate investing and if you’re making money as a W-2 you can set aside X amount per month and make a plan to make X amount in revenue and work backwards and that working backwards idea was just so cool to me right so we put a pen to paper there and we ended up building
a plan essentially to work backwards from that goal, which was awesome. And that’s where we really kind of made that stick at that time. So yeah.
Erika (07:04)
Yeah, that’s a it’s really exciting. And, you know, you’ve you’ve been in the game for a little while now. So with your investment strategy today, how how has that evolved and what’s your primary focus now?Aaron White (07:18)
Yeah,so I guess I left my W2 last year.
⁓ I had gotten a realtor license maybe four years ago, give or take, and we had been working on the side, just finding deals, rental properties, and also just helping friends and families as realtors. My wife and I are both, right? So last year, both of us left RWB2, went full-time into working as the realtor business, right? One of the areas that we saw opportunity in that business was that
there wasn’t really anyone that could help, at least that I found, could help a rental property investor if they were a W-2 employee, right, and make it easy for them, right? And so we’ve built our business now to where 90 % of the work we’re doing is the realtor business, and we are targeting the niche of a W-2 employee who wants to build wealth through rental property investing and work backwards, right? So we’ve created an Excel model here in Houston where we are
where they say, this is how much I want to make. This is how much money I’m willing to set aside each month. And then it gives them a plan. It answers a lot of the unknowns. How many houses do you buy? What types of houses? What is the criteria for those houses?
and it walks them through a step-by-step plan. Year one, you buy one. Year two, you buy zero. Year three, you buy one, right? To get to that end goal, essentially. And so it simplifies things for them. And then we have crystal clear criteria of what to look for for them. ⁓
I’ve been playing around with lot of AI tools. I’m not a coder or developer, but my brother is. And he’s shown me kind of how I can get something started and he’s helped me debug some things. But it’s an exciting software that we’re getting into this year that helps us find deals for our clients much easier. So here in Houston, we have like over 400,000 listings, right? And it’s hard to…
to find rental properties is one of the biggest tasks I had as a W-2 employee. So this software essentially scrubs all sorts of stuff, looks at a rough rent number that still needs to be validated by a realtor.
but it gives a starting point for investors to go look at and say, hey, I want to see this, this, this, this. And then we go run, you know, final numbers, check things. Think of it like a mini local ⁓ deal finder for rental property investors that have a W-2. They’re looking for cashflow. It precalculates the cashflow with taxes, insurance, HOA, all of that. But because we know what they’re looking for, because we have a plan, it opens an opportunity for repeat business. And we just work as realtors helping people
buying houses, right? On the investing side, today I’m looking at multifamily properties in tertiary markets. So like two hours plus outside of Houston most of the time. And we’re just looking for distressed properties that are run down or have lower rents, right? Because they’re run down or not or just how they’re being operated and ⁓ interning those. Those are a two, three year process of essentially bringing that property up to par.
So yeah, that’s a little bit of today.
Erika (10:30)
Yeah, wow. There’s so much going on there and there’s so many possibilities with the AI, whether it’s the AI or ⁓ what you have going on as an investor or as an agent. Are there specific market trends that you’re seeing that make single family or multi-family properties attractive right now?Aaron White (11:27)
Yeah, so I think we’re seeing one of the best buying opportunities in Houston that I have seen since I’ve been here in 2014, right? In terms of purchase prices, the ability to negotiate even a little bit, this is by far the best market. And we’re not talking huge, huge discounts on turnkey properties, right? Turnkey properties on average, like a good discount here in Houston is five to 7 % off the list price. It’s not like crazy, crazy low, right?But nonetheless, in Houston, normally there are no discounts. Oftentimes, the normal market here is to go above asking, right? And we’re very close to asking price in the market. So on the buying side, it’s a great opportunity, whether it’s single family or multi-family, and we help clients find both, right? It really boils down to what is their end goal, right? A good deal is not a end goal, right? And I always try to understand what is the metric you’re looking for?
cash on cash return? Is it know cap rates? Is it a specific dollar number by a specific time you want to reach? And how do you plan on getting that goal? Then it makes it much easier for me to go out and find those properties and bring them to my clients.
Erika (12:43)
Yeah, and having that kind of clarity with what these W-2 workers want and need is so important. How do you balance the long-term vision that they have and then keeping those clients motivated in the early stages as you’re working with them?Aaron White (13:04)
Yeah, good question. I do see like a lot of people have the idea, like I want to be an investor. And then they realize, well, the money’s not quite as good as I thought. maybe their tenants are a little bit rougher than I thought, or we have problems, so on and so forth. So people fizzle out, right? And I think what helped me see that rental properties made money was time.And second of all is a vision. So when I read that book and I realized in 2018, like, hey, you can actually make a plan and work backwards and be a multimillionaire or make multiple six figures a year. And it wasn’t rocket science. You literally just need to be disciplined and create the systems to do that. That was to me inspiring, right? So that’s why I love to always have a conversation in the beginning, like, hey, what is it you’re looking for and what do you want to get out of real estate? And that’s what I had a problem with when I started with real estate was like,
because I hadn’t set expectations from real estate, I kept passing up on deals, not knowing really whether a deal is good or not, and it’s analysis paralysis. think every investor struggles from it at one point or another, but you gotta put it down on paper, and it’s really important to do that. So, like you said, having that long-term vision, I think, inspires people to keep going, and knowing that…
These things are normal that you face, the bad tenants or whatever that come across. Hopefully you have less of them because you’re screening them, right? But yeah.
Erika (14:33)
Yeah, for your clients who are new to the game, are there specific types of strategies that you use to help them when it comes to acquiring these properties?Aaron White (14:44)
In terms of acquiring…Most of the stuff as a realtor, we’re looking at on market properties, right? We’re not really getting into off market properties. ⁓ I do still have some websites and leads that come in from other businesses I’ve kind of worked in parallel in the past and the SEO just still works great and brings us potential properties that we could wholesale to a few clients. So something that we do most certainly, we also run into a few prospective sellers where like I’m talking
I’ll meet with one later this week where…
it’s know a probate situation, it’s run down, it needs work, it’s not going to get approval with a loan right, an FHA or conventional loan because it just has it has things like leaks in the pipes or a leak in the roof and the lender will never approve that. It has to be a active investor that buys this property that’s going to burry it, that’s going to flip it, something like that right and so we of course keep that in mind as to the appetite of our our clients that we have.
and bringing them those deals as well when they do arise.
Erika (16:33)
Yeah, yeah, absolutely. So I want to pivot a little bit and talk more about the, you know, your own investing side. You know, every investor has a story where things didn’t go planned, a deal that went sideways or a moment that tested your resolve. Aaron, can you share one of those moments from your journey and what you learned from it?Aaron White (16:55)
Sure, sure. I would say my first one was probably one of the worst ones that we had there in terms of experience because it was emotional for us, right? ⁓ When we moved to Texas, we just didn’t have a lot of savings, right? And I had a job and finally we saved up a little bit of money, but that first tenant… ⁓I mean, it cost probably 11 grand to fix that house because they just smoked so heavily in there and trashed it so badly. It was a small little house, right? 1200 square foot house in Georgia.
And so it was quite a bit of work for that small of a house. And at the time it was, I think, the most emotional that sticks to you, right? That, ⁓ because you and your wife are dealing with this and you’re stuck in this situation, you can’t go to McDonald’s this week because you got to fix up a house that’s, ⁓ that is what it is, right? So anyhow, I think ⁓ that experience taught me a lot.
I learned the value of doing proper credit checks. I learned the red flags that I didn’t do on the first one. ⁓ We learned the most through that process.
and realized also from talking to other friends that many had done it for 11 years and never had one that bad, right? So it’s an anomaly that had occurred. So networking and understanding what is normal in a rental property and what is not was a really critical lesson. Second of all, understanding like, because rents do go up and the things that I am reading in books are actually true. Like rent does always go up. Home values eventually always go up.
lulz but they eventually go up. That helped us a lot. Of course we’ve had other properties like the burb properties we did, the smoking cat lady, you walk in and you smell that ammonia so and so for us right, but we chose those problems.
And I’ve learned a lot through contractors and things that you deal with. Never hire the lowest one. They’re always trouble, right? If they’re a lot lower, there’s a reason. So we added an extra month and a half to that project and a lot more cost too in terms of getting work done or not getting work done, right? And so it’s how to work with contractors, how to set expectations, what is a good job, finding good contractors via referrals and network.
I would say to other investors, your network, I mean you always hear your network is your network, but I think what you don’t get out of it is like your network is to help you through problems. If you know somebody who’s been through a problem can give you a referral for a contractor and they’re reliable, that it’s just worth so much, so, much, because you avoid all those problems that you face. So go out and talk to a lot of people, that’s what I would say.
Erika (19:44)
Yeah, I wow, I found that so fascinating that with that, know, that in your story was sprinkled the importance of networking. And for our listeners who are looking to level up and they know they need the network, but they’re, you know, not sure where to go or how to do that. What kind of advice would you give them?Aaron White (20:05)
absolutely. So in most city, there’s different programs like Eventbrite that if you just search REI investing or real estate investing, you can find a lot of different groups around you. Another great resource is Facebook.Just research Facebook your city name and oftentimes you’ll see different groups of investors hop on there They’ll have different deals and things they’re talking about but you can say hey what kind of groups are in the area? Where are the meetups so and so forth? It’s a great way to go physically meet people right and talk to people If you’re in the Houston area, of course reach out to me, too I’m involved in a few of those as well and can get you plugged in for sure. So, yep
Erika (20:48)
That’s fantastic. And Aaron you had mentioned to me earlier that ⁓ you have the plan to get more into multifamily, which is so exciting. Can you share more about what that looks like for you? Are you planning to scale your portfolio, take on more clients or maybe explore new markets?Aaron White (21:07)
Yeah, absolutely. So I bought my first multifamily a couple years ago.And it was a learning experience because it was actually that house in Georgia that I sold that I had initially I sold it, right? So it had gone down 70 % from the 113 K that I bought. We ended up selling it and making a couple hundred K off of it, right? Which is great. We moved that into a quadplex. the quadplex, I learned a few things like, Hey, that, that tenant turnover time, you can’t go in and flip it like a house where it’s just clean and done, right? You flip one unit, you fix up some things on the outside.
and some systems, great. But then there’s still a trashy tenant next door and so you have trouble filling all your units until you finally roll through getting everything there, right? But we pulled the rents up, we almost doubled the rents, but.
90 % increase in the rents from where they were because we basically flipped each of these units, we put new roof on, put new water heaters in, had new stuff, safety stuff in that property that just wasn’t built proper railings and so on so forth, right? And ⁓ get it to where it’s running properly now. So we’re focusing more on finding properties like this. That’s in a tertiary town in Georgia, it’s small little town, right? And we often look in those towns of like two to 7,000
people
where ⁓ there’s a multifamily property kind of like that. It needs distressed work essentially. It’s a two to three year play where we put some money into it and then we refinance out of it, pull our money back out. It’s like a burr but longer right because the banks want to see it.
seasoned and running properly, especially in these markets. know lenders are leery of multifamily, ⁓ yeah, there’s a great opportunity to find properties now because of that. yep.
Erika (22:56)
Yeah, that’s exciting. And going out further into those tertiary markets, how are you finding these properties knowing that it’s harder to have boots on the ground, so to speak?Aaron White (23:10)
Yeah, so ⁓ property managers are a valuable, valuable tool, right? And having a few planned questions that you’re gonna ask property managers is really important. So ⁓ oftentimes the seller…The seller’s agent can connect you with the existing property manager who you probably don’t want to use because it’s not being necessarily run correctly. But sometimes you just have an investor that doesn’t want to cough up the money for repairs, right? And that’s the case. And then they can also connect you to other folks in that city that are there. Most of these towns, if you just Google search property manager, there’s like two or three that pop up.
And ⁓ you start asking a few questions and they can tell you a lot. What’s the potential rent? What needs to be done to this area? You know, we saw one that looked amazing. Like it’s like a 14 % cap rate. But I called like three property managers and they’re like, you don’t want to buy that property.
Right? Like they don’t want to manage it. there’s just too much violence, drug use, other problems in that town. There’s no new jobs. It’s actually, things are closing down. Supermarkets are closing down and you can avoid pitfalls. Right? A lot of times there’s a reason that it’s a 14 % cap rate or 15 % cap rate. Right? So it’s really just about making some phone calls and figuring out
like what’s actually going on right in those neighborhoods ⁓ to move things the right direction.
Erika (24:42)
That’s so insightful. Aaron, before we wrap, if someone wants to reach out, learn more about your approach, or maybe even work with you, what’s the best way to get in touch?Aaron White (24:53)
Certainly, yep. You can go onto our website, it’s ALISTTX.com, so it’s A-L-I-S-T-T-X.com, or if you search Aaron A-List on most of the social, that’s my handle there, and a great way to connect, for sure.Erika (25:11)
Aaron, thanks so much for dropping all this knowledge today. It’s great that you’re helping make real estate investing accessible to people and helping change their lives with that.Aaron White (25:22)
Yep, absolutely. Thanks for having me, Erika. It was great meeting you.Erika (25:25)
And for everyone tuning in, if you got value from this episode, make sure that you’re subscribed to the Real Estate Pro Show. We’ve got more conversations coming up with pros like Aaron who are building wealth the smart way in real estate. We’ll see you on the next episode.Aaron White (25:41)
Great, thank you guys.
