Posted on: February 16, 2022
WI 887 | Rental Portfolio

 

As a way to collate investment assets, the real estate industry uses rental portfolios to catalog an investor’s current or past deals. Rental portfolios are essential in being able to reap monetary returns out of your recorded achievements.  As it implies, this is a long-term agenda. Thus, the group or individual who holds such a collection gets remitted at a much larger scale as well. Is it really all that necessary when you’re already getting a decent profit anyway?

Let us welcome Wholesaling Inc’s newest coach, David Dodge, as he graces us with 5 incontestable benefits of building one as early as your first investment. Throughout the episode, David pitches how quantifying your investments can lead to opportunities for passive income, leverage, wealth, appreciation, and tax benefits. It is the fastest way to get out of the transaction treadmill and let your money do the work for you. Tune in and be one step closer to never having to bargain your time for money ever again.

Getting Off the Transaction Treadmill – 5 Reasons Why You Should Be Building a Rental Portfolio

As always, I’m excited that you are joining us. I have a very special guest with us. This guy who I’m about to introduce you to has been a close friend for a long time. He’s a Multipliers brother, a seasoned real estate investor and most importantly, the newest coach to the show. I’m talking about David Dodge. What’s up?

I’m doing great. I’m so excited. I can’t wait to start helping as many people as possible, hosting, coaching and having this opportunity. Chris, thank you so much.

We are excited to have you. I know anyone that’s reading knows that when we take a look at bringing a new coach onto the platform, our mentality is simple. It’s two words, student first. We want coaches that love the success of our students more than they love their own success. If you have ever coached with someone like that, which shows the coaches we have like Lauren Hardy and Brent Daniels, you feel it because that is a different type of mentality.

David Dodge is king when it comes to building a rental portfolio, particularly in utilizing the BRRRR method. We had a lot of requests for this from the tribe. The tribe is coming in and saying, “We want to learn how to build passive income and be able to know that we can get out of the game at some point and not have to continue to do deals because we have created something that’s going to pay us whether we are working or not.”

As we have listened to your feedback, we knew that the next thing for you was the BRRRR method. We are about helping you do your first. It does not matter if it’s your first wholesale deal, first virtual deal, first deal purchasing land or whatever it looks like. We are here to help you do your first rental portfolio or add your first property to that. We are going to lead you in that direction and help you become successful with it. I would like to get into a little bit of meat here.

That’s my favorite part. Let’s do it.

I was talking to David. I said, “We are going to talk about the BRRRR method. We are rolling you out. I don’t want to talk so much about your coaching program. We will touch a little bit on that. I want to talk about your passion.” How big is your rental portfolio?

Wholesaling is a marketing business. Direct-to-seller is the name of the game.

We have 88 doors.

How long have you been in the real estate game?

I have been in the game for seventeen years and full-time for seven in 2022.

The Transaction Treadmill

You have done fix and flip and wholesale. You name it. All these years, this is where you have landed. You have built everything to continue to strengthen this rental portfolio yourself. I want to know why you are so passionate about it. Those that are listing can open their eyes to what this might look like if they incorporate it into their overall business plan. Let’s talk about the five things David Dodge loves about the BRRRR method. Number one, it creates passive income that gets you off the transaction treadmill. Break this down for me.

Whenever you are wholesaling deals, once you close a deal, you get paid. That’s amazing. I love wholesaling and teaching people how to do wholesale deals. The problem is that you have to start all over essentially. I love rental properties because it spits off cashflow. Cashflow is what’s left after you collect all the rent and pay all of the bills. It is not that difficult for a property to cashflow $400 or even $500 on a single-family home with our lending environment.

If you have 1 or 2 of these properties that are making you, let’s say, $500 a month, that’s $1,000. I don’t know about you but that’s a lot of money. If you have 50 of these things, that’s almost $20,000. That’s a lot of money. The beautiful thing is that you don’t have to be on this transaction treadmill necessarily. Trust me, I love marketing to sellers and doing wholesale deals. I will never stop doing that. The beautiful thing about rentals and cashflow is if I want to go on vacation for a month, which I don’t, I would be okay because there’s cashflow coming in from these rental properties.

WI 887 | Rental Portfolio

Rental Portfolio: Rental properties spit off cash flow. Cash flow is basically what’s left over after you collect all the rent and you pay all of the bills. Also, it’s really not that difficult for properties to do these days.

 

What I love about what you said is it removes you from having to do deals to a place of doing the deals because you want to. Talk about that because that’s a very different drive.

We do a ton of marketing to motivated sellers. Direct-to-seller is the name of the game. That’s what wholesaling is. It’s what it starts with. It’s a marketing business. At this point, I’m not chasing people around and trying to get them to sell me a deal. I’m not going into the bad neighborhoods and looking at deals to get a deal. I can be more choosy and specific with my intentions. At this point, all of the marketing that we do is for rental properties and a little bit of fix and flip. We have three going. We do a couple. Essentially, we keep the best and wholesale the rest.

Anything that fits our buy box for being a good rental or fix and flip, we cherry-pick, that’s the progression that I would love to see the audience do. Start with wholesaling. If you want to start with rentals, that’s fine too, by all means. What I mean is to start with direct-to-seller marketing. When you get great deals, you don’t have to wholesale them. You can cherry-pick those deals and add those to your portfolio as rentals. Number one was cashflow. Those rental properties will spit off income and cashflow.

We are always transparent here at the show. Talk about where you have your rental portfolio income-wise if you don’t mind sharing. You were talking about, “If someone was doing one deal versus this.” It’s the difference in the position that you are in because of your rental portfolio versus someone that is doing transactions.

Most of my portfolio, 90%-plus, is on twenty-year loans, which means that the majority of them cashflow around $300 to $350. I am pivoting more in doing 30-year loans. That’s where you get that $400 and $500 a month in cashflow. To answer your question, I’m an open book. I love sharing and helping people also be able to achieve financial freedom because that’s, in my opinion, what rentals will ultimately do. They give you financial freedom.

I own over 60 single-family homes. I also have roughly about 30 apartment units. My portfolio spits off a healthy $18,000 every month. We have about twenty apartments that we are using the BRRRR method on. We are not going to have any of our own money in them at the end. It’s such an amazing strategy. Once we get through these next couple of rehabs over 3 or 4 months, the passive income from the cashflow should be in excess of $22,000 a month.

Someone could do a deal every single month and make $15,000 to $20,000 on a wholesale deal. You said, “If I did not want to that month, I don’t have to do a deal. I can do whatever I want.” There’s that freedom. Talk about that piece and that ability to know that you can do that.

If your passive income is at or above what it costs you to live every month, then you don’t need to trade your time for money anymore.

That’s the beautiful thing. I still love doing deals, so I will, but I don’t have to. I don’t necessarily try to be at the office after 5:00. I want to be home with my wife and hang out with my friends. I’m still doing marketing and deals, but I don’t have to. I can turn it off. If I do want to take a long trip or vacation, I’m not stressing the whole time that I’m gone because we have these rentals that pay us every single month. Essentially, it’s also another tool to get paid via sleep. If you are only getting paid from trading time for money, then how much time do you have?

If you can build a business or a portfolio that pays you to be absent, then now you can create financial freedom. For anybody reading that does not understand financial freedom fully, let me give you the simplest definition. If your passive income is at or above what it costs you to live every month, then you don’t need to trade your time for money anymore. You could quit your job. You don’t need a job. I do this full-time because I’m trying to scale my passive income to $100,000 and $200,000 a month. I got a ways to go. I’m just getting started. You don’t need to think that big necessarily if you are brand-new. You can do this with 1 or 2 properties. If you want to scale it, I’m here to help.

All About Leveraging

That’s number one. It’s solid and very intriguing. Who does not want to be able to wake up every day and choose what they want to do? That’s ultimately what freedom is. It’s the ability to choose. Number two, it creates leverage to expedite the growth of your organization. Talk about this.

What we do at the end of the day is buy, own and control assets. If you are unfamiliar with what an asset is, the simplest definition is it is something that puts money in your pocket routinely. That could be monthly or quarterly. A type of asset could be a piece of real estate or rental property. It could also be a stock that pays a dividend. The problem with the stock that pays a dividend is you have to have the money to buy it. You can use some leverage like margin but you are not getting a multiplier. Typically, you put $100 and then you can buy $160 worth of stock. That’s not that exciting. I want to be able to buy a $100,000 piece of real estate with none of my own money.

The cool thing about leverage is you can leverage every step of the way. Here are a couple of quick examples. I’m leveraging virtual assistants to help with my marketing. I’m leveraging private money and hard money lenders to buy my deals. I’m leveraging general contractors to rehab my deals. I’m leveraging property management companies to manage my deals. I’m leveraging bank financing or credit union financing to refinance my deals. I’m leveraging my team to be able to repeat this process. It’s not just one at a time. I have fifteen going through my system.

Leverage is huge. Leverage is what allows you to grow at a faster rate. Rather than taking step-by-step or plus, you can go multiplication.

WI 887 | Rental Portfolio

Rental Portfolio: If you are only getting paid from trading time for money, then how much time do you have? If you can build a business that pays you to be absent well, then you can create financial freedom.

 

I personally don’t know of any asset that you can buy with little to none of your own money. The beautiful thing about rental property is you can do this and be all in at the end with none of your own money out of pocket. It’s truly amazing. You can’t do that with stocks, bonds or any other asset class. You have to have the capital to do it. In this model, you don’t have to have a ton of capital. I love that about it.

Non-Taxable Wealth Creation

Particularly for all of us, we go back to when we started the real estate game. You might be starting as you are reading. We don’t have money. We have time. We have to spend that time to create money so that we can do the things that cost money, like marketing. For those of us that are listing and are newer, it’s like, “I have got time. I don’t have a lot of capital. I can start to build this rental portfolio via the BRRRR method.” That’s the position that almost all of us are in when we started as entrepreneurs. Let’s go to number three. This is a big one for you. I know you love the phrase wealth creation. It’s even more than that. It’s wealth creation that’s not taxable. Talk about why you love this and explain it a little bit.

This might be my favorite. Who does not want financial freedom? You need cashflow to do that. You need income to pay your bills. My bills are about $7,000 a month, which might be triple what some people’s is. Some people may be reading and being like, “That’s nothing.” It’s all relative. If you are bringing in $18,000 a month, that’s $10,000 to $11,000 extra on top. The great thing about wealth creation is it is non-tax. Years ago, I had an epiphany and I was like, “The more I make, the more money I have to give Uncle Sam.” That’s everybody. I’m not special. That’s the way that it is.

I started thinking to get wealthy and not just get rich temporarily. Rich, in my opinion, is temporary. Wealth is long-term. To be able to create wealth and do it without already having a lot of wealth is such an amazing strategy. Whenever we go out and buy a rental property, we use the BRRRR method specifically. We don’t have any of our own money or very little of our money in it. In the end, we have essentially used the equity that we captured in the deal as the down payment. That’s how we are able to acquire it. Here’s the coolest part about this. The equity that we captured is wealth. You can cash out on that and also borrow against that if need be.

That’s the leverage piece that you were talking about.

You can leverage against your equity, sell the property, get a line of credit and refinance it. There are so many different ways to leverage against it. Here’s the thing. When you create and capture equity, you are creating wealth. Here’s the best part. You are not taxed when you create wealth. You are only taxed when you create income or earned income. I like to say created because most of my income is passive at this point. That’s the goal at least.

To wrap up wealth with a funny little thing, when you ask most people, “How much do you think you pay the government in taxes?” Most people are going to say, “It’s 30%, 35% or maybe 40%.” That’s going to depend on your tax bracket but that’s where it stops. People don’t think beyond that. They are not wrong but they are not right. Here’s why. You are taxed when you earn the money somewhere between 30% and 40%.

Getting rich is temporary. Wealth is long-term.

You spend that money on a house, plane, boat or RV. You have to pay a tax every year to own that piece of property. You are taxed in perpetuity on the things that you use the money to buy with. When you go into the grocery store and get your groceries or go to the gas station and get your gas, you pay sales tax. I don’t know about you but I pay about 10% in sales tax. There are additional taxes that you have to pay.

At the end of the day, the effective rate that we all pay in taxes is over half. It’s even closer to 60%. Would you rather have $200,000 worth of income that you get to keep $80,000 of or $200,000 worth of equity capture that you get to keep $200,000 of? You don’t have to pay one penny, nickel, dollar or anything in taxes on this wealth creation. You can leverage and borrow against that wealth down the road. That’s a little bit more of a 2.0 course. It’s a little bit more advanced.

When I borrow against the property, that right there is not income. It’s debt. There’s no tax. Wealth in general, is my favorite thing. It’s not because I’m cheap. It’s because I’m smart in a way that I know that the biggest expense for every one of these readers is taxes, like it or not. What can we do to minimize or, in some cases, reduce it? It’s rental properties. Wealth creation is my favorite thing when it comes to rental properties.

Appreciation Is Icing On The Cake

Number three, you came with a punch. Let’s go to number four. Appreciation is the icing on the cake when it comes to this whole rental portfolio and the BRRRR method that you are teaching. Talk a little bit about that.

Appreciation is the icing on the cake. What I mean by that is I never buy a property to bank on it and appreciate in the short term to make a profit. Instead, it’s icing on the cake for me. I don’t factor in appreciation in any of my formulas or when I’m doing due diligence. What is appreciation? Appreciation is when you own a piece of property and over time, the cost of all of the properties goes up. The value of those properties goes up.

What you are going to see is the appreciation is going to be at or above what inflation is typically. Inflation over the last years has been higher than normal. Also, the value of all of the real estate is appreciating a little faster. I don’t bank on it but here’s a quick little statistic. From 1968 to 2004 was a 36-year period. We saw an average of 6.5% appreciation every single year. Some years, it’s more. Some years, it’s less. Some years, they won’t appreciate it if you have a dip or something like that.

The great thing about appreciation is if you have a long-term mindset, which I challenge everybody reading to think about. Don’t think about the next six months from now or even a year. Think 5, 10 to 15 years out. Over that amount of time, it’s almost guaranteed that the cost of real estate is going to be more, especially with the way that we have inflation going. Don’t bank on it. I don’t suggest you do. If you have a long-term mindset, the value of your properties will increase.

WI 887 | Rental Portfolio

Rental Portfolio: When you buy a property with the BRRRR method, you have used the equity that you captured in the deal as the down payment. That equity that you captured is wealth. You can cash out on that if need be.

 

Writing Things Off

That’s a nice kicker to this whole methodology. It’s the icing on the cake. It’s one more reason or stamp on why this is a great strategy for building long-term wealth. Let’s bring it home with number five. There are a lot of tax benefits when it comes to owning rental properties that put more money in your pocket. That’s a little bit on this because this is huge. It’s the ability to write things off.

I talked a little bit about how when you create equity, it’s tax-free. It’s not income. It’s wealth. That’s part of the tax benefits but there’s more. Whenever you own a piece of real estate that’s a rental property, you can’t do this with your primary residence. With any property that is not your primary residence and that’s rented out or focused on as a rental property, you can depreciate that property. This is a tax term. What that means is you can write off about 1/27 of the value of the structure. You have to discount the land, neither here nor there.

Let’s say you have a $100,000 property. You can write off roughly about $2,000 on your taxes. That’s not the exact math. I’m just using simple numbers here. That’s a phantom expense. You have your income and expenses. They net out a number. That’s what you pay your taxes on. You can increase your expenses without having to spend money because you own this real estate. The reason that you get this tax benefit called appreciation is that the government wants to incentivize any investor that is providing housing to the nation and your fellow Americans.

They figure, “If you are renting out this property, you are going to have wear and tear.” They say, “We are going to reduce your taxable amount because you may or may not have to spend money to fix these properties up over time.” We are good about making the tenants cover all those expenses, so we don’t have to come out of pocket. You may from time to time but ideally, you don’t. You still get to write that depreciation off.

The cool thing is if you are a part-time investor, the appreciation will offset the income that you are making on the property. If you are a full-time investor, the depreciation will offset any and all of your income. It’s amazing. The tax benefits are huge. I barely pay any taxes. I don’t even understand how it’s legal. I don’t even necessarily agree with it being super fair but it’s the rules and the law. I’m playing the game the way the game is supposed to be played and the way that the wealthy play this game.

I love it. I’m not going to stop. I’m not trying to tell them to change the rules but it is a little unfair when you have somebody working at a fast-food restaurant or anywhere. They are grinding and working hard. The government is taking 50% of their money. We can use our brains, be smart and get into assets and investments that essentially reduce the amount of taxes, so we are able to keep more of it. All of these combined are so amazing.

Recap And Coaching

Let me recap these for the readers. Number one is rental portfolios, rental properties and the BRRRR method. Create passive income that gets you off the transaction treadmill. Number two, you are able to gain leverage to expedite your growth. Number three, it provides wealth creation that’s not taxable. Number four is appreciation, which you call the icing on the cake. Number five is tax benefits that put more money in your pocket.

Never buy a property to bank on it appreciating in the short term to make a profit. That’s just icing on the cake.

Those are the five things that you personally love most about the strategy, which is awesome. Let’s transition here. You are now a coach with the show. We are so excited to have you. People are reading. They’re like, “I have been waiting for this.” You might have been the person that posted this in the Facebook group for Wholesaling Inc. or mentioned it to one of us.

As coaches, we are listening to you as an audience. For those reading, what differentiates this program? What differentiates you as a coach? There are two parts to it that make a great coaching experience. Number one, the coach is providing great content and number two, the coach themselves. Those are the two things that determine this experience. What are your differentiators? Why should someone go onboard with David Dodge to learn this process?

Here’s the thing. It’s student first. I’m financially free. I’m going to keep growing, but I want to try to help as many people as I possibly can quit their job and also become financially free. Maybe they are already a full-time investor but they are on that transaction treadmill. With rental properties specifically, using the BRRRR method is super scalable. My program, BRRRRMethodMastery.com, is going to forge you over to Wholesaling Inc.’s website, where you can learn more. It’s not necessarily for people that are looking to use the BRRRR method. That’s part of it. If you don’t own a rental and you want one, we will help you with that too.

The BRRRR method is such an amazing method because it’s scalable and simple. It’s so scalable that you can do this method with 15 or 50 properties at the same time. If you want to do one, that’s fine too. I go above and beyond to help all of my students and put them first. I don’t do one call a week. I don’t think that’s quite enough, personally. I do two calls a week with my students. Additionally, I let them come to the meetings that I have with my acquisitions guy, dispositions guy and my entire team. We do this twice a week. I allow my students to be a fly on the wall.

They can watch your business, how it’s operating, how you are doing deals, what’s good that day on the wins and what’s the struggle and challenge for that day. That’s like being in your office.

We are not just landlords. The BRRRR method is a strategy that you can use to acquire a lot of assets rapidly with little to none of your own money. We also do wholesale and fix and flip. We also love buying rental properties. The great thing is they can be a fly on the wall and see the entire business. At any given time, we have a couple of wholesales going and are in the process of buying a couple of properties. Sometimes there are headaches but you can learn a ton from that.

At any given time, I have anywhere from 10 to 20 rehabs going. We have talked through each one of these, “What’s going on?” If you follow along, you can learn a ton about what’s happening. Sometimes there are headaches and hiccups. We talk about those and you can learn a ton from them. There’s property management. Sometimes a property we will rent right away. Other times, we may have some challenges there. You can learn a ton from that.

WI 887 | Rental Portfolio

Rental Portfolio: Any property that isn’t your primary residence, you can depreciate that property. Now, this is just a tax term but what that means is you can write off about 127 of the value of the structure.

 

Last but not least is dealing with the banks and pushing these properties through. There are certain things that you want to stay away from, want to do, and can do to make this process even simpler for you. We cover all of that and essentially allow anybody and everybody that’s a student to come in, be a fly on the wall, and take part in our meeting. Directly after that, we open it up for education on a particular topic or general Q&A for anybody that has questions about what we are doing in our business but more importantly, what they are having struggles with within their business.

I’m going to speak on behalf of David. I know you well. We spent a lot of time together and traveled around the world. We have been down to Costa Rica together and on some fun adventures flying fighter jets and shooting tanks. I was there when David shot his first flamethrower. He almost set his feet on fire or something crazy. I know David. David is the real deal. You will be hardpressed to find someone that is more genuine and sincere.

I got to be honest with you. He’s a super motivator. That is his superpower. David is the person you get around. When you are done, you feel better about yourself and you feel like you can go conquer the world. I feel that’s how a coach should make you feel. He has been that before he was ever a coach. In my opinion, it’s what makes him such an exceptional coach. David, we are excited for you to be a part of the tribe.

For the rest of you reading, if you are interested, you want to begin by asking questions. As always, book a call and do due diligence. You can go to BRRRRMethodMastery.com. Book a call and David Dodge can help you do either your first deal on a rental portfolio or rental property or number two, help you elevate your game. It’s either one. He’s here to help both. David, thank you so much for coming on. We appreciate you. I look forward to you helping a lot of students.

Thanks, Chris. I appreciate you.

To the rest of you, as always, thank you so much for joining us. We will catch you soon when we add more value. I will talk to you later.

 

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About Lauren Hardy

Lauren Hardy is a Virtual Investing expert and Real Estate influencer who owns multiple companies in the real estate industry including real estate investment, coaching, and software companies. She is also a Wholesaling Inc coach and co-host of the Wholesaling Inc Podcast.

Her experience in the last decade has been focused on real estate investing and creating products and services to serve the real estate investing community. If you are interested in investing in real estate virtually, house flipping, or virtual landlording, Lauren’s your girl.

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