Posted on: March 10, 2022
WI 904 | BRRRR Method

 

Wholesaling is the art of finding discounted properties. It goes beyond just assigning your interest in a contract to somebody else for a fee. In wholesaling, what matters the most is you close shiny deals that will then unlock the door to unlimited finances!

BRRRR expert David Dodge will keep your engines running as he gives you the secret sauce in wholesaling 101. He has done over 700 wholesale deals and owns 88 properties—BANANAS, RIGHT?! Learn how to find discounted properties that work best for you and your business in this exciting episode.

From Doing Over 700 Wholesale Deals To Owning 88 Rental Properties Using The BRRRR Method

Episode Transcription

This is going to be the perfect conversation for something that I have been talking about for the last few years and that is if you start out and you’re building your real estate business, portfolio, and experience, start out very simply by finding ugly houses and getting big checks. What I’m saying here is focus on sourcing discounted properties, finding these properties, wholesaling them out, getting that income in, so that you can then not go and spend it all, but pay off your debts and then invest that money into assets.

I’ve got the perfect example of this. He’s going to give us an incredible blueprint on how to do this. He’s done over 700 wholesale deals. He owns 88 doors. He’s done 200 BRRRRs, which is buying, renovating, renting and refinancing them to pull his cash out. It is Mr. BRRRR Method himself, my great friend, David Dodge on the show. David, how are you?

I’m doing awesome, Brent. Thank you for having me and for those kind words.

I love the strategy and what you’re doing. You are now at $18,000 in passive cashflow a month from your investments. Not only that, but all of those investments every single month are getting paid down lower, so your equity is increasing. Appreciation is taking effect. Depreciation affects your income taxes. You’re doing all the right things. How did you come to this? You were a pilot several years ago and now you’re a real estate mogul. How does this happen and how do we do it as well?

You said a great and important thing. We all should start by finding motivated sellers and buying discounts, Brent. You nailed it. That’s how I started too. When I went full-time that is, I was like, “I need to find these motivated sellers. I need to get discounts,” because if you don’t have a discount, it’s difficult to make money no matter what strategy you’re using in real estate.

If you have a discount on a property, it makes everything so much easier. I’m out of the Midwest in St. Louis, Missouri. This market that I’m in is it’s a great market, but it’s not a high price market by any means. As you had mentioned, I’ve done hundreds of wholesale deals, but in this market, the one I’m in, $20,000, $30,000, $40,000 wholesale deals are hard to come by.

We can find those. I’m working on one right now. That’s about $40,000, so it’s an awesome one, but the average wholesale in my markets, usually somewhere between maybe $7,000 and $12,000. That’s our standard average wholesale deal. If you have a team, you can do more deals, but you also have more overhead. I was tired of being on the transactional treadmill. That’s a great way to describe it. Once you do a wholesale deal, it’s great, you get paid. It builds confidence, so you can go do more, but you’re starting all over every time that you complete a deal.

I was trying to figure out a way to make the money keep coming in as well as make money while I sleep. That’s where landlording came in and it is the name of the game. That’s what my passion is. The BRRRR method is a strategy to acquire a lot of real estate very quickly. The coolest part is you can do it with little to none of your own money when you use this strategy.

That’s what happens. We read Rich Dad Poor Dad. Robert Kiyosaki’s talking about his rich dad talking about all these assets that he owns, he’s driving an old truck, he’s living in a nice house, but nothing that’s going to be called luxury and he’s building up his assets. There’s a difference between being rich and being wealthy. Rich is that you make a lot of money. You’ve got a lot of money coming in. What are you doing with that money? Are you spending it? Is it going to interest payments for debt that you have or is it going to investments?

Anybody can look it up and it’s worth the Google is, the average person in America, how much is it spent paying taxes and interest? You’ll find out it’s January through October. What do you do? Do you have to increase the amount of income that you have coming in and decrease the amount of interest that you’re paying on your debts? The best way that I have ever seen to be able to do that is to wholesale real estate, earn that $10,000, $20,000, $40,000, do that consistently, then all of a sudden, you’re out of the rat race. You’re able to do it full-time if you weren’t able to be able to do that before, and then you find, “I built an ATM machine or cash machine here. What do I do with it?”

People want to work with those they know, like, and trust.

You are saying, “I’m going to go and I’m going to put the profits that I’ve made from the 700 wholesale deals that I’ve done, I’m going to go and buy properties.” Not only am I going to buy properties, but I’m also going to buy them at a discount. I’m going to fix them up, rent them and then I’m going to refinance, and get those funds out of those properties, in most cases, I would assume. I’ll let you give me the whole breakdown of that process. Now, you’ve got that money to go put it into another property and this is how you build up a huge portfolio.

The best thing about using the BRRRR method to buy rental properties is that you can do it 100% with other people’s money. In fact, the last 100 properties that we’ve used the BRRRR method on, we’ve done none of our money. I don’t own all of them, I sell them off turnkey occasionally, but I love keeping them. We’ll always borrow all of it. The purchase, rehab, holding costs, closing costs and in some cases, I’m borrowing an additional $5,000 or $10,000. We’ll go rehab that property and make it look pretty. We’ll get it rented and then we’ll go back to the bank, and we’ll pay the lenders back. It’s the most amazing strategy ever.

You’ve made a bunch of money doing wholesale. Why not fund it yourself? Why even raise funds? Do you want to do more? Do you want to go fast?

I don’t like using my own money on any of my deals. There’s a specific reason for that. The reason is banks don’t like to do cash-out refinances. It’s harder to do cash-out refinances. They’re going to lend a little less when they do a cash-out refinance. If I have my own cash in the deal, it basically is cash-out. Whereas if I borrow it from a private lender or a hard money lender, now I’m walking into the bank and I’m not asking for a new purchase loan. I’m asking for them to pay back an existing loan. They’re not creating new risks. They’re transferring the risk.

I found that if I use my own money, it’s not as easy to get as much of it out, the 80% essentially out. Whereas if I borrow it from somebody else, I can get it all back. The second reason is my funds are limited. I could maybe afford to do 4 or 5 of these at a time, but if I want to do twenty at a time, which I’m doing right now, I need to leverage other people’s money.

Where are you getting this money from? Somebody reading is like, “I would love to do this. Where’s he getting his money?”

All of my money comes from the purchase. It comes from two places. It comes from private lenders, who I have met 100% of them at local real estate clubs and the other is hard money lenders, who I also met every real estate club. Get out there and go to the local REIAs. You will meet these people and that’s where I get the money to purchase. On the refinance, that’s typically going to be a local bank or a local credit union. Although I have started working with some of these national lenders as well, I prefer the local banks.

How does that unfold? You’re at a real estate club. You meet somebody that you know is doing well or that lends money. What’s the conversation?

I don’t even have to go to the real estate clubs and seek out these lenders. What I’ll typically do is I’ll show up with deals that I’m trying to sell. At the beginning of most of the clubs, they’ll have wants and needs or a gift. You get up in front of the group with a microphone. I’ll typically say, “I got this deal that I’m trying to sell.” Towards the end of the meeting and people will approach me. They’ll want more interest in this deal.

At that point, I opened up the conversation like, “I get deals all the time and my passion is keeping them. It’s BRRRR-ing these deals. Although, sometimes we’ll wholesale them.” Basically, it’s me making friends with people. People want to work with those they know, like, and trust. I don’t try to approach some random stranger and say, “Can you give me a loan?” Instead, I’ll do 1 or 2 deals with them first and get them to know me, like me, trust me, and then I’ll take them out to lunch or I’ll open up that conversation about, “Do you have any extra money laying around you want to put to work?”

WI 904 | BRRRR Method

BRRRR Method: The best thing about using the BRRRR method to buy rental properties is that you can do it with other people’s money.

 

Are you telling me that the secret key to unlocking the door to pretty much unlimited finances is to find deals?

Absolutely, it is.

That’s what we’re talking about. That is Wholesaling Inc. People think that wholesaling only means one thing, and that means assigning your interest in a contract to somebody else for a fee. That is not what wholesaling is. Wholesaling is the art of finding discounted properties. The exit strategy that you use is up to you.

You can assign it to somebody, can take it down and flip it or keep it in your portfolio. There are three options. Wholesaling is truly finding those deals, but what David is giving a real-life example of is, if you have these deals, you’re not going up to people empty-handed. You’re going out with opportunities. You’re building a relationship. You earn money for people that have money, they will lend you money.

That’s the thing about the private lenders is once I paid them back, they’re like, “Can I give it right back to you?” They want to keep that money-making them money. It started out with one lender. At this point, I maybe have 7 or 8 at any given time. I also use some hard money lenders as well. The private lenders are better because it’s less underwriting. It’s a text message or an email or a phone call. The rates are a little cheaper, but there are certain reasons that you’d also want to use a hard money lender as well.

I bought a 23-unit apartment building and I’m going to be all-in to this thing for about $950,000 and most of my lenders only have, $200,000, $300,000, $400,000. I didn’t want to have to pool from multiple lenders, so I went and I paid a higher rate with the hard money lender, but it’s easier to be able to get it from one place. All of these lenders, I met these people at REIAs. I sold them deals or I bought one of their wholesale deals.

The funny thing is most of my lenders are also real estate investors. They were at REIA clubs, but they’re also a little older. Not old, old but maybe in like their 50s or 60s. Some of our lenders are even in their 40s. They don’t have the energy that we young guys have, but they have the money. Whereas we have the energy and maybe not the money. They would much rather invest in somebody like us that has good energy and knows what they’re doing.

The best thing about the private lenders as well too, from their perspective, is if we screw up, which we have never done, but if we do, it’s backed by the property we bought and you mentioned, we’re not buying retail properties, we’re buying deals. It’s funny in a way, but if I did screw up for whatever reason, my lender would be like, “Cool, give me that deal.” It’s awesome.

You win in so many different ways as a lender. I understand that now because now I’m at that point. You were saying, sometimes it’s a text message or a call. I’ll get a text message from Luke Rotvold with the Viking Boys and they do incredible things. He was part of my company for three and a half years. I know their track record. They make it a ton. They have a ton of assets, whatever it is. I sent over the wire and I sent over the paperwork for the personal guarantee and we’re done. That’s it. I get a 10% return plus a little bit extra. It’s incredible.

The reason I bring that up to everybody is everybody can get to that point but it starts with finding discounted properties. Finding those properties is the foundation of all the other things that you want to do in this business. It’s going to give you the track record and expertise to where you can confidently have a conversation with people that have those funds and ask them for the opportunity to use their funds to do some exciting things for your own business. You’re getting that loan on the property and then you’re replacing that loan with a conventional loan and getting a much lower interest rate on that, which makes your properties cashflow.

If you can get financial freedom, then you can also achieve time freedom.

Most of my loans are commercial loans because they’re in LLCs, but regardless we’re getting loans to do so. In the beginning, I was going out seeking these people, buying deals from them or selling them deals, and then open up in that conversation, but the thing is over time, let’s say you borrow money from somebody and you pay them back and you do that 10, 20, 30 times, all of a sudden you build up a lot of credibility with that person.

That person may have a friend, who’s got a bunch of money and then they want to get in. Before you know it, you have 7 to 10 people hitting you up, “I need to put some money to work.” It’s crazy, but I have more private lender money available that I can typically even utilize. It snowballs, but again, you got to start by finding those deals. You nailed it. That’s where it all starts.

I’ll give a pro tip for everybody out there that’s raising funds, the best time to do it is when there are rumblings or when they make the adjustments to the interest rates. When interest rates go up, investors pull their money out of the market because they know that there’s going to be a dip and they’re timing it, so they need to put their money somewhere. There’s a great opportunity.

As we’re in 2022 here and you hear grumblings of interest rates going up, watch how much private money is going to be raised. It’s going to be absolutely bananas. Get on your horse right now. Start taking action. Start finding opportunities if your goal is to build a robust rental portfolio because that’s what it is. I don’t know a single person and I talked and coached a lot of people around the country that wants to build a wholesaling business and be a wholesaler.

It’s a great entry because it teaches you how to talk to sellers and people. That’s what it teaches you. It teaches you how to get out there, run appointments, get comfortable, get people to know, like and trust you and how to get deals. Once you get deals, you’re going to want to pivot or transition into a 2.0 or a 3.0 as the investor. Always start with deal-finding and wholesaling. We have a little motto at the office here, “We keep the best deals that come in and we wholesale the rest.” We’re still wholesaling tons of deals, but the best ones you can cherry-pick. That’s what you should do once you are at that level.

What are the best ones? What makes one the best and what makes one the rest?

The way I define that is what’s best for you and your business at the current time. It’s not necessarily, “It’s a 3-bedroom, 2-bath. It’s a great deal.” Sometimes cash gets tight. We have a rehab that goes over budget or, in my case, twenty. Sometimes the best thing to do is to wholesale to make some money, to bring in the door. Other times we may be sitting on six figures and we’re like, “We don’t need to wholesale right now. Let’s go buy some more rentals.”

I love that question because it’s what’s best for you and your business at the time that the deal was presented to you. If it makes sense to keep it to where you can get paid in your sleep and create financial freedom, which is what I love to do, then keep it. If money is tight and things are slow, wholesale it. You have options.

This isn’t a specific location. We’re going to keep all these. This is a timing thing.

WI 904 | BRRRR Method

BRRRR Method: We don’t want to buy anything that’s too small or too big or strange because at some point we’re going to probably have to sell these properties.

 

If it’s in the buy box, which is a set of parameters that make for good rental properties.

Break that down. What makes a good rental property in your business?

What makes for a good rental property in my business that I would consider adding to the portfolio and using the BRRRR method, because that’s what I always want to do. I want to do this with none of my own money. The deals that I love to keep are deals that are going to have a minimum of $20,000 worth of equity, which is wealth creation, as well as $300 minimum cashflow.

Those are the financial pieces. I need to make at least $20,000 worth of wealth or equity and at least $300 that’s cashflow, meaning what’s left at the end of the month after you collect the rent and pay the bills. On top of that, I don’t want to be driving two hours to be managing a rental property, so it’s going to be about 30 minutes from where I work in my office and then, we don’t want to buy anything that’s too small or too big or strange.

At some point, we’re going to have to sell these properties. We don’t want to be buying a little one-bedroom, 400 square foot house. The ideal property is, 3-bed, 2-bath, maybe even 4-bed, but we’re not buying 5-bed or 6-bed. It’s basically a very standard type of home and we need to get a deal on it. One last thing I’ll mention is we love the 1% rule.

If a property hits the 1% rule, it is guaranteed to cashflow at least $250 to $300 a month. That’s going to depend on the loan that you go with, but the 1% rule is a great rule. Let’s say that I can find a property that I can buy at $80,000 and it needs $20,000 worth of work, and I’m all in it for $100,000, will it rent for at least $1,000 a month? If so, that’s 1%. Ideally, you can be at or above 1%. My portfolio is averaging about 1.2% to 1.3% on average.

Are you looking at certain price points?

We don’t like to buy properties and be all-in under $50,000 because no bank wants to do a loan that small. We’re always looking for an all-in. We may buy a property for $50,000 that needs $30,000 and be an $80,000 but that property should appraise for $120,000, $130,000. Being all-in above $50,000 is the minimum. In my market in St. Louis, the average rental that we have rent is somewhere around maybe $1,200, $1,300. I don’t typically shoot for these rentals that are $1,800 or $2,200 or $2,500 because then the amount’s going to be higher.

You can make those work, but for me, the sweet spots are somewhere between $90,000 and 130,000 all-in and then the goal is to be all-in, purchase, rehab, holding, closing, and all of that stuff right at 80% or less than what it will appraise for because if you can do that and hit those metrics, you can do this with none of your own money. You can borrow it, fix it up, make it nice, get it rented and then you can go to that bank.

There’s a process to it. It’s not as easy as buying something, fixing it up and getting it rented. You got to buy it at a discount. There are certain ways to fix it up and do it right. There are these techniques when it comes to renting as well. We teach all that at BRRRR Method Mastery. Whenever we go to get the refi, we’re getting loans on the appraisal, and if we’re all-in at 80% or less, that means that we’re going to be able to get a loan to pay back that private lender or that hard money lender. We’re not going to have a dollar, not a nickel, not a dime, not a penny of our own money invested in that deal in the end.

Get people to do deals right away with none of their own money.

Do you put it into something else?

You borrow that money again and you keep going. That’s the great thing about this method. It’s so scalable. Right now, I have eighteen rehabs going, maybe even twenty. There are four steps to this thing. This is not something that you can do in two weeks. It’s going to take you a couple of months to get through this entire process, but that’s okay because it’s scalable.

I may have 4 or 5 deals in the purchase stage and we’re waiting on these to close. I may have 4, 5, or 6 or in my case, 15 or 20 properties that are being rehabbed. Once those are rehabbed, we may have 2, 3, or 4 that are being leased out by our property management. Once we get them leased out, then we may have 2 or 5, or whatever it may be that are being ready to be refi’d. It’s scalable and that’s what I love about it.

Single-family versus townhouses versus condos versus multifamily?

It doesn’t matter. I’ve done this with over 200 single-family homes. I own 60-plus as of right now. We’ve done this with duplexes, triplexes, 5, 6-seven units. I BRRRR-ed a ten-unit about a few years ago and right now, I’m working on a 24-unit that I’m going to be BRRRR-ing. You can do this at scale. I know guys that are doing this with 200 and 300-unit apartment buildings.

It doesn’t matter. The main thing though is what you said right out of the gate. You got to buy these deals at discounts. That’s where the wholesaling comes in. It’s the marketing. If you get a good discount and you use some of these proven methods and strategies, you can do this with none of your own money.

Let’s talk about the BRRRR Method Mastery because it’s exciting. You have joined the Wholesaling Inc., coaching team. You are let loose and it is the next step. First, you come in, you talk to people, you get a bunch of deals, money, experience and then what do you do with it? You start BRRRR-ing properties and building your portfolio. Talk to me about the BRRRR Method Mastery, the coaching and you also have a book that you wrote. This is not some fly-by-night thing for you. This isn’t some, “I’m doing this on the side.” This is your life.

My goal has always been to retire by the time I’m 40. I’m 37 now and I’m basically there. I make money while I sleep because of my rental portfolio. My portfolio is being paid down and paid off by my tenants. It cashflows in the excess of $18,000 a month. You said this as well, it has massive tax benefits. I barely even pay taxes. I don’t know how it’s legal, but it is. It’s 100% legal and fair, but there are massive tax benefits with it. It is truly my passion to keep building my portfolio, but also to share, teach, help and coach other people to be able to achieve financial freedom. That’s what we all get into real estate for.

We leave our jobs because we want to work less, make more money and hopefully create financial freedom, but what happens? Not always, but somebody leaving that 40-hour a week job to go work 60 and that’s okay because you got to hustle, you got to learn this business, but after you do that for 2, 3 or 4 years, it gets exhausting. You’re essentially on a transaction treadmill.

The beautiful thing about being a landlord is that you can get off of that treadmill and you can start making money passively, which is tax less than the earned income. Also, you’re making it while you sleep. As you build the portfolio, you make more and you can do it as I said, with none of your own money. The goal is to create financial freedom and that’s what BRRRR Method Mastery is all about.

WI 904 | BRRRR Method

BRRRR Method: If you get a really good discount and you use some of these proven methods and strategies, you can do this with none of your own money.

 

It’s helping people create financial freedom because if you can get financial freedom, then you can also achieve time freedom. That’s what is the most sought-after thing that I can think of, being able to have the freedom to go do whatever I want. I’m going to be with you in Mexico. If I didn’t have financial freedom and time freedom, I wouldn’t be able to do those things.

What makes the BRRRR Method Mastery better than buying a book or watching YouTube videos or whatever else?

When I first started doing BRRRR at scale about a few years ago, I was leaving $20,000, $15,000 in a property and then after 6, 8, 10 months, I figured out a way to maybe leave $8,000 or $10,000 in a property. It took me about eighteen months, maybe even as much as two full years to master the BRRRR method. There are certain things that you want to do and do it right and there are certain things that you want to avoid, to not have to leave money in it.

In the program, what we do is we teach you how to do it the right way from the beginning, so you’re not spinning your wheels and leaving $15,000 or $20,000 in a property out the gate. My goal is to get people to do these deals right away with none of their own money and then be able to scale it where they can do multiple at the same time.

It’s BRRRRMethodMastery.com. If you guys are reading this, then that’s where you go and you guys can check that out. David, I’m so excited that you’re part of Wholesaling, Inc, the Rhino Tribe. You’re going to be helping out a lot of people build a lot of wealth. I love you. Thank you for being on here. You’re the best.

Thank you, Brent.

That’s it, everybody. Everybody that I talked to in this business that is starting out, the goal is financial freedom, as David was saying. What that means is control of your schedule, control the rest of the time that you have on this planet. It’s so critical and precious. It’s worth that grind that 1 year, 2-year, 3-year, 7-year grind of working and building and challenging yourself to be a real estate entrepreneur because at the end of that tunnel is that financial freedom and the control of your schedule.

I’m not saying that as hyperbole. That’s what happens. You build up your reputation and business that finds incredible discounted properties, and when you do that, you have so many different options. I encourage everybody. Thank you for reading. I love you and I encourage you as always to go out there and talk to people. See you next time.

 

Important Links

 

About Brent Daniels

Brent Daniels is a multi-million dollar wholesaler in Phoenix, Arizona… and the creator of “Talk To People” — a simple, low cost, and incredibly effective telephone marketing program…

Also known as “TTP”… it helps wholesalers do more, bigger, and more profitable deals by replacing traditional paid advertising (postcards, yellow letters, bandit signs, and PPC) with being proactive and taking action every single day!

Brent has personally coached over 1,000 wholesalers enrolled in his “Cold Calling Mastery” training, and helped 10,000’s of others who listen to him host the Wholesaling Inc. podcast, watch his YouTube channel, and attend his live events…

A natural leader, Brent combines his passion for helping others with his high energy, “don’t-wait-around-for-business” attitude to help you CRUSH your wholesaling goals as quickly and easily as possible!

Leave a Reply

Your email address will not be published.

[class^="wpforms-"]
[class^="wpforms-"]