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 Wholesale 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.
#Replay 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. It’s a special day because I have a very special guest with us. This guy I’m about to introduce you to has been a close friend for a long time. He’s a multiplier brother. He is a seasoned real estate investor, and most importantly, he’s the newest coach to Wholesaling Inc. Who am I talking about? 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’re 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 very 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’ve 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 obviously king when it comes to building a rental portfolio, particularly utilizing the BRRRR Method. We’d had a lot of requests for this from the tribe. The tribe came in and said, “We want to learn how to build passive income. We want to 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’ve created something that’s going to pay us whether we are working or not.”
As we listened to your feedback, we knew the very next thing for you was the BRRRR Method. We’re about to help you do your first. It doesn’t matter if it’s your first wholesale deal, your first virtual deal, your first deal purchasing land, or whatever it looks like. We’re now 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’d like to get into a little bit of meat here, David Dodge.
It’s my favorite part. Let’s do it.
I was talking to David. I said, “David, we’re talking about the BRRRR Method, and we’re rolling you out.” I don’t want to talk so much about your coaching program. We’ll touch a little bit on that. I want to talk about your passion. How big is your rental portfolio?
We have 88 doors.
How long have you been in the real estate game?
I’ve been in the game for several years and been full-time for seven years.
#1 It Creates Passive Income
You’ve done fix and flip wholesale. You name it, and all these years, this is where you’ve landed. You have built everything to continue to strengthen this rental portfolio yourself. I want to know why you’re so passionate about it. Those that are reading can maybe 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. I love this transaction treadmill.
Whenever you’re 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 basically what’s left over after you collect all the rent and you 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 $500 a month, that’s $1,000. I don’t know about you, but that’s a lot of money.
Rental properties are great because they spit off cash flow.
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 necessarily be on this transaction treadmill. Trust me, I love marketing to sellers and doing wholesale deals. I’ll never stop doing that. The beautiful thing about rentals and cashflow is as if I want to go on vacation for a month, which I don’t, but if I wanted to, I would be okay because there’s cashflow coming in from these rental properties.
What I love about what you said earlier 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.
That is so cool. We do a ton of marketing to motivated sellers, direct-to-seller. That’s the name of the game. That’s what wholesaling is. It’s what it starts with because it’s a marketing business. At this point, I’m not chasing people around trying to get them to sell me a deal. I’m not going into the bad neighborhoods looking at deals to get a deal. I can be more choosy and more specific with my intentions. At this point, all of the marketing we do is for rental properties and a little bit of fix and flip. We have three going now. We do a couple, but essentially, we keep the best and wholesale the rest.
Anything that fits our buybacks 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 is 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, and those rental properties will spit off income that cashflow.
For you, we’re always transparent here at Wholesaling Inc. Talk about where you have your rental portfolio income-wise if you don’t mind sharing. Talk about if someone was doing one deal versus this, the difference in a position that you’re in because of your rental portfolio versus someone that is doing transactions.
Most of my portfolio, I would say probably 90%-plus, is on twenty-year loans, which means that the majority of them cashflow around $300, maybe $350. I am pivoting more to doing 30-year loans, and that’s where you get that $400 and that $500 a month in cashflow. To answer your question, Chris, 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’re using the BRRRR Method on, and we’re 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, I’d say maybe about 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. For you, you said, “If I didn’t 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. It’s that ability to know that you can do that.
That’s the beautiful thing. 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 they pay us every single month. Essentially, it’s another tool to get paid while you sleep. If you are only getting paid from trading time for money, how much time do you have? If you can build a business or a portfolio that pays you to be absent, now you can create financial freedom.
For anybody reading that doesn’t 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, you don’t need to trade your time for money anymore. You can quit your job. You maybe don’t need a job. I do this full-time because I’m trying to scale my passive income to $100,000 a month. I got ways to go. I’m 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.
#2 It Creates Leverage To Expedite Growth
Let’s go to number two. Number one, it’s solid and very intriguing. Who doesn’t want to be able to wake up every day and choose what they want to do? That’s ultimately what freedom is, the ability to choose. Number two, it creates leveraged to expedite the growth of your organization. Talk about this. This is interesting.
What we do at the end of the day is we buy assets. We own and control assets. If you’re unfamiliar with what an asset is, the simplest definition is it is something that puts money in your pocket routinely. It 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’re not getting a multiplier.
Going direct-to-seller is the name of the wholesaling game. It’s a marketing business.
Typically, if you put $100, maybe 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. A couple of quick examples, I’m leveraging virtual assistance to help with my marketing, private money and hard money lenders to buy my deals, general contractors to rehab my deals, property management companies to manage my deals, and bank or credit union financing to finance my deals. I’m leveraging my team to be able to repeat this process and not one at a time, Chris. I have fifteen going through my system right now.
That’s solid, and leverage is huge. Leverage is what allows you to grow at a faster rate rather than taking step-by-step. You can go multiplication.
I personally don’t know of any asset that you can buy with little to none of your own money. That’s the beautiful thing about rental property. You can do this and be all in, and in 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.
#3 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’re reading now. We don’t have money, but we have time. We have to spend that time in order to create money so that we can do the things obviously that cost money like marketing, etc. I love that those that are newer are like, “I’ve got time now. I don’t have a lot of capital. I can start to build this rental portfolio via the BRRRR Method now.” That’s the position that almost all of us were in when we started as entrepreneurs. I love that. Let’s go to number three. This is a big one for you. I know you love this phrase, wealth creation, but it’s even more than that. It’s wealth creation that’s not taxable. Talk about why you love this and maybe explain it a little bit.
Who doesn’t want financial freedom? You need cashflow to do that and income to pay your bills. My bills now 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’re bringing in $18,000 a month, that’s $11,000 extra on top. The great thing about wealth creation is its non-tax. About a few years ago, I had an epiphany. I was like, “The more money I make, the more money I have to give Uncle Sam.” That’s everybody. I’m not special. It’s the way that it is.
To get wealthy, not try to get rich. 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, buy a rental property, and 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 it for the equity we captured in the deal as the down payment. That’s how we’re able to acquire it. Here’s the coolest part about this. That equity that we captured is wealth. You can cash out on that if need be. You can also borrow against that if need be.
Is that the leverage piece that you were talking about earlier?
Yeah. You can leverage against your equity. You can sell the property, get a line of credit, or refinance it. There are so many different ways to leverage against it. Here’s the thing. When you create equity, you capture equity. You are creating wealth, and here’s the best part. You’re not taxed when you create wealth, Chris. You are only taxed when you create income or earned income or created.
Most of my income is passive at this point, or that’s the goal at least. To wrap up the wealth with a funny little thing. Most people, when you ask them, how much do you think you pay the government in taxes? Most people are going to probably say 30%, 35%, or maybe 40%. That’s going to depend obviously on your tax bracket, but that’s where it stops.
People don’t think beyond that. They’re not wrong, but they’re not right. Here’s why. You are taxed when you earn money somewhere between 30% and 40%. You spend that money on a house, a plane, a boat, or an RV. You have to pay a tax every year to own that piece of property. You’re 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 you go to the gas station to get your gas, you pay sales tax. I don’t know about you, but I pay about 10% sales tax, and 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 probably even closer to 60%.
It is crazy. What would you rather have? Would you rather have $200,000 worth of income that get you to keep $80,000, or would you have $200,000 worth of equity capture that you get to keep $200,000? You don’t have to pay one penny, not one nickel, $1, not 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.
It’s a little bit more advanced, but when I borrow against the property, that isn’t income. It’s debt, so 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 everyone in this audience right now is taxes, like it or not. What can we do to minimize or, in some cases, reduce it? It’s a rental property. Wealth creation is my favorite thing when it comes to the final product.
The beautiful thing about rental property is you can do this and be all in with none of your own money out of pocket.
Number three, you came with a punch. Let’s go to number four, appreciation, as you say, is the icing on the cake when it comes to this whole rental portfolio or method that you’re teaching. Talk a little bit about that.
Appreciation is icing on the cake. What I mean by that is I never buy a property to bank on it appreciating 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 in cost. What you’re going to see is the appreciation is going to be at or above what inflation is. Inflation over the last years has been higher than normal. 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, it was a 36-year period, we saw an average of 6.5% appreciation every single year. Some years more, some years less, and some years they won’t appreciate 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 for a minute, don’t think about six months from an hour or even a year or two. Think of 5, 10, or 15 years out. In that amount of time, it’s almost guaranteed that the cost of real estate is going to be more, especially with the way we have inflation going now. Don’t bank on it. I don’t suggest you do, but if you have a long-term mindset, the value of your properties will increase.
#5 Tax Benefits
That’s a nice kicker to this whole methodology. It’s icing on the cake. It’s one more reason and 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. Touch a little bit on this because this is huge, the ability to write things off.
I talked a little bit about how when you create equity, that is tax-free. It’s not income. It’s wealth, and 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 depreciate that property. You can’t do this with your primary residence, but any property that isn’t your primary residence that’s rented out or focused on as a rental property. This is a tax term. What that means is you can basically write off about 1 to 7 of the value of the structure. You have to discount the land, neither here nor there, but regardless, let’s say you have a property that’s $100,000 property. You can write off roughly about $2,000, and that’s not the exact math.
I’m using simple numbers here on your taxes. That’s basically a Phantom expense. If 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 Depreciation is that the government wants to incentivize any investor that is providing housing to the nation and your fellow Americans. They figure, “If you’re renting out this property, you’re going to have wear and tear.” They say, “We’re going to reduce your taxable amount because you may or may not have to spend money to fix these properties up over time.” We’re 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, but you still get to write that depreciation off. The cool thing is if you’re 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 and 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 wealthy played this game.
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’re grinding and working hard, and the government is taking 50% of their money. We can think by using our brains. We can be smart and get into assets and investments that essentially reduce the amount of taxes, so we’re able to keep more of it. All of these combined are so amazing.
Let me recap these for the readers. 1) Rental portfolio, rental properties, and the BRRRR Method create passive income that gets you off the transaction treadmill. 2) You’re able to gain leverage to expedite your growth. 3) It provides wealth creation that’s not taxable. 4) Appreciation, which you call the icing on the cake, and 5) Tax benefits that put more money in your pocket.
David, those are the five things we talked about that you personally love most about the strategy, which is awesome. Let’s transition here. You are now a coach with Wholesaling Inc. We’re so excited to have you. People are like, “I’ve been waiting for this.” You might have been the person that posted this in a Facebook group for Wholesaling Inc or mentioned it to one of us as coaches.
We’re listening to you guys as an audience, but for those reading, what differentiates this program, David? What differentiates you as a coach? There are two parts to it that make it a great coaching experience. 1) The coach provides great content, and 2) The coach themselves. Those are the two things that determine this experience. What are your differentiators? Why should someone on board with David Dodge learn this process?
Here’s the thing, like you said in the very beginning, 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 to quit their job and also become financially free. Maybe they’re already a full-time investor, but they’re on that transaction treadmill. With rental property specifically using the BRRRR Method, it’s super scalable. My program, BRRRRMethodMastery.com, is going to forge you over to a Wholesale Inc website where you can learn more, but it’s not necessarily for people that are looking to use the BRRRR Method. That’s obviously part of it. If you don’t own a rental and you want one, we’ll help you with that too.
Never buy a property to bank on it appreciating in the short term to make a profit.
The BRRRR Method is such an amazing method because it’s scalable and simple. It’s so scalable. You can do this method with 15 or 50 properties at the same time, or if you want to do one, that’s fine too. I go above and beyond to help all of my students. I put them first, and I don’t do one call a week, Chris. 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 and dispositions guy. We do this twice a week, and I allow my students to be a fly on the wall.
What’s your business? How it’s operating? What’s good that day on the winds? What’s the struggle and the challenge for that day in your office?
We’re not just landlords. BRRRR Method is a strategy that you can use to acquire a lot of assets very 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. We’re in the process of buying a couple of properties, and 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’ve 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 the property, “We’ll rent right away.” Other times we may have some challenges there, and you can learn a ton from that. 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 and you want to do and can do to make this process even more simple for you.
We cover all of that, but we 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’re doing in our business, but more importantly, what they’re having struggles with within their business.
I’m going to speak on behalf of David because I know you well. We spent a lot of time together. We traveled around the world. We’ve been down to Costa Rica together. We’ve been on some fun adventures, flying fighter jets and shooting tanks. I was there when David shot his first flame thrower. Here’s what I’m going to say. David is the real deal. You’ll be hard-pressed 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’re done, you feel better about yourself and feel like you can go conquer the world. I feel personally that’s how a coach should make you feel. He has been that before he was ever coached. My opinion is what makes him such an exceptional coach.
David, we’re excited for you to be a part of the tribe, and for the rest of you guys reading, if you’re interested, we want to begin by asking questions as always, book a call, and do due diligence, but 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 your first rental property. Number two, he can help you elevate your game on either one. He’s here to help both. David, thank you so much for coming on. We appreciate you and look forward to helping a lot of students.
Thanks, Chris. I appreciate you.
To the rest of you, as always, thank you so much for joining us, and we will catch you soon when we add more value. Talk to you later.
- David Dodge – LinkedIn
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About Chris Arnold
Chris Arnold is a 15 year Real Estate veteran who has closed over 2500 single family real estate transactions in the DFW metroplex. Chris is the founder of multiple companies that are managed by a US virtual team, which allows Chris to run his organizations while living in Tulum, Mexico full time. His passion for leaders has led to the creation of Multipliers brotherhood which serves the top 5% of real estate entrepreneurs out of the US. Most recently Chris has launched his REI Radio coaching program. This program is designed to teach real estate investors the marketing stream that everyone knows about but NO ONE is doing!