Episode 142: How Profit First Impacted David Dodge’s Favorite Business Model, The BRRRR Method
The Profit First REI Podcast
December 29, 2022
David Richter
Summary:
Acquiring assets with little to no money is a real challenge for first-time investors.
We’ve got David Dodge, a full-time investor for eight years, who shares with you the BRRRR method and how to use this strategy to acquire using little to no money and doing it rapidly.
Listen as David shares how Profit First impacted his business and why the BRRRR method is his favorite strategy in acquiring properties.
Key Takeaways:
[00:43] Introducing David Dodge
[02:21] David on What Excites Him the Most about Real Estate
[04:00] Introducing the BRRRR Method
[05:42] How BRRRR Method Works
[14:14] Money Struggles David Experienced in the Past
[19:58] David Shares His Addiction to Investing
[29:00] Keys to Success of David in Real Estate
[34:06] Connect with David Dodge
Quotes:
[16:04] “Anybody that is gonna do due diligence for you is selling you.”
[27:52] “The richest people I know are experts of tax because they know how to avoid it.”
[29:20] “Failing is part of the process. The equation to success is a bunch of failures and a bunch of trying, then you get the success.”
Connect with David:
Website: https://www.wholesalinginc.com/
Tired of living deal to deal?
If you are a real estate investor or business owner tired of living deal to deal and want to double your profits, head over here to book your no-obligation discovery call with me. Either I or someone from my team will hop on a short call with you to get clear on your business goals, remove any obstacles holding you back, and map out a game plan to help you finally start keeping more of the money you work so hard to make. – David
Transcription:
David Dodge:
So one of the things that your book has definitely helped me out with is put money aside Profit first, of course. So that way you have it, you don’t spend it on marketing or operations or overhead or whatever it is.
Outro:
If you’re a real estate investor who’s sick and tired of living deal to deal, then welcome home. Hear from everyday real estate investors just like you, and discover how they’ve completely transformed their business by taking a profit First approach. This is the Profit first for REI podcast, where we believe revenue is vanity. Profit is sanity. It’s time to start making profit a habit in your business. So here’s your host, David Richter.
David Richter:
We have a great episode today on the Profit First REI podcast with David Dodge. He talks about the benefits of the Burr strategy, gives a lot of the benefits, breaks it down for you and what it can actually do for you. That’s a big part of that first section. So if you’ve always wanted to know what the heck is Burr, what does it stand for, and what benefits can I receive from it, that’s a good one to elicit. He admits his addictions on this episode. And if you wanna know what those addictions are, then please Eli on you might have some of these addictions as well. Two, he hates paying taxes and he talks about some of the things that he mitigates his task tax liabilities. He also gives his success keys, which one of ’em I a hundred percent agree with and cannot agree with more than you.
Please listen to this episode. You can take some keys away from this and get more money in your business and keep more money. Have a great time listening. Here we are. It’s a private first Aria podcast. Again, have David Dodge here. You might know him. He’s on a lot of different podcasts. He’s done a lot of things in real estate investing as well too. I’ve been on a couple of the ones with him as well. So David, it’s great to have you on the show here where I’m interviewing you, so just, just a refresher. I’m interviewing you on this one.
David Dodge:
<laugh>, so that’s right, David, thank you so much for having me,
David Richter:
Man. <laugh>. Yeah, well thanks for being here. I know that you provide a lot of value to a lot of people and with not only that you teach them, but like you do it as well too. Like you’ve got passive income from your stuff. So I always love having people that do the thing that they teach about and showing other people how to do it successfully. I also like people who like the Profit First model. That’s why I wanna make sure we talk about that today and like getting and diving into that. But I wanted to ask you first, what excites you about real estate? Like why real estate and like what keeps you going now that you’re in the real estate investing world?
David Dodge:
Yeah, absolutely. So what excites me about real estate is passive income. It is being your own boss. It’s the ability to take something that’s really old and outdated and maybe even dangerous in a nuisance and make it pretty again. Um, I love to provide housing to, you know, for individuals that, you know, can’t afford to buy their own home. So we rent properties out. Um, I love helping sellers get out of tight spots. I love helping other investors find their next good deal for a rental or a fix and flip. Um, so really, I mean, just all things man. Like, I’ve been full-time at this for about eight years, David, and you know, it’s my passion. Love fixing and flip and love wholesale and love, you know, buying rentals and building the portfolio. Um, and, but you know my favorite strategy of all real estate investing used to be wholesaling. Um, and we still do that, but now my new favorite strategy is using the Burr method to acquire rental properties with little to no money using that strategy. So that’s really what I’ve been up to. You know, I’ve been investing for almost 20 years. It’s probably about 18, you know, give or take.
David Richter:
I stop you real quick. Yeah, please. What is Burr, just so people know, if they’ve never done a real estate deal before, can you explain what that stands for? Because I could see people being like, what the heck is bird? Is he live in a Place?
David Dodge:
Yeah, so Burr, the bur method, I didn’t create the Burr method, I didn’t invent it, nothing like that, but I have written a book on it. It’s called the Burr method. So you can find that online. Uh, but what the Burr method is it’s an acronym, it’s B with four R’s behind it and what it stands for, the acronym stands for, B stands for buy, and then the four R stands for rehab, rent, refinance, repeat. So what it is, it’s just a strategy that us real estate investors use. Um, and my definition of this strategy, so if I was to say what’s the definition of the Burr method, the simplest way for me to describe it would be, it is a strategy that real estate investors use to acquire assets using little to no money and doing it rapidly.
And that’s really the cool part is that this is really scalable, right? So that’s what the acronym stands for, that’s my definition of it. Uh, but essentially it allows us to go out and buy rental properties, rehab those properties, get them rented, take them to a bank and refinance them. And in the end we can do it with little to no money. In fact, I’ve done about 200 of these bur deals over the last five years. And the average amount of money that we leave in a rental, in the end, we’ve gotten down to $1,200.
David Richter:
Wow.
David Dodge:
So now these are houses that average about 150 K and we are putting anywhere from 20 to 40,000 into the rehab. So the way that this operates and the way that this works, so that, that’s kind of the what, let’s talk about the how. Right? I’m sure people are curious.
David Richter:
Sure.
David Dodge:
The how, here’s how it works. Here’s how you acquire a rental with little to no money. And again, we’re averaging about 1200. You find a deal. So we, you know, the first letter in the Burr method is to buy, but I like to elaborate on that a little David, and just say, you gotta gotta buy it at a discount. Cuz if you don’t, it’s gonna make this strategy difficult. Not impossible, but difficult. So if you can find a good deal on a property and you can buy it at a discount, boom, you’ve done that, that’s great.
Now, we don’t like to use any of our own money. And again, that’s the whole purpose of using this strategy is to acquire assets. We’re little to no money, but we gotta buy the house before we do anything else. So that’s where our private and our hard money lenders come in. So we network at RIAs and we find the hard money lenders and we build great relationships with friends, family, acquaintances, other investors to acquire private money lenders, right? So we borrow the money from these lenders to go find these deals and to buy these deals. And we typically are gonna borrow an additional 20, 30, maybe even 40,000 above the purchase from these same lenders and investors to fix the property up. So step one, find a deal, buy it, use hard money or private money. Step two is to borrow a little bit more when you bought, when you buy it to cover your rehab and then to rehab the property.
So when we rehab the property, we are doing a couple things. We’re making it look pretty fixing up the neighborhood, but we are also gonna be reducing the amount of capital expenditures that we’re gonna have on the property, hopefully for seven to 10 years. So that’s referred to as CapEx, right? So the roof, the H V A C, the windows, the kitchens, the bath, the plumbing stacks, all the main things that, you know, that we refer to as capital expenditures. We’re gonna do that in the beginning. Now this has a lot of, ancillary, I think is the right word, ancillary benefits because it’s going to increase the value of the home, which is gonna help with the appraisal. And it’s also going to allow you to rent it faster and for more money because you’ve just done updates and made repairs and made this property look really pretty, right?
Buying properties that need work to put into your rental portfolio is one way to do it. I don’t like that way. I like to buy properties and fix all the stuff that’s wrong with them and then rent them out. So that’s what we’re doing essentially with the bird method. And then the last benefit of rehabbing the property I already mentioned is this. It’s gonna force some appreciation, it’s gonna increase the value of the property, but it’s also gonna mitigate the risk of the lender on the backend. Because when you bring this to them, you’re not just bringing a property to them that you wanna buy a, you already own it. So you’re going to them asking for a refinance, not a purchase. And that changes things, but also it’s rented. So the next step after rehab would be to rent it, go ahead and get it rented out.
You’re gonna get top of market cuz you’ve done these repairs and then you’re gonna take it to the bank for the refi. Well, the bank’s gonna see that it’s gonna have a high value cuz you rehabbed it and they’re also gonna see that it’s rented, which makes it an asset and lowers their risk. And then last but not least, they’re gonna see that you just updated the hell out of the thing. You fixed it, you put a new roof on it, you put a new H V A C if it needed a stack, you fixed or replaced the stack. Typically we’ll do flooring, light fixtures, plumbing, fixtures, kitchens and baths. Right? So that’s just basically what we’re doing. So, um, you know, going through this process is great. So we borrowed the money to buy at a discount. We rehab, it increases value, increases rents, decreases risk and capital expenditures.
Then we go get it rented at the top of the market and then we take it to the bank. And the difference here, and I skipped over this in the beginning, but the difference here is we’re not asking the bank to help us purchase the property. We already own it. So what we’re doing now is we’re asking the bank to refinance. And here’s the cool part about this, David, when you go to the bank and you ask to do a refinance, they may or may not ask you about the purchase price, especially if you’ve fixed the property up. The purchase price is kind of irrelevant.
David Richter:
Mm-hmm. <affirmative>
David Dodge:
Now that you’ve, you’ve fixed it up and that you’ve brought it to them as an asset. So, you know, the original way that Dave, myself used to invest basically passively for about 10 years, um, was I would find a property, didn’t buy it at a discount, I’d get it on the market, on the MLS i’d, I would then get an agent to help me make an offer on it full retail.
And they would get appraised whenever I’d go to the bank and the bank would basically say, Hey Dave, we’ll give you 80% of what it appraisees for, but if you’re paying retail, what you pay and what it appraises for are gonna basically be the same number, maybe a little different, but for the most part it’s the same. And the bank’s gonna say, Hey Dave, you know, your purchase price is one 50, the house appraises for one 50, we’re gonna give you an 80% loans, we’re gonna give you 130 th or 120,000. I believe that’s 80% of one 50. It is,
David Richter:
Yeah.
David Dodge:
But that means that you have to bring 30 Gs to the table, man, 30 k that’s a lot of money to like have to save up to bring to the table to buy a property. Well that’s what Dave did for 10 years.
So don’t be, don’t invest like old Dave right now, invest like new Dave. So instead of bringing, saving $30,000 to bring to the table to buy a rental, now we find discounted deals. We borrow the money to buy them, we fix them up, we get them rented. Now we go into the bank and we say, Hey, Mr. Or Mrs. Banker, we we’re bringing you an asset. It’s been rehabbed and I already own it. So I don’t need a loan to buy it. I need a loan to refinance it. Well, when the bank looks at a refinance loan versus a purchase loan, there’s a lot less risk for them because they’re piggybacking off of somebody else’s due diligence. Right. They also don’t care what you paid for it. So here’s the big difference, David, when you go in for a refinance, they still say, we’re gonna give you 80% of what it appraises for.
But here’s the difference. What it appraisees for after you bought it and fixed it up and got it rented is gonna be a whole hell of a lot different than what you paid for it. Right. Whereas in the original example, what you paid for, it was what it appraised for. Yes. Well now we’re forced in appreciation, we’re buying it at a discount. So now in this case, let’s say it was a similar example, $150,000 appraised property, well the bank’s gonna say, Dave, we’re gonna lend you 120,000. You know, you can use this other 30 grand worth of equity that you have in the deal as your 20%. So if I owe my hard money or private money lender, now this is for the purchase and the rehab by the way. Let’s say I owe them $120,000 in the end, but that includes all the interest that I owe them too. Now it’s only gonna cost me about 1200 bucks for closing costs.
David Richter:
Yeah.
David Dodge:
To do it. And that’s where we get our number. So
David Richter:
Awesome.
David Dodge:
Sometimes David, we can do these deals and we can walk away with two or three or five or maybe even 10,000, right?
David Richter:
Yeah.
David Dodge:
But the goal is typically zero, right? Meaning none of our own money, if we make money, great, but what we’re really using this strategy to do is, a, to acquire assets b, to do it with little to none of our own money and to c do it rapidly. Like right now I think I have six or seven properties going through the bur process. Now, the process doesn’t happen overnight.
David Richter:
Right.
David Dodge:
It typically takes, you know, 3, 4, 5 months. You know, if it takes us more than five months, we need to speed things up, you know. But, um, it’s a, it takes a little bit of time to get through the process, but if you can acquire a rental, well, let’s say 11, 12, $1,300 out of pocket, that’s cash flowing. It’s fully rehabbed, it’s rented versus $30,000 out of pocket. That’s a home run, right?
David Richter:
Yeah.
David Dodge:
And then again, it’s very, very scalable.
David Richter:
Awesome. Well that’s a good expedition of the Burr method. I love it as well too. That’s how I did my first couple deals and got my way to financial freedom and real estate from that method as well too. So I definitely love it. Let me ask you, because not every part of the journey is sunshine and roses, so
David Dodge:
Oh, most of it’s not <laugh>, right? <laugh>.
David Richter:
So what money struggles have you faced in your business in like in the real estate investing journey? Because I’m sure cash flow hasn’t always been great, you know, like there’s been the ups and down cycles and since it’s the profit for Star I podcast, I wanna ask like what struggles have you had along the way? Oh yeah. Especially around cash.
David Dodge:
It’s a great question, man. That is a great question. So, you know, I’ve only lost money on three deals. It, it’s possible it’s four, I think it’s three out of about a thousand transactions. Hmm. And the only reason that we’ve lost on the three that we have is basically two things we did wrong and we did this wrong on all three of the ones we lost on. So what we do wrong, we overestimated our A R V and we underestimated our repairs. That’s it. Those are the two mistakes that we’ve made that has lost us money on three deals out of a thousand. So what can cause cash flow issues? Well, thinking you’re gonna sell a property for more than you do, or thinking that the rehab’s gonna cost a whole lot less than it does. And if you make that mis make both of those mistakes on the same deal, that’s typically when you start to lose money.
David Richter:
Yeah.
David Dodge:
If you make one of those mistakes, you hopefully you don’t lose anything. You just make a little or you break even. And that’s still a win in my book. Right? Right. Because we learn things as we go. Um, so, you know, basically, you know, those are the two things that I would caution any and all investor triple check your ARVs wrong.
David Richter:
How have you fixed that, for the next like deals then you said three out of a thousand. So like how have you not lost it on the, you know, 997 others? Like do you have a process in place to make sure, like you were just saying there, like double triple checking or like making sure the repairs are like what happened with those deals or how
David Dodge:
Did that happen? Yeah, that’s a great question. So basically I don’t take anybody else’s, um, advice or due diligence on a property. Okay. Unless smart, unless you know, I’m looking at that comparing it to my own.
David Richter:
Yeah.
David Dodge:
Right. Like anybody that’s gonna do due diligence for you is selling you.
David Richter:
Right.
David Dodge:
Think about it. Why would they do that for you? They’re gonna say, oh well the one down the street sold for 680,000, well that’s also a four story house, right? With 12 bedrooms, mine’s two stories with two bedrooms, right? Like, come on. So anybody that’s given you numbers is selling you. So basically do your own due diligence. And of the three properties that we lost money on, I piggybacked off of other people’s due diligence. That was the mistake. So make sure you do your own due diligence, run your own comps, make sure those comps are comparable and that they’re recent and that they’re close in proximity and that they’re similar or like as possible, right?
And then when it comes to the repairs, we always pad our repairs and inflation is not helping with the cost of supplies, materials,
David Richter:
Right, yeah
David Dodge:
And the labor, all those things are going up. So it used to cost us 30 grand to rehab a rental properties costing us 40 to 45. So when we walk into a property that we think is, you know, gonna be about 40 grand nowadays, we know that we’re not seeing every single thing that’s wrong with it. Cuz not everything is visible when you walk it. So at this point, if we think it’s 40, we’re gonna say, all right, we’re gonna borrow 45, 47, 48 and if we have to bring that seven or 8,000 back to the closing table, who cares?
David Richter:
Right? Yeah.
David Dodge:
Right. But if we need it, then we’re not digging into our own pocket or into the other 7 89 rehab budgets pockets,
David Richter:
Right.
David Dodge:
To fix this one.
David Richter:
Right? Yeah.
David Dodge:
So really, I mean at the end of the day, the only reason that people lose money is because, I mean, in my opinion, now there’s probably a couple other reasons, but they typically all stream or steam from somebody’s being overly aggressive and they’re optimistic about the A R V. So don’t do that. Just look at the middle of the range. And the way I look at it too, David, is if I have an A R V peg at 180 and I get an appraised for one 90 or I sell it for one 90, that’s icing on the cake.
David Richter:
Yeah.
David Dodge:
But if I’m hoping for one 90 and it comes in at 180, I’m like shooting myself in the foot. So try not to be overly aggressive and overly optimistic. Just come in at a good fair number that everybody would agree with.
And if you beat it, great but you gotta, you can’t be overly optimistic. Now that’s on the ARVs. So the, on the flip side with the repairs, same thing. Don’t be optimistic like I can do this for 12 grand when it’s gonna cost 20.
David Richter:
Right.
David Dodge:
So what you should do is you should borrow 25 and if you don’t use that other five grand, great. You already have it sitting aside, you bring it back to the table or maybe it appraises higher than you had hoped and you keep the five grand.
David Richter:
Right.
David Dodge:
That you over borrowed. And that’s essentially a cash out refi. It’s just done in the beginning versus in the end. See I love to do that as well. If I know that we’re buying it a big deal and I can buy a house for 80 and it needs 20 grand worth of work, but I know that it’s gonna appraise for 1 50, 1 60, I’ll borrow the 80, I’ll borrow the 20 and then I’ll borrow another 10 or 15. Because then when I go to my refi, I’m not cashing out with the bank, they’re just paying back another lender. But what they don’t know is that I didn’t spend all the money that they gave me on the purchase and the rehab. I keep some so you can get creative with this strategy two and cash out without cashing out.
David Richter:
Yeah.
David Dodge:
You know, it’s amazing.
David Richter:
Yeah. That’s awesome. So I wanna ask you another thing too. So that was a great explanation of like why your money struggles and what’s happened and how to even, you know, mitigate some of that and make sure that other people don’t do that. Which great info there since Profit first podcast. I wanna ask you, have you ever struggled to pay yourself from business?
David Dodge:
Oh business. Absolutely.
David Richter:
Or from
David Dodge:
Absolutely in the, and I’ve read your book, I love it. And we implement a lot of the things that you teach in the book, which is great. But one of the things that I have to admit, I think that’s the best way to describe it, is I’m addicted to investing, I’m addicted to it. And you know, this is a good thing that, you know, I think we should kind of talk about just for a minute here, but.
David Richter:
yeah, let’s do it.
David Dodge:
The IRS taxes you on your income.
David Richter:
Yep.
David Dodge:
They don’t tax you on your wealth, so that’s good. A k a equity that you capture in a deal. So if I could have the, the choice of making $20,000 in income that comes in and hits my bank account and then I gotta go pay 30 to 40% tax on that.
Or the other option is to acquire a piece of real estate that’s got 20 to 30 grand worth of equity in it. That equity is wealth. I can borrow against that equity, but that wealth creation event by buying the rental with the equity in it or buying that real estate with the equity in it isn’t taxed. That’s not a taxable event.
David Richter:
Yeah.
David Dodge:
So what we do is we are addicted to investing. Our goal isn’t to make more money cuz that means we have to pay more to Uncle Sam. Our goal is just to create as much equity and wealth as we possibly can to avoid as much tax as we can. So one of the things that your book has definitely helped me out with is put money aside profit first Of course. So that way you have it, you don’t spend it on marketing or operations or overhead or whatever it is.
Another thing that I like to do is not all of my loans are in escrow. So at the end of the year I get a $75,000 tax bill for real estate tax. And this last year we had about 55 60 grand set aside. So that was huge for us because then we only had to come out of pocket, let’s say 20 roughly.
David Richter:
Yeah.
David Dodge:
Versus 75. Right. So every time that we do have an income event, we put some of it in the profit first for you know, for profit for us, the owners. And we put some of it into escrows and it definitely helps with the cash flow management side of things.
David Richter:
Awesome. And it’s funny that you said that like the IRS taxes on income versus wealth because we just had a guest on and he said it, almost it’s the same thing only in a different way. He said it that, you know, a lot of entrepreneurs like to make money and focus on making money, but they don’t focus on growing the money. And like it’s like that’s the difference, which I’m also picking up the vibes of why you like Burr now more than wholesaling. Like you said at the beginning, like, I love wholesaling, that’s what I got started, but now I’m doing more of the Burr method. Is this a big reason, is that, well I’m picking up on that. Is that correct?
David Dodge:
Yeah. I can’t stand paying taxes
David Richter:
<laugh>,
David Dodge:
I dunno about you.
David Richter:
Me.
David Dodge:
I dunno about you man. I can’t stand it. And here’s the thing, David, if you ask the average person walking down the street, how much do you think you pay in tax? Not in a dollar amount but in a percentage amount. The average person’s gonna say, I don’t know, a third. And here’s the thing, they’re not wrong, but they’re not giving you the entire answer.
David Richter:
Right.
David Dodge:
So of the income, the money you make, you gotta pay a roughly about a third of the government. And that number varies of course, but it’s roughly a third.
David Richter:
Yep.
David Dodge:
But then whenever you have the money that you’ve just paid taxes on, you get tax when you go spend it. So you go to the grocery store or the gas pump, I don’t know what state you’re in, it’s gonna vary state by state, but in my state it’s 10%.
So if I go buy bananas or orange juice, I gotta pay for those plus 10% more.
David Richter:
Mm-hmm. <affirmative>
David Dodge:
In sales tax
David Richter:
mm-hmm. <affirmative>. Yeah.
David Dodge:
So that 33 percent’s now 43% cuz I had to add 10% on when I spend my money. And then you have to spend money every year annually just to own things. So you have real estate taxes, you have personal property taxes. If you die, you might have an estate tax. So what I’m getting at David is, the amount of taxes that we all pay isn’t a third. After you add up all of it, you get taxed to earn it, you get taxed to spend it, you get taxed to invest it in certain things like planes, boats, campers, trailers, homes. So then you have to pay money to own these things. So at the end of the day, it’s not 33%, it’s 51 plus percent.
David Richter:
Right.
David Dodge:
It’s more than half.
David Richter:
Yes.
David Dodge:
So once people learn this and they actually start to comprehend that all this money that they’re making, they get to keep less than half of it, you start waking up with a different goal in mind.
David Richter:
Yeah.
David Dodge:
And that goal isn’t to make more money because that just means that you gotta give more money away.
David Richter:
Right.
David Dodge:
Instead, how do you make money that you get to keep, that you can use to grow? And that’s what your point was. And to snowball and the way is, is to reduce the income. Now, let’s be honest, you can’t take it to zero. I gotta eat, I gotta pay for gas, I gotta pay for my own home, you know, food, shelter, entertainment. But what I’m getting at is, I cap my income at roughly six figures. I don’t need 300 or 400 or $500,000 in income.
I’m good with 90 to a hundred K. But what I’m doing at the same time is because I’m reducing the income, I’m increasing the wealth.
David Richter:
Hmm. Yeah.
David Dodge:
So instead of making 20 grand on a wholesale, I wanna use the burr method on a deal and hopefully have 30 or 40 grand worth of equity, which is tax free. If I need it, I can capture it by selling the property or refinancing the property or by borrowing against the equity, which by the way is an income, it’s debt. So I wanna perpetually live in a system where I’m using debt because debt is tax free and it also shelters the wealth that you have and it keeps it from being taxable.
David Richter:
Yeah. I think if more people thought of taxes almost like a real penalty, like it is like it’s not just, oh you pay taxes for the government, you know, like to build the roads and stuff. It’s like no, they also give you loopholes and they give you certain outs of like, if you do this, you don’t have to pay the taxes or as much. So if you like thought of it in like the penalty format, it’s like now that’s you, Yeah. You’re gonna be slapped sometimes on the hand, but you don’t always have to be slapped on the hand. You’re doing that now conscientiously.
David Dodge:
It’s Unbelievable man.
David Richter:
It is, it’s happen
David Dodge:
It’s unbelievable. So I just did a quick Google search, how many pages in the United States tax code and it is showing me roughly 70,000 pages. Now this is a quick Google search. This could be, this could be way wrong. Even if that’s double what it is. Let’s say it’s 35,000. Come on guys. There’s only two or three pages to tell you when you gotta pay, where you gotta pay and how you pay.
David Richter:
Right.
David Dodge:
The rest of these other pages, they’re loopholes, they’re ways to defer, deter or to not pay,
David Richter:
Eliminate
David Dodge:
In certain cases. Eliminate. Right. So knowing your tax law and the advantages that real estate gives investors because of, you know, depreciation and interest expense and all the costs, right?
David Richter:
Right.
David Dodge:
Are gonna help you get wealthy because they’re gonna mitigate taxes. They’re gonna reduce taxes, they’re gonna defer taxes. Um, and you can use leverage to buy real estate. So not only does real estate cash flow if it’s rented, but you can use leverage to buy it and then you get phantom expenses like depreciation on, you know, to offset the rest of your taxes. So yes, a lot of people hate taxes. I get it. I don’t like ’em either. But here’s one thing I’ve learned over the years. The richest people I know are experts at tax because they know how to avoid it. Yeah. Not how to pay it, how to avoid it.
David Richter:
Mm-hmm. <affirmative>. .
David Dodge:
So if you are wanting to grow, definitely start by reading David’s Profit first book for real estate investors and learn how to manage your cash flow, but also learn how to avoid taxes so you can keep more of the money you make to grow even faster.
David Richter:
That is awesome information. Especially like, since you threw that in there about the book. So I’ll, you know, it’s like on the show here of course, like I’ll always take that. But I do have a question here because, um, we’re
cutting down to the end of the show here in the last.
David Dodge:
Yes sir.
David Richter:
Couple minutes. But I wanted to say, I view you yet, you’ve done real estate for years, dad, you’ve been successful in this arena. And this might be, you might have just talked about one of your keys to success, but I’d like to ask you like over the years, what do you think has been like one or two of the keys that you would say, this is why I’ve been able to stick it out in real estate, why I’ve been able to be successful and do 200 bird deals, or do all the deals that I’m doing now and create this passive income. What would you say is some of the big things that.
David Dodge:
You know, you would say the, uh, some of the main things would be? And that’s a great question. You know, number one, you gotta embrace failure. You know, I talked about the three deals I lost money on. I’m not ashamed of that.
David Richter:
Yeah.
David Dodge:
I’ve got 997 profitable deals and three that I lost on guys. Losing, failing is a better way to word this. Actually failing is part of the process.
David Richter:
Yeah.
David Dodge:
You wanna know the equation to get to success. It’s failure plus failure plus failure plus failure, plus a bunch of trying. And then eventually you get to success. You have success, but you got, you can’t be afraid to fail. So number one is you can’t be afraid to fail. Number two, surround yourself by people that are already doing the business. So if that means, you know, find somebody, partner up with them, ask them if they’ll mentor you.
If there’s nobody in your backyard, then hire a coach.
David Richter:
Yeah.
David Dodge:
Hire a local one, hire a virtual one, it doesn’t matter. But find somebody that’s doing what you’re wanting to do and it’s gonna speed up the process. I always have at least one or two coaches at least probably spend, you know, nothing crazy, but 30 to 50 grand a year on coaching.
David Richter:
Yep.
David Dodge:
Because it’s gonna shorten the time, the curve. Right. It’s gonna shorten the timeframe for me to be where I’m at, to where I wanna be.
David Richter:
Yep. And the headaches and heartaches of
David Dodge:
Yeah,
David Richter:
what they’ve already gone through.
David Dodge:
Absolutely. And then the only other thing that I would recommend, would be to start making more offers. You know, I talk to so many people, David, so many people that, you know, here’s a perfect example. Somebody will hire me to help ’em coach or, to coach them on how to do, you know, wholesale deals or
David Richter:
Yeah.
David Dodge:
You know, start buying rentals using the bur method or whatever. Right? We do all kinds of different coaching. But whenever somebody comes to me and they say this, Dave, I’ve been doing this on my own for like three months and I’m not having a whole lot of traction, but I am doing some marketing, you know, I’m sending some mail or I’m, you know, doing an hour of, a week or an hour a day even of cold calling, but I’m just not getting anywhere. The first thing I ask them is, well how many offers have you made this week? And if the answer is zero, then I say, well how many offers have you made this month? And if the answer is zero, then I say, well how many offers have you made since you started? And the answer’s often really low, like two or five or 10.
So here’s the thing, guys and girls listen in. Let’s just, let’s go through a transaction, but let’s go through it backwards cuz this is such a great exercise. So let’s just say we’re wholesaling a deal, we’re not even doing rental burr. That’s a little bit longer of a process. We’re wholesaling, right? So at the end we get paid.
David Richter:
Yeah.
David Dodge:
That’s the result, right? But in order to get paid, we have to have something to sell. So we have to find, we have to find a buyer that wants to buy what we’re selling, right? Well, before we get to that stage, we have to have a property under contract and have legal, um, right. To market that contract equitable interest to be able to then find the buyer. Well, in order to have that legal right of, you know, equitable interest to sell that property, we have got to get it under contract.
Well, in order to get a property under contract, you gotta typically spend some time on the phone with the seller and make an offer to them or go run an appointment and make an offer to them. So making offers, leads to getting properties under contract, which essentially is inventory. And then from there, once we have inventory, we can sell it. So you can’t make money in real estate wholesaling specifically, but really in all aspects of real estate investing if you don’t have anything to sell,
David Richter:
Right?
David Dodge:
So you gotta make offers to get inventory. Literally the number of offers you make daily or weekly is gonna equal the amount of money you’re gonna be able to generate in your business. If you’re making one offer a week, you’re gonna get a deal, but it might take you four years. If you’re making one offer a day, well there’s no reason that you don’t get a deal in the next two, three months.
David Richter:
Yep.
David Dodge:
And if you’re like me and my team and you’re making five to 10 offers a day, hopefully you get a deal once a week.
David Richter:
Yep.
David Dodge:
So you gotta make offers. So that’s the last piece of advice for the listeners guys. Make offers, make more offers. That’s really the key to be able to make money. You got, you gotta make offers.
David Richter:
Yeah. And I can’t echo that enough. Back in our heyday, when we were doing 30 deals a month, we were doing 3000 offers a week because we were on like the HUD HomeStore, this was back when HUD HomeStore, like there was just deals everywhere. All the foreclosures were out there. So we were just bidding, bidding, bidding all the time. And it was a numbers game, you know, like we could fail 99% of the time, but it only took the 1% of those offers to come through and we were doing 30 deals a month.
David Dodge:
Yep.
David Richter:
And it was like, that’s all we had to do. So I a hundred percent echo that. Make offers, don’t be scared to make offers, even if they’re bad offers, when you get out there, you’ll learn as you go along, you’re learning more of the skills of trusting yourself to be able to make those offers and go out there and actually do something. That’s really good. Really love that. So David, you’ve provided a ton of value here. So let’s, how can the listeners provide value back? Like how can they get in touch with you, get ahold of you or like what are you looking for at this time?
David Dodge:
Yeah, absolutely. David, thanks again for having me, man. I’m super grateful for your time and I really appreciate this opportunity to hopefully share some, some valuable insights and some just some value with the audience man. So, uh, the best place to learn more about me as well as, you know, the program that I love to help people learn and to teach and to coach, would be to head on over to wholesalinginc.com/rentals. And at that page, again that’s wholesalinginc.com/rentals. On that page you can learn more about me, you can learn more about the Burr method and how it can help you build a portfolio and how to do with little to no money. Uh, but also you can have the option to book a call with my team and learn more about our program as well.
David Richter:
Awesome. There you go. David, it’s been awesome having you on this show. And if you’re listening right now as a real estate investor and you’re tired of living deal to deal or tired of paying too much in taxes or have no idea what your taxes are going to be and don’t have any profitability right now, head over to simplecfosolutions.com. We can at least see if we’re the right solution or if we have the right solution in our network. So you don’t have to be worried about the finances anymore. You can actually attain that financial freedom and build real wealth. So that’s what we wanna set you on that path. So just like David was saying in this episode, we wanna make sure we’re getting you that clarity so you know, <laugh>, if you’re paying 51% in taxes or not, and if we can help you get down way down on that percentage. But thank you again David, for being here. Really appreciate having you on. Uh, you’re a great guest. I know there’s a lot of value Dr. Driven on this episode today.
David Dodge:
Hey, thanks for having me Dave.
David Richter:
So remember, start making your profit a habit in your business.
Outro:
This episode of the Profit First for REI podcast is over, but there are plenty more where that came from. Are you ready to learn how David and his team can help implement the Profit First system in your business? Schedule a discovery call at simplecfo.com right now. We’ll see you next time on the Profit First for REI podcast with David Richter.
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