Back in 2006, Aaron was a pharmacist who decided to dive into the real estate market and start investing. He bought a townhouse at the top of the market and realized that he could make more of a profit renting then just solely owning it. Once 2009 rolled around, he knew there were major opportunities to be had and started investing in real estate all over the country. As an “accidental investor”, Aaron now holds his real estate license and is more excited than ever to continue doing business in real estate while also maintaining his pharmacy career.
On this episode of Multifamily Real Estate Investments with Don and Eden, Aaron shares how he stumbled upon real estate in 2006, now thirteen years later concluded his first real estate syndication and is in control of 29 units. He also will dive a little deeper into how he just completed a six-unit syndication deal in Pittsburgh, Pennsylvania and how exactly he found the property and raised the funds to invest. These step by step examples are sure to impress and enlighten you on how to get started in the real estate business.
Highlights:
- Aaron’s Beginnings in Real Estate
- What he looks for in a solid deal
- Key Lessons Learned
- Why he is a Pharmacist and Real Estate Investor
- Current Projects
How to Connect with Aaron
Email: ahowell7@hotmail.com
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TRANSCRIPTION
Hello everyone, my guest today is Aaron Howell who stumbled upon real estate accidentally back in 2006. Now 13 years later he concluded his first real estate syndication deal and is currently in control of 29 units. Let’s hear more about how all this happened.
Welcome to the Real Estate Investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to multi-family apartment buildings and off-market strategies.
Hey, Aaron welcome to the show. How are you doing today? Great. How are you?
I’m doing just fine. I’m doing just fine. So tell us a little bit about your day. How does it look like?
Well, I get up early. I take the car in for service. That was done in about an hour and 15 minutes. I stopped by fellow investors business for a few minutes to chitchat. I’m home for the rest of the day and I don’t have any plans. Might take the dog for a walk later and maybe take a nap.
So it sounds like you’re semi-retired.
I am a part-time pharmacist these days. I just got my real estate license so I have access to the MLS now. And you know I’m a part-time investor so I’ve got a lot of stuff going on but nothing overwhelming at this point.
Yeah. So I already know a lot about you. And so that’s why I want to ask you about your real estate career for our audience so they would know as much as I know about you. So how about you tell us a little more about that.
Sure sure. Well, I got started sort of as an accidental investor. I had bought a townhouse in 2006, kind of at the top of the market.
I think there was one neighbor who paid maybe even more for their townhouse than I paid for mine. By 2009 the market had tanked. I had kind of outgrown the property so I knew I needed to move into a larger property and I kind of moved outside of the city. I thought ‘oh you know I’ll sell my townhouse yet should be no problem.’ You know ended up leaving it for about a year. The prices kept dropping off and dropping my realtor at the time said hey you know you ever thought about renting it.
So yeah at this point I probably need to you know a month or two later we had a tenant move in and I think that’s kind of within the light bulb initially clicked. You know the tenant paying the mortgage was way better than me paying it. And then a year or two later I made a trip to California and Nevada to do some mountain climbing. And my mom mentioned you know get some real estate information while you’re out there. Newspapers and flyers and stuff that you can get it like gas stations and restaurants and stuff. And then a month later so she was like hey we need to go to Las Vegas and take a look at some of the properties. You know I don’t know where she got this idea. She’s not really an adventurous person but we did go to Las Vegas and put it in all four on a pretty single-family residence at the time the market out there was really hurting. I went back about six months later and bought another property another single-family residence and you know at that point I was like ok do this four or five times I can have an extra thousand dollars a month. A couple of years later I’m going to school as a pharmacist. I graduated from pharmacy school in 2000. So this is like 10 years into the job, 11 years, you know the light bulb starts to click a little bit more and more and more 2013 I meet my wife. She didn’t become my wife until 2015. So you know you’re thinking about things 2014 got a duplex here locally and you’ve got a really good buy on it, 2015 I got a single-family residence and actually two single-family residences 16 got a duplex. At work, a lot of the culture started to change. You know I could just tell you know the workplace is changing for the pharmacists that the company I work for you could tell a change in tone of voice on a conference call us and things like that. In 2017 I purchased three duplexes and a quad, that year my mom and I sold the one property in Vegas to be home together. Then I sold the second property that I owned individually. Those I did 1031 exchange with my property and use it to help close on those side duplex, then, in 2018 formed a partnership with some friends. And we purchased a six-unit building in Pittsburgh and then in late 2018 early 2019 completed my first syndication on another six-unit building.
But for the six utilities that are outside of Pittsburgh and most recently I moved from a primary residence into another primary residence and we have got that property rented now some up to twenty-nine units at this point and part-time and pharmacy that lets me take a nap in the middle of the afternoon.
Ok. So the first question I have is why are you still doing your job as a pharmacist when you are in control of 29 units?
To be honest with you, I enjoy the job still. I enjoy helping people. I enjoy the process of a pharmacy. I’m kind of strange, I like mowing the grass, I like shoveling snow, I like painting. For some reason but I think because you can look back at the end of the day and say oh you know that the job is done. You can see the work you did. Pharmacy kind of does that same way know at the end of the day you know you can look back and say you know I help these people today. So I still enjoy it. You know it’s a steady income I go in three days a week clock in and do my job. You know. Go home. I’m not in charge of anything like I was at the previous job. So a lot of the headache and stress that I had to deal with it’s gone. I have one key on my key ring. Now at this point, I used to have five or six keys. I had a door key safety register key after I left a full-time job at the previous company. Yeah, just a lot of stuff. The first month or so I kind of went through withdrawal. You know I was used to doing all kinds of odds and ends and having to think about things and worry about where my next employee where I was going to recruit them from. So I don’t have to worry about that anymore which is great.
Yeah. So it looks like you’re doing it the right way. Like you keep yourself together you’re not changing with the success. And that’s great because success has a lot of benefits but it has a downside as well. And I know what you’re talking about. I know how it feels when you become successful then everything changes so fast and sometimes it’s very overwhelming.
Yeah, the market’s doing really well. You know if the market is downturned, I don’t know whether I did a good job purchasing these properties or not. I mean I could have been completely out of percent wrong. I think I’m doing well with cash flow but you know until the market kind of turns in the wrong direction we won’t know for sure. But I feel like I’ve done well with the purchasing.
Yeah I don’t think you’re doing anything wrong because you’re focusing on the small properties you’re not going on the 50 to 100 unit kind of apartment buildings that are overheated and people are paying for them.
I think if you’re doing your research well enough you’re pretty safe. And especially if your properties are cash flowing because whatever it is you could weather any storm. If your cash flow is positive right. Right yeah. That’s very cool. So let me ask you this. Are you going to keep your job forever now that you’re I could say financially free or close to being financially free?
You know I don’t know for sure. I see myself wanting to go to work less and less.
You know I still enjoy it but I find myself at work you know the kind of wishing my eight-hour shift was a five-hour shift or my eight-hour shift was a four-hour shift. And I recently got my real estate license. I have a bunch of investor friends you’re like oh ok you know hey you can give me info on this and that or I have some friends that are like Hey could you help me find my next house so we’ll see where that goes. But at this point you know I see myself being a pharmacist for a while especially if I can go in and kind of you know part-time like I’m doing now like last week I worked an extra day next week I don’t work any kind of put on my schedule I’m not available so it’s pretty flexible.
Ok. So I want to ask you more about that six-unit syndication deal we just did in Pittsburgh. So tell me more about this deal. How did you find the property and how did you raise the funds?
Well, the first property we bought in 2018, the broker I stayed in touch with him. I told him I had left my job. I was looking for some other properties to add to the portfolio. So he had been in touch and the property we found where he found for us we end up closing on I think maybe in August or so. He had you know given me the information. And at first, I know the properties are kind of like an ugly duckling you know the cash flow is good things going really well but it’s not the prettiest building. Yeah at first I was kind of like you know we’ll see and then over time, the price dropped and the price dropped in the price dropped.
So we got it for about fifty thousand dollars less than it initially was listed for. But basically just kind of keeping in touch with that broker. You know after we closed that first deal I think they realized you kind of you can close another deal or you have the potential to close. You know what you’re doing. So I just stayed in touch with him. He’s emailed me a couple of other deals since we closed in January on the syndication but haven’t really found anything I liked yet more than my job. So what is it that you like when you’re looking at a deal? You know obviously cash flow. I’m also looking at the surrounding areas. You know I invested in 2015 through 2017 pretty heavily in Cleveland. You know there’s certain neighborhoods there are zip codes that I like better than others. Same thing with us investing in Pittsburgh I was kind of looking at the areas you know the suburbs where we’re dealing with. That’s important. You know you want your tenants to feel safe. You want your tenants to want to live in your property. You want it to be close to certain amenities. Good school zones things like that but it predominately cash flow. You know that’s going get you through the tough times if things go wrong and the property manager to you know a lot of people on you know where I’m investing it that far the property manager will make or break the deal for you lots of times and the property manager we use there in Pittsburgh is very aggressive. They’re good at putting tenants in place when there’s a vacancy.
Yeah, it’s always important to have a good team member on your side especially a property manager when you’re dealing with multi-family. So tell me more about the cash flow when you’re saying it was cash flow. What were the numbers? So what is the percentage that you’d be interested in purchasing?
What was it we’re looking in the grand scheme of things about a thousand dollars a month? You know the eight hundred and a thousand dollars a month which is about 8 to 10 percent you know that the first six months on a new property lots of times pretty rocky.
And after things settle you know we’re kind of looking for that 8 to 10 percent return. You know the first couple months we’ve taken into account we’ve got reserves set up. You know the lender knows a lot of times that people are borrowing that want 6 months of reserves because they know just like you know I’ve learned over time that things don’t always go as planned for that for six months to a year.
Yeah. So tell us more about the units. So what is the composition of the units?
There’s a couple of ones but most everything there is the one I think got the top unit or the best unit was a three-one. But you know it’s in a good school district also. Literally, the dividing line for the school district is in the middle of the street. So the other side of the street has that you know a different school district different taxation because Pittsburgh basically taxes on the school district. You get a tax bill from the school district itself. Yeah. So the 3/ 1 you know it was in probably the best shape it was tons of space. So we walked in there and I was like wow this is really nice. And the guy was only charging like six hundred dollars for the unit. So you know right after closing it went vacant and I think we raised the rent to around 750 or so which is more kind of what’s normal for the market there. Yeah.
And so the other units the 2/1’s and the 1/1 they were in bad shape?
No. The previous owner was a handyman. That was his profession. So pretty much everything was in really good shape. I mean like I said the building looked ugly from the outside but once you got inside the units were in pretty good shape. I mean we’ve replaced a little bit of carpet. Some of the paint schemes were a little bizarre you know like the kind of like lime green and things like that we were you know when we renovate the units to neutralize that and just kind of make it more tenant-friendly. But yeah most everything was in pretty good shape. The owner’s unit probably was the one that was in the worst shape and I had the weirdest paint colors but when he leaves he’s actually still paying us to rent at this point and he’s actually fixing stuff for the property manager as part of like part of his rent.
So tell me in that case, your value add was just increasing the rents and a little bit of touch-ups but just increased the rents right?
So he did not know the previous owner did not know what his property was worth or how much he could be renting for? Correct me if I’m wrong.
No, I think you’re exactly right. You know I think maybe him living there and dealing with the tenants on a day to day basis he became very friendly with them and you know when it came time to raise the rents he was probably less likely to do so because they were friends and a neighbor. Yeah. So you know now that we have a property manager and they’re you know they’re obviously getting paid a percentage of what rents they bring in you know they’re getting more. Aligned with the market.
Yeah. So let’s break it down you stumbled upon this property that you know is doing all right but could do better because the rents are just for a little bit lower than the market rents. Right. Then you just raise the funds through syndication for a six-unit which is not I believe it was the total purchase price? It was three hundred thousand. So it’s not that expensive of a property so the raise is not that difficult did you finance it? We did yes.
Twenty-one years and five-point two five percent and I raised about one hundred and five thousand dollars.
I’d open the accounts at the bank we use doesn’t have a huge debt they don’t have a really good app yet their like a smaller local bank. They don’t have a great website literally as we were you know we were raising money a couple of days. I was literally calling in on their phone number and checking the balance throughout the day making sure all the money was yet again never done that my entire life. But I kind of did a happy dance around lunchtime when I heard that you had all the money was deposited and we were ready to go for closing nights.
So tell us a little bit about the people that you raised funds with. Do you know them because I bet it’s not a lot of people since we’re talking about 300 thousand pounds deal right?
You’re correct. Yes. So for them you know I was the fifth investor the originator of the syndication. I got a small percentage but then I invested my son myself. One of the investors I’ve been friends with for a couple of years. I met him through Bigger Pockets. We’ve been catching up for coffee and another investor was the previous investor on the other partnership. He invested with us again another investor was a friend of a friend – father-in-law of our friend. I had asked if he was interested in investing and he said no but my father in law maybe. And then the fourth investor was that person who had reached out to me after a previous podcast and we’ve talked on the phone we’ve met in person. So we’ve become friends over the time period. So yeah kind of just a random collection of people when investors you know.
Yeah. So it is to my understanding you never had a real estate license before you just did it. So how did you even know about this deal? How did you even start? You must have gone through getting to know Zillow and Redfin and all these other websites that you could learn a little bit about the market but they’re not super accurate. So you had to have some guts.
Yeah.
Are you talking about the Pittsburgh market or just in general? In general, like you never had a real estate license. So how did you get into the MLS and look for properties, to begin with? So let’s say that there is somebody – in a position where they don’t have a real estate license and they don’t have money but they want to do what you’re doing. So how would you recommend for them to start when they don’t have all that information. So for me for instance I have a real estate license and I’m very experienced in real estate and if I want to look on a deal then it’s very easy for me to understand analyze it because I’ve been doing this for a few years and because I have a license and access and all of the software and programs and MLS and name it I mean I have access to it so I can analyze anything but you did not have that access. So how did you analyze deals? How did you even understand the values?
Well you know initially I just kind of look at on Zillow or Redfin or realtor dot com you know and I would familiarize myself with the market you know initially in Vegas we were looking there wasn’t a lot of time that stuff would hit the market and we’d be under contract in that day. So we had become friends with the realtor there. Now as I kind of progressed to moving it’s in the best sense closer to home. My realtor here would lookout for things for me. You know I’m looking all the time myself. So I became familiar there with properties. And as far as Cleveland goes I would just scour the MLS on a daily basis. I think becoming familiar with the market you’re looking and like a certain zip code. I think that makes a huge difference. If you’re looking every day you’ll know what’s a deal and what’s not a deal. You just develop this sixth sense that you could just pick it up when you see it right. Essentially yeah. You know as you look at more and more stuff you’ll just know ok that’s an owner trying to hit a homerun there or you know that’s a value there property wise but you just you know you learn over time just looking at things over here but you must have got knowledge from books and podcasts and stuff and that if you’re the type of person I think you are that you look like the type of person that educate yourself when you want to learn something.
I don’t even know how I found Bigger Pockets initially. I think that’s my first podcast. I started listening to. And you know from there I branched out. And know as far as you know educating myself podcast wise I was driving 35 minutes to work every day, 35 minutes home, so that gives a lot of time to listen to a podcast.
As far as reading goes I’ve always been a good reader. I think after graduating pharmacy school I probably swore that I would never read a book again. But you know at some point along the way I did start reading and you know that’s really helped as far as education-wise and there’s only so much reading. You do have to take action. You know you have to put that knowledge into play at some point.
Yeah definitely. If you’re reading and you’re not taking action then you never have any chance of executing what you’ve studied. Exactly.
Yes. So what are your goals for the future? It looks like you’re doing well and you’re getting to know the real estate world. What do you aspire to be in a few years?
You know I. I see myself still being a pharmacist may be the even less part-time than I am now. I’m anxious to see what this real estate license takes me. You know I think I could be a value add to investors here locally. You know they were looking for properties. I think you could probably help them out as far as knowing what’s good property and what’s going to be good for them. So we’ll see. And then you know just maybe just enjoying the properties and currently, maybe you know maybe adding a deal or two a year. You know. I don’t have a specific job or goal that I’m working toward. But you know a few more here and there that are good properties and cash flow definitely won’t hurt anything. Yeah.
So what would be the best advice you’d give the beginner real estate investor? I would say educate yourself with you know with a little bit of action moving forward you know to join your local RIA meet people. Maybe even get your real estate license. You know I could see myself down the road as I’ve added you know realtor friends or clients or that may be having more partners potential partners I should say for a deal that I might find you know I think I’m on Bigger Pockets of meet local reach and stuff like that. There’s only so people in those meetings but I think I just expanded my network will help out. And I think you know somebody who is getting started?
So what are the best ways to connect with you? Probably my email. You know I would email someone back if they e-mail me I’m a. Which is ahowell7@hotmail.com – I’m on Bigger Pockets, I’m on Linkedin I have a website – blacklickcapital.com. Those are the best ways. You know like I said out you know I’ve been on a couple of podcasts previously and I emailed everyone back who e-mails me which is always kind of funny hearing where people are from that they heard the podcast. I actually had one or two people here in Charlottesville, Virginia reach out to me say ‘Hey I heard you on the podcast I live in Charlottesville too’ which is kind of strange that many people listen to the same podcasts that you’re listening to.
Oh yeah definitely. And then people from your city. That’s a great opportunity to increase your network. Exactly. Yeah. That’s great.
So I really want to thank you for being on the show Aaron, you gave us some beautiful insights so I really appreciate it. And I’m sure our audience would appreciate that as well. So thank you very much. And I wish you all the best and keep exploring the real estate world. It’s amazing there are so many things that we don’t know yet and we are just longing to see where it’s going to take us.
Right. That’s right. Well, thank you for having me today. All right, Aaron, you’re welcome. Thank you for coming. I appreciate it. You have a nice day. All right thank you.
Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time.
