How This Pharmacist Started in Real Estate Investing and Renting Properties
Aaron Howell, a real estate investor, real estate agent and ambulatory pharmacist at University of Virginia Health Systems joins Tim Ulbrich on this week’s episode. Aaron talks about his journey from accidentally falling into his first investment property when trying to sell his condo to how he built his current portfolio that includes 29 units in 3 different cities across the country. Aaron’s real estate investing and the cash flow it provides has put him in a position to choose how he spends his time.
About Today’s Guest
Aaron Howell graduated from West Virginia University with his BS Pharmacy in 2000. Aaron is a part-time pharmacist at the University of Virginia Health Systems and the Pharmacist in Charge at the Charlottesville Free Clinic. He is also a private pilot and recently became a real estate agent. Before he met his wife, he accidentally fell into real estate investing. They currently have 29 rental units in their portfolio in 3 different cities across the country.
Summary
Aaron Howell is a pharmacist and real estate agent. He accidentally fell into real estate investing when he couldn’t sell his condo in Charlottesville, Virginia in 2009. After having it on the market for a year, his realtor suggested that he rent it out to at least bring in some income. That’s when the lightbulb went off for Aaron and his passion for real estate investing began.
After renting out that property, his mother suggested that he look at properties in Las Vegas to purchase. In 2011, the market was very hot and properties were selling for a half or a third of their original listing. During a visit to Las Vegas, he got one property under contact for $90,000 (original asking price was $270,000) which would bring in about $1,100 a month while being rented. Six months later, Aaron purchased another property without even seeing it. In 2014, his local realtor showed him a listing for a duplex in Charlottesville which he ended up purchasing. In 2015 Aaron married his wife, a nurse, found BiggerPockets, and ended up purchasing property in Cleveland to rent.
Aaron was still working as a full-time pharmacist for Walmart, however, in 2016 the company started talking about cutting hours. At this point, Aaron knew he needed to get his portfolio in order and redid his home equity line of credit.
To buy properties, Aaron uses his home equity line of credit. He worked hard to pay the principal on his first house down and eventually built up equity in it. He then opened a HELOC and uses it as a bank to fund purchases. He’ll take a large chunk out for the principal and down payment and then will use money that’s cash flowing from other properties to pay the HELOC back down.
When choosing a property to purchase, Aaron focuses on three main areas: location, price and the condition of systems (roof, water heater, etc). When asked about his financial why, Aaron shares that his goal is to generate more time and to have more flexibility in their schedules. He currently works 3 days a week, however his wife is still a full-time nurse and he’d like to be able to provide her the option to reduce her hours if she wants.
They currently have 29 rental units in Cleveland, Pittsburgh and Charlottesville.
Mentioned on the Show
Episode Transcript
Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. We mentioned before that we would be bringing more real estate investing content to the YFP community, and I’m excited to do exactly that this week through my interview with Aaron Howell, who is a real estate investor, real estate agent, and ambulatory pharmacist at University of Virginia Health System. Aaron, welcome to the Your Financial Pharmacist podcast.
Aaron Howell: Thank you so much for having me.
Tim Ulbrich: I’m excited to do this. We had a conversation a few weeks ago, and you got me fired up about your path in real estate. As I mentioned, we’re wanting to do more with this topic in the community. I think your story is really going to inspire many, so I appreciate you taking the time. And before we jump into your specific journey in real estate investing, including your current holding, talk us through your pharmacy career thus far since graduating from West Virginia University in 2000.
Aaron Howell: OK. I started out — kind of rewind that a little bit back to 1994. I graduated high school and my aunt — I kind of started college that August. My aunt was at the local pharmacy talking to the pharmacist there. She’d mentioned, hey, my nephew, he’s looking for a job. And the pharmacist there had mentioned like, hey, we’re actually looking for a technician. So I just kind of luckily got the job, started there, loved it, enjoyed it, kind of soaked everything up. You know, I knew I’d be kind of aiming for that as a career. So I was just like a dry sponge at that point just soaking every little bit of info, working extra shifts when somebody needed to trade or couldn’t work a shift. Got into pharmacy school, graduated, and moved to Charlottesville, Virginia, took a job here in town. And I didn’t know a soul. I remember talking to my mom and grandmother and they were like, “Why are you moving to Charlottesville?” And I just kind of just wanted to go somewhere and get kind of a fresh start — not that anything was bad back home, but I moved here, I didn’t have any relatives, didn’t have any friends that were living here, and kind of just started from scratch and started working. I worked for about probably a year and a half as a staff pharmacist. And then I took an overnight position at the pharmacy there. At the time, they were open 24 hours. Did that for about a year and then I started floating from various pharmacies kind of in central Virginia. And did that for about three years. At one point, you know, I was kind of approached by my district manager to take a PIC job at a local pharmacy, the one that was closest to my house. So I started there, did that for about three years, then I changed companies and then took a job with them. Worked for about 10 years, and so I worked up until about 2008 for Kroger. And then back in middle of 2008, I kind of had the idea of maybe changing companies. There had been some transition kind of with the leadership at Kroger. And so I made the move to WalMart chain. Literally, a good friend of mine was working as the PIC there and he’s like, “Hey, we’ve got a spot open.” It was like maybe half a mile, maybe a mile down the street, so I made the move then. And at that point, I had bought my first townhome at 2006 or so. This was 2008. And I worked up until June of 2018 at WalMart. And at that point, made the move down to a part-time position at the University of Virginia Health Systems.
Tim Ulbrich: Awesome. And that’s your work as an ambulatory pharmacist. And we’ll talk a little bit as we go through, I’m sure, how real estate investing allowed you to go down into a part-time position as you were able to supplement some of your income. But let’s start back at why real estate investing. Obviously, many pharmacists listening I’m guessing have much of their investments tied up in 401ks and 403bs and other areas, which certainly makes sense. But you obviously said, hey, I want to also get involved in real estate investing. Why was that the case? And where did that desire come from?
Aaron Howell: I mentioned that the house, or townhome I had purchased in 2006, you know, it really started kind of there. By 2009, I’d kind of outgrown the place just space-wise. I was like, I need a bigger place. I think I wanted a yard and a garage and things like that. So I decided to move a little bit outside Charlottesville to a small community called Crozet. It’s kind of to the west of Charlottesville, kind of toward the mountains. And bought a home, and this is kind of like in the height of the Great Recession. We had listed the house for sale, the prices were decreasing and decreasing and decreasing. So we had it on the market for about a year. My realtor at the time was like, “Hey, why don’t we go ahead and just rent this thing?” So I was like, OK, sounds good. So about a month later, he had brought a tenant to look at the place. She decided to move in, and you know, the lightbulb kind of went off at that point. She stayed a few months and then she lost her job and she had to move away, but I found the second tenant myself. And she did great. She eventually purchased the place in 2016. She was a great tenant for a beginner landlord like me. I’d go to fix something or go to go by to pick something up, and she had the place looking better than when I lived there. So she was a great start. But somewhere along the line there, I think the lightbulb just kind of went off. And I kind of thought to myself, OK, I can outsource my debt and take advantage of the tax benefits and maybe put a little bit of money, aka cash flow, in my pocket at the same time.
Tim Ulbrich: So I find it interesting you kind of accidentally fell into that first one. You mentioned the recession, not being able to sell the condo, and that person recommending that you get into a rent situation, which turned into a purchase. Obviously the numbers made sense. Can you talk a little bit about the cash flow with that property in terms of what was that doing in terms of month-to-month, which obviously I’m sure gave you the momentum to say, hey, I want to do more of this, you know, with other properties.
Aaron Howell: Grand scheme of things, I pretty much broke even. I might have maybe had $50 or $100 a month cash flow.
Tim Ulbrich: OK.
Aaron Howell: At that point, I wasn’t the one making both mortgage payments. I did that for a year. It was kind of painful. But you know, with her kind of making the mortgage payment and then long story short, when I sold the property in 2016, she had paid the property — or I had paid the property down to where I actually got a check at closing. Even though it was a monumental real estate fail, it was kind of like a high tuition real estate university for me over those seven, eight, nine years.
Tim Ulbrich: Yeah. Yeah, and I think it’s a good strategy even though you accidentally fell into it, I think it’s often something that people might think about, especially if they’re in a good rental situation with their first home and they’re looking to buy a second home or a condo situation like yours. You know, do they have the financial margin, the capacity to keep that property if the numbers make sense, of course, and purchase their second property but ultimately be able to rent out their first? And I guess my question for you on that point, Aaron, is you obviously had put yourself in a financial position that although painful, you could short-term take on two mortgages as well as come up with a down payment on a home without having to sell that condo. So I think for some of our listeners, they might be thinking about, there’s no way I would move in unless I pull the equity out of this to put down a down payment. So can you talk a little bit about how you were able to put yourself in the position, you know, whether it was you had paid off debt at that point, you had solid savings that allowed you to be able to front the two mortgages as well as come up with the down payment on the new home without needing the equity from the condo?
Aaron Howell: Yeah. You know, at the time, I had done some good saving. I had some money kind of set aside in the bank. You know, all through those years, there was a great shortage pharmacy market-wise. So from when I graduated in 2000 to when 2008 I had left Kroger, there was a huge opportunity for overtime. I mean, I’ve got a picture of me holding up like five paychecks, and just kind of like — it was kind of crazy at the time.
Tim Ulbrich: The good old days.
Aaron Howell: The good old days, yes. You know, like Kroger would pay us monthly. But they would pay you weekly for overtime. So I had gotten I think maybe a paycheck or two and like two or three overtime checks. And it was just a good time. I saved that money, though, and kind of was able to get into the second home.
Tim Ulbrich: Yeah, I’m guessing we have recent graduates that are like, what is this guy talking about? This doesn’t even exist. But what I heard there is you were intentional about saving it. Obviously, I think that could easily have been sucked up with other expenses. And I think being intentional to have liquid savings, whether it be for an emergency fund or beyond that, to put yourself in a position to be on the offense when it comes to something like a real estate purchase. I think that’s such an important, important detail in that story. So you accidentally kind of go into this first property, a condo you couldn’t sell, you turn it into a rental, you mention it’s break even, maybe a little bit better. Where did you go from there that ultimately obviously has led to your current portfolio? Talk to us about the second, the third, the fourth property and how you made those decisions.
Aaron Howell: Somewhere along the line, sometime after moving or right before moving out to Crozet, I become — got interested in hiking and mountain climbing. And I’d went to a mountaineering school in Alaska for a week on Denali, or in Denali National Park in 2008. I’d been to Mexico and climbed some of their highest peaks in 2009. So 2011 rolls around, and I fly into Las Vegas to go climb Mount Whitney, which is the highest mountain in the Lower 48 states. And my mom had mentioned before I went, she’s like, “Hey, get some of those real estate booklets that they give away for free like at gas stations and McDonalds.” And I was kind of like, “Huh?” And she’s like, “Yeah, the market out there is really depressed. You know, grab one of those while you’re out there or a couple of them and bring them back to take a look at them.” And you know, I completely blew her off. I’m Point A to Point B lots of times and I landed in Vegas and immediately made a beeline to Bishop, California, driving for brief stops in Death Valley and looking around a little bit. But real estate was not on my mind at that point. But a month or two later, she had sent me some listings via email and she’s like, “Hey, I’ve been in contact with an agent there in California” — not California but Las Vegas and you know, “Do you want to fly out there maybe and take a look at some of those properties?” And I’m just kind of like OK? Maybe? So we made the trip out there. And the market at that point, this was probably August or so, maybe late August, September of 2011.
Tim Ulbrich: OK.
Aaron Howell: The market at that point was just crazy. People were buying stuff left and right because it was half of the original price, a third of the original price, so we got one place under contract. It was pretty much Class A, you know, nice, gated community. The house was about five or six years old. We picked it up for like $90,000. I think it recently had sold for $270,000. It was getting probably $1,100-1,200 rent per month.
Tim Ulbrich: OK.
Aaron Howell: So it was kind of very easy. We had been recommended to a property management company there by the realtor. We used them from the get-go. They did great. So about six months later, I go back and I buy the second property on my own at this point kind of getting a taste for that first property. Again, the market was just crazy hot. Stuff would come on the market, it looked good, and it would go under contract by noon, 1, 2, 3 o’clock. So at this point, I didn’t fly out there at all. I just trusted the realtor’s input. She was able to get me into another property. We got it for $100,000. Again, $1,100-1,200 rent per month, pretty much Class A in a nice, gated community. And you know, the funny story is — and I highly do not recommend this — I never saw the property. I didn’t go out there to see it, I had the home inspector do the home inspection, I got the report, I had pictures, but grand scheme of things from purchasing it to selling it in 2017, I never physically laid eyes on the property, which was strange. Again, I don’t recommend that for the most part. But so things go well there, 2012, late 2012, get that property, and at the same time, I started getting my pilot’s license, so that kind of put property buying on hold for awhile. I’m still managing at WalMart, doing things there. The company was great to work for up until that point. 2013 rolls around, I have some mutual friends who introduced me to my wife. So I met her. 2014, we get engaged. Late May or so, maybe early May of 2014, I walked into my realtor’s office just kind of saying hey, shooting the breeze, and he hands me a listing for a duplex here in Charlottesville, which is near the college, aka prime rental market there. So long story short, after probably about four months of working on closing and whatnot, we purchased the duplex. And Day 1, it was pretty much a cash cow. It’s also been the problem child of the portfolio too.
Tim Ulbrich: There’s always one if not more.
Aaron Howell: Yes, exactly. You know, there’s been many days I’m like, sell it. Sell it all. But for the most part, like the last couple years, it’s had 0% vacancy. The property management company here just keeps it — if the tenant doesn’t renew, they have them move out four or five days ahead of time and then July 1, they’ll have a new tenant in there and ready to go. So 2014 rolls around, 2015, early in January, I got married. We at that point — I had kind of found Bigger Pockets online and was looking in the marketplace there and then discovered Cleveland. So we at that point, probably June, July, contact a realtor up there and we fly up there, take a look at some properties, we go to an Indians game, we went to the Rock and Roll Hall of Fame, had a great time.
Tim Ulbrich: Awesome.
Aaron Howell: But we get a house under contract, single-family home at that point and close on it probably November or so. And in the meantime, my realtor here again knowing kind of what I’m looking for, he shows me a townhouse that was a foreclosure just here in the neighborhood. There was no sign up in front of it. Lots of times, he and his partner don’t put signs up in front of properties. They just list on the MLS because they don’t want people just tire kicking. But I can see the townhouse from right here, from my back porch. And I had no clue that it was for sale, but we go in there, and there was an awful smell, the carpet was messed up, not one of the appliances in the kitchen worked properly. Like the refrigerator was dead, the microwave was missing the handle, the oven’s bake cycle didn’t work. But we end up purchasing that about the same time we did our first purchase in Cleveland. You know, again, that one here local, the townhouse I can see from here has been a great rental property. We’ve had pretty much 0 vacancy the last couple years. So 2016 rolls around, and we purchase another duplex in Cleveland, kind of later in the year. And then things at work kind of changed late 2016. You know, it was kind of happy-go-lucky. I had built a kind of great staff there at work, and then kind of late 2016, you could hear kind of like winds of change on the conference calls. Everything went from like, “You guys are doing great. This pharmacy is leading in this, this pharmacy is leading in this. You’re doing great,” to late 2016, it went from that to kind of like, “Hey, we need to cut hours.” And you know, at this point, it was kind of like, OK. So another couple months go by, maybe another two or three months, and I’m like, I need to get my butt rolling with my portfolio. So I redid some things. I changed our home equity line around a little bit. The things in our neighborhood were selling for a lot more than I had ever purchased for back in 2009. So we redid the home equity line and kind of got things rolling there in Cleveland. I went back I think maybe in April or so for a home inspection. We had got a quad under contract there. And it went from the home inspection, everything looked pretty well. And I remember kind of flying out that day to go to Cleveland for the inspection and this little voice kind of in the back of my mind was like, how dare you think you could leave pharmacy and be a real estate investor? How dare you? But I knew that other people had done it, so I was like, if other people can do it, then I can do it.
Tim Ulbrich: Yeah. Now, so that’s really — it’s really awesome. And first of all, congratulations. I mean, what you’ve done here — and we’re going to dissect it a little bit more, I’ve got a lot of questions that I’m hoping our listeners are thinking as well — but first of all, congratulations. I mean, what you’ve done and I think obviously you’ve taken some risk, calculated risk along the way, you’ve taught yourself. And I think for many of us, especially when we’ve been in school for so long, maybe residency training, other things, there’s kind of that one-track mindset of maybe I can only do this. But I think what you saw as changes were happening in the market and obviously latching onto an area that was of interest to you that would diversify your income and give you options, also allow you to build your portfolio and long-term wealth, I think it’s really incredible. And so many things that I want to dissect. The first one — and you alluded to this maybe a little bit with the HELOC when you talked about the Home Equity Line of Credit, you know, if I’m somebody listening to this and I have no real estate investment properties, I’m thinking to myself, man, he’s just talking about buying properties, buying properties, buying a home in Vegas, buying a duplex in Cleveland, buying a quad in Cleveland. So what is your strategy? How are you coming up with the cash to buy these? Are you putting these on conventional loans with 25% down? Even that, where is the cash coming from? Has it been savings? Has it been a HELOC? Has it been a combination of? And what might be some strategies our listeners can find in that area?
Aaron Howell: Yeah, that’s a good question. So basically, the home equity line, I had purchased my house in 2009. And for a long time, I had worked really hard to pay it down, to pay the principal down. And I paid extra whenever I could. I would get a bonus at work and I would use that to just pay the mortgage down. So eventually, I’d build up equity. The market here, the values were improving, and you know, I was paying the principal down. So eventually, I opened up a home equity line and over the years, I’ve kind of used that as a bank to fund purchases. So I’ll take like a big chunk of principal for the down payment and then with the cash flow from Property A, Property B, Property C, I’ll take and pay the home equity line back down or use the home equity line to pay more principal down on the original property.
Tim Ulbrich: OK.
Aaron Howell: I just basically use that kind of as a bank. It could be problematic. You actually have to make payments on the home equity line.
Tim Ulbrich: Sure.
Aaron Howell: And it’s almost like the bank’s giving you enough rope to hang yourself with.
Tim Ulbrich: Yep.
Aaron Howell: But you had to be kind of somewhat responsible in a controlled kind of fashion.
Tim Ulbrich: Yeah, and I’m glad you mentioned obviously there’s risk there as well. But I think many investors — and I know several, and my wife Jess and I have explored a similar path — once you put yourself in a good equity position on your home, if done well with calculated risk and you understand the risk and you have a good emergency fund and you’re buying properties that you’ve done your homework and you know that the numbers and all those things, obviously you can mitigate that risk. But nonetheless, the risk is still there. And you have to be aware of it, but I think your point is well taken is that we don’t want our listeners to hear this and say, “Oh, well, I’ve got a decent amount of equity in my home and I’m just going to run out and purchase properties and use it as a bank and hope for the best.” So I think that obviously, there’s payments that come with the HELOC, obviously the longer you have that money out, you’re going to be paying interest on that depending on the rate, a whole host of variables to think about. But I think that strategy is one that our listeners should think about that especially when they either have their student loans gone or maybe have a really good debt payment plan, got a really solid emergency fund and have a good equity position on their primary residence, OK, how can they then begin to move into that next level, offensive position if they’re interested in real estate. And I think this speaks so well to some of the challenges with $0-down mortgages and other things that you know, if you enter into your primary residence with a good equity position to begin with and then you can ensure that home is at a price point that you can ideally make aggressive payments, even potentially extra payments to build more equity, it’s going to give you options in the future. And here, we’re talking about one option being that you can then potentially invest in real estate. What, Aaron, do you look for — and we’re going to talk in a little bit about, you know, maybe preference of property because I know you have a variety of things from duplex to quad to single-family homes, you started with a condo, but before we do that, what are you looking for in terms of general rules of thumb when you’re screening properties to say OK, I think this one looks good enough in terms of something I might want to invest in? Are there a couple rule of thumbs? And I know this is obviously a complex question, but a couple things that you tend to focus in on?
Aaron Howell: Yeah. You know, initially, I think I kind of looked for location. I wanted the property to be in an area where there are going to be tenants who want to rent the property. I mean, you could buy something in a population of a town that’s like 2,000, but it’s going to be hard to rent it. So that’s one thing. Probably No. 2 is the price, obviously. You want to be able to cash flow some. 3 is the condition kind of some of the systems in the house, you know, like how is the roof, the hot water heater, what are the condition of the units? Because at some point, you’re going to be putting that money back into or into the property, and you’d like to put it in later than sooner. Those are some of kind of the key things. But location, primarily is the big thing.
Tim Ulbrich: OK. And you mentioned, I know for our listeners, we could get into this in the future as well, but on Bigger Pockets, they often talk about a 1% rule, which is obviously a very general rule of thumb. But in short, the idea is if you buy a property for $100,000 and you’re able to rent it out for $1,000 a month, then obviously you’d meet that 1% rule. And the examples you’ve given so far were above and beyond that. Again, very general rule of thumb. But I’m guessing something along those lines is numbers you’re looking at but other variables that are included in there as well, correct?
Aaron Howell: Yeah. Yeah, absolutely.
Tim Ulbrich: OK. So one of the other questions I had for you is I find it fascinating that you have invested in multiple areas, so obviously you started with the condo, you mentioned the Vegas property, you talked about some others you picked up in Virginia where you’re located, you mentioned identifying the Cleveland market as a unique opportunity where you saw and have continued to invest. And then one we haven’t talked about is you’re also doing some investing in the Pittsburgh area. But I’m guessing as our listeners hear that, they might be thinking, man, how are you comfortable with investing outside of the area? You know, you can’t necessarily just drive down the street and see how everything’s going. And I could see that being both a blessing and a curse. And so talk a little bit about the out-of-area investing or long distance investing and how you became comfortable with that. And what are some things our listeners might want to consider if that’s an area they’re going to dabble into?
Aaron Howell: Yeah, originally the out of the area investing was in Vegas. We were just essentially at that point looking at the barrier to entry, which is price on the property, what would our down payment be? So that was a big thing. Some reservations generally you would have kind of at a distance would be like how are you going to manage the property? You know? And a lot of people ask me like, do you manage those yourselves? And I always answer like, no way, man. No way. So a good property manager is going to make your life a lot simpler or make your life a lot tougher. And that’s kind of my key is just honing in on that property management company. You know, the one we had in Las Vegas is amazing. The one we have here locally, they’re great. Our Pittsburgh property managers are great. I’ve recently just changed property managers in Cleveland, just kind of wasn’t comfortable or wasn’t necessarily real happy with the management there. So we’ve made that change. But investing at a distance, it’s a little less comfortable than you would normally like it. I mean, I would love for all my properties to be here in the Charlottesville, Albemarle, Virginia area. But the barrier to entry because of price is pretty prohibitive. So I’ve kind of got to go where the market is available, where I can purchase things that cash flow well. I mean, I could buy a house here in our neighborhood and buy it for $300,000, $400,000, $500,000 and charge $2,500 rent, but I’m not going to make the cash that I do say like if I purchase a duplex in Cleveland for $100,000 and I’m getting $1,500-1,800 rent.
Tim Ulbrich: Yeah, and I think what that does is, you know, to your point, it allows you to look more strategically at markets where the numbers make more sense than the area in which somebody is. So for example, my wife and I are here in Columbus, Ohio, and I don’t claim to know the Columbus, Ohio, market as well as many other investors do, and I’m sure there’s plenty of deals to be had regardless of market. But we’ve gone outside and identified some opportunities with another pharmacist up in the Muskeegen, Michigan, area because of just more opportunity there where the numbers make sense. And one of the books I read — and I’m sure you’ve read as well — and we’ll link to in the show notes for our listeners is Bigger Pockets has a really good book on long distance real estate investing. And one of the takeaways I had from that in addition to being able to then shop by market and where the numbers make sense is it really forces you I think to develop systems and processes and checklists that I think allow you to scale and grow if that’s a goal that somebody has. And I’ve seen that firsthand where, you know, when I can’t drive down the street and see something or run by the property before work and have to work with contractors at a distance, you start to put some of those other checks and balances in place and develop some of those other systems because you can’t control, you can’t do all of those things. And I think that in hindsight, now that we have this first one behind us out of area, I feel more comfortable doing more knowing that I think we’ll be able to grow a little bit quicker because it’s not all on our back, you know? And again, property management being another one that I often hear people that want to do that themselves. And I, like you, tend to think about it as hey, look at the deal and calculate in property management, of course assuming it’s good, as a cost to ensure that the deal still makes sense with that cost included because I think that’s going to allow you to get to the point of growth that I’m assuming many people want to get to with their portfolio in the future. Do you have, Aaron, you’ve mentioned single-family homes, duplexes, quads — do you have a certain type of property that you would say, I really like these better for this reason? Or are you just looking at a variety of opportunities that come your way and looking at where the numbers make sense?
Aaron Howell: You know, I think a lot of people like to start with single-family. You know, I’ve graduated more to multi-family at this point. You know, I kind of think maybe the bigger, the better at this point. You know, I have the same issues on a duplex that I have on a six-unit apartment building that we purchased. Same issues, but scaling it is just a lot more manageable for the property manager and the six-unit absorbs the hit. Say if we had to change a hot water heater on a duplex, that’s $800-1,000 there that basically eats up cash flow for a month or two. Where if we have a six-unit building and we have to replace a hot water heater, that’s maybe a half a month’s cash flow.
Tim Ulbrich: Makes sense.
Aaron Howell: So over time, I’ve kind of graduated into the bigger, the better. But also too if there’s a deal in front of me on a duplex, I think I probably would take advantage of that also.
Tim Ulbrich: Awesome. Yeah, that’s cool. I think just the reinforcement there of looking at the numbers and being open to the opportunities, whether it be something you hadn’t originally thought, whether that’s a duplex instead of a single-family home, or a quad instead of a duplex, or another variance of an area. So I mentioned in the introduction, Aaron, that you’re a real estate agent in addition to being a real estate investor. So give us that backstory. Why did you decide it was worth your time and effort to get an agent’s license?
Aaron Howell: You know, over time, as the portfolio grew bigger, I knew at some point in the last year or two that I needed to change my CPA services. And so I did change that last — I guess officially this year for the first time. But in the last year or so, I’ve kind of sat down with them on several calls, and they kind of planned out some strategies. And one of those strategies was becoming a real estate professional in the IRS’ eyes, that I was spending probably, you know, an hour or two hours a day just dealing with real estate stuff in general. And they said, you know, “Hey, you need to take care of keeping a log with your time you spend on doing things. And then you need some active hours.” And where I wasn’t managing the properties myself, they recommended me getting my realtor license because I needed to have some of those hours for the year to be where I’m materially participating in real estate. So where I didn’t have the management, where I’ve outsourced the management, that realtor status or license was the way to go about that.
Tim Ulbrich: OK. Got you. One of the questions — and you and I talked a little bit about this when we talked a few weeks ago, but I think it’s important, as I’ve said on the show before, that people have a purpose and vision behind their investment decisions, whether that’s investing a 401k where they’re saving a significant amount of money, whether it’s starting a business or here, whether it’s buying real estate. And we often talk about this as the financial why. Why do you want to do what you’re doing? So as you reflect on building this mini-real estate empire, what’s the goal? I mean, obviously you’re going to hopefully build wealth over the long term and you have positive cash flow, all of those things, but what is the bigger goal, the why behind what you’re trying to do with your real estate investment portfolio.
Aaron Howell: The bigger goal, I think it will change over time, but the bigger goal now is to be able to generate some just time. I’m down to three days a week as a pharmacist. If I need to go in more or if I want to go in more, like example, I think last week on Wednesday, I went in for like three hours. I had to be in Charlottesville for a meeting at the bank. And my wife, she had just went out of town for a nurse’s conference, so I was like, you know what, I’m going to go in. I’ve got to be in at 11:30 or so, so I’m going to go in and work from like 8:15 to 11:15. You know, I was scheduled for two days, and I’d taken off the Wednesday, Thursday, Friday. So I actually did go in Wednesday for the three hours, but I just, meh, I’ve got to go, see you guys later, bye.
Tim Ulbrich: Right.
Aaron Howell: And they were just kind of funny, they were short staffed that morning so I walk in there, they’re like, “What are you doing here?” And I just came to work a little extra. They were like, “OK. Great.” But you know, having the real estate portfolio, ultimately, I’d love to be able to generate some more flexibility with my schedule, if not just mine, my wife’s also. She’s working like nine days in a 10-day pay period now. So she works five days one week, and then she’s off one day the next week, so she works four that week. Maybe giving her the option of maybe working 2-3 days a week, just like kind of what I’ve done. You know, she’s had kind of a stressful two or three days at work, and she’s telling me about it last night and so I think down the line, maybe giving her that option too. Yeah.
Tim Ulbrich: Love it. Yeah, love it.
Aaron Howell: And we don’t have kids yet, but at some point, we’ll have kids. And we have a little park down from our house and they have soccer leagues. I’d like to be able to coach the kid’s soccer team at some point down the road.
Tim Ulbrich: Yeah. Options, option, options. I mean, I think that we try to talk about that a lot in terms of when you’re putting together a financial plan — and here, we’re talking about real estate investing, but it could be a whole host of things that putting yourself in the position to make decisions rather than those decisions being made for you. Speaking of your wife, one of the things I was thinking about as you told your story is that you were already investing in several properties, I think out in the Vegas area, and then you mentioned you met your wife and you ultimately, of course, got married. Talk to me about that in terms of you were doing this investing, then you got married. I’m guessing we have many people listening that maybe one partner’s really interested and the other either maybe is not interested or is kind of like, yeah, I’m on board, I’m not on board, I want to learn more. How has that worked for the two of you? Was she instantly on board or was that a journey that you two have kind of come along together along the way?
Aaron Howell: To be honest with you, she’s not terribly involved in real estate investing. I think she kind of gives me a blank slate and just says, “Hey, don’t screw up.”
Tim Ulbrich: No pressure.
Aaron Howell: No pressure there, no pressure. But you know, I think at this point, she trusts me. I’m cautiously ambitious with the whole portfolio. But I think at this point, she trusts me. She’s really on board, though, with the realtor. She’ll ask me like, “Hey, what’s this couple? Do you think they’re going to find what they’re looking for?” Like, “Well, you know, I think they really liked the house today.” And she asks me questions about that. I mean, she’s aware of what’s going on for the most part, but she kind of after about 30-45 seconds, she’ll glaze over. But at this point, she trusts me and things are going well for the most part. So she kind of lets me take charge.
Tim Ulbrich: Sure.
Aaron Howell: And just don’t screw up.
Tim Ulbrich: Don’t screw it up. And I would encourage our listeners, if anybody finds themselves in a situation where one person’s been eagerly learning this topic by listening to Bigger Pockets, reading books, and the other maybe is not as interested or just hasn’t been as eager in their learning, I think dragging somebody along is certainly never the right approach, especially when you’re potentially taking on some risk. And I would encourage people to dive into education together. I think when two people can learn together, just like we talk about with the budget, setting a vision, setting the goals together, and then working on the budget, I think the same thing is here true. If you can learn together, you know, watching webinars, listening to a podcast, reading books, I think it’s much more likely to be successful when you can both be on that journey. Before I ask you as a wrap-up question, ask you about your current portfolio because we talked a little bit about the beginning and some things you did along the way but haven’t talked about exactly where you are today, where would you recommend — I mean, Bigger Pockets is one resource you mentioned, which I would second, great resource. Anything else you’d recommend to pharmacists that are listening that say, “Wow, he’s really got me intrigued. I want to learn more. I want to think about getting started in 2020.” Are there certain books, other websites, other podcasts that you really have found helpful for you in your own learning and your own journey?
Aaron Howell: Yeah, I found at some point along the way, I think I had heard him as guest, the Michael Blank podcast on multi-family investing. It’s Blank. He’s German, so the k is pronounced a little differently than you would normally say it. But it’s spelled Blank. I’ve found that podcast, I found that ultimately to be very kind of informative as far as what I wanted to do with my portfolio and my career. That’s been a great find. Another thing too if you’re interested in investing, generally, there’s some local meetups for real estate investing. I’m sure, you know, any major city, you could probably go to meetup.com or find a meeting, maybe a once-a-month or twice-a-month meeting there. And just kind of immerse yourself with people who are doing the same thing or doing things that you’re wanting to do.
Tim Ulbrich: And we’ll link to the podcast you mentioned, we’ll link to Bigger Pockets as well in the show notes. And we’re excited, we’ve got some more content as I mentioned at the beginning of the show and hopefully some opportunities coming your way as well for those that want to learn more about this, for those that want to invest in properties. And we’re excited to build upon a lot of the existing content and education that’s already out there and bring a lot of that to the pharmacist community. So let’s wrap up, Aaron. Where are you at today? Tell us about your current portfolio and what you see coming ahead here in the next year or so.
Aaron Howell: So at this point, we spent a lot of this year kind of consolidating the stuff we’ve purchased in 2017-2018. And when I say consolidating, I mean kind of developing systems more so. We’ve had the property manager transition. But we’ve renovated a bunch of units. And at this point, I’m kind of with the portfolio, I’m looking to syndicate. We did our first deal in January as a syndication.
Tim Ulbrich: Oh, cool.
Aaron Howell: So I’m looking to do a little bit more of that, kind of gathering some passive investors for that. But you know, just have been kind of enjoying things a little bit, kind of got the realtor status off the ground here in the last couple months and just kind of been enjoying things.
Tim Ulbrich: So how many doors do you have? And what cities are you at today here in 2019?
Aaron Howell: We are currently at 29 doors. We’ve got 13 in Cleveland, 12 in Pittsburgh, and then four here locally.
Tim Ulbrich: Awesome, awesome. Very cool. Well, thank you so much, Aaron. I appreciate you taking time to share your experience with our community. I think it’s going to be inspirational. Again, as I mentioned, I think many people in the community have a desire to learn more if nothing else or maybe need that nudge to say, hey, I’ve been learning for a couple years, now I’m ready to get started. And I think hearing from others that have done it and done it well is really helpful. So thank you so much for taking the time to come on the show and congratulations on the success you’ve had and wish you the best of luck in the future.
Aaron Howell: Alright, thank you very much.
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