113 Active INCOME, Passive WEALTH Show Featuring Nick Aalerud, AA Real Estate Group

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113 Active INCOME, Passive WEALTH Show Featuring Nick Aalerud, AA Real Estate Group

Wendy & Bill are live with Nick Aalerud of AA Real Estate Group, to discuss his background, why he started AA Real Estate Group, and how he helps investors on a grand scale.

After graduating from Saint Anselm College in Manchester, NH, Nick Aalerud began his investing career as a banker for BNY Mellon Financial.

While there, Nick began to see the value of investing in real estate and the many advantages it has over the traditional financial markets.

Nick sought further education in real estate investing and started AA Real Estate Enterprises as a real estate acquisition firm in 2005.

Expanding the focus of the company to include wholesaling, rehabbing, new construction, rental properties, and short sale mitigation, AARE has since completed more than 170 rehabs and rebuilds with multiple active projects currently in process, and manages over 50 rental units in New England, Pennsylvania, and Florida.

A passionate advocate of the importance of education as well as the real estate investing industry, Nick serves as a mentor to individuals getting started in the business and is a sought-after speaker at networking events and educational seminars.

Carolina Capital is a hard money lender serving the needs of the “Real Estate Investor” and the “Small Builder” borrower who is striving to build wealth and generate income for themselves and their families. We offer “hard money rehab loans” and “Ground-up Construction Loans” for investors only in NC, SC, GA, VA, and TN (some areas of FL, as well).

As part of our business practices, we also serve as consultants for investors guiding them to network with other investors and educating them in locating and structuring transactions. Rarely, if ever, will you find a hard money lender willing to invest in your success like Carolina Capital Management.

Bill Fairman (00:01):

Hi, everyone. Welcome to our show. The Active Income, Passive. No. Damn it I keep messing up our own show name.

New Speaker (00:09):

You got it. It’s Active Income, Passive Wealth, isn’t it?

Bill Fairman (00:11):

No it’s Passive Income, Active, Wealth.

New Speaker (00:16):

No, it’s right there on the screen. It says Active Income, Passive, Wealth.

Bill Fairman (00:18):

All right. So every time I get our show wrong, but it doesn’t matter! This time you’re going to stay tuned because we have a wonderful guest. His name is Nick Aalerud and he is in the greater Boston area and he has been through the trenches just like we have. You’re going to want to stick on the edge of your seat because we’re going to talk about what we see coming down the pike. Stay tuned! So dramatic.

New Speaker (00:57):

I love it. I love it.

Bill Fairman (00:58):

You know, we’ve, this is like our hundred and.

Jonathan Davis (01:04):

Is it that many?

Bill Fairman (01:04):

We’re like at 120 some odd episodes of this show and I still can’t get the name of our show correct.

Jonathan Davis (01:11):

I it all still feel like out first round and they probably look like it

Bill Fairman (01:15):

Oh thanks for putting scroller in it. So I’ll try and get it correct next time. So Active Income, Passive Wealth Show. We are Carolina Capital Management. I am Bill Fairman and this is Jonathan Davis. We make loans. If you don’t know what we do, our website is CarolinaHardMoney.com. We also allow for investors to give us the capital we need to make loans with. Right? So if you’re a borrower click on the apply now tab, if you are seeking a passive income, then click on the investor tab. Don’t forget to like share subscribe, hit the bell, whatever the heck that means. And if you have any questions for us or our guests, we have a comment section. It’s either going to be on the right side of your screen or underneath, depending on the platform you’re viewing as from. have I covered everything?

Jonathan Davis (02:10):

Yeah, I think so. When it says hit the bill, I always think of like growing up and going to a long John silvers and you hit the bell on your way home.

Bill Fairman (02:17):

I never saw that because I always went to the drive-thru. They had no bell at drive thru. I’m lazy. I don’t want to get out of the car. Without further ado, Nick is proud of his 28 degrees Fahrenheit in the middle of the afternoon in the greater Boston area. Thank you so much for joining us, Nick.

Nick Aalerud (02:41):

Thanks for having me Bill and John pleasure to be here, dude.

Bill Fairman (02:44):

Thank you. I know you really mean it.

Nick Aalerud (02:49):

I do. It’s funny it, so I’m laughing my butt off in the green room there because I also, I can’t remember the name of my own podcast either. So thank you for that. And also you guys have a lot more courage than I do, cause I would never do mine live. I at least can go back and edit like God bless you guys for doing what you do.

Bill Fairman (03:09):

Well, they kind of hardened you when you do it live because you know, you can’t go back and fix it and what the heck let’s just move forward. If we fix it, we might come off as we’re a little too stiff or maybe,

Jonathan Davis (03:23):

Maybe no, too much. Goodness of live, you know, you get the real flavor.

Bill Fairman (03:27):

That’s right. And I don’t want people to think we’re too smart. So, Nick, you’ve got a lot of stuff going on. You’re a real estate professional as well. You have a banking background, I mean, you’ve done fixing flips and buying holds and wholesale and what was the other, I’m trying to think of? Short sales stuff. I mean, you you’ve been doing it all. You’ve gotten into commercial property, by the way, I love the self storage space. I love the multifamily space, but there are different aspects to every bit of that and congratulations on getting in there and learning it all. How did, how the heck did you get started?

Nick Aalerud (04:13):

Thank you for that. And it’s funny, you mentioned congratulations. It’s for me, it’s just been one tumble after another, right? You just start tumbling around and you realize there’s certain things change trajectories and you kind of form your buying rules and form your criteria. But yeah, so that’s the long and short of it will you just said I started, as the banker working 70, 80 hour weeks, it wasn’t anything special. It’s a great title, but it was more just a high-level teller for mutual funds, stocks and bonds for life insurance companies. That’s really what it was and they had me working 60, 70, 80 hour weeks working on Christmas day, new year’s day. I was handling foreign trades and all sorts of stuff and I just remember seeing as a whole long story about a board game, which I won’t get into, but I saw an infomercial on TV once at two in the morning, think it was 2003 or 2004 and it was a guy saying, you know, Hey, learn to buy real estate pennies on the dollar. So, okay. It sounds kind of cool. So I bought, I called up 800 number and paid 50 bucks for a binder to come in the mail. And it was all about like tax lien, investing like, Oh, it’s kind of neat. You know, this might be my way out of the corporate grind. And as I continued, it said, if you’re serious about real estate investing call this 800 number, I guess I’m serious. I acted on an infomercial. I guess I’ll call this number and the best salesman in the world. Talk me into my first $6,000 over the phone. Coaching bootcamp scenario taught me how to do advertising for motivated sellers and direct mail and phone calls. And the biggest thing they got me to do is read the book, Rich Dad, Poor Dad like most of your audience has already and guests have already read. It might, is that right?

Jonathan Davis (05:54):

Yup.

Bill Fairman (05:55):

Absolutely.

Nick Aalerud (05:56):

A lot of people got started with that book. Yeah.

Nick Aalerud (05:57):

That was it. Right? Change, the mindset changed everything. And I immediately started to say, this is it. I have to go and do real estate. So I didn’t stop there. I invested in at least $60,000 more of stuff, they had things called learning annexes back then, right with, you know, the Kiyosaki’s and the trumps and all the gurus came into one spot and got to peddle their wares. Right? Some of it was really good. Some of it was not so good but I just bought everything. And about a year later, 2005, I was really angry because I hadn’t done a deal yet really, really, really angry with myself that I had made all this investment and this is my time and what am I doing? And I should just be working. And at the time I didn’t realize it. And the story goes about I was in the shower one day. I had a lot of hair back then. I know no one believes me, but I had a lot of hair back then. And I remember being in the shower, looking at the shampoo bottle saying, you know what, by the time the shampoo bottle goes down to zero, I’m going to have my first deal in real estate. And every single morning I’d get in the shower and see the shampoo bottle go more and more and more. This became my accountability partner.

Jonathan Davis (07:03):

I hope you still don’t do that.

Nick Aalerud (07:06):

There’s better accountability partners. Is that what you mean? But I I’ll never forget it. I was, it was a mindset. It was a mindset shift in, and I was there on an online forum at the time, trying to get, you know, back online forums were kind of cool right now. They’re cooler now. And a guy from Minnesota reached out to me and said, Hey, I see you’re hustling. You’re trying to get some first deals. I have access to undervalued real estate. Now mind you, I’m a banker, but it’s my first time of the financial world is 2005. Okay. I have access to undervalued real estate here in the Minnesota market. And what I’m going to do is I’m going to find this undervalued, where you get an under contract at 20% below as is market value. We have a tenant buyer and people with poor credit lined up to rent these things for 20% above fair market rents. And we’re going to contract with them to sell it 20% above current value in three years after they get their credit back together. And they work with as loan officer and this and that. And back then, Bill, I know you were in the business, but I got to, this was still crazy to me, how this was legal back then we could sign a purchase and sale agreement and go to the closing table for $450,000. Get conventional financing on that for 90 to a hundred percent finance, right? And the seller legally, could give us a check back at that closing for about $60,000 saying, Hey, good luck to you. And thanks and call the authorization right through the closing. So we would make money, make money wasn’t real money, right? It was leveraged money, make money at the closing, purchase closing, rents every single month, and then resale in three years, I’m like this guy is going to teach me about lease options and rent to owns, and he’s gonna teach me how to manage property, this is great, no brainer. I’m going to do five in one week. There’s my deal. My first deal in real estate, I’m going to close on five and one week. And I had, you know, the mortgage broker lined up, he a credit partner. That was his thing, right? So sign on the dotted line for sure. 10 loans. Most of them, a hundred percent finance. Two of them were 90% finance and just went for it. And we had our call with him on Tuesday for next steps and getting the tenants in there and getting the security deposits and the first month rent and he didn’t show up to the call percent of that money, the purchase, closing money for the record. So he didn’t show up to that call. And then as we continue to forward, you know, where are you? Dude, are you okay? You all right, what’s going on? And no emails. And it turns out, right? All of the leases were forged. There were no tenants. He had sort of just, I don’t know if it was, it was intentional, but I still was being malicious, but either way, I, my first deal in real estate were five deals in my first five deals. I lost all five, four, one, two short sale. One went to foreclosure. I didn’t know what a short sale was back then. And it investors out of Minnesota actually helped me out. Yeah. I was the motivated emotional seller that didn’t want to deal with paperwork. Didn’t want to even think. I can’t believe I made these decisions, right? And it took me a hard six to seven months before my, the phone was ringing every 38 seconds with 10 robocalls, right? Of 10 defaulted loans. Your, your phone’s just off the hook. And I remember I was thinking to myself, this is horrible, horrible place to be mentally. And I took six months off and myself back at work. But if they checked my credit, I lose my job because you have to have good credit to work at it bank, right? And I just remember coming up for air in six months saying there’s still something with real estate. Like I just lost all my credit. I started with 800 credit score money in the bank, like positive head on my shoulders. And I just had a major learning experience where, where am I headed now? And that led me to my next strategy, where, what do you do in real estate if you don’t have a cash or credit or anytime and you have a little bit of time, and that was the wholesaling strategy. So I would knock on doors, and made a whole bunch of phone calls once I get my mind. Right. Again, which was the hardest part. I have a whole story on that. I wrote it on Amazon, but, you know, I should have knocked on doors in the Summerville Cambridge market here, which is butts Boston and talked to a lot of tenants and got to their landlords. And I found one person at a REIA group that was buying three family, triple Deckers and conduit them and selling them and he started paying $5,000 per contract that I could send to him. And he taught me how he bought, that taught me how to estimate construction a lot better and it taught me how to manage my time working only nights and weekends, trying to make a wholesale, no business work. And I learned everything from there and from there, 2006 came, and I remember I did, I think under 12 deals for him where I was flipping him, you know, $5,000 a contract and I finally had enough for a down payment with Bill, you know, very well. I learned what a hard money lender was and the first person, right? Cause I was non financeable out of the gate and I had enough for a down payment and my first hard money loan. It was a triple Decker in Somerville. And I broke even. And that was the best when I had had in real estate. And it taught me everything I needed. And from there I, as a banker, I learned process and SLPs and procedures, the boring stuff that entrepreneurs don’t want to think about. I still thought that way, I thought in an Excel sheets, I thought in process and I just said, okay, I’m going to form buying criteria. I can’t afford to lose any money because they don’t have any lose. So what, how can I buy, how can I market, how can I more effectively build this business where I can’t lose money? It’s impossible for me to lose money. If I do a, B and C and D, and that became, you know, a rehab company and, you know, 400 rehabs later, we maintain profitability on 98%. It doesn’t mean those 2% were hard. And, in horrible losers, I told you before the show, every single big loser I’ve had is because I’ve bent my rules, those same rules I learned in 2006, I would bend them a little bit because whether it was an ego thing, whether it was like, what’s my next step. Like I know this now what’s more sexy, what’s exciting. Mansion beach houses was one of them, you know, like a big multi-family commercial apartment buildings was another. Every time I bent my rules, I would learn another lesson. And the lessons of their nuts is squash me down. Right. But to kind of pivot and change trajectory, what can I now put into this rule, this box of rules that, that helped me move forward. So that’s how I started. That’s my big starting in real estate.

Bill Fairman (13:20):

You know, it’s funny, you mentioned on the bank side of, it’s just a good, just a nice title because that’s one of the things I laugh at people in the banking business and, and I’m sorry, I’m not making fun of you. It’s just, I don’t like the big banks because this is,

Jonathan Davis (13:41):

In Louie compensation. Here is it’s pretty titled.

Bill Fairman (13:43):

There you go. Like, I’m a vice president or something.

Jonathan Davis (13:51):

That’s what I said, Like I’m vice president like you and everyone. And I think the teller might be too.

Nick Aalerud (13:56):

True story.

Bill Fairman (13:57):

But if you think about it. Banks are working on really low margins. That’s why they got into the wall street world, because that’s where all the big money is being made, making loans. You don’t make a lot of money making loans, especially long-term fixed rate loans. You’re, not making much of a margin. So you have to have a pretty decent spread. Now, if you’re humongous, then, you know, the volume kinda makes up for that.

Nick Aalerud (14:25):

Yeah. So you’re looking at a mergers and acquisitions piece, right? Or you’re relying on, yeah. I mean, that’s kind of what it, what it is. I get ya,

Bill Fairman (14:32):

On your losses and I want say losses, their learning experiences. What are your takeaways from number one, I know what this answer is going to be dealing with people you don’t have a relationship with and this is why I think it was beneficial for you being in a regroup to work with a mentor versus finding somebody on the internet, uh, to all of a sudden, have you sign your name on the dotted line, so to speak. But at the same time, you were anxious to do something and you don’t want to have what Larry Goings called shelf help. You spend all this money on education, and it just sits on the shelf. But, and we talk about this all the time, mentorships and getting relationships with people before you get out and do this stuff on your own, you still have to learn. You still have to get in there and learn this stuff. So I think, and, you know, you can expand on this. I think you learned more and more valuable lessons on that first deal that you did with the triple than any of the other education that you got in the real estate investing side. What do you say?

Nick Aalerud (15:58):

It is for when it comes to residential real estate, I would say that it was on that breakeven deal. It was the really confidence for me. It finally gave me like, okay, this can work proof of concept because I didn’t have anything to speak to that yet. I will say that if it weren’t for my, the Minnesota experience, I wouldn’t have taken the first step. And I think everyone needs to take the first step in order to get into a second, third, fourth, and a hundredth step, you know? So I look back now. I mean, it’s all about mindset shifts. I mean, every single challenge that I’ve had has literally led me where we are today with a vertically oriented organization and with an amazing team. And so I really can’t speak negatively, although I did for a long time, like for a long time, they kept me here, right. I was angry at him, angry at myself and not only that we’re going to get into it today, but you know, there’s a whole bunch of other partners in Boston that got me involved with, I call it a brush with the sec and I was so there’s a was a lot of anger at first, and I think it’s natural as humans to have that anger, but it’s how quickly can we pivot and say, what do we learn, right? How can we shrink the anger and shrink the resentment and shrink the, putting your head in the sand. We have to do it because we’re human, but like, how can we make that smaller to get, to get what’s the next step? What’s the next level? How can I implement? How can I retarget, you know?

Jonathan Davis (17:16):

The best entrepreneurs in real estate, or are those who are, solution-oriented not problem-oriented who, who just, they just find the next solution. They just keep work. It may take them 10, 12 times, but they’ll find the next solution.

Nick Aalerud (17:30):

Go ahead. Yeah.

Bill Fairman (17:31):

I was going to say, I don’t know anyone that’s in business that hasn’t failed. Everybody fails along the way. And, you shouldn’t really call it failure. It’s part of the learning process. And, you know, you have no control over markets. You do the best you can to minimize risk outside of your control but markets happen, things happen that are totally out of your control. And sometimes you pick something that just doesn’t work and you have to turn around and, and find something out and this is why I love small business in general is that most entrepreneurs are like Jonathan said, solution oriented and there they get knocked down. They come right back up. We can easily pivot and go in another direction if you need to, if you’re one of these people that, you know, have that straight and narrow thinking, you’re not going to last long in real estate,

Nick Aalerud (18:33):

You nailed. And you mentioned earlier relationships and coaches and mentors, and you’re absolutely right, as far as, you know, shortening the learning curve and investing in the right partnerships, the right people around you. I will say this, you mentioned market cycles. You and I have been through market cycles. There’s an awful lot of the, what we very dangerous people right now. We call home run heroes, at least locally that, you know, have not lost anything because they started in real estate in 2015 or 16. And the market has certainly compensated for any mistakes they have made. And they don’t know what it feels like to have a market turn. They don’t know what it feels like to have, you know, lenders sort of I’ll squash it, you know, all the wall street, lenders squash away and, and, you know, Carolina Capital Management, right? And the local hard money people finally, are super competitive as far as like, people are all going to be going to the hard money lenders because they can’t go to commercial anymore. So, it’s homegrown heroes do scare the heck out of me. There’s a joke around here. Massachusetts has license plates. One’s a red, Red’s the ones who have been updated the last 20 years. And you have to put both of them, one of the front, one of the back of the car, there’s still people driving around with the one green one, which means they haven’t been in an RV in 25 years or so. And that scares the heck out of, most of us here, we call home run heroes, the green license plate people.

Bill Fairman (19:49):

Yeah. Eventually that eyesight isn’t what it used to be in those reaction times are a little bit, longer than they should be. They need to go DMV

Jonathan Davis (20:01):

On that point. You just made me, we’ve had that in our mastermind meetings. It’s, you know, these people who have become millionaires or whatever in the last, you know, five, 10 years. Like, is it because you’re awesome or is it because the market cycle was just right? It’s like, yeah, you got to watch yourself and check yourself. He goes, we’ve had a really good market cycle and it probably, wasn’t just you.

Nick Aalerud (20:24):

Yeah. That’s it luck and skill, right. If they’re both combined together, you’re, you’re even better off, but you can either have luck, have skill or have both, but you gotta be in the right place at the right time with the right relationships, a hundred percent,

Bill Fairman (20:34):

Nothing wrong with being lucky and having the right time, as long as you’re preparing yourself for a downturn, one of the things that we promote a lot, a profit first book, and it is, if anybody is new to the show, that’s listening, look it up Profit First is going to save your butt if you do it properly. Alright. We have a question from, from Mark, you know, how do you make money in property management, or is there a,

Jonathan Davis (21:09):

Is that a lost leader? How much additional expense would it be to outsource it? Well would you like to answer this Nick or?

Nick Aalerud (21:19):

Yeah, absolutely. Cause we, we, we played with that exact question, not just a year ago. So, we, so now we have just to give you an idea of the organization. So we started with our, you know, wholesale company. Then we went into fix and flip and then fix and flip lid and do real estate retail brokerage, right? Because if we’re going to be selling our own properties, we might as well try to have access to MLS. And then we can bring in quality people that are licensed agents that can help sell our inventory. That led into a short sale negotiation firm, because we were dealing with a lot of sellers back then, right? ’09, 10, 11 that had some issues with their debt and we had to get out and I had had experience in that. So it happened to be, I helped with that and then as we move forward, right, we built a rental portfolio and the only natural course of action for me. And this is to speak to your question, Mark. I mean, based on maybe based on the challenges that I’d had, I’m, I was kind of a control freak, and that’s not a good thing, not a good thing at all, but I was a control freak, and I tried to hire, I had a PA, I was not financeable until 2014, but I had to, I knew in my head, I had to start building a rental portfolio to help with my wealth building in 2009. So I went out to a market that was not local to Boston, where I could buy houses, cash that I didn’t need loans on. That was a much smaller, lower priced market. And when I started buying single family houses and renting them, I tried using third-party management companies. Every single one, every time we would get the report back, there were things on the report. I’d have to question it. And of course I was the pain in the butt client, right. Like they didn’t want to deal with me either. And I’m like, if I’m just dependent, I want to be a payment by client either. So what can I, what do I demand of myself and not putting someone else through the pains of having to deal with me? So we formed our own, it was internal at first. Internal property management company that only dealt with our inside portfolio. So that wasn’t even a moneymaker. That was literally just to say, okay, cause again, banker right process and checklist oriented. How do we make this a process? So it’s not some guy running out to every property in the world talking to a tenant, leasing that up, but then not knowing like we wanted recurring communications, we wanted a preventative maintenance schedule, we wanted all sorts of these and I have now what we call a 44 point value add inspection checklist, which actually helps increase value of assets under management, but for anybody who hires us. So that was all internal up until 2019 and it was just because we had our own portfolio and I, and I couldn’t trust anybody else. So we ended up doing it ourselves. But in 2018 ish, I had that vision of, well, why am I keeping this to myself? And if we can monetize it even better, but we have all the checklists, we have the processes, we know how to hire people. I’m going to open this up and show them how they can increase value in their own assets by just doing one of 44 things that will make our, the fee you mentioned, Mark, our fees are between eight and 10%, monthly of collected rent. Now, I personally think, and I still do think that if you don’t have 50 units or more, you should be hiring it out and it’s totally worth your while because you, you can focus on your next deal instead of managing your own assets. Right? But if your intent is to do we make money on it now, even now as an external force we have, it’s a breakeven proposition now, but what it does is it allows us to hire some good people. Like we hired a lead maintenance tech that it’s now working on the management company, but it’s also someone we can use for our rehabs and fix and flips, right. We’ve hired a really good executive assistant or lead property manager. That’s working there. That’s also good to work in a capacity for the other companies as well. So it’s allowed us to kind of bring in some high quality people and give them have more income coming into to take care of them. Maybe that, it’s just a question, maybe it doesn’t, but I think if it’s worth it for you to do it and you want to make it an actual business, you’ll need 50 units or more to make it worth your while.

Bill Fairman (25:13):

Yeah. And one thing about property management, the tenants hate you. The property owners hate you. If you’re dealing with a management company and you’re the landlord, please tell your management company. Thank you now and again, that goes along the way know, assuming they’re doing a good job, thank them because it’s a thankless job

Nick Aalerud (25:37):

You’re caught between a rock and a hard place. That’s exactly right. Yeah,

Bill Fairman (25:40):

That’s right. So Nick given our current economic climate, we know now that it’s going to be a democratic controlled house Senate and executive branch, and I know you have this great, crystal ball. What do you see? Kind of short term and then maybe the next five years short term, maybe year to two, and then out the five years, what do you see coming?

Nick Aalerud (26:12):

Oh boy, I love this question. Okay. I’ll try to be quick and thank you for my soap box Bill. I appreciate that. So, um, obviously we all had to pivot in may, June, July of this past year. And one of the things that we did is we took a really hard look like if, if this business stopped tomorrow, who knew what was going to happen, right? If this business all stopped tomorrow, what did our bloodline look like? What did I CA how much cash did we have and how many months could we last with our, with our breakeven? And once we were done slashing expenses and, and doing a 13 week cash projection log and all this, I then had to look at the, at, at the future. Okay. Then what’s coming? And I do know now, especially, and I hate to say I’ve been waiting for a correction, right? But I think a lot of investors have been waiting. A lot of the long-term investors have been waiting for a correction. We didn’t know it was a pandemic. There’s going to be a catalyst, but the market needed a correction and here we are. Now besides the correction that the market needed and I didn’t know the answer either, but what the government has put in place to assist with the forbearances and the deferral mortgage payments and the eviction moratoriums and all these, they have tried to help. But again, maybe going back to my banker mindset and going back to what I can forecast out economically, what I think is going to happen every single time they put in a new effort in place every single time they even provide more stimulus to the economy, which is by the way, good but it’s a devastating blow once we have to start to normalize without parachutes. So for instance, so this is a big background to say, my short sell company is gearing up for this, right. And I’ll talk about first sales first, my short sale company is saying, okay, so here’s, what’s going to happen. At least, especially up here, we still have a foreclosure moratorium and eviction moratorium in place. I don’t know if it’s nationwide or just statewide, but either way it’s here and every single one of these people is going to get a call from their lender in three months, maybe six months, maybe nine months, depending on how far they kick the can down the road. And they’re going to say, okay, so, you know, it’s over now and we as a lender, you know, we are gonna need to make good on your six, nine months or 12 months of non-payments. So here’s a few options. Number one, you have your job back now, right and income is back and steady. So, you have, I’m sure you’ve been escorting this money and you have it all in a lump sum and you just pay it out, right? Like, no, I, you know, I don’t even have my job back. I have a different job. I’m in a service job now. Okay. No worries. Here’s what we’ll do. We’ll the government has allowed us to do a COVID month. So we’ll have to take what you owe and we’ll amortize it over the next two years. So it’s your mortgage payment plus like 500 bucks a month, depending. Like, I can’t even pay my mortgage payment. I can’t do that. Okay. No worries. We’ll take your back payments. We’ll throw it on the back of your loan and we’ll refund the entire thing over 30 years, and you’re gonna be paying, you know, probably like about 50 bucks more than your mortgage payment was like, I don’t even have my job back because this is what happened, right? Bill and John businesses like mine, like a lot of peoples have learned to operate more with less, have learned to do more with less. I, we got rid of our office space. Why haven’t we got rid of, we didn’t get, we actually were in a growth phase. So we hired people instead of let people go. But we’re, you know, very careful as to who we hire and we got a lot better talent. I’ll tell you we had turnover, but it was good turnover. Like we got better talent and let some of the other stuff people go, so businesses have want to do more with less, which means that they’re not just people. Aren’t just gonna magically get all their jobs back. This aren’t gonna magically just come back and release all the office space and release the industrial and release the restaurant and, Oh my God, restaurant hospitality, Holy cow. Like they’re not coming back. And 4,000 square foot restaurants I already tried. Cause I had, I was building out a restaurant and a restaurant tour that I was talking to building it out for them. You know? Oh, we were looking for now 1800 square feet instead of 4,000. I understand, you know, we want to drive through, we want, you know, a lot of takeout spots. I get it. So my whole point is here’s what I see is going to happen. Residentially, all of those people are going to get their calls from their bank eventually. All those people are then going to have those options. Some of them might have gotten a better income job, most of them will not have gotten a better income job than they had. So they won’t be able to afford any of those good minds as they’re called. They’re going to be forced to sell. Now up here, we have stupid amounts of demand. That’s still pent up in our marketplace. We’re still having a stupid buying, you know, buying bid Wars and all that. So the first wave and the second wave going to be fine, they’re going to make a ton of money when they go to sell. But what happens is the third, fourth and fifth waves as they come out with all this happening, we’re filing an to see a normalization of that supply demand market. We’re finally going to see houses, stay on market for seven days, 14 days, 30 days, and eventually 45 days. And eventually a price decline, price decline. This is the third, fourth and fifth wave. This is just all my crystal ball, right? And everything’s still okay until the moment the price just declined. Price, decline, price decline, or the maintenance required because people can’t afford to, you know, a peer or fix their boilers, right? Or fix their, we have ice dams every year and roof leaks like you can’t, people can’t afford to fix that. The moment you start to see on the MLS subject to third-party approval sold as is short sale only. The investors smelled blood in the water. The offers crash down to, you know, 60, 70% of what they leave in the list prices are because they think, Oh, short sale. I can make money with short sales and that’s, what’s going to cause I feel the massive correction, at least locally in my new England market. So that’s first and second, we have no problem. Third, fourth, and fifth wave. I’m seeing all this come out. I love to pick dates because why not take a stab at it. Right. So I’m thinking that we’re going to see, but, but for the record, my first correction where the media had to acknowledge a correction in the national real estate market was August 14 in 2014. So I was way off on that for the record. So, you know, I’m going to pick a date and say, you know, January 10th of 2022, we’re going to see the residential real estate market, at least locally to me, my new England market, tart to see some price declines and see some, some pain. Now I’m going to, because I’m still on my soapbox. At one more point we talked about, which is the commercial side. Commercial side is what I see first coming. I looked, I took a long, hard look at all the loans that were taken out the ten-year notes that were taken out in 2011 and 2012 that were large office space, restaurant, retail, industrial, at least again, this is more local to my market. I took a bit look at that. And there’s like five or 6% of the entire commercial market that took out 10 year notes. They’re going to have to refi. Lord knows they can’t refi with their occupancy levels. Right now they’re going to have to sell. Not only are they going to have to sell, most of those loans were not wall street. Most of those loans were what we, you know, the regional banks that have a lot of stuff in house. They’re not going to be able to reload their funds until these loans are made good. Right? They’re not gonna be able to do any of that. So I’m personally predicting, and this is again, local to my markets, a commercial capital freeze in my market that is going to trickle up to wall street. And I don’t know what’s going to happen nationally. Again, I speak for new England but I’m going to see a commercial capital freeze, which means commercial values. As soon as Q3 early Q4 of this year, we’re going to see a tremendous crash. Cause they’re already feeling pain. We know that, but they’re going to start feeling a lot more pain as all these notes start to come do. That’s mine, that’s my box. And I, to the point, I’m putting a whole bunch of money behind it and we’re preparing our teams to start taking action. And repivoting, as you saw any sort of office retail, industrial into multi-family or self storage, depending on those zoning laws.

Bill Fairman (33:47):

I know that commercial industrial space is going to be in a lot better shape than the retail and office. Obviously, with the remote working office is going to hurt, your retail spaces. I think as long as you have, you know, the little small mom and pops kind of boutique stores that people still want to go to and they could be coffee shops and stuff like that, they’re going to do okay. As long as people feel comfortable going out and going to them, but hospitality and some of these other, things that you’re going to have some serious issues in the value of these properties but again, it all becomes a opportunity for others to come in and listen, business needs bankruptcy. Why? Because if you have a business that for some reason can’t handle, or if they’ve overstepped, they’ve been there over their skis and they can’t make money anymore, the companies that come in and buy the equipment in the bankruptcy sales are the ones that are getting in at a much lower price and now they’re able to hire people and be able to create profit because now they’ve reset with sorry, the ashes of others. And I hate to say that but that’s what market cycles do is that they create opportunities for some it’s bad for others, but it’s opportunity, right?

Jonathan Davis (35:22):

That’s true. And, Mark just asked another question. We throw it up there. What resources and what information do you use to structure the deals for your owner finance deals? Is it state dependent? I think that’s directed at you, Nick. I think he’s asking what, what do you use to structure your, finance

Bill Fairman (35:38):

Do you, do you do any owner finance deals?

Nick Aalerud (35:41):

We have. So Massachusetts specifically, right? We have all sorts of funny laws like California. So when you ask go to financing, there’s different laws, right? There’s residential owner financing, there’s owner rock owner financing, there’s there’s commercial owner financing for multi-family. Um, most of our owner financing. Now we’ve stayed away from residential owner financing. There’s a whole bunch of laws around it, especially from Iraq. Um, if we can do master lease options, lease options is kind of what we do to take control of property. But I’ll say in, in we use owner financing now more for the multi-family space when a landlord wants to avoid tax liability. Um, so they that’s typically where we find the value it, but we don’t push it and we also there’s a bunch of gurus out there teaching that you can, you can buy a whole bunch of money, a whole bunch of deals with no money out of pocket. We don’t operate that way we always make sure that we have some money to show out of pocket so that they know where we’re serious and legit and owner financing the rest. So we might put, you know, two, three, 5%, 10% down owner finance, you know, 10 or 20% and then get a primary loan for the rest. We use it as a tax deferral strategy Mark, more than anything else.

Bill Fairman (36:53):

Yeah. And that makes sense if you’ve owned a property for quite some time and that owner could participate in some of the financing as well. They would much rather not have to pay that capital gain right away. So that’s, that’s an awesome strategy. Nick, thank you so much for your time.

Jonathan Davis (37:13):

It’s been great.

Nick Aalerud (37:15):

Thanks for having me, but guys, I was with pins that you can hit, you get let to a soapbox, you’ll be vent about my, one of my issues. This is great psychology session. Like this is great.

Bill Fairman (37:25):

Typically our first 30 minute show is about S on our soap box. So it’s nice to have somebody else on their own. It seems like we’re, we’re on the same page in most of our prognostications as it were

Nick Aalerud (37:41):

Well, you’re in front Ryan’s crew, your front line. So you’re again, uh, you guys have a well-established business, but I mean, you know, when there’s market changes, you’re going to have to maybe double and triple your business too on the, on the lending side. So that’s at least what I would think.

Bill Fairman (37:54):

And, you know, things are going great right now. We had in December the biggest month that we’ve ever had since we’ve been in business. Is that likely to continue? I think for the short term, probably, yeah, for the next two or three years, or one to two years, as we think that the government is going to be just throwing all this money out there and values are going to remain high and they’re still going to be a good demand. But you know, there’s, there’s pain coming and so you just have to prepare for it. Nick, are you offering courses as well?

Nick Aalerud (38:33):

We do. Yeah. Yeah. We’re we’re actually, so yeah.

Bill Fairman (38:37):

How can people get ahold of you?

Nick Aalerud (38:39):

Sure, sure. They can find, so if they go to, I mean, I’m on Facebook and LinkedIn, they can check me out there. It’s a real estate group. We also do have a podcast it’s called the shut up and do it podcast which is based around people who have faced challenges. It’s just like you said, so thank you for and we do have a coaching and mentoring program. It was a formerly called the complete deal flow system. And while we haven’t even announced to the public yet, it’s now going to be called REI ignited or REI ignition. So that’ll be coming out in the next two weeks. So appreciate that.

Bill Fairman (39:14):

Perfect. Awesome. I hate to go, but time is ticking.

Nick Aalerud (39:20):

You got it.

Bill Fairman (39:20):

So thanks again for joining us folks.

Jonathan Davis (39:24):

Thank you.

New Speaker (39:24):

We are Carolina Capital Management. Thanks for joining the show. If you’re a borrower interested in borrowing funds, CarolinaHardMoney.com click on the borrower tab. If you are an investor looking for passive returns, click on the investor tab, don’t forget to like share, subscribe and hit the silly bell. What’s the name of that show? Active income. Passive wealth.

Speaker 3 (39:48):

Yeah.

Bill Fairman (39:51):

Well, it only takes a few more days and I’ll forget it. So, all right. Anyway, you guys have a great week. We’ll see you next time on this same channel, so to speak different link.

Speaker 3 (40:04):

Thanks guys.

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