Updated: Jul 4, 2020
The first million dollars is always the most difficult, find out this mistakes Aaron Fragnito made as Peoples Capital Group built it's first million in real estate wealth. What would Aaron have done differently? How can you scale quickly and what regrets does Aaron have getting started. Find out that and more through this short podcast.
Also why is the cash out refinance the best way to manage your real estate portfolio? We cover that and more today on the Passive Cash Flow Podcast. The Passive Cash Flow Podcast is for beginner or experienced investors. Learn how you can diversify out of the stock market, own a part of an apartment building & start earning Passive Cash Flow! Peoples Capital Group has been helping passive investors build wealth in NJ real estate for 10 years. Visit www.PeoplesCapitalGroup.com to find out if you qualify to start earning passive income and pay less taxes via investing in real estate. IRA's and 401K's are accepted. -- https://www.facebook.com/peoplescapitalgroupnj/
Aaron Fragnito: All right, ladies and gentlemen, welcome back to the Passive Cash Flow Podcast. This is Aaron Fragnito your host and episode number 14 here at People's Capital group. Today we're going to talk about how I made my first million in real estate. It's quite a story, so many mistakes in there. Also to clarify, a lot of people in real estate they say they made their first million and everything. Now as far as I'm concerned if full disclosure, I think being a millionaire means you take home a million dollars in a year. I am not a millionaire, I'm not taking home a million dollars in cash in a year, that would be crazy. I'm 32 years old and we haven't built our company quite there yet, but I certainly do have well over a million dollars of equity in real estate. When I say my first million, I'm going to talk about how I created my first million dollars of real estate net equity. If I sold all my real estate, I'd have a well over a million dollars. I think that's quite an accomplishment, I want to talk about that and how I built my first million in real estate over the last 10 years here in New Jersey. Again, if you want to learn about how you get invested in one of our apartment buildings go to peoplescapitalgroup.com. We buy a new apartment building every single three or four months here in New Jersey. We work with passive investors who get awesome returns on their investment and to learn how you can qualify for that investment opportunity go to people'scapitalgroup.com and put your information in. We'll contact you see if you qualify or come to one of our upcoming events here at People's Capital Group. Let's jump into it here, how did I make my first million? What were the mistakes I made? What were the smart things I did? Obviously did a few things right, but I probably did a lot more wrong and those make better stories so we'll talk about those a little more. The first building I got, well the first commercial piece of real estate I bought was a six family building with Seth and we got this by putting signs on telephone poles. That sparked me off to your getting buildings, buying, renovating, refinancing, getting our money back. We bought the building for about $220,000, it was a motivated seller. He mismanaged the property, there were about three vacant units on the property and out of six or half the building was vacant. We bought the building for 220, put another 50,000 into it or so and got it fully leased up. At this point is fully at least up six family in Newark there and we had it appraised for about 500,000 so we pulled out about $350,000 of our money. We got back our entire initial investment and we pocketed some cash on top of that. Now that's tax-free cash that we pocketed because when you do a buy renovate, refinance out and you refinance that cash out of your property that's non-taxable income because it's debt. We're not selling the building, we're not exiting the LLC, we're buying, renovating, refinancing the building, we're getting all our money back and if you do your job really well, you get some money on top of getting all your money back. That's called a cash out refi. We exercise that strategy until today, that’s how our investors make awesome tax-free returns on our buildings but now we do it on a larger scale. It's more profitable doing it on a 25 unit than it is on a six unit you can imagine. We still do six units but we prefer larger scale buildings these days. That was our first building we bought renovated, refinanced out, if you had Google that BRRR strategy, well before everyone, all those millennials like bigger pockets were talking about it, we were doing it in Newark so before it was called a cool buzz word, we were doing it. The BRRR strategy is now buzzword and you can Google that BRRR and that's what everyone's doing these days and it's an age-old practice to build wealth in real estate. The only difference is now the millennials, which I am so I can make fun of them, have given it a name so now it's called the BRRR strategy so it's really cool to do now because it's got a name. That's how we did our first building. From that point, we got a 25 units building. Now remember this all kind of start with me making a plan as well. I was a ski instructor in Colorado after I had graduated from college and is around 2010 and the market was terrible so just going back before I got that first building was Seth. I really don't know what I want to do with my life. I was a ski instructor in Colorado, I remember Enterprise Rent-A-Car said I could work for Enterprise Rent-A-Car. Went to a job before I graduated college and they said if I worked really hard at Enterprise Rent-A-Car, they'd start me a $32,000 a year and then by the time I was 65 if I put enough money away my IRA and made the right decisions I could retire. That didn't really interest me. I said no, that's not the path I want. I don't want to build someone else's dream and slowly climb the corporate ladder and sure I would have done just fine at Enterprise Rent-A-Car. Maybe I'd have my own franchise by now. Who knows man, I would've climbed right quite quickly. I would have been a millionaire anyway, but for the most part I did have a