Brett:

I'm excited about our next guest. After a successful career in the Air Force as an executive role for a software company. He founded a consulting company in 2005, the Great Recession brought some turmoil around 2009, and which kind of helped him transition into real estate. Where he now helps people create and preserve our wealth by buying one to four-unit complexes throughout the United States and other locations. Please, welcome to the show with me, Dr. Axel Meierhoefer, how are you today?

Axel: 

Yeah, very good, Brad. Thanks for having me.

Brett: 

Absolutely. Glad to have you on the show. Tell us a little bit more about your story and your current focus?

Axel: 

Yeah, absolutely. So the Last Name is Meierhoefer, which is a very German name. And that's also where the accent is from. And like you started out the story is basically I came over here as an exchange officer with the US Air Force, there's a program where you literally take the other person's job. So I became an assistant director of operations. And the guy who had that job took over the flight school that I was responsible for and did that for a while. And we thought, after two years, we would go back or maybe three years would go back to Germany. But after that assignment, I was told there was a need for a project management job at the US Air Force Base. And I did that and therefore six years, and ultimately, when you can fly anymore, you get close to retirement age. And you can decide, I always said, if you want to fly a desk, or you want to get out, so I decided to get out was immediately recruited into a software company in Santa Barbara, which we'll probably come back up again when we talk about the capital gains tax and worked for them for four or five years before I started my own business. And then, like you said, came up with this question, how do you actually work and develop some income, passive income for retirement and over time, and over the years, develop this passive income strategy, first of all myself, and then people said, Oh, you got to share it. And you gotta put it on the web and stuff like that. And so I started doing that. And now we're helping other people do the same thing, basically, walk the same path that I'm walking.

Brett: 

Amazing. And you're out of San Diego. Now, I spent a little bit of time in college, which is an amazing place and you buy in for plexes, in or single-family up into a four Plex, in multiple locations. And we're talking about building an ideal real estate wealth, and growing that and what that looks like, here in a minute. But before we go there, Dr. Axel, I want to take one step back. And I believe that we all have been given certain gifts in this life. And these gifts have been given to us to be a blessing to others. So I'm curious, maybe one or two gifts that you believe you were given and how does that help how you help bless people today?

Axel: 

Yeah, I don't know. I really think you nailed the hit the nail on the head because it's really a gift given that I wouldn't even be able to say where it came from what I always say if somebody were to ask me what's my superpower, then it's probably the ability to see the big picture much before other people see it, right. Like you can oftentimes look at things incrementally or right before you know so ahead of your nose or something like that. And somehow I don't really know how to do it. Honestly, I often times get people to tell me where did you see this? How did you anticipate this and that's basically you know, see things in the big connective frame and that has helped me a lot of times to avoid mistakes or develop strategies and stuff like that.

Brett: 

Amazing. Absolutely love that and so now let's dive right into what it is that you do. By the way, you can find more about Dr. Axel and I won't even try to pronounce his last name. Just know that it's Dr. Axel and idealwealthgrower.com. So Dr. Axel, what's the number one away a two or number one secret, or the first Secret to Building your portfolio with cash flowing producing one to four units throughout the United States?

Axel: 

When the one number one thing, and it's very close to the number two thing is performance is really becoming clear in your thinking. Or if you, you know, have somebody to help you, as a mentor or as a coach really become clear. How do you define performance for yourself? So in our case, we basically use as an initial anchor for performance, the 1% rule, meaning like you, you look at the property, how much do they want to sell it to you for, and you take 1%, and that should be your monthly rent. So if I look at any properties here in our area there are anywhere between about 650,000 to a million, which means even if I get the lowest end $650,000 property, I would have to get 60 $500 a month in rent, to meet that performance. And that is pretty much impossible to find. And that's why we said we need to find a place or places out of state where that is possible. So performance, I would still say is probably number one, closely followed by the selection of the turnkey provider.

Brett: 

Okay, so make sure we gather that for the listeners. So performance, close, number one, you defined performance, or how do you define difference for yourself? So make sure you have a clear vision for what winning is, right? Let's define what's, you know, what's going to score the bucket and what's not going to score the bucket, right, what's going to get the base hit the double the triple the home run and one way to politically apply that is using what's called the 1% rule, which states if I can buy something, let's say for $650,000, I would like to have at least a 60 $500 of rent, right? 1% of that on a per monthly basis. Is that a fair summary?

Axel: 

Yeah, that's perfect.

Brett: 

Excellent. And then you said the second one was,

Axel: 

The second one is the selection of the turnkey provider. And I have to go a slight little bit broader so people understand so turnkey investing basically means you find a company who finds what I call the ugly duckling in a nice neighborhood, the kinda like the worst house there buys, it puts all the renovations new electrical, new plumbing, kitchen, bathrooms, everything new. So it renovates the company and then puts a price on it, that is add or just slightly below appraisal. Now, if they do this, as the good ones, 210 12 properties a month, they have a pretty good idea. And they know the area very well on what is a fair price that the property after renovation would appraise. So that's, on the one hand, the price that you would buy it for. But also importantly, it needs to be appraised so that you can actually put financing on it. But here comes the really important component. And why I say it's clause number two, to performance. And that is that exact same company that found the property renovated, the property sells it to you after it appraised at the sales price or slightly below, they also need to be the ones who manage it for you. And that is because there is a very important dynamic. And you can ask yourself if any of your listeners and viewers can ask themselves, if you were asked to fix something, and you know that after you fix the chart a few months after that, you will be responsible to maintain it. Because the person who owns it would not be there all the time, then you fix it in a way that you have as little work as possible with maintaining it, versus fixing it and selling it and never seeing it again. So picking turnkey providers who are actually doing all these steps, finding, renovating, putting a fair price on it, and managing it. That's the number two top priority.

Brett: 

Wow, Doctor that's actually, put that so well, I'm gonna make sure I encapsulate this because, you know, I grew up in the Bay Area with my dad part of my life. And we'd build these, you know, custom homes or conditions and, and construct them right. And he'd always say don't move bricks twice, right and make sure that whatever we're doing, we're doing in a way that's going to get top dollar too, but you're even taking another step forward. And if we had to still manage those properties afterward, we're going to have a higher level of care and responsibility to make sure that we're not having to fix it again. Is that a fair summary?

Axel: 

Yeah, absolutely. Especially if you think about the things of daily lifetime we are all encountering, right? Like if you were to say okay, I fixed it. So it looks good, it feels good. It works fundamentally, you could go and get any kind of the cheapest appliances for example that are on sale and put them in and you know, they will be doing okay probably for the first year. But when you think about it from a long term buy and hold strategy and you will be the one maintaining it. You will probably say well, I'm rather giving up a little bit on the profit of the sale and make my monthly management fee without ever really Oh for a long time having to do anything and therefore put a little bit better appliances a little bit better for us. It's a little bit better fit. fixtures and on and on and on, if you go through any apartment or house and you and your dad bid or any of the listeners maybe living in and see, okay, look around and see all the things and imagine what you put in the cheapest possible thing you could get to maximize profit when you know that if it breaks, you are the one that's going to be cool to fix it.

Brett: 

And you're gonna be the one that's responsible, right held accountable. I think that's the other part, right? Because even though you're the investor, and they're the manager, you can say, hey, look, they can't just point to the other guy, right? Oh, well, two years ago did you go talk? No, you're that guy two years ago, you're that you're six months ago, right? What didn't you do or did you do or didn't do what you should have done? And if you're not doing that again, then I'm not going to buy this next property for me. Is that a fair summary to Dr. Axel?

Axel: 

Well, absolutely. And so one thing you know from this big picture thing that you asked me about as kind of like a god given gift and a sense that I recommend is if you are the investor, the purchaser of the property from the turnkey provider or if you're doing this on your own and manage it on your own. I would strongly recommend as one little rinky trick trick, whatever you want to call it is for each one of the things that use any kind of utilities or anything that uses gas uses electricity uses water, always when you purchase it or when the turnkey provider, purchase it on your behalf, so to speak, get the extended warranty. I once did a case study to go literally through the whole list sat down with one of these people at Lowe's and I want I pretended as if I were to basically equip a house with everything that I could imagine then ask okay, tell me for all these things on our list, which ones can I get an extended warranty for which was about 80% and then I asked how much would it be and the price for the extended warranty anywhere between three years to six years, eight years on like water heaters and stuff like that came together when you edit it all up to about $1,000 so if you really think about it, you buy $100,000 house, you pay an extra $1,000 but you know for a fact and everything pretty much is under warranty for the next five to eight years. That's you know, foresight that really makes the deal good for you and for the turnkey provider because if anything breaks, then you don't have that hassle of whose fault it is you just apply the warranty. 

Brett: 

Love it. Makes sense to buy the extended warranty people especially for newer appliances or newer houses and get that going there. Or guess you could even say for used places too, right? Because if you get into the place and it's already a couple years old, it's probably even more likely to fail right? So you might as well get the warranty on that as well.

Axel: 

Yeah, exactly what I'm buying is basically a fully renovated property or ability to rent properties. So in both cases that would apply but if somebody says well even for your own house, I would say you know, if you step away from the investing perspective or the capital gains management perspective and say what would I do for myself for everything we buy that we put in the house or replace it now? always spend and I mean, you know that you at Best Buy they always say do you want the extended warranty? It's $9

Brett: 

By the way, is there a warranty company you use that you go to for this kind of stuff for home stuff? Do you have one?

Axel: 

No, I'm not missing. I'm not doing it myself and the turnkey providers I work with buy so much volume that you know they basically get the warranties from whoever the supplier.

Brett: 

Will get back to them.

Axel: 

If you don't tell them they wouldn't do it. Yeah, so I've actually encouraged our turnkey providers to consider it not just for me because I'm asking for it or for any of my clients who I sent to them in general like why wouldn't you do it it's nicer for them to because then you know it's not a fight with the investors all the time.

Brett: 

Very good. Now let's go into a live deal but what's the last deal you just bought? Is there one you bought last week or last month that you can kind of break down and dissect.

Axel: 

Probably one deal that is most interesting is a little bit ago it was in January 2020 a deal in Dayton, Ohio that I originally wanted to purchase with financing as part of a 1031 exchange and I ultimately ended up having to buy it one buying it cash because I couldn't wait within the 180 days for the financing. I got the financing for the other eight I bought nine at a time eight got financing. The last one for some circumstances somehow took longer and I said okay, well then in that case, you just buy it.

Brett: 

So let's do the stats. What was the purchase price?

Axel: 

The purchase price was 79.

Brett: 

That was close to 80,000. And was this turnkey?

Axel: 

It was turnkey. I was one of those like I said ugly ducklings and it rented for 25 a month.

Brett: 

825 a month is excellent. And they redid everything we did the electrical, the flooring, the dual pane windows roof.

Axel: 

Yeah, and the reason I picked that one is they would have done even more. It's kind of probably going to sound funny to you Brett but when I visited and this is actually another little tidbit that I always advise. I know pandemic was a little tricky, but if at all possible, take a look at what you buy. So I went there and looked at it at the end of 2019 when it was in the middle of renovation. And they wanted to do the typical thing that you see in a lot of flip properties these days. But when I walked in with with a guy from the turnkey company, I saw that the it appeared to be reasonably good shape hardwood floors, but more importantly, it had and you may have seen this in these older houses, these kind of dark wood frames around the windows stop wood frames around two doors, dark wood, French doors with glass in it and stuff like that. And so I just said, Hey guys, what are you planning to do with it? And they said, we will renovate everything. This stuff really has character. And so I want you to check this, get somebody who knows their stuff about it, check it and if it's good, then renovate it, meaning like, grind it out or basically clean it up.

Brett: 

Send it and refinish it.

Axel: 

Yeah, refinish it and so forth. And so for about half of the house, the floors were salvageable, got refinished, and then all these frames or these French doors, and that's why you might say, well, you got more than 1% in rent. They were literally when the house was first available to look at every 10 people wanted to rent it and they beat each other up on the rent. Because it was different. It wasn't a cookie cutter gray.

Brett: 

Add a little more character and a little more a little more customization. I think that's a great point. Make sure you think as much as you can before you think before here, if we're building something or have a think about what the consumer or the tenant might want, okay, so what was the downpayment for this $80,000 that you bought it cash?

Axel:

Well, in this case, I bought cash and then put refinancing on. So it was basically 16,500 in downpayment.

Brett: 

Okay, so you refi back out, and you came about 16,000 in or 17,000, let's just call it that. And the interest rate on that was what?

Axel: 

The interest rate on that was 4%.