After doing 600+ house flips, surely there is something to be learned. But is house flipping really the best way to financial freedom? And why has he turned to the BRRRR rental property strategy after all these years? Join Ken McElroy, Danille, and BiggerPockets’ Tarl Yarber in a discussion about quitting your job, flipping homes, and why rental properties are still the best real estate play.
Ken McElroy:
Hey everybody. It’s Ken McElroy. I’m here with Danille. Hello. And more importantly, here with my good friend, Tarl Yarber who just had a birthday.
Tarl Yarber:
Actually today is my birthday!
Ken McElroy:
Oh, wow. I thought it was this weekend.
Tarl Yarber:
Oh yeah, we do all the fun stuff. Not on the– today’s Monday. It’s a work day!
Ken McElroy:
That’s true. And, uh, just had a, the, uh, my, a blessing to have hung out with the you and Grace, your wife and your, your beautiful son.
Tarl Yarber:
Yeah. We were very fortunate to go see you guys get well, we didn’t see you get married together. See the party after the marriage.
Danille:
You guys got to go to the fun part.
Tarl Yarber:
Yeah, the fun part. Instead of that boring orchard canyon wedding that you guys had.
Ken McElroy:
I know exactly. So, uh, the reason I wanted Tarl on today, because a lot of you guys are stuck in this day-to-day grind. You’re stuck in the, you know, working for the man. And right now it’s never been more apparent. And what I mean by that is, you know, a lot of us are, uh, we all started kind of working for somebody and, you know, moving up in your career at Tarro, it’s been impressive to watch you, honestly. I know you’re still young. You guys are, you’re just starting a new family, but, um, why don’t we talk about, cause I think a lot of times people look at either myself or even Danille, or, or even you now, and they don’t realize, like you had to kinda shift your mindset from working and grinding and, and, and being concerned about rent and bills and cars and, and going out and saving for vacations and all the things that we all been and done. And, and, and sometimes it’s hard to look at that journey. So let’s start there. Uh, cause I know you were grinding it out early on, right? When you’re 21 years old, you were a financial planner, you were broke you’re in debt. You had credit card. Like a lot of people are right now. So why don’t we start there?
Tarl Yarber:
That’s the funny part you said I was a financial planner and I was broke with lots of credit card debt. Yeah.
Danille:
I would love to hear a little bit about that when you get into your story, like what you were thinking as you were giving financial advice to people.
Tarl Yarber:
That’s a, what’s the term? Uh, so this is 2005, right? And especially with real estate gurus that are out there those days, you always heard like a fake it till you make it kind of a thing. Uh, and I definitely live that lifestyle at age 21. So, um, I, uh, I got it. I actually, I started doing financial planning for people who believe it or not when I was 20 and I was in high, I was in college and I wanted to make some extra money. So I had already at 18, I had a financial planner who I was putting $25 a month away to a mutual fund. Uh, and by doing that, I just thought like, Hey, cool, I’m finally saving. It actually came from reading rich dad, poor dad. And I thought I should do it. So, but when I was 20, I wanted to make extra money.
Tarl Yarber:
So I talked to the same financial planning business. I said, Hey, can I work with you guys part time? And you’ll get licensed and learn all that cool stuff and teach people how to run their finances. Um, and I did that. So while I was in college and then I immediately dropped out of college just a few months later after starting that, cause I was like, I could make more money doing this. And I also got introduced to real estate. I bought a, a, a seminar called uh, how to turn $10 into $10,000 in 30 days or less. And it was on wholesaling real estate at assigning contracts. So get that start financial planning, drop out of college. Uh, and I thought I’d make a lot of money and that didn’t happen at all. Uh, and instead I got into massive credit card debt, uh, and at least for me at the time, right, it was massive credit card debt today. It’s like, that’s a revolving balance, but for, but back then at 20 years old, when you have 10 grand in credit card debt, you think you’re going to go broke, but did that pulled out all my cash advances? Um, all my credit cards today. So I could survive while I was teaching 40 year old somethings how to not be in debt and how to save for retirement and pay off their mortgages and all that stuff while I was a hypocrite.
Ken McElroy:
But hold on one sec before you gloss over something, I think is important. You were learning, it’s like in order to be a financial planner, you have to go through a bunch of stuff, right. You have to be licensed and that’s knowledge and you know, and, and all it did is it kind of shifted your mindset. And then you took this course clearly $10 to 10,000 didn’t actually work, but you took it. You probably gleaned some stuff from there. And I think that’s kind of the, isn’t that kind of the message here is, uh, yeah, I mean, you were at the plate swinging away, uh, but you were also light bulbs were going off. Obviously.
Tarl Yarber:
I think that’s the, that’s a great point, Ken, like, uh, I was doing everything I could to try to learn as fast as possible. Like I grew up very broke, uh, with, uh, in my household and we were, we were like lower, sorry, where was it? Upper lower income. There you go. So we were low income, didn’t qualify, but we made just enough to where we didn’t qualify for anything, uh, for financial service purposes, like college loans, things like that. Uh, and because of that, I didn’t want to be that way. And the rest of my family, I mean, if I made 30 grand a year, 35 grand a year, I would think that I was the richest person in the world, uh, back then. And the, and I didn’t want to be that way. I wanted to make a lot of money. I wanted to have a lifestyle.
Tarl Yarber:
I wanted to own an island. I wanted everything, everything. And so, but I didn’t know how to do that. So I just kept learning and I would like get CDs and I would listen to those. I’d read your books. Like I’d read everybody’s books. I’d uh, my car was always a like university, like constantly I’d be driving and listening and going to anything I could to learn as fast as possible. Um, but I also made a ton of mistakes back then. Uh, and I think that’s where I learned most of my stuff, learning financial services by messing up my own finances, uh, being able to relate to people like trying to do the real estate thing and failing at that for about a year. Uh, and, but I just kept, kept going. And so it’s, I got a lot of story there. I don’t know where you want me to go with it, but I’m just kind of rambling now.
Danille:
I think what would be interesting is like, just to get into your mindset of a 20 year old kid giving financial advice to these people, I’m like, what were you thinking? Where are you like in your head where you’re like, I have no idea what I’m talking about or what, what were you, what was going through your mind?
Tarl Yarber:
I actually did think I knew what I was talking about. So that was a big thing for overconfidence. Um, but, uh, but that was part of it. I mean, I, I mean, financial education is, I mean, it is what it is like, so it’s, you can, there’s lots of different subjectivity to financial like strategies, but at the end of the day, it’s pretty objective, um, you know, keep your liabilities low and your assets high. Uh, and it was, I just kind of followed that as much as possible. So when I was talking to these 40 somethings, right, um, or 30 somethings, 40 somethings, 50 somethings, uh, about their finances, it was just like, it was, you know, we had a lot of software tools. Like they kind of make me look cool, but it was basic math. Like you show somebody liabilities, you sell somebody’s assets, uh, this is your net worth. And you will say, you want to retire, but you have no money whatsoever. Uh, and you’re not saving anything in your 401k. So you should probably do that. That’s pretty much what financial planners do, uh, outside of course, trying to sell them cash value, life insurance, which we never did, but that’s a, for everybody listening, most financial planners are just insurance salespeople, um, at the, in my opinion, at least.
Ken McElroy:
Let me ask you a question when you were sitting there, like, you know, I can, I can picture this, you know, this 21 year old kid, you not, and sitting there looking at these people, was it, was it kinda like looking in the mirror and go, this is not where I want to be.
Tarl Yarber:
Totally. And it’s, you have people that were working great jobs, happy households, happy lives, but they were living paycheck to paycheck. And so there wasn’t a, I did it for six and a half years, almost seven years. And there wasn’t a single client I could think of that was on track by any means whatsoever to where they actually wanted to go financially. And it was a, it was, it was a great experience for me to go through, especially in my twenties where I saw most of these adults, right. And people that have been working 20 years, 15 years, 30 years. And they’re not on track whatsoever for any kind of retirement or any kind of lifestyle that they actually really want, but they think they are right. That’s the sad part is that they think that if they keep doing what they’re doing, they’re going to get the results they’re seeking.
Tarl Yarber:
But once you it’s just math, like once they start seeing that they’re not saving, they’re not, they’re in debt up to their eyeballs. And, uh, they have tons of liabilities and there’s nothing being put away for any kind of retirement or no assets at all. And then you kind of show it to them. You kind of like, kind of feel bad a little bit where you’re like, Hey, you’re totally screwed unless you make some changes, uh, big changes. And for some people there was too late, like they’re already in their fifties and they have like 10 grand to their name. Uh, and they got nothing going for them in the future unless they make drastic change or work forever. And that was, that was a big eye opener for me to have that in my early twenties.
Danille:
I think it’s interesting that you say that Tarl. Cause I, when I was in my twenties, I worked at a bank and I think working in a bank kind of to your point, taught me a lot about people because when you’re in your twenties, you think everyone has their together when they’re in their fifties or forties or, you know, whatever. But then when you work at a bank or you work in financial services, you kind of realize, oh my gosh, these people that are carrying around Louis Vuitton bags and driving a Tesla, like they’re paycheck to paycheck too, you know? And so that was kind of eye opening for me where it’s like, wow, it’s not everyone that looks like they have their stuff together. Sometimes doesn’t, you know,
Ken McElroy:
You telling me this because the deal would say that she’d be a teller, right. Just fresh out of college. And they would walk in with all completely dressed to the nines and then she’d pull up their count. You know, they can’t see she’s pulling up their–
Danille:
Or they’d be disputing cause they overdrafted and you know, what came up first and you know, and it was just like, wow, you know, and I remember the one where’s my parents and neighbors. And they were like a politician and the board and you know, all this stuff and it’s like, they don’t have their stuff together either. You know? And, and so I think it’s important for young people. I think working in a financial job is very eyeopening because you kind of see, wow, I need to make a change. Cause that’s how I was too. I was kind of paycheck to paycheck and I’m like, wow, this just doesn’t magically just kind of start to work. I needed to do something in order for this to work or else I’m going to end up like the people that I’m helping.
Ken McElroy:
I think when you’re young, you, you, you just, for whatever reason, you, you’re very naive and you’re ignorant. You think that when people are 30 and 40, that things are going to get better just because there’s more years. Right?
Tarl Yarber:
No, I agree with that fully. And it’s anyway. And also today’s age. People are all over social media. They, it’s very, it’s very easy to look flashy on Instagram and it’s very easy to show the highlight reels of everything. So I mean, it’s unfortunate for a lot of the younger generation today. They see that and they think that everything is just so cool and easy, and they’re going to be all flashy too and make lots of money. Um, but there’s a lot of work involved in this and it’s a lot of mental, um, a lot of mental work and it’s not going to just happen from a normal W2 job. That’s for sure.
Ken McElroy:
Exactly. What would you going back now? Cause I know we’re going to have obviously listeners at all ages, what would you have told your younger self now, like am you’ve made some very, very good moves and thankfully you got into the financial planning world early and all kind of got exposed to, but a lot of people don’t, you know, they got caught up in these corporate jobs. They’re, you know, they’re moving along and, and you know, they’re trying to, you know, move up in whatever they’re trying to move up in. And, and, and I think one of the, that happens when, um, when, when, when you, when you don’t come from anything tall, like you said, it, you touched on it. You said you learn a lot when things aren’t going. Right. I feel like you don’t learn hardly anything when things are good, you get kind of comfortable and two, you get a little cocky and you’re like, oh, it’s all about me. And look what I’ve done. It’s hard when you are making money. It’s hard. When you come from money to actually look at things objectively and see what you could do differently. It’s actually very hard. It’s not that hard. I’m speaking from my own personal experience when all you have is up.
Tarl Yarber:
Yes. When all you have is up and it’s failure, I almost think so for those of you guys listening, my back, I’m a, I do real estate, right? This is what I do now. Right. So lots and lots of single family homes. And I have almost felt like I’ve made every single mistake you could make. I should pretty confident. I have made every single mistake you can make in single family, real estate investing like pretty much legitimately. And there’s been times where I feel like I’m a martyr for real estate investors, just so I can go through these experiences and just be better, but also show other people how not to go through the same mistakes
Ken McElroy:
Before we jump off of that. How many homes are you talking about? Cause I know pretty, pretty close to the number of, well, why don’t you say it…
Tarl Yarber:
Uh, if, if I actually tallied them all up, it’s somewhere around 650 ish, give or take a single family homes.
Ken McElroy:
This is somebody who’s been through 650 single family home transaction guys. So, and, and with it a kind of a short period of time too, honestly, because you’re still on, you’re on,
Tarl Yarber:
I’m 37 now. And uh, we did, I didn’t go full-time into real estate until about 28, late 2011. So you’re talking about the last decade we’ve done most of these deals, uh, and, but a huge chunk of them have been in the Seattle market since 2015. Give or take. Yeah.
Ken McElroy:
So what would you, what would you tell your younger self? Like what are, what are, what are what’s something that somebody can take away and make a change?
Tarl Yarber:
I would say have more confidence in myself, uh, is a big thing. There’s a lot of, there was a lot of, uh, intuition and gut checks that I thought would be the right thing inside of me. But my head was like, no, there’s too much risk. There there’s too much risks. Don’t do it. And I was big. I was always afraid of losing it. Right. So it’s because of coming from nothing. I had nothing. So I guess one thought is, you know, if you go back to nothing, you just started out with what you already had. But I was also, as I was building up, I had, I had fear that I would go backwards. And so I was, I would, didn’t take as many risks as I could have, and I didn’t have the confidence that I wish I did, uh, to take more risks or more opportunity, make bigger chances for opportunities, um, by pushing forward and having confidence in myself and being okay at a young age to risk it more. Um, because I could always do it again. But the, but looking back, there’s just so many opportunities that I passed on in life just because I just didn’t have the confidence in myself that I could do it.
Ken McElroy:
Yeah. That, that, uh, Danielle and I, we often talk about this it’s scarcity versus abundance. You know, even in my own family, I have, you know, people and granted, I came from a scarcity mindset. My mom’s still today as a scarcity mindset and, uh, which is totally cool, but I, when you grow up like that and it’s hard to punch through that, isn’t it?
Danille:
Yeah. It really is hard. I mean, especially around you, you know, I’m sure Tarl you went through this too, but you know, people kind of think you’re crazy, you know, for what you’re doing. I mean, they think it’s cool, but they also think you’re crazy, you know, because they’re kind of, you’re not on a traditional path, you know, you’re breaking away from the traditional path that you’re supposed to take.
Tarl Yarber:
Yeah. It’s a lot of people have that it’s comfort zone, like comfort zone kills. So like in a lot of, a lot of the people around you, when you start going for whatever you have going outside your own comfort zone, you’re setting ripples into other people’s comfort zones. And for me, at least my experience, my own family, a lot of my close friends, they trying to make, pull me back down to where they are not so much like to protect me, but I think honestly, to protect themselves and because I was going for more and talking about trying to get everybody else to do it too. Uh, and, and they were like, oh, you’re, that’s too risky. Maybe you shouldn’t like, there’s a constant push. Um, especially for my immediate family, um, of like, don’t do it. It’s scary kind of a situation. And I’m very, very happy. I did listen to a single word. Any of them say
Danille:
Right, exactly. And I think people, you know, um, they worry about what other people are gonna think of. They fail. Like I think, I think that’s a big one. I think it’s less about if they fail, but more about what other people are gonna think about them. If they fail.
Ken McElroy:
I remember the deal when, when, uh, she decided she didn’t want to be a school teacher anymore, you move back home and, and then she had that crossroads. Right. She was like, she got her paycheck when you know, why don’t you tell the story? Cause I remember you went home and I think there’s, there’s two voices we’re fighting. One is our internal voice, which is super hard to fight the exterior one was all your parents and Fred’s right. Yeah.
Danille:
Yeah. I mean, I, you know, I think I didn’t want to be a school teacher anymore cause they just was unsustainable. I mean, I was working three jobs. I was broke. I didn’t want to teach anymore, so I quit, but then I had no job. So I moved back home to Ohio and uh, you know, my parents, you know, why’d, you quit, you know, you went to school for four and a half years. It’d be a teacher, you know? And it’s like, yeah, you’re right. And I got a job with the bank, you know, that’s when I got a job at the bank and I, um, but I just, you know, my first business was bartending business. Right. And I had, I ended up having 30 bartenders under me, but it started with just me. And I remember that fear. I remember thinking, you know, people are going to probably think this is kind of stupid and I’m gonna, you know, what am I doing?
Danille:
And I have a college degree and dah, dah, dah, but I really want, I had to fight over that. Cause I had to say, you know what, I don’t want to work for somebody anymore. And all my skills at the time were in bartending. You know, I had bartended all through college. I had bartended why taught? I’m like, I think I could start this private bartending company. And I did, but it was really, really, really scary. I remember when I, um, you know, how you used to announce things on Facebook, like Danielle start, you know, started this business. I remember thinking, oh my gosh, everyone is going to think I’m so stupid, but I’m going to do it. Right. But then I really committed to it. And in the end, you know, I was making, you know, probably three or four times what I was making teaching and I was making it not working 40 hours a week and I was really enjoying it.
Danille:
And I had other people making the money for me as Robert Kiyosaki talks about, uh, in a business. And so, and then everyone’s like, oh my gosh, how do you do that? How can I, oh my God, that’s so cool. You know? Or, and they think you, the funny part is they think you never work. Right. I remember one time, um, there was a girl and she was like, well, you have all that time because all your bartenders just do all the work for you. And I’m like, in my head, I’m like, I wish it was that simple, but okay.
Ken McElroy:
But then, but then the traditional model, which is make money and invest it. Right. So that’s, that’s actually why you have three rental houses.
Danille:
Yeah, yeah, exactly. You know, I mean, I started small just thinking, I just need to buy myself a place to live because I don’t want to be paying rent forever. Um, and I kind of did it a very non, you know, not the smartest way, knowing what I know now, but I basically paid cash for the place because I just saved up a ton of money. Um, and yeah, just went from there. Kind of just started to build rentals. But if I would’ve stayed as a school teacher, I would still be working right now, summers off broke living in an apartment. And honestly just, I remember thinking even when I was a school teacher, if I don’t marry somebody that can take care of me, I’m going to be living like this for the rest of my life. And that is a young girl, was a terrifying thought because I never wanted to be in that position where I had to marry somebody for, you know, cause I couldn’t take care of myself, you know? And um, and that’s, I mean, I really feel with the teacher and trust me, I was not living lavishly. I think I was making 26 grand a year in Phoenix. So I mean, I had a roommate, I drove an old car. I mean I had nothing, there was no kind of Highlife going on.
Ken McElroy:
Yeah. And similar story with you, huh Tarl.
Tarl Yarber:
Oh, I I’d never made that much money at you as a real job before. So, uh, that sounds like a lot 30 grand animals. Um, but not the same thing. I drove a actually my favorite now I know these are favorite stories. My horrible stories, uh, back as a kid was when I went and got that seminar and I’m in my dad’s old dress shoes. Uh, and I had, I worked at Sears part-time too, by the way, uh, all financial planning. Uh, and I had Sears clothes on and like, uh, like a, a tie on and everything and like everything I’m driving this a Mazda MX three that the window didn’t work and the AC was busted, uh, in Sacramento, California in its 110 degrees in the summer there, uh, it’s not like Phoenix, but it gets pretty freaking hot. And I had to use a nail in the window, um, a roller, uh, automatic window to roll it down.
Tarl Yarber:
I had to stick a nail in there and hold it a certain way to be able to roll the window down so I can get, so I would drive to appointments, uh, in my Mazda, X three that I actually got for free because it was covered in mold on the interior. And I had to like bleach the whole thing. And like, so that’s my old cell, like doing all that stuff just to be able to try to like, not be broke all the time. But yeah, I used to do that. I used to go door knocking, looking for people’s houses, uh, to wholesale them in that same little car and the drenched in sweat, knocking on their door and go on the next, all of a sudden I’d go on a client appointment and try to teach them how to save money and invest. And uh, and then I would go research more real estate stuff and then go knock on doors and then go on appointments for financial services. And I just kept doing that until one day. I got good for lack of a better word, but yeah.
Ken McElroy:
Yeah. So the point is guys, everybody’s got a story and sometimes you look at somebody successful like Tarl and you think, I, I, the, there’s such a big gap between where I am and where Tarl is. And um, you know, I just want you to know that that, uh, you can do it right. People can do this.
Tarl Yarber:
Well, I think that like, so today, like we get, I’m sure you get hit up Kenny, as well as you to Neil where, uh, you know, people say, Hey, I want to like, how do I do what you did? Or like, or how do I get what you’ve got, right. Or I want to start full-time in real estate and I’m going to make a bunch of money in real estate. That’s a big one I hear today is people wanting to go full-time in real estate. And you know, Danielle, you have some rental homes, right. And you bought them cash, which is great. And so, and depending on who you talk to, right? Uh, but you were able to save up enough money to go buy them cash, which is great. So you get a cashflow from that and so forth with, you know, maybe you have debt on them now, but, um, but a lot of people, they think that they just want to go full time and go buy a bunch of rentals and they’re going to just be magically rich.
Tarl Yarber:
And well-off, uh, when really most Randall’s are only gets you maybe 200 bucks a month in cashflow at $300 a month of cashflow, not much. And they don’t really have a, a plan like for what they’re going to do when they go full time in real estate. So I don’t know where I’m rambling with this, but basically what I’m trying to say is if somebody wants to be in business for themselves, they got to ask themselves like, why are they doing it? And what are they going to do once they’re full time. If your goal is to make a ton of money in real estate, then what does that actually look like? Are you going to go do massive builds? Like a, what Ken’s doing now. Right. You’re building apartments now, right? Yeah. All right, cool. Here you go. Do that right out the gate. Are you going to go flip a house? Right? Are you going to go buy a rental? Like, um, each one has its own financial benefits to it, but uh, you’re not going to get rich overnight by it. A bunch of single family homes as rentals and stuff. For instance,
Danille:
What I think you’re trying to say too, is that this isn’t easy and it’s not a get rich quick situation. You know, I hear people say that all the time. Oh, I’m just going to go flip a house, you know, make some money. And it’s like, well, I mean, what do you know about flipping a house? How much is your loan going to be? Do you have contractors set up? Is there, you know, room to improve the value? I mean, there’s so many things and, um, it’s not easy and people actually lose a lot of money. I worked out with a lady where her and her husband did that. She was a school teacher. She’s like, I’m going to, we’re going to go flip a house. And I’m like, okay. And sure enough, they lost about $50,000 because they couldn’t sell it. Nobody was buying it. They, it took like months longer than it was supposed to, to be completed. It was a hard money loan. And so all of these things and it’s like, well, you didn’t really know what you were doing. And I think that people don’t want to do the hard work and the education part of it. They just want to be in real estate and make money. And that’s just not how it works.
Tarl Yarber:
I lost, I lost 86 grand on one house. Right. And I’ve had plenty of other losses on top of that. So if that’s your first house, well, some people were bankrupt after that. And, but it’s, yeah. I mean, but you can make a lot of money doing it. And I think too, another point there’s people that get really like what you said, Kenny earlier. There’s people that have nothing but success in real estate and they’ve never had those shortcomings and failures. Uh, and I’ve seen that with house flippers house flippers are notorious for this, especially if you’ve started flipping houses in the last like four years, uh, you’re just the market’s gone up a bunch. Like it doesn’t matter if you’re good at the business or not. The appreciation is saving you like all this kind of stuff. And they make a bunch of money, hundreds of thousands of dollars, if not more.
Tarl Yarber:
And then they go live that same lifestyle of making hundreds of thousands of dollars as well. So they’re not saving any of the money and reinvesting it. Uh, so I was that way for many years ago, but we’re a lot of times our, our lifestyle follows our income, right. And so if you’re having a huge success as a house flipper and you’re making half a million, a million a year, you’re also probably spending half a million or a million a year to, uh, because unlike, I think at the kneel in your shoes with buying rentals, um, a lot of people that go and buy passive income, they still budget and they still go save their money and they go buy another rental versus house slippers are notorious for blowing all their money and spend it on, uh, more flips or Gucci or whatever. And I’ve seen that as well. And so, um, so I would just, I don’t know where I’m going with that, but I think I’m just saying, like, if you’ve had nothing but success in this business, then, uh, you’re in for a rude surprise one day.
Ken McElroy:
That’s a good segue to what you were saying is, is you kind of have to have a plan. So if you are going to get into this business, let’s say you’re in a, uh, let’s say, um, you don’t really have a bright future in your career. Maybe you don’t have a career. Maybe you’ve been displaced in the pandemic or whatever it is. What are some early easy steps people can make today in order to move the needle just a little bit, because I think what I always tell people is I go, listen, I’ve always just tried to hit singles. That’s all I’ve ever done. And guess what? Sometimes they’re a home run. Sometimes it’s a double, you don’t know when you stand up to the plate, what it’s going to be, you don’t, if you’re swinging, you’re swinging. And so, but I’ve always personally, always, always just try to hit singles. And that has been a great strategy for me.
Tarl Yarber:
I love that. You said that I’ve never put words to it, but I, I think that’s all I’ve ever done is just try to, cause, uh, even though we’ve done a lot of houses, I’m extremely conservative. So the, because maybe cause my, um, scarcity mentality or fear of failure actually, or something like that, I don’t know if you’re losing what I’ve built, but, uh, I have a very tight margin that I like not tight margins around words. I have a very specific margin that I go after on a house. And that’s why sometimes I’ve never had huge wins on a home that we’ve bought, but I’ve also not had very many losses either. Like that one that I said for 86 is probably the worst one we ever had. But through that, some advice that we can give some people if they want to get started.
Tarl Yarber:
And this is know specifically what you’re seeking out of the business, like what are you looking to develop cashflow? Or are you looking to develop income, right? Are you looking to develop both, right? Are you wanting to work in single family or do you want to do multifamily? Uh, do you need to start like a baby step such as, do you go flip a house, right? Or do you go buy a rental, um, and grow from there, but no specifically why you’re doing it and what your end goal is. If your end goal is to make 10 grand a month passive income, then your real estate journey should be geared towards that. And if that means you have to make a bunch of money to reinvest into other markets for a passive, passive income or invest in Kenny’s deals, right? Uh, as an LP, then, then you need to go make a bunch of money to do that.
Tarl Yarber:
If it’s to go source the deal yourself, find the contractors, negotiate with the sellers, uh, you know, actually work the entire project from start to finish and be hands on the whole time. Then that’s another way to do it. But what are you willing to do to earn that 10 grand a month passive income? And how long do you want to take to get it? Um, if it’s to make a million a year flipping houses, all right, that’s a different game. So, uh, but what’s your purpose. I think people really need to spend more time on that. And then also really define, like, I’ve talked to a lot of people over the years about this, where they, you ask them what, you know, what they’re looking for in real estate and they can’t specifically tell you at all. Um, they can’t tell you the type of deal they’re looking for. They don’t know what a deal is when they see it. So if you could define what a deal is to you, then that’s probably one of the very first steps is like, what does that look like to you? Is it 15% cash on cash? Is it 20% ROI as an eight cap? Is it a four cap? Like what, what are you specifically looking for as well as the geography and blah, blah, blah, blah, blah. So yeah,
Ken McElroy:
Really good point. I get asked this too. And I always say I’m looking for 200 units where I can force equity that has a 7% cash on cash return on the average over the first three years. So that’s super specific. Yeah. And so what that does is it narrows a lot, but it also helps when you’re trying to raise capital because at some point Tarl is, you know, especially all three of us, we run out of money quickly, whatever we have money, we invest it. Yes. So, so then we have to go outside of our circles and we have to ask other people for money. And so you have to be that specific because of your raising money. You have to have that really clear for other people, if they’re going to invest in your vision to,
Tarl Yarber:
I think that’s, what’s funny too, is that we, uh, you just say we run out of money, right? And it might be hard for some people to realize that, that you only invest in real estate with money. So you need, you constantly need capital in this business and you might, your balance sheet might look great, but your cash statement might not. So you need money to do this business and we’re we’re investors in this business. Um, so I think there’s a lot of misconceptions, especially when you see house flippers that, uh, out there where people that are doing, uh, just transactional base investing that you don’t need a lot of money to do this business. You do, but it’s either going to be your money or somebody else’s money, uh, that you’re, you’re using because we’re investing right at the end of the day. Yeah.
Ken McElroy:
And of course, you know, what’s the job for a job. Well done a bigger job, you know? So what happens is you buy one house, you want to buy another one, you know, buy two houses. You want to buy another one. And you’re like, okay, this model worked. I learned a lot, somewhat. Some things went great. Some things didn’t go good. But that’s the same thing with our company when Ross and I, we got to 10,000 apartments, we were like, okay, the next goal is 25. And then all that, that comes with a whole new set of issues. And so, but I started with a two bedroom, two bath, just like so many other people I started with not knowing how to do it and using my own capital. And, and then I didn’t know how to do the rest. Right.
Danille:
Well, and I think that’s an important thing you bring up too is, you know, people, you know, we get a lot of questions on the YouTube and the podcast, oh, I want to just raise money and I’m just going to buy something. And it’s like, what experience do you have? And why would anyone give you money? If you don’t have never done anything like this before? You know? So you really need to start small, manage a property. If you don’t have any money, buy your own small rental. If you do, I mean, you have to do something. I mean, it’s not, people are just gonna throw money at you. If you, if you don’t, can’t prove that you know what you’re doing, unless you’re just a really good salesperson.
Tarl Yarber:
But I want to add though what you said to Kenny where it’s like, you know, you, you always went for more like, all right, here’s I reached my level here. Now let’s go to the next level level. Now let’s go to the next level. And I think that’s good to a point though, like, and I just want to push that. Cause I’ve also seen the opposite where people go to the next level next level, and then they lose it all because they, they, they bite off more than they can chew. But I think it’s, but for you, you, I mean, you’re competitive. You’re a go getter. You want to grow. Right. And I think that’s great. Um, and, but I also think for some people, they should stay at a certain level because that’s where maybe they want to be in their life. And maybe they’re being pressured by society or others that they need to go for more when in reality, they don’t need to go for more. So it’s, I think what’s really important is what do you want in your life? And Kenny, you want it to grow more. Right. But there’s other people that feel like they need to, for some reason, but they don’t want to. And I think, I think that’s important to also pay attention.
Ken McElroy:
That’s a great point. My, my sister, it’s funny. Um, you know, you met her, she, um, my sister, Kathy, you know, she did not go to college. She worked as a bookkeeper at a medical clinic in a little town called Everett Washington, which is where I grew up. And she was making, you know, a bookkeeper, not, not a CPA, not an accountant bookkeeper wage. And, um, she started with one and now she’s got what 20, I think something like that. And, uh, you know, she, she just hit 60 and you know, she slowly chipped away at it, but now what’s happened is she has millions of dollars in equity. Her tenants have paid off her rentals. Well, largely she, she, she does use debt. Uh, her husband, um, recently retired from a, uh, a blue collar position. And, um, but she’s now has cashflow to the point where she went and now just bought a beautiful home where she wanted to be. And the cashflow is paying everything. She has no retirement. She didn’t work for anybody that provided a retirement. She doesn’t have a 401k. She had to do her own health care. And she did it all through this slow methodic. I think she may be about one every few years maybe.
Danille:
Yeah. I mean, cause she has the multifamily, so yeah, like one.
Ken McElroy:
Yeah. So, so, you know, it’s just a long sheet. She played the long game and to your point point, Tarl, she doesn’t want to lose it. So she’s completely content. She she’s like I got, you know, my tenants pan off my houses. I’m good. I’ve got to manage them. And, and I’m out. I gotta make sure the rent’s coming in. And uh, but her and her husband are fine. She does not want to go grow this in double and triple it. She just wants to be.
Tarl Yarber:
And that’s smart. Like there’s tons of people there that have great careers that maybe even maybe love what they do, who knows. Uh, and they make income or, or maybe they make moderate income, but you can still invest that money. Right. And you can invest in real estate and you can build passive income. Um, I remember being, I think he was 18 or 19 years old and I met this guy. He was a firefighter out of Eldorado, uh, California. And I was playing paintball. I’ll never forget this guy. This guy changed my life. Just with the words he told me while we were playing paintball. Uh, and he said, I was talking to him about real estate. Cause I was read rich dad, poor dad. I’m talking to everybody about that stuff. Uh, and he said that he owned 120 single family homes. And I’m like, why are you a firefighter?
Tarl Yarber:
And he looked at me like I was like slapped him in the face. And he’s like, I am a firefighter. That’s who I am. That’s what I do. And I’ll do it to the day I die. I will burn every house I own down before I ever stopped being a firefighter. Firefighting is who I am. The house has just provided me the lifestyle and it just clicked. And I’m like, wait, you could do what you love. And then go make money doing other things like investing in and so forth. So it was a big eye-opening experience for me just talking to that guy briefly at paintball.
Danille:
Yeah. Well, and that’s true. You know, like I, um, you know, my real estate pays for my life. So like all my bills and everything else, and I still enjoy, you know, working with Ken, I still enjoy being an esthetician. I still enjoy other things. But when you don’t have to do them 40 hours a week and all the money you make from them, you get to do fun things with it makes life a lot more fun than working to pay rent or working to pay your car payment. You know, my rentals do all of that for me. So then my, you know, earned income is just, it’s, it’s fun, you know, and that really allows me to do my passion and have a good time, but also not have to slave away 40 hours a week and burn myself out.
Ken McElroy:
Okay. So all of us were on track before the pandemic. Obviously we know we all have been buying real estate. You went from flipping the cashflow, which I definitely want to talk about, but what was really cool was you and grace and your, and your new little one, you decided, you know what, I’m going to move to Hawaii during the pandemic. So you went where you wanted to go. So let’s talk about that. Cause you moved from, you know, the people’s Republic of Washington
Tarl Yarber:
Yeah. If you’re on the west side of the cascade mountains in Washington right now, you’re definitely part of the people’s Republic. But anyways, um, the, no, so my wife and I actually at the end of 2017, I was, this is pre COVID even like in, but there’s a reason why we were able to move to Maui so easily. Um, we were just, I was grinding like we had multiple employees and we were growing and we were doing tons of houses and we just had like just massive amount of activity with what we were doing. Um, but yet, despite the fact that I had like exponential growth, as far as my house volume was going, even my gross profits, everything were up. My personal net had equaled the same amount as the previous year. And it really me off because overhead, so overhead went up and operations went up and cost went up.
Tarl Yarber:
But my, my take home and my personal net stayed the same. And I’m like, how come I worked harder and graded harder to have more of these W2 people running around me, uh, and working for my business yet I am more stressed and I made the same amount of money. And so it really upset me. Uh, and so I kinda came to a head realizing I need to make some changes in my life. And I had a buddy of mine tell me that, uh, he was very, he’s very successful real estate investor. Uh, he told me that most people plan their entire business and build their entire business. And then whatever life is left over, they let they make the rest of their life fit that. So they, they work their business, they work the job, whatever it is. And if they have any time left over, they let the rest of their life revolve around that, that freedom, that remaining sliver of time versus why not just plan your life out the way you want it and then make your business adapt to how you want your life to be.
Tarl Yarber:
So make your business change versus you change for your business. And it was a big eyeopening experience for me in 20, at the end of 2017. So I told that to grace and I sold her on it. And we sat down for a number of weekends with a big, huge white butcher paper out. We started planning how we wanted our business to actually be so that we can live the lifestyle we wanted. And we wanted to be able to travel a minimum of six months a year, uh, remotely and be able to run a hundred percent of my business for you to be in my phone and not if basically the answer is this. Like if I have to be on a laptop, I’m wrong. Right? And so everything on my business has to be ran by my phone. That was the new business plan.
Tarl Yarber:
We started changing in 20 at the end of 2017. And we also wanted to be able to travel and we wanted to be able to do business because we wanted to, not because we had to. So that means we actually had to reduce our goals. So we limit, we actually reduced our income goals, reduced our business production goals. We reduced all of our goals just to the point to where we can live, how we really wanted to live, which was travel and be together every single day. So my wife and I wanted to spend every day together and we weren’t. And so since making that decision at the end of 2017, I can legitimately say we’ve spent pretty much every single day together and we still like it too. Uh, and so we did that. So we changed our business and going into 2018. And so one of the pandemic hit, we had already been working remotely, even though we lived in the same areas, our properties and our business.
Tarl Yarber:
I didn’t go to them anymore. Uh, I, we still traveled, we traveled 120 to 180 days a year. Uh, and then we weren’t able to travel in 2020. And so when the opportunity arose from a buddy, our buddy Brandon, uh, who lives right across the street from us here in Maui, was like, Hey, come to move the Maui. I’m like, oh, okay. Yeah, let’s go do that for six months. We’ll just do that for fun. And then, so we just picked up and left, brought our dog or cat and our kid, uh, to Maui at this house here that I’m at right now. And then after four months of being here, we’re like, why the hell are we going to leave in two more months? Let’s let’s stay longer. So it’s been a year now and nothing has changed in our business. And so, but it’s allowed us to live wherever we want to live, you know, work with whoever we want to work with. And it’s all because of the decision we made at the end of 2017 with just making our business, adapt to the lifestyle we want.
Ken McElroy:
Yeah. Listen, if what a great story. And so for those of you that are listening, you know what I think what happens is a lot of times we get caught up in routines and habits. We get up, we get in our car, we’d go to work or we open the laptop or you grab your phone immediately, right? When you wake up and you immediately spend whatever time and you, you fall into these, what I consider to be, you know, distractions and, and what you guys did was, um, you were super intentional about and on the same page, which by the way, is not easy when you now throw a spouse in. But if you’re, if you’re up, you don’t have that. It should be super easy if you do, it’s a little more convincing, but, um, but what you did, this is pre COVID is you had it all set up.
Ken McElroy:
So, and I I’ve known you long enough to know that, uh, like you, you guys have come to our home in Coeur d’Alene and you know, so, so what happens is when people call you like Brandon, which, you know, I love, uh, by the way, that’s, beardy Brandon from bigger pockets, you guys, Brandon Turner, uh, he just got two new books out, by the way, you should take a look at those. Um, and, and, you know, when he called or when we called you guys came and, and being able to have that freedom and the income, you know, you’re not worried about the plane tickets and the savings account, you know, and you have the time it’s really, really, it’s a shift in the way that, uh, it’s freeing don’t you agree?
Tarl Yarber:
I think it’s the most important thing. Like, at least in my, for my goal, when I was in my early twenties, wasn’t to be, to have millions and millions of dollars, it was to live freedom choice, right. Basically having freedom option choices. And if that meant I had to have millions of millions. Okay. But if it meant that I had consistent income every month, but I was still able to do what I want when I want, whenever I want it, then that was, that’s really all I wanted. And that’s what freedom is. Right. But we have different levels of that. Some of us want to be on Lear jets to go travel and stuff, and on a Gulf stream and others, like, I don’t mind being like a Southwest, even though you can’t take Southwestern, but it doesn’t, it doesn’t bother me. Like whatever. I don’t care as long as I get there, but it’s, some of us want to stay in a penthouse.
Tarl Yarber:
Some of us don’t mind staying at different hotels. So it’s, whatever’s good for you. Like, what do you want in your life? Right. And I, I, my wife and I are very bad at being grateful, uh, like, uh, doing gratitude for ourselves, basically appreciating what we have. I think that just comes from like just grinding and working so long. We really, really are working hard to try to be, have that appreciation, gratitude mindset for ourselves. But this last, this last year has been a good experience for us to look around and going like, wait, what are we stressed out about? Like, there’s a lot of bad going on in the world. And we’re able to still make choices that we want and live how we want to live. We should really be grateful for this right now. And I wish that I want to be better at that. So, um, I just feel like just like, you want to get a bigger deal. Like I still feel like I’m just checking boxes. Like I’m just, yep. I did that. Yep. I did that. Yep. I did that now. I need to go accomplish this. Yes, of course. I live in Mallya cool. Now, where am I going to live? And then it just becomes a checklist for me. And, uh, just for being a task manager. And I don’t know if that makes sense or that resonates
Ken McElroy:
Perfect. One Tarl, I’m telling you, like we say this all the time is you got to stop and celebrate the win and be grateful. And it is true, you know, whether you’re accumulating or just moving to the next thing or the next appointment or whatever, it’s, it doesn’t make sense after awhile.
Danille:
I do think it’s important. You celebrate your wins. You know, even if they’re small wins, right, maybe it’s saving your first $5,000 or buying your first rental or, you know, you often, and even myself included you blow by those things because to your point, Tarl, you check a box, okay. I got a condo for myself check, instead of congratulations for saving all this money to buy a condo for yourself, you know, you kind of need to give yourself a little bit of praise to, you know,
Tarl Yarber:
You do, and you need to celebrate that. And it sounds great. I love people that are very good at celebrating. Uh, I love being around them, right. So it makes me feel better. And I’m like, oh, I can celebrate it too. This is good. I have permission. It’s I think part of it is just giving yourself permission, like, and that’s the, like you deserve to celebrate. Right. Um, but other on the other side of it, when hits the fan, you know how to get after it and like take care of it. So it’s like, you’re not dwelling on it either. Like, I think there’s a catch 22 when you aren’t very good at celebrating it. It means you also, aren’t very, you’d also don’t dwell when you’re, you know, when the crap hits, the fan is stuff either you just go get after it. But
Ken McElroy:
So that is a good point before we jump, uh, you know, when you guys became very efficient, I know there’s, there’s some technology out there that definitely can help you guys. I mean, that was when you first said, Hey, how can we do this from a, from a smartphone, there had to be a tremendous amount of research. What can you share? What are some of the things that you did that people can also do now to help speed things along and use AI and use technology to, to make them more efficient.
Tarl Yarber:
So I can only speak for my personal business. So depending on what you’re, what you’re doing in your business is going to adapt, but like, it’s like, look, it’s the 20 it’s 2021. Right. So if you don’t use any kind of technology, then congratulations. You’re one of the only people. But the fact is like Dropbox, Google drive. We use this program, Smartsheet, we use a sauna like we, uh, we’ve used a bunch of other programs like base camp and so forth to, uh, you know, there’s VoIP services that you can use for phone calling services. There’s so many cool technologies out there to help your business run, uh, via the cloud, right? In some capacity. So for us, we use, uh, Smartsheet, Assata and Dropbox. Those are the three softwares we use all the time, uh, for everything. But each port, each purpose of those softwares has a different, uh, process system, SOP, whatever you want to call it, uh, for why we use it.
Tarl Yarber:
And I think what’s really, really important, uh, for people that want to, you know, develop streamlined systems processes for their business, uh, is to not like jump around a lot is to kind of like, there’s no, there’s no magic software. That’s going to make everything better. Like it doesn’t exist. So you have to find something that adapts well to you and then just go use it, right. Use the heck out of it, build a process out of it and then change slowly in my opinion with it, like until you, cause there’s always shiny pennies everywhere. Like somebody else has, uh, somebody else uses Monday and somebody else uses, like, I don’t know, Trelio, it’s somebody that you like. There’s so many programs out there and there there’s a lot of people that want to compete for your software business too. But, um, find something that works for you, build a process around it and actually document it.
Tarl Yarber:
And I think that’s where most people fail, where we succeeded is as we built out standard operating procedures for our business, we actually documented it and it wasn’t just in our head. So it all starts with you. So even if you are by yourself in your business, you think, why do I need a document? My process, uh I’m by myself, right? Well, because as you get busy and as you start to scale, those processes are going to need to be duplicatable with people that you bring on and hire. Uh, and they need to be able to understand it. So a system doesn’t, it’s not a system, if you’re the only one that can work the system. So, uh, other people need to be able to adapt to it too, but this is a big conversation, but like, that’s kind of my, what I just have done over the years.
Tarl Yarber:
I’ve read three there’s three books. Here we go. I’ll get that. Here’s three books that my entire business runs off of the four hour workweek by Tim Ferris, uh, which is all about mentality, right? In my opinion, which is just like, how do you take something complicated and make it simple? Or if you, if it’s a 10 hour process, how do you turn it into a one hour process? It’s just like really challenging yourself for those kinds of, um, uh, processes. I guess the other one is the one thing by Gary Keller, which is like, what’s your highest and best? Like, what’s the one thing that either you or your business sees the focus on what I found for me after really reading that. And then I wrote out a list of everything my company has to do. Uh, and the number one thing that I am best at which I’m best for my company is networking.
Tarl Yarber:
So I realized that if I can go network and I can go make it rain for my business, then that drives all business to us, right? So that’s my strategic ability for my company’s networking. Um, and then it also trickled down to what’s the most important thing in our rehab process that if we just took care of this thing in the rehab process, everything else becomes easier on our acquisitions. What’s the most important thing we need to look for for there. So the one thing by Gary Keller is a great book to get that mentality shift for us to really focus on what’s most important. And then the third book is the checklist manifesto by a to Guan day. Um, which I don’t know if you guys have read that, but that’s, I, I love that book. It’s a medical field book actually, but it’s about taking really complicated processes and making them into a simplified checklist and the mentality around, um, doing that. So we use those three, I’ve used those three books to pretty much mentally shape, uh, how we do our business and the four hour work week is selfish. So it’s more, how do I get everybody else to do everything so that I can go live my life? Um, but the checklist and the checklist manifesto, and the one thing is where like our, um, SOP has really come from for how we run things through a sauna and Smartsheet on our end. So
Ken McElroy:
Yeah, I’ve read the first two course. And, uh, you just reminded me, I need to reread those because it’s been a while. Um, but, um, the checklist manifesto that, that’s an interesting one. I hadn’t heard that one before.
Tarl Yarber:
Yeah. I really, I really liked that book and it’s, uh, it’s actually a fun read. It’s actually about how they took a, how one of the leading causes of infections and death in a lot of hospitals was doing an intravenous RV, uh, through your spinal. Like almost like a spinal tap at, through your spine and IB, uh, and how a simple checklist, pretty much eradicated all infections and people dying from getting this, uh, getting infected by an IB in their spine versus some medicine or some. It was just a simple checklist. It’s the whole story of how that got developed. And it’s a great business book, but the underlying story behind it is this healthcare situation that a tool, uh, was a part of, cause he’s a, a, um, orthopedic surgeon and he gets hired by other consulting things. It’s a really cool book. I really like his books actually.
Ken McElroy:
I’ll tell you the one thing though, the, you know, obviously a that’s a great book. And one of the things that we did that we studied that book here. And our one thing we decided as a company was, uh, take care of the resident. So, you know, we have 10,000 tenants residents living in our properties and if we take care of them, occupancy stays high turnover, stays low employees, stay happy, investors make more money. But the process, what a lot of times what happens is it’s probably not what a lot of people would think would be our focus, but sometimes people think investor returns are our focus or, you know, buying a property and having the right cash flow. All those are, uh, don’t get me wrong. They’re important. But it all boils down to that resident for us, at least that’s our one thing. And so our whole company revolves around that all decisions are made around that tenant, the resident experience and, and, um, and then everything resonates from there. And it’s really been helpful for our company to stay focused on that one issue.
Tarl Yarber:
I, I couldn’t agree more. I mean, it’s like a trickle down effect, right? And it seems like it’s the for you guys, you chose that. Like for me, we’ve flipped houses. Like, so I realized that our, if we focus on planning, like that was our big thing. If we get really good at planning, then everything else is really easy and that’s a loaded thing. There’s that means a lot of stuff, but especially on the rehab process, but we just focus. So hardcore on the planning phase, everything else is easy if we just have a good plan, uh, and all of our mistakes have come in our business because we rushed into things or we bit off, more than we could choose to or whatever it might be, but it’s, everybody has a different one thing for their business. They just gotta know what it is. Uh, and most people don’t. Unfortunately
Ken McElroy:
I would agree with you. So, so Tarl, we’re, uh, wrapping up here. So, um, couple of things, one, thank you. This has been a great, uh, you’ve been a great friend and, uh, it’s always great to see you guys and we want to come see you out in Hawaii before you roll out of there. That’s number one also too. How do people get ahold of you? What’s the best way?
Tarl Yarber:
Uh, I would honestly say unfortunately right now through social media. So Instagram, my handle is @TarlYarber and T-A-R-L and then last name Yarber Y-A-R-B-E-R that’s one of the best ways to reach me directly is just, you can message me on Instagram, uh, you know, through, through that, I’ve honestly, that’s it like we don’t our website. We don’t really promote it. We don’t really push things out right now. Uh, for it, we’re kind of under the radar a little bit right now. Um, but that’ll change later as we start changing, going into 2022, but yeah, @TarlYarber on Instagram.
Ken McElroy:
Hey, thanks again, buddy. Always great seeing you and, uh, can’t wait to see, uh, you and grace very, very soon.
Tarl Yarber:
Ah, thank you guys. Thanks for allowing us into your life. You guys are awesome.