Real Estate Nerds 53 | Asset Protection for Real Estate Investors : Royal Legal Solutions

Real Estate Nerds 53:

Best Deals

"Persistently Hunting Great Investments"

Nick Aiola
Virtual CPA
Real Estate Nerds
Episode 53: "Best Deals"

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Nick Aiola runs a 100% virtual CPA firm that caters to real estate investors. Today he joins Scott Royal Smith to discuss his best deal, which actually began as an acquisitional nightmare. Nick explains how he made an offer on a four-family until located just a few minutes from his own home, aiming for the most favorable deal he could land. It wasn’t that simple, and Nick had to go back-and-forth for a couple months between the seller and the bank in order to finally get the deal laid out correctly and favorably.

Scott Smith: Hello, and welcome to the Real Estate Nerds podcast. On this best deal episode, we will explore the human side of real estate investing with a seasoned pro about the legendary best deal of their life. The deal isn’t just the investment, it is also the person executing it. Stay with us and learn what it takes to be the best investor possible.

Scott Smith: Hi, and welcome to the Real Estate Nerds podcast. I’m your host, Scott Royal Smith. I’m the owner of Royal Legal Solutions, your one stop shop for everything real estate investor related, business tax, legal, you name it. We got you here at Royal Legal Solutions. Need an estate plan? You think you’re going to die soon? Whatever the case is, we got you. I’m here with my good friend Nick. He is a brilliant CPA, works with a lot of real estate investor clients of ours, a very, very smart guy, overall pretty amiable. And you know, he dresses up. He looks pretty. He likes to be able to make sure that he’s a showstopper whenever he walks in the room, which is kind of cool.

Scott Smith: That’s his style, that’s what he needs. Nick, thanks for coming on the show today and joining us. I know you’re going to be talking about a best deal here, but can you just kind of set the stage first a little bit about who are you before you get into this best deal, so we can get to get a picture of who is Nick, before he gets into this deal that turns out to be great for them.

Nick Aiola: Absolutely. Scott, and thank you for that introduction. That is priority number one. Got to look good and everything else follows, hopefully.

Scott Smith: Awesome. Yeah, for sure.

Nick Aiola: So yeah, as you said, my name is Nick Aiola. I am a CPA, and we run a 100% virtual CPA firm that caters to real estate investors. We do work almost exclusively with real estate investors, individuals, businesses in the real estate industry. Yeah. It’s something that I’ve always been interested in, and my family’s involved in, so it made sense to kind of marry the two and specialize in that area. I always like to tell clients of mine, it’s kind of like going to a doctor, right? You can go to your primary care physician if you have a cold, but if something more serious is going on, he’s going to refer you to a surgeon or a specialist. It’s kind of the same thing here. We tend to focus on that one sector of the tax market instead of claiming we know the entire code. It makes it a little easier to provide value.

Scott Smith: Absolutely. So you’ve been doing some real estate, and what led you to be successful inside of your business dealings?

Nick Aiola: I think they kind of go hand in hand. It’s just that entrepreneurial mindset. I’ve always had that in me since I was a kid. You kind of run both as a business. You take lessons from one and apply it to the other, so whether you’re finding deals, or putting together deals, or working with partners or other investors, the same thing applies in business. You’re only as good as the people you surround yourself with as your team. I guess the same principle applies to both business as a CPA and in the real estate game. You need good people around. You can’t do everything yourself. I’m sure you can attest to that, right, Scott?

Scott Smith: Yeah, you’ve got to. Your people are your everything when it comes to it. So what’s the deal that we’re talking about here today, Nick, that was one of your best deals?

Nick Aiola: This deal actually just recently closed on December 31st. The dynamic of the deal remains to be seen, but the “best part” of the deal is the acquisition process. It was a nightmare, for lack of a better term. I guess I’ll take you through it, and talk about how we got there. Initially, I always keep I guess one eye on the tax code and one eye on the market. I’m always looking for something. In this instance, I wanted to get into the multifamily space, so I was looking at, and I have a great agent that I work with. I was looking at duplexes, triplexes, but I really wanted either a three or four family.

Nick Aiola: I must have looked at I don’t even know how many properties, offered on I don’t even know how many properties. Then this one I saw was sitting on the market. It’s a four family unit, maybe 10 or 15 minutes away from where I live. So close enough to where I can manage it. I always kind of had my eye on it and it was sitting there for a while. It was a little bit out of my price range, but I liked it. I kept falling short with some of these other offers and deals, and I decided, you know what, I’m just going to make an offer on this property. Let’s see what happens. I offered basically, started with an FHA loan, three and a half percent down, straightforward. I wanted to put as little cash into the deal as possible.

Scott Smith: Yeah, I think that’s pretty common, right?

Nick Aiola: Yep.

Scott Smith: Everybody’s trying to say what’s the least amount of money they can get down and use the leverage. Get into it-

Nick Aiola: Yeah, exactly. It worked with three and a half percent down. The intent is to obviously move into one of the units, and I would have been able to live for free. That was goal number one. But not even a response. I didn’t even get a decline, no response at all from that offer. So I decided to mix it up a little bit, threw some seller financing offers in there, installment sale. Anything, you name it. I think I made four total offers on this property without even a response. And these were all different structures. Finally, we kind of just asked the seller, “What are you looking for? I know you’re not getting much interest on this property. It’s been sitting here for months. It doesn’t look like you’re really rushing the sell, so what are you looking for?”

Nick Aiola: For whatever reason, she wanted a traditional 20% down conventional loan offer. A lot of money, especially around this area. I talked to my agent and I said, “Let’s make the offer, and I’ll make it happen some way.” I figured we could start that way, and maybe I can source some of the down payment somewhere and see where that gets us. So that’s exactly what we did. Made the offer, back and forth once or twice, and we got an offer accepted 20% down, which is exactly what she wanted.

Nick Aiola: Now mind you, this whole process already has taken about a month to two months just to get to this point. Then went to contracts. There were a few maintenance issues that she wasn’t too keen on fixing. I was a little hesitant about pursuing without it being fixed. We met in the middle on some of them, and finally got those done, and moved onto financing. I must have called 25 lenders to get the best deal in the world. Right? I mean, the CPA.

Scott Smith: That’s hustling, that’s right.

Nick Aiola: Yeah. I mean, if someone’s got a deal, and what really set the motor running was I got one of those envelopes in the mail from Quicken Loans and it was like, “If you find an offer better than what we can give you, we’ll give you like a $250 gift card or something.” So that really kicked me into gear, because I was like, I’m determined to find it. And lo and behold, I did. I found a better offer, I found a great offer from a local bank around here. Everything seemed to be going smoothly. I’m checking in with my loan officer, and going back and forth with the underwriter. Problems come up, as they always do. I realized that we’re kind of stagnant. We’re not making any progress.

Nick Aiola: I get word from the underwriter that I’m not approved for the loan. I said, hmm, that’s crazy. I mean, I know I’ve given you a rockstar presentation of all my stuff, letters, statements, you name it. Packages that I even do the same for my clients. I’m very familiar with providing these packages to banks, and usually they’re pretty solid. So I said, hmm, something must be missing here. It turns out that the loan officer forgot to include the rental income that would have been generated from these three other units into the calculation, in addition to the rental income from my primary that I own now, because I would have been moving and renting that out.

Nick Aiola: That’s four units of rental income averaging probably around $1,800 to $1,900 a month each unit. That’s a substantial amount of income to leave off of the application there. So initially got denied for that amount of the loan. I went back and forth. We got down to the problem that that was excluded, and she apologized for the mistake, and tried to write a letter to rectify it, asked for a second opinion. The underwriter would not budge, did not even want to speak to me. They didn’t want to look at the case again. So yeah, it was rough and just another obstacle. I was thinking, man oh man.

Scott Smith: What do you do in that kind of situation, because it looked like they stonewalled you pretty good, and it’s not your fault.

Nick Aiola: Yeah, they did. Luckily, I spoke to 24 other lenders, so I had some backup.

Scott Smith: This is the most prepared anybody’s ever been going into a real estate transaction, I think.

Nick Aiola: Yeah, right. It was that quote, “If you fail to prepare, you’re preparing to fail,” or something like that. So I guess I took it to the extreme. But yeah, luckily I was able to fall back on my second choice, who I originally actually wanted to work with in the beginning, but the offer just wasn’t there. The structure of the offer was a little bit different. The other one proved to work out a little bit better for me, but I was happy to go back and kind of tuck my tail between my legs and say, “Listen, I need you here.” Working with him was great. It was seamless. Again, I had to come out of pocket for a little bit more, the interest rate was a little higher, but he was able to close me in about three weeks from that point.

Nick Aiola: Throughout this whole process, I had mentioned before how I was saying I wanted to source some of the down payment, which I did. I wound up getting in touch with family members and being able to structure a deal that way with sourcing a portion of the down payment. At one point, that was about to fall through also because that whole deal was just kind of on thin ice. One thing was going good, another thing was going bad. I was like, this is never going to, maybe in a year from now this will work out. I said to my agent, I was laughing, we were at the closing table. I said I wouldn’t be surprised at this point if we got here and all the pens were out of ink and I couldn’t sign.

Nick Aiola: So we persevered, got the keys in my hand on the 31st, and it’s been great ever since. I inherited three tenants. Working with them has been nice so far, and just doing a facelift on the fourth unit before I can move in. But yeah, overall I would say that’s I guess kind of an insight to any beginner or someone who’s just starting out, and maybe waiting to get their first property, or their second property, or a multi unit or something like that. Just dive in and don’t give up on it obviously. There’s always going to be hurdles that come up, but it’s just a stepping stone. Ultimately you’ll get there, and you’ll see it’s not that bad, once you get it, it’s not that bad.

Scott Smith: That’s awesome. Nick. Well, I think that’s a great story, man. I want to say thanks for sharing that with us here today and your bestie. I usually like to wrap up every episode with like a lesson learned. One of the lessons I learned from your talk here today was the need for preparation around making sure that you have other options if something falls through. Especially since, you know any randomness can really happen to you. If you really want the deal, then it’s all about that preparation coming into it. If you wanted to leave the listeners today on this episode with like a lesson learned, what would that be?

Nick Aiola: Yeah, absolutely. That’s a great one. Definitely be prepared, and just take the dive, take the initiative. Don’t get stuck in analysis paralysis, because I was certainly there, especially on this deal. You’ve got to just take a chance. As long as you do your due diligence, you do your analysis, trust in yourself that you’re doing it right and that you know what you’re talking about. If you can see all these other people doing it, I’m sure you can do it too, and just go for it.

Scott Smith: That’s awesome, Nick, and for anybody that wants to get ahold of you, what’s the best way for them to do that?

Nick Aiola: Sure. You can find us on our website, it’s aiolacpa.com. That’s A-I-O-L-A cpa.com. I’m going to find all this on our social media tags and things like that, and that’s pretty good spot to reach us.

Scott Smith: Awesome. Well, thanks Nick for coming on. Everybody, this is Scott Royal Smith. I’m the owner of Royal Legal Solutions. That’s your one stop shop for everything real estate related. Thank you everybody for tuning in this week, and we look forward to catching up with you guys again soon. Thanks, Nick.

Nick Aiola: Thanks, Scott.

Scott Smith: That’s all for this best deal episode. I’m your host, Scott Royal Smith, with the Real Estate Nerds podcast. When investments go good, that can go great. You’re legendary best deal could be your next one. So keep at it. Thank you for joining us, and if you enjoyed the show, leave a review to help clue in those sleeping masses for what they need to know and what we all need reminders of. Do your good deed for the day, and I’ll see you again soon.

Hosted by Scott Smith, Lead Attorney and Founder of Royal Legal Solutions

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If you have questions about our content or suggestions for future episodes or guests, reach our podcast team at podcast@royallegalsolutions.com

About Nick Aiola

Nick is a CPA based in New York, specializing in tax planning and preparation for real estate investors.

He works almost exclusively with real estate investors and businesses/individuals in the real estate industry. He is also an investor. Real estate investing has always been an area of interest for Nick and he is always happy to help people who share the same interests.

More ways to connect

Visit his site here: aiolacpa.com

Linkedin: https://www.linkedin.com/in/nicholasaiola/

Connect With Nick Aiola

Connect with Nick via his website, aiolacpa.com, where you can send him a direct message.

Listener Resources

Thank you for joining us on today’s episode of the Real Estate Nerds Podcast. For even more free educational resources on real estate investing and the law, check out the Royal Legal Solutions blog. You can also reach our host Scott Smith directly, connect with him on LinkedIn, subscribe to the Royal Legal Solutions YouTube channel, or join our investor community on Facebook.

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When making business decisions that affect your long-term goals, like what types of investments to make with your retirement dollars and which vehicles to use, it really is best to be aware of all of your options. We frequently talk about the Solo 401(k) and Self-Directed IRA as tools for funding your retirement. But what about life insurance? And what about the stock market? What if we told you there is a tool that allows to to reap some benefits of both? It’s called Indexed Universal Life Insurance–and some investors have found it a useful addition to their retirement plans.

What Is Indexed Universal Life Insurance?

Indexed Universal Life Insurance (IUL) plans are a variety of permanent life insurance plan that features a cash-building element. One primary benefit of these plans is that the policy holder gets some of the gains of being associated with the stock market without all of the risk Wall Street is famous for. This is in no small part because of how these policies are designed. IULs earn in part because they are directly linked to a market index, such as the Dow or the S&P 500.  Any gains remain within the policy, albeit a cap rate will limit how much you can make. However, you are protected during a particularly bad year for your index with an IUL. The worst case scenario with these plans is that you make nothing, but you never actually lose money no matter how poorly your index performs. The protection of your principal is actually derived in part from the same cap rate that limits your gains.

How much money do policyholders stand to make? Historically, returns run between 5-9%. The S&P Index has actually returned at 9-11%, but the upside limit on UILs stems from the account’s cap rate. For this reason, many advisors argue that the UIL can make a wise addition to a retirement or estate plan once more traditional and self-directed accounts are maxed out.

Tax Benefits of Indexed Universal Life Insurance (IUL) Plans

There are three key tax benefits of IULs. First, you may pay into the policy with pre-tax or after-tax funds. Withdrawals from the policy may be made tax-free if you are under 59 1/2. Such withdrawals are regarded as loans, with your death benefit serving as collateral. Any funds paid out to the beneficiary are also tax-free, including normal benefits upon your passing. This is true regardless of their value.

Ask the Experts at Royal Legal Solutions About Your Retirement Planning Options

Regardless of where you are in the retirement planning process, Royal Legal Solutions an assist you. We have extensive experience educating investors about self-directed investment options. Many of our investor-clients love our Solo 401k information, product, and compliance services. Our Self-Directed IRA services can also be helpful for retirement planning, as the SDIRA is yet another vehicle that allows you to diversify and take total control of your investments. To determine which of the available retirement planning strategies are best for you, consult with one of our experts at Royal Legal Solutions. You may also contact us with any questions you may have about your options.

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