333: Client Case Study, Dan Franks CPA

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Welcome to the AIPIS Show. For accredited income property investment specialists and those who aspire to be. If you're a real estate, mortgage or financial professional, this is the place for you. We'll explore innovative investment analysis, sales, marketing and income generating strategies for the most historically proven wealth creator income property. Learn from the experts as they show you how to build a better business and a better life. It's my pleasure to welcome Dan Franks to the show. He is a client. I've known him for quite a few years before he became a client through the podcasting industry, which is, by the way, an industry largely thanks to him and his business. And we'll talk about that in a moment. Also, Dan has a background in finance, he's a cpa. And so we're going to dive into his story and how he became acquainted with us a long, long time ago. Dan, welcome. How are you?

Thanks for having me on, Jason. I'm great. Yeah, it's definitely quite a full circle thing after listening to you over so many years and working with you over the past year or so on the real estate side of things. Ye awesome to finally be a guest.

I believe you told me a few times over the years that I was the first podcast you ever listened to. Is that true?

That is true. Yeah. You mentioned I was an accountant. Lots of paper pushing and busy work going on in the accounting field. And then yeah, I decided there had to be some good way to pass the time outside of listening to music and maybe learn at the same time. And so somehow through itunes at the time is what I was using. I came across your show and became the first show I listened to. That was in 2008.

That's fantastic. Wow, 2008. So 12 years ago. And what's amazing about that, I mean, a lot of people, maybe we are the first podcast they found, maybe not. But the amazing thing is you are really a legend in the podcasting industry. And maybe that's not because of your own podcast, but it's because of what you started. You quite literally started a movement in the podcasting world. Tell us about that.

Yeah, I think maybe legend is a little overstating and I'm not sure I would claim legend status by too much.

You're so humble, but you really have done some big stuff.

But yeah, what we created was like you mentioned, it's called podcast movement and it was really intended to be a movement of hobbyist independent podcasters who are doing amazing things on their own with maybe a small audience, a small dedicated audience, something like that. I mean, very similar to how your show was when you started. But these shows that have such loyal followings, loyal fan bases, loyal listenerships, we felt like there was an opportunity for everyone to get together, learn from each other, network and grow together. That's really what podcast movement started as. And it started, you know, we've talked about many times together, talking about in person events and conferences and things like that. And that's how it started was just, it was a small Kickstarter crowdfunded conference of a bunch of independent podcasters getting together. And it's just grown into even more of a movement than we ever thought it would be when we named it that. And now we've got, you know, over 36,000 people in our Facebook group and our events are attended by 3,000, 4,000 people a year and, you know, a daily newsletter that's going out to 15,000 people every morning. So it's really turned into, like I said, way more of a movement than we ever intended it to be.

That's fantastic. Congratulations on your success. That's just really, really phenomenal to create a movement like that. And it is quite literally a movement. I went to your very first conference and I think you had maybe, I want to say like 400 people there or something. And I think that was in Dallas. Was that Dallas? First one?

It was my hometown in Dallas. Yeah. 550 people, if we're being exact. But it's definitely grown quite a bit since then. And you know, this, you've run small events, large events, medium size event, and those in person gatherings, they take on different personalities based on the number of people that are at them and the makeup of them. So, you know, right now we're in the middle of, you know, an event that's causing us not to be able to have these in person gatherings. And I really, I know you talk about the FOMO or not having the fomo, fear of misunderstood, you know, being kind of happy, you don't have to get out of the house, but I do think eventually a lot of people are going to kind of have that urge to get back together and whatever the new normal is, still want to get together and gather and hang out, know, rub shoulders in a safe way with their peers or their, you know, people they're trying to learn and network with.

Absolutely. My statements on that won't last forever. It's just a nice break right now. That's all but I'll get antsy and want to get out of the house, too. But you have been diversifying your financial life and you started investing in real estate with us just like a year ago. So you. You're fairly new at it still, right? Tell us about that.

Yeah, it's funny to think back that I've been listening to your show and believing in what you teach and what you're espousing to the listeners for 12 years now. But it took me 11 of those years to actually do it myself. So, yeah, I went to my first Meet the Masters last year and brought my wife with me and just told her, like, hey, we're finally going to do this. I want you to come with me and hear what Jason and his speakers say, and let's meet with some of these local market specialists, and then let's put the pedal to the metal and start going. And so that was just about a year and a half ago now, maybe not even that much. And now we've got five properties and the sixth one is under construction and should close within the next month or so. She was like, wow, you weren't kidding when you said this. Meet the Master is going to be the start of this thing. And it's been nonstop ever since.

That's a great story. I love it. I love it. Where did you buy first? You're in two or three markets now, right?

Yeah, that's correct. We are in the Pennsylvania market. I guess it's considered south central Pennsylvania. You know, I think that Meet the Masters was kind of their first introduction to your network and met with them there. And really I was kind of intrigued by the charm of some of their older houses that they were renovating and putting on the market. And being from Dallas, all of our houses kind of are the same ranch style house, different sizes and stuff, but there isn't just a whole lot of charm or personality. So just from that standpoint, just seeing what their, you know, the aesthetics of the properties they were working with up there intrigued me enough to look into it. And going up there, a lot of those houses are over 100 years old. But, like, that's the entire city. The entire city. Some of them. All the houses are like that. And, you know, seeing the quality of the work that they were doing, that was just what really interested us. We went to several different markets before we picked the first one to invest in, physically went to several different markets and did the tours with the different.

That's kind of rare. You know, most of our clients don't Go to the markets, they don't visit. They just buy. Virtually. I mean, everybody's doing everything virtual nowadays, but we've been doing that for 16 years, virtually. So.

Yeah, well, yeah, and they told us that, too. But, you know, I mean, I'll say it's good to build, and I've learned this through, you know, business in general. Not just this, but it's good to build rapport with the people who you're going to be working with. And I felt like we were able to build more rapport than we would have been able to just talking over the phone. And, you know, we still. Obviously, Sarah's our investment counselor, and we still everything, you know, we work with her and go through her and everything. We always have her there by our side. But also having that rapport with the boots on the ground has really helped us. If, you know, issues come up or during the close process or maybe just to say, hey, is there any. Are there any houses, you know, coming down the pipeline that we might need to keep our eyes on? Just to me, like, that's one of my biggest things in business is anyone that's in any part of the business, you know, cycle, whether it's investment or whether it's our own business, you know, being able to know who to pick up the phone and call or just having that relationship, then they can put a face to, to the name and they, you know, know about our kids or whatever it is. Like, we're friends on Facebook now. So, yeah, I really. They told us that. And then several of the other markets we visited said maybe like 5% of the clients they work with ever go to those markets. So it's a small investment, but I want to say we flew out in the morning and flew back in the afternoon or evening. So we didn't even have to pay for a hotel in Southwest, based here in Dallas. It was like $200 worth of plane flights and a day off work, and it was well worth it.

Good stuff. Okay, so Pennsylvania was your first market, and where else?

Pennsylvania was the first market. We've actually. We're up to four. Four houses up there now, and then Jacksonville, so Jim and his team over there. So we've got one new build in Jacksonville. We're about to get our first tenant in there, and we're pretty excited about that. And then we are a part of their new townhome complex they're building in the Atlanta suburbs. So same also with Jim's group. So those will be our next two markets.

Those all sound like great Decisions. Dan, what are some of the. Well, maybe we'll go kind of in chronological order here for the listeners. You started listening to the podcast back in 2008 and why. Why real estate? What got you interested in real estate?

You know, I don't know if it was as much real estate that got me first started was. I mean, the show is called Creating wealth. So that intrigued me and a lot. I kind of had my first batch of podcasts I listened to at that time while I was listening on the job. And some of them were about stock market investing, and some of them were about personal finance, and this one was about real estate. But then everything around real estate obviously as well. And just something about when you talk about the steady nature of real estate, the buy and hold type strategy that you can go through, you get through real estate and then all of the benefits with the tax, deferred depreciation and leveraging other people's money with the mortgages, just kind of all of those things that you kind of stack one reason on top of the other, on top of the other. That real estate just made so much sense, really. Kind of. It was nice to have that foundation, I want to say, even though through work and stuff I was putting money in the 401k and the IRAs and all that, but knowing in the back of my head where I felt like the smart place to put that money eventually would be, that's kind of the biggest thing I would say that I got out of real estate was just all of those reasons. It's like any one of those reasons that you always talk about with your commandments, any one is a good argument for real estate. But when you just start stacking them on top of each other, I think that was just that compounding effect that made me believe it. And I think the biggest one is just being able to. If you want to drive out and look at your asset and put your hands on your asset, it's there, it's physically there, and it's protected by insurance and all those things. So it's there. And if it's not there, then you've got the safety net. Whereas with stocks and everything else, especially now with this pandemic and all of the funky things that's happening with the. You see the jobless reports going up, but then the stock market going up as well, that math doesn't add up. Whereas with real estate, it adds up a little bit more.

To me, it's such a great multidimensional asset class. Obviously, I couldn't Agree with you more on all of that stuff. Okay, so you got interested. You were just interested in creating wealth and investing. And then really real estate was the thing outside of your own business that you were, well, that you started several years later when you were doing accounting. Did you have your own business at all? Did you have your own CPA practice? Or were you always with a company?

So I started out with Big four for two years and that was a lot of busy work. But what I can credit that with is listening to your podcast. I discovered a lot of things to do to pass the time while I was doing that busy work at the big four public accounting firm. But then I left that and went to a small firm, and that was a whole lot more. I felt a little bit more like a business owner and entrepreneur at that small firm. So while I wasn't a partner per se, they really did kind of give me the freedom to actually learn what the heck I was doing, which I wasn't getting at the big firm. And I did start to build my, I guess you would call it my book of business and went out and friends, families, peers, those types of people I was able to bring on as paying clients and kind of manage those relationships. And I think that was, that was pretty important to me in learning before I launched my own business. Just seeing how businesses ran, being so hands on with the financial aspects of business, really, how better to learn how a business functions where it's strong, where it's weak, than looking at what matters most and that's the money coming into the business and going out of the business. So that was kind of the most important thing to me in my journey that led me to running my own business was that ability to learn from what other people were doing. That's a long way of saying I didn't run my own business, but a lot of aspects that someone running their own accounting firm. I did learn that in terms of the clients I was working with and the assistance I was providing them.

Did you have a specialty as a cpa? I mean, were you doing tax returns, audits? Probably very different at the big four accounting firm versus the small company. What did you do?

Yeah, so our core business was taxes and bookkeeping. So a lot of our clients we were doing, you know, full cycle accounting. Everything from helping them with their payroll to their taxes to their bookkeeping. But the other interesting thing that we did was, I guess now it's got the name like outsource CFO is what they call it.

That's really basically it's really popular.

Yeah, it's very popular. And anyone who doesn't know what that means, it's pretty self explanatory. But if you've got a business and you know, if you're a bricklaying business or whatever it is, where you know you need to hire the people in house that physically do the important work for the business, but you realize that you as the business owner aren't capable of responsibly managing the financial operations of your business. You hire, whether it's a firm or an individual, to be a part time CFO for you. That includes everything from managing the books to filing the quarterlies to managing payroll and really hopefully being a big picture advisor to what's happening financially with the business. You know, maybe you as the operator of the business or the owner of the business might be in the weeds of the core function of the business, but you've got somebody else who knows what they're doing on the financial side that's, you know, helping you out and being that responsible set of eyes and ears.

Sure, sure.

In and around the financial thing. So we did a lot of that. And again, that was before that was such a buzzword, the outsourced CFO was. But you know, looking back, it's like, wow, that's what I was doing for these companies. And again, that's, like I said, that's, that's what really kind of got me interested in doing my own thing was seeing other people doing their own good stuff.

Well, before we get back to real estate investing and a little more of your client case study. And all of our listeners always appreciate when real clients come on the show to share their story. So thank you for doing that. But I've got kind of an oddball question before we get back to that because you're a CPA, a lot of our listeners, and we've had many CPAs on the show over the years, I'm sure you've heard them. A lot of our listeners ask for referrals and they say things like, well, my CPA doesn't know enough about real estate or they don't know about deductions or you hear this constantly and it's a little bit of a risky word to use, but they're not creative enough. Do you have any advice for people on finding a good CPA? Because a lot of CPAs, they really kind of don't know. You sort of need one that knows real estate. Hopefully they're actually investing in real estate themselves and so they understand the asset firsthand. But any advice you can share on that?

Yeah, I think a lot of it is, like you just said, the relatability. So whatever it is that you're specializing in, and I'm assuming a lot of these, a lot of listeners, it'll be real estate. Finding someone that, you know, doesn't just own their house, but. And, you know, because a lot of people that just own their primary residence thinks that's, you know, their most important investment. But you listen to Jason, you know, and find out that maybe your personal resident isn't actually an investment at all. Right? Like, you might be better off renting your personal residence or whatever. So almost finding somebody that understands that difference, you know, owns their own real estate, that's great. That's the easy one. But I almost say, like, you know, if you're listening to this podcast, you've obviously picked up some of the lingo. And whether it's some of, you know, your invented phrases, Jason, or whether it's just things that, okay, you kind of have to be, you know, talking the talk once you start listening to these podcasts and you understand phrases that you only would use if you're intimately familiar with the process of buying, owning and renting real estate or flipping real estate or whatever it is you're doing. And, you know, seeing if the, if the accountant is familiar with that lingo, seeing if some of that verbiage or some of those phrases that you use, if you get that blank look back when you use it, or if they, you know, they just keep going with the conversation because they know what you're saying. I really feel like that's the biggest thing. So when I was bringing on clients as an accountant, you know, one of the things I specialized in was some of these people I was meeting through the podcast space that were running their large scale podcast businesses, they would tell me, wow, like my old CPA, they weren't even familiar with PayPal or they weren't even familiar with some of these other, you know, payment processors or Patreon, which is a really big thing in the podcast podcast space. All of these things that podcasters like this terminology, these tools that podcasters were using that were revenue, you know, revenue generating tools. Their old accountants had no idea what it was. So they felt like they were having to train the people that were responsible with helping them with their finance, right, to then properly, you know, treat these financial things. And they felt like that was backwards. So the fact that when they talked to me, I knew what they were talking about. I potentially often had relationships with people at these companies and, you know, maybe even was the user of some of those tools myself, that was so comforting to them that I was most likely more expensive than some of those other, you know, CPAs that they had talked to or previously used. But the fact that I talked, the talk that they talked really made a big difference. So I kind of equate that same thing to real estate, where, you know, if you say something that makes sense to you and it doesn't make sense to your accountant, that's a pretty big red flag.

It is, yes. That's true. So if you bring up 1031 exchange and you ask specific questions about it, or depreciation recapture or any of the lingo, real estate lingo that we talk about all the time, they don't know about it, you're probably not talking to the right person. So that's good.

Yeah, don't even accept, like, even if they say, oh, you know, because one of our biggest things is if a client would ask us a question and we wouldn't know the answer, we'd say they would teach you. Well, you know, it's good to admit if you don't know something, because then you can turn that in, you know, saying, you know, kind of reassuring the client of, you know, I'll look into that, and I'll make sure to put some time and effort into researching that for you. But if they say that, then you don't want to be there. You don't want to be their test dummy, or you don't want to be their learning experience, especially if it's a, you know, if you're interviewing, you know, a new CPA or something like that. So if you're already working with a CPA and you might bring a new concept or something like that to them, then maybe that's okay. But if you haven't signed the dotted line to work with someone yet, definitely kind of throw out all those terms and ideas on the front end.

Right. And throw them out as a test so you can see if they gobble them up or if they say, well, let me get back to you on that type of thing. Yeah, good stuff. Well, as you embarked on your real estate investing business, and I think it is a business, I think people should really look at this as though you have podcast movement. You have. And I don't know if you still do CPA stuff, if you still do tax or not, maybe you could tell us. And then you have your real estate investing business, and it really is a business, because I think you Plan to build a big portfolio and, you know, share with us some of your goals and thoughts and maybe challenges that are things you've learned or anything you can do to help the learning curve for the listeners.

Yeah, so I don't do taxes anymore. I don't know if you'd call it pride or just. It feels good to. If I have a question or get a tax document in the mail, I can pass it on to my cpa. Now, it's nice to some of that stuff not to have to be on top of all the fine print all the time like I was back in the day. But, yeah, I absolutely do treat it as a business. So even though I do, you know, often refer to them as my investments, them being the houses, the properties. I sit down once a month and do the books just. Just like I do for or like I did for podcast movement. I do the books for the houses. I make sure I understand all the money going out, all the money coming in. Whenever the monthly reports come in from the property managers, I make sure that, you know, everything that's on there is something I already expected or. And if it's not, then I get to the middle of it. So, yeah, I mean, I do treat it as a business, and I think you kind of need to, unless you really want it to be, you know, as super passive as possible and you're just. I think that's possible to be a little more passive about it, but. But I feel like that's not necessarily the most responsible way to do things, and especially if you're looking to build something and not just build it, but grow it and put it in the best position to succeed. Yeah, I feel like you do just have to treat it like a business. And like I said, with the books, I sit down just like I do for the regular business. I have, like I was mentioning with the local market specialists, I have probably more communication and more staying in touch with them than maybe they would prefer. But I feel like, again, as a responsible business owner, it's better to be proactive and getting ahead of some of the issues that might come up. We had a property that was not getting a tenant put into it as fast as I thought it should. And we were kind of. What we were seeing was that the market was hot and that people were. The days on the market for some of these vacant rental houses were pretty low, but ours was seemingly higher than it should be. So we stayed on top of it. And Sarah helped us. Sarah, our team member from Platinum, helped us stay on top of it and figure out what was happening and get to the root of the issue. I think we even tagged you in on several things, Jason. But that's one of the best things about working with you all is having that support system. I think I've mentioned to you in the past that before we started purchasing properties through you all, we dipped our toes in the water with another group, and we kind of felt like we were thrown to the wolves a little bit. So when we talked to that group and they referred us to a local market specialist, and then we kind of felt like the cord was cut and we were put out there on our own, and we just were not ready for that. So when we came back and started working with you all for the first time, it just felt like it was so different. So I feel like you guys are holding our hands when we need us to or when we need you to. But on the flip side, we do have some of that autonomy and that connection to the local market specialist and to the property managers and all of that to where once we are ready to go out there on our own and start talking to them, and we don't need Sarah's support to figure out why the tenant's not being placed or something like that, then we have that autonomy. So I feel like, you know, working with you guys, it's just been a really good balance of having your help when we need it, but also having, you know, kind of being able to be on our own, where I have spoken to some friends who worked with other groups, and I think a lot of times, like, the contacts at those local market specialists are, like, safely guarded, so you're never allowed to actually talk to the person who's selling you the house, which really just scared me. That's weird.

No, I wouldn't.

Yeah, it's really weird. It's really weird. And, like, even they kind of discourage you from going out and visiting the local market specialists and visiting some of the markets you want to invest in, because. Because they want to own those relationships, and they don't want anyone else to know these people. It was really bizarre to hear that and just so thankful that that's not how it is working with you all.

Yeah. Yeah. Well, I'm glad you feel that way. And one of the things, Dan, we really pride ourselves in is we really go to bat for our clients. And you've got to balance, in any business, the relationship between both sides of the equation. The vendor, or in this case, the seller and the buyer. Right. If you're a store you got to manage your relationship with your suppliers. You got to manage your relationship with the customers that come in and buy things. And I just feel like the person who is the one spending the money really deserves kind of, you know, a lot of assistance and help that does cost us sometimes because the sellers want us to push people into deals. And you know, I remember this one that came up, you know, a few years ago was really kind of huge. You know, they're like, why aren't you guys, you know, just telling the client to just do it? And I'm like, because we don't want them to do the deal like that. You've got to fix the property. It was over some repair issue or something and they just couldn't believe it that we weren't just telling our client and pushing them into the deal, pushing the buyer into the deal. I mean, they're both clients, but pushing the buyer into the deal. So we just think that play the long game, that's what I always think is the best investment. Sometimes you have some short term cost over playing the long game, but I think it's a better strategy overall. Any particular tools you like to use or systems you have or anything you want to share with people as we wrap it up? Dan?

Yeah, I mean, for me, QuickBooks I know like the back of my hand, so it's just been so easy to start using that for the rental properties.

But most people don't know QuickBooks like you because you're a CPA and that was probably something you've lived in for many years, right?

Yeah, it was. So it was an easy transition. I even tried, I tried to convince myself that some of these tools out there might be able to do what I wanted. But ultimately, when you kind of know how the sausage is made, you want to then be involved with it in terms of the bookkeeping. So you want to be able to tweak it exactly like you want it. Whereas some of these other tools, they're made for people that don't necessarily want that kind of control or know how to do it. Yeah, you know, some of the tools like are really nice and shiny and they can pull in your bank accounts and they can pull in, you know, even connect to the property management systems. But like even some of those I found, like they were double counting some of the deposits and double counting charges because they were almost too fancy and pulling together too many pieces of information. So I definitely tried a few. But if you know how to keep books and that's something you've done before it ends up, at least in my case, saving time compared to trying to those automated systems ended up requiring more manual work than anything else.

Right, good. What are your goals with your real estate portfolio?

Yeah, good question. We had the goals of we wanted to get. I think we just wanted four properties in the first year and we ended up being exactly four, but with two that were kind of already in the pipeline happen to be new builds instead within that first year. But I just want to keep responsibly growing it kind of ideally when the cash flow from the houses starts building up enough money to then reinvest that money, I think that's going to be something that's really, really cool. When we are able to generate enough cash reserve from the cash flow coming in from the current houses to then buy a new one, that'll be the biggest thing. Because right now it was our savings and investments and other kind of cash reserves that we've used to, to purchase these six houses. But I think whenever the houses start generating enough revenue to then purchase other houses, that's kind of going to be a really cool kind of milestone for us and something that we're looking into. And then it's not only, you know, they're not only sustaining themselves, but then they're making enough money to keep growing the portfolio. So, you know, I think the next big goal would be for my wife and I each to be able to get those 10. Those 10 properties in our names.

Right, so 10 each, right? 20 total.

Yeah, 10 each. So right now? Yeah, so right now we've kind of been splitting them up and the primary, you know, our primary residence is in my name. So my wife will be able to get up to 10 investment properties in her name, nine more in my name. And then, you know, I think to me, when you hit that, that wall of, okay, now we've kind of maxed out this way of, you know, financing the properties. I guess you could look at that as a bad thing because then obviously you have to get creative and do some different things.

You can't get the good Fannie Mae Freddie Mac loan anymore is what you're referring to.

Yeah, exactly. But then it's also like, to me, a milestone of like, wow, look at what we've built to the point where now we have to start getting more creative. Now we have to look at alternate means. Like, to me, that's almost like a good thing because it's like, wow, look at what we've built and what, you know, it's a good problem to be facing.

Yeah. You're moving into the big leagues. Yeah. So that's a good problem to have that you need to get alternative financing. So get the 10 each. That's kind of the next goal is for your wife to get 10 and you to get 10. Then you'll have 20 and then you can go from there, right?

Yep, exactly. And then maybe we'll be able to have Meet the Masters again, so then I can go meet some folks there that can teach me what to do next.

And it is going to be virtual this time. We just figured if we keep waiting, we're going to be bumping up against our Profits in Paradise event, which is in the fall every year. And so we've just got to do it virtually this time. And by the way, thank you, Dan, for your advice on virtual events and you provided a couple of really neat referrals and stuff, too. So we appreciate that. And all of our listeners who attend Virtual Meet the Masters will appreciate that you had a hand in helping us do that. So thank you very much for that. I appreciate it.

You're welcome. I'll be there whatever the Meet the Masters networking sessions look like. I'll be there to meet everyone else virtually. So I'm excited for whatever comes of it.

Good stuff. Well, hey, thank you so much for sharing your story today. And it's always great to have a client case study and we just appreciate your business and we appreciate you sharing, too. Thanks again, Dan.

Thanks. Look forward to seeing you at the Virtual Meet the Masters.

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