Jason uses this Flash Back Friday show from Episode 524, originally published in June 2015 to look back at a client’s success. Fernando talks about his financial independence day. He built a great portfolio after working at Apple Computers and investing. Now Fernando is one of Jason’s investment counselors and answers common questions his clients ask him.

When Fernando first met Jason, he had a goal to purchase enough properties to successfully achieve ‘financial independence day’. A couple of years later, he built an impressive portfolio and is now retired from his job at Apple Computers. Fernando is now one of Jason’s investment counselors and today he hopes to answer some common questions his real estate investor clients have been asking him.

Investor 0:00
You’re gonna laugh, but because of your podcast, we’re positioned well. So I don’t know how else to thank you, but thank you, your podcast and your services are amazing. And I wish I could do more as far as working with you guys, but I haven’t really but um, maybe in the future, obviously. But once again, our family is grateful to you and your services, and your information is priceless. Thank you so much.

Jason Hartman 0:28
Take care. Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is handpicked to help you today in the present and propel you into the future. Enjoy. This show is produced by the Hartman media company. For more information and links to all our great podcasts visit Hartman media.com.

Announcer 0:55
Welcome to creating wealth with Jason Hartman during this program, Jason He’s going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine self made multi millionaire who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom, you really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:43
Welcome to the creating wealth show. This is episode number 524. And this is your host Jason Hartman. And today I thought we’d talk about just sort of some listener questions some common questions FAQ. type things that we’re always getting from investors, and just kind of cover those because there’s just an endless amount of these and listeners, please go to Jason Hartman calm and leave us a message. I don’t play every message on the air. By the way, some messages really are sort of not necessary. It doesn’t make for good podcasting necessarily. It’s just sort of maybe an operational type message. But you know, we do listen to all of those. And we love to hear your feedback on anything and everything. And of course, your listener questions are much appreciated. And also speaking of participation, if you’d like to come on the show, we’d love to have you come on the show as a guest. Talk about your investing experience, ask questions in real time, you know, kind of discuss issues. We’ve got such an intelligent listener base out there, and that’s why we just love to hear from you and have you on the show. Feel free to do that. If you want to book a time with me, just go to Jason hartman.com slash Jason, take 30 seconds fill out the little appointment request, and we may well just put you on the show. Okay. But in the meantime, you can also go to Jason Hartman comm click on the Send voicemail message, and we may well air your voicemail on the show one of those a couple of those questions I got, just before we start and I’ve got Fernando here, who’s going to be doing some of these listener questions with me, but two of the more number one it’s kind of funny. Why was I recording in the closet? Good question. Fernando, you’re here to Okay, so I thought I made that clear, but I guess I didn’t okay. on that. Just so you know, as an audio person. One of the things you look for is soft surfaces. hard surfaces are terrible. Okay. Glass, hardwood floors, marble. You know, this is all the stuff we don’t like. We like fabric we like soft because it makes the sense sound really good. And in my house that won’t be my house for very much longer actually because I’m moving to La Jolla, California. I have 18 foot ceilings and hardwood floors. So this place is it’s like an Echoplex. It’s terrible. It really is terrible for audio, my new place is going to be a little bit better. Even though I have marble floors I’ve kind of thought about how I’m going to put some baffling up and make the sound better. And I am not recording in the closet today. But I tell you podcasters audio if you want to do an audio recording the best place to do it is in your closet because it’s got basically it’s got padded walls okay with clothing hanging from the rack So, so that’s that. Hey, Fernando anyway, you’re here. I guess so. Welcome.

Fernando 4:48
I am here. Yeah, you gotta make shift recording studio in your closet. That’s That’s good. It’s

Jason Hartman 4:53
pretty good. No, I’ve only I’ve only recorded one time from there but I’ve done it in a couple of hotel rooms, too. When I’ve been traveling, it’s pretty good. You know, the closet is the place for sure if it works, that’s what it counts and save the come out of the closet jokes because I can just hear Oh, you know? Oh, gosh. Okay, so another question I got is someone joined our members section that was useless. So thank you for that comment, by the way, and we are working on it. I guess on the member section, our audio recordings, use a flash player. And of course, flash and Apple don’t get along very well. And Fernando since he used to work for Apple before you retired with your investment portfolio with your properties, maybe you can comment on this. But yeah, Steve Jobs and Adobe kind of had a fight years ago, Adobe makes flash. And so he wanted us to do that another way and put them on to Vimeo. And you know, I think that’s, that’s a great idea. I’ve got one of my guys working on it now. Patrick, who’s in the San Francisco area who does some of our production work for us. is investigating that. So thank you for the feedback, we’ll work on it. But remember the content in the members section, you know, whether it be the monthly member calls or other audio content we have in there. It’s never going to be as easy as the podcast, the podcast system, especially if you’re an apple user, is the easiest thing in the world, the way RSS feeds work and so forth. And it’s just a great, a great technology that has obviously revolutionized the world of media. You know, this kind of stuff is a little bit harder, you know, when I download audio books or audio files, from non podcast sources, you know, there’s some few extra steps for me to and I do it all the time. So I hear you, but the, the feedback you gave us is good, and we’re working on it. Okay, Fernando, any comment on flash and apple or anything like that?

Fernando 6:49
Oh, Steve Jobs had a longer explanation for why he didn’t think flash was the future and busy basically has to do with Adobe’s Flash products are basically proprietary hundred percent proprietary, and they control the development of future future enhancements, pricing etc. And that’s definitely something that that Steve Jobs Steve Jobs did not want to want to see. And he had concerns about reliability, security performance. And basically he just wasn’t wasn’t seeing flashes the future. And you know, I think there’s there’s newest standards that have come out, but the flash is still very popular. And I get messages every now and then I need to upgrade my flash version. And if you don’t, I just can’t use the web very effectively, which is, which is bad, isn’t it? Nice listeners to have a retired Apple executive here with us

Jason Hartman 7:46
retired based on his real estate portfolio and now owns 70 units. So, Fernando Once again, congratulations. That’s awesome. So hey, you wanted to kind of do some q&a stuff today and I think that’s a great idea so dive in.

Fernando 8:01
Yeah, so I’ve been going through a great experience as I get more involved with Platinum properties and, and work with you and as as you know, and listeners know, we’re starting a new company that is going to provide a better experience for for investors. And part of that process, part of my learning processing in being able to contribute to, to this new startup is to understand the business from the inside and how clients interface with with Platinum properties and the investment. Okay, I know I know how that works from the client side since I started as a client myself, and I needed to to get a more holistic understanding of the business and and since I’ve been doing this I’ve been talking to a lot of clients. I’ve been coaching clients on the Financial Independence Day consulting, I’ve been answering questions meeting with people. And I’ve noticed a few patterns that that have come up as clients are asking some fundamental and some basic, very important questions. So I wanted to, to just bring these up and address some of them and also have you Jason talked about some of this and, and give, give the clients a good starting point for these these fundamental questions. So

Jason Hartman 9:36
remember, you’re listening to flashback Friday? Our new episodes are published every Monday and Wednesday. Good, absolutely. And Fernando, I know that’s really been an interesting experience for you moving from client to becoming an investment counselor. So yeah, what kind of questions what’s the first one

Fernando 9:59
so for for clients that are that are new.

Fernando 10:03
The common question is, is is this? Fernando I have no experience in real estate I you know, I want to get started but I basically don’t know anything. What’s the process in in basically what are the fees that I should expect?

Jason Hartman 10:19
Okay, well, let’s talk about the traditional process first and then let’s talk about our process version 2.0, maybe version 3.0, which is much much better if I must say so myself. So first of all, it’s important maybe for the listeners to know that my background for 19 years is in the traditional real estate business. I was I started at century 21. I went to work for REMAX was one of their top agents in the world for several years. You know, I used to list and sell people’s houses. I first started out for a little while, for my first year in the business selling HUD and VA repos in mostly in the Indian An empire of Southern California. And I did work with a lot of investor clients then. And then I kind of switched to working with investors a little bit, but mostly regular home sellers, mostly because I mostly have listings, but also homebuyers as well. And that was mostly in Irvine, Newport Beach area of Orange County, California. And so the traditional process the way people have always, quote invested unquote, in real estate, you know, they would, they would think, Hey, you know, I, my home’s been a good investment. I’m getting these postcards, notepads, and maybe a pumpkin from this realtor in my neighborhood, who I recognize and maybe I should call them up and ask them about investing. And here’s where the huge mistake begins. Okay, because first of all, the area in which you live probably isn’t the best area in which to invest because Cuz it’s you probably live, if you’re listening to the show in a reasonably nice area, maybe a very nice area. And those areas never have good cash flow. So if you know you’re you’re going to go around your neighborhood, you’re going to look locally, you’re not going to really be thinking like a real investor. And you know, you’re going to buy a property that’s maybe somewhere near you, not really ever considering any concept of rent to value ratios, land to improvement ratios, what I call the LTI ratio that reduces your risk when you invest. And you’re also going to be working with a person who just is not usually very competent when it comes to investment properties. The vast majority of the real estate industry is dedicated to people that are just you know, really nice people who network and have friends and they get business because they network have friends, not because they’re very good at what they do or very knowledgeable what they do. And look, I, I can say this because, you know, I r1 as it were, you know, improper grammar intended, you know, the real estate industry is is just not staffed by very good people, for the most part, maybe 20% of them are pretty darn good. You know, when I owned a real estate company for eight years that I eventually sold the Coldwell Banker in 2005. You know, I trained real estate people, thousands of them really at seminars that I would do for the industry and stuff like that, and then working for my own company. And I mean, most of them just aren’t very serious about their career at all. They don’t take courses they don’t want to learn. You know, there’s there’s a joke in the industry that you know, real estate is for people who couldn’t get a real job, and I’m not the only one who says that I’ve heard it many times from other people, you know, so that’s what you’re usually faced with. Okay, that’s the traditional way to invest. And certainly there are, you know, that said, there are great real estate people out there that are engaged in the traditional real estate business, but it’s like anything in life, you know, it’s the 8020 rule, right? The Pareto principle, and maybe in real estate, it’s worse than 8020. It’s maybe 9010. Okay. So, so that’s, it’s important to understand, that’s the way most people do it. And they achieve vastly inferior results. And that’s what I used to do. You know, I used to help people do that plan. And it just didn’t work very well. You know, it worked when you were lucky. When, you know, maybe you you had some appreciation that just happened by accident, not necessarily by anything you did. But it isn’t the way to go. It’s not the way to be a good prudent investor, a good conservative, prudent, successful investor. So the way we do it is that you listen to the podcast, you gain some education for free, okay? You learn about it, you learn a solid philosophy for investing and a unique philosophy for investing. So you listen to the show, and you learn about it. And then you go to our website, Jason Hartman calm or you and you, you know you fill out an inquiry form and interest form there on the website just take you 30 seconds to do that, or you call us and you talk with one of our investment counselors. And we help you assess your investment goals, whether they be income and cash flow, or appreciation or tax benefits or asset protection. And then we help direct you to different pre screened markets nationwide, that we have affiliate relationships in We can refer you to those those vendors, those providers of property those local market specialists, or LMS is not to be confused with MLS multiple listing service. I know those are the same letters and in different order. And we can refer you to these people who will help you acquire investment properties. And we basically act as an area agnostic source for you to bounce ideas off of, for you to learn from. And also we help you exert a lot of leverage over the different providers who are selling the properties to you. We’re area agnostic, so if one market doesn’t make sense, or if that provider that local market specialist and isn’t doing their job, will refer you to someone else, and there’s really no other place that you can go to get that exact formula the way we do it. We call it the complete solution for real estate investors. And it usually all starts by you just visiting our website, filling out a contact form. And then we contact you. And we have a conference call with you. We arrange three way calls after that with different local market specialists. And we help you select properties in markets that we recommend that we’ve researched, that we recommend, and that we have relationships in. So, Fernando, do you think that answers the question?

Fernando 17:29
Yeah. So in summary, number one, get educated on what we do. And podcasts are a great way to get educated, choose a market and number two is to choose a market that we recommend on the website. And number three, let us know when you need help and or is ready for an introduction to the provider or local market specialist for that market. And that kind of summarizes it.

Jason Hartman 17:55
Okay, so Fernando, I think I think you’re you said it much better than I did. And you took like eight less minutes than I. That’s not fair. He listeners Fernando’s making

Fernando 18:10
you give the full answer that’s well, let me just Jason if I if I may, when we talk about gadget getting educated the podcasts are obviously the preferred preferred vehicle because they are free and there’s so many different podcasts. I usually recommend clients to listen to a few podcasts. There’s a few about certain markets that we have done recently, and the one on Chicago was done a while ago, it’s it’s broadcast for 85 real estate investing in Chicago with local market specialist john. That was a good one. There was one that we did on Jackson, Mississippi, and this is podcast five 08 Jackson, Mississippi real estate investment market profile with local market specialist Brad and there is an older one for Memphis that we’ve done those as podcast. 255 It’s also pretty interesting. This is a relates to the property to that we did a Memphis a few weeks ago. listeners, they’re interested in general education could listen to podcasts. 405 This is the one that talks about how to read. Sorry, the investing on one on one how to read a property pro forma. Oh, that’s a critical one.

Jason Hartman 19:37
Yeah, thank you, Fernando. That’s it. And by the way, there is a YouTube video on that too, that you can you can find on my YouTube channel, which is called I believe it’s called Jason Hartman real estate. I think it’s like the lowest rated channel on YouTube but you know, we’re just not begin video over here. I don’t know why me I think it’s because I have a face for radio. But we you know, are the podcast is hugely popular. So thank you listeners for making it so, but yeah, we just never mastered the YouTube thing. But anyway, that is a great, you know, it’s a great audio, you can listen to the podcast, but if you want to see it, there is a video too and it’s about I think 27 minutes long, really foundational content. Okay, super important.

Fernando 20:24
And I remember you when when I got started, you told me Fernando if you learn how to decipher the pro format, how to play with the various assumptions. This will teach you so much and I agree 100% that that was that was critical. So this is very important. This podcast 405 is very important. 405

Jason Hartman 20:42
so Episode Number 405 folks, little over 100 episodes ago, listen to that one. It’s it’s really fantastic.

Fernando 20:51
Okay, so yeah, and client studies are very, very popular those podcasts he started the case by case studies. These are Very, very popular. You just did one with Joe. I just listened to it today. It was very good. I don’t remember the the number for the one today, but I can. I can list it in a minute. The other ones that were I think would be great for new clients to listen to our episode 514 client case study with Phillips Phillips Sullivan.

Jason Hartman 21:26
Oh, yeah. Phillip Sullivan’s great. He was on just recently. Five 514 Okay. 558 458 is another client case study. Yeah, you misspoke you said 558. So 458 right. Okay.

Fernando 21:39
Yes. 450 sorry. I’m with Fernanda,

Jason Hartman 21:41
this is with David Bordeaux. Yeah. David Porter, awesome guy. Yeah. Great Investor. Yeah,

Fernando 21:45
yeah, they really great guy and the one that I was on, which is 459. And this is the client case study with Fernando. So

Jason Hartman 21:54
Fernando. Wow. I know that you’re promoting your own thing.

Fernando 21:59
Well, No, it is actually interesting. When I talk to clients that already know about me, it makes the conversation go a lot faster.

Jason Hartman 22:07
Right? It does. It does. That’s one of the great things. You know, folks, you listen to the podcast you it’s asynchronous. Okay, so that’s just a big word for saying that you get to listen at your convenience. We publish it our convenience. You know, it’s just a great thing. And then, after you do some listening, and you get to know us, you get to know our clients, you hear it right from them, okay, our clients and their own experiences come to a live event. That’s another thing I really want to stress, Fernando, come to a live event. You know, some of these events, we’re kind of crappy at promoting them sometimes. So some of them are relatively small, where we might just have you know, 25 people on a property tour, and come to a live event. Meet us. undoubtably. Some of our past clients are at these events and some new client as well and and you know you have you share a bunch of meals with us and get to hang out with us get to know us get to know the process. So that’s another thing I’d really recommend is a live event.

Fernando 23:11
Yeah, I agree 100% I always tell people that that is one of the best ways to to really step up their game you know, get get educated with a podcast and then and then network with existing clients and come meet us. Yeah,

Jason Hartman 23:27
good stuff. Good stuff. Okay. So do you want to switch to another question? Sure. So

Fernando 23:31
all Do you want to talk about fees as well?

Jason Hartman 23:34
Oh, yeah, yeah. fees. So we charge $900,000 up front. No, no refund at all policy. no refunds available.

Fernando 23:44
You’re gonna scare some people, right?

Jason Hartman 23:46
Yeah, yeah, I know. I’m obviously joking around here. No, we don’t charge anything. I mean, it’s our surfaces are free. Okay, now why are they free? Do you think we’re doing this as a charity? Heck no. I’m a capitalist. Okay. You know, what we do is we get we operate a referral network. So we get a referral fee from the local market specialist when you buy a property, but I do want to stress something about that. That’s very important. See, most of the sort of real estate guru models are based on the idea that, you know, they they get you all jazzed up, they sell you, you know, a coaching program for an outrageous price. You know, $27,000, I met one of our clients that, that spent $62,000 on I think Robert Kiyosaki his coaching programs, you know, we we don’t do that. Okay, we’re in the real estate business. Now, what does that mean to you the listener? Well, it means a lot because there’s no disconnect between the real world and what we talk about here on the podcast, and what we talk about About and we do have some educational products that are very inexpensively priced. But you don’t need to buy any of those. Heck, if you want to go to Jason hartman.com, we do have some products there. You know, for a couple hundred bucks, you can get some good educational products. But, you know, there’s no requirement to buy anything from us. Not even real estate. But the difference is, is that what we say here on the podcast, what we say in our home study courses, it has to come true in real life, or we don’t make any money will go out of business. Because we offer properties for sale. We’re an actual real estate company versus the typical guru model, get you all jazzed up by telling you a bunch of unrealistic things that you know, you can you could potentially find the needle in a haystack deal. You could potentially do this in real life. That’s what You know, their promises, but it is so hard and so time consuming, that it’s just not realistic. So, Fernando, you want to hear a I’m want to hear a joke, a bad joke,

Fernando 26:12
go ahead and

Fernando 26:15
say, Yeah, I

Jason Hartman 26:16
should say no. So So here’s my bad joke, okay. And this one is something that is commonly used in the world of multi level marketing or network marketing. Because those deals, we’ve all heard the presentations. They’re always, you know, that sort of too good to be true category, right? And so, so this one is similar to that. And it’s about a guy who dies, and he goes to heaven, and he’s at the pearly gates. And who’s at the pearly gates, I think St. Peter, right. St. Peter’s at the pearly gates, and says to them, well, you are here at the gates of heaven, and you have a choice to make. And he says, Well, what choices that well, the choice is, do you Want to go to heaven and spend eternity here? Or do you want to go to hell? And and the guy who had just passed away says, Well, of course I want to go to heaven. Well, that’s a silly question. And he says, Well, actually, some people decide they’d rather go to hell. Some people think it’s quite fun down there. And he’s and he says, and here’s the thing, no obligation, you can go and try it tonight. And you can go and check it out. And if you don’t like it, just come back and you can spend eternity in heaven. So the guy says, Well, what the heck, I’ll try it. And so they send him down to hell. And the guy is totally impressed. You know, there are beautiful women down there dressed in gorgeous evening gowns. All the guys are dressed in tuxedos. They’re holding champagne flutes drinking Dom Perignon, you know there there’s beautiful buffets with food and there’s dancing and music, and he couldn’t believe it. He thought this is phenomenal. I guess hell isn’t so bad after all. And he goes back up to St. Peter. And he says, You know what? You were right, that I loved it down there. So send me back and he says, Are you sure? You know, once you make the decision, it’s for eternity. And he says, Yeah, I can’t see anything wrong with it. It seems pretty good. Well, he gets back down to hell. And it’s nothing like it was the night before. It’s really awful. And first off, it’s hot, but you know, it’s a dry heat. Like they say about Phoenix, where I live, where I live for not too much longer, right. And he looks around and, and people are wailing and pain and, and, and they’re disheveled and they’re, there’s nothing to eat, nothing to drink, and, and, you know, people are climbing and clamoring and trying to get scarce resources. And it’s just it’s just awful beyond beyond belief. And he pulls someone aside and he says, Hey, what happened? I just made the decision to spend eternity here. I was here last night and it was great. And he says, Oh, you came last night. Well, that was the opportunity meeting. And and Oh yeah, well that’s that’s how it is. And and that’s, that’s basically what these real estate gurus out there are doing. Okay. They’re selling this opportunity, but it’s almost impossible to achieve. Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday.

Fernando 29:46
Yeah, I actually had a client comment on that, that that he’s just wary of the chi osaki type programs where they charge thousands of dollars for a bunch of classes for Day Dreamers.

Jason Hartman 29:58
You know, you could use that money to buy property. I think in some ways, we’re the opposite. We say, you know, don’t spend any money with us buy some properties, okay? Now, look, if you’re a more advanced investor, and you’ve got more money and more resources, and you’ve developed some wealth already, you know, you can join our new thing, the venture Alliance mastermind group, and you know, that’ll cost you a little bit of money. But as you’ll see on our first weekend coming up, and by the way, Gary Pinkerton just joined us as a guest for that weekend. So welcome, Gary. We’re looking forward to seeing you in San Diego. Oh, that’s great. And, and you know, Gary Fernando.

Fernando 30:36
Oh, yeah. I know, Gary. Well, he’s

Jason Hartman 30:37
great. He’s a great guy. It’ll be great to have him there. And that’s something if you want to do some bigger deals and partner with some other people in that group. It’s a unique mastermind group dedicated to to that kind of thing, but you certainly don’t need to do that. You don’t need to spend one penny with us. Get the free education on the podcast. And talk to an investment counselor will refer you to the local market specialists. And what we talked about here when we talk about performers and properties, you know, if we can’t show you properties like that in real life, don’t buy them, you know, and then if you don’t buy them, we’re not going to earn a referral fee. And we’re going to go out of business ultimately, right. So, you know, and we’re in business, we’ve got a thriving business. So obviously, it seems to be working and it’s been working for many years and, and, you know, there there are problems. It’s not perfect by any means. It’s just better than everything else. So, so anyway, good. Good question. Good question. So thank you for asking that. What’s next? Let’s do one more.

Fernando 31:42
Okay, next one. Question about what entities are usually used for real estate income investing.

Jason Hartman 31:51
Okay, so LLC is the limited liability company is the most common vehicle, but you don’t have to use any entity. at all, you can just buy real estate in your own name. And you can protect your assets pretty well by just getting good insurance, liability and real estate is very easy to insure around. There are complicated discussions that we could have on entity formation. The reasons for doing that I’m not a lawyer, I’m not a tax advisor. So there are a lot of complexities to that. We’ve talked about them on prior episodes, I’ve interviewed attorneys on prior episodes and, and tax advisers on prior episodes that have discussed that in detail. One of the great things you can do is go to Jason Hartman calm and just search various keywords, you know, like asset protection would be one of them. And you can find all the occurrences or at least most of them, where I’ve talked about that on prior episodes, so, but the LLC is the most common entity, Fernando, did you want to add something to that without us getting into a very long conversation about about entity You know, there, there’s a lot of complexity there.

Fernando 33:00
Yeah, we could spend a whole episode on that or more. No, I usually point people to one of Mark koehlers book, Mark Kohler is an attorney, a CPA and he’s spoken in

Jason Hartman 33:11
who’s been on the show before.

Fernando 33:13
The show was spoken in our events in the book that I like is called what your CPA isn’t telling you. And you can find this in iTunes or Amazon. You also can find more about mark and his website Mark Kohler com.com.

Jason Hartman 33:31
Yeah, and it could be lawyers are liars. That’s another book he his older book and, and he’s spoken at our events or meet the Masters events several times. So you know, most people listening know him. And yeah, he can, he can offer some good advice on that, too. Yeah,

Fernando 33:45
yeah. And that book just quickly that what your CPA isn’t telling you he describes the different entities that could be formed and how they can be a can be arranged for real estate investments. It’s an interesting book.

Jason Hartman 33:58
Yeah, good, good stuff. Okay, good. Did you want to get maybe one? One more in? We got to wrap up here, but we could do one more.

Fernando 34:05
Yeah. Let’s see.

Fernando 34:09
Yeah, there’s a question from Elliot that I wanted to discuss. And his comment was, it seems you guys really like Memphis right now. But the properties are a bit more expensive than say Birmingham, Alabama, is the quality of the properties reflected in the $30,000 price difference? Ooh,

Jason Hartman 34:31
that’s maybe a good question for Fernando. But I would say yes, it is. I would say in a lot of this, it doesn’t necessarily mean that it’s because of Birmingham or Memphis. It’s not necessarily related to the city itself. But it’s related to whichever local market specialists we happen to be working with in that city. And their focus on what kind of properties they are focusing on. Right. So you could have, you know, a higher or lower end property in any given market. You know, every city pretty much offers a range of properties, right? And that that may be more speaking to the local market specialist and what they like, or what their focus is at the time. And we have local market specialists that we will change them in our relate in our business relationship with them. For example, in Birmingham, we’ve been talking to our local market specialists, they’re about getting some B and A type properties rather than the C and D type properties that they’ve mostly specialized in. And so, you know, it’s just a different kind of investor for each A B or C property class. And what they like, you know, it’s not necessarily the market but I would say yes, that’s the 30, you know, and it’s not really 30 as a standard, but 20 or $30,000, on average, maybe price difference. is reflective of the properties. Fernando, what do you

Fernando 36:02
think? Yeah, so a couple comments of first one we you know, as we, as we upgrade our our software and we’ve been talking about the work that Jason and I have been doing on this, we’re going to come up with a dashboard metric which is likely going to be called it some sort of a barometer that quickly can tell the investor what sort of quadrant this property falls under, and it’s going to slide from income to appreciation in one axis and from class A, B and C on the other axis. What this will tell the investor is if this is a lower end property, maybe a Birmingham property, the the skew is going to be towers, more income, more cash flow for a class C type property, so it’s fall gonna fall in a particular quadrant, which will give you a basic understanding on what sort of investment This is good. investment is different when you go for a lower end property as a class C property as you compare to a class a property in general, when you look at the lower price properties, you know, Birmingham is a good example, Jackson, Mississippi is another example. They have lower prices for the for the homes that’s typical. And rents also are lower. But the projected return on investment is usually higher in many cases, if not the most cases. But what this also means is that the tenant base can be more transient, which turns into that will create more turnovers. What I’ve seen in our what probably should be expected is over an extended period of time. markets like Memphis and Birmingham might perform similarly. Sorry, excuse me. But the lorien power prop properties such as one in Birmingham, the ones he brought Meet him in Jackson might require more babysitting from the investor morning more involvement from the investor. So I tend to think of the lower class see properties in markets that specialize in class see more tired towers, the more experienced investor, a new investor wouldn’t necessarily have the experience or sometimes the patience and the understanding to deal with more issues which should be expected. When you have lower lower rates. Yeah,

Jason Hartman 38:34
I agree. And, you know, for investors look at you can have a good or bad tenant on any property. Okay. You know, there have been bad tenants who have rented mansions from people and, you know, cause problems, okay. But by and large, that you know, as a general rule, and of course, it’s general it’s a stereotype I get it, that if you if you stick with the A and B properties, you’re Going to have less, less attention that you need to pay to those properties, the see and even lower properties. In some cases, they will generally look better on paper than they work out in real life. And that’s something to know. Okay, so yeah, good point. Good point. Fernando. It’s already 39 minutes, we got to wrap up. More questions. Yeah, we do have more questions, and let’s save those for a future episode. So those were great. And I thank you for bringing those to the listeners, Fernando, that was really good. Just do you want to share any any general thoughts before we go just as we wrap up here.

Fernando 39:41
Just one other trend that I’m seeing when I talk to clients again, I’m learning quite a bit quite a bit in this process. But there’s a lot of apprehension to get started to buy the first property in the know Sarah, our other investment counselor has mentioned this in the past that that’s One of the main pieces of advice that she gives to clients is Don’t, don’t wait to get started and buy your first property because the learning for that first property is going to be so much greater and the depth of the learning is going to be much more than you can get from just listening to the podcast and listening to to the other clients really by buying their first properties when you when you when you learn, so don’t overthink the numbers too much. You know, there’s there’s slight differences between one property or another. But if you were picking one of the properties from the market is that we recommend you usually going to be in the right going the right direction with with a property that has a good chance of performing well. So don’t spend too much I spent six months before I got started buying properties, analyzing different properties with a spreadsheet and trying to understand The minute differences between one property tax versus another, you know, how much was paid being paid for insurance for one versus another, and it’s really it wasn’t necessary. I think I lost about six months. You know, I should have started six months before. So don’t wait. Yeah, right. Yeah.

Jason Hartman 41:19
That’s, that’s, that’s a great thing. Fernando, you know, this business of investing in anything in life. It’s always on the job training, if you will, you’re gonna learn the most when you actually do it. When you actually have a property, and you have your money in the game, it brings a new you to the whole thing. Okay. When when you’ve got something at stake. And so I think that’s important. You know, don’t agonize about stuff gets started, you know, the journey of 1000 miles begins with a single step. It is amazing how Time passes so quickly and how you can Grow your investment portfolio so quickly and really, really do some amazing stuff. I’m going to talk here on an upcoming episode about my own experience and in you know, as I have throughout the last 523 episodes, but but more about my own experience and in just this amazing growth you experience you know, I I recently along with one of our clients sold 125 unit apartment complex, and now we’re buying potentially three more properties through that 1031 exchange a marina. Yes, I never thought I would own a marina mobile home and RV park and another larger better apartment complex. And you know, this is how you become a real estate mogul. You know, it all started with the first little crappy one bedroom condo that I bought when I was 20 years old. And you know, diversify. And a whole bunch of other properties. So there’s a lot you can do here. The most important thing is that you get started. So, Fernando, thanks for talking to me about this stuff and bringing these great questions to us today. And listeners, thank you so much for your continued faith on us. Thank you for listening to the show. Go to Jason hartman.com. Leave us a message, check out some of the home study courses the blog, contact us. We’ll be glad to help you no charge as your investment counselor, and we just look forward to growing with you and helping you invest in I wish everyone happy investing. Thanks again for listening.

Fernando 43:38
This show is produced by the Hartman media company All rights reserved for distribution or publication rights and media interviews, please visit www dot Hartman media.com or email media at Hartman media.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate or business professional for individualized advice. opinions of guests are their own. And the host is acting on behalf of Platinum properties, investor network, Inc. exclusively.

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On this Flash Back Friday, originally aired as episode 959 in February 2018, Jason talks about how housing isn’t simply the purchase price but the monthly payments. He continues a client study case with Scott who lives in Washington DC. Scott previously owned retail commercial properties but sold them and shifted into residential real estate. They go into his transition and why he made the change. Then he talks about his experience with 1031 Exchanges.

Jason Hartman 0:00
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is hand picked to help you today in the present, and propel you into the future. Enjoy.

Announcer 0:15
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. Here’s your host Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:05
Welcome listeners from 165 countries worldwide. This is your host Jason Hartman with episode number 959 959. Thank you so much for joining me today as we have yet another client case study. A lot of you met Scott, and maybe Kelly at several of our events. Scott was at meet the masters. I don’t believe Kelly came with him. But they are a young couple that is doing great things with their real estate portfolio. You’re going to hear about it today. They have moved from shopping centers, to single family homes. And I know what some of you might be thinking, why would you do that? Don’t you want to own a bunch of shopping centers and be a bigwig? Maybe not, you know, housing is where it’s at folks. Housing is where tap that is where You should be. I’ve told you all the reasons over the years over the last 14 years I’ve been saying, you know, they can always outsource all the office jobs offshore. They can outsource the manufacturing offshore, they can outsource the retail to the internet. And all of this has a huge impact. But everybody still needs a place to live. It’s a fundamental human need. What are the three fundamental human needs? Food, clothing and love? Happy Valentine’s Day, by the way, everybody? It is Valentine’s Day. No, it’s actually food, clothing and shelter, and food, clothing and shelter. But I will tell you, I was kind of hoping the day here today would fall on a 10th episode show because I have a special Valentine’s Day episode for you. And I guess we will run that is episode number 916. Coming up. Remember every 10th episode, every show that ends in a zero, we run something of general interest in Hey, love is of general interest right to all of humanity. Well, almost, we will run our Valentine’s Day show a little late. But hey, it’s better Nathan lever. I mean, like the never. We’re going to get to our case study today. That’s what we’re going to do. That’s what we’re going to do. But first, I want to tell you a few things. The good old National Association of Realtors, you know them that largest trade group in the world with like 1.4 million members. Yeah, they’re big. They’re big. We’ve had their chief economist on the show before. We’ll have them back again to talk about stuff but they’re out with some new research as they are all the time. today. They just published it nearly two thirds of us housing markets. See home prices hit in all Time high, while housing inventory hits an all time low. And I know what some of you are thinking.

Jason Hartman 4:11
Is it a bubble? Jason? Is it a Bubble Pop? No, it’s not a bubble yet, but it will be eventually. So sit tight. Stay tuned. I’ll let you know when I think it’s a bubble. But hey, what do I know? I don’t even know. Nobody knows. You know, nobody knows. The head of the Federal Reserve doesn’t know, the President of the United States doesn’t know. NAR certainly doesn’t know. JOHN burns doesn’t know Jeff Meyers doesn’t know Jason Hartman doesn’t know. But you know, we can get some clues here and there can’t wait. The question is not what is the price of the home? The question is, compared to what is it an all time high compared to the monthly mortgage payment The home or is it an all time high compared to the price of the home? See there in lies the problem, as you know, because you are a sophisticated smart investor, because you listen to my show, you’d have to be smart and sophisticated to listen to my show. Otherwise, you wouldn’t be able to keep up with the superior information we are. We are sharing here. Okay, so I yeah, I don’t know. I get kind of goofy sometimes, don’t I? So people buy house on a payment, not a price. In fact, I don’t care what the price is. If the payment is low enough. That’s what they’re buying. They’re buying a payment. So it is not at a all time high based on the payment. And then you have to ask, geographically. Where are you talking about two thirds. Two thirds of us housing markets well is that of the Case Shiller 20 or is it all 400 ish housing markets nationwide? And that is the question we need to ask, right? We need to know this stuff because the Case Shiller is heavily loaded. In fact, three fourths of the Case Shiller 20 are cyclical, bubble oriented, crazy markets that I wouldn’t touch with a 10 foot pole. In fact, where do you think that saying came from? Do a lot of people carry around like, in the old days, when someone came up with a 10 foot pole saying, did people carry around 10 foot poles and decide not to touch things? I don’t know. It’s goofy. Funny saying, right. Okay, so consumer satisfaction research. Yeah, that’s boring. Who cares about that? You know, these groups are always doing surveys to say how great they are. Right? I’m not going to share anything with that with you. But this one’s in Also from NAR housing affordability decline from a year ago in December, moving the index down 2.3%. Moving it down 2.3% from a year ago and this is December to December obviously it’s it’s not December anymore as we know, because, hey, there’s a clue. It’s Valentine’s Day. We know that’s not in December don’t wait. So, yeah, housing affordability declining, but still in the linear markets, it’s not far off. housing affordability is still pretty good. And that’s why inventory is so low and the market is booming. In the cyclical markets, though. Man, there’s going to be a bloodbath. Some people are going to get hurt. They’re going to get hurt. I’m telling you, watch out. You know, we’ve got this event coming up in Silicon Valley, March 3, San Jose, hope you’re going to be there and join us for Jason Hartman University. Go to Jason Hartman University did an art calm and One of our clients, Greg, who was at meet the Masters, of course, and many of our other events. He sent me a voxer message this morning and he said, Jason, I will be there on March 3 in Silicon Valley. And I am trying to get some of my California friends to come in here what you have to say. And I just can’t peel them away from thinking now, he didn’t exactly say this. I am I’m using some poetic license. So let me run with it. Because this was the gist of it. I can’t peel them away from the fact that they think they are all brilliant geniuses, because they speculate on a house in a cyclical market, and the price went up. And you know, the old saying, you’ve heard me say it, I don’t know if this is actually an old saying like that 10 foot pole thing, but at least I say this every Everybody’s a genius and a bull market, aren’t they? Everybody’s a genius in a bull market. A rising tide floats all ships. You’ve heard that one right? I didn’t make that one up that everybody’s a genius and bull market. That could be me. I don’t know. I’m not sure. I’m not going to take credit because I’m not sure. I deserve credit. But anyway, you know, if I was Bill Clinton, I would take credit for everything, even though I didn’t do it. If I was Obama went to so I picked on the democrats check. What else can I do today? Okay, yeah, we’re gonna have our client case study. We talked about some NAR stats. Those are interesting course. I look forward to seeing you in Silicon Valley, San Jose, March 3. Jason Hartman calm or Jason Hartman University calm and this is a great event will only have it once this year. I think you will learn the math of real estate you’ll learn how to do the math. In fact, that’s another thing that Greg said to me said, you know, these California people, they just don’t know how to do math. Now, he didn’t mean that broadly. But if they knew how to analyze a real estate deal, they would never invest in these total fluff crazy nutty markets. What goes up? must come down. Hey, that’s an old saying to like that 10 foot pole thing. So yeah, just remember that the higher they fly, the harder they fall. All of these markets will eventually fall, how much longer can they go? Nobody knows for sure. But believe me, they’re not going to go forever. So that’s what you got to know about that. So linear markets, where the conservative, prudent real investors invest. That’s where you want to be. Let’s go to part one. And let’s talk to Scott about how he went on his real estate investing journey that started just 10 years ago. That’s it in 10 short years, just did an exchange exchanging one of his commercial properties for 30 I think 37 No, no, not on the exchange. He bought some others from us before the exchange, and then a bunch more during the 1031 exchange. So it’s good stuff. The most tax favored asset class in America, the most historically proven asset class in the world. And guess what? You can find those those great things at Jason Hartman comm slash properties. Jason hartman.com slash properties. All right, Jason, stop talking. Get to the guest part one plant case study, Scott and Kelly, you’re gonna love this. Here we go.

Jason Hartman 11:42
Hey, I want to bring to you another case study. We have a couple of wonderful clients that volunteered to be on the show. And they’ve got a big story and just a great outlook and attitude on real estate investing and the long background in the income property investing world from Commercial to residential. So we’ll talk about that transition now. It is Scott and Kelly. They live in Washington, DC. And Scott, welcome. How are you? Hey, Jason. I’m excellent. How are you? Yeah, good. Good. It’s good to have you on the show. Thank you for coming on and sharing your story. Give us a little bit of your background, you and your wife and you know, just kind of tell us about that. And then we’ll dive into your story.

Scott 12:22
Yeah, sure. Kelly and I are kind of your typical, hard working, well educated people. We went to graduate school, we got jobs in the corporate world. And then when the real estate market crash came along, we came across an opportunity to buy a portfolio of shopping centers. And so in 2009, we acquired five shopping centers, and tried to shepherd them through the real estate crash. And we were able to do that. And recently we’ve been selling off the shopping centers and converting to a more residential. Mm hmm.

Jason Hartman 12:55
Cool. So Scott, first of all, everybody’s gonna you know, they’re baking. has a question that everyone’s baking task probably is, how did you get the money to acquire all those shopping centers? That’s a pretty good head start, isn’t it? Or no, you know, sometimes these kind of stories can surprise you a bit.

Scott 13:13
We get lucky. This is a person that I had worked for doing their bookkeeping when I was in college, and in contact with them over the years. And when the real estate crash came, this individual was really looking forward to retiring and selling all the property. And suddenly they weren’t able to. And so they were looking at holding a portfolio of shopping centers through another business cycle. And the way it was looking is going to be quite a long one. And so I was just having a conversation with this person and said, you know, if you really want to sell those things and retire, why don’t you sell them to me? And so he did, and he sold Kelly and I the entire portfolio. No money down.

Jason Hartman 13:56
Wow. Oh my gosh, that’s fantastic. What a What an amazing started. So when you say you worked for him, was he in the business of being a landlord? Or was there another business? What do you mean by that?

Scott 14:10
Yeah, he was fully in the business of investment, real estate, okay. And I was just doing his bookkeeping and collecting rents from tenants while I was going to undergrad.

Jason Hartman 14:21
And fantastic, what an amazing story. So here is the secret, then folks, the thing you can take from this is go to work for some big time real estate investor, do the bookkeeping, so you know the numbers. And then when the next recession hits, let’s see if he can buy it. It’s great story. Totally awesome. So these were, you know, retail shopping centers. So interesting, you know, during the Great Recession, were you worried about the retail Apocalypse, as they call it now? Did you see it coming? I was just kind of wondering what was your outlook? What was Kelly’s outlook on that? At the time?

Scott 14:57
Yeah, we were definitely concerned. We had You know, careers that were based on, you know, graduate degrees and all this that we’ve been working on for decades, or about decade and a half. And we had to make the decision to give up on both of those careers and go full time into managing shopping centers. So yes, we were very concerned about all the risks associated with that. But in the end, we found that we didn’t have that much difficulty. I mean, retail is definitely changing. But all neighborhoods need a barber and a beautician and a nail salon and a liquor store and those kinds of things and that kind of neighborhood strip centers that we have, they’ve survived, okay,

Jason Hartman 15:35
right, right, because they don’t have the big box and the other stuff that’s affected by the online, online takeover retail, and you know, I got to tell you, it concerns me, the typical thing that happens in every business is you get whenever you get some big player, they’ll come in and essentially by the market by undercutting it. auto companies do this. You know, Uber has done this. Yeah, I mean, you know, it’s a common practice and but right by the market, even if you have to run at a loss or you know, just very low profits by the market, kill your competitors, and then raise the prices and abuse your customers. And you know, that’s sort of a typical story. So that concerns me very much about, you know, big centralized power like Amazon. Any thoughts on that? Just as as a tangent?

Scott 16:20
Yeah, absolutely. Yeah. These tech companies are able to run at a loss for years and years in a row. And somehow their stock price goes up, and they’re able to generate more funds from investors. And so it really would concern me if I was a grocery store, Amazon was coming in to the grocery market. I would be very concerned because, you know, a local grocery store chain just isn’t able to raise money that way. Yeah.

Jason Hartman 16:47
Right. They don’t have the scale. That’s what sort of perverse about the marketplace and the way the venture capital system works and, and so forth, isn’t it?

Scott 16:54
Oh, absolutely. And you know, it’s scary being a small business person, when you’re going up against corporations. who, you know, have tax advantages? Maybe smaller business just doesn’t have, or the ability to borrow funds at rates are much lower than small business has always been scary. But you kind of hope that being nimble and taking your own talent and really putting it into something full time that you’ll be able to find a way find a niche in the market. And we were able to do that. Yeah,

Jason Hartman 17:22
yeah, good stuff. Okay, good. That’s obviously a tangent. But it does concern me for I mean, for the customers from a customer perspective, the mostly you know, why and when did you get the idea that you should sell the shopping centers, or at least some of them and then buy residential properties by single family homes and tell us about that evolution?

Scott 17:43
Sure. Well, it was never our goal to be full time owners of shopping centers. It’s just an opportunity that was too good to say no to that we decided to take on. Really what we want to do is just have a nice life and not work too hard. And these particular shopping centers took a lot of effort to run. Or the reason for that is they were in parts of town where it’s hard to hire professionals to come and do the management for us. And so we had to do our own property management. And so part of the reason that we’re selling the shopping centers and exchanging them for single family homes, is that we’ll be able to get property management with these portfolios of homes, so that we don’t have to do so much work ourselves. Right, right. Okay. Okay, good.

Jason Hartman 18:27
What did you do? And when did you do it? Well, I guess maybe the first question is, when did you discover I guess you discovered my podcast, you you and Kelly came to a couple of events.

Scott 18:36
Tell us about that. One thing that happens when you don’t have a real estate background that you instantly buy, you know, very expensive portfolio of real estate. realize you don’t know anything about this field you have to learn. So I didn’t really have friends in the real estate field. So I was looking for resources. And podcasts was really something that I could do on my own schedule, and get information about the real estate market. Without having to you know, know any individuals or pay for classwork or anything like that. Just really convenient. Since we bought this portfolio, I started listening to your podcast in 2009. And we were sold on the idea we really liked the idea of turnkey single family, especially as a way to grow our portfolios time went on. And so in 2012, we bought our first property in Memphis, for your group. Now, Kelly was not as excited as I was at the time about it. So I had to convince her so I had to invest with my own money. So I actually use my IRA and purchased a single family home and my IRA, and it’s worked out great.

Jason Hartman 19:41
So this is interesting. So your wife wasn’t excited about it. So she says, Hey, use your own money in your retirement account that you had before we were.

Scott 19:54
If you want to

Jason Hartman 19:56
do it, honey, put your money where your mouth is. Don’t put my money there.

Scott 20:01
There’s, there’s not a lot of money that’s just mine, you know, it’s ours, you know, but and this is, you know, I think a lot of marriages probably work this way. But my my retirement fund is something that I squirreled away on my own. And I really thought I was going to work it out and to prove the point. You know, I went in I bought a house. Yeah. And it worked. Yeah,

Jason Hartman 20:21
yeah. Good stuff. You came to our Memphis one of our Memphis property tours, right? And you bought one property. That’s, that’s it. Just one.

Scott 20:29
Initially. I just bought one. Okay. And then the next year, I think we bought one more. And then the year after that, we bought two more and then the after that, we bought another two more.

Jason Hartman 20:41
Okay. Were those all Memphis by the way? Were you staying in that same order? Amen. Okay, okay, so you just have doubling down in Memphis for a while. And what happened the year after that you were about to say

Scott 20:51
you after that was last year. And so last year we bought 12 in Memphis, we bought 15 and Jackson and we bought for an open Houma city. Okay, cool.

Jason Hartman 21:01
So you’ve got through our group. Now, Scott, what do you have about 36 properties or something like that?

Scott 21:07
3737. Okay, good. And what happened last year, that was the big change of acquiring all these additional properties. They really happened on the commercial side, we saw that interest rates look like they’re starting to go up. And commercial real estate is valued primarily by the cap rate, or the return rate that people can expect when they purchase it. And so when the interest rate goes up, that will deteriorate the value of the shopping center, as far as your ability to sell it. And so we saw interest rates coming up, they’re still low at the time last year. So we decided to sell the shopping center and switch over into residential primarily because residential prices are still a bit low. I think there’s a lot of opportunity to pick up value there. And also it looks like homes are going up in value kind of quickly. Whereas shopping center Going down in value as the interest rate rises. So it’s just a good time to take advantage of the difference between the two markets.

Jason Hartman 22:08
I couldn’t agree with you more, by the way, I think that’s very insightful that the residential market just has a much better future than retail properties do. We talked about the retail Apocalypse, obviously, you know, most people understand what’s going on there. But at the end of the day, you know, Scott, like I will say, everybody needs a place to live. And that is just not going to change. Right?

Scott 22:32
Absolutely. And, you know, the markets we’re buying in a robust markets there, the population is stable and growing, and the values are stable and growing. It’s not like we’re just buying residential anyway. We’re buying in good markets, right. You know, one of the other benefits Jason is with our shopping centers. They’re all located in one geographic area. But with this residential, we’re able to diversify across three different markets,

Jason Hartman 22:56
right. So you’ve got you’ve reduced your risk by diversifying Like that, that’s one of the other good reasons it’s good to not have, you know, like one lump of an expensive property or, or anything like that. Because you can definitely diversify. geographically. All real estate is local, as I like to say. Certainly not my saying that’s an old saying, and but, but Yeah, it does. It does allow you to do that. But you know, Scott, I mean, you and Kelly, as you were thinking of doing a 1031 exchange on, you know, shopping centers, and you were also, you know, just buying real estate before you did the first exchange. You could have done anything. I mean, you could have adopted numerous different strategies you live in Washington, DC, that’s obviously an expensive cyclical market. Why not just invest right around the corner from where you live?

Scott 23:50
Well, you know, we try to invest with the investment makes sense. And so in the case of the properties that we acquired from you guys, we were able to make sure that we get a nice Return, that they’re in good solid markets where we know will get that return over a long period of time. And we have property management in place, we don’t actually have to do the work ourselves to run the property. Right.

Jason Hartman 24:12
So let’s talk a little bit about property management with the shopping centers. You did your own management By the way, what do you still own in terms of retail properties? And what did you sell? Did you only sell one of the centers or two of them?

Scott 24:25
We sold three of them last year we sold one in years gone by so we’re just down to one less shopping center. Okay, got it. Got it.

Jason Hartman 24:32
Yeah. And by the way, isn’t the 1031 tax deferred exchange? Just a beautiful thing?

Scott 24:38
It is so great. Yeah, it’s gonna do so much good for us. Having done this exchange last year. I’m just thrilled. Yeah, good, good stuff. You don’t even realize some of these benefits until you do it yourself. Yeah, the benefits for our depreciation are just amazing. And I did last year, if I were to do it in 2018, it would be even better.

Jason Hartman 24:58
You mean because you got to Restart the clock on your depreciation and plus the residential properties have a shorter depreciation schedule, it’s about 25% shorter, which means you get more tax benefit more quickly. Right?

Scott 25:11
Right. And the life of my investment is probably not going to be 40 years long. So in the case of a commercial depreciation schedule that almost certainly never get to the end of it. But with the residential, I’ll be able to get a lot more capture a lot more depreciate, right, right?

Jason Hartman 25:27
If there’s a couple of newbies listening to the real estate game, depreciation, makes income property the most tax favored asset class in America. It is the most wonderful benefit and it’s such an oxymoron, that you can have appreciation and make money on that and you can have depreciation and save a ton of money on that at the same time. It’s it’s, it’s such a great, great asset class. It really is. You did that exchange, you’ve shorten your depreciation schedule. Before we talk about property managers. Before we started this, this recording for the show, Scott, you were telling me about how your exchange went. And, you know, just sharing a couple stories about working with our network. I thought that was pretty interesting. Did you want to share that with the listeners?

Scott 26:13
Well, luckily, when you’re selling commercial real estate, the timeline for selling a property is quite long. So we were under contract and still had 90 days to go before we got to the actual closing of the commercial property. And so I had a few extra days to do some property tour. So I got in contact with Sarah, my investment coordinator over there. And we went and visited our I went and visited a few markets and got to know property managers got to see their product and I was pretty sure I knew which markets I was going into on the closing day. On the closing day, I had 45 days to identify my properties. And within a week, I’d identified the properties in Oklahoma City and in Jackson, Mississippi, but I still had quite a bit Capital leftover that I need to allocate. And I was planning on allocating that to a certain market and the vendor, the provider of the homes, actually went through bankruptcy and the bankruptcy was announced in the newspaper, just before I signed my sales documents to purchase that portfolio. And so I spoke to my attorney and they said, well, being a 1031, exchange, you can’t be guaranteed that you’re going to be able to buy these in case there’s some kind of action in the foreclosure court. And so I actually had to back off of a rather large investment, just a couple weeks into my selection process. Right. I found a new market and I was all set to reinvest with this other company, other provider this time in Memphis,

Jason Hartman 27:46
right another one of our local market specialist.

Scott 27:48
Yeah, I had lined up another rather large portfolio, and I was getting ready to sign to purchase these. And I showed it to the bank I was borrowing money from and they said They didn’t want to finance any new home purchases. So they never said that to me back when they’re giving me the commitment, the loan commitment. But when it came time to identify houses for these portfolios, the financing company I was working with actually didn’t want to do the deal if they’re brand new homes, construction. And so once again, I had taken a time to identify these homes and then the last minute, I had to abandon my plans. Wow.

Jason Hartman 28:27
Yeah. So were you were you were you worried? That can’t really describe how worried I was I was very worried. I’d like to say that I aged about two years and that 45 days, okay, so let me just explain this to the listeners. So this is because, you know, you have these tight deadlines, to complete 1031 tax deferred exchanges. And if you don’t, you know, for example, like you could lose some of the properties you were buying and not be able to acquire them or identify them and you would just have to pay tax on the the amount of money Didn’t reinvest. Okay. So it’s not like the whole thing was off. But anything outside of the exchange is going to be taxable. So you want it to not have any tax liability, and transfer all of the game from the sale of the shopping center into the new single family homes you were buying. And this is the problem you’re describing. Go ahead.

Scott 29:21
Yeah, so I, you know, especially when you’re dealing with large sums of money, and the tax rate comes out to something like 23.8% it can be really scary. So I was looking at about 10 more days left in my identification period. And I was calling Sarah and I was freaking out. And she did some good digging for me and put me in touch with a provider in Memphis. And I was able to allocate the final 800,000 in our purchase with just about seven days left in our selection period. And so that worked out great. That provider basically saved me they gave me All their inventory for the next two months. Just let me buy it all at once. Yeah, lo and behold, three months later, we closed on all that property all in one day.

Jason Hartman 30:08
Right, right. Yeah. Yeah, you know, you’re reminding me of a story, not this part, specifically, but we had some clients a few years back and we talked about their story on the show, they sold a another single family home that they’d inherited, it was in California, it was about two and a half million dollars. And then they purchased I think 36 or 38 homes through us on the exchange, you know, income properties, obviously, I don’t shouldn’t call them homes, their investment properties, but but single family homes, they were pretty amazed that we were able to help them pull that off. That’s all there’s a lot of properties to acquire in one swoop like that really quickly, especially in a market where, you know, the market is obviously tight, right. And things are selling like hotcakes. I mean, there’s very little inventory so that can be It really worrisome I’ve done a few exchanges over the past few years. And personally, even though I’m in the business of doing this, I had the same problem. You know, I was really worried that I couldn’t complete the exchange and I don’t want to get stuck paying the tax on the capital gains from the, the relinquish properties, you know, you know, good stuff. It can be serious.

Scott 31:19
Yeah. But you know, I don’t think this opportunity really existed before companies like Platinum properties were around, right. If I were to try to go out and use the MLS to purchase 31 single family homes, some nightmare and try to negotiate on all 31 and try to get them all inspected and close. It would never happen. It’s completely impossible. Yeah. And especially with the financing I used, I had to be able to close on at least half a million dollars at once at the same closing on the same day in order for them to do the financing. I tried to do that with you know, 31 different single family home.

Jason Hartman 31:56
Oh god sellers, you would have never happened yeah, that’s that’s a And really amazing how you share that story. This will be continued on the next episode. Thank you for listening and happy investing. Hey, I hope you’ll join me in San Jose on March 3, as we host, our Jason Hartman University event. Now this event is for the real practical hands on interactive education on income property investing, where you will learn how to actually do the math, how to evaluate the deals, we will go in depth into this subject of how to analyze a real estate deal. And once we do that, we’ll talk about how to build a portfolio, how to properly structure a portfolio, how to diversify it, how to sequence your mortgage financing, and it is a fun event. We do some gamification. You’ll meet a lot of people because you’ll be working with the people in the class, and it’s a one day event. You can check it out at Jason Hartman University. com. Jason Hartman you University com. We’ve been doing this event for about three or four years, and people absolutely love it. We’ve done it in San Diego and Salt Lake City. Now we’re doing it in San Jose. We’ve done it other places as well. I just can’t remember where offhand, but it’s a great event, and we try to do it about once a year. I asked her we did it in Oklahoma City. This time, we will be in San Jose Silicon Valley. On March 3. Jason Hartman university.com Jason Hartman University com. Get your tickets today, and we’ll look forward to seeing you in Silicon Valley on March 3. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own and if you require specific needs legal or tax advice or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

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On this Flash Back Friday comes from, originally published in October 2017 as episode 892, Jason hosts client, Clay Slocum. Clay currently has four properties in his real estate portfolio. He explains that he worked closely with investment counselor Oscar before buying his first property. When he realized he his initial investment could grow exponentially he bought the property. He gives listeners insights on the power of compounding interest, asset protection, and the Memphis market.

Jason Hartman 0:00
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is hand picked to help you today in the present and propel you into the future. Enjoy. This show is produced by the Hartman media company. For more information and links to all our great podcasts visit Hartman media.com.

Announcer 0:27
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:17
Welcome to the creating wealth show, Episode 892. This is your host, Jason Hartman, thank you so much for joining me today. It’s been absolutely crazy. This Las Vegas shooting this terrible, disgusting tragedy has it has just it’s turned my life upside down in the past few days, but I have absolutely nothing to complain about compared to the victims and the people who witnessed it closely. I did witness the event. We published an extra Episode 891 yesterday on an off day, Tuesday, or we don’t normally publish episodes that told of my firsthand eyewitness account of the shooting and then one of my friends who was in lockdown how The Mandalay Bay hotel. I was of course at the top of the Mandalay Bay Hotel 25 storeys above the shooter. And recounted that story yesterday, but it’s just just awful. I mean, I can’t believe this and I just can’t wait to learn about this psychopaths motivation. It’s just unbelievable. It really is. I know we’re all still in shock the whole world’s in shock about this. Or at least all peace loving decent people are not Yeah, as you know, ISIS claimed responsibility right away. And you know, who knows what’s true anymore? The media person some of the media denies that some of the media is just not talking about it. I don’t know. Nobody really knows yet. But it’s absolutely a crazy thing. Today I was interviewed on inside edition, or was it extra? I can’t remember which one I got a couple media interviews. I know it was on TV in San Diego. They interviewed me via Skype yesterday. You know, you you Get a video of that and publish it. And it’s it’s like, wow, the whole whole world. I’ve given a copy of it to the FBI they asked for it. I mean, the FBI actually messaged me on Facebook. It’s crazy and never thought that would happen. I never thought I’d witnessed such a terrible tragedy like that, but at least I did not witness it close up. I was a pie. I saw the concert below. You know, you heard the whole story yesterday, if you listen to that episode, where we just talked about that. So let’s go back to real estate investing and talk about that. You know, this is all weighs heavy on everybody’s mind that I will never forget that night.

Jason Hartman 3:40
It changed me forever. I’m sure I don’t even know how yet but it’s, it’s unbelievable. It really is. It’s just tragic. Moving on. We have got a client case study today that was of course recorded before the shooting and then basically the terrorist attack that happened and that is our client place. Welcome. So So I so appreciate him coming on the show. And I appreciate all of you clients coming on the show to talk about your story and in definitely your unique insights about real estate investing, you know, play, we’ll talk about some things that have not occurred to me. I’ve not heard them before, really wonderful, original thoughts about how to evaluate one’s investments, consider one’s investments, just really great stuff. So we love it when clients come on the show. If you would like to be on the show, we’d love to have you. If you have something to contribute, just reach out through the Jason Hartman. com website. Or if you’re working with one of our wonderful investment counselors, reach out to them and they’ll get you connected. And we’ll we’ll have you on the show to share your story and your real estate investing goals or just your questions. You know, if you just have questions for me, I’d be happy to answer them on air as well. And by the way, we’ve got a whole bunch more questions. From the last three contests for the Amazon echoes and, and the Apple AirPods that we gave away, and you really had some very thoughtful questions and comments. So we will get to those over the course of the next several episodes. You know, we just got a lot to cover. We’ve got so many great episodes coming up for you that I’ve been recording episodes just like crazy the past few weeks. I interviewed Dan Burris today a really interesting futurist, who’s developed basically that the software that Zillow uses, kind of underlying their system that he licensed that and he developed several great real estate apps and it’s just a futurist in general, we’re talking to about having him come to meet the Masters in La Jolla, which by the way 96 tickets sold so far for that event, the most ever this early. So thank you to all of those of you who purchase tickets, and if you haven’t purchased your tickets, get in on the early bird pricing you know the price does end escalate, as we get closer to the event and is not just based on time, but also based on ticket sales. So it’s like an airline folks, the sooner you buy your tickets, the better. Okay, so get your tickets at Jason hartman.com. Click on the events section and do that. So we’ll get to a lot of those questions. We’ve got a really interesting interview coming up next week for you, where we interview a new lender in our network who has some really interesting financing programs. If you’re already working with one of our investment counselors, of course, they can connect you with her, but I did a really insightful interview with her. And we should be publishing that one next week. We’ve just got a whole bunch of interviews I can’t ever remember all of them but if it’s like a blur, all of the the interviews I’ve been recording, we’ve had some great guests recently, so stay tuned for that. I don’t mean to talk to you all about the future and what’s to come. Because today we have a great show with with our client clay on a case study as well. Do Get your tickets for the meet the Masters event. We look forward to seeing you there also, I also want to give a shout out to the new property tracker system. If you’re if you haven’t been to real estate tools calm lately and checked out the the apps for iPads and iPhones and the web based app property tracker that has been totally upgraded. Take a look at that really some great changes that Fernando and and Zach and and Michelle and that whole team did to work on property tracker and really upgraded and take it to the next level. I think you’ll love it. So check that out as well. And you can also find that at the front page of Jason Hartman calm But without further ado, let’s get to our client case study with clay Slocum. Here we go.

Jason Hartman 7:55
It’s my pleasure to welcome a another client to the show. We always love playing k studies we get great feedback on them. And if you’re interested in coming on the show, just reach out to your investment counselor and we would love to hear from you and possibly feature you on the podcast. So again, today we’re going to do another client case study with our client clay Slocum play. Welcome. How are you? I’m doing pretty good yourself. Good. Good. It’s good to have you on you are a 32 year old millennial. And we’re going to talk about some millennial stuff when it relates to as it relates to real estate investing in clay. Where are you located?

Clay Slocum 8:31
I am in Northern California.

Jason Hartman 8:33
Okay, great. The where we’re like more specifically than that

Clay Slocum 8:38
up in the Chico California area.

Jason Hartman 8:40
Okay, fantastic. So you you are not in the Socialist Republic of San Francisco. And, and you are not paying $8,000 per month to rent a closet either. So good for you. Yeah, I think these high priced markets are just crazy. I gotta I gotta A message from one of our other clients today who lives in Los Angeles and is a wealthy wealthy client, by the way, a celebrity client whose name I will not mention, but he and his wife been buying properties from us and he was just commenting how absolutely nuts. The Los Angeles market is. I mean, these markets are just Gosh, I mean, they are bubbles. I don’t know when they will burst but they are bubbles for sure. I mean, it’s just it’s just absolutely crazy. plate. You want to talk about a bunch of things today. One is the power of compounding for millennials. I think that’s super important. It’s a great message for people at any age to hear. And then you know, we’ll talk about some other stuff too. So go ahead and dive in. Where do you want to start?

Clay Slocum 9:44
Oh, well, I guess I’d really like to start with talking about compound interest. You know being being a millennial and potentially having you know, the the years ahead to to work the magic on these investments on the investment properties, that number can can do some real magic for you. And so it was something that I, myself actually kind of had to play around with and in order to discover the true power, and I’ve been honestly trying to explain it to my friends ever since, but it definitely has its power to make your growth just exponentially fly up at a certain point.

Jason Hartman 10:29
Yeah, no question about it. And, you know, I know you mentioned you had some spreadsheets and things like that. So feel free to share any numbers or figures you aren’t with us. But I will tell you clay, you are absolutely right. Einstein called compound interest, the eighth wonder of the world. And it is truly amazing. How you know, as I always say, most people in life are hurt by inflation. They’re hurt by government spending their hurt by time and as real estate investors when we do a right or All these things are to our benefit. You know, we watch the news and we look at you know, we hear a story about government waste, and, you know, government spending and, you know, that’s actually beneficial to us as real estate investors. You know, time passing by most people would rather not have time passed by they’d rather go back to the good old days and in as investors we put all these things father time, Mother Nature, even when it comes to natural disasters, this is all actually beneficial to us. Oddly, so, yeah, that’s that’s great compound interest. Very, very powerful thing.

Clay Slocum 11:35
Yeah, yeah. No, I mean, looking at some of the numbers that I ran, you know, I’m looking, I just ran this a few minutes ago, so I can talk to it. But if you were to put down if you were going to get $100,000, you know, invested into into your properties and say you were able to achieve something like a 32% ROI. You know, in About 18 years that gets you all the way up to 14 million, which is, is amazing. It’s great.

Jason Hartman 12:06
Yeah, but let’s be a lot more conservative than that. Now, many income properties, with All Things Considered all of the different elements of return on investment of ROI can certainly produce 32% annually. But like I always say, even if it’s only half as good, right? It’s still pretty amazing. It really is and, and with leverage, you can vastly outperform inflation. So yeah, it’s true, truly amazing. Isn’t it? powerful tool.

Clay Slocum 12:40
I went back and checked my own, you know, spreadsheets and everything and ran the numbers myself after listening to one of your podcasts. It was I forget the gentleman’s name, but he’s the submarine Captain or Gary Pinkerton?

Jason Hartman 12:53
Oh, yeah.

Clay Slocum 12:55
Yeah. And he was talking about the the leverage factor of the appreciation and just how that that can dominate, especially if you can find yourself in a consistently appreciating area or, you know, heck anyone know, one of the hybrid markets and like Phoenix perhaps or and ride it up even higher that that could really drive drive some things. But now I do completely agree with you that it’s pretty safe to just stay with you know, your cash on cash and you and your principal pay down those are those are good numbers in in and of themselves.

Jason Hartman 13:30
Yeah, they definitely are. I mean, you know when you can get 10 or 12% cash on cash, and you know, used to be better than that, but it will those numbers will improve over the years as we see rents go up but of course, rents always lag appreciation. We always say don’t don’t count on the appreciation. It’s just the icing on the cake, but boy, it sure is a nice treat when you get it and sometimes you get it in spades. I mean, it’s just phenomenal. Really is really is so good stuff. Good stuff. Yeah,

Clay Slocum 14:02
I pulled up historical data on that actually I went back to Fannie I think Fannie Mae’s website had had it printed but I went back since I think they had a record it up to last World War Two, maybe even. And, and they just had by decade, you know, home values. And I plotted it all out how just for the audience, I’m an engineer, and I’m also a licensed real estate agent. And so I love the numbers. I’m in the numbers all the time. But regardless, when I use engineer are you I am I’m actually a pavement engineer, which is in the civil engineering realm. Formerly a geotechnical engineer, which is why I think Oliver and I get along so well. He’s a former geologist, sometimes we we nerd out on that topic.

Jason Hartman 14:50
And then in Oliver is your investment counselor with our company, so yeah, it’s good. We have clay. We have so many engineers clients, it just boggles my mind how many of our clients are engineers, and I always used to say, like, when I was in traditional real estate for many years before I got into the investment only side of the business, the most difficult clients to work with were engineers. Because they were just they were, it was very hard for them to make a decision. And, and but now, I love engineers, you know, they’re, they’re, there are our best clients because our approach is so analytical. Our approach to investing is really, you know, it’s just very nice to be able to deal with things on a very sort of rational analytical basis. But I tell you, the one thing about this is that when you invest in single family homes, the most historically proven asset class in the entire world, rather than apartment buildings, or mobile home parks or office buildings or retail centers around You the other types of real estate outside of the single family home realm, you’re dealing with people that see here’s the power okay? You can buy a property with an analytical mind you buy a single family home with an analytical mind you buy it like an investor based on my 10 commandments of successful investing and all the other stuff we teach, but then when you sell it someday, you can sell it to a non analytical person in emotional person who, who will pay you a premium for emotions, okay? You know, I call it the emotionality premium. And and that’s, that’s just a great thing. You know, when you sell, you can sell to either an investor or a regular traditional homebuyer. And when you buy you buy like an investor. So it’s great. All the other types of real estate all the other classes, you buy it hopefully as an investor mind, and you sell it to an investor mind. So you don’t get any emotional. premium. Do you know what I mean by that? Does that make sense?

Clay Slocum 17:02
Oh, you know, I just renewed my license. And so I completely agree. That’s why real estate agents use the comparable sales approach whereas, you know, with multiplexes and everything else like that they like cap rates, and they like the income approach or the cost approach. Yeah, but with comps that, you know, we in order to use comparable properties that that’s how you can account for the human element there. I think.

Jason Hartman 17:30
It really is amazing. Okay, go ahead. Tell us more about your analysis and the other stuff you wanted to talk about.

Clay Slocum 17:37
Oh, yeah. So I mean, I did track the the the median house prices across the United States and it definitely is, it’s asymptotically approaching, it’s actually hovering around 5%. I think it went 464465 something like that, over the period, but I think that’s a pretty good estimate or I’d like to think that that’s going to be a good estimate to go with and, you know if you’re if you’re getting emotional, oh, sorry. Yeah, no, that’s national.

Jason Hartman 18:08
Okay. So that’s a national average. And what time period I know you said Fannie Mae went back even to like World War Two, I think you said, but like, what, what time period are you talking about?

Clay Slocum 18:20
I’m

Jason Hartman 18:22
gonna explain how nerdy I am. I actually did it by a 30 year period, 20 year period, 10 year period, and then a running aggregate period. And they all started so tell me where you started and stopped though, stop and start because I just saw this today. One of my clients, our clients tagged me on Facebook, and someone else had posted this, that they had just read an article that if you wait, the cost of waiting to buy a home in Nashville, Tennessee, okay, Nashville’s not one of our markets always been a little too expensive. So we’ve never been a to recommend Nashville, unfortunately, but we do a lot in Memphis and I think play you own in Memphis as well. And if you wait a year in Nashville, it’ll cost you $32,000. That’s, that’s what the article said. So interesting. It’s a $32,000 per year cost for not making a decision. That was pretty interesting. If you’re in Los Angeles, it’s even more. So that’s why it really matters. see a lot of those surveys, like if you’re looking at Fannie Mae, for example, the last data that they’re posting might be from a couple years ago. I don’t know. That’s why I’m curious as to when you started and stopped, because it makes a pretty big difference if you include the last few years,

Clay Slocum 19:40
right? Yes, yes. No, it does. I don’t know exactly when they stopped it was it was stored data and so I would have to go back and check that but I did like that it was kind of it. The curve was asymptotically, approaching about 5%.

Clay Slocum 19:56
But you know, when when you put that in

Clay Slocum 20:00
Well, I think going back what I was, what I was getting at is if you know if you put in the hundred thousand dollars to start and if you can, you know, if you do get that 32% return, you know, the power of compound interest is so, so big and I think I said at 18 years, you’d be about $14 million. But all it takes is two more periods for you to get back up to about $24 million. And so two periods is $10 million. And that’s, that’s the that’s the numbers. I like to tell my my friends when I’m trying to explain what I’m doing and also see if they have interest because, you know, it’s easy for them to say well see how it goes for you. And you know, oh, maybe it maybe after you know, maybe we can do it after we buy another car or we remodel this part of the house and I just kind of tell them like you know, it pays to do it now. It’s not that I’m not turning this A $20,000 down payment into, you know, into 22 or $23,000. It’s, you know, on a 20% return, it’s the turning a million dollars into $1.2 million or turning turning $10 million into $12 million. Okay, so when you said $10 million per period How long’s a period? What do you mean by that? Oh, a year, if you get a 32% over a single year and turn. So if you take 14 million and then multiply it by, you know, 132%, then and then you essentially do that twice. So two years in a row, you can get that 32% right, then yeah, you get that okay, but

Jason Hartman 21:40
But what did you What did you start with to get to 14 million and how long did you wait, what was the compounding period to get to that? Oh, it was the starting

Clay Slocum 21:49
amount. Gotcha. So 100

Jason Hartman 21:52
were Yeah, yeah. Okay, so $100,000 invested or $100,000 property because we’re throwing around some things numbers here, I want to just make sure we’re clear, you know, compound, the reason Einstein said, compound interest is the eighth wonder of the world is because when it compounds, you keep working with a bigger tool with a bigger war chest. And that war chest gets so big that, you know, once you get to the $14 million number, increasing that by $10 million isn’t I mean, it’s hard, and it takes time, but it’s not incredibly difficult. Like it might sound I mean, I know we’re throwing some huge numbers around. So I almost want to rein that in. And I want to, I want to I know you didn’t do the math for this, but I want to really look at I want to say to the listeners look, even if you got 12% annually or 10% annually, I mean, it’s truly amazing. It’s phenomenal. What you can do in a relatively short time. I mean, I just cannot believe how quickly Life has passed. And the older any of you get, you know, if you’re 30 4050 years old, six years old and older, you know, you just know you. It’s like you remember 20 years ago, like it was yesterday. I mean, every year passes so much faster, you know, from our perception of it does. And it’s just amazing. Like, there’s an old saying, everybody overestimate what they can do in a year. And they underestimate what they can do in five years. You know, and that’s so true. Because the compounding, you know, in a year, you don’t get much compounding can’t go very far. But in three years and four years and five years, you’re starting to see some real compounding going on if you just stay the course. So so go ahead with your thoughts on that clay I interrupted you.

Clay Slocum 23:54
Oh, yeah, no, that was a $100,000 is you’re in investment that’s not a $100,000 property, that’s 100,000, which might be four properties, you know, okay,

Jason Hartman 24:07
so besides thousand dollars each, you know, kinda

Clay Slocum 24:11
and, but if you were to take that out that’s, you know, 18 years get you to 14 million which, you know, maybe it’s a lot easier to think about it as far as just, you know, taking taking that hundred thousand dollars and you know a 20% return on that gets you $120,000 that’s 20,000 you know, $20,000 is a pretty good pretty good money especially to be making passively of sorts, no question about it and like

Jason Hartman 24:40
the iceberg, a lot of this return on investment sits under the water and you don’t notice it, you can’t really see it until later, you know, you wait a few years, and then you do my reply to your diet plan or you sell the properties and you contend 31 exchange them. But if you want to Take the money out, you can do a new vehicle that I’m looking at and I’ll have a guest on to talk about this in the future called a deferred sales trust. deferred sales trust a vehicle I’ve been looking at if you if you want to essentially cash out, okay? And and maybe you don’t want to buy another property now I don’t think that’s the best plan. But it’s a way you can defer gains and extract the wealth from your real estate portfolio slowly and just pay taxes and little dribs and drabs. So it won’t be such a hard hit. So there’s there’s a lot of structure opportunities available and things like that. So yeah, it’s play. Isn’t it? Amazing? You know, when you really look at these, the numbers and the compounding effect, it’s just incredible, isn’t it?

Clay Slocum 25:45
Oh, yeah, it definitely. And that’s why I really am trying to, you know, show all my friends. I have a friend who drives a forklift and I was asking him, you know, how long do you think it would take you to save up the downpayment He said, You know, I probably do that in about 18 months. And so, you know, I actually ran through with him, I said, Okay, if you can take $25,000 and, and put that into a house, and then you get, let’s, let’s just assume conservatively about 24%. And I just walked him through every single year multiplying it by, you know, 1.2, which is 20% increase, and his eyes kept getting wider and wider, and he kind of walked away. And at one point, he looked at me because he’s a high school friend of mine, and he looked at me and he said, why didn’t they teach us this in school? And we just kind of laughed,

Jason Hartman 26:41
because they, they don’t want you to know this, you know, they don’t want you to know this stuff. You know, it’s, it’s an amazing thing. And so you just keep multiplying it by 1.2. And then you take that number and multiply that times 1.2 and you keep doing that over and over again, is truly amazing. You know, we’ve all heard the thing about how you can Take a penny, and double it every day for 30 days, and you have, I think, like $14 million at the end of the month, you know? You know, it really is it really is shocking. And I just want everybody to be careful. If you go, you know, Google compounding calculator or actually don’t Google it, because Google is evil. Dang it, you bring it, you can bring it. Yeah, you heard me say that before you can bring it but you can do even better than bringing it, you can DuckDuckGo it. I think everybody should switch their search engine to DuckDuckGo that does not keep any logs on your searches. So that’s the better thing DuckDuckGo it’s a search engine. And it’s pretty good. I’ve been using it lately. And I like it. It’s good. Yeah. Really, really produces some good results. And so you can use that. Okay. Compounding is the eighth wonder of the world. We talked about that. Tell us about your properties. So how many properties Do you have now playing

Clay Slocum 27:58
I now have I have three and then I also have, well actually, I guess four. So I have three active ones. And then I also pulled off one of the properties, you’re buying it through my self directed 401k. So that was, that was a lot of paperwork. I will I will admit a lot of paperwork. But I was tickled when i when i got it to come through and so I have that and then I guess my and then my, to my wife’s 401k we also have one locally here in California.

Jason Hartman 28:35
Good stuff, good stuff. Okay, good. So congratulations on that. Keep up the good work. What else should we talk about? You want to talk about your experience with any of those properties or anything or Yeah, do you want to talk about working with our investment counselor or, or some of the other questions that we discussed before we started

Clay Slocum 28:53
definitely Yeah, no, I think you know, the, to get some other people who might be on the fence out there. It took me a while to, to buy into the concept of buying out of state. And that’s really one of the things that I really attribute to you guys, you know, you all the podcast and then working with all over extensively in the beginning just kind of working through that and how the numbers worked and the comfort level of it. But you know, one of the things that I think Oliver did the best for me is after talking extensively with him, I think he might have paired me up with you know, like almost like a match com like he paired me up with the perfect local market specialist to fit my, my personality and my my investment philosophy. And so I kind of attributed to him but I’m very, very happy with the way the transactions go and, and the way the interactions kind of all fluidly occur with you know, with me and all of her and the local market specialist and just you know, It, it really has been a pretty seamless process, which I didn’t necessarily anticipate, but I’m thrilled that it has worked out that way. So

Jason Hartman 30:12
glad to hear it. It’s excellent. Yes. Good stuff. Yeah. Okay, good. No, you you wanted to talk about also some legal questions and you have a bunch of things here that you sent me on my appointment request. What else? Just take it wherever you want.

Clay Slocum 30:28
Oh, I have lots of questions. Um, I think, let me let me finish up on on the Memphis market. I did do an analysis that that all of her was was thinking would be beneficial for some people to have because I ended up running the numbers. I was a little bit concerned. I mean, out here in the Socialist Republic of California, I see a bubble already occurring again. I and you know, I see what’s real what is happening in the Bay Area. There’s another bubble going on. So I’m I’m in fear that maybe there’s a correction coming. But I had to go back and I, you know, it’s not perfect data but Zillow Does, does have a, a list of essentially the median housing price. And they have it published for Memphis. And so I went back into that, and I was able to kind of plot the entire, you know, January 2008, all the way through their anticipated January 2018 median housing prices. And so I actually plotted you know, the the depreciation that occurred during the during the bubble, you know, during the burst of the bubble, and then kind of the tumultuous news that occurred for the next few years followed by the rise that we’ve seen in the last couple few years. And then I put all those you know, different depreciation and appreciation numbers into you know, my performer and I did an analysis I needed to see what was going to make sense because The thing I had to get over was not being the, you know, analysis of proud, you know, paralysis of analysis. Maybe I should put my money in, you know, in a bank account until the bubble burst guy, you know? Yeah, good luck with that

Jason Hartman 32:15
idea. I’ve seen many people try it over the decades, and this is where I even agree with the stock market people I hate to say, but market timing does not work. Okay. You know, you can you can sort of nip at it around the edges. I’ll admit that, that, you know, of course, you want to be smart. And of course, there are some things to consider when it comes to market timing, but the pure market timers, they just never end up

Clay Slocum 32:44
as good as the people who just get their money in the market and get it working for them. And that’s what actually penciled out. I was I was a little bit surprised to find this, but essentially, I modeled four scenarios. One of them was the You know, the investor who wasn’t wasn’t decided they wanted to keep their money in the bank. And they wrote out the whole, you know, downturn and then the tomato business and invested at the exact right moment, you know, at the low in which occurred in January 2016. So I modeled what that, you know, what would that would look like followed by in January

Jason Hartman 33:21
2016 is not the low. I mean, you know,

Clay Slocum 33:24
if you look at the, if you actually look at the Memphis market, there was January 2016 was lower than January 2015.

Jason Hartman 33:35
And so, there was some volatility for some reason in the market right there. And so, you know, what I attribute that to, I bet it was the hedge funds and the private equity groups that were beating up the market. So, that’s a small anomaly. But I think to do that, right, you’d really have to go back to like, 2009 2010 you know, to look at a study like that, but but go ahead,

Clay Slocum 33:57
tell us what you did. Yeah, no, no, no, there was definite depreciation for for the first two, three years, and then it was kind of flat a little gain. And then 2016 was was the low again. But essentially, the way that it penciled out is, if you were to invest, you know, let’s take $100,000 investment again, if you were to take $100,000 and get a single year’s return based on, you know, some of the performances and then go through the exact downturn that occurred based on that median housing price. By the time that you know that that person that stash their cash in the bank, you know, making pretty much nothing, got their money involved. After the volatility in 2016 ish. You know, everything had already come back up and the person that had gotten just a single years of single year of a performance pulled ahead, and so that was the One of the things that really helped me feel like, you know, if I can’t time this, and you know, if I, if I don’t want to look at my crystal ball, then hey, you know what this person not only did pretty well, but they, you know, there’s a chance that they came out ahead of the person who was kind of waiting for the dust to settle.

Jason Hartman 35:18
Yeah, then so there’s so play, there’s that old saying, We’ve all heard it, you know, keep your powder dry. Right? We’ve all heard that saying, and there’s some validity to that in some areas of life. But the problem of market timing is that the human mind has this bias, that it does not see the cost of waiting. Nobody really interprets that opportunity cost of waiting very well. Our minds just don’t do that. But it does interpret the cost of losing. So say for example, you invest and the prices go down. Now of course, since we’re all smart investors listening to this. Or if you’re new, you’re not smart yet, but you’ll be smart soon. Right? I promise. And, you know, we understand that income property is a multi dimensional asset class. So, you know, I talked about the three dimensions of real estate, there’s really many more than that. But, you know, even if the prices go down, you know, we still have the return on investment, from cash flow from cash on cash return. So, our bias just looks at prices. Number one, that’s the way most people think they think, Well, you know, I bought this house in Los Angeles, and I paid $500,000 for it, and the market tanked. And it went down to 350 or $400,000. Right, and I lost 100 grand or 150 grand, and that’s what everybody sees, but, or they bought the property in Memphis, and the market went down. It went from 120,000 to 100,000. So I lost 20%, but they never see the amount of money They made from the cash flow and from the tax benefits and the other benefits. And they they don’t see that, that they lost that money by waiting. You know, it’s just funny how our minds work. We’ve got to overcome our own mind. A lot of time, don’t we?

Clay Slocum 37:17
Yeah, definitely. Definitely. Yeah, that that bias

Jason Hartman 37:21
is there. Yeah. I mean, even if you’re an engineer, you have the same brain that all the rest of us have. And the way you overcome it, is by doing what you did, and really doing a study, and really looking at the numbers, and really evaluating opportunity, cost, opportunity cost is a cost that most people don’t see. They don’t evaluate properly. And it’s just an oddity of the way our brains work. I’m not sure why but I’m sure we just had to have that it’s built in from evolution. And it’s there for some reason,

Clay Slocum 37:56
right? Yeah. Yeah, exactly.

Clay Slocum 38:00
And then to to carry on the the other two, two scenarios Iran is the the investor that invests the money and then gets two straight years of of returns based on the performer and then goes through the same, you know, median house fall that we saw in 2008. Nine and that person never went below their original price. And so, you know, if you think it’s going to happen in a year or two years or you don’t know, that was that was really powerful to see that if you know unless you can do it to the day. It makes sense to get it in there and let it start compounding and getting the cash on cash. But you’ll you’ll appreciate this, this last scenario ran and that was I pulled up s&p 500 numbers from the downturn and and then I used historic averages and I ran the same scenario and I took it out about 20 years. And I’ll just talk in terms of percentages here. But yeah, it was about 5% it was only one 20th of what the investment properties ended up yielding in a 20 year period.

Jason Hartman 39:14
Wow, isn’t that amazing one 20th. And this is why we don’t none of us ever know anybody who got rich in the stock market. Unless, unless they’re an insider, right? That’s the only ones who ever get rich in the stock market. But um, we all know lots of people who got rich in real estate isn’t isn’t that just, you know, the reason why true because the stocks don’t have the multi dimensional characteristics the income property does. And so that’s a that’s a very important thing to consider. It certainly is. Okay, hey, Clay, we gotta wrap it up. But is there anything else quick that we can talk about before we say goodbye?

Clay Slocum 39:51
Yeah, I mean, if I if you don’t mind, I’m going to open up two cans of worms and you can answer them however you want or choose to hold them off, but You know, I guess the

Jason Hartman 40:01
I have a feeling I know one of those cans of worms, it takes like, three hours to answer but

Clay Slocum 40:06
go for it, just just the whole concept of when to think about putting properties into an LLC and kind of detaching them from your own personal assets and whatnot. And then the second one is just whether there is a place or the best place to go to try to understand, you know, the in an easy fashion, the tax aspect of investment properties. And so I’ll leave it to you to take us out. I’ll

Jason Hartman 40:34
take those two and answer them as quickly as I can. So first of all, the question of entity structuring and asset protection is extremely complicated. I’ve had Garrett Sutton on the show several times. He’s a good attorney in that in that field. I’ve talked about it several times. I’m not a lawyer. But I want to say this one thing that so few people understand And that is the concept of the internal threat versus the external threat. When it comes to asset protection, most people, again, there’s some for some reason they have this bias and it really makes them dumb and blind or you know, and in here, here it is the bias is that they think all about the internal threat, meaning the threat that exists inside of the asset. So with income property investing, that’s usually the tenant. Okay. Now, in all these years, I’ve never been sued by tenant. Okay, so, I mean, I’ve had hundreds of tenants, okay. But and, you know, just never had any legal problems with tenants. Okay. I’ve had legal problems in business for sure. You know, especially with what I say on the podcast, some people get bothered by what I say when i when i out there crooked behavior. But anyway, you know, that’s one of the things we have to deal with, right. So that isn’t external threat. So let’s take me as an example. This is a good I’ll just use myself as the example to explain this. So I’ve got all these rental properties and all these tenants, right? And if one of them slips and falls, and you know, and Sue’s me because they say it’s my fault, they have the slip and fall, the famous thing you always hear about right? That I’ve never ever with thousands of investor clients heard of that happening, that lawsuit. I’ve never heard of it. I’m not saying it hasn’t happened. I’ve just never heard of it. Okay, so none of our clients have ever told me, oh, attendance slipped and fell on their property and sued them. In fact, I don’t think any of my clients ever, ever even told me a tenant has ever sued them. And I know that I haven’t been sued by a tenant, you know, bought my first property at age 20. And then all these years, you know, just never happened. Right? Okay. So that’s one thing. That’s an internal threat. And that threat is very easy to ensure around to just have good insurance and make sure you renew your insurance policy on time. So it doesn’t lapse. Okay. That’s pretty easy to insure around. Okay? Now, the external threat is and let’s use me as the example. So here I’m doing this podcast. And I stumbled on this, you know, property manager who’s ripping me off and ripping my clients off in Kansas City. I talked about it on the show, he Sue’s me, that is an external threat, or at least it’s external to the properties I own. Right. So if that guy was able to sue me and win and get a judgment against me, then he could go looking for assets that I have in my personal name, right? Or in states, even in entities in states that aren’t, you know, friendly to the investor. And and he could get a judgment and then go domesticate that judgment in that state. And say, you know what, this guy owes me money. He hasn’t paid me and I want in court, blah, blah, blah. And he has a house in the Socialist Republic of California. And even if that house in California is inside an LLC, it doesn’t matter, I can foreclose on the shares in the LLC or the corporation, and I can get that asset. Okay? Now as Garrett Sutton explained, and again, I’m not an attorney, I gotta say that I’m just speaking from my own personal knowledge as a layman. So check this out, you know, reach out to Garrett Sutton or any attorney that knows this field and ask them for details. I’m just giving you the concept. Okay. But if if I have that property in a Wyoming LLC, as Garrett explained when he was on my show, and he’ll probably be speaking at our upcoming meet the Masters again in January, he’s spoke at the last two of them, then they can still get that judgment. But until I take the asset out of the LLC. They can’t attack. Okay, when it’s inside that LLC, it’s protected. If it’s in California, it’s not if it’s in another state that’s unfriendly, it’s not. Here is another big complication about all this stuff. When you start crossing state lines, it gets very complicated and this is why you really need to talk to Garrett or another attorney and get this straightened out if you if you even go down this path because it’s it’s a fairly complicated path. Okay. What happens is say you have the Wyoming LLC, but you know, Wyoming is not a place we necessarily recommend to buy properties right there. We haven’t found like good investments there. So you might buy properties in Tennessee, or in Florida or Indiana, Indiana, and or wherever we recommend. And then you have those properties owned by your wife. LLC. Well, then you have to register most of the time. I don’t think you have to do it in every state, but in most states you do. You have to register it in that state, like it’s doing business in that state. And then the question is, what laws apply the laws of Indiana, or Florida or Texas or Tennessee or the laws of Wyoming? And these become murky, complicated issues. Okay. Now, note that I’ve only talked about the internal threats so far. Now, let’s talk about the external threat. Okay. So the external threat is here I am doing my podcast and I explained that you know, the guy in Kansas City and you know, he could sue me and get a judgment and so on so forth, right, or the property tax lien company in Georgia or South Carolina or wherever the heck their base because it’s complicated. They’ve played the game. Right, just like we’re talking about, right, and so I don’t even know where they really exist to tell you the truth, okay? But the external threat is you know, you’re driving your car, you get in an accident, the insurance doesn’t cover all of the damages, or you say something on your podcast, or you run a business or you’re a doctor and you have a high liability business or whatever, right? That’s the external threat. So the external and the internal threat are different threats. And with the internal threat, the tenant suing you, for example, they can still get that asset from the inside, okay? And the best way to protect the asset from the inside is to either have that asset, you know, own through a bunch of structures or just have good insurance. Good insurance is the best asset protection if you asked me, the other one is a high loan balance, so leverage the assets so there’s not much equity in the asset to get The external threat is a different set of circumstances. Okay? So again, this stuff is complicated. It’s most people just massively oversimplify it. They go to one of these, these disgusting In my opinion, Mills that all just sell you a bunch of entities and they don’t really consider what you’re doing, you know, you need someone to thoughtfully consider this stuff with you. Okay. And the other thing is, once you set up all these entities, then you got to start keeping everything separate. And there’s like governance, things that you have to do and follow some formalities and, and you know, you gotta maintain them and it’ll cost you money every year to maintain them. You know, it all can be done, but I’m just saying, you gotta really think it through. Okay, so how’s that for an answer? I know I didn’t answer it. But did I confuse you?

Clay Slocum 48:51
Start with the start.

Jason Hartman 48:53
Yeah, it’s a it’s a start to the road down confusion and complexity. So there you go. And then the other problem is If you put your properties inside of LLC, it’s going to be harder to refinance them later. Okay. So that’s a whole nother ball of wax. Oh, it’s also harder to insure them because the insurance becomes a little more complicated too. Okay. Okay, so Okay. All your tax No, let’s let’s take your tax question clay. Okay. So, tax question. So if you really want to learn about taxation, there are certainly many courses out there that you can buy and things like that. And I don’t have one to recommend, unfortunately. But h&r block, teaches courses. And I was going to take one several years ago just because I wanted to improve my own knowledge. But the problem is they’re not focused and they’re not targeted. They’re mostly just how to fill out the forms. Okay. They basically teach you how to become an enrolled agent, basically. Right? And so they have courses, but one of the best ways I think you can learn about this stuff is to simply buy a software like turbo packs, or, you know, there’s many others out there too, right. And you can buy one of those software’s and try doing your own tax return. I’m not saying that’s the return, you want to turn into the IRS. But just by going through the exercise of using the software, you’re going to learn some stuff. I have not done this. But I think it could be a good education. The other thing you can do is you can just listen to my podcast. And if you haven’t listened to some of the interviews I’ve done with tax experts over the years, go to Jason Hartman calm and use the search engine there and find those interviews and just listen to them and they will help you and you can reach out to those professionals and talk to them and ask them questions. I will tell you one that I did not have a very good experience with is Kohler. Okay, so I had them do my taxes one year and I did not like the experience at all. I found his law firm to be a little bit better than that, but you know, had some issues there as well. But tax wise I didn’t like my experience. Okay. I hope it doesn’t sue me for saying that. You see how my businesses external threat. But you know, I mean, I like him. He’s a nice guy and all but I just did not like the experience using his tax firm. We’ve interviewed some others on the show that, you know, I’d recommend had some good experiences with If nothing else, you can learn some things from them. Okay, and just learn some things by listening to that interview. Does that help? Does it make sense?

Clay Slocum 51:30
Yes, yeah. No, it does. It does. Okay, good.

Jason Hartman 51:34
Good stuff. Well, Clay Slocum, our client, thank you for bringing some of these issues up sharing some of your research. I appreciate it. The power of compounding. Very important. Don’t like like Robert Allen says the old saying, don’t wait to buy real estate. buy real estate and then wait. And I just want to wish all of you happy investing to you clay and to all of our listeners. And thanks so much for coming on and sharing your story to

Clay Slocum 52:02
today. Thanks, Jason.

Jason Hartman 52:06
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice of any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

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On this show, Jason and investment counselor Adam bring on a client for a case study. They also chat with one of the network lenders to discuss the direction of mortgage rates. Later, Jason hosts the client Damon Santa Maria. Damon has purchased 20 properties in 6 years and looks forward to investing in more income properties. Damon talks about his experience of self-managing and provides tips for those looking at doing so.

Investor 0:00
You’re gonna laugh, but because of your podcast, we’re positioned. Well, I don’t know how else to thank you. But thank you, your podcast and your services are amazing. And I wish I could do more as far as working with you guys, but I haven’t really but maybe in the future, obviously. But once again, our family is grateful to you and your services. And your information is priceless. Thank you so much.

Announcer 0:27
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate Stay transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:17
Welcome to Episode 1220 712 to seven. This is your host, Jason Hartman, thank you so much for joining us today. And greetings from beautiful Copenhagen, Denmark. This is my third time in Denmark. It is a beautiful place we stumbled onto some fantastic weather. And wow, the weather all the Danes just keep telling us It couldn’t be better. We had dinner last night with some friends here. One friend who is an American, Iranian born American who got engaged to a Danish guy just hearing about their situation and immigration and all of that stuff because you know he wants to move to the States. With her and going through all of that was interesting to hear the details of it. But it was also interesting to hear and have some discussions about the regulations in Europe. And, you know, my view on this, it just every time I come to Europe, you know, once or twice a year I was, of course born here, I become rather quickly frustrated with the regulatory environment and the way it has put such a big weight on the economy. How you know, you hear from Europeans, when you try to get things done, because it’s a continent that’s largely anchored in the past, and it has an incredible past. I mean, European history is fascinating, to say the least, very, very fascinating, but you know, there’s a lot of anchoring to the past. And it’s fair to ask ourselves, what has us what is our anchor? Are we anchored toward the future, the past the present? Of course, we’re all anchored to all three of these things. But I would say Europe is mostly anchored to its past. And you’ll hear when you try to get things done. You’ll hear the word procedure a lot. It’s not our procedure here, you know, this is our procedure, we have to follow the procedure. And that becomes frustrating to someone like me, but hey, I told you that last time I was here, and the time before that, probably so you’re not hearing anything new for me on that. But hey, we’ve got some great episodes here coming up. I’ve been recording heavily over the past few weeks to get a lot of episodes ready for you. And I’ll make some quick commentaries along the trip here. Coming up next, we are going to Berlin and going to Berlin, Germany, then Gdansk, Gdansk, Poland, I’ve been to both of these places before a few times. Gdansk, of course, is the place of the Solidarity Movement with liquid lens, you remember his name in the news. Last time I was there, I went to the museum and it was quite fascinating. So a lot more Come up and, and we’ve got Finland and in St. Petersburg, Russia, Helsinki, Finland I should say to be more specific. So I’ll have more on that for you as the next episodes come up. I’m not sure if you can hear the crashing waves but greetings from somewhere in the Baltic Sea. As I am sitting on the balcony of our cabin here in route from Helsinki, Finland cruising to St. Petersburg, Russia. We had a great day in Helsinki today and I’ve been there before but it was great to visit again. And now heading back for my second trip to St. Petersburg Russia. And it looks like Coco the dog will be able to get into Russia so very excited about that. The Russian government is sending a veterinarian on board on board the ship tomorrow morning to give her a quick exam before she heads into the country. practices for Russian. So that should be fun. I’ll let you know how it goes. Anyway, let’s go to a quick mortgage update before we get to our client case study with Damon Santa Maria.

Adam 5:17
Welcome to the July edition of the mortgage minutes. We’re joined today by one of the lenders from the network. Welcome to the show.

Lender 5:23
Thanks, brother. How you doing this morning? I am doing well. Now. Can you tell us what is

Adam 5:27
going on? We’ve been seeing mortgage rates for homebuyers dropping significantly around

Lender 5:32
the last month or so what’s it looking like for investors out there saying, you know, they’re going to experience some decline as well. Of course, they’re not going to match up, you know, rape or rape just because of the risk associated with the least the perceived risk by wall street for an investor versus a homeowner, but they’re also seeing some decline. Now, an interesting thing that some people don’t quite know, and many will, you know, it’s going to be hard to understand is that there’s going to be different coupons available in the mortgage banks. securities pools for each type depending upon the risk, sometimes you’ll see more decline in the home owner style mortgage or the primary residence mortgage versus an investor one because they they have different pools that investors choose to invest into. So you’re talking about like pension funds, and other like mutual funds and other securities that are deciding to take on some mortgage backed securities, and they will decide where they’re going to plant their money depending upon the potential risk associated with it or the perceived risk. So if they pour more money into the pools that will fund your owner occupied housing, you might see a greater decline, then you might see in investor interest rates because of the availability of funds. Lately, we still have seen many of those decline alongside the owner occupied rates, but not quite to the same extent. And the thing that’s really fueling it now at least a back and forth on the interest rates that we’re seeing some days it’s getting a lot of improved. Britain and other days it gives it all back. And it goes back to where it was a couple of days before as far as the trades are concerned. And that has a lot to do with these talks with China. And that’s feeling majority of it. So what rates are you able to currently get investors in the 15% down realm, we’re probably talking about the the mid fives, 5.5, maybe 5.6, depending upon many other factors, you start getting into the 20%, down probably five and a five and a quarter, you start getting into 25 and breaks below 5% or may just lead right at that 5% depending upon the day. One of the things we’re seeing, you know, the president come out and say I can do whatever I want to the chair of the fed the chairman Sanam, here for four years, this has created, you know, a bit of volatility, how has that been impacting the bond rates, as is going on? Is it causing more fluctuation than normal? Or is it kind of just regular? You know, I think that a lot of that volatility between the executive branch and the banking world over here, the Fed. I believe that it’s kind of been absorbed. Possibly by the market in the sense that they’ve been seeing this going on for a while. So they’re not that I don’t see that as making as big an impact, because it just seems like that’s been happening for what over a year now. But what is making more senses, you know, they’re looking more at the economy and what’s going to happen with the economy. And this whole conversation with China is impacting the economy more than I think the conversation between the Fed and the president. And ultimately, when you’re talking about the Fed, the Fed has some sort of influence about what the market does with the Fed decisions directly don’t directly impact. It’s an inverted impact of interest rates. So because of what they’re indicating, that’s again, more economic indicators that it does additional economic indicator, which would get the end trader whoever’s getting ready to invest their money into the market where they go into bonds, equities, commodities, precious metals, which is another commodity or currency, they’re going to decide on that based upon what they’re gathering in all the economic realms and the Fed is a part of that. So right now, interestingly enough with the Fed putting various Little into the market as far as mortgage backed securities market like they did before with quantitative easing. It’s being more fueled by just the traditional investing divestment pads that was created in the mortgage backed securities world to begin with back with Louis ternary in the 70s. And on up till now, that’s been killed by just the regular market. So it’s interesting, we’re keeping really low rates, even with the quantity of tightening kicking in in 2017, less fed involvement in the mortgage backed securities. It’s the general market that is keeping them where they are now today.

Adam 9:30
I know one of the interesting thing that’s happening is the rates have been dropping significantly over the past couple months. But owner occupied mortgage starts haven’t been responding the way that they normally do. Have you been seeing the changes in mortgage applications for investors in your office recently,

Lender 9:47
actually, even the mortgage applications for investors is not as heavy as it was before. I think because of all this volatility in the market. There may be a lot of people holding out. Now we’re still having a lot. There’s still a lot of applications coming in. But if you want to Look at the amount of applications are coming in Africa, Africa, quantitative tightening, when there was the fear of the rates going up and people just jumping in as fast as they could to get ahead of that. And now the rates are coming down people like, oh, let’s see where they settle. I think that’s the problem. And what I really preach in a big way to real estate investors of rates don’t matter. They absolutely do not. When you start looking at how inflation pays off your mortgage for you, inflation is not 2%. As the Fed says, you start getting into the depth of inflation, and start adding back in what they’re taking out exceeds 5%. And if interest rates are in the five, you’re not paying anything on the mortgage, so once the investor wrap their head around, this actually takes control of their business as a CEO of their business, and then gets the right people in the boardroom with them. The right lender, the right real estate provider to discuss these things and understand what their business means and what the business is doing. They can start getting off the fence. You’ve got to Get the right people to work with. I preach it up and up and down. I pretend to be the CFO to their business. So I’ll be the fractional CFO under the trust advisor is in their boardroom to help them to understand. Don’t sit there and wait for the bottom to hit because you’ll never find if you find it, you find it accidentally because you’re involved. But if you’re trying to time at personally, nobody that connected to the market to time it perfectly. Unless you’re manipulating the market, it’s the only way to do it. None of us are listening to this have the billions of dollars or trillions of dollars it takes to manipulate the market.

Adam 11:30
You can only see the bottom on the way back up. Now, one of the one of the things that as rates have dropped, is if you purchase in the last two years or so your rate might have been you know, in the mid sixes potentially. Are you seeing any movement in the refi market,

Lender 11:45
some and the only time I really pushed an investor to get involved in the refi market is when it comes time to to extract capital from that and reinvest it because of what’s going on, you know, talking about the inflation piece, and all that just jumping in there to drive Your payment for an extra $23 of cash flow or jumping in there to just rock your rate because you feel better about it. That’s not efficient way to run your business. That’s actually a really inefficient way to run your business because you’re spending money to get the loan done. There’s a reason why the banks love to preach refi your loan, right? Because if you ride that loan out for 30 years, inflation literally eliminates the debt. Now Jason talks about inflation induced debt destruction. But if you’re refining every three, four or five years, because the rates went down, you’re paying more money into the system, just so you can feel better about your rate. And you’re really spending way more you’ll ever get back out of that. I don’t care what people say is what your savings is over five years or you get paid back into No, you don’t. You really need to think about that a little bit more. Sit down and understand it sounds great. Thank you for your time today. Thank you, sir.

Jason Hartman 12:53
It’s my pleasure to welcome another one of our clients on the show and this guy has been a client for a long time. He’s done not Not only properties but land contracts, and we’re going to hear about that he’s up to 18 transactions through our network. And it’s great to have him on the show. He reached out I think it was last week and asked to be on and tell his story. Damon, welcome. How are you?

Damon Santa Maria 13:15
Great. Thanks to be here. Jason.

Jason Hartman 13:16
Good to have you on so Damon Santa Maria. You just have such a cool name. First of all, it sounds like a place a movie or something. I don’t know.

Damon Santa Maria 13:26
My wife joke says that was the only reason why she married me was because my last night cuz he

Jason Hartman 13:30
had a cool name. Yeah.

Damon Santa Maria 13:33
Very good. Very good.

Jason Hartman 13:34
Where do you live? Where are you located?

Damon Santa Maria 13:37
live in Houston, Texas. All right.

Jason Hartman 13:38
Well, that’s actually one of our market. Did you buy any properties in Houston through our network?

Damon Santa Maria 13:44
Not through your network, but I currently have one rental right around the corner from my house.

Jason Hartman 13:48
Okay, cool. And when did you come in contact with us? I want to say it was like six years ago, but that’s just a guess

Damon Santa Maria 13:55
it was six years ago and funny enough. I found you While I was scrolling through the iTunes radio shows, there was a continuous loop of your podcasts. And because I worked from home at the time, I would kind of put on either background music or in this case podcasts. And somehow I found you and that’s how I came to know Platinum properties. And then Jason Hartman network,

Jason Hartman 14:22
your first event. I know you came to Irvine or Newport for some of our events, and was it a meet the Masters back in 2012 or something? 2013, something like that.

Damon Santa Maria 14:34
Yeah, I think it was a little rock property event, creating wealth. And that was my first event and then meet the Masters Later that year, or the following year in Irvine. Oh,

Jason Hartman 14:46
okay. I remember that. Yeah, we had a little property tour in Little Rock. So that was great, good stuff. So that was your first time. What got you interested in real estate investing,

Damon Santa Maria 14:56
if I can kind of back up and provide some context You know, I grew up with very little financial education. I didn’t know anyone in real estate and my parents had limited financial tools to kind of teach me what made things worse was I was a horrible student. Somehow I had, you know, a 2.5 GPA could get you into college, you know, back in the day, and, you know, I’m happy to say that after six years, I graduated with a degree that I never ended up using. But despite, you know, all of the cards kind of being stacked against me, I always had a drive to make money. And it really became my passion to hustle and ground. And, you know, after graduating from college, I got into, you know, medical sales and surprisingly, I did, you know, very well, and before long my, my wife and I, you know, we started making more money than we could spend. And this was before the great, you know, recession. So, we in vested in things like, you know, poor one K’s, Roth IRAs, mutual funds, etc. But as all of us know, after the Great Recession, we realized how quickly our investments could disappear. And we had very little control. And so when I started listening to your podcast, things just made sense your 10 commandments and then 20 commandments of real estate investing,

Jason Hartman 16:25
we’re up to 21 Now, do you know that we have 21 commandments now?

Damon Santa Maria 16:31
What’s the

Jason Hartman 16:32
21st? Well, the 21st one is thou shalt avoid manias. So whenever anything’s a mania, that should be a warning sign to us that a bubble is forming. That’s my point.

Damon Santa Maria 16:45
Yeah. I like it a lot. And that’ll become my favorite investment or a commandment but so yeah, yeah. So you know, in 2013, I finally pulled the trigger and you know, after reading books and listening to so many podcasts and going to great events that you put on, I finally found a house that I liked that was right around the corner. It was a great time to buy, I wish I could go back and go buy 10 or 20 more when the prices were low interest rates were low. To this day, you know, I still have the same tenant from 2013. And so they’ve been there, they’ve never missed a payment. And I just got an email from them last week, asking if they could stay till 2022. So that’ll be nine or 10 years, the same tenant in place, and it’s been a great investment. That was my first one. And where’s that? Where’s that one located here in Houston? That’s

Jason Hartman 17:40
Houston. Okay. I gotta tell you, you know, I had a tenant in one of my properties stay for nine years. My mom is finally losing her tenant that she talked about on the show. You probably heard a couple of those interviews, and the guy has been there since 1989. He’s finally moving You just told me Yeah, yeah. So it is amazing. Some of these tenants will stay a really long, long time. But I’ll tell you, Damon, sometimes they stay too long because the owners lazy and they’re not raising the rent enough. So there is a balance to that.

Damon Santa Maria 18:15
Absolutely. Yeah,

Jason Hartman 18:16
yeah. Okay, so you still got that same tenant, you just kept buying properties, you’re up to 18. Now, you also bought some of the land contracts, which is something we did, we did a fairly small number of those deals, but I think the listeners would love to just hear about your experiences along the way. Sure.

Damon Santa Maria 18:34
So I’m actually not to correct me but I’m actually up to 20 properties, oh, 18 through us 18 year network, which, you know, that’s a fair amount. It kind of I think goes to show how happy I am, you know, with Platinum properties and the service that you and Sarah have provided over the years. At one of the meet the Masters, you know, I had a bunch of IRA money sitting around That I converted to a self directed IRA. And I liked the idea of getting, you know, a 910 percent cash on cash return within my IRA by buying what’s called the land contract. And essentially I’m acting as the bank, where a person who may not have stellar credit will come to someone like me and say, hey, I want to buy this house, I’ll pay you nine or 10% interest and you act as the bank for me, because I can’t get traditional financing. Those deals have worked out very well. Most of those deals have doubled in appreciation and doubled in value. I sold one about a week ago, I’m in the process of selling another one and we’ll do very well on each one of those property. Now those

Jason Hartman 19:50
are inside your self directed IRA. Right? They are okay so you don’t have to worry about a capital gains problem until you know I mean, the account will be bigger because capital gains. And then when you ultimately take distributions, you know, you’ll sort of pay for a little bit of that later. But that’s great. That’s a good way to do it. So, and then the buy and hold properties, I’m guessing most are all are outside of your IRA.

Damon Santa Maria 20:14
Correct. All of the long term buy and hold are outside of my IRA that my wife and I have bought, we kind of stagger you know, she’ll buy one and her name, then I’ll buy one of my name so we can kind of maximize the Fannie and Freddie loans up until 10. Good stuff. So your wife is working unable to qualify for those loans, too, right? Correct. Excellent. Yeah. So you can get out you can go up to 20. That’ll be great. So yeah, good stuff. What about the regular rental properties to buy and hold properties, share any of the lessons you’ve learned there or the experiences you’ve had? It’s very exciting. to kind of look at properties. Look at pro formas. Calculate the numbers. That’s where I kind of get a little bit nerdy And I enjoy that process. But I think some of the learning lessons that I had was, you know, early on, I wanted to just get into the game. So I would buy lower price properties that I could afford see properties that had a higher ROI on them higher cash and cash return. But I’ve learned over time that sometimes when you have a $60,000 property, you don’t have the highest quality of tenants. And subsequently, sometimes the property managers are a bit challenging as well. So.

Jason Hartman 21:39
So not only in the cheap properties, can the tenants be challenging, but so can the property managers?

Damon Santa Maria 21:47
Right. Absolutely. And, you know, I think you’ve pointed out on several podcasts that you’d rather have a property manager with a B property than an a property with a B level Property Manager. And that’s entirely true. I can’t kind of overstate that enough. Property Management really is so key to this industry. Or as you kind of pointed out, you know, the lack of property management and kind of letting them step out of the way. The tenants many times are great folks, and I enjoy, you know, having the tenants in all of my properties. But the property managers can sometimes step on on toes a bit.

Jason Hartman 22:29
Right, right. And so what just to clarify what we’re really referring to when I say lack of property management is referring to self management of not having a property manager at all, because I’m really more and more convinced that that is the way to go. We just keep hearing such good things from our clients about it. I’ve had good experiences with it. You know, I don’t know some of the property managers. They’re great. Some are just terrible. But regardless of whether They’re great or terrible, or whatever they are in between mediocre, you know, wherever they end up on the spectrum, there’s still just a natural built in conflict of interest where everybody doesn’t want the same thing. And whenever you have that, you know, you have the same problem in many businesses, right? financial planners, obviously, financial advisors, they don’t necessarily want the same thing their clients do. Yeah, it sounds good. They say they do. You know, I want you to make money. So you’ll have more to invest. Yeah, but, you know, there’s a short term and long term trade off there, right. And usually everybody will take the short term trade, and lawyers, same thing. You know, they want to build as many hours and the client wants a result. And so there’s a conflict of interest, right, and it just doesn’t work. So whenever possible in life, try and have interest aligned as much as possible. That’s the lesson and sometimes you just get How to get them out of the way and just self manage. Now, are you doing any self management yet?

Damon Santa Maria 24:05
I am with the property that’s closest to me here in Houston. I am self managing that property and working out. It’s working great again, the have never missed a payment. I’ve come to know they’re their family. And we’re not best friends or anything, but we have a mutual respect for each other. And there’s certain expectations that I’ve outlined that they adhere to. And it’s been a very good relationship, and I’m happy that they’ve stayed as long as they have.

Jason Hartman 24:37
Yeah, good. But yeah, not doing any self management yet on the other properties on the long distance stuff. Hmm.

Damon Santa Maria 24:43
Now, that’s probably one area that I’m a little less confident in because all of my properties are so far away. And you know, maybe just not having the education or the tools or maybe Even just the time because I think once you start to self manage, you do get perhaps more interaction, more contact with your tenants. As you know, things arise. And, you know, the last thing I want is to have a bunch of deferred maintenance where the tenants are afraid to perhaps contact me if something does go wrong. And then you find out years later, there has been a leak or, you know, some, again, deferred maintenance that has gone unnoticed or unreported.

Jason Hartman 25:32
Yeah, and I understand that as a concern, Damon, you can overcome that though. There are ways to handle that and, you know, do inspections and all sorts of things like that, but most of its just communication, you know, if your tenant is not going to report a leak to you, that would be pretty amazing to me that they would just suffer with a leak. And by the way, how’s the property manager gonna know? It’s gonna have to come from a tenant report. Anyway, right? The funny thing is the managers. I mean, they might do inspections every year. But not all of them do that. And even if they do, it doesn’t mean they’re going to catch everything. And usually it’s all based on the tenant reporting and issue. Right? And so, just something to think about now. Good point. Okay, so any other lessons or things you want to share or goals for the future?

Damon Santa Maria 26:27
Yeah, I think just in general, we kind of live in a time where for me personally, it you know, I have to be careful not to chase those shiny objects, like buying a business or Bitcoin or whatever the, you know, the shiny object of the day is and really have that long term focus on building, you know, income producing prudent properties, that cash flow, and that’s been something that there’s all these distractions out there and And for me, you can easily become distracted by those shiny objects. So that’s kind of been my focus from from day one is to, you know, build that portfolio of, of cash flowing properties and I’ll continue to do that here in you know, in the future.

Jason Hartman 27:16
That’s awesome. Yeah, the long term focus is a very good thing. It’s a very sure thing compared to the speculative today it’s Bitcoin tomorrow it’ll be gold and the next day it’ll be something else. You know, it’s really crazy how that and that’s commandment number 21 about manias right there. Thou shalt avoid manias. Absolutely, absolutely. Absolutely. Do you have any metrics you want to share Damon of your properties, you know, cash flow metrics, I know you’re, you’re buying and selling a little bit too. So you know, when it’s kind of a moving target. It’s not always easy to have some really good numbers but anything you want to share on the metric side,

Damon Santa Maria 27:56
from a metric standpoint, I think the performance that you put out on each property do an excellent job of outlining each financial indicator. I mean, for me cap rate is not as important as cash on cash return. Yeah, good, good. I tend to look at cash on cash return is kind of a primary metric for gauging how a property will perform today and into the future as well.

Jason Hartman 28:26
It’s definitely a better metric, and overall return on investment too.

Damon Santa Maria 28:30
Right. You know that that number, I think can be a bit nebulous at times because I think if I’m not mistaken, that includes appreciation. Yeah. Right.

Jason Hartman 28:42
Yeah. So the appreciation is obviously speculative, because you don’t know if that’s going to happen or not, which is why we say appreciation is the icing on the cake. And so you don’t see that until you have a liquidation event or at least a refi or Wi Fi or die. Yeah,

Damon Santa Maria 28:57
yep. Good stuff, okay. Any other metrics or anything Like that, so you you like cash on cash return the best overall cash flow is king for me. And when I look at a pro forma, you know, the other metric that’s kind of hidden is the maintenance. And we, I tend, I have tended to gloss over that in the past saying oh, there’s not going to be any maintenance. It’s a brand new property, newly rehabbed, etc. But if you don’t build that into your cash reserves, you know, sometimes that can sneak up on you, especially with a tenant turn or, you know, those unexpected events were an H Draco’s, or the water heater goes, whatever the case may be. And so sometimes taking that defensive calculation is just as important as you know how much money you’re going to make as well.

Jason Hartman 29:52
Hmm, yeah, very good. What are your goals for the future? Are you gonna keep buying more properties or is is 18 while 20 Is 20 enough for what’s the next plan?

Damon Santa Maria 30:03
Actually, I you know, I’ve been at a steady clip of, you know, buying three to four properties a year. And this year I’d like to do maybe five or six before the year is up. And I’m taking some some steps now working with Sarah to potentially buy a package of properties. But my goal is to continue to build that up for the foreseeable future. And, you know, have it help pay for college as well for for my three children.

Jason Hartman 30:35
Fantastic. And Damon, one thing I didn’t ask you is what markets you’re in. I know you mentioned Grand Rapids, of course, Houston, where you live. Did you buy in Little Rock on that tour?

Damon Santa Maria 30:46
I did. I bought a house in Little Rock. That’s been a great performing property there. Most of my properties are in Memphis. Memphis has been a great market over the years and it continues to perform Lot of inventory there. I also have a house in Indianapolis as well, as well as Florida.

Jason Hartman 31:09
Good stuff. We’re in Florida,

Damon Santa Maria 31:10
just north of Tampa.

Jason Hartman 31:12
Okay, so yeah, you did Port Richey, probably right?

Damon Santa Maria 31:15
Yes. Yeah.

Jason Hartman 31:16
Yeah, I wish we had more properties there. Those sold like hotcakes. So well, that’s great. So you’re nicely diversified. And you’re just going to keep building your portfolio. And that is a great story. And you did this all in six years. Sounds like it’s just going very, very well. Thank you for joining us on the show and sharing your story. Really appreciate it, Damon,

Damon Santa Maria 31:37
appreciate your time, Jason, and thanks for having me.

Jason Hartman 31:42
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman. Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

Read More...

On this Flash Back Friday, originally published in December 2017 as episode 917, Jason brings on client guest, Adam Jackson. They discuss how Adam started his real estate journey at the end of 2016 and has since purchased 11 homes all in a year. Adam shares the markets he’s currently invested in and what he looks for when investing.

Jason Hartman 0:00
So we did something very interesting A long time ago on the show, one of our clients was an expert in guided visualizations and the law of attraction. And she was kind enough to come on the show and do a guided visualization for us. And she actually did this for us at a live event. I believe it was actually at one of our meet the Masters conferences many years ago. What I wanted to do is offer you a little gift. And that is an extra bonus episode every week. This will come out on Saturday, a little bonus episode, and it’s nothing like a regular episode. It’s totally different. It’s going to be a guided visualization. I’ve hired an expert for this, and she does a great job of guided visualizations. And you know, the power of visualization, anything the mind can conceive and believe it can achieve. That’s what not Polian Hill, one of the early success authors of thinking Grow Rich told us and if you can get your mind your subconscious mind to conceive and believe things with multi sensory detail, that is a very powerful tool. So why don’t we take this tool and make it specific to the principles of real estate investing that I teach. And we will do that we are customizing guided visualizations, we hired this expert. And every Saturday we will release a very short guided visualization as a sixth episode per week on the podcast. And you can take the weekend and listen to this and relax and they’re just a few minutes long. They’re very short, and it will help you in your visualization of your bright future your abundant future as an income property investor. So I hope you like it. It’s just a little bonus for you. Look for this every Saturday.

Announcer 2:06
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is hand picked to help you today in the present and propel you into the future. Enjoy.

Announcer 2:22
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps. On the road to your financial independence day, you really can do it on Now, here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 3:13
Welcome to another episode. This is episode number 917 917. And this is your host, Jason Hartman, thank you so much for joining me today, as we have a great client case study for you today. Yes, another client case study. We love it when our clients come on the show we’ve had so many on, we really appreciate your contributions and sharing your experiences with other people. So if you are out there, and you are interested in being on the show and sharing your lessons and your experiences and your pathway to building a fantabulous real estate portfolio, please let us know reach out at Jason Hartman calm if you have an investment counselor, you’re working with them. Reach out through the investment counselor at my company. And we will be happy to have you on the show and we appreciate you sharing your experiences. I want to remind you, we have this fantastic contest going. Jason hartman.com slash contest. First prize, valued at $4,297. general admission ticket to meet the Masters in 2018 and a $500 cash travel allowance. You can apply that toward your hotel, your airfare, whatever you like, and a venture Alliance mastermind weekend, one weekend for you and a guest that’s a $3,000 value and this is not you know, I love it when they have these contests or prizes or gifts or giveaways or whatever bonuses. And they say, you know, well this is our five zillion dollar value. Well, no, this is real because people really pay this much for this stuff. Okay, so this is not some phony pie in the sky value. As you know, as I teach in real estate, you know, there are three types of appraisals. Right? There’s the cost approach. There’s the income approach, and there is the comparison approach. The comparison approach is the most common for residential real estate, our favorite investment. In fact, I say it’s the most historically proven asset class in the entire world. I always say that the best appraisal the most accurate appraisal as to the value of any property is when you put the property on the market and you sell it to a ready, willing and able buyer. Okay, ready, willing and able buyer and they actually pay for the property then You have the world’s most accurate appraisal, right? Their only problem is you’ve sold the property. But hey, if you really want to know what your property is worth, sell it, then you’ll know. Okay, so that of course is the world’s most accurate appraisal, these values of these prizes we’re giving away at Jason Hartman comm slash contest. These are real legitimate values because people have paid repeatedly, repeatedly repeatedly for this stuff at these prices. So first prize, basically 40 $300 in value, okay, second prize, 20 $100 value, venture Alliance weekend for one person and an Amazon Echo 100 bucks, and then third prize and echo hundred bucks. You know, that’s the way it always works in life. It’s the gold medal in the silver medal and then trailing way behind is The bronze medal. But hey, look at, like I’ve said before this contest, your five year plan contest, so easy to enter. And thank you for those of you who have entered already. It’s really not for the prizes. This is for you. Because by declaring your goals, you are going to enlist some magical powers. magical powers. There’s this great song by triumph, the Canadian band, magic power. It’s an awesome song. Check it out. It’s an oldie but a goodie. That’s what you will be enlisting magic power right when you enter this contest by doing your video. So all you have to do three little steps, record a short video about your five year plan. Where do you see yourself in five years? What are your goals, your family, your finances, how many properties you’re going to own, where they’re going to be etc, etc. What is included in your investment portfolio and how Will we here at Jason Hartman, calm help you achieve these goals, and then publicly upload the video, put it on YouTube, and we will judge by the best video and the video with the most views, okay? And you know, this can be a couple minutes long, you know, keep it short to three minutes. That’s all you need. And then good luck. Hope you win and win one of these great prizes. So Jason hartman.com slash contest. Real easy. And again, you’re doing this for yourself, not for the prizes. The prizes are just a little perk on the side. Okay, another thing I want to mention earthquakes, yes, earthquakes, folks, if you own property in the Socialist Republic of California, and I know many of you do or any other earthquake zone. They are predicting some big earthquakes here in 2018. So Be careful. I know most people with properties in the Socialist Republic of California, my home state for most of my life. Fortunately, not anymore, though, I’m happy to say, because I do not pay

Adam Jackson 9:12
any

Jason Hartman 9:13
state income taxes, because I live in Nevada. And you know, who knows where I’ll live next time. I want to try a few places. Before I get too old. I want to try living in a few different places. But my criteria is, if I move, I gotta move to another no income tax state. So that’s the idea. Okay, anyway, you don’t have earthquake insurance. yet one more reason to follow my advice and turn your castle into a kingdom, liquidate your overpriced overvalued California property, either through a sale or in a less formal liquidation way, liquidate the equity by refinancing that property Pulling the cash out, getting control of that equity. And then using either the sale proceeds or the refinance proceeds to buy income properties that make more sense nationwide, and you’ll be diversified. You’ll have better rent to value ratios. And that’s what our investment counselors can do. They can help you do a portfolio makeover. It’s totally free, a portfolio makeover. So Jason Hartman, com, fill out any web form on our site, one of our investment counselors will contact you and help you with that. free of charge. Venezuela, let’s talk about Venezuela. You know, folks, socialism is a disaster. And it’s ugly, big brother. communism is an even bigger disaster. So socialism sucks. Yes, it does. I don’t know why people in the West think they can do it better. Yes, they do. They think if we just keep trying, we just keep trying the basic philosophy, the political philosophy that is responsible for the deaths of about 150 million people in the last century. Yes. Adam up, Chairman Mao, Joseph Stalin, Adolf Hitler, and all the rest of these rotten evil communist and socialist dictators. Okay, add them all up, right? And, yeah, you’ll get to around 150 million. There’s some smaller ones in there too. But, you know, if this system was so good, why do they have to force people at the point of a gun to follow the system? Because it is a disaster. So next time you think about, you know, voting for someone like Bernie Sanders, well, you know, think about that. Yes, I get the Bernie Sanders is not an evil dictator. I understand that. But it’s a step in that direction. And you’ve seen what a disaster it’s been throughout history. And every time in history and every place on Earth, it has been a massive, terrible failure. Well, Venezuela is another example. Now, you know that I’m a big proponent of what I have dubbed inflation induced debt destruction. That is a very powerful tool for creating a lot of wealth. And income property is the most friendly asset to enable you to follow my inflation induced debt destruction strategy. And Venezuela. Wow, what a an incredibly ugly, disastrous, disastrous scenario.

Jason Hartman 12:46
CNN reports the economy in Venezuela is in a complete death spiral. It has gotten a lot worse in the last two weeks. So in the Venezuelan Currency the bulevar right? Here’s what it takes to buy one US dollar to trade one US dollar on November 1. Yes, dear listeners, that was 27 days ago. It was only 27 days ago. It took 41,290 Boulevard, the Venezuelan currency to buy one US dollar. On November 15. It took 60,942 two by one us start on November 21. It took 84,372 to buy one US dollar. Ouch. Okay, the bulevar has lost 90 6% of its value this year. Now compare that to the US dollar, which has lost over 96% of its value since the Federal Reserve was created just over 100 years ago. Okay, so of course not as bad as Venezuela. Obviously, inflation has increased by 4,000% 4,000% in Venezuela. Well, look at Zimbabwe, Zimbabwe, the poster child for bad monetary policy, has a new leader mcguffey is out that disgusting scumbag, Robert Mugabe is out. And there’s new leadership in Zimbabwe Who the heck knows how that’s gonna work out? Probably not too much better. I’m not hopeful, but hey, I don’t know much about it. So I will not comment until the disaster proves to be true. And then we’ll talk about it all the time. And that’s the way it goes. So this is what happens. Look Folks, to a lesser degree, this is what’s happening in the United States, it’s a much lesser degree. But in the US, you can buy a 30 year fixed rate debt attached to commodities, called income properties that are built and manufactured from these assets. These commodities, that trade worldwide that aren’t attached anyone currency, things like lumber, concrete, copper wire, petroleum products, glass, steel, and even labor. And these are not attached to any one currency. They are needed globally. Every human on Earth needs these commodities, they consume these commodities, you can get three decade long, incredibly cheap fixed rate debt against it, and then you can take advantage of inflation induced debt destruction, the hidden wealth creator with income property, so if you’d like to learn more about that, and you have not been a listener to last 916 episodes of my podcast, just go to Jason hartman.com and type in inflation induced death destruction. And you’re going to see all kinds of podcasts, and articles and tools and information on that topic. Anyway, without further ado, let’s get to our client case study today, as we hear about acquiring all these properties in just one short year. It’s a great story. So listening right now to another client case study.

Jason Hartman 16:41
It’s my pleasure to welcome another client to the show. We always love client case studies and we so much appreciate our clients coming on the show and contributing and sharing their experience their knowledge, and just how they’re building their real estate portfolios and today, you are in for a treat everybody. We’ve got our client Adam Jackson, who has been investing with us for just a little over a year now. He’s coming to us from Connecticut. Adam, welcome. How are you?

Adam Jackson 17:08
I’m doing great, Jason. Thanks for having me. Good. Good. Hey,

Jason Hartman 17:10
thanks for coming on the show. I appreciate it. You know, you’ve been working with one of our investment counselors, you’re up to 11 properties. Now. I’m so glad to hear it. You. You’ve got five in Memphis and six in Jackson, Mississippi, and you’re planning to move into a third market this year. You don’t have much time. Oh, no, sorry. That’s 2018. So next year, you’re planning to move into a third market. You’re just doing an awesome job. So I really appreciate you coming on sharing your experience. Adam, give us a little bit of your background. You’re a former Marine. Tell us a little bit about yourself.

Adam Jackson 17:42
Absolutely. So I’m actually calling tonight from Shelton, Connecticut, which is a suburb about 45 minutes outside of New York City. Yes, I wasn’t the United States Marine Corps for four years. From there. I got out and I was working at the korski aircraft building Blackhawk helicopters. And then for There I actually stayed in the in the aerospace industry. And now I do international trade compliance, which is just basically getting things in out of the country legally. And then of course, on the side, I’m doing everything I can to build a solid real estate portfolio.

Jason Hartman 18:16
That is excellent. So you’re one of the few and the proud the Marines and what did you do in the in the Marine Corps

Adam Jackson 18:23
in the Marine Corps. I was an m&a when tank crewman. Not sure if you’ve ever seen that machine in action, but I highly recommend YouTubing it is the main battle tank. I did two tours in Iraq. So I was I went to falooda so I actually got to use my training.

Jason Hartman 18:37
Uh huh. Wow, fantastic. Well, I’m glad you got back safe and thank you for your service. That is amazing. So is the M one a one of the really, you know, badass tanks that we have? I don’t know much about tanks. Yeah. Tell us just you know, quickly a little side note about that. Some of those go really fast, don’t they? It is just they go like 70 miles an hour and Yeah, I mean, it’s just a huge tank. And you know, some of these are just incredible state of the art machines that cost like many, many, many, many millions of dollars. Give us a little background on that tank.

Adam Jackson 19:12
Yeah, absolutely. Well, the tank is 70 tons when it’s fully combat loaded. It doesn’t do it. Yeah, it’s pretty heavy. doesn’t go 70 but we’ve gotten up to 40 to 42 miles an hour, but it feels like we’re 70

Jason Hartman 19:25
tons. 42 miles an hour is pretty fast.

Adam Jackson 19:29
Absolutely. It feels like it. The tank has 120 millimeter main gun. It has three machine guns. It can hold about 10,000 rounds of 762 ammo, and 1000 rounds of 50 caliber. But then it also has incredible optics. And you can pretty much see better at night than you can during the day. And it’s just an amazing machine. Yeah, well, I was I was happy to be part of it and to be able to have that experience. That

Jason Hartman 19:58
is amazing. Wow, wow. Two tours of duty, huh?

Adam Jackson 20:01
Two tours? Yeah, I got back from the first one volunteered for the second. And that’s what I was looking to do. I was looking to be inspired. And that’s what I got.

Jason Hartman 20:09
Yeah, well,

Adam Jackson 20:10
good, good stuff. Well, we’re glad you’re back safe. You got out of the Marine Corps. And now you are in the aerospace industry, dealing, I’m sure with all kinds of complicated laws, it sounds like you have a security clearance and all that kind of stuff. Tell us a little bit about your job nowadays. So the job nowadays is dealing with international militaries, commercial customers, and really what it is, it’s a layer of customer service where you’re selling different aircraft and aerospace components to these customers. And in order to comply with US law and other international laws. We have to make sure that all the due diligence is done, and that we can import and export legally. And it’s kind of interesting because international trade and the politics that we see the geopolitical events that go on Those directly affect this job. So it’s not exactly exciting. But there’s definitely a lot of knowledge that you need in order to do this effectively and to do it legally. Because the last thing that you want to do is go against international law because the US government can actually revoke your ability to import and export.

Jason Hartman 21:18
Yeah. Wow. Yeah, that sounds like I’m sure that is a very, very complicated position you have, and you are married with three young children. Just had your third I guess. So congratulations on that. We’re not sure if we’ll see you at the meet the Masters because of the three young kids and especially the new newborn, but we hope to see you there. Tell us a little bit about your real estate portfolio and stuff like that. First of all, maybe how did you come to find us? Did you come through the podcast and how long ago was that the started listing.

Adam Jackson 21:48
It was the podcast, I started researching real estate investing about three or four years ago. Two years ago, I was lucky enough to stumble upon the podcast when I was doing a search I listened to you for probably three or four months, but I was hooked after the first episode, just everything from the real estate information, politics, the philosophy, the economics, and after about three or four months, I decided, you know, I’m going to put my information in and see what Platinum comes back with. So I plug my information in on the website, Oliver contacted me a couple of days later. And by the way, he has been a tremendous resource for me just pointing me in the right direction, especially as somebody with no prior experience to real estate investing, but he definitely pointed me in the right direction, help to educate me and help to show me different sources of information where I can better myself as a real estate investor,

Jason Hartman 22:43
good good stuff. That’s great to hear. Yeah, yeah, I love our team of investment counselors, they really care for the clients, they really do a great job and, and you know, when it comes down to it, you know, we’re a middleman or in our business and, and, you know, they really go to bat and stick up for the clients to get them Good treatment from the local market specialists and the property management teams and all that stuff that ready for and so, you know, it’s really nice to have good people but also to have a lot of leverage over these different service providers so that the clients hopefully get a good result. Again, this isn’t always easy. It’s it’s no bed of roses, as they say,

Adam Jackson 23:19
Where did you buy your first properties. So the first properties I purchased in were in Memphis, I made the decision. Okay, let’s give this a try. And as soon as I put the first property under purchase agreement, I just decided to start researching like crazy. And I’m the type of person that once I have the information I need, or at least I think I need, I go ahead and take action. So I didn’t really need to be sold on more of the information about real estate investing just because I can see on it space or at least after going into the multi dimensional benefits, that it was just a superior investment. So after putting that first one under person agreement, I decided to do two more and I needed to put On three at one time, I figured why don’t I get my feet wet here. So I closed on the three within the first I guess it was about three months after I talked to Oliver for the first time. And then I bought a fourth one in cash prior to the end of 2016. So I ended up with four in Memphis by the end of last year. We got fantastic

Jason Hartman 24:20
good stuff in so you’ve got five there now and then six in Jackson, Mississippi, and another one of our markets now sounds like you bought, I guess one with cash was that the only one you bought with cash so far out of the 11 properties you have through us? That was the only one that we bought in cash. But we did do cash out refinance A few months later. So I pulled the money back out. Yeah. Don’t you love that. I just love that about income property. You know, I always say the beautiful thing about it is that you can rewrite the deal all along the way. So the deal is one thing when you buy it because it’s a cash purchase, but you can get the money back out or at least some of the money, sometimes more than the money you put in you know, it depends And then still own and control the asset. It’s the best. It’s the most historically proven asset in the world. It’s just great. What Why did you buy that one with cash though? And tell us about jumping through the hoops on qualifying for the loans? I bet that wasn’t so easy was it?

Adam Jackson 25:16
Well, since I have a W two job or w w two income, it was actually pretty easy. The reason that I decided to do that fourth one in cash is because I believe at the time, you could only do up to four Fannie Freddie loans with 20% down, right. And I was trying to find a way to get my wife on board who does not have w two income. So we decided to purchase that in cash, do a cash out refinance, but still have her name on the deed. But then I think shortly after I purchased that property, the rules of it got a little memorable. Yeah, exactly. That’s when I really ran with it. Yeah, good stuff. Once I once I found out they could all be 20% down. That’s only started, you acquire the others,

Jason Hartman 26:01
you acquire those properties. And then why Jackson, Mississippi? Did all of her guide you to that market? Or did you look at some others?

Adam Jackson 26:08
This came from a discussion between myself and Oliver, at that point kind of had to do with the amount of capital that I had. So, in Jackson, there are affordable homes, I felt like the rent to value ratio, were pretty good. I mean, pretty much everything that I’ve acquired in Jackson has a rent to value ratio above 1%. And I just felt that it was another linear market. And after speaking with the provider, and also seeing caliber of properties that I was getting in relationships surrounding properties, I thought that it would have been another solid cash flowing market, which it has been up until this point.

Jason Hartman 26:46
Yeah, good, good stuff. So you’ve got the five in Memphis that was your first market. Then six more in Jackson, Mississippi. That’s your second market. Where do you think you’ll your third market will be as you move into it to increase your portfolio again,

Adam Jackson 26:59
well After all the research that we’ve done all the conversations we’ve had looks like I’m going to Indianapolis

Jason Hartman 27:05
good stuff. Yeah. Well, I’ve owned several properties in Indianapolis and, and still have a share of one now with one of our clients. So that’s a great market and we’ve been in that market for a long time. So good, good stuff. Those are three good pics. What are some of the experiences or learnings you had? Did you have any big problems and hassles? You know any, any tips and advice you want to share? And I do want to remind you to talk about the balance sheet and financial statements, stuff that you did mention before we started recording as well.

Adam Jackson 27:34
I’ve learned a lot along the way. I mean, just from putting something under purchase agreement, sending in the earnest money doing everything that I need to do to get the financing. But I’ve got to say that my advice is that it is not perfect, but nothing really is. But I do agree that this is much better. It’s multi dimensional, as far as the benefits go. And I did deal with one eviction. I’ve dealt with other minor repairs. I’ve had a problem with one of the ecac systems. But other than that, I mean, I’m able to look past that. I’m not saying that somebody who has the same issues would look at it the way I do. But again, I’m in this for the long haul. I’m in this to really just build a good portfolio and keep my emotions in check. You know, that is probably the best advice that I could give for somebody who hasn’t purchased yet or who’s dealing with a pretty perfect situation. It’s not perfect, but it’s definitely worth it in the long run.

Jason Hartman 28:33
Yeah, it doesn’t need to be perfect. It just needs to be better than everything else. That’s the only that’s the only thing we’re striving for. You know, you just reminded me of one of my favorite quotes. You know, my mother taught me a lot of things in life, obviously, but one of the things she really taught me I mean, she grew up pretty much I don’t want to say like dirt poor but definitely poor on a farm in upstate New York and she became wealthy after many years of struggle and, you know, and she’s so tenacious and so persistent. And one of the things she used to always say to me when I was a kid, and I, you know, kids who quit too easily and don’t have a lot of endurance, you know, she would always say, Jason, finish the job, Jason finish the job. That really she instilled that in me. And I remember, one of the awesome quotes that I later came to love is this quote that success. Success is largely a matter of hanging on after others have let go. Success is largely a matter of hanging on after others have let go. It really is that it’s life is just a game of attrition, you know, other people will give up easier. And who was the celebrity gosh, I can’t be Denzel Washington or something. I can’t remember who said this, but I thought it was a really good saying and, you know, he said something like, you know, I may not be as talented or as smart as that guy or the next guy, but I’ll outwork them. I will outwork them. You know, and that’s the one thing we can all rely on at the end of the day, if we have nothing else going for us, we can just be more persistent and just outwork everybody else, you know? And that’s definitely the thing you gotta do you gotta see the big picture of the long term. And, you know, would you say, I bet you your military background contributed a lot to that thinking, I would definitely say so. I mean, the military inspires you to go get something and never to quit until you achieve it. And that’s one of the things that was instilled to me in the Marine Corps. Also, another thing is just having the discipline to get started, continue with something and complete it. Now, my mission with the single family homes is to acquire probably between 40 and 50 spread across those three markets that I’ve decided on, you know, at this point, all of the energy that I have all of my resources is going into that goal. So yes, I mean, I would agree with persistence and just making sure that you can complete the mission at hand and, and that’s really what I’m doing here with this real estate portfolio. That’s awesome. Good good stuff. Okay, so you had an eviction, you had an air conditioner replacement and those, those things bummed you out. That’s not good news. either of them. They cost you some money. But one of the things I remember when I was a young real estate agent, and I was just started at REMAX and I was working really, really hard on this, what they call a farm area where you pick a neighborhood, you know, when people sell their houses, you try to get all the listings, right, and you get to know everybody in the neighborhood. So I had this farm area called Winwood townhomes in Irvine, California. And I remember I was working so hard, I was getting to know everybody in that area. And then one day on what’s called the hot sheet of all the new listings that comes out every day, you know, came out with a computer, the hot sheet came out and my competitor marks about he is his name. He got two new listings and I still hadn’t even got my first listing in there. And I was just working so hard and I was like 21 years old, you know, he was like 40. So, you know, he had like maturity going for him. I didn’t. I remember going in, I was so disappointed. And I went into my broker. And I said, Tom, look at this. I mean, I think I’m just going to give up. And he says, Jason, he said something really wise to me. I had a lot of conflict with that broker over the years, but he helped me in many ways. And he said, don’t suffer day to day, add it all up at the end of the year, and then decide if you’re happy, don’t suffer day to day, add it all up at the end of the year, and then decide if you’re happy. And I did that. And I became the number one wynwood broker, I sold like 90 some odd properties in there. And, you know, it was a huge lucrative farm area for me,

Adam Jackson 32:44
but I could have easily given up,

Jason Hartman 32:46
you know, had I not had that conversation with him. And you know, for real estate investors, when you talk about the eviction, you have the air conditioning replacement. You know, when we have these problems, I would say, modify my old brokers. Well, you know, the don’t suffer day to day thing, add it all up at the end of the year, you gotta wait a little longer in real estate, and you got to add it up, at least wait to add it up until you file your tax returns. And you see how much money you save? Because every problem like that, like the eviction, remember, the government is your partner. Yes, they get their cut of the profits, but not really in real estate, because it’s so tax favored, but they also share in the losses. Okay, so really, you know, we’re only paying maybe 60% of this 40% is paid for by the government, right? So the loss isn’t as bad as it seems. And then of course, you know, if we can take the depreciation and the other tax benefits, and you know, some additional write offs, it’s really good. It’s funny that you say that because I’m not new to investing or at least the idea of it, but I opened up my first retirement account when I was 19 years old, and I would contribute the max every single year. And then I started working for a company that also offered a 401k

Adam Jackson 34:00
I started contribute to these accounts. And then one day, I woke up and said, you know, you know, this is not good. I’m handing my money over to Wall Street, but yet I can get at it. If I decide I want to take the IRS penalty. So what I did was I started crunching numbers, looking at the real estate investment, and said, You know, it actually makes more sense for me to cash out these accounts, and sink it into real estate. And that’s a large part of what I did when I started building the portfolio. And then it wasn’t until I filed taxes the next year, that’s when I became a believer. So

Jason Hartman 34:37
lever you kind of heard that word. I want to make sure people heard that you said you became a believer, right?

Adam Jackson 34:42
Yeah, might have cut out. I was a full believer at that point. Yeah, it really what it did was, it touched on the four dimensions of real estate, but I actually call them four different types of income. And that’s really how I’m viewing this. Now. You have the cash flow, which is the Holy Grail. This is what people typically keep score with, but then you have the depreciation, okay, which will eventually go to my income statement in some way, shape or form, then I have the appreciation of the asset, which will eventually put money into my account. And then I have the loan pay down by the tenant. So, there’s actually four different ways that I’m receiving income here. And when I had those other retirement accounts, I would receive nothing.

Jason Hartman 35:27
Yeah. Yeah, you know, Wall Street is definitely broken, isn’t it?

Adam Jackson 35:33
Absolutely.

Jason Hartman 35:34
It really is. It’s pretty terrible. Yeah. And you know, when you really I always talk about how a lot of people are winning, but they think they’re losing simply because they don’t know how to keep score. It is so important to just understand how to keep score. So maybe that’s a good segue into what you wanted to share with people about financial statements.

Adam Jackson 35:59
Yeah, absolutely. So over the last couple of years, I’ve become very interested in personal financial statements. So we always hear about financial statements in business. And those two would be the balance sheet and the income. But what I’d become more interested in is how the two relate to each other, and how they talk to each other. So from the rich dad series, I’ve learned that an asset puts money into your pocket, whereas a liability takes money out of your pocket. And what I’m doing at this point is I’m trying to funnel every resource that I have whether it’s savings from my w two income, reinvesting cash flow, we’re actually even looking to start a little side business just as another stream of income. And really what we’re doing with with all of this income, all of the savings is we’re dumping it back into the asset column on our personal balance sheet, which is in the form of assets or at this point, single family homes. So we do make sacrifices. There’s no doubt about That, but I’m looking at this long term. And I believe that if we all put enough money into the asset column on our balance sheet, eventually there will be more income coming in then time that I’ll have to be able to invest it. Right? Well,

Jason Hartman 37:14
that’s a very good statement, you know, being willing to delay gratification, think long term, and just build up that that asset column. Right. You know, one of the other things I just want to remind people, of course, I’ve said all this stuff before, there’s nothing new under the sun as King Solomon taught us, right. But the other asset that a lot of people don’t realize they have is their credit, their ability to borrow their ability to gain leverage with that credit. That is another thing that should go in the asset column and you got to make sure you use it. It’s not an asset. If you don’t use it like it’s a shame to have that asset unused equity in your home is another unused asset. And that’s a shame. People have, you know tons of equity in their home or properties that they’re not using that equity is sleeping money. It’s lazy money, you got to put it to work. So understanding what an asset is and what a liability is. And, you know, back to the Kiyosaki comment you made either earlier, the Rich Dad Poor Dad Robert Kiyosaki comment is that your home is always always a liability. Okay, whether you rent it or own it, it’s an expense, it’s a liability. You know, you might, depending on where you are in the market cycle, make money on your home through capital appreciation, but it’s always a liability, you always have to count it as a liability and considered a liability. So very, very important to understand that that that overprice car that someone listening might have, you know, that’s eating up money, I mean, you know, that’s a house. Okay. You know, that’s like another house in your portfolio. If you have an $80,000 car or a $60,000 car, you know, you should buy another house. pen, and that house would produce 789 hundred dollars per month in income versus costing you money and depreciating, right? So it’s very important to be buying assets rather than, you know, rich, wealthy people acquire assets, poor people acquire expenses and liabilities.

Adam Jackson 39:18
You know, it’s just that simple in symbols of well, right,

Jason Hartman 39:22
right now the appearances of wealth

Adam Jackson 39:24
going back to what you were saying about renting, and also just just acquiring liabilities, like things like a house well, when I was 24 years old, I purchased my first house and I wanted to pay this thing down as quickly as I possibly could, you know, wasn’t until I started investing, understanding and learning about inflation, monetary and fiscal policy as you always go over. But what we decided to do was to use arbitrage to do a cash out refinance on all of the equity that was just sitting dormant in the home. We borrowed that money at 4.3% and then went and purchased a additional income properties. So I think it’s a beautiful spread. I mean, 4.3% on the cash out refinance, to go make purchases and investments that are going to yield probably between 30 and 35%. This year.

Jason Hartman 40:16
Wow. Yeah, I think that is that is a phenomenal deal. And you got to just keep acquiring those assets. Now, it doesn’t mean to anybody listening that you should never reward yourself. I mean, the whole point of all of this discussion, and everything we do is that you gain wealth, so you can enjoy it and enjoy your life. It’s not to be Scrooge. That’s not the idea here. But there’s a balance, like there isn’t everything and I was a huge student of the late Stephen Covey. I just loved his work and still do. And one of the things he talks about is the P versus PC balance. P is production and PC is production capacity. And it kind of reminds me of that, in that the old thing was that Abraham Lincoln said maybe George Washington, I don’t know. I destroyed everybody’s quote on my show. But, you know, if if I had seven hours to chop down a tree, I would spend six hours sharpening the axe, you know, you know the quote, I’m talking about, right? I think it was Lincoln, the sharpening the X is increasing your production capacity, right. So that would be like delaying gratification, and investing today, you’re increasing your production capacity. And in this example, the production the P and the P versus PC balance would be you know, actually chopping the tree, right. But it also in this in this example, kind of need to use it another way it might be enjoying our wealth, right and enjoying the extra time we’ve gained in the passive income and so forth. So you’ve got to have a balance, you know, you need to reward yourself a little bit along the way. So I don’t want to make the recommendation that would it would all just sacrifice forever. And then die. That’s not the point. Okay, right. thoughts about that? I mean, you sound like you’re pretty young, and you got a young family. So you know you’re in it depends what stage of your life you’re in. Right. But I hope that you’re rewarding yourself a little bit along the way, too.

Adam Jackson 42:14
Absolutely. I mean, I just turned 31. So I guess I am on the young side. But at the same time, I’m not going to look at it as if I’m ahead of the game, because I do have a lot to learn. And I have a long way to go. But as far as Yes, we are making our sacrifices, but for instance, in order to get a new car, okay, so I could probably use a new car. So this example would be but I need to acquire four additional assets before I get that car. So this is sort of that discipline mindset, I guess, that maybe I got from the military, but it does a couple of different things. Number one, it allows me to delay that gratification. But number two, I’m also using my desires and my necessities to push me closer to those goals. Right. So Wait short, it’s sort of twofold.

Jason Hartman 43:01
Yep. That’s a great way to look at it. You’re basically you’re kind of gamifying yourself, you’re playing a little game with yourself and you’re just saying, look, you know, you can have the new car you want, you just got to acquire four more assets first, and those assets will pay for the car. And then you have the best of all worlds, you know, but most people go out in life and they have no patience whatsoever. They’re just everything is whatever’s proximate, whatever’s right now, you know, instant gratification, very undisciplined mindset, and they just acquire so it’s like, I gotta have a new car today. You know, the way you’re thinking of it is great. I love that. It’s really good,

Adam Jackson 43:38
really good. And then another thing to touch on the point about Scrooge and hoarding money and not not enjoying, you know, another thing that we are trying to do in our lives is to give more, and I give because it makes me feel good and I give because it helps others, but I also believe it’s important because it’s constantly revealing to us that in abundance mentality. So it’s not that I have to hoard everything for myself I want to give to others as well. And not only not only money, not only time, but knowledge and anything that I can do to kind of pass on some sort of happiness. So I’m trying to take the broader approach and improve in all different areas.

Jason Hartman 44:18
Yeah, that’s a great outlook. I love it. You know, when we give, it sets up our mind to know that there’s more so that’s another way we’re gamifying herself, right? hoarding is not going to make you rich. No one ever got rich saving money. Okay. Never it has never happened. But yeah, so when you give you set up your mindset for abundance, and the world is a very abundant place. Love the zig ziglar quote, he says, you can have everything in life you want. If you just help enough other people get what they want. It sounds like you’re doing that. And Adam, really thank you so much for sharing your experience in your your path to becoming a Great Investor today. We really appreciate that and Any

Adam Jackson 45:00
closing thoughts you want to share? The only closing thought I would say is, if you’re on the fence about it, if you’re thinking about it, I would say, do whatever you can to take action. Get involved, get your feet wet, even if it’s only two or three properties, because as soon as you do that, once you start seeing the different benefits that are rolling in, you will thank yourself, and hopefully you’ll want to keep going with it.

Jason Hartman 45:24
You know, Adam, that is a great closing thought. And I hate to spoil it because I got one more question for you. It relates to what you just said. So there’s this type of person, this type of mentality that wants to understand every aspect of something and learn it all first. Many of these people turn out to be seminar junkies. You know, they listen to podcasts, they go to all the seminars, they read all the books, they know everything, but they don’t do things. And what would you say, you know, I mean, you’ve acquired 11 investment properties here in just over a year. 13 months basically. And you know, what would you say? The difference between, like learning first or learning well doing? See, I think the thing is, we learn the most just by actually doing the thing. We gotta just do the thing, or we’re never going to really learn it. It’s all going to be like, book theory, it’s going to be like, the professors that run the universities that sit in the ivory towers and have like, no real life experience. And you know, you just can’t learn it from a podcast or

Adam Jackson 46:30
a book. You got to go do something at some point, right? Yeah, absolutely. One thing I think, I think there’s a mixture and we need to we need to be exposed to the information before we can actually go and execute. But for instance, one of the early videos that I watched from you was how to read a pro forma and I thought that was a great video. It did explain certain things. But really what I wanted to do after that video was to review the pro formas and not just look at the numbers, but understand how the software Got to those numbers. So for instance, understand even what makes up the loan to value ratio, or what makes up an ally, or even a cap rate. So, you know, because at that point, that’s when you really go in depth. And understand on a deeper level. Good, good stuff. Yeah. And another thing is, is I believe that it’s important to go in depth with certain things to really study a certain person. So that’s why I listened to all of these podcasts. I have other mentors and and other gurus that I listened to and go in depth into and I just find that focusing on a few things in depth is better than getting a little bit of everything.

Jason Hartman 47:44
Yeah, right. Right. You don’t want to be a jack of all trades and Master of None. So you got to pick like, you know, just a few things and really focus and go deep and concentrate on it. And you know, that’s what you’re doing in your markets. You’re not overly diversified, which is great. You got two markets, you’re gonna have your third mark. Soon and build a portfolio of you know, I think you said 5060 houses in those three markets. So I think that’ll be an excellent plan. And I just want to wish you the best and Adam Jackson, you know, thank you so much for sharing everything today. We really appreciate having you on the show and, and hope to see you at one of our upcoming events. So thanks again and happy investing to you. And you as well Jason, thanks for

Adam Jackson 48:21
having me.

Jason Hartman 48:23
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much have appreciate that and be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

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Jason begins the show with in-house economist Thomas as they discuss a new tax law and its impact on tax brackets. They look at the government’s interest in keeping the official inflation low and how it hurts most citizens. Later on the show, Jason plays a clip from 2010 Meet the Masters of Income Property discussing the different aspects of self-management. Investment counselor Drew discusses the 8 properties he’s self-managing and brings up different issues he’s had.

Investor 0:00
Well, I like real estate just because I like the benefit of being able to have a mortgage pay off real estate over time so that when I retire, I have something I like the fact that it’s boring. I want to be able to be entertained and travel and do a lot of things in my retirement. And that boring investment of real estate allows me to do that.

Announcer 0:24
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help You follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:14
Welcome listeners from 165 countries worldwide. Thank you so much for joining me. By the time you hear this episode 1179 1179 I will be in either China or South Korea, one or the other Seoul, South Korea or somewhere in mainland China. So greetings, greetings. Anyway, we will have a guest today but for the intro portion of the show, I’ve got our in house economist Thomas here, and we want to continue our discussion on some of the finer points of inflation, deflation, good or bad, good or bad for whom, and kind of dissect this issue a little bit more. We want to talk also about the the official rate versus the unofficial rate. And so let’s dive into that. Thomas, welcome back. Good to be with you. Good to have you again. So a big overarching question. I think our listeners know the answer to this, but I’ll just phrase it just in case, do government’s benefit from inflation? Is inflation a good deal for governments? And since we’re talking about governments and they’re so closely related, although not directly related in the US, at least in theory, central banks like the Federal Reserve, or the European Central Bank, or the central banks of any countries right now, the US is in a distinctly different position than every other country on Earth, for the obvious reasons, largest economy, most powerful superpower, etc, etc. Biggest brand the name, nobody mentions that but yours truly. But also, of course, the US has the reserve currency of the world, the dollar and I think it will stay that way for many, many decades to come. There are those who say different, but they always seem to be wrong. We’ve got understand that the US is in a very different situation than other governments. Same with the Federal Reserve versus other central banks. But the overriding question, do governments benefit from inflation? Take it away?

Thomas 3:19
Well, before answering that one, I thought that was interesting. You mentioned central banks in the context of inflation. One of the headline articles was about Trump’s appointment or proposed appointment of two individuals to the Federal Reserve Board, Herman Cain and one other and they will likely be dissenters to

Jason Hartman 3:42
higher interest rates there. There’s an interesting thing, right? You know, Herman Cain, and I don’t know who the other person is, offhand. But Herman Cain, obviously much more famous because, well, hey, he ran for president. He was the folksy guy with the funny sayings. So that’s sort of like Trump that’s kind of Trump like, but remember last year when the Fed was raising rates so aggressively, that Trump was really criticizing how and the rest of the Fed for trying to ruin the party, if you will. And he was right, it didn’t seem like they were being overly aggressive. I think even they agreed with that. And they put that on the shelf for the time being. Ultimately rates do need to go up so that when the next cycle hits, the Fed has ammunition to deal with with that cycle and one of the big ammo is lowering the rates, right to stimulate things. But Trump wants to get some people in the Fed who are not going to ruin the party for him. Right.

Thomas 4:42
Yeah, theoretically, they’ll be more favorable to the current administration. What I thought was interesting is that, you know, Trump’s trying to get some dissent on the Federal Reserve Board. You can probably guess economists tend to vote together. There’s very rarely a dissenting vote among the federal Open Market Committee, and he’s trying to make it more of a debate trend and make it less of a groupthink type of situation. And then this morning, the IMF released a note cautioning that central banks should avoid any political influence in their decisions. You kind of see the two opposing views happening right now with the Federal Reserve. I don’t think the IMF is happy with the two new appointees to the Federal Open Market Committee.

Jason Hartman 5:31
Okay. So just dissect that a little bit more for us. Most people really don’t think about the FOMC. And the finer points of that unless they’re in the business unless they’re a commentator or, you know, newsletter writer or whatever, or an economist. They just think about, oh, hey, Jerome Powell. He’s the chair. But there are what seven member banks, right. There’s a lot to this. It’s obviously a big organization. It controls the money. Planet Earth mostly, to a larger or lesser degree, just takes down that rabbit hole a little bit more, if you would,

Thomas 6:07
yeah, the Open Market Committee, they set policy for the Federal Reserve, and they’re voting members and non voting members. Some members are appointed by the president and other members come from the member institutions. And the group actually votes on what the target federal funds rate will be. That’s what most people I think call is the interest rate. And they also vote on the asset purchases or the Federal Reserve and any policy that the Federal Reserve adopts the Federal Open Market Committee. They’re like the board of directors, the Federal Reserve. Sure.

Jason Hartman 6:43
All right, so back to our larger question. Governments, like everybody, you know, have they have two sides of the ledger, right? They have income taxation, right? And expenses, entitlement programs, debt, etc. Now, what’s interesting is that when you Look at the expense side of the ledger, the same way we do with an income property. Remember if you go to Jason Hartman calm and you look at any of the performance we have, you will see something called n o i net operating income net operating income or noi. And noi leaves out a very significant element that is an expense, it leaves out something called debt service. So your mortgage payment on that property is not included. It is not deducted from noi noi or net operating income only includes the operating expenses of the property, not the debt service. Those are different concepts. Why would this be that way? And this goes back, Thomas to what we’re talking about here with governments and how they benefit from inflation or not, because the debt is considered a different concept than the actual Spencer’s so on a property for example, if you refinance the property, or you have an adjustable rate mortgage and your debt changes, it, probably almost almost never would it change the operating expenses of the property, right? So you’re, you’re still going to have maybe the same property management fees, the same maintenance expenses, etc, but only your debt services change. So debt service needs to be viewed as a distinctly separate category. And when we calculate cap rates or capitalization rates, a metric, I don’t think is very good. It’s okay. But it’s not great. But it’s commonly used in commercial real estate circles. When we calculate cap rates, they are based on noi, they don’t include debt service, so very important thing there. So whether a government benefits from inflation or not, it depends. We have to categorize its income and expenses, and it’s Types of expenses differently, don’t we?

Thomas 9:01
Yeah, you know, on the revenue side of the balance sheet, the federal government wants revenue to be higher. And the way to get it there is to have actual inflation be higher than what’s reported inflation. So, taxable income times the rate when that’s growing faster, entities get more money on the expenditure side, the net interest cost of the debt when inflation is higher, the value of that debt goes down.

Jason Hartman 9:29
Right. And then that right there is an example of what I call inflation induced debt destruction. So the cost of repaying that debt gets cheaper in real dollar terms, and that’s wonderful for governments, right? That’s a huge, huge benefit. So they have an incentive to create inflation from that perspective, but when they receive income, they also have an incentive to see inflation right Thomas

Thomas 9:59
Yeah. Because income tax or corporate income tax, they are linked to the inflation rate. And when the inflation rates higher, more money comes in.

Jason Hartman 10:09
Okay, so more money comes in. But you could argue that in real dollars, it’s not more money, only a nominal dollars, right? Because even if the tax law stays the same, and no percentages of tax do or difference in deductions happens, then you still have this situation where, because it’s a higher dollar amount, because everything’s inflated, the government will receive a larger chunk of money, but they pay their debt at a cheaper rate because of inflation induced debt destruction. Now, what about non debt expenses? What about entitlement programs? What about government workers and their wages? Those are typically adjusted for inflation, aren’t they?

Thomas 10:56
Yeah, that’s the case where in this case, the federal government hasn’t incentive to have the reported inflation rate to be lower than what the actual inflation rate is? Because right Social Security goes up by the rate of inflation and when inflation is 2% versus 3%, that makes a big difference on how much is going out the door.

Jason Hartman 11:16
Okay, so expenses, non debt expenses, I would argue that it’s really the same as debt, or is it different? It has inflation induced debt destruction too, doesn’t it? Even if it’s adjusted for inflation, and here’s, here’s where it gets really important. By the way, we might as well bring this up. Now, here’s the part that gets really important. You’re listening listeners, you’re paying attention right now is the time to listen. If your mind is wandering off when you have the official rate, or the stated rate, the consumer price index, for example, versus the real rate of inflation. We’ve talked many times about how that’s manipulated. How the official rate in the real rate are two different worlds. But if they say the official rate is 2%, for example, then they increase the entitlement program or the government wages with a cost of living increase of 2%. But what happens when the real rate of inflation is for example, 4%. That’s the unofficial rate. It’s the real rate. So the government is benefiting in a huge way they’re right, because they have a very big incentive to understate the rate of inflation. Because if they can pay back in dollars that are 4% cheaper. Well, they’ve only given a cost of living increase of 2% because that’s the official rate. They’ve got an arbitrage don’t take Thomas. And just

Thomas 12:47
Case in point this let’s see this year. 2018 was the first year of the new tax reform and I

Jason Hartman 12:54
love it, I see a bundle. So Trump,

Thomas 12:58
it definitely saved large portion of the population a good amount in taxes, one of the provisions in it did play around with the inflation rate it changed. Let’s see the inflation measure used to calculate the income brackets, their tax rate brackets, right you pay 3%, you pay 10% on the first X amount of income and 15%, then, you know, you go up to the top marginal rate and those brackets rather than being linked to the CPI, they are linked to the chained CPI, which is a lower inflation rate. So individuals because their income typically rises faster than the chain cpi, they’re more likely to fall into a higher tax bracket because their income will grow faster than tax brackets,

Jason Hartman 13:49
right. So that’s another way that they can really manipulate it because if the official rate is stated it in that example 2% the unofficial rate is really for percent income is inflating, you’re paying a higher percentage, right? But it might kick you up into another bracket. And that’s huge. That’s a big big deal, isn’t it?

Thomas 14:13
Yeah. If you’re in the 35% bracket, you know, it’s a chunk of money.

Jason Hartman 14:18
Yeah, no question about it. Okay, Thomas, we got to get to the rest of our show. But let’s wrap it up.

Thomas 14:23
What else? What else? Do you want to tell the listeners? Oh, inflation is a great thing if you take advantage of it.

Jason Hartman 14:29
Yeah, no question about it.

Thomas 14:30
It’s bad magic, if you don’t

Jason Hartman 14:33
love it. I love it. Yes. So take advantage of inflation induced debt destruction, the best way to do that is with the most historically proven asset class in the entire world. And that is none other than income property, because of its very special multi dimensional characteristics that allow you to really, really take advantage of inflation and make it benefit you. So let’s get to the rest of our show. In conclusion of our self management week, we go back to the 2019 meet the masters of income property event, where drew Baker gave his presentation on self management.

Drew Baker 15:15
So there’s stuff on the phone that you’re able to deal with that the property manager is never going to take care of this type of stuff. And so you’re just noticing these sloppy oversights, you know, dirty closets. Still stuff that’s simple to anyone that just walks through the property will notice. So after 10 years, I kind of came to the conclusion that my property is on life support for Dummies. And, and so it’s no dig on any vendors here. I haven’t used none of the vendors here. I used as managers. So this is my experience. And if you find a good property manager, please tell them about me. We don’t invite these bad. Oh, yes, yes. So part of the best Benefits of self management is step one, finding a leasing agent, finding someone in your market that knows what they’re doing what’s renting currently and how to successfully find a good tenant.

Jason Hartman 16:12
Okay, so let’s let’s talk about a leasing agent for a moment. What do you mean when you say that? Do you mean a realtor? A regular realtor who will do leases now? Yes, a lot of realtors and a lot of markets do leases some don’t? Yeah. And so, this is not a property manager offering an unbundled or all a cart service, right? Just and let me just define it. So you know, the property management thing has usually been throwing in multiple activities together. One, you know, marketing and, you know, handling the lease, writing up the lease, screening the tenants, and then putting the tenants in the property, managing any repairs or fix up and then collecting rent each month. So what you’re doing is you’re saying hire a real estate agent. Yeah. And they do the least Stop, right? How much do you pay them?

Drew Baker 17:01
Well, that’s the next thing. Part of my reservation about going with a leasing agent, a realtor to do the lease up is it was, it was a property versus a property manager was it was more expensive. It was about one month’s rent, not half rents month worth of rent. But the reason for that is the property manager gets all this back end money that you don’t really think about. And so, yeah, you got a great deal on a cheap haircut, but then you look in the mirror and realize you’re an idiot, you know, and so part of the problem here is I’m negotiating up front, someone to, you know, take a good amount of time to take quality photos, market the property, go there and meet with you know, plumbers to deal with little issues. And they’re on the hook for getting me to the finish line to find a good tenant. And, and then also, you kind of have some say about what type of tenant you’re going to get in terms of Hey, do you want this tenant over here that has five kids and works on cars in the driveway? Or do you want this family that has, you know, to I mean, and I sell just kind of briefly look over and kind of come to the conclusion of what she thinks, and we’ll figure out what makes the most sense for the property. The next thing is whoops, is building a network. And so I’m I think that building that network of support in the local area, is what helps me ultimately find good vendors. So this list on the left is something that the leasing agent gave me that said, Hey, here’s everything you got to do to the house, replace the porch post, I think you have a problem with the front porch. And the you know, you have to deal with this thing in the kitchen and this thing in the bathroom. So I went on Yelp and I found a contractor that got highly recommended. I called around to a few people kind of got some references in the area and the thing is that Nice’s a leasing agent lives in the market. They get homes ready to be sold or rented. And a lot of times they know people in that area that can do the work. So you can kind of lean on them to find people to help you. So this porch post right here was being was rotted out and showing signs of decay in the attic. The I got the licensed contractor to go out and give me an expert evaluation of the house. He looked at at the roof. He looked in the attic noticed that the dryer vent was not connected and it was billowing into the attic. So this was a fire hazard and a safety hazard on the front porch that I had to dress immediately whereas the property management had made this rent ready. And so I have control over what type of mailbox post I want to use. He said Are any of these pillar posts interesting to you via text while he was at Lowes, I said nope. Go to the ARDS. So, so he gave me the ability to choose, I said, I want to have it look like it is in the neighborhood. I don’t think this isn’t going to work for me. So, so I saw the job to completion through his text messages. And so you can see this was rotted out. This was taken by the agent. And so you know, we were worried about this pillar post, because I’m like, Is it a leak in the leak in the roof? Is it What’s going on here? So he was able to identify where the leak was coming from that little gap that he cocked in and put in a new porch post. And what’s funny is he took me a took the photo on the left showing me the job being complete, and my tenant took the photo on the right saying, Ah, he forgot to come you got to have him come back. He forgot to connect the gutter extension. So he came back the next day and came back the same day actually, and got a complete. So I want you guys to guess kind of what the labor component was to do. Replace All this stuff. It was 500 bucks, took them about a day to do.

Jason Hartman 21:06
So what do you say that would have cost with her?

Drew Baker 21:09
Oh, I mean, first of all, I don’t think they would have done half as good a job. And it would have been three times more money. And I would invite in my name is a little time, I’m finding that the vacancy loss by getting the tenant turn quickly and getting someone in there on those eight properties turns out to be about $100 extra month. And then if three of the properties, let’s say, come up for lease renewal year, and that’s, you know, that comes out to about $125 a month cumulative for all the properties that I’m saving, it really adds up repair market fees. You know, this is about $150 a month, cumulatively that I’m keeping and then the management fees themselves is $625 a month for the for these portfolio in the market. And this as Up to 1600 bucks, believe it or not. And the last point that gets us there is scheduled rent increases. And I’ll show you kind of the strategy that I’ve increased rents, by giving tenants notice these property managers, they send you a letter in the mail and you go, oh my goodness, like, there’s no planning, there’s no expectation they feel in the dark. They don’t know what’s going to happen. rents been the same for four years. I didn’t get a heads up, they’re not prepared for it. They’re paying late anyways. So I’m sort of cultivating my tenants to get prepared if something’s coming down the road. So there is this this slide my wife put in because she’s like, you can’t talk about picnics and butterflies and rainbows right right. You gotta Yeah, she’s she’s gonna get up here and start heckling me. She’s gonna go Oh, my gosh, I’ve seen

Jason Hartman 22:49
she’s, she’s in Katie’s employer.

Drew Baker 22:52
So I’m getting calls all times a day is this is part of the problem. And I you know, the other thing is, is this is Indianapolis. The timezone difference is Three hours away. So, you know, when tenants there are messaging me at, you know, before they go to work, I’m, you know, sound asleep and it’s you know, four in the morning. So a lot of times I’ll wake up and have to kind of dig myself out of a inbox, but it’s not too bad. You know, maybe I’ll get a text message every other day. And right now I’m kind of in full blown maintenance mode trying to get everything squared away. So it’s smooth sailing into the future. So right.

Jason Hartman 23:28
So an important thing I think, to understand is that you’re you are spending a bit of time on this now. Yeah, but you’re looking at is like you’re just fixing a lot of things from the past. We get this kind of smooth out. What do you think your your, the amount of time you’re going to spend managing eight properties now? You’ve got more properties in a whole nother market in Memphis? Yes, I know. But you are you self managing any Memphis I You are so

Drew Baker 23:56
that property in that market. I I’ve had mixed success. And I went into my portfolio and looked at it and said, which one of these properties is going to give me the less least amount of trouble? And I let the property manager know is going to let them go? They said, Oh, no, no, once you just take one of them and see how it goes, and I didn’t even tell him I was going to self manage. I just said, I’m gonna let you guys go. So I took that property over, you know, the tenant called me last week and said, the furnace went out. I have a friend that lives in Memphis, And hey, if you know someone that’s good at h back, please let me know. He gave me two referrals. I contacted them on Friday afternoon and said, Hey, on Monday, can you schedule to go out and take a look at this, and it was not that hard. And, you know, I looked at the performance of that one property. And I had seen the last previous years, they had not had one service request. So you know, I picked a property in my portfolio that I thought was going to be low, main While I work my way into that market to build my network of vendors and support before I let the other people let the other properties under mint under management myself, so I’ll give you an example. I had, I was at a wedding in Arizona, and I got a call, the tenant said, Hey, I’m looking at the invoice here, and it says there’s a pet rent. I’m paying 950 a month, and I should be paying, you know, 1050 a month, but I’m paying 950 a month and this pet rent here we gave away the dog long ago. So this should be taken off. Well, I had to have the uncomfortable conversation of telling them, Hey, no problem. I’ll remove it. I know in a year in six months, you’re coming up for renewal. I’m planning on going through fixing all these things getting it improved, but just so you know, at the end of the six months, it’s going to be adjusted to market rent, when we get this place up for for rent, so they kind of work uncomfortable called me back or a bit flustered because they didn’t, they had just been charged for this pet, they didn’t have any more. And they heard they were going to get a running, please. So sometimes, you know, being friends with the people trusting people from afar, having a relationship with the tenants can be a downside and having them call you at all times of day. I agree. of the eight properties that I have here. Four of them are new tenants. So it’s not like some of them are new, some of them are not. The other downside is, and this might be kind of cuts both ways as I’m reinvesting my profits into the property to kind of give it a sparkle. So the way to realize is the tenants are your customers. This is a business and you have to think of it that way. You have to give good customer service if you want your tenants to be happy and stay. And so the property manager, the fridge, handled broke and they just tried to glue it back on and if They could after they tried to do that a couple times, I’m sure they would just replace the whole refrigerator. I went online, was able to buy two refrigerator handles, send it to the tenant, do research on the part I said take a photo of the serial number model number in the fridge. And I was able to send them to through Amazon Prime for $25. And they were a static and ironically, the fridge handle broke again and they had to put the other one on so no wonder they sell it as a two pack. So

Jason Hartman 27:28
here what you did is you actually they view your have this light and you actually shipped your tenant the ceiling fan right

Drew Baker 27:36
ahead of me here. Yeah. So now I’m going to talk about the ugly part the worst situation I’ve ever had and give you a chance to kind of see how I was able to problem solve. This was a sump pump that had gone out a couple years prior. The tenants don’t speak English well. They told the property management company property managed company did nothing for years. The tenant ended up ripping out the sump pump themselves once I sent a pump to them to pump out all the water took them. I took them I think like six hours to pump out all the water. I went on Yelp and not all people on Yelp are created equal. Got an estimate for $12,000 to fix this bottom sump pump, whoa. So I, I have an infinity pool in my basement want to come over. And so I decided, you know what, I’m going to go ahead and call Justin, the guy who really saved my butt on this property and say, Hey, do you have anybody you might recommend? And he said, You know, my cousin is a licensed contractor. Here’s his, you know, Yelp page. He gets great reviews on Angie’s List. Why don’t you give him a call. So guess how much it costs to replace this sump pump. It was $12,518 Well, he came in and sent one of his good old boys in and we did it for 637 no mold. It’s not a big deal. Wow. Then the polar vortex hits a couple months later. This is scary. My tenant calls me Early in the morning, of course and says, Hey, just to let you know, the pipe, the main pipe froze. And because the access door because we’re getting all this water in this access door is broken. Some cats who didn’t who wanted to survive the cold night came in and ripped all your ductwork open to crawl in and survive. So I called my friend of a friend, contractor guy who did the sump pump and said, Do you have anybody that can come help me do this? He said, I can do anything you want as long as I don’t have to come outside. So he sent one of his guys out there, did it, massage the water pipe back into into shape, and did it for under $1,000. We paid the guy 50 bucks an hour because it was 10 below and it was I don’t I don’t know how anybody did it. So kind of the last point here that I think it’s kind of funny, Jason go back is if you want when I did the remodel on that property that you saw where there was $100 bump in In rent, my handyman left all the boxes, the toilets all at the out in the front for their trash man to take. And I had my tenants texted me and said, Did you schedule with the trash man to pick them up? And I said, the handyman didn’t take them. Nope. And they’ve blown around in the cold and they’re all strewn across the lawn. I would really like to get them out. So I called the trash company. They said, Oh, well, today’s Tuesday, and we won’t be able to pick up till Monday. And each item is going to cost $20. So for them to pick up these, you know, five items, it’s going to be 100 bucks, and I just thought, Oh my gosh, that’s crazy. And I have to wait a week. It’s gonna sit outside. So I went I put a Craigslist ad and this is the problem solving aspect. I put a Craigslist ad I said, Hey $20 to the first person that comes and takes two free working toilets curbside, and believe it or not, everybody except Jason texted me and said I’ll be glad to come pick him up and the guy I didn’t even really The boxes were there. So he said, I’ll do it for 25 bucks. So now I have this guy. I paid him through Venmo. He came and picked him up the next day, and the tenant was going. So that’s it.

Jason Hartman 31:13
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

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On this Flash Back Friday from Episode 971, originally published in March 2018, Jason Hartman discusses why home sales are very strong and where he expects them to go. Later on the show, he brings on client Brandon Cook, a member of the Venture Alliance Mastermind. They discuss his success in real estate investing. Cook currently owns 6 properties and is looking forward to more investing. He talks about some hurdles in purchasing your first property.

Jason Hartman 0:00
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is hand picked to help you today in the present, and propel you into the future. Enjoy.

Announcer 0:15
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. Here’s your host Jason Hartman with the complete solution for real estate investors,

Jason Hartman 1:06
welcome real estate investors, lifelong learners curious people. This is episode number 971 971. And this is your host, Jason Hartman. Thank you so much for joining me today, as we do another one of many client case studies. Now I know a lot of you really like hearing from young people that are doing good things in the world. And this one is certainly one of those. Our clan and youngest venture Alliance member Brandon cook. We just realized he hadn’t been on the show before. So he’s on today, and he’ll share his story with you and how he’s investing and started very young and he’s been coming to our meet the Masters event and really all of our events for many years now. I just saw him in San Jose at our gym. You live Jason Hartman University live event just a couple of days ago. So he’s on the show today and I think you’ll enjoy it but a couple of housing stats for you some of the latest stats, this is from our friends at NAR National Association of Realtors. I used to be a member for many, many years. They publish a lot of stats, you gotta take them with a grain of salt, because, hey, they’re out promoting their agenda. So just understand that but hey, stats are stats, I’m assuming the stats are accurate. They do some good research. So thanks to them for this data today. So home sales, home sales are very strong. They are ticking along at a an adjusted rate of 5.38 million looking like what’s going to happen. The median price is about $240,000 Just in December Now remember, there’s always a lag in these statistics, a lag because is it you know, it took so many years for NAR to finally come around and create a pending sales index which I could never understood what took them so long to get to this, but they finally did it. This is not pending. Remember, things have to close. And then they have to get the data from all of the various county recorders and the places they get data from the MLS systems. And so there’s always a lag time in this stuff. Understand leg, leg leg, the stats are almost always 60 to 90 days behind. So literally when you’re hearing about housing stats, they are number one, they’re never localized enough. That’s the first problem. But number two, they lag Like a whole quarter, a quarter of the year, there a quarter behind many times. So this is from December, New Home Sales Reporting in at 625,000. When we look around the country, and we look at January, and we look at the median number of days on the market, right? The red hot places are mostly the usual suspects, but not completely, not completely the usual suspects. They are mostly the cyclical high flying markets with glorious highs and ugly ugly lows, lots of bankruptcies and foreclosures during the bad times. And home sales are clicking along at a very, very rapid pace in places like the Socialist Republic of California. Washington State, very hot Oregon. Not as hot still moving well, Nevada where where I live in the no income tax state of Nevada, Utah. Very, very hot Colorado very hot, but oddly ready for this one. This one is an outlier, where our friend Rand Paul is from his dad spoke at our meet the Masters event Ron Paul, right. He was one of our keynote speakers. Kentucky, Kentucky market homes are selling in less than 31 days, less than 31 days. And looking around the country, you know, most of the country, it looks like things are selling in 46 to 60 days. That’s the vast majority of the country. So that’s kind of interesting to look at that stuff as well. So what we have coming up in the world, what do we have coming up? Well, we’ve got our first Northeastern event coming up, Carrie and I just got off the phone with our national Yes, we’re Moving up in the world, we now have a national accounts manager. We are looking at locations in Philadelphia, we may not pull that off. By the way, we may end up in Washington DC, in May, working on event in Washington, DC or Philadelphia in May. So more to come on that. And then also our venture Alliance mastermind in the Big Apple, New York City in May as well. Course sooner than either of those is the Ice Hotel coming up in just about a month. Well, a couple days less than a month. That’ll be just great. A bucket list once in a lifetime trip to the Ice Hotel in Sweden. So if you’re interested in that, let us know. We may if we’re lucky, be able to get you a room. An ice cold art suite. Yes. One night in there one night in the warm room. Don’t worry. People don’t die in these rooms. They they look Live but they are really glorious. It’s just a such a unique thing. Look it up. Don’t google it because Google is evil, being it being it being the Ice Hotel in Sweden, and check it all out. It’s really neat. So what is the most expensive market? Well, I just got back from there, the most expensive housing market in 2017. We just had our Jason Hartman University event there in San Jose. Technically it was in Sunnyvale, but San Jose, Sunnyvale Santa Clara that Metro

Jason Hartman 7:35
the price of Whoa, whoa, whoa. $1,270,000. Do you know what the cheapest market is the least expensive housing market? Cumberland, Maryland, weighing in at just $84,600. That actually kind of surprises me. I mean, not in a really blighted area in the inner city of Detroit? I guess not because it’s always a metropolitan area. It’s always an MSA. You know, it’s just like voting districts, right. You’ve heard the term gerrymandering, right? Well, the gerrymandering concept of course if you forgot what it was, you probably learned it in school. That concept is where the democrats and the republicans they will cut things up to try and get the election to work in their favor right. They do this because the republicans absolutely suck at public relations. And they never seem to get their message across the democrats always seem to own the message even though their philosophies the less desirable of the two. Not that either are that great. You must be a libertarian because it’s the only way to be it’s the only honest answer and politics but anyway, or misnomer that we have a binary system because, hey, the powers that be want us to be arguing with each other all the time, right? They would make you think because the democrats are much better at campaigning and much better at public relations. They would make you think that Oh, those evil republicans are doing all the gerrymandering, right? No, Democrats do it too. They both do it. You know, it’s, it’s just the way it is. So gerrymandering is pretty much like the MSA. But the MSA is so far as your humble host knows, do not change every four years or every two years in an election cycle. But but they do cut up in odd ways where you get good areas, bad areas. Maybe that’s the reason Detroit wasn’t the lowest price homes or some funky area in you know, North Dakota, right or something like that. Just because, you know, you’ve got a lot of very nice areas on the outskirts of the Very bad inner city of Detroit. Right? So that’s what happens there. Okay, well, hey, let’s get to our client case study. And let’s look at young people doing great stuff. And also remember that we have a junior membership now, a just newly announced Junior membership for the venture Alliance available. The price is nice. So you younger members, we want to get you involved. We want to get your new thinking we want to get your excitement and enthusiasm for life in the venture Alliance. We just think it’d be fun, so that’d be good. We’d love to have you what else Oh, yeah, book recommendation. I’m always going through tons of books, tons of books. As far as just audio books alone. I probably do a good hundred and 50 of those a year. So average of maybe three a week. I’m always learning stuff. It’s almost like a compulsion and addiction. It’s like OCD. I must be learning. abl always be learning always be learning. Well, an oldie but a goodie, you know, I’m always telling you gotta watch old movies, and you got to watch old TV shows, and even read old books. You got to do this. So you gain a perspective, for many reasons, not the least of which is to watch how far society has fallen.

Jason Hartman 11:33
Yes, it is an amazing time to be alive. But in many ways, society is just falling apart. I don’t know whether I should be an optimist or a pessimist. Some days. I just don’t know. But mostly I’m an optimist. So there you go. The famous the late great, Peter Drucker, the management guru of the century of the last century. Right, an amazing, amazing person. You know, I haven’t studied his stuff for several years. I check in with his, his works once in a while, and they will live forever because they are brilliant, brilliant, brilliant. Peter Drucker was a brilliant man. No question. Anyway, the effective executive, well, that was really good. Now it’s about management, but really not relating to property management. Or it’s related to corporate management, but it’s also related to self management. And I don’t mean that in the sense of self managing your properties, I mean, managing oneself, right self management, Peter Drucker, highly recommend it. Really good stuff, not about real estate, but about management and life. And it’s interesting to go through that material and it’s just so old fashioned, but in a good way, in a good way. in a very positive way. So Peter Drucker’s effective executive, I would highly recommend, so not a real estate book, but a good one nonetheless. Okay, let’s dive in and talk about a plank case study today with Brandon, here we go.

Jason Hartman 13:24
I’m looking forward to sharing with you another great case study today and I love it when we have our younger clients, Millennials, Generation Y, that is really making a difference in their own lives and the lives of others, inspiring us to be better investors and, and just better all around people. Brandon cook who is on With me today is our youngest venture Alliance member he joined right as a founding member right in the beginning a long, long time ago. It’s just great to have him here. He’s a fighter pilot in the Navy. He’s the only guy I know that knows how to And takeoff on an aircraft carrier. Brandon, welcome. How are you?

Brandon Cook 14:04
Hey, Jason. Great. It’s really good to be on the show.

Jason Hartman 14:07
Yeah, I can’t believe after all the years we’ve known each other that we haven’t had you on the show before. I mean, you’ve spoken a few words here and there, like a venture Alliance event when we’ll pass the mic around. But we haven’t really done a show about your journey, you know,

Brandon Cook 14:21
like small appearances, but nothing, nothing dedicated. Been on some of the other the other shows in the Hartman Media Group, but not this one. So I’m looking forward to a good discussion.

Jason Hartman 14:31
Yeah. Well, it’s good to have you on thank you in advance for sharing your story with clients. And it’s really quite inspiring. Because, you know, I remember seeing you way back in maybe 2009 or 10, eight, nine years ago, maybe more even at some of our meet the Masters events back in the old days. When did you discover my podcast, for example, and how did you get involved with us and what was the start of your interest in real estate?

Brandon Cook 14:58
Well, as far as My interest in real estate that came from reading Rich Dad Poor Dad reading some of the other Kiyosaki books and he lists different asset classes. Real Estate interest me the most because it was something I knew I could go on deployments with, it would still kind of keep running you know, I wouldn’t funded a small business. As soon as I went on my first deployment in the Navy, it fall apart. So I was looking for something passive and a more proven system. And then that’s how I found you. You were one of the first companies that I basically sought information from, believe it or not, I found you in print. Can you believe that? I don’t know. I don’t know if you still market in print at all? No, I

Jason Hartman 15:39
don’t really not really. We we don’t really advertise at all anymore. But what did tell me what you found. I found

Brandon Cook 15:45
an ad it was an ad in in like an Entrepreneur magazine or so I was in a bookstore and saw a small It was kind of like in the back pages where they put like 12 ads on a page. You know, there was your Hmm older facia, you know, platinum properties investor. And when I went home and googled you, I think it was Google but yeah, yeah, it wasn’t. It was like,

Jason Hartman 16:09
that was around back.

Brandon Cook 16:11
Yeah. 2009 Okay. I found the creating more podcasts. And when I did I subscribed. I remember the newest show was get this episode 48 Oh my gosh.

Jason Hartman 16:26
So as we speak, Episode 959 is being released today. And you know, I don’t know when the listeners will hear this. Obviously, they may hear away in the future. We may be in Episode 1700 by then. But Episode 48 was the first show you heard that is amazing. Oh my god. What was I talking about? And did I make any sense?

Brandon Cook 16:48
It was it was I can’t remember. I mean, it was some of those early shows had a lot more core content, real estate. And I loved it. So I didn’t just start From there, I went to just episode one, and just listened through that. Wow, I think it took me to, you know, Episode 60. Before I had caught up and then and then I was just listening to each one. It was once a week or once every two weeks back then. And now I’ve been listening to you ever since the first event I went to was at the it was Hyatt Regency in Irvine. It wasn’t in the room.

Jason Hartman 17:24
Yeah, it was in that room. I remember the stadium’s audience

Brandon Cook 17:27
style room. It was it was a side room, maybe, I don’t know. 35 to 40 attendees.

Jason Hartman 17:34
Yeah, yeah. Yeah, I remember that. I remember when you were there. And I think the one you were at was the one where one of our clients and he’s probably listening and I’m going to forget his name. Sorry, but he actually made a song. For me. He made a song out of my 10 commandments, and he brought his guitar and he flew out from I believe it was North Carolina, and he performed the song About the 10 commandments and refi till you die. principles that was awesome. We got to find the recording of that it was so great.

Brandon Cook 18:07
Yeah, that was it. That was the first event. I bought my first property with you, shortly after that meet the Masters in Phoenix, and then just started buying one per year to kind of today where I have six rentals.

Jason Hartman 18:20
Yeah, absolutely. Fantastic. Okay, and so you’re 31 years old. So young guy, you bought your first property in Phoenix that that wasn’t where the meet the Masters was. I just wanted to make sure that was clear to the listeners. That was back when we were recommending Phoenix. So you made a lot of money on that property because Phoenix went up we can’t recommend it anymore because too expensive. Now,

Brandon Cook 18:42
that was a great property. If I could have afforded 10 of them. I would have you know, obviously hindsight is 2020 it’s because it was so cheap. way below construction nearly had I mean, I think I remember doing the math. It was like $42 a square foot. Oh

Jason Hartman 18:59
my gosh. No, you can’t do that anymore. Yeah.

Brandon Cook 19:02
And here I am trying to figure out how to get a mortgage for the first time because I’m at this point, I’m 23, I believe, or 23 or 24. And, you know, had never been a renter my whole life and was kind of nervous. I’m like, What is going to happen with this? I’ve never seen this property. But, but honestly, your educational material gave me that confidence to go on. That’s fantastic.

Jason Hartman 19:27
You know, Brandon, you’re definitely one of our youngest clients starting at age 23. I mean, you’re not the youngest anymore, but we’ve got some young clients, but 23 is pretty young. That’s just awesome. That’s just awesome that you, you did that. Obviously, it’s working for you. So that’s just great news. Now, the other interesting thing is, you got your family involved with this. I think you got them involved. Maybe they got you involved, I don’t know. But your mom and your dad come to our events. I’ve met them both several times. And tell us about that. What are they doing?

Brandon Cook 19:57
Sure. So my dad was the first to hop on board the real estate bandwagon. I took him I think my second meet the Masters, I took him with me so, and he went to nearly everyone after that. There was a year or two in there that he and I both missed. But for the most part we’ve been been in ever meet the masters. My mom’s more recent. She just came to this last one in January. And as far as properties Yeah, I convinced my dad took them a little bit to act. You know, and I had talked to you about this, I think, at one of the property tours, and you know, he just said it, Jason, my daddy, he understands the material. But taking that first step jumping into that first property, it’s a big obstacle, big barrier for him. And honestly, I think, especially with your young listeners, that’s probably an obstacle that they have as well. It’s always the first one that’s the hardest, isn’t it?

Jason Hartman 20:54
Yeah. Yeah, it is. And you know, maybe Brandon, you know, because you’re a fighter pilot. Maybe you can draw some comparisons. Of course, everybody thinks being a fighter pilot is like super cool. At least I do. We all saw Top Gun and you know you guys have this great coolness image being fighter pilots. For sure.

Brandon Cook 21:13
It’s not like the the I can assure you.

Jason Hartman 21:16
I believe you I believe you. Yeah, but I believe that, but I’ve never been able to break the sound barrier and you have so I’m a little envious, okay. I want to break the sound barrier sometime. Here’s the question, though, with real estate and income property investing getting off out of your comfort zone to buy that first property. That’s the hardest. And I think there’s this tendency among everybody with everything in life is that a lot of us we want to learn about everything. Before we do it. And a lot of it, you just gotta actually do it. Right, right. You know, can you learn how to fly a fighter jet in the classroom and ground school know at some point you got to actually fly. Right. And I think there’s some parallels. For like first time investors Of course, we have a lot of people that aren’t first time investors, you know, they own dozens and dozens and dozens of properties. Now, but the first one, it’s kind of the hardest, you know, speak to that a little bit,

Brandon Cook 22:18
you know, back to the classroom versus getting in the aircraft. You’re absolutely right. In fact, I would say sometimes we try to do too much academics and not enough execution of what you know of it. You like your if you wait to 100% solution and knowledge before you act, you’ll never do anything. And I haven’t read anything that says this. But just a gut feeling is that younger generations and millennials and younger, I think this is going to be a worse problem for those generations. Because we grew up in the information age where information is so easily shared and you can binge read, you can go all ahead and knowledge and not in action. execution. So, as a fighter pilot, you know, you have to be able to scan quickly. If the solution is there, then you pull the trigger you you know, employ the the missile or bomb or whatever it is you’re doing. I’ve also heard the other kind of analogy that’s like people that will aim forever, you know, Ready, aim, aim, aim, aim and never fire right now. So I guess, with my background with being a fighter pilot going through that training, I think absolutely. That helped helps me in my investing, and soon my entrepreneurial endeavors. Of course, gonna become knowledge in what I can, but I’m going to go for a 90% solution, realize I’m going to still make mistakes, most likely, but it becomes time to do

Jason Hartman 23:46
Yeah, all real life, education and real life training is on the job, if you will. So it’s on the job of being a real estate investor. It’s on the job of doing anything you’ve got to actually do there is a certain level learning that comes by doing only. And, you know, look, I kind of hate to use this comparison already, because it’s a family friendly show. But I’m sure everybody listening has made love before. Okay. Could you read about that in a book and understand it? No, you know, there’s no way to read about that academically, right? You just have to actually do it. Right. You know, I think that’s kind of a it’s actually a pretty good comparison. I hate to bring up that, you know.

Brandon Cook 24:33
Speaking of love, you know, it’s Valentine’s Day. I didn’t mention that in the intro.

Jason Hartman 24:38
It is valid. I know, but but they’re not going to hear it. They’re not going to hear this for probably a couple of weeks.

Brandon Cook 24:44
To bachelor guys talking to each other on Valentine’s Day. I can’t think of anything more lonely.

Jason Hartman 24:49
I know, man life is. Life sucks.

Brandon Cook 24:54
Yeah, Valentine’s Day. That’s what all the single guys say. Yeah. Well, I don’t know.

Jason Hartman 24:58
I think it depends. I think As far as the like the Valentine’s Day episode that actually goes out tomorrow. So you know, folks, you will not be hearing this obviously on Valentine’s Day. You’ll be hearing it in a couple of weeks. Okay. But the Valentine’s Day episode that goes out tomorrow as Episode 960 is a good follow up to win. I have the author of the Five Love Languages on the show, which was a good Valentine’s Day Episode Two, but what was I gonna say about that? Oh, yeah, I think people who are either married or in relationships, I’m guessing this is nobody knows. Because you never get any real data on this. I think people in relationships and marriages, they kind of toe the company line, if you will, and they want to be good people. And so you don’t really get like honest data about how is it you know what’s like? And then there are the complainers. It was just complaining, oh, it’s terrible or my wife or husband, but I think the 20 to 25% of them that are happy are probably like the luckiest people on earth. Because that’s just you know, it’s life’s greatest gift. Possibly, you know, maybe children also. So yeah, anyway little sideline there must we get off on a tangent,

Brandon Cook 26:12
overcoming the analysis paralysis and acting and and to bring it full circle, although that was maybe an obstacle for my father at first he is in two property area owns two and he’s getting into his third right now and my mom has I think she has one and is an escrow on her second and then my sister with her brother in law are on five or six in Memphis. So yeah, it is a family affair Now again, it works dinner conversations that you know home for the holidays, talking about this real estate thing. So awesome works. That’s awesome. Hey Brandon, how old is your sister? My sister’s 32 more nearly a year apart.

Jason Hartman 26:51
Yeah. So she’s a year older than you and she’s accumulating quite a few properties to it’s interesting that the kids are buying more than the parents. Yeah, it’s gonna interest. Yeah.

Brandon Cook 27:03
The the parents were victims of the conventional model they been employed their whole lives diligently contributing to a money market account. And of course, that doesn’t really secure your retirement, especially in an inflationary environment. We’ve, you know, come to discover

Jason Hartman 27:21
well, right, yeah, no, that’s definitely what most people do. And we’re trying to talk them out of that, that standard plan. So that’s good. But when you were talking about learning versus doing basically, that’s what it came down to. You reminded me of two things. Number one, one of my favorite quotes, let me see if I can remember it. Because something like this successful people make decisions quickly, as soon as all the facts are available, and change them very slowly, if ever unsuccessful people make decisions very slowly, and change them often. And you know, that’s thing when you just Just go for it to some extent, and you force yourself to get out of your comfort zone to be uncomfortable, you know, and you just get in there and you look, you know, look, I’m a capable person, I’m going to figure it out, I’m not going to know everything before doing this, there will be some mystery, but I’m just going to jump in and deal with it as best I can. And those are the people that just win in life, because there’s just a certain amount of like, extra credit you get from life or, you know, points, you just get a certain amount of points and wisdom from actual action. It has like its own inherent value. And it also reminds me of one of my favorite books by Michael Masterson. That’s his pen name. And I had him on the show. It’s called ready fire aim. And that’s what you were talking about. And I, I heard, you know, one of our clients, Doug Berg, who’s been on the show before and you know, Brandon, yeah, he was in the Navy also. Or maybe Marines I think was the Navy. He talked about how, when you learn to shoot, that’s actually the technique, because the way your brain works, and maybe you can speak to this, you actually have to fire almost before you aim. And I know that sounds completely weird, but he explained it really well to me. I don’t know, maybe you got some of that in your military training. And you can speak to it.

Brandon Cook 29:24
Yeah, that’s interesting. Yeah. I also think that what he may be also talked about there and that example was that you can dry fire or shoot without, you know, pull the trigger, work on your grip, you can do all that without a bullet in the chamber. And you’ll be smooth all day, but then as soon as just the cartridges is put in the breach, and you know, that you’re actually going to send around downrange, it changes your, your technique, it’s like, psychologically, you know that you’re actually going to shoot the gun and change it and I see that too, with my pilot training as well, we’ll do just dry runs with no ordinance all day. As soon as we have ordinance coming off the aircraft or we’re shooting the gun. We don’t fly as good of a profile, a weapons delivery profile. So there’s that there’s that psychological element where reading it in the book and visualizing it is important. Yeah, you’ll be a perfect investor in that realm, right? You move actually executing it’s going to be different. You’re going to make mistakes and think back and go. I can’t believe I made that mistake. Right. And that’s okay.

Jason Hartman 30:31
Yeah, we all we got to just do things in life, I always say, and my saying is cultivate rational recklessness. Be willing to be a little bit reckless in your actions, because otherwise you’ll just never take any actions and you’ll be textbook smart. You know, you know, the world’s full of educated derelicts as the saying goes, Brandon, what have you learned over the years as an investor as a young investor, share, like any tips, you have any technology You use applications, organizational techniques, just anything you want to share.

Brandon Cook 31:04
Yeah, sure. I learned, man. There’s a lot I’ve learned that I can’t even think of its, I would say, productivity is something I really, really struggled with early on. Maybe that’s a product of the information age to that kind of lack of focus or not distraction. Yeah. So when I initially started investing, I was severely disorganized. I was not keeping track of my books. So I didn’t know where money was going in and going out. And I started doing my own bookkeeping, and I think that is a must. Everyone should either do their own books or even better you pay someone to do your books for you. Because if you’re going to be a investor and an entrepreneur, you’re more or less you’re making decisions, leadership decisions, and working in teams. You shouldn’t be pushing paper and in the mechanics, that’s not really the The life of an investor or a business owner, real estate investing is kind of running its own little business.

Jason Hartman 32:06
It’s definitely a business. Absolutely.

Brandon Cook 32:08
It becomes this kind of business, even if you have property managers, so I think that was it was a mindset shift, I think, for me initially was to learn how to delegate and learn, you want to have good records, and then make decisions based off good reports, you know, so early on doing books and having my income statement, having my balance sheet and reviewing them once a quarter was an absolute must be I was stalled until starting that what what software are you using

Jason Hartman 32:41
What? But

Brandon Cook 32:43
it’s, it’s moving away from again, QuickBooks is the standard and I’m not going to learn QuickBooks, I’m going to pay someone to start doing that for me, but it’s into it as well. So it’s going to move over very easily. And I just recently started using the property tracker as well so I can actually track more in Investment specific.

Jason Hartman 33:01
Yeah, so So in other words, Quicken or QuickBooks is used for the General Accounting, but property tracker is used for the specifics of managing the real estate itself, managing the leasing calendar, the insurance calendar, you know, the taxes, you know, it helps you do your taxes. It’s just a great tool. I love property tracker. So that’s, that’s good. Okay, good. Well, we gotta wrap it up. But you know, just any other comments you want to share with our listeners? You know how why to do it.

Brandon Cook 33:31
We want to talk about ninja lines, too.

Jason Hartman 33:34
Oh, that’s right. Thank you for the reminder. Yes, just quickly, with Brandon’s help. So thank you, Brandon for helping on this. You were one of our founding venture Alliance members, we developed a junior membership to welcome some younger blood into the venture line. So if you are under 35, you can join the venture Alliance now for $5,000 per year rather than the normal fee of eight For two people, it’s 7000 per year if you’re under 35 versus 10,000 for the normal fee. So, Brandon, hopefully now you’ve talked to a couple of our clients about this, right? No, I haven’t. Oh, okay. Not yet. Not yet. Okay.

Brandon Cook 34:14
Now, yeah, I had some issues with contact numbers. I had a number that was bad and, and I was looking to get another couple. So stay tuned. For some of you, I will be reaching out just to explain how much value I pulled from being in the venture Alliance and also answer any questions about kind of the normal flow of our weekend and things like that. And I didn’t mention that in my case study earlier, but I was able to join for the very first event and it was very valuable for me to surround myself with other business owners will really with business owners because I don’t have any business other than my six rentals. Being an entrepreneur is about being creative and about surrounding yourself. with others and overcoming obstacles, and that’s all, you know, all we talked about at the venture alliances, it’s a positive weekend. It’s a positive event. And so I felt honored honestly, to be in the presence of the other members. And I thought, well, this would be a great opportunity if, if more younger of your clients could get on board. Yeah,

Jason Hartman 35:19
we’d love to have more younger investors in the venture Alliance. That’d be great. And venture Alliance is our elite mastermind group. It’s a lot of fun. Brandon, you joined us at our first event in San Diego, you went to Dubai with us and Jekyll Island and Newport, Rhode Island. You’ve been on all the trips, right? Have you missed any of them? I miss Chicago. I miss the Chicago trip. Okay,

Brandon Cook 35:42
God, I came in for the last day. That’s right. Yes, I got another weekend engagement. But yeah, other than that, I’ve made every single event. It’s been fun.

Jason Hartman 35:51
Good, good stuff. Well, thank you so much for being involved in venture Alliance. And if your peers are out there listening Brandon, your younger peers who are interested Real Estate Investing and entrepreneurship and and just having fun and going on neat trips and you know once in a lifetime experiences join us go to venture Alliance mastermind calm. Brandon, thank you again for coming on and sharing your your story and your case study with us. We appreciate it. appreciate being on as well Jason, thanks. Happy investing. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe. So you do not miss any episodes. We look forward to seeing you on the next episode.

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This Flash Back Friday was originally published in January 2018 as episode 937. Jason talks about inflation on assets in all markets. Then he gives us a taste of what he will be talking about at the upcoming Meet the Masters of Income Property event. Later on the show, he starts a client case study with Gary & Sue Pinkerton. They give a background into whey they are investing in real estate and why they plan on investing even after having a terrible first experience.

Jason Hartman 0:00
So we did something very interesting A long time ago on the show, one of our clients was an expert in guided visualizations and the law of attraction. And she was kind enough to come on the show and do a guided visualization for us. And she actually did this for us at a live event. I believe it was actually at one of our meet the Masters conferences many years ago. What I wanted to do is offer you a little gift. And that is an extra bonus episode every week. This will come out on Saturday, a little bonus episode, and it’s nothing like a regular episode. It’s totally different. It’s going to be a guided visualization. I’ve hired an expert for this, and she does a great job of guided visualizations. And you know, the power of visualization, anything the mind can conceive and believe it can achieve. That’s what not Polian Hill, one of the early success authors of thinking Grow Rich told us and if you can get your mind your subconscious mind to conceive and believe things with multi sensory detail, that is a very powerful tool. So why don’t we take this tool and make it specific to the principles of real estate investing that I teach. And we will do that we are customizing guided visualizations, we hired this expert. And every Saturday we will release a very short guided visualization as a sixth episode per week on the podcast. And you can take the weekend and listen to this and relax and they’re just a few minutes long. They’re very short, and it will help you in your visualization of your bright future your abundant future as an income property investor. So I hope you like it. It’s just a little bonus for you. Look for this every Saturday. Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is hand picked to help you today in the present and propel you into the future. Enjoy.

Announcer 2:22
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps. On the road to your financial independence day, you really can do it on Now, here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 3:13
Welcome listeners from around the world. Thank you so much for joining me. This is your host Jason Hartman with episode number 937 937. As you’ll notice, the last episode in your feed is not really an episode, it was just an announcement about our upcoming event and I want to just say, thank you all you are really testing us. You’re making us work hard with all these last minute registrations. You know, you try to order the name badges early, and get everybody in and then you get 20 more people that want to come at the last minute. Are we the only real estate conference going on in town? Or this year? I don’t know. It must be maybe we’re just the best. Yes, we are just the best. Anyway, we are honored To have so much attendance and have all of you coming. If you are joining us this weekend, and I hope you are, be sure you check that last episode. And also check your email because you received an email from us with the app download link. Great little handy dandy app, a lot of you have already downloaded it. We can tell because we’re watching. Yes, there is no privacy anymore. We can tell how many people download the app, and what pages they’re most interested in, in that app. By the way, I want to tell you, there is a lot of stuff in that app. So make sure you go through all of the different pages and the documents we have up there. And we will keep adding to them in real time. So one thing that’s interesting before we get to our client case study today, but I just thought I’d share this little article. It’s about technology. And the two companies that really revolutionize the world of technology are of course Well, there are many. But the two famed companies that started in garages in Silicon Valley. Well, you know what they are? Well, actually a lot of companies started in garages in Silicon Valley. Hewlett Packard was one of them. But that’s not who I’m talking about. I’m talking about good old, the two Steve Jobs and Wozniak with Apple Computer. And then Bill Gates and Paul Allen with Microsoft. Right? Well check this out. A little article that I thought was interesting. It was about how Apple is going to do a code release. And I guess they’re going to release the code of their big flop. What was their big flop you ask? Well, it was back in 1983. I remember this as a kid was lisa lisa computer It was a big flop named after Steve Jobs daughter hopefully likes his daughter better than the the computer. At the time. I know he had a strained relationship with her course the late Steve Jobs we are talking about, obviously. But what’s interesting about it is this when I read this article, I wasn’t thinking of real estate investing, or anything like that any of the great financial stuff we talked about, but it’s this right. So the Lisa computer adjusted for inflation today would cost you ready for this? It would cost $24,700 in inflation adjusted dollars. Now, that’s only based on what it’s based on the official rate of inflation. So think about it, folks. I have a feeling that almost but not all of you, almost all of you listening. were alive with us in the world in 1983. I’m just guessing, okay. And as such, you can think about this right. The example I give a lot on inflation and due step destruction is based on a 1972 homebuyer and they were living in their home. And you saw the way they just massively benefited from inflation. And, in fact, in that example, which we might talk a little bit about this weekend that meet the Masters in that example, they literally got paid. They got paid to live in that house for three decades, while they had that mortgage at 7.37%. And if it’s a rental property, it would have been dramatically better. So a lot to know about that. But that’s just interesting. You know, most people hate the passing of time. And I mean, that in the sense that look, you know, we all have to surrender the things of youth, right, our bodies don’t work as well. We look in the mirror, we don’t look quite as good as we used to. That’s, that’s the whole reason I’m doing this. So that all of you can retire. While you’re still good looking. Hey, I’m a little punchy, because, well, it’s so dark out. It feels so late. It’s not really that late. Alexa, what time is it?

Alexa 8:14
It’s 8:23pm.

Jason Hartman 8:16
See, it’s not even that late, but it feels light when I’m recording here anyway. So yeah, I get a little punchy later in the day, right. But you’re thinking that’s the way it is all the time. Okay, so one of the things I will be sharing this weekend that I’m really excited about, I’ve been working on it for a few days now, is these core beliefs that we all need to have as investors. You know, back in 2004 2005, I released my 10 commandments of successful investing. And then years later, I added another 10 so we have 20 official commandments of successful investing now. Well, I thought I’d do something a little more random at this upcoming meet the master servers and just release a whole slew of core beliefs and I’ve been jotting them down all day today for you. Well, not jotting, typing actually. You know, it’s a shame my teachers in school when I was in school back in the day, they used to say I had such good penmanship. And now when I try to write something freehand, I can’t even write anymore. It’s terrible. Because I type everything. And you know what’s even worse about that? I suck at typing. I am the slowest worst typist ever hunt and peck method. It’s a disaster. It’s really bad. So another reason that I appropriately hate email is my lack of typing skill. Yes, I did not know that we would need to type as much as we do. Okay, anyway, rambling here. I apologize. Let’s get back to work. Jason, get back to work. We’ve got a really good case study. Today, we’ve got a husband and wife case study today. Yes, we’ve got both of them on the show. So you can hear two points of view. And that is Gary Pinkerton, our client who has been on the show a couple of times, but we brought his wife Sue on the show as well. And so I think you’ll really like this interview now, I must warn you, I must tell you something first, that he reveals, but he did not reveal it, Gary, I’m talking about he did not reveal it. In this case study right away as you’re hearing their real estate investing story. The first house they bought that did not work out very well. They didn’t buy it from us, okay, that that property, they did not purchase it from us. So I was glad to hear that. But I do remember. And as he started talking about the story, you know, I probably talked to him about this years ago, but I forgot and we just did the interview. You know, I must admit that I almost almost Never prepare for an interview.

Jason Hartman 11:04
you’re all thinking I can tell. That’s why your show stinks. It’s terrible. Okay, well, I don’t know, most of you keep listening. So I guess you like my stinky show. So yes, I’ve only prepared for a few interviews over the years. And one of them was the first interview with Bill errors. Yes, domestic terrorist, the man who made Obama interesting interview nonetheless, that was a really interesting interview. I think it was one of my better interviews. And I did prepare for that one, because I really didn’t know enough about the guy, the guy that they said made Obama. And you know, I’m certainly not an Obama fan. But I wanted to, I really wanted to dive in on that interview and see what he said. So I did actually prepare for that one a little bit. A couple of others. I did a little research before interviewing the guests, but I did not talk to sue and Gary at all before this interview about what we would talk about, we just dove in and started yapping away. He does reveal that he, he purchased this property from another party outside of our network. But what’s interesting about that is that we actually tried to work with this same vendor for a very short time years ago, the guy in San Antonio and I was he was talking about it, I knew who he was talking about. So yeah, interesting point, small, small world. For better or worse. It is a small world, especially in my business, this little cottage industry, of dealing with income properties nationwide, very cottage industry, not many people in it. Very small world, very hard to find. Good local market specialist. But when you download the app for this weekend’s conference for meet the Masters, you will see the list of a bunch of our local market specialists who are attending and at this upcoming event. We have more than ever, we have the largest group of local market specialist ever. And why? Well, because we really have to do our job. And essentially our job well, one of our many jobs is to be a turnkey property aggregator. That is our role. Well, it’s one of our many roles, in addition, providing education support, and a terrible podcast. Okay, so in where the host gets on tangents all the time, that is one of our big jobs to be a turnkey income property aggregator right, and to line these properties up. So in order to assemble a enough inventory of properties, for all of you who are coming this weekend, to purchase to find good investments, we had to invite a lot of local market specialist. So yeah, you’re going to see quite a crowd there. But the nice thing is this time, we’re doing it better because we have Almost 300 people for this weekend, it’s our biggest ever. We have exhibit spaces for them, you can sit down at their spot with a table, you can go over documents, paperwork, pro formas, we’re going to be putting performance and PowerPoint slides from any of the speakers right into the app. So that’ll be super duper handy for you. And remember, we are live streaming this event. So if you can’t make it, get a live streaming ticket. Now, let me tell you, just a couple quick things before we get to our client case study today and our guest, Sue and Gary Pinkerton. One is that we will live stream this weekend. And you can buy tickets for the live stream at Jason hartman.com. Also, you can grab a last minute ticket to come in person, we would love to see you in person. That’s always the best way to do it. And several of you have asked they’ve said, Well, I can’t come. And you know what, I can’t watch the live stream because I’m busy. that weekend. Well, yeah, that’s why you can’t come I get it, I get it, I get it. So we’ll we have a product that you can buy, where you can, you know, watch all of the sessions and all the speeches and so forth, and get some materials and so forth like that. I want to say 85% chance, we will have a product that you can actually buy after the event. However, I do want to tell you one thing, we do not have the rights to include ron paul in that product, in our negotiations with his people, we could not obtain the rights to share his talk on any products like that. So that will be the one thing missing. You will see ron paul on the live stream that we have the right to and then of course live you can obviously see him if you come in person, but on any product. It will exclude Ron Paul, but our We’ll have all the other sessions. So I just want to let you know that look for that in the future. And, hey, I am rambling again. So let’s get to our client case study and hear how they really did a great job on their path. As real estate investors, they are building their own Empire right now, over the last several years, they’ve been doing it they, I believe, came to our first meet the Masters in 2011, I want to say but they’ll tell you on this interview, I had a very hard time with the first property like I did with my first property that I purchased at age 20. You know, just decided that this is the right thing to do, and they kept going, and they turn that property around, and their other properties have been good experiences. And they are really doing a great job at it. So I’m very proud of them. And without further ado, here is the interview.

Jason Hartman 17:02
Hey, it’s my pleasure to do another client case study today. And you’ve heard from one of our guests but not the other. So we’ve got a husband and wife, real estate investor team here today, and it’s Gary Pinkerton Captain Gary Pinkerton, who you heard from before on the show, and then his wife Sue Pinkerton. And they are 49 and 47 years old. They met in Connecticut where Sue grew up. Both of them are engineers. But Sue also became a nurse. They’ve got two boys, Jake and Ryan, Jake is 16 Ryan’s 13 at the time of this recording, and they’ve got 17 properties in five states. They’ve got two more under contract, which will bring them up to 19. And then I guess another one is being built. So that’ll be 20 and all with their primary residence. I want to talk to them today about their real estate investing journey but also specifically about something they are doing a very good thoughtful job of, and you’ve heard me talk about this several times. Over the years, but that is the topic of mortgage sequencing. They are doing a very good job with mortgage sequencing. So let’s go ahead and dive in Sue and Gary, welcome. How are you

Sue Pinkerton 18:11
are doing good. Thank you.

Gary Pinkerton 18:13
Thanks, Jason. Always good to be on your show. Good to have you on the show.

Jason Hartman 18:16
So what kind of engineer Are you

Sue Pinkerton 18:18
have a chemical engineering degree from Villanova?

Jason Hartman 18:21
Oh, fantastic. And Gary, are you a mechanical engineer or electrical or what are you

Gary Pinkerton 18:26
mechanical? And then I got a nuclear engineering after that.

Jason Hartman 18:28
Nuclear Engineering. How cool is that?

Gary Pinkerton 18:32
I learned how to build nuclear reactors that’s really really useful in America today.

Jason Hartman 18:36
You guys are really doing a great job of accumulating properties and building your portfolio. So hats off to you on that. Like I said in the intro, the mortgage sequencing is something we got to dive into but first, Sue, can you tell us a little bit about what inspired the two of you to get into real estate investing? I think you came to us in 2011 bought your first property then and and then attended your first meeting. masters in 2012, if I’m not mistaken, but give us a little background.

Sue Pinkerton 19:03
So I think Gary was kind of the first one to spearhead that I’m not sure what really turned him on to it. But he he was ready to, you know, kind of jump in with both feet. And the first property we purchased was a four Plex in San Antonio. And then I believe he went to meet the masters. So then he was kind of all in our first property was a huge disaster. Doing great now really good now and kind of if we could have seen into the future, we probably would have bought a couple more. But, you know, had a really rough road in the beginning. And I’ll admit, you know, I was the naysayer, I’m like, this is not going to work. This is ridiculous, because the experience was really bad. And you know, Gary’s like, Nope, I’m not, you know, I’m sticking to it. I’m following these, this guidance. And, you know, here we are, what, just a mere five years later and I have 10 properties that I’ve purchased in the past two years. And you know, Gary’s almost fulfilled his 10 for the mortgages. So, you know,

Jason Hartman 19:59
I think Got to tell you something, a comment on your first property. My first property was a disaster too. And I have mentioned this before, at the risk of repeating myself, I just look back on my life at that first rental property that I purchased that crappy little one bedroom condo on in Coventry lane in Huntington Beach, California. That was a terrible disaster had to evict the tenants. They destroyed the property. I didn’t sell it, and I made some money selling it right away. You know, I just got rid of it after that. And I could have so easily given up I could have just said, I mean, I was only 20 years old after all right? You know, I could have easily just decided, hey, this whole real estate thing is for the birds. It doesn’t work, blah, blah, blah. And I guess you had your first experience was negative in the beginning, but it turned into a positive. So let me just ask you, I know you’ve had some good experiences with your other properties. But the one first property that was difficult, that specific property turned around and that went well later is that we’re selling We’re talking about the whole portfolio.

Sue Pinkerton 21:02
No I’m so that specific property, it took a good three years, maybe even closer to four before it finally, you know, really turned around. And, you know, as we look back on it now, it’s doing very well, it’s in a good area that’s continuing to grow. And, you know, we would say, oh, we’d like to buy more, but now we’re kind of priced out of it. So

Jason Hartman 21:26
yeah, that’s the other thing. If you just simply have the tenacity and persistence to buy and hold the properties. You can almost bank on this cycle. I mean, it’s not a perfect thing. But the cycle generally speaking, I mean, if you ask anybody, as far as appreciation goes, and remember, it’s a multi dimensional asset. So it’s not just about that, because rents a lot of times are counter to appreciating their their appreciation, their non correlating right, as we talked about in the three dimensions of real estate, but essentially seven of every 10 years are good. appreciation wise, three are bad. So you got a 70% chance, if you just hang on that you’re going to do very well. Right? So if you do nothing else, except just be persistent, and follow that simple quote of mine that I, as always inspired me by I believe jack Paar, who said, success is largely a matter of hanging on after others have let go. Success is largely a matter of hanging on after others have let go. You don’t have to be as smart as anybody else or is lucky or advantaged or have inherited money. Just hang on after others have let go. And you’re probably going to do pretty well.

Sue Pinkerton 22:42
Right? Yeah. And Gary was the one who was he was very persistent because our issues came it was a new construction. So all our issues revolved around the builder and the issues that he was having. So I mean, we didn’t even get to tenants until like year three,

Jason Hartman 22:58
right, so quick Crazy stuff crazy stuff. Gary, any comments on it? or general comments?

Gary Pinkerton 23:04
One thing I think it’s important to say is that that property, I did not get to the Platinum property investor network. And it’s what actually drove me to the network. We’ve had problems, you know, not equal to that one. But we’ve had some substantial challenges, even in the last year with rehab projects that didn’t go well, but mainly with bad property management. And those we did get through the network. And the reason I came to your network, is because I spent a lot of time understanding the people who were involved with specifically you. And I felt like I could trust this group. Right. And and we were like minded. And I believed in the idea that you bring, you know, some weight behind some ability to help us get resolution and you did, and that’s case specifically where we had problems in Memphis. It’s all been resolved, our money was recouped, probably beyond what I expected. So that’s really one of the points I want to make is this. Is that event even though it did turn out very well, and my wife was very patient with me to get through that it actually did change the course of our investing and so much quite a bit for the better. And the other thing I want to mention, Jason is all the guys out there and I say this on my, on my podcasts that you have to listen to your wife’s intuition, because it is dead on Yeah, I sent her a text once a photo of the property under construction, and it had the builder who turned out to be pretty rough and the real estate broker guy, you know, their version of our investment counselors

Jason Hartman 24:32
standing in the picture. I know that I know that we’ve seen Antonio that you bought that property. Yeah. You know, we were trying to do a deal with him. And we’re glad we didn’t. But yeah, yeah, yeah. I sent

Gary Pinkerton 24:43
her a picture and she said, Well, what’s up with those two, they look pretty chummy. Like they’re very good together. And I said, Yeah, that’s a weird thing to say. Yeah. Right on.

Jason Hartman 24:50
Yeah. Yeah. Well, women’s intuition is, is very reliable. A lot of it’s not perfect like and nothing’s perfect. But you know, there’s it’s definitely to be considered no question. about it, no question about it. Good stuff. Okay, so what came next in your journey? So you bought that one in San Antonio. Thankfully, you didn’t buy it from us. That was a tough one. It did turn around ultimately. So that’s good. And then you just kept buying more now. You came to the your first meet the Masters, I think in 2012. Is that correct? Carrie? That’s right. Okay. Okay. So that was probably in Irvine, California. I assume that’s when we were doing them there. Right. And then what properties Did you buy next? Like what was after that and and were you were you still buying more? I’m curious. Were you continuing to buy your properties? Well, you were having a bad experience on that first one that you bought from that weasel in San Antonio.

Gary Pinkerton 25:41
Well, like Sue was saying I was moving fast like a freight train and she was doing a decent job of holding me back but I did end up buying four properties total while five properties excuse me five properties. Three were ended up being in St. Louis through the network. The other one that I bought was from The same guy, the same broker, at least not the builder, thankfully and Houston, it was a model home, it did very well. But it was kind of in spite of the health of the real estate broker I used. So my point to and you wanted to get to that mortgage sequencing stuff, at the time, you got more money, I want to say that you could put it like 20% down on the first floor, and then you had to go 25% down on subsequent ones. And I think he could only get six at the time. So I was really, really focused and all the conversation at the time was about buying the most expensive properties early. So I was very focused on you know, having a higher down payments on the first properties, and that’s why I got that four Plex and then model home, which was a pretty expensive new construction.

Jason Hartman 26:44
Right, right. So let’s talk a little bit about this mortgage sequencing discussion, because that’s one of the things that we really did a lot. We talked a lot about this several years ago, that it was important to, you know, if you’ve got that w two job You’re an employee, which that’s the what the lenders love. They just love loaning money to traditional employees versus entrepreneurs. And then you want it to be since it was counted on the number of loans, not the loan amount. You wanted to try and stack up the more expensive properties if you could with those loans. Right. What’s interesting in this mortgage sequencing conversation is, is how you, Gary retired from your career as a Navy submarine captain. And then Sue has, I believe, recently retired from her career. And now you’re in a position where you’re I assume your income now is commission based income, I’m not sure Gary, and then Sue is probably going down that road that way too. So you’ve really done some real thinking about this. You’ve really considered the way you’re going to manage the mortgage sequencing and the acquisition of different properties by different spouses. You No like you bought yours. And then Sue bought others under her name and talk about that either one of you who wants to take that on?

Gary Pinkerton 28:07
Yes. story about how I ended up being the owner of the Jacksonville new construction.

Sue Pinkerton 28:13
Yeah, so well how many you had like four or five, I think right. And then that was about the time you were retiring and going to the commission based sales job. And then I had gone back, I was working part time I’d gone back full time. And so then that was when we shifted over to my 10. We put our primary residence only in Gary’s name to free up some, I guess I would say leverage for me, and then we bought what four, five and Memphis three in Jacksonville. And then I was supposed to do a new construction in Jacksonville but we got a little antsy with my leaving my job, and then ended up buying in Oklahoma City actually just bought just before the property tour, but I did see the property at That time. And so that’s kind of my class a premier property in my portfolio. The Jacksonville new construction got delayed. And then so Gary ended up picking up that one just because it was a is a nice looking property in in a nice area down there. So right.

Gary Pinkerton 29:17
So we have that. So you got six in your name in Memphis. And then we had the three rehabbed ones in Jacksonville. And all you know, those are great properties. And then there was a new construction in Jacksonville, the finishers out but it was like all new construction, it was delayed a month or two. And when they told me that, I was trying to figure out how to break the news to sue and she calls me to and basically the drive that commute the one hour commute to work was another ugly one and she’s like, that’s it get this last house bought, I’m quitting. And so I said, Well, we need to look for a new property then because this was not going to be ready. So in the end, I’m a proud owner of a Jacksonville property and she has one nice one in Oklahoma City. That’s how we got into that fifth market.

Jason Hartman 29:58
Okay, so I’m not gonna Why the Jacksonville thing is like supposed to be funny you Is it because you didn’t intend to get into another market? Or right?

Gary Pinkerton 30:07
Well, no, it’s just that it was in her name, and it was not going to be ready. It was delayed another about a month, month and a half and she wasn’t going to work that long, it was clear that she was leaving. So if we were going to get the 10 one, we weren’t gonna be waiting on that property. So I called Aaron Chapman who I absolutely love as my lender. And because I call him the closer and this is an example of that story. I said, Aaron, I understand I’m asking a lot but we need to move this property from Sue’s name to my name and we’re going to put another one in hers and close it in the next three weeks. And we achieved that.

Jason Hartman 30:38
Yeah, okay. Okay, good. So, so time was of the essence to do that. Bo, is what you’re saying, right? I got it right. I got it. Okay, good. Good. Okay. So anything else on the journey of acquiring more properties? And you know, maybe what, what made you pick certain markets or properties, you know, any particular like did the investment counselor steer you to one or the other? Or did you kind of what was your thinking about why you should pick Memphis and St. Louis and Jacksonville over in the and it? I don’t know, if you own properties in India, I can’t remember where your properties are. But you know what caused you to pick what?

Gary Pinkerton 31:15
Well, the first at the beginning, I really liked the product that was offered in Texas. And so I kind of ended up there plus Texas was a really strong, you know, market at the time. And I mean, it is now it’s just a little overpriced, of course, but then I liked St. Louis, because the numbers looked amazing on the, you know, the BC class properties there in St. Louis. And I learned, you know, that numbers look really good on BMC. And they don’t perform often as as high as that, but St. Louis was near where I grew up, and I knew that city very well. And Memphis is not that far from where I grew up. But I think Sue, you had some, some strong input, I think on Jacksonville and Oklahoma City, and I think we’re both just kind of comfortable with Memphis, but what are your thoughts on Jacksonville and and OKC

Sue Pinkerton8 32:00
You know, I kind of take a different perspective when I’m looking at the markets, you know, and I’ll think, Well, you know, what, I live there, you know, what kind of house would I like to see or so I tend to go more towards the, I would say the B type properties, you know, kind of more middle of the road, you know, Gary’s very willing to deal with the C class properties, and even the older properties. I like something a little bit doesn’t have to be brand new. I just like a little bit newer, you know, so that’s kind of where we went. And, you know, as far as the areas, I think, you know, we were just following you, and you had been in Memphis and Gary had been on the Memphis property tour, and I think he texted me like, Hey, I just bought this house and there’s a few more that look good. So, you know, we’re just kind of moving around, you know, following your advice of the three to five areas, you know, and then you know, we like Florida, Jacksonville think the three that we bought Gary, those just kind of popped up, right. It was a return that we were really looking at. We talked to Sarah and we said hey, we’re kind of interesting. in Port Richey, and

Gary Pinkerton 33:02
also Jacksonville so we like the her parents live here in Florida we see Florida is one of those markets that has a little bit of room for kind of a blend of upside and the cash flow still make sense. But Sarah, you know, it was on her radar now. And shortly after that she sent us an option to get three that were kind of coming as a package. So we grabbed those who may, sir has been very helpful. And Sarah and Sue, I think are very similar in what kind of properties they would get. I think I think Susan newer stuff is very similar to what what Sarah has an airport, right?

Jason Hartman 33:29
And remember that if you’re listening to this podcast episode, years from now, which you may very well be on a flashback Friday or just listening to the back catalogue. This may all change in terms of markets, and you know that but yeah, the idea is the principles of investing in the psychology of it. Those pretty are pretty darn consistent over the years. I mean, a lot can change, but there are sort of some fundamental, I don’t want to say absolutes, but they’re almost Absolute, you know, almost I mean there you know, it’s like the old saying, no rules or laws apply universally including this one. This will be continued on the next episode. Thank you for listening and happy investing. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice in any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode. Welcome to meet the masters of income property investing. I’m your host Jason Hartman.

Announcer 35:08
Join us in beautiful La Jolla, California on January 12 through 15th. This is your chance to meet the masters of income property investing. Learn from an amazing collection of experts all in one room. You’ll meet a ton of local market specialists, mortgage lenders, tax professionals, and investment specialists such as Jeff Meyers of Myers research, and john burns, real estate consultant heard from Robert Kiyosaki Rich Dad advisors, Ken McElroy, his real estate investment expert, and Garrett Sutton, his attorney who specializes in asset protection. Find out what leading economists are predicting for 2018 including Danielle DiMartino. Booth, founder of money strong LLC, and Andrew zappin. From Moneyball economics, here from leading entrepreneurs how to maximum Your income streams, you’ll learn unique financial strategies from Patrick Donahoe of paradigm life, and how to give birth to a brand from Brian Smith, founder of Australia brand. This year also features a very special guest, Dr. Ron Paul, former Congressman, presidential candidate, and staunch advocate of liberty. Right now you can upgrade your ticket to include VIP access and a dinner with Dr. Paul. Enjoy a fine dining experience and fascinating conversation. Seats are limited, so upgrade your ticket today. Ask questions and learn why real estate is the most historically proven asset class. Armed with new information, you’ll have the confidence to take massive action. As the saying goes, don’t wait to buy real estate. buy real estate and wait. Surround yourself with like minded people and build friendships that will last a lifetime share strategies and tips. With other investors and hear about their successes and struggles, make 2018 the year you decide to achieve your dreams. Real estate is a proven way to create true wealth within your lifetime and achieve long term financial independence. Don’t wait. Join us in La Jolla. reserve your seat today.

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Jason Hartman and investment counselor Adam start the show talking about how people are leaving high tax areas and getting audited by those states after they leave. After the discussion, Jason brings on client Ira Boyd to talk about his real estate journey. Ira started purchasing properties on his own, with some minor success but expected more. He explains that after he found Jason’s network he was able to get better properties and is looking to expand his portfolio beyond the 13 homes he currently has.

Investor 0:00
About 2014 I found you, it was just a perfect fit. I gotta say it just the show just resonated with me. And I just took off, I was one of those freaks that went back and listened to every single episode. Several of them, I listened to him for multiple times, you know, and just couldn’t get enough I was just eating it up. It was fantastic. And that led me to go to some of the events and I went to meet the Masters, which for any of you listeners out there, that is the way to go. I mean, what happens is you get there, you’re in the room with other clients and it inspires you and you start to hear their stories and you see that it’s real and it takes it to the next level. And then not to mention just the lineup of people in the room, you know, the CPAs and the lenders and the local market specialist. It’s just a fantastic place to be to really take it to the next level it It gave me newfound energy.

Announcer 0:50
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to The world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with a complete solution for real estate investors.

Jason Hartman 1:41
Welcome to Episode 1152 1152. This is your host Jason Hartman. I’ve got Adam here with me before we introduce another client case study today from our friend IRA Boyd. He reached out booked an appointment in my scheduler and you can do the same. Jason Hartman call Calm slash Jason, if you’d like to be on the show, and we’d love to hear your case studies, I always get such great feedback on these. Everybody really loves hearing them, and then meeting and talking to that person when they come to one of our live events. And of course, we’ve got meet the masters of income property, our 21st anniversary event coming up this Saturday. And Adam, I think before we get into anything today, we got a few things to discuss. We ought to just discuss meet the Masters for a moment. Is that okay with you? That works for me. Okay, sounds good. So, we start this Saturday at 8:30am for registration 8:30am. We are trying to smooth out the registration this year. Hopefully it’ll work. Please come at 830 have a cup of coffee on us. And that’s like a $12 cup of coffee because it’s at a hotel. So it’s got to be better than Starbucks, right? With 1% gratuity 25% they call it plus plus it’s 25% service to And then there’s tax, of course. So it adds up to about 35 34% or something like that. But here’s what you got to know. In the hotel contract it says that the servers do not get the 25%. Is that unbelievable? It’s just every industry and you know, later this weekend, we’re going to really rail on Amazon, Jeff Bezos, the modern day slave driver that he is, and the really appalling conditions of working for Amazon it’s it’s mind boggling. It’s just amazing how the corporatocracy you know we complain most of us that it’s rolling over us as customers right? But it is rolling over the working poor in the worst way. And I know you’re going to say what are you Jason will liberal? No, I’m definitely not but Adams a liberal.

Adam 3:50
I’m a libertarian. And I just think the market has to rise up against this and correct these forces that beat big discussion. If you’re going to call it gratuity, you should get Ever to the people who are doing the serving but and the taxes, we’re going to talk about this New York but I mean, the taxes that you’re getting hit with in California are because they they’re not getting money from anywhere else.

Jason Hartman 4:10
It’s a complicated issue. So we’ll go into that anyway, registration at 830 on Saturday, coffee plus plus. That’s what they call it plus plus. And we will start hopefully promptly at 9am. And we have a big agenda for Saturday, a lot of presentations to get through, and that’s going to be great. Of course, we sent out an email with all of this information, so check your email box for an email from me. We will go until 6pm on Saturday night, we’ll take a two hour dinner break. And then we will reconvene at 8pm for a concert. We’ve got a Rod Stewart tribute band. So please dress in some fun 80s style clothing now. I don’t know if Rod Stewart really is 80s but that’s It’s kind of how I think of him of course he’s got a multi decade career. But anyway, dress for fun on Saturday evening. I think a lot of people are going to wear white. So if you want to wear all white, you know you could call it a white party. So that’ll be fun for Saturday evening and then on Sunday networking and coffee at 8:30am. And we go to 6pm on Sunday where we conclude the weekend. attire business casual, and Adam we will be opening the green room on Saturday at the first break at 10:30am. And you can go into the green room and network with the speakers take photos, do deals or or just kind of hang out and relax between the sessions. And that’s for VIP and elite tickets. We did have someone asked us today if they can upgrade to VIP. I’m sorry, it is completely sold out. So we closed VIP registration about two weeks ago. We do have a couple of tickets left for general admission. Now we have I think sevens tickets. left. Hopefully we’ll sell those before Saturday, Jason hartman.com slash masters. And we just look forward to seeing you all there. So it’s gonna be a great time this weekend. Adam, when do you fly in? I fly in Friday night round. I think I get there about 530 California time. Good stuff. Well, we’ll look forward to seeing you. And we will be just setting up on Friday evening. So it shouldn’t Oh, yeah, I’ll help some

Adam 6:21
of that, I guess, get the manual labor going on.

Jason Hartman 6:24
Come on down and find us Come on down and find us. So hey, a long time ago, right around the time I moved out of California, one of the best life decisions I’ve ever made back in 2011, leaving Golden State. When I moved out to California, I predicted that California and other high tax jurisdictions would build what I call an economic berlin wall in order to stem the flow of not only the brain drain, but the money drain as people leave these high tax Nexus areas and you know, if you don’t know That’s exactly what happened in East Berlin. When the communists were running East Berlin, people were just fleeing communism. And they finally decided over the course of literally one weekend that the brain drain was becoming too costly as people were fleeing to the west. So they they erected the wall, essentially, in a weekend, if you can believe that. It was a believe it was a holiday weekend, as I recall. And they just put up that Berlin Wall all of a sudden in the same as happening from an economic perspective in places like New York, California, etc. Where people try and cheat. They try and cheat the system. You know, a lot of people in California say they are Nevada residents, because of course, there’s no income taxes in Nevada. Adam, the article that either you were I can’t remember who posted in our content group talks about that, right.

Adam 7:55
Yeah, it was, especially now that the tax reform is kicked in. People are getting their property tax capped

Jason Hartman 8:03
at the $10,000. Right at the $10,000. New York is seeing people leaving, especially for states such as the one you just moved to Florida. CNBC has essentially said, Hey, if you’re doing that you’re going to get audited. Yeah, not just a little audit, they’re going to go deep. They’re going to get your cell phone records. They’re going to get your they said, Dennis records. If you have a pet, they’re going to look at where you’re boarding your pet whenever you go on vacation, all of that stuff. I mean, they’re going deep, because it’s a state says they have a $2.3 billion budget deficit. And they want their money. Yeah, they do. They do. And look, you know, the government has the right to do that. I mean, the Franchise Tax Board, the FTB in California, they are relentless. They are vicious. You know, folks, if you’re thinking you’re going to cheat, if there’s anyone out there listening that thinks they’re going to get away with this you’re not because the one thing that will for sure be a dead giveaway is your cell phone because they know Know what tower your cell phone is talking to. Okay? They know what toll booths your car goes through. We live in a surveillance society. There are cameras everywhere. You know, I remember people in Corona Del Mar California and area of Newport Beach where our upcoming meet the Masters is I’d be at the coffee shop years ago when I live there and they’d be talking about how Oh, yeah, I’m technically a you know, wink wink Nevada resident, I’d say well, how do you do that? And that, you know, this was before I knew anything about and say, I just give my buddy in Nevada, my credit card and I say, you know, charge some things on it, it’s okay with me go out to dinner, whatever. And that’s how I will prove to the state of California that I live in Nevada. Good luck with that, you know, first of all, what you’re doing is a crime. Second of all, they’re they’re going to catch you Okay, and then they have every right to so they say that if you want to establish residency, you know, get a doctor and a dentist in that area, register to vote, get a driver’s license, etc. You know, Whatever the usual stuff that we’ve all heard, right, but they will know where you spend your time. toll booths, cameras, you know, pet boarding, like you said cell phone records being the most damning of all. And then people will say things like, well, I’ll just get two cell phones. Oh, good luck with that one. They’ll figure that out pretty easily. Okay. So it’s just simply not going to work.

Adam 10:23
What boils down to is if you want to leave New York because of the high taxes, leave New York. Yeah, if you want to stay in New York, then stay and just be ready to get hit on the taxes. I mean, these states have decided this is how they’re going to do business. And that’s their right. But it’s your decision whether or not you stay or go and if you decide, hey, I want to move to Florida, then just move to Florida. You can still do we live in a mobile society. Anything you can well, not anything but most things you can do in New York, you can do in Florida. Exactly. Exactly. You

Jason Hartman 10:55
know, Adam, you know what always has amazed me throughout my life, even when I was a kid, right? How liars they just feel that they need to lie all the time. I say, you know, instead of lying, why don’t you just make it true? You know, it’s really there’s really just no need to lie just make it reality you you have the choice and the power to make lots of things in your life are reality. So there’s no need to lie about things just just make them true. You know, like you said, Just move you know, you can visit New York, you can be there less than six months of the year. You can do all kinds of things to make it true. There’s no need lie. It’s just not going to be profitable for you.

Adam 11:38
Yeah, and one of the things that surprised me whenever I was reading this article is auditors look at your home and they compare your home in Florida or you know, wherever you’re moving through there to Florida because a lot of my they say they’re going to look and see if your new home is bigger and more expensive than the run in New York. And write to me was amazing because first off a lot of Florida homes compared to New York homes are just not going to be as expensive. Yeah. What if you don’t want to live in a huge house?

Jason Hartman 12:05
Right, right? Well, you know that that one’s kind of a tough one, because those two markets are so different. You know, if you live in Manhattan, you’re obviously going to be in a tiny high rise, it’s still gonna cost you $3 million. But $3 million in Florida will buy you a an estate. Okay. So, you know, they’re just going to, it may not be the same square footage or price, but it’s going to be the overall kind of standard of living on it. You know, there’s, there’s an old saying, if it talks like a duck and walks like a duck, it’s a duck, it doesn’t matter what you call it, it’s still a doctor. Right? You know, they can make sense. And, you know, a lot of these cases go to court and you’ll be arguing them in front of a judge, you know, the judge will make a decision as to whether or not you’re a resident or not,

Adam 12:47
yeah, and these it works. I mean, they’ve been conducting about 3000 audits a year about this, and they’re collecting about a billion dollars over those audit. So I mean, clearly people are trying to cheat the system. They’re getting busted.

Jason Hartman 13:01
Yeah, don’t do it, folks. Just make it true. You don’t need to lie. Just make it true. I’m telling you, and I’ve said it for years. Make it a plan to get yourself out of these high tax business unfriendly jurisdictions. It may take time you do it over a few years. I remember for the longest time, I was just honestly kind of bored with living in Orange County. It’s a beautiful place. I love to visit. Look, we’re having our event there on Saturday. I’m a fan. I just don’t want to pay the taxes. I don’t want to pay the real estate prices. The home I bought here in Florida probably is better than my last couple of houses in Orange County, and it’s less expensive. So it’s just a matter of, you know, what really constitutes quality of life. And so that’s the thing. Hey, Adam, we better get to our client case study today with IRA. Let’s hear what he has to say. And we’ll continue this on another episode. Don’t forget

Adam 13:59
meet the master series coming up this weekend. If you can’t make it, there is a livestream option available. So go to Jason Hartman comm check that out, you should come to the event. But if you can’t, for some reason, one of the other, do get the live stream because it’s worth listening in and hearing everything.

Jason Hartman 14:15
Yeah, it’s not just listening. It’s watching to res video. So thank you for the reminder on that, Adam, you can join us from anywhere in the world, maybe even the International Space Station orbiting Earth on the livestream. But I can’t guarantee that your internet usage fees won’t be really high in the space station. So

Adam 14:33
but a small market, small market,

Jason Hartman 14:34
they’re small, small number of people affected but I just have to say that just in case. Okay, so Jason hartman.com slash masters live stream Tickets are available for those who are coming live, which is even better. We look forward to seeing you on Saturday.

Jason Hartman 14:57
Hey, I’m excited to bring to you a another client Case Study today and this is with our client, Ira Boyd. He has 13 properties. One is his own home and 12 our income properties. He lives in Southern California around Burbank. It’s just great to have him come on and share his story today. Ira. Thanks for coming on. How are you?

Ira Boyd 15:15
Jason? Thank you for having me on. I’m honored to be here.

Jason Hartman 15:19
Well, it’s good to have you. So first off, I guess I should ask you, when did you become interested in real estate investing?

Ira Boyd 15:25
Well, I bought my first property in 2004. And then and I knew nothing, I just had a little bit of extra money and I thought it was a really good idea. And I always knew that you know, real estate was a it always heard it was a pretty sound investment. I bought a couple more in 2007 and then got crushed in the ensuing crisis that occurred well

Jason Hartman 15:47
buying in 2004. Anybody would get hurt by that? Probably. Right. Those initial properties that you bought, kind of we’ll call it the first round IRA. Where did you buy those were those so CalPERS properties are those nationwide

Ira Boyd 16:02
one was in Austin which did okay during the downturn, but then I bought two in Salt Lake City and one of those was just like a really nice house I fell in love with it I made that mistake I fell in love with a big beautiful house and wasn’t it would have been fantastic to move into but it wasn’t a great rental and it took a dive

Jason Hartman 16:21
that’s the thing it’s almost better in some ways if you don’t see the property because then you’re forced to make a decision with your intellect not your emotions, right?

Ira Boyd 16:32
Yeah, I totally fell in love with it and it was just it was a bad call and what came out of that was fantastic though because I was really kind of filled with shame. Honestly, I was embarrassed that I made such a bad investment because over the next couple of years it just nosedive and I just couldn’t get out of it. But what happened out of that it turned into something good as as oftentimes tragedy you know, crisis out of crisis comes good things. Yeah.

Jason Hartman 16:55
It you know, crisis is an opportunity writing the dangerous wind like the Chinese say right?

Ira Boyd 17:00
Yeah, that’s right. And it did for me and I turned it into I started educating myself more I started reading all the books on real estate that I could get my hands on. And then I started listening to podcasts, which changed my life really for the better I think in in about 2014 I found you it was just a perfect fit I gotta say it just the show just resonated with me and I just took off I was one of those freaks that went back and listened to every single

Jason Hartman 17:26
episode. I love those people. I know

Ira Boyd 17:29
it’s we’re weird group but I listened to several of them. I listened to them for multiple times, you know, and just couldn’t get enough I was just eating it up. It was fantastic. And that led me to go to some of the events and I went to meet the Masters which for any of you listeners out there, that is the way to go. I mean, what happens is you get there, you’re in the room with other clients and it inspires you and you start to hear their stories and you see that it’s real and it takes it to the next level and then not to mention just the lineup of people in the room. You know the CPAs and lenders and the local market specialist it’s just a fantastic place to be to really take it to the next level it It gave me newfound energy. Yeah, that’s great IRA.

Jason Hartman 18:08
So first off, I want to say, Don’t feel bad look at millions of people. I mean, about what 12 million people went into some level of foreclosure during the Great Recession, right. Nobody knew that was going on, except the people in The Big Short Movie and the book.

Ira Boyd 18:26
Yeah, exactly. fantastic movie. And I know that now.

Jason Hartman 18:30
Yeah, yeah, yeah. But at the time, I know it’s hard. It’s hard. Definitely, definitely. But you know, the whole we’ll call it the debt industrial complex. It’s a big scam. It’s just a total scam. So don’t feel bad about that. But you got through the Great Recession. You found my podcast, and you said 2014, I think right. Yeah, that’s correct. When did you come to your first meet the masters of that very next year? Oh, 2015. Okay. Do you remember I’m getting curious. Do you remember what your first episode was? Where you listen to our podcast?

Ira Boyd 18:57
No, I don’t because I you know, the Right when I got ahold of it like I said, I just started spooning it up and I just listened to tons of them and then yeah, I went to that you know I went to the meet the masters and it was fantastic you know I became a bag man with Aaron yeah

Jason Hartman 19:12
him in his funny is funny bag that’s an inside joke if you weren’t there or you haven’t been to other meet the Masters where I did that when steward explained

Ira Boyd 19:21
Yeah, other than to say you had a bag filled with like a razor blade and some whiskey and a condom. So okay,

Jason Hartman 19:26
yeah. larious Yeah, it was hilarious. But I don’t think most people get that so when when did you buy your first property through our network?

Ira Boyd 19:36
It was pretty soon right after that because I was on board once listening to the podcast for long enough took me to the event and once you get there for me, that’s when I got traction. Meeting the other people inspired me talking to the investment counselors personally you know, I got into dealing with Sarah on a personal level and when you know and also at the events you’re having the evening with people you might have dinner you might have a few drinks and that takes it to the next level because your personal with them now now you there’s a level of trust that you didn’t have before. And once that happened I was in and so I think I bought a property right away, waited for a little while it felt good that weren’t any real problems knock on wood. And so I just started accumulating them and it’s been pretty damn good ever since. Yeah.

Jason Hartman 20:23
That’s so great to hear. And so now you’re up to 12 income properties, and what different markets are you in across the country?

Ira Boyd 20:30
I kept one in Austin. I had actually bought one other one in Austin prior to getting tied into you. And since then, I bought eight in Memphis, and one in Indianapolis.

Jason Hartman 20:43
Okay, fantastic. Good. Good. I think you’re missing one in that count. Yeah, that would be 11. So where’s that other one? Myself,

Ira Boyd 20:55
I kept one of my other properties that I told you about. Oh, okay, got ya. Got ya. Good stuff. Good. stuff.

Jason Hartman 21:00
So you’re mostly Memphis in Indianapolis now? What’s your plan for the future? I think you might be over invested in Memphis, although that’s a great market. I own four properties there myself. Are you going to do more Indianapolis or some other markets? What do you think? Well,

Ira Boyd 21:15
it’s funny you say that because I all the initial ones with you I did in Memphis because I really, I just really liked this local market specialist that I met at one of the events, and I just kept going back to him, we built a good rapport and I had such good success with them that I went back. That’s what I on your advice. I kind of wanted to start diversifying more. And that’s when I bought the Indianapolis property. But most recently, I took my family on a little Southern trip was really fun over the holidays. We landed in Memphis and we rented a car, looked at some properties in Memphis, and then we went down to Jackson, Mississippi, looked at some properties there. Yeah, my intention was to buy in Jackson, but it just didn’t. It didn’t fit that just didn’t.

Jason Hartman 21:56
Yeah, you know, that’s why there are choices. I mean, different markets and It’s not just the market, it’s really more the team, the provider, I think I, I think you should choose the provider, the local market specialist in the team first and the property second. Sorry, agree with you more, even if the local market specialist is a good choice at first, they don’t always remain a good choice forever. That’s one of the biggest problems with our business. I think they fluctuate, right and a fragmentation of it. But what are some of the you know, like lessons you’ve learned or advice you want to share with other investors? I think that’s one of the best things that comes out of these client case studies we do on the show.

Ira Boyd 22:34
I mean, I could go in tons of different directions with that. I like to call myself a working stiff by day and an investor by night. Yeah, that’s great. You know, by the way, we should say you’re in the entertainment industry. You live in Burbank. So the movie industry is you know, you’re right there, right. Yes. What I’d like to do what I’m trying to do, what a lot of people are trying to do is turn my w two money into legacy money. And you know, it’s going well so far. I think my advice to people is, really, I would say, show up at one of the events, it might be one of the most important things at least it was for me, like that really inspires me. That’s when I’m in the room with like minded people. It’s a powerful thing. And it just motivates you to act.

Jason Hartman 23:10
Yeah, I listen, I want to expand on that thought for listeners, folks, you got to get out of the theory stage. You know, it’s great to be listening to podcast, you know, read books, whatever, get your education, that’s certainly important. But you got to go meet people. And I’ll tell you what I discovered this IRA. It’s just like you’re saying, When I joined I, you know, I used to just be running my business and keeping my head down and doing that. But when I joined young entrepreneurs organization, my first sort of mastermind group, if you will, and I saw other people in my peer group that were doing, like much bigger things that I even imagined I could do. I thought, wow, you know, what you realize by, you know, hanging out at the bar and having a drink with him or going to dinner with him, just like you said, you know, it’s not what takes place at the conference. Like that’s one thing, you know, sure, it’s great to hear the speakers and learn things. But when you hang out and maybe share a meal with just real regular people, I don’t know, at least for me, the way I describe it is what clicked, I think, in my mind is that I used to, it used to be sort of, like, live there were those people and there was me, right? And then I realized that, hey, this guy isn’t, you know, he’s doing way bigger things than I am. But he’s not some white great person or anything, I could do that too. You know, he’s a great person. And, and I’m just a regular person, you know, like, I could do that. Do it, like makes it real, you know, there’s a difference. And that’s the power of the mastermind group, you know, conferences, everything like that. Yeah.

Ira Boyd 24:41
If I can expand on that a little bit when I went to the event what it was that like, there’s people in the room that have hundreds of houses, but then there was somebody sitting next to me that had two houses, right, right. levels. Yeah, yeah, exactly. discuss his situation where he invested who his property managers were is it working. Were there any issues and that’s what makes it really real. And I’ve made contacts there that I still, you know, talk to now, which is great. Yeah, that’s, that’s a great networking tool as well.

Jason Hartman 25:08
Yeah. So you can you have someone you can just bounce ideas off with, yeah, kind of get a partner. You know, it’s one thing I want to encourage people to do is use those networking, you know, other clients of ours that you meet at our events, have an accountability partner to you know, help you stick to your goals. And hey, Ira, did you know six months have passed? Did you buy another property yet? You know,

Ira Boyd 25:29
yeah, it’s so true. You keep each other motivated. By the way, you know, I have named your program I call it the Jason induce debt destruction. That’s my boy. I love it.

Jason Hartman 25:41
So for those of you who don’t know, what I was referring to, is my concept of inflation into step destruction, which is used debt in a powerful way. And inflation basically pays it out. Your tenant pays off for you, but so does inflation, right? And so this is the Jason induced debt destruction. I’ll take it. Thank you. I love it. That’s great. That’s awesome. Hilarious. So going to conferences, masterminding with people, that kind of stuff, that’s great advice. I definitely recommend it. Any other learnings like you know how to deal with your property managers? Or are there any tools or technology or apps you’re using or anything like that,

Ira Boyd 26:18
you know, I’m really not right now, I may get to the point where I self manage more. I know you talk about a lot on your podcasts, and I listen with intent as in my future, I would like that to be me, honestly, that’s what I’m kind of working towards. But I’m years away from that I’m in that, you know, I’m just in my career, and I like it. And I’m going to stay there for a number of years. But when at the end of that I would like to transition into more of a real estate focus, you know, yeah, yes, I would just like to take advantage of the tax write off to be as a real estate specialist, your real estate professional designation,

Jason Hartman 26:52
and thank you, and again, that doesn’t mean you go out and sell real estate. It just melts. It’s an IRS classification that will allows you some fantastic tax benefits. And you know, I roll with 12 income properties. If you weren’t doing the full time working stiff job in the entertainment industry, you could probably qualify or at least be close to qualify. I’m

Ira Boyd 27:13
getting closer, Jason. Hey, you’ll be there. You’ll be the first one to know. That’s awesome. Good. Good

Jason Hartman 27:19
job. Good job. So what’s your plan with your portfolio? I think I asked you that. But I don’t know if I like the answer. Like, yeah,

Ira Boyd 27:24
I’m glad you asked me that because I’m really looking forward to the next meet the Masters because I want to do a portfolio makeover. I’d like to get in somebody’s here and talk about I have a few properties that have a lot of equity in them. And one I own free and clear that I know that I want to do a 1031. So I’m sort of just waiting right now to actually get there and talk to people in person. And I’m gonna take action this year. I’m super excited about it. That’s what I want to do. That’s great.

Jason Hartman 27:49
Yeah, the great thing about the 1031 exchanges, of course itself that you get, you know, tax deferred exchange, it’s not tax free because someday if you liquidate you’ll have to pay the tax. But you also get to refinance in the process. And so you can 1031 exchange and refi till you die at the same time, which is a great plan.

Ira Boyd 28:10
It’s a pretty sweet deal.

Jason Hartman 28:12
It is a pretty sweet deal are using like property tracker to track your properties or anything or just using an Excel spreadsheet or what what are you doing there? I’m honestly doing a kind

Ira Boyd 28:19
of old school and getting to the point where I need to take it to the next level. But you know, the acquisition of all these properties happened over the last four years primarily. So I’m still I mean, I’ve have a big huge drawer here filled with all the stuff and I constantly just check all my books and go through it. Twice a month, I’ll cross reference everything and kind of just go through and make sure that it’s going smooth, make some emails and whatnot, take care of any issues. They’re usually small so far, but that’s it and I yeah, I do need to take it to the next level probably. Right. Right. So I I know it varies from month to month, but if you had to average it out, you’ve got the 12 rental properties. How long does it take you every month, you know Do everything involved with owning and managing those properties, right? Like, is it you know, half hour per property like D spent six hours a month, 12 hours a month? Or less or more What? Gosh, it It varies. But I would say I mean, if I wanted to, I like it a lot. So I spend more time on it than I actually need to, but it’s still it’s probably 68 hours a month max. Yeah, I can do less if I but I, you know, I just think it’s really good for you to stay involved. So that, like, I’d like to send out emails to my property managers, just to let them know that I’m paying attention. Even if there’s even if there’s no problem that is going on. I like to just go like, hey, everything okay, how you doing? Even if it’s just meaningless, small talk. It’s really just to let them know that I’m paying attention. I think it’s

Jason Hartman 29:44
helpful. I think that’s very helpful. They know that you are an aware engaged owner. So yeah, that’s that’s really good advice. Just about a half hour property. And you say you could spend less if you want to, you’re just not trying to be like super efficient with a portfolio. So that’s a good question. You know, a lot of people say, Well, how long does it take now? Have you had any repairs that you’ve liked negotiated down or any learnings from that, that, you know, you can share with investors?

Ira Boyd 30:12
You know, I had a problem with an air conditioner. And really, that’s kind of what you always talk about on the podcast that inspired me to ask more questions. And I think I had it off at the past because even though it wasn’t a real problem, what I did is the minute that they sent me an email saying that there was a problem, maybe a lot of people wouldn’t even respond to that. And they would just do the service, right? But instead, I engage with them good. And so I don’t know that it would have gone bad or anything. I just didn’t allow it to go back. Right, just right away. I was like, Okay, let’s get some bids. And you know, it’s just so engaged that I just think they’re like, Okay, cool. We’re going to take care of this professionally and rightfully, and we’re not going to mess around with it and they’ve been pretty good about it. Good. Well, that’s that’s really good. You know, the old saying an ounce of prevention is worth a pound of cure. Right

Jason Hartman 30:59
there. Good advice. Very good. Well, Ira, thank you for sharing your story. That’s just awesome. I love it. One last question I want to ask you about is rent increases. Now you’ve been five years. Well, not quite five years in the game, at least with us. You did it before you found us too. Are you increasing your rents? are you pushing those up over time? Is that

Ira Boyd 31:20
happening or not? Really? To be honest, not at all. I’m very hesitant of that. I’m more like, leave well enough alone as far as that goes. And, you know, I’ve listened to you talk about it and taking that into consideration, but I really like the idea of keeping tenants longer, instead of threatening to push them out in any way. I almost just like to

Jason Hartman 31:40
not rock the boat. Don’t be too hesitant to raise rents, though, you gotta you know, I would say even if your rent increases are smaller, do them so that you get people in the habit of them. I’m gonna bug you about that one. Okay, I’ll bet you to raise your rents. I mean, you can. tenants are used to rent increases. They’re used to everybody’s used to inflation. They just expect it, you know, even if it’s not three or 4% per year, you know, it’s 2%. I mean, on $1,000 property, that’s 20 bucks. No one’s moving for 20 bucks.

Ira Boyd 32:10
Okay, no doubt, but let me back up a little bit. But the truth the matter is, is that the property managers take care of that a lot anyways, okay, so so it’s not like you’re not raising them? No,

Jason Hartman 32:19
right? You’re not pushing it.

Ira Boyd 32:21
Yeah, I’m just not pushing it, because most of the time, it’s already wrapped into the deal. You know, they there’s rent increases that have come along. There’s, it’s just happening a lot out there, which is great for all of us investors. And I think the property managers are in tune with that so that it’s happening more often. And even when there’s turnover, the next tenant is actually paying at a slightly higher rate. So it’s priced into the new rent into the new rent. Okay, good.

Jason Hartman 32:45
Glad to hear that. How long are your tenants staying? Are you finding that they’re staying more than a year to time or is it kind of a, you know, we perform an 8% vacancy every year so one month per year, essentially right? But are you finding That it’s better or worse than that,

Ira Boyd 33:01
I would say that’s probably a pretty good number. I will say that most of my tenants sign two year leases right out of the gate, good, good, bad, changes it a bit and you know, probably helps. And I won’t maybe even see some of those problems until years down the line to be realistic about it. But right now, I would say I’m on the better end of that.

Jason Hartman 33:21
Good. Good to hear. That’s awesome. That’s awesome. What’s the average cash flow from your properties? Are you getting, you know, a couple hundred bucks a month per property? I mean, it depends depends on the financing. And you know, it’s complicated, but

Ira Boyd 33:32
no, but that’s what I always strive for is about 200 to $250 per property,

Jason Hartman 33:36
good stuff, and what kind of properties Do you like to buy? Do you like the nicer properties or you know, class like a, b or c as we talked about?

Ira Boyd 33:45
I love the you asked me that. I mean, first of all, what I will tell you that it has changed over the years like the first houses, you know, I just wanted a big beautiful house and then I realized for one what i what i like I actually like single level homes. For just for Right. Even less square footage is becoming more attractive. I like nice houses for sure. It’s still very important to me. If I could have my choice, I’d kind of be that guy who just invested in a properties only but to be honest, it’s more like a and b but I always try to go for the best houses that I can. But I like them simplified. I don’t like carpet. It’s kind of all the things that you’ve been preaching.

Jason Hartman 34:22
Yeah, like yeah, floors, make your property bulletproof. You know, and you know, you don’t have to do this right away just whenever there’s a tenant turnover, and you gotta replace carpeting, pay a few extra bucks. It’s really not much it’ll pay off in the long run, and get yourself the vinyl plank floors or some hard surface flooring. And yeah, you can do it throughout the house. I actually prefer it like in my new house, I have hard flooring everywhere except the bedrooms. And people say you know, put the carpet in the veterans. I really would prefer the hard flooring in the veterans to

Ira Boyd 34:53
me too. I think it’s a beautiful look for what

Jason Hartman 34:55
it is and it’s just so much more durable and you know, I have a dog and if my dog gets sick throws up. You know, it’s still like I don’t need to just wipe it off. It’s easy

Ira Boyd 35:05
to my house to let me tell you this that on that trip that I described to you earlier, in Memphis, I bought a house while I was there. Yeah. And I really didn’t intend to I was on one of our property tours. No, just on this trip that I was telling you in the over the holidays. I took my family. Got it. Got it. Yeah. And while we were there, we saw the perfect style house. You just asked the question, you know, like, what kind of house do I like to invest in? It was in one of the best places in Memphis, one of the best neighborhoods. They had a brand new roof on it, they redid the floors. It had a new hbic and a new water heater. It’s just it’s bulletproof. You know, it was single level. small square footage was everything that I like.

Jason Hartman 35:42
Yeah, that’s great. That’s great. Good, good stuff. Yeah. You know, doesn’t this become a little bit of like a collector’s edition. I you know, I just love collecting these little houses, you

Ira Boyd 35:54
know? pastic it’s, it’s right up my alley, and I’m really enjoying it. I’m looking forward to The future. Yeah,

Jason Hartman 36:01
good for you. Well, I again, thank you so much for sharing your story. You know, everybody loves these client case studies when our clients come on the show. So we really appreciate it and the listeners appreciate it even more than we do. So thank you so much. And I will see you in about 10 days at meet the masters. Jason, thank you so much for having me. It’s an honor and, you know, continued success to you, my friend, thank you.

Ira Boyd 36:23
Join us March 23, and 24th for the 2019 meet the masters of income property.

Ira Boyd 36:29
Let’s break this down and look at some of the strengths of income property. As an asset class, I found that this event is really helpful because I am totally a newbie to real estate investment. And so I picked up so much information. One of the great things about it is that it’s so fragmented, right? embrace the fragmentation.

Jason Hartman 36:52
We’ve actually been learning a lot about the tax benefits to real estate and a lot of I’ve been investing actually well over 10 years. years now, and I learned a lot of new things today. The other advantage of this weekend is networking. Meeting new property managers meeting new area specialists and seeing the product they have to offer that changes here by you. Register now with Jason hartman.com slash masters. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman. Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe. So you do not miss any episodes. We look forward to seeing you on the next episode.

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This Flash Back Friday show was originally published in March 2017 as episode 876. Jason chats with Investment Counselor Sara about the impact of Hurrican Harvey in Houston. While it was one of the worst natural disasters in recent history it also provides a great opportunity for rebuilding. The price of commodities increase so this will impact the area’s real estate prices.

Jason Hartman 0:00
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is hand picked to help you today in the present, and propel you into the future. Enjoy.

Announcer 0:15
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. Here’s your host Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:06
Welcome to the creating wealth show. This is episode number 876 876. This is your host, Jason Hartman, thank you so much for joining me today. I have got Sarah, our lead investment counselor here who’s been with me the longest to do this show with me today. Sarah, how are you?

Sara 1:22
Hey, Jason. Good. Thanks for having me back.

Jason Hartman 1:25
Looks like your son. Jordan had his first day of sixth grade today. How exciting.

Sara 1:31
Yes. Didn’t he look great? Yeah, I

Jason Hartman 1:33
saw him on Facebook. He looked good. He looked good. First thing I want to talk about Sarah today is the absolute tragic chain of events that is unfolding in Houston with this flooding. I mean, it’s just it’s just so heartbreaking to see those pictures on TV and the news and the videos. I cannot believe that I feel so bad. I donated to a couple of the Houston recovery charities yesterday. And it’s just terrible. You know, we’ve done a lot of business in Houston over the years, and many people have reached out to me since the flooding unfolded there and asked me, you know, people are being disaster capitalists. Which, by the way, I want to mention I think was Naomi Klein. I read her book called disaster capitalism many years ago, and I don’t think that’s a bad thing, even though I’m kind of laughing about a little bit because whenever there’s a disaster, you know, these people the opportunists jump in and, and go and think how can I make money off that right? And the stock market reacts and, you know, the whole economy reacts to this type of stuff. And that is not a bad thing. That is a good thing, because all of the disaster capitalists, okay, and I admit there are people who are crooks and bad people to take advantage of situations, but for the ones who don’t, they are providing needed services for safety and recovery. And, you know, all the things people need without capitalism, specifically disaster capitalism, who would be there to provide it the lousy government? I mean, look at the tragic job they’ve done. Look at that terrible job they did during Katrina and New Orleans and the other areas that were affected. I mean, it was pathetic. And I, you know, I’m being an armchair quarterback. I don’t know enough about it yet. But it seems like the government’s response here is pretty pathetic. Again, not only is the response pathetic, but the fact that they even allow this to happen in the first place. And what I mean is going back to the urban planning and the flood control, and, you know, all of the systems involved in water management in Houston, just not acceptable. So we’re going to dive into this topic a little bit today. But first off, I want to express just my deep concern. And Sarah, I know, you feel the same way. It’s just a terrible, terrible situation in Houston and hopefully, the recovery will be swift.

Sara 4:01
Yeah, I mean, it’s just really heartbreaking. I’ve been totally glued to the TV and my Facebook feed. You know, I have a friend I went to high school with that has been posting live video of the flooding. And ironically, she lives where I own a property in in Katy, Texas, which is pretty far inland. I mean, I’ve had that property for 10 years, I’ve been through hurricane before with, you know, very little damage. But I really think that this storm was even bigger than anybody really expected. I mean, I know there was warning, and I know they said it was going to be the biggest storm ever, but it just, you know, it happened quickly. And I think they’re still storming out there. I mean, it’s really too early to tell the magnitude of this thing and the devastation, but I completely agree with you that there’s going to be a huge need for help, you know, in housing and several different areas and so we’re going to need You know, people, you know, these capitalists to come in and make that happen. So I completely agree with you there.

Jason Hartman 5:06
Everybody will criticize the disaster capitalists, but without them, you know, there there wouldn’t be any help. So let’s talk a little bit about, you know, what we’ve learned from prior disasters. And what we saw happen and in Katrina is is certainly the best example. Because the first Well, I don’t want to say the first that this is not an order, but just some of the things that happen are number one, we will likely see, obviously, a lot of litigation, okay. There will be a lot of insurance, bad faith litigation, people suing their insurance companies saying that they didn’t provide enough coverage and many times they’re right, I mean, insurance companies, they they try to weasel a lot of times and not pay claims or not pay as much as they should pay. So there will be a lot of litigation there. Of course, there will probably be a call for and probably be an actual more toryism on mortgage payments. When we saw this during Katrina, where many of the lenders did a six month moratorium and said people don’t have to pay their mortgage for six months. And guess who benefited most from that and who got hurt the most from that? Well, the people that had that had equity in their properties didn’t get any benefit from that. Because, you know, if you if you don’t have a mortgage, how can you get a benefit from a moratorium, right? So so that’s the first thing that happened, the people with the debt, they got the benefits. So again, as I always say, the best insurance is a high loan balance. And when you go back to that other topic I brought up of the insurance, bad faith litigation and all the lawsuits that will undoubtedly come out of this. If people have a lot of equity in their property. And if people own their property free and clear, meaning they have 100% equity. Well, they’ve got to go hire the lawyers. themselves and fight with the insurance companies themselves. But in some cases, when they have a high loan balance, the lender will go to bat for them and sometimes the lender doesn’t even formally go to bat for them, but the insurance company just knows that there is a lender and a high loan balance and, you know, if, if the disgusting criminals at Wells Fargo, for example, just like to pick on Wells Fargo, because they’ve had so many scandals recently, I mean, just pathetic, disgusting company. I hate Wells Fargo Have I told you that lately. They they you know, a lot of times the insurance company will be more likely to be on better behavior and pay claims more quickly and more completely, if you will, when there is a lender involved. So again, going back to my very old saying the best insurance is a high loan balance. Okay, after that as your insurance policy. The first thing is a high loan balance. With your lender. So we’re going to see that we’re probably going to see a moratorium and payments, we’re going to see FEMA or some federal agency and maybe state agencies as well come in and offer disaster relief assistance. I’m sure President Trump is visiting, I believe, today, if I’m not mistaken, some of the hard hit areas. So we’ll see, you know, low interest loans will see various government aid and so forth, offered as well as the government, you know, usually creates the problem in the first place, and then acts like the hero when they come in and solve the problem that many times they created or had some hand and creating in the first place. But that’s just the way our system works, what we might see in the future, but you know, I wouldn’t bank on this because nobody knows, is we might see some sort of tax incentive for rebuilding. We saw this in something years ago. And Sarah, you know, because you’ve been with me for what, almost 10 years now, right? Yep, yep. And that was the go zone. Remember the go zone zero?

Sara 9:01
I do. In fact, when I bought my property in Houston, it was supposed to have been a go zone property and then

Jason Hartman 9:09
read about that

Sara 9:10
some debate about the, you know, certain zip codes and things like that. And so I don’t think I ever actually took that deduction, but a lot of our clients did. And so, you know, I have to imagine that they’re going to have to do something like that to rebuild this, this huge community. You know, one of the statistics that I heard and you know, in fact check this, but I heard that only 15% of homeowners have flood insurance. And I was personally advised not to get flood insurance and it wasn’t required by my lender. And so I think that’s going to have a huge impact on the devastation and and the rebuilding of the community because I have a feeling we’re going to see that a lot of people were not insured for flood.

Jason Hartman 9:57
So yeah, when you talk about things like flooding insurance in earthquake insurance. This is a problem because, as opposed to something like a natural disaster, like a tornado, for example, or, you know, maybe it’s not a natural disaster, but a fire, right? Those only affect a small number of homes usually, or maybe just one home, you know, tornadoes can be very surgical. Whereas a hurricane is broad, an earthquake is broad. So, you know, if if the big key Well, it’s not if but when, when the big California Earthquake comes, even if people have earthquake insurance, you know, there may not be coverage and coverage may be very limited because it can’t all be paid. And, you know, the the state is involved in those things. And, you know, as in the in the golf areas that were after Katrina, but you know, even states don’t have unlimited budgets, even countries, as we know don’t have unlimited budgets. We talked about that quite a bit on the show. Certainly insurance companies don’t have unlimited budgets, the likelihood that claims can even be paid is a whole big question. So we’ll probably see a variety of things come out of this but a lot of the people that reached out to me directly were probably thinking well, you know, maybe I’ll I’ll go in and and try to pick up a deal you know, buy properties on the cheap in the in Houston, for example, and rehab them I mean, they don’t need extensive rehab Of course, water is a really tough kind of damaged to deal with. So there are those types of opportunities but for our clients, those are too complicated and too involved and too hands on. Our clients aren’t into that type of thing. You know, another one of our clients talked about he should get into the business of providing construction materials like sheet rock and you know, that’s the old idea of the gold miners instead of you know, mining for gold or panning for gold, you know, just sell Levi’s and pics and axes, you know, provide the infrastructure Rather than the than the actual, you know, doing the things sometimes that’s the Better Business, right? So there are all kinds of things that will happen out of this tragedy. And we don’t even know what they are yet. We’re just speculating on some of them, some of them are pretty obvious that they will happen. We’ll just see how it unfolds. It’s going to take a long time to rebuild. This is a huge, huge tragedy. I mean, the amount of money and damage is just mind boggling. It really is. Sarah, do you have any other thoughts or comments or things you want to discuss about it?

Sara 12:35
I mean, from an investment standpoint, what would you suggest for somebody who already say owns a property there? Let’s say they had significant flood damage, you know, thousands and thousands of dollars, and they didn’t have flood insurance. You know, would that person continue to pay their mortgage? I mean, assuming the tenant can’t live there, so there’s no income. You know, what would an investor do in that kind of situation?

Jason Hartman 13:00
Well, also, that’s a good point you just brought up kind of as a tangential point is, you know, do they have does their insurance policy cover for loss of rent, some, some policies have that. And it you know, won’t be complete coverage, but it will provide something. But I would say it’s too early to tell. Just wait, you know, a week or two weeks, you’re going to start hearing about moratoriums on mortgage payments and things like that. I’ll just bet you that’s that’s coming. Sorry about the noise, my housekeeper’s in the background here. If you can hear that. So that’s probably coming. So just it’s just too early to tell. So just sit tight, when we hear read about this stuff will certainly talk about on the show, your lenders will notify you directly if you were affected and your properties were affected. So it’s just too early to tell. But yeah, I would say that’s a high high likelihood that there is going to be a moratorium and mortgage payments. So if you followed my plan and you you used to leverage prudently and you tried to maximize your borrowing capacity, that unused asset of credit. And by the way, a small tangent here, one of our listeners was talking about and posting on Facebook about how high her credit score was. And I chimed in right back to her and I said, your credit score is too high, that means you’re not using Enough of your credit, your utilization isn’t high enough. Remember, when people look at their assets on a balance sheet, and you know, you look at a balance sheet has two columns, right assets and liabilities. And people put what things they own, and what liabilities they have against them, what loans they have against them and so forth. And in so doing, you know, they never consider their ability to borrow their credit score as an asset and they should, if you’ve got a really high credit score, that is not a good thing. Once You get over 720 or even 740. It’s irrelevant. Your credit score is fantastic. You know, if you have a credit score, that’s 800, you know, you’re not using your credit enough, folks, you got to use it more. So try to borrow more money. Now, that doesn’t mean get a bunch of stupid consumer debt, that means get more investment grade debt against good quality, rental properties. The other thing and I alluded to this in the beginning of our talk today, Sarah, but I didn’t really touch on the point I don’t think is commodity prices. Whenever you see natural disasters like this, you see commodity prices go up. So the cost of labor, the cost of gasoline and oil, you know, this third, the big part of the refining capacity of the country is in golf. Okay. So we’re probably going to see an increase in those prices. We’re going to see an increase in prices of all of these construction materials. Everything from sheet rock and Congress Create a lumber to copper wire to blast steel, I mean, just every construction material will become more expensive and labor will become more expensive. And there will be a lot of workers moving into the impacted areas. Okay. People will move from surrounding areas into Houston and the other affected areas in Louisiana to do construction and provide services and provide labor and insurance adjusters will move there. You know, I mean, this is, you know, in a way I hate to say it, but it’s an economic boom, okay. Now, this isn’t the kind of economic boom you want because it’s more like war. Okay. War destroys things, but they also say war stimulates the economy. Well, the biggest public works project of all time was World War Two, you know, and many say that’s what got us out of the Great Depression, World War Two. But you know, it’s not the kind of economic boom you want necessarily, right? But it is Is it is it is it boom? Nope, no question about it either way,

Sara 17:03
quick question there. So when you say that the commodities prices will go up, are you referring to just locally in Texas or nationwide globally,

Jason Hartman 17:16
globally, globally, because these these construction materials are traded globally. So, man, they are not indexed to any one currency, which is a wonderful thing, you know, that they’re not tied to the dollar or the yen, or the Euro, or any any one thing. They are, they are a global commodity, they are money, they have intrinsic value. So, so that’s a that’s a really, that’s a really good thing from an investor standpoint,

Sara 17:48
right. So assuming, assuming that’s true, and all of those commodities do go up in price, you know, and it’s a catch to the global market, then we could see real estate prices go up because it’s going to increase The cost to build new properties everywhere. So we see now the cost of real estate go up in several markets.

Jason Hartman 18:08
Absolutely, that is a indirect impact, because this will cause construction prices to increase. So, you know, all of these things, you know, you don’t need to be affected. And and by the way, I want to talk about one more thing that I saw happened in Katrina, sometimes in just a moment about insurance claims and so forth. But yeah, you don’t need to be directly impacted from this because when commodity prices go up, it basically increases the value of your property anywhere, okay, especially closer to the incident itself, but globally, because, again, you know, lumber and concrete and all of these materials, copper, they’re traded globally, they’re not tied to any one currency. Talk about one other thing here. And that is something that I think happened during the Katrina disaster. And that is insurance claims. Okay. So sometimes people look at this tragedy and you know, I used to talk about how the Chinese symbol for crisis is the same as opportunity. And literally translated that symbol means crisis is an opportunity writing the dangerous when writing the dangerous wind. And we all have had and you know, when you’re younger, it’s hard to understand this. But when you grow up a bit, and you’ve had a lot of experiences in life from which to draw, you know, that a lot of things can seem really, really negative. Really bad things happen in your life. And you think, Oh, my God, this is the end of the world. Right? But, you know, it’s like, the author Richard Bach said, you know, what, what the caterpillar calls the end of the world, everybody else calls a butterfly, okay? So it depends. how you look at it and if you just wait long enough, a lot of times, things can turn out really, really positively. So let me give you some examples. And this happened to one of our clients in Katrina. Okay. His property was completely destroyed, completely destroyed by the storm surge. Okay. I mean, just wiped, it was gone. And you know, this client, Sarah, you remember him, okay. And I won’t mention his name right now, but it was completely destroyed. And, you know, this is a way of actually renewing and rebuilding. So a condo developer came along and wanted to do an assemblage and buy up some lots in this area. And it turns out the property as a vacant lot post disaster was worth a lot more money than the than the home itself. Okay. So, so it’s interesting how that works, and sometimes the insurance claim now I’ve talked about insurance, bad faith and how sometimes insurance companies don’t like to pay claims, but it’s Does the insurance claim will actually overpay, and you can get the construction done for less than you receive from the insurance company? So, a lot of times these things work out a lot better than we think at the time.

Sara 21:12
Yeah. I mean, I can’t recall which client you’re talking about. You have to tell me later.

Sara 21:19
But we’ve seen this over the years with, you know, other types of insurance claims as well. You know, where did they get a lump sum jack and worked out better, you know, so, yeah, I guess we’ll kind of have to just wait and see. I mean, for all I know, it’s, I think it’s still raining in Houston. And Sir, you know, we have to let the storm work its way through and, you know, then take it a day at a time and, you know, I just, I feel so bad for these people that are, you know, actually occupying the homes and, you know, people that are still stranded. So, there’s still going to be a lot of, you know, relief efforts out there.

Jason Hartman 21:59
You heard this unboxer yesterday when Brittany had chimed in on one of our threads there, she said that one of her friends that lives in Houston just moved there three weeks ago, can you imagine? And they’re their house is full of water. There are literally fish swimming in their living room. Yep. Oh my god, I can’t even imagine. It’s just terrible. But um, hey, Sarah, let’s wrap this one up. But do you want to just grab one quick listener question from our AirPods contest. We’re trying to work our way through some of these questions. And maybe we’ll just grab one of them real quick before we wrap up. So Sarah, you can pick

Sara 22:38
Yeah. Okay. Let’s do we’ve got Laura. And her comment actually was I love the tangents.

Jason Hartman 22:46
Well, thank you, Laura. I will I will keep going with the tangents. I always go off on tangents.

Sara 22:51
Yeah, so I’ll read the question here and then you can answer. Hi, Jason, could you please discuss some specifics of how your own single family portfolio Perform during the Great Recession? Did your rental rates go up or down? Did you have more tenant turns? Did class a property tenants move to class B, and C properties? And the last question, did you see any more in one marketplace versus the other?

Jason Hartman 23:18
Oh, gosh, you had to pick such a long question right? For this, because I know you’ve got to go and so two eyes here I’ve got a record another recording coming up. But I’ll try to answer that one is to simply as possible Laura. So first of all, at first and now you know, we’re talking 10 years ago basically now right? So this has been a while but the nice thing is you can go and listen to my past episodes of the podcast that I was doing way back then and you can hear what I was saying you know, like right from that actual experience them but um, what I noticed happened is that it first the rents strengthened on my own properties. My clients properties, and the tenants stayed longer. And that was good. And then what I noticed happened as the stupid government got involved. And we had we, you know, we had an election year in 2008, obviously, right. So the the politically correct, idiotic thing to say was let’s keep everybody in their home. Now, of course, the question on answered from that was, what home should they be in, in other words, was the school teacher who was making, you know, $58,000 a year in that $800,000 home that they got with a subprime loan that they never should have received that loan anyway, in the first place? Should they be staying in their home? And so the government shoved every you know, down everybody’s throat, the loan modifications and the workouts and the bailouts and, you know, millions of people stop paying their mortgage and you know, that’s going to happen in Houston. A little Louisiana to just wait. And, and so that really perverted the market. The market forces couldn’t do what they should have done, okay, because what they should have done, which I teach about in the three dimensions of real estate, and they started to do but then they ultimately didn’t it didn’t continue is when the housing market, meaning the sales market falters, and it slows as long as the population is increasing, which it kept increasing through the Great Recession. The rental market should strengthen and rent should be there should be a lot of upward pressure on rents, and people will stay longer in the rental property. And that didn’t start to happen. I noticed it at the beginning of the Great Recession. But then as we moved into it, and the government kept telling the banks to bail everybody out. And you know, of course, there were three Big bailout multi trillion dollar bailout programs that we taxpayers paid for, as they did that the market forces couldn’t do their thing. And so there really wasn’t as much increase and upward pressure on rents, as we should have seen. So again, to answer that question, it started to happen at the beginning, and then it kind of just petered out and sort of stabilized through the Great Recession. Really, if you think about it, for investors, it was only a couple of really dark years there. Because people started coming back into the market, you know, reasonably significantly. I mean, Sarah in 2010, you know, I started to see business really pick up and those were the people that made all the money. I mean, you know, they they just did really well, because they obviously bought when, you know, when there was a lot of fear, right.

Sara 26:48
I was just thinking, you know, that ties right into this whole Houston discussion. It’s like it when it’s happening. I remember when that first started happening in 2008. I mean, it seemed like The world was falling apart. It was really dark and gloomy and people were scared. And it was bad for a couple of years. But you’re right. 2010 it just picked right up. And we haven’t looked back since. And, yeah, the buyers in 2010 2011, you know, they made out, like, just beautifully. You know, so maybe a little inspiration for anybody having, you know, challenges in Houston is that, you know, it’s going to probably seem heavy for a little while, but you know, it will, it will work out good stuff.

Jason Hartman 27:35
So anyway, I know we’ve got to wrap it up. I think that kind of answers that question, Laura. I know your questions, a little more in depth than that, but we’ve got to run. So we will, you know, maybe touch on that a little bit more on a future episode. Okay. Sarah, thank you for joining me today. And our thoughts and prayers are with everybody in Houston. You know, please listeners if if you find it in your ability, you know, figure out out the best charities to donate to, and donate to the relief effort there. And you know what, just hope that things work out for the best. We will talk to you on the next episode. Thanks for listening and happy investing to all of you.

Sara 28:12
Thanks, Jason.

Jason Hartman 28:15
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice of any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

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