Jason Hartman gives us a client case study on this Flash Back Friday episode. He welcomes Vernon Grant to discuss some of the investment properties he purchased with the network. Grant compares the New York City real estate market to Tampa. Then he discusses how to use equity to maximize returns. Jason goes through his strategy, “refi-til-ya-die.”
Jason Hartman 0:00
Be sure to check out our cyber monday sale. It is going all week long. It will end soon, but it’s our best deals of the year at Hartman, education calm. That’s Hartman education calm where all of our info products and educational products are half price for Cyber Monday. Our best sale of the year Hartman education calm. 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 0:49
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 hits. 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 1:39
Welcome to the creating wealth show, episode number 809 809. This is Jason Hartman, thank you so much for joining me today as we do a another case study. Yes, we have one of our clients on with us today. And we love it when our clients come on the show and share their experience the good, the bad and the ugly aspect. questions and get them answered. So if you would like to be on the show, just reach out to us and let us know. If you’re working with one of our investment counselors now you can just reach out through them. Or you can just reach out through Jason Hartman calm, and we’d love to put you on the show, and answer your questions here, your experience, etc. Of course, you can always reach me on voxer as well. My voxer name is Jay heart 88. Jay heart 88. If you just have a quick question there, which we may play on the show, we don’t always play those on the show. But sometimes we do. Sometimes they’re a little hard to organize, and too many of them come in and I can’t keep track of them all. But I went to flickable. I tried, I gotta get back on that and start playing those on the show. Anyway, yeah. Let’s get to our guests today, and do this little client case study. I hope you enjoy it. And one of the things I want to remind you of, and we talked about it here on this interview with our client, is that the ideal thing In terms of properties where you don’t have good rent to value ratios, the ideal thing, if they’re really far off is always to sell them, do a 1031 exchange if necessary. So you have tax deferral, and then buy less expensive properties with better rent to value ratios, that would be the first choice. The second choice is to refinance them, because at least if you refinance them, you get control of that equity. you’ve engaged in the practice that I call equity stripping, which is a very good practice, so that your equity is no longer lazy money. It’s not tied up in the property, you can use it you can do some good with it, and you actually lower your risk. I know this is counterintuitive for many people, and we’ve talked about it many times on the past 808 episodes. Just keep that in mind. Selling doing if necessary at 1031 tax deferred exchange, which By the way, a word of caution here and remember that I am not a tax advisor. I’m not a lawyer, always seek competent. And it’s not easy to find competent, by the way, always advice when it comes to this stuff because taxes and legal questions are particularly complicated. And one of the things that people are sometimes surprised by is that they can have a property that they are selling for the same price. They bought it, but they’ve taken a big tax write off for many years, and that tax write off is the the best tax benefit, because income property is the most tax favored asset class in America. And that is called depreciation. It’s a non cash right off, it’s a phantom right off. It’s a wonderful, wonderful tax benefit. But remember, if you’ve taken that tax benefit for the last five years, and you sell the property for the same price, you bought it for Then Hey, you gotta pay that back. And that’s called depreciation recapture. So even if you’re, if you think from a very elementary understanding that you’re just breaking even, you’re really not, you’re really making money. And and this is the thing with real estate investing because it’s this wonderful multi dimensional asset class, income property, the most historically proven asset class in the world, a multi dimensional asset class where we’re we earn our profits, we earn our returns from many dimensions. With that in mind, a lot of people they just, they’re making money, they’re winning the game, and sometimes they think they’re losing because they don’t know how to keep score.
Jason Hartman 5:48
And that’s what we teach you to do is keep score on the show, keep know how to keep score, and of course, go to real estate tools.com for some excellent tools that can help you keep score. And help you be a better investor go to Jason Hartman calm listen to or really watch that free 27 minute video that we’ve got on how to analyze a real estate investment that can be very, very helpful in learning how to keep score. And so part of keeping score is knowing that you’ve received this tax benefit for in that example, I just mentioned the last five years. And if you sell the property for the same price, you bought it for, hey, you’re going to have some depreciation recapture potentially, right? And so you still might want to do a 1031 tax deferred exchange. So that is something very important to keep in mind. Okay. So in either case, we let’s get to our guest interview today. And if you’re out there, you’re one of our clients. We’d love to have you on the show as well. Just reach out to your investment counselor, or contact us through Jason Hartman. com or contact me through voxer at Jay heart Eight. And we’d always love to have you on the show. Anyway, here we go with our client case study.
Jason Hartman 7:12
It’s my pleasure to welcome one of our clients back to the show. Well, first time for this one, but we’ve had many clients on the show over the years and we always like to share these talks with you as sort of case studies and also have them ask some questions and so forth. And all of those questions apply to many of you listeners as well because many people have the same questions and are thinking along the same lines about stuff. And I just want to welcome Vernon grant. Vernon How are you? I’m well thanks and yourself. Good Good to have you on the show. And you’re coming to us from New York City area. And it’s great to have you and you have really been helping your your parents out with their real estate investing it sounds like and and doing some of your own.
Vernon Grant 7:58
Give us a little background if you would So, I’m an engineer by trade, but
Vernon Grant 8:05
I went into business for myself in 2001. And I’ve been continuing that until today. And now I have a little bit more time that I can help my parents out with their investing that they started in the 90s, I would say, and I like a lot of your ideas, and I would like to put what they have to good use to, because what they have already is growing. But I think you can do a lot better based on your stuff.
Jason Hartman 8:41
Yeah. Well, that’s it. That’s a great topic. When did you discover my podcast?
Vernon Grant 8:45
Actually, I was listening to Ryan Moran’s podcast.
Vernon Grant 8:52
Freedom Fastlane I’m not sure if you remember it.
Jason Hartman 8:55
Yeah. I’ve been on a few of Ryan’s shows. So yeah,
Vernon Grant 8:58
yes. And so It was quite a while ago that I heard about your podcast, but I just was so busy, I didn’t have the time to listen. And within the last, I would say two months, I have been so many episodes of your podcast, it’s so great. You have so much good knowledge, you know, so many people, they will pick and choose information that they wish to share. But it’s not the big picture and you give such a clear big picture you tie in so many things to the market. And what if and what if and what you should do in those situations and you’re you’re quite conservative with how you invest. And so I mean, it just makes so much sense.
Jason Hartman 9:48
Well, I appreciate it. Vernon thank you and I’m glad you liked the show. So you you’ve been bingeing on the episodes, any idea how many episodes you’ve listened to.
Vernon Grant 9:58
Oh, man, at least A couple hundred.
Jason Hartman 10:01
Yeah, good, good stuff. Well, I hope you don’t get sick of me anytime soon. But you’re probably sick of me already. And you went to college for computer and electrical engineering. And then, and you were also in the Marine Corps for eight years as well. Yeah. Yeah. So and then you said you started your own business. So in 2001 what kind of businesses that
Vernon Grant 10:25
well was automotive accessories, so you know, people hooking up their cars to go faster and look different and all of that stuff and I was really into that scene. I still love cars. However, I wanted to try to shift gears because you know, as the economy changed, things changed with the industry and although I love cars, it’s just not that great of a business and more and and you know, we will We’ve made a lot of money. And in the crisis, we’ve lost money. And so again, you know, with your strategies, even in those different markets, I could have been making money. So I don’t want to lose it anymore, so to speak,
Jason Hartman 11:15
let’s not miss any more opportunities if we can help it. So your father was a property manager. In fact, he was managing director of a property management company in the 80s and 90s. So you’ve got that background in real estate and that interest, it sounds like
Vernon Grant 11:30
yeah, I mean, I’ve been around it so much. You know, there have been times where he had to go back to Manhattan at like 3am because some commercial property that he’s met in managing some crisis happens and so I’ve been in it and even his father was a realtor as well. So I like it. I just hadn’t had time to wrap my myself. around it and and digest all the information because there’s a lot of information, but thank goodness in this day and age, you know, it’s so readily available. Yeah,
Jason Hartman 12:10
good, good stuff. Well, sounds great. Well, tell me about some of the questions you have. And you know what, what you’re thinking of doing. And let’s outline some strategy here because you’ve got a couple of different moving parts, and I think we could, you know, align those really well for you.
Vernon Grant 12:27
Okay, so, we’ve already identified a few properties that we’re getting, but my main question is, my parents have a particular house that they want to retire in. And when they bought it in 96, it was they purchased it at approximately $195,000. And now it’s worth about 424,000. So they’ve got quite a bit of equity in there and
Vernon Grant 13:00
I’m not sure which
Vernon Grant 13:03
direction will benefit us best keeping in mind that you know, they still want somewhere to go to vacation and have fun and or live for several months out of the year. So I want to take that equity out and do something with it or do a 1031 exchange but I need your advice as to which one might be best.
Jason Hartman 13:29
Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. Okay, so the $424,000 property I believe that’s in the Tampa Florida area. Is that correct? Yes. Okay. And your parents are living in that area. Are they living in New York or kind of both or what?
Vernon Grant 13:53
They’re still living in New York. Okay,
Jason Hartman 13:56
so they live in New York and they want to retire in the potential In the Tampa property, right? Correct. Okay, good. So do they own a home in New York? Yes, they do. And how much is that worth?
Vernon Grant 14:08
That is about the same. About the same
Jason Hartman 14:13
425,000. Same price. Exactly. Okay. And what what’s their target date for retirement?
Vernon Grant 14:22
Maybe
Vernon Grant 14:25
my mom will definitely retire within the next year. So they want to move not maybe right away, I would say within the next four or so four or five years.
Jason Hartman 14:36
So is the property in Tampa rented out now?
Vernon Grant 14:39
Yes, it is.
Jason Hartman 14:40
Okay, and how much rent are they getting? Well, I actually I can tell you, okay, without without knowing. I’m gonna guess that they’re getting somewhere in the ballpark of maybe 20 $100 a month. Wow, that’s really, really good is 20 222 You know, I was gonna say 2200 and I just didn’t want to be too aggressive but you know, they paid 195 for it so they’re basically getting about a point five rent to value ratio. Yeah. And Vernon Isn’t it amazing? You know, I have tried this little parlor trick all over the world. And it doesn’t matter what city what language what currency. You know, it can be Paris, France, it can be Hong Kong. It can be you know, Tokyo, it doesn’t matter where it is. It could be LA, you know, it can be Tampa, Florida, or Miami or anywhere Boston, it doesn’t matter numbers or numbers, right? The ratios are always about the same. It’s incredible. You know, if you’ve got a property that’s worth $424,000, you can convert that any into any currency on earth, and that rent to value ratio. Not Not withstanding, you know, rent control or communism or you know, something like That, right? But if it’s in the free market, it’ll generally be just about the same ratio. So it’s it’s truly amazing to me, it really is. I remember I was in Belize once looking at properties down there. And this has nothing to do with those properties because I wasn’t interested in them. But I was talking to a wealthy insurance guy, about his business and so forth. And he, I talked about this on a former episode, and I don’t even remember where he moved from now. But, you know, he, he and his family had moved, and they were renting a place in I think, Miami if I’m not mistaken. And they said it was worth I think they said it was worth 1.3 million. And I said, Oh, so you’re paying about 4000 and rent and he said, How do you know and I, you know, I just know
Jason Hartman 16:49
it’s amazing how well that works. So listeners that let that be a lesson that it’s all about ratios and those ratios hold hold true and in every language Every currency, every geography, it doesn’t matter where so it’s really amazing. Okay, so they’re getting 2200 for their, their Tampa property, and it’s worth 400 and let’s just call it 425,000. And they’re renting it now. So is do they have some attachment to that property? You know, like, when did they buy it? 1996 I guess did they ever live there? Or was did they just turn it into rental and say, Hey, you know, in 20 years we’ll retire here was that they’re thinking that’s exactly what it was in 20 years. We’ll retire here. Okay. All right. So, I mean, from a pure numbers perspective, I would definitely be selling that property. And you know, when they retire, they can buy another property and that retirement thing is a moving target, you know, they might not retire in the timeframe they’re thinking and they might find a better property, they might pick a different area, you know, I don’t know I mean, all of this stuff is such a move. Target and there’s so many opportunities and the world is changing so quickly nowadays that, you know, from a purely investment standpoint, that property definitely does not make sense, right? Because, as you well know, I would like to see them get 1% per month. So again, for 425,000 invested capital, I’d like them to get, you know, $4,250 per month, not 2200 per month. That’s just a pure numbers angle. It doesn’t include psychology, it doesn’t include sentimentality and emotions and various things like that. Of course, you can’t quantify those things very well. But then the other thing they’ve got to think about is the property in New York. Of course, when I probably wouldn’t do anything with that because it would be too upsetting to their life, you know, unless they want to move and they don’t like it. If they if they want to move then I would sell that one and and pay 20 $200 to somebody else to Have the equivalent home, you know and live in New York until they retire. There’s also a question of kind of timing the real estate market because that New York market is such a frothy, cyclical market. Right? And it’s die as I always say, it’s very difficult Vernon to time any market. I would certainly say it’s, you know, it’s on the verge of being overvalued. Okay. But again, who knows, you know, that could that could, you know, if if the Trump economy really does boom, and the money loosens up, I mean, that that frothy market could go on for years more. I’m just saying that today. From a fundamentals perspective, it’s out of whack and we all we all know that. Okay. Did you have a deeper question here, like
Vernon Grant 19:52
so. They are also old school mentality. So it takes a bit of convincing To to let them know that, you know, it’s not about we get the property and you pay and you pay till you pay it off. Which is what they still, you know, especially my mom, she has that that mentality. She’s a nurse, by the way. So you know, she’s, she’s been working at the same job for like 40 plus years, and that they just want to pay it off. So if I introduced to them an idea that they’re going to have to pay for where they live again, it has to be, I have to offer them something more than Hey, you, you have to pay your monthly mortgage on this place on this new place. So whatever it is
Jason Hartman 20:45
yet the hard thing in life, especially for old school, people that are thinking like old school way, which, by the way, they’re not wrong. They’re just out of sequence with the times right there. plan worked great when it all started to not work was post 1971. When we went off the gold standard, then the game really changed because the lending standards changed. Money got easier and inflation reared its ugly head. And the game just totally changed. That was really the the inflection point when it all happened. The hard part, as you’ve heard me talk about on the show, Vernon, to get people to understand and in any area of life, not just investing is that you can’t hear the dogs that don’t park. They never look at what what might have happened, or what didn’t happen because they did or didn’t take another path. They only see what they did. They didn’t see what they didn’t do or what they could have done. That’s hard for the human mind to think that way. And it’s it’s that old thing you can hear the dogs that don’t bark
Vernon Grant 22:00
I’ve heard a quote sorry to cut you ever heard a quote? That that reflects that same thought that you can’t see past the choices you don’t make?
Jason Hartman 22:09
Ooh, that’s a good quote. Who said that one? I like that.
Vernon Grant 22:12
Yeah. Remember,
Jason Hartman 22:14
I like that. Let’s let’s find that I got I’m gonna I’m gonna search that. That’s a good quote. You can’t see past the choices you don’t make. Really good. Thank you for sharing that one. I like that one. I almost like that one better. It’s it’s more understandable than you can hear the dogs that don’t bark. But anyway, yeah, you can’t see past the choices you don’t make. So it begs the question, what choices are your parents or many other there are 10s of millions of people in this very similar situation, right? When choices aren’t they making? Well, they’re choosing not to sell $850,000 worth of two properties and do 1031 exchanges where they could buy Eight single family detached homes and diversified markets that would net them around while not net, I want to say it’s really gross, but its net. Also, I’m kind of thinking of it differently than myopically people would think of it from an accounting perspective, but it would just get them 800 or $8,000 per month in income, right? And then they could turn around and rent the place they live in and pay 2200 for that one. Right? Because in New York, or or Florida, it’s the same deal. You know, it doesn’t matter. Right, right. Right. They could rent that equivalent property. They’re living in now for about 2200 a month in New York. And then when they moved to Tampa, they could also do the same thing. But most people’s mind say, Well, hey, if I’m renting, I’m throwing money away. That’s how everybody thinks of it. That’s how I used to think of it too. But when they the choice they didn’t make is they chose not to get $8,000 a month. For that same value of real estate,
Vernon Grant 24:03
right? I mean, it’s it’s also the tools that they have you, you can’t really understand a thing if you don’t have the tools to understand it with, right?
Jason Hartman 24:16
Yeah, you know what that reminds me of? It’s kind of like the concept of vocabulary. Now, we’re going on a little tangent here, but when you know certain languages have, you know, fewer words from which to choose. So it literally limits the populations ability to think and, you know, an educated people or children, for example, you know, they have a smaller vocabulary, right? So they, they that that’s their vocabulary is literally the tool with which you can think and if you have a big vocabulary, you can think more thoughts. You literally can’t think of thought that you can’t express usually right? And so if there’s not a word for it, then, you know, it’s very hard to think about it right. So,
Vernon Grant 25:06
yeah, yeah. How do you express it? That’s why we come up with labels for things and containers to put things and classify things. So we can understand them. Yep.
Jason Hartman 25:15
Yep, no question about it. And, you know, props to the English language, the most widely spoken language on Earth. It’s also the largest language with about six 700,000 words, I believe, where if you look at like French, Spanish, Italian, I think they’ve all got around 150,000 words. So a lot fewer tools. And the reason English is that way, is you know, not because English is so great or anything, it’s just a language that happens to adopt and sort of suck up a lot of words from a lot of other languages. You know, we have all sorts of foreign words woven into the English language, right? And I guess other languages don’t do that as much as English does. So it’s just kind of interesting. Tangent alert. tangible area. But okay, so the other thing they could do, if they don’t want to sell those properties, because I know that, you know that, that mindset that, you know, your parents have, my mother has that same mindset is when you sell something, it’s like you lost it, right? You gave it up, right? And that mindset is very hard to, to, you know, kind of argue with, right. So the other thing they could do is they could do refi till you die, right. And that is another option because at least they could get that equity out and make it work for them. Do you know what kind of debt they have on the properties if any, or have they paid them off for
Vernon Grant 26:44
I’m not sure about the Florida property I I know they’re still paying for it, but very minimal amount. And I know the one in New York, I did recently convinced them to refinance it. So refi cash out. So that’s how we’re getting those extra few properties that I was just mentioning to you. And now I’ll be at the Memphis tour, by the way.
Jason Hartman 27:10
Oh, good. Hey, I look forward to seeing you at the Memphis property tour with that, boy, I’ll be in Memphis in six days. I haven’t even it’s right around the corner. So we look forward to seeing you there. And by the time people listen to this, that will have probably already happened.
Vernon Grant 27:26
So we’re going to buy about three properties with that
Jason Hartman 27:29
with the equity. Okay, how much are you pulling out to buy the three properties?
Vernon Grant 27:36
I think so far total it came out to about 68,000 that we have to put down. That’s not
Jason Hartman 27:44
bad. That’s all. Basically for $68,000 you can buy three properties you’ll gain or they are you are, you know both of your guest. Gain diversification because you’ll be in a totally different market right that which will be good. Those three properties should produce somewhere in the neighborhood of, you know, 2700 to $3,000 per month in income, right?
Vernon Grant 28:08
Yeah. Okay, good cash flow, actually,
Jason Hartman 28:11
yeah, fantastic. And once once your parents see, you know, sometimes you got to do it to really internalize it or understand it, you know, in your, in your gut. Once they see that, and they actually do that deal. And they see that look, here, we’re getting $1,000 per month for each of these properties, for example, and I’m just pulling out around number I don’t know the exact properties you’re looking at, then, you know, they’ll think well, these three properties with only $68,000 down, we generated a gross of $3,000 per month, they’re going to be thinking, well here, we’ve got $425,000 in this property in Tampa, and all we get is 2200 a month.
Vernon Grant 28:56
And it’s only breakeven sometimes,
Jason Hartman 28:59
so That will probably go a long way and getting them to see the light, if you will, you know, and I know it’s it’s hard, you know, I mean, I take my own mother’s example, the countless conversations, have, you know, slash arguments that I’ve had with her about this stuff? You know, it’s funny, too. This is the funny thing. Another funny thing about the way the human mind works, and I don’t know why it’s this way, it just is. But we will trust a stranger, a total stranger, more than we will trust her own friends and family, the people we know well, and I don’t know why that is, you know, there’s an old saying familiarity breeds contempt. And even if we love these people, or you know, like them really well, there’s a familiarity we just don’t respect that as much as we respect someone, you know, at
Vernon Grant 29:54
a distance. It happens all the time. Even like, let’s say my dad, if he’s having some medical issues like with eating and stuff like that, because I’ve taught myself so much about health and so on. I tell him, okay, this is what you should eat. And this is why you’re having this problem because you’re doing this and he not listening to me at all. And then one day he goes to the doctor, the doctor tells him, that’s when he changes. I said to him, what is it because I don’t have a PhD or an MD, and that’s why you don’t listen to me. Come on. I’ve been telling you this for years. Yep,
Jason Hartman 30:34
yeah, no, you’re right. But even if you did have a PhD and an MD, you still would be family and he would not listen to you. That’s so true. It’s just it’s just the way I don’t know why that is. It’s just, there’s all kinds of these funny quirks about the way the human mind works, but it just is just an odd, odd thing the way it works. So just a reminder, you’re listening to flashback Friday, our new episodes on published every Monday and every Wednesday. I think with your folks that that refi plan is really going to help when they see those three properties performing. Now, are those going to be all three in Memphis? Or are those if you purchase those properties yet or don’t tell me about that
Vernon Grant 31:20
we’re under contract. So we’re just getting our approvals stuff. We’re already pre approved, and we just need all the paperwork and so they can run them by the underwriters.
Jason Hartman 31:30
Okay, good stuff, and where are those properties?
Vernon Grant 31:33
Those are all in Memphis. Okay. So after you do those three in Memphis, if they’re, you know, if they decide to sell one of the two properties, and by the way, I didn’t ask you Do they own any other properties? Yes, they do. They own a couple pieces of land. And one other property but that property, you know, they lost some money on it. So they’re just, it’s rented and the prices re appreciating again. So we’re just waiting it out.
Jason Hartman 32:04
Tell us a little bit about that one.
Vernon Grant 32:06
Well, one is actually also an
Vernon Grant 32:10
in South Florida that is near Tampa.
Vernon Grant 32:16
And I forgot exactly
Jason Hartman 32:18
how much is it worth? Do you know that the metrics on it what it’s worth and what it rents for,
Vernon Grant 32:22
not what it rents for, but I do know they purchased the 105 and the current value is 89.
Jason Hartman 32:31
Okay, so it’s gone down in value, and that one is probably got a pretty good rent to value ratio. So oddly, that one that they lost the money on is probably the one that they may be most likely should keep. However, I have a feeling and I don’t know this, but I have a feeling that that’s a condo isn’t it?
Vernon Grant 32:53
It absolutely is.
Jason Hartman 32:55
And I don’t like condos unless they’re very good deals. I just don’t like condos. And there been a lot of condo problems in various areas around the country. And in look listeners, I don’t want you to hear me say that I’ll never do a condo, I will do a condo. It’s just got to be a much better deal. Okay, there’s got to be something to offset the fact that it’s a condo. Okay. I just don’t like condos, they have a whole new set of potential problems with them. Okay, so that one, you know, that probably rents for around 900,000 a month I
Vernon Grant 33:28
bet right? Yeah, I’m thinking it because I remember seeing the numbers. It was like anywhere from eight to nine.
Jason Hartman 33:34
Yeah, so so that’s, that’s fine in terms of rent to value ratio. Now, the one thing we didn’t explore on any of these properties, by the way, is the debt structure on them, you know, what is the as they say the capital stack, right? You know, if you have a high interest rate loan on one, or an adjustable rate loan on one and you know, maybe you have a low interest rate on another, these things can also influence your thinking on selling or refinancing or, you know, when you refinance, if you’ve got a very low interest rate first loan on the property, occasionally, it’ll make sense to put a second loan on it, sometimes not. So there are there are numerous factors here, right? We, you know, I just want to make sure everybody knows that. Maybe the age of the property, the location, you know, properties. Some areas in Florida, for example, have really high insurance cost properties in New York have really high property taxes, right. So, you know, there are multiple things to think about. And in New York, you might be in a rent controlled area, and that’s really bad as an owner, but it could be really good as a tenant. So there are all kinds of other dimensions, but what were you going to say?
Vernon Grant 34:48
I was going to ask what so I am assuming that the advice would be the most optimal thing would be 1031 exchange, correct?
Jason Hartman 34:58
Oh, yeah. The 1031 exchange Is is the way to go for sure. Because it allows you to basically trade properties all your life and deferred for defer the gain. And, you know, listeners also need to be very mindful. I was looking at one of my properties I’ve been over the past several years, I’ve been reworking my portfolio and selling some properties and trading them for others. And so I’ve got this one property in an old market. We used to do Mobile, Alabama, and it’s been very good to me. I bought it when there was something called the go zone going on. And you hear me talk about that on the old episode. Yeah. And that was a tremendous tax benefit. Like so many government policies that eventually turned into a mess because the you know, so many investors got attracted there that the properties became overvalued and we stopped recommending it but our our clients who got into the go zone early enough, did very well and including me, you know, this particular property is only worth about the same as well. I purchased it for, but because I had such tremendous goes on tax benefits, I would I would potentially sell it and breakeven, but I would really need to do a 1031 tax deferred exchange on that property because, and I asked my accountant, I said, Hey, dude, what’s my depreciation recapture on this property? And guess what he said, then by the way, this property’s worth about $170,000 give or take. But if I sold that outright, and just broke even on paper, by the time the tax consequences came up, I would get at $98,000 in depreciation recapture on which I would have to pay taxes. Wow. So, you know, in a way you can get kind of trapped into this real estate game, which isn’t all bad. Okay. It’s actually quite good. But you’ve got to really think of it and, you know, people make mistakes sometimes and they’ll sell a property thinking, Hey, you know, I’m just breaking even or I’m making 20 grand, it’s no big deal, I’ll just pay the taxes on the 20 grand. No, you’ve already taken a bunch of tax benefits over the years here that you got as a deduction. And now, if you don’t do a 1031 exchange, you got to recapture those and pay them. Okay. So things aren’t always as simple as they look. So be careful. Always consult a tax advisor, and make sure you have one that knows about real estate. Yeah, certainly. Very, very important. So any other thoughts or questions you want to share with the audience?
Vernon Grant 37:42
At what point do you know if it should be a refi till you die versus 1031 exchange?
Jason Hartman 37:50
Well, really what tells you that is the rent to value ratio? And on both of those properties, ideally, if there was no Sort of life hassle factor or emotional factor involved from just a cold pure numbers standpoint, I would definitely be selling those properties. Okay, and doing 1031 exchanges, but I do, of course understand there are other considerations. So, you know, those those are there are other factors to weigh in there. And, you know, if your folks are going to retire in two years, it’s looking like the markets going to continue booming pretty well. I mean, that’s what most people think, I think, you know, the money money supply is flowing into real estate. For all the Trump reasons I’ve mentioned on prior episodes of, you know, our for him being our first real estate president, you know, eliminating or softening, Dodd Frank, etc, etc. If they’re going to retire in two years, just stay put make life easy and keep that New York property you know, it’s only two years not a big deal. Right. And, and but, but I would really consider selling the Tampa property.
Vernon Grant 39:01
Okay, and I guess purchasing another one that they like somewhere to live down there.
Jason Hartman 39:07
Yeah, or three or four more and, and then they can buy back into that market or they might really decide they just want to rent because maybe that’s, you know, that’s not their final perfect location. Maybe it’s not their dream home, maybe they want to have some flexibility, you know, maybe they want to go on a cruise for a year or travel I mean, renting is just so, so, so much easier, you know,
Vernon Grant 39:31
and that’s true. You don’t have all those costs that you have to worry about. Yeah, yeah,
Jason Hartman 39:36
no question about it. It’s it’s really quite easy to be a renter, you know, and you don’t have to unload a property, you know, you can just give 30 days notice and move out. You don’t have to show it and have people invading your privacy and it’s just much easier. There’s a lot of hidden costs in hohner homeownership to upkeep and all that stuff. A lot of times They’re spending working on their house and going to the hardware store and when you’re a renter, you just you just live there. No, it’s much easier. So, all good stuff to think about but Vernon Hey, thanks for coming on the show and sharing your story and your parents story with us. And you know, hopefully they will listen to this podcast if you can get them to do that. And I hope it helps them and we will look forward to seeing you at our upcoming creating wealth seminar and Memphis property tour next weekend.
Vernon Grant 40:28
No problem. Thank you so much for your help and time.
Jason Hartman 40:31
My pleasure, 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 approach We’re 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.
Today’s show begins with Jason Hartman and Adam discussing how investors are taking a big risk (and breaking Commandment #5 in the process) if they take part in buying the stock for a company that’s never turned a profit.
Then Jason welcomes Lisa Tomita, a client with 4 properties who has recently decided to self-manage two of her properties. Jason and Lisa discuss the ups and downs of investing and how self-managing has turned Lisa into a more empowered investor ready to deal with all the bumps along the way as she moves closer to her financial independence.
Investor 0:00
I really need to thank you and Sarah for being there for me, you guys could have easily said, This isn’t my problem. This is your problem. Your lack of due diligence is entirely your fault. And not done anything at all. But you guys have been there for me every step of the way. You responded on voxer at 342 in the morning, I know, it might have been 642 depending on where you were, but honestly, who works at that time. So just the fact that you guys were there for me. I appreciate it so much.
Announcer 0:32
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 1:22
Welcome listeners from 165 countries worldwide. This is Jason Hartman with Episode 1147 1147. Thank you so much for joining me today. I’ve got Adam here with me. And Adam, what are we doing today? We’re doing a client case study, right? Yeah, from a young millennial. So good news. Those millennials may not be buying as many houses as everybody else to live in. But this one is decided, hey, it’s time to get into investment properties. Well, let me tell you this one is this is our client, Lisa and she’s awesome. She’s really bright. She is just doing all the right stuff. It’s just great to hear her story. She got in contact with me because Her investment counselor connected me on a voxer chat with her because she was having some challenges with her property. And as I was listening to the dialogue back and forth, I was so impressed with how prepared she was, and how specific she was in holding the property manager accountable. And this is exactly what we want. Again, one of my big goals here is to create a group of millions of empowered investors who are empowered to get the results for themselves. And if they don’t self manage, they at least are holding their service providers accountable. This will make the world a better place for all a better place for all. Yeah, really excited about this case study. We have that coming up in a few minutes. But you know, most of our listeners if not all of our listeners, even my older mother uses These services. She’s kind of semi tech savvy just because it’s so convenient. And that is ride sharing. You know, so my mom regularly takes lift and Uber. And Adam, you were reading up on lifts IPO. Now both of these companies, the two big ride sharing giants are going public this year. And you found some interesting things in this relates to commandment number five, Thou shalt not gamble. Remember, investing is about cash flow. It’s about income. It’s not about speculation, or capital gains appreciation. Adam, tell the listeners what you found. Yeah, so lift is coming out with their IPOs later this year, and they’re expected to be valued around like 20 to $25 billion, which is, I don’t know if you know this, that’s a lot of money. But in their financials, they actually came out and said they’ve never turned a profit, which isn’t horribly surprising. But they essentially said there’s no real way from For them to do it effectively to turn a profit effectively, until they get completely autonomous with their vehicles, no drivers in them at all. And the only way otherwise they can do it is to jack up rates, or to slash the rates of their drivers pay, which would essentially make them into the taxicab service that we had before. And will send drivers over to Uber that then Uber will, you know, have a glut of drivers and probably cut their pay as well. And just make it a vicious cycle. So these rideshares It may look like a good deal and it may be a good deal. I mean, I’m going to take one when I’m at meet the Masters, whenever I get to the airport is call up an Uber go there. But the companies themselves are not turning a profit and they are not looking like anytime in the future. They’re going to be turning a profit. So if you invest now, what you’re really doing is saying I’m going to hold this until and I believe they’re going to be around until all of the autonomous cars are in and their whole fleet. Is that so? I mean, you’re investing for the long haul for this. Yeah, you definitely are. Well, what’s interesting about this as well, you’re an atom, but I’m going to talk about another atom for a moment. And that is Adam Smith, who wrote the Wealth of Nations, the famous book, which really kind of made the world understand modern economic theory. And he talked about the invisible hand, right, the invisible hand in free market commerce, that dictates prices. And maybe what we’re seeing here with Lyft and Uber, is we’re seeing that maybe those taxi companies weren’t ripping us off so badly after all. Now, granted, they were ripping us off all these years because they had a semi monopoly. They had kind of a duopoly right. And the music industry was ripping us off too, for decades and many industries have done that whenever they have, you know, very little or no competition. Of course that happens. But the invisible hand comes into play when there’s some competition. And so what is so dysfunctional about these tech oriented companies is that they are over funded over funded by venture capitalist. And because they’re over funded, they can go in and buy the market with artificially low prices. And you know, the company I am talking about now is in the real estate business, they are in our business, they will remain nameless, but they are an over funded venture capital funded company. We’ve never tried to raise or raised $1 in this business. I did talk about it a little bit last year, but just never got around to it, frankly. And I keep telling myself, I’m going to get around to it because I’ve had many people asked me if they could invest in the company, and so we have to do things on an economic model. That makes sense, okay, but when you’re an overfunded country, company when you’re an over funded tech company, you can undercut you can buy the market, and you can low consumers into being your customer. But then, of course, what you’re going to have to do, when eventually economic forces set in when the Invisible Hand dictates you will have to actually raise prices. This is really a bait and switch, isn’t it? I mean, I’m talking about for consumers, it’s a bait and switch. Now we’re talking about this from two angles. We’re talking about it from the potential shareholder angle and the consumer angle. But on the shareholder angle, what you say Adam is pretty darn interesting. You usually see when IPOs come out, there’ll be a spike right at the beginning, and then it goes down. And I think it’s going to be a really steady down whenever it comes to Uber and Lyft. If this holds true, yeah, it’s um, a lot of investors are violating commandment number five, of course, they’re not investing for income. They’re not buying look at if you’re going to be in the stock market. You’re going to speculate in that huge casino known as Wall Street, you should at least buy only dividend paying stocks. Because then you’re buying on a model. That makes sense. It’s it’s an income based investment. So you can calculate the I’ll call it the rent to value ratio
Jason Hartman 8:22
on your stocks, but most investors just do this speculative, it’s a frenzy. It’s a mob mentality. It’s a mania. It’s very, very risky stuff. So it’ll be interesting to see how this plays out. Adam could if fails miserably that could be the end of lift. I mean, if lifts IPO, Phil if enough people look at it and realize it and Uber as well. And they can’t get the money they need. It could make him I mean, essentially go away. Well, I don’t have to go back private. Yeah, yeah. Yeah. I don’t think there was a Yeah, like almost nil. Okay. But if you’re thinking about investing in companies that don’t make money, you know, like Doug, and I always say, guess what? Real businesses make money, they actually show profits. Everything else is, is just ridiculous. So this is the typical bait and switch that always happens. It’s happening, you know, with Amazon because the prices have been artificially low and they’re ratcheting up the screws on everybody from the sellers to the consumers and it’ll get worse. Lift and Uber same thing, the company in our space that, you know, drowning and venture capital money, same thing. They’re undercutting the market, nobody can make money on their economic model. While that’s what I contend at least Look, I know the business I’ve been doing a lot longer than they have. So this stuff is artificial, and it usually ends up very badly. So we will see what happens. We’ll see what happens. But hey, if you think there’s a free ride, there is only occasionally a free ride. And we’ve got one for you. Yep, a free ride. I wanted to say And I wanted to say to our attendees of meet the Masters, if you are local, if you are driving to the event and you are interested, we are going to raffle off the furniture that we have to buy for meet the masters. You know we have furniture on the stage, we order several pieces of furniture. Now, we’ve got some nice white contemporary barstools, eight of them that we ordered for the stage for our panel discussions, and some other things. If you want any of this, we’re going to raffle it off to the attendees. And hey, you know, if if you want to take it and ship it, you can but it’s not gonna be worth it for you. So all I’m saying is leave a little space in your car. If you want to take any of its own Sunday night when we’re finished with it. We probably not like Texas, there probably aren’t a whole lot of Californians with trucks coming to the event. That’s true. It’s not like it’s not like living in Texas where you got to pick them up truck but these you can put in your car. It’s pretty easy. And I just wanted to say leave some space because we always give the furniture away. So leave some space. If you can’t do that. We’re going to have some great contest coming up that will announce on the show. Adam, I just got a new coffee maker. I gotta share it with our audience. I gotta give one of these away. So give me one. Why not? Because you know, I hate coffee. I knew you were messed up. messed up. You’re crazy. So coffee is very good for you. You know, it prevents old timers supposedly sponsored by the coffee Growers Association. I can’t stand this stuff. So never have Well, I think it’s good. I think it’s good. Okay. Hey, any last minute announcements for meet the masters. I’ve got I had a long talk with George Gilder yesterday. He said, Yeah, I’m probably gonna come into LA x and I’ll just take Lyft or Uber so applies to our conversation we just had and he will be speaking at our event Tom, we all right. We just got a great event coming up. Jason Hartman comm slash masters and Adam, you ready for our case study. Let’s listen to the millennial. Okay, let’s hear from Lisa. millennial investor. I think she said she had four properties. She We’ll talk about it in the case study. And here we go. Join us March 23, and 24th. For the 2019 meet the masters of income property. 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’m totally a newbie to
Adam 12:19
real estate investment. And so I picked up so much information.
Jason Hartman 12:22
One of the great things about it is it’s so fragmented, right? embrace the fragmentation. 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 now. And I learned a lot of new things today. The other advantage of this weekend is networking,
Jason Hartman 12:46
meeting new property managers, meeting new area specialists and
Adam 12:50
then seeing the product they have to offer that changes
Jason Hartman 12:52
here by you. Register now with Jason hartman.com slash masters. Hey, it’s my pleasure to welcome one of our clients to the show, and they Lisa Tomita, we love doing these client case studies and I get such great feedback from you listeners on them. And Lisa has really a great story. She was introduced to our network back in 2015 when her dad brought her to our meet the Masters conference for her 25th birthday. And then Lisa acquired four properties to in Little Rock and two in Jackson, and is here to talk about her story. She’s had some bumps in the road and some challenges and has done a very nice job overcoming those and I think is on the right road. Lisa, welcome. How are you?
Lisa Tomita 13:41
Good. Thank you for having me.
Jason Hartman 13:42
Yeah, it’s good to have you on the show. And, you know, thanks for volunteering. And interestingly, your desire to come on the show kind of came out of really having a pretty significant challenge with one of your properties. That challenge kind of like you know, when you when you have one difficulty You take a different road, I guess inspired you to self manage the property. Is that correct?
Lisa Tomita 14:05
Yeah, that’s totally correct. So back in November, we went to your profits in paradise in between the bashing of millennials, aka me. Sorry. I learned a lot about self management. And I think that conference definitely gave me the courage to do it myself. I got cozy. I let my property manager go. And I haven’t looked back. Yeah. So as a result of the self managing, I think I’ve developed really good relationships with my tenant. In fact, last night, when I was at the gym, actually ended up spending an hour on the elliptical, cuz I was talking on the phone to my tenant. Oh, you
Jason Hartman 14:47
know, Lisa, you do understand that people listening might say the last thing they want to do is talk to their tenant for an hour
Lisa Tomita 14:54
right now, but I think that shows the relationship that I’ve developed with them right you know, she definitely has my back. Last week she kicked out roto rooter because they wanted to charge me $200. And she said, Oh, no, we’re not spending that. But she shouldn’t really care about how much money I’m spending, right? Instead, she went to Lowe’s, she bought drain. Oh, and she bought a new plunger, and she punched her sink. And she hasn’t had problems. You know, isn’t
Jason Hartman 15:21
that great? I mean, I had no idea you were going to tell that story just now. But it’s great. You know, most people, it’s kind of like you hear about dealing with employees or you know, your children and stuff like that, like, if you show confidence in them and treat them fairly. Most people are decent people, and they will rise to the occasion. And here you’ve got this tenant that is looking out for your interest and protecting your interest. Whereas the property manager unfortunately,
Lisa Tomita 15:54
did the exact opposite. Right. eminently, that’s just one of my tenants. My other tenant, the oven broke, and she was asking her friends if I could use their employee discount to get her a refurbished stove. She wasn’t even asking for a new stove. I was also very nice. Yeah,
Jason Hartman 16:10
it’s amazing. Now you’ve got four properties now, is that correct? Correct? Yeah. And wow, you’re in your 20s. That’s, that’s fantastic. So congratulations on that. And are you self managing all four of them? Or just the two? Just two, just two of them. Okay. So it sounds like your other property manager. Are they doing okay for you? Are they great? Are they so so? Or how’s that going on the other properties that you still have managers?
Lisa Tomita 16:36
I think I could give you a better answer in a couple weeks, okay. I had one of my tenants not be able to make their rent because of the government shut down. So now they’re about two and a half months behind. You know, I don’t want to kick them out because kicking them out causes maybe I did math and it’s about $4,000. Every time I have to put a new tenant in between los rents and expenses. Yeah,
Jason Hartman 17:01
well, you’re going to find I bet, Lisa, you’re going to find that that number decreases when you self manage. Because this is kind of the concept I’m trying to convey to people is that many times self management is actually easier. It takes actually less time, because you remove this inherent conflict of interest, where the manager is trying to serve two masters Well, they’re really trying to serve three, they’re trying to keep the tenant at bay and serve them. They’re supposed to be serving you the owner, right? Because you’re actually their client, they have the obligation to you. And then they’re serving their own interests, self serving, right, and, you know, everybody’s self serving, you know, that’s the way capitalism works, okay? But they’re basically trying to keep three plates in the air, three balls in the air at a time, right, and it can’t be done. So just you just get them out of the way. You’re dealing directly with a tenant. And interestingly, like I mentioned a moment ago, that headend many times just becomes a much better citizen, or at least seemingly we I mean, we don’t know the conversations between the property manager and the tenant, usually. But I find that my tenants, they’re great. They’ll repair things. They’ll do research for me. They’ll spend their time meeting contractors getting multiple estimates, you know, you don’t have to wait for your rent. So it’s much easier to calendar your rent when it just comes in on the first with a property manager because you have this lag time and receiving the rent. You know, you kind of don’t know when to expect it exactly. And different property managers might, some will send it on the 15th, some on the 20th. So at the end of the month, they’ve got that float where they’ve got that rent for maybe two, three weeks, maybe four weeks, right? sort of hard to keep track of right when you just go direct, it just becomes easier,
Lisa Tomita 18:52
right? So everything hits my cozy account just like you recommended and then it goes straight into my bank account. There’s no waiting.
Jason Hartman 18:59
Yeah, isn’t that good? Right. So the first of the month comes along, you know, the rent is just there, huh?
Lisa Tomita 19:04
Yep. Nice.
Jason Hartman 19:05
Yeah. Now in fairness to this whole process and property managers, we do have to say, it’s kind of new for you, right? You’ve been self managing for maybe what, five months or six months? Five months, right? Yeah. Yeah. So what do you expect going forward?
Lisa Tomita 19:23
I’m not really sure. Right now. Everything’s kind of up in the air. I quit my job in November. So I’m looking at ways to get more into invested, not more invested. Yeah. more active in real estate. Okay, great. And what was your job? What were you I was in marketing.
Jason Hartman 19:38
Okay. Okay. Great. And so, you’re really you’ve got this interest in real estate. And now you can explore that a little bit, but you you actually chose to quit your job. You didn’t get laid off or anything, right? Yeah.
Lisa Tomita 19:51
Titled millennial, right? Yeah. There you go.
Jason Hartman 19:56
Okay, I’m going to apologize to all our millennial listeners, because we have tons of them. were picking on them a little bit, but you must admit some of its deserved. No, no. Okay. All right. I’m sorry. I’m sorry. I’m gonna stop picking on millennials. You know what, I’m probably just jealous that I’m not one of them. That’s probably what it is right? So maybe you never know, you never know. Anything more you want to share on self management. I mean, what were you talking to your tenants along about? Got any upgrades to properties? You know, you’ve got basically 1500 dollars extra year that you’re not paying to a property manager, something like that.
Lisa Tomita 20:31
Yeah. So last night, we were talking about she wants to switch out the countertop, and she’s willing to pay for the whole thing herself. Wow. She just wanted my permission. And she was sending me links from Lowes onto like different types of Formica she wants to use. She already got the quote, I gave her with the estimate that I got for another problem we’re having in the house. And she said, Oh, no, that’s too expensive. Let me ask around to see if I can get you a lower quote. Her husband’s a roofer. So he knows people who would definitely be able to help get that price lowered.
Jason Hartman 21:06
Wow. Well, that’s handy. Gosh, you’ve got this tenant who is taking a nice active role in improving the property. And then you’ve got the tenants husband, who is a roofer, how convenient. How convenient is that? And, you know, Lisa, I got to tell you a story. It just happened a few days ago with one of my property managers, and this is on one of my Memphis properties. They had emailed me, maybe early last week, said, okay, we need to fix some shingles on the roof. You mentioned roof. So I thought of it. I said, Well, what’s going on? You know, the couple emails back and forth. They explained it to me. I said, I need a quote. And she said, Well, it’ll be $520 or something like I think was $520. And I said, Well, I need to see the written quote, I don’t just need an email from you saying it’s 520. Like, that’s not enough information. And it’s certainly not proof right? I need proof. I need to actually document. So she sends me in the next email, a quote and I said, I need pictures and she sent me pictures. This quote is just handwritten on a piece of blank estimate paper. Okay, it has no contractor name. And I said, Who is the contractor? Who is that roofing company? What is their contact information, blah, blah, blah. She emails back and says it’s I don’t know, I think she said David Gonzales or something like that. And I said, well, who’s that? Does he have a phone number and address a website, a contractor license number? You know, I need to know who’s doing the work. And I need the estimate broken out into what exactly is going to be done the quote, then she emails me a couple of days ago. And this was maybe Tuesday. It’s now Thursday. And she says, we haven’t heard from you. And we need to get the roof fixed. And we’re going to go ahead and authorize the work and I said, Don’t you dare I replied right back and I said, Don’t you dare do that. I need another question. And I need it. Just like I requested the first time. Imagine this, Lisa, the same day, I hear back with, oh, here’s another quote for $250 less than half what the other guy was going to charge. Okay, less than half more than 50% off. So I said, go ahead and do the work. $250 great, you know, less than half. And then after I authorize it, I sent another email a few hours later and said, Do you have any comments about the fact that we were going to spend more than double? And she said, Well, you know, I just wanted to get it done fast. Everybody’s happy to spend your money, aren’t they?
Lisa Tomita 23:40
You know, they really are. Yeah,
Jason Hartman 23:42
we gotta watch out for ourselves and protect our own interests and get that intermediary that conflict of interest out of the way. I’m really glad you’re doing it and, and Lisa, don’t you feel more empowered and more independent now like you can. Are you learning some things?
Lisa Tomita 23:58
I’m definitely learning lot I do have to say though, I think you’re lucky that you got those estimates because I’ve been in situations where I get slapped for $700 in charges for an air conditioning, Cajun installation, and I didn’t ask for that. I’m not saying it’s not needed, but I’m just saying, like, did we really need to buy a $600 air conditioning cage, you have to authorize
Jason Hartman 24:21
this stuff. They have no right to spend your money. They have to get your approval. And not only that, it shouldn’t cost that much. acade should be like $350 it should be you know, like half fat. It is amazing. You know, my mom taught me and drew Baker who’s speaking at meet the masters and you know, he’s been on the show several times. He’s talking about self management. These are two people I know that they get deals on stuff. And you think, Well, time is money. You know, they must spend their whole day chasing down a deal, but they don’t. It’s really easy to sort good deals with the internet tools that we have nowadays. So yeah, it’s great. And even if you go back to having a manager, you will be a more competent manager of your manager. Now you
Lisa Tomita 25:12
right, I think, before I was a little bit more hands off, but after seeing all the things that I’m getting charged for, and then going to the conferences and talking to other people about their experiences, I’ve definitely become more active, active enough to quit and do this instead. Yeah,
Jason Hartman 25:30
good. I love it. You know, the the property management industry, just like many other industries, the legal industry, the healthcare industry, the college industrial complex, that complex, you know, all of these things, there comes a point when people push back, they realize, look, I am getting overcharged, and I’m getting mistreated, and I demand better. And you know, they look for other options. And so, in our world, it’s different. property management side. And there are some great property managers out there. I’m not bashing all of them, just like there are some awesome millennials out there. But you just deserve better. And so I’m really glad you you demanded it for yourself. It’s awesome. What about due diligence? Talk to us about that for a moment.
Lisa Tomita 26:19
So there’s levels to due diligence, and I didn’t realize this going into 2018. I thought, you know, if you go down, you visit with a provider, you know, you tour with them for a couple of days, you get familiar with their work. That should be good enough, you know, especially if you trust them. But it’s definitely not even if they say that they’re doing the property inspection, you need to get your own done as well. Because in the situation I’m in now, I didn’t get the property inspection done. This is the fifth house I bought with the provider. And it’s been a total disaster. And if I hadn’t fired my property manager, I’m not sure I would aware of it, but I would have had lost the tenant and been out a pretty significant amount of money probably like $4,000. That’s significant.
Jason Hartman 27:09
Very good point. So one of the other things I love about self management and you know, I have a blend, I have some of my property managers that I just love, and I let them do the management. And some, you know, there’s every degree in between, but you don’t know what’s going on. You don’t have any first hand knowledge, all you get is hearsay from them. And it allows them to really cover up their own stakes a lot, doesn’t it? When you’re not dealing directly with the party? You don’t know. I mean, I experienced this all the time with all different professionals, accountants, lawyers, when someone is in there representing you, you don’t get the benefit of direct communication. And with the direct communication, you can make better assessments and know what’s going on and they can paper Over a lot of their mistakes, they can blame another party, they can do all kinds of stuff that isn’t in your best interest. Right?
Lisa Tomita 28:07
Definitely. It’s funny because when I was prepping for this interview, I went back and I looked through a booklet I got from the Memphis tour in 2015. And all your commandments are laid out in there. And thank you just touched on commandment three. But I realized in buying this specific property, I violated four out of the 10 commandments.
Jason Hartman 28:27
Well, sorry about that. Hey, listen, Lisa. Don’t worry. It’s really six commandments and four suggestions. I’m joking. But yeah, I violate them myself from time to time and it seems like every time I violate one of my own commandments, I paid for it. So try to stick to him as best he can. But you know, it’s like anything look, you know, none of us are perfect. We should all do lots of things we don’t necessarily do you don’t always eat right? We don’t always exercise and you know, that’s just life. But good. You know, you learn and you become more independent on the home inspection. The issue, you did not hire your own home inspector, right? Tell us a little bit drill down on that, like the property. The seller had a home inspection and they handed it to you. Is that what you’re saying? Or you just decided not to get one at all? or What did you mean there?
Lisa Tomita 29:18
She told me that she was in her process. She does the home inspection. So I thought, Oh, I’m fine. This is like I trust this lady. This is the fifth house I have with her between my dad and I right. I guess she didn’t do it either. I’m not really sure. Her website says she does the home inspections, but I wasn’t handed a stack of paper. Well, I wouldn’t be handed anything that wasn’t emailed a stack of paper action. So I don’t even know if it’s actually been done or not. And I didn’t realize that till we started having these problems.
Jason Hartman 29:49
Yeah, so folks always have a home inspection and here’s a question I get asked from time to time. Do I need a home inspection on a new home What if it’s brand new construction? Do I need a home inspection? Let me answer that now. And this doesn’t apply to Lisa. I’m just answering in general for the listeners. If it is a big, you know, builder like a big regional or national builder, home builder, then I don’t think you need one. I mean, look at I just bought a new home recently that I live in, I didn’t get a home inspection. Okay. And it’s no big deal because I’ve got this big builder and you know, I’m going to tell them what they need to fix and you know, they’re going to come over and do it, not necessarily right away, but they’ll, you know, they’ll get it done. But if it’s a small builder, it’s building like a couple of houses here and there. I would even get a home inspection on a brand new home, it’s well worth the money. And we’re going to be doing some episodes about home inspections. You know, at meet the Masters we’ve got a home inspector with with a lot of visual aids and pictures of things to watch out for and this is the new thing and I’ve been wanting to do it for Couple of years but unfortunately home inspectors are not like these charismatic public speaker types like I am right now just getting their technicians and they don’t usually do this kind of thing. But my goal is to educate and create millions of empowered real estate investors, whether it be through other elements, but the one sort of missing element that we haven’t covered much is the physical stuff about the property right, the physical attributes, and that’s what we really want to dive into. So good, good stuff. Lisa, what else do you want people to know?
Lisa Tomita 31:36
I really need to thank you and Sarah for being there. For me, you guys could have easily said, This isn’t my problem. This is your problem. Your lack of due diligence is entirely your fault. And not done anything at all. But you guys have been there for me every step of the way. You responded on voxer at 342 in the morning 642 depending on where you were, but Honestly, who works at that time, right? So just the fact that you guys were there for me, I appreciate it so much. We have a family friend who bought a couple properties with the competitor. And I’m putting that in air quotes right now. Right? And they did nothing. So I think if anyone out there is trying to debate whether or not they should buy a house from you, or a competition, like it’s you guys hands down, there’s nothing else you could have done everything that I needed. You guys did for me, and I really just appreciate it so much.
Jason Hartman 32:32
Well, thank you for that. And you know, we’re happy to do it. We want to see our clients be successful. These are frankly, little inexpensive houses. You live in Orange County. I used to live there. Well, it’s redoes in Orange County or LA County, I
Lisa Tomita 32:47
guess, technically in LA County. But I walk to the Orange County border,
Jason Hartman 32:52
right. It’s right. It’s right on the line. Yeah, exactly. You live in Southern California. I used to live there and those are expensive houses. You know, when you when you sell one of those properties, you make a lot of money. But these are little inexpensive bread and butter houses. So we depend on repeat business. It’s like a restaurant, you know, we need our clients to keep coming back. But even if it wasn’t for that reason, it’s just the right thing to do. I just hate injustice. And I think some of these vendors and players in our industry are so weaselly, and they’re just bad operators, and I’m just not going to put up with it. You know, so, so good. Yeah. Now, we’re happy to do that. And thanks for thanks for sharing that. Lisa. Is there anything else you’d like people to know? What’s the future hold for you? What are your some of your investment goals? I mean, now you’re thinking of maybe going into this on a full time basis? Is that what you’re thinking? Or
Lisa Tomita 33:43
there’s a couple things I need to figure out. Still, I think if there’s any advice that I could give, I think I touched on it earlier. Your 10 commandments are really the truth. I think between education that having a good team, not gambling and maintaining good I think those were that I just listed off, just are so important that you really should write it on the back of your hand or tattoo it on the back of your hand. So you never forget. Because I think if I held on to those closer, I wouldn’t be in a situation.
Jason Hartman 34:18
We’ve all got to learn our own lessons. Right. And, you know, that’s just part of life. And in growing into it, thanks for sharing that and everything, Lisa. And I just want to say, Look, I don’t think there’s anybody listening to my podcast or coming to our live conferences, who doesn’t believe that income property is the best asset class, but you know, you have problems from time to time. It’s not without its problems, for sure. And as long as you can, you know, stay in the game, overcome the problems and the adversities, and you know, learn from them and just do it better next time. The acid is so durable, that it’s like the self Healing asset, you know, take a couple lumps and you know, your ROI will be hurt. But it doesn’t last that long. You know, it just recovers so nicely, always. So that’s one of the great things about the resilience of income property, isn’t it? Yes, definitely. Yes. Good stuff. Well, Lisa, thank you so much for coming on and sharing your story. And I am sorry to hear that you will not be able to attend meet the Masters coming up. But I know you’ve been before, obviously, on your birthday. And on your 25th birthday, so you reach the quarter century club right at the point when we had to meet the Masters in 2015. So that’s awesome. Keep in touch and let us know how it pans out with everything. And, you know, maybe you’ll be self managing your other two properties at some point. Who knows?
Lisa Tomita 35:46
Yeah, maybe that sounds good.
Jason Hartman 35:48
Yeah. Good. Good stuff. All right. Thanks for sharing and happy investing. Thank you. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sort 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.
Jason Hartman begins today’s episode from the city of Shanghai, one of the largest (and densest) cities in the world. Since he’s been in town he’s started thinking about the importance of population density on real estate. It impacts everything from the quality of life to the desirability of businesses to the pricing of every unit.
Then Jason talks with client Greg Scott about his journey from accidental landlord to an owner of multifamily properties. Greg and Jason examine why people don’t know whether they’re winning or losing, how Greg was able to continue investing through the Great Recession, and what sort of demographics are making being a landlord look better and better.
Investor 0:00
Well, the first one is scary. But then after that, our second one was down in Atlanta, which we actually never saw that property. We owned it for a number of years and then sold it at a pretty nice profit and Phoenix and then we bought another one in St. Louis through and then and then the last one we bought a new network was also back in Indianapolis. And interestingly the very first property we bought the one I need Annapolis we still own it. And it actually has the very same tenant in it with the same tenant since 2008.
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 listeners from 165 countries worldwide. This is Jason Hartman with Episode 1100 and 84 1184. Thank you for joining me today, as I am talking to you from Jin mouse tower at the Grand Hyatt, Shanghai, China. And Wow, what an amazing view. Actually, the view would probably be a lot more amazing if it weren’t clear. Now, the thing in China I have noticed in my travels here over the past week and a half is that you can’t really tell what’s in the air. Is that fog, is it pollution. I don’t know yet. We haven’t been outside yet today because we Woke up and enjoyed this incredible spa they have here with hot dips and cold dips and steam rooms and saunas and working out and what have you from the gym and the spa here amazing only to be exceeded by the View from our room on the 77th floor. This is an 85 I think it’s an 85 storey building at the top, there’s an observation deck want to get up there today. Looking out on the Shanghai It is really incredible. This is an amazing city last night, the light show was just unbelievable. And interestingly, the buildings with all of their different light shows on all these buildings. You know, of course this stuff would never have been possible without the advent of LED lighting First of all, but also, of course, the computer processing power needed to coordinate these light shows that are as tall as a skyscraper and coordinated between Many different buildings, at least seemingly is just nothing short of amazing. It is truly an amazing time to be alive. And Shanghai. I don’t know yet because we haven’t been out because, well, hey, I’m going to hear some flak about this, but my girlfriend’s a little slow on getting out into the city today. So hopefully, no, I see someone about to throw a computer at me. So hopefully we’ll get out and I’ll actually get to see this city.
Jason Hartman 3:27
She’s been here a few times, so nothing new for her. But new for me for sure. In this city is it’s unbelievable. I mean, just looking out at it. The views from here are absolutely spectacular. I kind of look at some of the most amazing man made environments on Earth. Of course, we took the venture Alliance mastermind to Dubai a few years ago on one of our mastermind trips, and that is an amazing man made environment Dubai you know, just an incredible structures, incredible buildings. Shanghai is amazing in a different way. You know, just the architecture and all of these places in Hong Kong where we were yesterday. totally amazing. Shanghai may well be the largest population city on Earth at about 24 million people. These cities are just big and I can’t believe the density of these places. And so I looked that up and I did some research, because when we talk about real estate investing, one of the things we always want to kind of keep in mind is population density, population density. It’s an important factor. We haven’t talked about it much, because it doesn’t matter that much in terms of the markets in which we invest. But it does matter overall, just in your understanding of real estate investing. And I’ll give you an example. Many, many years ago, when I started my traditional real estate career in the remember going south, having grown up in Los Angeles and Long Beach County fornia those two places, what about 30 miles apart maybe. And then going even further south, into Orange County, California where I spent my the vast majority of my adult life, built a really big real estate career there in the traditional real estate world had a real estate company there that was later purchased by Coldwell Banker back in 2005. And everybody credited me with incredible timing. Because that deal closed. Get this You ready? November 11 2005? Yeah. Pretty good timing, I’d say. But that wasn’t the point here was it? Here’s What amazed me about population density is coming from Los Angeles where I thought the quality of life was actually much lower, much lesser, not nearly as nice as living in beautiful Orange County, California, which I consider to be a nicer place. The population density was lower in Orange County, higher in LA Angeles, the prices in Orange County were lower. I know most people think, well, Orange County is really expensive. But back then, you know, it was sort of considered the suburbs of La really, you know, the ads for the Irvine company used to say, just 40 minutes to Los Angeles. So don’t try that today. Because the traffic and the density has increased quite a bit. But that’s when I realized at a very young age, that one of the huge drivers of real estate prices, they weren’t really related to quality of life, it was related to population density. And population density was either a function of or a result of I you know, it’s kind of a chicken and egg question, right? In terms of job creation and employment growth and high paying jobs and so forth, for example, and I know many of you listening live in places I talked about, and I don’t mean to cast aspersions on any particular places, but just for me personally, I’d love to live in New York City. For maybe three months, just at one point in my life, but I certainly wouldn’t want to live there permanently. I don’t think places with high population density really offer very good quality of life. I think better quality of life is found in lower population densities. And I know there are some other advantages. I remember talking with my friend, Sam Jeet, who lives in New York City. And he, we were having coffee one day and in Scottsdale, Arizona, when he came out for a visit. You know, we were comparing the two and comparing the real estate prices and comparing the employment and so forth. And he says, Jason, the thing I love about New York City, is that you just meet so many very, very smart people. And you know, I agree with him, you know that that’s, that’s true. And in higher priced markets, higher population density markets, mostly This doesn’t track Exactly. I’d say that the popular Because it’s just Darwinism, right? Darwin said, survival of the fittest. The Darwin belief system would say that people largely get sorted by prices, right? So it’s really expensive to live in New York City. It’s pretty darn expensive to live in Los Angeles. And it’s pretty darn expensive to live in Orange County, California, and many, many other places around the country and around the world. So the more expensive, the real estate market and virtually everything in life is driven out of real estate prices. Whether or not you can get a table and a chair at the local coffee shop is driven by the price of real estate. For example, in Laguna Beach. I remember going to beach as a area in Orange County, California. It’s really beautiful. It’s really expensive. And when I lived in Newport Beach, we would commonly go to Laguna Beach and Have dinner or lunch or brunch or whatever that’s, you know, common place to go to. It’s a really beautiful place. I remember talking to one of the restaurant owners, and asking him, you know, why don’t you have more tables and more chairs, and he said, Every chair and health, I’m certain that this has changed over the years. So don’t quote me on this. It’s not a contemporary statement I’m about to make. But he says, Every time we put a table in, you have to pay the city $6,000 it’s 6000 bucks for an extra table. So he says, that’s why I didn’t have more tables.
Jason Hartman 9:30
So anyway, that was many years ago, he told me that so I don’t know what the deal is now, but but you get the idea that everything is driven. It’s a function of the price of real estate. So arguably, in a really expensive real estate market, where it’s hard to quote unquote, survive, if you will, and I don’t mean survival, but I mean, economic survival. The population just gets smarter because it weeds people out right you got to be more ambitious. You got to be smarter to live in a place like New York. City or any really expensive real estate market. But personally, you know, nowadays your associations can be with people all over the world with our great telecommunications and of course, we all travel now more than ever. So you’re not really as married to any certain geography anymore. As I’ve said many times, life has become much more portable in the recent decades. And so you still have access to all those really smart people in those high Darwinism affected type of real estate markets. But you don’t have to live there and pay the price yourself to associate with them. And so just kind of an interesting thing. So as I’m, as I’m looking at Shanghai here, that thought kind of came to mind probably a little bit of a tangent here, so forgive that if you would. But we’ve got a quaint case study today. This is a pretty amazing story. Now. I’ve talked to you many times over the years about how really Being a single family home investor, the vast majority of my life, I always wanted to kind of graduate, if you will, to bigger deals. And I did do that I did, I think successfully graduate to bigger deals. I’ve got about 280 units, give or take. Now, I own some of those in partnership with clients of mine. And, you know, I’m not convinced that bigger deals are better deals by any means. But I am convinced that if you want to do really, really big things, ultimately you’ve got to figure out how to scale anything in life, right? It’s all about leverage and scale. So I graduated years ago, where I got into apartments, mobile home parks, and I still believe that the single family home is really the best thing going overall. Now, what’s interesting is that recently coming Out of the Great Recession. So over the past decade or so, the single family home investment has been scaled more than it ever has in history by these big investors, and big hedge funds, and big private equity groups who have scaled single family homes, to the tune of thousands and thousands and thousands of single family homes. And the economics of the single family home, I believe really are the best in so many ways. But for those of you who are interested in apartments, or bigger deals of any sort, I think this will be an interesting interview because it is a story of a graduation interview, if you will, from starting with eight single family homes purchase through our network years ago, on up to a larger apartment complex. So let’s jump in and listen to that case study. And I think you will enjoy it and we will talk to you on tomorrow’s episode. Here’s the case study.
Jason Hartman 13:06
It’s my pleasure to welcome a returning guest back to the show he was on many years ago and that is an investor. His name is Greg Scott. He started his investment career with us back in 2008, and graduated into doing some big stuff in the apartment world.
Greg Scott 13:22
Greg, welcome back. How you doing? Hey, I’m doing well. Thank you. It’s good to talk with you.
Jason Hartman 13:26
Yeah, it’s good to have you. And it’s funny, you know, we just reconnected through a real estate forum. It was interesting. I didn’t remember and then you said, Hey, you know, I’ve been on your show before I was a client many years ago. And, and then you told me what you were doing now. And you started with single family and, you know, just kept buying and buying and investing and investing. And now you’re up to? You’re a big multifamily investor, right?
Greg Scott 13:51
Yeah, we just closed on a 272 unit apartment in Indianapolis.
Jason Hartman 13:55
Well, congratulations and your first single family home invasion. property was through our network in Indianapolis as well
Greg Scott 14:03
back in 2008. Right. Yeah, there’s a little bit of a story about that. But I can tell but that was our first purposeful investment into the real estate. Awesome.
Jason Hartman 14:12
That’s great. That’s great. Good stuff. You started with single family homes. You got up to I think, like you said, 14 single families. Was that about right? Yep. You got it? Yeah. Okay. And how many over how many years? Did you accumulate the single families and then what was the transition to apartments,
Greg Scott 14:28
what didn’t have any with us as my own. My wife and I both worked for automotive companies in Detroit, which is where we’re from, and we were looking for passive income outside of the ups and down to the automotive space. And through a bad flip, we actually turned into accidental landlords in Detroit. And that’s when we realized that being a landlord wasn’t hard. And then we decided what we need to buy more property but we didn’t want to buy it in Detroit because it was subject to the ups and downs of automotive and that’s where we discovered your network. And and 2008 we bought our first property in Indianapolis. And after a year, we realized why wasn’t as hard as scary as we thought. And we subsequently went on to buy six more properties to your network and eventually through other places and get up to 14 single family homes.
Jason Hartman 15:15
Now that’s awesome. Good to hear. When you lived while you still live, he lived in the Detroit Metro area and that property in Indianapolis, you know, that was out of town for you, right. So, you know, we have investors doing it from much further than that, but after it’s out of driving range, it’s not as well be as far as it needs to be right. So that was that was a scary thing to buy that first property far away. Hmm.
Greg Scott 15:39
Oh, the first one is scary. But then after that, our second one was down in Atlanta, which we actually never saw that property. We owned it for a number of years and then sold it at a pretty nice profit and then Phoenix and then we bought another one in St. Louis through you. And then the last one we bought in your network was also back in Indianapolis. And interestingly, the very first property we bought the one I needed Annapolis, we still own it. And it actually has a very same tenant and it was the same tenant since 2008. Wow. Isn’t that amazing?
Jason Hartman 16:06
So have you increased the rents on that property in the last 11 years?
Greg Scott 16:11
Yeah, we have in a little bit every year. That area hasn’t appreciated hugely in rent, but it’s done very well. And so do you think
Jason Hartman 16:20
you just kind of got lucky getting a tenant that stays for 11 years? Or was it something you did or any, anything you want to share? Because this is what people don’t realize a lot of times, you know, some of these tenants stay for a long time. And you know, you probably heard it on the show. My mother still has that same tenant that we profiled on the podcast years ago. That’s been in one of her properties since get this 1989 the guy could have paid it off. Yeah.
Greg Scott 16:54
But he’s still rent. I don’t think we’ve done anything. Anything really special just every now and When you get a property where tenant stays a long time, we’ve had plenty of properties where we’ve had, you know, tenant change out seems like every year and sometimes you’ll get a tendencies for two or three or five. You just never really know. But it is kind of odd to have somebody in there for over 10 years, right? Yeah,
Jason Hartman 17:16
that’s something else. Share with the listeners. You know why you like real estate, if you would, and you know, kind of what your outlook is on it in the future and whatever you want to share like that.
Greg Scott 17:26
You’re talking about Angie Smith, the returns are really, really strong because there’s so many ways you can make money in real estate. But it’s also just incredibly tax favored. Just a anecdotal story, but I still work and was talking to my friends about their taxes this year, and almost all of the folks who just have a W two job ended up paying much higher taxes because they weren’t getting as much taken out last year after the Trump tax changes. We ended up selling to single family properties last year, and we had one apartment that we’ve invested in it sold. So we had a huge amount of capital gains, and we actually didn’t have to pay anything other than our withholding. So we already had, even though we had about $200,000 in capital gains, because of all of the deferred depreciation that we had had in prior years. So I just give you a sense for the power of inefficiency of the tax with real estate. So we just love it.
Jason Hartman 18:16
Yeah, that’s fantastic. You know, it’s such a great asset, and what would you say to people, it kind of relates to what you’re talking about, about the tax benefits, but see a lot of people, Greg, they think they’re just treading water, or they even think they’re losing in the real estate game when they’re really winning, because they don’t really look at the multi dimensional stuff, the tax benefits, etc. You know, I will say a lot of people think they’re losing, but they’re really winning, but they just don’t know how to keep score properly, because they don’t know how to analyze the numbers, right?
Greg Scott 18:50
What would you say to that? I completely agree with you. People forget that their mortgages slowly being paid down. If you pay attention to it. It’s usually about you know, in a typical single Family, maybe $1,000 a year that you’re getting, but nobody really pays attention to that. You’re generally getting some appreciation and because of your leverage, you look at the return on your total cash invested, it’s usually pretty strong. And then you’re getting the cash flow. And then you add on top of that the tax benefits and it’s pretty amazing what you can the returns you can get from single family real estate and multi family real estate for that matter. Yeah, right. Right.
Jason Hartman 19:21
Yeah, really is any best practices you want to share on being a landlord, you said it was easier than you thought. And I love hearing that, you know, some, some people have a hard time and some of that is just luck of the draw, you know, some of it is not paying attention properly, you know, so it depends for different reasons that it goes poorly and badly. Sometimes you get lucky and it’s just good luck, sometimes bad luck, you know, but any best practices you can share with our listeners,
Greg Scott 19:48
I would say the one thing that we’ve become pretty good at is very simple concept is trust but verify.
Jason Hartman 19:59
That’s good. I love it.
Greg Scott 20:01
We’re works. We trust our property managers, but we read the reports and we stay on top of them. If we hire somebody to you know, I’ve had some roofs go bad with hail storms, and I’ve got hired a roofer. And then, you know, make sure they take lots of pictures and have the property manager come by and just check that it’s done right and check with the tenant that there’s no leaks. And just doing that, constantly trying to just check up and make sure everything’s working right has done very well by us. We haven’t had to have any, you know, major changes in our life other than just keep doing that.
Jason Hartman 20:33
That’s great trust, but verify. Did you ever Well, you probably have by now, I’m guessing. But maybe in the beginning days, did you ever self manage any of your properties? Or did you always have managers?
Greg Scott 20:44
We did not none of the ones through your network. We have a 24 unit apartment. Only about 20 minutes from our house and there were a few months we self managed that not necessarily by choice ends up having to get rid of the property management company that was running it because they stopped collecting the rent one month. And man is that ourselves about three months until we could find somebody else to come in and take it over. So we have experienced that it was a good experience learned a lot of things just having done that in apartments course you getting a little bit lower level of tenant than you do in a single family house. So you get a lot of excuses and interesting stories and reasons why the rent isn’t paid, but
Greg Scott 21:23
you can make it work
Jason Hartman 21:24
right. Okay. So on that note, do you like like in the single family home world, I mean, applies in the multifamily world to of course, but do you prefer the Class A B or C type properties? I mean, you talked about those interesting excuses he had from the especially the lower end tenants, do you have a preference like each investor has sort of that what they like better and worse, you know, some some like section eight some hate it, you know, it just depends, right? temperaments vary.
Greg Scott 21:52
I like working class housing. And different people have different definitions of A, B and C. So I would say have trouble when you Different definition, we may be talking about different things. But working class housing is something that people get. I like it because it’s hard to make new working class housing. Usually they’re older properties, which means you have a negative supply, they tear them down, they don’t build new ones, okay, but the amount of people that need that it’s growing. And so when we, you know, eventually we’re going to hit a recession here and the higher priced properties. So, you know, in the apartment space, the places to get 2000 $3,000 a month, rent on a two bedroom, those are going to be the ones that get hit the hardest because those people are going to want to downsize to maybe a 1500 or $1,000 month, but if you’re playing in eight or $900 a month space, there’s always people that will rent that.
Jason Hartman 22:42
So if it’s a single family home eight or 900 a month, or for multifamily,
Greg Scott 22:47
I’m talking more multi on like a two bedroom but if I was in the in the single family properties, we rent probably 1000 to 13 1600 somewhere in that range. Okay,
Jason Hartman 22:57
so still bread and butter his family were
Greg Scott 23:00
Very, very much so. But
Jason Hartman 23:01
that can be definitely be B class housing that will rent for 1300 a month ease and you know, even lower end of a range depending on the market.
Greg Scott 23:09
They’re very solid neighborhoods, or neighborhoods that you might. They’re certainly not war zones. They’re certainly that there’s certainly areas you feel comfortable walking down the street at night, but they’re not million dollar houses.
Jason Hartman 23:21
All right. Any other best practices you want to share with people or any technology that you’ve used or, you know, anything that’s helped you just kind of be a better investor, any side of the business?
Greg Scott 23:34
This is a best practice. But one thing I will talk to a lot of my friends who seem very interested in the returns were getting, but they never get going. I think the most important thing is getting going, Oh, started getting out there doing something. I love it that you said that that
Jason Hartman 23:47
is so darn true. You know, you just the journey of 1000 miles begins with a single step as the saying goes and yeah, just do something. You know, there’s so many people that and maybe these are like your friends, right? They want to Learn more about it. They agonize about it. They want to figure it all out in advance. And you just never can you don’t know what’s going to happen once you do it, you know, you’ve got to just figure it out while you do it. Right. It’s the iterative process you you learn on the on the job training as an investor, right?
Greg Scott 24:17
Yeah, I can’t tell you how many times I’ve had friends tell me all the ways that it won’t work. But it does. And I can refute every single one of their arguments, but they always want to try to find more, I guess why they shouldn’t do it. Absolutely.
Jason Hartman 24:30
Well, the proof that it does work is you know, your success in building a little real estate empire for yourself and your wife and you just retired your wife, didn’t you?
Greg Scott 24:42
Yeah, we did. Last Friday was her last day. We’re very excited about that. She’s gonna dedicate her time, full time to turn it around this project that we just bought, and we’re very excited about that. That’s fantastic. Yeah,
Jason Hartman 24:55
good for you is the project you bought really like a a rehab. Are you retaining that property? Or what are you doing with it?
Greg Scott 25:03
Well, it is actually because high occupancy right now we bought it at 92% occupancy looking forward to Bay, we’re actually going to be up in the 98%. So it’s we’re in a good shape from that perspective. But that said, we’re bringing about $3 million to rehab it an upgraded, it’s got a lot of deferred maintenance. So we’ve got roofs that need replacing water heaters, h HVAC systems. So there’s a lot going on there. But then we’re also going to start completely redoing the interiors. And as we redo the interiors, as the tenants just naturally turn over, we’re expecting to course bump up the prices to reflect the brand new interiors. And we will ensure over time, change the profile of the tenants a little bit. But we like the area to solidary just like the kinds of I mentioned before, and we just think there’s a ton of opportunity here. Yeah,
Jason Hartman 25:50
yeah, that’s awesome. What is your outlook on the renter market? You know, back in? When did you start listening to our podcasts like I know you bought your first property through a network back in 2008. So that was 11 years ago. But when did you start listening? Were you We must have been before that, obviously. But how long before
Greg Scott 26:06
I started listening to your podcast when you were on? I think Episode 35, something like that. Wow.
Jason Hartman 26:14
I don’t know when that was exactly, but I’m gonna guess that was about 2006 or seven.
Greg Scott 26:19
Right? It was around that time. Yeah.
Jason Hartman 26:21
Yeah. And then 2008. I mean, you bought that first property, right at the beginning of the Great Recession. How did that go?
Greg Scott 26:29
Well, the first one has been an Indianapolis was you talked about linear markets. So it’s about linear, you can get Indianapolis this really hasn’t changed. But what was fascinating to me and really helped me understand the benefits of geographic diversification is around the same time we bought a property in through your network in Atlanta and one in Phoenix, and Atlanta was a judicial foreclosure state. So the foreclosures took a lot longer to drag out. Phoenix was non judicial foreclosure and they cleared a really fast. And so the price of that Phoenix property quickly doubled. It was amazing. I like just got lucky and bought at the right time. And we ended up selling that property after a couple years so we could buy more. And then the one in Atlanta Actually, its value went to about half of what we bought it at, but it didn’t matter because the cash flowed cash flow. Great. So we just hung on to that one for another three or four years and then the prices came back up once all the
Jason Hartman 27:25
manor property. I’m surprised that sounds pretty substantial. I mean,
Greg Scott 27:31
it would have been about to the late 2008, early 2009. Somewhere in
Jason Hartman 27:35
there. Everything in the news was like doom and gloom, the end of the world. Lehman Brothers failed you know, the whole global financial system Iceland files for bankruptcy more Are you worried?
Greg Scott 27:49
I think back in the days before I started investing in real estate, I would have been terrified because your 401k goes up and down. I know my 401k turned into the to do one day Yeah. Once we started investing in real estate, and the cash flow doesn’t change on your property because Lehman Brothers goes out of business, right? And because the value goes down, it doesn’t really change either. Hmm. And that’s why you want a cash flowing property because you can hang on to it through the ups and downs. Yeah. And you know, they’re in real estate. There’s more ups and our downs for sure. But just that one Atlanta properties example, we didn’t have to sell it because the cash flowed the cash flow covered any pairs that we had, that came up throughout the years, but we just held it for years longer than the Phoenix property. And when we sold it, we made a nice profit. So it was great. No problem. Yeah, that’s amazing.
Jason Hartman 28:37
So you were talking about the Atlanta property? I kind of interrupted you there. Sorry. You were talking about the Atlanta property? And you know, even in the time with depressed values,
Greg Scott 28:46
it was fine, right? Yes. The main reason the values were depressed is because there were more properties that were coming through the foreclosure process. So there was a flood of inventory on the market. So yeah, if I had to sell it, which I did, the property value was depressed. But my plan was just to keep it the cash flowed. And so we just waited until that wave of foreclosures went through and it was fine.
Jason Hartman 29:08
Now, isn’t that interesting? See, that’s the thing. I think people that watch the values get themselves into trouble, psychologically. Well, you need to watch the cash flow.
Greg Scott 29:18
Yeah. Operations and the cash flow. Yeah, very,
Jason Hartman 29:22
very good. Very good. How have you found your managers to be on the larger multifamily properties? It’s obviously just my experience, but I was under the, I think, mistaken belief that when I started really getting into the bigger leagues, and dealing with larger multifamily properties, as I’ve done, I’ve had two big complexes now. I’ve still got one of them. And I sold the other one. 10th did a 1031. You know, I thought the quality of the managers would be just a lot better. And I haven’t really found that to be true. Sadly,
Greg Scott 29:59
what do you think? The multifamily space is real division between small and large properties, small being under 100 units, basically. And on the smaller properties, it is harder to find property management, because usually you’re having to have people share time between properties. And so you’ll pay a lot for transportation. And we don’t know where Bob the main this guy is. So he’s gotta be put on somebody’s payroll. So charged to the property. Yeah, yeah.
Jason Hartman 30:25
And you know, technology is going to get pretty good at solving that problem. Pretty soon, it’s on the way. And you know what I’m talking about like that. The apps that the contractors are starting to use, the tracks are geolocation, it tags, the photos with geolocation. You can’t cheat this stuff that I don’t want to say it’s impossible, but it’s pretty hard. Clock some in and out based on location and, you know, like, really, that’s getting better, which is beautiful,
Greg Scott 30:50
beautiful. Yeah, with our large property management company on a bigger property. We’ve been quite pleased. Once you get over 100 units you can usually afford both a leasing agent And amoenus person. So in our property, we actually have six staff. And we hired a very professional property management firm. And they we actually did a lot of due diligence on property management before we selected them. But they really have the processes and procedures ironed out. They’ve done a really nice job taking over the property and getting it stabilized, although we still follow trusted, verify. So they tell us what they’re going to do. And then we just verify that they’re doing it and staying on top of it.
Jason Hartman 31:26
Yeah. What’s your outlook for the future? I kind of alluded to that earlier. But I just wanted to get that as we wrap up. I think that would be a good thing to talk about. Oh, because what I was going to say is, you know, back in 2008, when you started with us, I was talking shortly after that, about the demographics coming at the rental market over the next decade being phenomenal. And I keep kind of pushing that back. I still think we got another really good decade of demographics in terms of high rental demand. What do you think?
Greg Scott 31:56
Well, I keep waiting for this recession that’s supposed to be coming. It hasn’t happened. But individually it’s going to happen. But I still think if you’re buying good workforce housing and ranges that people can afford, and you got cash flow, you got nothing to worry about. Because Yeah, there you’ll have a recession. And you have when you come out and you have a period of growth, so as long as you’re not putting yourself at risk by taking on speculative investments, or negative cash flow investments, you should be fine through this little bit of a downturn. But if you’re looking at the kind of macro trends, we still have this eco boom generation, or Gen Xers that are huge population, many of them are delayed in buying into their first single family houses actually delayed in buying cars, a lot of to which we pay attention to. So I expect that’ll be a huge round pool for a long period of time. And like I said, they’re not, there’s not too many places out there that are building affordable, brand new housing, particularly in the apartment space, but even in single family. And most of the new stuff that’s getting built as you know, I’ve heard on your show tends to be higher end stuff. Yeah. So that means your your supplies constraint in that area. So you got more people coming in and the constraints apply. it bodes well for those of us who are Oh,
Jason Hartman 33:07
yeah, it definitely does. It definitely does. Do you like my talks about packaged commodities investing? Because you’re really a commodities investor, you know, you own all those raw materials. And it’s a lot more expensive to buy the new and assemble that property again today, isn’t it?
Greg Scott 33:27
Yeah, absolutely. And that’s certainly part of it. I know that from what I’ve read, I may get this figure wrong. But there was a study done that said that verses 20 or 30 years ago, about $20,000 of a new house goes to cover regulatory costs. And so there’s another reason why it’s hard to book entry level housing, and a great reason to own it. Yeah,
Jason Hartman 33:50
all those barriers to entry are really bode well for the people that already own the property. So congratulations, investors. I know most of you listening are taking advantage of what Greg and I have taken advantage of. And if you haven’t, you know, like Greg said, Get Started. Okay? Don’t be the coulda, shoulda woulda person. It’s an amazing asset class. And it’s really not that scary. You know, it’s been done for thousands of years, this concept, you know, we’re here to help you do it. In Greg, I just really appreciate you coming on the show again and sharing your story. It’s always great to hear these case studies. our listeners love them. So
Greg Scott 34:28
thank you again. Well, Jason, thank you for having me on. It was good talking to you again. And again. Yeah, I don’t think we would have taken that first step if it wasn’t for your network. So thank you for getting us into it. And for all the education you have been provided throughout the years on your podcast, because that’s what gave us the courage to take that first step.
Jason Hartman 34:46
Well, the pleasure is all mine. These are the stories I live for. I love to hear them. It’s great that your wife has retired and it’s just awesome. So keep up the good work, Greg. Thanks again for sharing your story 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 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.
Today’s Flash Back Friday comes from Episode 705, originally published in July 2016.
Live events offer investors an opportunity to meet other investors who are successful using the long-term buy and hold strategy, to hear about real-life examples of the acquisition process and to learn the tips and tricks which can make an investor’s life easier. This episode is full of useful information that is framed around real client questions including what were Jason’s biggest mistakes.
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 has 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 listeners from around the world. And thank you so much for joining me. This is your host Jason Hartman with episode number 705 705. So glad so many of you have stuck with us for a decade. I talked to two listeners just in the last few days. I don’t know time goes so fast. Was it last week or just in the last couple days? I’m not honestly sure. But it was recently. How’s that? Who said they have been listening to the show for 10 years? A decade of listening to a complete idiot like Jason Hartman. Gosh, how can you do that? Well, no, just kidding. He’s not that dumb. Anyway, we will keep the content coming and help you build great real estate portfolios, and make sure that you avoid as many mistakes on your road to financial freedom as possible. And we’re going to continue that talk today, as we’ve got one of our investment counselors you’ve heard from before Oliver. Oliver, are you there? Hey, everyone. Yes,
Oliver 2:09
I am here, Jason. And we’re here to help
Jason Hartman 2:11
you, obviously. And Oliver is coming to us from San Diego, California, sunny San Diego. And it’s a lot cooler than Phoenix right now. You know, it’s just kind of miserable here right now. I don’t remember it being this bad.
Oliver 2:26
I’ve got to say, Jason, it’s pretty nice. Here. We’ve got the nice ocean breeze. La Jolla is still calling your name though. No way. I’m not going back to those ridiculous oppressive taxes.
Jason Hartman 2:36
And you know, the other thing I really didn’t like about living in San Diego or California in general, is that the crowds, everything’s just so high on the hassle factor. And I mean, I can imagine, you know, like for our listeners who live in LA or New York City, or Oh my god, it’s just too hard. You know, I like going to places and getting parking spots and not waiting in line and getting into restaurants without a big wait. In, in high in densely populated areas resources are scarce. And I like them when resources are a little bit more abundant. So, but yes, the heat is pretty miserable. I’ve got to admit, the air quality’s miserable. You know, kind of a thing you get in living in Scottsdale or any place like this. In the summers, you get a little bit of cabin fever. It’s sort of like how people in inclement climates back east must feel during the winter. We kind of get it out here to in a different way. I mean, it’s you can go out but it’s it’s not very pleasant outside. At night at night, it’s okay but in the daytime, oh my god, just you gotta stay in.
Oliver 3:39
I’m gonna say I lived in you know, I’m from Canada, and I live there, you know, just about my entire life. And during the winter, it got really cold as you know, you’re not really up there all that much. But minus 30 minus 40 was pretty typical where I was at, and cabin fever. You definitely get it because you’re indoor the vast majority of the time, so you tend to try and Head down south, whether it be San Diego, the Caribbean, Mexico just about anywhere to get away from the cold for at least a week or two.
Jason Hartman 4:06
Yeah, that’s true. But I gotta tell you something, there is one benefit to places like that. And if you’ve noticed this, folks, you know, this is a theory that I developed a long time ago, when my mother sent me to upstate New York in ninth grade, which I really hated her for that at the time. But ultimately, it was a good experience. I think it was good for me. She sent me to live with my grandparents in upstate New York in ninth grade. And I went to the same school, she went to Letchworth Central School, which is the school out in the boonies. I lived with my grandparents on a dirt road. And I went to school there and I couldn’t believe how much smarter the kids were in Podunk, rural upstate New York than they were in Los Angeles, California. Okay, and I’ll tell you my story. theory. The reason they’re smarter is because in places with inclement weather, people stay inside and they read more stuff, you know, in places like Southern California or Arizona eight months away two thirds of the year our weather is frickin awesome here. I think it’s the best in the world. Not right now. But two thirds of the year, really three fourths of the year it’s it’s pretty phenomenal here, in places like this where it’s beautiful all the time you’re outside and you’re not reading and learning you’re out socializing, bike riding, doing, you know, nice cool things, but you don’t get as smart. You know, if you’re, if you’re stuck back east in the snow sitting at home, you’re going to read some stuff and develop your brain a little more.
Oliver 5:44
Am I wrong? I don’t know. I think that Yeah, there’s different ways to be looking at that because as a Canadian, you know, I was out there. I’m skiing. I’m out doing I’m on ski doos. I’m out. doing you know, snowshoeing around. If not, you’re going Went to like sugar cabins, there’s so much you can do, even though it’s
Jason Hartman 6:03
not a sugar weight, it’s a sugar cabin.
Oliver 6:06
So in French, it’s called
Jason Hartman 6:08
like a gingerbread house.
Oliver 6:11
It is in the woods, but it’s not some mystical place. It’s a little bit different essentially where they go and they, they they tap maple trees and they Yeah, they do the whole sugar process essentially go to this place and you have you know, a whole maple syrup fests essentially you have a whole breakfast and then you go outside you do these things on on the snow, where you get essentially like pure taffy from the from the trees, and they show you the whole process, and it’s fun. And you know, you get the whole family out and it’s it’s a good time.
Jason Hartman 6:40
Okay, cool. Well, we do have to actually talk about real estate investing, which is a show so I won’t debate this forever. But I will, I will bet that you were not outdoors as much as people in say Southern California or Scottsdale, where I live. You know, we’re so Cal where I grew up, that’s where the weather’s just really All the time. I bet that wasn’t as often I just bet you people in that kind of weather stay inside more but hey all over. I don’t know, maybe that’s the reason you’re not as smart as the rest of your peers up there.
Oliver 7:11
Oh, you’re gonna punch me
Oliver 7:19
well put it this way they haven’t moved down here yet. So
Jason Hartman 7:22
they’re either developing their brains or they’re really dumb for staying in that cold weather I you know, I don’t know which But anyway, you kind of you kind of left that opening wide open. I had to take it. So. Okay, let’s move on. All right. Okay, grill me, and you can get back at me Go for it.
Oliver 7:39
Maybe we’ll have maybe we’ll have a Jason Hartman Rose one of these days. Well, you can rowspan a lot of things.
Jason Hartman 7:44
So you did a interesting little project. I had no idea you were doing this behind my back nonetheless. But you reached out to a bunch of your clients and started surveying them on all these questions they had and that’s what we want to talk about today. What Your investor clients are thinking out there. And hopefully we’ll get time I want to share a story from one of your clients, you know who I’m talking about. I’m not gonna mention his name that we met with. And he’s, I’m sure listening at Starbucks a couple weeks ago, few weeks ago, actually, he’s working on buying 23 properties from us now. And I just want to talk about that Chicago gun control thing, because I thought it was so interesting. Go, tell us what you did. And what questions did they investors come up with?
Oliver 8:30
Alright, so I reached out to a number of my, my clients, and I’ve got some really, you know, some really smart people. And they’ve got some really specific client questions, but
Jason Hartman 8:41
some of them also are those smart people from cold climates.
Oliver 8:44
You know, they’re from all over the place. I do, but
Oliver 8:49
I don’t I don’t look at it that way. I essentially see that we’re all incredibly intelligent just to start with, by the by the fact that
Jason Hartman 8:57
we all listen Oh, To add to my earlier comments, right? And of course, nothing is always true, there are just sort of trends. But listen, the people that live in the warmer climates, maybe they don’t study and read as much, but they have better bodies because they’re working out and they’re, they’re showing off their skin a little bit more, and they’re probably happier. Okay, so the advantages and disadvantages of each there. There are certainly lots of studies that show living in bright sunny climates, no effect moods and they make you happier. So there’s given take for everything.
Oliver 9:35
Does that mean that if you move down here from the cooler climates your IQ is going down? Is that the correlation here? 18 Well, I
Jason Hartman 9:42
don’t know if you’re I agree. I guess maybe you’re getting a little lazy intellectually, but you’re happier and you got a better body. How’s that?
Oliver 9:50
I think that’s another Jason Hartman theory. 1000 page book, but I
Jason Hartman 9:56
know I have a feeling I’m gonna get some flack on that. Someone’s gonna say
Oliver 9:58
I think you’re gonna get a lot Well,
Jason Hartman 10:00
isn’t that like racist or something? No, it’s not. God. I swear I can’t say anything in America anymore. It’s ridiculous. Okay.
Oliver 10:11
Jason, if you were running for president, what would be your slogan?
Jason Hartman 10:15
My slogan would be I’ve offended everybody by now. So I’ll never get elected.
Oliver 10:23
Well, I still think you would get some votes.
Jason Hartman 10:25
My I listen, I can’t run for president because to run for president. You have to be well, not to run but to be president. You have to be born in the United States. And I wasn’t born here overweight, neither was Obama. Okay, here we go with another tangent. Oliver, get to these questions.
Oliver 10:45
All right, back to real estate here. Alright, so to start off, Jason, why did you start in real estate I mean, you had so many different avenues that could have gone through when you’re, you know, studying in California in Southern California or you grew up in Newport. So many different things going on at that period of time. Why real estate?
Jason Hartman 11:03
I just when I saw that infomercial at age 16, and after growing up poor and I grew up in Los Angeles, by the way, I lived as an adult in Orange County but grew up in LA, when I saw that infomercial for Robert Allen, the real estate guru who has questionable stuff going on, you know, he’s typical real estate guru guy. But you know, that really inspired me I got me very interested in this real estate stuff in it. It seemed like it was very accessible even to me, the poor kid from LA, and I got his book, I read three chapters, I put it down, my mom picked it up, read the rest, got really interested. And she said to me, You know, when I was 18, I was about to graduate from high school. There’s this real estate seminar in Anaheim. Why don’t you go and I went, I rounded up nine of my buddies from high school. They were all there Friday night, and then only one of them was left by Saturday morning, everybody else went to the beach and by Sunday, I Afternoon, when the thing was wrapping up, I was the only one that stayed the whole weekend, because I just wanted it more than they did. They were more comfortable than I was. They had better lives. They had parents with more money. You know, I wanted to have that. So that’s why I was I think I was just more motivated. And, and that’s one of the things that I think when you’re less comfortable, you’re more motivated. And so that’s why luxury can kind of be the wall to apathy. So we always have to guard against that in our lives. Because luxury and comfort make us complacent. Generally, as humans, you know, we won’t try as hard. And so sometimes intentionally making ourselves uncomfortable, I think that can can motivate us. So something to think about but but that’s that’s really what got me interested in it. And my first year of college when I was 19 years old, I got my real estate license just because I wanted to learn the basics. And then when I was 20 years old, I bought my first rental property and I made money on it and then I bought another one and another one and kept buying properties. And I just love it. I think it’s the the most historically proven asset class in the entire world, as you’ve heard me say before. Yes, quite a few times, but Okay, so you know what that said, other than the, you know, one of the answers, which would likely be I would start I would have started earlier, if you could go back in time and give yourself one piece of wisdom or advice, what would what would it be, it would be to buy properties that had cash flow rather than properties that were speculative. See, I called myself an investor for all those years that I was buying properties in Orange County, California. And those properties really looking back never made much sense. Even though I made money on a lot of them. You know, they just really didn’t make sense because the cash flow never worked. They never made sense as an investment the way I view them today, as a much more conservative investor. Now in a much more proof An investor today, but remember, commandment number five, Thou shalt not gamble. The property must make sense the day you buy it or you don’t buy it. And that’s the key. Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday.
Oliver 14:22
I couldn’t agree more with you, Jason. Just give me an example. I met someone the other day, and he bought in San Diego in the northern county and Carlsbad area. He bought a house for about $475,000. And he told me, let me guess it rents for
Jason Hartman 14:37
rents for 2000 a month.
Oliver 14:38
Oh, he’s got a little more. He’s got about 20 $500 a month for it. That’s pretty good. The big thing he told me is that, you know, it’s actually worth 500 on paper. It’s like, well, that’s fantastic. How much did you put down? He said, I put down about $250,000. I said, Are you crazy? So we got the talking about this. I said Why are you doing this? So well listen all our intention. So now it’s going to go up to 900. I said, Are you kidding me? I really just couldn’t really believe what I was hearing.
Jason Hartman 15:08
He might be right, it might go up to 900,000. But it might not. And that’s the problem. If you just buy for yield, if you just buy for cash flow, which, by the way, in those of you who’ve been to my live events, you hear me dive into this much more deeply. Cash Flow doesn’t necessarily mean you’re buying for positive cash flow, or a certain amount of cash flow per month because that’s all dependent on how much money you put down on the property and it gets all murky. You’re buying for rent to value ratio, that’s the proper way to analyze an investment and the rent to value ratio on that $500,000 house even though he got a bargain on it potentially. Maybe he’s right, maybe got it under market, which Hey, congratulations. It’s running for a point five RV ratio when you’re Your target is right around a 1% it’s double that. So literally, here’s how silly we get as investors and Listen, I’ve been guilty of this too. So I’m not just saying other people doing this are dumb. Well, I guess be out there they are dumb and I’ve been dumb to put it that way.
Oliver 16:16
Okay, but the concept when you hear these people saying, Well, I don’t want to buy anything that’s far away from me. I want to buy something close to me. So this guy you’re talking to probably lived in San Diego, I assume. And he bought a property in San Diego as an investment right? Is that true by the way? It’s actually not he’s actually he’s from lived in New York and then came down here and then saw this and hoping that it’s gonna be doubling but who knows. Maybe that goes to your words, your theory, Jason, and about warmer and cooler climates. I don’t know.
Jason Hartman 16:48
Who knows. I don’t know. But let’s not go back into that one. It will take too long to discuss it and I but here’s the thing. Think about it. Think about if you live in San Diego or La Orange County, the cost of buying a property that is near you physically, okay? is basically in that equation in that example, you just share it all over the it’s costing you 20 $500 a month. Because if you spend $500,000, on any property, you see on Jason Hartman calm, you’re going to get around $5,000 a month for it, versus a $500,000 property where you have no diversification, you just have one rather than five, okay? And you only get 2500 a month for it. That’s basically I cost of 20 $500 per month for you to buy a property that’s near you. Okay. If you, you know, in the example of you live in Southern California and that properties in Southern California, that’s what a lot of people do. So, the question is, how bad could it go for you to not lose 25 $100 a month. So say for example, you buy these five properties for $500,000, the same amount of money invested. And you have properties now in two or three diverse, prudent cash flow oriented, good rent to value ratio markets, right? And in that case, you’re you’re basically gaining 20 $500 per month and say for example, every property, you have a property manager who’s a crook, and they’re ripping you off to the tune of 100 bucks a month. They’re making up some fake repair or overcharging you for something to the tune of 100 bucks every every single month. You’re gonna lose $500 You’re still $2,000 ahead. Do you see how Yes, you things can go wrong? Yes, property managers can stick you they can nickel and dime you they can rip You off, but the amount of damage is so much less than the amount of damage that people don’t even see. Because you can’t hear the dogs that don’t bark. When you’re investing in that Southern California market, for example, or that Miami market or that Boston Market or New York or, or, you know, whatever you get the idea, just that expensive market, that makes no sense. So that’s the point I want to make to people.
Oliver 19:25
So essentially, look for rent to value ratios. That makes sense. We look for that at least at 1% as being one of the big criterias here.
Jason Hartman 19:36
Yeah, yeah, get get the have the target be that 1% number 1% of the value per month. 500,000 brings you 5000 per month. Okay, that’s the deal.
Oliver 19:46
All right. Here’s another one of our questions from from one of my clients named Blake is asking more specifically about property management. And when you have a tenant in place and essentially trying to come to an agreement with the property managers You tell them, Hey, we, if any type of repairs over X amount for example $250 I want to know about this, contact me before, don’t do not go
Jason Hartman 20:12
out there. So what Blake is saying is he wants to authorize that repair and I would say absolutely look at folks, and we’ve talked about this on past podcasts is a great question Oliver and Blake, thank you for saying that, Oliver, because I’m glad you brought this up. And I haven’t talked about in a little while. But certainly we have on past episodes, there are two types of discretion your property manager has okay. And remember, a lot of people self manage their properties and we can teach you how to do that. That’s part of the content in the j th you are Jason Hartman University members area. But the deal is that the property manager has discretion and they need this discretion to fix anything to prevent a crime. And emergency from becoming worse. So say for example, a pipe breaks, and they need to call a plumber on an emergency basis to get them out there to stop the leak. Okay, your property manager needs discretion to do that. Okay. But what they often ask for that they that is not required is a bunch of discretion for either monthly or per incident type of repairs. And there’s a difference between monthly and per incident. Okay, a big difference. So the first thing I want you to do is when you get that property management contract, I want you to read it and understand it. Look, folks, you have got to be a good manager of your managers. That is your responsibility and we’ll help you do it. But ultimately, it’s your property. So this falls on you got to read your contracts. And the thing I want you to consider negotiating And that was contracts is I want you to say to the manager, look, I am not going to agree to a $250. Or even worse, a three or $400 per incident, not per month. By the way, a lot of times it’s per incident, discretionary budget for you the manager, because I’m really reachable. And you can just email me or you can send me a text or smoke signals telephone calls. voxer would be the best way to communicate ever invented in all human history. Make your manager use voxer because it’s the best way to communicate ever. You can do that. And they can reach out to you and say, hey, look, something broke. We need to fix it. It looks like it’s gonna cost $200 and then you can say yes or no or get another quote. And I want you to make the manager send you a written quote, if it’s, you know, if it’s a more expensive item, not if it’s 50 bucks, don’t you know, don’t Don’t worry about that. But you should have discretion. And I think you should cap these discretionary items for the manager to maybe $200 per month. I did not say per incident, I said per month, because during a month, they could have two incidents and suddenly there’s $400 from your rent is gone at their discretion. And you got to watch this. Don’t don’t give them that much. I mean, keep them on a short leash as the saying goes, and the responsibility you have if you want to make their lease short is you’ve got to be available, and you’ve got to respond quickly to communications about stuff like this. I personally, I make mine $100 per month. I don’t want to see anything more than $100 per month. discretionary coming out of my rent check. Unless they can’t texted me and I approved it. And if it’s a big item, tell them you want three written quotes in here. Let me tell you one more thing about written quotes or written estimates, I call them quotes. Because if you call them an estimate, that means it’s just an estimate. I want a quote, okay, if I can get it, but you don’t want it on the property managers letterhead, or just an email from them saying, Hey, we sent the vendor out there, and they said it would cost $325. Well, who’s the vendor, I want this quote from the vendor on their document. And their document, of course, would have their name at the top, you know, Joe’s Air Conditioning Repair, and it would have their address and their phone number. And you could just call Joe up and say, Hey, Joe, can you do any better on this? Part of this is really a matter of setting the tone with your manager and making them understand that you are paying attention. And once you kind of train them to that you don’t have to do it forever. Usually You just have to do it at the outset, or the first time there’s an issue. Make sure they know you are and you are an astute, aware investor who’s paying attention. Who’s not going
Oliver 25:12
to get nickeled and dimed. Okay, exactly and why this is such a huge topic as well as because investors out there, we’re really here to help you, we want to make sure that your investments are performing well. We also want to make sure that your cash went on your properties that you own or that your funds aren’t being gobbled up by all these little expenses here and there. So
Jason Hartman 25:30
now, Jason, one last thought on this over here is what happens when your managers just goes out there and if you’ve got $100 cap per month, if they’re out there spending two $300. What would be your recommendations on how to deal with that, other than just changing property management companies? Well, first of all, if it’s in the contract, they can’t do it. Okay? Because they have to follow that contract. I mean, look, they don’t have to people can just ignore contracts, but that’s not going to happen too much. Okay. And this is one of the other things is that we provide a lot of leverage over these managers because we’ve sent them a lot of business. So look, if you have a problem with your manager, I mean, not if it’s a little thing, okay? But if it’s an ongoing thing, or it’s a big thing, contact your investment counselor at at our company, and they’ll help you with it. I mean, all over Look, you’ve helped clients that bought a property from you a long time ago. And they reached out to you and they said, Hey, you know, I got this problem. And, and, you know, sometimes you just cc them on an email, and Oliver or Sarah or Carrie, or Fernando or whomever, whichever investment counselor can just chime in and say, Hey, I don’t think this is right. And when they see that there’s some oversight going on, and especially when that’s oversight from us, who gives them a lot of business. It matters to them, and they’re going to take better care of you.
Oliver 26:55
Exactly. I can’t say how right you are there. Whenever there are no issues that come up that we need to get involved with. We are there for you were there for you to help you the clients.
Jason Hartman 27:06
Yep, good stuff. Okay, next question.
Oliver 27:08
Now to move on to our next question over here. This is maybe a bit more of a personal one. I’m not sure if it relates to real estate it probably does. But what would you say is the biggest mistake you made and how did it impact your life?
Jason Hartman 27:21
Oh my God, we don’t have enough time for mistakes. There are too many too many to list. I don’t know even where to go with that one. But I bought a jet. A jet plane. Jet. Yeah, so you should have you should have known me then. No, I bought a jet. But I never took delivery of a jet. Because during the Great Recession, the company making the jet Eclipse aircraft went out of business. They went bankrupt. And it’s really what I talk about when I talk about pooled money assets or pooled money investments. When when you Investing in a stock or bond or a mutual fund, this is really kind of the same thing. Because what happened in that Eclipse deal is the the executives basically skimmed a bunch of money off the top. Okay. I mean, look, I believe they did and other people believe they did. It’s, I don’t know that it was ever litigated or proven. But, you know, certainly they were paying themselves, they took salaries, they probably took bonuses. A lot of investors were very upset about it. Right. And and when I say investors, I say that because a bunch of people, a couple thousand people put down big deposits on those planes. And then the company went BK and never delivered the planes. And so that’s what happened to me and I lost a bunch of money. What would you call your jet? Oh, I didn’t have a name for it, but never thought about that. We I didn’t get that close to delivery, unfortunately. But yeah, so so you know, the old The old saying if if flies floats are the other F word. It’s better to rent than buy. That’s what people say. And I also had a big yacht too. I had a 48 foot boat too. And that was a huge waste of money. So, you know, just rent these things, you know, have them on demand, don’t buy,
Oliver 29:16
you know, just like we did at the venture Alliance back in San Diego, we rented this huge yacht that was,
Jason Hartman 29:22
you know, what, you just get on and off of it, you don’t have to clean it, insure it, maintain it. You don’t have to deal with anything, it’s so much easier. So just rent stuff. It’s sharing economy, you know, assuming we’re not even gonna own cars, we’re just gonna do sharing economy type on demand, transportation, it’s just, it’s kind of crazy to own stuff in some ways. The point is, you want the usability of stuff, and you want to be able to use it and control it or not necessarily actually own it yourself, because with ownership comes a bunch of responsibility. Now, of course, I don’t mean that for investment properties, but in a way you can argue Oliver, that you don’t really even own your properties if they’re leveraged, because you only own maybe 20%. And the bank owns 80%. Now they don’t believe in in the real sense, but they’ve put up 80% of the money, and you control 100% of the asset. It’s a beautiful, beautiful thing. So in a way, it’s, it’s kind of like having an option on the other 80% that you didn’t even pay for, you know, they, they loaned you the money on it. And guess what, you outsource the responsibility of paying that to a tenant, you you, you outsource the debt to the tenant. It’s a It’s a beautiful, beautiful, incredible equation.
Oliver 30:39
It definitely is. And that’s why we are in it. We love it. Here’s another one for you based off, you know, we you’ve been doing this for about 12 years now. And obviously, you’ve been able to help a lot of people on the way and we’ve been able to hear from these great clients you know, many times on the podcast or at our events. When they come and you know, obviously, what I’ve noticed is that our greatest reviews always come from our clients. But you’ve been able to impact so many people’s different lives across this time. Based on everything you’ve done so far, what would you say that you are most proud of?
Jason Hartman 31:14
Just a reminder, you’re listening to flashback Friday, or new episodes are published every Monday and every Wednesday. You know, I’m really proud of our business model and our team, our people. I think we’ve just got a fantastic team of people. Of course, you included our other investment counselors, and our other staff members who’ve been with us for many, many years. It’s just, it’s the type of environment where people and I know this sounds totally trite. And if you don’t know us, and you’ve never done business with us, probably sounds like total BS, okay? But you guys really care about the clients and you go to bat for the clients and I just love that. I remember your years ago during the Great Recession when Sarah came to me one day and, and she and she was having a hard time, you know, things weren’t going very well. And she was just kind of getting started in the business and, and she came to me one day when we had this big expensive overpriced office back then, you know, Class A office building in Orange County. She came to me and she said, Look, you know, I really like this because I feel like we’re really helping people. We’re really, you know, we’re really doing something good. And I thought, that’s when I knew I had a really good person, because she wasn’t just in it to make a sale. You know, she really had to believe in something and a lot of people are doing things they believe in, but a lot of people just aren’t, you know? So it goes both ways. And I just love our team and I love that. I don’t feel like I have to manage all of you, you you self manage. You You really do you know, I don’t have to look over anybody’s shoulder and question their ethics or worried about my reputation being soiled by one of my team members, because I’ve got really good team members that really care and they’re always going to do the right thing. Now, it hasn’t always been that way. We’ve certainly had a few bad apples over the years. And I will mention one not by name. But maybe six months ago, I was talking to one of our clients, they had an investment counselor from the past at our company. And they said, I think all he cared about was himself and but those people don’t last in our company, you know, because they’re just the quick buck mindset just doesn’t work.
Oliver 33:39
Now, I definitely know that if anything, Real Estate’s definitely more for the long term patient. One, most definitely. So
Jason Hartman 33:45
I’m really proud of our business model. I’m really proud that we’re helping people self direct their financial future. I’m really proud that we’re taking money away from the crooks on Wall Street the modern version of organized crime. I’m really proud of our team. And and you know, I guess I should add that I’m really proud of our clients too. We’ve got so many fantastic clients that look, folks if you have not been to one of our live events, and by the way, we have one coming up. And Oliver, maybe you can talk about that, because you’re helping us plan it. I recruited you to do that, which
Oliver 34:20
I think was a little bit I decided I had to,
Jason Hartman 34:24
I had to, I had to bribe you a little bit for that. But But if you haven’t been to one of our live events, and you haven’t met our other clients, and met our team members, but really most importantly, our other clients, that will be an event, you know, meet them, they have no agenda. They have no stake in saying anything good about us, right? But you’re going to come and you’re going to hear good things. You’re going to see real people following our plan. Real people, please come to our live events. Let me tell you something. With the prices we charge our live events. We if we’re lucky, we break even, okay, we do not make money on live events. All right, they are generally a loss leader for us, we do them, because we want to have that high touch approach. So that several times a year, we’ll have an event where you can come and meet us, and you can meet our clients. And you can see that this is real. This is not some pie in the sky info marketer. I was just reading on one of these real estate forums today about someone who got burned, because they bought this $41,000 program from this real estate guru. And they got nothing for it. That person could have purchased two properties with that money, you know, and it’s just so sad.
Oliver 35:46
That’s a, unfortunately a theme that appears to be going on over and over and over again in all these different events all over the countries all over the world.
Jason Hartman 35:53
Now.
Oliver 35:54
All over the world. There you go. And the biggest thing is, you know, sometimes I speak with clients that are brand new or They just installed the podcast and they’re like, hey, Oliver, you know, I really want to get involved. But I’m really hesitant. I mean, I’ve either purchase or lost money in buying into some program out there. And what I always tell them is, the biggest benefit that you can do is come to an event here, you will be able to meet people that may have one to maybe 2030 or 40 properties that have done it. They they’re just, you know, normal people. They’re great people. They’re awesome. But it just goes to show you that it really can be done. And it really is possible. So just come to an event for those of you that are that I know, you know, my voice come to an event. I’m talking to you specifically first time investors come to this.
Jason Hartman 36:43
Absolutely. Yeah, absolutely. Okay, so let’s talk to them about our event real quickly. And then maybe we got room for one final question after that. So this event is in Phoenix and we’re just getting the hotel all synched up. So we’re going to announce the the actual venue soon But we’ll have a very nice event. It’s two days. It’s something where you’re going to learn about how to use software to evaluate your real estate deals, and track your portfolio and help manage your investments really valuable. It’s a totally new event for us. We’ve never done an event like this before. It’s it’s a completely new concept and events for us. Of course, those of you who have been following us for a while maybe been to many events over the years and we have a lot of repeat people coming to our events, you know, that we have are creating wealth event, you know that we have our Jason Hartman University event, and you know that we have our meet the Masters event just once a year. Our next meet the Masters I think will be our 18th meet the masters. Wow. Why? Well, because we used to do it twice a year. Okay, now it’s too hard to plan so we only do it once a year because a lot of work. That’ll be right around January, but this event will be right after our venture Alliance events. And so it’ll be September 10, and 11th. In Phoenix, September 10, and 11th. In Phoenix, it’s just going to be an awesome event over anything else you want to say about that, it’s gonna be
Oliver 38:11
great, it’s gonna be fun, you’re gonna be able to learn, we’re gonna have a bit of a different format. This time, we’re going to do a bit of a q&a panel, we’re actually going to walk you through a typical buying procedure, I guess you can say
Jason Hartman 38:26
from this is for acquisition. Yeah,
Oliver 38:28
exactly. And on the panel, what’s really gonna be helpful too, is we’re gonna have the the property managers as well as the providers, they’re the ones that are actually doing the rehabs on these homes, you’re able to then ask him a bunch of questions that that may have come up on some of your properties that you want to know, you know, how would this property manager that maybe a little different in a different market handle this? Or what would they have done for me that maybe the other one ones,
Jason Hartman 38:50
let me tell the listeners something about this event. So one of the things we are attempting to do with this event is take a little bit of the weight off our meet the Masters event, because I think last time when we did meet the Masters in La Jolla, San Diego, California area last January, we had we had too many speakers and it was too rushed. So we’re planning to have four local market specialists at this event. And we’re gonna we’re gonna evaluate for markets, we’re going to do it mostly in a panelist format. So rather than letting them get up there and speak and their speaking ability is sometimes good, and sometimes it’s bad. Okay. Elizabeth, one of our wonderful clients who’s a venture Alliance member, and helping us plan our Seattle event preventer Alliance, which is the weekend before this, by the way, she said, Jason, let me come out and train your speakers please. And and the other speakers are great, but the local market specialists are not speakers. Okay. Yeah,
Oliver 39:52
I can’t wait for Elizabeth to do this. I guess he’s gonna be awesome.
Jason Hartman 39:55
But we’re gonna do this as a as a as mostly panel discussions. We’re going to have property managers, their local market specialists who acquire properties that you can buy. So you’re going to have it’s like it’s kind of a combo software event and Buying Event. And you know, like best practices in acquiring investment properties event. So income property software plus Buying Event, it’s at Jason Hartman calm check it out early bird price right now 297 per person, which is going to go up as the event gets closer. So register immediately at Jason Hartman comm slash events, Jason hartman.com slash events. I think you’ll really enjoy that. Oliver. One final quick question.
Oliver 40:40
All right, one final quick question. I’ll keep it short. We can leave you on this for another time. It’s what is your most prized possession and why?
Jason Hartman 40:46
Well that would have to be my dog Coco. But But dogs should not be considered property. You know it because they are like human beings. But anyway, that’s the way the court system looks at them. One state court I read an article last week, they actually ruled that dogs are not property. They’re, they’re sentient beings. Of course they are. They’re totally emotional and incredible creatures. But yeah, so if it had to be a possession, since it’s considered a possession, it would be my dog.
Oliver 41:17
All right. Would we have time for one more?
Oliver 41:19
Well, I
Jason Hartman 41:20
have to make one announcement about that. Coco will be at the event in Phoenix Coco Hartman, my dog, so you’ll definitely want to come just to see
Oliver 41:29
for now amazing. We all love Coco. Awesome.
Jason Hartman 41:33
Okay, what? One more go.
Oliver 41:34
All right, one more here. What do you think the top three most important qualities are real estate investors should possess or develop to become and remain successful when utilizing the buy and hold strategy,
Jason Hartman 41:45
really internalizing the 10 commandments. My 10 commandments of successful investing number one, number two, being willing to delay gratification for something bigger in the future and having the patience to Do that. And number three, which kind of dovetails into that that one is managing your emotions, you will hit bumps in the road, there will be times when this is not easy. There will be times when you think, gosh, is this really working? Do I want to give up, you’ve got to understand how to keep score. So many investors are winning. Yet sometimes when something bad happens, like you got to replace an air conditioner, or a tree branch falls on the roof or whatever, you have a bad tenant you have to evict. So many investors are winning when they think they’re losing. And they think they’re losing just because they don’t know how to keep score. They don’t know how to do the math, they don’t know how to properly analyze their investment, and all of its beautiful multi dimensional characteristics. So that’s one of the things frankly, you’re going to learn at the event we just mentioned on September 10 and 11th in Phoenix. So come to that
Oliver 42:59
zactly and for Those of you new listeners for the 10 commandments, you can find those at our website at Jason.
Jason Hartman 43:05
Yeah, absolutely. Good stuff. Hey, Oliver, thanks for these questions, and I know you’ve got more of them. We’ll do them on a future podcast. Okay,
Oliver 43:12
fantastic. Great speaking with you, Jason. All right. Take care. Bye bye.
Oliver 43:17
I’ve never really thought Jason is subversive. But I just found out that’s what Wall Street considers him to be. Really now How
Oliver 43:24
is that possible at all?
Oliver 43:26
Simple. Wall Street believes that real estate investors are dangerous to their schemes? Because the dirty truth about income property is that it actually works in real life.
Oliver 43:37
I know. I mean, how many people do you know not including insiders who created wealth with stocks, bonds, and mutual funds? those options are for people who only want to pretend they’re getting ahead.
Oliver 43:48
Stocks and other non direct traded assets are losing game for most people. The typical scenario is you make a little you lose a little and spin your wheels for decades. That’s because the corporate crooks running the stock and bond investing game will always see to it that they win. This means unless you’re one of them, you will not win. And unluckily for wall street. Jason has a unique ability to make the everyday person understand investing the way it should be. He shows them a world where anything less than than a 26% annual return is disappointing.
Oliver 44:25
Yep. And that’s why Jason offers a one book set on creating wealth that comes with 20 digital download audios. He shows us how we can be excited about these scary times and exploit the incredible opportunities this present economy has afforded us.
Oliver 44:39
We can pick local markets, untouched by the economic downturn, exploit packaged commodities investing and achieve exceptional returns safely and securely.
Oliver 44:50
I like how he teaches you how to protect the equity in your home before it disappears and how to outsource your debt obligations to the government
Oliver 44:57
and this set of advanced strategies. For wealth creation is being offered for only $197.
Oliver 45:05
To get you’re creating wealth encyclopedia book one complete with over 20 hours of audio, go to Jason hartman.com forward slash store.
Oliver 45:14
If you want to be able to sit back and collect checks every month, just like a banker Jason’s creating wealth encyclopedia series is for you. 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
On this Flash Back Friday, Jason Hartman hosts Greg Saylor, a corporate software engineer, who was looking for a reliable investment strategy. They discuss how Greg found the network and was listening to the Creating Wealth podcast during his long commutes. After picking up the phone and getting connected to one of Jason’s investment counselors, he started real estate investing. Six months in, Greg quickly acquired 6 properties that gave him a monthly income of $4000 a month.
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 has 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 show. This is your host Jason Hartman episode number 665 665. And today, we’ve got a great show for you. We’re gonna have a client case study. Yes, it’s our client, Greg sailor, who purchased six properties in six months, six in six. And I think you’ll really like his story, six properties in rapid succession. And he’s doing great with them. And you’re going to hear firsthand his story of how he looked at alternatives and came to real estate, because it is the most historically proven wealth creator in the entire world period. There’s nothing this good. I mean, everybody has access to it. It’s just it’s just such a great thing. So a couple things before that. I want to make sure that honors that you have made our relationship official Yeah, are we go and study, I hope so, what you need to do is make sure you press that subscribe button in iTunes or whatever podcast platform you’re using. To make sure you do not miss any episodes. We’re coming at you three times a week, every Monday, Wednesday and Friday. And occasionally, we might slip a little announcement in there on a an alternate days, so you don’t want to miss any of that stuff. We got some great stuff coming up for you been doing a lot of good interviews. I did one today that I think you’ll like and just a lot of a lot of good things coming up. I gotta get the schedule all outlined for our upcoming episodes as we move toward episode number 700. Whoo. That’s a big deal. 700 Wow, we’re getting up there. And remember, overall, I’ve got about 3000 podcast episodes out there with all of my others. shows. You know I rarely mentioned these other shows. So of course the longevity and biohacking show the jetsetter travel show. on that show we talk about expat living. We talk about all kinds of interesting stuff, offshore investing, which ain’t so great tell you the truth. I’ve certainly looked at that up, down sideways. And we’ve just never found anything internationally. That makes as much sense here as it does in the good old US of A Gosh, holistic survival show. If you’re feeling depressed, do not listen to that show, because it might push you over the edge. It’s definitely not the optimistic stuff. But you know, there’s two sides of the brain. We’re all we all have a positive and negative side, right? I was gonna say we’re all bipolar. No, unfortunately, we’re not all that. But we all we all have ups and downs. We all think of the positive and the negative. And it’s interesting. I’ve been reading this book, and it talks about what I’ve talked about on the show. Before many times, which is that concept of what will you do more for Will you do more and this is such an important part of how we think as humans and how we invest as real estate investors. Because what will you do more for? Will you do more to go and earn 2025 35 4045 even percent on your on your money by investing it in income property, the most historically proven asset class or will you do more? To save some money? We do more to avoid loss or to gain something what is the stronger motivator in our psychology Well, since we have been conditioned by aeons of scarcity, our mentality is always to preserve to conserve That is the that is the way we operate. In fact, I was reading another book and I can remember they used a funny phrase. Oh yeah, here it is. Cognitive misers. Yes, we are cognitive misers. So even with our own brain power, we can serve. Because, interestingly, the brain compared to the rest of our body doesn’t weigh very much. But you know, it takes like 20 or 30% of the energy that your body uses. That’s pretty amazing. If you think about it, our brain is very greedy when it comes to energy. And if you think about it, we’re kind of lazy as people. I mean, that’s just the general propensity of, of all of us. I think. I mean, I get I’ve certainly get this way. I hope you share that with me and you do. I hope it’s not just me, I guess I’ll say, but we don’t want to make a big effort to think Earl Nightingale used to say that we’ll go around when we have a problem we’ll ask our neighbors what to do our families what to do our parents or children or uncles or cousins you know we’ll look at our horoscope, we’ll do everything. But the last thing we’ll do is sit down. And he said, with a pen and paper and actually think the problem through write, actually think the problem through and that’s because of this propensity to conserve, to conserve our energy to conserve even our thought energy. We are cognitive misers. That’s what the that’s what the experts say. And I was gonna say that’s what the psychologists say, but I don’t know if it’s a psychologist or a biologist or a physiology. I don’t know. I don’t know exactly what experts said that But some experts said it Trust me.
Jason Hartman 6:55
Oh, anyway, so so we will do more to have Avoid loss than to gain. And certainly I noticed this in my own behavior all the time. For example, when I shop for clothing, one of my favorite places is Nordstrom Rack. I think Nordstrom Rack is a pretty great deal. And it’s funny. It’s just funny how this is. I mean, time is money. And we will search around online and look for the best deal on something. But when it comes to desire for gain, because the gain is speculative, and the conservation is not it, that is also speculative, by the way, but it’s not as speculative is that as the possibility of gain. So we will take the old saying a bird in the hand is worth two in the bush, right? A bird in the hand is worth two in the bush. And so because we’ve had scarcity throughout our history as humans, we Still think that is the world in which we live. And it’s not we live in this world of massive abundance, even in bad times. Even living under Obama anism Yes, Obama anism slight communism, but it’s got a different flavor. What will they call it a Bernie Sanders becomes president? Well, he’s probably not going to we’re either gonna have a very weird, loud, boisterous guy, you know who I’m talking about Mr. T there, or we’re gonna have the criminal known as Hillary Clinton. Yes. That will probably be our two choices. It’s always it’s always that we don’t really ever get a choice, do we? We always have to just vote for the Yep, you guessed it the lesser of two evils, right. So given that one, you know what my decision is going to be listeners. But again, Certainly not my favorite. My favorite was disqualified A long time ago and that was Mr. Rand Paul, of course, Ben Carson using kind of an interesting guy. We had him on the show before. We’ve had quite a few presidential candidates Austin Peterson, the Libertarian candidate, john McAfee, of course, another Libertarian Party candidate for President. I don’t know who’s leading. I mean, Rand Paul endorsed john McAfee on the Libertarian Party side. I don’t know we’ll see who’s living. One of our clients said a great thing to me today. She’s so funny. I just cracked up what I heard her say this. We were boxing back and forth. Yes, that’s you, Michelle. And she says, it gets lonely being libertarian in the San Francisco Bay Area. That was the funniest state that Oh, God, she really made me laugh on that one. But yes, it does get lonely being a libertarian sometimes, but I tell you, it is rising that ideology I’d say it probably has a stronger foothold than it has at any time in my lifetime, at least I would say that Ron Paul, Rand Paul, Ron Paul, the father, of course, he was surprisingly popular
Jason Hartman 10:15
with Generation Y with the millennial generation. Now, hey, you know, folks, we’ve talked a lot about Gen Y, by the way, and the fact that they’re going to make great renters they’re going to be renting for a long time. This is the reason why we’re seeing such strong rental demand, virtually everywhere in the country in virtually every market. We did a call today with our local market specialists, not all of them, but most of them. We had about 25 people on the line. And we were talking with our different teams in Indianapolis and Memphis just all over the place, you know all our different markets, right? I don’t need to explain Little Rock, Arkansas, etc. excetera So anyway, we had them all on a conference call today. And the first thing I did is I went around the virtual room, and I asked them all what was going on? And without Well, I actually cannot say in all fairness without exception, because there was one exception. Virtually all of them 2424 out of 25 said, inventory shortage, really tough to get good inventory battling to get inventory, way more buyers and sellers, etc, etc. One of them said they weren’t having too much of a challenge with inventory. So kind of interesting there as we went around. Jason, what was your point? You’ve gone all over the board. Presidential candidates there’s no choice. A lonely libertarians in Northern California. That’s kind of like being Sleepless in Seattle. Inventory shortages. I don’t know what was my point, maybe someone can write me and remind me and I’ll talk about it on the next episode after flashback Friday, of course. So, a couple things, make sure you subscribe to the podcast. We so much appreciate your reviews of the podcasts on iTunes or Stitcher, radio, whatever your podcast platform is, go and review the show. Make sure you’re subscribed so you don’t miss any important episodes. And we very much appreciate your ratings, your reviews, and telling your friends about the show to spread the word so they can join us as we get toward episode number 700. We got a big sale going on. Before we get to our guests here. I want to tell you about this because we just launched it and you probably haven’t. Now, here’s the thing at Hartman education comm our new little website Hartman education.com just my last name, education calm In education comm we used to just have one product there. Now we have three Yes, we have the meet the masters from 2015, the meet the masters from 2016. And the first ever j h you live or Jason Hartman university course, from San Diego. Now I know a lot of you listening have attended all of these events, right? So if you’d like to get a copy of the video, or the audio download, look people I know, but you don’t always need to see this stuff. Sometimes you want to download the audio have it with you so it’s portable. And then if there’s something in there that strikes your interest, or the speaker mentions a visual aid, and you want to see that, then you can just go back to a very well organized portal with these three courses and you can log in You can watch the video at your convenience. So super handy course. I’m really happy. This is the first time we’ve had these all online. And we are kicking it off with a big huge sale. Yes, a big sale. So normally, each of the meet the Masters courses are 497 apiece. And the Jq live is 297. But bundled together, we normally sell this for 1197, which is basically 100 bucks off, it would normally be what 1291 all together, but for a limited time. What will be the limitation here? See, when you’re in the marketing world, you got to create this false sense of scarcity. And folks, let me tell you, this is complete bullshit. Oh, Doc, you’re not supposed to swear on this show. It’s complete BS. You know, I’m a little punchy here, aren’t I it’s it’s the end of the day. Got a big day here?
Jason Hartman 15:02
So, yes, you’re not supposed to swear on the show. We are a clean family friendly show here. So Well, most of the time, anyway. And normally These are 1291 if you buy them separate 1197 if you buy them together, but for a limited time, because we gotta have some urgency, we got to create urgency, right? Otherwise, you’re never going to get off the dime and make a decision. So what is the limited time going to be for a limited time? What should be the time limit for this sale?
Jason Hartman 15:47
Oh, yeah, shot that thing. Okay. That just goes on way too long, doesn’t it? How about if we say for the next week? Yes, one week
Jason Hartman 15:58
sale on this website. Maybe we better make it a little longer. Because what if you’re not? What if you’re not caught up on your episodes and you haven’t listened to them all? Let’s make it. Let’s make it two weeks. Let’s make it a two week sale. Okay? For two weeks, you can get all three of these for only 797. And that, my friends, is a great deal. 797 all three courses, audio and video beautifully well organized. We got a great little online university sort of website for that. So check it out. Take advantage of that Hartman education calm. Also, we’ve got our Ohio property tour and creating wealth seminar coming up. That’s going to be fantastic Cincinnati area, Jason hartman.com. Click on events, check out the details for that and join us a bunch of you have already so we’re looking forward to seeing you there. And that is coming up in early June. So check that out. Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. Without further ado, let’s get to our guest, a client case study six properties in six short months with Greg Saylor. It’s my pleasure to welcome a another case study a case study from one of our wonderful clients. We love hearing from you. And we would appreciate having any of you on the show. Let us know if you’re interested in being on and sharing your story. This is where the rubber meets the road. These real stories from clients really inspire our listeners. It’s my pleasure to welcome Greg Saylor. Now, let me tell you a little bit about Greg. He is a software engineer. He’s in the cybersecurity field for big corporate enterprise applications. And he started investing with us just about five months ago. So he’s pretty new with this And we love to hear from investors at all levels, even investors who haven’t started their journey yet, once in a while that’s really interesting. Or maybe they just started, or they’re just a few months in like Greg or there’s several years in and they’re veteran investors and they can tell us the good, the bad and the ugly about investing. So let’s just dive into it and welcome Greg Saylor. Greg, how are you?
Greg Saylor 18:24
I’m doing really well. Jason, thank you so much for inviting me on the podcast.
Jason Hartman 18:28
It’s good to have you and you are closing on your sixth property. That’s you’ll have a six pack next week, right?
Greg Saylor 18:36
That’s right.
Greg Saylor 18:38
Yeah, I’m really happy about that. I couldn’t, couldn’t be happier with how things are going good,
Jason Hartman 18:42
good stuff. Well, it’s new. So there will be bumps in the road and problems. I’m just gonna warn you. It’s not all roses, but I’m glad to hear it’s all going well, it’s it’s mostly roses most of the time. So first of all, what got you interested in real estate investing. I mean, I’m sure over the of your life. You’ve you’ve done and tried a bunch of things, maybe stocks, maybe maybe you work for a publicly traded company and you have stock in that company. I don’t know. But what’s the interest with real estate?
Greg Saylor 19:11
Well, actually, I do work for a publicly traded company right now. But I’ve never really done much investing. I mean, I did the 401. k thing. I did try to trade stocks a few times, and quickly discovered that when it comes to trying to time things, I’m just not good at it. And I can’t, some people might have that skill. It’s not one that I possess. And the other thing, I guess, I’ve always had an interest in real estate. It seems like I think everybody says that, but you know, it’s always I’ve always just been fascinated by it as a kind of a necessary human need, you know, and we’ve moved around a lot when I was a kid, so I never really had I guess Kind of a stable place to live. I, my mom, you know, tried to buy a house at one point and succeeded at that, but then we lost it. And so it’s just kind of always been sitting back there that this made sense, but I didn’t know how to make it work. You know, that’s kind of where I came from. And I just had success in anything else, you know?
Jason Hartman 20:18
Well, let me first tell you, Greg, I, you mentioned that when you were referring to the stock market, that you weren’t good at timing, and just to make you feel better, nobody’s good at timing, no matter what they tell you. And here’s how you know, all of these fund managers, all of these different mutual funds, and I don’t just mean fund managers of mutual funds. All of these different advisors, there have been numerous surveys on them that by and large, none of them beat the index funds. So there they charge big management fees, and you can pretty much get the same result. It’s been this has been this has been documented over and over for decades, okay, and you’ve probably heard this stuff, you can get the same result by just buying the index, just buy the s&p 500. If you’re into stocks in the first place, and I think stocks suck, you know that it’s the modern version of organized crime. But don’t feel bad if you’re saying you can’t time the market because nobody can. The people that do it full time that made it have made a career out of it can’t time the market either.
Greg Saylor 21:24
Yeah. And then you have all these shenanigans that are going on behind the scenes in the stock market to probably have a whole many our discussion around some experiences I’ve had with that. But you’re exactly right. I finally just put my 401k into the total market index fund. And I think it’s good to have that but I started investing in real estate, you know, last November, in the stock market, I managed to lose about $20,000 between November December. So
Jason Hartman 21:56
yeah, you could with $20,000 as you now know, having Just six properties, you could buy another property.
Greg Saylor 22:02
Exactly right. And, you know, I? Yeah, that’s it. I mean, I like cash flow. I think cash flow is really, really compelling. And like I just like everybody else, I can time the market. So why even try? perspective at this point?
Jason Hartman 22:23
Yeah, absolutely. But But even if you could time the market, it doesn’t mean that you’ll win the game, but doesn’t mean that you outperform good solid income property investments. Anyway. So yeah, very, very good points. Okay. So Greg, tell us what you did when you started getting interested in real estate investing, because you knew you could you could do better there than you could in the stock market. What do you do first,
Greg Saylor 22:47
I kind of knew I started looking around locally in California. And it was sort of, I guess, the same sort of general direction that I took when I bought property, which is I started looking for properties that seemed like they would make sense.
Jason Hartman 23:05
Now, does that mean the house you live in?
Greg Saylor 23:07
Yeah, that’s right. So
Jason Hartman 23:08
okay, so you don’t you do own your own home. And just so the audience knows you live in the Bay Area, San Francisco Bay Area, right? That is correct. Okay. And whereabouts Do you want to be more specific, I mean, it’s a D live in San Jose, or where
Greg Saylor 23:21
I live in is up in actually the unincorporated part of Alameda County, and in Hayward, which is right about halfway between San Francisco and San Jose, or kind of near Oakland on the East Bay. Um, but that’s so when I was looking at buying a property. I was living in San Francisco at the time, and I just started, you know, expanding my search until I found property that had the amount of land that I wanted, that was something I could afford that that I liked, and that put me into Hayward. So it’s the same kind of thing with investment property. I started looking in areas I knew and I just kept expanding and getting bigger and bigger. Finally, I realized I was up in Chico of all places looking at, you know, rental housing for college students. And I’m thinking I really want to get into that. Not really. And they didn’t even make that much sense there. So I kind of said, well, there has to be another way, there has to be another way to invest in real estate. And that’s when I started listening to your podcast and a couple of other podcasts. And, you know, I knew it wasn’t gonna be California. I knew it had to be somewhere else. So I just was trying to find a solution to that.
Jason Hartman 24:31
Right, right. And by the way, you know, there are no other podcasts on real estate investing to ever listen to. So we are the only one.
Greg Saylor 24:42
Certainly my favorite.
Jason Hartman 24:43
I would like to think of that. It’s, it’s not true, unfortunately. But yeah, good stuff. So you started listening to the podcast, and when was that? I mean, your first purchases were in November of last year, about five months ago. How long did it take? How long were you educating yourself, listening to podcasts. And then before you did your first deal,
Greg Saylor 25:03
I would say about 45 days. But I listened to a lot of podcasts, I have quite a commute between my house and work. So I have might say about two hours a day, so about 10 hours a week of listening to podcasts. So I got through quite a few of them pretty quickly. And then I called and left him a voicemail and Oliver called me back, we had a very nice conversation. And I just knew it was the way for me, it made sense to me, the investment vehicle makes sense. It’s not complicated. I mean, the transaction might be a little complicated, but the investment itself makes a lot of sense and seems relatively simple, you know, huh? Yeah,
Jason Hartman 25:47
yeah. And you know what, I’m so glad you mentioned that because I find that a lot of these different investment promoters out there who are promoting whatever type of investment they hide things through complexity. The world is not a really complex place, as it might appear on the outside, you know it. Uh, sometimes the simple things just are the best. I mean, the concept of just owning a property and renting it to someone. I mean, there are things you have to know, no question about it. We saw a lot of time on this podcast talking about many different aspects of real estate investing. But overall, I mean, you don’t you don’t have to understand the Fibonacci curve, or all of these crazy things, these Wall Street guys would have you understand, you know, some of these other investment schemes out there. It’s just, it’s just not really that complicated is that it’s just a simple workable thing. Right.
Greg Saylor 26:43
Yeah. I mean, there’s like the acquisition. I mean, there’s, you know, a number of players involved, of course. So, it does get a little bit, you know, not I would say cumbersome, a little, you know, there’s movie pieces during the acquisition piece. But after that, you’re right. I mean, it’s, for me, it’s pretty straightforward. Other mortgage, the tenant, the insurance, property management, that’s maintenance. What else? Is there? Really?
Jason Hartman 27:08
Yeah, you got about six components, I’d say you know, 567 components depending on how you look at it, depending on whether or not you have a homeowner’s association. So there are a few moving parts, but it’s a really small number of moving parts in comparison. So what was your first property? Which, Which one did you buy first?
Greg Saylor 27:25
Yeah, let me add one more thing. And the other thing is that those moving parts are ones that I feel like I can have influence over. But I don’t like my insurance carrier, I can go get a different one. I don’t like my property manager, I can get a different one. So I think that’s like, if I want to raise the rent, I can raise around if I need to lower the rent, I can lower it. You know, it’s that having that flexibility in all the dimensions i think is a good thing.
Jason Hartman 27:51
Doesn’t it feel nice to be in control of your investments?
Greg Saylor 27:53
Yeah, it really does. Yeah,
Jason Hartman 27:55
it just makes such a difference. It really does. Yeah, good. Good stuff. Okay. So you’re first deal. Tell us about that.
Greg Saylor 28:01
It was in Indianapolis, it was a duplex. And actually, I had in mind that my first three properties were going to be duplexes because of the way that the lending lending works is the first four properties that are duplexes are 25% down. And then after that, they go to 30%. So I kind of wanted all of my and then after four, of course, the single family homes go to 25%. And I just wanted to keep it putting 25% down on my properties. So I loaded up on the duplexes for the first three, because I had my primary home, which was number one, and then switch to single family homes.
Jason Hartman 28:40
So Indianapolis was one duplex. Are you about a couple of them there?
Greg Saylor 28:45
I bought two in Indianapolis
Jason Hartman 28:47
and where those new construction or resales?
Greg Saylor 28:51
I’m sorry, do you mean like rehabbed or,
Jason Hartman 28:54
oh, no. What were they were they brand new or from a builder or were they, you know, rehab. I mean, all All of our properties pretty much are rehabbed. So that kind of goes without saying, but or where they resales where they already owned prior to you’re buying them.
Greg Saylor 29:08
Oh, I bought them from your network from
Greg Saylor 29:13
yesterday were rehabbed.
Jason Hartman 29:14
Okay. Good, good stuff. And so you’ve closed on those properties probably by now, I’m sure. And you’re closing on your sixth property next week. So tell us about the process of buying and, and how that all went and getting them closed and so forth.
Greg Saylor 29:30
Well, it was pretty smooth. I mean, I’ve I had some issues early on with I was working with a lender that you guys did not recommend or hadn’t recommended. And I didn’t like how that was going. So I asked Oliver, and he suggested some other folks that you guys recommended and that just went because greatly simplified everything
Jason Hartman 29:57
was what was the problem with AIDS. The first lender that you didn’t like so much,
Greg Saylor 30:01
um, it was just kind of a lack of, of communication, you know, as a new, somebody new to investing. You know, I just didn’t there’s a lot of questions I need to have answered and I was not getting clear answers. You know, it could be me, you know, sometimes, you know, people could communicate differently. We were just not communicating well with them. Whether it was my fault, their fault. I don’t know. It just wasn’t a good time. Sure.
Jason Hartman 30:33
Yeah, absolutely. And one of the things I say frequently is that investment property financing is a specially. So going to the person that did the purchase of your home or the refinance on your home, it won’t necessarily work out very well. You really got to have someone who specializes in financing investment properties. It is a different thing, even though even though those investment properties are residential properties in other words, they’re For units and under, it’s still a different deal. It’s really it really is a specialty. we’ve, we’ve we’ve seen that all too many times over the years. Yeah.
Greg Saylor 31:09
And actually on that point, now I’m reflecting back on this because it’s so new. If you’d asked me this, two or three years from now, I probably would have completely forgotten about it. But at the same time, I was closing on two properties simultaneously, those two duplexes actually holding on three properties simultaneous has turned three investment properties simultaneously, and decided to throw into the mix to refinance my primary residence. That was a mistake, because as soon as they were getting like close to ending the refinance my primary residence, all of a sudden on the soft credit pool, they saw the credit pool from another lender. So it was like, now they want documentation on all the investment properties I was buying. So it’s like
Greg Saylor 31:52
it was an interesting December was an interesting month. Yeah,
Jason Hartman 31:56
yeah. The stuff to do there. Definitely. Okay, so you got those points. properties financed in you got them closed. Tell us about whatever part you want about the property management about getting tenants, just whatever you’d like people to know.
Greg Saylor 32:12
Okay, so I guess I’m, I’m a software engineer, so I’m kind of a numbers guy. And, you know, I, I’m going to be looking at some of those, I think you call it property manager. I’m gonna be looking at that software soon. But, you know, I started building these spreadsheets in the spreadsheet here has gotten bigger and bigger and bigger and it’s becoming increasingly difficult to track this but
Jason Hartman 32:35
yeah, use property tracker makes it so much easier. You’re not doing that yet. Hmm,
Greg Saylor 32:38
not yet. Okay, that’s what
Jason Hartman 32:40
I’m gonna bug you about. For sure, I want you to use that because you’re gonna find it’s so much easier to to keep track of your properties when you use that software.
Greg Saylor 32:52
Yeah, so I guess I’m kind of in. I don’t want to say negative thinker, but I as my professional kind of look for problems, right? So some of the identity had a couple of like minor snags along the way. And no, don’t I’m not trying to be negative here but the like on the I know
Jason Hartman 33:13
we will listen, we want it to be realistic, like Yeah, one of the things we really try to do, Greg is, is provide real transparency. Other people out there will hide the flaws, look at this is that there are problems. I’ll be the first to tell anybody. It’s not perfect. But like Winston Churchill said of either democracy or capitalism, it’s just better than everything else. That’s all. That’s the only thing I say it’s better than everything else.
Greg Saylor 33:39
So like one of the things that I found, like, when I’m looking at properties, using your website that I found a little tricky was the providers. Some of them put 20% down, other ones put 25% down, they put different interest rates in there, and it doesn’t really translate to what interest rates I’m able to get But that’s why I had to build the spreadsheet right there because I needed to be able to take that numbers, put them into my spreadsheet, so I could see what the actual
Greg Saylor 34:08
numbers were considering the financing.
Jason Hartman 34:11
Right, exactly. Just a reminder, you’re listening to flashback Friday, our new episodes are published every Monday and every Wednesday. So that is a terrific point. And that’s one of the reasons I want. Well, for the first part of that is, all of our investors need to number one, embrace the fragmentation, like I say, because that’s what keeps the institutional investors out of our business. So you do have that fragmentation, which is annoying. I completely get it right. Because you have one, one group in one area that does it one way and another group in another. It does it another way, right. Yeah. So there’s fragmentation but standardize your data as much as you can by using our system. From the property tracker properties shopper system on the Jason Hartman comm website, but the second part of it is, is that if you actually subscribe to that software, you can change the assumptions. And you can make it all dynamic. It’s static when you’re looking at our website, and we are working on an upgrade to that. But I’m not gonna say that’s coming anytime soon, you know how software projects go in your business. But then you can change those numbers and you can make them all 25% down, like you said, You wanted to have them all be consistent, like that are all the same interest rate or whatever you want. So yeah, good point.
Greg Saylor 35:36
Yeah. So So basically, I told you know, where I had this spreadsheet where I could enter four or five numbers, and, you know, I would use your website, your website gives you a great, kind of, should I should I look at this further, kind of, right. I mean, I can figure that out really quick from your website. But then I just take horrify numbers, punch them into the spreadsheet, I got three properties that look attractive, and I’ll punch them into my spreadsheet and figure out what Which one? Yeah, for the members looks better. And so it’s kind of like the filtering that I can do on your website is really good. But there’s just another. It’s like the due diligence, I guess.
Jason Hartman 36:12
Yeah, absolutely. Okay, good. Good. So tell us what else happened. What what, tell us more about the experience.
Greg Saylor 36:19
Okay. So, in addition to that, I kind of have this view of risk, I think, around these around my properties. That as long as I have, let’s say, good solid, let’s say really conservative, single family homes, that Windows I can afford to take some other risks like with duplexes or with maybe properties in a little bit lower rent, lower grade neighborhood, you know, as long as I have that good foundation of good performing conservative, you know, really good properties and I can you know, Take a little bit more risk in some other areas. So I’m I’m, as you would say, I think, independently owned and operated. So I, you know, can take a little bit more risk in my life perhaps. So the third duplex I bought in Chicago. And it was in a not not a very good neighborhood of Chicago in section eight tenants. But it’s been a really, really good performing property. But the trick there, I think, was a property manager that knows how to deal with those tenants in that area. That is, like was critical for me. So I did a lot of betting on that particular property manager, I wouldn’t have felt as comfortable doing that, for example, in Indianapolis, just based on, you know, not there’s anything wrong with any of the property managers there. They’re all wonderful, but it’s just experienced with that type of tenant.
Jason Hartman 37:55
Right? So it’s especially Yeah, no question about it.
Greg Saylor 37:58
Good. And then I switched single family homes. I bought one in Memphis. That’s number four. And then hopefully next week, I’ll be closing on another one in Memphis and another one in Columbus, Ohio.
Jason Hartman 38:10
Fantastic, Eric, congratulations. Why did you pick the certain markets you picked? And what was behind that? I mean, you could have picked different markets. Why does
Greg Saylor 38:19
it? I think it’s coming back to a bit a little bit of my view of risk, which I can’t even really articulate that, well. It’s just sort of this innocuous thing that I wanted to be in, you know, a few different markets with different types of properties in those markets. And I liked all of these markets. I like all of these areas. Columbus is probably the easiest one, I guess, but that’s because I was surprised by the property taxes they’re liking. In Chicago, the property taxes are high as we all know, but the rents kind of support that in Columbus, not so much but I feel like Columbus
Greg Saylor 39:02
It’s coming around.
Jason Hartman 39:03
Yeah, I agree with you Ohio isn’t as blighted as it used to be. I, I’m not as hopeful about Detroit. But but the Ohio markets that were actually really pretty blighted in years past they’ve they’ve come around quite a bit. I mean, when I’ve been in Columbus, Cleveland, I mean, I just I’ve been pleasantly impressed. I really didn’t expect to think as highly of those markets as I did until I, you know, till my last visit before my last visit to them, you know, and I reported on that on prior podcasts, but,
Greg Saylor 39:38
and I should say, as well, you know, I lived in Indianapolis for many years, and made many road trips to Chicago and Columbus. So I was a little bit more familiar with those areas as well. So I can’t say it was conscious Lee, looking at those markets because I was familiar with the area, but that might have been an unconscious factor. I don’t know. But But you know, it’s like, I looked at all the markets. I looked at, you know, Atlanta, you know, all the markets and those ones just resonated with me. in Columbus. I like, like you just said, I think I just, I like the way that city feels for some reason, you know?
Jason Hartman 40:19
Mm hmm. I agree with you. No, I agree. I agree. Good stuff. Okay. What else do you want people to know about the experience? Just anything else? The question I haven’t asked you,
Greg Saylor 40:30
I would say
Greg Saylor 40:33
another surprise that I had along the way. And I feel like I’m being so negative. I don’t mean that but was, you know, property taxes. I’ve been a bit surprised a couple of times with property taxes. So I think it’s worth for me is added as part of my workflow, whatever you want to call it, to just double check the property taxes.
Jason Hartman 40:51
I think that’s very good advice. And one of the constant battles we have, and property taxes, I would say are one of the hardest ones. To hold local market specialist accountable on is they generally speaking, they are not conservative enough on the numbers. You know, they’re salespeople, okay? They want to sell properties. And we are constantly as they upload properties to our website. And we make them do the uploading so that they have to make the representation about the property and its performance and you know, its projections and so forth. But one of the things that we’re constantly battling with them is, you know, estimating rents higher than they should be, we want them to rein it in and be more conservative. And that’s one of the nice things about having a someone like us that offers an area agnostic approach, and will tell you, if we think they’re, they’re being too optimistic on those numbers, but one of the hardest ones for us to check and know is property taxes, because that’s a complex thing and it varies by the municipality. So Just always take whatever they tell you and just assume it’s not going to be quite as good as they tell you. Okay, that’s the first thing. But the second thing is and I talked about this on a recent show about the Chicagoland area. Of course, when we talk about these markets, we’re not being specific as to city, we’re talking about metropolitan areas. Okay. So everybody understands that, even if property taxes go up quite a bit, given their financial perils in the Chicago or the Illinois area, I should say, the whole state. I think the numbers still work out pretty well. I mean, I took our performances and changed them based on a 1020 even a 30% increase in property taxes. And those deals still look pretty good to me.
Greg Saylor 42:48
Yeah, I’m baffled in kind of a good way how the properties are performed, and just the general quality of the rehab work that has done there. I’ve just been really, really blown away. Buy it. You know, I would think my brain tells me that a property in those areas at that price point with those property taxes wouldn’t perform, but we run the numbers they perform really well. Mm hmm.
Jason Hartman 43:13
Good, good stuff. No, it is surprising. And I think that has the chance to really be more of a hybrid market, where you could see some decent appreciation, as opposed to the more linear markets that just sort of chug along and appreciate more moderately. So that’s another benefit of it.
Greg Saylor 43:28
Yeah. And let me get this knot out as well. Because I’ve said I’ve said a couple of things about, you know, the, your website and some of the things we just talked about. But you know, being a software engineer, one of the things we deal with is normalized data a lot. And you guys have done a remarkable job of that there’s other providers out there that are in multiple markets and they do not do nearly as good of a job as you guys do. So even though I have a few, but I’m calling almost due diligence items are not even and there’s minor, but they’re You guys do a really good job of giving us, you know, a good idea of what a property is going to look like if we were to buy it.
Jason Hartman 44:07
Yeah, yeah. Good. Thank you. We really, you know, that’s the first thing I said, when I got into this business. Many years ago, as I said, look at goddess standardize the data, because I was trying to do this myself. And I didn’t have anyone to help me. I mean, that’s why I started this business is back in 2003 2004. I wanted to become a nationwide investor. And I mean, the data I would get Greg, it was so like, I had to be a detective work for every deal. It was just crazy. The amount of detective work I had to do and I had to assemble things into my own format. And it drove me absolutely nuts. You got to standardize the data. So that’s absolutely imperative.
Greg Saylor 44:53
Yeah, I couldn’t agree more. And the other thing I would put out is
Greg Saylor 44:59
already Gotta go with this Oh.
Greg Saylor 45:02
In terms of the property of course I track all my income and expenses in you know, month by month. And I’ve been pretty surprised that the properties haven’t just met the Performa they’ve actually exceeded the Performa So, in general, like after upgrading is all said and done, I think the numbers you guys put up there are actually pretty conservative.
Jason Hartman 45:25
Yeah, that’s what we try to be we just want you to have a better experience than what we say. But even if you don’t even if those numbers come in short, it’s still gonna be pretty good, you know, compared to whatever else you might do. I would say I would hold our our deals up against anything else you could find, you know,
Greg Saylor 45:42
so yeah, and then here’s a real example like the Chicago Party, which I mentioned wasn’t in such a good neighborhood. But I kind of knew that I knew I was taking a little bit more risk with this property.
Greg Saylor 45:53
It we need to put a fence up right there’s
Greg Saylor 45:57
no say not good activities going on in the back. yard at night. So we need to put a fence up, which is something that we probably wouldn’t have to do. I wouldn’t have to do if I say we I mean, the property manager and I were in Campbell on that, we probably wouldn’t have had to done in any of the other properties that I bought. You know, it’s just little things like that that can. But you know, it’s just a risk that I kind of knew going into that.
Jason Hartman 46:21
Right. Right. And so plan for some additional expenses. Be conservative on your numbers have a reserve fund. That’s all good advice. Right. Very, very good points and tell us what are your plans for your investment portfolio? I mean, you know, you got into this because you wanted to earn a higher return on your money, of course, and maybe the overall goal of financial freedom and leaving the corporate world someday, I don’t know, what are your plans?
Greg Saylor 46:47
That’s an interesting one, because I really enjoy the work that I do, but you know, it’s, for me, growing up really poor has had sort of this odd psychie I can’t really explain it but it’s sort of almost a fear of losing everything that I’ve had my whole life. So, to me this is kind of more about redundancy about redundancy of income stream. So if something does happen that has already had a very positive impact on that, you know, I already feel more relaxed, just generally speaking, and you know, things are getting better. I don’t know if I should say this, but you know, the income that I’m getting for these properties just kind of blows my mind. I mean, I’m generating close to $4,000 a month from these six properties. Wow, that
Jason Hartman 47:39
is fantastic. Yeah, that’s what those are those all based on 25% down yeah. Yeah. Wow. Yeah, you’re doing great.
Greg Saylor 47:47
Yeah, you be happier with this. I’m like, really blown away by it. I mean, that’s that’s not county maintenance and things may conceal assets. That’s how I kind of rate my goal. Progress. I guess. is looking at the income, but then not counting vacancy loss or maintenance. That’s how I kind of track my goals. I guess, you know, you know, I track the performance, I track my goals
Jason Hartman 48:11
in terms of goals, do you have a certain number of properties you want to buy?
Greg Saylor 48:14
I think it depends on what’s going to happen after property number 10. I’m not sure. I know, there’s some solutions out there, but I’m still not real happy with the ones I’ve seen the other
Jason Hartman 48:26
in terms of financing more than 10 properties, right? That’s
Greg Saylor 48:29
right. Yeah. Yeah. And and the other thing that I’ve noticed is, you know, the debt to income ratio, or personal debt to income ratio is actually a really important factor in financing. And what I always thought is that as I buy more properties that I’m going to have income coming in from the property and expenses going out with it, my debt to income ratio is actually going to go down. But that doesn’t happen. It actually goes up. I suppose. It depends on where you start and that income curve, but the way numbers averaged out, it actually gets kind of keeps creeping up with every property purchase. And I think that number needs to be less than 43%. I don’t want to speak for anybody. But so it’s, you know, I’ve been, you know, I count for that on my spreadsheets now to just to make sure that if I’m looking at a property that it’s not going to my debt to income ratio is going to be okay with that.
Jason Hartman 49:19
Right? Okay, good. Good stuff. And so you’re gonna get to your 10th property. And one solution because you don’t like the financing out there for more than 10 properties is to just get married and have your spouse buy 10 more.
Greg Saylor 49:35
There you go.
Greg Saylor 49:37
Now, you’re just teasing me, Jason there. Yo. Yeah. Good.
Jason Hartman 49:41
There’s a creative solution, Greg.
Greg Saylor 49:44
Actually, here’s another creative solution I thought of, I don’t know how all this would play. But you know, one has the flexibility to relocate. My understanding is you can buy one primary residence a year Well,
Jason Hartman 49:56
yeah, but that’ll that’ll be a slow process. But yes, you can do that. Absolutely, yeah.
Greg Saylor 50:00
So yeah, I’ll definitely be hitting, you know, 10 properties this year. So it’s, you know, in less than a year, basically, I would have, you know, filled out my conventional financing. So,
Jason Hartman 50:12
yeah, good, good stuff. Well, Greg, it’s been fantastic hearing your story. Thank you so much for sharing it with the listeners, just, you know, anything else you want to say, to wrap it up,
Greg Saylor 50:21
I just want to give another shout out to Oliver, because part of the due diligence that I do is, of course, looking at the neighborhood. And he gave me a lot of really good ideas. And I found some on my own to about, you know, kind of how to, like make it back to risk. You know, I want properties, some in good neighborhoods, I’ve met some I actually want some properties and some less than great neighborhoods. And some things I used to look at that are what’s around the property. Like, is it just a bunch of liquor stores or are there movie theaters? Or are there other things like you know, as the kind we look the scalar like, more Entertainment type things around the property. And then you get into the really good neighbor you got like golf courses and things like that. So I kind of use Google in a very large way just to figure out what’s around the property and get a sense of, you know, is there a Home Depot nearby or Lowe’s nearby? You know, that kind of stuff. I think that’s been really helpful for me, and of course, just walking around the street, the technology that’s out there now to be able to look at a neighborhood is just phenomenal.
Jason Hartman 51:31
Yeah. And soon, as soon we’re going to be able to dispatch our personalized drones out to do that for us, too. So it’s, it’s Greg. It’s an amazing time to be alive as I always say.
Greg Saylor 51:42
It certainly is. And it’s done. Personally. Thank you to you and all that you guys do. I know you guys work really hard on on everything, and I’ve been an incredibly fortunate benefactor from not so
Jason Hartman 51:56
well thank you so much. We appreciate your business and appreciate having you as a My aunt and hope that we can help you build an awesome financial freedom portfolio. So thank you.
Greg Saylor 52:06
Thank you so much.
Greg Saylor 52:08
I’ve never really thought of Jason as subversive. But I just found out that’s what Wall Street considers him to be.
Greg Saylor 52:15
Really. Now, how
Greg Saylor 52:16
is that possible at all? Simple. Wall Street believes that real estate investors are dangerous to their schemes? Because the dirty truth about income property is that it actually works in real life. I know I mean, how many people do you know not including insiders, who created wealth with stocks, bonds and mutual funds? those options are for people who only want to pretend they’re getting ahead. Stocks and other non direct traded assets are a losing game for most people. The typical scenario is you make a little you lose a little and spin your wheels for decades. That’s because the corporate crooks running the stock and bond investing game we’ll always see to it that they win. This means unless you’re one of them. You will not win. And unluckily for wall street. Jason has a unique ability to make the everyday person understand investing the way it should be. He shows them a world where anything less than a 26% annual return is disappointing. Yep. And that’s why Jason offers a one book set on creating wealth that comes with 20 digital download audios. He shows us how we can be excited about these scary times and exploit the incredible opportunities this present economy has afforded us. We can pick local markets, untouched by the economic downturn, exploited packaged commodities investing and achieve exceptional returns safely and securely. I like how he teaches you how to protect the equity in your home before it disappears and how to outsource your debt obligations to the government. And this set of advanced strategies for wealth creation is being offered for only $197 to get you’re creating wealth encyclopedia book one complete with Over 20 hours of audio, go to Jason hartman.com forward slash store. If you want to be able to sit back and collect checks every month, just like a banker Jason’s creating wealth encyclopedia series is for you.
Greg Saylor 54:20
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.
Jason Hartman uses this Flash Back Friday show to showcase a client study with Gary Pinkerton. Gary discusses his experience in real estate investing, specifically outlines issues with tenant turnover. He talks about how he reduces maintenance costs by buying and upgrading durable replacement materials. He also discusses preventative measures he uses to minimize turnover expenses. Gary talks about why he likes two year leases with built-in rent increases and shows listeners how.
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. Hi, Jason, thanks for inviting me on the give a quick preview of the new YouTube channel. As many of you know, Jason has been podcasting for many, many years delivering a lot of value to his audience, and providing thousands of episodes of free education. And he brought me onto the team a couple of months ago to help him dive into the world of video in order to expand his educational platforms. So we recently launched a new YouTube channel that is now the official YouTube channel of Jason Hartman and his company. And you’ll find a couple of older channels on YouTube that are specifically for some of Jason’s podcast shows. But this new channel is exclusively for original educational content. All About Income property investing. It will include a select amount of a few full podcast episodes that are the most popular. But for the most part, it’ll just be clips from podcasts and original videos. The channel is just Jason’s name Jason Hartman. And the channel setup is almost like an online course where you have playlists that are categorized into key areas that cover the whole gamut of real estate investing. And that way you can easily find content about specific topics that are relevant to you. And so subscribing to this YouTube channel will be like attending an income property investing school. If you’re a beginner, you’ll find value there. If you’re a veteran, you’ll find value there. The categories of education that you’ll get to enjoy in this channel include my 10 commandments of successful investing and your most of you are probably aware of his 10 commandments. He goes into some depth in the series that we have on that channel, finding the right markets and properties, analyzing real estate deals, managing your properties and tenants current laws and rules for income, property investing, debt, taxes and how those two things affect real estate, economics and current trends related to real estate investing, financial freedom mindset and inspiration, and popular podcast episodes, and then clips from different events. Those are the kinds of things you can expect from this channel. And you’ll also get some short clips of some key training that was pulled from specific podcast episodes that are within those different categories that I mentioned. So I encourage you to go subscribe now, the link to the channel will be in the show notes. But for now, you can just search Jason Hartman channel on YouTube, and then scroll down to where you see Jason’s name with his face. And the blurb for the channel reads, we provide real estate investors with education, research resources and technology to deal with all areas of their income property needs. And so once you see that description, oh no, that’s the right time. channel so we hope to see you there.
Announcer 3:04
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 3:55
I want to take just a moment to tell you about renters warehouse and award winning property management company services over 13,000 investors with over 18,000 properties nationwide. They are the only residential property manager rated by Morningstar. Their centralized model with local staff provide trustworthy support across multiple markets. These experts track all aspects of your property and never try to profit from maintenance repairs. Plus you’ll enjoy flat rate pricing and warrantied tenants up to 18 months. Check this out for a free three month property management trial. exclusive to Jason Hartman listeners visit renters warehouse comm slash Jason again that’s renters warehouse comm slash Jason.
Jason Hartman 4:51
Welcome to the creating wealth show. This is your host Jason Hartman with episode number 836 836. Thank you so much for joining me today as I am happy to be back in the good old US of A Yes, I have left the land of scarcity and lack and that is the European continent. I know, it may be a surprise to some of you that I say that but, you know, from an economic only standpoint, I am only talking about economic and standard of living. I am not talking about culture and history and lifestyle, but only from the economic standard of living kind of kind of point of view. America is the land of abundance and Europe, where I was born is the land of scarcity. You know, it’s like every time you walk into a hotel room, you got to put that stupid card and the light switch to get the electricity to go on. Every you know, the cars are small, the houses are small, everything is little, you know, like you take a shower and the little water heater that heats the shower water runs out. It’s just a land of lack, you know? If you live in the US, or Canada would be included in this, or you know, many other countries, of course, you just you just don’t know how lucky you are, you know, it blows my mind, again, that the Obama and Bernie Sanders crowd wants to make America more like Europe. I just don’t get it. It made blows my mind. I mean, look, I was born in Europe. I’ve been to Europe a zillion times. I love going there. But America is the land of abundance. Now, of course, the waistline of Americans is too abundant. And the end, you know, that’s there. There are problems with it. It’s not all good. But I just tell you the the free market, the abundance thinking is such a important part of your success as a real estate investor and as a person in life in general. Today, I want to welcome back to the show, our client and venture Alliance member, Mr. Gary Pinkerton, former nuclear submarine Captain Gary, welcome. How are you?
Gary Pinkerton 7:04
Thanks. Thanks, Jason. I really appreciate it. This has been two or three times I’ve been on but and it’s always humbling, but I you know, I feel like it’s a it’s an awesome experience. So thank you for inviting me back.
Jason Hartman 7:14
Well, thank you for joining us. And yeah, so you retired from the Navy? What about a year ago now?
Gary Pinkerton 7:20
Pretty close. Yeah, I stopped. Stop working. And officially was August 1, but almost exactly a year ago when I finished in uniform. Well,
Jason Hartman 7:28
during the Great Recession, you know, we heard a lot about people being underwater. You used to be underwater, too.
Gary Pinkerton 7:33
I did. I did. But it wasn’t an accident that was on purpose.
Jason Hartman 7:36
That was on purpose in that submarine is. This is such an amazing thing. You know, Gary, I tell you, we have got to line this up as a venture Alliance weekend trip. You got to take people onto a submarine sometime we got to make that work somehow.
Gary Pinkerton 7:52
Yeah, you know what I could, I think we could totally do that just as a tour and I can guide the tour with the whoever’s on the On the ship would probably appreciate me doing instead of them doing it. But, you know, would be a great opportunity to kind of add just some personal insight to it. I think it might be a great tour. And anytime that we line this up near one of the coasts, we could do that.
Jason Hartman 8:11
I definitely want to do that. And, and you know, what we’ve got to do, as part of our this would be a great venture Alliance mastermind photo op, is if we could, you know, have one of our venture Alliance members stand in one of those keys. And another one you see at one of the keys, you know, in the movies, how you turn the key to launch the nuclear missiles, can we launch a couple nuclear missiles just for fun?
Gary Pinkerton 8:33
No. And in fact, we’re not even gonna get that photo. I don’t think
Jason Hartman 8:37
they do it in the movies and they do it you know? Is it really like that, by the way, is it like that you got to turn to keys or a kids probably not like that anymore. It’s
Gary Pinkerton 8:48
pretty close. Because there certainly is a whole lot of redundancy and backup and more than one person involved which many of you think about it as it now I’m a private citizen with some with a family here and I’m really happy. The fact that there’s a whole A lot of backup before, you know before we make those kinds of decisions. So yeah, it’s pretty similar.
Jason Hartman 9:04
Yeah, well, interesting, very interesting stuff. Well, hey, Gary, you said something to me today that I thought was really important. You know, we were we were using boxer in boxing back and forth the best way to communicate ever invented in human history. voxer we were doing that this morning before we started recording the show. And you said that you wanted to talk about something that’s really I think, super important to real estate investors. borrow a phrase from poker thinking of Keith, our venture Alliance member who’s a professional poker player, and it’s called the turn the turn, okay. Anyway, that’s important to a real estate investor, because this is the area where yet you just lose money, and it’s on the tenant turn. So it we’ve talked a lot about this over the years, of course, but it begs the question, what can we do to number one, keep our tenants longer. Number two Make those turns between tenants, I’m talking about the time between the tenant when you may have to do a make ready to get the property ready for the new tenant, this is something that can really eat up, you know, eat up a lot of your return on investment. And and the turn is vitally important. So the first thing on the term, I think we want to say to our listeners and investors is don’t have the turn. Okay? So, try to avoid the term completely the tenant turnover and keep the tenants there. But don’t do that. At the risk of being one of these dumb landlords that doesn’t maximize yield, there’s a balance between these two, right? You want to increase rents, but not enough to motivate the tenant to move, obviously. So maybe, let’s talk about that. But then let’s also talk about what can we do to make our properties more bulletproof. So That it’s cheaper so that you don’t have to spend a bunch of money on the turn. And the other thing is we have this constant issue, Gary, of the property managers if you’re not self managing your properties, okay? Now, this is something that if you’re self managing, you’re not going to run into it as much, as long as you’re not wimpy with your tenant. Don’t be wimpy with your tenant, okay? You know, be a business person and have expectations for them and make them live up to it. And here, I’m talking about security deposits, okay. But with property managers, we have this inherent conflict of interest. You know, there’s an old saying you can’t serve two masters, right. And property managers kind of do serve Well, two masters and then themselves. So they serve the owner that’s truly their client, okay, that they have the fiduciary obligation to, hopefully that’s a fiduciary obligation. I don’t know if it truly is in every state, but it’s an obligation because the only is the one paying them right and that’s who the contract is with. And but then they also have the tenant. And you know, they don’t want their name all over Yelp and all these complaints sites when they are aggressive or maybe not even aggressive, but force their the tenants to uphold their part of the bargain. So if they, you know, if they damage the property, the property manager can be reluctant to charge the tenant for repair items. Okay. And this is one of the reasons I really like self management, one of the many reasons I do like it, you know, and maybe whatever else you want to talk about, and of course, you’re a very experienced investor, you’ve got many properties that you’ve purchased through our network. And you know, you’ve been investing with us for years. So tell us about some of your thoughts and experiences on the turn.
Gary Pinkerton 12:49
Yeah, so I’ve had quite a few recent experiences. I’ve also had a lot of conversations with Fernando and everyone. I think he’s very familiar with Fernando and, and he and I, it’s really funny. My hat is off to that that guy because he I went to the venture or excuse me, the meet the Masters in 2012. When we were both basically starting right there, I went a little bit different direction with a couple investments syndicated things that I participated in, I wish I hadn’t, I didn’t lose a lot. But you know, kind of long story short, and then I’ll get back to the property management, Fernando went directly into properties, it has, you know, quite a few more. And so he’s seen this a lot more than I have. And but I’m starting to see quite a bit of the turn as well. And I think that kind of generalize things, what seems to happen when you get a you know, recently rehab property in a B class kind of neighborhood, whether it be a, you know, a four Plex, or a duplex or even a single family is that there’s this churn at the very beginning, because you don’t always have the best tenants in there. But the thing is that when you do get that really good, dependable tenant, eventually you may take the second or third time, then when you get that tenant, you got to recognize that you have that tenant and you don’t really want to lose the tenant, and they will typically stick around on their own because that makes them the good Dennett and and so there’s a lot How to turn at the very beginning on a property it seems, and then you settle into had somebody for five years and then I had somebody for two years and then you know, maybe was another one year one, but then I jump back in and I get a three or five. So it’s real important to find that person and then do things that is necessary to hold on to them. But also, as you pointed out, don’t be wimpy. Don’t be a bad business person. So, for example, I have a class a building in San Antonio that I bought before you know, I joined the network several years ago, I had a tenant there that was really good. But the market had you know, she was there for two years and this spring it can do for her to renew our lease and she said Listen, I just haven’t been keeping up with the rental increases. So I actually lowered her rent not raised but lowered it by $50. I put us about 150 on the market, but it’s a class a building. So that’s not a large percentage. It’s like less than 10% and I let her renew for that year, but we did a two year lease so the next year was higher. And and so that helped me not have to have a 1500 dollar turn. It helped her not having To spend money to move and most importantly, I had been to the property recently, I knew she was taking care of it well, so it was it was a win win for everyone. If you go to like, you know, I have a property in St. in Memphis, for example. And, you know, I have several properties there. And this is a bad egg, but I have several good eggs. This one I got in October and put a 24 month lease on. And so now we’re approaching six months in the
Jason Hartman 15:24
independent right right there is one way to decrease the churn is to write your leases, works, right? Well, yeah, it does nothing, hey, nothing always works. Okay. But as a general rule, I believe you should try and do two year leases on your properties. Okay. And if you want to, you can build an escalation into that contract. It doesn’t mean you’re leasing for you know, say the properties leasing for $1,000 a month doesn’t mean you’re committed to $1,000 a month for two years. You just say the first year is $1,000 per month and in the second year is a Thousand $30 per month. Okay, and that’s pretty easy to do, you know, to have an escalation built in. That’s maybe, you know, 3% right. 30 bucks. So yeah, go ahead. So two year leases first first first rule. Yeah.
Gary Pinkerton 16:15
Right. And, and I like the idea, right? And this isn’t a new idea, but I like and have had good experience with the concept that you always want to and you’ve said this a lot, Jason that you always want to have your clients with the understanding that rent will go up each year when it’s renewed because the market economy inflation is going to go up in most areas, right. So a small
Jason Hartman 16:34
rent your tenants your tenants and, and get them that’s a very good Gary, get them used to that, like you’re training them, okay? Even though it’s just a minimal increase. You’re putting it in their mind right, planting that seed that that’s just normal. That’s what happens rents go up.
Gary Pinkerton 16:54
Okay. Right. In this one property 24 month lease. recently read had been it was newly rehabbed in October, and the tenant never once paid on time, right? So we knew from the beginning, my wife, Sue does, you know the books for this. And she kept telling me, Hey, we’re not going to want to keep this tenant around. But the other thing she said, and this was really insightful. She said, that, hey, that the management company in this case, and this is not uncommon, the management company is keeping all of the all of the late fees, which is fairly standard. But again, it goes against this idea of the manager and the owner having our interests align because what is a
Jason Hartman 17:36
conflict of interest? I hate that part of it. Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. And we’ve spoken out about that a lot. You know, and what we mean there, folks, is that when the management company keeps 100 percent of the late fee. Well, you know, follow the money, right? What’s their motivation going to be? It’s going to be to, to make the tenant pay late fees and that makes them predatory on the tenant. Okay? It’s like incentivizing them to have this bad relationship with a tenant. Now tenants are late, okay? Doesn’t mean that happens. But you don’t, you know, you don’t want the that to be such a high profit motivator for the management company, you know, $50 late fees every month 5% of say $1,000 rent, right? You know that. That’s a big difference. When the management fee is only 100 bucks a month, for example, or 90 bucks and they get a $50 late fee. What you know, they’re going to almost encourage that they’re going to train them to be late. And then the tenant feels like they’re getting ripped off. You don’t want the tenant the tenant ultimately leave you you mentioned it but it like is your they’re not really your client. But you said client And they are your customer. Okay? So you want to have that relationship good. You don’t want the tenant to feel like you’re getting ripped off every month.
Gary Pinkerton 19:07
Right, exactly. And so and Sue even mentioned, she’s like this guy is paying later and later every month. And so he would scrape together 150 $200. And 100 of it would go or 75 of it would go to the management fee. And then he would leave there dejected and you know, upset that he has scraped that together, and it didn’t pay off even half of what I owe this month. And so you could just see it happen. Well, eventually here. And in the beginning of May, we get a notice from the the property manager, and this was our first indication that that the place was ratings today, your property is vacant, here’s your make ready and make ready was 20 $300. And the place just, you know, got rehabbed in in October. Now there’s some contributing things to that. One of them is that they made the client Sorry, I said it again. They made the tenant the customer very upset every time you had an experience with him and he did no favors and trying to keep that property in good shape. But But Also, you know, there were some mistakes on the rehab that, you know, should have been things that should have been done that were fixing this round. And it was a fresh set of eyes from the management company didn’t happen to be the same company that did the rehab. So, you know, some of that 2500, I will admit is, you know, stuff that needed to be done at the beginning, but about 1500 of it really wasn’t. So if we go Jason, back to where you were, you know, we were talking about what incentivizes the management company, they, you know, they placed the first tenant got paid for that, they got a ton of late fees, they’re going to get a really nice, you know, 15% markup on all of the the make readies, they’re going to get to place another tenant. So, you know, that’s fairly tough. And I think the way around that, again, some of this when you get a new property, just have to keep working and making sure that you know, maybe you get involved in who they place there and ask them questions. I do that often. So I think you know, you just turned through but but how do we prevent that from being expensive, I think is one of the things we want to talk about. Right? That term? Yeah.
Jason Hartman 21:01
Yeah, no question about it. Okay. So do you know, I want to make a comparison as you were speaking, Gary, about your experience with the property managers and the late fees? Do you know what some of these property managers are? They’re kind of doing they’re basically running almost like a payday loan business. Yeah. Or a payday check cashing business that’s not, you know, cashing your check in a bank, right? Where these fees are just exorbitant. And these people live hand to mouth, you know, a lot of them and there are a bunch of very expensive financing options, you know, that the term predatory lending comes to mind because that’s what it is where, you know, these these people are not financially sophisticated, and they’re just trying to get by and, you know, you put them in a position where your tenant is basically spending five to 10% extra per month, just because they’re late on the rent in is this vicious cycle. You know, I almost sound a little bit like a socialist here, you know, but but it’s really it’s not fair. You know, it’s not fair, I’m going to stick up for the tenants. It’s not fair to the tenants. So one of the principles that we constantly talk about here on the show and in all of our teachings is you’ve got to have an alignment of interest, okay? And if you if you don’t get control of the relationship, and you do decide to have property managers, which is fine, there are some great property managers out there. And there are some bad ones too, no question like anything. But if you don’t get control of that relationship, either by self managing or just controlling the property management agreement and relationship there and making sure things are in alignment, you know, your interest and your tenants interest, and your managers interest should be in alignment as much as possible. I won’t go into that because we’ve talked about that deeply could take you know, another hour But you know, and past episodes, it’s their go to Jason hartman.com. You can search terms like that property management, flat fee, property management alignment of interest. You there’s lots of discussions about that on prior episodes. But But yeah, how can we minimize cost of that, that tenant turnover when you have it?
Gary Pinkerton 23:20
Well, I think first, you know, the customer’s always right, right? And you can’t always say the tenant, give the tenant whatever they want. That’s not really what I mean. From the managers perspective, the owner is a customer and the tenant is a customer, as you commented, they kind of work for two people. So I try to prevent the vacancy if I can do that to begin with as an example, and then I’ll get to how do we minimize the cost, but I have a property in St. Louis, a very good tenant and they’ve been there on a two year original lease, paid always on time, very, very good tenant, taking nice property, nice care of the property, but it had a roof issue, so water damage over time. Some door hinges need to be fixed and you know some other pretty, you know, minor things re cocking the bathtubs. And so they basically said, Hey, we’ll sign another lease, we’d rather not increase because there’s problems here in the property. And, and I said, Well, I if I, if you don’t sign again, then I’ll be able to fix all those properties and raise the rents substantially quite a bit above what they paid. And, and so we kind of came to basically an agreement, they say, well, we can’t afford to raise it, you know, to the market rent right now. So instead of me paying 2000 to 2500, to do a turn on a property that it’s been quite a while, so it would probably cost that. I said, Hey, I’ll take care of the highest priority items for you kind of a mini turned cost. And then they went up partway in the rent, and I got to retain a really good runner, so that that book is not yet published, but I’m hoping that that’s how it comes out. It seems like that’s where it’s going, as far as you know, as far as what can we do you guys have already Jason, you’ve already talked to you and Elizabeth both about some really Good options and I’m starting to put those into place. You know, so the the wood laminate floor is a great option. I even had a property there in St. Louis where we were going to put that in but that extra expensive 1500 dollars my property manager said, Hey, you know, the guy who doesn’t make readies for us just recommended that we just pull the carpet and we paint it because that’s standard for the properties where we are here in this location. So I think being able, you know, having a good conversation with a manager that that you trust and that you have good rapport with. They will save you a lot of money because they know the area they know what’s expected when the tenant the potential tenant comes in looking to rent your property.
Jason Hartman 25:35
Yeah, okay. So that’s all very good stuff. So you want to make the property the physical condition of the property as bulletproof as possible. And you’re referring to our our clan and venture Alliance member has been on the show Elizabeth Embry, who by the way is hosting a another show the women investing network, so check that out as well. And yeah, and she’s doing a great job with that, but Elizabeth talked about You know, the laminate floors that the flooring, I mean, you know it’s an amazing time to be alive, right? new material sciences, better flooring, it’s much cheaper to maintain over the long haul. It’ll cost you a little more than carpet in the initial part but in the long run it will be a lot less expensive. So I did one of my houses in San Antonio, you know, it came up it was like six, seven years I owned it and never replace the carpet or anything and it was finally just time to do it. Once this last tenant moved out. It was about $1,000 more and I did the entire house in the wood laminate, and that house has now got bulletproof flooring, okay, you know if there’s a tear in that flooring, it’s really easy to fix it and replace it. I don’t think you should do the dark flooring. I think you should do kind of a middle tone. Okay, color is an issue. Of course you know when it’s dark. Number one, it shows all the dust and number two makes the rooms look smaller because darker rooms look smaller. Of course in lighter rooms. Look Barger and then the other thing that I’m a huge fan of is on the paint. You either do lotion paint, or you do you know, the more like a naml ish paint. Okay, egg shell is the name of the finish, not the color. Shell is a color, but it’s also a finish. Okay, so low sheen or eggshell finish paint and rather than flat paint on the walls which scratches and in just any little thing looks awful. Okay, on the flat paint you do the low sheen throughout the house, you know, on the walls and the scuffs and scratches and fingerprints, they just wipe right off. You know you can just cleaner, any household cleaner, you can just wipe it off, and the those walls become very durable. And I just think back to one of my own houses in which I lived the last. Well actually the last house I lived in that I own back in Orange County, California, which I I talked about when I teach people about the LTI ratio in the Hartman risk evaluator that’s the house okay? I lived in that house for seven years. And I put a shelf finished paint on it, and that paint looks good for seven years and I was not easy on it. Okay. So you know, make the walls bulletproof and the flooring bulletproof by doing those two things, okay? That will really reduce your your long term costs. So you got to spec that out, you know, if you’re, if you’re buying a property today, and that local market specialist in our network that you’re buying from, you know, they do different types of rehabs, right? And they always want to deliver you the house at the lowest price, but you may want to tell them look, I would like to spec this house at a higher level, I want to, I want to spend, you know, 200 bucks more and I want low sheen paint throughout, okay, and I don’t know what the exact cost will be, but, you know, it’ll be a little more and I want to do the laminate flooring, the sort of would look at laminate flooring throughout instead of any carpet and make it a lot less expensive. So I think those two things are very valuable.
Gary Pinkerton 29:09
I agree I agree and the only other thing I the two other I guess quick things again kind of market dependent, but I have a couple markets San Antonio and and for whatever reason St. Louis. There are areas where the air conditioners every year have substantial problems, air conditioners and heating systems and so I have gotten into a routine where I pay for that I’m sure everyone has experienced where some local either your property manager or if you’ve ever used a heating service that then they contact you but they offer this you know this come check it out at the beginning of the season very nominal fee of $75 or $100 or something. I’m using that now because the when when your recognition or fails or when your heating system fails, it’s when the when Mother Nature has tested it and it’s tested every other one in the area too. So you will pay out the nose Your tenants will be extremely unhappy, because it’ll be delayed and getting response because they’re busy with every other house that just got tested. So I do that now. And I’ve gotten good experience and haven’t had the crises that I had every year before that. And then the other thing I would say is don’t be hesitant to use a service, something like home advisor, I love homeadvisor. I’m self managing a property in San Antonio, Texas from New Jersey. And I use homeadvisor all the time. And it’s incredibly inexpensive. Tell us how you use it. What do I use it for appliances, a stove broke a dishwasher broke. I’ve used it to have a gentleman work on replace, you know, the control valves in a bathroom. So just really for any maintenance service. I simply just put in what the problem is and the zip code and you can choose where do you want people to call you immediately. That’s typically what I do and are three different people providers will give me a call. A couple of them that will head out to the property. There’s, you know, sometimes there’s no visit charge So it’s not a big commercial about them. But there’s there’s other services available. But don’t be hesitant even with sure there are
Jason Hartman 31:05
no and of course, Angie’s List is one of them. The problem with Angie’s List, at least last time I was using it, I don’t really use it anymore because it was all localized by zip code, you know, and we’re, we’re nationwide investors. So, you know, we’d have to join Angie’s List in each of our markets where we own properties. And and that’s, you know, Gary, that’s one of the great things too nowadays, you can do this with a couple clicks of the mouse, right? You can, you can basically run your real estate Empire, you know, nationwide, yourself, and there’s so much transparency now that was not there. Think of all I want everybody listening to think of all of the 10s of millions of real estate investors over the last few decades that have made fortunes investing in buy and hold rental properties. And they didn’t have this kind of ease of use and transparency that we have today is is an amazing time to be a real estate investor, okay? You don’t need to rely on, you know, some estimate from a property manager or a contractor. You can easily compare things. No one can be su anymore about the cost of a garbage disposal or cost of whatever, because you can go to Home Depot’s website and you can find out yourself.
Gary Pinkerton 32:25
Yeah, exactly. And that’s what I was going to say, Jason is that I would not hesitate with those services available like that. And the great experience that I’ve relayed to you that I have every time with this, I wouldn’t hesitate just, you know, checking you’re doing this even when you have a property manager, for example, in that property that went vacant early. One of the things on the make ready was that the dishwasher scene seems to be broken, probably needs replaced. And when I asked them, could you explain that? They said, Well, we couldn’t get the door open. And so their estimate was $450 plus 15%. Mark and I said that’s okay. That’s okay. I’ll Take care of myself, right? And I haven’t yet achieved that the person is coming next week, but what I fully expect is that the door was stuck, you know? Or even if not, it’s still going to be far less expensive for me to put a brand new one in, then have them go do that. So it was simple. Again, it was a click of a mouse. So just another thought on how you can reduce turn by just a little bit of personal development that took me 10 minutes.
Jason Hartman 33:22
Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday. Yeah, and yeah, you know it then it might even take you less than 10 minutes to you know, it’s really, really amazing just didn’t have the discipline and the initiative to do some of this stuff. And at the very least, it is going to, you know, we’re all about the empowered investor, right, giving you the tools, whether they be the software tools that you can find it like real estate tools. com Okay. The software company Fernando and I purchased Couple years ago, so you know great tools there that the other tools you can find at Jason Hartman calm and helping you be the empowered investor. And one of the things you do, even if you don’t actually take any of these things to the finish line, if it’s just an email, in here’s an example of how it plays out. You get an email from your property manager or your tenant, and it says this and that and a lot of your tenants if you’re self managing, you’ll find your tenant to be incredibly helpful to you, where they will do a lot of the legwork for you. It’s amazing to me, how well that works. You know, the tenant, a lot of times, you know, they’ll say, Hey, I already called someone and and they’re coming over to look at this, you know, this repair item, right? And the property manager might say, Hey, we got a complaint from the tenant and you know, we need to fix this and you know, then they have someone go out and take a look at it. If you simply go to Home advisor or you go to you know the Home Depot or the Lowe’s website site and you look up this item and just copy the link and paste it into the email and say, Well, I checked the Home Depot website and looks like we can get this part for you know, $52 and 36 cents, right? The property manager or the tenant are going to be Wow, this guy is on the ball. Okay? And, and even and here’s a little secret, even if you’re not on the ball, you want to fake it till you make it. You know, you want to make them think you’re on the ball, that you are a sophisticated investor who’s not going to put up with a bunch of crap and overcharges and you’re not going to pay through the nose, you’re not lazy. You’re going to click your mouse a few times, and do a search or two on whatever it is, and you’re going to be the empowered investor. Okay? Simply by sending that one email that you will change the nature of The relationship that you know, that email that shows Look, you’re not just taking their word for it, you’re checking things. Okay. And that’s going to make you a much more successful investor.
Gary Pinkerton 36:09
Absolutely. So I promised to the audience that I will keep checking into this, I mean, reducing the turn is kind of becoming a passion for me, because I think it’s important, you know, very simple numbers, if you were making, you know, net $250 a month on a property. And you were in this process where where it was because it was the property managers best interest to turn it every year, not even offer a renewal, you know, then then you would be, you know, setting up to make $3,000 a year, right? Well, if your turn is 2000, every time because you haven’t thought, you know, closely about how to reduce that. That’s not a very good profit. And there’s a lot of other dimensions to real estate that make it very valuable. But that one cash flow would not be a good one in that scenario. So we have to figure out how do we extend this out to two or three years between turns and how do we get that turned down to 1000, maybe 1500. I think it makes a huge Yeah, very,
Jason Hartman 37:00
very good point. Well, Gary, I know we were going to talk about a couple other things today, but we have run out of time. As as, as usual, but I think this is an important topic. And thank you for sharing your case study as a client, with our audience again, we really appreciate it. And we’re going to have you back on soon. We’ve got a couple of news items we want to talk about about the the disappearing middle class about Mr. Zuckerberg, the biggest invader of privacy in human history besides the folks at Google. And what he thinks I you know, I think he’s got political aspirations. I can see a Zuckerberg presidential candidate, and he’s, I want to I want to talk about his universal income stuff. He sent me an article on that that’s fascinating. And we like to talk on the show about the macro and the micro things okay, because they’re both important, you know, the big picture stuff, societal government, political, and then the detailed tax. practical stuff like reducing the cost of tenant turnover. But Gary, before we go, you know, I just want to ask you about some educational stuff real quickly here and maybe share your thoughts on investor education with people. Because you, like so many of our clients have been really just very motivated about sort of being in the culture, if you will, staying in the loop, coming to events and being really involved in and we’ve got two events coming up and you’re coming to both of them. We’ve got our our venture Alliance mastermind event and and you were like, I think our third member of the venture Alliance that’s coming up in Chicago in June. So it’s a What about three weeks away, I think. And then we’ve got our Oklahoma City Jason Hartman University Jay Chou and property to recombination coming up first weekend of July. What are your thoughts about those two events?
Gary Pinkerton 38:54
Well, venture Alliance has been a really, really stretching process for me. You know, if From all aspects, you know, I mean, it’s not inexpensive. And you did that on purpose to stretch people. And it certainly, you know, worked in my case, you know, especially three years ago when we started this or two years ago. And so it has caused me the stretch, it’s caused me to raise my game. And, and the people I’ve gotten around have been far more what I’ve learned from them and shared and the experiences has been far more than you know, any monetary cost has been for me and I think everyone else who tries this would would experience the same thing. So I certainly invite everyone to come join us and the bigger our group gets, the more value that gets added to every one of us so I’m one of the most motivated people off the hair, you know, trying to to tell others about it get people to join us because I’d love to have a bigger group even I’m learning a ton here and getting a lot of value, but it would be better. You know, if I just think about Keith, and and Chad, you know, Keith being our, you know, our poker player and Chad, one of our local market specialists, the most, the two most recent and john, I mean, my gosh, some great people that I’ve learned a ton from so very Caroline’s really awesome on kind of on the other side more on the basics, go to school stuff with Jade University. And that area tour there in Oklahoma City very excited to go back to that. But for me, you know, repetition is the mother of success. And, you know, Ziegler had a quote and I know you his you may know his quotes better than me, but it was something like you can change your world or you can change your results by what you put into your mind. And so I go to those kinds of events, to conferences to education events that you put on Jason, for two reasons, one, because for that, quote, by what I put in my mind, so if I’m, if I’m continuously putting that information in my mind thinking about it going over how it why this process makes sense, then it keeps me focused on that. And it kind of keeps me on target. But it also you know, refreshes things that I’ve forgotten in the past or, you know, paths I wanted to go down but kind of got distracted. But then the other quote about you are the sum total of the five people you spend the most time around Well, I want to spend my time Well, yeah, that’s right. I want to spend my time around guys like you and then venture Alliance but also people who were long term investment, wealth creation minded and everyone in that rooms like that. So, for me, it’s amazing. It’s rejuvenating for me. There’s also that repetition of learning.
Jason Hartman 41:15
You know, when we had our venture Alliance mastermind weekend on Jekyll Island, GA, the birthplace of the Federal Reserve, and we have G. Edward Griffin speak at our last meet the Masters event. He’s been on the show several times as well, the the author of the creature from Jekyll Island book, but I’ll tell you one of the things that my mom said my mom came to that event. I think that’s the only venture Alliance event she’s been to. But she said, she said to me afterwards, she said, Jason, you know, this group you have is so stimulating. They’re constantly like reading books and going to conferences and learning things and, and they’re just, they’re just so engaged in life and she just said she couldn’t believe how How stimulating that that was to, to sit around the boardroom table. But interestingly, in the room where they found her the federal reserve the Federal Reserve room, at the Jekyll Island, hotel and resort or resort and club or whatever it’s called where we stayed. And she said her mind was just expanded from that that meeting and that’s what the venture Alliance is all about. So you know, up your game, I mean, you know, get take it to the next level, check out venture Alliance mastermind.com for that, or, or just go to Jason Hartman, calm click on events, you can find information in both places. And we’d love to have you involved in that you can always come as a guest to those events on a one time basis. Of course, the property tour and Jason Hartman University event for the weekend and the first weekend of July on Saturday and Sunday, are an Oklahoma City this time so you’ll see properties properties are in short supply, inventory is very scares,
Gary Pinkerton 43:01
that’s for certainly for true or that certainly
Jason Hartman 43:04
no question about it. But we’d love to have you join us for both of those events, folks. So check those out Jason hartman.com and venture Alliance mastermind calm and and Gary, thank you so much for joining us today appreciate having you on the show and appreciate you being so giving and willing to share your your personal experiences and your your case study as a client. We appreciate that. So thank you.
Gary Pinkerton 43:25
Absolutely. Thanks so much. I look forward to round two when we finish up we’re going to talk about
Jason Hartman 43:29
Alright everybody, we’ll talk to you on the next episode 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 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.
Jason Hartman starts the show talking about how real estate investors cash flow even in a high-interest rate environment. He looks at the Federal Reserve and discusses why they are increase rates. Later, he gives 3 specific strategies for investors to use and talks about self-management. He hosts client Andrew Baker to give his experience in self-management. Andrew also talks about his experience with a lender he worked with through the network.
Announcer 0:02
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 0:52
Welcome and thank you so much for joining me today. This is your host Jason Hartman with Episode 1064 1064 And I am coming to you today from my new office. Yes, I have adopted a new temporary office for a few hours a day every day this week. As you may know, I am in Aspen, Colorado, beautiful Aspen, Colorado. It’s just absolutely gorgeous here. The weather is nice. And you know, I discovered this little picnic table in the middle of a park. And I’m out here with my dog. And I’m out here with my friend leashes dog. So I’ve got two assistants with me, in addition to technology. And I’ve recorded several podcasts out here this week. Yes, it is an amazing time to be alive. The fact that you can do this much nicer than being indoors. I’ll tell you that. So I’m under some nice shady beautiful trees and maybe you’ll hear the leaves rustling when the wind picks up once in a while. Give you a little ambient background noise. Maybe it’ll make you a little jealous. Hey, usually I’m the one jealous with everybody else being outdoors and I’m cooped up inside. So this has been kind of fun this week doing this. So today, we are going to talk about how you can get good cash flow on properties with rising interest rates. As you probably know, amongst all the news, it has been a busy news week amongst all that news. The Fed has hiked the interest rates again. Now of course, mortgage rates did not go up they did not respond to that fed rate hike immediately. Remember, the Fed does not directly control mortgage rates However, they certainly influenced them no question about that. We’re going to talk about that today. And you know, several new things will come into the market and since I have been in the business for I don’t know I gotta go look at that. days between two dates website again, but I’ve been in the business a long time you heard me talk about that before I am claiming the the throne, the crown, the spot As the most experienced person, in this particular little niche of my industry, I believe I am the most experienced person. If anybody listening is more experienced than yours truly, please come forward and tell me I am wrong. But yes, I’ve been doing this what, maybe 1700 and 23 weeks now or something like that a long time. So I’ve been through a few cycles. And you know, it’s interesting. One of my friendly competitors was talking about how, you know, you really shouldn’t listen to or do business with people who haven’t been through a cycle yet. So many people started in this business in 2009, or 2010. And my friendly competitor said that they’d been in the business since 2004 2005. And I’m thinking you’re a baby. That’s like kindergarten.
Jason Hartman 3:56
Compared to me, so yeah, anyway, Just kind of funny. They’re just kind of funny, but But yeah, so here are a few new things based on my excessive amount of experience. Here are a few things that I believe will come back into the market. Number one is one that I coined the term for back in 2004. I was doing my conferences and seminars and I coined the phrase, deferred downpayment. Many of you haven’t heard me talk about that in many, many years, because there’s been no reason to. However, I think we are going to be talking about the deferred downpayment again. Yes, Jason Hartman is phrased for downpayment. I think that is coming back. So look for that on future episodes. We will also see I believe, a little bit of a resurgence of adjustable rate mortgages. I think the adjustable rate market will come back a little bit, not in a hugely significant way. But we are seeing rates in For sure, that will mean that the adjustable rate mortgage, the A RM or the variable rate, mortgage, whatever you want to call it, is going to make a reappearance. It really hasn’t been very wanted or needed in the marketplace with these financial repression, low interest rates that we’ve had for so many years. And they really are, you know, it’s good and bad. I mean, of course, if you’re getting a new loan, you want very low rates. But for lots of parts of the economy, low rates are a pretty bad thing. They are part of the financial repression scheme that many of us have talked about. So look for those two things. And But wait, there’s more. One more thing. I want you to look for the reemergence of the buy down the buy down mortgage now, as you know, because you’ve been listening to my show, and I’ve taught you so many things. Yes, pat myself on the back. Hey, I get to do this a little bit because I got a birthday coming up. This week and with that in mind, I’ll be a little bratty Okay, don’t you get to be a little bratty on your birthday? I think it’s, it’s earned. Especially at my age, you know, hairs thinning out. Beard is turning gray hairs not turning gray. funny though. Well, there’s a little bit of gray in there, which I don’t mind the gray. I think gray is kind of cool looking, actually. But yeah, the thinning, not so much. If anybody has a suggestion for that, or a cure or something, you’ve done this work, because they’ve been promising a cure for hair loss for forever. And I’ve been waiting. No, I’m not taking any pills. And no, I’m not getting any surgery. But isn’t there supposed to be something that like, it’s an amazing time to be alive, right? It’s supposed to turn your genes back on and make those follicles work better? Yeah. Well, you know, they keep talking about it. But the FDA has held it up. They say they’re on the verge. They’re on the verge, but it’s not here yet. So anyway, yes, we will see these three things or these things come back right and the buy down. That’s what I was going to do. plane down to you. So when you get a mortgage, there are these, you know, two major components to the cost of that mortgage. One is, of course the interest rate. That’s the one most people talk about and think about. But the other component of that is the prepaid interest, the prepaid interest. See, when you get a mortgage, sometimes you pay interest in advance. And the name for that is called points, points loan points. A point is 1% of the loan amount. And what that really is, is nothing more than prepaid interest, and you can elect to have more or less prepaid interest. I’ve owned a few mortgage companies over the years and had a few different mortgage arrangements over the years. I’m not in love with that business. So I’m not in it now. But if you were pricing a mortgage, you know, let’s look at it from the side of the mortgage company. Okay when they price a mortgage When they tell you, hey, you’re gonna pay five and a quarter percent, and you got to pay me one point to get that loan, they could also price it at par, meaning they could price it with zero points and tell you, you have to pay 5.75% interest, or they could price it with two points and tell you that you could get a rate of 5% or maybe 4.75 with two and a half points or something like that. So you see, this pricing has nothing more than a scale, they can price it higher or lower on the interest rate. If you’re willing to pay more or less pre paid interest in the form of points. And when you buy alone down, that simply means that you’re paying more points upfront to get a lower rate in the long term. And that can be a very wise deal can be a very good deal to buy down the rate. Because the idea if you’re a long term investor is that you’ll hold that loan for many, many years, and get the benefit of that lower rate, which the buy down will pay for itself. So paying a little more upfront, can be well worth it. And what you need to do here is get a little spreadsheet out and calculate the time horizon, the time horizon for the break even point. And usually you’re going to find that time horizon is somewhere in the neighborhood of three years, give or take. So if you’re gonna own the property longer than three years, it’s usually worth buying the rate down. Now, the buy down isn’t a question of, yes, you’re going to buy it down or no, you’re not going to buy it down. It’s a question of how much you’re going to buy it down or how much you’re not going to buy it down. These are all things that you can talk to our lender network and our investment counselors about we’ll be happy to help you with this in more detail. Of course that’s what we’re here for. Now. cup Other things. Let’s talk a little bit about what went on last week. So new home sales were up last month, we talked about that before two months of declines. However, increasing costs of borrowing we just been talking about that. Could temper that a little bit. But remember, the way it works first is there’s an increase in buying. And then ultimately, you know, higher rates will temper the home sales rate pending home sales. Were down slightly in August for the fourth month in a row, tight inventory. That’s definitely the biggest issue, rising rates, a secondary issue to that and increase prices. Of course making affordability very, very difficult for people, especially in the high end markets. The cyclical markets, the markets, we don’t really like okay, but home prices are still rising, they’re going up, even though the pace is a little slower. Of course, the Case Shiller index told you about the flaws with the Case Shiller index many times over the years Rose 6% For the annual number in July down from 6.2%, in June, okay, or that’s the other way around, you know what I mean? You know what I mean? Okay, Fed is expected to hike policy rates again in December, and three more times in 2019. Wow. And as I’ve said before, can you hear that when it is windy here? Wow. This is the most transparent Federal Reserve in my lifetime for sure. They say that increasing inflation and very strong employment rates, support rate hikes. Okay. So that’s kind of the update on a few things there. I also want to give you a little self management update from our client and somewhat becoming frequent guest on the show. And that is Drew Baker, and he left me a message that I thought I should share with you about salt Management. So hear that is and then we will get to our mortgage guests today and talk about mortgage rates and how you can keep your cash flow good, even in a rising rate environment.
Andrew Baker 12:12
Hey Jason, I’ve little self management update for you that I think is kind of fun that you might appreciate. So I had a property that I haven’t had a chance to get into for years, and I lost the rent ready photos, because it’s been probably five years or more. The tenants have been in there and they it’s been like crickets for a while. So I wanted to get in there, see what was going on. And so I had my tenant handyman, go over there. And the biggest problem lately is
Jason Hartman 12:40
now keep in mind, he’s talking about a property in Indianapolis or Memphis, I know he owns in two markets, and he lives in Southern California. So just understand that when he’s in the context of what he’s saying here.
Andrew Baker 12:53
I’ve had to use the 13 year old son of these tenants to translate back and forth because they don’t speak English. So what’s nice is my tenant, the other tenant that’s doing the maintenance on on these properties that’s helping me out. He’s speak Spanish. And he went over there and said, Hey, Andrew, I’m here, just want to touch base with you. And I said, Hey, call me on FaceTime. So he called me on FaceTime, turned the camera around and showed me everything in the house. And I said, Hey, I think of, you know, a ceiling fan with the remote would look nice there. And well, maybe the chandelier is a little bit off from the table. So maybe we get a chandelier that’s a little higher up and let’s go around the house and count all the dome lights that might need to be replaced. It was really nice because I got a chance to kind of see the floor plan.
Jason Hartman 13:39
Now, if you’ve listened to the other episodes, you know that Drew’s philosophy is he’s trying to really improve his properties. And he’s doing it so inexpensively buying incredibly inexpensive stuff at Costco, okay or online. And just having it sent to the property. He’s got one of his tenants basically acting as a handyman for the rest of his properties. He’s, he’s still ahead with all the money he saved on property management fees. He’s got much happier tenants. He’s got higher rent, he’s improving cash flow. And he’s improving his properties all at the same time. He’s doing all these things concurrently, and coming out ahead financially by self managing, really just an awesome deal
Andrew Baker 14:26
in 3d and make some design decisions there. What was interesting was, you know, ask them about the appliances and he’s my maintenance guys translating to the woman who’s living there. And she said, Oh, yeah, the property management company. We told them that the stove went out, but they never came to fix it and ignored our service requests. So we got this cheap, free stove that we put in place, but then the burners stopped working. So they’ve been renting a house without like a properly working stove. I guess it doesn’t regulate the temperature. You’re well enough,
Jason Hartman 15:00
another crappy property manager, right? Imagine that. a property manager that doesn’t do their job yet keeps taking your money.
Andrew Baker 15:09
Imagine that.
Jason Hartman 15:11
You can tell, like I say, a booming economy does not make for good morality and good business ethics. In fact, it does the exact opposite. Because people become very overconfident. They all think they’re doing great work when they’re not, because they can get away with it because the rising tide floats all the ships. You know, it’s like Napoleon’s famous quote that I always try to remember the most dangerous moment comes with victory. That’s when we become complacent, cocky, and the downfall is right around the corner. So yeah, this is just great what he’s doing. I mean, he’s really doing a good job here. And we’ve recommended it talked about it a lot on the show. So let’s listen to the rest of his message.
Andrew Baker 15:56
Well, that’s ridiculous. You know, you can’t live in a house without you know, appliances. So, I said, Hey, you know what? I’m going to go and find something as a placeholder to put in there temporarily. So I went on Craigslist in Indianapolis, I found a nice electric stove that someone is moving, so they needed to sell it. It was $150. And the funny thing is, is my maintenance handyman is a truck driver. So I said, hey, go over there and pick up the stove and put it in the house. He said, Well, I can’t do it till Monday. So I called the people on Craigslist and said, Hey, can you go deliver the stove? I’ll pay you an extra $25. They said, Sure. So I told the tenant, these people are going to come drop off the stove, please pay them $150 and I’ll take it off your rent, and you have a nice stove that matches the appliance suite that’s already there. Same brand, you know, and fits in nicely. So it was kind of it was a little bit of legwork, but it was nice to have these people Get a stove the next day that matches what they already have. Have a translator. And then the funny little tip of the hat at the end was the son texted me and who’s you know, the one that speaks English and said, Oh, my parents are so happy. Thank you so much. We really like the fan, the new fan that you put in with the remote and the stove and all that stuff. And they said, Hey, if you ever need a painter, my dad is a professional painter. And, you know, it’s funny because when I looked around FaceTime, my tenant said, the maintenance tenant guy said, Hey, The place looks like they really.
Jason Hartman 17:33
So you know, if you didn’t catch what he’s doing here, right? He got a walkthrough of his house, from what 2000 miles away on FaceTime video.
Andrew Baker 17:42
It’s great condition with it. And the walls are all painted nicely and everything. So the wife told me that they’ve really kept the place up while they’ve been living here. And so I thought it was funny that, you know, maybe one of my tenants might be my painters, my painter in the future. So, you know, it kind of made me realize that people people that were renting to, in these neighborhoods have service related jobs. And you know, maybe it’s a little bit, you don’t want to totally, you know, eat from the same place you are renting from necessarily, but in terms of, you know, you want to be careful not to cross the line and alienate people if they don’t do good work, but seems like the proof is in the pudding, you can see the paint job in the house. And so start off small and work your way up. But I thought that was kind of a fun little social experiment that ended up working out well, and I could do it remotely. And everyone’s happy. You know, it’ll be a place that the last day.
Jason Hartman 18:38
I love that story. I love it. I love his whole story, his whole diary on self management that he has been sharing with us. So Drew, thank you for that all of our listeners really appreciate it. Look, folks, we offer property managers and property management referrals Of course, and some of them are great, and others start out great and become less than great. You Say later and we end up firing them. And we, you know, we help our clients get new managers when needed and things like that. But the best thing, my best hope for all of you listening, whether or not you actually self manage your properties is that you are able to do it that you are empowered investors. Remember, that’s a core idea. It’s a core philosophy of mine and my companies is to create an army of empowered investors. That’s our slogan, right? We provide the complete solution for real estate investors. And one of the best things to do is to make you empowered, so you don’t have to rely on anybody else. And when you do rely on someone else, you can choose to rely on them. And you can also call them out when you know you’re getting a story and you’re not getting a fair shake. So that’s the best thing we can offer you. Hey, learn more about this in Hawaii at our profits and paradise event. We’ve got a fantastic event coming up. It’s going to be really fun. Educational, just some great people coming. So we’ve still got tickets for that. Still got early bird pricing, what are we about six weeks out, maybe five weeks out, go to Jason hartman.com. Get your tickets for profits in paradise. And we’ve got a few new guests joining us for the venture Alliance component following that event in Hawaii. So we’ve got Waikiki Beach and then Hawaii for venture Alliance retreat. And you can join us for both of those things. Jason hartman.com for more info, and here is Adam with your mortgage update.
Adam 20:41
Welcome to the mortgage minutes for October 2018. We just had the FOMC meeting end and they raise rates from 2% to two and a quarter. And we’re here talking with the lender from Jason Hartman’s network. How are you today?
Lender 20:55
Good, Sir, how are you? Thank you for inviting me to the call.
Adam 20:57
Absolutely. Now, the Fed raised rates from two to two and a quarter percent, many people expected them to raise rates because, well, they said they were going to. And so Was this the rate hike everybody was expecting? Or was it a little bit bigger than expected?
Lender 21:13
No, this is what was expected and to be quite honest, was most likely priced into the market. So as we were looking at rates for the past number of weeks months, the anticipation of this fed rate hike coming through had already been kind of absorbed by the market. And it was totally expected sometimes when the Fed acts outside of what’s expected are the norm. So for example, if they had raised half a point instead of a quarter, then that would have created a ripple in the marketplace and would have had a reaction where rates would have moved one way or the other.
Adam 21:47
Okay. Now, as the Fed has stated, they’re going to keep raising rates and I think last I read, they’re looking to get up into three, three and a half percent for the Fed rate, which is still a huge jump from where it is now. Now is the market the Morgan Market already pricing that in completely? Or do they do it kind of meeting by meeting?
Lender 22:05
No, I think they’re probably not pricing the full extent of that into the market right now, but certainly would have anticipation for another quarter point hike, maybe by the end of the year, at least indicated by the Fed. So I think then once we see if inflation is a concern in the market, then our mortgage rates might continue to move higher with the Fed. Although the next hike might be anticipated at a quarter point. Beyond that, it’s hard to say if they will continue in that trend. Now, what kind of impact does
Adam 22:37
as December approaches and they look at their next meeting? What kind of impact will the quarter point create to investors? Should we look for our rates to increase a quarter as well? Or kind of what are we looking at?
Lender 22:51
Well, I think you got to look at a couple of things in tandem, you know, if the stock market continues to rise, you know, then then money flows out of the bond market into The stock market in a very general sense. So that will have an impact on mortgage rates considering that mortgage rates are tied to the bond market, if the stock market continues to strengthen and the bond market continues to weaken, then mortgage rates will continue to weaken and rise and they in return. So, you know, there are a lot of other factors that go into, you know, how lenders price mortgage rates, but a good indicator of that is where the 10 year Treasury yield is at today. So as that continues to rise, mortgage rates will continue to rise, regardless of what the Fed does.
Adam 23:32
Okay, now, let’s talk about rates. What rates are you seeing right now we’re gonna assume somebody has a pretty decent credit score, what rates are you seeing for people who put down 25% and 20%? What’s kind of the range that we’re looking at this month?
Lender 23:46
So from an investment property standpoint, if you take an average purchase price, let’s say of 125,000, and you put 20% down with a good credit score, and a good credit score will be anything over 742 Today I’m seeing 5.75% of for a 30 year fixed with no points. And then if you were to put 25% down, we’re likely going to get that rate down to about 5.25%. With no points.
Adam 24:12
Right now, are you finding at this time that many investors that points are making sense or points not really making sense right now,
Lender 24:21
you know, for investors who are in the market to put 20% down and, you know, are looking to grow their portfolio, I would say, you know, they’re retaining that other 5% to apply towards a future acquisition, you know, or for another property. But having said that, some investors will look at the 20% down interest rate at 5.75 and say, Okay, if I can pay a half a point or if I can pay another point, and the point is 1% of your loan amount. So if you put another 1% in one point into buying down the range, you can likely get the rate down to the 25% level, like you can get it down down to like 5.25, or maybe even 5.375. So some investors like that, because ultimately they’re really putting 21% into the deal rather, and then getting the benefit of the 25% down raise. So some investors are looking at paying that one point, when they’re in the market, let’s say just to put the 20% minimum down, those investors that we work with that are coming to the table with the 25% down, generally are happy with that rate without points. So we are seeing both sides of it, though, but like I said, those folks that want to put 20% down and maybe pay a point, are getting the benefit of the lower 25% down similar interest rates. So that’s attractive for them.
Adam 25:42
Okay. Now, there’s a lot of political stuff going on that’s impacting our economy in general. What things do you see coming in to the economy that might impact the mortgage rates in the next month or two? Is there anything going on that you think might have a significant impact one way or another
Lender 25:59
Oh, I mean, any any geopolitical event that occurs can have a big impact on mortgage rates. You know, let’s say there is some global trouble, for example, with Iran, okay, or continued sanctions on China and other countries, those could have a big impact on how the stock market reacts. And if the stock market does take a turn from recent highs, then obviously money would flow back into bonds and our rates could improve. But anytime you see some geopolitical activities, such as any kind of strife or war, threat of danger to the US economy, then generally speaking, that’s money flowing out of the stock market back into bonds.
Adam 26:39
But you haven’t seen anything in particular that you are worried about happening over the next month or two,
Lender 26:44
not necessarily No, not seeing anything other than, you know, the continued improvement in the market and the stock market, which is weakening our rates, you know, or weakening the bond market. So,
Adam 26:54
now, where do you expect if the Fed gets all the way up to their stated goal of You know, in the threes, where would you expect interest rates to be around that time?
Lender 27:04
Well as it relates specifically to an investor, you know, I think your 20% down interest rate today at 5.75 could end up around six and a quarter, maybe six and a half, which would correlate to a primary own interest rates, you know, the equivalent being around 5%, you know, your primary home interest rate today, is it still very good in the mid 40s? You know, it’s about 4.5 4.375, with excellent credit scores on a similar downpayment. So as a relates to our investor community, at a worst case scenario, I probably seeing it plateau in the low to mid 60s.
Adam 27:39
So whenever the December meeting comes along, and they raise it a quarter percent, should we just expect there’s gonna be a quarter percent bump in our rate as well?
Lender 27:48
No, not necessarily, you know, again, that could already be priced in or it could be priced in over the course of the next couple of months. So if they do move it again in December, and we have similar rates today, then I I really don’t see that being the indicator of why rates would go higher. I think the stronger the economy is stronger the stock market reacts to that the weaker our rates will be or the higher rates will go.
Adam 28:10
Okay. Now, is there anything I haven’t so you think is important for the investor. Now,
Lender 28:14
you know, I think what’s really important outside of rates for investors is what we’re seeing across the nation as a national lender, and an expert in the investment property, kind of niche financing world inventory. You know, I think most turnkey partners that we work with, are struggling with inventory or the inventory that they do have in flying off the shelf pretty quickly. So I think from a financing perspective to some of our clients who are in the market, looking to grow their portfolio, you know, try and find those properties through the investment property counselors and jump on them as quickly as you can.
Adam 28:50
All right. Well, thank you very much for your time. I appreciate it and
Lender 28:54
hope you have a good one. Absolutely. Thank you very much.
Jason Hartman 29:05
I’m Jason Hartman and I’d like to invite you to our very first two day conference in beautiful Hawaii. Many of our attendees are making a vacation out of this event, you will learn the most innovative strategies for real estate investing available today. We have helped thousands of people invest in properties around the US, and we can help you do it too. So I hope you’ll join us and happy investing.
Jason Hartman 29:44
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 media.com. 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.
Jason starts the show discussing the aftermath and terror of Hurricane Florence with Phil, a guest from Myrtle Beach. Phil talks about the status of his neighborhood and what’s happened in the area as well as the good deeds of the community and how they’ve looked out for each other. Jason goes into the interview segment of the podcast on a happier note hosting guest and client Diana Dine. They discuss her real estate journey and her experience with the network. Diana bought her property less than a year ago and in a total of 7 months accumulated 4 more in the Jackson and Memphis markets. She went in about her experience investing in real estate. Diana just recently bought her first home and is now up to 5 properties between Jackson and Memphis. She recently went to both cities to meet with the Local Market Specialists and discusses her future plans as she moves toward her financial independence.
Investor 0:00
You’re that kind of person and you’ve got the capital and you’re a great negotiator. You’ve got great people skills. You You could probably be a successful flipper, but it’s like a job. Right? If you’re not flipping, you’re not making money. And that’s why I prefer income property because you just make money every month.
Announcer 0:17
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. Now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:07
Welcome listeners from around the world to Episode 106 to 1062. This is your host Jason Hartman coming to you from beautiful Aspen, Colorado today. It is absolutely gorgeous up here with leaves changing and the air smells like fall. I love the smell of fall air, don’t you? So today we have got two things one negative and one positive. Let’s start off with a report from the hurricane affected areas in North Carolina and South Carolina. You’ll hear about that, from someone who’s there living through it, it is getting worse, not better. So I think it’s important to have kind of an on the ground update of that. And then we will go the second half of today’s episode will be a client case study with one of our clients and I think you’ll find what they have to say very interesting way As she will share some of her investing experience with us. So let’s go ahead and get started. Welcome to Episode 106 to 1062. This is your host, Jason Hartman. And I thought I would give you a report from Myrtle Beach, South Carolina in the wake of the tragic events of Hurricane Florence, that recovery there has been slow and much to my disappointment. things appear to actually be getting worse, not better. And I’ve got phil jackson on the line with me He is a resident can update us on what’s going on. Phil, welcome. How are you doing? They’re
Phil 2:37
great. Thank you so much for having us. We really appreciate it. It’s actually like you said it’s getting worse. The river flooding is coming up swallowing homes whole, displacing thousands of our residents. So we are just trying to maintain and get everyone in our community to help that they need what’s the situation with power. Do you have Electricity, is it spotty or what’s going on there? So far, all the homes that are livable, and businesses have power there is power outages in certain places. But the power companies are doing an amazing job keeping that online because that would just add to the you know, disaster that we’re already living in. Right now,
Jason Hartman 3:19
right in Myrtle Beach I mean many other areas have been affected as well but and I’ve been to Myrtle Beach you have a kind of a unique bad situation there right with the way the rivers flow. Now these these rivers and the hilly areas that just I mean, there were trillions of gallons of water that were dumped. And now you haven’t even reached the point to where these rivers have crested yet is that correct?
Phil 3:43
Correct. And to the north of us, they have crested but all that water is moving south as a way for us track was like came in from the east and actually moved south again North East so it just dumped 20 plus sometimes 30 plus inches of rain in border Bell and in North Carolina, which all that water feeds down to us. And it basically goes out of Georgetown, South Carolina, which is about 20 miles south of us. And we have a bunch of rivers that lead through our communities to to be exact, the walkable and the intercostal waterway. And those rivers are just following this water and we have the PD River and the Santee river and all these rivers are just coming to a head yet kind of bottleneck right here in Myrtle Beach and south part of each so the water is up 2628 feet in some places. Oh my God, that’s amazing.
Jason Hartman 4:35
Try and paint a picture for us of what that looks like. When you’re talking about flooding. I mean, like what percentage of the streets are drivable? Just give us some kind of a picture of that if you would.
Phil 4:47
A lot of people have taken a boat on a river and you’ve already seen houses and homes along the rivers, some within basements and just picture a dock being above a roof line on a house that’s located on In the river, that’s what’s happening docks are actually releasing from their poles that are drove into the ground that they’re secured to. And then that water’s coming up into the neighborhoods that are along the river. And there’s a ton of houses that are 234 and five streets, off the river that are flooded out. So it’s basically the same. It works the same way as a title search, but just on a river search, and you can drive boats in neighborhoods, and there are people kayaking and canoeing to get to their properties to check on them
Jason Hartman 5:32
when they’re driving boats and kayaking and canoeing to get to their homes to check on them. What are they seeing, are they seeing just the roofline of their house? are they seeing the eaves, the doorways and the windows are what
Phil 5:45
the ground level home? Yes, and the homes that are up on stilts, a lot of them the first floor is completely covered in water. So it looks like that it’s a single story home but they’re actually two story homes
Jason Hartman 5:59
and They have their own stones. So not only is the water above the stilt level, but it’s up into the first floor. And then there’s a second floor home, you know of the home on stilts, right? Correct. That’s unbelievable.
Phil 6:13
It’s just shut down all river traffic. So boats are allowed to the river unless it’s a ski or dinar and because the week as well, so you have some homes that are literally inches away from it going into their home. So if you added a boat week, or even a vehicle driving down a street and creating awake, that could make the difference of someone’s house being saved or completely flooded out, you know, it sounds minor, just a truck driving down a flooded Street. But in reality, those couple inches could
Jason Hartman 6:44
really make a difference. Oh, yeah. Because if the water comes in or out, it’s a whole series of problems with water, you know, more than just damage. It’s incredible. You know, water can’t be compressed. It’s already as compressed as it can be. You know,
Phil 7:00
like a gas and I tell you what this community I’m so proud of this community because everybody has stuck together. We are our school districts are unique here as well. We’re one district, both Georgetown and Orange County, as one district, Georgetown county and Orange County. So you know, there’s two districts, but the entire district is closed at this concert. We’re going on, I think 23 days that the kids that not been in school, and I tell you what, to have the area high schools, three of the area high schools, I’m sorry, have been sandbags. drop off and fill locations. And it’s amazing to see how many kids are out there. Actually filling sandbags delivering sandbags off at St. James High School yesterday. It was about 400 people filling sandbags and another line of about 100 trucks delivering at this filling their truck up and just going into neighborhoods using each sandbags. So everybody is pitching in to try to save as many homes as possible. Yeah,
Jason Hartman 8:00
stuff like that whenever you have these natural disasters or disasters of any type, it really is heartwarming to see how great human nature can be and how people can bond together and you know work for the greater good. That’s just a wonderful thing. It’s wonderful to hear that what can people do for you fill in what charities and aid organizations are helping you there you know, you’re on the ground, you’re seeing it firsthand. It’s one thing to, you know, see it on the internet or hear about it on TV, but you’re right there. I mean, who’s really helping and what can the listeners do if they want to help?
Phil 8:33
We know the Triton relief group has really stepped up in our area, and they’re actually what we’ve partnered with them and this morning became as an idea last night about 7pm to open up a distribution and Donation Center, Andy camp from ama produce, which is where I work, has, you know, contacts in our neighborhood and secured a warehouse 10,000 square foot warehouse For us, along with Marnie Kennedy and a couple other volunteers, we have opened up SC needs help distribution and Donation Center. And we currently are getting the local cable company is bringing us a phone line, internet service. We’re getting dumpsters out here. And we are filling up this 10,000 square foot warehouse fall donations. And the Triton relief group is sending it out to local communities and local hotels that are housing people. And there’s a hotel downtown called Midtown hotel. And he has opened up his entire hotel for free for the evacuees. So currently, he has 300 people staying at this hotel, and it’s absolutely free. And so a lot of these efforts are being trickled down to that place and several other shelters and hotels to get those folks to stuff they need. Yeah, it’s great to hear that people are helping on the negative side. Have you seen or heard about any scammers, you know, whenever there’s a thing Like this, you get great stories of great people pitching in and helping out. But you also get a lot of opportunistic scammers that are, you know, going and siphoning off funds and promising repair work, and they’re not really doing it. I mean, the scams are rampant. Have you seen or heard anything about that kind of stuff going on? miraculously? No, not yet. And I think the reason why is because we do have such a strong community, that people if someone tries something like that, the words out, you know, and then there are people to step up and just put a stop to it and even approach these people and take it upon themselves to say, Hey, you know, you’re done. It’s not going to happen here. Yeah, obviously, once the flooding recedes and work, you know, everybody wants to help and everybody wants to make money and they see all these opportunities. I believe that’s when those things are going to come about even more, but people are even just scared. It’s hard to even get in town right now. So a lot of those people that do that from out of town are not coming in town yet, but I do foresee something like that taking place. But like I said, we got to jump on that. And I think we’re gonna try to keep that at bay as much as possible.
Jason Hartman 11:09
Yeah, yeah. Excellent. Well, so thank you so much for sharing this and, you know, you are in our thoughts and prayers and we wish you the best there. It is really, really tragic. You know, you think the hurricane is the terrible part, but it’s really the after effects are usually the most devastating, right? Is that correct?
Phil 11:25
No, it is correct. And living in a beach town and growing up here my whole life. I’ve been through Hugo and Matthew and Floyd friend, just family members were through Hazel and everybody that has been through it. They know that it’s not the hurricane part. You know, you can have a hurricane. category three come in and you’re fine. It’s your house, you lose power. You may lose some shingles, maybe a window you’re fine, but as a couple weeks after that really tests you and that’s why people evacuated. Not to get away from the winds and the rain, but as to get away from the flooding and the aftermath of not having power. For weeks, well, mosquitoes, food shortages, gas, sort of just things like that. So I think a lot of people need to be aware of that. You’re not running from the actual storm itself. You’re reading the aftermath. Yeah,
Jason Hartman 12:11
yeah, that’s absolutely true. Well, so again, thank you for sharing what’s going on there. We wish you the best. Just keep the faith and keep doing your thing. And now thank you for being involved in contributing to the solution for everybody. We appreciate it.
Phil 12:25
Awesome. Thank you so much for having me.
Jason Hartman 12:30
Hey, we always get great feedback when someone comes on the show one of our clients and does a client case study. We had another volunteer recently and I’m so glad to have her here. Her name is Diana Dine and she lives in Colorado. She recently visited some of our local market specialists in Mississippi and Tennessee. We’re going to talk about that and just give her a warm welcome Diana, thanks for coming on the show. Appreciate it.
Diana Dine 12:58
Thanks for having me. I’m excited. I talk to you.
Jason Hartman 13:01
Yeah, it’s good to have you. So just give the listeners a little bit about your background. You live in Colorado. What do you do for a living? I am in the financial services industry.
Diana Dine 13:09
So that’s always been kind of interesting that I kind of went this direction. But yeah, for over 20 years, I’ve been in the financial services industry more like corporate side product management, what do you mean? Are you helping big companies invest their Treasury funds or what kind of stuff? No more so on retirement planning, so it’s not so much of I don’t see clients, I help with kind of the back side of how the products run or the retirement so individual retirement accounts, small business retirement accounts, fantastic, good
Jason Hartman 13:47
stuff.
Diana Dine 13:48
And I have a team that helps me do that. They’re a company. Okay, great. Good, good stuff. So what got you interested in real estate and how long ago did you become interested in the real estate investing world? My commute is really long. It’s close to 100 miles roundtrip when I go to the office, so I wanted to have a good job and also support my kids and keep them in an area that they were really comfortable with. I got a divorce A few years ago, and it was trying to balance providing for them and also keeping them in a happy environment. So I took a job pretty far away. And so with that commute, I started listening to podcasts and books and just trying to use that time, so I didn’t stress out on my drive and 25 doing so. So I just started listening to podcasts, and I came across yours and just for a year, I think at least a year. I just listened and thought, Well, you know, this is really interesting. And I like to hear about more of the what’s going on politically and economically. But I always thought real estate investing is kind of out of my realm. It’s Not something that I was really familiar with. But I would say after a year of listening to your podcast, I can’t remember which one, but the light bulb just went off, like, I can do this. Now, there’s, there’s ways to do it, I have money, but somehow I couldn’t figure out how to use it. And I just didn’t want to do that drive and have that corporate life forever. So I’m like, I gotta find a different way. So I can have some flexibility to be there with my kids and be able to provide for them. So that’s kind of how I got involved with deciding to go down that real estate venture.
Jason Hartman 15:34
I know you mentioned, Diana, that you can’t remember what episode it was that sort of was the seminal episode, I guess that made you interested. But do you remember what the reason was? Or the like the topic or anything? I mean, I know you wanted to avoid the commute, probably want to have more time to spend with your kids and so forth, of course, but was there a particular thing was it another client case study, maybe that inspired you or a particular angle on investing or something?
Diana Dine 16:02
It was, I think it was the client studies. I couldn’t remember which one I was listening to. But he also was just trying to figure out how to support a family, and a different way of doing it. And he’s pretty sure he’s a lot younger than me and started with the young family. And I remember his kind of journey. And I’m like, Well, if he can figure it out, I can figure it out. And that’s when I went ahead and called Sarah. I talked to Sarah, right? She was mentioning and it was toward the end of last year. So this happened pretty recently. And she said, You need to go to masters like, sounds great, but am I brave enough to go all by myself to meet the Masters? And she’s like, yeah, you can do this. I mean, my dad go, it’ll be great. I’ll be there. And I’m like, Okay, I’ll go to meet the master. I love that’s a great story. Yeah, I know. I schedule my flight didn’t registered and off I went. Okay, cool. You talk to one of our investment coaches. Sara and then you flew from Colorado to San Diego and came to our meet the Masters event. So it was great to have you there. And when did you buy your first property through our network was it just recently or a while back, I hadn’t purchased anything until I went to meet the masters. And they just a little prep work to make sure that I was ready with I did a refinance on the house and thought I could use cash out on that on a property or two, but I didn’t really realize when I went to meet the Masters, just all the great information and all the the ability to chat with the local market specialists and you had them up there to kind of explain the different areas and their expertise and their local markets. And once they did I that’s when I felt really comfortable to start walking up to the different tables and I walked up to the Jackson in Jackson, Mississippi to look at those properties. And they talk to the local market specialist there and I’d like to Okay, I’ll pick this one. And this was good. Like, I think I can do this. Now I like I can do this, you know. So that’s kind of how it started. So I admitted to buy two properties there at NEPA masters. And now I just close on my fifth property on Tuesday. And I have the two that I have in Jackson and I have three with him in Memphis, right. Yeah,
Jason Hartman 18:24
good. Good stuff. Good stuff. So you actually traveled to both markets, I believe, right? I did in August,
Diana Dine 18:30
I just really wanted to. I’ve never been to either place. And here I am buying properties. And I just felt like it would make me feel better to go out there and meet the team, see the areas my property. I’m going through their property management. So I wanted to meet them, make sure I felt comfortable with the team. It was really fun.
Jason Hartman 18:51
Yeah, good, good stuff. So you actually bought the properties and then you went to the markets, right?
Diana Dine 18:56
I did for four of them and then when I was out, looking Memphis was very clever to show me more properties. And I’m like, okay, I should get this one
Diana Dine 19:07
under contract on this one, and that’s what I just flow. Good stuff. So you got a
Jason Hartman 19:11
fifth property while you were there. Fantastic. How were the local market specialists when you went there, you know, tell us about your experience visiting with them and so forth. I had like
Diana Dine 19:21
the plan I one of my girlfriends, I said, let’s make this a girl trip and let’s go see my properties and go to Memphis and go to Graceland and all that other stuff. So she was game. So I direct her along with me and I sent out emails to both the local market specialist and saying that I was coming out and they both were fabulous. say, Okay, we’ll roll out the red carpet for you. And I told him what days I’d be there and I first went to Tennessee and Memphis and met the local market specialist there and he took us around to see my properties to kind of tell us about the area and the growth and kind of gave me the Nice background to everything. And then, of course, you know, got a little yummy barbecue there. You know, they brag about their barbecue in Memphis. So they all know
Jason Hartman 20:10
for sure, yeah,
Diana Dine 20:11
exactly. And then I met the team, the management team. And so that was pretty much a full day of doing that is very nice. And like I said, he also showed us some newer properties that they were just finishing the rehab on. And I just really felt like when would be a great, great opportunity to add to the portfolio.
Jason Hartman 20:29
Fantastic. Good stuff. I always like to ask, and you’re probably not prepared for this. So forgive me if I put you on the spot. But do you have any questions or concerns about investing that I can answer because whatever questions you have, everybody listening probably has the same exact questions or do you kind of feel like you’re on the road now and you’re moving along and you’ve kind of got all your questions answered, or are there any remaining that you’re thinking about now?
Diana Dine 20:56
I would say I was pretty nervous. When I first started everything I did, I was like, Am I doing this? Right? And I would just ask them, you know, going through the the mortgage went through the same mortgage company for all of them and worried about what I was fumbling through and the insurance and like, Oh yeah, I gotta get insurance on these, I’m gonna figure this out. And so, but now on the fifth one, I felt pretty comfortable. I I’m, you know, I knew what I was doing and how he’s going about it. But I would say that some of the concerns I have, would be, and you were just talking about this about interest rates going up a little bit more. And I noticed from my first property to my fifth property, it did go up, although, you know, my credit score and all that’s really good, it just the rate the mortgages went up. And so part of me is like, do I hold off and just see how things go for a while or do I continue to buy you know, and kind of like juggling where I go back? You know, from here,
Jason Hartman 21:54
yeah, good stuff. So So now you really learned it by doing it right. And this is what we Find over and over Diana, is that there are some people that are new to it, and they’re sitting on the sidelines. And they want to learn everything first. And they’ll spend years going to conferences and reading books and trying to learn all about it. But the real learning comes from action that comes from doing it. I don’t know. It’s just human nature. We all bring a different us to the table right when we’re really doing it. So the first few properties It sounds like you were you had concerns and questions. And then when you got to the fifth one now you’re kind of a pro. Right?
Diana Dine 22:38
Well, I wouldn’t know about that. But close. I felt much more comfortable. That’s for sure.
Jason Hartman 22:42
Yeah, absolutely. Good stuff. So what are your plans for the future?
Diana Dine 22:46
You know, one of the things for me, the Masters that you you actually had them go up on their five year plan. And I, I had my five year plan and figuring out my properties and what I’m willing to do, and I feel like I’m ahead of the game. On my plan, because I kind of took a more conservative approach like, okay, two properties this year, two properties, and in so many years and five years, I’ll have what I need. I really look at that. And you know, like I said, I have five properties already within like seven months. And I do want to get to the 10 properties that I have my nine properties that are investment properties that I can do. So that’s my plan to do that. And then I’m not sure what to do after that, do I switch them out how much time goes by? So I guess my have to relook at things and figure out the next steps after the 10 properties.
Jason Hartman 23:39
Yeah, absolutely. So 10 properties is is sort of your first goal right? Now, do you have a an idea as to when you will retire from your job at how many properties will it be 15 or anything in mind there. So if I continued to do the single family homes, I think I came on to like, 20 properties that I would need to replace income and quit the job. Mm hmm. The listeners should know, these are inexpensive properties, you know, maybe you want to mention like, what’s your average price of the properties you purchased so far?
Diana Dine 24:13
Sure. All properties give or take are right around 100,000. Okay, so give or take around
Jason Hartman 24:17
100,000. So the five properties is 500,000 in value, and you’re in two markets. So you’re nicely diversified so far? And did you just say 15 properties would be kind of the retirement metric where you could leave the corporate job
Diana Dine 24:31
in 20. Oh, 2020. Okay.
Jason Hartman 24:33
So 20 and that will give you x amount of cash flow. And, you know, you know, from listening to the podcast, there’s a lot more to it than cash flow, because it’s a multi dimensional asset class, which is the wonderful thing about income property. Yeah, good, good stuff. When do you think you’ll get to the 10?
Diana Dine 24:50
I’m thinking next year. Mm hmm. Okay, good. Yeah, just trying to figure out what I’ll need to do the next group and have my 10 by next year. My first step,
Jason Hartman 25:00
now you’re in you’re in Mississippi and Tennessee so far. Do you have your eyes on another market or two more markets for the next properties?
Diana Dine 25:09
I think Indianapolis Yeah. Indianapolis is
Jason Hartman 25:11
great. Good, good stuff. Good stuff. We also have good stuff in Florida and you know, Little Rock and some of our other markets. So that’s great. But yeah, Indianapolis is great. And then you will be diversified in three markets now, before you started investing in real estate in the income property. Did you ever own your own home before?
Diana Dine 25:35
Yes, yeah. I’ve always own my own home.
Jason Hartman 25:37
So you’re familiar with real estate in terms of buying your own place, like your place in Colorado? But these were the first rental properties that you purchased, right?
Diana Dine 25:45
Yes, that’s correct. Yeah. Good stuff. Good stuff.
Jason Hartman 25:48
Good. Well, hey, thank you so much for sharing your story. I really appreciate it. Are there any thoughts or questions or anything else you want to share with the listeners? We really appreciate you sharing? Well, I think we’ve covered it and Thank you, Jason, and fun. All right. Well, thank you so much, Diana. Appreciate it and happy investing to you.
Diana Dine 26:05
Thank you.
Jason Hartman 26:16
I’m Jason Hartman and I’d like to invite you to our very first two day conference in beautiful Hawaii. Many of our attendees are making a vacation out of this event, you will learn the most innovative strategies for real estate investing available today. We have helped thousands of people invest in properties around us, and we can help you do it too. So I hope you’ll join us and happy investing.
Jason Hartman 26:55
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any other 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.
On this Flash Back Friday show (original Episode 327, published in July 2013) Jason Hartman chats with listener Michael. Jason talks about what he would do if he were new to investing. They go into the basics of self-management and its advantages. They go through a few property profiles and discuss returns.
Jason Hartman 0:00
Welcome to meet the masters of income property investing. I’m your host Jason Hartman. The 2019 meet the masters of income property March 23, and 24th in Newport Beach, California. What is
Jason Hartman 0:18
the sort of the one trick, the hack the secret that really empowers people to success, income property, the most historically proven asset class in the entire world. Register today at Jason hartman.com. forward slash message. Early Bird pricing ends Friday, February 1. 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
Michael 0:49
to real estate investment and so I picked up so much information one
Jason Hartman 0:54
of the great things about it is that it’s so fragmented, right? embrace the fragmentation Jason Hartman calm forward slash masters. 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 1:19
Welcome to creating wealth with Jason Hartman. During this program, Jason is 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 and 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 2:10
Welcome to the creating wealth show. This is your host Jason Hartman. This is episode number 327. And today’s guest we will have on will be a Jerome Corsi, you’ve probably heard his name. He’s written many, many books. He’s quite a scholar on several subjects. So I think you’ll enjoy that interview. And if we have time, we’ll have a collar on as well. But first, I’ve got Michael here to join me for the intro portion of the show. And we want to talk about some tips for investors. Michael, welcome. How are you?
Michael 2:37
I’m doing great today. Jason. How you doing?
Jason Hartman 2:39
Good. Good. on your Facebook this morning. You said that Newport Beach was like Hawaii. It looked and felt like Hawaii. What did you mean by that? Is it hot and humid?
Michael 2:47
Yeah, it was I was going to Toastmasters at 630 in the morning and it was kind of cloudy, extremely humid. So most people would see that and take man it must be really beautiful but it’s just it’s more like One of those tropical storms that comes in and I think you’re probably getting hit by that monsoon type weather as well right now, right?
Jason Hartman 3:05
Let me tell you something last night, it was amazing. It was about 10 o’clock maybe 1030 and for the first time in my whole life, I got an alert on my iPhone. I did never happened I don’t know how that’s generated or maybe the National Weather Service or some emergency alert service thing. Anyway, it said dust storm dust storm warning. And so you know we get these dust storms in Arizona they’re not too great but they’re not as bad as it might seem. And you know, once your windows are closed, so you know about a half hour at I thought that’s really weird. And about a half hour after that, sure enough, there is this incredible dust storm and keep in mind I live like 300 feet above the ground in the tallest all residential building in the state of Arizona. And if you’re listening in New York City and 300 feet, no big deal, right? But we hear that It’s a real high rise. And you know, I have floor to ceiling glass almost throughout my penthouse, there’s very little wall space. I have a lot of pictures from my last house that I don’t have any place to hang, because the wall space is virtually all glass. And this storm starts and I don’t know how fast these winds were blowing. But it felt like they were going about a zillion miles an hour, and I went outside and the dog would bark and out on the decks. And it was just crazy out there. I mean, it was crazy. Last night now, I’ve been into storms before and in our last creating wealth seminar I showed one that I filmed last summer, and it was in the daytime so you can really see it at night. You know, you can’t really make heads or tails of it. But these storms they call them have boobs. And that’s the Middle Eastern name for these sandstorms that happened in the desert. And the pictures were phenomenal. I showed them at our Memphis, creating wealth seminar and property to a couple of months ago. And wow, they’re just not splitting This one that different thing about this one is it was long. I mean, it lasted. I don’t know, I think over an hour and I finally just, I was so tired. I just went to bed. And I woke up about an hour and a half later, and it was it was gone. But it was crazy. I mean, the storm was crazy. It was loud, and windy and dusty and things were flying all over the place. And Whoa, I mean, I couldn’t believe that people were I looked down on the streets and there were some cars out people were driving a little bit but
Michael 5:32
it was not picturing like the Scorpion King when the giant I think it was that movie when the giant brown cloud of sand starts tumbling in and everybody disappears. I don’t know if it’s, I’m sure it’s a little sensationalized in Hollywood.
Jason Hartman 5:45
That sounds like some cheap Japanese horror movie like Godzilla or something. I don’t know about this one, the Scorpion King What’s that? I don’t know what
Michael 5:54
it was with the rock and something in like the Middle East. I don’t think I even saw the whole thing, just a part of it. But you know, that’s a A common a common scene and in movies, I feel like the crazy Arabian Desert Sandstorm that comes in and suddenly, you know, they’re drinking tea and a nice little tent set up and then everything’s just blown to bits.
Jason Hartman 6:13
That wouldn’t surprise me. Yeah, I gotta get a little worried that like the windows could break here or something. But they’re so thick. I mean, the mic and interesting. They’re probably bulletproof. I don’t know. Probably not. But anyway, so yeah, no, it says some crazy weather here in the summertime. Also, of course, it’s, it’s hot. So anyway, you’ve got some questions that investors commonly have. And you wanted me to answer them on the show, right?
Michael 6:36
Yeah. I just thought let’s skip some current events today. And investors want to want to pick your brain. And I think, you know, it’d be nice to get some more of this content going. And just a comment I first made so let’s go back to show 323 was Sarah and you were talking about her boat?
Michael 6:55
Yeah, I
Jason Hartman 6:56
was giving her a hard time about that. Wasn’t I If you didn’t if folks if you didn’t listen to this show, Sarah is a successful investment counselor. She’s been working with me for several years, and she bought a boat. And I was teasing her about spending her money spending too much money, you know, and I was giving her a hard time about that. And Michael, I think you really made a good point that I maybe should have balanced that out a little bit. So yeah, what is your point?
Michael 7:23
My point was, Sarah practices, what she preaches you practices what you preach, she owns investment property. And so in our internal Facebook group that we use, I said, you know, in reality, it’s probably Sarah’s tenants that are paying for that boat, not Sarah. And you are right, remind all of our investors and clients out there that all these investments are a phenomenal way to pay for things that are not investments.
Jason Hartman 7:50
So absolutely. And you know what, you are completely right. And I was probably sound like, I’m just getting too frugal in my old age, but I’m really not I mean, the whole point of this the whole point of getting rich in real estate, so you can enjoy your money and have the things and the lifestyle that you want to have. And you are absolutely right Michael and bringing that up. So Robert Kiyosaki his philosophy is pretty good. You know, he calls things like boats and fancy cars and second homes and things like that. He calls them doodads Rich Dad doodad. And so it’s kind of a funny thing. But what what his deal is, is, I think in one of his books that talked about how he was saying to his wife, Kim, that he wanted to go buy a new Ferrari. And she said, Well, okay, if you want a new Ferrari, go buy another apartment building and just make sure that the income from the apartment building can pay for the cost of the Ferrari. And you know, that’s exactly right. If you want to buy a doodad just make sure that you first buy some asset that creates income first, to pay for the doodad. The whole point here is to get out of the rat race so that we’re living on passive income, not active income. There’s no truly passive investment in my opinion. But real estate is pretty close to a passive investment. It’s it’s not truly passive. Nothing really is, in a practical sense, I’m not talking about like, the IRS is definition of a passive investment or an active investment. I’m just talking about the practical aspect. You have to pay attention to every investment you have. So you want to buy a Ferrari or boat, get another couple of properties that will pay for that very good point completely agree.
Michael 9:29
Yeah, I see people that pay cash for cars. And I think, man, if you just took that cash and bought an investment property or a couple, you could either pay for lease payments on that car and the equivalent for the rest of your life. Or you could pay for the loan payments and still be probably putting money in your pocket at the end of the month.
Jason Hartman 9:49
You are absolutely right. So Tim Ferriss who wrote the four hour workweek, which I think was a pretty good book, and I kind of want to qualify that by saying not because it was a great day. book, but just because the book made me change my thinking about some stuff, and I consider that to be a great accomplishment. A lot of the things in there, he says are kind of like, really, you know, I don’t know, maybe, Yeah, they are. But I didn’t like go out and apply all those things. And he’s given out websites left and right. And I didn’t look all that stuff up. But conceptually, the book just made me change my thinking of it. And one of the things he talks about is that, you know, one of his goals was to have an Aston Martin and I think an Aston Martin is like the most beautiful car on Earth. Besides the now defunct Fisker, which the Fisker Karma was a beautiful car to grew literally a rolling work of art right? Well, you know, when Aston Martin is that really sort of reached have an Aston Martin, and he calculated the the payments on an Aston Martin, and they were like 20 $200 a month, probably plus insurance was probably pretty high in a car like that. So it’s not that hard. Five, six little residential properties will probably produce 20 $200 a month for you. So if you want an hour And Martin, go out and generate 20 $200 a month in income property, relatively passive investment income. And Heck, go drive around really snazzy Aston Martin that’s going to depreciate like crazy fine with me. I mean, I don’t think it’s the best use of your money. But everybody wants a few luxuries and really cool material things in their life. Think about your goals that way. I think that’s just fine. No problem.
Michael 11:24
It’s kind of like in dieting, a new nutritionist that I follow real smart guy. He says there’s nothing you shouldn’t eat just better times that you should eat things. So you should eat carbs after you’ve been at the gym or immediately before. So this is kind of like you shouldn’t necessarily go spend all your money on these things, but there’s a better way to buy it. And that is with assets that will pay to buy these other items that will depreciate, but then these assets will appreciate and generate income for a lifetime. If you hold them.
Jason Hartman 11:56
You got it. That’s exactly the plan. So very good point. So we got Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday we got the doodad thing, we’ve come to some balance on that right instead of me just teasing Sarah about her her boat. And listen, I used to have a 48 foot boat. And let me tell you that thing was such an expense. The old saying about a hole in the water you throw money into, it is true with a boat for sure. The other one is the two happiest days of boat owners life when you buy it and when you sell it, that is also true. So anyway, just a little balance on that, but try to keep your spending on that kind of stuff in check. Ultimately, the goal is create wealth and buy things that will create wealth for you, rather than things that give the appearance of wealth. If you don’t save and you don’t form capital, so you can buy assets that produce income, then you can never afford the appear instance of wealth, and you want to be able to afford those comfortably when you have big giant cushions, and or they’re not going to break the bank and become a stressor to you. The important thing is to keep money and material things as the servant, where you’re the master and they’re the servant, not let them run your life, not let them own you, right? Yep. Good. Okay, so let’s talk about some investor tips and questions. All
Michael 13:24
right, we’ll take a couple. These are questions I hear from people constantly. They want to know what would Jason say? So let’s all take three of these that I had posted. Let’s just start out what would you do Jason if knowing what you know, today, if you were a brand new investor, try to give us the, the quick and the dirty of what you would do to get going and to get from novice to your first property as quickly as possible.
Jason Hartman 13:50
Okay, so first of all, that’s a great question, Michael. First of all, understand that we have clients that are all over the board. Some of them are just trying to get their first person property and get it rented out and turn it into a good semi passive investment. And some people are buying dozens and dozens and dozens of properties. And some people are wanting to buy big apartment buildings and things like that. So we’ve got people all over the board. And I love that. Because the beginning investors keep you in touch with a certain kind of thinking. And the sophisticated investors that are purchasing many, many, many properties keep you in touch with a certain kind of thinking. And we’ve got everything in between. So if I were just starting out, and I was a total novice investor who was just looking to buy my first property, first of all, I’d have to know that I’ve got to save up enough money and do enough capital formation to acquire that first property to save up for the downpayment on that first property. And then after that, I’ve got to put myself in a position where I’m doing things right. Okay, I’ve got to make sure that I’m also preparing my credit and managing my credit score and do it That in advance of that first purchase. So there are certain things that you can do. And we’ve done shows on this in the past that you can do to improve your credit score and improve your likability to a bank and make sure that you look like a good borrower. So that’s some something that you have to do. Once you’ve done those two things, then all you have to do really to be a very good investor, in large part is simply follow my 10 commandments of successful investing. We’ve done shows on that. I harp on one or two commandments, usually on every show pretty much, but you need to buy a property that makes sense the day you buy it. So that’s commandment number five, Thou shalt not gamble. Don’t be a gambler, if you live in a gambling oriented place, and what I mean by that is a state like California, or New York, New York City mostly or any sort of expensive, urban area, Boston would be one of them several areas in the northeast. would qualify is that many, many places in the state of California qualifies that. Don’t be investing in places like that you’ve got those are places where you can get in trouble too easily. You’ve got to be investing in properties that makes sense the day you buy them. So what qualifies is making sense? Well, cash flow, does the property produce income based on a reasonable down payment from day one? That is what makes sense is the RV ratio or the rent to value ratio a sensible number? Can you get about 1% every single month out of that property? Well, that’s the first thing I would do. And even before that, when you say investing, we’re assuming that someone wants to invest in real estate and income property. So the first thing I’d say even before that is commandment number three, invest in something that you own and you have direct control over be a direct investor so that you don’t get ripped off, so you don’t get some manager of the deal. Taking a bunch of your money. skimming the profits off the top, be a direct investor. So that’s all really embodied in my 10 commandments of successful investing. If you’re new to this show, type that in the little search engine on our website, at Jason Hartman calm there’s a little Google search bar there that allows you to search all of the stuff on our site. And that will help you a whole bunch. I think that’s Episode 216. Oh gosh, no. 216 was a rehash. But there was the original episode of the 10 commandments on there somewhere, probably like Episode Number 15 or 18 way back in the beginning, any we’ve talked about them through the course of the last 326 shows as well. But you know, I’m just saying where they’re all embodied in one place.
Michael 17:44
Okay. Let’s say you were you figured out what market you want to go to. There’s two houses that your investment counselors and to you, how are you gonna pick between the two houses?
Jason Hartman 17:55
Huh? Yeah, good question. So that I don’t know No, I do know, excellent. But I’m going to say I don’t know, because I’m not looking at two specific houses. First of all, I’d say that don’t be putting yourself in a position where you agonize the deal to death where you don’t do anything. Okay, you got to do something, wisdom and action, ready fire aim, right. But assuming you’re going to really do something, and you’re not going to let the deal pass you by. If you’re looking at two properties, you obviously are looking at the numbers, we format all our data in the same exact way. So when you look at the properties at Jason hartman.com, slash properties, all of those have the same format. So if you learn how to read that single page, you do not have to be a detective. You can see all of the numbers and we just did a members only call last week actually on how to read a performer and how to analyze the numbers and the metrics on a deal. So if you’re not a member, please become one for a whopping hundred and 20 bucks a year. Okay. And you can go in on the member site and you can hear the recording of These member only calls that we do. But if they’re the same numbers wise, say for example, one property has a projected return on investment of 30% annually, and so does the other property. Well, then you’d look at things like go to Google Maps, and look at the satellite view of the property and look at the Street View of the property, if it’s available, most of the times it is and which street looks like a better neighborhood. We did a show a couple of years ago, or one of our clients who was buying many, many properties in Indianapolis, David was his name. And he was looking at what he called the free lunch metric. And we kind of joked and made a name out of it. You know, if there’s a lot of free lunches in the school district of that property, then he didn’t like it as much. He likes a low level of free lunches that the government is giving out these free lunch vouchers because to him, it meant that it was a better higher income area,
Michael 19:54
but then we kind of debunked that one right or somebody to be they just said a lot of people realize they could get a free Lunch that they jumped on the bandwagon. And it made that metric a little less telling of the true economic status of the area.
Jason Hartman 20:07
Fair, fair enough. He could be looking at every single podcast, everything could kind of be debunked here and there, okay. And some people love, like section eight government assisted rentals, and some people hate them. They’re just different strokes for different folks type thing. You know, the great thing about government rental assistance, or like the section eight program, is that you know, you’re going to get paid every month, right? The government’s a pretty reliable payer, even if the money is in depreciated dollars. So So there are some things like that, but which house simply looks better? Which house has a you know, a better neighborhood which houses newer which house is older? Those are some things and this is why this can’t be done by a computer. It’s not an airline ticket. It’s not a stock. It’s not a ticket to a concert. A lot of that stuff can be done by a computer, but with income property because every house is a little bit different. You actually need to make a judgment call and form an opinion. And if I was looking at two specific properties for this question, Michael, I could probably go a little deeper into this. But looking at Google Maps, look around the neighborhood. I mean, does it look like there’s any adverse thing that might affect the property, maybe a landing strip, meaning in airports nearby, maybe a big industrial facility? Maybe a railroad track? Maybe a prison? Maybe it’s in the flight path of a landing strip, right? So these are things they’re not things that would instantly say No, don’t do the deal. But it would say the price or some mitigating factor needs to be in place to make me want to do the deal.
Michael 21:42
Correct. Okay. You know, you talked about self management before. Can you give some basics on how somebody, some thoughts that they’re going to have if they’re going to go down that road of what they’re going to be getting into and what has made it that you’ve done, easy for you Yeah, you’re 20 properties are self managed. Is that correct? No, not that
Jason Hartman 22:03
many. So basically, I like a self managing my properties. And I think that it can be done. It’s been amazing to me and I, you know, this is like a one hour discussion, okay? But look up self management on the search bar, Jason Hartman calm and search it because we’ve done shows on that, that go into great detail about self managing your properties. And my story is basically this. I have a property that I still own in San Antonio, and my property manager a few years back, he wrote a letter saying, Hey, I’m getting out of the business. And I had Karen searching around for another property manager for me, because we weren’t actively selling in that area at the time. And so she was she was looking around for a new property manager, and she found a couple and one that she really liked, and you know, she was just kind of assisting me and otherwise I would have done this myself and I’ve done it myself too. And I never got around to signing up with that property manager. And suddenly for this property I’ve never seen And this tenant that I’ve never met, suddenly, I just didn’t get around to signing the forms and hiring the new manager. And a check arrives in the mail from the tenant with a nice little note that says, hey, I guess the property managers out of the business, he said to pay you directly now. And so the tenants name was Tony. And for several years, I just self manage that property. And it worked out great. Now, if you asked me if I could self manage a property that was 2000 miles away from my home that I have never seen with a tenant that I have never met, occupying it. If that were possible, I would have told you, you were out of your mind. But now that I’ve done it, and I’m now doing it with several of my properties, you really can do it. The only thing you definitely need the real estate agent for is to lease the property to a new tenant and handle the walkthrough when the tenant moves out. And it’s funny you should ask this question, Michael because my property in Athens, Georgia that I self manage, just the tenant just moved out. Literally about two days ago. And last week, I hired a an agent to lease the property up for me. I didn’t sign up for property management, I just signed up for leasing. He’s charging me, I believe he’s charging me 50% of the first month’s rent to do the lease. And he went over, he met the tenant, he took pictures, he sent me the pictures, he said this and that a couple things need to be fixed. And he is getting quotes to fix them up. And he’s going to send them to me, and he’s going to lease the property to a new tenant. But he’s not going to be the property manager. After he does his initial one time service, handle the walkthrough with the content, advise me on how much of their security deposit to keep, if any, how much to give back. If any, and get the repairs done, get the property ready for the new tenant, lease it up to new tenant, do the walkthrough with them, get all the documents signed, check their credit screen, the tenant and so forth. He’s out of the picture. I’m the manager and you know what, it works pretty darn good. I’ve got to say I really liked self management. Now, on the other hand, if I have a great property manager in that area that does a fantastic job and doesn’t mark up the cost of repairs, or I feel that they’re doing a good job and they’re not ripping me off here and there. I’ll keep the property manager, I do it both ways. And basically, what decides for me is how good the property manager is, if they’re a great manager, I’m going to keep them like my Austin, Texas property. I’ve got a fantastic manager. I’m going to keep them. If I have a bad manager. I’ll get rid of them and I’ll self manage.
Michael 25:32
Okay, do we have time for how about one more? Yeah, let’s do okay. Let’s just what question should people be asking property managers when they’re now got the net, the house I want? And I’m talking to the local market specialist, who’s probably the property manager, what should I be concerned with?
Jason Hartman 25:47
Who may or may not be the property manager? Well, first of all, you’ve got to when you get your property management agreement, you’ve got to actually read it, folks. And you’ve got to understand what this manager is proposing here are Are they reasonable? Are they charging 10% per month plus an entire one month fee to lease it up? If there is a late fee involved? Do they keep the late fee? Do they split the late fee with you? And that means when the tenant pays the rent late, and there’s a late fee, what happens with these things? Do they mark up the cost of repairs? Or do they do the repairs? manage them at cost? And what I mean there is if someone has to go out, and they have to call a contractor out to replace the garbage disposal in a property, do they say they just pass that through at cost? Or do they charge you a 15% markup? So if that’s a $200 cost, you’re going to pay $230. Now, I don’t object to that outright. Here’s what I object to. When all of the fees are high if they want a 10% management plus a one month lease up plus they keep all the late fees plus they mark up the cost of repairs plus this and plus That, that sounds unreasonable to me. But on the other hand, if they only charge me 8% management, and they only charge me 50% lease up fee, and they pay all of the advertising costs, and they split the late fee with me if the tenants late, then it gets a little more reasonable. You see what I mean there? So you have to look at the whole picture. It’s not one thing or the other. It’s what does the holistic view of my relationship with this property manager? What does it look like? The other thing is a now that’s probably that managers, probably the person that we referred you to, which may or may not be the local market specialist that sold you the property? Well, you should always check with another property manager and do some of your own due diligence. Check with completely outside property manager and compare these things and also get a sense of how the properties are leasing how quickly they’re leasing understanding of That market from an outside source who is not affiliated with us. Now, you can use whoever you want to manage your properties, you can do it yourself, you can use a manager that you you find, you can use a manager that we refer, it’s your property or direct investor. So you get to make the decisions, which is a really nice luxury. However, the one thing I must mention to you is that when you use the manager that we refer you to, then you’ve got the ability to have leverage over them. And that leverage is a very powerful tool. See, we refer these managers dozens, if not hundreds of accounts, and you might follow my one of my 10 commandments. It says, Thou shalt diversify, and you’re buying maybe two properties in each market or one property in each market. So you don’t represent a big account to that manager. Or if you go outside and use your own manager, the one we didn’t refer, then you don’t represent a big account to that manager and you don’t have a little leverage over them. But through us through my company, you have leverage over that manager, because we refer them a lot of business. So if you have a problem with them in the future, if their service isn’t good enough, if they’re trying to stick you with a little extra fee here, they’re just call Michael, call Sarah, call Steve, call Ari, call your investment counselor, call Dave at our company, or email them and say, Hey, this doesn’t seem right with a manager and will email that manager will get on the phone with that manager. And we will help you sort through it and get better service. So you have a lot of leverage, because of the volume of business. We send that manager and that really, really is a big help to investors. It’s probably one of the biggest benefits we offer.
Michael 29:47
Absolutely. So just for our audience, we’re going to be really expanding on all these topics in the members section. So it’s on the agenda, you know, we encourage people to sign up to get some really deeper level luck. Get some of these topics,
Jason Hartman 30:01
hey, per 10 bucks a month, it’s about the best deal going. But listen, you don’t have to become a member. You get all the services from our investment counselors, regardless of whether you sign up for the membership or not that we offer Jason Hartman calm, but there’s just some additional resources there for you. And not the least of which I want to mention this again. A couple of years ago, I did a show with Garrett Sutton, who is the author of I think now two of the Robert Kiyosaki Rich Dad books about asset protection and making sure you’re getting all your tax advantages. He’s a great lawyer that has written some great stuff on this topic, and his interviews in the members section. And I mean, just that alone is a phenomenal resource for you. It can save you an absolute fortune in terms of how to structure your entities if you’re doing any entities, why you should do them, what’s involved. And you know, we touched on that on the show as well. But you know, again, he’s the attorney. We’re not an attorney. Okay. None of us are attorneys. None of us are CPAs So there’s some great additional resources like that in there. So join, get a membership and get full advantage. Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday. Michael, was there anything else before we go to our guest? I don’t think we have time. Okay. Yeah, you wanted to do a current event right
Michael 31:25
now I was gonna hit a property, but Oh, yeah,
Jason Hartman 31:27
no, we always got time for a property. Let’s just do it real quickly. Where’s this one?
Michael 31:30
This is in Memphis. And it’s, it’s in the lower end. It’s only 46,900 purchase price.
Jason Hartman 31:39
That’s one of the least expensive properties will we ever have in that range? Yeah. Wow.
Michael 31:43
So So the proform actually puts it as a cash purchase because the loan amount would be 35,000, which actually I think we can. I’ve talked to a lender that would go down that low and it makes the numbers a bit better. But even as it not, not,
Jason Hartman 31:57
not many lenders will because it’s Just too small loan amount. Yeah. When you when, when the loan amount is like $36,000. That’s like a car loan. Okay, it’s smaller than a lot of car loans.
Michael 32:08
Yeah, so this is $36 per square foot, and it’s mostly brick, which is pretty amazing. And let’s just hit some of these numbers 1300 and four square feet. It’s it’s a two bed, two and a half bath. And the cash on cash even being purchased cash is 10%, which I think is absolutely phenomenal.
Jason Hartman 32:30
What’s the projected when you’re looking at the performance there? What’s the projected overall return?
Michael 32:35
So it’s only 16? Because it’s
Jason Hartman 32:38
the cat has arrived was hash. Yeah. If you leverage that’d probably be like 40%.
Michael 32:42
Yeah, what the? With leverage. It’s 41%.
Jason Hartman 32:47
Hey, that was a pretty good guess on my part one.
Michael 32:52
So yeah, that it’s got tremendous numbers. If you want it to try to explore it. financing, talk to your investment counselor, we’d be happy to see if we can make that work. If you’re looking if you have about 50,000 cash and you just want to buy something cash, this is right there in that range. So if
Jason Hartman 33:12
you if you if you’ve already got 10 properties that you’ve used up all of your Fannie Mae loans, and you’ve gone above that limit, and spouses can each get 10. Okay, so that’s 20 properties. But if you’ve done that, and you’re just now buying cash for all your properties past your first 10 properties, then the little inexpensive property like this is great, because it won’t consume too much of your capital. And Michael, what what is the cap rate on that property? I’m curious. It’s a 10 and a half 10 and a half cap. I was telling Steve, on an intro I recorded with him that I looked at a Sam’s Club deal today. You know, I’m on the list for all these commercial real estate brokers. They sent me a Sam’s Club and this is what your brother in law does, is retail properties like this. It was $18 million and it was a six cap a 6%. cap rate. I mean, that’s just terrible.
Michael 34:01
That’s actually a pretty good cap flow for $80 million investment. I know.
Jason Hartman 34:05
But the point is, it’s kind of like counterintuitive. People think if you’ve got a bunch of money and you can do big deals that you’re going to get a better deal like a better cap rate. It’s actually counterintuitive. The cap rates go down on those bigger properties are little cheap investment properties. They’re great. I mean, they get the returns are so much higher on our little single family homes, and they aren’t a big apartment complex or Sam’s Club, you know, or any kind of big commercial property just this is this is this is why the opportunity is here for the small investor, that the numbers are better on our deals than they are in the deals the big institutional players get. I love it. It’s just awesome. It’s totally awesome. Michael, is that awesome.
Michael 34:47
I it is phenomenal. It’s it’s the little guy gets to win.
Jason Hartman 34:51
Yeah, you really do. And this is the way you can win with direct investment in in good income properties that follow my 10 commands. rules. They’re diversified. They make sense today you buy them, your direct investor, you maintain control. And you know it’s the most tax favored asset in America. It’s the most debt favored asset in America, meaning you can get the most leverage on it. Unless it’s a $35,000 loan amount. You may not be able to get a loan that small, but some some phenomenal stuff here. Let me mention our next show is with Senator Byron Dorgan and then Episode 329, was with James all toucher 330s with Robert Greene, who wrote all those great books like the 48 Laws of Power seduction, some great stuff. 331. We’ve got Meredith Whitney. She called the banking crisis before anybody else did. We’ve got less Leopold for 332 talking about some hedge fund cookery that’s really interesting. So really some fantastic shows coming up. So a lot to look forward to. But hey, let’s go to Jerome Corsi here, Michael, and thank you again for the questions today. And and we’ll keep doing some stuff like this and answer some more investor questions on the show. So and if we have time Master Jerome Corsi will take a caller as well. We will be back with Jerome Corsi in just about 60 seconds.
Michael 36:08
Now you can get Jason’s creating wealth in today’s economy home study course, all the knowledge and education revealed in a nine hour day of the creating wealth boot camp created in a home study course for you to dive into at your convenience. For more details, go to Jason hartman.com.
Jason Hartman 36:32
Hey, it’s my pleasure to have Jerome Corsi on with us for just a moment here to just talk about a single quick issue. And that is Obama’s plan to take away or take control of people’s for one K’s. We’ve talked a lot about this on prior shows. And Jerry has been on some other shows, talking about some other topics and books that he’s written. And it’s great to have him on to talk about this. Jerry, welcome. How are you? I’m doing great. Jason. Good to be with you again. Thank you. It’s good to have you back. And I know this is just a quickie discussion. Here, but what are your thoughts on the possible power grab of our 401 Ks and IRAs and, and and retirement funds in this country?
Michael 37:08
Well, I just warn people, this is a huge pot of money. It’s sitting there typically sitting in banks are investments, and the government can see it. Now. They’ve all ministrations made various overtures, they’ve held hearings. They’ve had Department of Labor, look into it public hearings, and they’ve kind of been around the edges of the topic, which is, well, maybe we should require a portion of the fees to go into a government created annuity. In other words, have you return the money, that’s Treasury with an IOU to pay you something in the future for that money? The reason I’m concerned about it as soon as the government like the United States under the Obama administration, we crippled with our debt is out. 16 going to 17 trillion from 10 trillion with George W. Bush took over so you know, we’re about to double Come on. During the Obama administration looks like the trend continues our national debt. And let’s say eight years, that kind of an alarming increase in national debt, usually at some point is going to force the government. We can’t just keep, you know, buying our own debt. Under these quantitative easing programs of the Federal Reserve, the Reserve’s balance sheet won’t absorb this much debt at some point or other. So the concern I’ve got is that other countries like Argentina, have actually gone in and nationalize retirement accounts one way or the other and effectively taken the money. Maybe they’ve left IO user guaranteed, which may or may not have gotten fulfilled and is allowing me to sing in Cyprus, when Cyprus was faced with having to get yet another government bailout, organized by the International Monetary Funds in the EU. And basically, the international bankers just confiscated a portion of the savings. deposits. Now this can happen in a Western democracy belonging to the EU, then who’s to say anybody’s deposits are really safe? And again, it’s not that I’m saying the Obama administration is breathing down your neck is going to take your 401k tomorrow. I’m just saying it’s something to think about, and to watch very carefully, because the overtures have already been made by the Obama administration. And I take the fact the overtures have been made as a serious event,
Jason Hartman 39:30
do you do you think that they will orchestrate a false flag event? Or there’ll just be a market crash? I mean, how would they lead into this type of thing, you know, and try and make it palatable in some way?
Michael 39:40
Well, I’m not sure a false flag would be created or any events that occurred as a negative event could be jumped on by the administration. I mean, you seen the Obama administration do this we get the the Newtown shooting Newtown shootings or any school shooting in the media. levy above istration pounces on that tragedy to push a gun control agenda. So any negative downgrading of the United States any kind of a pulling out of the Federal Reserve in the amount of quantitative easing the amount of our Treasury debt the Federal Reserve is willing to buy the could result for instance, in an increase in interest rates, which would make the cost of financing our debt tremendously more expensive. Any of these situations could precipitate the government saying Well, let’s just take X amount of hundreds of millions billions trillion whatever the government decides it wants, somehow or other private savings accounts, baby into the mall government annuities or government guarantees to take the cash and use the cash to solve the financial crisis at hand
Jason Hartman 40:53
and it never will. Because
Michael 40:55
unfortunately, with the western economies are doing is you know, this is not a recession. This is not a typical Kinsey and postwar downturn. My analysis has been for the beginning, that we are in a structural global downturn precipitated by opening up labor markets to under priced labor on a basis where it was economical to fire higher priced labor, the western economies which undermined middle income workers, and essentially killed the goose that laid the golden egg the global economy was being fueled by middle class demand. But when you know the work went to India, China, eventually the middle class was going to run out of spending power. And that’s the structural we today stimulate demand with Keynesian deficit spending. The jobs were created created in China, India, this has been the problem and it’s not going to be solved by deficit spending. Problems with these massive welfare states we built the proportion of the federal debt that is not a federal budget is non discretionary. spending. In other words, entitlement spending is rapidly growing over 60% of the budget, and it will not flow down just because the economy slows down. That’s the problem.
Jason Hartman 42:11
Yeah, very good points. And folks, get control of your retirement plans, at least make them self directed, if at all possible, because I think the government will go for the low hanging fruit, they’ll the easy money to convert his money in brokerage accounts, and savings accounts. That’s the easy grab. The harder grab is that self directed stuff where it could be you could have some gold you could have some real estate some private money lending, you know, who the heck knows that’ll just be so hard to quantify, and so hard to grab, because it’s so fragmented, any defensive strategy thoughts there,
Michael 42:45
what I think self directed IRAs are good diversification maybe into some commodities certainly diversifying the accounts. So it becomes harder to grab your entire account, IRA or 401k simply be Positive banks, the positive banks, his CDs is easy to grab,
Jason Hartman 43:05
that’s for sure. So you want to make it just harder because the low hanging fruit is what they always go for. Hey, I know you’ve got to go. But thank you for some quick insights on that and appreciate having you. We’ll have you again on soon. Okay.
Michael 43:16
Okay, Jason, thank you.
Jason Hartman 43:23
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 appreciate that. 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.
Jason Hartman begins this show with investment counselor Adam as they discuss the Balanced Budget Amendment. They also talk about a mortgage relief fund in Colorado and how to protect yourself during a crisis. Inflation becomes part of the discussion. Later in the show, Jason brings on Curtis for a client case study. Curtis has purchased 13 properties in the past 3 years and discusses his experience with a huge insurance claim. He goes into his future long-term plans.
Investor 0:00
I kept reading and listening and then went forward in the podcast that I went to your website. And I looked at the site see half of the different properties and the numbers. I started learning about the numbers and what they meant. And being the skeptic I am and being a techie, actually with a program to go and scrape your website and other people’s websites and redo the calculations just so I could prove it out myself. And eventually, I came to the conclusion that real estate is a great deal.
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 Number 1100 and 14 1114 1114. This is your host, Jason Hartman, coming to you today from beautiful Dallas, Texas, The Big D, where it is very chilly. In fact, it almost feels colder here than it did when we went to the Ice Hotel last year with the venture Alliance.
Adam 1:41
That’s because the beds there had fur on them.
Jason Hartman 1:44
Oh, maybe that was it. Maybe that was it. Well, hey, as you might have heard listeners, that’s Adam and Adam is here back on the show to do the intro with me. And after that we’ve got a client case study. I think you’ll really enjoy this story. They’ve got 13 rental properties now. Their real estate investing career. Adam, you know how it began? It’s an amazing story. ready? I’m ready bagels. Yes. Not where I was expecting you to go bagels inspired this couple to get into real estate investing and because there was a hole in their retirement plan, right. Oh, haha, that’s pretty good. Adam is a part time comedian. When he’s not when he’s not on the show doesn’t pay the bills. Yeah, right. Exactly, exactly. But you know what we just did Adam here in Dallas. We just walked over from the hotel here to the JFK assassination site. Now, I got to tell you, right around well, shortly after you were born, I’m guessing Adam. Yes, I’m, I’m the senior person here. And I saw the movie JFK, the famous Oliver Stone movie. We had Oliver Stone’s son on the show before He talked about many of his father’s projects. And that movie intrigued me so much about the JFK assassination that I actually flew to Dallas in the early 90s to visit the former Book Depository where Oswald supposedly took the shot from now, Adam, you live in Austin, and you were just in Dallas this weekend, although we didn’t see each other here. Have you been to that site?
Adam 3:27
I have not been I was at the perot museum with my son. And that’s actually a really cool museum. I could spend a whole day in there. I didn’t have a whole day. But that’s more like dinosaurs and earth and science stuff.
Jason Hartman 3:38
But so it has nothing to do with ross perot in his career.
Adam 3:41
No, I didn’t. I was a little surprised. I didn’t research it at all before we went and so I was a little surprised whenever I walked in, and it was dinosaurs and space and all that. Got it. Got it. Well,
Jason Hartman 3:51
you know, I kind of think it’s too bad. perot didn’t become president. What do you think of that? Or maybe you weren’t really painted. You were a little young back then
Adam 3:59
as little young But based on what I know, from what I’ve heard about his policies that probably wouldn’t have been my cup of tea. Really?
Jason Hartman 4:06
Wow, I’m kind of surprised. I mean, I know you probably supported Clinton. But, you know, perot was sort of a, you know, he appealed to both sides. It’s all about the economic stuff for me. I don’t think he would have gone the way that I want to these days. You know, the famous line from H. Ross Perot, when he ran for president, his I think his most famous line was probably that giant sucking sound. And he was he was referring, I believe, to NAFTA. I’m pretty sure he was referring to NAFTA back then when he said that, and he was talking about how, you know, all those jobs would be sucked out of the US economy. And he was exactly right. That’s exactly what happened. So, I don’t know. I think perotta shook stuff up too. And you know, even no matter what side you’re on, everybody will agree that Washington is a mess, and it’s just an insider’s game and politicians, no matter what side or on, you know, they don’t represent the people anymore. And they’re so detached from us. And it’s just sort of it. That’s a universal complaint either side of the aisle I find and Do you agree? What do you think? Well, I would definitely agree. But he supported the Balanced Budget Amendment. And that would be a death blow to the United States. So yeah, you know, that’s an interesting one, because I’m glad you brought that up. Because on the face of it, that sounds like a responsible idea, you know, on the face of it. I mean, I’m sure you’d agree that at face value, right,
Adam 5:31
right. It’s a it’s a great way to run a home. Right, terrible way to run a country.
Jason Hartman 5:35
Now, why do you I’m curious why you say that, because the only way you could balance budget is if the government takes out as much as it puts into the economy. It has to be even and the only way you can do that is to stagnate, your growth, your growth has to be zero. If that happens, your economy can’t get bigger, and it can’t get smaller. So it’s just it would crush our GDP growth. I do agree with I think a, as much as not having a balanced budget amendment allows politicians to be very irresponsible. The flip side of that if we did have one would just curtail growth. You know, it’s sort of like, you know, I’d almost compare this to the Dave Ramsey philosophy. We had Dave Ramsey’s number two man on the show, and he said all kinds of silly stuff that didn’t make sense. But don’t get me wrong, folks. I’m not hating on Dave Ramsey, because I think, for the audience he serves, he’s carrying a really good message for people who are irresponsible and get themselves into debt and spend money on stupid things. I think Dave Ramsey is great, but I don’t think he knows anything about investing. You know, he’d be like, oh, by everything with cash, you know.
Adam 6:54
He gets your life to a point where you can actually think about investing
Jason Hartman 6:57
Right, exactly. So if you are under Water, and you’ve got a bunch of credit card debt, you know, debt from being irresponsible. Dave Ramsey is the guy you need. And you know, that’s really a good message for anybody who has looked up to and everybody has people have looked up to certain, you know, mentors or idols right, you know, there for certain stages of your life. And sometimes you need to kind of divorce from them and find a new mentor, a new guru, if you will. And I agree with you, that’s a great way to put it. So you’re you’re right, a balanced budget amendment would make the country a much smaller country. And so the Dave Ramsey philosophy would be like the Balanced Budget Amendment, the other side of the philosophy would be, you’ve got to take risk, you’ve got to take on some debt. And really counter intuitively the debt is actually less risky. You know, that’s the less risky position. And we’ve got an interesting story about that the article we were just talking about OFF AIR Adam, about Denver. tell the audience what’s going on in Denver. I, I posted this in our private Facebook group. Now the venture Alliance has access to this group. And it was pretty interesting because what do I always say? The best insurance is a high loan balance. Tell us about that story.
Adam 8:17
Yeah. So obviously the government shut down because compromise is dead. So Denver is saying, hey, if you’ve been furloughed, actually, they’ve expanded it past furloughed, if you have, if you’ve experienced an income reduction due to involuntary employment changes the official term. They’re offering a grant for two months of mortgage payments, which they’re saying a maximum is $5,000 total, and you can apply for it. And if you get it, it’s free money. It’s not alone, son of interest free loan. It’s just $5,000 they’re giving you so you can pay your mortgage and not be foreclosed on or go into bad credit situations. The partial government shutdown, which I think is kind of awesome in a way. But, you know, not really, but
Jason Hartman 9:04
sort of, kind of awesome. And I’m sure you’ll disagree with me on that, Adam. But we don’t need to go there be too long that discussion will go go get that one later. But this is not a federal government thing. This is just a Denver thing, right? It’s been paid for by the city or the county, one or the other. Right. And so, so it’s a local government thing versus a federal government thing. But the point is, and why I posted this article is because it shows yet another have so many examples, Adam, where the people who do the seemingly right thing, they work hard, they make extra mortgage payments and they pay off their house, they pay it off early, right? Or they pay all cash for their house, they get burned the most, because they’re not going to get any of this free money. Okay. Similarly, when big natural disasters happen, like the old Hurricane Katrina and I remember, we reading all the articles about that the mortgage companies and the State’s Attorney General’s they put a moratorium on lenders saying don’t force anybody to pay their mortgage for six months. Now. That’s fine. If you have a mortgage, you get this relief. Great. But what if you don’t have a mortgage? Does someone send you the equivalent of your mortgage payment every month? No of what it would be you don’t get anything
Adam 10:28
get six months of zero?
Jason Hartman 10:29
Yeah, exactly. So the best insurance has a high loan balance. And there are some marginal exceptions to this one that I’ve taken advantage of a little bit in my Florida property. And I explained that on a prior show, but by and large, really, you’re just better off not using the property as a bank. You’re better off using the property as a property and it’s the most debt favored asset class in America. It’s the most tax favored asset class. America, and of course, the most historically proven investment in the world. So
Adam 11:05
yeah, interesting. And not only that the city’s doing it. But then banks, I’ve been hearing stories about banks around the country are starting to get ready to make deals with people already the federal employees so they don’t have to go after him. It’s happening now to not just Katrina there. I’ve been hearing about mortgage companies talking to furloughed workers and saying, you know, let’s work out a deal beforehand. So this doesn’t become a thing. Yeah.
Jason Hartman 11:28
Yeah. You get no help if you’ve done the seemingly right thing and paid your mortgage off. So having that loan balance, you’re going to get some relief, you’re getting some help. So that’s really interesting. Thanks for bringing that up in the Balanced Budget Amendment. Adam. So I told you that this client case study we’re about to hear was inspired by a package of bagels and what I meant by that, and you’ll, you’ll hear our clients say that here in a couple of minutes, is that inflation is so real So significant, and most people don’t realize it, because it’s not just the price of things going up. It’s the size of things getting smaller. So I am looking at Consumer Reports, November 2015 issue. I just grabbed this, you know, before I got on the plane and it says three years old, four years old at well, three and a half, little more than three years old,
Adam 12:23
which means you move to three and a half year old magazine.
Jason Hartman 12:26
Yes, I do. I tend to keep a lot of stuff you know, I’m kind of bit of a packrat. So I grabbed this and I was reading it on the plane. This article is entitled that empty feeling. Have you ever felt duped when opening a bag of chips or a bottle of pills, only to see a lot less product than you expected? Learn how to shop smarter. See the inflation they can either raise the price of something or give you less of it, which effectively is the same as raising the price. So on the Hershey giant nope chocolate bar was seven ounces. Now it’s 6.8 ounces on the Ivory soap bar. It went from 4.5 ounces to just four ounces in 2012. And they show pictures of all this stuff which is fascinating, less fattening ice cream. Well, how about a larger package with two less bars in it? This one really surprised the writer. It said really wrote Jocelyn would have Salem, New Hampshire, and she sent Consumer Reports a photo of the the 12 box and now the 10 pack box of hood ice cream sandwiches. Right? I love ice cream sandwiches by the way. Hey, audience listeners, if you ever want to get on my good side, just bring me an ice cream sandwich. Those are good. Okay, chips, NyQuil and dayquil. pills. Okay, you know you’re getting less and less the at the package sizing is the same. a jar of peanut butter. It’s got a big dimple in the bottom. Now in the plastic to take up space. So they don’t have as much peanut butter, the minus the lid that you screw on to the laundry detergent, you know, when you got a big bottle of laundry detergent, they make that lid now so big, you know, because it’s a cup that you put the detergent in, right? And they’ve been able to make it the package look the same. And it used to be 64 ounces. Now it’s only 59 ounces. Oreo cookies are smaller now. They just give all these examples and that’s just inflation, inflation, inflation, so you’re really paying more, and my philosophy of investing is based largely on inflation to stop destruction. You’ve heard me talk about that many times over the years. So there we go. So you’re saying
Adam 14:43
when I land in San Diego for meet the Masters, I need to go get a box of ice cream sandwiches for you to bring to the hotel.
Jason Hartman 14:50
You could do that. But please don’t bring it from San Diego because you’re gonna want to be landing in Orange County last year. Yeah, that was last year.
Adam 14:59
And I was just in San Diego. So some top of my head.
Jason Hartman 15:02
Yeah, yeah. Well, this time, folks, you’re coming to Newport Beach, California, on March 23, and 24th. And we’ve got a beautiful hotel venue there. Jason hartman.com slash masters for more details on that tickets have been selling very quickly. So we look forward to seeing all of you there. We’re going to be announcing a couple great speakers real soon. And it’s going to be a great event. This is our 21st anniversary meet the Masters event. So we look forward to seeing you all there and Adam. Time waits for nobody. We got to get to our guest interview our client case study. You ready? Let’s do it. Here we go. What is the sort of the one trick, the hack the secret that really empowers people to success, income property, the most historically proven asset class in the entire world.
Jason Hartman 16:04
Let’s break this down and look at some of the strengths of income property
Curtis 16:08
as an asset class. And 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.
Jason Hartman 16:18
One of the great things about it is that it’s so fragmented, right? embrace the fragmentation. 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 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 then seeing the product
Curtis 16:46
that have to offer that changes year by year.
Jason Hartman 16:50
We always love it when clients volunteer to come on the show and share their story and share kind of a client case study. So I saw This appointment booking come up someone booked an appointment on my link recently, and I called him up and we’ve got Curtis risk Chuck on the phone. And his wife Karen was not able to make it for the call today. But Curtis, welcome. How are you? Hey, Jason. I’m doing great Friday before a long weekend. There you go. It’s good to have you on the show. And you are in Raleigh, North Carolina. Is that correct? That’s correct. Fantastic. Well, just before we started kind of formally doing the interview here, you were telling me about your story and what got you interested in real estate? I guess it was bagels, right?
Curtis 17:31
That’s right. It started way back in 2008. Right after the crash. Uh huh. I went to the store to buy groceries. I looked at the six pack of bagels and I saw that the price would increase 50 cents. And I thought how can there be no inflation? I just saw a bunch of inflation in front of me. So I started me down a journey about questioning what people were telling me what what I was hearing from the media, and it rolled back a lot of I’ll call it brainwashing and propaganda. that had been pushed on me. Eventually I came to the conclusion that, you know, maybe that’s a little extreme, but I think for one case or losing proposition, it’s gambling. And after losing the money in 2008, I didn’t want to gamble anymore. So I started learning and researching and moving forward. And eventually I came across you believe it or not on carry lessons on capture. And you said some things that really resonated with me so and I looked up your podcast, and I’m a bit of a skeptic. That’s my nature. And so I actually started listening your podcast, I went back and I actually think your best podcast of your early 1211212 100 Thank you for talking about things like how inflation is actually leveraged in your favor with real estate, right and being a numbers guy. I started looking into this and I actually went, I couldn’t find your original podcast, but I bought I think the transcript off of Amazon. Yes. Yes, I went through that. So I kept reading and listening and then went forward in the podcast that I went to your website. And I looked at the site, see half of the different properties and the numbers. So I started learning about the numbers and what they meant. And being the skeptic I am and being a techie, actually, what a program to go and scrape your website and other people’s websites and redo the calculations just like it prove it out myself. And eventually I came to the conclusion that real estate is a great deal. Yeah. Problem.
Jason Hartman 19:31
Yeah. What’s the problem? You have a skeptical wife? Why?
Curtis 19:35
Why was even more skeptical? Right. And so the way I convinced her was that he had a conference in Orlando, and I asked her if she wanted to go to Orlando, where we had to go to the conference, and it was the Orlando thing first, I think that’s waiter to come. So we went to Orlando. We listened to the speakers. She’s skeptical, right. So she listened to speakers, talk to people that were right beside us, and they had already bought houses and they’re having happy with the results. And then she got off a went talk to Aaron who was in the back of the room, right. And she grilled him I think for about two hours on financing issues of financing issues, mortgages, whatever she could think of. He handled it. And she walked me and said, Let’s do this. We didn’t buy a house that day. But when we started the ball rolling when 2016 we bought three houses 2017 bought two houses, and then in 2018 and bought six houses. properties in Memphis, Little Rock, and in Jackson, Mississippi. Fantastic. Spend the full speed Yeah.
Jason Hartman 20:35
So now what are you up to? Are you up to like 13 or 14 houses then all together? We’re up to 13,030 you’ve got 13 properties there. Okay, great. And Curtis, you know what I didn’t ask you just so the listeners can get kind of get a little context here. What do you do for a living?
Curtis 20:53
I am what’s called the technical director for a high tech firm. So I oversee a bunch of software we develop And the engineers that are under so I’m I don’t do any more coding. I’m the guy who actually Shepards everything to make sure it gets done. And I’m a problem solver. That’s what I did. Yeah.
Jason Hartman 21:13
So you have that analytical mind. And you even created a, you programmed a little program to scrape our website and get the property information, and then redo it with your own calculations. That’s amazing.
Curtis 21:27
Wow. Yeah, that’s a skeptic in me, it’s one of the things is that they had different interest rates. I love that I want to normalize everything. And you know, it’s not like you start off with a little thing and gets bigger and bigger and bigger. Eventually, I went to multiple sites, and it helped it helped to convince me right being sort of a skeptical guy. Right, right. That’s fantastic.
Jason Hartman 21:46
Okay, great. So you’ve got that, you know, software engineer background. You know, that skepticism and what is your rights do? What’s her background? My wife is in the quality department of a hospital here. It’s a big hospital right? She’s in compliance. She looks after making sure all the regulations are followed. Yeah. And if there’s a problem with respect to that she has to intervene. So she has a very busy job as well as I do. Yeah. And she’s so she’s doing regulatory compliance. Now you’re up to 13 investment property. So congratulations on your success there. And what really got you interested was it sounds like you know, that you realize there’s more inflation than you’re being told, right? And of course, income property performs extremely well, against inflation, doesn’t it?
Curtis 22:36
Right, right. You gain equity, right? Because the price goes up. And then equity is leveraged by the ratio, right? Or it increases by the ratio of your leverage, right? Which really, you know, knock my socks off. Yeah, you get to go into that. You get a multiple right. And then your tenant pays your loan. You get some cash flow, and it gets that was the name lation induce debt destruction, right. That’s that’s the one people don’t usually realize. Yeah.
Curtis 23:02
Oh, and you get the tax break, don’t get the tax breaks really important tax benefits. Yeah,
Jason Hartman 23:05
most tax favored asset class in America, and the most historically proven asset class in the entire world. I think that’s what I say, at least along your journey of buying properties. Tell us about that. I mean, what I always say and I know people struggle with this, it’s a very fragmented industry. You know, there’s just a lot of different players that property managers you have to deal with. Some are just bad and some are good and some are just mediocre and, and some are outright crooks get all types, you know, they’re all different in that that’s kind of frustrating, a little bit, right? Because you can’t standardize things super well in our business. But also the benefit is that keeps the big institutional players out of it to some extent. I mean, they’re here a little bit. We all know that you know, Blackstone and invitation homes we’ve all heard of those big institutional investors, but by and large, there are Really small player in the overall market size in the aggregate. Tell us about some of those experiences and how you overcame challenges or, you know, tempered disappointments or anything like that.
Curtis 24:11
I hate to disappoint you. But it’s been a great experience so far. And that the one of the things that really drew me to your organization was that you had vetted the turnkey provider, as well as the management company. And you said that you’re a champion for your customers. And so I figured, well, that means he has leverage over these people. So there’s something goes wrong, you know, Jason Hartman and team can ride to my rescue. And so far, I haven’t had any issues in the sense of with the turnkey vendor or the management company. The management companies have been exceptional, responsive, quick, professional. It’s great. You know, for somebody who’s really busy, this is a great way to invest. Now, I have to say that being a skeptic, we went outside of your network. We did go to another turnkey vendor, we went to you know, the place where the They did their work. They had this beautiful binder with pamphlets. And we looked at it. And then they went to show us the houses. And it was not what I expected. And you know, the thing that scared me is we went to an older house. Look at this. This is a great investment property. They went into the basement, and there was literally a electrical junction box with four wires coming out and one of the sides hanging in midair. Wow, hanging in midair. Yeah. So at that point, it was, well, we’re not doing anything with this team of people. And we went back, we went back to your organizations because I hate to sound like commercial, but they’re just quality people.
Jason Hartman 25:35
Yeah. Well, thank you. I appreciate that. And we we work hard on that. And I tell you, we miss out on a lot of business by really being you know, people in our industry think we’re too rigid, you know, and it’s a tough balancing act because of course we want to have more business but and more inventory of properties. But you know, you just can’t cut corners. You got to maintain quality. So I’m glad to hear that not every experience is that positive, though, you know, people do have challenges with this stuff. And it’s definitely far from perfect. It’s just better than everything else. That’s all I can say.
Curtis 26:12
Well, yeah, the my threshold may be a little higher than normal because I have, I deal with a lot of stuff at work. And so I just looked at some stuff as it’s the way you get business done. Right. And one of the things that happened to us is, a year ago on a bed in Memphis, one of our houses the water here to pipe broke, and the tenant was away for two weeks and they came back to find, I guess, a stream of water flowing through their driveway, totaled the house, right? Yeah, it’s the property management company. Just handle those all. So one tip I have is if your property management company has struck a deal with a local insurance company for landlord cake, that local insurance, that’s we had changed that over just a couple of weeks before and because we had done that it saved us so much grief because it was a local insurance. company, they had a plan made just for us. They paid our mortgage for several months while everything was being reconstructed. You know, in some ways, it was challenging emotionally. But from a time standpoint, there was very little drain management company handled everything. So we were just very impressed. That’s fantastic.
Jason Hartman 27:21
So how good insurance that is definitely important. Do you know how much that claim was? I’m kind of curious. Did you get involved and see the the price that the you know what the insurance company paid?
Curtis 27:31
I think it was around 55 K. Whoa, that is
Jason Hartman 27:34
a big one. Yeah. That is a big one. But you know what, you’ve got a rehab house. I mean, they probably got 1 billion right now.
Curtis 27:46
Yeah. Yeah. Fantastic. And did you I’m curious, did you lose your tenant during all that time? I mean, where did the tenant stay or did they just move to another property, then he had to get a new tenant. So the tenant had tenant insurance and so they We’re able immediately to move I guess, to a hotel or motel or something. And there are great tenants. But we couldn’t expect them to wait around for three or four months. So they actually went somewhere else. And then we got another tenant. Right. I think the rehab took about five months, believe it or not.
Jason Hartman 28:13
Wow, that is I think that’s the biggest one I’ve ever heard of. I’ve never heard as a claim that big or rehab that long. That’s pretty extensive. Well, the water heater was in the know. So we went all through the house. Yeah, that’s all through the house. That’s an unusual design to you know, definitely. Well, what are your plans? For your real estate portfolio? Are you still buying more properties?
Curtis 28:38
We do plan on buying more properties will get up to our 18 because my wife and I are both on our primary. And then we’ll just we’re not sure you know, we may move into notes. We may move into you know, maybe multifamily syndications. I think investing in hard real physical assets. that generate cash, right is the thing to do coming up. I mean, that is where my focus is. Yeah, none of this paper stuff that can evaporate. Yeah,
Jason Hartman 29:10
yeah, no, I agree with you. I mean, no matter what, and I’ve tried almost everything out there. In terms of investments. I just like the hard asset, the best, it’s the best. And I don’t like syndications, because you know, that’s commandment number three, thou shalt maintain control, you’re violating it, because the syndicator can rip you off. And I just got a call from a New York Times reporter about a guy that was out peddling have fun, and it’s like a 1.2 billion with a B dollar fund. So it’s a big Fund. The SEC is all over them now because they they are alleging that they were running a Ponzi scheme. Those tax lien investments I did you know, I filed a lawsuit claiming that that company was running a Ponzi scheme. And now I’ve been burned on my first first position loan, the first position mortgage, I got burned on some seconds before, but never a first until just recently. And I’m going through that now we’re going to have to take a real haircut on that deal. It looks like, you know, when you when you hold the paper, there are all these lending rules that you have to abide by and all this stuff. It’s pretty complicated stuff, you know, to navigate that world and just the idea of buying a house and running into someone that’s just simple. You know, it really is a simple asset class, and that’s what I love about it. Yep,
Curtis 30:29
I agree.
Jason Hartman 30:30
Yeah, good stuff. So um, do you have retirement plans? Or why real estate investing just to make more money or do you want to get out of the rat race and retire? What’s the plan?
Curtis 30:43
So that is at least a huge portion of our retirement thoughts, right, you know, you have this rent the rent should track inflation to some degree. I can trust that you know, 75% of that rent or cash flow will come in and 25% will be for something Sort of disbursements of sort of the ratio I’m finding. And so that was what we’ll use for our retirement plan. I’m a huge part of our retirement funds month to month, you also get all the other benefits. So, yeah, we’re planning and that, in fact, if all goes well, my wife will take an early retirement, and, you know, she’ll be the one managing the portfolio. Fantastic.
Jason Hartman 31:21
Now, any management tips for people, I mean, I’m glad to hear you’re having such a good experience with the property managers. But you also have to manage your own affairs, you know, bookkeeping a little bit, and things like that. Any thoughts on, you know how much time that takes every month to manage the 13 properties? You know, any any tools that you’re using to do that property tracker or otherwise?
Curtis 31:44
Yeah, at the moment, we aren’t using any external software other than a spreadsheet. I’ve just made it a habit every Saturday, roughly every Saturday to spend about an hour going through things. When things come up from the property management company. They come in by email deals. Right away, don’t let them accumulate or wait. I usually find that that makes things a lot easier. One of the realizations I’ve come to is that when you talk about the real estate investment mechanism, it’s the people that matter. And so what mattered the most to me was from a property management, having people I could trust that I liked, that had experience. And so that mattered a lot to me just from a sleepy well perspective, from a, you know, a bookkeeping perspective. Well, we’re using excel at the moment, right, and I have an income tax accountant that manages all the other stuff and I just plopped the papers on his desk. He’s really good to
Jason Hartman 32:42
have that’s good, good for you. Good for you. The team is I you know, I’ve said this often. I’d rather have an A team, you know, in terms of the local market specialist and the property management company, in a bee market than the other way around because the team is so great. Critical. It’s just so critical to have a good team of people, including our team. And that team on the ground, the boots on the ground, so to speak. So yeah, that’s great. I couldn’t agree more that that’s very important part of it.
Curtis 33:13
Yeah. When you invest in real estate, I think we didn’t really invested in as the people that are on your team. Right? Right. You’d lay the cash at once, but it’s the people that really make that investment sin. Right,
Jason Hartman 33:25
right. Including the tenants. By the way, you know, a lot of people don’t ya kind of consider that. And I said this on the show before, I’m sure you probably heard it, but I’ll just say it again here. You know, when you think about it, someone is spending 33% to 40% of their monthly income on your property. And it’s literally like you have all of these tenants working for you. You have 40% of a person’s income. That is hugely significant. I mean, what other business can say that they get 40% Someone’s income, right? Apple Computer can’t say that. He No, no other. No restaurant can say that. Nobody can say that except a landlord. The landlord gets a third to 40% of their monthly income.
Curtis 34:16
It’s amazing. I guess it depends if they consider the government of business, right? Well, fair enough.
Jason Hartman 34:20
Yes, the government gets a big percentage too, especially in New York or California. Yeah. No question about that. Good. Good stuff. So you and Kieran have been married for 33 years, right? That’s right. Fantastic. And you never thought about real estate investing sooner in your marriage.
Curtis 34:38
I wish I had, I really wish I had, it took a large amount of deprogramming to stop looking at my 401k of the stock market. And my job I have to deal with data. So I had the choice of listening to the propaganda or listening the data eventually the data one out there led me down another path and then, you know, again, learning about the four or five ways that Real Estate works in your favor is like, Okay, this is no brainer. But is it real it? It sounded too good to be true. So I was hyper skeptical eventually I convinced myself. I wish I’d known earlier. The good news. I think it’s good news is that we’re speaking to our children. So my son who’s 24 and graduated just bought his own house. It has a renters he’s house hacking, I guess. My oldest daughter is just buying right now. Their first property rental property, even though they don’t have their own house, right. They’re buying a rental house. Fantastic. So
Jason Hartman 35:32
that’s how I’m able to pass it down. Yeah, so that’s what we’re doing. I lived at home at my mom’s house. I bought a rental property at age 20. And I didn’t move out till I was 22. So, being a landlord first is very important. That’s a good idea. Yeah, really good. Yeah. Good stuff. Good stuff. Curtis, thank you so much for sharing this great story. I really appreciate it. And I’m sure all the listeners will appreciate it. They always love hearing client case studies. And listeners out there. If you’re one of our clients, and I know many of you are thousands of you, please reach out to us. We’d love to have you on the show. We always get so much nice feedback on these interviews and people just really appreciate it. So thanks for giving back. Curtis, thank you so much. And thank Karen as well. I know she couldn’t be here today. Next time, we’ll have her on and appreciate your story and just want to wish you a happy investing. Thank you, Jason YouTube. 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. Sing 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.
