Jason Hartman looks at a potential market crash but not in the housing market. He welcomes Russ Munson in the interview segment to do a client case study and discuss Russ’ story about a legal battle with Apple over trademarks and a Pear logo. Russ talks about his journey into real estate and how it has supported his food business.
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 multimillionaire 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 0:53
Welcome to Episode 1553 1553 We’ve got a guest today, one of our clients actually who’s going to talk a little bit about his real estate investing experience. But also he’s going to talk about something interesting. And it is another form of this abuse and bullying by big tech. I tell you folks, you might think why is Jason talking about this so much on a on a real estate investing personal finance show, because it is important. This is like one of the major issues of our time, when we search for something with a company that controls somewhere around 70% or more with YouTube, talking about Google, of course, of the world’s search traffic. We never know what we don’t see, you know, search results. When we log on to Facebook. We never know what doesn’t show up in our news feed. You can’t hear the dogs that don’t This is a big deal. Now, this example today is an example of trademark trolling. Well, you’ll be the judge. I don’t know, that’s my opinion, I could be wrong. But you’re going to hear a pretty harrowing story here from one of our clients I and also you can talk a little bit about his investments and how it made it possible for him to start his company and gain financial freedom by starting to invest in properties with us, maybe, I don’t remember but maybe 910 years ago, something like that. So he’ll tell the story in just a moment. But before that, you know, I think a lot of people are making a huge mistake out there, and I’m hoping I can save you from it. Now listen, I am looking for this deal, too. We are in a pandemic. And everybody is out there thinking well, not everybody. I say that figuratively, of course, it’s figure of speech. But many people are out there thinking, well, there’s going to be a market crash. The economy is in trouble. Yes, you are right. But this is very uneven what’s going on in the world right now? And a lot of apartment owners and other investors are talking about this phenomenon look on the screen, apartment rent collections continue to decline. And that is true. But the question Remember, you listeners and viewers and followers have called it I didn’t name it this. You’ve called it the Jason Hartman question. I’m flattered. I love it. I’ll take it. I’ll take it for sure. That question is, if you’re a regular follower, you know, compared to what, compared to what we have to realize first, that no apartment owner, no real estate investor ever collects 100% of their rents. It just doesn’t happen. They have economic vacancy, and they have physical vacancy. Now physical vacancy is of course when the property’s vacant and no one’s paying you rent. Economic vacancy is when the property He is occupied, and they’re not paying rent and you got to kick them out. Right. But there’s been so much talking concern about the eviction moratoriums and all that stuff. And, you know, the forbearance and you know, the owner generally just passes it along to the lender, right? But, folks, you got to realize something. This issue is largely an issue of larger, mostly institutional apartment investors. Now, I’ve owned a couple large apartment complexes, 139 units, 125 units, I’ve got a mobile home park now that’s 120 units, and we’re building some single family homes on that land on the park because we’ve got some waterfront area there, where we’re not gonna have mobile homes, we’re gonna have single family homes, and when we’re gonna sell those, but retain the land lease so interesting stuff you can do. So you know, I’m in this world and I know lots of people who are I just interviewed the founder of a very large apartment. Investment Company and they do some, they play in some other asset classes as well Self Storage, etc. And they do business in seven states. And, you know, we went into this in depth fuel here that episode, folks, if you’re looking for this big crash in the housing market, I don’t think you’re gonna find it. And if you do, if you do, it will be a result of much higher interest rates. And I want you to realize something, so you don’t miss the opportunity. Because many, many millions of people have missed great opportunities. Now most people aren’t missing the opportunity right now. And maybe it’s an anomaly. Maybe the skeptics and the doomsayers the people that have been calling the end of the world for the last 2030 years, you know, the bad news sells, right? Maybe they’ll say, well, Jason, it’s just an anomaly what’s going on right now? Yes, there’s a housing boom, yes, prices are rising, but it ain’t gonna last. Maybe there’ll be right, maybe, but will they be right based on the price of the property or the cost of ownership. And those two things are significantly different. Just want to remind you that people buy a property based on the payment based on the mortgage payment. Almost nobody buys it on the price of the property. And based on the mortgage payment, housing in the markets we like now this is not true of all markets, is actually cheaper today than it was in 2006. In terms of a monthly payment, the price is higher. Yes, that is true. And you see all these people that have a shallow understanding of the market. The talking heads on CNBC now, I don’t mean to pick on CNBC. They got some great coverage on a lot of things. But any news station, any major media outlet, where they’ve got to condense things into a small soundbite, or they don’t look at issues deeply, and they don’t have a deep understanding, they’ll say things like, well, if you’re looking at housing prices in 2006, at the prior peak, and you know, they differ on when the peak was fine and dandy, depending on what market you’re looking at what sub market, what price range, blah, blah, blah, you know, you can peel that onion a lot of ways, but they say, housing prices are higher now than they were then and look what happened then we had a big crash. Okay. What what’s the monthly cost of ownership? You never bothered to consider that, do you? Right. And that’s the true cost of housing. That’s the true price of housing is the monthly cost, not the overall cost. Also, they never bothered to look at the underwriting standards. On those loans, well, sometimes they do. I won’t say never figure of speech, you know, you got to use a finger. Yeah, to do some generalizations and some stereotyping to make things simple, you know, easy to understand, right? But they usually don’t consider the underwriting of the people holding those mortgages. And the underwriting standards today have been very conservative in most cases. You know, I know there are some low down loans, but even with the low downpayment loans, the underwriting standards have been tight. Okay, by enlarge tight, it’s not like it was last time. So if you’re looking for that, you know, 2008 crash, you’re probably going to miss the opportunity there. And by the way, that was my dog moving. Did you hear that? She moves like a cow. Yes, dog makes very funny sounds. And sadly, my dog is not feeling well. So please pray for her quick recovery. very worried about it, I could show you a chart, but I don’t have it handy of mortgage credit availability. And you will just see how hard it is to actually get a mortgage right now. And how hard it’s been over the last several years, showing that the banks are underwriting very carefully. So if you’re looking for all those defaults Not going to happen, except they’re going to happen here in the commercial real estate market. Now, not all classes have commercial. Here’s another faulty thing people do. They miss classify it and they call it commercial in quotes. Well, what does that mean? What type of commercial property? Where is it located? Is it office space? Is it retail properties? Is it industrial properties? Is it self storage? Is it gas stations, like you know, there’s a zillion different types of commercial property. And then there are many locations and price ranges and different types of asset classes. lots of ways to divide this up a lot of segments What needs to happen? But generally, the two hardest hit asset classes in the commercial real estate world, of course will be office space and retail properties, especially in trophy, tier one cities. New York, San Francisco, LA, and to an extent, Boston, Seattle, San Diego, you know, to a slightly lesser degree, Portland, etc, right? All of these places very hard hit civil unrest, no ability to socially distance concerns about contagion, etc. Right. Here’s the question people should be asking is they should stop worrying about the market itself and look at the knock on effect, because all of these commercial properties, they have mortgages, and those mortgages are tied to securities, various securities but especially bonds cmbs commercial mortgage backed securities And as these mortgages default, and the bankruptcies mount and they’re already mounting these companies filing for bankruptcy, and we’re gonna see a lot more of that it’s gonna get a lot worse before it gets better. But it’s just Joseph Schumpeter, my favorite economist, his concept of creative destruction. This was happening anyway. COVID 1984 simply accelerated that trend. So, as we see that there are going to be massive defaults on these commercial mortgage backed securities. And guess who owns those well, life insurance companies, pension funds, university endowments, and private investors like you potentially, you know, you might have those in directly, you might have direct ownership or they might be in some fund that you own and you don’t even know it. That’s going to hurt. That’s the thing people should be looking at. But when we look at retail sales overall, look at this chart if you’re watching by the way Through not I’ll explain it to you. It says us retail sales return to pre pandemic levels, monthly retail and food services sales in the United States, seasonally adjusted, which is the better way to do it. According to the US Census Bureau, that’s where this chart is from. The August figure figure represents an advance estimate based on subsample of Census Bureau’s full retail and food services sample. And it basically shows a slight upward trend where you’ve got $537.52 billion in sales in August. And yes, you know, you go back a few years and even if you go back two years, it was as high it did take a dip during the lockdown phase. And we you know, we still have lock downs in many areas, but overall, it’s up. Now, it’s not up in physical stores. It’s up online. Of course, you already know that and we’ve talked It ad nauseum on prior episodes. So let’s go to our guests. But I do want to remind you that we have our version 2.0 of our asset protection and estate planning webinar. And that’s available to you at Jason hartman.com. Slash protect Jason hartman.com slash protect a more advanced webinar that you guys asked for. So we aim to please and we provided it our lawyer, went back to the drawing board, redid his presentation and made a more advanced version based on a lot of the questions you asked for those of you hundreds and hundreds of you that attended the prior webinar. So Jason hartman.com, slash protect, like protect your assets, and Jason hartman.com slash protect for that. And without further ado, let’s go to our guest and let’s talk about his real estate investing case study. As he started with us somewhere around 10 years ago, I think and also So, this trademark trolling, well, you decide it’s trademark trolling. I think it is by Apple, one of my am one of the companies I really admire. In fact, I’m using their products right now and spend an awful lot of money with that company. All right, here we go.
Jason Hartman 14:19
It’s my pleasure to welcome one of our clients back to the show, and that is Russell Brunson, or Russell Johnson. And he was on the show before talking about his client case study as a real estate investor. But today, we’ll touch on that. But today we’re going to talk about something else. And that is an aspect of the tech tyranny that I keep talking about. As you know, I am a consumer advocate, and I have a very big distaste for bullies. When I hear stories, like you’re about to hear, I really get upset about them. You’re going to hear about a tech giant, the largest company in the world and that is Apple. Computer a company that I, I use their products. Most of us do have long thought of myself as a fan of Apple, but I’m definitely becoming less of a fan. And this story is one more step in that direction moving the needle away from my interest in Apple. You know, I used to really like Tim Cook and thought he was doing a great job. But some things I’ve really called that into question lately, and this is yet another part of that story. Russ is a CPA. He also has a company that he started, that is now being bullied by Apple. So you’re gonna hear that story and hear a little bit about his real estate investments and how we got to this place. Russ, welcome. How are you doing?
Russ Munson 15:41
I’m doing well. Thanks, Jason, for having me on. I’ve been listening to your podcast for years. And so it’s fun to be on again. Yeah, it’s great to have you.
Jason Hartman 15:48
It’s great to have you. When did you first start listening to my podcast, just out of curiosity,
Russ Munson 15:52
I started right in the middle of the Great Recession. So when the housing collapse was happening before I was just searching on fire Test players for best real estate podcasts landed on yours. And it kind of guided my investment philosophy and a lot of the decisions that I made in terms of my own investing, and been a big fan of, of yours ever since.
Jason Hartman 16:14
Good stuff. Well, thank you. And thank you for all your business and your referrals. We really appreciate that, obviously, tell us how your investing involves a little bit and how it funded the business you have now.
Russ Munson 16:25
So I started, I started picking up just a couple of houses locally, I live in Utah during the Great Recession when everything was basically free. And I just saw I was in the mortgage business at the time. And it was obvious to me that when the cost of buying a house was less than the cost of building a house, unless you had a massive population decline, like something good was going to happen to the prices of those when I was mostly investing at the time with the properties I was purchasing just for appreciation. And then I started listening to your podcasts and started learning about really the value of some of these other markets other than my home state and Utah. And I just didn’t really have the resources to branch out of Utah. I just released I didn’t think I did. And so I connected up with an investment counselor at your company and started acquiring properties outside of Utah. I started in St. Louis, a couple of duplexes and for plexes there, and then I bought several properties in Memphis and several family members properties in other markets and started the cash flow machine, I guess.
Jason Hartman 17:26
Excellent. Excellent. Well, good for you. So you started investing with us when around 2008 or nine or so back?
Russ Munson 17:33
I think my first property probably would have been 2000. It might have been 2009.
Jason Hartman 17:39
Yeah. So 11 years ago, then it’s 2020. Now, so just in case you’re listening to this five years from now, so you never know.
Russ Munson 17:49
a time or two?
Jason Hartman 17:49
Yeah, yeah, you definitely have. Well, you started in the Great Recession, which was a good time to start times of economic uncertainty or times that create a lot of opportunities. And I think now we might be seeing that again. So without going down that rabbit hole, which would take a long time to discuss, I want to just get to the story a little bit. So you began investing with us that enabled you to fund a business. Yeah, that’s right. Okay. Tell us about.
Russ Munson 18:18
Yeah. So I was investing in real estate on the side of my main job, I was a CPA work for a large bank. And at the same time, my wife was actually building a food blog. And I was kind of helping figure out how to make money from the food blogging business. And we got to a point where we were able to make that business very successful. And I was able to quit my full time job from the combined income of the food blog and the real estate business. And when we got into that, like our food blog really took off since to the rise of Facebook, back when Facebook was first starting to go big. And we got millions and millions of followers on Facebook and had a ton of traffic In order to build a business there, and then shortly after we built that business, the Facebook algorithm turned against us. And it started to erode our traffic and try to keep users on Facebook instead of on the content provider site. And so we had kind of a really rough experience there figuring out how to monetize the content based business when in control, so,
Jason Hartman 19:23
Yeah. I know that’s the problem with today’s world. I tell you, these big tech companies are just bullies and we’re obviously going to get into that today. They can just ruin people’s lives and you just have no recourse at all. It’s so unfair. That’s why we need we need these companies to be split up. We need a broader marketplace. So there are choices. So there’s more variety. It’s indeed this would have never been allowed post Industrial Revolution, you know, post robber barons, Carnegie’s Melanie’s, Rockefellers, etc. And now we have that again, because there’s so much better at lobbying and Basically faking that they’re in other businesses that they’re really not in. Because right who Google Google does this extremely well, by the way, you know, folks, have you ever wondered why Google is in so many businesses that make like no money that are complete failures? It’s not, they’d like to say, well, they’re experimenting, they’re trying to get into this market, they’re trying to compete. The real reason is, so they can dodge the antitrust bullet. That’s why they do this. They have no interest really, in a lot of these businesses. I don’t think I mean, look at this, my view as an outsider, obviously. So, you know, maybe they think differently, but I don’t believe them. So they say, Well, you know, we’re in the self driving car business, we’re in the search business, we’re in the, you know, this business for that business. And, and we don’t dominate any of these things. You know, we’re in all these businesses, right? And so, so they’re able to dodge that bullet plus the fact that they spend a zillion dollars on lobbyists, and they get all the laws written in their favor. It’s just a complete scam. So hopefully, this is going to change But if you want to share your screen and show us your business, so we can get the background and then let’s see what’s happening. We’re gonna look at Legal Notices, and really kind of dive into this. I think it’ll be fascinating to you.
Russ Munson 21:13
Yeah, it’s really interesting, the arguments, they’re not monopolies. I mean, it’s hard to imagine there have never been bigger companies with more market power in the history of the world. And if they’re not monopolies, I don’t know how we define it. It’s an interesting, interesting situation.
Jason Hartman 21:29
When when these companies have gdps, larger than many countries, I think you can call them monopolies by them. Right. And the fact that they all work together, and they curry favor with the government by becoming proxies for the government. Think also about this listeners and viewers. The government is not allowed to impede your right to free speech under the Constitution. Of course, we know that is the first amendment, but a private company can censor your speech. And it’s a private company becomes a proxy for the government. And that’s how they curry favor with the government to get laws written in their favor and allow them to pay little to no taxes because they have all these offshore companies. It’s a complete scam. I mean, this is just a complete scam. Hopefully this will move the needle and they won’t take the show off the air because they definitely censor this kind of stuff. What kind of food blog was your wife doing?
Russ Munson 22:33
Yeah, so our food blog that we built was called super healthy kids. So it’s a blog dedicated to helping parents have the resources they need to feed their kids healthy food instead of junk food to kind of battle their kids desire for chicken nuggets and mac and cheese all the time. And get them eating and developing healthy habits.
Jason Hartman 22:52
Right so so there you’re gonna you’re gonna piss off a lot of big powers. McDonald’s isn’t gonna like you very much, right?
Russ Munson 22:59
So Our Facebook pages tend to be full of controversy about people sued religions. So right, it’s very interesting to put a good way to put it. Yeah, but what we kind of did was super healthy kids, I mentioned that we have seen kind of how those big companies, big tech companies, algorithms could make it so that you aren’t really in control of your business. So we decided at that time to start building some sort of content delivery system that wasn’t in control of big tech companies that we could extend to other food bloggers to build their businesses on. And so that’s how this business that we are running into problems with apples was formed in that company’s called prepare, as you can imagine, in our view on thing that’s interesting to think about here, as we kind of walk through what we do with prepare is how dissimilar the services the nature of the operations of what we’re doing are from a computer technology business. there’s virtually no way that these two Businesses can be confused or be considered competitors. So it’s kind of an interesting background for this, what we do with prepare is we create a connected cooking experience, so that you can store all of your favorite recipes in one place. And you can use basically all of the content that you like to consume on the internet without the advertising infrastructure that bothers you will use the content, and that your use of that content will benefit the content creator directly. So we have a paid version of prepare called prepare gold, where subscribers can pay $59 a year to be a member. And we then share that revenue directly with the content creators. And that’s kind of exactly our view of how some of these tech companies should work. They don’t share their revenue.
Jason Hartman 24:48
What is the content creator someone with a recipe?
Russ Munson 24:51
Yeah, so in the example you can see here, this recipe from super healthy kids if I were following super healthy kids on prepare, I would have access to their content. in a format that doesn’t include display advertising from that food blogger, that’s really kind of a cumbersome thing to cook from a phone when the ads are jumping all over the page, right? We’ve solved all of those content problems. And then as a user, you can see if you’re, if you’re not a paying user, which how I’m logged in. Now, it’s not a paying user, you can view that content on the blogger site. If you with those advertisements. If you decide to pay, then you can view any of their content with no advertisements and we then send that money back on to food blogger. So
Jason Hartman 25:33
So first off, I want to be a content provider because you as you may have heard on the podcast, I’m a little bit into cooking now. It used to be that the best thing I made for dinner was reservations. But I’ve gotten better especially with these lockdowns and so forth. And I tell you, I make the world’s best salad ever really. like nobody makes a salad better than I do. Okay, so I gotta give them recipes on your site go
Russ Munson 26:02
Awesome. Well, we’d love to have you as a content creator. And that would kind of highlight that we could, we could have an eat like Jason meal plan that people can subscribe to and be fit like you. So and that’s really kind of the idea behind prepare. It’s it allows you to create cookbooks, to store even your own family recipes. So you can, for example, create your own cookbooks with all of your family recipes, I share my family recipes, you can do your meal planning. And you can even send your grocery list directly to Walmart to do your shopping so you don’t have to go to the store anymore.
Jason Hartman 26:37
Oh. Yeah,
Russ Munson 26:37
we basically just hide all the things that you need to put from home successfully into one solution. And that’s really what prepare was about that having it not be a tech company that isn’t caring for everyone who’s involved in that transaction. The content creators involved in the transaction prepares involved in the transaction, and the consumer is involved in the transaction and we’re really trying to do right by everyone.
Jason Hartman 27:00
So so your investment counselor posted something in our private group about how this was happening to you this this burgeoning legal battle with Apple. Then a couple of days later, I actually saw it in the mainstream media. I saw a story about you. And I thought, this is our client. Now what are you going through what what is apple? What is their problem with your company?
Russ Munson 27:25
When we started prepare, we filed for a trademark for this pair icon. It’s a it’s an icon that clearly represents a pair. It’s usually used in the color green, it looks nothing like an apple whatsoever, used to represent a meal planning and cooking business. And the fact that it looks nothing like an apple is why this has gotten so much media attention. So when we filed for our trademark, unbelievably this will tell you how the legal process in the United States works in January of 2017. We went through the whole process with the trademark approval board and We finally got our trademark approved in fall of last year, where the trademark agency of US government said look, there’s no conflicts here. We’re going to release this trademark.
Jason Hartman 28:08
And so that’s the USPTO. The Patent and Trademark Office.
Russ Munson 28:12
That’s right.
Jason Hartman 28:13
Yep. I have many trademarks. I know them well. Okay.
Russ Munson 28:15
Yes. So they gave us the all clear and published our trademark for other companies in the world to look at and see if they had a problem with it. And on the last day of the window to oppose our trademark, Apple didn’t file to oppose our trademark they failed to extend the date that they could oppose our trademark and then repeatedly filed to extend that date as far as they possibly to make this as difficult as possible for us to bear the burden of and keep us in limbo as long as possible. In practice they do with all of the trademark opposition’s they do.
Jason Hartman 28:47
Yeah, apples to apples in a big fight with fortnight. I don’t know much about that story. I haven’t been following it, but they’re in a big fight with him too. So the article that I saw in the mainstream media was basically It said something to the effect of Apple to start up, change your logo or else that was, I believe, right? So they’re telling you that their logo is an apple with a bite out of it. Your logo is a pear with no bite out of it looks nothing like their apple. But I guess Apple is claiming the rights to all fruit. Yes, or the rights to vegetables too. If If I opened a company called broccoli or you know potato would they be suing me I mean,
Russ Munson 29:35
I wouldn’t put it past them but it’s very clear that they what they described in their legal action, and I’ll show you what their actual legal action says it says consumers encountering applicant that’s us Mark are likely to associate the mark with Apple. Applicants Mark consists of a minimalistic fruit design with a right angled leaf, which readily calls to mind Apple’s famous Apple logo and creativity. Looking for a commercial impression? And then they show a side by side that clearly shows no similarities between these two logos other than what they described. They’re both fruit and they both have leaves.
Jason Hartman 30:11
Now No, no wait. Now when you file for a trademark, there are I think 40 classes under which you can classify your trademark. And some of the classes you can tell the government designed over us because they’re kind of odd. Like what I want to trademark My name is trademarked for example, right? Jason Hartman is a trademark, okay? I can trademark it under like one class or multiple classes. And the classes are a little bit funky. You know, they don’t make sense to at least the layperson, but you’re not a computer company, right. You don’t want to make cell phones, iPhones, smartphones, or computers or hardware. You’re selling recipes.
Russ Munson 30:53
There’s no competition whatsoever. And in our class description, we’re in the same class in terms of creating software. But if that is what makes us competitors, and everyone creates software, I’m sure you create. There’s no company that doesn’t create software anymore. But our class description describes it as software for meal planning, and recipe management. And Apple, interestingly, isn’t even. They’re not even contending that they’re in a competing business with us. In terms of the class, they are saying that, because they have the Apple Watch and the Apple Health app, that somehow they may eventually end up in the recipes business. And so they don’t want consumers to be confused between those two.
Jason Hartman 31:36
Okay, now, do you have an app in their app store?
Russ Munson 31:39
We do? Yes. Okay. Have an app in Apple’s App Store and in the Google Play Store,
Jason Hartman 31:43
and what was the app? What is the app called?
Russ Munson 31:47
The apps called prepare? So that’s the name of our company.
Jason Hartman 31:51
They approved your app.
Unknown 31:53
Yeah, there’s no problem. We follow all of the App Store guidelines completely.
Jason Hartman 31:57
How long ago did they approve your app?
Russ Munson 31:58
We’ve been in the app store since September of 2017, for years,
Jason Hartman 32:04
okay, so for three years and how long ago did you first file for the trademark
Russ Munson
in January of 2017?
Jason Hartman 32:12
Okay, so they approved your app, and they saw the design. The logo is on the app, I’m sure, right.
Russ Munson 32:17
Yeah, yeah, logo is the main app icon.
Jason Hartman 32:20
Do they threatened to kick you out of the app store? Also?
Russ Munson 32:23
No, they haven’t made any threats about the App Store. They are just saying that our logos are confusing and that we need to change ours. They’re demanding that we change our logo and abandon basically the brand that we’ve spent the last three years building and that they have a right they believe they have a right to control our intellectual property that we own and have developed.
Jason Hartman 32:47
Now, did you file under multiple classes for the trademark?
Russ Munson 32:51
We did? Yeah. We thought file under kind of a social media type class that is basically electronic communication class and under a software development class for meal planning software.
Jason Hartman 33:02
Okay. And they agree that you could if you abandon the software class, well, I don’t know if you’ve had this negotiation with them or if you’d be willing to do it. But did they agree to stop harassing you if you would abandon the software class and maybe keep the others are.
Russ Munson 33:21
So Apple has made no requests of us regarding the abandonment of our class, they have focused entirely on this concept of that consumers are going to be confused between our logos so they’ve made no contention regarding us, changing the class and things being better. They have solely repeated to us and reiterated to us that our minimalistic fruit design with a leaf is confusingly similar to their apple. And when we when we got that information, I mean just honestly reads kind of like an onion article. We have a just belief that media is the site with these phony stories.
Jason Hartman 33:59
With the phone.
Russ Munson 34:02
There’s no way that any rational consumer could think this. So we thought, well, when we go talk to Apple, then we’ll obviously be able to straighten this out because there’s more of a story here, then we’re reading in this filing of their son. The answer’s no, there’s not. They’re really contending that pears and apples can’t coexist without consuming, confusing consumers.
Jason Hartman 34:22
Do you know if there are any other examples of other fruit logos that Apple has had problems with?
Russ Munson 34:31
There are. So they have this is not we’re not like a random target here. They have come after. In our research, we found more than 40 other unrelated fruit icons and logos that Apple has opposed the vast majority of which just don’t respond to Apple’s opposition and lose their trademarks. And very, very rarely does somebody decide to fight apple. That’s actually what spurred us on to want to fight apple in this case. It’s so this such a ridiculous claim. And it’s being done over and over and over again, regardless of the fruit, their claims against oranges, bananas, apples, limitless numbers of them, it’s hard to even imagine if Apple were to want us to change our logo, how we can change it in a way that it wouldn’t be violating their, their brand from their perspective.
Jason Hartman 35:21
So I have litigated cases where the other party is just either a crook or a bully. And, you know, I know that if I look at I have resources, I can afford to stand up to them, but other people can’t. And I look at like their litigation history, and I’ve heard the other complaints from other consumers that just never bothered to take them to court. I feel that it’s my duty to do something. Because if you don’t stick up to them, who’s gonna do it? They’re just gonna keep rolling over everybody. So I really applaud you for doing that. Of course, I’m not a legal expert. Neither are you. But this just Seems on its face like to a common sense layperson, that this is an act of just bullying you know, they they’re a trillion dollar plus company. I mean, they know they can just throw their weight around and, and just roll over and destroy companies like crazy. It’s ridiculous. Here’s what this article says, By the way, and I saw this on Newser. Mainstream Media by then. Apple two small startup calling, ditch that logo or else the tech giant Sue’s prepare over its logo. Have you guessed it, a pair? No to small startups. Try not using a fruit logo, Apple might get mad. The tech behemoth has again filed suit over a fruity logo. This time against a five employees startup called prepare that advertises itself with the image of a green pear entrepreneur reports which by the way, entrepreneurs was in a big lawsuit with a friend of mine years ago. And one they bullied him into submission because he was using the word entrepreneur, which incredible wasn’t like it was an entrepreneur. I mean, this is unbelievable sometimes. Okay, and it says now Russell Munson, the recipe apps founder has posted an online petition. You can see the prepare logo here and there’s a link to it and seeking people support, quote, it’s it’s a very terrifying experience to be legally attacked by one of the largest companies in the world, even when they have clearly done nothing wrong on quote. He writes, we feel a moral obligation to take a stand against Apple’s aggressive legal action on quote, his petition has more than 63,000 signatures so far.
Russ Munson 37:48
Wow. It was a few days ago. We’re up to 175,000 now.
Jason Hartman 37:53
Oh, so you’re showing the petition on change.org?
Russ Munson 37:57
Yeah, this is a petition that we’ve we’ve seen Apple actually in received no response to this. In fact, we sent this petition. And we honestly assumed that when they saw the public outcry about this, because millions of people have seen our logo side by side, and nobody is confused, we thought, you know, maybe they’re making this legal argument, really, I think people will be confused. So let’s use our millions of social media followers with our food blog, to run that experiment in the real world. And no one is confused. There’s nobody has gone into an apple store and asked them if they can help them make dinner. It hasn’t happened. So we, we and by the same token, nobody has tried to buy a computer from us since this whole thing came to light and became public.
Jason Hartman 38:45
So you’re not selling many computers with pears on them? Hmm.
Russ Munson 38:48
No, believe it or not. We haven’t stepped into their business at all. Yeah. And we thought that they would respond to this petition saying oh, well, they’re a rational actor in a way and would look at this and say, okay, there’s There’s no confusion. Let’s drop this, it’s not worth the PR nightmare that this is. And we have learned from our attorney speaking with their attorneys that not only are they not dropping it, they’re doubling down, they’ve now filed an opposition against our trademark in Canada as well. And they’re doing their best to make this as expensive and painful as possible for us to keep our logo.
Jason Hartman 39:19
You know, I’m not familiar with the world of the big corporate world, I’ve never worked in a big corporation, I don’t really understand how they operate. You know, you just kind of wonder if this kind of stuff makes it to the desk of like a human who’s actually thinking versus lawyers who are just incentivized to, you know, do their job, right. extract value from people. You know, that’s what that’s what some of you do, like, just Tim Cook, for example, as a human being know about this. And if this makes it to his desk, or a meeting with him, would he just be like, like a rational person and say, you know, this kind of ridiculous I think we should just let this go.
Russ Munson 40:01
I hope that would be the case that if you could get through to other other people inside of Apple, I think they’ve intentionally designed the system so that you can get through. So they have not responded to the comment requests of dozens of reporters who have reached out to them not a single comment requests has been responding to their stances to just ignore this and and left legal pathway with us.
Jason Hartman 40:27
So they have they actually served you with a lawsuit. I mean, the article says they sued you, but I it doesn’t sound like they have Yeah,
Russ Munson 40:33
yeah. So in the trademark proceedings, what they’ve done is filed a notice of opposition, which is a document they filed with the USPTO that we then have to respond to if we don’t mount an aggressive defense of their opposition, we automatically lose the right to use our logo.
Jason Hartman 40:50
And so I had that happen once in one of my trademarks. You know, I have many businesses and my main thing is the real estate business but you know, I’ve other businesses too, and I felt a clothing trademark years ago. In a clothing company that was like 100 year old clothing company, opposed my mark. And, you know, we went back and forth. I spent some money and they finally relented and let us have our mark, because we weren’t competing with them. But that at least was clothing to clothing prices so different, that it just seems like a stretch. Again, I am not a legal expert folks, so I can render a legal opinion. And you know, the law is complicated. Of course, it’s super complicated, but
Russ Munson 41:31
yes, certainly is. And I think there are some structural problems in the law that facilitate this sort of behavior where it puts large companies at an advantage over small companies, probably because that incentivize additional legal fees to be set. You know, Apple can have their attorneys file, dozens and dozens of these opposition’s every year, knowing that maybe 10 5% of the people on the other side are going to Spend the minimum $50,000 that it’s going to require to fight them all the way to the end. Yeah. And it doesn’t matter to them. It doesn’t matter at all. But it matters to those dozens and dozens of businesses for whom $50,000 to defend it is an extraordinary amount of money.
Jason Hartman 42:17
And believe me, it could cost way more than $50,000.
Russ Munson 42:22
That’s the minimum to get something like this, right?
Jason Hartman 42:24
Yeah. Yeah. I mean, apple, I’m sure has the best lawyers on planet Earth. And they pay them a fortune. They have giant law firms with tons of resources, research resources, research capabilities, just, it’s just insane. I mean, the, the, the level at which they can fight it’s like, you know, it’s like the US going to war with some dumb little country that has no military. Right. You know, it’s just, it’s not a fair fight. And that’s that’s the problem with the legal system that says,
Russ Munson 42:55
Yeah. Yeah, that’s a fight that by default, we lose. So there’s no, there’s no option to not defend, you either quit or defend. And there’s no second Review Board. There’s no common sense person that looks at this to see, oh, if you don’t have a case, then you’ll have to pay the legal fees. If you want to take this frivolous lawsuit through, there’s no, there’s nothing there. It’s just just your attorneys lawyer up,
Jason Hartman 43:17
see what you know, you know, Prager, you, or Prager University, sued YouTube slash Google slash alphabet, whatever you want to call them. And I don’t know the status of that case. But they claimed that Google or YouTube was, you know, down ranking their videos in the app store because their videos are conservative and Google, Google is liberal. Okay, as most tech companies are, and you know, I don’t know where they got with that. I assume they probably didn’t get anywhere with it because of the way the system works. And this, they just have everything in their favor with their lobbyists there. They can write law, they don’t have to fight the law. They write the law, okay. When they have lobbyists, an army of lobbyists. Have you and the reason I’m Saying that is because I’m wondering, do you have any inkling or any suspicion that because of this problem, that Apple is down ranking your app in their app store, they control the audience that sees your app? Because they control the App Store.
Russ Munson 44:19
They do
Jason Hartman 44:20
it at least they don’t control the internet. Okay, at least not yet. And so they can’t control who sees your website, necessarily. But they certainly can control who sees your app. And they can in
Russ Munson 44:33
inside of the App Store, we truly have no evidence that they have done anything within the app ecosystem to punish are out in connection with this. In fact, the the message getting out there like the support of hundreds of thousands of people has been extraordinary. We’ve had so many people downloading the app and using it having a good experience that there’s at least we’ve we’ve turned lemons into lemonade hear if I can still say that and just use a friend. I should probably be extra cautious. Yeah, we’ve been able to turn lemons into lemonade here. And I don’t have any suspicions that the other side of Apple, the technology side of Apple is, is somehow punishing us.
Russ Munson 45:18
Which is good. Hopefully they’re not. So that’s, that’s good. I’m gonna download your app right now. So anything else you want to tell us questions I didn’t ask you. You know, just let us know. And by the way, I want to invite any representative from Apple that wants to come on the show and tell their side of the story. Okay. You know, we’re open. I have people that disagree with me constantly on the show, you know that Russ, because you’ve been listening for a while. I have people that I wouldn’t even come close to agreeing with on my show. You know, we’re always happy to hear the other side of the story. You know, anybody from Apple? certainly welcome to come on and tell their side of the story. So go ahead and anything I didn’t ask you.
Russ Munson 45:54
And the only thing I would say in closing is I hope that the fact that there’s somebody standing up to Apple inspires other people to do so, you know, one of our missions, that super healthy kids is to raise healthy kids. And that includes them having healthy social and emotional habits. And one of the main things that’s part of that is developing the character to be able to stand up to bullies stand up to injustice and do the right thing. Even when it makes you uncool or unpopular, it’s going to be incredibly expensive. It’s just important that our world is filled with people who will stand up to bullies to gamble, who are willing to take advantage of other people. And I hope this inspires some people to do the same.
Jason Hartman 46:35
I hope so too. And you know what, the way I look at it in business, is I look at some of these things that I have to do is just inefficient things that really don’t always make sense economically. Sometimes they do. But I look at them as if nothing else. It’s like charity work. Okay, you know, I donate money to charity. And sometimes you have an additional expense. That’s Like for the greater good of the industry, the community, the human race, whatever, right? And, and so I totally understand what you’re saying there. Thanks for sharing your story with us. And I wish you the best. Thanks for sharing your investing story with us. You were on the podcast one other time before talking about real estate investing and how that’s helped you. So, you know, but this is more about the pair, the apple Who would have thought, it’s not David and Goliath, it’s the apple in the pair.
Russ Munson 47:31
So believeable was a pleasure to be on. I really appreciated all of your advice over the years, and there’s a lot of wisdom in your podcast and it’s been a real benefit to us and helped us create a financial position where we can build a business and do the things that we’re doing. So good stuff.
Jason Hartman 47:47
Yeah, yeah, it’s my pleasure. And I hope that this show does not get censored in some way. What you you have to fear with the powers that be you know, there’s the the power of the world to show elections and just everything to, you know, start or end wars is in the hands of a few giant tech companies. It’s It’s unbelievable the power they have. So, you know, let’s let’s hope they they follow Google’s old saying that Google has certainly not followed. That is don’t be evil, you know, right. All right. Well,
Jason Hartman 48:20
good luck, Russ. Thanks for sharing the story. And by the way, give out your website. Is it prepared calm?
Russ Munson 48:26
Yeah, free care.com p p, e AR like the fruit, calm and stuff.
Jason Hartman 48:30
Alright. Thanks again.
Russ Munson 48:32
Thanks, Jason.
Announcer 48:38
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Jason Hartman starts the show discussing Journey Capture, a Journey tribute band that played during the Meet the Masters event. In the interview segment, Jason continues a two part conversation with clients Sue and Gary Pinkerton. Sue gives some tips on self-management and also discusses why real estate is not a passive investment.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Announcer 0:13
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 1:03
Welcome listeners from around the world. This is your host Jason Hartman and I’ve got a special surprise for you today. You know, we always try to tread new ground occasionally and we are doing that in this episode number 938 Episode 938. So thank you for joining me today. And you know we have meet the Masters coming up on Saturday. It’s just a few days away literally. And I have to tell you something about myself that you may not know. It is something I am not allowed to share on the air with you at risk of a lawsuit. What is this that you don’t know about me? Well, you may not know that I have incredibly good taste in music. I’m a big fan of music. I absolutely love music. We have hired a tribute Japan to Play journey for ESET meet the masters. And I have got the director and the bass player here with me. He is a classically trained, truly professional musician. I’d like you to meet Giorgio Giorgio welcome. How are you? Oh, thank you. I’m doing great. It’s an honor to be here tonight. And we are. So looking forward to the show and providing an amazing experience for everyone. Well, we are looking forward to it too. You know, this is the first time we’ve ever done a musical performance at any of our events, or you know, including meet the masters. We do several different types of events every year. We’re super excited. And you know, when I was looking for musicians, I thought who doesn’t love journey? In fact, I’ll tell you a kind of a funny story. I had a little spot in my life several years ago where I lived right next to ASU and I kind of felt like I was going to college. It was really fun for a little, a little few years. In my life there, I remember I was hosting a big giant party one night. And I had, I don’t know, probably 200 people in my swanky penthouse right by ASU and I accidentally, I fiddled with the stereo system and a journey song was playing, and I accidentally turned it off. And that was a huge, like it just ruin the mood. And one of my friends Darren yelled out the funniest line ever, he said, Nobody ever turns off journey. I thought that was I thought that was a great line. What inspired you guys, Giorgio, to do tributes to journey I mean, such a great band. I remember seeing journey as I mentioned to you in the Rose Bowl years ago with 90,000 people. Just amazing. I’ve seen them a couple times in concert.
Giorgio Giorgio 3:49
Why journey? You know, that’s a great question. Well, interesting enough, just a little background about me, which kind of brings us to where we’re at now. I have a jazz background and I have played a lot of jazz, a lot of fusion jazz. I actually even played with the great Frank gambali, who’s probably the foremost fusion jazz guitarist in the world today. And so, what I love playing along with classical and jazz and conventional contemporary music is I love progressive music. I love music that has great heart and emotion and drive. And that’s why I love journey so much. Yeah. And so what inspired me is years ago, I Tucson journey and the second I heard them, I just fell in love them. I go, these guys are amazing. The music is amazing. They’re so prolific, and they bring you to a better place. I think I’m into a lot of music, but you know, compared to some of the other like, either British progressive rock groups or American progressive rock groups. To me there’s something about tourney that says everyone apart. Yeah, so so I just thought literally got into them and learn their material really well. And then a few years ago, I said to myself, you know what, I want to audition for attorney terrific parent. And so I auditioned with my current group, who audition literally about 15 players. And I got the gig, probably because I knew the material better than probably most of the other ones that the additional people that that came. So that’s kind of how that all came about. And the beautiful thing is, we don’t just play the music. It’s not like playing like if you’re in a top 40 band or something like that. We’re all accomplished players. We all have graduated from conservatories. And we take it very seriously. But we have so much fun in the process. And so I think what we do is our goal has always been to, if you close your eyes, can you hear the difference between the two? And a lot of people have said, kind of hard to tell the difference. So that so that’s an honor. Right? Right. If we’re getting people to that point, then we’re doing our job. Yeah, you definitely are.
Jason Hartman 5:59
Well, you know, I have To tell you, I think that jazz musicians are likely and you know, correct me if I’m wrong about this. I’m not an expert. I’m just a consumer. But I think jazz musicians are probably the most technically talented musicians out there from a technical perspective for sure. I mean, you know, of course everybody has their own taste in music musics a very personal thing, obviously. But jazz is a you know, it’s a it’s a technical type of music. What would that be a proper characterization?
Giorgio Giorgio 6:28
Absolutely. You know, it has so many nuances and different avenues. And the chord structures and in a lot of complex most jazz is very complex. And you know, it’s not just like playing a 145 progression as you would call a music where you’re going to a one chord to four core to a to a five chord or whatever the case may be or another progression is 13625. With jazz, you can go from one you know from a six eight rhythm to a three four rhythm change. Just instantly and so that is quite complex. Yeah. To master that. It takes a while. Yeah. Right. So that’s a wonderful compliment. Thank you. And that’s the beauty of it is to always be challenged and, and be inspired at the same time.
Jason Hartman 7:14
The interesting thing about tribute bands, I mean, of course, there’s a lot of hacks out there that aren’t professionally trained like you guys are. And you know, I can’t wait to see you guys live Saturday night and you’ve done some big gigs. I mean, you recently played for the city of Fullerton in front of 15,000 people and we’re honored to have you play for our little our humble group. But you you’ve done some some big stuff. You’ve got some good stuff on your resume, and I’ve watched your videos and they’re great. Tell us a little bit about some of the gigs you’ve done.
Giorgio Giorgio 7:45
Yes. Well, we did New Year’s, we did a great new year’s festival for the city of Fullerton. There was about 14 to 15,000 or so people. It was a great event very, very festive and had fireworks and you know, but you know, again, A lot of journey fans and we got a really great review from from the city. And they actually are. We’re in the process of scheduling another event so that’s always good when you’re called back. That’s awesome.
Jason Hartman 8:12
And also you open for Eddie money, I believe, right? Oh, yeah, we open for any money and to me tickets to paradise.
Giorgio Giorgio 8:20
Yeah, he’s the funniest guy ever. I mean, he came, it was kind of interesting story. He came into our dressing room after we finished soundcheck and we talked for probably two and a half hours and he kind of talked about these great stories, you know, experiences in his life and how he got discovered. And you know, he was like really just kind of like hanging with a musician, so to speak, a very humble guy, hilarious, really insanely funny guy. And it was it was a great show. And so that was an outdoor event, a huge festival during the summer. And I loved it. It was phenomenal.
Jason Hartman 8:55
And you also got to hang out with journey last year, didn’t you? You went backstage and
Giorgio Giorgio 9:01
we were actually invited to the Irvine Meadows which was the second to last show or last concert of the great before they were called concert venue. And so we actually got to bought it backstage. And the drummer, my drummer from turning captured Scott Brooks and I spent the entire show two and a half hour show. We were literally about six feet away from them in this special area like VIP area, and we saw the whole show and then after the show, we hung out with journey in the green room and talked about equipment and history and experiences. And we met the new lead singer are now
Jason Hartman 9:45
they discovered him on YouTube. karaoke story
Giorgio Giorgio 9:53
Yeah, yeah, the lead singer that superseded Steve Perry when Steve Perry left. He had a voice hit something when happened to his voice. They had to replace him quickly. And they and Neil Shawn, the lead saint lead guitarist, was looking on YouTube videos. And he saw or now Panetta, in the Philippines. He was in a band journey tribute band. And they called him up. And he thought it was a joke. But eventually they flew him first class to I think San Francisco is some Sound Studio. And he was he was in San Francisco for about a week. And he auditioned. And ironically, he didn’t do a really good job the first time out, but they they kept on working with him. And then I think after the second day or third day, he nailed it. And it was, He’s unbelievable. Such great, great energy. He’s very humble guy, too. So he’s really been an asset. I can’t believe he’s already been with the band. 10 years. Yeah, good. So Wow, that’s amazing. Time does fly. Yeah. I want to make sure and we got to wrap it up because we’ve got an interview to do for the rest of the show here. But I wanted to introduce you before everybody comes to see you on Saturday. And I can’t wait to see you guys there. I want to put in a couple requests. Okay, now now listeners if you have any requests for any, any journey songs and they do a few other things too. So my go off and do something besides journey as well, a little bit. I want to request stone in love. And don’t stop believing you got to do this don’t don’t stop believing, of course, right? And we’ll see if all of our investors in the audience can sing. Don’t stop believing, you know. Okay,
Jason Hartman 11:32
well, we will we will accommodate those requests. Absolutely. We could do every decade of the hits from the from the literally from the 70s to the 80s and the 90s. Until Steve Perry left and we even do some Steve Perry tunes just for fun. And then even some of the new stuff with arnelle Panetta so we’re here for you guys. We’re going to do an amazing show. It’s gonna be a memorable night. Yeah, we’re looking forward to it. So everybody come in to meet the masters. Reach out to your investment counselor and tell them your journey request and we’ll we’ll submit them to Giorgio in his group and, and see if they can line those up for you and we’re looking forward to a real good night too. It’s the first time again we’ve we’ve done a musical performance but we really want to make this a part of our events. I’m super excited to have you guys Giorgio thank you so much and you know any anything else you want to say before we jump to our interview for the rest of the show today?
Giorgio Giorgio 12:31
pleasure speaking with you tonight Chase and thank you so much and we are going to rock this Saturday. Awesome. Any of you who don’t have
Jason Hartman 12:39
tickets and want to grab a last minute ticket? Hey, go to Jason hartman.com slash masters Jason Hartman comm slash masters and grab your last minute tickets. We’ve got a few left elite is sold out. And you know, I probably have to say the IP is sold out although I have to check with Carrie on our team on that but but we definitely have Jen admission tickets left, we’re just going to have a great time for three days, it’s going to be awesome. And for those of you who already have tickets, make sure you download the conference app. So you have the schedule, the speaker BIOS, their resumes, a whole bunch of resources documents that we’ve loaded into that. And we’re going to continue to load more documents in the PowerPoint presentations, all kinds of good stuff for you. So be sure to download the app. We have sent you an email with the link to download the app. So be sure to get that Hey, everybody, we got to jump to the second half of Su and Gary and their and their client case study and get to the good part of their real estate investing journey. And I just want to say before we do that, everybody, don’t stop believing. We’ll see on well on Friday morning, but Giorgio will see you in your band on Saturday night. So thanks for joining us.
Giorgio Giorgio 13:52
Thank you so much, truly enjoy edit.
Jason Hartman 14:01
So now that you’ve had some time with these properties and with your portfolio, share some best practices tips, if you will, for dealing with property managers. I don’t think you self manage anything. But certainly self management is probably something you’ve considered. I think the two of you, Sue and Gary have maybe listened to every single podcast episode I’ve done. And by the way, we’re almost at 1000 at the time of this recording, so yeah.
Gary Pinkerton 14:31
I’ve listened to all of them numerous times. Because I’m helping you with kind of some of the flashback Friday stuff. So lots of stuff there. My first comment on the self management Gary, I actually do self manage that four Plex f original property, we self manage that entire building for a while, and I found it to be amazingly easy, and I won’t go too much into mine because Jason and I covered that on a previous episode. My thoughts, I would love to hear yours. One of the things I was going to mention at the end of the journey, Jason is that Susan, as you said, had finished up her full time job, and is now becoming the real estate professional to run our properties. And it’s pretty amazing. But she knows more, and has probably more lessons now at this point about managing the managers than I do. Mm hmm.
Jason Hartman 15:14
Good stuff, Suze, share some of those with us if you would.
SUe 15:16
So we self manage the single family residence in Oklahoma City, because that was a newer construction. And then we still self manage, I believe two of the units in the four Plex kind of just got to where it was time for a tenant turnover. And, you know, we weren’t really clued in on the background checks and you know, all of that kind of stuff for new tenants. So he handed over two units to property management down there. But otherwise, you know, kind of, I just find sometimes you do have to, you know, I’m still spending some time managing the managers, because I find that things will slip through the cracks, you know, and I’ll use our Memphis as an example one of the houses is a section eight property, and we weren’t getting paid the section eight portion one month it was less than the normal than the next month, it was nothing. And it took me to say, Hey, you know what’s going on here? Why is this going on and to get on the property manager and to look into it. And then, you know, that ended up being a four to five month ordeal. And, you know, we got Sarah involved and all that. It came out, okay. But you know, we were good for a couple months. And then you know, now we just had another issue for a month. And so I do find that I can’t just take their numbers and put them in my spreadsheet.
Rea 16:39
You know what they’re
Jason Hartman 16:40
doing? Yeah, you gotta pay attention. But you know what, I’m curious. Both of you have talked and this is one of the things I really value is transparency. And I try to share on my show, and I think everybody that’s listening for a while will completely agree with us. Hopefully, that you know, I’m just really transparent, the good the bad and the ugly because You know, when you are just upfront about it, people’s expectations are set correctly. And I find that makes my life a lot easier. Frankly, I’ll say it’s even for a selfish reason. But to an outsider who’s maybe happened to catch this is the first episode that they listened to, right? And they’re thinking, Well, why would I want to deal with this with all this problem? You know, I’ll just put my money in the stock market or keep it in the bank or something. You know, it sounds like a lot of headaches. Can you guys address that is why would you be excited about it? After all this, right,
Gary Pinkerton 17:35
we’re trying to drive away the competition.
Jason Hartman 17:37
Okay, got it. Got it. You don’t want other investors buying properties? Right? You’re trying to turn them on? Yeah.
Sue 17:44
Oh, I was gonna say it’s because when when you have that month, where everything goes great, and you’re just like, that’s why I do it. Because, you know, had minimal maintenance calls. Everyone paid their rent on time. And then I fully realized like, all my cash flow that month, and I’m just like that There you go. Now it’s like a game, like, how many months in a row? Can I? Can I make this happen? Right?
Gary Pinkerton 18:05
Yeah. And and for me, it’s about one of the things that’s important is that that the investor learns how to keep score correctly. And I’m kind of repeating, you know, something that you’ve talked about a lot. But when you correctly keep score, it’s not just about the cash flow. And in fact, you know, the being able to offset the depreciation of the dollar to offset inflation. It’s huge, especially when you do it leveraged, right. So I talked when we were at Oklahoma City, Jason Hartman university that, you know, the numbers that are on all of these properties that we were looking at are in the 30s and 40%, total return on investment. And that’s actually what we’re still seeing with our properties, because of the multi dimensions of it. Right. And, and so, yeah, you know, your comment about you feel every bump in the road. It’s a fractionalized industry. It’s going to keep a lot of people from joining it, but what
Jason Hartman 18:53
about IT industry is what I’m gonna say. Yeah, yeah. Yeah. One of the things let me just call that Gary for a moment. One of the things I say Is that, you know, this is a common frustration with investors Hey, it frustrates me everyday to is that it’s a very fragmented industry, you know, everybody’s doing stuff a different way your property manager in, in one city will do it differently than in another city. One of my sayings is embrace the fragmentation because that fragmentation is what makes it very difficult for the institutional investors to get into the game. Now, granted, we all know they’re here to some extent, but in comparison to the overall marketplace, the institutional investor component in the business of buying and holding and renting single family homes is like nothing. Okay. You know, you can say, okay, invitation homes has, you know, 50,000 homes or whatever they have now, right? And that sounds like a lot. But in comparison to the overall marketplace of 15 million or so. Single Family property, residential properties owned by small investors. They’re nothing, okay? They’re nothing. Yeah, and if this was not Frank Did like that goldman sachs and Warren Buffett, and every and your Berkshire Hathaway, I should say, you know, or and every other institutional investor would be in this market eating our lunch. Okay. So it’s good that it’s fragmented. That’s what keeps them out. They it’s hard for them.
Gary Pinkerton 20:18
Exactly. Yeah, exactly. What I was going to say is, it’s some of the stuff that I’m going to talk about it that incredible opportunity to talk and tell our story that meet the Masters is that you know, this opportunity for I mean, we are both extremely bullish that we’re on the right path, and that a lot of Americans need to take this path, because it until you develop part of your personal finances that enables you to have consistent passive income and offset any concerns of inflation. You’re never really going to have the ability to go off and do what you want. You know, I mean, there’s no bank account big enough in my opinion, that will do that for you. But if you have something that keeps up with the changing economy keeps up with inflation. It gives you have the freedom to go off and you know, step off the treadmill of life and do stuff you want to do. I mean, the reason we’re bullish on it, I mean, I think Seward agrees because of the freedom that it creates for our family.
Jason Hartman 21:09
Yeah, and pardon my crass language here, but it just sounds better to say it this way. It doesn’t keep up with inflation. This kicks inflation’s ass. It does it in two ways. Of course, inflation reduce debt destruction, which, you know, regular listeners all understand very well by now. But also just leverage basic leverage, because, you know, you outpace inflation on a five to one ratio. It’s a beautiful, beautiful thing. So and then you have other dimensions where you earn return on investment as well. So yeah, good stuff. Good stuff. Yeah. You know, Gary, you just can’t do it. And But see, the thing that I would argue and I’m sure you know, I don’t know we’ve never talked about this before. Over the years, you’ve been clients, but you know, I’m sure you guys have invested in stocks and bonds and done all the sort of Wall Street pooled asset stuff and you You know what that stuff, it’s like, you have to totally pay attention to that.
Jason Hartman 22:03
I mean, anybody listening who thinks they can give their money to some financial planner, or even put it in an index fund, they are crazy, you have got to pay attention that you’ve got to read, you’ve got to learn, you’ve got to watch CNBC all day, even then, it’s so out of your control, you really have no idea how you’ll do. But you know, I always say there’s no such thing as a passive investment. And let me share a small example. This is not a major example. But it’s worth talking about. Even the bank is not a passive investment, because, of course, your money is getting destroyed by taxes and inflation. We all know that. But, you know, I have some bank accounts that you know, I just spread money around in different banks, and, you know, I don’t want to go over the FDIC $250,000 limit. And so you know, I just never do anything with them. They just sit there right I you know, I have a little bit. I admit, I have some money in the bank because I honestly don’t have enough time to deploy it. Okay, sometimes, and I do my real estate investing, I do hard money lending. And so I get this, you know, notice, like, you know that we think your account has been abandoned. You’ve got to sign this letter and fill out this paperwork. Otherwise, we’re going to let this treat to the state. And I’m like, Are you kidding? There is nothing passive here. Oh, like even a bank account. There’s an example. Right? So yeah, right. It’s, it’s,
Sue 23:33
I’m not really
Sue 23:37
we’re off on a tangent here by now but
Sue 23:41
back in
Jason Hartman 23:41
before real estate investing, you know, before Gary got on this kick, and then he got you enrolled in it. What did you do? Were you were you not the money person was Gary the money person or there we both are, you know, were you looking at your 401k and the stock market and that kind of stuff?
Sue 23:57
Yeah, we would both do it. Keep an eye on it. And we were just, you know, kind of mutual funds because, you know, we thought we could just invest in it and not really have to pay attention to it, right? Because you’re investing for the long haul, and we’re not buying and selling, and hurt me now. So that was where we were, you know, put as much money into your 401k as you could, or Gary had the Thrift Savings Plan. And so that was what we did. And then you know, and I know, Gary has told the story before, you know, my parents are retired now, but yet my dad is constantly like, Am I gonna have enough money to make it through you know, he’s only in his 70s how much longer you know, am I going to need this money for and you know, so it just kind of all circles back to not wanting to have to worry as I get older that I’m gonna outlive the money. Yeah,
Jason Hartman 24:48
yeah. So as a as a health care person, that you are you gotta, I’m sure agree with this that the biggest problem a lot of people are going to face and it’s a good one is too much life left at The end of the money because people are sadly, because of obesity and diabetes and all this stuff. You know, life expectancy actually has gone down slightly in America for like, the first time ever, I believe I just read that. But overall, I am I think it’s an amazing time to be alive. And as you’ve heard me say, and I think that that is going to take a real turn with some of the longevity technologies, longevity sciences that are just, it feels like they’re on the verge of making some red majors, right? Yeah, yeah. So yep, better.
Sue 25:36
You know, hopefully, age expectancy will go back up, and then you know, what are you gonna do work into your 70s or work into your 80s or 90s or 100?
Jason Hartman 25:46
You know, like, if you listen to Ray Kurzweil, he says, We’re gonna have things that you know, clean out our veins and arteries. And yeah, it’s amazing. I mean, all this stuff that’s right around the corner. It’s pretty cool. credible good stuff. Want to share any other like another best practice before you go and let’s kind of wrap it up or anything I didn’t ask you about that you want to share?
Gary Pinkerton 26:08
Well, Jason, most importantly, I just wanted to say thanks for having us on. Thanks for helping lead us through this journey of five to six years. I mean, it’s been just incredible for us. Like we pointed out earlier, we shared some complaints but I think that’s because we’re type a people and you know, your mom has commented once and you’ve laughed about we’ve laughed about numerous times your mom’s comment that she complains all the way to the bank about her section eight tenants. Yeah. But you know, at the end, when you look at those B class or even your C class or and the a class will be at the end of the year, if you spend time to actually keep score correctly, you’ll be amazed at the impact and then everything got so much better with the new tax changes. So I’m very very bullish on this. I can’t wait to you know, kind of share our experience and talk about what I do you know, meet the master. So this next couple of weeks coming is going to To be amazing.
Jason Hartman 27:00
Yeah, good stuff. Well, thank you so much for sharing Sue Gary, we really appreciate it. It’s always great to have case studies. our listeners love it. And they love to hear from real people that are doing real stuff that have real challenges, real highs, real lows, you know, you know, it all kind of works out in the wash. So, you know, I think the key, the key thing is just understand, go in with realistic expectations. There will be problems. It’s just part of life. It’s, you know, we’re all adults. We know it’s not all a bed of roses. Hopefully we learned that by now. And God, you know, you just got to be persistent and work your way through it. That’s what you do with anything that you want to see come to fruition. So, so thank you both so much for sharing with us today. We appreciate it and we’ll look forward to seeing you as soon as meet the masters. Thank you. Bye.
Sue 27:52
Thank you.
Jason Hartman 27:54
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. Welcome to meet the masters of income property investing. I’m your host Jason Hartman.
Announcer 28:48
Join us in beautiful La Jolla, California on January 12 through 15th This is your chance to meet the masters of income property investing. Learn from an amazing collection of experts All in one room, you’ll meet a ton of local market specialists, mortgage lenders, tax professionals, and investment specialists such as Jeff wires of Myers research, and john Byrne’s real estate consultant. Learn from Robert Kiyosaki Rich Dad advisors Ken McElroy, his real estate investment expert, and Garrett Sutton is attorney who specializes in asset protection. Find out what leading economists are predicting for 2018 including Danielle DiMartino. Booth, founder of money strong LLC, and Andrew zachman. From Moneyball economics. here from leading entrepreneurs how to maximize your income streams. You’ll learn unique financial strategies from Patrick Donahoe of paradigm life and how to give birth to a brand from Brian Smith, founder of Australia brand. This year also features a very special guest, Dr. Ron Paul, former congressman presidential candidate and speaker On advocate of liberty. Right now you can upgrade your ticket to include VIP access and a dinner with Dr. Paul. Enjoy a fine dining experience and fascinating conversation. Seats are limited so upgrade your ticket today. Ask questions and learn why real estate is the most historically proven asset class. Armed with new information, you’ll have the confidence to take massive action. As the saying goes, don’t wait to buy real estate, buy real estate, and wait. Surround yourself with like minded people and build friendships that will last a lifetime. share strategies and tips with other investors and hear about their successes and struggles. Make 2018 the year you decide to achieve your dreams. Real estate is a proven way to create true wealth within your lifetime and achieve long term financial independence. Don’t wait. Join us in La Jolla. reserve your seat today.
Jason Hartman begins today’s show illustrating the effects of inflation on investments. Later he discusses the upcoming Meet the Masters of Income Property event and what participants can expect. In the interview segment of the show, he hosts Sue and Gary Pinkerton to go over their real estate journey. They discuss why they started investing and how their first property went terribly wrong. Even with that negative experience, they continued strategizing mortgage sequencing and later describe successes they have had.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Announcer 0:13
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 1:04
Welcome listeners from around the world. Thank you so much for joining me. This is your host Jason Hartman with episode number 937 937. As you’ll notice, the last episode in your feed is not really an episode, it was just an announcement about our upcoming event. And I want to just say, thank you all you are really testing us. You’re making us work hard with all these last minute registrations. You know, you try to order the name badges early, and get everybody in and then you get 20 more people that want to come at the last minute. Are we the only real estate conference going on in town? Or this year? I don’t know. It must be maybe we’re just the best. Yes, we are just the best. Anyway, we are honored to have so much attendance and have all of you coming. If you are joining us this weekend, and I hope you are Be sure you check that last episode. And also check your email because you received an email from us with the app download link. Great little handy dandy app, a lot of you have already downloaded it. We can tell because we’re watching, yes, there is no privacy anymore. We can tell how many people download the app, and what pages they’re most interested in, in that app. By the way, I want to tell you, there is a lot of stuff in that app. So make sure you go through all of the different pages and the documents we have up there. And we will keep adding to them in real time. So one thing that’s interesting before we get to our client case study today, but I just thought I’d share this little article. It’s about technology. And the two companies that really revolutionized the world of technology are of course, well, there are many, but the two famed companies that started in garages in Silicon Valley, Well, you know what they are? Well, actually a lot of companies started in garages in Silicon Valley. Hewlett Packard was one of them. But that’s not who I’m talking about. I’m talking about good old the to Steve Jobs and Wozniak with Apple Computer. And then Bill Gates and Paul Allen with Microsoft. Right? Well check this out. A little article that I thought was interesting. It was about how Apple is going to do a code release. And I guess they’re going to release the code of their big flop. What was their big flop? You ask? Well, it was back in 1983. I remember this as a kid was Lisa, the Lisa computer. It was a big flop named after Steve Jobs daughter. Hopefully he likes his daughter better than the the computer. At the time. I know he had a strained relationship with her and, of course, the late Steve Jobs we are talking about obviously, but what’s interesting about it is this when I read this article, I wasn’t thinking of Real Estate Investing, or anything like that any of the great financial stuff we talked about, but it’s this right? So the Lisa computer adjusted for inflation today would cost you ready for this? It would cost $24,700 in inflation adjusted dollars. Now that’s only based on what it’s based on the official rate of inflation. So think about it, folks. I have a feeling that almost but not all of you, almost all of you listening, were alive with us in the world in 1983. I’m just guessing. Okay. And as such, you can think about this right. The example I give a lot on inflation and do stet destruction is based on a 1972 homebuyer and they were living in their home, and you saw the way they just massively benefited from inflation. And Pat, in fact, in that example, which we might talk a little bit about this weekend that meet the Masters in that example, they literally got paid. They got paid to live in that house for three decades, while they have that mortgage at 7.37%. And if it’s a rental property, it would have been dramatically better. So, a lot to know about that. But that’s just interesting. You know, most people hate the passing of time. And I mean, that in the sense that look, you know, we all have to surrender the things of youth, right? Our bodies don’t work as well. We look in the mirror we don’t look quite as good as we used to, you know, that’s, that’s the whole reason I’m doing this so that all of you can retire. While you’re still good looking. Hey, I’m a little punchy, because, well, it’s so dark. Count, it feels so late. It’s not really that late. Alexa, what time is it?
Alexa 6:05
It’s 8:23pm.
Jason Hartman 6:07
See, it’s not even that late, but it feels late when I’m recording here anyway. So yeah, I get a little punchy later in the day, right. But you’re thinking that’s the way it is all the time. Okay, so one of the things I will be sharing this weekend that I’m really excited about, I’ve been working on it for a few days now, is these core beliefs that we all need to have as investors. You know, back in 2004 2005, I released my 10 commandments of successful investing. And then years later, I added another 10 so we have 20 official commandments of successful investing now. Well, I thought I’d do something a little more random at this upcoming meet the masters and just release a whole slew of core beliefs and I’ve been jotting them down all day today for you Well, not jotting, typing actually. You know, what’s a shame my teachers in school when I was in school back in the day, they used to say I had such good penmanship. And now when I try to write something freehand, I can’t even write anymore. It’s terrible. Because I type everything. And you know what’s even worse about that? I suck at typing.
Jason Hartman 7:24
I am the slowest, worst typist ever hunt and peck method. It’s a disaster. It’s really bad. So another reason that I appropriately hate email is my lack of typing skill. Yes, I did not know that we would need to type as much as we do. Okay, anyway, rambling here. I apologize. Let’s get back to work, Jason and get back to work. We’ve got a really good case study today. We’ve got a husband and wife case study today. Yes, we’ve got both of them on the show. So you can hear two points. View. And that is Gary Pinkerton, our client who has been on the show a couple of times, but we brought his wife Sue on the show as well. And so I think you’ll really like this interview now, I must warn you, I must tell you something first that he reveals, but he did not reveal it, Gary, I’m talking about he did not reveal it in this case study right away as you’re hearing their real estate investing story. The first house they bought, that did not work out very well. They didn’t buy it from us. Okay, that property, they did not purchase it from us. So I was glad to hear that. But I do remember. And as he started talking about the story, you know, I probably talked to him about this years ago, but I forgot and we just did the interview. You know, I must admit that I almost almost never prepare for an interview. you’re all thinking I can tell. That’s why your show stinks. It’s terrible. Okay, well, I don’t know, most of you keep listening. So I guess you like my stinky show. So yes, I’ve only prepared for a few interviews over the years. And one of them was the first interview with Bill airs. Yes, domestic terrorist, the man who made Obama interesting interview nonetheless, that was a really interesting interview. I think it was one of my better interviews. And I did prepare for that one, because I really didn’t know enough about the guy, the guy that they said made Obama. And you know, I’m certainly not an Obama fan. But I wanted to, I really wanted to dive in on that interview and see what he said. So I did actually prepare for that one a little bit. A couple of others. I did a little research before interviewing the guests. But I did not talk too soon, Gary at all before this interview about what we would talk about, we just dove in and started yapping away. He does reveal that he he purchased this property from another party outside of our network. But what’s interesting about that, is that we actually He tried to work with this same vendor for a very short time years ago, the guy in San Antonio and I was he was talking about it, I knew who he was talking about. So yeah, interesting point, small, small world. For better or worse. It is a small world, especially in my business, this little cottage industry of dealing with income properties nationwide, very cottage industry, not many people in it. Very small world, very hard to find good local market specialists. But when you download the app for this weekend’s conference for meet the Masters, you will see the list of a bunch of our local market specialists who are attending and at this upcoming event. We have more than ever, we have the largest group of local market specialists ever and Why? Well because we really have to do our job. And essentially our job? Well, one of our many jobs is to be a turnkey property aggregator. That is our role. Well, it’s one of our many roles, in addition, providing education support, and a terrible podcast. Okay. So, you know, we’re the host gets on tangents all the time. That is one of our big jobs to be a turnkey income property aggregator right, and to line these properties up. So in order to assemble enough inventory of properties, for all of you who are coming this weekend, to purchase to find good investments, we had to invite a lot of local market specialists. So yeah, you’re gonna see quite a crowd there. But the nice thing is this time, we’re doing it better because we have almost 300 people for this weekend. It’s our biggest ever. We have exhibit spaces for them. You can sit down at their desk spot with a table, you can go over documents, paperwork, pro formas, we’re going to be putting performers and PowerPoint slides from any of the speakers right into the app. So that’ll be super duper handy for you. And remember, we are live streaming this event. So if you can’t make it, get a live streaming ticket. Now, let me tell you, just a couple quick things before we get to our client case study today and our guest, Sue and Gary Pinkerton. One is that we will live stream this weekend, and you can buy tickets for the live stream at Jason hartman.com. Also, you can grab a last minute ticket to come in person, we would love to see you in person. That’s always the best way to do it. And several of you have asked they’ve said, Well, I can’t come. And you know what, I can’t watch the live stream because I’m busy that weekend. Well, yeah, that’s why you can’t come I get it. I get it. I get it. So will we have a product that you By where you can, you know, watch all of the sessions and all the speeches and so forth, and get some materials and so forth like that, I want to say 85% chance, we will have a product that you can actually buy after the event. However, I do want to tell you one thing, we do not have the rights to include ron paul in that product, in our negotiations with his people, we could not obtain the rights to share his talk on any products like that. So that will be the one thing missing. You will see Ron Paul, on the live stream that we have the right to. And then of course live you can obviously see him if you come in person, but on any product. It will exclude Ron Paul, but it’ll have all the other sessions. So I just want to let you know that look for that in the future. And, hey, I am rambling again. So let’s get to it. Case Study and hear how they really did a great job on their path. As real estate investors, they are building their own Empire right now, over the last several years they’ve been doing it they, I believe came to our first meet the Masters in 2011, I want to say but they’ll tell you on this interview, had a very hard time with the first property like I did with my first property that I purchased at age 20. You know, just decided that this is the right thing to do. And they kept going, and they turn that property around. And there are other properties have been good experiences, and they are really doing a great job at it. So I’m very proud of them. And without further ado, here is the interview. Hey, it’s my pleasure to do another client case study today and you’ve heard from one of our guests, but Not the other. So we’ve got a husband and wife, real estate investor team here today, and it’s Gary Pinkerton Captain Gary Pinkerton, who you heard from before on the show. And then his wife Sue Pinkerton. And they are 49 and 47 years old. They met in Connecticut where Sue grew up. Both of them are engineers. But Sue also became a nurse. They’ve got two boys, Jake and Ryan, Jake is 16 Ryan’s 13 at the time of this recording, and they’ve got 17 properties in five states, they’ve got two more under contract, which will bring them up to 19. And then I guess another one is being built. So that’ll be 20 and all with our primary residence. I want to talk to them today about their real estate investing journey, but also specifically about something they are doing a very good thoughtful job of, and you’ve heard me talk about this several times over the years, but that is the topic of mortgage sequencing. They are doing a very good job with mortgage sequencing. So let’s Go ahead and dive in soon. Gary, welcome. How are you
Sue 16:02
are doing good. Thank you.
Gary Pinkerton 16:04
Thanks, Jason. Always good to be on your show.
Jason Hartman 16:06
Good to have you on the show. So what kind of engineer Are you
Sue 16:09
have a chemical engineering degree from Villanova?
Jason Hartman 16:11
Oh, fantastic. And Gary, are you mechanical engineer or electrical? Or what are you
Gary Pinkerton 16:17
mechanical? And then I got a nuclear engineering after that.
Jason Hartman 16:20
Nuclear Engineering. How cool is that?
Gary Pinkerton 16:23
I learned how to build nuclear reactors that’s really, really useful in America today,
Jason Hartman 16:27
you guys are really doing a great job of accumulating properties and building your portfolio. So hats off to you on that. Like I said in the intro, the mortgage sequencing is something we got to dive into, but first, so can you tell us a little bit about what inspired the two of you to get into real estate investing? I think you came to us in 2011 bought your first property then and and then attended your first meet the Masters in 2012, if I’m not mistaken, but give us a little background.
Sue 16:55
So I think Gary was kind of the first one to spearhead that I’m not sure what really turned out onto it. But he he was ready to, you know, kind of jump in with both feet. And the first property we purchased was a four Plex in San Antonio. And then I believe he went to meet the masters. So then he was kind of all in our first property was a huge disaster doing great now really good now and kind of if we could have seen into the future, we probably would have bought a couple more. But, you know, had a really rough road in the beginning. And I’ll admit, you know, I was the naysayer, I’m like, this is not gonna work. This is ridiculous, because the experience was really bad. And you know, Gary’s like, Nope, I’m not, you know, I’m sticking to it. I’m following these this guidance. And, you know, here we are, what, just a mere five years later, and I have 10 properties that I’ve purchased in the past two years. And you know, Gary’s almost fulfilled his 10 for the mortgages. So, you know,
Jason Hartman 17:50
I got to tell you something to comment on your first property. My first property was a disaster too, and I have mentioned this before, at the risk of repeating myself, I just looked back on my life, that first rental property that I purchased that crappy little one bedroom condo on in Coventry lane in Huntington Beach, California. That was a terrible disaster had to evict the tenants. They destroyed the property. I did sell it, and I made some money selling it right away. You know, I just got rid of it after that. And I could have so easily given up I could have just said, I mean, I was only 20 years old after all right? You know, I could have easily just decided, hey, this whole real estate thing is for the birds. It doesn’t work, blah, blah, blah. And I guess you had your first experience was negative in the beginning, but it turned into a positive. So let me just ask you, I know you’ve had some good experiences with your other properties. But the one first property that was difficult, that specific property turned around and that went well later is that we’re saying are you are you talking about the whole portfolio?
Sue 18:54
No, I’m so that specific property. It took a good three years for me Be even closer to four before it finally, you know, really turned around. And, you know, as we look back on it now it’s doing very well it’s in a good area that’s continuing to grow. And, you know, we would say, oh, we’d like to buy more, but now we’re kind of priced out of it. So
Jason Hartman 19:17
yeah, that’s the other thing. If you just simply have the tenacity and persistence to buy and hold the properties. You can almost bank on this cycle. I mean, it’s not a perfect thing. But the cycle generally speaking, I mean, if you ask anybody, as far as appreciation goes, and remember, it’s a multi dimensional asset. So it’s not just about that, because rents a lot of times are counter to appreciating their their appreciation, their non correlating right, as we talked about in the three dimensions of real estate, but essentially, seven of every 10 years are good. appreciation wise, three are bad. So you got a 70% chance if you just hang on You’re going to do very well, right? So if you do nothing else, except just be persistent, and follow that simple quote of mine that I, as always inspired me by I believe jack Paar, who said, success is largely a matter of hanging on after others have let go. Success is largely a matter of hanging on after others have let go. You don’t have to be as smart as anybody else or as lucky or advantaged or have inherited money. Just hang on after others of like, oh, and you’re probably gonna do pretty well.
Sue 20:33
Right? Yeah. And Gary was the one who was he was very persistent because our issues came it was a new construction. So all our issues revolved around the builder and the issues that he was having. So I mean, we didn’t even get to tenants until like, year three,
Jason Hartman 20:49
right. So crazy stuff. Crazy stuff. Gary, any comments on that? Oh, general comments.
Gary Pinkerton 20:55
One thing I think it’s important to say is that that property, I did not get to the Platinum property. Hester and Howard. And it’s what actually drove me to the network. We’ve had problems, you know, not equal to that one. But we’ve had some substantial challenges, even in the last year with rehab projects that didn’t go well, but mainly with bad property management. And those we did get through the network. And the reason I came to your network, is because I spent a lot of time understanding the people who were involved as specifically you. And I felt like I could trust this group, right. And we were like minded. And I believed in the idea that you bring, you know, some weight behind some ability to help us get resolution and you did, and that’s case specifically where we had problems in Memphis. It’s all been resolved, our money was recouped, probably beyond what I expected. So that’s really one of the points I wanted to make is that event, even though it did turn out very well and my wife was very patient with me to get through that it actually did change the course of our investing. And so much quite a bit for the better. And the other thing I want to mention, Jason is all the guys out there and I say this on my on my podcast that you have to listen to your wife’s intuition because it is dead on. I sent her a text once a photo of the property under construction, and it had the builder who turned out to be pretty rough and the real estate broker guy, you know, their version of our investment counselors standing in the picture. I know that I know that we’ve
Jason Hartman 22:25
seen Antonio that you bought that property and you know, we were trying to do a deal with him. And we’re glad we didn’t. But yeah, yeah,
Gary Pinkerton 22:32
yeah. I sent her a picture and she said, Wow, what’s up with those two? They look pretty chummy. Like they’re very good. It’s together nice. And yeah, that’s a weird thing to say.
Jason Hartman 22:40
Yeah. Right on. Yeah. Yeah. Well, women’s intuition is, is very reliable a lot. It’s not perfect. Like, nothing’s perfect. But you know, there’s it’s definitely to be considered, there’s no question about it. No question about it. Good stuff. Okay. So what came next in your journey? So you bought that one in San Antonio. Thankfully, you didn’t buy it from us that way. was a tough one. It did turn around ultimately. So that’s good. And then you just kept buying more now, you came to the your first meet the Masters, I think in 2012. Is that correct? That’s right. Okay. Okay. So that was probably in Irvine, California. I assume that’s when we were doing them there. Right. And then what properties Did you buy next flight? What was after that and and were you were you still buying more? I’m curious. Were you continuing to buy your properties? Well, you were having the bad experience on that first one that you bought from that weasel in San Antonio.
Gary Pinkerton 23:32
Well, like Sue was saying I was moving fast like a freight train. And she was doing a decent job of holding me back. But I did end up buying four properties total, while five properties excuse me five properties. Three were ended up being in St. Louis through the network. The other one that I bought was from the same guy, the same broker, at least not the builder, thankfully, in Houston. It was a model home it did very well. But it was kind of in spite of The real estate broker I used. So my point two and you wanted to get to that mortgage sequencing stuff. At the time, you got more money, I want to say that you could put like 20% down on the first floor, and then you had to go 25% down on on subsequent ones. And I think he could only get six at the time. So I was really, really focused and all the conversation at the time was about buying the most expensive properties early. So I was very focused on, you know, having the higher down payments on the first properties, and that’s why I got that four Plex and then model home, which was a pretty expensive new construction.
Jason Hartman 24:35
Right, right. So let’s talk a little bit about this mortgage sequencing discussion, because that’s one of the things that we really did a lot. We talked a lot about this several years ago, that it was important to, you know, if you’ve got that w two job, you’re an employee, which that’s the what the lenders love. They just love loaning money to traditional employees versus entrepreneurs. And then You want it to be since it was counted on the number of loans, not the loan amount. You wanted to try and stack up the more expensive properties if you could with those loans, right. What’s interesting in this mortgage sequencing conversation is, is how you Gary retired from your career as a Navy submarine captain. And then Sue has, I believe, recently retired from her career. And now you’re in a position where you’re I assume your income now is commission based income, I’m not sure Gary, and then Sue is probably going down that road that way too. So you’ve really done some real thinking about this. You’ve really considered the way you’re going to manage the mortgage sequencing and the acquisition of different properties by different spouses, you know, like you bought yours, and then Sue bought others under her name and talk about that either one of you who wants to take that on
Gary Pinkerton 25:58
Yes, sorry. About how I ended up being the owner of the Jacksonville new construction.
Sue 26:04
Yeah, so well how many you had like four or five, I think right. And then that was about the time you were retiring and going to the commission based sales job. And then I had gone back, I was working part time I’ve gone back full time. And so then that was when we shifted over to my 10. We put our primary residence only in Gary’s name to free up some, I guess I would say leverage for me, and then we bought what four or five and Memphis three in Jacksonville. And then I was supposed to do a new construction in Jacksonville, but we got a little antsy with my leaving my job. And then buying in Oklahoma City actually just bought just before the property tour, but I didn’t see the property at that time. And so that’s kind of my class a premier property in my portfolio. The Jacksonville new construction got delayed. Then So Gary ended up picking up that one just because it was a is a nice looking property and in a nice area down there. So right.
Gary Pinkerton 27:09
Yeah, that’s so you got six in your name in Memphis and then we had the three rehabbed ones in Jacksonville. And all you know, those are great properties. And then there was a new construction in Jacksonville, two finishers out but it was like all new construction, it was delayed a month or two. And when they told me that, I was trying to figure out how to break the news to sue and she calls me it’s and basically the drive that commutes the one hour commute to work was another ugly one and she’s like, that’s it get this last house bought, I’m quitting. And so I said, Well, we need to look for a new property then because this one is not going to be ready. So in the end, I’m a proud owner of a Jacksonville property and she has one nice one in Oklahoma City. That’s how we got into that market.
Jason Hartman 27:49
Okay, so I’m not getting why the Jacksonville thing is like, supposed to be funny. Is it because you didn’t intend to get into another market? or Why?
Gary Pinkerton 27:58
Well, no, it’s just that it was in her name and it was not going to be ready. It was delayed another about a month, a month and a half. And she wasn’t going to work that long, it was clear that she was leaving. So if we were going to get the 10th one, we weren’t gonna be waiting on that property. So I called Aaron Chapman who I absolutely love as my lender. And because I call him the closer and this is an example of that story. I said, Aaron, I understand I’m asking a lot, but we need to move this property from Sue’s name to my name and we’re going to put another one in hers and close it in the next three weeks. And we achieved that.
Jason Hartman 28:29
Yeah, okay. Okay, good. So, so time was the essence to do that below as well. Right? I got it. Right. I got it. Okay, good. Good. Okay. So anything else on the journey of acquiring more properties? And you know, maybe what, what made you pick certain markets or properties, you know, any particular like, did the investment counselor steer you to one or the other or did you kind of what was your thinking about why you should pick Memphis and St. Louis and Jacksonville Over in the and I don’t know, if you own properties in India, I can’t remember where your properties are. But you know what caused you to pick what?
Gary Pinkerton 29:06
Well, the first at the beginning, I really liked the product that was offered in Texas. And so I kind of ended up there plus Texas was a really strong, you know, market at the time. And I mean, it is now it’s just a little overpriced, of course, but then I liked St. Louis, because the numbers looked amazing on the, you know, the BC class properties there in St. Louis. And I learned, you know, that numbers look really good on BNC and, you know, perform often as as high as that, but St. Louis was near where I grew up, and I knew that city very well in Memphis is not that far from where I grew up. But I think so you had some, some strong input, I think on Jacksonville and Oklahoma City, and I think we’re both just kind of comfortable with Memphis, but what are your thoughts on Jacksonville and, and OKC?
Sue 29:51
You know, I kind of take a different perspective when I’m looking at the markets, you know, and I’ll think well, you know, what, I live there, you know, what kind of house would I like to see Or so I tend to go more towards the, I would say the B type properties, you know, kind of more middle of the road, you know, Gary’s very willing to deal with the C class properties and even the older properties. I like something a little bit doesn’t have to be brand new. I just like a little bit newer, you know, so that’s kind of where we went. And, you know, as far as the areas I think, you know, we were just following you and you had been in Memphis and Gary had been on the Memphis property tour, and I think he texted me like, Hey, I just bought this house and there’s a few more that look good. So, you know, we just kind of moving around, you know, following your advice of the three to five areas, you know, and then you know, we like Florida, Jacksonville. I think the three that we bought Gary, those just kind of popped up, right. So we found that we were really looking at, we’ve talked to Sarah and we said that hey, we’re kind of interested in Port Richey and
Unknown 30:53
also Jacksonville. So we like the her parents live here in Florida. We see Florida is one of those markets that has a little bit room for kind of a blend of upside and the cash flow still make sense. But Sara, you know, it was on her radar now. And shortly after that she sent us an option to get three that were kind of come in as a package. So we grabbed those. So, I mean, Sarah has been very helpful. And Sarah and Sue, I think are very similar in what kind of properties they would get. I think I think Sue’s newer stuff is very similar to what what Sarah has in
Jason Hartman 31:20
her port, right? And remember that if you’re listening to this podcast episode, years from now, which you may very well be on a flashback Friday or just listening to the back catalogue. This may all change in terms of markets, and you know that but yeah, the idea is the principles of investing in the psychology of it. Those pretty are pretty darn consistent over the years. I mean, a lot can change, but there are sort of some fundamental I don’t want to say absolutes, but they’re almost absolute, you know, almost I mean, they’re, you know, it’s like the old saying, no rules or laws apply universally including this one. This We’ll be continued on the next episode. Thank you for listening and happy investing.
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Jason Hartman 32:55
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Jason Hartman hosts his mom, Joyce, and a client, Drew, to discuss their respective property management approach. Drew is in the process of going towards self-management but currently uses property managers. Joyce is an advocate of self-management and answers some of Drew’s questions, including those about tenant relationships, longer tenant retention, rent collections, and many other aspects of management.
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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 1:04
Welcome to the creating wealth show. This is your host Jason Hartman episode number 952 952. Today we have part two, with my mother and our client drew Baker. They’re actually both clients. My mom is actually a client. Just so you know, she is the extreme do it yourselfer. And drew has, I believe 10 properties Now in addition to his own home with property managers, I take a middle ground on this, as you know, I think the hybrid approach is the best approach. I do want to mention two areas of potential danger and pitfalls. And this is if I haven’t pointed out enough in this, I do think a hybrid approach is a good idea for many people, not all people. You’ve got to have some experience and you can get some experience by beginning your investment career having property managers and learning from them what they do well what they do poorly etc. Just a couple of pitfalls. Areas number one, occasionally, you will have difficulty with insurance for self managed properties, insurance companies, you know, they feel the kind of safe one size fits all benefit or situation is to just have a professional property manager. And sometimes they require that to get a certain rate. So your rates might vary, and companies might vary based on whether or not you’re self managing. That’s one thing I don’t know if I pointed out in this interview, I do want to point that out. So check that carefully. You know, make sure that you are always when you have an insurance policy, you are filling out applications correctly telling your insurance broker the correct things and you’re not misleading them in any way. Okay, so that’s obvious, goes without saying should go without saying at least. And then the other thing is, I’m the most tender and I guess risky part of this is the turn. I believe it’s the term Over, I think collecting rent on a monthly basis, it’s actually quite easy. A lot is made that it’s a big deal. I’ve never found it to be any big deal. And all the times I’ve self managed over the years, I find that to be the really the easy part, the tenant turn is the more difficult part. And that’s where you’ve got to pay attention. You’ve got to make sure you hire a property manager on an all ecard basis, or a real estate agent on an all a carte basis. And you’ve got to really hold them accountable and make sure they’re doing the things. They meet with the tenant who’s departing. They check the property, they send you photos, they do the final walkthrough as they move out. You make sure the utilities are on in between. If it’s a cold climate, and you may need consider winterizing the house pay attention to that. That’s another area where you know you could have a pipe break or something like that look at I know, we’re talking about all these complexities and difficulties. But look, income property is the most essential Quickly proven asset class in the entire world, you got to know what you’re doing a little bit, you got to pay attention, you know, my philosophy, there’s no such thing as a passive investment. So, you know, just learn a few things, pay attention to a few things and you’ll be fine. Okay? It’s the most historically proven asset class in the world. It’s a multi dimensional asset class, where you earn return in many ways, versus the Wall Street, the modern version of organized crime on Wall Street, where they’re skimming all the profits off the top, and all of the other pooled money investments out there, income property, the most historically proven asset class in the entire world. So that said, note the things that I’m mentioning, so be careful on the turn. Ideally, you’re hiring a property manager to do all a cart, lease up and walk throughs in and out and things like that between tenants. But the best thing is to keep your tenants for a long time. And when you self manage a lot of times, you can do that more effectively than you can with a property manager. And we’ve talked about that over the years. If you’re a member of our j h, you can find out about that at Jason hartman.com. And if you’re a member of that, we have a couple of conference calls where we go in, in depth on self management. And we’ve talked about this many times over many years. There are prior podcast on it as well. So here we are with another one. Today is part two. So we will dive into that. By the way, next week, we’ve got some exciting shows coming up for you also flashback Friday tomorrow. But next week, we’re going to talk about slicing pie, as it applies to real estate investors, how you can equity share and share profits in income property investments with partners and do it very effectively using this wonderful methodology called slicing pie. We had the founder of the slicing pie methodology speak at our venture lions mastermind event in Chicago a few months back, it was quite interesting. So we’re going to talk about it as it applies to income probably I think you’ll like that that’s coming up next week, as well as a bunch of other great stuff. And remember, for the Ice Hotel trip, we got a couple more spots left. Venture Alliance and non venture Alliance members are eligible for this trip. The information on that is at Jason Hartman, ice hotel.com. I know it’s a long domain name. Jason Hartman, ice hotel.com that’s the world famous Ice Hotel in Sweden. This is a bucket list once in a lifetime trip. So consider joining us check it out. Jason Hartman Ice Hotel calm. We’ve also got our San Jose Jason Hartman University event ja to live in San Jose on March 3, check that out at Jason Hartman calm and let’s go to part two of hybrid property management. Here we go. So one more about how you deal with tenants on an ongoing basis. I mean, rent collection problems, repair problems. Those are the things people are concerned about. What else do you want to share?
Joyce 7:10
Well, I have some people, which, again, if it’s Los Angeles, I get all of these vendors from the apartment Owners Association. They just have hundreds of vendors. And they know you’re not dealing with Miss little housewife who stays home teaches and bakes cookies. They know that because you’re part of the apartment Owners Association, that you are going to get a better price. And if you don’t get a better price, you simply turn around and call the apartment Owners Association and tell them about it. So there’s painters, there’s electricians or plumbers, there’s everything. And that is very, very helpful to me for the properties that are in Southern California. Otherwise, you simply have to go online and I also get tell them phone books, which is kind of like ancient things that aren’t online, you always can look in the Yellow Pages and find people, again, you just make those 10 phone calls, and you get a good price. It’s a lot cheaper to help a lot of people come to you and give you bids, rather than you taking three bids and trying to get a decent price.
Jason Hartman 8:26
Yeah, right. So you you get a lot of phone calls.
Jason Hartman 8:30
Yeah, you get a lot of people out to that property. Now, here’s another self, man. Two things I want to say. Number one is, you know, we obviously don’t recommend investing in overpriced Southern California. But these are properties that you bought, you know, decades ago. So you still own them. And I haven’t convinced you to sell them on 1031 exchanges yet and buy 20 more properties. So that’s one thing. We’ve talked about that on other shows, so we won’t go into it here. But the other part that’s interesting is that the tenant when it’s occupied, you’re referring To the tenant turnover in between tenants and the make ready. But when the property is occupied, the tenant does the work for you. It’s amazing to me, like I have literally had tenants in my self managed properties, call me and say, Hey, the air conditioning isn’t cooling. It’s not coming out cold anymore. And I already called, and I got a couple of bids on fixing it. And I said, well just email them to me. And I’m like, they’re doing my work. For me. It’s incredible. They’re at the property. I mean, the nice thing about not living near your properties is you can’t go over and meet anybody. So the tenant or the real estate agent or the property manager hired for all carte services during the tenant turn, or even not. We’ll help you do that. One of the things I’ve done effectively and I know my mom has is I’ve used local service providers like realtors and property many managers to just do things for free. Because remember, you’re a potential customer for them. They want your business, they’ll go over and take a look at your property. Mom, I remember, I was with you one time, when you were on the phone with a realtor who was going to look at your property for you and tell you if the tenant had moved, like you didn’t hear from the tenant, you didn’t get the rent. And so you asked this realtor to go over there and the realtor saw the tenant and handed her cell phone to your tenant. They were like in the driveway or something of you know, talk about that a little bit. They idea of getting people to help you out local people.
Joyce 10:39
Yeah, I can’t remember that too much. But I do remember taking
Jason Hartman 10:45
it was the best
Joyce 10:47
Bond. Yeah, but, you know, lots of times, I will ask a realtor, if I am having I haven’t had problems lately, for quite a long while as a matter of fact, but sometimes when you’re doing an eviction You have to know if that tenant has left or not, because you don’t want to travel there, you know, until, and so I’ll just ask the realtor to go by and take a look and see if the tenant is still living there or not. And of course, that realtors quite happy to do so, because she thinks she’ll get a listing to sell the house, or at least she’ll get a listing to rent out for you.
Jason Hartman 11:23
Right, right. And so there’s a whole army of people out there that are more than willing to help you and provide services to you some for a fee and some for free just as a goodwill gesture to try and get business. Okay, so talk to us about evictions a little bit when a tenant goes bad. I want you to talk about retaining tenants because you have your tenant stay a long time in your properties mom, and then that in the best thing is to retain them of course, and to not have a lot of turnover. But the second thing is to handle evictions. Well, if they turn out to be deadbeats, talk to us a little bit about that if you wouldn’t how you handle those things.
Joyce 12:00
Okay, well, if the rent is not there, first, I have a process server for $35. Do a three day notice to pay rent or quit. And you don’t have to wait the three days. If you have one of those terrible clauses it you know, not late until five days, the first day that the rent is not there in your bank account, you email that form or fax that form to the process server and have that process or service. Okay, that makes your tenant know that you serious on top of everything. And once they get that legal notice that attitude changes almost magically. Good. Yes, you don’t get that rent, within three days. Just start to eviction, because you know what, a bad tenant will only get worse and worse and worse. So it’s imperative that you get Get out as soon as possible.
Jason Hartman 13:02
The concept being you know, you’ve all heard it with, like, if you have children or pets, if you give an inch they take a yard. Right. So, yeah,
Drew 13:10
I have a question. I have a question. You know, I think that that might work on paper. I don’t know how that works in practicality. You know, if somebody I know everybody the dog ate their homework, but, you know, sometimes things in life happened where somebody lost their job, and they need a little bit of flexibility. I have maintained a new philosophy that zero tolerance, it’s an impersonal thing, I’m gonna have to just go through I need to do what makes sense for me. And it’s not constantly making exceptions. But Joyce, is there any flexibility because I think when you have a more direct line of communication with tenants, and you’re being you know, friendly and trying to make them happy as a tenant, since they’re your you know, they are your customer. You’re right, yeah, I mean You can’t just kick them to the curb in every situation. But I don’t know, if you have any flexibility or what how your approaches because my issue with the property man doing it self management style is that if you’re now having a relationship with the tenant, is it awkward at all to raise the rents on them? Because that now feels like you have this relationship that now you’re sort of, yeah, we get it good.
Jason Hartman 14:26
We can through the, you know, how does it feel? So, I’m not maybe that’s like 10 questions in one, but give me your thoughts. Let me tee that up a little bit. It’s counterintuitive, true. It’s the opposite. A lot of times, because the tenant has the pressure of pleasing you, of maintaining a relationship with you when it’s some third party property management company, man, they’re just taking all they can get. They’re gonna ask for everything and object everything when they have to maintain that relationship with you personally. They want to be careful they want To maintain a good relationship with our landlord. Go ahead, mom.
Joyce 15:03
Okay, Drew, there are certainly cases, and especially if that tenant has been there for a long time, that you are certainly going to cooperate with that tenant. What I’m talking about if that this was a new tenant, and if that rent isn’t there, like within, say, the first six months that they’re in your house, okay? You send that three day notice to pay rent or quit via Process Server immediately. And pretty soon, you’re going to train that tenant to have that rent their honor before the first day of the month. Okay? That’s really important with a brand new tenant. But when a tenant has been living in your house for six years, for two years in things do happen. Okay. So definitely you’re going to give some consideration to that tenant. I’m just talking about that you get rid of your property manager. All sudden, the tenant doesn’t pay his rent. Right? So the first six months are really critical.
Jason Hartman 16:09
So it’s the probationary period deal with that tenant. Yeah, you set the tone. Yeah, that’s training them up to your standards. You got to set the tone.
Drew 16:16
Yeah. What I do like about kind of the approach is that you’re sort of training your tenant because I think the issue that I have with the property manager is, even though Jason It sounds like you have a great property manager in Florida, I find it very hard to teach an old dog new tricks these property manager I know and pinion they have their box, and if it doesn’t fit in it, they just are like,
Jason Hartman 16:42
totally agree.
Drew 16:43
Both of your point I think attendance is much more flexible than a property manager.
Jason Hartman 16:49
I agree. And the property manager will lie to you or shade the truth, at least sometimes, and act like it’s the tenant demanding something when it’s really useful. them, because you’re you don’t have a direct line of communication. The other thing I wanted to say a few minutes ago about that concept is that when you make it the responsibility of your tenants to deposit the money in your bank account, you got to have a national bank account, obviously, you know, with a big national bank. But there’s other ways they can do it cozy. As you know, there are other options too, when you make it their responsibility to do that every month, you are on top of it, you are attached to it very directly. And you know, the first is the first, a property manager will, you know, send you the rent on the 20th after the check clears and they process the payment, and sometimes the property managers late and one property manager does one thing and another does another thing. And it just gets all confusing. The way my mom does it, it’s clear. The first is the first there’s 12 times a year that you’re going to look online and look at your account, make sure those deposits are there. And that’s the end of the discussion. It’s just really clear.
Joyce 17:59
Okay, so Look at three or four of my tenants now regularly deposit the 20th or, you know, any time before the for right now.
Unknown 18:11
Yeah, it is funny because I was really kind of happy with one of the property managers because they promptly deposited on the first and what I realized was they were depositing
Jason Hartman 18:21
the prior month. Yeah, right. Exactly. I know.
Drew 18:24
Yeah. Yeah. So I there is there is something to be said about that. Now Joyce, how do you handle you know, raising the rent when you know, you’ve now had kind of a personable experience with the renter and do you build that expectation and early or how does that work? Because you know, one of the properties i have i’ve had a tenant, they’ve been great for five years never complained. And I was a little leery about raising the rent because I hadn’t done so he was never ready. I roll my mind mentality well, you know if you if you pull comps in the neighborhood, You know, it’s not like rents have gone bananas. And there is argument that you know, I mean, I think we’re at the Masters event meaning masters, which was great. I think one of the property managers was talking about, you know, the reasons why tenants leave. And one of them is for, you know, they find something cheaper now, not saying you should never raise the rent in five years, that was a mistake on my part because I wasn’t a hawk. But you know, I’m not sure on your end as far as self managing, and in general, you know, how do you set up that allocation? And what if you What if you haven’t raised the rent, let’s say in a five year period or a few years, like, Is it too late to do that? Tell me what you think.
Joyce 19:43
Okay, Drew.
Joyce 19:46
There’s a good chance you might lose that senate if you haven’t raised the rent in five years, when finally you decide to do that, because again, you have to train your tenants to your way of doing business like the guy to have the rent there. before. First day of the month, and then look, every year your taxes get raised every year your insurance costs more money. And you know what? You’re always going to have to spend some money on a hot water heater, a new refrigerator, a toilet, or whatever. Okay, so you have to have some money paid into that. You have to give him a raise What’s in here? There’s just no question. But the way I do it, is I go on to Zillow and Trulia. And I look and see what the rentals are for the area. And if you can’t decide yourself, call a local real estate agent and ask or call two or three of them. So you get a really good idea as to what the price should be. Now your property manager doesn’t ever want to raise the rent, because they don’t want to have to go to the hassle of finding a new candidate.
Jason Hartman 20:55
That’s interesting. And we’ve had we’ve had the debate about that before as to whether Not, that is the motivation that you just outlined with a lower rent, right? Or the motivation is to raise the rent too high so that the tenant leaves so they can charge you a lease up fee again. And I don’t know what’s true, nobody really does, because nobody knows what’s in anybody else’s head. But I’ll tell you something. When you self manage, you remove any of those kind of conflicts of interest. It’s, you’re going direct. Go ahead, Drew.
Drew 21:25
I want to throw a real life scenario that happened with me, and I think it’s kind of a to the point of the conversation. I had a property and the tenant was unhappy with the management company, I think over late fees, or they weren’t getting what they wanted. So somehow, they managed to find my information. I still don’t know how they did. I asked them and I didn’t get a clear answer, maybe through the county recorders office. They can they can
Jason Hartman 21:51
find it. It’s big data man. They found you can find anything.
Drew 21:54
They called me. Yeah, they called me and said, Hey, we’re unhappy. We’ve had this issue and property managers and getting back to us when they’re charging me a late fee. What do I do Bubba? So I kind of became this like party now added to the mix. So one day it was Thanksgiving. Okay. And it was the night of Thanksgiving. The ceiling fan had fallen off the roof when it was off the ceiling. All the drywall, all the insulation, everything had just dumped in their master bedroom. Wow. Jason is a huge
Jason Hartman 22:31
I never heard of something like that. Yeah, go ahead.
Drew 22:34
Wow. Yeah, well, apparently the builder or the person doing the rehab did not use the correct drywall screws or something. And there was some sort of issue in that regard. That was not meant, you know, was obviously impossible to know.
Jason Hartman 22:48
So what’s the question? What’s the question?
Drew 22:51
Yeah, so the question is, it’s Thanksgiving. This has fallen onto the tenants master bedroom, it broke their TV and you know, They said their their wife was afraid and all this stuff and I’m sitting here having to deal with this, you know, looking at the Thanksgiving dinner going, I don’t even know what to do. The question is, is like, now when I talked to the property management company, they had, you know, hey, we’ll get somebody out there, we’ll fix it. The tenant is like, hey, how much are they charging you? I can have my uncle do this. And oh, who’s gonna fix my TV? And it just became this real weird situation where they wanted Well, that’s that’s
Jason Hartman 23:31
insurance. The TV is insurance. That’s an insurance claim for the TV at least if not the ceiling fan to but the TV is definitely an insurance, you know, that’s their insurance first and your second I can answer that one for you. Okay,
Drew 23:44
okay. Okay. That was taken care of, but I guess that so they want to have their uncle do the job and they’re trying to bargain with you. And, you know, when you have a property management or hiring someone real that’s not part of the that doesn’t fit in the box. So it’s The tenant is trying to kind of cut corners. And you know, I don’t know how to deal with that. How do you do just tell the truth?
Joyce 24:09
The first thing, I think, because you, you have that property management company, that has got to be their responsibility for fixing it. I wouldn’t deal with a tenant because you don’t know the debit from Adam. You have no clue if they’re responsible people. If the guy is a real good, Handy guy, you have no clue, because you’ve never met them and you’ve had no relationship with them. So you’ve got to let that property management company handle that problem. And then I would get rid of that property management company.
Drew 24:43
Yeah, well, my main question, Well, my my, my hypothetical was more like, this is your home. This happens to you. You don’t know their work and they’re trying to bargain with you and my uncle can do the work for cheaper than this other person. I had to do the bid. You know,
Joyce 24:58
the question is it I don’t know. No, that cannot. And so I can’t try. You can’t do that.
Jason Hartman 25:05
Yeah. Because you may have a bigger mess on your hands. That’s another reason for self management. So there you go. Because then you’ll know the tenant, you’ll know who you’re dealing with. I mean, my aunt Joan, who was, of course, another speaker at meet the Masters, you know, she’s got, I think, now like 80 properties or so, and has always self managed everything. But you know, admittedly, what my mom is doing and what am Joan is doing is kind of old school. But I think there’s a lot to be said for it. I think, folks, we got to wrap up. We’ve been talking for a long time here. But the point is, I really believe that the hybrid approach is the thing to do. You have someone help you a property manager or a real estate agent, all a CART services, just to do the lease up. Here’s what they do. Again, let me just say this, okay, because we’ve gone into a lot of this that you don’t need to do while you’re listening. They they handle meeting the old tenant, they do. walkthrough of the property, they send you a bunch of photos, they help you determine what to give back and what to keep from the old tenant security deposit, then if any rent ready stuff needs to be done, and hopefully it doesn’t. But if it needs to be done, they line up the repair people, the painter or the whatever, and they have them get the house ready. And then they do the marketing for the new tenant, they screen them, and they’re responsible for all of this. And then they lease it up and they transfer the keys over. And they By the way, they also give you pictures of the house before it’s delivered to the new tenant. So that you have pictures to see that everything was now fixed, right? And then the new tenant when the next rent is due on the first of that following month, they pay you directly. This is the best system if you asked me, okay, and you know, I don’t do it with all of my properties. I do it with some, but oddly, these tenants they just don’t bug you like everybody thinks. One thing. I do want to close with We didn’t get to the tenant retention question, although drew asked a little bit about increasing rent and Mom, you said that you train people to expect rent increases, which I think is a very good policy, even if it’s a small rent increase, get them in the habit of knowing every year there’s a rent increase. Okay. But the longest tenant and we’ve talked about this on the show before you’ve ever had one of your properties, is the guy that’s been there since 1989. He got a bought the house by now, his mortgage would be paid off, right. But you’ve had some other tenants that stay a long time. What is your average tenancy before you do a turnover and what are some of your other like long tenants Mom, how long have they stayed?
Joyce 27:42
I think 5 6 7 years. Mm hmm. Yeah, it’s pretty typical. There’s an area I believe that valley where the lower class of the tenants and during the 2008 910 11 years, I had turnover because tenants lost their jobs.
Jason Hartman 28:00
So they weren’t they were moving around.
Drew 28:03
Okay, do you think that this style that you have? Does it change at all? Or do you have? Would you have a different approach? If it were in a class neighborhood versus a C class neighborhood? Or Jason, do you recommend? Do you think that you might have better success in a more affluent areas than you would dealing with people that are maybe a little bit more of a lower economic status? When you think about that? affluence? misnomer?
Jason Hartman 28:27
I mean, you know, a and b properties are generally the easiest to manage C and D properties are harder. But go ahead, Mom, what’s your answer?
Joyce 28:34
I think one of the things that you learn when you do the lease up if if the person is handy, or what kind of work he does, and sometimes that counts for a lot or just, I have a tenant in Northport and a lot of things went wrong with that house because it was a really cheap builder. And she It was very intelligent woman and she’d get estimates or she Have her ex husband do the work. And because she was smart, and she was good, I trusted her with a lot of things. And she saved me money. But that only comes with knowing that tenant,
Jason Hartman 29:11
amazingly, the tenant will do a lot of this work for you. And I don’t mean that they’re necessarily swinging the hammer, okay, but sometimes they are, I mean, that they will meet the repair people, they will screen them, they will get some quotes for you. They will save you a lot of time. I mean, I’ve had tenants call around and find the best vendor for me, I’ll end up paying for the thing, but they’ll say hey, I think I found you the best deal on this repair or that repair and this I can do myself, but you know, they’re trying to get brownie points with you. They’re trying to get like extra credit sometimes. And you know, make you know, they’re a great tenant, and you know, they want to help you out. They got to maintain that relationship. When you have the property manager in the middle. It’s not that way. It’s different. So look, let’s wrap it up. We Going on very long. This is
Drew 30:01
why I have I have my last question. Really important. I want to know Jason, would you want your mom to be your your landlord? No. Okay, Joyce Joyce, would you want? Would you want Jason to be your tenant?
Joyce 30:18
Well, I wouldn’t mind if I if I didn’t know him this my son.
Drew 30:24
I had to ask. Sorry.
Jason Hartman 30:24
Oh, that’s fun.
Unknown 30:28
He could afford my rent rate. Yeah.
Jason Hartman 30:31
Oh, that’s funny. That’s a funny question. But the point is, look, if you have a great property manager, they can be worth their weight in gold, a great property manager is great, but a mediocre or a lousy property manager, you know, you might want to consider the self management. I’m not saying it’s for everybody. It is for some people. If nothing else, you learn some stuff from this. We’re gonna have to split this into two episodes because this interview is so long. But I just want to thank drew and my mom. Thank you. So much, you guys for sharing some of the stuff.
Yeah, go ahead.
Joyce 31:03
Can I just say something to drew? Sure, you know, Drew, if you have five properties in, say, Indianapolis or something,
Jason Hartman 31:10
you got six there and four in Memphis? Yep.
Joyce 31:12
Okay. You know, you might really consider just totally self managing, because you could go there when I have to re rent a house. If it doesn’t work for one tenant, they always say, Well, do you have anything more in the area? Do you have any more houses? And in Moreno Valley, I’ve got four houses. So if another two houses up for rent, you know, I can show them that house. That becomes a real good point for you. You would know that neighborhood, you’d begin to know all of the good vendors. And you just might want to just
Jason Hartman 31:46
let me let me say something about that. This is a strategy I’ve talked about. See when you make the mistake like I did of over diversifying, you don’t have that if you’re going to buy or you already have, you know 20 properties 30 properties say that’s your your portfolio goal at this point, right? Don’t over diversify. If you can get 10 in each of three cities, you’re gonna have that what I call the pinball effect, like a pinball machine, right? They can bounce off one and go to the other. And, you know, you can start to actually influence comps in the market and rental rates, ultimately, sometimes. So I think that’s a good goal to move toward. And that’s another thing to think about, folks, we got to wrap this up. We’ve been on for an hour and 10 minutes here. So Drew, and my mom, thank you very much for sharing some of this stuff. It’s been just a very casual discussion today. Many of our interviews are much more formal than this, but I really appreciate you sharing this stuff. So thank you and happy investing to all
Joyce 32:49
good luck, Drew.
Drew 32:51
Thank you.
Jason Hartman 32:53
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 shows. Pacific 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.
Hybrid Property Management Strategy with Joyce and Drew
Jason Hartman brings on two guests, his mother Joyce, and client Drew. THey discuss their experiences with property management. Joyce is an advocate of self-managing and gives tips on how she has become successful at doing so. Drew discusses using a property management as he doesn’t feel ready to step into self-management. Jason brings up the idea of doing both, in a hybrid set-up.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Announcer 0:13
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 1:03
Welcome to the creating wealth Show Episode Number 951 951. Thank you so much for joining me today. This is your host, Jason Hartman. And we are going to do a show with three people today. We’ve got our client drew Baker on the line, and our other client, my own mother on the line. We are going to talk about self management. There are a lot of misconceptions in this area. And I want to clear some of those up today. Drew has several properties. He has property managers for all of them. My mom has several properties, and she’s self manages all of them. So we’re going to go into this great, maybe great debate today about these different concepts and different ways to deal with self management and how that opportunity is available to you. But first, a couple quick reminders and announcements if you were at meet the masters of income property. Thank you so much for joining us for that Go to Jason hartman.com slash photos. Jason hartman.com slash photos and get your photos. And if you are into voyeurism. You can go there too. And check out the photos of everybody else. How do you like that? Check that out. And for the Ice Hotel, we’ve got another registration. Congratulations to Jeff and Shannon who are joining us for the bucket list Ice Hotel adventure in Sweden. We need a few more people to greenlight this trip. Check out the details at Jason Hartman Ice Hotel calm Jason Hartman Ice Hotel calm. Also we’ve got another event coming up a J. Jason Hartman University in San Jose, California Silicon Valley, and that is coming up on March 3 very exciting event. We haven’t done this one in quite a while. We only do these about once a year. Let me just explain kind of the overview of some of our events just real quickly before we get our two guests going. Hear, basically we do a couple different kinds of events. We do our annual conference meet the masters of income property. And at that conference, I don’t talk very much. That’s basically a conference where we have a bunch of different guest speakers. And you kind of know what that’s about, probably because I’ve been talking about it lately. Then we have our creating wealth, one day seminar, okay, creating wealth. And that’s my core content that I’ve been teaching for 14 years. And we’ve had thousands and thousands of people come through that it’s sort of philosophical in nature, philosophies, mega trends on investing, things like that. And then we have Jay Chou. And we added Jay Chou, Jason Hartman University A few years ago, because people were requesting some real interactive content. They wanted to know how do i do the math of investing? How do I keep score? How do I decide which properties to buy in which properties not to buy? How do I figure out the calculations. And so this is a very hands on event where you will need a pen and paper or maybe a pencil, and you will be writing and you will be doing the equations and analyzing investments. It’s a very interactive event. So that’s what Jq is, this is on March 3, early bird pricing at Jason Hartman calm in the events section. So grab your tickets today. We’ve only got 15 tickets available at that early bird price. So we do have a partner on this event selling tickets for us as well. A local Ria Real Estate Investment Group up in San Jose, and so they will be selling tickets as well. These will sell very, very quickly. So Jason Hartman, calm in the event section for your tickets for that. So first of all, Mom, welcome. How are you? I’m fine. Jason, it’s good to have you back on the show. You’ve been on several times. And people always love it when you’re on the show and have You’ve spoken meet the Masters as well with my aunt Joan, your sister talked about the way you guys built and manage your your real estate portfolios. And then we’ve got drew Baker Drew, welcome. How are you? Hey, thanks for having me back. It’s good to have you. Good to have you and drew thanks for setting up the three way call. You know, folks, a lot of things bugged me in life. I complained a fair amount. I know that horse leaf blowers are one of the biggest evils and scourges in modern history, modern life. The other one that just amazes me and shocks me on a daily basis is What a pathetic piece of junk Skype is. We’re talking on Skype now. And it has the world’s worst user interface. And every time they update the program, it gets worse. But it does have a benefit. It has very good sound quality when it works. So I drew had to set up this three way call because for whatever reason, Skype cited it Didn’t want to do a three way call today. It’s mind boggling. Anyway, enough of my pet peeves. But you know what else really annoys me? Maybe you guys will have a comment on this. People that drive really loud cars and motorcycles. I mean, how is that legal? to have these incredibly loud vehicles that I can hear in my high rise when I’m trying to sleep? They make noise, they echo for blocks and blocks around. It’s crazy. Do you guys agree with this?
Drew 6:29
I’ve heard that there’s a strategy behind it to say that they don’t want to get hit.
Jason Hartman 6:3d
That’s for the motorcycles. But how do you explain the obnoxious cars that are modified? And you know, and they modify them so their exhaust is really loud? It’s just obnoxious, frankly. But yeah, I know the safety
Drew 6:46
every time somebody drives by like that. I just look at them and say out loud, Wow, you’re so cool. In irony, because it’s such a joke. It is really a joke, mom.
Jason Hartman 6:56
Now you have allowed car only because it’s an old car. My mom and drew have the same philosophy on automobiles, they drive them forever and get a lot of value out of them.
Joyce7:06
Why should I throw away something that works perfectly?
Jason Hartman 7:12
Well there,
Drew Baker 7:13
I’m just the steady horse. I want to just stick with something and drive it till it dies. And it’s our creature of habit. So why change it? If it ain’t broke? There you go, there
Jason Hartman 7:22
you go. Well, there is something to be said for a rational amount of frugality in life. I agree. But hey, both of you are pretty darn wealthy. I gotta say that much. You both have, you know, had different issues and frustrations with your property portfolio. And that’s what I want to talk about today. Because drew every time you come to me and talk about a property manager problem. I talked to you about how the hardest part of our business is property management. It’s where the rubber meets the road. It’s challenging, and I have recommended to you self management and I would recommend For a lot of people now, look, folks, this is not for the newbies. If you don’t know anything, don’t self manage, right away, learn some stuff from your manager, learn about management. But my mother has been self managing her real estate forever. And I always self managed my local properties when I was strictly investing locally. But now that I invest across the country about 10 years ago, and I’ve told the story many times, I became an accidental self manager of a property I had never seen, and with tenants I had never met. And I still haven’t seen that property. And you know, I have self managed very successfully, actually, several of my properties for years at a time. And the self management thing I think, is really something to consider. You know, in every area of life. Sometimes, it’s actually easier to just go direct and cut out the middleman Sometimes it’s better to delegate things, I admit, but sometimes it’s better to just do things yourself. Right. And with management, audibly, it might be counterintuitive to some except my mother. My mother is an extreme do it yourselfer. That’s what I call you an extreme di wire. Okay? She’s self manages everything and she’s got properties in several parts of the country. So I just wanted to compare and contrast these two approaches for bet. So Drew, you’ve always had managers you started buying in Indianapolis, how many years ago did you start and how many properties do you have now?
Drew Baker 9:37
I started in 2010. And it was sort of a funny thing because I’d saved up a bunch of money to put a down payment on a house in California. And when the prices went in half, I had enough to put about half down for a house. And since I was self employed, everybody just looked at you and laughed. If you were thinking you were going to get a loan, so I took the money and bought investment properties at a state that required cash only deals because they were all bank foreclosures through your network and I’m up to 10. Now, so
Jason Hartman 10:09
congratulations. I picked in Indianapolis and I have four in Memphis. Okay, so six in Indianapolis four in Memphis. And I remember you were buying stuff. I mean, you got some good buys on stuff back in 2010. So did everybody else, you know, of course, and I think the first property you bought I remember that property in Indianapolis. It was about what 55 $60,000 something like that.
Drew Baker 10:32
Oh, Jason, how dare you know, I got some. I got some amazing deals. all the places I bought in Indianapolis were between 40 and 50,000. Wow. Wow. All fairly new construction. You know, I think my prep my crown jewel was I got a four bedroom, two bath 1400 square foot house, you know, built in 2003 and I got it for 40 grand.
Jason Hartman 10:59
Oh my Got it. And so that was that was that was really a class a property, wasn’t it? I mean, it’s an adult in 2000. No, Class B.
Drew Baker 11:07
Yeah, I would say the problem is that with these areas that everything was built at the height, the market sort of evolved where everyone that came in got foreclosed on. So the neighborhood is sort of a little bit destabilized. But you know, build isn’t a build. So you got an A house, but you know that the neighborhood is probably more of a C plus neighborhood. Right? Right. Hey, house,
Jason Hartman 11:32
because because, because they were giving loans to everybody who could fog a mirror. Yeah, absolutely. So thanks for sharing that. And Mom, tell us about your situation. I mean, you were investing all around Southern California. And then you move. And I finally even though you never listen to me, I finally got you interested a little bit in investing in some of these lower priced markets. And you’ve got a couple of properties in those markets. Right. Alabama, Mississippi. Yeah.
Joyce 12:00
I do. And I had property managers for both of them. And the happiest day was when I got rid of those property managers.
Jason Hartman 12:10
I love it. And folks, I want to tell you, you can be free of property managers too, if you want. But there’s an interesting thing and I think I want to, I’m gonna take the middle ground in this discussion between the two of you on one corner, you know, if it’s a boxing match, we’ve got my mother who’s the extreme, do it yourselfer. And in the other corner, we’ve got Drew, who has property managers for all of his properties. But Drew, since I know you, you’ve been a client for many years and a friend before that. You are a do it yourselfer in many other areas of your life. So I don’t think you’re like afraid of doing this but you do have questions about it. And so I’m in the middle of all kind of referee this discussion. And here’s what I want to just start with to make the conversation faster. I do a hybrid selfie. management approach. That’s what I recommend. So the hybrid part comes when you need to get a new tenant, when you’ve got a tenant that is moving out, and you’re between tenants. That is the part where I believe you should always hire a real estate agent, or better yet a property manager just to simply do the lease up between tenants. Now really, you give them a little more responsibility than the lease up itself, okay? Because of course, in order to do the lease up, they need to meet with the tenant who is leaving, they need to get the keys from them. They need to go and say hi to them. They need to do a walkthrough of the house and take pictures and send them to you. So that you see what condition the house is in when that tenant was leaving. And you know, they can help you determine how much of the security deposit you want to give back and so forth. And you need to send the tenant away letter saying, Hey, you know, your security deposit was 1500 dollars, but I kept $300 for this, that and the other thing, and you need to itemize that. And there is, by the way, a time limit on that security deposit letter, I think in California, it’s like three weeks around the country, it’ll vary. So just know that and then you get the real estate agent or the property manager, doing all a CART services, all a CART services, if they’re a manager, okay, where they will screen that tenant, they will take applications they will advertise the property, etc, etc, and you will pay them strictly to do the lease up. Now, if you had a full property management contract, what that would include is them receiving the rent every month in handling everything. Okay? So this is understand. My opinion of this is it should be a hybrid approach. Now, Mom, the funny thing about you, and I loved I loved it. I thought it was hilarious when you said it. You said it from the stage it meet the masters. I think I was bugging you or someone had asked a question about why do you do all this yourself? You do it 100% yourself. You don’t get the help of anybody except maybe some free help from a local realtor occasionally and, and you can comment on that. And you said, Well, I’m retired. I don’t have anything else to do. I thought that was so funny. You carry comment on that?
Joyce 15:24
Well, yes. Because, you know, it just keeps you kind of active in in the game. When you’re retired, you have to go to all these stultifying women’s luncheons and raise money for charity and that is the most important thing in the world. So I like I like to begin business.
Jason Hartman 15:43
Drew, does that just make you laugh with my mom? It’s hilarious.
Drew Baker 15:49
Yeah, I love it.
Jason Hartman 15:51
You’ve got to go to all these stultifying women’s lunches.
Joyce 15:56
I mean, you have to do something with your life.
Jason Hartman 15:58
No, of course not. I
Joyce 16:00
think that’s a little bit boring to me. Yeah,
Unknown 16:03
yeah. Good.
Jason Hartman 16:04
Well, I agree. You know, I have zero interest in ever retiring. You know, I think he’ll the people that live the longest are the ones that keep themselves busy and occupied and stimulated. So I love that you do that mom, I think it’s great. But it doesn’t mean that you need to deal with every little thing on all your properties. But Drew, what were you gonna say?
Drew Baker 16:24
Oh, I just was gonna say I remember one time that’s an April Fool’s. You said you were gonna retire?
Jason Hartman 16:29
Yes, I did. I did write that on Facebook once. Yeah. Anybody who knows me knows that. That ain’t never gonna happen because I have you know, I don’t care how rich I get. I like working you know, you got to do something. You got to stay engaged with life very important thing and in my opinion. But mom, tell us about some of the issues and things that you deal with self managing your I mean, your self managing long distance, and you are the extreme do it yourselfer. Tell us a little bit about it.
Joyce 16:58
Well, let me make it suggestion. First off to drew crew, there is a wonderful organization called the apartment Owners Association in California
Jason Hartman 17:10
and the country by the way, just go ahead.
Joyce 17:13
Okay. Well, the one that I particularly belong to is the one in California, it’s $79 a year. And with it, you can run your credit reports, and every form that you ever need in the world to do everything legal is a part of that association. Plus, they send you a monthly magazine with all sorts of interesting articles. One of them is cases by you know, a landlord eviction attorney, and it’s just fabulous advice. Okay. So that would be that if you’re going to self manage, that would be the first thing I would suggest that you do.
Drew Baker 17:51
Okay. Great.
Jason Hartman 17:52
Apartment owners associations are not just for fun, go online. It’s a old usa.com Okay, so apartment owners associations aren’t just what they sound, the name is a little deceiving. I just want everybody to know that they have these all over the country. My mom happens to be a member of that one just because that’s where she used to live in Southern California where I used to live and spent most of my adult life. Let me just give you a little context here to for the conversation. We of course have sell properties nationwide through our referral network. Drew lives in orange, California in Southern California. My mom and I grew up in Southern California and Los Angeles and Orange County. That’s where both of us started investing. You know, she was investing when I was a kid. And then when I grew up, I started investing there too. And I found it to be very speculative. And I wanted to invest in better sort of cash flow oriented properties. So you’ve heard me talk about that before. But just a little context there. The apartment Owners Association, the associations all around the country that they have Have are for any type of properties. So it’s the name is a little deceiving. If you own single family homes, you know, you can still join an apartment Owners Association. And my mom does everything herself. So she runs the credit for the prospective tenants herself, does the background checks, and you can get that service yourself. I am not suggesting you do this. I think for our investors, the hybrid approach is the right approach to have. So let’s talk about that a little bit. Drew, you have questions and concerns about this. And I’ve said a lot about it. Talk to us about some of your questions and concerns and let’s just answer them for you.
Drew Baker 19:40
The first thing is, is I think it’s important to just basically started off with some assumption that you know that you’re not going to live near the property. I know you guys have some property in Orange County, or at least did or LA County. And it was
Jason Hartman 19:52
I wanted to say By the way, my mom now lives in Gulf Shores, Alabama, so she doesn’t live in Southern California anymore, of course. Neither do I. Okay, so she’s she’s across the country, just so you know. Yeah. But she also owns property in Alabama and Mississippi. And even the Alabama property’s not near her home, but go ahead.
Drew Baker 20:11
Yeah. Okay, so yeah, so you’re not you don’t live near the property, you’re not particularly handy. So it’s not like you can go over there and change the light bulb or whatever. She’s
Jason Hartman 20:19
way more hands than you might think. But go ahead. Okay
Drew Baker 20:22
All right. Okay. All right. Well, okay, maybe we’ll change the light bulb we can handle, you know, doing something more complicated, maybe. And you’re not afraid to make mistakes, you know, so make small mistakes, but you’re very afraid of making a big mistake. And then obviously, there’s exceptions to every rule. So, you know, you have to be flexible, because you’re basically a small business owner when you’re having to deal with a tenant and the tenant as almost like your employee, so you have to have some sort of business he feels to approach this and be successful. I hope so. That’s kind of the assumptions I think are fair to make. Starting off. Yeah.
Jason Hartman 21:00
And Mom, you know, if you didn’t do the lease ups on your properties each time, really, I think the rest of the stuff you do is really quite easy. So I’d like to talk about that. I see, I think the area that, like I said, the hybrid approach, hire a property manager to do the lease up, they will probably woo you, and court you to try and get the ongoing account because that’s the part that’s easiest and most profitable for them, I believe. Okay, but you don’t want to do that you want to have the tenants send you the rent every month. So mom, talk to us about how you do that. I love the way you do it. It’s super simple. You make the tenant responsible for just putting the money in your bank account. And you look online, and you’re really on top of it. You know, every month on the first you look and see if those deposits were made. Talk to us about that.
Joyce 21:56
Well, the first thing before that happens you have to let that tenant know that you are an absolute stickler for getting your rent on or before the first day of the month. And that’s what makes it easy. Well, I do that when I meet with a tenant, of course, you want to let the real estate agent handle that? Well, the first mistake they’re going to make is that they’re going to give the tenant that grace period in the reef. And so when it says, you know, when the rent is due, you cross out that grace period thing and you say zero days, and then you inform the tenant, that the late fee will be $70 if the rent is not there in your bank account rather on the first day of the month, and it is $5 each day until the rent is paid in full.
Jason Hartman 22:52
Okay. Let me say something on this. Let me say something on this. The laws regarding late fees do vary, but yours is actually in Not that bad mom, you’re actually kind of easy about it, remember it meet the Masters, when one of our property managers said it’s $25 per day. And I asked them, and that was in Memphis, by the way. And I asked him, I said, Is that legal? And he goes, Yeah, it’s legal. So, you know, you’re gonna have a tenant pay out pretty darn quick. If it’s 25 bucks per day. That’s expensive. So what you’re saying is that a lot of the leases have a boiler plate in them that say, you know, rent is due on the first and on the fourth, you’ll be billed before Yeah. Which is kind of silly when you got to stop doing that. Yeah,
Joyce 23:35
right. That’s just ridiculous, because that means you’re always going to be chasing your rent, right? My rent are typically in my bank account the first day of the month. Mm hmm.
Jason Hartman 23:47
Right. Okay. What else do you deal with on a monthly basis? Because again, my recommendation in this whole discussion, just make sure you hear me is that the owner the investor, the landlord deal With the tenant on the ongoing monthly basis, but not on the lease up in the screening, I think that’s the hard part. So you delegate the hard part and do the easy part yourself. Your tenants, you know, Mom, everybody talks about how, oh, you’re gonna get a call at three o’clock in the morning that the garbage disposal doesn’t work. I mean, I never get those calls. That’s just complete. Like,
Joyce 24:22
that’s ridiculous. First of all, that’s ridiculous.
Jason Hartman 24:25
Tell us about that. Your tenants bug you all the time. This is what people envision. No.
Joyce 24:30
Yeah. Okay. No, the longer you have the tenant, the less hassles you have with that tenant because they start regarding it as their house and they start fixing things. So you never get those. The garbage disposal is clogged, the toilet is clogged. And besides your lease states very clearly, that any garbage disposal that is plugged up because the garbage disposal works perfectly when they take over the house. That is their response. ability to call the plumber, because they’re the ones that put the bad stuff down. It’s the same thing with a toilet. The same thing with changing light bulbs. The same thing with a yard. They’re responsible for watering for growing, edging, trimming, all of those things are clearly spelled out in the leaf. And you do not get those kinds of calls. That’s ridiculous.
Jason Hartman 25:21
I know. It’s kind of like all the lawyers that talk all about this asset protection, you know, this huge need for more asset protection. You know, what if the tenant does a slip and fall? I have never heard of that lawsuit ever. I mean, I hear people talk about how it could happen. And it could I admit that, but I’ve never heard of it actually happening. Mom, have you ever had a slip and fall lawsuit or has a tenant ever actually sued you for anything other than you know, like a dispute in the rent or an eviction when you’re trying to evict them?
Joyce 25:53
No, they’ve never.
Jason Hartman 25:55
And how long have you owned a rental property for 40 years now? someplace, you know, his stuff is just folklore. A lot of times this is just mythology folks
Joyce 26:05
about 1980. I would say,
Jason Hartman 26:07
okay, since 1980, you’ve owned rental properties and a tenant has never sued you drew questions. Oh, I was just gonna add a point of humor. So my wife growing up the bottom unit, the kind of bottom two bedroom apartment that she she lived in a house where the top unit was the main house and the bottom unit was the granny flat and her grandma slipped on the front porch and had fractured her hip. And her parents said, we’ll sue us because that way you can take advantage of the homeowners association.
Drew Baker 26:43
That’s the one that I’ve only heard of. So grandma.
Jason Hartman 26:47
Okay. So mom with this ongoing monthly, you know, rent collection, repair issues. Do people call you and say there’s some answers cockroaches in my house, you know, send over a pest control company. Do they do that kind of stuff?
Joyce 27:05
It’s not my responsibility to do pest control, planning. And you know, you’ve had the company come in, you know fumigated, okay, type of thing. That is a tenant responsibility. That’s my judgment. Okay. And I will not I had a tenant in Canoga Park, who, after three months, she said, the dog got fleas in the backyard. And I said, Well, most people have their backyard sprayed when they have pets. You know, it’s just not your responsibility.
Jason Hartman 27:38
Yep. So here’s the other thing, Andrew, you know, and all the listeners, I’ve talked about this many times when it comes to the self management discussion. The property manager has an inherent conflict of interest. A lot of good property managers will get complaints on Yelp on you know, online, right? Because they’re tougher. With the tenants, you got to notice whenever you’re looking at a property managers reviews online, who are they coming from? Are they coming from owners or tenants? The property manager is inherently and I feel a little bit bad for them. They’re caught in the middle. So they’re trying to serve two masters and you can’t serve two masters. That’s the rule of life, right? It’s an inherent conflict of interest. So they will tend to maybe be soft on the tenant, costing the investor or the landlord or the owner more money, because they don’t want the tenant to go write bad things about them online. You know, they don’t want to argue with a tenant about stuff so they’ll give your money away. It’s kind of like these liberal politicians, you know, they give other people’s money away so that they can be seen as the nice guy like their frickin Robin Hood or something. You know, it’s it’s ridiculous. Talk about like, the late Ted Kennedy. Oh, he was such a nice man. No, he was a person who stole money from some people and gave it to other people to buy their vote. He’s uh, you know, I mean, how is that generosity? Yeah, everybody’s generous with someone else’s money aren’t they? Crazy? Less we digress. Well
Drew Baker 29:10
don’t let him drag you don’t let him drive you to a party. Yeah,
Jason Hartman 29:13
exactly. So, oh, Haha, yeah Chappaquiddick Chappaquiddick.
Joyce 29:19
Why don’t we talk about if a toilet needs to be changed or some particulars, then you might have in mind drew something.
Jason Hartman 29:30
Drew ask ask the extreme do it yourselfers. Yeah.
Drew Baker 29:32
What what I think the important thing is to say I think we’ve already touched on it a little bit. But Joyce, I’m curious. Step one, you have a vacant property. What are you doing? are you flying and putting getting posters and putting them up in the neighborhood? Yes, you know, how are you executing that to get the tenant if you’re not using a management company? I want to start there and then we’ll get into now you have a tenant. But first, how do you have a vacant property? How are you terming the unit and how are you getting the tenant?
Joyce 30:03
Okay, well, this is because I’m doing this all of my all myself and I come to Los Angeles or I go to Gulfport, Mississippi or I go to Northport, you know, Alabama and before I go there, I line up painters and gardening people because I don’t expect the property is probably going to look kanak ready. And so instead of wasting time, I will call 10 different painters and I will make appointments with them every half hour or so now you can’t control when they show up, but they will all give you estimates on painting that property and at the end of the day, you will know what’s a good price for painting that house and what isn’t. And I’ll also have gardening people show up and tell me getting the place you know shaped up what what this like to close. If you think you’ve got plumbing problems, call and have five different plumbers show up. You handle all of that stuff the first day. And in your phone call prior to ever arriving at the property, you say I will be in Los Angeles on January temps. And I would like to meet with you at such and such time. And if we can agree upon a price, you need to be able to go to work immediately or the very next day, because you don’t want to spend a lot of money on motel bills. So within three days,
Joyce 31:40
have no strangers over the band, because those people want to go to work immediately. Right.
Jason Hartman 31:47
And this is the part everybody that I am saying you delegate This is what the real estate agent or that property manager will do for you in the tenant turn but there’s Magic things about what my mom does I disagree with her doing all this herself. But you know, it’s like her retirement fun, I guess. So, whatever, you know, to each their own. But you know, one of the things I will say is, my mom gets great deals on stuff and drew you get great deals on stuff too. And I’ll just share a personal example. I didn’t even know this I didn’t realize that I have a very good property manager for some of my Florida properties. Okay. You know, I’ve been with this property manager for years. She’s great. Okay. And this is how I decide whether I’m going to have a manager or not. If they’re good, I keep them if they’re marginal or they’re terrible. I get rid of them and self managed that’s sort of how I make my decision. Kind of by default whether I’m going to do it right. And so the other day she reaches out to me I’ve got her trained now to use voxer that’s another thing that makes things very convenient. She reaches out to me on boxer says, Jason, your property on I can’t remember the address, but your property, it needs a new refrigerator and I bought Her back right away. And I say, I didn’t know I owned a refrigerator there. And she says, Yeah, you know, all our properties. They have refrigerators. Okay, well, fine. She says, and it’ll be $870 or something. And I said, That’s ridiculous. I’m not paying $870 for a new refrigerator. I said, you know, maybe we should just go to the tenant and say, we’ll reduce the rent by 10 bucks a month, and they buy their own refridge. And she was like, Oh, no, we can do that. Blah, blah, blah. You know, it’s ridiculous, right? And I said, Well, that’s just too much money. So somehow magically, she finds a better deal for me. And the next deal is, well, I’ve got this one. It was returned this refridge there’s a mom and pop appliance shop here right nearby. And this refrigerator is returned. She sends me pictures of it looks beautiful, looks perfect. Right? And you can get it for $350. It’s basically new under full warranty. It was just returned and my guy will pick it and install it and get rid of the old one for 160 bucks. I said, that’s fine. I’ll do that. But the hundred and $60 is too much. I’m happy to pay 350 for the refridge then somehow that refridge sells out from under me and I’m a little bummed out. Then she finds a new one. Brand new one on sale with delivery included. And disposal. The old refridge included, okay, from I don’t know, maybe it was Lowe’s or something I can’t remember. She sends me the link and the whole price all in for everything brand new, beautiful. refridge was like $460 Isn’t that amazing? Just because I resisted and didn’t accept what she told me. This is one of the things I’m saying, look, folks, I’m a wealthy guy. Okay, I got more than enough money, okay. But why waste it number one and number two, it makes you better to go through the exercise sometimes and push back a little bit. And you’ll be amazed just by asking a couple questions. Suddenly you See $400 It’s amazing.
Drew Baker 35:04
Yeah, one time I had a tenant who wanted a security door, you know, others have wire mesh doors on top of their door because they felt like they heard that there’d been a local break in or something. And so the property management came to me and said, it’s going to be $300 to do this. And I said, Well, if they want to add some security door to the front door, that’s their prerogative. I mean, that they rented it as is. And I said, Well, you know what, okay, I’ll do it. We can add $10 to their monthly rent, or I’ll split it with them, you know, and so they ended up going with a split, and then I thought that was fine, because they’re adding it to my property. So I shouldn’t have to pay for some of that,
Jason Hartman 35:43
in theory, it’ll improve the value of your property. Right. And so that’s the other principle I want to say and Mom, I I kind of doubt you do this, but I’m willing to do it like Drew. I did that deal on that first self managed property in San Antonio, Texas, where I didn’t know the property didn’t have a great garage door opener. And you know, the tenant sends me a note with the rent when my property manager gets out of the business, suddenly I’m self managing by default. That’s how it happened property I’ve never seen tenant I’ve never met. And he says, you know, I’d really like to get a garage door opener. So what I did is I basically said, Look, if you will pay, I think, I can’t remember the amount so forgive the exact numbers here. But I think I made a deal with him. If he would pay like $15 a month more in rent, I would buy the garage door opener, and he actually installed it. He was a super handy guy, and he installed it Now I know what some of your thinking you’re thinking, Oh my God, that’s gonna create liability. You know what if he gets hurt installing it, you’re gonna get sued? Yeah, I guess so. That’s possible, but it didn’t happen. And so here I am basically financing his garage door opener. And in about 14 months, he paid me back for it and I improve the comp, the value of the rent overall. So You know, there are lots of options here. Yeah, make deals. Don’t be afraid to make deals with your tenants. A lot of times they want to improve the property. And you know, improving your property is okay. They’ll help you finance the improvement many times. This will be continued on the next episode. Thank you for listening and happy investing. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman. Mediacom for appropriate disclaimers
Jason Hartman 37:34
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 the 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 hosts Brandon Cook, a young member of the Venture Alliance Mastermind. Cook describes his journey into real estate and insight into his growing income property portfolio. He talks about the challenges of investing and gives us some of the rewards as well.
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 real estate investors, lifelong learners curious people. This is episode code number 971 971. And this is your host, Jason Hartman, thank you so much for joining me today, as we do another one of many client case studies. Now I know a lot of you really like hearing from young people that are doing good things in the world. And this one is certainly one of those. Our client and youngest venture Alliance member Brandon cook. We just realized he hadn’t been on the show before. So he’s on today, and he’ll share his story with you and how he’s investing and started very young and he’s been coming to our meet the Masters event and really all of our events for many years now. I just saw him in San Jose at our Jq live Jason Hartman University live event just a couple of days ago. So he’s on the show today, and I think you’ll enjoy it but couple of housing stats for you some of the latest stats This is from our friends at NAR National Association of Realtors. I used to be a member for many, many years. They publish a lot of stats, you got to take them with a grain of salt, because, hey, they’re out promoting their agenda. So just understand that but hey, stats are stats, I’m assuming the stats are accurate. They do some good research. So thanks to them for this data today. So home sales, home sales are very strong. They are ticking along at a an adjusted rate of 5.38 million looking like what’s gonna happen. The median price is about $240,000 just in December Now remember, there’s always a lag in these statistics, a lag because is it you know, it took so many years for NAR to finally come around. And create a pending sales index which I could never understood what took them so long to get to this, but they finally did it. This is not pending. Remember, things have to close. And then they have to get the data from all of the various county recorders and the places they get data from the MLS systems. And so there’s always a lag time in this stuff, understand, lag, lag lag, the stats are almost always 60 to 90 days behind. So literally, when you’re hearing about housing stats, they are number one, they’re never localized enough. That’s the first problem. But number two, they lag like a whole quarter a quarter of the year. They’re a quarter behind many times. So this is from December. New Home Sales, reporting in at 625,000. When we look around the country, and we look at January, and we look at the median number of days on the market, right? The red hot places are mostly the usual suspects, but not completely, not completely the usual suspects. They are mostly the cyclical high flying markets with glorious highs and ugly ugly lows, lots of bankruptcies and foreclosures during the bad times. And home sales are clicking along at a very very rapid pace in places like the Socialist Republic of California. Washington State very hot Oregon, not as hot but still moving well Nevada where where I live in the no income tax state of Nevada, Utah, very hot Colorado very hot, but oddly ready for this one. This one is outlier, where our friend Rand Paul is from his dad spoke at our meet the Masters event Ron Paul, right. He was one of our keynote speakers. Kentucky, Kentucky market homes are selling in less than 31 days, less than 31 days. And looking around the country, you know, most of the country, it looks like things are selling in 46 to 60 days. That’s the vast majority of the country. So that’s kind of interesting to look at that stuff as well. So what we have coming up in the world, what do we have coming up? Well, we’ve got our first Northeastern event coming up, Carrie and I just got off the phone with our national Yes, we’re moving up in the world. We now have a national accounts manager. We are looking at locations in Philadelphia. We may not pull that off. By the way we may end up in Washington, DC In May, working on event in Washington, DC or Philadelphia in May, so more to come on that. And then also our venture Alliance mastermind in the Big Apple, New York City in May as well, of course, sooner than either of those is the Ice Hotel coming up in just about a month. Well, a couple days less than a month. That’ll be just great. A bucket list once in a lifetime trip to the Ice Hotel in Sweden. So if you’re interested in that, let us know. We may if we’re lucky, be able to get you a room. And ice cold art sweet. Yes. One night in there one night in the warm room. Don’t worry. People don’t die in these rooms. They they live but they are really glorious. It’s just a such a unique thing. Look it up. Don’t google it because Google is evil. Bring it, bring it bring the Ice Hotel in Sweden. And check it all out. It’s really neat. So what is the most expensive market? Well, I just got back from they’re the most expensive housing market in 2017. We just had our Jason Hartman University event there in San Jose. Technically it was in Sunnyvale, but San Jose, Sunnyvale Santa Clara, that Metro. The price of Whoa, whoa, whoa, whoa. $1,270,000 Do you know what the cheapest market is the least expensive housing market? Cumberland, Maryland, weighing in at just $84,600. That actually kind of surprises me. I mean, not in a really blighted area in the inner city of Detroit. I guess not because it’s always a metropolitan area. It’s always an MSA. You know, it’s just like voting districts. Right. You’ve heard the term Jerry. meandering right? Well, the gerrymandering concept of course, if you forgot what it was, you probably learned it in school. That concept is where the Democrats and the Republicans, they will cut things up to try and get the election to work in their favor right? They do this because the republicans absolutely suck at public relations. And they never seem to get their message across the democrats always seem to own the message even though their philosophies the less desirable of the two. Not that either are that great. You must be a libertarian because it’s the only way to be it’s the only honest answer in politics. But anyway, our misnomer that we have a binary system because, hey, the powers that be want us to be arguing with each other all the time, right? They would make you think because the democrats are much better at campaigning, and much better at public works. They would make you think that Oh, those evil republicans are doing all the gerrymandering, right? No democrats do it too. They both do it. You know, it’s, it’s just the way it is. So gerrymandering is pretty much like the essays, but the EM essays, so far as your humble host knows, do not change every four years or every two years in an election cycle. But, but they do cut up in odd ways, where you get good areas, bad areas, maybe that’s the reason Detroit wasn’t the lowest price homes or some funky area and, you know, North Dakota, right, or something like that. Just because, you know, you’ve got a lot of very nice areas on the outskirts of the very bad inner city of Detroit, right. So that’s what happens there. Oh, okay. Well, hey, let’s get to our client case study. And let’s look at young people doing Great stuff. And also remember that we have a junior membership now, a just newly announced Junior membership for the venture Alliance available. Prices nice. So you younger members, we want to get you involved. We want to get your new thinking we want to get your excitement and enthusiasm for life in the venture Alliance. We just think it’d be fun, so that’d be good. We’d love to have you What else? Oh, yeah, book recommendation. I’m always going through tons of books, tons of books. As far as just audio books alone. I probably do a good hundred and 50 of those a year. So average of maybe three a week. I’m always learning stuff. It’s almost like a compulsion and addiction. It’s like OCD. I must be learning. abl always be learning always be learning. Well, an oldie but a goodie. You know, I’m always telling you, you had got away Watch old movies, and you got to watch old TV shows, and even read old books. You got to do this. So you gain a perspective, for many reasons, not the least of which is to watch how far society has fallen. Yes, it is an amazing time to be alive. But in many ways, society is just falling apart. I don’t know whether I should be an optimist or a pessimist. Some days, I just don’t know. But mostly I’m an optimist. So there you go. The famous the late, great, Peter Drucker, the management guru of the century of the last century, right. An amazing, amazing person. You know, I haven’t studied his stuff for several years. I check in with his his works once in a while, and they will live forever because they are brilliant, brilliant, brilliant. Peter Drucker was a brilliant man. No question. Anyway, the effective executive, well, that was really good. Now it’s about management, but really not relating to property management. Or it’s related to corporate management, but it’s also related to self management. And I don’t mean that in the sense of self managing your properties, I mean, managing oneself, right self management, Peter Drucker, highly recommend it. Really good stuff, not about real estate, but about management and life. And it’s interesting to go through that material and it’s just so old fashioned, but in a good way, in a good way, in a very positive way. So Peter Drucker’s effective executive, I would highly recommend, so not a real estate book, but a good one nonetheless. Okay, let’s dive in and talk about a plank case study. Today with Brandon, here we go. I’m looking forward to sharing with you another great case study today and I love it when we have our younger clients, Millennials, Generation Y, that is really making a difference in their own lives and the lives of others, inspiring us to be better investors and, and just better all around people. Brandon cook who is on With me today is our youngest venture Alliance member he joined right as a founding member right in the beginning a long, long time ago. It’s just great to have him here. He’s a fighter pilot in the Navy. He’s the only guy I know that knows how to land and take off on an aircraft carrier. Brandon, welcome. How are you?
Brandon Cook 13:50
Hey, Jason. I’m great. It’s really good to be on the show.
Jason Hartman 13:54
Yeah, I can’t believe that through all the years we’ve known each other that we haven’t had you on the show before. I mean, you’ve spoken a few words here and there, like in a venture Alliance event when we’ll pass the mic around. But we haven’t really done a show about your journey, you know,
Brandon Cook 14:08
like small appearances, but nothing, nothing dedicated then on some of the other, the other shows in the Hartman Media Group, but not this one. So I’m looking forward to a good discussion.
Jason Hartman 14:18
Yeah. Well, it’s good to have you on thank you in advance for sharing your story with clients. And it’s really quite inspiring. Because, you know, I remember seeing you way back in maybe 2009 or 10, eight, nine years ago, maybe more even at some of our meet the Masters events back in the old days. When did you discover my podcast, for example, and how did you get involved with us and what was the start of your interest in real estate?
Brandon Cook 14:45
Well, as far as my interest in real estate that came from reading, Rich Dad, Poor Dad reading some of the other Kiyosaki books and he lists different asset classes. Real Estate interest me the most because it was something I knew I could go on deployments with. It would still kind of keep around and you know, I wouldn’t if I did a small business as soon as I went on my first deployment in the Navy, it fall apart so I was looking for something passive and more proven system. And then that’s how I found you. You were one of the first companies that I basically sought information from, believe it or not, I found you in print. Can you believe that? I don’t know. I don’t know if he still marked it in print at home. I don’t
Jason Hartman 15:26
really not really we we don’t really advertise at all anymore. But what did tell me what you found. I found
Brandon Cook 15:32
an ad it was an ad in in like an Entrepreneur Magazine are so I was in a bookstore and saw a small It was kind of like in the back pages where they put like 12 ads on a page, you know, there was your role there. facia, you know, item properties investor and when I went home and googled you, I think it was Google but yeah, yeah, it wasn’t it was like
Jason Hartman 15:55
this was around back.
Brandon Cook 15:58
Yeah. 2009 Okay. I found the creating podcasts. And when I did I subscribed. I remember the newest show was get this episode 48 Oh my
Jason Hartman 16:11
gosh. So as we speak, Episode 959 is being released today. And you know, I don’t know when the listeners will hear this obviously they may hear away in the future we may be in Episode 1700 by then. But Episode 48 was the first show you heard that is amazing. Oh my god, what was I talking about? And did I make any sense?
Brandon Cook 16:36
It was it was I can’t remember. I mean, it was some of those early shows had a lot more core content, real estate. And I loved it. So I didn’t just start from there. I went to just episode one and just listened through that. Wow, I think it took me to, you know, Episode 60 before I had caught up and then then I was just listening to each one. It was one a week or one every two weeks. back then. And now I’ve been listening to you ever since the first event I went to was at the it was Hyatt Regency in Irvine. It wasn’t in the room.
Jason Hartman 17:10
Yeah, it was in that room. I
Brandon Cook 17:12
remember that. stadiums audience style room. It was it was a side room, maybe? I don’t know. 35 to 40 attendees.
Jason Hartman 17:21
Yeah, yeah. Yeah, I remember that. I remember when you were there. And I think the one you were at was the one where one of our clients and he’s probably listening, and I’m gonna forget his name. Sorry, but he actually made a song. For me. He made a song out of my 10 commandments, and he brought his guitar. And he flew out from I believe it was North Carolina, and he performed the song about the 10 commandments and refi till you die. Like principles. That was awesome. We got to find the recording of that. It was so great.
Brandon Cook 17:53
Yeah, that was it. That was the first event I bought my first property with you. Shortly after that. Meet the Masters in Phoenix, and then just started buying one per year to kind of today where I have six rentals.
Jason Hartman 18:07
Yeah, absolutely fantastic. Okay, and so you’re 31 years old. So young guy, you bought your first property in Phoenix that that wasn’t where the meet the Masters was. I just wanted to make sure that was clear to the listeners. That was back when we were recommending Phoenix. So you made a lot of money on that property because Phoenix went up, we can’t recommend it anymore, because it’s too expensive. Now,
Brandon Cook 18:29
that was a great property. If I could have afforded 10 of them. I would have, you know, obviously hindsight is 2020. But it’s because it was so cheap. way below construction. Nearly half. I mean, I think I remember doing the math, it was like $42 a square foot that.
Jason Hartman 18:45
Oh, my gosh, you can’t do that anymore. Yeah.
Brandon Cook 18:49
And here I am trying to figure out how to get a mortgage for the first time because I’m at this point on 23 I believe 23 or 24 and You know, had never been a renter my whole life and was kind of nervous. I’m like, What is going to happen with this? I’ve never seen this property. But, but honestly, your educational material gave me that confidence to go on. That’s fantastic.
Jason Hartman 19:14
You know, Brandon, you’re definitely one of our youngest clients starting at age 23. I mean, you’re not the youngest anymore, but we’ve got some young clients, but 23 is pretty young. That’s just awesome. That’s just awesome that you, you did that. Obviously, it’s working for you. So that’s just great news. Now, the other interesting thing is, you got your family involved with this. I think you got them involved. Maybe they got you involved, I don’t know. But your mom and your dad come to our events. I’ve met them both several times. And tell us about that. What are they doing?
Brandon Cook 19:44
Sure. So my dad was the first to hop on board the real estate bandwagon. I took him I think my second meet the masters. I took him with me so and he went to nearly everyone after that there was a year To in there that he and I both missed, but for the most part we’ve been been an ever meet the masters. My mom’s more recent. She just came to this last one in January. And as far as properties Yeah, I convinced my dad took him a little bit to act. You know, and I have talked to you about this, I think, at one of the property tours, you know, just said to Jason, my dad, he, he understands the material. But taking that first step jumping into that first property, it’s a big obstacle, big barrier for him. And honestly, I think, especially with your young listeners, that’s probably an obstacle that they have is well, it’s always the first one that’s ours, isn’t it? Yeah,
Jason Hartman 20:42
it is. And, you know, maybe Brandon, you know, because you’re a fighter pilot. Maybe you can draw some comparisons. Of course, everybody thinks being a fighter pilot is like super cool. At least I do. We all saw Top Gun and you know, you guys have this great coolness image being fighter pilots. For sure.
Brandon Cook 21:00
It’s not like the the I can assure you.
Jason Hartman 21:03
I believe you, I believe you. Yeah, I believe I believe that. But I’ve never been able to break the sound barrier and you have so I’m a little envious, okay. I want to break the sound barrier sometime. Here’s the question though, with real estate income property investing getting off out of your comfort zone to buy that first property, that’s the hardest. And I think there’s this tendency among everybody with everything in life is that a lot of us we want to learn about everything before we do it. And a lot of it, you just got to actually do it. Right. Right. You know, can you learn how to fly a fighter jet in the classroom and ground school? No, at some point, you got to actually fly right. And I think there’s some parallels for like first time investors Of course we have a lot of people that aren’t first time investors, you know, that own dozens and others. And dozens of properties now. But the first one, it’s kind of the hardest, you know, speak to that a little bit,
Brandon Cook 22:05
you know, back to the classroom versus getting in the aircraft. You’re absolutely right. In fact, I would say, sometimes we try to do too much academics and not enough execution of what you know, if you like your if you wait to 100% solution and knowledge before you act, you’ll never do anything. And I haven’t read anything that says this, but just a gut feeling is that younger generations and millennials and younger, I think this is going to be a worse problem for those generations because we grew up in the information age where information is so easily shared and you can binge read you can go ahead and knowledge and not in actually execution. So as a fighter pilot, you know, you have to be able to scan quickly. If the solution is there, then you pull the trigger. Mm hmm. You You know employ the the missile or bomb or whatever it is you’re doing. I’ve also heard the other kind of analogy that’s like, people that will aim forever, you know, Ready, aim, aim, aim, aim and never fire. Right. Yeah. So, I guess, with my background with being a fighter pilot going through that training, I think absolutely that helped helps me in my investing, and soon my entrepreneurial endeavors. Mm hmm. Of course gonna become knowledged in what I can, but I’m gonna go for a 90% solution, realize I’m gonna still make mistakes, most likely, but it becomes time to do
Jason Hartman 23:33
Yeah, all real life education and real life training is on the job, if you will. So it’s on the job of being a real estate investor. It’s on the job of doing anything you’ve got to actually do there is a certain learning that comes by doing only and, you know, look, I kind of hate to use this comparison already because it’s a family friendly show. But I’m sure everybody listening has made love before. Okay, could you read about that in a book and understand it? No, you know, there’s no way to read about that academically, right? You just have to actually do it. Right. You know, I think that’s kind of a it’s actually a pretty good comparison. I hate to bring up that, you know.
Brandon Cook 24:20
Speaking of love, you know, it’s Valentine’s Day. You didn’t mention that in the intro.
Jason Hartman 24:25
I know but but they’re not gonna hear. They’re not gonna hear this for probably a couple of weeks.
Brandon Cook 24:30
Do bachelor guys talking to each other on Valentine’s Day? I can’t think of anything more lonely.
Jason Hartman 24:36
I know, man. Life is. Life sucks.
Brandon Cook 24:40
Yeah, Valentine’s Day. Yeah, that’s what all the single guys say. Yeah. Well, I don’t
Jason Hartman 24:45
know. I think it depends. I think as far as the related like the Valentine’s Day episode that actually goes out tomorrow. So you know, folks, you will not be hearing this obviously on Valentine’s Day. You’ll be hearing it in a couple of weeks. Okay. But the Valentine’s Day episode that goes Tomorrow as Episode 960 is a good follow up to when I have the author of the Five Love Languages on the show, which was a good Valentine’s Day episode too. But what was I gonna say about that? Oh, yeah, I think people who are either married or in relationships I’m guessing this is nobody knows, because you never get any real data on this. I think people in relationships and marriages they kind of toe the company line if you will, and they want to be good people and so you don’t really get like honest data about how is it you know, what’s the like, and then there are the complainer they’ll just complain Oh, it’s terrible or my wife or husband this or that. But I think the 20 to 25% of them that are happy are probably like the luckiest people on earth. Because that’s just you know, it’s life’s greatest gift. Possibly, you know, maybe children also. So, yeah, anyway, little sideline there once we get off on a tangent
Brandon Cook 25:58
overcoming the analysis paralysis and acting and and to bring it full circle, although that was maybe an obstacle for my father at first he is in two property area. He owns two and he’s getting into his third right now. And my mom has I think she has one and is in escrow on her second and then my sister with her brother in law are on five or six in Memphis. So yeah, it is a family affair now and it works in our conversations at you know, home for the holidays talking about this real estate things awesome works. That’s awesome. Hey, Brandon, how old is your sister? My sister’s 32. We’re nearly a year apart. Yeah.
Jason Hartman 26:38
So she’s a year older than you and she’s accumulating quite a few properties too. It’s interesting that the kids are buying more than the parents. Yeah,
Brandon Cook 26:48
it’s kind of interesting. Yeah. Yeah. They, the parents were victims of the conventional model. They been employed their whole lives diligently contributing to a money market. It counts and, and of course, that doesn’t really secure your retirement, especially in an inflationary environment. We’ve, you know, come to discover
Jason Hartman 27:08
well, right, yeah, no, that’s definitely what most people do. And we’re trying to talk them out of that, that standard plan. So that’s good. But when you were talking about learning versus doing basically, that’s what it came down to, you reminded me of two things. Number one, one of my favorite quotes, let me see if I can remember it. Because something like this successful people make decisions quickly, as soon as all the facts are available, and change them very slowly, if ever unsuccessful people make decisions very slowly, and change them often. And, you know, that’s the thing when you just go for it to some extent, and you force yourself to get out of your comfort zone to be uncomfortable, you know, and you just get in there and you look, you know, look, I’m a capable person. I’m gonna figure it out. I’m not going to know everything before doing this, there will be some mystery, but I’m just going to jump in and deal with it as best I can. And those are the people that just went in life because there’s just a certain amount of like, extra credit you get from life or, you know, points, you just get a certain amount of points and wisdom from actual action. It has like its own inherent value. And it also reminds me of one of my favorite books by Michael Masterson. That’s his pen name. And I had him on the show. It’s called ready fire aim. And that’s what you were talking about. And I, I heard, you know, one of our clients, Doug Guttenberg, who’s been on the show before and you know, Doug Brandon, yeah, he was in the Navy also. Or maybe it was the Marines I think was the Navy. He talked about how, when you learn to shoot, that’s actually the technique because the way your brain works, and maybe you can speak to this, you actually have to Fire almost before you aim. And I know that sounds completely weird, but he explained it really well to me. I don’t know, maybe you got some of that in your military training, and you can speak to it.
Brandon Cook 29:11
Yeah. Yeah, I also think that what he maybe also talked about there and that example was that you can dry fire or shoot without, you know, pull the trigger, work on your grip, you can do all that without a bullet in the chamber. And you’ll be smooth all day, but then as soon as just the cartridge is is put in the breech and you know, that you’re actually going to send around downrange. It changes your, your technique, it’s like, psychologically, you know that you’re actually going to shoot the gun, and it changes and I see that too with my pilot training as well. We’ll do just dry runs with no ordinance all day as soon as we have ordinance coming off the aircraft or shooting the gun. We don’t fly as good of a profile a weapons delivery profile. So there is that there’s that psychological element where reading it in the book and visualizing it is important. You’ll be a perfect investor in that realm, right? You move actually executing, it’s gonna be different. You’re gonna make mistakes and think back and go. I can’t believe I made that mistake. Right. And that’s okay.
Jason Hartman 30:18
Yeah, we all we got to just do things in life, I always say, and my saying is cultivate rational recklessness. Be willing to be a little bit reckless in your actions, because otherwise you’ll just never take any actions and you’ll be textbook smart. You know, you know, the world’s full of educated derelicts as the same goes, Brandon, what have you learned over the years as an investor as a young investor, share, like any tips, you have any technology, you use applications, organizational techniques, and it just anything you want to share?
Brandon Cook 30:51
Yeah, sure. I learned, man. There’s a lot that I’ve learned that I can’t even think of. It’s, I would say productivity is something I I really, really struggled with early on. Maybe that’s a product of the information age to that kind of lack of focus or not distraction to the idea. So when I initially started investing, I was severely disorganized. I was not keeping track of my books. So I didn’t know where money was going in and going out. And I started doing my own bookkeeping. And I think that is a must. Everyone should either do their own books, or even better you pay someone to do your books for you. Because if you’re going to be a investor and an entrepreneur, you’re more or less you’re making decisions, leadership decisions, and working in teams. You shouldn’t be pushing paper and in the mechanics, that’s not really the life of an investor or a business owner. Real Estate Investing is kind of running its own little business.
Jason Hartman 31:52
It’s definitely a business. Absolutely. Yeah,
Brandon Cook 31:55
it becomes it’s kind of on business. Even if you have property managers, So I think that was it was a mindset shift, I think, for me initially was to learn how to delegate and learn, you want to have good records, and then make decisions based off good reports, you know, so early on doing books and and having my income statement, having my balance sheet and reviewing them once a quarter was an absolute must a, I was stalled until starting that
Jason Hartman 32:26
what we’re using, but it’s, it’s
Brandon Cook 32:31
moving away from again, QuickBooks is the standard and I’m not going to learn QuickBooks, I’m going to pay someone to start doing that for me, but it’s into it as well. So it’s gonna move over very easily. And I just recently started using the property tracker as well, so I can actually track more investment specific.
Jason Hartman 32:48
Yeah, so So in other words, Quicken or QuickBooks is used for the General Accounting, but property tracker is used for the specifics of managing the real estate itself, managing the leasing calendar, the insurance calendar, you know, the taxes, you know, helps you do your taxes. It’s just a great tool. I love property trackers. So that’s that’s good. Okay, good. Well, we got to wrap it up. But you know, just any other comments you want to share with our listeners. You know how why to do it. We want to talk
Brandon Cook 33:19
about pension Alliance.
Jason Hartman 33:20
Oh, that’s right. Thank you for the reminder. Yes, just quickly, with Brandon’s help. So thank you, Brandon, for helping on this. You were one of our founding venture Alliance members, we developed a junior membership to welcome some younger blood into the venture lines. So if you are under 35, you can join the venture Alliance now for $5,000 per year rather than the normal fee of 8000. For two people, it’s 7000 per year if you’re under 35 versus 10,000 for the normal fee. So Brandon, hopefully now you’ve talked to a couple of our clients about this right
Brandon Cook 33:58
now I have it Oh, okay. Nice. Yeah, no, yeah. Okay. Now Yeah, I had some issues with contact numbers. I had a number that was bad and, and I was looking to get another couple. So stay tuned for some of you I will be reaching out just to explain how much value I pulled from being in the venture Alliance and also answer any questions about kind of the normal flow of our weekend and things like that. And I, I didn’t mention that in my case study earlier, but I was able to join for the very first event and it was very valuable for me to surround myself with other business owner who will really with business owners because I don’t have any business other than my six rentals. Being an entrepreneur is about being creative and about surrounding yourself with others and overcoming obstacles. And that’s all you know, all we talked about at the venture alliances. It’s a positive weekend. It’s a positive event. And so I’ve felt honored honestly to be in the presence of the other members. And I thought, well, this would be a great opportunity if, if more younger of your clients could get on board. Yeah,
Jason Hartman 35:06
we’d love to have more younger investors in the venture Alliance. That’d be great. And venture alliances our elite mastermind group. It’s a lot of fun. Brandon, you joined us at our first event in San Diego. You went to Dubai with us and Jekyll Island in Newport, Rhode Island. You’ve been on all the trips, right? Have you missed any of them? I miss Chicago. Chicago trip. Okay,
Brandon Cook 35:29
God, I came in for the last day. That’s right. Yes, I had another weekend engagement. But yeah, other than that, I’ve made every single event. It’s been fun.
Jason Hartman 35:37
Good, good stuff. Well, thank you so much for being involved in venture Alliance. And if your peers are out there listening Brandon, your younger peers who are interested in real estate investing and entrepreneurship and and just having fun and going on neat trips. And you know, once in a lifetime experiences, join us go to venture Alliance mastermind calm, Brandon. Thank you again for coming on and Sharing your your story and your case study with us. We appreciate it. appreciate being on as well Jason, thanks. Happy investing.
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Jason Hartman starts the show discussing the lack of affordable housing. Supply continues to drop across the nation. Jason gives his advice on how to profit from this. In the interview segment, Jason continues a two-part interview with Scott. Scott gives us insight into how Jason’s network helped him complete his 1031 exchange. He also tells us about the difference in self-management in office space versus residential.
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 listeners from around the world. Thank you so much for joining me on a windy day from the Windy City. Do you know what the Windy City is? While most people think it’s Chicago, I disagree. I think it’s Las Vegas. It is windy today. Beautiful clear. Not too cold or cool. It’s a little bit cool just ever so slightly cool I should say it’s in the 60s. And it’s gorgeous out but it is windy. Las Vegas is the Windy City. I’m telling you. We are going to have 30 mile an hour winds today. So I Love it. Love it. Love it. Love weather phenomena. I think it’s super interesting when when the weather changes. I love it when God puts on a show. And he does that with whether he or she sorry, I don’t want to offend any anybody. So there we go. We have got part two of our interview with Scott and Kelly today hearing about their client case study going from shopping centers to single family homes, lots and lots of them using the 1031 tax deferred exchange. Income property is the most tax favored asset plants in America, and the most historically proven asset class in the entire world. But before we do that, you know, I’ve talked a lot about the inventory shortage, the lack of supply in the marketplace. We’ve talked about absorption rates. We’ve talked about, hey, why aren’t there enough properties in which to invest? You know, why was the supply so limited? Well, that may seem obvious. And I’ve talked about many factors that are influencing that. But one of them was given a name by none other than one of our meet the masters of income property speakers, and one of our multi time guests on the show, and that is a real estate market researcher john burns. He calls it the barbell, the barbell that is crushing the supply of affordable homes. And so, a barbell as the name would imply, has weights on either end right waiting the bar and of course You’re gonna benchpress this barbell or whatever and the weight is on both sides of the barbell. Otherwise, it would just be a dumbbell. Well, no, it’s actually on two sides of a dumbbell too, but you get the idea. I’m not gonna go into trying to explain this anymore. The barbell of housing demand, and I’ve talked about this a little bit before, but this article with some statistics, I think will help you really see how formidable This is. And then I will attempt to provide a solution for you before we get to part two of our case study today. So first off, we’ve got the millennials. Now the millennials, we talk a lot about these millennials, this generation, I tell you, they were the most coddled waited on catered to generation in world history, right. We all know about the millennials, Gen Y. We’ve talked about them a million times, you’re probably sick of hearing about them. I’m getting a little sick of it too, but Anyway, they are finally moving in to the housing market. Yes, they are. The oldest millennial today is what that would make them about 35 years old or so. This is the generation right after yours truly a Gen X or myself. And then I followed my generation followed the baby boomer generation, and before them was the mature generation, okay, what’s sometimes known as the greatest generation, right? And so, here we have these millennials. Now, they are not moving into the housing market in any great compared to what percentage, right? Because you’ve got their entire demographic cohort, about 80 million strong, slightly bigger than the baby boomers at about 76 million. I know these numbers vary because they’re kind of guesses, you know, demographers will fudge around the edges. They’ll say that well, you know, if you’re a Gen X, or you’re really this Hear that you’re in terms of birthdate, if you’re a millennial, you’re really this year to that year. And there’s a little bit of disagreement here. There’s a little bit of disagreement as to the size. And hey, we’ve got all this on documented workers, or as Hillary Clinton calls them workers without papers. And you know, we don’t exactly know how many people we have in the country, right, or how many aren’t in each demographic cohort. But we do have a decent idea. So that’s the number we’re going with. We’re going with 76 million baby boomers, we’ve got about 40 million give or take Gen Xers and we got about 80 million millennials or Gen wires, and then we’ve got Generation Z, hey, in a few years, we’re going to be talking about Generation Z and then you’re going to be sick of hearing about them too. But by then you’ll be so rich from all your real estate investing that hey, you won’t even care. Okay, so we’ve caught the millennials now compared to what is always the question to ask, see, they are moving into the housing market, but not in a big way as a compared to what percentage of their overall cohort. But their demographic cord is so large, it’s massive, it’s 80 million people that even if a fairly small percentage moves into the house buying market, now, most of them are renters, or a lot of them are representing the shadow inventory. They are the live at home or they’re living in mom’s house live in a dad’s house. Hey, hopefully mom and dad are actually married, if anybody actually does that anymore. I know it’s not so popular as it used to be on. And I say that’s unfortunate, by the way, but whatever. Let’s not go into that rabbit hole and talk about how the birth rate has been destroyed. And the traditional nuclear family has been destroyed and the culture war goes on. right but that’s another subject So they are moving into the market a little bit, but their numbers are so large that it matters, right? So they’re finally doing family formation. They’re buying houses to live in. Okay. But then at the other end of the spectrum, you’ve got the baby boomers. They’re the other side of the barbell, and they’re moving down. And interestingly, and this is a new trend, and it’s one that I’ve talked about, and I believe john actually talked about it at meet the Masters during his speech. It is that these baby boomers, oddly, are renting, a lot of them are renting, but some are renting and they’re just taking advantage of the appreciation built up in their homes after the last several years, and they’re cashing out and they’re moving to their empty nest home. So with the two sides of this barbell, the millennials at one end, the move down baby boomers at the other end, or even the matures, Moving down, right? They are creating a huge demand on an already small supply of entry level housing, or lower price tier housing. Now, an interesting chart here. This is a chart that burns company put out, and this database on 31 markets, interestingly, and I’m not sure why he did this. But there’s always these interesting ways to slice and dice statistics. And this is why you gotta be careful. You can’t just look at data, you’ve got to, you’ve got to use some, some reasoning with the data. All right, that’s what the brilliant human mind was built to do is reason and isn’t it scary, that we have so few people that are willing to do it anymore? If you’ve had a debate about virtually anything on social media, you know, that critical thinking is all but extinct, right? Isn’t that scary? Well, another rabbit hole We could go down but we won’t. So you’re over your change. This chart I’m looking at shows the rapid, insane decrease in low price tier listings on the market. Okay. Now, he doesn’t define low priced here. So I’m going to make the assumption that he’s doing this based on the market, but you know, in relationship to that market. So the first stat is the Bay Area of California, you know, that Silicon Valley and by the way, we’re having an event and Silicon Valley coming up San Jose, March 3, Jason Hartman university.com We look forward to seeing you there tickets have been selling briskly for that event. March 3, Jason Hartman university.com in San Jose Silicon Valley event that’s a full day. It’s a full all day Saturday event. So come to that. Join us. Jason Hartman University comm for details and tickets, so in the Bay Area, low priced here listings are down year over year by 48%. Wow, that is scary bad in terms of lack of inventory in Denver, a market we used to recommend until it got too expensive. But hey, a lot of you listening bought properties from us in Denver years ago, and you made a fortune. Congratulations. I appreciate you. I don’t know if you can hear that. But you were just patting me on the back for helping you do it. Well, thank you very much. So Denver, they are down. 44% Raleigh Durham. Hey, another market we used to recommend. Don’t have inventory there now but many of you purchase from us in the Raleigh Durham area, the tech triangle at the other end of the country 35% decline. Seattle 34% decline we’ve never recommend Seattle’s always been too expensive. Orlando many of you were at our Orlando property tour a few years ago. You bought tons of properties from us in Orlando or the greater Orlando area and low priced listings in Orlando. by many considered to be one of the ground zero locations for foreclosure activity by the way, down 32% from one year ago, Minneapolis down 31% los angeles down 29% san diego down 24% Orange County, my former hometown along with Los Angeles and San Diego I’ve lived in all three of those places down 24%. Jacksonville, a market we’re currently active in in recommending but are suffering from an extreme lack of inventory. Down 24% low priced here listings from one year ago. Phoenix 23% down Charlotte down. We’ve had hundreds of you have purchased from us in Charlotte Down 23% Tampa. Down 22% Portland down 20% Riverside San Bernardino, down 18% in Atlanta, hundreds of you have purchase from us in Atlanta. Down 16%. Philadelphia down 15% Chicago land area down 10%. Washington DC down 9% New York. Really? Is there such a thing as a low price to your listing in New York, down 9% and Boston down 7% Miami down six, Dallas down 2%. Hey, you know the only market out of this survey that actually has a slight increase in low price tier listings. I wonder if you can guess I couldn’t have guessed. It’s Sacramento, California, where my aunt Joan, who was one of our speakers and who’s been on the show. One of our meet the master speakers where she owns about 100 properties give or take in Sacramento area. So actually a very slight increase in low price tier listings in that market. So I just thought that’s interesting. Now, what is the prescription from yours truly your ROI director, Jason Hartman, what would he recommend you do? What would his solution to this be? Well, he doesn’t have a solution. Sorry about that, hey, I can’t solve all your problems. I try. I really try to solve all your problems, but I can’t solve them all. My solution is, don’t wait to buy real estate, buy real estate and then wait, get what you can get. Get while the getting is good. Inventory will probably increase a little bit as we see interest rates go up or at least, that’s my hope. I really do hope the market calms down a little bit. And I also hope I don’t regret saying that business has been fantabulous The last several years I mean, really? Well, I don’t know, really the last eight years, it’s been fantastic. But I gotta tell you, it’s hard to operate in a low inventory market. So we would like to see inventory increase a little bit, so that you would not be so disappointed when you can’t buy enough properties because we know you want to buy more. And look what will happen when inventory increases, prices will probably soften that upward trajectory and price will probably calm down. Hey, that would be fine with me, because I’m not a capital gains investor anyway, if it comes, I can spend it just as well as the next guy. But really, we invest for yield, and at the same time we see prices either stop increasing so much, or even soften a little bit. It would be a welcome change in my opinion, we will see upward pressure on rents and that’s really What were in the game for yield, increasing rents, cash flow fine with me fine with me. So that is my thought that is my prescription for you get as much as you can lock in these low rates while they last, they are going away, that ship is pulling out of port. So catch it while you can, as the ship is pulling out a port as the train is leaving the station, whatever metaphor you want to use, okay? Just buy your properties, buy good properties that makes sense the day you buy them, go and find those properties at Jason hartman.com. Click on the properties section, and we’ve got properties for you there. And our investment counselors will diligently help you find good properties. So join us March 3 in San Jose, come and meet some of our clients. We’re going to have one of our lenders there to talk to you about financing. We’re going to have at least one maybe two of our local market specialists there to talk to you about properties and their management processes in team, and you can meet them in person. So it’s a great opportunity coming out to San Jose March 3. Jason Hartman university.com of course, we’ve got our Icehotel trip coming up. If you want a bucket list experience, talk to us about that as well. You can reach us through any of our websites, including Jason Hartman calm and let’s get to part two and hear more about Scott and Kelly from Washington DC and their case study on why they moved from commercial properties to residential properties for their investing portfolio. Here you go. That’s why I created this business is because I tried to do it myself also told the story you may have heard it but I’ll just recap a really quick In 2004, I was in negotiations to sell my traditional real estate company in Irvine, California to Coldwell Banker. I knew I was going to have a big check from the sale I was thinking well you know, I’ll just retire and do rental properties and not have another business you know, at least not for a while just take a few years off or something you know, I’m not the kind of person that is very interested in taking time off, but I figured I’d find something right you know, certainly didn’t need to work but I wanted to buy more properties and build my portfolio and I wanted to do it nationwide because I’d been through a couple cycles in California they were pretty severe. I thought you know, now I’m older wiser more conservative, I don’t want to do that again. I want to invest in diversify nationwide and I was researching all these markets Scott and I was like, reading like the best places to live in America books and you know the places rated Almanac and, and then I would go online, I would just spend hours I was, you know, like trying to digest data on the US Census website, which is nearly impossible, by the way, there’s just too much there. You know, I was just trying to figure this out, you know, what are the hot places to invest? And I’d seen it before. You know, I remember when there was the big downturn in Southern California in the 90s. I saw my clients just like abandon their houses. It was amazing. And I remember I had all these vacant properties listed when I was a traditional real estate agent for for REMAX. You know, I’d saw them go to Arizona, Texas, Colorado, Georgia, you know, like places it seemed like there was a commonality of like these few sort of states and cities they were all moving to right because that’s where the opportunities were. And I thought, you know, when one market is down, another market is up because all those people are leaving and bringing their money there right. And that’s where the jobs are going the employers do it and and so forth. And I thought this is this is why you got to diversify. You know, you got to invest with nationwide. And then I tried to actually do it myself. I just flew. You know, after doing all this research, I flew to these different markets. And I mean, it was terrible. Honestly, I couldn’t find anyone to help me anyone that knew what they were doing, you know, these real estate agents I was talking to, they just, they didn’t know anything and much less. They didn’t know anything about investing, right? Like, it’s like when I was in Austin recently, and this agent was trying to tell me about the cap rates on these multimillion dollar houses. I was looking at one for rent, it was 7500 a month. And, you know, I asked her what the value of the house was. And she said, Well, this one’s worth about $4 million. And I thought that’s pretty good deal for that for 7500. Which you can do you know, and I was thinking of renting this house, myself when I when I was there a couple months ago. And she started explaining to me about the cap rates. She had no idea Scott how to calculate a cap rate. I mean, it’s just it’s just mind boggling. It really is. And then I think Well, I’m gonna be relegated to just putting my big check from the sale of the company into you know, the stock market. And so I went met with all like concurrently I went and met with all the, you know, financial advisors in the private client group, you know, for the people that have a few bucks at Merrill Lynch, Ameriprise, Charles Schwab, etc. They didn’t know anything, either. I mean, they just said the same thing. It was like the same speech. It was the same pie charts. And none of them were wealthy. You know, like, they were just talking to wealthy people all day, but they weren’t, you know, they weren’t wealthy. And I thought this isn’t the way to go. I love real estate. Why am I even here? You know? You know, I just thought there’s got to be other people that want to do what I want to do. And sure enough, there you are. There’s a lot of people like you.
Scott 20:47
Yeah, yeah. And it creates great value for people like me. I’m very appreciative that I even have the opportunity to do this. My father was invested in real estate starting back in the 80s and And he never was really able to make it work in residential, just a hard way to earn income.
Jason Hartma 21:06
He was in commercial real estate then right?
Scott 21:08
He went into commercial, he went into warehouses and other stuff,
Jason Hartman 21:11
okay, like industrial type properties. But he tried it in residential. And he said he was never able to make it work, right?
Scott 21:17
No, he was never able to make it work
Jason Hartman 21:19
told us what do you mean by that
Scott 21:20
he had a hard time identifying properties to begin with. This was before the internet, he had a hard time with knowing what to charge for rent, it cost them in a lot of fees just to get a standard lease together. And then he didn’t have a good way to check people’s credit. And so he ended up leasing to people who didn’t have very good credit. And they were actually pretty good at using the court system. So when he tried to get them evicted, they knew that they couldn’t be evicted, at least in the state of Maryland. They couldn’t be there during the winter months. They could just quit paying the rent in October. And by the time you get them into court, it’s already December. Yeah. And the judge will say Well, I’m not gonna throw a fan. out in the cold right let’s talk again in April right around Christmas.
Jason Hartman 22:03
Oh my god.
Scott 22:06
guys just got over November. Just think it’s seven months of free rent. Yeah, yeah. And guess what the next year they can do it too.
Jason Hartman 22:13
Yeah, yeah, they know how to play the game in any of these liberal, you know jurisdictions you don’t want to be a landlord folks that are just not landlord friendly. We have a client years ago I remember he used to get up at our meetings, he did it a few times. And he talked about how he owned a property in Washington DC, you know, had rented it out, and then the people wouldn’t pay and he tried to evict them and there was this rule, this law that you can’t evict someone whenever there’s more than like a certain percentage chance of rain or snow. And that is like, every day practically, you know, you’d and you’d have to pay and schedule the sheriff each time to go and do the eviction. And it just got postponed and postponed and they just Capital isn’t there for free. It was unbelievable. You know? Yeah, yeah. Wow. Yeah, that’s how it is out here. That doesn’t work. Yeah, that doesn’t work.
Scott 23:07
And you get through your company, I’m able to go out and purchase, you know, 12 homes in Memphis over just a few days or every few months. And most of them I’ve never even seen and they’re able to cash flow. Well, the checks just arrive and I speak to the property managers if I want to, but most of the time, I don’t. Right. It just works out. It’s amazing. I’m glad you’re amazed and happy with your
Jason Hartman 23:30
experience. Tell us about property management. You know, the experiences with property managers are most certainly mixed. Okay. You know, some are good, some are bad. It depends on the manager that also depends on the circumstances. luck, I think plays a part in everything in life. What are your experiences with our property managers and, you know, do you have any tips for the listeners?
Scott 23:52
I’ve had a lot of experience. in Memphis alone. I’ve worked with four different property management companies. I will say that some provide are better providing homes and some providers have a better property management. When you’re considering a purchase, you want to look at the home itself and make sure it’s a wise decision. And you can always change management down the line. We have found a property manager that we prefer in Memphis, mainly because they keep in touch with us a lot and let us know what’s going on. Other ones just didn’t respond much by the phone or the checks, rent checks would arrive late. In some cases, you know, the rent checks were missed for an entire month and we had to go back and forth for months to find out what happened. That’s no good. We have a property manager were you given the perspectives on the property when we purchased it, there was a high rent and a low rent and after purchase, they wound up renting it out at the low rents, which was a little bit disappointing, but they also leased it out for two years. Well, when that lease was over, we asked them to please raise the rent. And that’s not what happened instead, they leased it out for another two years. Still. At that low rent,
Jason Hartman 25:01
so they just ignored your instructions.
Scott 25:03
They completely ignored our instructions.
Jason Hartman 25:05
Yes. lievable. Unbelievable. Yeah,
Scott 25:08
yeah, that particular property is coming up in September for a renewal. And so we’re trying to get on top of it. We’re seven months early here, notifying them and saying, Hey, we really need to bring this up on rent. You know, according to the websites, it should be rented for about 1550 a month, but it’s being rented out for 1295. So that’s about $250 a month that we’re missing out on. We’d like it the rent to be raised quite significantly. Well, we just sent back a reply. It’s just a form reply that we’ve seen many times. Now, unfortunately, that said that they’ll try to get the rent raised by 75 bucks, but they might only be able to get 50. And if the tenant refuses, maybe they won’t be able to get that at all. Well, I don’t know. Jason, do you think I should change to another property manager?
Jason Hartman 25:54
Yeah, I think so. That sounds like it. The interesting thing is though, you know, in I complained A lot about property managers and local market specialists when they’re not doing their job. I mean, Scott, you’ve heard me on the show, and boy, I got an episode coming up for you, too, that we’ve recorded with another covers. What’s interesting, you know that you always have to keep in perspective, and I think you’re pretty good at doing this. Even though you may have a bunch of complaints, and you have things go wrong, the investment can actually still be a pretty darn good deal at the end of the day cannot.
Scott 26:29
Absolutely, yeah. You know, there’ll be some good surprises, and there’ll be some bad surprises. But once you have a few investments, they tend to even out they tend to do pretty good. On average. Yeah, if you see chronic problems like repairs or just recurring and at high expense, then it might be time to switch property management. But if one isolated incident happens, you know, I would try to work it out before I’d switch it up.
Jason Hartman 26:55
Now make sense? make sense. Tell us about like your overall portfolio and how That’s working out, you know, do you have any metrics you want to share or anything like that?
Scott 27:03
Well, we really set out to get an 8% cap return
Jason Hartman 27:08
on our portfolio Spoken like a true commercial real estate guy. cap rate.
Scott 27:15
We’re trying to replace a certain investment with another investment is impeccable cap rate or better cap rate. Our target was 8%. And it’s been performing at almost precisely 8%. But once you take financing into account it does a little better than 9%. So we get very good returns on our investments ends very regular. We don’t really worry about how much money we’re gonna make this month. We know that it’s gonna be pretty good.
Jason Hartman 27:41
Yeah, yeah, good stuff. Good stuff. Have you considered self management?
Scott 27:47
That’s what I’m trying to get away from. Right, right.
Jason Hartman 27:49
Well, no, that’s that’s why I asked you that because you self manage the shopping centers. But you know, I tell you, I have rented I think seven commercial properties. As a tenant, you know, for my real estate offices in Orange County, and man, you know, that is just a high maintenance deal in terms of the management. In many of my properties, I would see or communicate with the management every business day. I mean, that’s far different than, like now, for example, I mean, I’ve you know, I own lots of investment properties, but I rent the high rise condo in which I live, and I hardly ever communicate with my landlord. He self manages it, we’d all send him an email every three months, maybe. I mean, there’s almost no communication between us. So self management in residential is a lot different than with a shopping center.
Scott 28:40
Don’t you agree? You know, I don’t know with office space, it tends to be very management intensive. Yeah, I agree with the retail shopping center, not so much. A shop owner just wants to be able to be open and be in business and they don’t want to see their toilets. Their interior is all owned by them. They manage the maintenance of the windows and doors and They pay their own utilities. So it’s really not that bad. The problems can be, you know, on the outside of the building, if someone comes and dumps a pile of debris in the parking lot, that can be an issue. I personally have security issues at the shopping center. And so I actually go there personally to deal with that at all hours of the night.
Jason Hartman 29:20
Wow, I can see why you don’t manage if that’s your background.
Scott 29:25
Well, part of what I’m trying to do here is get away from a workplace situation where I have to answer the phone when it rings. Okay. I would rather detach, fair enough, I totally understand. So, any tips on managing your managers that you want to share with listeners?
Scott 29:42
Basically, you have to remain active and remain interested. You don’t have to be going crazy over it all the time. You don’t have to worry about it. But do read the emails. do read the reports when they come in? If you have questions, call and ask and get answers. You may want to keep track of where repair are happening a lot, because often, you will find that the same thing will get repaired over and over. And that’s something that as an owner, you can identify and make sure the property manager becomes aware of. So that next time the repair happens, it’s, you know, final. Or maybe you can get reimbursed for some of those repairs, if they weren’t, in fact, successful repairs, right? And just pay attention. There’s some signs of bad management, if your rent check doesn’t show up. If the reports don’t show up. I would be concerned and I would take action on that. Call them up and find out what’s going on. reacted, yeah, but you don’t have to sweat it. Right. You don’t have to be fearful as long as things are going well, you know, do something else with your time. Yeah, right. I agree. I agree.
Jason Hartman 30:43
What are you doing with your time other than other than your properties or, you know, I mean, you’ve still in the shopping center business, obviously. So you’re you’ve got to do that reactive. And then you know, you’ve got to do some management of your managers on your single family home portfolio, but just out of curiosity, What else are you doing? enjoying life?
Scott 31:02
I am enjoying life. Yeah, just so happens that Valentine’s Day is tomorrow and my wife and I are gonna fly to Cancun and take some time off. Uh huh. Yeah. Awesome. But other than that, you know, I’m on a quest for the best real estate investment I can find right now. I’m just looking at all different opportunities, all different styles of investing. And the worst thing about is I keep finding great investments.
Scott 31:28
So it’s so good right
Jason Hartman 31:30
now. It keeps you tempted when you keep finding these great deals, you can’t refuse. Good stuff, good
Scott 31:37
stuff. I want to try to find the best opportunity. But you know, there’s so many good ones that come up. I just I want to get them all. Yeah. It’s like being a kid in a candy store. I totally get it. I totally get it. I feel the same way. A lot of times. totally understand.
Jason Hartman 31:51
Well, good stuff. Scott, thank you so much for sharing your story. And really just appreciate this and you know, just anything you want to say in closing before We wrap it up, I just wanted to say, Jason, I said this to you and Phoenix, I really mean it, I really appreciate that you created Platinum properties. It’s improved my life, the life of my family. And as far as I expect, you know, it will continue to do so for years to come. I’m just really appreciative of the impact that this has had and will continue to have on my life. And so I just want to thank you for what you do. Well, thank you, Scott. That’s so nice of you to say that, and then thank you, we should be thanking you for being our customer. So we, we appreciate you being a client and you know, of course, appreciate your business, and will always help you any way we can. So and then, also, thank you so much for sharing your experience on the show really, really great. Every listener always says they love to hear the client case studies. So, listeners, if you’re out there and you’re listening to this, and you’re a client of ours, Hey, come on the show. We’d love to hear from you. And Scott, thank you so much and say hi to Kelly for me.
Scott 32:55
I sure will thank you, Jason.
Jason Hartman 32:58
Hey, I hope you’ll join me in San Jose. On March 3, as we host, our Jason Hartman University event, now this event is for the real practical hands on interactive education on income property investing, where you will learn how to actually do the math, how to evaluate the deals, we will go in depth into this subject of how to analyze a real estate deal. And once we do that, we’ll talk about how to build a portfolio, how to properly structure a portfolio, how to diversify it, how to sequence your mortgage financing, and it is a fun event. We do some gamification. You’ll meet a lot of people because you’ll be working with the people in the class, and it’s a one day event. You can check it out at Jason Hartman University comm Jason Hartman University comm we’ve been doing this event for about three or four years, and people absolutely love it. We’ve done it in San Diego and Salt Lake City. Now we’re doing it in San Jose. We’ve done it other places as well. I just can’t remember where offhand, but it’s a great event and we try to do it about once a year. I asked her we did it in Oklahoma City. This time we will be in San Jose Silicon Valley on March 3. Jason Hartman University comm Jason Hartman university.com. Get your tickets today, and we’ll look forward to seeing you in Silicon Valley on March 3. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific 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 starts off the show today with a reminder: housing is NOT at an all-time high when it comes to payments (which is how people base their decision to buy), and housing is still where it’s at.
Then Jason has the first part of his client case study with Scott, from Washington DC. Scott owned a bunch of retail property previously, but recently sold all but one of them and shifted his focus toward residential real estate. Jason talks with him about why he made that decision, what the process was like doing his 1031 exchange, how his experience with property managers has been, and more.
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 listeners from 165 countries worldwide. This is your host Jason Hartman with episode number nine 159 959 thank you so much for joining me today as we have yet another client case study. A lot of you met Scott, and maybe Kelly, at several of our events, Scott was at meet the masters. I don’t believe Kelly came with him. But they are a young couple that is doing great things with their real estate portfolio. You’re gonna hear about it today. They have moved from shopping centers, to single family homes. And I know what some of you might be thinking, why would you do that? Don’t you want to own a bunch of shopping centers and be a bigwig? Maybe not, you know, housing is where it’s at folks. Housing is where tap that is where you should be. I’ve told you all the reasons over the years over the last 14 years I’ve been saying you know, they can always outsource all the office jobs offshore. They can outsource them Manufacturing offshore, they can outsource the retail to the internet. And all of this has a huge impact. But everybody still needs a place to live. It’s a fundamental human need. What are the three fundamental human needs? Food, clothing and love? Happy Valentine’s Day by the way, everybody, it is Valentine’s Day. No, it’s actually food, clothing and shelter, and food, clothing and shelter. But I will tell you I was kind of hoping the day here today would fall on a 10th episode show because I have a special Valentine’s Day episode for you. And I guess we will run that is episode number 960 coming up, remember every 10th episode every show that ends in a zero, we run something of general interest in Hey, love is of general interest right to all of humanity. Well, almost We will run our Valentine’s Day show a little late. But hey, it’s better Nathan lover. I mean late than ever. We’re gonna get to our case study today. That’s what we’re gonna do. That’s what we’re gonna do. But first, I want to tell you a few things. The good old National Association of Realtors, you know them, that largest trade group in the world with like 1.4 million members. Yeah, they’re big. They’re big. We’ve had their chief economist on the show before. We’ll have him back again to talk about stuff but they’re out with some new research as they are all the time. today. They just published that nearly two thirds of us housing markets see home prices hit an all time high. While housing inventory hits an all time low. And I know what some of you are thinking. Is it a bubble Jason is Little Bubble Pop. No, it’s not a bubble yet, but it will be eventually. So sit tight. Stay tuned. I’ll let you know when I think it’s a bubble. But hey, what do I know? I don’t even know. Nobody knows. You know, nobody knows. The head of the Federal Reserve doesn’t know, the President of the United States doesn’t know. NAR certainly doesn’t know. JOHN burns doesn’t know Jeff Meyers doesn’t know Jason Hartman doesn’t know. But you know, we can get some clues here and there can’t wait. The question is not what is the price of the home? The question is, compared to what is it an all time high compared to the monthly mortgage payment on the home? Or is it an all time high compared to the price of the home See, there in lies the problem as you know, because you are a sophisticated A smart investor, because you listen to my show, you’d have to be smart and sophisticated to listen to my show. Otherwise, you wouldn’t be able to keep up with the superior information we are. We are sharing here. Okay, so Hi, I don’t know, I get kind of goofy sometimes don’t I? So people buy house on a payment, not a price. In fact, they don’t care what the price is. If the payment is low enough, that’s what they’re buying. They’re buying a payment. So it is not at a all time high based on the payment. And then you have to ask, geographically, where are you talking about? Two thirds, two thirds of us housing markets? Well, is that of the Case Shiller 20? Or is it all 400 ish housing markets nationwide? And that is the question we need to ask. Right? We need to know this stuff because the Case Shiller is here. heavily loaded. In fact, three fourths of the Case Shiller 20 are cyclical, bubble oriented, crazy markets that I wouldn’t touch with a 10 foot pole. In fact, where do you think that saying came from? Do a lot of people carry around like, in the old days when someone came up with a 10 foot pole saying, did people carry around 10 foot poles and decide not to touch things? I don’t know. It’s Goofy, funny saying, right. Okay, so, consumer satisfaction research. That’s boring. Who cares about that? You know, these groups are always doing surveys to say how great they are. Right? I’m not gonna share anything with that with you. But this one’s interesting also from an AR. housing affordability declined from a year ago in December, moving the index down 2.3% moving down 2.3% from a year ago, and this is just cember to December obviously, it’s it’s not December anymore as we know, because, hey, there’s a clue. It’s Valentine’s Day. We know that’s not in December don’t leave. So yeah, housing affordability declining, but still in the linear markets, it’s not far off. housing affordability is still pretty good. And that’s why inventory is so low and the market is booming. In the cyclical markets, though, man, there’s going to be a bloodbath. Some people are gonna get hurt, they’re gonna get hurt. I’m telling you, watch out. You know, we’ve got this event coming up in Silicon Valley, March 3, San Jose, hope you’re going to be there and join us for Jason Hartman University. Go to Jason Hartman University COMM And one of our clients, Greg, who was at meet the masters of course, and many of our other events. He sent me a voxer message this morning and he said, Jason, I will be there on March 3 in Silicon Valley and I am Trying to get some of my California friends to come and hear what you have to say. And I just can’t peel them away from thinking now, he didn’t exactly say this I am I’m using some poetic license. So let me run with it. Because this was the gist of it. I can’t peel them away from the fact that they think they are all brilliant geniuses, because they speculate on a house in a cyclical market, and the price went up. And you know, the old saying, you’ve heard me say it. I don’t know if this is actually an old saying like that 10 foot pole thing. But at least I say this. Everybody’s a genius in a bull market, aren’t they? Everybody’s a genius in a bull market. A rising tide floats all ships. You’ve heard that one right. I didn’t make that one up that everybody’s a genius on bull market that could be made. I don’t know. I’m not sure. I’m not gonna take credit because I’m not sure I deserve credit. But anyway, you know, if I was Bill Clinton, I would take credit for everything, even though I didn’t do it. If I was Obama, I would too. So I picked on the democrats check. What else can I do today? Okay, yeah, we can ever client case study. We talked about some NAR stats. Those are interesting course. I look forward to seeing you in Silicon Valley, San Jose, March 3, Jason Hartman calm or Jason Hartman University COMM And this is a great event. Well only have it once this year, I think you will learn the math of real estate, you’ll learn how to do the math. In fact, that’s another thing that Greg said to me. He said, You know, these California people, they just don’t know how to do math. Now. He didn’t mean that broadly. But if they knew how to analyze a real estate deal, they would never invest in these total fluff crazy nutty markets. what goes up must come Down. Hey, that’s an old saying to like that 10 foot pole thing. So yeah, just remember that the higher they fly, the harder they fall, all of these markets will eventually fall, how much longer can they go? Nobody knows for sure. But believe me, they’re not going to go forever. So that’s what you got to know about that. So linear markets, where the conservative, prudent real investors invest, that’s where you want to be. Let’s go to part one. And let’s talk to Scott about how he went on his real estate investing journey that started just 10 years ago. That’s it in 10 short years, just did an exchange exchanging one of his commercial properties for 30. I think 37 Oh, no, not on the exchange. He bought some others from us before the exchange, and then a bunch more during the 1031 exchange. So it’s good stuff. The most tax favored asset class in America. The most historically proven asset class in the world. And guess what? You can find those those great things at Jason hartman.com slash properties. Jason hartman.com slash properties. Alright, Jason, stop talking. Get to the guest part one plant case study, Scott and Kelly, you’re gonna love this. Here we go. Hey, I want to bring to you another case study. We have a couple of wonderful clients that volunteered to be on the show. They’ve got a big story and just a great outlook and attitude on real estate investing and the long background in in the income property investing world from commercial to residential. So we’ll talk about that transition now. It is Scott and Kelly. They live in Washington, DC. And Scott, welcome. How are you? Hey, Jason. I’m excellent. How are you? Yeah, good, good. It’s good to have you on the show. Thank you for coming on and sharing your story. Give us a little bit of your background, you and your wife. And you know, just kind of tell us about that. And then we’ll dive into your story.
Scott 12:09
Yeah, sure. Kelly and I are kind of your typical, hardworking, well educated people. We went to graduate school, we got jobs in the corporate world. And then when the real estate market crash came along, we came across an opportunity to buy a portfolio of shopping centers. And so in 2009, we acquired five shopping centers, and tried to shepherd them through the real estate crash. And we were able to do that. And recently, we’ve been selling off the shopping centers and converting to a more residential. Mm hmm.
Jason Hartman 12:42
Cool. So Scott, first of all, everybody’s gonna, you know, they’re begging the question that everyone’s begging task probably is, how did you get the money to acquire all those shopping centers? That’s a pretty good head start, isn’t it? Or no, you know, sometimes, these kind of stories can surprise you a bit.
Scott 13:00
We get lucky this is a person that I had worked for doing their bookkeeping when I was in college, and in contact with them over the years. And when the real estate crash came, this individual was really looking forward to retiring and selling all the property. And suddenly, they weren’t able to. And so they were looking at holding a portfolio of shopping centers through another business cycle. And the way it was looking is gonna be quite a long one. And so I was just having a conversation with this person and said, you know, if you really want to sell those things and retire, why don’t you sell them to me? And so he did. And he sold Kelly and I the entire portfolio. No money down. Wow. Oh, my gosh, that’s fantastic. What
Jason Hartman 13:45
What an amazing story. So when you say you worked for him, was he in the business of being a landlord or was there another business? What do you mean by that?
Scott 13:57
Yeah, he was fully in the business of investment. Real Estate, okay, and I was just doing his bookkeeping and collecting rents from tenants while I was going to undergrad.
Jason Hartman 14:08
And fantastic, what an amazing story. So here is the secret, then folks, the thing you can take from this is go to work for some big time real estate investor, do the bookkeeping, so you know the numbers. And then when the next recession hits, see if you can buy it. It’s great story. Totally awesome. So these were, you know, retail shopping centers. So interesting, you know, during the Great Recession, were you worried about the retail Apocalypse, as they call it now? Did you see it coming? I was just kind of wondering, what was your outlook? What was Kelly’s outlook on that? At the time?
Scott 14:44
Yeah, we were definitely concerned. We had, you know, careers that were based on, you know, graduate degrees and all this that we’d been working on for decades, or about decade and a half. And we had to make the decision to give up on both of those careers and go full time into it. Managing shopping centers. So yes, we were very concerned about all the risks associated with that. But in the end, we found that we didn’t have that much difficulty. I mean, retail definitely changing. But all neighborhoods need a barber and a beautician and a nail salon and a liquor store and those kinds of things and the kind of neighborhood strip centers that we have. they’ve survived. Okay,
Jason Hartman 15:21
right, right, because they don’t have the big box and the other stuff that’s affected by the online, online takeover retail. And, you know, I gotta tell you, it concerns me, the typical thing that happens in every business is you get whenever you get some big player, they’ll come in and essentially buy the market by undercutting it. auto companies do this, you know, Uber has done this. Yeah, I mean, you know, it’s a common practice in business right? By the market. Even if you have to run at a loss or, you know, just very low profits, by the market, kill your competitors and then raise the prices and abuse your customers. You know, that’s sort of a typical story. So that concerns me very much about, you know, big centralized power like Amazon. Any thoughts on that just as a tangent?
Scott 16:07
Yeah, absolutely. Yeah. These tech companies are able to run at a loss for years and years in a row. And somehow their stock price just goes up. And they’re able to generate more funds from investors. And so it really would concern me if I was a grocery store, and Amazon was coming in to the grocery market. I would be very concerned because, you know, a local grocery store chain just isn’t able to raise money that way. Yeah.
Jason Hartman 16:33
Right. They don’t have the scale. That’s what’s sort of perverse about the marketplace in the ways of venture capital system works and, and so forth, isn’t it?
Scott 16:41
Oh, absolutely. And you know, it’s scary being a small business person, when you’re going up against corporations who, you know, have tax advantages that maybe small business just doesn’t have, or the ability to borrow funds at rates are much lower than small business has always been scary, but you kind of hope that being nimble and taking Your own talent and really putting it into something full time that you’ll be able to find a way find a niche in the market. And we were able to do that. Yeah,
Jason Hartman 17:09
yeah, good stuff. Okay, good. That’s obviously a tangent. But it does concern me for I mean, for the customers from a customer perspective them mostly, you know, why and when did you get the idea that you should sell the shopping centers, or at least some of them and then buy residential properties, buy single family homes and tell us about that evolution?
Scott 17:30
Sure. Well, it was never our goal to be full time owners of shopping centers. It’s just an opportunity that was too good to say no to that we decided to take on. Really what we want to do is just have a nice life and not work too hard. And these particular shopping centers took a lot of effort to run. Part of the reason for that is they were in parts of town where it’s hard to hire professionals to come and do the management for us. And so we had to do our own property management and So part of the reason that we’re selling the shopping centers and exchanging them for single family homes, is that we’ll be able to get property management with these portfolios of homes, so that we don’t have to do so much work ourselves. Right, right. Okay. Okay, good.
Jason Hartman 18:13
What did you do? And when did you do it? Well, I guess maybe the first question is, when did you discover I guess you discovered my podcast, you you and Kelly came to a couple of events. Tell us about that.
Scott 18:24
One thing that happens when you don’t have a real estate background and you instantly buy, you know, very expensive portfolio of real estate. realize you don’t know anything about this field you have to learn so I didn’t really have friends in the real estate field. So I was looking for resources. And podcasts was really something that I could do on my own schedule, and get information about the real estate market without having to you know, know any individuals or pay for classwork or anything like that. Just really convenient. Since we bought this portfolio, I started listening to your podcast in 2009. And we were sold The idea we really like the idea of turnkey single family, especially as a way to grow our portfolio as time went on. And so in 2012, we bought our first property in Memphis for your group. Now, Kelly was not as excited as I was at the time about it. So I had to convince her so I had to invest with my own money. So I actually use my IRA. Mm hmm. And purchased a single family home in my IRA. Mm hmm. And it’s worked out great.
Jason Hartman 19:28
So okay, this is interesting. So your wife wasn’t excited about it. So she says, Hey, use your own money in your retirement account that you had before we if you want to do it, honey, put your money where your mouth is. Don’t put my money there.
Scott 19:48
There’s, there’s not a lot of money. That’s just mine, you know? Yeah. But and this is, you know, I think a lot of Americans probably work this way. But my my retirement fund is something that I squirreled away on my own I really thought it was gonna work out and to prove the point. You know, I went and I bought a house. Yeah. And it worked.
Jason Hartman 20:07
Yeah, yeah. Good stuff. You came to our Memphis one of our Memphis property tours. Right. And you bought one property. That’s, that’s it. Just one. Initially. I just bought one.
Scott 20:17
Okay, and then the next year, I think we bought one more. Mm hmm. And then the year after that, we bought two more and then the after that we bought another two more.
Jason Hartman 20:28
Okay. What are those all Memphis by the way? Were you staying in that same marker? Ah, man. Okay. Okay, so you just kept doubling down in Memphis for a while. And what happened the year after that you were about to say?
Scott 20:38
Yes, sir. That was last year. And so last year, we bought 12 in Memphis. We bought 15 in Jackson. And we bought four in Oklahoma City. Okay, cool.
Jason Hartman 20:48
So you’ve got through our group. Now Scott, what do you have about 36 properties or something like
Scott 20:54
3737.
Jason Hartman 20:55
Okay, good. And what happened last year. As it was the big change of acquiring all these additional properties,
Scott 21:04
they really happened on the commercial side, we saw that interest rates look like they’re starting to go up. And commercial real estate is valued primarily by the cap rate, or the return rate that people can expect when they purchase it. And so when the interest rate goes up, that will deteriorate the value of the shopping center, as far as your ability to sell it. And so we saw interest rates coming up, they’re still low at the time last year. So we decided to sell the shopping center and switch over into residential, primarily because residential prices are still a bit low. I think there’s a lot of opportunity to pick up value there. And also, it looks like homes are going up in value kind of quickly. Whereas shopping centers are going down in value as the interest rate rises. So it’s just a good time to take advantage of the difference between the two markets.
Jason Hartman 21:55
I couldn’t agree with you more By the way, I think that’s very insightful that the rest rental market just has a much better future than retail properties do. We talked about the retail Apocalypse, obviously, you know, most people understand what’s going on there. But at the end of the day, you know, Scott, like I will say everybody needs a place to live. And that is just not going to change. Right?
Scott 22:18
Absolutely. As you know, the markets were buying in a robust markets, they’re the population is stable and growing. And the values are stable and growing. It’s not like we’re just buying residential anywhere. We’re buying in good markets, right. You know, what are the other benefits? Jason is with our shopping centers. They’re all located in one geographic area. Mm hmm. But with this residential, we’re able to diversify across three different markets,
Jason Hartman 22:43
right. So you’ve got you’ve reduced your risk by diversifying like that. That’s one of the other good reasons it’s good to not have, you know, like one lump of an expensive property, or, or anything like that, because you can definitely diversify geographically. Real Estate is local, as I like to say, certainly not my saying that’s an old saying, but but Yeah, it does. It does allow you to do that. But you know, Scott, I mean, you and Kelly, as you were thinking of doing a 1031 exchange on, you know, shopping centers, and you were also, you know, just buying real estate before you did the first exchange, you could have done anything. I mean, you could have adopted numerous different strategies you live in Washington, DC, that’s obviously an expensive cyclical market, why not just invest right around the corner from where you live?
Scott 23:36
Well, you know, we try to invest for the investment makes sense. And so in the case of the properties that we acquired from you guys, we were able to make sure that we get a nice return, that they’re in good solid markets where we know we’ll get that return over a long period of time. And we have property management in place. We don’t actually have to do the work ourselves to run the property right.
Jason Hartman 23:59
So Let’s talk a little bit about property management with the shopping centers. You did your own management By the way, what do you still own in terms of retail properties? And what did you sell? Did you only sell one of the centers are two of them.
Scott 24:12
We sold three of them last year, we sold one in years gone by so we’re just down to one last shopping center. Okay,
Jason Hartman 24:18
got it. Got it. Yeah. And by the way, isn’t the 1031 tax deferred exchange? Just a beautiful thing?
Scott 24:25
It’s so great. Yeah, it’s gonna do so much good for us. Having done this exchange last year. I’m just thrilled. Yeah, good, good stuff. You don’t even realize some of these benefits until you do it yourself.
Jason Hartman 24:37
Yeah, the benefits for depreciation are just amazing. And I did it last year. If I were to do it in 2018, it would be even better. And you mean because you got to restart the clock on your depreciation and plus the residential properties have a shorter depreciation schedule. It’s about 25% shorter, which means you get more tax benefit more quickly. Right.
Scott 24:58
Right. And the I have my investment is probably not going to be 40 years long. So in the case of a commercial depreciation schedule that almost certainly never get to the end of it. But with the residential, I’ll be able to get a lot more capture a lot more depreciation, right? Right. If there’s a
Jason Hartman 25:15
couple of newbies listening to the real estate game, depreciation, makes income property the most tax favored asset class in America. It is the most wonderful benefit. And it’s such an oxymoron, that you can have appreciation and make money on that. And you can have depreciation and save a ton of money on that at the same time. It’s It’s such a great, great asset class. It really is. You did that exchange, you’ve shortened your depreciation schedule. Before we talked about property management. Before we started this, this recording for the show, Scott, you were telling me about how your exchange went and you know just sharing a couple stories about working with our network. I thought that was pretty interesting. Did you want to share that with the listeners.
Scott 26:00
Well, luckily, when you’re selling commercial real estate, the timeline for selling a property is quite long. So we were under contract and still had 90 days to go before we got to the actual closing of the commercial property. And so I had a few extra days to do some property tour. So I got in contact with Sarah, my investment coordinator over there. And we went and visited our I went and visited a few markets and got to know property managers got to see their product, and I was pretty sure I knew which markets I was going into, on the closing day. On the closing day, I had 45 days to identify my properties. And within a week, I’d identified the properties in Oklahoma City and in Jackson, Mississippi, but I still had quite a bit of capital leftover that I need to allocate. And I was planning on allocating that to certain market and the vendor the provider of the homes actually went through bankruptcy and the bankruptcy was announced. In the newspaper, just before I signed my sales documents to purchase that portfolio. And so I spoke to my attorney and they said, well, being a 1031 exchange, you can’t be guaranteed that you’re going to be able to buy these in case there’s some kind of action in the foreclosure court. And so I actually had to back off of a rather large investment, just a couple weeks into my selection process. Right, I found a new market. And I was all set to reinvest with this other company, another provider, this time in Memphis,
Jason Hartman 27:32
right, another one of our local market specialists.
Scott 27:35
Yeah, I had lined up another rather large portfolio, and I was getting ready to sign to purchase these. And I showed it to the bank I was borrowing money from and they said that they didn’t want to finance any new home purchases. So they’d never said that to me back when they’re giving me the commitment, the loan commitment, but when it came time to identify houses for these portfolios, The financing company I was working with actually didn’t want to do the deal if they’re brand new homes, construction. And so once again, I had taken the time to identify these homes. And then the last minute, I had to abandon my plans. Wow.
Jason Hartman 28:14
Yeah. So were you were you? Were you worried? I can’t really describe how worried I was. I was very worried. I like to say that I aged about two years and that 45 days, okay, so let me just explain this to the listeners. So this is because, you know, you have these tight deadlines, to complete 1031 tax deferred exchanges. And if you don’t, you know, for example, like you could lose some of the properties you were buying and not be able to acquire them or identify them, and you would just have to pay tax on the, the amount of money you didn’t reinvest. Okay. So it’s not like the whole thing was off, but anything outside of the exchange is going to be taxable. So you want it to not have any tax liability and training. For all of the gains from the sale of the shopping center into the new single family homes you were buying, and this is the problem you’re describing. Go ahead.
Scott 29:08
Yeah. So I, you know, especially when you’re dealing with large sums of money, and the tax rate comes out to something like 23.8%, it can be really scary. So I was looking at about 10 more days left in my identification period. And I was calling Sara and I was freaking out. And she did some good digging for me, and put me in touch with a provider in Memphis, and I was able to allocate the final 800,000 in our purchase, with just about seven days left in our selection, period. Mm hmm. And so that worked out great. That provider basically saved me. They gave me all their inventory for the next two months. Just let me buy it all at once. Yeah, lo and behold, three months later, we closed on all that property all in one day. Right, right. Yeah.
Jason Hartman 29:56
Yeah. You know, you’re reminding me of a story. Not this part. Specifically, but we had some clients a few years back and we talked about their story on the show, they sold a another single family home that they’d inherited it was in California, it was about two and a half million dollars. And then they purchased, I think 36 or 38 homes through us on the exchange, you know, income properties, obviously, I shouldn’t call them homes, their investment properties, but but single family homes, they were pretty amazed that we were able to help them pull that off. You know, that’s all there’s a lot of properties to acquire in one swoop like that really quickly, especially in a market where, you know, the market is obviously tight, right, and things are selling like hotcakes. I mean, there’s very little inventory, so that can make it really worrisome. I’ve done a few exchanges over the past few years. And personally, even though I’m in the business of doing this, I have the same problem. You know, I was really worried that I couldn’t complete the exchange and I don’t want to get stuck paying the tax on the capital gains from the the relinquished properties. Yeah,
Scott 31:04
yeah, good stuff. It can be serious. Yeah. But you know, I don’t think this opportunity really existed before companies like Platinum properties were around, right? If I were to try to go out and use the MLS to purchase 31 single family homes so nightmare and try to negotiate on all 31 on and try to get them all inspected and close, it would never happen. It’s completely impossible. Yeah. And especially with the financing I used, I had to be able to close on at least half a million dollars at once at the same closing on the same day in order for them to do the financing. Right. I tried to do that with you know, 31 different single family home. Oh god sellers,
Jason Hartman 31:44
you would have never happened. Yeah, that’s that’s really amazing how you share that story. This will be continued on the next episode.
Thank you for listening and happy investing. Hey, I hope you’ll join me in San Jose on March 3. As we We host our Jason Hartman University event. Now this event is for the real practical hands on interactive education on income property investing, where you will learn how to actually do the math, how to evaluate the deals, we will go in depth into this subject of how to analyze a real estate deal. And once we do that, we’ll talk about how to build a portfolio, how to properly structure a portfolio, how to diversify it, how to sequence your mortgage financing, and it is a fun event. We do some gamification. You’ll meet a lot of people because you’ll be working with the people in the class, and it’s a one day event. You can check it out at Jason Hartman University comm Jason Hartman University comm we’ve been doing this event for about three or four years, and people absolutely love it. We’ve done it in San Diego and Salt Lake City. Now we’re doing it in San Jose. We’ve done it other places as well. I just can’t relate Where offhand, but it’s a great event and we try to do it about once a year. I asked her we did it in Oklahoma City. This time we will be in San Jose Silicon Valley on March 3. Jason Hartman university.com Jason Hartman University comm Get your tickets today, and we’ll look forward to seeing you in Silicon Valley on March 3. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific 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 starts the show reminding us that the best insurance is a high loan balance. He welcomes client, Adam Jackson, on the show today to discuss how in five years he was able to get 14 properties with infinite returns. Adam shares his journey and discusses his career from the USMC vet to his work in the aerospace industry.
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 multimillionaire 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 0:53
Welcome to Episode 1541 1541 today, we’ve got a fantastic Stick client case study and you are going to want to learn from how this guy did it. We’ve got our client, Adam Jackson on with us. And he’s been investing with us for the last five years and get this, almost half of his portfolio is now in the infinite return phase. He’s a former Marine, and now in the aerospace business, and just doing a little investing on the side, and this is the beautiful thing about income property, you can acquire the asset and then you can get all your money back as if you sold the asset, but you don’t have to sell it. You can still own the asset and still get the returns from the future of the assets performance. After you received all your money back. That is fantastic. Isn’t it Alright, so in our intro portion today, and by the way, this guest will be in two parts. So we will have him today and the second half of tomorrow but the first part you’ve got yours truly. And I’d like to start off with a quote. And this quote is a Shakespearean quote. So what does the Bard have to say to us? Well, in Julius Caesar, act four, comes this gold nugget of wisdom. There is a tide in the affairs of men, which, taken at the flood, leads on to fortune omitted, all the voyage of their life is bound in the shallows and in miseries. On such a full sea. Are we now a float, and we must take the current when it serves or lose our ventures. That’s good. I mean, Shakespeare talks weird. We all know that right? But really, really an incredible quote. And it just really goes to show us that so many times, we are faced with such incredible opportunities. And you know, we just finished our team call and we were talking about our clients who had purchased properties through our network over the years and people that purchase properties 10 years ago, eight years ago, five years ago, three years ago, even a year ago, have made great money. But you know, what’s interesting about that? Is that the same time there were people saying 10 years ago, eight years ago, five years ago, one year ago. Oh, the bubbles gonna pop on. I’m gonna wait until they were saying this three months ago. What am I talking about? I’m gonna wait I’m gonna keep my powder dry. I’m not gonna buy anything yet, because I’m gonna wait because it’s going to all collapse. And then I’m going to buy everything when it collapses. Yeah. Good luck trying to time the market. It sure seems like every brilliant market timer would have been out in force in March. That was only six months ago, folks, well, five months ago, depending on how you look at it, and they would have said, Wow, we’re in a pandemic. Yeah, the markets gonna collapse. Now again, you know, I’ve said this, we’re in the third inning here, folks, we got a ways to go here. But look, just buy properties that make sense from day one, and that is your insurance. You can ask for a better insurance policy than that. Just buy properties from that makes sense from the day you buy them. And you’ve got a very nice insurance policy. Now there are other forms of insurance policy included in your properly structured properly purchased real estate deals that follow Jason Hartman’s 10 commandments of successful investing, and even the next 13 of them up to the 23 commandments, but you only really have to follow the first 10. And you’ve got all sorts, all sorts of insurance. One thing I say is that the best insurance has a high loan balance. Well, that’s going to come true again here, folks. Our heart goes out to the people affected by the recent hurricane. And I’ve got an article in front of me Of course, this pushes up the prices of commodities, which are already more than high enough, right. This article says hurricane Laura Wallops areas with high mortgage delinquency rates. Wind surges hit over 150 miles an hour in Louisiana with dead Damage estimated in the billions. Insurers will have to fork over billions of dollars to pay for the damage that property owners incurred from Hurricane Laura last week. By the way, just a side comment, this wasn’t my point. My point will come in a moment. But my side comment is in every time you see one of these hurricanes, or really any natural disaster for that matter, sometimes, many times actually, it is an example, in another odd way of Joseph Schumpeter, the economist Joseph Schumpeter, his creative destruction. Now, it’s not very creative, admittedly, but it’s destruction. And sometimes, and I know this may sound cold and heartless and awful. But sometimes when you step back, and you look at the big picture, you see that a lot of this destruction was actually good for the people whose home was destroyed. Now, nobody will feel that way in the thick of it, certainly not. It’s terrible. But many of these people, and I’ve talked to them over the years and some of them are clients, like in Hurricane Katrina, I remember one of them. property was completely wiped out. And at first he thought, This is terrible. But then, but then he got his insurance payout. And a developer bought the property, because they were doing an assemblage assembling a bunch of properties to build a high rise where these little single family homes used to be. And that is an example of, in a way creative destruction. Because he made a ton of money off that deal. Okay, you wouldn’t think it you’d think oh, you know, it’s terrible. It’s tragic, right? A lot of times, tragedy seeming tragedy can turn out to be Really, really positive thing. And you’ve all seen this before in your own life. You all can think of examples in your past, where one thing, you know, a lot of times it’s a relationship, right a relationship that ended maybe you got dumped. Right? Maybe you got dumped, and you’re sad about that. And then you realize later, Oh, am sure glad I got dumped, because that can make room for someone a lot better. Right? And a lot of times, it turns out exactly that way. So you know, it’s, um, one of the key things in life is the concept of gaining perspective, perspective, perspective perspective. You got to stand back from the canvas of your life and stop focusing on one or two brushstrokes. And as the old saying goes, look at the big picture, you’ve got to look at the big picture in that big picture, it can turn out to be much more positive, much more positive than you think at the time. So hurricane Laura, okay, here’s the thing. As I’ve always said, the best insurance is a high loan balance. The best insurance is a high loan balance. I promise you, there will almost assuredly be a bailout. It’s common votes. It’s always coming. It’s always coming. But guess what? What will be the bailout for the people who own their homes free and clear? I bet it will be nothing. Okay, Jason, you’re overdoing it on the sound effects chill out. You know, it’s like a kid who gets this new toys new sound effect machine. It’s not new, but I just pulled them out of the drawer the other day. And so I’m liking the sound effects. So There will undoubtedly be a bailout program coming for the people who have mortgages and likely it will be a moratorium on mortgage payments, a forbearance program of one sort or another. It’s common folks. It’s always coming. And that’s the thing. You know, you’ve got everybody right now asking, Well, you know, I don’t know, I think the economy is going to crash, the housing market is going to collapse. Everything’s going to get really bad. Because what happens when all these moratoriums and what happens when all of the bailouts and what happens when the extra 600 bucks goes away, etc, etc, etc. Let me tell you what happens in today’s world. And I know you know, normally normally normally if the world were rational, I would never hang my hat on this. Now looking over at the hat on the top of my bookshelf, because in Florida, you know that Sun’s pretty hot in the middle of the day when you’re walking the dog Got to wear a hat. Especially because my hair is getting so thin. When does the cure for hair loss going to be invented? I’m waiting, I’m waiting. Otherwise, maybe I’ll shave it. Maybe I’ll just shave the head someday. Anyway, tangent alert. So you see all these people, you know, and they’re all worried about this, that and the other thing, but I think we really are in an era where we can hang our hat. hang our hat on the idea that there will be another bailout program coming. And certainly, as long as Jerome Powell is head of the Federal Reserve, Uncle Jerome is like the man with the goodies. Wow. More so than maybe any other Fed Chair. I mean, a lot of others. And you know, our email newsletter that will go out this week. I’ve been writing that and you know, I’ve been looking at and researching Fed policy over the years For that newsletter, this next one is going to be good folks, be sure you’re on our email list. Just go to Jason hartman.com. And make sure you’re subscribing I’m really dedicating some effort to that. I never really did before, I’ll be honest with you, really dedicating some effort to it, and our email newsletter that’s going out this week is going to have a lot of good content. So make sure you’re on the list, go to Jason hartman.com, put in your email address somewhere anywhere doesn’t matter. You’ll get on the list, you’ll get our email newsletter and make sure you whitelist us check your junk folder because sometimes they get filtered. That’s just the way it is, you know, the powers that be want to censor you when you’re talking about and by establishment. They don’t like you bagging on the Federal Reserve or questioning the establishment, which is what we do here. By the way, folks, we do that in case you haven’t noticed. Anyway, I’ve been researching that and you know, the fed you still really only have very blunt policies to deal with these these various crises. And now it has just invented so many really sophisticated tools. I mean, they all sort of at the end of the day come down to the same thing. Hashtag money printing. But, you know, the tools they have are much more Um, well, they’re much more, I guess I want to say they’re subtle. In a way either. I don’t know. I don’t know. I don’t know how to explain it. And I don’t know. I just don’t know what to say. But read the newsletter. It’s all there. Okay, what else? What else? Well, I think we probably better get to our guests today. really a wonderful interview. This guy was a great guest and, and Adam, we really thank you for being our client and really impressed with what you’ve done. So thanks for coming on the show. I know we’ve got a couple more client interviews, booked client case studies. And if you’re out there listening, and you want to come on the show and share your case study, we would absolutely love to have you you’re certainly invited on and All of our listeners really love to hear these stories. So a couple of announcements before we get to him. Number one, we have for our empowered investor inner circle, we’ve got our first private meeting this Friday, you should have all received an email on that with the link to the zoom meeting. And also this Friday, we have a meeting for all the people who purchased the asset protection program. Okay, we really wanted to do a deeper level kind of advanced meeting on that, where we can really dig in, take more of your questions. And you should have also received an email on that. Be sure to join us for that on Friday. And we look forward to seeing you there. A lot of you have asked about the empowered investor inner circle. We’re going to have a webinar on that soon and open it up to our broader audience. So thank you very much for your interest in that. So that’s coming, you know Rome wasn’t built in a day. No, Rome was not built in a day. You know, it takes us some some time to get all this stuff together. But we’re doing it we’re getting there. So it won’t be long before you’re invited to check out the webinar and then join the inner circle group and we open it up to the meet the Masters attendees first, but we’d open up to everybody in the audience soon. If you want to check out the asset protection webinar, go to Jason hartman.com slash asset you can check that out. And yeah, I guess that’s it for today until we get to our interview here with our client. Let’s go through a case study and let’s hear about how he created infinite return on almost half of his real estate portfolio in five short years. Five short years. Awesome. Awesome. Awesome. Okay, here we go. Hey, it’s my pleasure to welcome one of our clients back To the show for a third time and that is Adam Jackson. He was on about three years ago. He’s in the aerospace industry. He’s a USMC, combat veteran. Thank you for your service, Adam, by the way, he spent a two tours in Fallujah. So it’s probably got some amazing stories there. He’s celebrating his fifth year as a real estate investor. And he’s about to close on his 14th property. And he, he voted with his feet and moved his wife and four kids out of the Socialist Republic of Connecticut, right? That’s right. Can not California to Orlando, Florida, so he’s, he’s my neighbor not too far away. Adam, welcome back. Thank you for coming back on the show and sharing your client case study story. These are the best shows and by the way, anybody out there listening who wants to come on share their story, we would love to have you because listeners just love hearing about real people doing real great things. So congratulations. Now you’re basically dollar cost averaging, you’re not timing the market, which I think is fantastic. And you talk about how you’re getting infinite returns on almost half of your portfolio. Now, what does that mean?
Adam Jackson 17:14
Yeah, so basically what that means is, I purchased a lot of the property’s over four years ago now. And since that time, they have not only had the loan paid down, based on what what I was collecting and rent and how that gets paid down by the tenant, but also the properties have experienced a decent amount of appreciation actually more than I thought they were going to experience. So in what’s kind of funny is that at the time when I was purchasing these, everybody was saying, oh, interest rates are great, they’re probably not going to go any lower. They probably won’t be like this ever again. So you better do it. Now. What what, and there was good reason to think that by the way, there was I don’t fault anyone and I fully believed it myself. Right? Yeah, don’t do but Fast Forward four years, and Now the interest rates are even lower. So you combine that with the loan pay down in the appreciation, I’ve been able to basically pull out at least as much cash as I’ve put in sometimes more, in some cases, as what the original downpayment and closing costs were, and my payment has only gone up by a very minimal amount, sometimes 20 bucks in some cases, that is amazing. So, so congratulations on that.
Jason Hartman 18:28
So before we dive in, too deep, Adam, give us a little bit of your backstory, if you will, of course, would love to hear about your career in aerospace. And, you know, what’s going on there. And I think you have, you know, some thoughts about how that’s a signal as to what’s going on with the economy as well. But you know, maybe start by when you probably discovered my podcast years ago, what When was that? What year was?
Adam Jackson 18:52
So I would say would have been 2015. Okay, at this point, yeah. So it’s been about five years now that I’ve been listening to you
Jason Hartman 18:58
and I remember you tended our meet the Masters event about three years ago, I think the 2017 event. Did you attend other events as well? Yeah. Well,
Adam Jackson 19:07
I’m not sure if that was with Ron Paul. or so. No, that
Jason Hartman 19:10
was 2008 20. Oh, okay.
Adam Jackson 19:12
So I went to that I’ve been to prophets in paradise actually the most recent one in Orlando. Oh, you a Memphis property tour. And then the most recent virtual meet the masters.
Jason Hartman 19:23
Excellent, excellent. Good stuff. So 2015 and why did you get the bug? What what interested in you in real estate or, you know, income property?
Adam Jackson 19:32
Yeah. Well, I was always somebody who religiously contributed to a 401k, a Roth IRA, saving for retirement, living below my means, and that sort of thing. And in the back of my mind, there, there was always this feeling of, well, how am I really going to save enough? I mean, I mean, realistically, it was it just didn’t make sense to me.
Jason Hartman 19:53
How would nobody ever got rich saving money?
Adam Jackson 19:56
Exactly. And so I started to embark On this personal development phase and really kind of into this program, and I listened to all the classic personal development mentors and things like that, but I ended up listening to a book called seven, seven years to seven figures. I can’t remember who wrote it. But basically, it started talking about real estate. And then I thought it was really interesting, got really into that started to read and read and read. And then I searched for podcasts. And you were really the first one that came up and once I started listening to it, I just never stopped.
Jason Hartman 20:31
Yeah, by the way that that book you mentioned. That’s Michael Masterson. He’s been on the show. That’s Pena, so that’s not his real name Michael Masterson. It’s Mark Ford. I that’s a great book. I also read that book. I’ll tell you his book that I like even better is called and I think you practice this in the military By the way, the concept and sounds weird. of ready fire aim. That is a great book of Michael Masterson.
Adam Jackson 21:00
I have read that one. That’s a great one. Yeah,
Jason Hartman 21:02
I like it. But I mean, obviously, you went through boot camp and all of that stuff. You know, when shooting, I hear that some of the training, you know, that, like the marine training is, is this concept of ready fire aim? Because I understand that if you actually think about it, if you overthink the shot, you’re less accurate than if you just fire. It sounds counterintuitive, but and I don’t know if you remember that from any of your training a long time ago, but I just thought I’d mentioned that because another another military that told me about that.
Adam Jackson 21:35
No, I mean, that’s absolutely true. Now Now, when you’re when you’re sharpshooting or when you’re on the target range, yes, like you will make small adjustments, you will take a shot, you’ll see where it landed, you might adjust your windage or elevation. But I mean, I can definitely relate this more to what my job was in the military, which was on the one tank and those are all using cruiser, fully automatic weapons. So typically what we do, there is You start firing and in with all the information that you have, you take your best first shot or burst. And then from there you walk it to that target if it’s if it’s off at all right, right, the concept does hold.
Jason Hartman 22:13
That’s a great metaphor for real estate investing. And, you know, I think you know what I’m going to say, Adam, because a lot of people, you know, I mean, we have investors who are advanced investors, wealthy that are, you know, buying up portfolios of properties, but we also have brand new people that are thinking about doing it. And you know, some of them get in this trap where they want all the information before they do it. And you can never, ever have all the information. So your example of operating the Abrams tank, is you’ve got to fire, get the information from where that shot lands, and then adjust. And that’s how life is right. It’s that the law of life and investing and whatever is that whole process of doing something getting into information from it using that information to do it better than next time. Right? I would definitely agree. And also, once you finally engage, okay, you engage that target. A lot of times what happens is you end up finding information out there might have been certain conditions with that scenario that you were unaware of that first meet, maybe had heard about them, maybe you had trained for them. For instance, the fact that I bought properties going back to real estate, and four years ago, I mean, I didn’t know if the interest rates were going to go lower. I could have never imagined that I didn’t know if the appreciation was going to happen the way it did. I mean, I invest for you. So there’s all these other factors that you can eventually take advantage of with the information that you learn after you get started. Yeah, nobody can know all the information or how it’s going to work out in advance. You’ve just got to jump in and do it and adjust adjust along the way. That’s the only way anything in life works. I mean, that’s the way surgery works when a surgeon goes in and does surgery, right? It’s the way everything works. You just cannot know everything in advance. You’ve got to give up that need for certainty, and just go do things and and, you know, I like to say, cultivate what I call rational recklessness.
Adam Jackson 24:17
I like that.
Jason Hartman 24:18
You got to be a little bit reckless, you know? Yeah. Good. Anyway, go back to what you were saying. So, you were talking a little bit about timeline and things like that. And I interrupted you.
Adam Jackson 24:27
So? Oh, yeah, I guess this would this would just kind of go back to what I was doing with the properties as far as the approach of just consistently buying and not actually timing the market, not actually, you know, waiting for any significant kind of downturn, ebb and flow. Just Just continue to do this, getting control of the asset as soon as you can. And let it go to work for you. BMB the trajectory is incredible.
Jason Hartman 24:56
Absolutely. So get in control of the of the real estate. As soon as you can, and then let it work for you and then make those course corrections, right.
Adam Jackson 25:05
And it doesn’t take very long. I mean, again, only four years, I had more of a seven to 10 year plan, which I thought would have been realistic maybe for some sort of an exit plan or some sort of harvesting equity. But it happened even sooner than I thought.
Jason Hartman 25:18
Good stuff. Yeah, that’s awesome. So which markets are you in? What metro areas?
Adam Jackson 25:23
Yep. So I’m currently in Memphis, Jackson, Mississippi, also Jacksonville and Ocala. Hmm. So you’re good to know. Yes. So they’re, they’re nice and local. I can drive to those within an hour. I know not everybody has that luxury, but but that was definitely a selling point for me. And also Talladega, Alabama,
Jason Hartman 25:42
okay, good. Good stuff. And you live in Orlando? That’s correct. Fantastic.
Adam Jackson 25:47
So how did it start? I mean, you listen to the podcast, and then where was your first property? So the first actually what I did was I bought three properties right off the bat in Memphis, okay. And Those have actually proven to be some of my my best stories, some of my best winners. Yeah. I mean, ever since then I’ve really enjoyed the Memphis market. I can tell you though, what I did was I was going through the pro formas from a Memphis property tour, not it was really like three years ago at this point. And I could not believe the deals the way that the the way the pro formas looked, you know, they’re just the amount of cash flow and the rent to value ratio. But I was told that even years prior to that they looked even better.
Jason Hartman 26:32
Yeah, I can tell you that it’s, it’s never too late to start and the deal I’m still finding deals that look great today. So yeah, absolutely. I agree with you, and you use property tracker to to track your portfolio. And are you also using it to evaluate new deals. So you know, it certainly makes you hone in and you’re very familiar with the way that first year projection looks on the performer. You know, you’ve learned how to That works. And by the way, anybody watching or listening, if you go to Jason hartman.com, if you do one thing and one thing only, go watch that free 27 minute video on the front page of our website, it’s totally free. It will teach you how to read and understand every single number on that performer. And it’ll really teach you how to evaluate a real estate deal. And it’s probably the shortest best course on real estate investing ever. And it’s free. So 27 minutes, there you go. But yeah, so at the time when you were buying those properties, Adam, did they feel expensive to you?
Adam Jackson 27:36
Well, being from the Socialist Republic of Connecticut,
Jason Hartman 27:39
they call cheap, right, right.
Adam Jackson 27:41
Because they were barely in the six figure range. So they did seem fairly inexpensive to me. However, I would still have to make a 20 to $25,000 investment. So I think that maybe just kind of getting over that, especially with a Roth IRA at the time. I think that the contribution was 5000 or 5500? And, you know, probably something similar to that with what I was doing with the 401k. So, you know, obviously it’s a bigger investment, but the thing is, is that the money starts working, the the currency starts working for you immediately. And you don’t have to put it off. So yeah, I wouldn’t say it was inexpensive, but still a good chunk of change to me at the time. Mm.
Jason Hartman 28:24
Okay. And you know, what were some of the good and the bad things that have happened to you over the years, you’ve been investing for five years, you’re up to 14 properties in all the markets you mentioned. So congratulations on all of that. You know, you said you were surprised pleasantly surprised at how some of them have performed and that the appreciation you’ve gotten. So that’s awesome. But there have been some lessons along the way. I’m sure some things you have probably some regrets. I’m guessing. Any thoughts? The real world picture is what we want to paint here.
Adam Jackson 28:56
Yeah, sounds good. Well, I mean, I can tell you right off the bat, I have zero regrets. Only because anything that happened that might have been to the negative was actually offset by the lesson, you know. So I definitely learned an important lesson. Through those negatives, I can tell you that at the time that when I was going through and harvesting all this equity to dump back into the other three properties that I’m firing just in the last few months, I can tell you that those properties performed very, very well in general. And I think a lot of that might have had to do with with where I bought and what I bought, but I can tell you that the cash flow has been pretty solid for the most part. And now I have had some some issues. I think it’s very important to stay on top of your management. I think that if you have some sort of a charge that you need more detail on or maybe you just want to question for certain reasons, I think it’s very important to stay on top of the management. Demand those answers you know, demand the answers demand pictures are real. Yes,
Jason Hartman 30:00
absolutely, absolutely like that.
Adam Jackson 30:03
I can’t hammer that home enough. Yeah. And don’t be afraid to. I mean, if you have to, I mean, have a healthy amount of tension. If you have to do that, and let them know that you’re not, you’re not afraid to take your service or your business elsewhere. I
Jason Hartman 30:18
absolutely couldn’t agree more. Now to that end. And, you know, we’ve, as you know, have been really pushing and teaching people how to do self management, long distance self management, which, you know, like I’ve said many times, if you asked me if that was possible, 1314 years ago, I would have said No way, but it’s totally possible. And, you know, we have all these great tools to do it nowadays. And, you know, we just launched the empowered investor, inner circle, and all of that stuff, too. You know, our goal is to help, you know, thousands and thousands of investors really take control of their properties by doing self management. And the amazing thing I find is that sometimes because you get at third party that intermediary that middleman out of the way. It’s actually easier. It actually takes less time. Now it sounds like you’re not doing any self management yet, but you’ve probably thought about it. I don’t know. Are you
Adam Jackson 31:13
self managing? I think I’ve thought about it a lot. And actually, I was very, very close to firing property manager at one point to do that. And then we ended up improving the situation. So I didn’t actually do that. It has been on on my radar, and that’s partly why I bought in Florida, although I’ve had no issues there, of course, so but that’s definitely something I would I’d be willing to entertain. I think it’s a it’s a great thing to do.
Jason Hartman 31:38
Yeah, just the fact, Adam, that you, you know, hopefully we’ve conveyed to you that you have the confidence to do that. It puts you in a different negotiating position. When you’re asking for justification for an expense from your property manager. You know, now you can do it hopefully with some more confidence with some more guts to say Look, if I need to pull the plug and get another manager or just self manage, you know, I know there are options, right? And it’s gonna just make you a more powerful confident investor. Right?
Adam Jackson 32:10
Absolutely. And I think it’s kind of funny because I’m seeing parallels between my read my initial reluctance to actually purchase a property. And now fast forward four years, or maybe even a little bit more. Now I’m sort of at that same Crossroads with, okay, well, now, do I take these matters into my own hands? Do I take the plunge into self management? Mm hmm. So that’s one of the one of the things I’m definitely thinking about. Yeah. But But you know, like, going back into the portfolio, some of the good some of the bad again, most of those properties have performed very, very well. I’m at infinite returns on on many of them. I can tell you though, actually, this is a good story, my worst performing property. I finally I purchased it three years ago, and it was at the lower end, so I’m probably close. To like to maybe a see property, and I finally had my first month of cash flow in about two years. So think about that. I mean, that I finally got it stabilized, I think. But what’s funny is that when I look in my property tracker, and I look at the overall return, I’m still looking at a double digit. It’s a 15% return. Right. So you know, it’s funny, because you, you have alluded to or talked about in detail in the past, you know, if the deal only goes half as well, is it as it’s projected? Yeah. You still get these double digit returns? Yeah. All right. And that’s what I’m seeing here, you know, between appreciation tax benefits, but but the lessons I think that’s that’s priceless. So, absolutely. One bad egg, though, I think, yeah, one may get one at some point.
Jason Hartman 33:49
So your worst deal is 15% annual return on investment. That’s right. I love it. Yeah, that’s the worst deal, folks. It only gets better
Adam Jackson 33:59
to believe Yeah, I wouldn’t have believed that myself. Yeah.
Jason Hartman 34:04
And that’s, that’s a lower that’s a lower end property in terms of what we sell and what’s in your portfolio, right?
Adam Jackson 34:10
Yeah, it’s a lower end property. But I can tell you that I have another lower end property, I only have two in the portfolio. And that has been outstanding. I have a I have a section eight tenant in there. And the rent comes in like clockwork, there’s hardly ever a repair, the tenants are all leasing up. But that’s another thing. I’ve received so many renewals on leases this year. It’s just incredible. So you know, I can tell you that all the properties that I have There are currently leased, and I collected every rent last month including back rent from a property that was missed from the previous month.
Jason Hartman 34:47
Okay, so that’s a good question. So at the time of recording now, you know, we’re sort of in the midst of the lockdowns are spotty as some areas some not, but you know, every world’s mass right now. Right? There’s been a lot of talk about rent strikes and eviction moratoriums and stuff like that. Has everybody been paying your rent all the way through this? Or is that just last month that you were referring to? Or tell us about the experience on rent collection?
Adam Jackson 35:14
Okay, so that would be specific to last month. I can tell you, though, that everything has been very, very consistent. I mean, there might be one property that I don’t collect rent on for a given month, or maybe it’s going through a turnover. But that’s generally the average I would say one property out of the the double digit properties that I own. My I might miss the rent for some reason or another. But, you know, I just thought it was a testament to a lot of a lot of the fear that has been out there. And I remember months ago, we were we were wondering, I mean, okay, let’s build up the reserves. This could be bad, but you’ve been you better hang on to your hats. And I think this is just a testament to the fact that every property that I have is currently leased. The the leases are being renewed and last month in particular, I collected every rent.
Jason Hartman 36:06
Yeah, that’s fantastic. So the asset is just much more resilient than most people think. Adam, I want to go back to that comment you made because I’m not sure everybody really understands it on your worst performing property, and how, you know, some people in the income property investing game and the real estate game, they think they’re losing when they’re actually winning. And the reason they think that is they don’t know how to do the math, they just don’t know how to calculate it. They don’t understand that like an iceberg. You know, most of it is below the surface of the water. And there are all these things giving you return on investment because it’s a multi dimensional asset class, and they don’t see it, you don’t see it right away. Sometimes you don’t see it until the end of the year when you keep the books on it or when you do your taxes and you get a big tax deduction. or whatever, right. But speak to that a little bit more and maybe help our listeners understand that a little bit.
Adam Jackson 37:06
Yeah, I’m actually glad that you brought that up just because recently, I had spoken with another investor who purchased a property. They tried doing it for only one year and had a major repair. This was just somebody outside of the network, and they did it on their own. And it basically wiped out whatever their projected cash flow for the year would have been. And I think it was at that point. I mean, I basically told them some version of what you just said, how there’s just a lot happening underneath the surface, right. And I took it upon myself to go in and really do a deep dive on my returns and the calculations there. Now, at the time of the I guess it would have been 12 properties I had, I was looking at roughly $3,000 a month in cash flow, which I think is pretty good. I think that those numbers are pretty solid. But what I did was I took into account the appreciation, I took into account the loan pay down. And then projected tax benefits. This is not include inflation paying down the value of the debt or anything like that. And that $3,000 turned into between 15 and $17,000 per month for the total return. So it’s actually pretty amazing when you look past the cash flow, what’s really going on, especially if you leverage these properties at a five to one or four to one, you’re really looking at some incredible returns.
Jason Hartman 38:33
Yeah, yeah, you are, you are. And because you get, you know, like people, most people just look at the cash flow. And they think, I mean, I remember there was a comment on one of my YouTube videos the other day, I didn’t have time to respond to this skeptic, you know, but I’m not going to convince him I just give up on some of these people. They just don’t get it. You know, you’re either gonna get it or you’re not gonna get it right. But this one guy watched the video, I guess. And, you know, he commented, how is this possibly worth it? I’m gonna buy a property and get 200 off A month. So what? And it’s like, oh my gosh, if you just took the time to understand, I mean, what you know, to that guy, like, I want to say, Okay, look, I’m not gonna try and explain anything to you, or teach you how it works or how to calculate return or anything. Just ask yourself this simple question. How is it that you know, and I know because everybody knows them, right? So many people who created a lot of wealth through income property, yet, you probably don’t know anybody who did that in the stock market or buying gold or, I don’t know, maybe Bitcoin if they timed it, right. But you know, I don’t think that’s a sustainable investment. How do they think it works? You know, because they certainly have looked around. And they know lots of people have become very wealthy through income property, yet they still don’t take the time to understand it.
Adam Jackson 39:52
I think a lot of this has to do with the infrastructure around what we look at when it comes to Wall Street, and the The conventional wisdom as to what investing actually is. Yeah, I mean, I know that we’ve all talked about this, but income properties are outside of that system. So there’s no one that’s going to be pushing that. But But again, like you say, the wealthiest people are the ones who either have made their fortunes in real estate, or who put their money in real estate, and there’s good reason for that.
Jason Hartman 40:20
Yep. Abby, you’re absolutely right. You’re absolutely right. This will be continued on the next episode. Thank you for listening and happy investing. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice 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 hosts Ross Wordon to discuss his property plan. Ross discusses how he started at an Etsy store in today’s client case study. Ross Worden started a fast-growing business from an Etsy store. His early interest in real estate sent him on an investment quest. He discusses how he became educated by listening to over 500 episodes and after purchasing his first investment property, created a 10-year plan to get to 93 properties. Jason and Ross look at his current portfolio and his plans for growth.
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 multimillionaire 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 0:54
Welcome to Episode 1531. You know, I’ve been talking to you about how we’ve been working on developing some handy dandy calculators for you. Of course, we have a software company, property tracker, and real estate tools, you know, great, great software apps, iPhone and iPad apps Mac app available to you as well. But just some little calculators to do some quick stuff. Well, the one we’re going to talk about today is not a little one, actually, it’s a it’s a spreadsheet really more than a calculator. But it is super handy and powerful. And we are going to endeavor to make this one public. But this time, I can only say that your investment counselor will have this calculator available. What we did is we we took the calculator that our client, Ross Warden was nice enough to share with us and we elaborated that’s not the right word, Jason. We didn’t elaborate on it. We expanded on it. We improved it. We took his great idea. And we embellished it. I don’t know, what’s the right word? I don’t know. But anyway, we made version 2.0. Okay, so as our client our Ross is describing today, in his case study of how he plans to get to 93 properties. And that’s a pretty awesome goal for a young guy like this. I’m just so, so proud of him and what he’s done so far, and what he’s going to do, when he says, something’s gonna happen, it’s gonna happen because this guy is a Dewar. And that’s great. He joined us for our venture Alliance trip in Hawaii about a year and a half ago, and shared that this spreadsheet with us, we presented it at meet the masters. Since then, even we’ve made a few more modifications and improved it more, and your investment counselor will have this available to you. If you don’t have an investment counselor with our company. Reach out at Jason Hartman calm COMM or by calling one 800 Hartman, again, that 800 number only works in the US I understand we have, of course, listeners in 189 countries worldwide. If you are outside of the US, just go through the website, Jason Hartman, calm and inquire anywhere, any form on the website and we will get you an investment counselor who can run this calculator for you. They can do a screen share meeting with you and really show you the visuals and it’s just, it’s really awesome, I must say. But ultimately, the plan is to make this available on our website so that you can go plug in your own numbers and play with it. So that will come it will come. A couple of quick announcements before we get to this great client case study number one for meet the Masters VIP ticket holders. Remember your two bonus implementation sessions. The first one is this Thursday night. It’s Thursday, August 20 at 8pm Eastern 5pm Pacific. And then the second one is the following week, we sent you all an email today with the secret link for that. And then the for those of you who purchased the meet the Masters recordings, those will be done very soon. We’re just putting the final touches on them now. And we’re going to have a really nice portal for you to go in and access those and also an audio download. So you have the videos and the audios we really wanted to do this nicely have it indexed for you, you know, lots of others would have simply shared the link and not edited it cleaned it up. Chapter rised it if that’s is that a word chapter rising? I don’t know. Where’s that word? Jason chapter rise. I think chapter rising as a word. Yeah. Chapter rise, we’ve chapter it. Boy, that applause just goes on too long, doesn’t it? So and then we’ve got our live stream coming up on Sunday. on our YouTube channel and facebook, as well. So our live stream is there on Facebook at the Jason Hartman comm Facebook page. And on YouTube, just type Jason Hartman and you’ll find our channel and you can join us for the live stream every Sunday. That’s coffee talk. That’s not ta okay. It’s tea. Okay, caught coffee talk. So join us for that every Sunday. We had a great one last week. And by the way, you can watch the replay on the YouTube channel, so or on Facebook as well. So that’s available to you. Okay. Without further ado, let’s get into this session with the client case study with Ross talking about the calculator, and I think you’ll enjoy this. So here we go. It’s my pleasure to welcome Ross Warden to the show. He is one of our clients and he is doing a great job. And I just love to see young investors with big plans and this is no good. exception. If you’re watching on video, we will be sharing a little spreadsheet for you. So you can see his great plan to take over the world as a real estate investor. And we’ll go into that, but if not, I will share it with you here on audio. And I think it’ll be very insightful and enjoyable for you. Ross, welcome. How are you? I am excellent. How are you? Jason? Good, good. It’s good to have you on the show. And thanks for coming on. You know, the listeners always tell me they love to hear client case studies. And anybody listening. If you are one of our clients, and you want to share your case study story, please reach out to us through Jason hartman.com or at one 800 Hartman because our listeners would love to hear from you and not only give you 15 minutes of fame, but probably 2025 minutes. As it works, you know the old saying 15 minutes of fame, right? Good stuff. Well, I Ross start off, give us a little background. Where are you located?
Ross Worden 6:55
I am in Columbus, Ohio.
Jason Hartman 6:57
Excellent. And you joined us for our prophets in paradise event in Hawaii, just about a year and a half ago, I guess that was right.
Ross Worden 7:05
Yeah, beautiful. I was there for the conference and for the kind of mastermind retreat after that. So it was it was a fun time
Jason Hartman 7:11
that that’s what I was gonna say you were there for the venture Alliance retreats. So thanks for joining us for that. And that was a lot of fun. And I tell you, I miss travel. It’s who knows when we will be really traveling again, in any real way. I was looking at the TSA statistics this morning. And it it’s shocking, travel is coming back. And that’s encouraging. But it’s literally only 17% of what it was this time last year. And and that’s with a comeback. So travel is increasing for sure. But way, way way down, but you know, let’s talk a little bit about your business and background because I think it kind of relates to travel and, and that’s why I wanted to talk about it. So before we get to business, a little background. Did you grow up in Columbus, Ohio?
Ross Worden 7:59
No Actually, I’m from Findlay, Ohio, the northwest part of Ohio. I came down to Columbus in 2005 went to school at Ohio State University and graduated in oh nine with a degree in Industrial Design. Okay. And then did you do a Masters in Germany? Because you said you studied in Germany as well? No. So Germany is well known for their product design acumen, I guess. And I studied there for three months 2008 I believe it was and that was just a short stint was in my undergrad. Got it. Got it. Good stuff. Okay. So you did industrial design and then for your did you start your business right away out of school or no, it took me a while to figure out what I was doing with my life. And who really does figure it out. Right, right. No, I I worked in an industrial design or product design consultancy here in Columbus for about six years, but about two or so years into that I discovered that I had kind of an entrepreneurial gene, I suppose. And started pursuing just kind of a side gig to start paying down student loans and that sort of thing and hopefully, you know, get out of debt and kind snowballed. I turned out that I really, really enjoyed entrepreneurship and had just a passion for growth and personal growth and business growth and wealth growth and just kind of everything associated with that lifestyle. And so I really went deep into that I ended up quitting my full time job to pursue my own business full time in 2016. And that’s, that’s where I am now. That’s the path.
Jason Hartman 9:21
Okay, great. So tell us about your business. You know, I’ve been to 87 countries and, and you’ve traveled a lot and your business relates to travel. So now we’ll circle back to that. And then let’s talk about real estate investing.
Ross Worden 9:33
Yeah, very much so. So I think your observations about everyone wanting to travel but they can’t travel right now is very relevant to my business. So my business is called conquest maps. We make high quality pinnable travel maps that you put up on your wall, put pushpins on to keep track of where you’ve been where you want to go. Very simple concept. There just wasn’t what I was looking for when I wanted one for my wife and I so just given my skill set, I decided to figure out how to make it myself had a lot of criteria. For my business intentions, I guess and so I made a handful more, put them up on Etsy. And they sold and I guess long story short, I kind of reinvested all of my profits for the next four or so years. So now we just help travelers who want to see more of the world. We help inspire their, their adventures, and, and that sort of thing. And all through travel maps and travel related home decor. So it’s been a really fun thing. But particularly right now, nobody can get out. And so they’re thinking more and more about all the places that they want to go. So of all of all businesses, I think we’re in a fortunate spot, because while revenue took a serious hit, when the stock market was taken a big hit there, things have come back a lot and people are really they got the wanderlust right there. They’re really hoping to get out and they’re thinking about where they want to go. They want to put those pins in the map. And it’s been an interesting time. We’re struggling to keep up right now, in all honesty, so the best problem to have,
Jason Hartman 10:53
right, yeah, yeah, I was just gonna say that. I think people really do have serious wanderlust right now. More than Normal I mean, your generation millennial generation and you’re 33 years old, has very much wanderlust much more into experiences over things. But that travel has just been halted. So I would imagine a lot of people are dreaming of places to go when when, when times changed a little bit for sure. But with your background, in your degree in Industrial Design, and in here’s a stereotype, but it’s a positive one, you know, your age, it’s a surprisingly like low tech item. What do you think about that? speak to that if you would, it’s not a piece of software. It’s not a website. It’s a map that you hang on the wall and stick tacks and do right.
Ross Worden 11:42
Yeah, exactly. It’s a simple thing. But you know, regardless of all the tech things happening at the end of the day, people are always going to live in a home much like you preach right. And when you have a home when you have your, your own space, you want to put things up in it that represent you your lifestyle, your your desires. In life, and I think this is always going to be relevant, it doesn’t really matter if there’s a better or different or whatever, whatever solution out there, you can track your travels in 100 different ways. But at the end of the day, it’s just really, really awesome to see that map hanging up there to be thinking about it all the time. It’s when people walk into your house, you automatically have a way to discuss something interesting. Hey, I’ve been there, or Hey, I wanted to go there today. It’s just super interesting and super easy. And it just, maps are just cool.
Jason Hartman 12:28
Yeah, good. Like maps? I think so too. I think so too. What other kinds of products do you make? Besides the travel maps? You travel it related decor you said?
Ross Worden 12:37
Yeah, sure. So like Canvas prints, that sort of thing. Travel related artwork. We do like wall decals, vinyl decals, by far and away. The most popular things is our pinnable travel maps, though. So that’s that’s the leader. All right. And we’re known for is Etsy your main outlet for sales or is Amazon not at all? Not at all. That’s where I started. It was a very different landscape back there today. 2013 when I launched the store, now our best places our Shopify store our website, so conquest maps calm. Okay, so
Jason Hartman 13:08
that’s good because that means and you know, we’ve had Carmen on the show talking about Amazon being an Amazon seller and so forth and all the massive, terrible, disgusting abusers that Amazon and other big tech companies just abuse people like crazy. So you have your own store and your own distribution channel, which is great.
Ross Worden 13:27
Yeah, good. I would say yeah, I’d say I don’t know. 60 70% of our sales, especially now are coming through our website. We are on Amazon and we are on Etsy but we say own the vast majority of our customer base, which is far better, it’s better for them and it’s better for us. So it’s it’s a good thing.
Jason Hartman 13:44
Yeah, good stuff. Good stuff. Okay, let’s switch gears to real estate investing. So when did you become interested in real estate investing?
Ross Worden 13:53
To be honest, I would say sometime in high school. Oh, just like me. I was 16 book. Yeah. Yeah, I think I stumbled across a book called guerilla real estate investing. Hmm. And I read it. And I was just really interested, I never really understood the stock market like really, I mean, I get it. Now I’ve researched and all this stuff, I get it now, but it never quite clicked to me. It didn’t resonate. And so I just real estate just made sense intuitively. So I always kind of had it lurking in the back of my mind. But you know, the time when I started my business, I started this particular business because I started it with $500. I didn’t have any money I needed to get out of debt. And so real estate was a very far off dream. But now that I’ve got, you know, some revenue coming in, and I don’t, and I liquidated my 401k. There was not that much in it. I have nothing in the stock market now except, like probably $1,000 in a Roth or something. Right. And yeah, it’s just like, this was the goal I was working towards. I met you at a conference and I think, I don’t know, maybe three or four years ago. I just wasn’t ready for it. At the time. I was mostly interested in only building the business figuring that out, but it’s like, I locked that in the back of my mind. Like I need to circle back to this And when I found that it was time to actually start thinking about investment and retirement, which is not totally a philosophy I subscribe to anymore, right? I was like, Okay, now it’s time to really listen to Jason’s podcasts really dig into that. And that’s totally what I did. I’ve probably listened to 500 or more of your podcasts. Wow. Yeah.
Jason Hartman 15:15
That’s fantastic. Thanks for listening. So, did we meet at one of our conferences or someone else’s conference?
Ross Worden 15:22
No, is actually so you just had Ryan Moran on your podcast. So I joined the tribe for a while there. Actually Carmen was at that conference. I think I don’t meet her there. But yeah, you heard that and so
Jason Hartman 15:33
good stuff. So so we met at one of Ryan’s conferences, then. Yeah,
Ross Worden 15:37
yeah. It was a great
Jason Hartman 15:38
conference. Richard. Good stuff. Good stuff. So you’ve got five properties now. And you’ve got big plans to get to well on the spreadsheet, 93 properties, which is an ambitious goal, and I think it’s awesome, but you’ve spaced out very nicely over time to where it’s doable, you know, As the old saying goes, goals. should be just out of reach, but not out of sight. They should be a stretch, but still realistic at the same time. And I think that’s what you’ve really done. You’re exactly the philosophy. You’ve got a I mean, listen, you’re in the business of maps. Okay? And here you’ve got a roadmap to get to that hundred property goal. Why don’t we share screens now? And you can show us the spreadsheet and let’s take a look at that. This is really exciting.
Ross Worden 16:28
Yeah, sure. So this is obviously a dramatic oversimplification of what’s happening happening but this is this is basically my plan. So after that conference are the conferences that I went to back in 2018. I got my feet wet there in December, just dove right in got a property 2019 I bought two this year, I bought two and the goal is to buy one more and you can see the pattern here. 12345 basically every year, I’m increasing my quantity goal for target every every time so next year, I plan Do for the following year five, the following year six and so on. Around this time, that’s about year seven, my hope is to start
Jason Hartman 17:07
which is, which by the way, I got to translate this to audio. So this is now the chart starts from 2018. And now we’re at 2025. So this is seven years in. And as listeners may know, when I teach the refi till you die concept, we talked about the seven years based on the rule of 70 twos, the portfolio goes up in value by 50% at a modest 6% appreciation. So you could do a refinance there. You could do 1031 exchanges. There are lots of options here. But what we’re looking at is we see one property purchased in 2018, two in 2019, three in 2020. That’s this year, by the way, if you’re listening to this show, two years hence I just want to understand This is 2020. Now, for next year in 2021. And you know, four properties a year is a modest goal, people can do that they do it all the time through our network, five, in 2022, you’re just increasing it by only one property each of those years. Okay, so now, so seven in 2024, eight in 2025, your seventh year in as a real estate investor. And then what happens because now you’ve added a row to the spreadsheet, and and there’s a one underneath the eight. What does that mean? That means, in theory with that appreciation, or, you know, that’s the point at which I feel like it’s either a 1031 exchange or a cash out refi. So in theory, I should be able to with the money I’d previously invested in that first property in 2018, extract enough out in some capacity to buy an additional one that I’m not putting new capital into the system with. So that’s basically taking by one in 2018 and adding another one to represent that in 2025. Okay, and the same thing will happen in your saying you can buy the extra property, because you’re simply refinancing or doing a 1031 exchange on a on maybe a two for one, you might, you know, by then Ross, you probably be able to do a couple of two for ones. So a lot of your increase in purchase, like if you’re saying you’re going to buy eight properties that you’re which is two per quarter, you know, you might be able to just simply do that out of the portfolio without even putting in extra money. It’d be amazing. It’s very
Ross Worden 19:39
much like your how you explain the goals. I feel like this is kind of the well, I won’t say conservative roadmap, but relative to what it is. It’s a fairly conservative roadmap. And then yeah, if it gets better than all the better, that’ll accelerate the process. But
Jason Hartman 19:53
the nice thing I like about your your roadmap is that you’re growing at a rate of only one property. per year on that top line. And that’s very modest. You know, I see people, investors come in and they got these crazy goals. And, you know, I wish him the best, I hope they achieve it. But you know, they’re just not very realistic. This is a plan. That is, you know, it’s based on smart goals. It’s simple, and it’s attainable, like you, you could actually do this. Now, it’s the properties don’t depreciate very well, then you’re gonna have to rely on some income growth from your business to support your habit, if you will.
Ross Worden 20:37
Yeah. And that’s, that’s very much part of the equation. You know, I’m going to continue building the business or businesses as time goes on. And so while I don’t exactly know totally how this is all going to come to fruition, it’s all mapped out within part of that plan and the business continuing to grow and to support this. So yeah,
Jason Hartman 20:55
in the end, you know, that’s the other thing I want to say about investors with goals or people with any sort have goals. You never know how, at the beginning, you will never have all the answers at the beginning. Nobody ever does in any venture in a relationship, a marriage, a business and investment portfolio. You just don’t know. Nobody knows. We all have to, to some extent, throw caution to the wind, jump in with some degree of blind faith and just work through it. Obstacles will come up that you’ve never imagined. The world will throw stuff at you that you’ve got to overcome. But you know, that’s really good for someone’s intellect, their character, their self discipline. Yeah, that’s, that’s great. Okay, so, on the top line, we’re still growing at only one property per year. Very modest goal, okay. But on the bottom line, it 2025 we add that extra property we talked about Then take us through those last four years there of the of the plan, because you grow at it two properties the following year to what we’ll call extra properties. Do you have a name for that? Or, or maybe self funded properties? Yeah, we’ll find all that portfolio funded. Exactly. Yeah. So so the thought there is, if I can split my properties, after seven years, one property into two properties, my 2018 property, as we just discussed, becomes another property. So I add that in down here, my 2019, both purchases, those become two additional properties. So I still have those two, and then two more because I refined or whatever the case. And so all of those are getting essentially split and added added back in for these last four years. So 2026 there’s an additional two on top of the ones that I’m funding from actual investment, I guess I’ll call it outside investment of my own cash, three in 2027, for instance, To 2028, and five and 2029, on top of my sequential incremental increases, I guess throughout that time period as well. So at the end of 2029, represented over here is 93 properties, the monthly I’ve made the very simple assumption of $200 in cash flow per month on property, all of all of those properties and again, realistically, by the end of all of this, I should be doing a lot better on many of these by then probably with an annual income of this 220 or $223,000. Basically, the total investment required to do this is 2.3 million for all of these, it does not include the portfolio funded properties. Can you hover over the total investment so I can see your formula? Mm hmm. Okay. So that is you’re basically saying $30,000
Ross Worden 23:55
through acquisition, right,
Jason Hartman 23:58
so $30,000 per equity. position, right? Okay. Now in reality, you can get properties for 20 25,025. You can do pretty good downpayment and closing costs 20,000, you’re getting some more marginal properties, and we’re talking about downpayment plus closing costs. That’s the number, and he’s going with 30,000. So that’s nice and conservative. Now, I would say Ross, that you go from 2018 to 2026. I would say you can probably get all the way to the 2026 number, possibly on a self funded portfolio where meaning and this is rough, so forgive me on this. I’m just looking at this for the first time today with you. But if you can make it to buying the to getting to eight properties per year, yourself in other words with your own investment, I bet that one in two Thousand 25. And the two extras we’ll call this self funded in 2026. I bet you can pick up those, almost undoubtedly having the portfolio portfolio funded properties, meaning so no extra money out of your pocket to actually acquire those properties.
Ross Worden 25:18
Yeah, that would be amazing. So what I’ve calculated here, I just deleted those, you can see all of the properties $200 a month cash flow should spit out just shy of $90,000 a year. So that tells me I can at least buy about three properties with my assumptions per year with just the cash flow.
Jason Hartman 25:36
Wow, that’s fantastic. This, you know, you know what you’re really showing our audience Ross is the incredible compounding effect of just staying the course. Compound compound. You know, Einstein said that compound interest is the eighth wonder of the world. We’ve all heard that quote. And this is really an example of that compounding effect. Many of us have heard Heard, or seen the little illustration where they show? If you take a penny, I think that’s how it works. You take a penny and double it every day for just 30 days, you have over a million dollars. But the amazing thing about that is that on day, like 28, you don’t have much money at all. You know, and you really get to that amazing leap that exponential growth in just the last couple of days. And that’s that’s sort of what you’re showing us here. So
Ross Worden 26:32
that’s exactly it. I’m gonna pass on quite an inheritance. Yeah, if I can, if I can follow through with everything. Yeah. Well, you got it. Give Kids Yeah, two, two right now and one on the way actually, congratulations.
Jason Hartman 26:43
Yeah, those kids are pretty lucky. Yeah. Thanks. So 93 properties in 10 years. That is just an awesome plan. And I really appreciate you sharing that. Tell us more.
Ross Worden 26:56
Yeah, sure. Here’s a really cool tidbit about what I’m working on here. Right here around the the 2025 2026. Mark, that should be approximately the financial freedom mark. Basically, unless I choose to reinvest it, I could cover in theory, all of our living expenses around 2025 2026 with a reasonable, quite reasonable lifestyle as well.
Jason Hartman 27:21
So in seven years, on a very conservative portfolio growth, you’ve reached Financial Freedom Day. Yeah. And tell us what that number is, though. What’s the revenue? I believe I use the assumption of about $12,000 a month or I’m sorry, not even. So with bass living expenses, that sort of thing. It was like right around 7000 or something is, is our expenses seven 8000, right. And so you can see right here in 2025, our monthly revenue is $7,400. Right? But wait, there’s more. Because what we didn’t say is number one, you didn’t project any increases in cash flow, right? There’s no this is again, there’s no risk. To increase, okay, which is which is great. You’re being super conservative here. And at that point you have 37 properties in seven years. Yeah. Yep. That’s awesome. Really, really good setting.
Ross Worden 28:13
Yeah, very, it’s where so maybe it’s worth mentioning this is basically my only investment philosophy at the moment, but much like you’re well aware of with Patrick Donahoe, for example, I work with his team. I layer in whole life insurance policies. And as you mentioned, it’s good to keep 4% at least as backup cash reserves for these. And that’s where I store all of that. So it’s growing it, maybe 5% or more. Yeah, especially if we see all the inflation here pretty soon, right? And that’s where I keep all that liquidity and so it’s going to be my safety net for all of this as well. That’s a very important thing to keep in the back of one’s mind when they’re investing in this I have to be very safe. Yeah. And so I keep at least 12 months you know, that’s that’s way more than is necessary, but with the business and all of my liabilities on being as you can guess can Conservative with that approach. Sure. Yeah, that’s fair. That’s fantastic. Ross.
Jason Hartman 29:03
Yeah. Thank you so much for sharing this. What else would you like people to know? Or say? Or? I don’t know, if I asked you the sort of fundamental question you may have sort of answered it another way. But But why real estate, you said you never really related to the stock market. Any other things you want to say about income property that makes it
Ross Worden 29:22
makes it the choice for you? So to be honest, I’ve dabbled with, you know, the only only possible stock or mutual fund or whatever type of approach would be dividend investing. And I actually did that I put about $30,000 or so into the stock market a couple years ago, just to start seeing what that would be like, and it just, it wasn’t very good. And I think it was, I don’t know, a couple years ago, but the stock market started to taper off a little bit and it lost value. I’m like, this is absolutely terrible. I’ve never been a gambler in my life. I never even like playing $5 poker games with my friends. I’d be the dealer, right? So I just bailed. I totally pulled everything out. And I’m like, nope, this is this is what I’m gonna put into it. properties. And so I think especially getting to know it far better with how you explain things and just sticking with a philosophy. I mean, there’s a lot of investing perspectives out there, even within real estate. But I’ve just stuck with your philosophy. It’s just, it’s too good to argue with, you just really can’t argue with that there’s always an offense with with what is it the five or so facets of the benefits of investing with real estate? You just absolutely can’t beat it as far as I’m concerned. Now, I will be the first to admit that, you know, I’m 33. I’m a young investor. There’s a lot that I haven’t been through, there’s a lot that I don’t know. But all we can do is make the best option with the information that we’re given. And I’m making what I feel is a very, very good decision for the future of not just, you know, my life, but my family’s life and the generations to come within my family. So I feel very confident and very excited. I mean, this just makes sense to me. Obviously, I built this simply in a spreadsheet, but the numbers resonate. I understand what’s going behind. going on behind the numbers, but it’s it’s tangible stuff, right? It’s actually a property with people living in it. And it’s an it’s a thing. You can look at numbers with stocks and everything, but it’s just, they’re totally arbitrary to me. You don’t have any control, right? Either way. It’s always scary to me. I’m typing. I’m a business owner. I’ve got to control things. And this also works for
Jason Hartman 31:19
good. Yes. commandment number three, thou shalt maintain control. And that’s that’s really good. Ross, what, what markets are you invested in?
Ross Worden 31:28
So currently, I’m only in Memphis. And right now is about the time that I’ll be branching out just because of how complicated 2020 has been already. I may just go ahead and buy the next one this year in Memphis, but moving past that I’m looking at, Oh, I can’t remember I’ve been talking with Evan on a couple of markets, but I’ll probably branch out to somewhere else. I’ll just have to get the next LLC set up and there’s just a little more complication that is not really that big of a deal. It’s just things are busy, right.
Jason Hartman 31:55
It’s a crazy time we’re living in but you know what, if the end of the day All those protesters need a place to live. At the end of the day, you know, the commercial properties have been shut down. And the home has become the center of the universe. And you’re in a low density market. I was just talking to someone about, well, it was a actually a tech support person with Apple. And I asked her if she was helping me with my computer. I said, Are you you know, I’m curious. Rebecca, are you are you? Are you at home now? Are you working in the office? And she said, only a few people are in the office. I’m at home. And the people that this was interesting, by the way, you’ll you’ll appreciate this because one of the things I’ve talked about in my pandemic investing presentation is and we’re going to talk about this in our upcoming meet the Masters conference in depth is how elevators and mass transit are the two danger zones, but the and she mentioned the elevators specifically, she said I don’t want to get in an elevator and she was talking about that a little bit. But she also said that the people that couldn’t work at home, the apple employees that didn’t have the option to work at home, or those who had roommates, because they couldn’t provide the security, this, you know, it’s not just a secure connection, but it’s a secure computer. And you know, I signed up a few years ago for like a data service for real estate that, you know, would be helpful to us. And they sent an inspector to my house. And they said, I have to have an office with a locking door locking file cabinet, a paper shredder, not that I ever print any of this stuff anyway, but you know, it’s just kind of an old fashioned thing. And I can imagine like, if I had a roommate, they probably would have turned me down and said, No, you can’t have our service. And my mom did that, you know, for a tenant screening service that does credit checks because she self manages all her properties, and they came to her house. And that was the same thing you know, do you live alone? You can’t have a roommate and subscribe to some of these things. And that that was interesting. So literally you’ve doubled the amount of housing demand in the world if roommates have to split up like double double the market right right there so
Ross Worden 34:19
yeah about the divorce is hot
Jason Hartman 34:21
right? Don’t you don’t even need any divorces just roommate divorces? Yeah. And I think this is just an amazing time for us as real estate investors, investors following this specific plan that we’ve you know, we’ve outlined and you’re you you’ve bought into it and and thousands of other people have, thankfully so. Yeah, I think I think we got good years ahead. And in boring suburban real estate and linear markets, right? Yep.
Ross Worden 34:47
Yep, absolutely. I try to I try to get my my family members convinced. And you know, I’m pretty gung ho on it. Yeah. It’s exciting for me, and I think I understand it reasonably well at this point, too. So I love to kind of explain it and answer questions about it. My family and friends asked so well, yeah, Randy trying to spread the message. I guess after listening to 500 episodes of
Jason Hartman 35:05
my podcast, you’re probably a pro.
Ross Worden 35:08
You know, you know, it’s funny, Jason is I listened to them at one and a half or two acts. It’s actually weird to have this conversation here you at normal
Jason Hartman 35:14
speed. I’ll talk faster. Just for you. I’ll talk faster. That’s funny. That is weird. So are you self managing any of your properties?
Ross Worden 35:24
Not yet? Not yet. I do fully intend to eventually. But yeah, I’m, I’m self managing a business. So I don’t really have the time as well as you know, two to three kids shortly. So right, but financially, it probably will make sense. Evan turned me on to stessa. And I use that for a lot of the financial tracking and stuff that’s been really helpful. So I don’t I don’t see it being too complicated. Yeah, I mean, I do want to transition to that eventually. You know
Jason Hartman 35:48
what, and like I’ve said before, and everybody has to get their own comfort level with self management versus having a manager but I literally think it takes less time self managed. Now that may not always be true, because you never know what What’s gonna come up, but, you know, the tenant just doesn’t bug you that much, you know, because they’ve got to maintain that sort of relationship with you. And the tenants are so appreciative, like, I just, I just replaced an air conditioner in one of my properties, which, that wasn’t cheap, but you know, but it’s amazing. The tenant helped me, like, they went and found several contractors, they had them, come over to the house, give bids. And then I said, Who do you think we should go with that, you know, the prices are a little different, but they’re not that much different. Just tell me who you felt comfortable with. And they said, Oh, I don’t remember the name of the vendor. So I’ll just call it ABC air conditioning. They were much more professional. And they showed up on time and you know, they were neat and clean and they just seemed like they were running more professional operation and coincidentally, they were the cheaper one. So we went with them. And I also, you know, I asked the air conditioning contractor, you know, are you going to include a thermostat A new thermostat with the air conditioning replacement. And they said, Yes, we’ll include that. And I said, you know, I’d really like to upgrade the thermostat and get a Wi Fi connected thermostat for my tenant. And I thought this is going to the tenants will love this, right? It was like a nice surprise gift for them. But what it also does Ross is it lessens the wear and tear on my air conditioning unit. Because when they’re away, they don’t have to run it, they can control it from their smartphone. And so it won’t run all the time. It won’t run as much. And it won’t, you know, because they can set it to start running at a higher temperature. When they’re ready to come home. It doesn’t run in big heavy spurts, which put a lot of wear and tear on the unit. So I think that’s good for everyone. And I literally ordered the thermostat on Amazon. I shipped it to the tenant, I have all my tenants addresses in my Amazon account. I shipped it right to them. They said Oh, we got it and we’re gonna have a guy install it and then I got $100 off from the vendor, because I didn’t use their thermostat. And so literally, it was a $35 additional expense. The tenants love it. It’s got a real cool screen on it shows the humidity, the temperature, and you know, it’s all smartphone Wi Fi controlled. So
Ross Worden 38:17
solid investment. Yeah, that’s awesome. That’s awesome. So good stuff. Hey, thank you so much for sharing your plan with everybody really appreciate it. And anything else you’d like to say? Just to wrap it up? No, not other than I appreciate how genuine and transparent you are. I’ve learned a lot from you and your show. And you know, it’s really good to actually go and meet you in person. There’s there’s a lot of as you literally say yourself a lot of shady real estate people here tonight. So, you know, I really believe that you’re in it to actually help people and I feel like you’re a very trustworthy person. And I just appreciate all that you’ve done to help people and help me and on this journey. So I’m excited for the future. Good stuff. Well,
Jason Hartman 38:55
thank you so much. I’m honored to be your guide and you know, Our team will be here to help you through life and death through 93 properties. So all right, Ross, thanks so much and happy investing.
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