Jason Hartman starts the show with Adam Schroeder to discuss the transition from using a professional management company to self-managing rental properties. He gives his own experience in doing so and offers advice on what to look out for. Adam explains how to contact your tenant for the first time, gives a list of forms you’ll need, and talks about pet rent and more.
Announcer 0:00
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present, and propel you into the future. Enjoy.
Announcer 0:13
Hey, Jason, congratulations on your 1000 podcasts. That’s amazing. You are so productive. Not only that for creative work, but everything else that you do pretty incredible football as well. Just want to let you know I’m thinking about you and things are going great.
Announcer 0:33
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur. Who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:23
Welcome listeners from around the world. This is Episode 103 for Episode 1034, this is your host, Jason Hartman, thank you so much for joining me today. As I am coming to you so gratefully and so thankfully, from southern Florida, yes, back in the USA. It’s great to be back back from Europe, where I visit a couple of times a year. I guess you could say it’s my homeland. I was born there. So now you know, I can’t run for president. Not that I could win. But I was not born in the United States. I was born in Europe. Land of scarcity versus America the land of abundance. Yes, Europe where everything is smaller, lesser and lamer than it is in America. But I do visit there a couple of times a year. It seems like every year I was gone for almost a month. This time I like to visit. But I got to tell you, it is so hard to get anything done there. It is unbelievable. I just can’t imagine if I was in business in Europe. Now, of course we say Europe, it’s a generalization because every country is different. Right? But, you know, the overriding theme is bureaucracy, socialism, difficult to do things everybody talks about the procedure. It’s this is our procedure. Don’t you understand? We can’t actually think we’re drones. This is the procedure. Anyway, I gotta stop picking on Europe because I’m gonna offend more of my European audience. Hey, sorry. I know if you’re in Europe and you’re listening to this. You are not one of them and you are frustrated by exactly what I’m telling you because it is frustrating. It’s very frustrating. It’s kind of like attitude that the government will solve all your problems. I just, it just weaves its way through every part of life. You know, people say, Why do you talk about politics so much politics? It’s like air. You know, it’s a big deal. It’s the context in which we live, it impacts so much of our lives. But you know, whatever. We don’t have to keep on that. So what else is going on here? So the economy is booming. Congratulations to Trump love him or hate him. surpassed his growth goals in the last quarter. 4.1% I think I talked about that on the last episode. things they are booming. But let me tell you something before I bring on our guest today, you’ve heard him on the show before before we bring them on. Let me tell you something. I love a good recession. Yes, I do love a good recession. Why do I love a good recession because people actually Better in a good recession. Here’s what I mean by that. Even good people, people that are moral ethical people, even they are human, and they get busy, and they become ungrateful. And they stop trying when everything is handed to them too easily. And I gotta tell you, in an economy that is booming, people start to suck. They just do they become ungrateful about their customers. Don’t let me ever get like that. I will never be like that. I tell you. I am always grateful for my customers and clients. Maybe that’s because I grew up poor. I hope I never take them for granted. But a lot of people do. And the other thing that happens is in a booming economy in a booming environment, every flake under the sun comes out of the woodwork. I mean they just come out of the woodwork because It’s so easy to earn money that everybody can make it. When times are booming when money is sloshing around everywhere. When times are bad when it’s harder to get by when it’s harder to make it when it’s harder to establish oneself in the marketplace, where inventory isn’t scarce and reputation matters, and treating customers well matters. Well then, you know, you don’t see these people, they go back under the stone, you know, they live under or they go back to delivering pizza or working at Starbucks or whatever they do. But boy, when the economy is booming, every flake comes out of the woodwork. So two components here, I’m mentioning Okay, and, and you’ve all noticed it in your life, right? It doesn’t have to be in real estate. It’s in every area of life. The service isn’t as good. The people don’t care as much because hey, business is booming. Nobody matter who you are, no matter what you do, you know, the rising tide floats all ships, right? That’s the old saying the rising tide floats all the ships. And so that’s kind of the thing that is frustrating about a really good booming economy. Otherwise, hey, it’s great. It’s great. But it is frustrating. And you look at it. And you know, there are all these, you know, new gurus out there, right. And they haven’t even been through a cycle yet. They weren’t doing what I do during the Great Recession. And they certainly weren’t doing it during the three recessions before that. I mean, look, folks, I’ve been doing this for more than a quarter of a century. Yes, I know. I’m old. I’ve been doing it for more than a quarter of a century. Okay. I’ve been through the cycles. I’ve seen it happen. And you know, there is a lot to learn from that experience. I remember when I was younger and more cocky, and I know some of you are thinking you’re still cocky. No, I’m not. I’m much more humble now, because I’ve been through a few things. You know, I thought it’s so easy, you know, you don’t need to listen to these slow moving experienced people. I’m bored with all that, right? Let me just go out and make money, the sun shining everywhere, you know, blah, blah, blah. And I tell you, you know, those older experienced people, they know something. They’ve seen things that you haven’t seen, they’ve experienced things that you haven’t experienced. And then in the real estate business, you know, I don’t think I’m gonna declare something here. Maybe you’ll think I’m nuts. I think out of anybody in this business that does what we do. basically helping people buy investment properties nationwide and build nationwide portfolios of real estate. I’m going to declare that I think I am the most experienced person in this business. Yeah, I think I am. My closest competitor is radically less experienced than I am. And that’s my closest competitor. Okay, who I liked by the way, I like my competitor. Well, this particular one, some of them I don’t like because some of them are just crooks. Well, I don’t want to say that too strong because I’m about to get sued. Okay, so some of them are just sleazy operators. put it that way. But hey, you know, my closest competitor, a more experienced than that person by about two fold. So there you go, there you go. I think I’m the most experienced person in this place. I’ve had hundreds of tenants, hundreds of properties, you know, done all kinds of stuff in this field. So that is my cocky statement for the day. Tell me if I’m wrong. Am I wrong? Is there someone more experienced than me? That does what I do. Jason hartman.com slash ask, put me in my place and tell me, I don’t know anything? Yeah, go ahead. Go ahead. I mean, I’ve been involved in probably I was kind of adding this up in my head the other day and it’s not an exact number. Not an exact number but I’ve been involved I think in about 10,000 real estate transactions 10 Grand 10,000. And think about it, if you do the math when I was in resale real estate, you know, I’d sell anywhere between maybe 50 and 100 houses a year, depending on the year. And I did that for many, many, many years, almost 20. And then in this business, I know they overlapped a little bit, you know, I’ve been doing this for 14 years, and they overlapped a bit there in between, I was kind of doing both, you know, we’ve done maybe a few thousand transactions now in this side of the business. So, yeah, that’s a lot of experience. Okay. I will shut up now because I know I’m boring you with all my experience. Okay. Let me welcome back a returning guest and a client of ours. We’ll do a little case study here. And that is Adam Schroeder. Adam, welcome back. How are you?
Adam 9:52
I’m doing well. Thanks for having me on again.
Jason Hartman 9:54
Good. It’s good to have you and folks, you might remember that when Adam was on the show before he said This awesome thing is I was staying at his house for a couple days. It was great. Stay in there with you and the kids. And Adam has four kids. So he’s
Adam 10:09
thankfully resting right now.
Jason Hartman 10:10
Yes, yes. Yes. So that’s why I don’t hear all this noise in the background. Like, you know, you leave me these voxer messages and it sounds like a chaos over there, Adam, it’s crazy. But I think when you’re a parent, you become a little bit immune to that sound, you know, it’s just sort of like a dull roar, you know, get gonna get kind of immunize to it a little bit.
Adam 10:30
But anyway, and in the background,
Jason Hartman 10:31
yeah, yeah, it’s like a fan. And it’s like white noise, your white noise machine, right? Yeah. But you might remember Adam had this awesome family mission statement on the wall, in his family room in the house. And it was on the wall and like canvas and had this really cool thing and talked about it on the show before so that was good, Adam, but today you have some management and self management. We’re talking property management Questions. Apparently you Stoke your property one of your property managers. You’ve got a few houses in Memphis. I know. Are you in another market too? I can’t remember
Adam 11:09
where? Yeah, we have three in Memphis right now. And we just signed a purchase agreement for one in Jackson. On Friday. Jackson, Mississippi. Yes.
Jason Hartman 11:17
Good stuff. Mia. SSIS si. ppi. Okay, good. I remember learning to spell that when I was a kid. So you put that one under contract, okay. Now you’re not self managing anything, right? You’re doing property management all the way right professional man. Okay, right now. Yeah. And you had some questions for me. I think you said you stumped your property manager a little bit too with some questions. Tell us about that.
Adam 11:42
So I was just going along with the standard property management. And then I went to meet the masters. And y’all had the kind of discussion of the hybrid model and I got interested in it and you also during one of the property management sessions, you brought up some points that I thought oh, I need to ask My property manager about that and find out and so I started asking him questions and that’s okay. So wait a sec, wait, wait, wait, let me say a couple things.
Jason Hartman 12:07
So this was our meet the Masters conference where we had ron paul speak and john burns and bunch of other speakers last January in La Jolla. You were there you you actually did a little couple of broadcasts from that, but I thought was a super creative idea. So thank you for doing that. And you By the way, I didn’t say this, but you are located in Austin, Texas. Okay. So just wanted to give a little perspective, but go ahead with what you’re saying.
Adam 12:29
I started asking them questions saying hey, can I get this Hey, can I get that hey, this was mentioned at meet the Masters you can I get that from you. And it just became the more questions I asked the longer it took to get a response. And then we had our annual or semiannual walkthrough, and they did the walkthrough, but we didn’t get the report for two to three months. And then there were some problems that they wanted to fix. And I said okay, well, there’s no picture of that on the report. I need a picture of that to justify the expense. It took another couple weeks or a month to get the pictures and get all the answers. And it just became a nightmare. And I started thinking, you know what, if I’m going to go through all of this hassle, getting an answer from them, I may as well just do it myself. But before I do it myself, I wanted to get a little bit more clarity, which is why I wanted to do this podcast with you. Yeah, well, you know what, folks? This is what I’ve been saying about self management. Okay. And I don’t know that that’s where we’re going with this because by the way, this interview is completely impromptu. I have no idea what Adams going to ask me. Okay.
Jason Hartman 13:32
But if it’s about self management, you know, a lot of you think that it’s harder to self manage. I submit to you that it could be a lot easier. You know, like some people think, well, I don’t have the time to manage my own properties, right, folks, sometimes it’s less time to do it yourself. Here’s a great example that I’ve have shared before in the old days. People wouldn’t type their own letters, right? You know, I remember my mom when I was a kid, my mom was executive director of the Leukemia society. And she had a secretary and the Secretary, I remember hanging out at the office there because, you know, I was a latchkey kid. And so I just hang out at her office a lot. And I’d work there too, you know, and they’d pay me like nothing. But anyway, and then this was in Santa Monica, California. And my mom would say, hey, Pam, come in. Pam was one of her secretaries at the time. Pam come in and take a letter. And Pam would bring in a steno pad, stenographer pad, and write shorthand, and write what my mom would tell her and then go type it right. How many people do that nowadays? know everybody types, their own stuff, they email it, right? Nobody has people typing their own stuff anymore. Okay? It’s just not done, because it’s just easier to do it yourself. Same is true with like, You know, booking travel, for example, you know, I used to have Karen, who’s been on the show. And you know, she used to be our operations manager, when we had our big offices in Orange County, California. And Karen used to book my travel for me. Well, you know, what I realized as good as Karen is, it’s easier for me to just do it myself. I just you don’t need to have a middleman for some of this stuff. Sometimes it’s just easier to do it yourself. So anyway, that’s my thing on self management. Okay, Adam, go ahead. Sorry,
Adam 15:29
in relation to that. So what happened? The one that really spawned This was they did the home inspection on one of our properties. They emailed it to me on May 29. Aaron, and I looked at it Aaron’s my wife, we looked at it that night, we responded on the 30th. And then she said, they would reach out and get some more photos that day. She sent it on the 30th. And then on June 26, I emailed them and said, Hey, I haven’t heard anything and I wanted to check in and they didn’t respond and on July 13, I them. And I copied Oliver actually my investment counselor because they tend to respond more whenever I include him. And I on July 13, and then July 17, Oliver sent an email saying, Hey, what’s going on? And then she responded to that she responded to all of her once he got involved. And so it went from May 29 to July 17. Just isn’t that ridiculous? Just the simplest thing, just to get painters of this right of the damage. So my question is, as I’m considering the possibility, and as I’m, we’re probably going to go into self management in that market. What information do I need to get from the current property manager to be ready for the switch? Do I need to get anything from them?
Jason Hartman 16:40
The first thing is everybody should always have a library of pictures on every property they own. Okay, you always need that because every time you remark at the property, you need that and just your property manager should just give you a complete file. Now some of the stuff they’re going to say that can’t give you because of the tenants privacy. And this is another battle. You don’t have to engage in, if you self manage, you know, there are laws, of course protecting the tenants privacy. But if you take the middleman out and you manage your own properties, you hold those documents. Now you got to be respectful of all that, of course, but that’s a separate issue. But we’ve had cases, maybe like once or twice, I remember this coming up out of thousands of deals where the tenant will owe the landlord money at the end of the lease, right? They all either have some damages to the property or, you know, maybe they had an eviction or something right. And the landlord wants to pursue a judgment against the tenant. But the property manager will say, well, we can’t provide you a copy of their application and credit report, because that violates our obligation to the tenants privacy, right? Well, if you don’t have a manager and you’re the manager You have that. So if you need to get that information for collection agency, you got it right. There’s no battle. It just amazes me how lame some of these managers are sometimes and listen, they’re not all lame, okay, I know I make it sound like they are by the way I talk. You know why? Because I don’t point out all the good things they do and that’s not fair. Okay. I will be the first to admit they do a lot of good things. They do a lot of stuff right. But that’s not what we’re talking about. Remember, I’m a complainer. Okay and complainers change the world. There’s a Jason Hartman quote, Gandhi was a complainer Martin Luther King was a complainer Rosa Parks was a complainer complainers change the world. That’s my excuse for being a complainer. I don’t know if it works, but so you need to get a complete file. And you need to have a full library of pictures on all your properties. Okay? Always keep that nicely organized in your computer. So whenever you Have the property go up for lease. And then you can also I want to remind you all you can use a service called we go look calm, we go look calm. I interviewed them on the show before you might remember the episode where I had the the CEO of we go look calm on. And for 69 bucks, they’ll go look at things take multiple pictures report on things for you. super handy service for remote management. So is there something in particular you’re thinking besides just a complete file on the property? No. I mean, if it was pictures, kind of what kind of paperwork I can actually get from the property manager, like, I had to ask, I realized after meet the Masters that I didn’t have the actual lease, signed lease from the tenant, so I got rice, but I didn’t get all that. Yeah, I didn’t know if there were any other things that I wasn’t thinking of that I needed to get from them. So you’re saying there’s a chance I could get the application but, you know, they may. They may I don’t know. You know, just see what they’re going to say but you Tell them you want a complete file. And you know everything. I mean, you know, you have the right to it, they may bring up the privacy thing a little bit. They may object to some of that stuff. But what I would say is, look, if they do that, just say, Okay, if there’s something you can’t show me, then I want a redacted application. If you need to take something off of that and redacted for tenant privacy purposes that you can’t give to me, then send me the application redacted. Just blackout the information that I can’t see.
Adam 20:31
Okay. And then after we’re switching, I’m assuming I should send a letter or an email to the actual tenant to say, hey, you’re going to be in contact with me? what all do I need to give them? or What else should I give them?
Jason Hartman 20:45
You don’t really need to give them anything except tell them where to send the rent. And you know, I would just exchange contact information with him. You’re going to find that most of these tenants are just decent people, and they want to maintain a nice relationship with you and You’re going to find that everything’s going to be great. And you’re going to find that a lot of them do a lot of the repair work for you for free. So that’s nice, too. So,
Adam 21:07
okay, and so whenever you have to sign a new rent contract, where do you find like the contracts and all of the things you’re going to need to either reopen the current tenant or to find a new tenant?
Jason Hartman 21:19
Yeah, yeah, good question. So you can either get them from a property manager or a real estate agent in that local area. And by the way, these go state by state, but, you know, if it’s in Memphis, even the property manager you’re leaving, you can get it from them, okay? Because, you know, a good way to sort of change that relationship rather than end that relationship is to say to them, Look, I still need all a carte services. When the tenant turns between tenants. I need you to handle that for me. How much would you charge me? And some say we don’t do that. You know, they don’t do all a card or a bundled services, but a lot of them do it. Okay. So you can find a property manager that does it or you can have a real estate agent do it. And the real estate agents and property managers have access to the form library with all the different forms and documents now, that’s one place. Okay, that’s a good place to get this stuff. But you can also go to places like no lo Nolo press no lo calm and o l o calm. I think, you know, I mean, that may not be their exact website, but I think it’s probably no lo com. They have a lot of great books on property management. And they have a form library on their site. You can buy forms there, you know, you could buy them on amazon.com stationery stores sell generic forms. You can get them at places like Rocket Lawyer calm. There are zillions of places these forms are not a big deal. Okay? It’s just not a big deal.
Adam 22:55
And so if they don’t do Allah carte services, or if I’m not in than having them do it to say, what’s the best way to find an agent that will actually know what they’re doing?
Jason Hartman 23:05
Well, ya know, what they’re doing is a whole Good question. Because most of them don’t know what they’re doing. But you know, what happens when you use all a CART services, is there’s always a little bit of tension, because you’re always automatically dangling a little carrot in front of them, because they want to get your business. You know, if it’s a real estate agent that doesn’t do property management, they want to form a relationship with you. Because, you know, the likelihood is with most people, you know, in five years, you’re going to sell that property or three years, you know, or you might refer them to someone or you might want to buy another investment property in the area, you know, so they always know that there’s maybe some future business coming right with a real estate agent. With a property manager. It’s kind of the same thing. They want to get your property management account. So you can go and you can find property managers, you can look at Yelp and review reviews and stuff. It Like I’ve said before, I just want to caution everybody, that one of the challenges with property managers is the conflict of interest problem. You know, there’s an old saying you can’t serve two masters, you can’t serve two masters, you can only serve one. So a property manager might have bad Yelp reviews. But that might be because they’re strict with the tenants and the tenants hate that. So actually reading and looking at the reviews is important. So you know, you gotta sift through them. I mean, you know, you can’t believe anything you read online, but it’s better than nothing, right? It’s a guide, and get a referral, you know, get a referral from your investment counselor at our company, get a referral from other investors that you meet at our events. Those are good ways to so there’s lots of ways to do it. I just think that the type of relationship you get into with a full fledged property management agreement in less than Property Manager is really good. Some of them are really good, most are mediocre and some of them just suck. Okay, well, let’s face it is that even if they’re really good, or mediocre? You know, they get complacent. You know, with property management, it’s like you have a contract, you’re stuck with them. Right? You know, where is if it’s an all a cart service, you know, you’re not stuck with them. And everybody just views the relationship differently. Okay. You know, I’ll give you an example. In traditional real estate, like I used to be in traditional real estate for many years, right. The agents that had really long listing agreements, when someone wanted to sell their house, and if they gave me a really long listing agreement, I’m going to be a little more complacent about that. I hate to say it, right. It’s just human nature. Because you have time the listings not going to expire. You know, the seller is locked up. they’ve committed to you for X amount of time. If the listing the green Short, you know, it motivates them to work a little harder. Now, you don’t want to make it too short, that they’re going to think I’m probably not going to sell this house anyway. Right? Because it’s just not enough time. So, you know, whatever happens happens, but there’s a happy medium there in that relationship. Right.
Adam 26:18
Does that answer it? Yeah, I think so. So what kind of fees should I expect? I expect the general fee that I’m currently paying my property manager, which is like half a month rent.
Jason Hartman 26:26
Yeah, it varies by area. So some areas, the properties go into the multiple listing service the MLS, and in some areas, they don’t, okay, so it depends. And in some areas, the MLS fee to the CO broker or the agent that brings in the tenant, if they’re co brokering the deal will be 3% of the lease term. So how that works is an example of say the properties about 800 bucks a month just as an example, right, because I’m making it around number That’ll be about $10,000 a year if it’s a one year lease, right? 3% would be $300. Okay, that each agent would get 600 total, okay? that they’d split, but it’s probably not going to be that on that low of a rent. So it might be half a month’s rent, it might be 75% of the first month’s rent, it might be one month’s rent, okay? Or it might be a different scheme all together, like I mentioned with the MLS. Now, here’s the thing. You could make an agreement with a real estate agent or a property manager, but maybe even more likely a real estate agent that says, Look, I’ll do all the marketing, don’t worry about it. And you go list the property on postlets. You’ve got the pictures, you’ve got beautiful pictures of your houses, and you put it online and you list it yourself. And maybe you set up an email address. Okay? It’s a special email address. That’s like Adams Memphis properties calm or something like that, right? And this email address forwards to you to your regular email address and to whatever real estate agent or property managers address, you put that address on your postlets account, your Zillow account, whatever Craigslist, if you put it there. And then every time a lead comes in every time a tenant says they’re interested in that property, a prospective tenant, you both get the email. And you both see how many leads are coming through. And you know, a lot of these sites have dashboards on the back end where you can look there, and so forth. And it’s just a whole different relationship. When you see what’s going on. And you have some control over that relationship. And you know what, when I’ve done this, it motivates the property manager, because, you know, I say to them, hey, look, we got a doesn’t increase Last week, what happened to all those prospective tenants? You know, it’s just a whole different dynamic, Adam, it’s great. It’s great. Get a little control of this relationship. And this doesn’t take a lot of time. It’s just really, it’s like, hey, should I call someone into my office to dictate an email to them or just right at myself right
Adam 29:21
now getting into insurance? I think right now, the way our insurance is set up is we’re on a master policy with the property manager. Individual policies or lumping together for a commercial policy.
Jason Hartman 29:36
That’s a toughie. Okay, so probably, the individual policies are going to be better. Okay, probably the I’m not an insurance expert. Okay, but I just know how I got burned. And another one of our clients got burned by that affinity group management. They also go buy in whatever it national real estate Insurance Group and R e However, that is G or whatever, big, you know, national real estate Insurance Group. And now I think they’re under Rei guard or something like that I’m don’t quote me on this, because I’m not sure, but they’re using all these different names out there. And I know that there have been many complaints about them, and they burned me, they wouldn’t pay a claim that I had. I know that they wouldn’t pay one of our other clients claims to, and this was one of these very inexpensive insurances and insurance policies where they would insure your whole portfolio of properties, they wouldn’t charge you much at all. But then when the claims, you know, when it was time to make a claim, you know, they got a million excuses not to pay, and that was really annoying. individual insurance is probably going to be better. But again, insurance has become a bit complicated, and I’m not an expert. Now. We’ve had at Baptists on the show before he’s been at several of our events, you know, he’s insured a lot of our clients and properties over the years. And you know, he’s kind of talked about the difference between that and just look for those past episodes about insurance. Maybe go to Jason Hartman calm and just type the insurance, and you’ll see them come up because there’s a lot more detail
Adam 31:14
there. Now I know you’re a huge fan of pet rent.
Jason Hartman 31:17
Yep. And I’m a huge fan of pets too. I love animals, but they gotta pay their way.
Adam 31:23
Do you currently charge pet rent for your Oh, yeah. What have you found is a reasonable amount. 25 bucks
Jason Hartman 31:30
per pet. Okay. Yeah. So if they if they’ve got two cats, you know, you might make them a better deal. You know, maybe make it 44 or 25. For one, you know, 25 bucks a month. I mean, look, folks, every institutional landlord is charging pet rent. Why aren’t we doing it? institutional landlords, in other words that own big apartment complexes. And also, you know, these Wall Street firms, you know, private equity groups that own all these thousands of houses that they’re renting. They nickel and dime people for everything. Okay, folks, you should be nickel and dimed a little bit, you know, it’s the way it is in the marketplace. If they can charge it, you can charge it. It’s much nicer to live in a single family home than a crummy apartment building. So why can’t we charge that stuff to just like they are. And mostly it’s at the single family home landlords just aren’t asking for it. Just ask for it. You’ll be surprised how often you get it. This will be continued on the next episode.
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Jason Hartman starts the show talking about Las Vegas, casinos, and their impact on local economies. In the interview segment of the show, he hosts a long time client from Los Angeles. Joe has 90 properties in his real estate portfolio across five markets. He illustrates how he has been able to achieve financial independence.
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.
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Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is handpicked to help you today in the present, and propel you into the future. Enjoy.
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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 1:16
Well, I’m back home from lost wages Nevada. That’s Las Vegas. Pardon the joke there. I was at a conference there for the last three days. And Gosh, I’ll tell you, that city is you know, in some ways, of course, it’s cool. I don’t need to tell you the cool things about it. Everybody goes there for great shows. And in terms of the man made environment. I think the architecture is pretty awesome of a lot of these new hotels, but I’m not a person for any more laws. You know that about me, right? As a libertarian. I don’t want to see the government make any more laws, but I should tell you, it is so depressing to see the way these casinos are ruining people’s lives. My friends. friend was telling me there that he read a report about how every time a casino opens in an area, the divorce rate increases, the suicide rate increases, poverty rate increases, and just tons of social problems. He says that the increase is not minor. It’s dramatic. You know, I remember I get up fairly early most of the time. The first day I was there, I was down and you know, ready to go. Our conference started at 8am. So I was down in the casino, and I’m not a gambler. I wasn’t gambling, but I was just looking for a place to eat breakfast at 6:30am. And I saw people who were sitting at slot machines, bunch of bad habits of course, smoking cigarettes, sitting at slot machines. This is at Planet Hollywood, by the way. 630 in the morning, it’s like misery it’s it’s terrible what these casinos are doing to people. So between that and the Wall Street crowd In the pharmaceutical industry, and the government, we got a lot to watch out for don’t have a lot to watch out for for sure. Anyway, I’ve had some technical problems with my microphone lately. And so I decided to record this episode. And by the way before I tell you where I am, save the jokes because I know you know, you could easily make a joke about this. Okay, I get it. I am recording this episode, in my closet. Yes, in my closet because the sound is pretty good here. You know, when you’ve got a bunch of padded clothing all around you. It really is good for audio quality. Speaking of audio quality, that kind of leads me into another topic and I guess I will formally announce what I announced at the Memphis property tour a few weeks ago, and that is that I am actually moving. Yes, I’m moving to the Socialist Republic of California. Moving back after four years in Arizona, and it has been Have a fantastic four years here. I really do like Arizona. I’ve been in denial about this move. I have not wanted to do it. I have been putting it off. But here’s the story, just in case you didn’t catch it from a prior episode that I did in, I believe January when I was in La Jolla. That is that my accountant last October, I filed my tax returns on the very last day you possibly could. And my accountant says to me, Jason, you do realize that you have a $738,000 tax write off, you haven’t taken and I said No, I did not know this. What are you talking about? And he goes on to say that? Well, you you took the you took the write off at the federal level, but you have an accumulated write off in California that you have not taken and the state of California we’ll give it to you. But because you moved during your audit You don’t live there anymore. So there’s no way for them to actually give you the write off because you don’t earn money in their state. And I thought, Oh, my God, this is the biggest irony of the world, the person who sort of famously left California complaining and grousing about paying too much tax, you know, you add into the two major costs, right? taxes are the single largest expense any of us will have in our life. And what’s the other largest expense, it’s our housing expense, right? And so living in California, when I left California and moved to Arizona four years ago, I probably saved pretty easily about $300,000 a year in taxes and housing expense. I just love that. I mean, when you live in a lower cost place, you can accumulate wealth so much more quickly. Really, really think about these things that you know you spend money on in your life that I sort of didn’t think about for years. Why do I have an $11,000 mortgage payment living in Orange County, California, that’s a rageous, it would have been so much such a better deal to just rent an expensive property, of course, because I could have rented that same property for 4500 a month and had all the same, in fact, more enjoyment out of it, because I wouldn’t have to take care of it and be responsible for the repairs. You know, of course, the whole shows about real estate investing. So I love owning lots of properties. And the metric is, by the way, and you know, we’ve talked about this in the past, but the metric is, if you live in a house that is worth over 150 or over $200,000, then it’s time to consider because the rent to value ratio will be very much in your favor and and the higher price that house, the more favorable it becomes, then it’s time to consider you know, should I’ll be a renter of the personal residence, and an owner of as many investment properties as I can buy, because I want to own things that have favorable rent to value ratios for me, the owner or the landlord, and I want to rent things that have favorable rent to value ratios. For me, the investor owner landlord, did I say, I may mix that up, you get it right. As a tenant, you want to rent when it’s a higher end property. And as an investor, you want to have lower end properties probably now given the time of this recording about $100,000 give or take that you rent to other people because that’s the way that you arbitrage remember, arbitrage is really just exploiting the differences in things. That’s my, my elementary school definition for arbitrage. Remember, I do have some funny definitions for things. I call derivatives, those sophisticated financial instruments that should make us all run for the hills and scared to death, that wall street may collapse our economy, I call derivatives. Here’s my definition you’re ready. You’ve heard me say this before on the show, but not for a long time. The definition of derivatives, maybe, you know, maybe someone can just go and enter this in Wikipedia and in cite me This is Jason Hartman’s derivative definition. The thing about the thing, yes, derivatives are the thing about the thing. So, anyway, arbitrage exploiting the differences in things, you know, really elementary definitions here, but that’s really what they are. I mean, my definitions are accurate. So yes, I am moving to San Diego here very shortly. So there is my formal announcement. I got a really nice place. It’s almost 2000 square feet. It’s only two blocks from the beach. It’s got an ocean view. It’s a little bit obstructed. It’s not like a panoramic. My kotian view, I wish it were a little better. But it’s pretty good, nice walkable area. So I’m really I’m really kind of excited about it. Look, the government, the state of California is basically paying me to live in California. So I can live there for free for about a year, maybe two years, depending on how it all pencils out. And that’s not a bad deal. I would love to get something from the state of California. I’ve certainly given them enough over the many, many years that I live there. So and guess what the price of that places that I got? Well, you know what, maybe I just won’t say it. Okay. Because I rented, and I think it was a much better deal than buying the realtor who helped me kept saying, why don’t you buy something? And I said, because it doesn’t work. The numbers don’t work. It doesn’t make sense to buy anything. Today our guest will be a client and we’re going to do a case study another case study and folks listening. We would love to have you come on the show and tell Your story, case studies are great. Again, we know and our listeners are mature people, sophisticated people, they know that income property is not perfect. It’s just better than everything else. So what before we get to our case study? I’ll just share with you real quickly here, an article for what it’s worth. And I kind of say for what it’s worth, because, you know, everybody’s always pitching their own thing of course. Right. And we’ve got to we’ve got to be on guard for that and the the spin doctoring. I’m sure there are some who think I do it too. I try not to, but you know, we all fall in love with our own ideas, right? It’s, it’s just part of our nature. So the realtors Association Yes, n AR, the National Association of Realtors, the trade group that is allegedly the largest trade lobbying organization in the world I’ve heard. I don’t know I’m kind of wondering if that’s true when you look at like teacher unions. They’re pretty big unfortunate. BN ea, the National Education Association, who Steve Forbes, who is of course been on the show, Steve Forbes called them the national extortion Association. And I would agree, you know, teachers are great love teachers, but all the bureaucracy that’s been built around our public school system and what a total scam that is, and and of course, the leftist solution is, well, let’s just throw some more money at the problem. No, let’s not throw more money at the problem. Let’s throw less money at the problem and make them more innovative. The price of education should be dropping dramatically, because of all the technology available. I mean, you know, you want to get educated, go to the Khan Academy website, I donate to the Khan Academy or I should say my Charitable Foundation donates to the Khan Academy. If you have an extra seven minutes, you can learn about quantum physics, organic chemistry, or trigonometry or you No differential equations or whatever you want, there’s some great stuff on there. And guess what the price is? Free. Not bad. Anyway, where was I going? National Association of Realtors article tangent alert, they are predicting that prices will increase slightly faster than they did in the last 12 months, coming up in the next 12 months. So they’re saying prices are going to increase more quickly. We’ll see if that’s true. You know, I’m not really doubting that I kind of think in AR is probably right this time. We’ll see how it works out. But what’s interesting, they’ve gotten a little interactive map here that I’m looking at. And it says the map below shows the median expected price change in the next 12 months for each state based on February 2015 to April 2015. surveys. realtor respondents from Colorado had the most upbeat price expectations now Wait, calm down. Before you go saying Jason. Why aren’t you talking about the Colorado market? Look We have properties in Colorado. We haven’t really done much business there many of you listening have purchased through our network in Colorado. And by the way, I love Colorado. And maybe that’s I don’t know, because I’m such a big john Denver fan. Colorado is a beautiful, beautiful state. The problem is the prices are too high. They don’t work, you know, Colorado, it’s it just well, and I shouldn’t say Colorado, I should say, Denver metropolitan area. It just got too expensive. You know, same thing happened in many markets Phoenix, where I am right now, in my closet. That market got too expensive as well. So, again, we are area agnostic. When something makes sense. We’ll be recommending it. When it doesn’t make sense. We’re going to recommend something else that does. If you have a property in one of these markets like Phoenix, like Denver, hold on, just you’ve got a stabilized property. You’re doing great. You’ve made some money. Congrats. Thank you for being our client, and just sit tight, keep your properties rented, and just manage your managers get your nice return every year, you’re probably making a good 35 40% annually on your investment, all things in, you can go to Jason Hartman calm and look in the property section and look at those performance. Well, many of those performance have been dramatically exceeded in many of our markets over the past several years. Everything’s worked out better than we thought in some of these markets. So and sometimes it works out worse, you know, everything’s individual. It’s funny, too. When I talk to people, they ask me questions. Well, you know, what’s your average for this and that, you know, how’s this gonna work out? And unfortunately, I can’t answer a lot of those questions because everything is so individual. Every property is individual. Every circumstances individual, every tenant is individual. It’s a very fragmented business. As you will know, because we we talk about that a lot here on the show. Anyway. So the median price expected growth at 6%, followed by Washington DC, the capital of free government bailouts. Boy, that has done wonders for that market. Obama anism has done wonders for property owners in Washington DC, and it has hurt property buyers in Washington DC. When you start throwing out government money, and every every person, every business person on the planet is flying into DC to get their share of the government pie. That’s the kind of thing that happens. Okay, but again, you can’t get good rent to value ratios in Denver. Certainly you can’t get them in Washington DC or do better in Denver. You know, a lot of these markets, they just don’t work. Okay. Price expectations were also upbeat in Washington, Oregon, Nevada, Florida, Georgia, Michigan, Hawaii and New Hampshire. I’m sure with a median price growth expected before to 5%. with oil prices still at a slump. realtors expected price increases more modestly, at a median price growth of two to 3% in North Dakota, Oklahoma, Wyoming, Louisiana, in Texas, where the economy is more diversified. The median expected growth in prices over the next 12 months is about 4%. So there you go. There you have it from the realtors. And you know what? I have no love for the National Association of Realtors. I criticize them often. We’ve had their chief economist Lawrence Yun on the show before I got a couple of pieces of hate mail on that one. One guy wrote in Jason, why did you have this tool? Why did you have this tool on your show? They’re promoting their own thing, obviously. So you know, anyway, it’s whatever.
Jason Hartman 16:58
Remember, you’re listening To flashback Friday, our new episodes are published every Monday and Wednesday. It is what it is. But this time, I think this is probably a fairly reasonable estimate of what will happen over the next 12 months. But overall, it’s going to increase and it’s going to increase at a faster pace than it did over the last year, according to the National Association of Realtors. Well, I had a couple more things to share with you. But as usual, I’ve gone long. Let’s get to our guest today. Our client Joe has purchased I believe nine properties from us. He’s been with us for years. And we’ve got him and Sarah, the investment counselor Sarah, who you’ve Of course heard on the show before In this segment, so let’s dive in and hear what they have to say. Hey, it’s my pleasure to welcome one of our clients to the show. It’s Joe consol this and because investment counselor Sarah are with us, and we just want to hear a little bit about his case study the good, the bad and the ugly. And he’s got I believe Leave eight or nine properties now, and has continued down the path of real estate investing and retirement and financial independence through real estate. So Joe, welcome. How are you?
Joe Goncalves 18:13
Good, Jason, how are you?
Jason Hartman 8:14
Good, good. It’s good to have you. And we’ve got Sarah here to Sarah with us.
Sarah 18:17
Yep, I’m here. Thanks for having me.
Jason Hartman 18:19
Great. Great. Joe, tell us a little bit about your story. You originally I think heard about us on
Joe Goncalves 18:24
the radio on maybe KBC possibly on Los Angeles radio station is KBC. I don’t know about us here on Charolais or not also but either one of those two. And I made it easy to advertise on people that I trusted. So there you go.
Jason Hartman 18:39
And so you live in the Los Angeles area. Is that correct? Yes, I do. Good. Good stuff in you had a long career with the stater brothers organization. And then what got you interested in real estate investing?
Joe Goncalves 18:50
Well, I’ve always wanted to real estate I just didn’t want to deal with tenants and all the phone call so I just never got into and then when the market really went down in 2008 That’s when I started listening to radio and I heard you on radio. And that’s when I decided to do it because I, your method works with where I have to deal with tenants and, and unless, you know, issues that come up even though I do deal with it, it’s not the same. Yeah, right.
Jason Hartman 19:17
So did you invest like locally before you came to know us? And, you know, that’s how you knew that tenants were a bit of a hassle. Is that or did you know someone else who did or
Joe Goncalves 19:30
I have plenty of friends have plenty of friends who did and my dad also did. That’s why I knew Yeah, good stuff.
Jason Hartman 19:35
So basically, our system our slogan is the complete solution for real estate investors. And so, you know, having the the managers that were pre screened and, you know, having them manage your tenants and that kind of stuff. That’s really what attracted you. Right, right. Correct. And then a lower prices in California. Well, definitely, you, you can’t do anything that makes sense from a cash flow perspective. And amazingly, it’s not Los Angeles has just anywhere in California that it’s that way. It’s, it’s, it’s really mind boggling. I mean, like I’ve said on the show before, over the years, you know, even Bakersfield and Fresno and these, like, you know, fourth tier cities. Even those don’t work. It’s amazing to me, you know, you just can’t even make that work, you know?
Sarah 20:22
Well, it’s it’s so funny when I first met you, Jason, you know, I had never even thought of going outside of California. It just never crossed my mind. I mean, we thought about and then Empire areas, and because the prices were lower, but I mean, what about you, Joe? Did you ever even think of investing in California before you met Jason?
Joe Goncalves 20:41
Because I didn’t think it was a possible thing to do. Yeah, no, I never crossed my mind. How would you do that so far away, so I’d never, never crossed my mind to do that. So
Jason Hartman 20:51
yeah, you know, it was really about 12 years ago that I even first started thinking about investing outside of California and what I didn’t realize after So many years is that of all the properties I purchased and owned and rented in California over the years. I really wasn’t even an investor. I was a speculator, you know, and, and most of the time, you know, I got lucky but it was really just luck. It wasn’t, you know, any extremely good market knowledge because I’m, you know, you’re investing for appreciation and I’ve just never met anybody that can really predict appreciation or depreciation in any reliable fashion, you know, so. So yeah, what tell us Joe, more about your story like you. You heard us on the radio. Did you come to one of our live events then or start listening to the podcast or what was next?
Joe Goncalves 21:41
I heard I heard about your listen to your podcast. I think you were still in the teens. So I must listen to two or three times and then that’s when I emailed your company and when you’re when your investment counselors emailed me back, so I drove out to new as a new port to to The tour router or we used to be in Newport Beach. Yeah, years ago, I think because I was able to sit down face to face with him and see who he was. And he seemed very honest, I died pretty much on the spot. decided to buy two properties. Good. And where were your first two? My first two was a condo in Ohio and Columbus and my son in dollar run in Indianapolis brand new. Uh huh. Good, good stuff.
Jason Hartman 22:25
And so those were your first two long distance experiences? Did you go out and look at those properties first, or did you just buy them? It sounds like you just
Joe Goncalves 22:34
bought them right? I just bought them. No, I did. I went through years and years later to look at those actually about a few more slides to look for different properties on the area. But that was like four years after I bought them. So Right, right. Yeah,
Jason Hartman 22:47
we have like people asked the question, do your clients look at these properties? And you know, mostly before they buy them, they don’t look at them we would actually like them to because you know, they all understand what they’re doing better. But um, you know, they some Don’t even ask for they buy them. I mean, it was four years before you went and looked at them.
Joe Goncalves 23:07
Did they perform? Okay, like, you know what happened on those first couple of properties? There were flying. I think actually those first four or five that I had were priced at just quiet and how many issues lately it’s been a little more different. Maybe it’s because I have more. Well, there’s more chance of things going wrong. But the first few, four or five, there wasn’t really many issues of the tenants for long term. Not Not much. We’re proud of that the first two that I bought were pretty much brand new, so there was nothing to repair. They were very cash flowing, because at the time you weren’t really you weren’t really offering rehab was all pretty much brand new stuff. So it was a much cash flow, but they took care of themselves. Yeah, yeah. Good. Good stuff.
Jason Hartman 23:50
I mean, what was it that got you so interested in real estate the Why
Joe Goncalves 23:53
did you think real estate I know, the bad side is you didn’t want to deal with tenants. But what was the positive side? You know, what was your Exposure before this people I think people made money with real estate it’s it’s it’s been proven you know my dad was doing it many family friends that I have they were doing it actually I’m a real estate license two years ago I just at the time I didn’t care for it so so I knew it worked I just don’t want to have the headaches which thinking back now I should have been had the headaches I would have been even better off but but that was my thinking back then. Yeah, cool. Good, good stuff.
Jason Hartman 24:27
And so what happened next you purchase some more properties in some other markets, right?
Joe Goncalves 24:31
Yeah. kannapolis I got one there. Then I went to Atlanta. I think about one of the euros $6,000 or $5,000 down properties in Atlanta. Don’t we wish we still have those? I tell ya.
Jason Hartman 24:43
We can get those again. We’ll be loving life Believe me.
Joe Goncalves 24:46
And I think that was the first time I actually bought through Sarah so in So Sarah,
Jason Hartman 24:50
what what did you see is Joe was building his portfolio. Well, he and his wife we should say it wasn’t really just Joe. You know what, what did you see as he went along?
Joe Goncalves 24:59
Well, I Just saw him continue to grow his portfolio at a pretty moderate pace. I mean, he, you know, he’s your everyday Joe. He, you know, he was a hard worker, I mean, he was working in his career and, as was his wife, and he just continued to, to add to his portfolio, he did have some bumps in the road. In fact, our conversation today started with a another little minor bump in the road and one of the newer markets and, you know, he just continued to manage his managers and you know, check in with us and you know, obviously he’s attended several events, you know, since and, and, you know, slow and steady wins the race, right?
Jason Hartman 25:43
Yeah, definitely does. Joe, I love what you said to me in January at our meet the Masters event. Do you remember exactly what you said?
Joe Goncalves 25:51
I have no idea what you’re gonna was about
Jason Hartman 25:53
you retired,
Joe Goncalves 25:55
right? Oh, yeah. Well, yeah. I just retired a couple years. A month before that, yeah.
Jason Hartman 26:03
Go ahead.
Joe Goncalves 26:04
I was gonna say, Oh, no big deal. He just retired.
Joe Goncalves 26:07
That was really like a month ago that was, you know, I retired but I didn’t retire. I’m gonna do something else eventually. I was I got tired of working where I was at a grocery store for 37 years in the same building. I qualified for my retirement. So I took that and as of right now, I haven’t done anything else but I will find something else to do to fill my time and help out with more financial stuff so I can buy more stuff. Yeah, good, good stuff. So what happened next, what’s your portfolio building? What else did you do? Well, the last one that I bought actually I bought was with chicken guys recommended a checkbook IRA. So I, I bought that was mine. My wife’s IRA, we combined it and we bought a, I guess a classy house. But you know what, it’s the easiest one I have so far. It’s section eight. I get my rent every month and I’ve had the same tenant since Well, good stuff. Yeah. So do you like do you like the section eight properties better? I mean, you have a blend of both right? I’ve only had I only have one and that’s right now it’s the one with the least complaints that I have. So I had to maybe I would be a different story, but I have one and I have no issues right now.
Jason Hartman 27:14
And you know what I’ve said about that on the show, you know, some people love them. Some people hate them. It’s just a really different thing next year, I hate him, but this year, I think it’s great. Yeah. Sarah, what do you find with your wide variety of clients at our firm, you know, with with section eight, I kind of think and I don’t know what you’re gonna say to this because we haven’t talked a lot about this but Sarah you generally like the newer properties, that sort of class a type properties more and I’m assuming you don’t really like section eight stuff.
Joe Goncalves 27:46
Well, I don’t have any section eight properties myself. I, I’m, I don’t have honestly I don’t get very many complaints from clients about them. No. So I’m not opposed to that. I just think that having it’s more of like a maintenance issue for me with the newer construction, you’re less likely to have any maintenance in the first, you know, few years. And that was my experience with my very first property I purchased years ago in Texas, I bought it brand new. I don’t think I’ve put more than $2,000 into that house. And it’s been like eight years, you know, so maybe I’ve been lucky, I have had a good long term tenant. You know, but I think, you know, with section eight, usually those come with older properties and older properties come with more maintenance. So, but, you know, here’s the thing, sometimes the cash flow is so good that it can make sense. You know, as long as you’re willing to shop around a little bit on the maintenance items. I just think it’s a little more time intensive. So it depends on the investor. You know, I get clients that call and they have a big chunk of money. They want to invest they want Want to invest it all at once, and they don’t want headaches. And so for somebody like that, where they don’t want to be involved in the day to day and negotiating maintenance items and things like that, I suggest that they start with newer properties until they, it doesn’t have to be brand new, but just, you know, nicer neighborhoods, newer properties until they get some experience. And once they get the experience of making decisions, and they, they’re comfortable, and they can make quick decisions about maintenance items, and they have their teams in place and, you know, they know some contractors and areas, then as they get into some of the older neighborhoods, you know, they have that experience to make quick decisions and they’re not, you know, losing income. Because they’re, they’re sitting on decisions. And I don’t know if that made sense.
Joe Goncalves 29:50
To all your seminars, I think from what I heard from from your some of your vendors, section eight depends on the city, some cities are terrible, some are good. I have a friend who has section eight here in LA He wants nothing to do with it anymore. But I think the one of the things too is maybe there has to be more careful about how they take care of the property because they don’t get thrown out of this section A program. That’s one of my beliefs, I think there has to be a little more careful because you get a you get inspected every year. But they probably got to be careful, because if they’re not careful, they’re probably gonna not be a session anymore. And that’s a big loss for them. And,
Jason Hartman 30:26
therefore the tendency mean, right, correct. Yeah, yeah. Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday. I agree with you. That’s one of the great levers the landlord has over the tenant is that the tenants can lose their section eight status and God forbid, they would want to lose their free government handout, you know, so that’s, you know, they, they’re on the dole. But you know, one of the things I wanted to talk about is some of the property management practices and you I think it’s very important for investors to take an active role, even if they have property managers, to direct the managers to state what they want. And I’m seeing a lot more clients and I think this is a pretty good policy demand two year leases, from their tenants, because it’s more likely that that tenant will stay longer. And then you don’t have any turnover fees, any cleanup, any painting any stuff like that in between. So it’s it can be very helpful. Joe, any thoughts on that? Or Sarah? I like the idea. Not so my landlord, property manager actually doing that already. I don’t know if it’s because of tenants asking for it. But I got like two or three properties or two or leases. I think it’s great, right? And you can put a rent increase. You know, if you’re concerned about inflation happening in two years, or, you know, just increasing your yield. You can write that right into the lease. So you can just say, you know, the rent the first year is $1,000 a month the rent the second year is $1,040 per month and why Lots of tenants will agree to that. The other practice that I really think investors should try and do is to do hard flooring throughout their house, or, you know, at least carpet in the bedrooms only and hard flooring everywhere else. And then either low sheen or eggshell paint. an eggshell is not a color, it’s the texture of the paint, and it makes it just really durable. You know, I’ve had eggshell paint in some of my properties, and you know, that’ll that’ll last you eight years. I mean, you know, you put flat paint on the walls, you’re probably going to have to repaint after one tenant cycle, you know, maybe in just a couple of years. So, I think that’ll really save you money in the long run. It’s going to lead to another tenant themselves to Well, yeah, it certainly does. It always depends on the tenant. Yeah, Sarah thoughts.
Joe Goncalves 32:51
Yeah, I really like the idea that a two year lease but don’t forget to put that red increase in there, especially in today’s media. rental climate, I think rents are on the rise. I’ve been kind of checking on my properties. And it seems like rents are starting to trend up. So you definitely don’t want to forget that that piece. So that’s great advice. Well,
Jason Hartman 33:12
Joe, what are your next plans for your portfolio? What are your goals?
Joe Goncalves 33:15
Well, I’d like to buy some more of a since I’m between jobs, it’s harder for me to qualify for a loan because there’s no the incomes not the same. So really, when it is in I will like to buy, I like to get out of a couple markets and get into either condensed down or less markets, like you’re suggesting it now. Since you’ve changed your mind last few years, to three or four.
Jason Hartman 33:37
I’ve learned my lesson. So let me just elaborate on that if I can. So, you know, you hear at the intro to the show, you know, 11 states in 17 cities. And I used to think that was good because I was always buying before our clients would buy in, you know, given areas right? And now I really think people should be no more than five markets. I think the big mistake most investors make is they’re only in one market. And that’s a big mistake. But the other mistake on the other side of that is that they’ll be in too many markets. And then you’ve got too many different providers to deal with too many different tax collectors and cities, and you just don’t get the feel of the climate. So three to five markets are enough. And so let’s kind of play that out for the investor that’s buying nine properties. Three properties in each of three markets, I think is a great plan. If the investor is buying 90 properties, then 30 properties in each of three markets. But if they’re buying that money, you know, they could be in five markets. And there they’d have say, it’s well rounded off at 100. And it’s, you know, 20 properties in each of five markets, but I really don’t think anybody should be in more than five markets. So how many are you And now Joe, are you in eight markets? I believe no 1234 I bought, I think it’s five, you’re always you’re in, you’re in five different cities, but you want to become a little less diversified
Joe Goncalves 35:11
properties. Right, right, exactly. But you want to be less diversified. Do you want to get it down to three, I would like to get it down to three or four. The problem is some of the newer markets are really exciting. And I had no no phone anymore. Like, for instance, Memphis and Arkansas sound really, really good. But then be more so I wouldn’t mind three or four I think could make a lot less. So as property managers, it’s like a stainless taxes. It’s, it makes sense. It makes a difference. Yeah, it’s less
Jason Hartman 35:40
people you have to deal with and you know what else insurance because insurance is run state by state. And, you know, we tried working with the National Insurance Company, national real estate Insurance Group, they go by the acronym of the first letter of each word and also affinity group. Or affinity insurance, they kind of go by both names. And I had a bad experience with them and I know a couple of couple of other investors I know had bad experiences with them. And I was I was loving the idea of having one source for my portfolio nationwide would have been great, but they didn’t work out so I’m back to you know, just local brokers one in each state where I have properties and and you know, it makes it easier when you don’t have to deal with that many different insurance companies
Joe Goncalves 36:29
to write I have them on one of my my last property about was to was affinity and I’m not sure after what you just said, if I should keep them or not. Oh, yeah. Well, I’ll be happy to tell you my story if you want to hear it.
Jason Hartman 36:44
Yeah, I’m pretty upset with those guys. Basically, what they did and this is affinity group management or national real estate Insurance Group. This was kind of unusual. I mean, it was a surprise happening is I had a property and when we had that polar vortex, you know, the thing that surprised all the global warming people. And it got really, really cold. The property happened to be vacant at the time. And I’m not sure this is what happened, but I had a pipe break. Okay, and I’m not sure if it froze or, or what? And they said they wouldn’t pay the claim. And I said, Yeah, you have to pay the claim. And they said, No, there’s a clause in the insurance policy that says, if it’s not occupied, that you know, you have to do certain things, and I didn’t do them. And so are really my property manager didn’t do them. And so I said, No, no, you have to show that the cause of the pipe breaking and the subsequent damage was because of the weather because the pipe froze and they they have no proof of that whatsoever. And it got even worse. They tried to hide the insurance adjusters report. They said, I did not have a right to a copy of it. And so I went and my lawyer found that area of the law that says I have a right. And we wrote him a stern letter, and they finally turned it over. They tried to suppress that report, which I just thought was completely scummy of them. And then I was communicating back and forth with him in an email and I was just, you know, in a very Matter of fact, tone, I was not being rude or difficult, which I completely realize that I’m capable of.
Joe Goncalves 38:38
Show numbers this, I gotta make a mental note.
Jason Hartman 38:42
But I wasn’t doing it this time. Okay. I was completely civil. And I just said, Hey, you know, are you gonna pay this claim or what? And I explained my reasons, kind of, you know, more elaborately than I just explained now, you know, I mean, I thought I had a very good case. And I said, you know, please Don’t you know something along the lines of Please don’t tell me we have to litigate over this. And then shortly after that, they sent me a letter, basically, retaliating against me saying they’re canceling all of my insurance policies. Because I was difficult. Wow. Apparently they have a difficult clause that allows them to get out of the deal. Amazingly, so,
Joe Goncalves 39:28
anyway, everybody that I’m canceling anyway, right? Yeah.
Jason Hartman 39:32
And my attorney says that they can be liable for punitive damages for doing that what they did is completely wrong, you know, retaliating like that. So I have not entered into litigation with them yet, but I don’t know. I might have to I’m not sure. Hopefully, I won’t. But, you know, I just I think that was really, really unethical what they did, and you know, I think they, they deserve to be held accountable for it. So yeah, and then we had another client who has Another claim, it was a smaller claim, but that one was also denied. And the way they do their insurance is that they basically from what I understand, and I could be wrong about this, okay, but my understanding is that they, they do the insurance by getting a master policy through I believe, Lloyds. And maybe they have a couple different vendors for it. I’m not sure it’s for only the larger part of the claim. And the small claims they I believe, and you know, I don’t know this for sure, because it’s not been discovered, but I’m pretty sure that’s the way it works. They just self insure for the small claims. So, you know, just as I’m plucking a number out of thin air here, but you know, maybe if it’s a $25,000 or lower claim, they’re actually paying that money. And that’s why they’re really quick. My theory is that’s why they’re really quick to dispute those claims and not pay them because You know, that’s, that’s their money rather than the insurance company’s money. And so, you know, I think that’s just that’s just problematic. And I don’t like it,
Joe Goncalves 41:10
you know, in business like that. Yeah,
Jason Hartman 41:12
yeah, I’ve heard a few more horror stories, I believe a British woman living in England. She wrote me several big emails about them. She’s not one of our clients, but she just was livid about them denying claims and thought they were just doing all kinds of bad stuff. I can’t remember her name offhand. But yeah, so unfortunately, local insurance that’s what I’ve come back to just regular old insurance, but that is state by state. So you know, if you have multiple cities in Tennessee, or Texas or whatever, you know, you can use one broker and have all of those covered. Okay,
Joe Goncalves 41:48
so for me to think about something different. Yeah, definitely is, but
Jason Hartman 41:51
what we didn’t finish Joe is your goals for your real estate investments.
Joe Goncalves 41:55
My goal is maybe get into real estate also help my friends do what I’ve been able to do. Love before asking me about it, you know? So and spend more time with my family and hopefully grandkids my daughter’s married three years now so maybe in the near future we’ll have grandkids to take care of There you go,
Jason Hartman 42:13
there you go. You’ll be you know, isn’t it nice the freedom you can achieve with you know, this is the most historically proven asset class. It really does give you a lot of security although What did you do you know before you were investing in real estate were you were you investing in stocks and stuff like that?
Joe Goncalves 42:29
I you know, I did that years ago and I
Joe Goncalves 42:33
feel the bubble of 2000 I was doing I thought I was the smartest self investor out there and I’ve ever have you check on my stock quotes five times a day and then 2000 came around is like,
Jason Hartman 42:48
half the money that I lost. If I put into the stock market even I mean into the real estate even in much better shape. A lot of people have thought that same thing themselves. But you know, listen, Joe, you don’t have to worry because every time There’s a stock market crash. All of the insiders always get paid really well. You know, the people Goldman Sachs get their bonuses, the CEO, their company of that company. You know, God has huge salary and his bonuses you know, it’s just a little investors that get screwed over. So unfair, isn’t it?
Joe Goncalves 43:22
Yeah, I’d like his money in there everything.
Jason Hartman 43:25
But no, well, what can you do? It’s the modern version of organized crime as I always say.
Joe Goncalves 43:31
I tried options. I think I tried everything.
Jason Hartman 43:34
Were you doing? Just, you know, good old mutual funds and kind
Joe Goncalves 43:36
of simple stuff. Yeah, it was it was mainly about mutual funds. I did do some, some, some single stocks. I found this this little newsletter out of out of Oregon, that were were like four stocks a month. And what I found out was it was it was mailed out every month. And because I live in a West Coast, I got my letter the first day and I start noticing after about two or three months by the end of the day by the standards the market close all those stocks for quite a bit the next morning it was sometimes it doubled and so I started doing that I didn’t care what the code because they were like two or three four or $5 stocks they were just penny stocks I could double my money and in in 24 hours but then they went online so that it lost the male parts so everybody got their email at the exact same time so I couldn’t rely on the on the on the post office worried it delivered to the west coast first and by the time we got to the east coast when they start buying stuff he drove up the price of the people who had bought already bought from the west coast Yes, I even got a peel box so I can rent to the public post office every like fourth fifth or sixth of the month. I’d go there see if my letter in there as soon as it was in there. I rush home click on my buy 234 thousand shares of this and that and wait till the next day. Yeah,
Jason Hartman 44:58
yeah. Well, you You got it. Just know that that is not sustainable when things are going that well, right? Because this be that back then. Yeah, yeah, no, I Well, I didn’t know you back then. Otherwise I would have tried. Believe me. I love real estate. We all know that. Yeah, good stuff. Well, good. Well, Joe, thank you so much for joining us today and just kind of talking telling your story and congratulations on your retirement and, you know, it sounds like in you know, Next you’re going to be working as more of a hobby, really than a must,
Joe Goncalves 45:27
you know, then you know, then you have to write well, not as well off as Fernando. So no, we’re there. But
Jason Hartman 45:33
we’re getting by Yeah, good, good stuff. Well, hey, Fernando, is also working for just general stimulation and fun. And you know, it takes on a whole new meaning when you’re not really working for the paycheck when you’re just working because you want to work. It really, it’s just a whole different experience. It’s It’s wonderful when it’s like that. So, so congratulations to you and keep up your investing and keep building your portfolio and we’re happy to help you and thanks for being our client.
Joe Goncalves 45:58
We really appreciate it. Thank you. Jason,
Jason Hartman 46:00
Sarah, thanks for joining us as well, we’ll wrap it up.
Sarah 46:02
Thanks for having me.
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Announcer 46:46
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Jason Hartman 47:24
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Jason Hartman gives us a Thanksgiving Day episode and is joined by the new podcast editor, Adam Schroeder. Adam shares his personal journey into real estate investors. The two of them discuss how he and his wife worked through Jason’s network. Adam also talks about his family has mission statements. In the spirit of thanksgiving, they talk about being grateful.Â
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 to the creating wealth show Special Edition Happy Thanksgiving, it is Thanksgiving. This is episode number 914 on Thanksgiving Day, and this is your host, Jason Hartman and I am very thankful, very grateful to have you with me today. Just always grateful. You know, I think the one of the easiest keys to success, a really easy, simple strategy. To be more successful at any area of life is to simply be grateful to express gratitude, even if you don’t express it externally to others, which ideally you would do right, just to be grateful internally in your own thoughts, in your own thoughts when you are grateful. You are a stronger, more resilient, better person who can withstand More of life’s challenges more easily. Because gratitude really gives us all a sense of perspective, doesn’t it? It helps us appreciate what we have. And if we don’t appreciate what we have, it’s very hard to ever get more. So gratitude, I think is one of these simple, easy Strategies for Success. So for this Thanksgiving Day episode, we’re not recording this on Thanksgiving Day yet here. We’re recording it just a couple of days before, but I am with our new Podcast Producer, someone I’m very grateful for. And that is Mr. Adam Schroeder. I’m at his home, the home of his wife Erin, and his whole family. Adam has four kids. You have four kids, Adam,
Adam 2:48
that I am I’m grateful for all of them. Yeah,
Jason Hartman 2:50
that’s a lot. I remember hearing a sermon in church years ago. Were the pastor at mariners church in Irvine Newport Beach, kind of right on the border technically. He was up there talking and he has four kids, by the way four boys just like you do you have four boys do
Adam 3:05
so his house is loud.
Jason Hartman 3:06
Yeah. So it’s kind of a funny parallel. Actually, I just I just remembered this Kenton was up there talking. And he says, you know, who is more happy with their life? Who is more satisfied? Is it the guy who has $4 million? Or the guy who has four kids? And Kevin says, well, it’s the guy with four kids, because if he has four kids, he doesn’t want anymore. But if he has $4 million, he might wind on $8 million. Right? four kids is enough, right?
Adam 3:35
Yeah. For us it is. People keep asking me if we’re gonna have one more make a basketball team and I just tell them if they have the basketball skills, I do be a terrible basketball.
Jason Hartman 3:45
I can’t wait to Brittany here’s this episode because her husband is a basketball coach. And of course she’s been working with us for like nine years now. And Brittany says that her her oldest Griffin is like a natural basketball player. How can that actually be hereditary? I don’t know about that. But it’s interesting nonetheless. So, Adam, when I walked into your home yesterday, stayed over last night. I got one more night here and then I’m off to my mom’s house for Thanksgiving. What I absolutely loved right away is your family mission statement on the wall. It says the Schroder family, we will and it has, you know, pictures of the family. And this is something that I remember reading one of the Stephen Covey books, the late Stephen Covey, who of course, the Seven Habits of Highly Effective People and all of his other great books, but he has a book about the family mission statement and talks a lot about mission statements and stuff. What inspired you to do that and put it on the wall? It looks awesome, by the way, thank you.
Adam 4:45
Yeah, it’s it’s really great. It was something that Aaron she might have actually gotten it from, from that but Aaron just said we were kind of in a little bit of a funk. And it was you know, we were dealing with the kids and they were kind of driving us a little bit crazy for a few weeks. If you have four kids, your content,
Jason Hartman 5:01
you don’t want any
Adam 5:02
more. And we were just thinking, you know, we need a way to show the kids what’s important to us. And a way we can just, you know, eventually just be like, you know, look at the wall. Are you following that? Right? And so we just sat down, we took, we actually split up. And I wrote down mine. And she wrote down her as like, what is important to us as a family. So she came back with a list of like, 20, I came back with a list of 20. somewhere in that range. That’s a lot of things. It is narrowed it down a bit. And we looked at where there was, yeah, we looked at where there was overlap, right? We said, Okay, well, this, if it’s important to both of us, it’s probably important for the family. And then if I don’t have it on my list, why should I have it on my list kind of thing? And we came up with what is that? 12345 679 of them listed, but some of them have ampersands because we couldn’t quite right. It hadn’t nine exactly, but so we just kind of put it up there. We figured this way when the kids like I said, when the kids get older, and whenever we have moments where we’re questioning things, look up there and be like oh, Am I doing this? Yeah. So that was the top of mine.
Jason Hartman 6:04
I absolutely love it and it’s very artfully done. It’s very tasteful. And there is your wife Aaron walking by and Aaron you’re going to come down and be on the podcast that in case you didn’t hear that folks, she said nope.
Adam 6:17
She’s uh yeah,
Jason Hartman 6:18
she’s not into this kind of stuff. She’s not doing it she’s not doing it good good stuff. It is really great to have you producing the creating wealth show now thank you I know our listeners have noticed the production quality has already increased and Adams only been on the job now what maybe three weeks what started the journey well remember
Adam 6:35
and then editing for you since sep tember of 15
Jason Hartman 6:38
of 2015. Yeah, so like to over two years now.
Adam 6:42
They hadn’t done the greeting. Well, so you’ve been asking me to do it for a little while. Yeah.
Jason Hartman 6:45
So so what we did is we switch things up. Of course, if you’re new to the show, you know, we have a whole bunch of other podcasts we produced the longevity and biohacking show. The holistic survival show. You know the American monetary Association show the young wild Show, bah, bah, bah, there’s a whole bunch of them, right. Anyway, more than enough podcasts going on over here, over 4000 episodes. I think now, there’s a lot. There’s a lot. And of course, just the creating wealth shows almost that 1000 episodes. I’m very grateful and thankful to say that, you know, after publishing for, what, 12 years now, it’s been a long time. You’re doing our other shows, but I’m really glad to have you on board doing this show. You’re just really in tune with it. You’re interested in real estate investing, and you became a client A while back
Adam 7:31
and back in February or March? Yes.
Jason Hartman 7:33
So what nine months ago you you bought your first property through us? Yeah, we bought
Adam 7:39
one in February and then we bought another one in July. I think we didn’t realize we were going to buy a second one that quickly. But we kind of looked at our bank account after a few months like oh, we we could afford another one. So let’s go ahead and do that. So we’re gonna try to keep buying one, maybe two a year. Two might be a bit of a stretch at the moment, but yeah, Aaron wants to quit. So right to work towards that. Cuz I don’t make enough.
Jason Hartman 8:00
Okay, so Well, let’s give you a little background on you know what it is you both do and so forth. So we’re here at your home in Austin, Texas, and thank you for taking me in as your guest for two nights. Absolutely. Whenever I stay at someone’s home, I never stay for more than three days. Because I remember the Ben Franklin saying, Ben Franklin was just super wise one of our founding fathers obviously, Ben Franklin said, houseguests are like fish, they begin to smell after three days. So it’s I’ve never I don’t ever want to work out my welcomes. I’m on my way to mom’s house tomorrow. And, and I’m gonna see if I can do another podcast recording with Aunt Joan, who has been on the show before who’s built quite a real estate Empire. I saw that growing up and then my mom has built a decent real estate Empire herself. You know, I grew up with that. So those were two great influences as real estate investors on me growing up.
Adam 8:52
I don’t think anybody in my family has real estate in their portfolio my uncle might have Well, I think my had one but it was because when my mom’s father passed away, he got those. But they sold those since then. So we’re actually I think the only people in our family who have rental properties, and it’s been a bit of an adjustment.
Jason Hartman 9:12
Well, I’m guessing there’s really only one in your family who has a family mission statement on your wall in your room too, right? Yes,
Adam 9:17
that’s cool. So you are taking leadership in both of these things, and you and your families. So that’s great. We got all the Oh, you’re gonna be a slumlord jokes whenever we first started investing, no, no, I’ve seen pictures. That’s a nice house. Sorry. Yeah.
Jason Hartman 9:31
I hate to break it to you. And listen, if you know a lot of that is just silly. People that don’t understand the way things work. You know, it’s armchair quarterback criticism. You know, it’s always out there. It’s, it’s just part of human nature. It’s part of the way we all are. I don’t do that. So it’s weird. Yeah, yeah, exactly. Yeah, that’s, that’s what they think.
Adam 9:50
Okay, so you’ve got two properties now and are they both in Memphis? They are. They’re both in Memphis. They’re about 10 or 12 miles apart. They’re, they’re both there and they’re both rented. Thankfully, we had our first our first home was rented when we bought it a second home, they were still renovating it. Right. And so we had one month that it was not rented. I got rented out. So right, we’ll get our first payment from that and early December.
Jason Hartman 10:14
Good stuff. That’ll be nice. And
Adam 10:15
tell us about those deals like how much were they and how much do they rent for and tell us about your experience. The first one we bought, we went on the low end because we weren’t It was one of those. I guess we’re gonna get in this phase new. Maybe you are a slumlord. So we bought it, it was it was listed at 55. But the appraisal came in low and so they dropped it to 53. So we bought it for 53. And it rents it started renting at 695. Their lease ended in September and they actually the property manager up the rent to 725. Awesome. So we’re getting that and we second when we bought
Jason Hartman 10:50
you’re doing a lot better than 1% on that. Yeah. gratulations it was 1.3 or so whenever we originally bought so we’re probably up to about one four. And we’re Of course talking about the RV ratio or Right now your ratio. Yeah.
Adam 11:01
And our second one was 76. Nine. And again, the appraisal came in a little lower. So they dropped it to 75 I believe, yeah. 75. And that rents for they just rent it out for 850. Mm hmm.
Jason Hartman 11:15
Fantastic. So another one. Yeah. Good. Good stuff. Good to hear. You mentioned the appraisal thing. And I tell you something that is a common challenge nowadays. I’d say our two biggest challenges in the business nowadays are number one, getting any inventory of properties at all to sell inventory is obviously very scarce. Very limited. In all my years doing this since I was 19 years old, in the traditional business and the last, what, 13 years in the investment only business for 14 years, almost really, you know, I have never seen inventory this tight. This has got to be the lowest level of supply of housing I’ve ever seen. And so that’s super challenging. But the other problem is the appraisals don’t come in Because the appraisers are always looking in the rearview mirror, and so they’re looking at comps for properties that are, you know, four months old, six months old, whatever, and they just can’t bring the appraisals in. And you know, it makes the buyer think on one hand while I mean I like it when people finance properties because that appraisal acts as a safeguard. In fact, I would even encourage some of our cash buyers to get an appraisal, you know, but the problem is you can’t take the appraisal as the gospel, because it’s just not it’s always a rearview mirror picture. Okay, in an accelerating market. And when you have a, you know, very quickly accelerating market, it just doesn’t work a lot of times. So, one example that we had just the other day This was Kerry’s client, is we had an appraisal that was, I think, $7,000 apart. My suggestion to Carrie when she came to me was, why don’t you see if the client will go up? The client didn’t want to go up and split it. Okay, they didn’t want to quite go that far. I said, What do you see if the client will go up by $2,000 and the local Market specialists come down by 5000. And in this particular case, that worked, they agreed. So it doesn’t always have to be an even split. But folks, if your appraisal doesn’t come in, you’re probably gonna have to pay some extra money. Yeah, we were expecting to have to pay at least half but they just they agreed willing, they’re there. Well, they didn’t even agree. They just said, we’ll drop it down to the appraisal. We didn’t even ask that. So we don’t have we were okay with that. Yeah, but everybody listening, don’t expect that.
Adam 13:25
Okay, that we were fully expecting to have to
Jason Hartman 13:28
at least meet in the middle kick in some extra money to meet the appraisal halfway or something. Yeah. Interesting. Okay, so that was, that’s what happened on the acquisition, and those are both rented down. Sounds like they’re going pretty well.
Adam 13:40
Yeah. They’re going like, Oh, well, we have zero plans and going to see anytime soon. We don’t have any family vacations planned in Memphis, we just did our
Jason Hartman 13:47
California Memphis is not a hot vacation spot. Imagine that. Well, you know what it is, if you like music and Elvis and you know,
Adam 13:54
maybe when the kids get a little older right now, between seven and almost three, so it’s not really the Seen for Yeah, yeah, right. Right,
Jason Hartman 14:02
right. They’re a little older. But you went on a big vacation and you actually drove all over the place to California and back and wow, that’s,
Adam 14:10
that’s when you want to talk. You want to talk gratitude. That was one of the things Aaron mentioned to you her vacation policy that her job has, and that has been a blessing. She gets six weeks a year, and we’re able to take two weeks and go, we went to Carlsbad Caverns, we went to white sands. We did a weekend in San Diego just kind of hanging out, we went to the beach. Then we went to LA for a day just got to hang out. saw some old friends saw my cousin’s that I hadn’t seen in 20 plus years. And one of the things you said to me last night is you realize how grateful you are not to live in Los Angeles.
Jason Hartman 14:43
Me, me to having grown up where I’m grateful now I live in LA.
Adam 14:47
Yeah, I grew up there from late 80s, early 90s. And I always thought since I moved back to Austin, like, Oh, I shouldn’t move back to California and the weather was great. I liked it there and then I went back and actually drove in LA and I was like, I Hilarious We’re leaving. I said, if I ever talked about living in LA again, just remind me of this traffic because when it takes an hour and a half in a random early afternoon to go 20 miles, I don’t know, it might take an hour and a half to go 12 miles.
Jason Hartman 15:11
I mean, it’s just yeah, LA is beyond time and the hassle factor. I just, it’s just too high on the hassle factor. I’ve always wondered like, it’s an oddity about real estate. I have this theory that the price of real estate drives everything. I mean, maybe not everything but a lot of things in life, right? It drives how long it takes to wait to get a table in a restaurant. How hard it is to find a parking space, how bad the traffic is, of course, it drives that obviously, it drives what the job pays in that market. It drives whether or not you can get a table and sit and leisurely drink your coffee at the coffee shop or if you have to stand and if you look at places like New York City, you know like Manhattan Especially when they don’t even offer you chairs there. Oh, it’s, you know, I just don’t understand. Like, there’s a lot of like things that really just don’t make sense in the world, right? Why is it that these really expensive places are really hard to live in? Like, I think one of the easiest places to live is Phoenix. I love out of all the places I’ve lived in my life, which the list is growing, okay. I mean, I grew up in LA, I lived in Orange County as an adult, but I moved around a lot in Irvine in Newport Beach, buying and selling houses for many years. I kind of live in them and sort of speculate as I live there in Irvine in Newport coast and stuff. And then I moved to Arizona in 2011. And essentially live there really for six years. But I had a short stint where I moved back to San Diego for a little tax write off, talked about it on the show before, but of all these places I’ve lived. It’s odd to me that places like LA, and you know, I’ll take New York City as two good examples of this. I think Both of those places are very hard to live, right? They’re high on the hassle factor. resources are scarce. Everything is like wait in line for everything. It’s just a lot of people competing for very limited resources. Yet these places are super expensive. And, you know, I kind of say, look, there are 11 states, I think in the country that are no income tax states, we’re in one of them, Texas. I live in one of them now, Nevada. And I say, reduce your expense if you can live or make it your goal to live someday in a no income tax state. And a lot of these places are very pleasant, easy to live places with low real estate costs, reasonably low cost of living, reasonably good weather, no state income taxes. I just kind of don’t get it Why people live in some of these other places. Now, I know that you know, if you live in New York City, you’re mostly around a bunch of really smart People, but Austin is no shocker for that. I mean, Austin has like, you know, freeze to death out there. Yeah. And you just sweat to death. Maybe. Fair enough. But you know, everybody, hey, New York in the summer is pretty darn tough. Okay. But you know, you have a very educated population here. I mean, there’s a lot of really smart, interesting people in places like Austin. I mean, there are in San Francisco too. Now. I had dinner with Tim Ferriss. Last time I was here just a month ago or so he moved from the Bay Area to Austin, and got this same kind of sort of a population in both places, but one is massively more expensive to live in. And that’s the Bay Area, San Francisco, of course, not just the real estate prices and the general cost of living but the government. You know, if you’re successful in California, you’re paying 13.3% to the Socialist Republic of California. Here you pay zero.
Adam 18:55
You know, you just paid in your property taxes. I mean, it’s
Jason Hartman 18:58
Yeah, but you pay it there, and you Property taxes do even though you’ve got prop 13, which is probably one of the things that have fundamentally saved the California real estate market. Okay. Howard Jarvis back in the late 70s. proposition 13 made it hard to raise taxes. They still have special assessment districts called mello roos, and so on and so forth. bond issues and such. But you pay it in your property taxes there too, just because the values are so high. So the percentage may be lower, but the price is so much higher that you’re paying it either way. But hey, before we go too far afield into the real estate discussion. Remember it is Thanksgiving Day, we’re releasing this episode, and I want to talk a little bit about gratitude. Okay, so you’re familiar with Prager, you? And I love some of Gregory’s videos. This is Dennis Prager, who I’ve met before he used to endorse us on the radio when he was on KTLA and he’s just done a great job with Prager you. So, I want to play this little video and Adam and I’ll just have a little armchair quarterbacking. comment on it and so forth. And then we’ll kind of wrap it up. Okay, so here we go.
Adam 20:05
How many times have you heard someone say they want to make a better world? It is a noble sentiment, but very hard to achieve, right? Well, actually, it’s quite easy. All we have to do is increase just one human trait. This trait is so powerful, that it alone can make people happier without working on their happiness and make them better. And by better I mean more generous, more honest, more kind more everything good. Without a single lesson and morality. So then what is this one almost magical thing. drumroll please. It’s gratitude. You can’t be a happy person if you aren’t grateful. And you can’t be a good person if you aren’t grateful. Almost everything Good flows from gratitude and almost everything bad flows from in gratitude. Let’s begin with in gratitude. Here’s a rule of life in gratitude guarantees on happiness. It is as simple as that. There isn’t an ungrateful, happy person on earth, and there isn’t an ungrateful, good person on earth. There are two reasons. Reason one is victimhood in gratitude always leads to or comes from victimhood. ungrateful people by definition, think of themselves as victims. And perceiving oneself as a victim or perceiving oneself as a member of a victim group may be the single biggest reason people hurt other people from hurtful comments to mass murder. People who think of themselves as victims tend to believe that because they’ve been hurt by others, they can hurt others. The second reason ungrateful people aren’t good People is that in gratitude is always accompanied by anger. The ungrateful are angry, and angry people lash out at others. If in gratitude makes people unhappy and mean, then gratitude and most make people happy, and kind. And so it does. Think of the times you have felt most grateful. Were they not always accompanied by a feeling of happiness? Or aren’t they also accompanied by a desire to be kinder to other people? The answer, of course, is yes. Grateful people aren’t angry, and they don’t see themselves as victims. The problem however, and it’s a big one is that in America and much of the rest of the world, people are becoming less grateful. Why? Because people are constantly told that they are entitled to things they haven’t earned, what are known as benefits entitlements. And the more things that people think they should get, the less grateful they will be for whatever they do get, and the more angry and therefore unhappy they will be when they don’t get them. Here are two rules of life. Rule number one, the less you feel entitled to, the more gratitude you will feel for whatever you get, and the happier you will be. Rule number two, the more you feel entitled to, the less happy you will be. That’s why for example, children who get whatever they want, are usually less happy children. We have a word for such children spoiled and no one thinks of a spoiled child as a happy child, and certainly not a kind one. The more that you feel that life or society owes you, the angrier you will get, the less happy you will be. As a result, we are increasing the number of angry, unhappy and selfish people. The other way we are making people unhappy and even meaner is by cultivating a sense of victimhood. People are constantly told that they are victims because of their upbringing, because of past prejudice against their group, because of material and equality, because they are female, and for many other reasons. Next time you want to assess any social policy, ask this question first. Will this policy increase or decrease gratitude among people, you will then know whether it is something that will bring more goodness and happiness to the world or less. If I were granted one wish, it would be that all people be grateful. Gratitude is the source of happiness and the source of goodness. And the more good people and the more happy people there are walking around, the happier and better our world will be.
Adam 25:01
If you have a way of achieving such a world without increasing gratitude, let me know what it is. I’m Dennis Prager.
Jason Hartman 25:11
Well, Adam, isn’t that awesome. I love how concise Dennis Prager does that. You know, when I used to listen to him on the radio many years ago, he had what he called the happiness hour. And his whole contention was that if you want to make the world a better place, a lot of people want to make the world a better place, right? The first thing you can do is become a happy person. Because happier people, just by nature of them being happy. If they do nothing else contribute nothing else. They will make the world a better place because they’re just better to be around, right? Oh, and
Adam 25:43
yeah, one of the things that I whenever I’m feeling down and ungrateful is I try to think of the things that I actually have. Yeah, it’s kind of like what you talked about whenever you’re saying the resource. You don’t realize the resources you have. But I just think I’m like, okay, we have a house. I’ve got happy healthy kids. Yeah.
Jason Hartman 25:59
You’re not out on the street, your kids are not saying, right, we’ve got two functioning cars, right? You know, my wife has a job, kind of start going over the list and you’re already richer than two thirds of planet Earth than two thirds of humanity. Like you’re you’re way richer.
Adam 26:14
You know, I mean, yeah, we won the lottery because we live in the United States for the most part. I mean, you know, you’re already in the top 5%. Yep, just living here instead of someone
Jason Hartman 26:25
that just got a new president. Maybe it’ll get better now that Mugabe is gone. But no, it’s another subject. Let’s do that later. Go ahead. So
Adam 26:32
yeah, I mean, it’s just, it’s important to look at just kind of take a survey when you are grateful for something. I mean, the thing about the spoiled kids is true. I mean, our kids, as you’ve seen have so many toys, your kids have a lot of so many toys they do but in fairness, they don’t ask for more for the most part. Now, they and they only, they only play with a third of them at most anyway. So but we limit what they can bring in. We get the hami downs. Those are in they’re probably not going to go away. But we you know, if they start saying, I need this or I want this we just say okay, well how are you going to get it? Huh? What are you gonna use and they have their own money and we, we even have we have a rule with them. When they get money they have to save 20% they have to donate 10%
Jason Hartman 27:18
and they can keep 70% is basically Richest Man in Babylon formula.
Adam 27:21
Yeah and so they decided we adopted Liberty our dog a year ago. And our my five year old decided with all of his birthday money, he wanted the proceeds to go to Austin pets alive which is the group that was adopted her through so you know, it’s quote unquote only $36 but $27 something but it’s his money, it’s a land he knows exactly where it’s going and he chose what he was going to put his money towards.
Jason Hartman 27:49
So a couple things about that. Number one is that concept of giving and I think Tony Robbins probably express this at least for me the best I’ve Denis waitley to and Jim Rohn of course but is the concept that, you know, if you give when you donate to charity, it sets up your subconscious mind for abundance, because it tells your subconscious mind there’s more, there’s not scarcity, right? So even if you have very little, and you give something like the worst thing about being poor, and I think Earl Nightingale taught me this, back when I was 17 years old, the worst thing about being poor, is it deprives people of the inability to give. That’s got to be really difficult. Okay, that’s one concept of it. But the other concept of it that Prager was talking about in the video, is this concept of entitlement. There are so many people in the world and you know, we all feel like this from time to time. I certainly do. Okay, I’ll be the first to admit that feel like they’re owed something right. Like they deserve something. And you know, that is a big weight to carry around. Like you wouldn’t think that’s a way But when you’re like, in this mindset of, you’re owed this, you’re owed that the government, especially when it’s government, like the government has to give you something or your parents have to give you something or something like that. It is a tremendous weight. That is a burden. When you don’t have that. It’s freeing, you know, to realize that, like, nobody owes me anything. It’s free. It’s a burden to have people owe you stuff, you know, to feel that
Adam 29:31
way. I think that for the most part, because I think for the most part, people don’t want to have to have help. internally. If you look at any given person, I would say the vast majority of people in the world don’t want to have to rely on other people. I would agree with that. And so I think it’s kind of an innate human thing. I think they may not know how to do that.
Jason Hartman 29:52
And I think gratitude definitely, but then there’s a whole discussion of do you create dependency by giving people stuff, you know, like the spoiled example in the Dennis Prager video, right, is that you take away people’s ability, or at least their motivation, if not their ability to when you hand them stuff. So, there’s a certain, you know, it’s like, you can either, you know, give a man a fish or teach a man to fish, right, you know, like feed them for a lifetime or feed them for a day concert. And then that’s part of it. But in this talk, I’m just talking about the internal belief system. And that’s what Thanksgiving is about. It’s about feeling grateful for what you have in giving thanks for what you have, whatever your station in life, there are no small parts, only small actors. So don’t feel entitled. Even if you legally are entitled. Okay, and you may be right. Like, you know, if someone takes advantage of you in a business deal, right? You may well be legally entitled, but if you keep replaying in your mind how this person screwed me over that person, you know, and you Keep, like, obsessing about that. And instead of
Adam 31:03
focusing on the good things
Jason Hartman 31:04
that is on the shoulder, man, that’s awful, that’s not gonna serve you.
Adam 31:08
There are things like that, that can be put in the background and you think about the positives, because I mean, the negatives are gonna be there. You’re never gonna have a life with no negatives. But it’s all about what you focus on.
Jason Hartman 31:17
So at least one day here, at least one year,
Adam 31:22
on Thanksgiving Day, let’s just you can have a Tesla that’s falling apart in your life. Yeah, and you can still focus on me. I don’t have that anymore.
Jason Hartman 31:29
Yeah, exactly. But thankfully, I don’t have a crappy Tesla anymore. I’m so grateful for that. That’s another thing to be grateful for Thanksgiving. But you know, just really trying every day to think about what we all have and where we are. And if we are living anywhere in the Western world, you know what I often think of I have this morbid fascination with communism. I don’t know why it’s just weird. For example, remember when the iPads came out with the Great screen, what’s it called the retina display. Right? I remember when I first got my first iPad with a retina display. Do you know what I first did on that thing? I went to Google Maps and or Google Earth one or the other. And I looked at Pyongyang in North Korea, because I’m just so fascinated with it hermit regime in this dark country that like if you’ve seen the satellite at night, there’s like, no lights, the whole thing’s just dark. And dark. Yeah, South Korea, South Korea, like Britain lit up by like a clearly there’s an ocean between Yeah, no, no, it’s not. It’s not you look at it. Is there an ocean there? What’s going on? Yeah, because it’s dark. Right. And then I remember reading this article about these North Korean prison camps and the just the appalling, appalling conditions. And you know, these people that are in prison in North Korea are probably the vast majority are not even criminals. They’re just political prisoners, right? political prisoners are took a loaf of bread and then you get like 15 months hard labor just for that, or 15 years or said something wrong about the Kim family right? And you know, like you could be living in a North Korean prison camp, like that’s just a luck of the genetic dice, you know, or the geographical dice, one or the other or both. I mean, think about how if you live anywhere in the Western world in a allegedly free country, right? You are so rich by any measurement, no matter where you’re stationed in that country is, I mean, if you live in a crappy mobile home, that’s not even a double wide, okay, you have a home, and it’s warm,
Adam 33:35
and it probably electricity and it has really
Jason Hartman 33:37
long running water. And you know what, you are ahead of the vast majority of the globe’s population just right there. And that would be considered the lowest level in the US before living on the street. And even if you live in the street in the US, you’re probably better off than a lot of people. So anyway, the point is gratitude. That’s the word for the day. I don’t have anything bigger. poetic or profound to say about it. But, you know, just a nice reminder and, you know, thank you for sharing your story about building your real estate portfolio. So now you have three properties, the one in which you live here in Austin,
Adam 34:11
and our expense to rent.
Jason Hartman 34:13
And we should say your wife Erin, she’s a nurse anesthesia nurse, right? nurse anesthetist? Yeah, you guys. Are you still both in your 20s? You turn the big three.
Adam 34:23
Oh, I’m 35. She’s 34 Okay, all right. Well, she’s not 34 I didn’t say that. Okay, all right. She did she doesn’t she doesn’t hide her.
Jason Hartman 34:29
See if she would be on the podcast here and you want to be on the podcast now? I can hear the Nope. That’s funny. Anyway, Adam, thank you and welcome to the creating wealth show. Thank you for producing it and doing such a great job and I just want to wish everybody out there a very Happy Thanksgiving. If you’re not in the United States and you don’t celebrate Thanksgiving, just still celebrate it.
Adam 34:54
Yeah, just celebrated dovetail on our celebration. Just go with the name. Not the reason.
Jason Hartman 34:57
Yeah, exactly. That’s right. Happy Thanksgiving.
And thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman. Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
Jason Hartman hosts his mother, Joyce, alongside investor counselor Fernando. They are both returning guests and share some of their recent real estate investing experience. Joyce speaks about her experience joining the Apartment Owners Association. Fernando points out some educational resources. Jason gives some insight into why he recommends working with an investment counselor.
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 0:09
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is hand picked to help you today in the present, and propel you into the future. Enjoy.
Announcer 0:25
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:15
Today, I am planning, but you know what they say about plans, they don’t always happen, the best laid plans Of Mice and Men don’t always happen that way. So I’m planning to have as our guest today, john Michael Greer, the author of the wealth of nature, however, I have two people to help me with this intro portion. Because I’ve got some interesting stuff. And I just have a feeling we’re going to go too long. And we’re going to do the entire episode. In our discussion here. We will see. So if we don’t have john Michael Greer on today, I’m telling you in advance, he’ll be on the next episode. So I’ve got Fernando with us that you’ve heard on the show before Fernando, how are you doing? I’m doing great, Jason. How are you? Good. Good. And then I’ve also got my mother who’s been on the show, I think this is this month. I think this is your fourth time on the show, right? Oh, I’ve been here a few times. That’s for sure. Yeah. And every time you’re on the show, Mom, everybody says, we would rather have your mom host the show than you. So you could put me out of a job.
Jason Hartman 2:20
Well, anyway, so I wanted to talk about a couple of things. And Fernando and I are working hard on developing a software tool that will help people either use property managers in an ala carte fashion, where they can just buy the services they need, rather than buying the whole thing. And I think that’s just going to be awesome. So we’re working on that. Yeah, yeah. We’re working on that. And we’ll talk about it a little bit today. And then also the software tool would empower people to self manage their properties. And Fernando, I don’t know if you noticed this, but when You spoke at our meet the Masters event in January, you talked about the 70 doors that you have 50 properties and 70 doors total 70 units total. And you made a little offhanded remark that a lot of people picked up on I’m not sure if everybody did I’m not sure if you even heard the feedback on it. But you said that sometimes your self managed properties are easier than your properties that have property managers do you care to elaborate on that?
Fernando 3:31
Well, it’s it’s based on what I’m actually seeing. I get my my personality is the type that wants to look at every owner statement that comes for my properties. I want to make sure that I’m not being overcharged for items and a lot of times simple items that you know, handyman quick fix are sent over to to full fledged professionals, plumbers and electricians and for things that really don’t make sense. Since, and I spent a lot of time overseeing in, in arguing at times with the property manager about why was this done? And why was that done and in, you know, if I’m spending that much time overseeing the charges, and sometimes having to correct these charges, it makes sense for me to, to find a system to do this myself. And I’ve been able to do this self management on several of my properties, and therefore I can control the costs. I’m the one that is directly impacted by by these maintenance and repair costs add up very quickly. But I think the main thing that I mentioned in the meet the master masters is the fact that the tenants seem to have a different dynamic when they are dealing directly with the owner. Yeah, and
Jason Hartman 4:52
I noticed that and mentioned eight years ago, I completely agree with you, by the way and, and my mom’s gonna agree with us to go go ahead and start
Unknown 5:00
Yeah, so I noticed that for my properties, self managed properties, I sometimes I wonder if everything is okay because I don’t hear from the tenants for four months. And I sometimes will will contact and check on them, you know, just because I’m thinking of, you know, anything that could be possibly wrong and they’re not reporting and it’s just amazing how that works. It’s not true for all cases, but I know that that is true. And direct contact with the tenant also sets up a, I think sets up a different relationship then the property manager, which is kind of a black hole, to the tenant sets up a dynamic is definitely different.
Jason Hartman 5:44
Right. So let me let me just elaborate on that if I can. And Mom, you’re gonna definitely agree with this, I’m sure. Now look, the first thing I want to say with this folks, okay, is that property managers, some of them are awesome. I’d say some of them are definitely not awesome. And some are pretty bad too. And so it spans the gamut. And one of the things we do is if we get a bad apple through our network, we weed them out pretty quick because we’re constantly assimilating this feedback we get from our clients. And you know, eventually we get a few complaints. And we’re going to just get rid of this guy, if they’re just a bad apple, or we’re going to be able to put a lot of pressure on them to change. But in comparison to other investments, even if you have a property manager, who dings you nickel and dime you and even if they overcharge you think of the how much better this still is than any type of Wall Street oriented investment, or any type of fund where there are all sorts of overcharges that you never even know about. You have no concept that they’re going on. Okay, so that I just want to put that in context, Fernando fair statement. Yeah. Okay. One of the things though, With his self management is now how many doors do you have that you’re self managing versus you have managers on Fernando? I self manage about eight, eight to 10 properties depends on how you count it but significant amount and so you’re saying depending on how you count it because some are duplexes or four plexes Yeah, okay, so so out of 70 you’ve got eight to 10 depending on how you count that are self managed and all the rest have property managers. Now Mom, you’re self managing everything now. Right? All of your your entire portfolio self managed everything. Okay. And my mom, for those of you who may have not heard her on a prior episode, I call her the extreme like, you’ve heard of extreme sports. Well, my mom is an extreme do it yourselfer. And Mom, you just blow me away at your level of energy. And, and you know, you’d think you’d be kind of scaling back and so forth, but you are not even close to doing that. You’re just always running around and The level of extreme is that you now live in Gulf Shores, Alabama, moving there from Los Angeles several years ago, you go back to California to manage the California properties you still have, right? Yes. And you just did that. Recently. I mean, this, to me seems like a terrible idea. I mean, you literally self manage every part. Now I self manage some of my long distance properties. And I’ve been surprised that you can actually do that so well. But when it comes to doing the new lease up, I don’t travel anywhere. I just have an agent, do the lease up and do the walkthroughs for the tenant leaving and the tenant coming and so forth. And the handle any repair issues in between, but you do literally everything. I mean, you don’t have an agent do anything for you. Right, right. And you’ve been really excited lately. I mean, I remember many years ago, I was a member of the apartment Owners Association in Orange County. And recently, you’ve been coming to me a lot about how you love the apartment Owners Association. Tell us a little bit about that.
Joyce 9:08
Well, I just recently joined again, I was a member a long, long, long time ago. But I just recently joined and they have this magazine that comes out monthly maybe that’s what got me so excited about it, because you read all of the articles in it, there’s a whole bunch of classes that you can take and then there are all of these vendors that you know that advertised in the in the on the pages and and then they’re all classified in the front and the front of the book, you know all the plumbers together all of the eviction services together, at you know, everything from soup to nuts, all the people that sell stoves, refrigerators, etc. It’s disintegrate or organization
Jason Hartman 9:56
and the reason it’s great is because all Like our network, it aggregates things and it helps those vendors that are listed in the directory of The Apartment Association. You know, they’re kind of used to having dealing with shrewd property owners who are expecting good deals, right?
Joyce 10:18
Absolutely. That’s, for example, the man that came that I finally chose to fix my floors. He wrote a Oh a on the top of the sheet, because he knew he had to give me a good price
Jason Hartman 10:33
AOA meaning apartment Owners Association, right,
Joyce 10:35
yeah. Yeah. In the difference between his price for six sigma, for, you know, installing hardwood floors, and the price of the people that I had gotten out of the yellow pages of the phone book, the phone book, you hear that, folks, my mom actually uses the Yellow Pages and a phonebook. Well, in the internet, too, you know, sometimes you can’t get enough on the internet and Those people that advertise in the yellow pages are usually always there. You know, they’re still in business. Anyway, the difference was it went from 30 $700 Yellow Pages 30 $400 yellow pages to $2,000 apartment Owners Association persons.
Jason Hartman 11:18
Tell them about the painter you just hired. I mean, you got the whole inside of this house painted for a bargain price about what seven 800 bucks.
Joyce 11:26
Oh yeah. Previous previously, I for that particular house. I had been paying 1200 1300 1400 and you know, sometimes it was like a lot of tough stuff. It wasn’t a complete paint job. This was a complete paint job for two storey house. Three, three bedrooms, two and a half baths. You know, inside laundry room, we have $185 I did not have to tell the man to You missed this, you missed that you missed something else. I didn’t have to tell him to clean up his mess. It was it was. It was so amazing that I called up the apartment Owners Association, guy cod who had referred me to him and told him how pleased I was.
Fernando 12:17
George. So I have a question that is, is the apartment Owners Association only for California?
Jason Hartman 12:23
That’s a great question. There’s a national apartment Owners Association. And let me just say what this and that website, by the way is an A hq.org. That’s the national Apartment Association, na hq.org. We had them on the show years ago. I just asked my guests Booker to invite them back onto the show. And then they have a directory on that website where you can find local apartment owners associations, like the one My mom is a member of and so not every area will have them obviously it’s going to be bigger, bigger cities, but they have one in Birmingham, Alabama, for example, that’s one of our markets. And there are different sizes and so forth. And I think this can be a very handy thing. My mom does all her own tenant screening. I mean, she’s the extreme do it yourselfer. So just so you know, listeners, this interview, we you know, we have many different types of investors listening, we have investors who are completely busy with their, their business or their career, their profession, and they just want to buy six or 10 investment properties and not deal with it. This talk is not for you, okay? The investor this show is geared toward is one who wants to be a little more involved and maximize the returns a little bit more. Okay. So, you know, if you’re, if you don’t mind being involved, and maybe you like being involved, that’s who this is targeted at. And so, what I would say is, you know, joining these apartment associations, I mean, the one my mom’s a member of is $79 a year, you know, maybe in a city where you own a couple, three, four or 10 or 20 properties, it would definitely be worth it to join the association.
Joyce 14:07
You’ve mentioned the word tenant screening, and it doesn’t matter. You know where you are in the United States, they will do this tenant screening for you. I say that because it’s where the National Credit accompanies, you know, Experian and
Jason Hartman 14:25
Equifax and TransUnion TransUnion.
Joyce 14:28
And they simply will come to your home or your office and inspect it and for I think it was $59 or $55 or something, and then you have the right to run these credit reports 24 seven,
Jason Hartman 14:43
and so what they do is they make sure that you have a locking file cabinet and a paper shredder Right, right, and a lock on the door and a lock on the door and they they came into your 9600 square foot mansion, and what do they like, I got to invest in real estate right? Let the guy
Joyce 15:01
No, the guy took pictures inside outside Africa. He probably thought,
Jason Hartman 15:07
boy to get a mansion like this, I need to start owning some real estate. Real Estate Investor. Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. That’s good. So I’m looking here on the website and they have, you know, different levels of screening. They have the five star screening the four star that no inspection, I assume that’s no inspection of you right now. But that’s the problem with that. One is that you have to send them copies of all of your leases. So I thought that was too much work. So I had the guy come and do the inspection. Oh, okay. So then they can come out to your house anywhere in the country, because these are just outsource services who will just go do this inspection.
Joyce 15:54
Right, Right. Right. Yeah. Okay. And you got to pay $59 and then your setup. I can’t remember what it was. But it was something like that. It’s a minor charge.
Fernando 16:03
I’m curious just if you don’t mind Joyce or and you, both of you. So this is a it’s an apartment Association right so I imagine that there is a similar you know, group or company that is focused on on single family homes a social you know, some ownership landlord there isn’t really if there is one Why would you choose the apartment one versus the single family home or
Jason Hartman 16:30
the apartment one is don’t let that turn you off. You can join even if you don’t own apartments. When I first joined the Orange County apartment Owners Association, I was 20 years old and I had my little one condo in Huntington Beach. It was just a crappy little one bedroom condo. Okay, and I joined
Joyce 16:47
Facebook changed the name to owners who have rental units.
Jason Hartman 16:54
That’s a really it should be called the real estate investors Association. Okay. You know, really But yeah, don’t don’t let that turn you off. It’s not it doesn’t need to be apartments, okay, you know, you can any anybody can join it, it’s no big deal. These are really old school type organizations, but they have some great resources. If you look at, you know, the the website of the local chapters, they’re pretty primitive websites. I mean, you know, I remember when I was a member, they used to send out this little, like stapled together monthly newsletter, you know, it was just really basic. But, but that’s great. Look at this is not a some high end marketing organization. It’s just a place where you can get some good resources and the vendors go there because they can get a lot of business.
Fernando 17:37
Right. And I was looking at this website, as you know. And looks like they are announcing this new improved debt Reporting Service. That sounds really amazing.
Jason Hartman 17:51
I love that. Yeah, yeah. So what that is, and when I was surfing around the website, I posted that in our company, intranet site, and Fernando, you commented on it right away. This is where if you have a deadbeat tenant who owes you some money, you can send them to this collection agency really quite easily. And this is pre judgment. So you don’t need to have a judgment from a court. Yeah, you don’t have to have a money judgment for them to do it. But there’s it’s limited in what they can do. Basically, what they do is they bug the person who owes you the money is what they do, you know, they don’t have legal power to, to go and levy a bank account or garnish wages or anything like that, which you do have when you get a real judgment. But a lot of a lot of these people will just pay because they’re getting either mailboxes full of collection letters, and you know, they get phone calls or whatever. Mom, have you used that service your chance
Joyce 17:45
No, because I just joined but I’m certainly going to, because sometimes I don’t bother to get a money judgment, because I just figure that these tenants will never ever, ever be worth it, you know, for that extra hundred dollars or whatever it is. And so these people will go to work. Without the buddy judgment,
Jason Hartman 19:03
I’m gonna disagree with you on that, but just expand on that a little bit more if you would. So you when you have an eviction, and you’re obviously self managing everything, tell the listeners how you do your evictions.
Joyce 19:15
Oh, I might I myself serve the three day notice to pay rent or quit if you’re local though. No, no, I, I make it up myself and I fax it over to snap legal because they’re the least expensive ones. They serve the notice for like $33
Jason Hartman 19:30
Okay, and so that’s a process server is what snap legal is right, fastest server, right, right. And they go and they serve the tenant. They serve the three day notice to pair quite right,
Joyce 19:44
correct. And since I know how to make them out, they’re perfectly legal. And if we have to do the eviction, actually get started on it, then I simply send that information to the Attorney
Jason Hartman 19:59
When you say V attorney, the listeners don’t know what you mean. So you find you have an eviction service law firm, right? And I want to make a distinction there. Because when you say to the attorney, most people think, oh, they’re gonna go sit down with an attorney, they’re gonna pay, they’re gonna pay $300 an hour, and they’re going to get totally ripped off.
Joyce 20:20
Now, it could be eviction attorney service, I use all the eviction attorneys.
Jason Hartman 20:26
what I call a mill or an assembly line type of legal service, where they’re set up and they might process hundreds or even thousands of evictions every month, and they just charge a flat fee. Now, how much
Joyce 20:41
do they charge you? in different counties? It’s different amounts. It’ll be a little bit different amount in Orange County, a little bit different amount in LA County, a slightly different amount in Riverside County.
Jason Hartman 20:54
And what about your properties in where do you have Mississippi and Alabama to write? What about Have you had any evictions on those? I have had an eviction. Okay, so you’re only you’ve only dealt with evictions on the California properties so far knock on wood. Well, that’s why I want to I want to be in contact with apartment owner associations in Mississippi and an Alabama so that I know that I am doing the correct thing that I have the correct form. Right right and you’ll be ready in case you ever need them for even if it’s not for an eviction it could be for repair items and you know, getting the best contractors for all that stuff. So yeah, good. Good. Fernando questions
Fernando21:36
or no, it sounds good. I’m already already thinking about joining the association so
Jason Hartman 21:42
it’s cheap and easy. Now one of the things in Fernando since you’re on I want to talk to our listeners about this idea a little bit and I’ve looted to it on the show before I think I talked about it in more detail at the meet the Masters event we had that is the concept of doing Larger things and larger portfolios. And I had aunt Joan on several episodes ago around Thanksgiving time. Of course, that’s my mom’s sister. Okay. By the way, listeners, if you listen to that interview, I asked her editor to go back and improve the sound quality. And he says he made it quite a bit better the echo was, was pretty bad on that originally, and he says he redid that episode. So it should be a lot better if you want to listen again. But with that, I think one of the really good ways to approach this if you’re looking to do bigger stuff, and this is one of the things I really want to explore and actually implement with my venture Alliance mastermind group is the idea of owning neighborhoods. I really do like this idea quite a bit. I like single family homes the best. And I think the idea of picking three cities so that you are diversified and were in three cities. You get on a plan, you don’t do this all at once, of course, you get on a plan of where you’ve got a couple three properties in each city. And you you, you keep doubling down and focusing on these three different cities. And eventually you get to the point where you own, you know, 1020 or 30 properties in each of these cities, and hopefully they’re in, you know, sections and kind of, you know, broad neighborhoods of these cities, so that you can eventually get to the point as an investor in the growth of your portfolio where you can hire your own handyman and that person will go and do all of these things. And Fernando, you mentioned at the beginning, you know, rather than having a professional, very expensive plumber come out and do everything, you know, you can just have a good reliable high quality handyman. Do a lot of this stuff, and even if they’re not Your own person that actually works for you. If they’re getting a lot of business from you, they’re going to really care about and pay attention to your account and and provide you with really good service and really good prices, you’re going to be able to call them at at 11am on Sunday morning and say, Hey, can you go check this thing out, you can shoot them an email, they’re going to be very responsive, because they’re going to know that you have a lot of business in this area, and they’re going to want to take care of you. You know, for NATO. We’ve talked about that idea before any any thoughts or elaboration you want to share on that?
Just a reminder, you’re listening to flashback Fridays, our new episodes are published every Monday and every Wednesday.
Fernando 24:44
Well, I think the the idea of buying as you mentioned in the beginning, the idea of buy bigger units, you know, apartment complexes is is is very interesting, especially as we talk to clients that that want to I guess they want to achieve their financial independence. in, in, in by large number of properties quickly. Some of them have talked to me about buying apartment complexes up front and there’s some issues with buying these big, big size investments upfront. You’re not necessarily taking advantage of the, the the 10 spots that Fannie Mae and Freddie bank allows you to, to to take out as you’re doing financing. So if you become part of of a group that is able to buy under a company, I suppose you know, an LLC is formed and in the LLC belong we invest in, in this larger apartment complex, and there is a different you know, an alternative for for doing this for building your portfolio more quickly than trying to build This on your own, which could create some issues. Definitely. So
Jason Hartman 26:03
I want to make a comment about apartments. You know, I have I currently own both I have single family homes and apartments in one of my apartment complexes, while one I sold several months ago. And another one I’ve got and it looks like it’s sold, we’re going to be doing a 1031 exchange on that one. And myself and my partner who was at masters, by the way, he talked on the microphone for a little bit that Steve I’m referring to. This is 125 unit complex in Scottsdale, Arizona. And I got to tell you that, you know, the apartments there, they’re like good and bad, you know, you can do great with them. Obviously, you can do bigger things with them. But the quality of tenants is just low, it’s just lower, and it’s more high. It’s much more high maintenance. You have very high maintenance, tenants and apartments because they know it’s a big management company. And like you started to say at the beginning of the interview It’s sort of this black hole concept like the tenant doesn’t have any reservation. They don’t feel like they’re putting upon someone sort of the laws of civility and courteousness, don’t apply when it’s a management company like it does when it’s a person. And Mom, I know you’ve experienced this because your tenants don’t ask you for much. And you don’t do a whole lot in terms of, you know, repair items and things like that. But in an apartment, they expect every little thing and an apartment, you’re running a business, you know, you you will be reviewed on Yelp, just like the dry cleaner, or the restaurant down the street. Okay. You know, it’s a whole different game. When you have an apartment complex, it’s just a completely different thing. So the single family homes, I like them the best, but the advantage of the apartment is you can have this centralized management, you can have this centralized repairs, you can have economies of scale. And the way my aunt Joan did that I like that plan pretty well. You know, when you start to own a neighborhood of single family homes, because what you can do there is that you can actually start to increase your rents pretty dramatically and improve the values of the neighborhood. If every time a tenant is looking in a given neighborhood, they’re bouncing around on your houses like a pinball machine. You can do a lot to to increase rental income and increase values if you have good upkeep of that neighborhood. So I think this is a pretty good opportunity. And by the way, Fernando, I wanted to mention we’ve not mentioned this on the show yet but we have a new product in the Jason hartman.com store. And it is consulting with Fernando. It’s called Financial Independence Day consulting. And basically Fernando will do what he does Did for himself starting three years ago, where he he created some awesome spreadsheets and a plan to lead to his financial independence day. And Fernando, you you retired from Apple Computer last May. And do you want to share anything about the Financial Independence Day consulting?
Fernando 29:17
Oh, sure, just a few things that you know, as you know, you and I have been talking about this and we’ve had a lot of interest from from clients and people that I want to do what I did myself which is achieve my financial independence and we coined the phrase Financial Independence Day, as, as really embodying the, the idea of being able to have enough income from properties to augment in my case to completely replace the income from from your corporate job from your W two job. So with that in mind, we’ve been putting together some
Fernando 30:00
Some material to create a product that I think we’ll be able to offer later on that we’ll have a full version of, of how to achieve this financial independence day. And as a complement to that, what we’re offering now is this consulting this hourly consulting, where I’ll basically share my experience and help create a plan that is personnel personal to to the client, and takes into account their situation and starts out with, with the the softer spreadsheet that looks at how many properties and what sort of properties are needed to replace their income. And we talk about different financing options and how to sequence mortgages in order to take advantage of what what we have now. In different offerings, such as agency type financing with Fannie and Freddie backing, commercial banking, in portfolio landing, there’s a lot that goes on behind the scenes in order for this financial day to happen and I went through this process myself and by by having done it, I can certainly provide some some ideas and help people along that want to want to achieve it. So this is something that we’re just starting out with and I’m pretty excited about it. I think it’s, it feels very good to be able to share the role that I that I’ve been going through the has been just exceptional and there’s been a lot of interest in in learning how to do this and having a an actual plan on how to get there with a fixed dating mine and six ideas on how to do it.
Jason Hartman 31:57
Yeah, a goal a goal defined as half achieved As the saying goes and and that’s what the Financial Independence Day consulting is all about. So check that out and sign up at Jason Hartman calm and Fernando will will create that financial independence day for you you’ll you’ll meet on the phone or Skype and talk for just under an hour maybe and he will you know work those spreadsheets out for you and I think that’s a really cool product you’re doing Fernando so congratulations on that mom any tips you want to leave people with or anything I didn’t ask you anything we didn’t share before we wrap up and and obviously listeners will have the guest on the next episode because of course we went really long as we knew we would
Joyce 32:37
Wow, I would like to learn about Fernando’s financial independence day well, you you’re you’re already there.
Fernando 32:45
You’ve done pretty well for yourself, I should say I want to learn more from you as I learned today. So I think we’re in the same boat.
Jason Hartman 32:51
Well, that’s that’s what we’re doing is learning from each other learning from each other. So maybe a final tip before we go you know if either of you want to share anything Or an experience or whatever, is just as we wrap up
Joyce 33:03
Ah. The only thing I can say is that and Jason, you do this in your seminars all the time. It’s the education. And what I see in the in, you know, in belonging to the apartment Owners Association, it’s the constant education.
Jason Hartman 33:21
Yeah, good stuff. Good stuff. Fernando, any closing thoughts?
Fernando 33:25
No, I think that that’s that’s an excellent point. I think it’s a it’s the first step in in achieving financial independence and it certainly was my first step is just trying to learn listening to podcasts and books and any any any information that you can about the different facets of real estate, income and real estate investing. There’s so much to learn and there’s always new things that come up. So without, without that backing without that, that background information gathering and learning. It’s really difficult to achieve anything. There’s a Big value in that
Jason Hartman 34:01
Education is the shortest distance between poverty and wealth. So that’s definitely important. But the great thing about today is you don’t need to pay for that education because it’s, it’s pretty much free. The I guess what I’ll leave you with is go back and listen to the old episodes. We’ve got almost 500 episodes here for you. And we do play them on flashback Friday, some of the selected old ones. But of course, getting through 500 will take almost forever. So go back and just listen to them yourself, and really take advantage of them. And there’s some there’s some great content, some great guest interviews there that I’ve done, and we were going to keep them coming. We’ve got a lot of great stuff coming up for you as well. So we will have our guests talking about the wealth of nature on the next episode, and be sure to go to Jason hartman.com. We’ve got some awesome properties right now in Atlanta, in Little Rock in Chicago boys, Chicago, a lot of interest in that market. We did that on the last show. We talked about that one. Just a lot of great stuff coming up, and we will look forward to talking to you on the next episode. Thank you so much for listening, and happy investing.
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I know I mean, how many people do you know not including insiders who created wealth with stocks, bonds and mutual funds? those options are for people who only want to pretend they’re getting ahead.
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Jason Hartman 37:57
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Jason hosts Investment Counselor Sara to discuss the impact of Hurricane Harvey on Houston. They discuss how prices increase for commodities are building efforts start. Prices of labor also increase as many people are directly impacted by natural disasters.
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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 company solution for real estate investors.
Jason Hartman 1:04
Welcome to the creating wealth show. This is episode number 876 876. This is your host, Jason Hartman, thank you so much for joining me today. I have got Sarah, our lead investment counselor here who’s been with me the longest to do this show with me today. Sarah, how are you?
Sara 1:20
Hey, Jason. Good. Thanks for having me back.
Jason Hartman 1:23
Looks like your son. Jordan had his first day of sixth grade today. How exciting.
Sara 1:29
Yes. Didn’t he look great? Yeah, I
Jason Hartman 1:31
saw him on Facebook. He looked good. He looked good. First thing I want to talk about Sarah today is the absolute tragic chain of events that is unfolding in Houston with this flooding. I mean, it’s just it’s just so heartbreaking to see those pictures on TV and the news and the videos. I cannot believe that I feel so bad. I donated to a couple of the Houston recovery charities yesterday and it’s just terrible. You know, we’ve done a lot Lot of business in Houston over the years, and many people have reached out to me since the flooding unfolded there and asked me, you know, people are being disaster capitalists. Which, by the way, I want to mention I think was Naomi Klein. I read her book called disaster capitalism many years ago and I don’t think that’s a bad thing even though I’m kind of laughing about a little bit because whenever there’s a disaster, you know, these people the opportunists jump in and, and go and think how can I make money off that right? And the stock market reacts and, you know, the whole economy reacts to this type of stuff. And that is not a bad thing. That is a good thing. Because all of the disaster capitalist, okay, and I admit there are people who are crooks and bad people that take advantage of situations, but for the ones who don’t, they are providing needed services for safety and recovery and you know, all the things people Need without capitalism, specifically disaster capitalism, who would be there to provide it the lousy government? I mean, look at the tragic job they’ve done. Look at the terrible job they did during Katrina in New Orleans and the other areas that were affected. I mean, it was pathetic. And I, you know, I’m being an armchair quarterback. I don’t know enough about it yet. But it seems like the government’s response here is pretty pathetic. Again, not only is the response pathetic, but the fact that they even allowed this to happen in the first place. And what I mean is going back to the urban planning and the flood control, and, you know, all of the systems involved in water management in Houston, just not acceptable. So we’re gonna dive into this topic a little bit today. But first off, I want to express just my deep concern. And Sarah, I know, you feel the same way. It’s just a terrible, terrible situation in Houston and hopefully the recovery will be swift.
Sara 3:59
Yeah, I’m It’s just really heartbreaking. I’ve been totally glued to the TV and my Facebook feed. You know, I have a friend I went to high school with that has been posting live video of the flooding. And ironically, she lives where I own a property in in Katy, Texas, which is pretty far inland. I mean, I’ve had that property for 10 years, I’ve been through hurricane before with, you know, very little damage. But I really think that this storm was even bigger than anybody really expected. I mean, I know there was warning, and I know they said it was going to be the biggest storm ever, but it just, you know, it happened quickly. And I think they’re still storming out there. I mean, it’s really too early to tell the magnitude of this thing and the devastation but I completely agree with you that there’s going to be a huge need for for help, you know, in housing and several different areas. And so we’re going to need, you know, people, you know, these capitals to come in and make that happen. So I completely agree with you there.
Jason Hartman 5:04
Everybody will criticize the disaster capitalists, but without them, you know, there wouldn’t be any help. So let’s talk a little bit about, you know, what we’ve learned from prior disasters. And what we saw happen and in Katrina is certainly the best example. Because the first Well, I don’t want to say the first, this is not an order, but just some of the things that happen are number one, we will likely see, obviously, a lot of litigation, okay. There will be a lot of insurance, bad faith litigation, people suing their insurance companies saying that they didn’t provide enough coverage and many times they’re right. I mean, insurance companies, they they try to weasel out a lot of times and not pay claims or not pay as much as they should pay. So there’ll be a lot of litigation there. Of course, there will probably be a call for and probably be an actual moratorium on mortgage payments. And we saw this during Katrina, where many of the lenders did a six month moratorium and said people don’t have to pay their mortgage for six months. And guess who benefited most from that and who got hurt the most from that? Well, the people that had that had equity in their properties didn’t get any benefit from that. Because, you know, if you if you don’t have a mortgage, how can you get a benefit from a moratorium, right? So so that’s the first thing that happened, the people with the debt, they got the benefits. So again, as I always say, the best insurance is a high loan balance. And when you go back to that other topic I brought up of the insurance, bad faith litigation and all the lawsuits that will undoubtedly come out of this. If people have a lot of equity in their property. And if people own their property free and clear, meaning they have 100% equity, well, they’ve got to go hire the lawyer themselves and fight within Insurance companies themselves, but in some cases, when they have a high loan balance, the lender will go to bat for them and sometimes the lender doesn’t even formally go to bat for them, but the insurance company just knows that there is a lender and a high loan balance. And, you know, if, if the disgusting criminals at Wells Fargo, for example, just like to pick on Wells Fargo, because they’ve had so many scandals recently, I mean, just pathetic, disgusting company. I hate Wells Fargo Have I told you that lately. They they you know, a lot of times the insurance company will be more likely to be on better behavior and pay claims more quickly and more completely, if you will, when there is a lender involved. So again, going back to my very old saying the best insurance is a high loan balance. Okay, after that is your insurance policy. The first thing is a high loan balance with your lender. So we’re gonna To see that we’re probably going to see a moratorium and payments, we’re going to see FEMA or some federal agency and maybe state agencies as well come in and offer disaster relief assistance. I’m sure President Trump is visiting, I believe, today, if I’m not mistaken, some of the hard hit areas. So we’ll see, you know, low interest loans, we’ll see various government aid and so forth, offered as well as the government, you know, usually creates the problem in the first place, and then acts like the hero when they come in and solve the problem that many times they created or had some hand in creating in the first place. But that’s just the way our system works, what we might see in the future, but you know, I wouldn’t bank on this because nobody knows, is we might see some sort of tax incentive for rebuilding. We saw this in something years ago and Sarah, you know, because you’ve been with me for what almost 10 years now, right?
Sara 8:55
Yep. Yep.
Jason Hartman 8:56
And that was the go zone. Remember the go zone, Sarah
Sara 8:58
Do In fact, when I bought my property in Houston, it was supposed to have been a goes own property. And then they
Jason Hartman 9:07
made about that,
Sara 9:08
you know, some debate about the, you know, certain zip codes and things like that. And so I don’t think I ever actually took that deduction, but a lot of our clients bid. And so, you know, I have to imagine that they’re gonna have to do something like that to rebuild this, this huge community. You know, one of the statistics that I heard and you know, in fact check this but I heard that only 15% of homeowners have flood insurance. I was personally advised not to get flood insurance and it wasn’t required by my lender. And so I think that’s going to have a huge impact on on the devastation and and the rebuilding of the community because I have a feeling we’re going to see that a lot of people were not insured for flood.
Jason Hartman 9:55
So yeah, when you talk about things like flood insurance and earthquake insurance, This is a problem because, as opposed to something like a natural disaster, like a tornado, for example, or, you know, maybe it’s not a natural disaster, but a fire, right? Those only affect a small number of homes usually, or maybe just one home, you know, tornadoes can be very surgical. Whereas a hurricane is broad, an earthquake is broad. So, you know, if the big Well, it’s not if but when, when the big California Earthquake comes, even if people have earthquake insurance, you know, there may not be coverage and coverage may be very limited because it can’t all be paid. And, you know, the state is involved in those things. And, you know, as in the golf areas that were after Katrina, but you know, even states don’t have unlimited budgets, even countries, as we know, don’t have unlimited budgets. We talked about that quite a bit on the show. And certainly insurance companies don’t have unlimited budgets, the likelihood that claims can even be paid is a whole big question. So, we’ll probably see a variety of things come out of this, but a lot of the people that reached out to me directly, were probably thinking well, you know, maybe I’ll, I’ll go in and, and try to pick up a deal. You know, buy properties on the cheap in in Houston, for example, and rehab them, I mean, they don’t need extensive rehab Of course, water is a really tough kind of damage to deal with. So there are those types of opportunities but for our clients, those are too complicated and too involved in two hands on our clients aren’t into that type of thing. You know, another one of our clients talked about, he should get into the business of providing construction materials like sheet rock and you know, that’s the old idea of the gold miners instead of, you know, mining for gold or panning for gold, you know, just sell Levi’s and pics and access, you know, provide the infrastructure rather than the than the Actual, you know, doing the thing sometimes that’s the Better Business, right? So there are all kinds of things that will happen out of this tragedy. And we don’t even know what they are yet. We’re just speculating on some of them, some of them are pretty obvious that they will happen. We’ll just see how it unfolds. It’s going to take a long time to rebuild. This is a huge, huge tragedy. I mean, the amount of money and damage is just mind boggling. It really is. Sarah, do you have any other thoughts or comments or things you want to discuss about it?
Sara 12:33
I mean, from an investment standpoint, what would you suggest for somebody who already say owns a property there? Let’s say they had significant flood damage, you know, thousands and thousands of dollars, and they didn’t have flood insurance. You know, would that person continue to pay their mortgage? I mean, assuming the tenant can’t live there, so there’s no income. You know, what, what would an investor do in that kind of situation?
Jason Hartman 12:58
Well, also That’s a good point you just brought up kind of as a tangential point is, you know, do they have does their insurance policy cover for loss of rent, some, some policies have that. And it, you know, won’t be complete coverage, but it will provide something. But I would say it’s too early to tell. Just wait, you know, a week or two weeks, you’re gonna start hearing about moratoriums on mortgage payments and things like that. I’ll just bet you that’s that’s coming. Sorry about the noise, my housekeepers in the background here. If you can hear that. So that’s probably coming. So just it’s just too early to tell. So just sit tight. When we hear read about this stuff we’ll certainly talk about on the show, your lenders will notify you directly if you were affected and your properties were affected. And so it’s just too early to tell. But yeah, I would say that’s a high high likelihood that there is going to be a moratorium and mortgage payments. So if you followed my plan and you use leverage prudently And you tried to maximize your borrowing capacity, that unused asset of credit. And by the way, a small tangent here, one of our listeners was talking about and posting on Facebook about how high her credit score was. And I chimed in right back to her and I said, your credit score is too high, that means you’re not using Enough of your credit, your utilization isn’t high enough. Remember, when people look at their assets on a balance sheet, and you know, you look at a balance sheet has two columns, right assets and liabilities. And people put what things they own, and what liabilities they have against them, what loans they have against them and so forth. And in so doing, you know, they never consider their ability to borrow their credit score as an asset and they should, if you’ve got a really high credit score, that is not a good thing. Once you get over 720 or even 740 it’s irrelevant. Your credit score is fantastic. You know, if you have a credit score, that’s 800 You know, you’re not using your credit enough, folks, you got to use it more. So try to borrow more money. Now, that doesn’t mean get a bunch of stupid consumer debt, that means get more investment grade debt against good quality, rental properties. The other thing and I alluded to this in the beginning of our talk today, Sarah, but I didn’t really touch on the point I don’t think is commodity prices. Whenever you see natural disasters like this, you see commodity prices go up. So the cost of labor, the cost of gasoline and oil, you know, there’s a big part of the refining capacity of the country is in golf. Okay. So we’re probably going to see an increase in those prices. We’re going to see an increase in prices of all of these construction materials. Everything from sheet rock and concrete to lumber to copper. wire to glass to steel, I mean, just every construction material will become more expensive and labor will become more expensive. And there will be a lot of workers moving into the impacted areas. Okay. People will move from surrounding areas into Houston and the other affected areas in Louisiana to do construction and provide services and provide labor and insurance adjusters will move there. You know, I mean, this is, you know, in a way I hate to say it, but it’s an economic boom, okay. Now, this isn’t the kind of economic boom you want because it’s more like war. Okay. War destroys things, but they also say war stimulates the economy. Well, the biggest public works project of all time was World War Two, you know, and many say that’s what got us out of the Great Depression, World War Two. But you know, it’s not the kind of economic boom you want necessarily, right? But it is it is. It is a Boom, nope, no question about it either way,
Sara 17:01
quick question there. So when you say that the commodities prices will go up, are you referring to just locally in Texas or nationwide globally,
Jason Hartman 17:14
globally, globally, because these these construction materials are traded globally. So, and they are not indexed to any one currency, which is a wonderful thing, you know, that they’re not tied to the dollar or the yen, or the Euro, or any any one thing. They are, they are a global commodity, they are money, they have intrinsic value. So, so that’s a that’s a really, that’s a really good thing from an investor standpoint,
Sara 17:46
right. So assuming, assuming that’s true, and all of those commodities do go up in price, you know, and it’s attached to the global market, then we could see real estate prices go up because it’s going to increase the cost to build new properties everywhere. So we see now the cost of real estate go up in several markets. Yeah, absolutely,
Jason Hartman 18:07
that is a indirect impact, because this will cause construction prices to increase. So, you know, all of these things, you know, you don’t need to be affected. And by the way, I want to talk about one more thing that I saw happen in Katrina, sometimes in just a moment about insurance claims and so forth. But yeah, you don’t need to be directly impacted from this because when commodity prices go up, it basically increases the value of your property anywhere, okay, especially closer to the incident itself, but globally, because, again, you know, lumber and concrete and all of these materials copper, they’re traded globally, they’re not tied to any one currency.
Sara 18:54
Yeah, those are great points.
Jason Hartman 19:02
He will get back to the show in just a moment. But I wanted to remind you that our meet the masters of income property event, the one we do just once a year is coming up in January and tickets are selling briskly. We’ve already got about maybe 65 tickets sold for this event, and it’s months and months away. And that I attribute to the early bird pricing, which is pretty fantastic. So get your early bird pricing at Jason Hartman comm slash events. That’s Jason hartman.com slash events for our meet the masters of income property in January of 2018. I’ve also got Zach here with me to talk a little bit about the property tracker visual update really quickly. And our special offer for the first 20 listeners Zack, welcome How you doing? I’m great. How are you Jason? Good, good. Good to have you for just a quick moment here before we get back to To the show. And you’ve got a terrific background, you’ve been a great asset to us at Real Estate tools and helping with property tracker specifically, and kind of overseeing the visual update you were out live at our Oklahoma City property tour, and you kind of presented some of the updates there. It looks beautiful. Tell us a little bit about it real quickly, and then about this special offer. So we’ve taken the property tracker platform, and we’ve done a basic ground up visual update. We’ve made it more intuitive for our customers. And what we’re doing now for the new onboarding event is the first 20 customers to email me directly at administrator at Real Estate tools. COMM will get a one hour onboarding session with me scheduled whenever you’d like fantastic and we’ve already had a couple people inquire about that. So don’t wait because those slots will fill up quickly. That’s a one hour onboarding This is the part that we feel everybody has trouble you know, in life in so many things. If you just get it started, and you get it going, it all works great after that. And that’s the thing. You know, Zack will basically help you start to use the software to get all your data in there, upload your properties to the system, and it is just a beautiful, super handy system after that. So Zack, that email address again where people can contact you. Yeah, it’s administrator at Real Estate tools.com administrator at Real Estate tools calm. And if you can’t remember that if you’re driving or working out or whatever you’re doing, you can just go to Jason Hartman calm and on the front page. You can sign up for property tracker and then later refer back to this to get your one hour onboarding. So administrator at Real Estate tools.com Zack, thanks for joining me. Let’s get back to the show. Okay, so Let’s talk about one other thing here. And that is something that I saw happen during the Katrina disaster. And that is insurance claims. Okay. So sometimes people look at this tragedy and you know, I used to talk about how the Chinese symbol for crisis is the same as opportunity. And literally translated that symbol means crisis is an opportunity, writing the dangerous wind, writing the dangerous wind, and we all have had in you know, when you’re younger, it’s hard to understand this. But when you grow up a bit, and you’ve had a lot of experiences in life, from which to draw, you know, that a lot of things can seem really, really negative. Really bad things happen in your life. And you think, Oh, my God, this is the end of the world. Right. But you know, it’s like, the author Richard Bach said, You know what, what the caterpillar calls the end of the world Else calls a butterfly. Okay? So it depends on how you look at it. And if you just wait long enough, a lot of times, things can turn out really, really positively. So let me give you some examples. And this happened to one of our clients in Katrina. Okay. His property was completely destroyed, completely destroyed by the storm surge. Okay. I mean, just wiped, it was gone. And you know, this client, Sarah, you remember him? Okay. I won’t mention his name right now, but it was completely destroyed. And, you know, this is a way of actually renewing and rebuilding. So a condo developer came along and wanted to do an assemblage and buy up some lots in this area. And it turns out that the property as a vacant lot post disaster was worth a lot more money than the than the home itself. Okay. So, so it’s interesting how that works, and sometimes the insurance claim now I’ve talked about Insurance bad faith and how sometimes insurance companies don’t like to pay claims. But sometimes the insurance claim will actually overpay. And you can get the construction done for less than you’ve received from the insurance company. So, a lot of times these things work out a lot better than we think at the time.
Sara 24:16
Yeah, I mean, I can’t recall which client you’re talking about, you have to tell me later. But we’ve seen this over the years with, you know, other types of insurance claims as well. You know, where they get a lump sum check and works out better, you know, so, yeah, I guess we’ll kind of have to just wait and see. I mean, for all I know, it’s, I think it’s still raining in Houston. And so, you know, we have to let the storm work its way through and, you know, then take it a day at a time and, you know, I just I feel so bad for these people that are, you know, actually occupying the homes and, you know, people that are still stranded. So There’s still gonna be a lot of, you know, relief efforts out there.
Jason Hartman 25:03
You heard this on voxer. Yesterday when Brittany had chimed in on one of our threads there. She said that one of her friends that lives in Houston just moved there three weeks ago, can you imagine? And they’re their house is full of water. They’re literally fish swimming in their living room. Yep. Oh my god, I can’t even imagine. It’s just terrible. But um, hey, Sarah, let’s wrap this one up. But do you want to just grab one quick listener question from our air pods contest. We’re trying to work our way through some of these questions. And maybe we’ll just grab one of them real quick before we wrap up. So Sarah, you can pick
Sara 25:42
Yeah. Okay. Let’s do. We’ve got Laura. And her comment actually was I love the tangents.
Jason Hartman 25:50
Well, thank you, Laura. I will I will keep going with the tangents. I always go off on tangents.
Sara 25:55
Yeah. So I’ll read the question here. And then you can answer. Hi, Jason, could you please discuss some specifics of how your own single family portfolio performed during the Great Recession. Did your rental rates go up or down? Did you have more tenant turns? Did class a property tenants move to class B, and C properties? And the last question, did you see any more in one marketplace versus the other?
Jason Hartman 26:22
Oh, gosh, you had to pick such a long question, right? For this, because I know you’ve got to go. And so do eyes here. I’ve got it. I’ve got another recording coming up. But I’ll try to answer that one is to simply as possible Laura. So first of all, at first and now you know, we’re talking 10 years ago, basically now, right? So this has been a while. But the nice thing is you can go and listen to my past episodes of the podcasts that I was doing way back then. And you can hear what I was saying, you know, like right from that actual experience them. But what I noticed happened is that it First, the rents strengthened on my own properties and my clients properties, and the tenants stayed longer. And that was good. And then what I noticed happened as the stupid government got involved. And we had we, you know, we had an election year in 2008, obviously, right. So the, the politically correct, idiotic thing to say was let’s keep everybody in their home. Now, of course, the question unanswered from that was, what home should they be in, in other words, was the schoolteacher who was making, you know, $58,000 a year in that $800,000 home that they got with a subprime loan that they never should have received that loan anyway, in the first place? Should they be staying in their home and so the government shoved every you know, down everybody’s throat, the loan modifications and the workouts and the bailouts and, you know, millions Have people stopped paying their mortgage and you know what’s going to happen in Houston and Louisiana to just wait. And, and so that really perverted the market, the market forces couldn’t do what they should have done, okay, because what they should have done, which I teach about in the three dimensions of real estate, and they started to do but then they ultimately didn’t it didn’t continue is when the housing market, meaning the sales market falters, and it slows as long as the population is increasing, which it kept increasing through the Great Recession. The rental market should strengthen and rents should be there should be a lot of upward pressure on rents, and people will stay longer in the rental property. And that did start to happen. I noticed it at the beginning of the Great Recession. But then as we moved into it, and the government kept telling banks to bail everybody out. And you know, of course, there were three big bailout multi trillion dollar bailout programs that we taxpayers paid for, as they did that the market forces couldn’t do their thing. And so there really wasn’t as much increase and upward pressure on rents, as we should have seen. So again, to answer that question, it started to happen at the beginning, and then it kind of just petered out and sort of stabilized through the Great Recession. Really, if you think about it, for investors, it was only a couple of really dark years there. Because people started coming back into the market, you know, reasonably significantly. I mean, Sarah in 2010, you know, I started to see business really pick up and those were the people that made all the money. I mean, you know, they they just did really well because they obviously bought when, you know, when there was a lot of fear, right?
Sara 29:52
I was just thinking, you know, that ties right into this whole Houston discussion. It’s like it when it’s happening. I remember when first started happening in 2008. I mean, it seemed like the world was falling apart, it was really dark and gloomy and people were scared. And it was bad for a couple of years. But you’re right. 2010 it just picked right up, and we haven’t looked back since. And yeah, the buyers in 2010 2011, you know, they made out, like, just beautifully. You know, so maybe a little inspiration for anybody having, you know, challenges in Houston is that, you know, it’s gonna probably seem heavy for a little while, but you know, it will, it will work out
Jason Hartman 30:38
good stuff. So anyway, I know we’ve got to wrap it up. I think that kind of answers that question, Laura. I know your questions, a little more in depth than that, but we’ve got a run. So we will, you know, maybe touch on that a little bit more on a future episode. Okay. Sarah, thank you for joining me today. And our thoughts and prayers are with everybody in Houston. You know, please listeners If you find it in your ability, you know, figure out the best charities to donate to, and donate to the relief effort there. And you know, we’ll just hope that things work out for the best. We will talk to you on the next episode. Thanks for listening, and happy investing to all of you.
Sara 31:16
Thanks, Jason.
Jason Hartman 31:19
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Jason Hartman hosts one of his clients, Adam Jackson, to look at his journey into real estate. Adam started in 2016 and has just recently purchased his 11th home. He gives listeners some advice based on his experience and points to different markets that he is keeping an eye on. He also explains how he uses financial statements for investing.
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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 another episode. This is episode number 917 917. And this is your host, Jason Hartman, thank you so much for joining me today, as we have a great client case study for you today. Yes, another client case study. We love it when our clients come on the show we’ve had so many on, we really appreciate your contributions and sharing your experiences with other people. So if you are out there, and you are interested in being on the show and sharing your lessons and your experiences and your pathway to building a fantabulous real estate portfolio, please let us know reach out at Jason Hartman comm if you have an investment counselor you’re working with, then reach out through the investment counselor at my company, and we will be happy to have you on the show and we appreciate you sharing your experiences. Want to remind you, we have this fantastic contest going, chasing hartman.com slash contest, first prize, valued at $4,297. general admission ticket to meet the Masters in 2018 and a $500 cash travel allowance. You can apply that toward your hotel, your airfare, whatever you like. And a venture Alliance mastermind weekend, one weekend for you and a guest that’s a $3,000 value. And this is not, you know, I love it when they have these contests or prizes or gifts or giveaways or whatever bonuses. And they say, you know, well, this is a five zillion dollar value. Well, no, this is real because people really pay this much for this stuff. Okay, so this is not some phony pie in the sky value. As you know, as I teach in real estate, you know, there are three types of appraisals. Right? There’s the cost approach. There’s the income approach, and there is the comparison approach. The comparison approaches the most common for residential real estate, our favorite investment. In fact, I say it’s the most historically proven asset class in the entire world. I always say that the best appraisal, the most accurate appraisal as to the value of any property is when you put the property on the market and you sell it to a ready, willing and able buyer. Okay, ready, willing and able buyer and they actually pay for the property. Then you have the world’s most accurate appraisal right there. Only problem is you’ve sold the property But, hey, if you really want to know what your property’s worth, sell it, then you’ll know. Okay, so that, of course, is the world’s most accurate appraisal, these values of these prizes we’re giving away at Jason hartman.com slash contest. These are real legitimate values because people have paid repeatedly, repeatedly, repeatedly for this stuff at these prices. So first prize, basically 40 $300 in value, okay, second prize, 20 $100 value, venture Alliance weekend for one person and an Amazon Echo, hundred bucks. And then third prize in echo 100 bucks. You know, that’s the way it always works in life. It’s the gold medal in the silver medal, and then trailing way behind is the bronze medal. But hey, look at like I’ve said before, this contest, your five year plan contest, so easy to enter And thank you for those of you who have entered already. It’s really not for the prizes. This is for you. Because by declaring your goals, you’re going to enlist some magical powers. magical powers. There’s this great song by triumph, the Canadian band, magic power. It’s an awesome song. Check it out. It’s an oldie but a goodie. That’s what you will be enlisting magic power, right, when you enter this contest by doing your video. So all you have to do three little steps, record a short video about your five year plan. Where do you see yourself in five years? What are your goals, your family, your finances, how many properties you can own? Where are they going to be etc, etc. What is included in your investment portfolio? And how will we here at Jason Hartman, calm help you achieve these goals and then publicly upload the video. Put it on YouTube, and we will judge by the best video and the video with the most views, okay? And you know, this can be a couple minutes long, you know, keep it short to three minutes. That’s all you need. And then good luck. Hope you win and win one of these great prizes. So Jason hartman.com slash contest. Real easy. And again, you’re doing this for yourself, not for the prizes. The prizes are just a little perk on the side. Okay, another thing I want to mention earthquakes, yes, earthquakes, folks, if you own property in the Socialist Republic of California, and I know many of you do or any other earthquake zone, they are predicting some big earthquakes here in 2018. So be careful. I know most people with properties in the Socialist Republic of California, my home state for most of my life, for Not anymore, though, I’m happy to say, because I do not pay any state income taxes, because I live in Nevada. And you know, who knows where I live next time I want to try a few places. Before I get too old. I want to try living in a few different places. But my criteria is, if I move, I gotta move to another no income tax state. So that’s the idea. Okay, anyway, you don’t have earthquake insurance. yet one more reason to follow my advice and turn your castle into a kingdom, liquidate your overpriced overvalued California property, either through a sale or in a less formal liquidation way, liquidate the equity by refinancing that property, pulling the cash out, getting control of that equity and then using either the sale proceeds or the refinance proceeds. To buy income properties that make more sense, nationwide, and you’ll be diversified. You’ll have better rent to value ratios. And that’s what our investment counselors can do. They can help you do a portfolio makeover. It’s totally free, a portfolio makeover. So Jason Hartman comm fill out any web form on our site, one of our investment counselors will contact you and help you with that. free of charge. Venezuela. Let’s talk about Venezuela. You know, folks, socialism is a disaster. And it’s ugly, big brother. communism is an even bigger disaster. So socialism sucks. Yes, it does. I don’t know why people in the West think they can do it better. Yes, they do. They think if we just keep trying, we just keep trying the basic philosophy the political philosophy that is required. sponsible for the deaths of about 150 million people in the last century, yes. had them up. Chairman Mao, Joseph Stalin, Adolf Hitler, and all the rest of these rotten evil communist and socialist dictators. Okay, add them all up, right? And, yeah, you’ll get to around 150 million. There’s some smaller ones in there too. But, you know, if this system was so good, why do they have to force people at the point of a gun to follow the system? Because it is a disaster. So next time you think about, you know, voting for someone like Bernie Sanders, well, you know, think about that. Yes, I get the Bernie Sanders is not an evil dictator. I understand that. But it’s a step in that direction. And you’ve seen what a disaster it’s been throughout history. And every time in history and every place on Earth. It has been a very Massive, terrible failure. Well, Venezuela is another example. Now, you know that I’m a big proponent of what I have dubbed inflation induced debt destruction. That is a very powerful tool for creating a lot of wealth. And income property is the most friendly asset to enable you to follow my inflation induced debt destruction strategy. And Venezuela. Wow, what a incredibly ugly, disastrous, disastrous scenario. CNN reports the economy in Venezuela is in a complete death spiral. It has gotten a lot worse in the last two weeks. So in the Venezuelan currency, the bulevar right, here’s what it takes to buy one US dollar to trade one US dollar On November 1, Yes, dear listeners, that was 27 days ago. It was only 27 days ago. It took 41,290 bulevar. Ours the Venezuelan currency to buy one US dollar. On November 15. It took 60,942 to buy one US stock on November 21. It took at 4372 to buy one US dollar. Ouch. Okay, the bulevar has lost 96% of its value this year. Now compare that to the US dollar which has lost over 96% of its value. Since the Federal Reserve was created just over 100 years ago, okay, so of course not as bad as Venezuela, obviously, inflation has increased by 4,000% 4,000% in Venezuela. Well, look at Zimbabwe, Zimbabwe, the poster child for bad monetary policy, has a new leader Mugabe is out that disgusting scumbag, Robert Mugabe is out. And there’s new leadership in Zimbabwe Who the heck knows how that’s gonna work out? Probably not too much better. I’m not hopeful, but hey, I don’t know much about it. So I will not comment until the disaster proves to be true. And then I’ll talk about it all the time. And that’s the way it goes. So this is what happens. Look at folks, to a lesser degree. This is what’s happening in the United States. It’s a much lesser degree, but in the US you can buy 30 year fixed rate debt attached to commodities, called income properties that are built and manufactured from these assets, these commodities, that trade worldwide that aren’t attached anyone currency, things like lumber, concrete, copper wire, petroleum products, glass, steel, and even labor. And these are not attached to any one currency. They are needed globally. Every human on Earth needs these commodities, they consume these commodities, you can get three decade long, incredibly cheap fixed rate debt against it. And then you can take advantage of inflation induced debt destruction, the hidden wealth creator with income property. So if you’d like to learn more about that, and you have not been a listener to the last 916 episodes of my podcast, just go to Jason Hartman, calm and type in inflation into step destruction and you’re going to see all kinds of podcasts, and articles and tools and information on that topic. Anyway, without further ado, let’s get to our client case study today, as we hear about acquiring all these properties in just one short year, it’s a great story. So listening right now to another client case study. It’s my pleasure to welcome another client to the show. We always love client case studies and we so much appreciate our clients coming on the show and contributing and sharing their experience their knowledge, and just how they’re building their real estate portfolios. And today, you are in for a treat everybody. We’ve got our client, Adam Jackson, who has been investing with us for just a little over a year now. He’s coming to us from Connecticut. Adam, welcome.
Adam Jackson 14:58
How are you? I’m doing Great, Jason, thanks for having me. Good. Good. Hey,
Jason Hartman 15:01
thanks for coming on the show. I appreciate it. You know, you’ve been working with one of our investment counselors, you’re up to 11 properties now. I’m so glad to hear it. You. You’ve got five in Memphis and six in Jackson, Mississippi, and you’re planning to move into a third market this year. You don’t have much time. Oh, no, sorry. That’s 2018. So next year, you’re planning to move into a third market. You’re just doing an awesome job. So I really appreciate you coming on sharing your experience. Adam, give us a little bit of your background. You’re a former Marine. Tell us a little bit about yourself.
Adam Jackson 15:33
Absolutely. Um, so I’m actually calling tonight from Shelton, Connecticut, which is a suburb about 45 minutes outside of New York City. Yes, I was in the United States Marine Corps for four years. From there. I got out and I was working at the korski aircraft building Blackhawk helicopters. And then from there, I actually stayed in the in the aerospace industry. And now I do international trade compliance, which is just basically getting things in and out of country. legally. And then of course on the side, I’m doing everything I can to build a solid real estate portfolio.
Jason Hartman 16:07
That is excellent. So you’re one of the few and the proud the Marines and what did you do in the in the Marine Corps in the Marine Corps?
Adam Jackson 16:16
I was an MMA one tank crewman. Not sure if you’ve ever seen that machine in action, but I highly recommend YouTubing it is the main battle tank. I did two tours in Iraq. So I went to Fallujah, so I actually got to use my training.
Jason Hartman 16:28
Uh huh. Wow, fantastic. Well, I’m glad you got back safe. And thank you for your service. That is amazing. So is the MMA one of the really, you know, badass tanks that we have? I don’t know much about tanks. Yeah. Tell us just, you know, quickly, a little side note about that. Some of those go really fast, don’t they? It is just they go like 70 miles an hour. And, you know, I mean, it’s just a huge tank. And you know, some of these are just incredible state of the art machines that cost like many, many, many more many millions of dollars. Give us a little background on that tank.
Adam Jackson 17:03
Yeah, absolutely. Well, the tank is 70 tons when it’s fully combat loaded. Oh, yeah, it’s pretty heavy. doesn’t go 70 but we’ve gotten it up to 42. Okay, 42 miles an hour, but it feels like we’re
Jason Hartman 17:16
70 tons. 42 miles an hour is pretty fast. Absolutely.
Adam Jackson 17:21
It feels like it. The tank has 120 millimeter main gun. It has three machine guns. It can hold about 10,000 rounds of 762 ammo, and about 1000 rounds of 50 caliber. But then it also has incredible optics. You can pretty much see better at night than you can during the day. And it’s just an amazing machine. Yeah, I was I was happy to be part of it. To be able to have that experience. That
Jason Hartman 17:49
is amazing. Wow. Wow. And two tours of duty, huh. Two tours.
Adam Jackson 17:53
Yeah. Well, I got back from the first one volunteered for the second. And that’s what I was looking to do. I was looking to be inspired and And that’s what I got. Yeah, well, good, good stuff. While we’re glad you’re back safe, you got out of the Marine Corps. And now you are in the aerospace industry, dealing, I’m sure with all kinds of complicated laws, it sounds like you have a security clearance and all that kind of stuff. Tell us a little bit about your job nowadays. So the job nowadays is dealing with international militaries, commercial customers. And really what it is, it’s just it’s a layer of customer service where you’re selling different aircraft and aerospace components to these customers. And in order to comply with US law and other international laws. We have to make sure that all the due diligence is done, and that we can import an export legally. And it’s kind of interesting, because international trade and the politics that we see the geopolitical events that go on those directly affect this job. So it’s not exactly exciting, but there’s definitely a lot of knowledge that you need in order to To do this effectively and to do it legally, because the last thing that you want to do is go against international law because the US government can actually revoke your ability to import and export.
Jason Hartman 19:10
Yeah. Wow. Yeah, that sounds like I’m sure that is a very, very complicated position you have, and you are married with three young children. Just had your third I guess. So congratulations on that. We’re not sure if we’ll see you at meet the Masters because of the three young kids and especially the new newborn. But we hope to see you there. Tell us a little bit about your real estate portfolio and stuff like that. First of all, maybe how did you come to find us? Did you come through the podcast and how long ago was that that you started listening?
Adam Jackson 19:39
It was the podcast, I started researching on real estate investing about three or four years ago, two years ago, I was lucky enough to stumble upon the podcast when I was doing a search. I listened to you for probably three or four months, but I was hooked after the first episode just everything from the real estate information, politics. The philosophy, the economics, and after about three or four months, I decided, you know, I’m going to put my information in and see what Platinum comes back with. So I plugged my information in on the website, Oliver contacted me a couple of days later in, by the way, he has been a tremendous resource for me, just pointing me in the right direction, especially as somebody with no prior experience to real estate investing, but he definitely pointed me in the right direction, helped to educate me and help to show me different sources of information where I can better myself as a real estate investor,
Jason Hartman 20:34
good, good stuff. That’s great to hear. Yeah, yeah, I love our team of investment counselors, they really care for the clients, they really do a great job and, and, you know, when it comes down to it, you know, we’re a middleman in our business and, and, you know, they really go to bat and stick up for the clients to get them good treatment from the local market specialists and the property management teams and all that stuff that we’re for and so you know, it’s really nice to Have good people, but also to have a lot of leverage over these different service providers so that the clients hopefully get a good result. Again, this isn’t always easy. It’s it’s no bed of roses, as they say, Where did you buy your first properties? So the first properties I purchased in were in Memphis, I made the decision. Okay, let’s give this a try. And as soon as I put the first property under purchase agreement, I just decided to start researching like crazy. And I’m the type of person that once I have the information I need, or at least I think I need, I go ahead and take action. So I didn’t really need to be sold on more of the information about real estate investing just because I can see on its face, or at least after going into the multi dimensional benefits, that it was just a superior investment. So after putting that first one under purchase agreement, I decided to do two more. And I ended up closing on three at one time. I figured why don’t I get my feet wet here. So I closed on the three within the first I guess it was about three months after Right talk to Oliver for the first time. And then I bought a fourth one in cash prior to the end of 2016. So I ended up with four in Memphis by the end of last year. We have fantastic good stuff. And so you’ve got five there now and then six in Jackson, Mississippi in another one of our markets. Now sounds like you bought, I guess, one with cash was that the only one you bought with cash so far out of the 11 properties you have through us? That was the only one that we bought in cash. But we did do a cash out refinance A few months later. So I pulled the money back out. Yeah, tell me you love that. I just love that about income property. You know, I always say the beautiful thing about it, is that you can rewrite the deal all along the way. So the deal is one thing when you buy it, because it’s a cash purchase, but you can get the money back out or at least some of the money, sometimes more than the money you put in, you know, depends and then still own and control the asset. It’s the best. It’s the most historically proven asset in the world. It’s just great.
Adam Jackson 22:59
What Why did
Jason Hartman 23:00
you buy that one with cash though? And tell us about jumping through the hoops on qualifying for the loans. I bet that wasn’t so easy was it?
Adam Jackson 23:07
Well, since I have a W two job or have w two income, it was actually pretty easy. The reason that I decided to do that fourth one in cash is because I believe at the time, you could only do up to four Fannie Freddie loans with 20% down right. And I was trying to find a way to get my wife on board who does not have w two income. So we decided to purchase that in cash, do a cash out refinance, but still have her name on the deed. But then I think shortly after I purchased that property, the rules of it got a little memorable.
Jason Hartman 23:41
Yeah,
Adam Jackson 23:42
exactly. That’s when I really ran with it. Yeah, good stuff. Once I once I found out that they could all be 20% down that’s only started to acquire the others.
Jason Hartman 23:52
you acquire those properties and then why Jackson Mississippi did all over guide you to that market or did you look at some others
Adam Jackson 24:00
This came from a discussion between myself and Oliver, at that point kind of had to do with the amount of capital that I had. So in Jackson, there are affordable homes, I felt like the rent to value ratio were pretty good. I mean, pretty much everything that I’ve acquired in Jackson has a rent to value ratio above 1%. And I just felt that it was another linear market. And after speaking with the provider, and also seeing caliber of properties that I was getting in relation to the surrounding properties, I thought that it would have been another solid cash flowing market, which it has been up until this point.
Jason Hartman 24:37
Yeah, good. Good stuff. So you’ve got the five in Memphis, that was your first market. Then six more in Jackson, Mississippi. That’s your second market. Where do you think you’ll your third market will be as you move into it to increase your portfolio again?
Adam Jackson 24:50
Well, after all the research that we’ve done all the conversations we’ve had, looks like I’m going to Indianapolis
Jason Hartman 24:56
good stuff. Yeah. Well, I’ve owned several properties in Indianapolis. Listen, and still have a share of one now with one of our clients. So that’s a great market. And we’ve been in that market for a long time. So good, good stuff. Those are three good picks. What are some of the experiences or learnings you had? Did you have any big problems and hassles? You know any, any tips and advice you want to share? And I do want to remind you to talk about the balance sheet and financial statements, stuff that you did mention before we started recording,
Adam Jackson 25:24
as well. I’ve learned a lot along the way. I mean, just from putting something under purchase agreement, sending in the earnest money, doing everything that I need to do to get the financing. But I’ve got to say that my advice is that it is not perfect, but nothing really is. But I do agree that this is much better. It’s multi dimensional, as far as the benefits go. And I did deal with one eviction. I’ve dealt with other minor repairs. I’ve had a problem with one of the AC systems. But other than that, I mean, I’m able to look past I’m not saying that somebody who has the same issues would look at it the way I do. But again, I’m in this for the long haul. I’m in this to really just build a good portfolio and keep my emotions in check. You know, that is probably the the best advice that I could give for somebody who hasn’t purchased yet or who’s dealing with a pretty perfect situation. It’s not perfect, but it’s definitely worth it in the long run.
Jason Hartman 26:24
Yeah, it doesn’t need to be perfect. It just needs to be better than everything else. That’s the only that’s the only thing we’re striving for. You know, you just reminded me of one of my favorite quotes. You know, my mother taught me a lot of things in life, obviously. But one of the things she really taught me I mean, she grew up pretty much I don’t want to say like dirt poor, but definitely poor on a farm in upstate New York, and she became wealthy after many years of struggle, and, you know, and she’s so tenacious and so persistent. And one of the things she used to always say to me when I was a kid, and I you know, kids Do quit too easily and don’t have a lot of endurance. You know, she would always say, Jason, finish the job, Jason finish the job. That really she instilled that in me. And I remember, one of the awesome quotes that I later came to love is this quote that success. Success is largely a matter of hanging on after others have let go. Success is largely a matter of hanging on after others have let go. It really is that it’s life is just a game of attrition, you know, other people will give up easier. And who was the celebrity gosh, I can’t be Denzel Washington or something. I can’t remember who said this. But I thought it was a really good saying and, you know, he said something like, you know, I may not be as talented or as smart as that guy or the next guy, but I’ll outwork them, I will outwork them, you know, and that’s the one thing we can all rely on at the end of the day. If we have nothing else going for us. We can just be more persistent and just outwork. Work everybody else, you know, and that’s definitely the thing you got to do you got to see the big picture of the long term. And you know, would you say, I’ll bet you your military background contributed a lot to that thinking, I would definitely say so. I mean, the military inspires you to go get something and never to quit until you achieve it. And that’s one of the things that was instilled in me in the Marine Corps. Also, another thing is just having the discipline to get started, continue with something and complete it. Now, my mission with the single family homes is to acquire probably between 40 and 50 spread across those three markets that I’ve decided on, you know, at this point, all of the energy that I have all of my resources is going into that goal. So yes, I mean, I would agree with persistence and just making sure that you can complete the mission at hand and, and that’s really what I’m doing here with this real estate portfolio. That’s awesome. Good good stuff. Okay. So you had an eviction you had an air conditioner replacement and those those things bummed you out. That’s not good news. either of them, they cost you some money. But one of the things I remember when I was a young real estate agent, and I was just started at REMAX and I was working really, really hard on this, what I call they call a farm area where you pick a neighborhood. You know, when people sell their houses, you try to get all the listings, right, and you get to know everybody in the neighborhood. So I had this farm area called wynwood townhomes in Irvine, California. And I remember I was working so hard, I was getting to know everybody in that area. And then one day on what’s called the hot sheet of all the new listings that comes out every day, you know, came out with a computer, the hot sheet came out and my competitor marks about he is his name. He got two new listings, and I still hadn’t even got my first listing in there. And I was just working so hard and I was like 21 years old, you know, he was like 40. So, you know, he had like maturity going for him. I didn’t I remember going in, I was so disappointed. And I went into my broker. And I said, Tom, look at this. I mean, I think I’m just gonna give up. And he says, Jason, he said something really wise to me, I had a lot of conflict with that broker over the years, but he did help me in many ways. And he said, don’t suffer day to day, add it all up at the end of the year, and then decide if you’re happy, don’t suffer day to day, add it all up at the end of the year, and then decide if you’re happy. And I did that. And I became the number one wynwood broker, I sold like 90 some odd properties in there. And, you know, it was a huge lucrative farm area for me, but I could
Adam Jackson 30:35
have easily given up,
Jason Hartman 30:37
you know, had I not had that conversation with him. And you know, for real estate investors, when you talk about the eviction, you have the air conditioning replacement, you know, when we have these problems, I would say, modify my old brokers quote, you know, that don’t suffer day to day thing at all up at the end of the year, you got to wait a little longer in real estate, and you got to add it up. At least wait added up until you file your tax returns, and you see how much money you saved. Because every problem like that, like the eviction, remember, the government is your partner. Yes, they get their cut of the profits, but not really in real estate, because it’s so tax favored, but they also share in the losses. Okay, so really, you know, we’re only paying maybe 60% of this 40% is paid for by the government, right? So the loss isn’t as bad as it seems. And then, of course, you know, if we can take the depreciation and the other tax benefits, and you know, some additional write offs,
Adam Jackson 31:34
it’s really good. It’s funny that you say that because I’m not new to investing or at least the idea of it, but I opened up my first retirement account when I was 19 years old, and I would contribute the max every single year. And then I started working for a company that also offered a 401k. And I started to contribute to these accounts. And then one day I woke up and said, You know, this is not good. I’m handing my money over Wall Street, but yet I can get at it. If I decide I want to take the IRS penalty. So what I did was I started crunching numbers, looking at the real estate investment, and said, You know, it actually makes more sense for me to cash out these accounts and sync it into real estate. And that’s a large part of what I did when I started building the portfolio. And then it wasn’t until I filed taxes the next year, that’s when I became a believer. So
Jason Hartman 32:28
believer, you kind of started that word. I want to make sure people heard that you said you became a believer, right?
Adam Jackson 32:33
Yeah, it might have cut out but I was a full believer at that point. It really what it did was it touched on the four dimensions of real estate but I actually call them four different types of income. And that’s really how I’m viewing this. Now. You have the cash flow, which is the holy grail, this is what people typically keep score with. But then you have the depreciation. Okay, which will eventually go to my income statement. some way shape or form, then I have the appreciation of the asset, which will eventually put money into my account. And then I have the loan pay down by the tenant. So there’s actually four different ways that I’m receiving income here. And when I had those other retirement accounts, I would receive nothing.
Jason Hartman 33:18
Yeah. Yeah, you know, Wall Street is definitely broken, isn’t it? Absolutely. really is. It’s, it’s, it’s pretty terrible. Yeah. And you know, when you really I always talk about how a lot of people are winning, but they think they’re losing simply because they don’t know how to keep score. It is so important to just understand how to keep score. So maybe that’s a good segue into what you wanted to share with people about financial statements.
Adam Jackson 33:50
Yeah, absolutely. So over the last couple of years, I’ve become very interested in personal financial statements. So we always hear about financial status. In business, and those two would be the balance sheet and the income. But what I’d become more interested in is how the two relate to each other, and how they talk to each other. So from the rich dad series, I’ve learned that an asset puts money into your pocket, whereas a liability takes money out of your pocket. And what I’m doing at this point is I’m trying to funnel every resource that I have whether it’s savings from my w two income, reinvesting cash flow, we’re actually even looking to start a little side business just as another stream of income. And really what we’re doing with with all of this income, all of the savings is we’re dumping it back into the asset column on our personal balance sheet, which is in the form of assets or at this point, single family homes. So we do make sacrifices. There’s no doubt about that. But I’m looking at this long term. And I believe that if we all pour enough money into the asset column on our balance sheet, eventually there will more income coming in then time that I’ll have to be able to invest it. Right? Well,
Jason Hartman 35:05
that’s a very good statement, you know, being willing to delay gratification, think long term, and just build up that that asset column right. You know, one of the other things I just want to remind people of course, I’ve said all this stuff before, there’s nothing new under the sun is King Solomon taught us right. But the other asset that a lot of people don’t realize they have is their credit, their ability to borrow their ability to gain leverage with that credit. That is another thing that should go in the asset column and you got to make sure you use it. It’s not an asset, if you don’t use it like it’s a shame to have that asset. unused equity in your home is another unused asset. And that’s a shame when people have you know, tons of equity in their home or properties that they’re not using that equity is sleepy money. It’s lazy money, you got to put it to work. So Understanding what an asset is and what a liability is. And, you know, back to the Kiyosaki comment you made either earlier the Rich Dad Poor Dad Robert Kiyosaki comment is that your home is always always a liability. Okay, whether you rent it or own it, it’s an expense, it’s a liability. You know, you might, depending on where you are in the market cycle, make money on your home through capital appreciation, but it’s always a liability, you always have to count it as a liability and considered a liability. So, very, very important to understand that that that overprice car that someone listening might have, you know, that’s eating up money, I mean, you know, that’s a house. Okay. You know, that’s like another house in your portfolio. If you have an $80,000 car or a $60,000 car, you know, you could buy another house and and that house would produce 789 hundred dollars per month in income versus costing you money in depreciating right so it’s It’s very important to be buying assets rather than, you know, rich, wealthy people acquire assets, poor people acquire expenses and liabilities. You know,
Adam Jackson 37:10
it’s just that simple in symbols of wealth, right, right now the appearances of wealth going back to what you were saying about renting, and also just just acquiring liabilities, like big things like a house. Well, when I was 24 years old, I purchased my first house and I wanted to pay this thing down as quickly as I possibly could, you know, wasn’t until I started investing, understanding and learning about inflation, monetary and fiscal policy as you always go over. But what we decided to do was to use arbitrage to do a cash out refinance on all of the equity that was just sitting dormant in the home. We borrowed that money at 4.3% and then went and purchased additional income properties. So I think it’s a beautiful spread. I mean, 4.3% on the cash out refinance to go make purchases and investments that are going to yield probably between 30 and 35%. This year.
Jason Hartman 38:07
Wow. Yeah, I think that is that is a phenomenal deal. And you got to just keep acquiring those assets. Now, it doesn’t mean to anybody listening that you should never reward yourself. I mean, the whole point of all of this discussion, and everything we do is that you gain wealth, so you can enjoy it and enjoy your life. It’s not to be Scrooge. That’s not the idea here. But there’s a balance, like there is everything and I was a huge student of the late Stephen Covey. I just loved his work and still do. And one of the things he talks about is the P versus PC balance. P is production and PC is production capacity. And it kind of reminds me of that, in that it’s the old thing was that Abraham Lincoln said, maybe George Washington, I don’t know. I forget. I destroy everybody’s quote on my show. But you know, if I had Seven hours to chop down a tree. I would spend six hours sharpening the axe, you know the quote, yeah, I’m talking about right, I think it was Lincoln, the sharpening the axe is increasing your production capacity, right. So that would be like delaying gratification and investing today, you’re increasing your production capacity. And in this example, the production, the P and the P versus PC balance would be you know, actually chopping the tree, right. But it also in this in this example, kind of use it another way it might be enjoying our wealth, right and enjoying the extra time we’ve gained in the passive income and so forth. So you’ve got to have a balance, you know, you need to reward yourself a little bit along the way. So I don’t want to make the recommendation that we would all just sacrifice forever, and then die. No, that’s not the point. Okay, right. thoughts about that? I mean, you sound like you’re pretty young, and you got a young family. So You know you’re in it depends what stage of your life you’re in. Right. But I hope that you’re rewarding yourself a little bit along the way to
Adam Jackson 40:06
absolutely. I mean, I just turned 31. So I guess I am on the young side. But at the same time, I’m not going to look at it as if I’m ahead of the game, because I do have a lot to learn. And I have a long way to go. But as far as Yes, we are making our sacrifices. But for instance, in order to get a new car, okay, so so I could probably use a new car. So this example would be but I need to acquire four additional assets before I get that car. So this is sort of that discipline mindset, I guess, that maybe I got from the military. But it does a couple of different things. Number one, it allows me to delay that gratification. But number two, I’m also using my desires and my necessities to push me closer to those goals. Right. So it’s short, it’s sort of twofold.
Jason Hartman 40:52
Yep. That’s a great way to look at it. You’re basically you’re kind of gamifying yourself, you’re playing a little game with yourself and you’re just saying well You know, you can have the new car you want, you just gotta acquire for more assets first and those assets will pay for the car. And then you have the best of all worlds, you know, but most people go out in life and they have no patience whatsoever. They’re just everything is whatever is proximate whenever is right now, you know, instant gratification, very undisciplined mindset, and they just acquire so it’s like, I gotta have a new car today. You know, the way you’re thinking of it is great. I love that. It’s really good,
Adam Jackson 41:29
really good. And then another thing to touch on the point about Scrooge and hoarding money and not not enjoying, you know, another thing that we are trying to do in our lives is to give more, and I give because it makes me feel good and I give because it helps others. But I also believe it’s important because it’s constantly revealing to us in abundance mentality. So it’s not that I have to hoard everything for myself. I want to give to others as well. And not only not only money, not only time, but knowledge And anything that I can do to kind of pass on some sort of happiness so I’m trying to take the broader approach and improve in all different areas.
Jason Hartman 42:09
Yeah, that’s a great outlook. I love it. You know, when we give, it sets up our mind to knows that there’s more so that’s another way we’re gamifying or self right? hoarding is not gonna make you rich. No one ever got rich saving money. Okay. Never it has never happened. But yeah, so when you give you set up your mind set for abundance and the world is a very abundant place. Love the zig ziglar quote, he says, you can have everything in life you want. If you just help enough other people get what they want. Sounds like you’re doing that. And Adam, really thank you so much for sharing your experience and your your path to becoming a Great Investor today, we really appreciate that.
Adam Jackson 42:50
Any closing thoughts you want to share? The only closing thought I would say is, if you’re on the fence about it, if you’re thinking about it, I would say do whatever you can to Take action, get involved, get your feet wet, even if it’s only two or three properties, because as soon as you do that, once you start seeing the different benefits that are rolling in, you will thank yourself, and hopefully you’ll want to keep going with it.
Jason Hartman 43:14
You know, Adam, that is a great closing thought. And I hate to spoil it because I got one more question for you. It relates to what you just said. So there is this type of person, this type of mentality that wants to understand every aspect of something and learn it all first. Many of these people turn out to be seminar junkies. You know, they listen to podcasts, they go to all the seminars, they read all the books, they know everything, but they don’t do things. And what would you say, you know, I mean, you’ve acquired 11 investment properties here in just over a year, like 13 months, basically. And, you know, what would you say the difference between like learning first or learning well
Adam Jackson 44:00
See, I think the thing is, we learn the most just by actually doing the thing. We got to just do the thing, or we’re never going to really learn it. It’s all going to be like, book theory, it’s going to be like the professors that run the universities that sit in the ivory towers and have like, no real life experience. And you know, you just can’t learn it from a podcast or a book, you got to go do something at some point, right? Yes, absolutely. One thing, I think, I think there’s a mixture, we need to we need to be exposed to the information before we can actually go and execute. But for instance, one of the early videos that I watched from you was how to read a pro forma. And I thought that was a great video, it did explain certain things. But really, what I wanted to do after that video was was to review the pro formas and not just look at the numbers, but understand how the software got to those numbers. So for instance, understand what makes up the loan to value ratio, or what makes up noi Or even a cap rate. So, you know, because at that point, that’s when you really go in depth and understand on a deeper level. Mm hmm. Good, good stuff. Yeah. And another thing is, is I believe that it’s important to go in depth with certain things to really study a certain person. So that’s why I listened to all of these podcasts. I have other mentors and other gurus that I listened to, and go in depth into, and I just find that focusing on a few things in depth is better than getting a little bit of everything. Yeah, right. Right.
Jason Hartman 45:36
You don’t want to be a jack of all trades and Master of None. So you got to pick like, you know, just a few things and really focus and go deep and concentrate on it. And you know, that’s what you’re doing in your markets. You’re not overly diversified, which is great. You got two markets, you’re going to have your third market soon, and build a portfolio of you know, I think he’s had 5060 houses in those three markets. So I think that’ll be an excellent plan and I just want to wish you the best and Adam Jackson, you know, thank you so much for sharing everything today. We really appreciate having you on the show and, and hope to see you at one of our upcoming events. So thanks again and happy investing to you.
Adam Jackson 46:11
And you as well Jason, thanks for having me.
Jason Hartman 46:15
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Jason Hartman hosts client Clay Slocum to the show. Jason describes Clay as a millennial who currently has four properties in his real estate portfolio. Clay gives us his experience working with investment counselor Oscar. Clay gives us his discovery of exponential growth. He goes further discussing the power of compounding interest and talks about asset protection.
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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 company LEED solution for real estate investors.
Jason Hartman 1:03
Welcome to the creating wealth Show Episode 892. This is your host, Jason Hartman, thank you so much for joining me today. It’s been absolutely crazy. This Las Vegas shooting this terrible, disgusting tragedy has just turned my life upside down in the past few days, but I have absolutely nothing to complain about compared to the victims and the people who witnessed it closely. I did witness the event. We published an extra Episode 891 yesterday on an off day Tuesday, where we don’t normally publish episodes that told of my firsthand eyewitness account of the shooting. And then one of my friends who was in lockdown at the Mandalay Bay hotel, I was of course at the top of the Mandalay Bay Hotel 25 stories above the shooter and recounted that story yesterday, but it’s just just awful. I mean, I can’t believe this and I Just Can’t wait to learn about this psychopaths motivation. It’s just unbelievable. It really is. I know, we’re all still in shock the whole world’s in shock about this. Or at least all peace loving decent people are. Yeah, as you know, ISIS claimed responsibility right away and you know, who knows what’s true anymore? The media parsh some of the media denies that some of the media has been just not talking about it. I don’t know. Nobody really knows yet. But it’s absolutely a crazy thing. Today I was interviewed on inside addition, or was an extra I can’t remember which one I’ve done a couple media interviews. I know it was on TV in San Diego. They interviewed me via Skype yesterday. You know, you you get a video of that and publish it and it’s it’s like, wow, the whole whole world. I’ve given a copy of it to the FBI, they asked for it. I mean, the FBI actually messaged me on Facebook, crazy and never thought that would have And I never thought I’d wouldn’t have such a terrible tragedy like that but at least I did not witness it close up. I was a pi i saw the concert below you know, you heard the whole story yesterday if you listen to that episode where we just talked about that so let’s go back to real estate investing and talk about that. You know, this is all weighs heavy on everybody’s mind that I will never forget that night. It changed me forever, I’m sure I don’t even know how yet but it’s, it’s unbelievable. It really is. It’s just tragic. Moving on. We have got a client case study today that was of course recorded before the shooting and then basically the terrorist attack that happened and that is our client place locum so I so appreciate him coming on the show and I appreciate all of you clients coming on the show to talk about your story and, and definitely your unique insights about real estate investing. You know, play well Talk about some things that have not occurred to me. I’ve not heard them before, really wonderful, original thoughts about how to evaluate one’s investments, consider one’s investments, just really great stuff. So we love it when clients come on the show, if you would like to be on the show, we’d love to have you. If you have something to contribute, just reach out through the Jason Hartman comm website. Or if you’re working with one of our wonderful investment counselors, reach out to them, and they’ll get you connected. And we’ll have you on the show to share your story and your real estate investing goals or just your questions. You know, if you just have questions for me, I’d be happy to answer them on air as well. And by the way, we’ve got a whole bunch more questions from the last three contests for the Amazon echoes and and the apple air pods that we gave away. And you really had some very thoughtful questions and comments. So we will get to those Over the course of the next several episodes, you know, we just got a lot to cover. We’ve got so many great episodes coming up for you that I’ve been recording episodes just like crazy the past few weeks. I interviewed Dan Burris today a really interesting futurist, who’s developed basically that the software that Zillow uses, kind of underlying their system, he licensed that and he developed several great real estate apps and it’s just a futurist in general, we’re talking to about having him come to meet the Masters in La Jolla, which, by the way, have 96 tickets sold so far for that event, the most ever this early. So thank you to all of those of you who purchased tickets. And if you haven’t purchased your tickets, get in on the early bird pricing, you know, the price does escalate, as we get closer to the event and is not just based on time, but also based on ticket sales. So it’s like an airline folks, the sooner you buy your tickets, the better Okay, so get Your tickets at Jason hartman.com. Click on the events section and do that. So we’ll get to a lot of those questions. We’ve got a really interesting interview coming up next week for you, where we interview a new lender in our network who has some really interesting financing programs. If you’re already working with one of her investment counselors, of course, they can connect you with her. But I did a really insightful interview with her. And we should be publishing that one next week. We’ve just got a whole bunch of interviews I can’t even remember all of them if it’s like a blur, all of the the interviews I’ve been recording we’ve had some great guests recently. So stay tuned for that. I don’t mean to talk to you all about the future and what’s to come. Because today we have a great show with with our client clay on a case study as well. But do get your tickets for the meet the Masters event. We look forward to seeing you there also. I also want to give a shout out to the new property tracker system. If you’re if you haven’t been to real estate tools.com lately and check out the the apps for iPads and iPhones and the web based app property tracker that has been totally upgraded. Take a look at that really some great changes that Fernando and and Zack and and Michelle and that whole team did to work on property tracker and really upgrade it and take it to the next level. I think you’ll love it. So check that out as well. And you can also find that at the front page of Jason Hartman calm But without further ado, let’s get to our client case study with clay Slocum. Here we go.
It’s my pleasure to welcome a another client to the show. We always love playing case studies, we get great feedback on them. And if you’re interested in coming on the show, just reach out to your investment counselor and we would love to hear from you and possibly feature you on the podcast. So again today, we’re going to Another client case study with our client clay Slocum play welcome. How are you? I’m doing pretty good yourself. Good. Good. It’s good to have you on you are a 32 year old millennial. And we’re going to talk about some millennial stuff when it relates to as it relates to real estate investing in clay. Where are you located?
Clay Slocum 8:18
I am in Northern California.
Jason Hartman 8:20
Okay, great. The were like more specifically than that
Clay Slocum 8:24
up in the Chico California area.
Jason Hartman 8:26
Okay, fantastic. So you you are not in the Socialist Republic of San Francisco. And, and you are not paying $8,000 per month to rent a closet either. So good for you. Yeah, I think these high priced markets are just crazy. I got a I got a message from one of our other clients today who lives in Los Angeles and is a wealthy wealthy client, by the way, a celebrity client whose name I will not mention, but he and his wife been buying properties from us and he He was just commenting on how absolutely nuts the Los Angeles market is. I mean, these markets are just Gosh, I mean, they are bubbles. I don’t know when they will burst but they are bubbles for sure. I mean, it’s just it’s just absolutely crazy. plate. You want to talk about a bunch of things today? What is the power of compounding for millennials? I think that’s super important. It’s a great message for people at any age to hear. And then, you know, we’ll talk about some other stuff too. So go ahead and dive in.
Clay Slocum 9:30
Where do you want to start? Oh, well, I guess I’d really like to start with talking about compound interest. You know, being being a millennial and potentially having you know, the the years ahead to to work the magic on these investments on the investment properties. That number can can do some real magic for you. And so it was something that I myself actually kind of had to play around with and in order to discover The true power and I’ve been honestly trying to explain it to my friends ever since. But it definitely has its power to make your growth just exponentially fly up at a certain point.
Jason Hartman 10:15
Yeah, no question about it. And, you know, I know you mentioned you had some spreadsheets and things like that. So feel free to share any numbers or figures you want with us. But I will tell you clay, you are absolutely right. Einstein called compound interest, the eighth wonder of the world. And it is truly amazing. How you know, as I always say, most people in life are hurt by inflation. They’re hurt by government spending, they’re hurt by time. And as real estate investors when we do it, right, all these things are to our benefit. You know, we watch the news and we look at you know, we hear a story about government waste, and, you know, government spending and, you know, that’s actually beneficial to us as real estate investors. You know, time Passing by most people would rather not have time passed by they, you know, rather go back to the good old days. And as investors, we put all these things father time, Mother Nature, even when it comes to natural disasters, this is all actually beneficial to us. Oddly, so, yeah, that’s that’s great compound interest is very, very powerful thing.
Clay Slocum 11:22
Yeah, yeah, no, I mean, looking at some of the numbers that I ran,
Clay Slocum 11:27
you know, I’m looking, I just ran this a few minutes ago, so I can talk to it. But if you were to put down if you were to get $100,000, you know, invested into into your properties and say you were able to achieve something like a 32% ROI you know, in in about 18 years that gets you all the way up to 14 million, which is is amazing. It’s great.
Jason Hartman 11:52
Yeah, but let’s be a lot more conservative than that. Now. Many income properties with all things considered. all of the different elements of return on investment of ROI can certainly produce 32% annually. But like I always say, even if it’s only half as good, right? It’s still pretty amazing. It really is. And in with leverage, you can vastly outperform inflation. So yeah, it’s true truly amazing. Isn’t it? powerful tool. Hmm.
Clay Slocum 12:26
I I went back and checked my own, you know, spreadsheets and everything and ran the numbers myself after listening to one of your podcasts. It was I forget the gentleman’s name, but he’s the submarine Captain or
Jason Hartman 12:39
Gary Pinkerton?
Clay Slocum 12:42
Oh, yeah.
Jason Hartman 12:42
Yeah. And he was talking about
Clay Slocum 12:44
the the leverage factor of the appreciation and just how that that can dominate especially if you can find yourself in a consistently appreciating area or you No, heck, no one no one in the hybrid markets and like Phoenix, perhaps are ride it up even higher that that could really drive drive some things. But no, I do completely agree with you that it’s pretty safe to just stay with you, you know, your cash on cash and you and your principal pay down those are. Those are good numbers and in and of themselves.
Jason Hartman 13:17
Yeah, they definitely are. I mean, you know when you can get 10 or 12% cash on cash. And you know, it used to be better than that, but it will those numbers will improve over the years as we see rents go up. But of course, rents always lag appreciation. We always say don’t don’t count on the appreciation. It’s just the icing on the cake, but boy, it sure is a nice treat when you get it and sometimes you get it in spades. I mean, it’s just phenomenal. Really is really is so good stuff. Good stuff. Yeah,
Clay Slocum 13:49
I pulled up historical data on that. Actually, I went back to any I think Fannie Mae’s website had had it printed but I went back since I think They had recorded up to last World War Two maybe even. And, and they just had by decade, you know, home values. And I plotted it all out. Now just for the audience, I’m an engineer, and I’m also a licensed real estate agent. So I love the numbers. I’m in the numbers all the time. But regardless when I use engineer are you I am I’m actually a pavement engineer, which is in the civil engineering realm. Formerly a geotechnical engineer, which is why I think Oliver and I get along so well, he’s a former geologists, sometimes we we nerd out on that topic. And then and Oliver is your investment counselor with our company. So
Jason Hartman 14:41
yeah, well, it’s good. We have clay we have so many engineer clients, it just boggles my mind. How many of our clients are engineers, and I always used to say like when I was in traditional real estate for many years before I got into the investment only side of the business the most difficult clients to work with were engineers, because they were just they were, it was very hard for them to make a decision. And, and but now, I love engineers, you know they’re there. They’re our our best clients because our approach is so analytical, our approach to investing is really, you know, it’s just very nice to be able to deal with things on a very sort of rational analytical basis. But I tell you, the one thing about this is that when you invest in single family homes, the most historically proven asset class in the entire world, rather than apartment buildings, or mobile home parks or office buildings or retail centers, or any of the other types of real estate, outside of the single family home realm, you’re dealing with people that see, here’s the power, okay? You can buy a property with an analytical mind. You buy a single family home with an analytical mind you buy it like an investor based on my 10 commandments of successful investing and all the other stuff we teach, but then when you sell it someday, you can sell it to a non analytical person in emotional person who, who will pay you a premium for emotions,
Clay Slocum 16:21
okay?
Jason Hartman 16:22
You know, I call it the emotionality premium. And and that’s, that’s just a great thing. You know, when you sell, you can sell to either an investor or a regular traditional homebuyer. And when you buy you buy like an investor. So it’s great. All the other types of real estate, all the other classes, you buy it hopefully as an investor mind, and you sell it to an investor mind. So you don’t get any emotional premium. You know what I mean by that? Does that make sense? Oh, you know, I just renewed my license. And so I completely agree that’s why real estate agents use the comparable sales approach whereas you know, with multiplexes and everything else like that. They like cap rates, and they like the the income approach or the cost approach.
Clay Slocum 17:09
Yeah, but with comps that, you know, we in order to use comparable properties that that’s how you can account for the human element there. I think
Jason Hartman 17:17
it really is amazing. Okay, go ahead. Tell us more about your your analysis and the other stuff you wanted to talk
Clay Slocum 17:23
about. Oh, yeah. So I mean, I did track the the median house prices across the United States, and it definitely is, it’s asymptotically approaching, it’s actually hovering around 5%. I think it went 464465 something like that. Over over the period, but I think that’s a pretty good estimate. Or at least I’d like to think that that’s going to be a good estimate to go with and, you know, if you’re if you’re getting anywhere.
Clay Slocum 17:53
Oh, sorry. Yeah, no, that’s national.
Jason Hartman 17:55
Okay. So that’s a national average. And what time And I know you said Fannie Mae went back even to like World War Two I think you said, but like, what what time period are you talking about?
Clay Slocum 18:07
I’m
Jason Hartman 18:09
gonna explain how nerdy I am. I actually did it by a 30 year period, 20 year period, 10 year period and then a running aggregate period and they all start Okay, so tell me where you started and stopped though, stop and start because I just saw this today. One of my clients, our clients tagged me on Facebook, and someone else had posted this that they had just read an article that if you wait, the cost of waiting to buy a home in Nashville, Tennessee, okay, and Nashville is not one of our markets salt has been a little too expensive. So we’ve never been able to recommend Nashville unfortunately, but we do a lot in Memphis and I think play you own in Memphis as well. And if you wait a year in Nashville, it’ll cost you $32,000 that’s that’s what they are. said, so interesting. It’s a $32,000 per year cost for not making a decision. That was pretty interesting. If you’re in Los Angeles, it’s even more. So that’s why it really matters. see a lot of those surveys, like if you’re looking at Fannie Mae, for example, the last data that they’re posting might be from a couple years ago. I don’t know. That’s why I’m curious as to when you started and stopped, because it makes a pretty big difference if you include the last few years,
Clay Slocum 19:27
right? Yes, yes. No, it does. I don’t know exactly when they stopped it was it was with storage of data and so I would have to go back and check that but I did like that it was kind of it the curve was asymptotically, approaching about 5%.
Clay Slocum 19:43
But, you know, when when you put that in?
Clay Slocum 19:47
Well, I think going back to what I was, what I was getting at is if you know if you put in $100,000 to start and if you can, you know if you do get that 32% return, you know the power of compound interest is So, so big and I think I said at 18 years, you’d be about $14 million. But all it takes is two more periods for you to get back up to about $24 million. And so two periods is $10 million. And that’s, that’s the, that’s the numbers. I like to tell my my friends when I’m trying to explain what I’m doing and also see if they have interest because, you know, it’s easy for them to say, well see how it goes for you. And you know, oh, maybe maybe after you know, maybe we can do it after we buy another car or we remodel this part of the house and I just kind of tell him like, you know, it’s it pays to do it now. It’s not the it’s not turning the $20,000 downpayment into, you know, into 22 or $23,000. It’s, you know, on a 20% return it’s the turning a million dollars into $1.2 million or turning turning $10 million into $12 million. Okay, so when you said $10 million per period, how long is a period? What do you mean by that? Oh, a year, if you’re getting to 32% over a single year and turn. So if you take 14 million and then multiply it by, you know, 132% then and then you essentially do that twice. So two years in a row, you can get that 33% right,
Jason Hartman 21:25
then yeah, you get that okay, but But what did you What did you start with to get to 14 million and how long did you wait, what was the compounding period to get to that? Oh, it was the starting amount. Gotcha. So 100. Were, yeah, you Okay, so $100,000 invested or $100,000 property, because we’re throwing around some big numbers here. I want to just make sure we’re clear. You know, compound. The reason Einstein said, compound interest is the eighth wonder of the world is because when it compounds you keep working with a bigger tool, with a Bigger war chest. And that war chest gets so big that, you know, once you get to the $14 million number, increasing that by $10 million isn’t I mean, it’s hard and it takes time, but it’s not incredibly difficult. Like it might sound I mean, I know we’re throwing some huge numbers around. So I almost want to rein that in. And I want to, I want to I know you didn’t do the math for this, but I want to really look at I want to say to the listeners, look, even if you got 12% annually or 10% annually, I mean, it’s truly amazing. It’s phenomenal. What you can do in a relatively short time. I mean, I just cannot believe how quickly My life has passed. And the older any of you get, you know, if you’re 30 4050 years old, six years old and older, you know, you just know you it’s like you Remember 20 years ago, like it was yesterday. I mean, every year passes so much faster, you know, from our perception of it does. And it’s just amazing. Like, there’s an old saying, everybody overestimate what they can do in a year. And they underestimate what they can do in five years. You know, and that’s so true. Because the compounding, you know, in a year, you don’t get much compounding can’t go very far. But in three years and four years, in five years, you’re starting to see some real compounding going on, if you just stay the course. So so go ahead with your thoughts on that clay I interrupted you.
Clay Slocum 23:41
Oh, yeah, no, that was a $100,000 is your initial investment. That’s not a $100,000 property. That’s 100,000 which might be for properties.
Jason Hartman 23:53
You know, okay. So, only $5,000 each Yeah, kinda
Clay Slocum 23:58
and but it If you were to take that out that’s, you know, 18 years get you to 14 million, which, you know, maybe it’s a lot easier to think about it as far as just, you know, taking taking that hundred thousand dollars and you know, a 20% return on that gives you $120,000 that’s 20,000 you know, $20,000 is a pretty good, pretty good money especially to be making passively of sorts, no question about it. And then like the
Jason Hartman 24:27
iceberg, a lot of this return on investment sits under the water and you don’t notice it, you can’t really see it until later, you know, you wait a few years, and then you do my refi till you die plan or you sell the properties and you can 1031 exchange them but if you want to take the money out, you can do a new vehicle that I’m looking at and I’ll have a guest on to talk about this in the future called a deferred sales trust. deferred sales trust a vehicle I’ve been looking at if you if you Want to essentially cash out? Okay, and maybe you don’t want to buy another property. Now, I don’t think that’s the best plan. But it’s a way you can defer gains and extract the wealth from your real estate portfolio slowly and just pay taxes and little dribs and drabs. So it won’t be such a hard hit. So there’s there’s a lot of structure opportunities available and things like that. So yeah, it’s it’s play. Isn’t it? Amazing? You know, when you really look at these, the numbers and the compounding effect, it’s just incredible, isn’t it?
Clay Slocum 25:32
Oh, yeah, it definitely. And that’s why I really am trying to, you know, show all my friends I have a friend who drives a forklift and I was asking him, you know, how long do you think it would take you to save up the downpayment and he said, You know, I could probably do that in about 18 months. And so, you know, I actually ran through with them I said, Okay, if you can take $25,000 and and put that into a house and then Say you get, let’s, let’s just assume conservatively about 24%. And I just walked him through every single year multiplying it by, you know, 1.2, which is a 20% increase, and his eyes kept getting wider and wider. And he kind of walked away. And at one point, he looked at me as he’s a high school friend of mine, and he looked at me and he said, why didn’t they teach us this in school? And we just kind of laughed?
Jason Hartman 26:28
Well, because they, they don’t want you to know this, you know, they don’t want you to know this stuff. You know, it’s, it’s an amazing thing. And so you just keep multiplying it by 1.2. And then you take that number and multiply that times 1.2. And you keep doing that over and over again, is truly amazing. You know, we’ve all heard the thing about how you can take a penny and double it every day for 30 days. And you have, I think, like $14 million at the end of the month, you know, you know, it really is it really is shocking. I just want everybody to be careful. If you go, you know, Google compounding calculator or actually don’t Google it, because Google is evil. Dang it, you being it, you can bring it. Yeah, you heard me say that before you can bring it, but you can do even better than bringing it, you can DuckDuckGo it. I think everybody should switch their search engine to DuckDuckGo that does not keep any logs on your searches. So that’s the better thing. DuckDuckGo it’s a search engine. And it’s pretty good. I’ve been using it lately, and I like it. It’s good. Oh, yeah. Really, really produces some good results. And so you can use that. Okay. Compounding is the eighth wonder of the world. We talked about that. Tell us about your properties. So how many properties Do you have now
Clay Slocum 27:44
claim? Um, I now have. I have three. And then I also have, well actually, I guess four. So I have three active ones and then I also pulled off one of the properties You’re buying it through my self directed 401k. So that was, that was a lot of paperwork. I will I will admit a lot of paperwork. But I was tickled when i when i got it to come through and so I have that and then I guess my and then my through my wife’s 401k we also have one locally here in California.
Jason Hartman 28:22
Good stuff, good stuff. Okay, good. So congratulations on that keep up the good work. What else should we talk about? You want to talk about your experience with any of those properties or anything or Yeah, do you want to talk about working with our investment counselor or, or some of the other questions that we discussed before we started
Clay Slocum 28:40
definitely Yeah, no, I think you know, the, to get some other people who might be on the fence out there. It took me a while to, to buy into the concept of buying out of state and that’s really one of the things that I really attribute to to you guys. You know, you all the podcasts and then working With all over extensively in the beginning, just kind of working through that and how the numbers worked and the comfort level of it. But you know, one of the things that I think Oliver did the best for me is, after talking extensively with him, I think he might have paired me up with, you know, like almost like a match.com like, he paired me up with the perfect local market specialist to fit my, my personality and my my investment philosophy. And so I kind of attribute it to him, but I’m very, very happy with the way the transactions go and, and the way the interactions kind of all fluidly occur with you know, with me and all over and the local market specialist and just you know, it, it really has been a pretty seamless process, which I didn’t necessarily anticipate but I’m thrilled that it has worked out that way. So
Jason Hartman 29:58
glad to hear it. Yeah, stuff good stuff. Yeah. Okay, good. Now you you wanted to talk about also some legal questions and you have a bunch of things here that you sent me on my appointment request. What else? Just take it wherever you want.
Clay Slocum 30:15
Oh, I have lots of questions.
Clay Slocum 30:18
I think let me let me finish up on on the Memphis market. I did do an analysis that that Oliver was was thinking it would be beneficial for some people to have because I ended up running the numbers. I was a little bit concerned. I mean, out here in the Socialist Republic of California. I see a bubble already occurring again. I and you know, I see what’s real what is happening in the Bay Area. There’s another bubble going on. So I’m I’m in fear that maybe there’s a correction coming. But I had to go back and I you know, it’s not perfect data. But Zillow Does, does have a, a list of essentially the median house. Price, and they haven’t published for Memphis. And so I went back into that, and I was able to kind of plot the entire, you know, January 2008 all the way through their anticipated January 2018 median housing prices. And so I actually plotted you know, the depreciation that occurred during the during the bubble and during the burst of the bubble and then kind of the tumultuous ness that occurred for the next few years followed by the rise that we’ve seen in the last couple few years. And then I put all those you know, different depreciation and appreciation numbers into you know, my Performa. And I did an analysis I needed to see what was going to make sense because the thing I had to get over was not being the you know, analysis of Prowl you know, paralysis of analysis. Maybe I shouldn’t hold my money in, you know, in a bank account until the bubble burst. You know,
Jason Hartman 32:01
yeah, good luck with that idea. I’ve seen many people try it over the decades. And this is where I even agree with the stock market people I hate to say, but market timing does not work. Okay. You know, you can you can sort of nip at it around the edges. I’ll admit that, that, you know, of course, you want to be smart. And of course, there are some things to consider when it comes to market timing. But the pure market timers, they just never end up
Clay Slocum 32:31
as good as the people who just get their money in the market and get it working for them. And that’s what actually penciled out. I was I was a little bit surprised to find this, but essentially, I modeled four scenarios. One of them was the, you know, the investor who wasn’t, wasn’t decisive, they wanted to keep their money in the bank. And they wrote out the whole, you know, downturn and then the tumultuous sness and invested at the exact right moment, you know, at the low end which occurred in January 2016. So I modeled what that you know what what that would look like followed by January 2016 is not the low. I mean, no, but if you look at the, if you actually look at the Memphis market, there was January 2016 was lower than January 2015.
Jason Hartman 33:22
And so there was some volatility for some reason in the market right there. And so, you know what I attribute that to I bet it was the hedge funds and the private equity groups that were bidding up the market. So, that’s a small anomaly. But I think to do that, right, you’d really have to go back to like 2009 2010 you know, to look at that study like that, but but go ahead, tell us what you did.
Clay Slocum 33:45
Yeah, no, no, no, there was definitely depreciation
Clay Slocum 33:49
for the first two, three years, and then it was kind of flat a little gain and then 2016 was was the low again, but essentially the way that it pencils out is If you were to invest, you know, let’s take $100,000 investment again, if you were to take $100,000 and get a single year’s return based on, you know, some of the performance and then go through the exact downturn that occurred based on that median housing price. By the time that Neo that that person had stashed their cash in the bank, you know, making pretty much nothing, got their money involved. After the volatility in 2016 ish. You know, everything had already come back up and the person that had gotten just a single years of single year of performance pulled ahead and so that was the one of the things that really helped me feel like you know, if I can’t time this, and you know, if I if I don’t want to look at my crystal ball, then hey, you know what, this person not only did pretty well, but You know, there’s a chance that they came out ahead of the person who was kind of waiting for the dust to settle.
Jason Hartman 35:05
Yeah, then so there’s so clay, there’s that old saying, We’ve all heard it, you know, keep your powder dry, right? We’ve all heard that saying, and there’s some validity to that in some areas of life. But the problem of market timing is that the human mind has this bias, that it does not see the cost of waiting. Nobody really interprets that opportunity cost of waiting very well. Our minds just don’t do that. But it does interpret the cost of losing. So say for example, you invest and the prices go down. Now, of course, since we’re all smart investors listening to this, or if you’re new, you’re not smart yet, but you’ll be smart soon, I promise. And, you know, we understand that income properties a multi dimensional asset class, so, you know, I talked about the three day mentions of real estate. There’s really many more than that. But, you know, even if the prices go down, you know, we still have the return on investment from cash flow from cash on cash return. So our bias just looks at prices. Number one, that’s the way most people think they think, Well, you know, I bought this house in Los Angeles, and I paid $500,000 for it, and the market tanked. And it went down to 350 or $400,000, right, and I lost 100 grand or 150 grand, and that’s what everybody sees, but, or they bought the property in Memphis, and the market went down and went from 120,000 to 100,000. So I lost 20% but they never see the amount of money they made from the cash flow and from the tax benefits and the other benefits, and they they don’t see that they lost that money by waiting. You know, it’s just funny. hormones work. We’ve got to overcome our own mind. A lot of time, don’t we?
Clay Slocum 37:04
Yeah, definitely. Definitely. Yeah, that that bias
Jason Hartman 37:07
is there. Yeah. I mean, even if you’re an engineer, you have the same brain that all the rest of us have. And the way you overcome it, is by doing what you did, and really doing a study, and really looking at the numbers and really evaluating opportunity, cost, opportunity cost is a cost that most people don’t see. They don’t evaluate properly. And it’s just an oddity of the way our brains work. I’m not sure why but I’m sure we just had to have that it’s built in from evolution and it’s there for some reason, right?
Clay Slocum 37:43
Yeah, yeah, exactly.
Clay Slocum 37:46
And then to to carry on to the other two two scenarios, Iran is the the investor that invest the money and then get two straight years of returns based on the Performa And then goes through the same, you know, median house fall that we saw in 2008. Nine, and that person never went below their original price. And so, you know, if you think it’s gonna happen in a year or two years or you don’t know, that was that was really powerful to see that if you know unless you can do it to the day. It makes sense to get it in there and let it start compounding and getting the cash on cash. But you’ll appreciate this, this last scenario ran and that was I pulled up s&p 500 numbers from the downturn and and then I used historic averages and I ran the same scenario and I took it out about 20 years. And I’ll just talk in terms of percentages here. But yeah, it was about 5% it was only one 20th of what the investment properties ended up yielding. In a 20 year period,
Jason Hartman 39:01
wow, isn’t that amazing one 20th and this is why we don’t none of us ever know anybody who got rich in the stock market, you know, unless, unless they’re an insider, right? That’s the only ones who ever get rich in the stock market. But um, we all know lots of people that got rich in real estate isn’t isn’t that just, you know, the reason why true because the stocks don’t have the multi dimensional characteristics the income property does. And so that’s a that’s a very important thing to consider. It certainly is. Okay, hey, Clay, we got to wrap it up. But is there anything else quick that we can talk about before we say goodbye?
Clay Slocum 39:38
Yeah, I mean, if I if you don’t mind, I’m gonna open up two cans of worms and you can answer them however you want or choose to hold them off. But, you know, I guess the
Jason Hartman 39:48
I have a feeling I know one of those cans of worms that takes like, three hours to answer but go for
Clay Slocum 39:53
it. I just the whole concept of when to think about putting properties into an LLC and kind of deed catching them from your own personal assets and whatnot. And then the second one is just whether there is a place or the best place to go to try to understand, you know, the in an easy fashion, the tax aspect of investment properties. And so I’ll leave it to you to
Jason Hartman 40:20
take us out. I’ll take those two and answer them as quickly as I can. So first of all, the question of entity structuring and asset protection is extremely complicated. I’ve had Garrett Sutton on the show several times. He’s got a good attorney in that in that field. I’ve talked about it several times. I’m not a lawyer. But I want to say this one thing that so few people understand and that is the concept of the internal threat versus the external threat. When it comes to asset protection. Most people again, there’s some for some reason, they have this bias and it really makes them dumb and blind or you know, and in here, here it is the bias is that they think all about the internal threat, meaning, the threat that exists inside of the asset. So with income property investing, that’s usually the tenant. Okay? Now, in all these years, I’ve never been sued by a tenant. Okay. So, I mean, I’ve had hundreds of tenants. Okay. But and, you know, just never had any legal problems with tenants. Okay. I’ve had legal problems in business for sure. You know, especially with what I say on the podcast, some people get bothered by what I say when i when i out there crooked behavior. But, but anyway, you know, that’s one of the things we have to deal with. Right. So that is an external threat. So let’s take me as an example. This is a good I’ll just use myself as the example to explain this. So I’ve got all these rental properties and all these tenants right, and if one of them slips and falls And, you know, in sues me because they say it’s my fault. They have the slip and fall, the famous thing you always hear about right? That I’ve never ever with thousands of investor clients heard of that happening, that lawsuit. I’ve never heard of it. I’m not saying it hasn’t happened. I’ve just never heard of it. Okay, so none of our clients have ever told me, oh, attendance slipped and fell on their property and sued them. In fact, I don’t think any of my clients ever, ever even told me a tenant has ever sued them. And I know that I haven’t been sued by a tenant. You know, I bought my first property at age 20. And then all these years, you know, just never happened. Right? Okay, so that’s one thing. That’s an internal threat. And that threat is very easy to insure around to just have good insurance and make sure you renew your insurance policy on time so it doesn’t lapse. Okay. That’s pretty easy to insure round. Okay, now, the extra money threat is, and let’s use me as the example. So here I’m doing this podcast, and I stumble on this, you know, property manager who’s ripping me off and ripping my clients off in Kansas City. I talked about it on the show, he sues me, that is an external threat, or at least it’s external to the properties I own. Right. So if that guy was able to sue me and win and get a judgment against me, then he could go looking for assets that I have in my personal name, right? Or in states, even in entities in states that aren’t, you know, friendly to the investor. And and he could get a judgment and then go domesticate that judgment in that state and say, You know what, this guy owes me money. He hasn’t paid me and I won in court, bah, bah, bah. And he has a house in the Socialist Republic of California. And even if that house in California is inside an LLC, it doesn’t matter. I can foreclose on the shares in the LLC or the corporation, and I can get that asset. Okay? Now as Garrett Sutton explained, and again, I’m not an attorney, I gotta say that I’m just speaking from my own personal knowledge as a layman. So check this out, you know, reach out to Garrett Sutton or any attorney that knows this field and ask them for details. I’m just giving you the concept. Okay. But if if I have that property in a Wyoming LLC, as Garrett explained when he was on my show, and he’ll probably be speaking at our upcoming meet the Masters again in January, he’s spoke with the last two of them, then they can still get that judgment. But until I take the asset out of the LLC, they can’t attack it. Okay, when it’s inside that LLC, it’s protected. If it’s in California, it’s not if it’s in another state. That’s only friendly, it’s not. Here is another big complication about all this stuff. When you start crossing state lines, it gets very complicated. And this is why you really need to talk to Garrett or another attorney and get this straightened out if you if you even go down this path because it’s a it’s a fairly complicated path. Okay. What happens is say you have the Wyoming LLC, but you know, Wyoming is not a place we’d necessarily recommend to buy properties right there. We haven’t found like good investments there. So you might buy properties in Tennessee, or in Florida, or Indiana, Indiana, and or wherever we recommend. And then you have those properties owned by your Wyoming LLC. Well, then you have to register most of the time. I don’t think you have to do it in every state, but in most states you do. You have to register it in that state like it’s doing business in that state. And then the question is, what laws apply they laws of Indiana, or Florida or Texas or Tennessee or the laws of Wyoming? And these become murky, complicated issues. Okay. Now, note that I’ve only talked about the internal threats so far. Now let’s talk about the external threat. Okay. So the external threat is here I am doing my podcast and I explained the you know, the guy in Kansas City and you know, he could sue me and get a judgment and so on so forth, right? Or that property tax lien company in Georgia or South Carolina or wherever the heck your base because it’s complicated. They’ve played the game, right? Just like we’re talking about right and so I don’t even know where they really exist to tell you the truth. Okay. But the external threat is you know, you’re driving your car you get in an accident, the insurance doesn’t cover For all of the damages, or you say something on your podcast, or you run a business, or you’re a doctor, and you have a high liability business or whatever, right, that’s the external threat. So the external and the internal threat are different threats. And with the internal threat, the tenant suing you, for example, they can still get that asset from the inside, okay? And the best way to protect the asset from the inside is to either have that asset, you know, own through a bunch of structures or just have good insurance. Good insurance is the best asset protection if you asked me, the other one is a high loan balance, so leverage the assets. So there’s not much equity in the asset to get the external threat is a different set of circumstances. Okay. So again, this stuff is complicated. It’s most people just massively oversimplify it. They go to one of these these Disgusting in my opinion Mills, that I’ll just sell you a bunch of entities and they don’t really consider what you’re doing. You know, you need someone to thoughtfully consider this stuff with you. Okay. And the other thing is once you set up all these entities, then you got to start keeping everything separate. And there’s like governance, things that you have to do and follow some formalities and, and, you know, you got to maintain them, and it’ll cost you money every year to maintain them. You know, it all can be done, but I’m just saying, you got to really think it through. Okay, so, how’s that for an answer? I know I didn’t answer it. But did I confuse you?
Clay Slocum 48:38
Start with the start.
Jason Hartman 48:39
Yeah, it’s a it’s a start to the road down confusion and complexities. So there you go. And then the other problem is, if you put your properties inside of LLC s, it’s going to be harder to refinance them later. Okay. That’s a whole nother ball of wax. Oh, it’s also harder to insure them because the insurance becomes a little more complicated to okay. Okay, so why don’t your tax? No, let’s let’s take your tax question clay. Okay. So tax question. So if you really want to learn about taxation, there are certainly many courses out there that you can buy and things like that. And I don’t have one to recommend, unfortunately. But h&r block, teaches courses. And I was gonna take one several years ago just because I wanted to improve my own knowledge. But the problem is they’re not focused and they’re not targeted. They’re mostly just how to fill out the forms. Okay? They basically teach you how to become an enrolled agent, basically. Right? And so they have courses, but one of the best ways I think you can learn about this stuff is to simply buy a software like TurboTax or, you know, there’s many others out there too, right. And you can buy one of those software’s and try doing your own tax return. I’m not saying that’s the return you’ll want to turn into the IRS, but just by going through the exercise of us Using the software, you’re going to learn some stuff. I have not done this, but I think it could be a good education. The other thing you can do is you can just listen to my podcast. And if you haven’t listened to some of the interviews I’ve done with tax experts over the years, go to Jason Hartman calm and use the search engine there and find those interviews and just listen to them and they will help you and you can reach out to those professionals and talk to them and ask them questions. I will tell you one that I did not have a very good experience with is Kohler. Okay, so I had them do my taxes one year and I did not like the experience at all. I found his law firm to be a little bit better than that, but you know, had some issues there as well. But tax wise, I didn’t like my experience. Okay. I hope he doesn’t sue me for saying that. You see how my business is external threat. But you know, I mean, I like him. He’s a nice guy and all but I just did not like the experience using his tax firm. We’ve interviewed some others on the show that, you know, I’d recommend had some good experiences with If nothing else, you can learn some things from them. Okay, and just learn some things by listening to that interview. Does that help? Does it make sense?
Clay Slocum 51:17
Yes. Yeah. No, it does. It does.
Jason Hartman 51:20
Okay, good. Good stuff. Well, Clay Slocum, our client, thank you for bringing some of these issues up sharing some of your research. I appreciate it. The power of compounding. Very important. Don’t like like Robert Allen says the old saying, don’t wait to buy real estate, buy real estate and then wait. And I just want to wish all of you happy investing. To you clay and to all of our listeners. And thanks so much for coming on and sharing your story
Clay Slocum 51:49
today. Thank you. So
Jason Hartman 51:53
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 of any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
