Investment counselor Sara joins Jason Hartman in this Flashback Friday episode. They talk about the Memphis market and set expectations for potential investors. Jason and Sara also discuss the price ranges of  A, B, and C class properties, having the right mindset and remembering that every property is an individual case.

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. This show is produced by the Hartman media company. For more information and links to all our great podcasts visit Hartman

Announcer 0:26
Welcome to creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine self made multi millionaire who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities, this program will help you follow in Jason’s footsteps on the road to financial freedom, you really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:08
Hey, welcome to the creating wealth show. This is your host, Jason Hartman. This is Episode 512 512. And I’ve got Sarah here with me. She was in Memphis and Jackson, as you heard on the last show, and she is our top investment counselor, and has been with me many, many years and has lots of insights. And I’m always trying to twist her arm to get her on the show. Sarah, welcome. How are you? I’m great. I have a little bit of a Memphis hangover. What does that mean?

Sara 1:41
Oh, well, you know, we flew in late last night and just a busy busy weekend. Lots of fun, lots of learning. So just playing a little bit of ketchup today.

Jason Hartman 1:52
Good, good stuff. Yeah, you’re really was a good weekend, you know, we did three days in Memphis. And one day in Jackson, Mississippi. As all of our listeners who listen to the last episode, we recorded the Jackson, Mississippi, just as we were going out to look at properties. So now having spent the entire day yesterday looking at properties, we have some impressions to share with listeners. And I’ll start because I don’t know if you want to start. So shall I start on my impressions? You should start. Okay. All right. So my impression is that Jackson is a good, mostly C class market. Now, of course, there are some beautiful areas in Jackson, that can be a and b class markets or property types. But in Jackson, I mean, you know, the stuff we saw with our provider there was, I think a solid C, maybe c plus class neighborhoods. And of course, as is almost always the case, those properties have really good cash flow, at least on paper, but more demands in terms of management, they really require a little bit more attention. So again, it comes down to the concept of my commandment of the 10 commandments for successful investing my commandment about financial planning, which is very important, and that’s commandment number four. But also, part of that is not really financial planning, because financial planning would involve things like what is your risk tolerance as an investor? You know, are you willing to take large risks? Are you very conservative, are you somewhere in the middle where you want to allocate some of your portfolio to higher risk properties that could appreciate more and have more appreciation potential, but the cash flows not as good and, and then another, and then you know, your time horizon, your investment goal, whether it be capital appreciation, cash flow, tax benefits, income, but then another part of that is really your own psychology, your own personality as an investor. And for that, I would really say that, you know, the, the properties we have now in Jackson are good properties for someone who wants to or is willing to, I should say, maybe nobody wants to. But, you know, for someone who number one has experience with investing, and they’ve, you know, they’re they’re not new to the game, and they’re also willing to pay a little bit more attention to their portfolio, because of the type of tenant quality that you will most likely be dealing with. And you know, those C class tenants, or even c plus b minus tenants, not always every case is individual, but they do require a little more attention, and most of the time, and so that’s really the thing I wanted to convey about Jackson. I liked it quite well. But again, these are not brand new. Homes in yuppie neighborhoods, we have homes like that to properties like that, that make good income properties. But you know, again, cash flow not as good at least on paper. Sarah, would you say? That’s a fair assessment?

Sara 5:11
Yeah, that’s a good assessment. I think that Jackson has some potential. I like the provider, I had a great time, you know, we probably looked at, I don’t know, eight to 10 properties. And, you know, my takeaway was that of those eight to 10 properties, there was one that I thought I would buy this, you know, this looks like a, you know, a good clean property, you know, better neighborhood, nice curb appeal. Still not a cookie cutter, you know, neighborhood, but just a good solid rental property. And so, you know, we discussed after me giving that feedback to the provider, you know, we discussed the possibility of being more properties like that. So, again, depending on your risk tolerance, you may be interested in the lower, you know, $50,000 price point properties, but I don’t see Jackson as like a big growth market, I don’t see that you’re gonna get, you know, any big rent increases, they’re very good for cash flow. But I think a little more risky in terms of the amount of maintenance you might have, I mean, you might get lucky and have a good long term tenant. And that’s one thing, you know, he didn’t say it was that these tenants tend to say, a lot of section eight, you know,

Jason Hartman 6:21
let’s talk about that for a moment. Okay. So the reason the tenants tend to stay is because a lot of them are on some sort of government assisted housing program like a section eight, okay, when you’re on the dole, what real motivation Do you have to change anything? And you know, when you’re when you’re the type of renter who’s paying $700 a month rent, and living in a property that our investor can buy for 45, or $50,000. Moving is a pretty expensive affair, you know, of course, you’re going to do it yourself, of course, you’re going to have to rent a truck, but you’re going to have to change your utilities over you’re going to have to put down new deposits. You know, these these are not in that class of property. They’re not commonly, I mean, it’s pretty rare, actually, that they’re upwardly mobile type of tenants. So they do stick around. And that’s the one nice benefit. And, and, you know, again, on this tour that we went on, on Monday, yesterday, it was you, Fernando, and my mother, and I, you know, my mom has lots of experience with section eight government assisted tenants, and I joked when we were in Memphis at the creating wealth seminar, I joked and in front of the whole audience, I said, Yeah, my mom complained about her section eight tenants all the way to the bank. Because as I was growing up and hearing her bitch and gripe about section eight, you know, she was she was creating a lot of wealth for herself. I mean, a single mom who, you know, basically started with just one property and without another and got another and, and, you know, she would complain about the section eight stuff, but, gosh, it’s dependable, you know, it’s dependable. And the interesting thing is, is that you didn’t, I’m just gonna say you did not love what we saw at all. You said one out of eight, I think that you liked my mom didn’t like it that much, either. And my mom is pretty scruffy. You know, she’s the extreme do it yourselfer. Oddly, she has, I guess, as much of a dichotomy and her her personality as I do, probably because, well, I’ll get my hands dirty, and dive into something and do it myself too. And I don’t mean fixing our properties, because I don’t do that anymore. Although I used to do that a little bit. And she’ll do that. But then, you know, she lives in this beautiful mansion, you know, really likes really, you really nice things and buys designer clothes. So it’s just kind of a contradiction. It’s a funny thing. But Fernando, though, was the was the one who was different as I and I was just kind of trying to be quiet and get the feedback from all of you and throw in my opinion later. Can you imagine that? That I didn’t insert my opinion, but Fernando really liked it. I mean, you know, he was like, Oh, yeah, I like this, you know, because government rent, very dependable, and you know, great cash flow. But again, now he’s got four years of investment experience under his belt with a big portfolio. And it’s diverse, you know, he’s got some class A stuff, he’s got some class B and some class C. And his tolerance is willing to accept those more attention sucking tenants, you know, that just need more attention, because there are people that aren’t upwardly mobile usually. And it’s just a different type of manager.

Sara 9:39
Yeah. And I think that initially, these properties will outperform some of the nicer areas because they are higher cash flow. But I don’t know I would be curious what the, you know, five year picture looks like generally

Jason Hartman 9:55
speaking, and you’re right, because generally speaking, you I mean, at least historically, and we don’t know if this will hold that way. But historically, the nicer properties tend to have better appreciation. There was an old rule. I remember many years ago, listening to one of the many real estate gurus I followed for many, many years in my in my 20s. Okay. And one of them said, if you’re in a neighborhood, and you’re driving around looking at properties, and you see someone jogging, get out, you don’t want to invest there. Because that in other words, his point was, it was a yuppie type neighborhood. And by the way, I’m hope everybody knows when I say yuppie, that means young urban professional, right? That’s an acronym from from like the 80s. And so, you know, he would say, don’t invest there, because he liked that C class stuff. Fernando liked it. My mom used to like it, I think, now she isn’t in favor of it, because he just doesn’t want to deal with the government. It depends, right?

Sara 10:57
Yeah, I mean, I think at some point, you want to have a good healthy mix of ADC properties. So I think the key is to be a seasoned investor before you, you know, like you said, have experienced before you go into, you know, a C type, property or properties. And I would definitely encourage you to go visit the market.

Jason Hartman 11:21
So what Sarah saying, I think, is very good advice. There are three basic types of properties that we talked about a, b, and c. And the A properties right now. Now, of course, this is subject to change, because everything’s dynamic and fluid. But right now, if we’re taking a snapshot in time in the markets that we recommend, Sarah, would you kind of agree that we could define some of this by price range? And I’m going to throw out some numbers. Let’s see, if you agree with them, you know, we don’t rehearse anything or talk about anything much in advance. So it’s all it’s all raw in here it is. Okay, I’m gonna say that in a property in the markets that we recommend, is anywhere from 120,000 to $170,000. For a single family detached home, would you agree with that?

Sara 12:12
It depends on the market, I don’t think you can compare all of our markets to each other, like, like tech, that would be a good, like a Texas property. Indianapolis maybe, but like, in Memphis, for example, we saw a lot of Memphis properties, right. So they’ll define sometimes a $90,000 property, you know, which is significantly less as a property. And then you know, some people will distinguish, distinguish in a property versus in a area, you know, so keep in mind, it’s a matter of opinion.

Jason Hartman 12:45
It is it is, and it’s in, it’s going to change. You know, if you’re listening to this episode, two years from now, which I know people love to do, they go back and listen to the old episodes. And of course, we do flashback Fridays to at least currently. So I’m just trying to give the listener some sort of idea as to what that means and in different providers to find them differently to, and it depends where it varies, but right, if so you say so let’s

Sara 13:13
separate it, let’s separate it by the linear markets and the hybrid market. So the linear markets, I think the price point could be like 90 to 120 130,000 would be your area,

Jason Hartman 13:25
but let me explain that for us. Okay, so three types of markets, linear, cyclical, and hybrid. We don’t recommend cyclical markets. So we’re not even going to talk about that. We do have mostly linear markets, the markets that just chug along and appreciate slowly. And then we have some hybrid markets who have a little bit on the edge, they get more toward the cyclical, but not much. They still make sense from a numbers perspective, and you can still get decent cash flow. So okay, Sarah, that’s a good way to look at it. So the let’s What are right now? Yeah, in your eyes, the strict linear markets, they would be what Memphis, Jackson,

Sara 14:04
Memphis, Birmingham, Indianapolis. Those are the top markets that I would say are linear and

Jason Hartman 14:12
hybrid markets that we have right now. And we’re not really doing much business in these markets because they don’t really work that great. Okay. But at times we kind of move in and out of them. But I’d say a hybrid would be Austin, Texas, Denver, Colorado, Phoenix, Arizona. Atlanta, is becoming a bit of a hybrid market because it’s Atlanta has appreciated 10% in the past year and maybe even Dallas. Yeah, Dallas is becoming a bit of a hybrid to you know, now you don’t think Houston is moved there at all or has any hybrid ish nature to it. Do you

Sara 14:47
a little bit. You know, we talked about that market this weekend. There’s definitely a buzz about Houston still, you know, and I know we talked about the oil prices, but I talked to a lot of people People that still think Houston is hot. So it’s,

Jason Hartman 15:03
it is hot in the summer and it’s humid too.

Sara 15:07
Well, I mean, it seems to have appreciated quite a bit over the last year, which is good for our clients that bought there a year ago. Right. You know,

Jason Hartman 15:14
I’ve been very happy with my Houston properties for over many, many years now. And so, you know, Houston, I did kind of issue a yellow light warning when oil prices were really, really crashing, they seems to they seem to have, you know, found a maybe a floor will remain to be seen. So this is not a matter of you can say this is linear. That’s hybrid always for sure. Okay. It’s a 50 Shades of Grey issue. Okay. Boy, see that. Just saying that on my show is going to increase my shows transcripts, SEO value. 50 Shades of Grey, okay. Yeah, see there, there were key. That’s folks, that’s known as keyword stuffing. Okay. And then if I say other keywords like Harvard University, and Enron and you know, then I put a stock symbol next to it. That’s all the search engines will love us. Right? Okay. So, linear hybrid. Okay. So linear, I would say, oh, they’re linear markets. Let’s talk about Mario’s St. Louis, Kansas City. What else? I think we sent we sent them all. We said all the ones that were recommending at the moment, okay, sure. There’s some others, Columbus, Columbus would be a good, good. So anyway, that’s the idea. And what Sarah is saying, and I think this is excellent advice that you’re giving the listeners is that get your first experiences in a and b property types. And then once you’re comfortable as an investor, so if you’re new, we want you to start with a and b. And once you’re comfortable, and you’ve got, you’ve built up some mental muscle, okay, in this whole investing game, then dip into more of the C type properties because the C’s can be great, but you know, they are a different a bit of a different animal. Okay, so now and

Sara 17:10
keep in mind, once you have a big portfolio of properties, your portfolio, you know, will cover your vacancies and your maintenance items, and you don’t feel it as much, you know, when you when you’re just getting started. And maybe you have, you know, five properties, you’re still kind of building the momentum. And so those vacancies and maintenance items that come up hurt a little bit more. And again, it goes back to the psychology of investing. So

Jason Hartman 17:37
so if you have a portfolio and you have 10 properties, and two are vacant, or to our a Now remember, there’s a difference between economic vacancy and physical vacancy, say, two are economically vacant, which means the tenant is in them, but they’re not paying. Okay, so you only have a 20% vacancy loss in that situation. Whereas if you only have two properties, and one is vacant, you have a 50% vacancy. And if you feel a lot more, and you know, we’ve had lots and lots of clients on the show over the years, in fact, we got some great client interviews coming up, who have been on the show recently, and I love it when they share their real world experiences, you know, we call it the good and the bad and the ugly, okay, the good, the bad, the ugly, you know, one of your clients, Sarah, who’s been on the show a few times. And that’s Bob from Colorado, by the way, hey, Bob, you said, you’ve purchased nine properties from us so far, and eight have been great. And one is a problem child? Well, you know, if you had nine kids would probably be about the same.

Sara 18:43
You know, what I’m Bob, he’s like the perfect example of somebody who has the right mindset for investing. And he does well with some of the, you know, C area properties. And I forget exactly what he said to me. But, you know, he was kind of telling me about that one bad property. And he said, Well, geez, I learned a lot.

Jason Hartman 19:05
So that’s the thing in life you Do you at least if you learn something from it, you’ll be in good shape. But the idea is to learn on our experience, not your own whenever possible. You know, because we sort of aggregate all these client experiences, the good, the bad, and the ugly, and we share them with you on the show. Okay. And I think all our listeners know, we’re just super transparent about that. The ones we don’t always share are the ones that are the clients really shot themselves in the shoe. You’re never gonna let me live that one down. I’m not because you’re so funny. You know, you have a few of those. You had a couple of others too, but very, very good. Good stuff. Okay. So anyway, there we have summed up Jackson, Mississippi, I think for our listeners for the moment. So if you’re interested, Jason, you can compare and A, B and C properties. And eventually when we come out with our new software, we’re going to actually be grading them properties right on the software. So, you know, but you know, I think most of our investors, if they’ve been listening for a little while they can identify an A, B or C property. But actually, we didn’t finish that price criteria thing. So I want to try and take a stab at it. So hybrid markets 120 to 170 is probably likely, though not always, to be an a property. Okay. And now there’s some overlap. And I’m gonna say 80,000 to 130,000. You notice there’s overlap, right? That’s intentional. 80 to 130,000 is probably going to be a B type property. And then 40,000. Yes, we do occasionally have these $40,000 properties, although we don’t recommend them too much. Those are more for more experienced investors usually. So I’m going to say 40,000 to 90,000. Could be a C type property. But I don’t know, Sara, maybe you’ll disagree with me. I mean, I you know, we’ve seen people get a properties for 75 80,000 sometimes do, right? Yeah, sure. And 2010. Oh, well, well, oh, yeah. I’m gonna be I’m sorry. Did I say I think I think you’ve got it narrowed down pretty well. Okay, good. So I just wanted to give that kind of guideline, and then you can tell by looking at them and all kinds of other counseling that we can help give you. But hey, let’s talk about rents for a moment. Okay, I’m looking at an article in new wire. This is really, it’s amazing how this happens. You know, what, what goes on in the housing market, is you always have prices take the lead when it comes to increases, and rents follow prices, and they follow them rather slowly. So the title of this article is rents increasing more quickly than home values in many markets. Well, duh, I could have told you that. Okay, that pretty much always the way it happens. And even when home values level off, or are declining slightly, you’ll still see rents increasing, because those are the lagging indicator, they always lag the prices. And here’s one of the core differences between commercial property and I’ve owned several commercial properties, apartment complexes, and residential properties, meaning under four units, four units and under, okay, when you get over, when you get over four units of five plus that’s considered commercial property. And other types of commercial property, like retail centers, office, buildings, industrial buildings, that type of stuff, the core difference, and one of the reasons I really like housing better residential property better is because it’s illogical. It doesn’t follow the income. So if you’re going to sell your apartment complex, Now, granted, this, of course changes, but generally speaking, the price or the value of that apartment complex will be determined by the income it produces. In a residential property, you listeners, as investors, you determine the value of the property based on the income it produces. But remember, you’re a tiny percentage of the market, the rest of the world out there, even people who consider themselves investors, but they’re really speculating. And they’re they’re just gambling idiots. Okay, gambling fools. Most of them. They don’t consider income to be a big part of the deal. And if you want to know more about this, you can watch the HGTV show called income property. I mean, I don’t know Sarah, I don’t know why they call it income property. It doesn’t produce enough income. I would call that alligator property. That’s property that loses you money. Jason, I think you and your mom need your own reality TV show. You liked hanging out with my mom, didn’t you though? She’s pretty. She’s pretty funny. Fun.

Sara 24:01
She’s a lot of fun. Just so the listeners know, we had a three hour drive from Memphis to Jackson. Mom was driving and she was letting

Jason Hartman 24:09
me DJ part of the way so I got to control the music a little bit. Not always. Yeah, she gave Jason a hard time about his music selection. We put on YouTube now who listening does not like you too, right? I mean, that song one by you too. That’s got to be one of the best songs ever. It’s like Stairway to Heaven. It’s great. Okay, it’s a phenomenal song. Sorry listeners if you don’t like it, but you’re crazy. You’re like my mom. Okay, cuz that’s an awesome song. Check it out. Go to your computer your device and type in one oh n e by YouTube. It’s awesome song. Anyway, I put that on in my mom is Oh no, that his voice sounds to ugly. Mom. That’s Bano. Big time and she goes, I know who he is. He’s always talking about all these causes and political thing. Cuz that’s how she knows who he is. Okay. But yeah, I got to control it a little bit, but not all the way. But she’s funny. She’s, she’s very opinionated, isn’t she? She is. apple doesn’t fall far from the tree. Okay, I guess you’re right about that. Okay, back to rent increases, I’m gonna just cut that one off. So it says residential rents in the United States are continuing to rise up 3.7% year on year to 13 $162 a month. Okay. So that’s, they don’t say if that’s a median or average, okay, but in keeping pace with housing price growth of 3.9% over the same period. So of course, these are nationwide stats, and they’re almost meaningless a little bit because all real estate is local, of course. But anyway, it is what it is, here’s what I want you to notice that listeners are the 1362 as the average or median, I’m not sure, because the article doesn’t say, interestingly, that most of our rents fall slightly below that. And one of the things is Sarah and I were talking about A, B and C class properties a few minutes ago, one of the things that I want you to consider as an investor, and one of the things that we generally do with sometimes we kind of break these general rules, okay, but it’s a general rule is that when we are in an area, we want to be investing in properties that are slightly below the area’s median price. And we want our rents that we’re charging our tenants to be slightly below the median rent in that area. Okay. Because that always, I think, and this is just an opinion, it’s not exactly data driven, but it’s just kind of from so many years experience doing this, it always gives you the opportunity to catch a bargain Hunter, on the way up or down in the socio economic ladder, or it gives you a chance to have your price of your property and your rent on your property pulled up a little bit, just by generally what they’re comparing you to around around in that market. Okay, Sarah, is that a fair statement?

Sara 27:18
Yeah, that’s a fair statement. And the other thing we were discussing was, you know, rent increases per the type of property. So, you know, in a property might have a higher percentage of rent increase annually, then your see property

Jason Hartman 27:34
that is true, and see the key there. And the same goes for appreciation. By the way, generally, these are all general things we’re talking about nothing’s nothing’s set in stone. But generally speaking, what you’re going to see on those a properties is that you have more potential for value increases, and more potential for rent increases, because the people that are living in those properties are purchasing those properties from you, they’re living in there as a renter, or purchasing them from you when you sell them in the future, hopefully, 27.5 years down the road, because that’s how long I generally want you to keep your properties, you know, they’re more upwardly mobile, so their incomes, they’ll find a way to increase their incomes, and be able to pay you more. Okay, and so and so that’s why I mean, I always say try and target, but it depends on the market, try and target a 4% annual rent increase. So that just means if you’re charging $1,000 a month now, hopefully in a year, you can get $1,040. Now, what is going to make that possible or impossible, here are some of the factors. And again, every property is individual. So this is not a conclusive concept. But what is going to make that possible or impossible is what are the interest rates at the time that you try to get the rent increase if rates are very low. And at the same time, if financing is plentiful, and easy to get? It’s going to be very hard, if not impossible for you to get a good read increase. You may have to even when the market was really, really hot in 2004. And things were going crazy. And we were obviously in a bubble time. And I predicted the end of the crazy expensive market in late 2005. And I was right about that. I predicted that just completely accurate and it’s Yeah, you know, I was saying that in all kinds of seminars. I had vociferous arguments with Orange County, California realtors, and, you know, they’d say I was crazy prices are gonna go up 25% next year, I said, No, they’re not. We’re at the end. This is about it, everybody’s tapped out. But what’s going to depend is you know whether that renter has another option. And remember if rates are low, That renter can go and buy. And that means prices are probably going up. And if they’re paying attention to the housing market, they’re feeling a sense of loss a sense of scarcity. They’re feeling like, you know, they’re having conversations like, Hey, honey, if we don’t buy a house, we might be left out. And so they’re likely to be hunting for a house. This is the upwardly mobile tenant, but the section eight tenant who’s living off the government, okay. They don’t usually, you know, they’re not, they’re not delaying gratification. They’re not pushing themselves as hard. They’re not exerting themselves as much usually. Okay, this is a general statement, of course. So, them saving money for a downpayment, even if the downpayment is only $3,000. That’s a big deal for them to do that. And so it just depends. If interest rates are very high, and the option to buy something isn’t possible, than the likelihood is, you’ll be able to get higher rent increases, but the value of your property won’t usually in that type of market be appreciating, in fact, it might be softening and depreciating, but your cash flow will be increasing. So this is the kind of that three dimensions of real estate concept. Sarah, what do you add to that? Um,

Sara 31:21
no, I agree. I mean, I don’t have a lot to add to that, just based on my own experience, I, I agree that nicer properties tend to yield a little higher rent increase. And, you know, my view properties, you know, they’ve been kind of slow and steady. And I have yet to venture into the C class, which is why I have my opinion on you know, the Jackson C class properties.

Jason Hartman 31:49
Now, I want the listeners to know something now, is that when you see an article, or you hear stories about rents increasing in a place like Los Angeles, for example, and maybe you hear me talk about this article, and you hear me say, quoting the article that rents are up 3.7% year on year, and in this article, prices are up 3.99%. Now remember, this includes entire nation, okay? If you’re here’s one that’s interesting. In this article, it says of the 17 metro areas where rents are growing more quickly than home values. The biggest differences are San Francisco with rents up 14.8% year on year, and home values up 9.6%. So that’s San Francisco. Okay, well check this out. Well, Kansas City rents are up 8.6%. And the price is up 4%. One more in Pittsburgh, okay, I used to live in Pittsburgh as a little kid. rents are up 6.3%. And prices are up 4.3%, respectively. So what does that tell you? It tells you that in high priced markets like San Francisco, I use the example of La before I just glanced down the article and decided to read that little clip from it. You know, those rents are so out of sync with values that it’s absurd. I had one of our people on the show that does some video production and podcast editing for us. His name is Patrick, and he was on an episode, maybe two, three months ago. If you want to find that episode, just go to Jason And type Patrick in the search bar, and you’ll find him. He lives in San Francisco. And he lives right in a prime area in a rent controlled house that he pays I think 20 $300 a month for and it’s worth about $1.5 million. And his wife is a trademark attorney or an intellectual property attorney, I should say, you know, he’s a great guy. And they’re basically trapped. But oddly, they’re not trapped in a bad deal. They’re trapped in a great deal. I mean, when you can rent a $1.5 million house for 20 $300 a month. You know, he says that they think about moving and they kind of want to move. But their deal is so good that they’re crap. How did they get that deal? I want that they got it in 1997. And they’re and so their landlord just hasn’t raised the rent. They can’t it’s rent control. Yeah, so it’s the Socialist Republic of San Francisco, just like the Socialist Republic of Santa Monica. down south, okay. And these these these rent control, it always leads to shortages and disaster and you know, it’s every socialist communist program never admit they never work. I mean, history is replete with examples of this, of course, right? So they’re trapped. But if their rents went up by 20% next year, they would still be getting a phenomenal deal. You see what I mean? That’s what I want the listeners to understand. These are why these stats are so misleading. It’s because the rent to value ratios and high priced markets, whether they be Miami, LA, San Francisco, San Diego, New York, Boston, you know, whatever, just any market that’s high priced around the world, those rents are so far behind prices, they’re lagging so much that it wouldn’t matter. If they had a huge rent increase, it’s still a terrible deal for an investor. Because if you buy a new Prime property today in San Francisco, and then you turn it into a rental, you you could pay $1.5 million for that property. And because that renter hasn’t been in there for years, and hasn’t been benefiting from these very limited rent increases, that the rent control laws require, you know, you could maybe rent your place for 5000 a month, or maybe even 6000 a month. But that deal still stinks. Because, you know, for $6,000 a month, I mean, that should be a $600,000 value property, not a $1.5 million property, without 1%. rent to value ratio target. So that’s what’s so misleading. And I’ll just remember Sarah, that years ago, like 2004, there was the Los Angeles Times article, and it just shows you how stupid the media’s and how they mislead people. It talked about the 10 best and the 10 worst rental markets in the country. And it said, if you’re a landlord and investing in Oklahoma City, you’re really out of luck. Because the average rent there is only $763. You know, that’s not exact, but that’s about what it said, okay? And if you’re a landlord in Los Angeles, you’re doing great, because the average rent is like 16 $100. But they did they failed even consider the price of the property in Oklahoma City versus the price of property in Los Angeles. Actually, it’s the reverse was completely true, that article was absolutely 180 degrees wrong. But most people read that, and they think, Well, I better invest in Los Angeles than do yet it seems so obvious, is obvious. But you know, you got to be listening to the creating wealth show and listening to my podcast, to really know, you know, we try to get you know, this is not exactly sophisticated stuff we’re talking about. But compared to most of the world, and even investors with a lot of money, don’t let it fool you that people with a lot of money are sophisticated. Sometimes they are most of the time, maybe they are but not always, you know, they, sometimes a lot of money makes you kind of careless, and not pay attention to things. So I guess the point, the take home point is with everything we’ve talked about today’s era, is that everything is an individual case. Right? It’s all every property is individual, every investor is individual, every tenant is individual. And you really got to think through the numbers. And think through what type of investor you are, what type of psychology you have, and all of that think but more importantly, act. Actually, that’s the best advice you’ve heard all day, folks. Because thinking will not make you any money. Only taking action will make your money so so be sure to get your investment portfolio going. And if you’ve got it going, make sure that you are always always always expanding it. There’s an old saying for investors. And you know, of course, not all states have escrow, but in California and other states you use escrows when you buy a house, and one of the sayings is always be in escrow. In other words, always be buying something, you know. So if your escrow lasts about, you know, 45 or 60 days, you know, that means you’re buying six properties a year, always be in escrow always be acquiring something that has made people incredibly incredibly wealthy over over the course of history gotta acquire assets, you got to control assets and I just have to say no, we’ve gotten a little long here and you know, what’s new? So much for 20 minutes, right?

Sara 39:26
You guys have got to come to Jason’s creating wealth seminar. I mean, you know, I, I go and I sit in the back of the room, you know, every year twice a year you’ve

Jason Hartman 39:37
been but you’ve been to like 100 and some of them probably by now.

Sara 39:40
This is my you know, this month is my eight year Platinum property anniversary. So you’ve

Jason Hartman 39:45
been with me eight years and we’ve put up with each other that long, huh? We have we may actually like each other now. You know, I do like you.

Sara 39:54
Oh, how sweet. Hey, we did ride in a car for three hours together. Not Many people can do that.

Jason Hartman 40:01
We gave Fernando and my mom the front seats. And we were in the back just hanging out. DJing from there. Yep. karaoke, more like karaoke, right? karaoke? Yes. Yes. Bye bye Miss American Pie, drove my Chevy to the levee. We did sing that one remember?

Sara 40:18
I yes, I do remember that. So you know, but back to the, you know, seminar, you have to stay plugged into these events. There’s nothing like going to one of Jason’s live events, sitting in a room full of people that are like minded. I mean, I get pumped up every time I just network with our own clients, and you know, our new providers. And it’s, it’s just really an incredible experience. So, you know, I was sitting back there this time thinking, Man, there were a couple of people that really wanted to come and couldn’t work out their schedules. And I was really feeling bad that they didn’t make it because it was just, you know, very inspiring.

Jason Hartman 40:54
You know, Sara, that I want to comment on one other thing that you told me a couple of weeks ago, every once in a while, we get someone who starts listening to the podcast. And they’re skeptical, the sounds like it’s some big show, and everything is contrived, right. And you know, I understand, listen, there’s a lot of shysters out there. There’s a lot of scam artists out there. But we’re real people, we’re a real company, we’ve been around for a very long time. You know, if you’re skeptical, here’s the best thing you can do, come and meet not us meet our clients, because they are in the room, you’re going to meet people who are real people that you can talk to without us there, you can go have coffee with him, you can go have lunch or dinner with him, you know, without us. And you can hear their real experiences. Our clients who have been investing with us for years, still come to our events, they repeatedly come over and over again. And I always feel like I’m getting up there just totally repeating myself and thinking they must be bored. And not maybe they are a little bit, but they still come and one of the big parts of our events is the networking with other investors, of course, you’ll get to meet us to an our team, but but I think it’s really more important, you’re going to get to meet our clients. And you know, maybe, I don’t know, help me with this one, Sarah, but maybe 30 or 40% of the room is a client? In other words, they purchase one property at least. And then somehow and then, you know, 60 70% there, they haven’t purchased anything from us yet. would they? Would that be about right? That’s my guesstimate. Yeah,

Sara 42:37
that’s a fair statement. I mean, you know, some people are coming back for me, it was some people buy, and they’ve never met us in person. And then you know, your goes by and they’re ready for more deals. And so they’re coming out to tour properties, but they’re getting the education too. And so, yeah, and then some of the clients that come out have been to several events. So it’s, the thing about the seminar is that there’s a lot of new content, even though it’s the same philosophy, and you know, the same overall message, everything changes every year things change, you know, and having the lenders come up and talk about these changes. And, you know, it just, it’s endless. Yeah,

Jason Hartman 43:17
I, you know, there’s one more thing I want to say, before we let everybody go today, you know, we’re always going longer than we think we’re gonna go. But when you start investing, and when you start talking to people about investing, and when you even talk with the providers, we refer you to, okay, whether it be our local market specialists who provide properties in areas, whether it be our lenders, our legal advisors, and we’ve got a whole team. So you know, our slogan is the complete solution for real estate investors, we can refer you to pretty much everybody you need to make this happen for you. But the thing I do want to say, is, be careful who you listen to, don’t just go off far afield. We are the objective ones who provides referrals to all these different services. Just don’t, don’t make a mistake by just listening to some, you know, half baked advice. One of the worst areas of half baked advice that I see, by the way, are real estate investors who, you know, we talk about the 10 commandments, you know, you might follow that, but it’s when you go, and you buy a one off property, a one off deal. One of the huge resources that we offer is that we have such a big volume of customers and a big volume of business is that we have leverage over these service providers. And I just see people that go and you know, in one of the form groups I’m in, you know, people were talking about, oh, you know, some guy’s got three properties that he’s going to liquidate in McAllen, Texas. And someone tagged me like I shouldn’t Look at this, no way, I don’t care. We don’t do one off deals, we do deals based on relationships, where, where our providers have a big stake in, in our referrals continuing, and our clients being happy with the results. So I’m telling you, if there’s one thing to avoid, it’s the one off deal syndrome, because you’re just never going to get great treatment in a one off deal. All right, everybody. This was just kind of an open raw conversation today. So I hope you don’t have an interview after No, no interviews. This is this is the show today. But listen, go to Jason Check out the properties, check out the educational products, the blog articles, if you’re not a member, yet for a whopping 100 120 bucks a year, by the way, we’ve been a lot of people have been becoming members lately. So that’s great. You can get on those monthly members only Jason Hartman University calls and those are, those are really a great resource. Anyway, we just thank you so much for listening. Thank you to everybody who came out to our Memphis property tour. And it looks like our next property tour, although it’s not totally confirmed. We’ll be in Atlanta in probably late July. So listen to more on that. We’ll do the creating wealth seminar and the property tour at that event as well. So more to come on future shows and on the Jason website in the event section. Thank you so much for listening, happy investing to everyone. Thanks for joining me, Sara. Thank you.

Announcer 46:37
What’s great about the shows you’ll find on Jason is that if you want to learn how to finance your next big real estate deal, there’s a show for that. If you want to learn more about food storage, and the best way to keep those onions from smelling up everything else, there’s a show for that. If you honestly want to know more about business ethics, here’s a show for that. And if you just want to get away from it all and need to know something about world travel. There’s even a show for that. Yep, here’s the show for just about anything, only from Jason or type in Jason Hartman in the iTunes Store.

Announcer 47:17
This show is produced by the Hartman media company All rights reserved for distribution or publication rights and media interviews, please visit www dot Hartman or email media at Hartman Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate or business professional for individualized advice. opinions of guests are their own and the host is acting on behalf of Platinum properties, investor network, Inc. exclusively.


Today’s guest is a listener of the podcast, Ian Kimbal. He asks Jason Hartman about owning apartments versus single-family homes, protecting yourself from liability when you’re young, and the best ways to screen property management companies. They also talk about real-estate specific resume and having a bank account for real estate activities.

Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman

Announcer 0:13
Welcome to creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine self made multi millionaire who not only talks the talk, but walk the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom, you really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 0:48
Welcome to the creating wealth show. This is your host Jason Hartman. This is episode number 529 529. We’ve got a good listener q&a show for you today. Our listener Ian is calling in with some questions. We’ll be with him in a moment. But first couple of notes on upcoming episodes. Wednesday will be a 10th show and we will have the world famous Bob Proctor, author of few great books very big on the speaking circuit was also in the very famous little short film called The secret. And you’ve all heard of that. His latest book is the ABCs of Success. He’s also author of you were born to be rich, so he’ll be on on Wednesday. And for flashback Friday we’re going to talk about multi generational wealth preservation with Katherine McBean, author of get rich stay rich pass it on Monday Next week, we’ll have yours truly talking about something or other I haven’t exactly decided what. And then the following Wednesday for Episode 533. The famous economist Laurence Kotlikoff is back on the show with us to discuss Social Security, how you can maximize that. And it’s kind of amazing, you know, this is not something I think about at all. I’m really just knowing that Social Security won’t be there for any of us in any legitimate way. I know. We have to kind of think that way because it is so mismanaged along with our government in general. You know, he’s got a New York Times bestselling book right now on maximizing Social Security, there really are some interesting tricks of the trade on that, that I was certainly not aware of, I don’t think much about it at all. Because I think God, if I actually need Social Security, when I eventually, someday do qualify for it, I am not doing very well. I plan to be extremely wealthy by then not having to think about Social Security, but interesting point. And he’s also of course, going to be with us. He’s done the most extensive studies really, on the 200 and $10 trillion time bomb. So he’s going to talk about that. And then the following Friday for Episode 534. We’re going to talk about some interesting Wall Street stuff, the collapse of Bear Stearns, look forward to those shows.

But as we dive in today, first of all, I am not broadcasting from my closet, the place with great sound with padded clothing everywhere. That makes the sound really good. I am broadcasting from my guest bedroom. How does it sound today, I’m not on my good microphone. So of course, it won’t be as good in that respect. But I think the acoustics in this room are fairly good. Given that I am sitting on top of the unmade guest bed with those a great, a great memory foam. So that’s got to be fairly decent for sound even though I’m not using a good microphone for this one. I was going to record this introduction last night. And I just wanted to kind of sleep on it and process my thoughts and emotions a little bit. And I just got to tell you, we finish last night or yesterday afternoon really our inaugural kickoff for the venture Alliance mastermind group. And I am just I just got to tell you, I’m so honored and I am so moved by the people that we had attend this last weekend. It was really just a phenomenal, phenomenal weekend. And what was interesting about it and I you know I I never really do events like this where it was a really just a very intimate event. It was a very interactive event. It was not the usual thing where I’m giving a presentation. This one was much more interactive. Of course I presented a few times on a few things, a few different investment deals. We had our Analysts come up with the analyst Oliver for the venture Alliance who is analyzing deals and looking at them. We had hot seats, that was really one of the highlights, people, investors come up and talk about whether they want to get out of the corporate world, or they want to increase that real estate portfolio size, or how to manage their real estate portfolio better. A couple of them even talked about starting a business, so that they could supplement that with their real estate portfolio. And really, we just, we just went over some very interesting ideas. We had a guest speaker come in, really our very first, I think our very first paid speaker at any event, who did a really interactive exercise to help everybody get to know each other better with with some very, some very telling questions. And, and that was really good. Friday evening, really, before all of that we ate dinner at a just a fantastic restaurant that is 50 years old. It’s called Mr. A’s. And it’s at the top of a high rise building in San Diego. And it’s just, it was amazing. You know, of course, all of us real estate investors were thinking, well, this, this restaurant is a tenant, on the top of this building, it’s been there for five decades, five decades. And that building, obviously has been there more than five decades, couldn’t be less, right, because the restaurants been at the top.

Real estate is just so wonderfully stable. That building has been sitting there producing income for five decades for its owner. Just think about that, you know, these these rental properties. They are such a stable, wonderful, historically proven asset class, the most historically proven asset class in the world. So that was really great, really nice, beautiful view of San Diego, San Diego Harbor, the city lights etc. You know, Saturday, we had our presentations that I already talked about, I’m kind of jumping around here. Saturday afternoon, we had a couple hours of free time, people went shopping, hung out by the pool, whatever. And then Saturday evening, we met and we got on a beautiful brand new I mean, you know, not completely brand new, we weren’t the first people to ride in it brand new, but pretty much a brand new, beautiful sailing yacht, a 50 foot beautiful yacht, we had some food delivered by a professional caterer. We ate and we drank and we talked, and we cruised around San Diego harbor where there was almost no wind, just very, very dead. But we did actually have the sails out and we motored for a little bit of it and sailed for a little bit of it. Then we went out in the famous Gaslamp district did a little bar hopping. That was fun. And then Sunday morning, we met again, had breakfast together, did some presentations, I talked about a few different things. We did a couple of hot seats, and we weren’t going to go paragliding. But once again, the same thing with sailing, there wasn’t enough wind. So instead of doing that, we went for a Segway race, you know the the famous segway scooter. We rode around La Jolla, beautiful La Jolla on those. And then we went and we had lunch at George’s which is the Georges ocean terrace. Just a spectacular view of La Jolla and La Jolla Village and the harbor and then the ocean. That was great. Then we walked down to the park, did a couple more hot seats, and shared some great ideas. And then talked about our next meeting for the venture Alliance, which is tentatively or thinking of tentatively the last weekend of September for that. And we were talking about different places we might go and different locations for the venture lions meeting. And so I am just honored and moved, you know, the people are, are the ones who make it work. And we have such wonderful clients. You know, they’re so bright. They’ve got so many great ideas. They’ve just got so much to share their such sharing, giving hopeful, wonderful people.

So I just want to thank everybody who attended for being married was a fantastic kickoff. I really couldn’t have been better, except for the weather. You know, San Diego and it’s June Gloom. That could have been better, I would say. But otherwise, it was just a spectacular, phenomenal. Excellent, wonderful weekend. So thank you to everybody who attended and made it happen. If you’re thinking about the venture Alliance, check it out. We do have a formal application that we finally created. Go to venture Alliance mastermind and check out what we have to offer there. Maybe we’ll see you in September at the next meeting. So zoom Bob way, you know Zimbabwe Of course, the poster child for bad central banking and government. Well, their exchange rate now is 35 quadrillion Zimbabwe dollars to one US dollar. That’s how bad their inflation was. Now remember, the Zimbabwe dollar and the US dollar when it began were near parity. They weren’t far off from parity, which means you could exchange one Zimbabwe dollar for one US dollar, and now it’s 35. quadrillion. Okay, that’s quadrillion. I don’t exactly know how much that is. But is that 1000 trillion? Is that what a quadrillion is? It’s a big number. Okay. Amazing. That’s what happens with bad governance, and with bad central banking, an amazing story there and get ready, because we are eventually going to have some real inflation here in the US. I’m looking at a 2009 article that I posted in one of our groups. It is from 2009. From the Wall Street Journal, it’s got a picture of a helicopter Ben, our former Federal Reserve Chair Ben Bernanke. The article is entitled back in 2009, six years ago, get ready for inflation and higher interest rates. Now, we certainly had some inflation since 2009, no question about it. But it got relatively tame the last couple years, so but it’s just we all know, it’s just got to be baked into the equation. And as prudent real estate investors, we’re going to profit handsomely from that, from what I call inflation induced debt destruction. And in addition to the inflation induced destruction, we are going to profit from the packaged commodities investing aspect as well, or the assembled commodities investing aspect, which I also talk about. So, income property, being a multi dimensional asset class, provides so many wonderful opportunities for that. Without further ado, let’s get to our listener today, who’s got a few great questions that I tackled with him. And let’s go to Ian and then Wednesday, I will look forward to talking with you as we have Bob Proctor on for a 10th episode show where we talk about a general success and better living topic, not specifically about real estate, but a general better living topics. So that’ll be Wednesday. Let’s get to our listener with a call in and some good questions here. And let’s talk to Ian. Here we go.

This is Ian Kimble show listener calling in with some real estate investing questions. Ian, welcome. How are you?

Guest 13:00
Thanks, Jason. I’m doing great. Doing great. How are you?

Jason Hartman 13:03
Good. Good. It’s good to have you on the show. Thanks for sharing your questions with listeners, what we always find is that, you know, when one person has the question, usually a whole bunch of other people do too. So I appreciate you being willing to put your questions out there. And, you know, we can educate our broader group of people to so

Guest 13:22
fire away. Absolutely. I mean, the biggest struggle I would say I’ve been having lately as you listen to another couple podcasts recently by by Kevin Buffini had one person on his show, I forget the name offhand. But he essentially said, you know, rather than jump right into, you know, real estate feet first with whatever it is that you can afford, just for the sake of getting a deal done, you know, it’s better to wait a year or two and really, you know, secure that deal. It’s going to make a big impact on your life and kind of give you that initial leg up. So we kind of use the analogy of instead of, you know, buying maybe that single family property for the 15 or 20 or $25,000. downpayment, you know, you should be looking at a, you know, even 12 bucks or 20 unit and I know, for some people, it’s Oh, yeah,

Jason Hartman 14:15
okay, so Whoa, that’s a that’s a great question. Okay. So first of all, I before I answer that question, I want to give the listeners a little background. So you heard me on another show, you heard me being interviewed on Kevin show, and then you’ve been kind of you said, binge listening to my podcast, right. And, and really learning a lot from that. So that’s great. Thank you for listening. Gosh, I think that, you know, I thought you were going to say, it was a question of, you know, do I buy my first single family home as an income property now, or do I wait and keep looking for a better deal? Okay, now, that question, I think, would have been a little harder to answer than the actual question, which is, you got this advice from someone, or you heard this other guy talking on the show saying, you know, don’t do a single family home, just search around, save some more money and wait and try and buy a you know, like a 24 unit apartment complex in status. Is that the question basically?

Guest 15:21
Yeah, yeah, more more or less? That’s easy.

Jason Hartman 15:24
That’s a terrible idea. I mean, that is a terrible idea. Talk about Have you ever heard the expression Baptism by fire? I have. That’s exactly what that will be. Okay, you know, listen, I started out with what I started out with a condo, a little crappy one bedroom condo. That’s how I got started when I was 20 years old, my first property. And I’ve told the story on my show many times, so I won’t, like bore everybody with it. But suffice it to say, you know, it was kind of a bad experience, in a way, my first deal because I had to evict the, the crummy tenants that I had in there. And, you know, I didn’t know anything and know how to do it, then. And I just kind of, you know, I kind of learned by on the job training, if you will, but had I gone into and I’d say, I waited till I was 26. Okay, and I purchased a 16 unit, little apartment complex or something, or even a four Plex, you know, I would have missed out on all that inexpensive education. What I mean is that, you know, your, the size of your mistake is limited on a on a single property, the size of the mistake can be really big on an apartment. And the other thing I would say about and you know, not only that the opportunity cost of missing the return on investment, I would have made on you know, those single family properties I did earlier in my career in my investing career. apartments are complicated. I mean, they are a different animal. And I actually did a an episode, I’ve talked about that subject many times. But I did a full episode on it, where I was actually interviewed on someone else’s show, but I played it on my show on the creating wealth show, where we compared single family homes to apartment buildings, and believe me, you can make money in both of them. But the apartments are like running a business, they are complicated. There’s just a million little moving parts, you know, there’s just a lot more to it. Okay, good old, single family home was a pretty simple concept. And it’s a pretty reliable investment. You know, of course, you know, you got to buy it, right, you got to buy it in the right area, you got to you know, you gotta know what you’re doing a little bit. But, I mean, does that make sense? What I’m saying so far?

Guest 17:48
It does, it does, you know, and that’s kind of the the struggle admin you’re faced with is to, you know, obviously, with the bigger units, you can get economies of scale. And you know, if you have 25 doors to, you know, a single bigger apartment building, that’s only one roof, you have to replace every 30 years versus 25 roofs you have to replace, they know you talk Yeah,

Jason Hartman 18:11
but that one roof is a bigger roof, and it’ll cost you a lot of money. Okay? It’s not that simple. See, one of the things you got to remember when you’re thinking about apartments, and listen, I like apartments, I’ve made a lot of money and apartments too. Okay, I’ve got a lot more experience in single family, maybe, maybe that’s why I kind of like it better. I don’t know, the thing you got to remember in apartments is you’re running a business. And every business has a reputation. And, you know, your apartment building has a reputation. You know, people will go online and they’ll write reviews on Yelp about your apartment complex, right? In a single family home, nobody does that. Okay? They’re not gonna say, I live at 123 Elm Street. And I think the manager is a jerk, you know, it doesn’t happen. But your apartment is like a complicated enterprise. Okay, it’s, you know, you’ve got all these people that are right next door to each other, and they’re talking to each other, and they’re talking about the management, and they can do rent strikes. And, you know, they can like kind of gang up on you, you know, it’s a different animal. It’s a really different dynamic and an apartment, okay? And they’re there. They’re just, you know, the laws that protect you in the world of single family home because you’re when you’re when you’re one to four units, which is what our government considers to be. And, and a commercial property is anything four units or four units and above or above four units, I should say five units and above. And, and residential is four units and under. And when you’re in residential, you’re not expected to be an expert. You’re not expected to know what you’re doing. You know if you get into a problem on campus, commercial property, hey, you’re a businessman grow up, you know, it’s like, the judge will not care, he will not listen to your sob story. But in a residential property, you’ve just got a lot more rights, there’s a lot more disclosure obligations. You know, it’s it’s just a really a much simpler type of investment. Okay.

Guest 20:21
Makes sense? Yeah, absolutely.

Jason Hartman 20:24
Now, now, can we rephrase your question? Because here’s what I thought you were going to ask me when you started to talk, I thought you were gonna say, Well, sure, I’ve got the money to buy my first property today. Should I buy it? Or should I wait until I can find a better deal or wait until I can save a little more money or wait until I can get a little more educated? And here’s the way I was gonna answer that question is, number one, I can’t really determine how educated you are. But if you have the money to buy your first property, and you have at least 4% of the value of the property and cash reserves that you’re not going to touch, that’s your emergency fund, okay? You don’t use that to, you know, cover a little things, you’re gonna keep it in the bank, not spend it on, you know, paying for something in your regular personal life. You know, you’re you’re ready to go. I mean, I wouldn’t, I wouldn’t wait. Because when you Wait, you’re you’re making a prediction on what’s going to happen, you know, will prices go up? Will they go down? Will interest rates go up? or down? Will rents go up or down? And the likelihood is, you’re going to get left out on the cold without that debate? Okay. So that’s what I thought you were going to ask me when you start.

Guest 21:43
Yeah, absolutely. And that totally makes sense, man, I’ve seen things in the news that suggest, you know, reads could be getting higher again, and the not so distant future. And, you know, obviously, money is pretty, pretty cheap to borrow for, for the time being. And, you know, so I definitely had been looking at some properties on the site, you’re in kind of the Memphis and Little Rock region in, you know, anywhere from 80 to 150,000. region. There don’t think maybe you don’t always open to to any class, but I’m sure it’d be easier to start in kind of A or B class, out of the gate, but definitely, you know, makes makes a lot of sense. I guess from, you know, the way that people typically, structure and there’s been a lot of podcasts that talked about, you know, setting up entities or LLC, or just having umbrella coverage, and I had been calling around to a couple, you know, insurance companies and a brokerage company I’ve worked with in the past, I think for you know, $150,000 property in Memphis with like a $1 million liability policy, they quoted me a 1300 and 1400 a year. All in including the obviously the property insurance. But yeah,

Jason Hartman 23:04
right. Right. Right. And, you know, the real question is, do you even need that much liability insurance? I bet you could kick that bill down to, you know, seven or $800 per year. I mean, I haven’t shopped for an insurance there. Well, I actually have I just bought two properties in Memphis, what am I talking about? See, this is what happens when you get so busy that you don’t even remember what you did two months ago, yes, two months ago, I bought a couple of properties in Memphis, but I don’t honestly remember what my insurance cost was on them. But, you know, this is another thing that I kind of find, I think you might be falling into this, like, caught. It’s kind of a trap. You know, frankly, Ian, where, you know, everybody’s like telling you, oh, well, you know, you got to set up a couple of LLCs. And, you know, you’ve got to get all this insurance. And I mean, you’re a young guy, right? Aren’t you in your 20s? Did you tell me that?

Guest 24:01
I’m 28? Yeah. 28. Okay.

Jason Hartman 24:03
So, you know, you probably I don’t know, I could be wrong. You could be you know, you know, the founder of Facebook? Well, I know you’re not but you know, but you could have a ton of money, right? But probably your age, you don’t have that much to protect yet. Okay. And granted, what I just said there is kind of a specious argument anyway. So I want to point out the error in my own statement, and that is that, you know, if you got a judgment against you, it goes into the future. Okay. So you don’t want to get a judgment against you. Okay. I, I have a personal experience with this. And I’m kind of fighting a battle like that right now over a developer that I sued, actually and lost the first round and I’m fighting with them what’s on appeal now, but that’s another complicated story for another show. And so you don’t want that to happen. But I will tell you that look, I in this business for well over 20 years, okay, and everybody talks about, oh, you know, the slip and fall off suit, right where the tenant slips and falls, and they sue you, I have never heard of that actually happening in real life, ever, like no client of ours has ever told me, you know, the tenant is suing me really over anything. I mean, I’ve never had that happen to me, you know, they’re only really, if you have good insurance, and you make sure that your insurance doesn’t lapse. In other words, the policy doesn’t expire. And, you know, you forget to renew it, right? There are really only as far as I can tell, and like, I’m not a lawyer, I have to make that disclaimer, I’m not an attorney. So I don’t know, every little in and out of the law. But, you know, just from my own experience, and from what I hear from clients, there are really only two major areas where you could really create liability for yourself owning properties, outside of, you know, outside of the stuff you can easily insure around. Okay, here they are, as I see them. Okay, this is my own opinion, you know, there could be something else I’m not thinking of, but here’s the here’s what, how I see it. Number one is discrimination. Of course, we have fair housing laws in the United States, and you cannot discriminate against people, there are what’s called protected classes of people. You know, there are things like race, age, family structure, sexual orientation, you know, things like this, all the stuff that’s kind of obvious, right, that most people wouldn’t discriminate anyway. Hopefully, they wouldn’t. And, you know, discrimination is something that occasionally landlords get sued for. And, you know, if you’re using a property manager, you’re one step further removed from that kind of liability, okay, and you’ve got to use a reputable manager. Okay. So that’s one area. Now the other area, if there is a safety or security concern on that property, so let me give you an example. If the tenant says, My door lock broke, and I can’t lock the door, and if you just kind of ignore that, and you don’t do anything about it, and someone walks into that house, and Rob’s your tenant, or you know, assaults your tenant, heck, you’re gonna have a problem, okay? Because Because you were negligent in your duty as a landlord to provide a safe, secure property. Okay, you’ve got to respond within a reasonable amount of time and take care of business. And that’s reasonable, right? So, you know, just do those things. And you’ll be okay. Yeah, yeah. Hey, I wanted to mention something before I forget that. I think I found the episode where I talked extensively about single family, residential property investing, versus apartments. And that’s at Jason It’s Episode Number 362, of the creating wealth show. So Episode 362. And I’m pretty sure that’s the episode where I talked quite extensively on that topic. Okay. 362.

Guest 28:18
Yeah, go ahead. Definitely be checking that out. So I’m on the topic of, you know, safety or security issues, then if, obviously, seems like you’re a big proponent of third party management companies. And I can certainly buy into that. I mean, I guess, in terms of who, you know, would would then bear the brunt of that liability issue. If a tenant did make a case about some sort of security issue. You know, and the property manager didn’t handle it as they should have been, without absolve you of some liabilities as a landlord that that still traces back to you.

Jason Hartman 28:54
That’s a great question. I’m glad you asked. There’s something called and again, I’m not an attorney, but this is what I know. Okay. There’s something called the law of agency. Okay. And your property manager would be acting as your agent. And I just learned this in real estate school, you know, many, many years ago. And the, the law says that the principal, in other words, the owner is responsible for the actions of the agent. So ultimately, yeah, you could be liable. And that’s why you want to use reputable agents, okay? Because if you have a really stupid agent, or a really reckless agent, or a really fly by night agent, they might not care and they say, heck, I don’t like purple people, you know, or, you know, I, you know, whatever, and they could get you into trouble. But the likelihood is you’re going to have a reputable agent, the likelihood is they’re going to not want to lose their license, which they could for something like that. They’re they have a business that they want to run, they don’t want to get sued, they’re gonna get sued too In that case, right? They’re gonna get sued first, and you’re gonna get named as well, and that lawsuit probably. And, you know, there, you’re just, you’re just not going to have that problem, you’re going to make it a little more arm’s length from you. So even though technically, you have that law of agency issue, I think, and I, you know, I’ve never litigated a case like this. So I don’t know. But, you know, I think you you do push that liability on to that agent to some extent, but, you know, ask a good lawyer.

Guest 30:34
Right. Absolutely. Cool. So, you know, I, you know, certainly another question I’ve been facing is, when it comes to, you know, I’m from are from New Hampshire area, but you know, working in sort of the Greater Boston Market, and obviously ruled out buying property up here a long time ago. So certainly do see a lot of value in the whole rent to value ratios and some of the more untapped markets that you’ve mentioned, such as, you know, the Memphis and a little rock in Indianapolis region. So when it comes to working from the sort of long distance relationship, do you typically secure, you know, say, insurance or financing from a lot of local brokers or banks in the area? And, you know, for someone like myself, who’s just starting out, do you have any recommendations when it comes to kind of establishing that trust or getting them to take that leap of faith in you, and you maybe don’t have the initial track record of half a dozen properties to kind of put in front of them and say, Hey, have I’ve done this before, you know, been successful and turned, you know, a profit or cash flow each month to, you know, to pay my debt services?

Jason Hartman 31:49
Is that for a lender, you’re asking, in terms of getting financed?

Guest 31:52
Yeah, primarily for a lender? And then I guess even for back to the topic of insurance. And then to to kind of full the third question is that, you know, if you’re talking about multiple properties, would you recommend, and I’ve heard, you know, even going as far as open up a different bank account, for each property that you buy to, you know, certainly make it easier to keep track of,

Jason Hartman 32:13
I don’t know that you need to, you could, if you will, you know, it’s all that’s all kind of personal opinion, how you want to organize yourself, right. But I would have, I would recommend a separate bank account for all of your real estate investing activities. Now, maybe you’ll have three properties, or 20 properties, and you’ll manage them all out of that same bank account, I would not commingle your property stuff with your personal stuff. It’s just a, there’s no law saying you can’t do that. I mean, in terms of your checking account, okay, you do have to keep things separate on your tax returns. But it’ll just make it easier when you go to do your taxes. And, of course, income property is the most tax favored asset in America, it’ll make it easier when you do your tax returns to kind of manage that and see the expenses. Right. So. So that’s one reason. Now, of course, if you if you do ultimately set up an entity, and you have, you know, one LLC that owns one property or a few properties, okay, if you do that, you’ll be in a position where you have to have separate bank accounts, because every entity needs to have its own separate bank account. Okay. So that’s that question. Now, your other question before that was about, I think it was a lender question about, you know, having a resume, if you will, in order to get financing. Was that your question? It seems sort of convoluted.

Guest 33:39
Yeah. Yeah. Basically, along those lines of, you know, even if you you have the cash and the credit score, you know, kind of coming to them with that blank slate still, even if we are talking about, you know, only $100,000 property.

Jason Hartman 33:55
Right, right, right. Okay. So here’s the thing about that, since the financial crisis since the mortgage meltdown that we had, you know, what, eight years ago now, I can’t believe it’s been that long already. It’s kind of amazing. It’s really the first time that I saw lenders putting kind of a lot of stock in the concept of the owners, or the investors resume. Okay. With that in mind, there’s not much of a resume issue in terms of buying single family homes and getting normal Fannie Mae, Freddie Mac type financing, but you do like if you’re going to buy an apartment building, especially if it’s an out of state apartment building, they’re going to ask for your resume, they’re gonna want to know, have you managed property from a distance before? have you managed an apartment building before? You know what kind of you really they really will ask for your actual resume? You know, you’re thinking, gosh, this is like a job. You know? And the lenders you know, they want to know that the person they’re loaning money to To has some experience and and that’s why it’s it’s good sometimes to partner with people, because when you partner with people, you can either ride on the coattails of their experience. And that’s how you can get your own kind of like having being a protege and having a mentor, right? Or they can write on yours. And you could, you know, you can sort of add to each other and complement each other with kind of your combined experience. Okay,

Guest 35:28
yeah. Have you? Do you have an opinion on any of the CC Iam courses?

Jason Hartman 35:34
Yeah, I do you don’t worry, I have an opinion on everything. Okay. I’ve been known to be slightly opinionated. So CCM is a series of courses. That is, it stands for certified commercial investment manager. And I, when I was 1920 years old, I actually started down the path of I wanted to get my CCIE. And I started taking courses like that. I remember one of my instructors, I think, his name, gosh, this was a while ago, I think his name was Dennis McKenzie. And he wrote some of the real estate textbooks for CCI em, and some of them for the state of California test prep and in continuing ed, and that was really fascinating to me, I did learn a lot by doing it. But I gotta tell you something, I think it’s just sort of funny commercial real estate. That world has this image of where you, you think that Oh, these commercial real estate brokers and by the way, the CCN courses for brokers, it’s not really for, it’s not really for investors, per se, although investors would learn some stuff from it, you know, it’s a, it’s a designation that you want to get if you’re a broker or a salesperson, okay, selling those properties. And the image you have in as a as an, you know, I was a real estate agent, while I still am. But back then I was, you know, like really aspiring to be a successful real estate agent. And the image you have is, oh, I’m going to do these huge deals, I’m going to be selling giant hotels for $85 million, and huge shopping centers for $46 million. And all this kind of stuff. You know what most of those commercial people really do?

Guest 37:23
only imagine they show

Jason Hartman 37:24
little crappy office spaces and retail spaces for people to lease. And they really, you know, I mean, a lot of them just don’t make much money at all. I mean, it’s funny, when I lived in Newport Beach, I would say I had about probably 60 friends in the commercial real estate business. Okay. 66 zero, I would say something like that. And a lot of these guys are living on Balboa Peninsula, which is a area in Newport Beach. It’s kind of like the party zone. And they’ve got three roommates, they all drive like Jeep Cherokees, and they’re broke. They’re, you know, it’s like when it comes their turn to buy around the drinks there. You can’t find them anywhere. It’s not what it seems I’ll put it that way. But But um, you know, of course, I mean, that said there are commercial real estate brokers that do do very big deals and make lots of money, but it’s a law of averages, right, the law of the 8020 rule, right, the prayed opens principle.

Guest 38:29
Definitely, definitely.

Guest 38:32
Cool. So I got a couple remaining questions won’t be in terms of your sort of your recommendations on screening, property management companies, I would imagine some of your investment advisors or, you know, advisors for some of the different cities that you guys work in would have kind of a preset list of their own. But when it comes to, you know, looking at, you know, the vacancy rates of some of these management companies or the clauses that they use in their contracts to make sure that any you know, owed money past a 30 day window becomes their liability and not yours or making sure they don’t sneak in sales commissions into the contract or that they’re, you know, if you’re only paying them on, on kind of the gross collected rent not on, you know, any vacant units, do you have sort of a guideline that you like to work off of when it comes to making sure you can trust the people who really are going to be that that face to your business for a lot of your tenants.

Jason Hartman 39:39
Well, yeah, that’s a that’s a hard one in and look, I will be the first to tell you that property management, it’s the hardest part of this whole thing. Okay. And talked on the podcast before Fernando and I are trying to develop a kind of a software and a system that will help people self manage their properties and you can self managed pretty effectively, you know, for our members that pay a whopping 120 bucks a year, okay, I do a monthly members only call, we got to raise the price of that thing seriously 33 cents a day is a little cheap. Okay. And anyway, we do monthly member calls. And we’ve done a couple of calls, and they’re all archived in the members section at Jason Where I’ve talked about how to self manage your properties. I’ve also talked about it on the podcast a bit too. It really can be done. But the the thing when you are dealing with a manager is number one, read the contract, the one part that bugs the heck out of me, is these discretionary repair issues. Okay, so let me explain that. So, there’s a couple layers to this, Let’s peel back the onion for a minute. Okay, these and by the way, these are great questions. Okay. So the first layer is that you’ve got to understand that a property manager has a responsibility to protect your property. Okay. So if a pipe breaks, and there’s an emergency situation, they do have the right, without, you know, maybe they can’t reach you, maybe they can’t get ahold of you, okay. And they do have the right to call the appropriate professional, in that case, a plumber and say, you know, stop the leak, you know, get everything stabilized. And then, you know, I’ll talk to the owner after that about, you know, how are we going to handle this, okay, and, you know, we’ll file an insurance claim, whatever, right. But you’ve got to understand the property manager always has the right to do emergency stabilization. We’ll call it like that, okay, to stop a leak, etc, right. Beyond that, though, the property managers all have this other discretionary repair clause in their contracts. And that discretionary repair clause can say, you know, we have the right to spend up to $200 per month, or $200 per incident. Okay, now, be careful here, because it could be per incident, or per month, and then the amount will vary. Some of our property managers and I have fought them on this, and I’ve told our clients not to do it. And, you know, they’ve written long emails to me explaining, well, Jason, you just can’t tell the clients not too late. Yeah, I can. Okay, I am on the clients side. Look, we love our vendors, we got to have good relationships with our vendors. But ultimately, the clients are what pay our bills here. Okay. Not the vendors, we can change vendors, but we got to have a loyal clientele. Okay, that loves us. And so, you know, I’m here for the clients. First and foremost, the vendors, after the clients, the clients come first, right. And, and so, you know, they have a clause in there that says they can spend up to $400 per incident. And, um, are you freaking kidding me? I mean, that’s crazy. Now, you got to understand, and this is why I, you know, even a great manager has a bit of a conflict of interest, and here’s why. You know, they’ve got to keep the tenant happy. They’ve got to keep the owner happy, and they got to keep themselves happy. Right? Okay. So the problem you have when you’re a property manager is, many tenants out there feel like they’re getting mistreated? Okay? You know, the Generally, the owner or the manager of the property kind of has the power, okay. So tenants will feel weak, and they’ll feel like they’re being abused sometimes. Okay, even if they’re not, they will just, you know, a lot of them have sort of an entitlement, Obama voter mentality, how do you like how I threw that in? Okay? This is why half the country hates me. Anyway, so they all kind of feel like that. And you know, they’ll go and they’ll write bad things about the management company online. And of course, the management company hates that, because, you know, they don’t want the reputation to suffer. And so to some extent, the management company will kind of sell the owner investor down the road a little bit, because they’ll try to please the tenant. And this is why this is why I kind of just like self management. And in my own portfolio, I do both. I self manage some of my properties, and I have professional managers for other ones. You want to know how I decide. I start with a manager. And then when the manager does something bad, I get rid of the manager and I self manage. I have some really good managers for my properties. And a really good manager is worth their weight in In real estate, I wouldn’t say gold, because gold is not a very good investment, it’s worth their weight in real estate, okay? And, and, and so a good manager can be awesome. And then there are the, you know, mediocre managers and then they’re the bad ones, okay? You got to understand the manager has this natural kind of conflict of interest. And it’s just part of the dynamic of everything, right, they want to make the tenant happy. They want to make the owner happy, sometimes it kind of feels like they want to make the tenant happier than the owner. And, you know, that’s kind of ridiculous. Now, what you find, if you self manage your properties, though, is that the the person, the tenant in your property doesn’t perceive you as some big company with an unlimited budget, and they know that you are a regular human being. And if they’re a decent human being, which most of them are, okay, most, the vast majority of people and tenants are very good people. There’s some bad apples, certainly, but they will feel the pressure of having to maintain a relationship with you. And that’s a good thing, because they will tend not to abuse you and ask for every little thing. But we’ve definitely found when there’s a management company, they ask for more stuff. Okay, you know, it’s just sort of like, this is some big, faceless company, what do I care? I’ve got some ants. So call an exterminator. You know, I’ve got, you know, lightbulb burnt out. I mean, I’m sort of overdramatizing it, okay. Now, you know, call someone to change the light bulb? Where is if they’re dealing with you, a lot of times the tenant will do that stuff themselves.

Guest 46:37
Yeah, that absolutely. Makes sense. And I guess, along those lines, for me, no. Last question or two to wrap up when it comes to that long distance self management, you know, or for any property, whether it’s self management, or managed by a third property? Will you always recommend still, you know, going out and seeing a property in person? Obviously, I know the importance of getting it inspected beforehand, and and all those other, you know, checklists prior to that, but do you do still recommend seen all of these properties in person before finally, pulling the trigger?

Jason Hartman 47:17
Yeah, great, great question. So I’m always going to recommend that our clients go and look at the properties before they buy. But here’s what happens in practice, they just don’t do it. Okay, they don’t do it very much, I would say that 95% of our clients just guessing, do not go to look at their properties before they buy them. And you know, when you get past this sort of traditional, local mentality that’s been around forever, you know, as far as real estate before the technological revolution that we’re in, you could kind of understand that, because everybody usually did things in their neighborhood. But the problem is their neighborhood may not be a good place to invest their own city may not be a very good place to invest. And even if it was the best place to invest, they still need to be diversified. Okay. And so most of the clients don’t go and look at their properties. But Heck, when they invested in the stock market, hopefully, they’re not doing that anymore. They didn’t visit the company, either that they were buying stock in. Okay, so it’s really just, you know, it’s just about the numbers, what is that property going to produce versus what you pay. That’s, that’s what this is about. I mean, I don’t much care what the house looks like, I just want it to be a rentable desirable property that is going to perform well. And I can figure that out from a distance, I can go on Google Earth, and I can look at the property from different angles, I can see what’s near the property. And, you know, you should do all of that stuff and deal with reputable people. And you know, you’re, we just haven’t had any big huge problems like that. You know, we’ve had a couple over the years. I mean, we’ve been doing this a long time. So you’re gonna get a couple things. I remember once years ago, a client who kind of was her own worst enemy, frankly, she was upset because she didn’t bother to look at the property on Google Maps. And it was like a block away from a train track. And so there was some train noise. But you know, the fact was, that there were, you know, maybe 100 homes right in that neighborhood. Also close to train tracks, okay. It’s not like people didn’t live there. They even lived closer than her house to the railroad tracks. Okay. Everything will rent at the right price. Okay. It’s not a question of, does that ruin the deal? It might just mean it rents for $50 less per month.

Guest 49:51
Okay, cool. I mean, I know I could go on for hours and hours and hours with uh, with questions, but those were definitely and

Jason Hartman 49:57
you know, I could do you

Guest 50:01
Yes, I do. Yes. Yeah,

Jason Hartman 50:03
yeah. Well, we we’ve been on 38 minutes. And these are great questions. By the way, I think I think a ton of people listening had a lot of these very same questions as you did. So they’re, they’re good questions. But, you know, I tell you, I had I not purchased that first property, when I was 20 years old. There’s just something that happens by what we’ll call on the job training. Because you bring a new, you bring a new person, you bring your A game, when your money is at stake, and when your future is part of that deal. So just get your first property going. Heck, if it’s terrible, don’t buy a second one. You know, it’s pretty good. It’s not perfect by any means. There are problems, there are frustrations, it’s just better than everything else. I mean, I just haven’t found anything else that even comes close, you know?

Guest 50:58
Absolutely. I will believe in that till till the day I die. And yeah, well,

Jason Hartman 51:03
hopefully, you’ll keep believing it after you have your first 10 properties or something. Right, exactly.

Guest 51:07
It’s gonna say, well, we’ll see if it changes once once. There’s a couple, a couple of houses to my name, but hopefully, hopefully, it stays that way. Good stuff. Wait,

Jason Hartman 51:16
it’s great. When did you become interested in real estate investing? You’re 28 now, and what do you do for a living? Did you mention that?

Guest 51:25
So I work at a digital advertising agency in the Boston area, and then here for the last four years or so, you know, back to when it first started as kind of a startup but growing up my mom’s side of the family. Her father, you know, when her relatives came over from Europe and you know, built 30 or 40 plus two units, residences in a suburb just outside of Boston and duplexes, right? Yeah, yeah, over the years, they’d sold some off, but you know, even when I was in high school, they probably still had at least 10 in the family. And, you know, every couple weekends, I would be going down with them to help rake leaves or put down vulture you know, paint walls when tenants changed over so it always been been kind of in in my blood and heard some horror stories, but also saw the the checks coming in each month or you know, that the big lump sum when they would find the seller property in an up market. So it’s always kind of been in the back of my mind, and I’ve you know, dabbled in, in the stock market certain these since, you know, since starting a job, but I’m looking for something, certainly something just more, I think, consistent and grounded. And, you know, it’s appealing to say the least,

Jason Hartman 52:39
yeah, it definitely is, it’s the most historically proven asset class in the world. So I am very glad you are discovering it at a young age. And I tell you, 1020 years from now will pass 10 or 20 years will pass in the blink of an eye I warn you, okay, you know, just get going start building your portfolio, get your first property, and then get your second and your third and it is amazing how fast you can grow your own little mini real estate Empire. So just get get started and just do it.

Guest 53:13
Okay, awesome. Sounds Sounds good to me.

Jason Hartman 53:16
All right. Thanks for the call. He and I’m gonna end the tape now. And we can just start wrap up off tape here. But listeners, I hope you enjoyed this. And that was Ian from we’re in New Hampshire. Yeah.

Guest 53:25
Yeah. down and down in Boston now.

Jason Hartman 53:27
Yeah, Boston. Okay. Boston. Can you say park the car in Harvard Yard for us. I can do it. Do it in a thick Boston accent. We want to hear it POC, the con hava Yod. Love it. That’s good. Alrighty, and thanks for joining us.

Announcer 53:42
Thanks a lot, Jason, really appreciate it.

Announcer 53:45
What’s great about the shows you’ll find on Jason is that if you want to learn how to finance your next big real estate deal, there’s a show for that. If you want to learn more about food storage, and the best way to keep those onions from smelling up everything else, there’s a show for that. If you honestly want to know more about business ethics, here’s a show for that. And if you just want to get away from it all and need to know something about world travel. There’s even a show for that. Yep, there’s a show for just about anything, only from Jason or type in Jason Hartman in the iTunes Store.

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


In this episode, Jason Hartman interviews a local market specialist from Memphis, Ryan. Ryan shares why Memphis is great for rental properties and the different levels of property available in Memphis. Jason also talks about a homeownership article from Time Magazine, government-assisted housing dilemma, and the evaluation process for finding properties.

Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman

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 1000s 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 1:03
Welcome to the creating wealth show. This is Jason Hartman with episode number 539. Thank you so much for joining me for 539. Our next will be a 10th episode of flashback Friday. So get ready for that. Remember, on the 10th shows we go off topic, we talked about something of general interest. But you know, it always relates back to money in some way, because that’s such a big part of the world, of course. And that’s what we’re here to talk about today. investing money, secure retirement, early retirement, or not really retirement, but freedom to do to live your life as you wish. So first of all, to that end, our Chicago property tour is coming up. We are meeting in Chicago, and I’ve got hotel information for you. few of you have signed up for that. And it’s a small group property tour. And so far, we’ve got an awesome crowd. So thank you so much for joining us, folks. Fernando and i, you can stay wherever you want, by the way. But Fernando and I are staying at this very swanky hotel. It’s called love bank, I think is how you pronounce that. It’s la ba n, qu E, we’ve got a group right there. And it’s an awesome hotel, you want to check it out, Google it, check it out, you’ll love it. It’s in Homewood, Illinois. And we’ve got a group right there of 171 per night, a little more pricey than our typical hotel of being like $130. But hey, number one in Chicago. Number two, this is an awesome looking hotel, it came highly recommended. So phone number 708-798-6000 708-798-6000, you want to check in on the 15th and check out on the 17th. And that is just next week. So this is coming up quick. All right. Also, for you venture Alliance members, remember you’ve got a big discount on that property tour. And we’re gonna tour by the way Detroit is confirmed. Okay, so if you want to join us, this will actually be a three city property tour. Now, we don’t have anything very formal in Detroit, the poster child for big government disaster can’t believe we’re even talking about going to Detroit. We’re not doing any business there. We’re gonna just check it out. We’re doing a little side trip there on Saturday, the 18th. So the plan is meet in Chicago, we are meeting there at the morning of the What is it, the 16th. And then we’re going to tour Chicago that day, we’re gonna have all our meals together, all the meals are on us, by the way, Friday morning, it will sweep over in Chicago, the 15th and the 16th. And then Friday morning, we’re going to drive over to Grand Rapids together. And we’re going to tour Grand Rapids that afternoon. And you know, maybe we’ll do a little breakfast on Saturday morning, if anybody’s staying longer. And then we’re headed out to Detroit. And I am leaving from the Detroit airport. So I fly into Chicago out of Detroit. That’s my plan. I’m just really looking forward to seeing you guys there. It’s the first time we’ve done this semi private, very small group property tour. So it should be a really good time. Okay, we’ve got a voicemail from a listener. And let’s play that. Let’s see what he says.

Listener 4:21
Hey, Jason, hope all’s well. My name is Roger. And I just want to say I enjoy your podcast and I look forward every week for the two episodes. I am your client. And I’m actually currently in the process of closing on my first property in Memphis, and really excited about that. And I plan on purchasing at least one income property per year. So as I embark on building an income property portfolio, I just wanted to understand a little bit more in depth about what it means to manage your property managers. I know you’ve touched on this subject, probably multiple times in the past. But I was wondering if we can spend a little bit more time talking about this perhaps in the intro section, or even in dedicated the whole episode for this. And if you can maybe provide some real life cases, examples from you, Sarah, Fernando, or even other investors who are willing to share that be awesome. And if you’ve spoken about this in the past, if you can maybe even provide the episode number, so that’d be great as well. Again, thanks so much. And I hope to see you soon again at a seminar or property tour. Thanks again.

Jason Hartman 5:35
All right. Hey, that was a great question, Roger. So thank you so much for calling in with that. And everybody, please use the voicemail feature, go to Jason Right on the right hand side, you can just leave a quick voicemail super quick and easy to do, just like Roger did. So that’s a good question. And yes, we have talked about that extensively. It’s sort of woven in, through so many shows. That’s what kind of makes it hard on the podcast to give you an episode number or several episode numbers, I will make it a point to do an actual show on that in the future coming up, where we talk about managing your property manager. Now, of course, we’ve talked also extensively, and I don’t want to, you know, Miss saying this one more time, about the opportunity to self manage your properties from a long distance. Again, I never thought I could do that. But it works out pretty well. So we’ll talk about both of those things. And I’ll make it a point to do an upcoming episode. That’s entirely on the managing your manager concept. In the meantime, though, if you just go to Jason, and you use the little search bar in the upper right of the website, and you just type in managing your manager, or property manager, you’re Of course going to see like a zillion occurrences of that and all of our shows and show transcripts and blog posts and so forth. There’s just ample advice in there in our back catalogue. So we’ll do another show on that, though, because we haven’t talked about it in a while. So I appreciate you bringing that up and look forward to an episode on that we will definitely definitely do it. Hey, before we get to our guest today that is going to talk about a Memphis property profile. I wanted to play a little bit of the audio from a CNBC piece. That’s pretty interesting about the market. And you know, as I’ve said, for quite a while now, the demographics coming at the rental housing market are nothing short of phenomenal. Maybe, quite possibly, in fact, I’m almost going to say just this is the way it is that they are the best they’ve ever been in history. So pretty phenomenal opportunities. And this video speaks to that. So let’s listen in and then I’ll have some comments on it for you. Again, this is Diana olek CNBC video very interesting.

‘Audio Clip’ 8:02
It is all about prices for both buying and renting home prices are still rising but at a slower pace than this time last year, not the case for rents which are at record highs in some markets, as demand far outpaces supply. Yes, we are seeing more new multifamily construction and deliveries of those units. But occupancy is now at an all time high despite predictions last year that more renters would turn into buyers. The key for buyers, though is twofold. First, the mortgage market rates are expected to rise slightly and new rules for lenders going into effect in the second half of this year, could stem access to credit, second supply housing starts are rising but at a far slower pace than demand. Now, builders are still trying to hold on to their pricing power, which is a lot easier to do when there’s slim supply. But some are starting to give putting up some lower priced homes, which could actually Stoke sales in the second half of this year.

Jason Hartman 8:57
So Isn’t that interesting? I mean, rents rising, housing prices rising, supply is constrained. And demand is increasing. Did I not predict this? Yes, I did. Of course I predicted it for a long time. And it is just I mean the next decade in the rental housing market. It’s phenomenal. It may be the best time in history. So I know a lot of you are thinking Gosh, I should have purchased in 2008 I should have been buying investment properties in 2009 or even 2010 or 11 or 12 or 13 or 14 last year and you haven’t gotten off the fence yet. And granted it was better than had you purchased then you would have made a lot of money by now. Okay, we all know that. But that’s all the shoulda coulda woulda we can beat ourselves up forever with that psychology. But we’ve got to just get in the game. Everything starts when we take action. So let’s get in the game and make it all happen. Okay. And you know, if you if you’ve already been investing, that’s great, increase the size of your portfolio, I think this is a good time to be picking up more and more prudent, sensible properties, not in the overvalued areas, because they’re definitely out there. But the markets, that makes sense. So go to Jason, click on the properties link, check out the properties we have. They’re phenomenal. You’re gonna hear about some in Memphis here with our guests today. But also, and by the way, this is a Memphis provider that we’ve been working with, it has not been on before. So I think you’ll like this one. If you’re joining us next week for Chicago, Grand Rapids, and our little optional side trip to Detroit, register at Jason For that someone just registered yesterday, we can still get in. And this will be a semi private tour. And venture Alliance members have a big giant discount on that, too. So if you’re venture Alliance, be sure you go because it’s a pretty great deal. Alright, let’s get to our guests. And let’s talk about Memphis.

Hey, it’s my pleasure to welcome Ryan, one of our local market specialists from Memphis, Tennessee, we’ve done lots and lots of business in Memphis, as you all know, we’ve talked about it, we’ve had property tours there, this has just been a really good market for us. If you’re looking for solid cash flow, and you’re careful about the areas within the city and the neighborhoods in which you invest, which we of course, will help you do that, along with our local market specialists, and guide you, you can really pick up some great deals in this market. We have lots of clients having very, very good experiences in Memphis. I own properties there myself, and it’s just great to talk more about it. Welcome. So what’s so great about Memphis?

Ryan 12:00
Well, we’ve had people investing in the Memphis area for many years, it’s not a new phenomenon for us. And so I think we’ve had a lot of attraction over the last four or five years, just because there’s been so many publications, target Memphis and talk about how great it is for investors. And so, you know, back in 2013, The Wall Street Journal rank is the number one city for buying rental properties. We were already working with investors in 2006, and 2007. So once you start getting these other publications and other gurus, start pointing people in that direction, you start getting a lot of questions about that. So I think it’s just been a hot spot for that you had CNN Money Magazine called Memphis, one of the 10, hottest housing markets in 2014. And a lot of that has to do just with the low cost of housing, low cost of living, and then how that works hand in hand with investors purchasing properties, that cash flow for them.

Jason Hartman 13:10
So give our listeners an idea as to, you know, one of the concerns they may have when they hear all of this great stuff about a market like Memphis, and many of the other markets we’re in as well, as they might be thinking, Well, you know, is it oversaturated? Are there too many investors in there, we have had that situation come up in some markets. One of them would be Charlotte, North Carolina, over the years, we’ve moved in and out of Charlotte, as it has been had a little saturation problem with investors. But Memphis, what we find is Memphis is like a renter city. It’s just really, you know, one person we were talking to set and I kind of love this, it’s sort of a funny way to look at it. But you know, I love Memphis, because everybody makes 40 grand a year, and they rent kind of that blue collar type thing. And you know, the the distribution centers, they’re like FedEx,

Ryan 14:05
they’re not gonna get up and move very easily. So these are fairly permanent fixtures versus information type businesses, which are very portable, right? That’s right. And so what we’ve had is you’re right, some of that is truth, even when they’re just in in it. We have about a 46% of our population rents in the Memphis area. Or if you look at the national average that hovers around 30% nationally, so we have an abundance of tenant base for your properties. We run a mid sized property management company with a little over 500 doors, and we consistently have rates of 5% or less, as far as the vacancy rates for our management company, which is just unbelievable. to continuously do that no matter what time of year it is, or Or you know, the amount of properties we have, that we’re currently managing, you have a lot of blue collar industry that provides a lot of tenant base. And we’re continuing to attract new businesses into the Memphis area, which has people moving in. And a lot of times, they don’t want to buy for that first one to three years to see if they’re going to stay in their current job, or just to learn the community. So always in abundance of tenants for your properties.

Jason Hartman 15:30
So what is it about Memphis that makes it such a renter oriented city? I mean, why it’s such a good deal. People say, Why don’t people buy? You know, why don’t they buy a home?

Ryan 15:42
Yeah, it’s interesting. When I first got into the business, I substituted as a leasing agent, when I first got my license. And I think that that was a great thing to do to learn more about investing. I’m an investor, just like most of the people listening to this either are or wanting to get into investing. And the reasons that tenants rent are multifaceted. Some of them are lifelong tenants. I looked at their credit scores, and I asked him, I said, Well, you know, you could purchase this home and pay less. Would you like to explore that? And their answer was, no, we’ve always rented did they have good enough credit to buy? Absolutely. And they literally preferred renting, they prefer renting. And they didn’t I don’t know, if they just didn’t fully understand the homeownership scenario, or you have a certain population that just wants someone else to take care of things. They don’t want to have to put a new roof on a home or to fix the air conditioner. If it were to go out, they would prefer someone else take care of those maintenance issues for world. Hmm,

Jason Hartman 16:51
interesting. That’s, that’s amazing. Yeah. So that so they actually said they’d prefer to rent. Okay. And do you have any other theories as to why that is? I have a few I’ll be glad to share with you. But I, you know, one is, maybe before you answer, I call it financial immaturity. You know, when I first got into the real estate business, and I was working with investors, and first time homebuyers, I mean, I was 19 and 20 years old part time going to college, selling real estate. And I was in Southern California. And, you know, I’d go out to the Inland Empire, Riverside, San Bernardino counties, and I would sell these government repos, FHA, HUD and VA repos. And in selling them, I would almost notice that when it was the first time buyer, not the investor, of course, it’s different for them. But when it was the first time buyer type mentality, they don’t need to take maybe a step back to take two steps forward, you know, they can always rent like a nicer place a little bit than they could buy. Now, back then, of course, interest rates were like, you know, 12 to 14%. Okay, so it was quite a different world. But you know, now amazingly, it can be cheaper, don’t sometimes you know, what, but but that financial maturity thing, it also includes saving up for a down payment, right? So, you know, even though the down payments are not that large, you know, if they’re 3%, or 5%, even that kind of saving is is just something some people just don’t want to do they don’t have the discipline to do i do that.

Ryan 18:26
That’s absolutely right. We we still work, our company is a full service real estate company, and we still work with first time homebuyers. And I would say that out of our capture rate, we still have probably 50 to 60% that never go through and buy a property, even though they contact us and say that’s where they’re ready to go. And they after a month or so going through the process. They they lose contact with us and we never hear from them again. So you know that they’re going to be continuing to rent a home or rent an apartment somewhere. They just can’t make that step to homeownership.

Jason Hartman 19:06
Yeah. Interesting. Any other theories about this? Because it’s a question we have long considered, whether it be in you know, Indianapolis, Memphis, Houston, Dallas, Austin, Atlanta, Charlotte, in any of these cities that we’ve done business over the years, you know, we haven’t totally figured it out as to why people don’t buy, you know, any more theories about that. I mean, you know, it’s a combination. It’s not that the reasons not the same for everybody.

Ryan 19:35
That’s true. That’s true. So, you know, I don’t know other than the, the, the two or three things that continue to pop up on our radar is they they just have been lifelong tenants. And then you have people that don’t even know that they can purchase a home. They don’t they don’t know that they can get qualified and and they’re just afraid to make that step and leap forward. to purchasing a home, and and some of it too, I think you find that the our society is changing, they don’t want to plant roots. And when you buy a house, you feel like you’re stuck in that situation for the next 2030 years. And I think that you have a generation now that’s coming along, that likes to be more free, more accessible to go where they want to go. Yeah, right, right.

Jason Hartman 20:27
Well, as I always say, and my listeners are probably sick of hearing me repeat myself, but the best thing you can have on a resume is mobility, you know, to go to where the jobs are. And it’s fascinating. I don’t know if you caught it. But there was a time magazine article, I’m going to say it was four years ago now maybe out of the time goes so fast. I can’t even might have been seven years for all I know. But but it was a you know, it talked about homeownership, and it had a, you know, picture of a house on the cover or a cartoon of a house, I think, and it said that, you know, they looked at these studies of homeownership rates in the economy. And it’s always been considered that homeownership is good for communities, it’s good for the economy, it lowers crime rates, it makes neighborhoods nicer. It’s kind of that whole george bush kind of ownership society concept. And they really poked a lot of holes in that theory, because homeownership means that when when people own instead of rent, it’s their, it’s more permanent. Yes. And that seems good on the surface. But in a modern economy where there’s a lot of alchemy, and velocity, and things are changing really quickly, you know, and it really helps to be flexible, and nimble and agile. In that kind of economy, the places with high homeownership rates, really, they found were more stagnant in many ways, it was kind of counterintuitive to all this stuff, we’ve all been brought up to believe, you know, because people couldn’t go to where the jobs were, you know, they were, they were trapped. They had to, they had to wait six months or a year to sell their house. And, you know, it was like a big mental process. Oh, my God sell the house. It’s like, you know, sense of loss. And it’s just a whole different psychology than give 30 days notice and be on your way, right?

Ryan 22:17
Yeah, absolutely. And so I think you see that, especially with the younger generation, they, most of the young people that we work with, they don’t know if they’re going to be in Memphis three years from now or three months from now. So there’s no right. No way that they’re going to put down roots purchasing a home.

Jason Hartman 22:34
Yeah, right. Right. Interesting. Okay. So any more theory about the renter thing?

Ryan 22:40
Not that I know of?

Jason Hartman 22:41
So what else about Memphis is so attractive to investors?

Ryan 22:45
You know, I think a lot of times, investors are coming from outside the Memphis area. Obviously, there’s a lot of local investors just like myself, and I love to invest in the Memphis community and have for years. But what people are looking for when when they’re looking to purchase in Memphis, or Atlanta or Indianapolis, some of those cities that you’ve described, is they want a market that is dynamic, they want a city to invest in, where there’s a lot going on, not not only with a local economy, not only with the, the tenants for their home, but they like culture. And Memphis has a lot of culture to it. So the investors that are purchasing here, they’re happy with their investment, they love the returns that they’re getting. And they also want to come see the properties because they want to come to Graceland where Elvis is that they want to come to Beale Street and and see all of the blues going on. They want to see the riverfront, where we’ve done just a tremendous amount of expansion. And they want to see the city continued to be dynamic and growing into just a more 21st century typesetting. And so you get all of that in the Memphis package, you get a great return on your investment, you get a house that cash flows, and then you get a city that’s dynamic, and has a culture that goes along with it. So I think that that just makes it extremely attractive to the investors.

Jason Hartman 24:17
What should people look for when choosing an investment property in Memphis? I mean, you know, one of the reasons and I’ll just tell you, and my listeners have heard me say it quite a while ago, so it’s not recent, me repeating myself. But one of the reasons we kind of stayed out of that market for many years, is that we felt it was pretty spotty. I mean, I think it’s, this is true of every city, of course, but I think it might be a little more true in Memphis that you have to be a little more careful about specific micro markets and neighborhoods. Would you agree with that?

Ryan 24:50
Yeah, absolutely. And so what you have you got to know what you’re doing and you do, we, when you when you look at different levels of properties, and most people split it up into an A level B level and a C level, if you find on our website, you asked me what type that is fit to a level property, you’re going to be in a good neighborhood, B level neighborhoods are going to be good solid neighborhoods as well. But when you get into C level, or some people even take that scale even further down, you really start evaluating we do a tri fold evaluation. First thing we do is we drive in and get a sense of the neighborhood. If the neighborhood feels Okay, that still doesn’t mean that there’s going to be the property that’s in question is a good property, we drive to the street, and we evaluate the homes that are around that particular investment property. If that passes test number two, then we drive by and we look at the house and make sure that the neighbors next door to it, make sure that the house has an appeal that’s attractive to tenants. And so with knowing that Memphis has some of those spotty areas, once you get into that sea level property, you really have to take a three level approach to evaluating the homes. And and that’s how you become successful. But the only way that you can do that is to really just know the city inside and out.

Jason Hartman 26:13
Yeah, okay, so So tell us more about that neighborhood analysis, if you would, and, you know, maybe any case studies, you want to share about properties that you you pass on, or you passed on in the past, you probably regularly pass on things, I’m sure, in properties you chose to buy, because you have a couple dozen investment properties yourself for your own portfolio, which ones would be go and no go and why.

Ryan 26:39
So what you get into is we evaluate hundreds of properties a month, just to find a few. And that’s not an exaggeration, we track every property that goes into foreclosure in the Memphis area. And, and we do drive by valuations of those properties. But what you wind up is you drive to that property and you find that it has some functional obsolescence to it, you, there’s no good way to get out of the driveway. Well, that’s not going to be a good property, even though it’s in a good area. Or you drive into a zip code that you you work in all of the time. But there will be a neighborhood that you just avoid like the plague, because it has just had a turn for the worse. And you know, that is going to be a management nightmare. And you got to remember, we own the management company, as well. So a lot of investors like working with that, because once the initial sale is done, we’re still here Manny’s in that property day to day. And so we want to make sure that we place investors in the right type of neighborhoods and the right type of homes, because we’re eventually responsible as a company as well to keep in those occupied with tenants and get them good returns.

Jason Hartman 28:04
Speaking of that, talk to us about government assistance, government assisted housing programs, versus non government assisted housing programs. As I mentioned to you, before we started, we have some investors who really like those types of properties where you have a government assisted tenant because the rent is very dependable. There’s, you know, almost I don’t want to say never, but almost never a collection problem. Because you know, Uncle Sam is writing the check, or some government agency might be a local agency to some people just don’t like them because they feel that they’ve got to comply with like more inspection requirements and more hassles, more bureaucracy, with some feel that the tenant quality is lower. What are your thoughts on that? And we’re Where do you stand? Do you love it? Do you hate it? I find that a lot of people aren’t really in the middle. Either. They love it or they hate it. And I’ll tell you one more thing. My mom had a lot of government assisted tenants in her portfolio over the years when I was growing up. And I sort of like to say sarcastically that she would complain all the way to the bank.

Ryan 29:10

Jason Hartman 29:14
What do you think?

Ryan 29:15
Well, over the 12 years that we’ve been doing this as a company, you’ve nailed it, people call us and they let us know right up front. You know, I I really do not want to explore a section eight or a government Assistant Program. I’ve heard horror stories about them, and I just don’t want to be a part of that. And then we have the flip side of that as well. People call and say, I absolutely love the way that section eight or government housing is run. I would prefer that type of tenant in my property. And it’s one of those things where you just can’t please everyone because it is extremes on both in we work with the largest local agency in the Memphis area is called Memphis Housing Authority, known in general is just section eight. And we do work with that organization. And, and, and have been very successful with it. The, the repairs, or the inspections that the homes go through, are typically looking for safety inspections. Is there some faulty wiring? Is there some type of leak in a plumbing? Is there a trip hazard, all of those things are things you need to be aware of as an owner anyway, because it doesn’t matter if it’s a subsidized tenant, or if it’s a traditional tenant, all of those things can cause you issues from a legal standpoint. So what Memphis housing does is they send out an inspector once a year, and they look for those type items that need to be corrected. So we work very well with them. Because that’s something that we want to be conscious of as a management company and as owners as well. So we do work with them. But we understand when owners don’t want to work within that system, we give them that option.

Jason Hartman 31:05
Yeah. Okay. All right. So what are some of the advantages and disadvantages? You know, maybe elaborate on that a little bit more? What can investors expect? Either way, I mean, one of the advantages, I’ll say, is that the tenants tend to stay a while, and they not always, but a lot of times, I don’t even want to say mostly, I think mostly, I’d say, you know, they, they, they’re pretty good, because they know that there’s this big lever hanging over their head that if they, if they abuse the program, if they get kicked out of the program, it’s very, very difficult to get back in. Some people say they’re just kicked out for life, which I’m not sure that’s always true, because life is long, and it takes a long time to know if that’s really true. And each case is individual, but they want that free money from the government, you know, so they’re, they’re usually gonna behave fairly well. Right?

Ryan 32:01
Absolutely. So one of the biggest advantage of a section eight tenant, in my opinion, is the longevity of it. Some of the houses that I bought, originally still have the same tenants in there. And their section eight housing, they rent, the rents on those are right around 850 per month. And, and it’s just like clockwork, very similar to the cliche like you’ve talked about your your mother grandmother laughing all the way anger, mother crying all the way to the bank. Yeah, complaining

Jason Hartman 32:35
all the way to the bank. Yeah,

Ryan 32:37
yeah, absolutely. And the same thing holds true. They’ve been there for six years now. And and have never thought about moving. So you get some of the advantage of longevity. If they find a place that they believe is their home, and know that they work well, with a management company, they don’t want to leave, they want to work within that system. And so we find that a lot of the subsidized Stinnett tenants stay for multiple years. The second thing is also true that you brought up, they do have guidelines that they have to go by. And if if they step outside those guidelines, or if there’s an issue with them, even within the community, you can get in touch with one of their agency supervisors, and they get involved and help you through that. So so there’s instances where you may have a complaint from a neighbor, and and their caseworker will get involved and say, Hey, we need to get you get these corrections made, or there’s going to be penalties for that. So, so you do have an agency that is there to help you. And third, you you’re 100% correct. They do not want to lose their voucher, then they have to provide the entire rent amount. And most of these people that qualify for subsidized housing, they need it. No other way to put it. And so they, they are very appreciative. And they are not going to jeopardize that by ruining your property or trying to take advantage of it for the most part.

Jason Hartman 34:23
Yeah, right. Right. Okay. Okay, good. So what area of I mean, we have other providers in Memphis, as you know, what is your thing? Is there something that makes you guys unique in terms of what types of properties you go after? Or do you sort of work the gamut of A, B and C class properties? You know, kind of what’s your what’s your angle, if you will, your unique selling proposition?

Ryan 34:48
Yeah, so over the years, we’ve, we’ve been able to provide a very individualized service. So on my board right now we have about 25 homes. that we’re working on. And they range anywhere from $60,000 price point all the way up to $250,000 price point. So no matter what the niche is, or no matter what the request of the investor is, we’re going out looking for those type properties on a weekly basis is there’s not a cookie cutter approach, we evaluate anything that looks like a good investment. But on the flip side of that, what we also sell is a relationship and an understanding of the process, you and I talked a little bit before we get started. And I told you, I’m a buy and hold investor. And so 99% of the time when investors call me, especially new investors, and they asked me about the area about the home about the investment, I usually own a property very similar to it within a few miles, or even in the same general area, and I can tell them about my experience. And then they get a lot of comfort in knowing that I’ve owned that home for multiple years, I’m still in the community, and I can have empathy, and also the knowledge to help them through that process.

Jason Hartman 36:17
Good. Well, is there anything I didn’t ask you that you just like to say in closing?

Ryan 36:21
You know, I think that the the biggest thing for the listeners to look at is just you’re you’re trying to choose what markets are best for investing your money. And the Memphis market has been extremely dynamic. But the great thing is the future of Memphis and the the businesses that are still looking to come here and expand in the Tennessee market, the they’re very attracted to it, just like investors are because of no state income tax, low cost, and an abundance of workers. So when you have big industries that are looking at the city of Memphis to invest their dollars, that is a great place for investors to look as well. And just follow the trends of people that are dumping millions of dollars of research into finding a good place to invest. Good stuff, good

Jason Hartman 37:16
information. Well, folks, if you have questions, if you’d like to be connected with our local market specialists there, go to Jason If you already have an investment counselor at my company, of course, talk to them, they’ll be happy to help you and connect you and arrange a three way conference call where they can be on the phone with you and talking through some of these issues, benefits, property selection, etc. And we’re just glad to help and glad to have another good provider on in Memphis. So thanks very much for joining us.

Ryan 37:45
Thank you.

Announcer 37:47
I’ve never really thought of Jason as subversive, but I just found out that’s what Wall Street considers him to be.

Announcer 37:53
Really now How is that possible at all?

Announcer 37:56
Simple. Wall Street believes that real estate investors are dangerous to their schemes? Because the dirty truth about income property is that it actually works in real life.

Announcer 38:07
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.

Announcer 38:19
Stocks and other non direct traded assets are a losing game for most people. The typical scenario is you make a little you lose a little and spin your wheels for decades.

Announcer 38:30
That’s because the corporate crooks running the stock and bond investing game will always see to it that they win. This means unless you’re one of them, you will not win.

Announcer 38:40
And unluckily for wall street. Jason has a unique ability to make the everyday person understand investing the way it should be. He shows them a world where anything less than a 26% annual return is disappointing.

Announcer 38:55
Yep. And that’s why Jason offers a one book set on creating wealth that comes with 20 digital download audios. He shows us how we can be excited about these scary times and exploit the incredible opportunities this present economy has afforded us.

Announcer 39:09
We can pick local markets, untouched by the economic downturn, exploit packaged commodities investing and achieve exceptional returns safely and securely.

Announcer 39:20
I like how he teaches you how to protect the equity in your home before it disappears and how to outsource your debt obligations to the government.

Announcer 39:27
And this set of advanced strategies for wealth creation is being offered for only $197

Announcer 39:35
To get your creating wealth encyclopedia book one complete with over 20 hours of audio go to Jason forward slash store.

Announcer 39:44
If you want to be able to sit back and collect checks every month, just like a banker. Jason’s creating wealth encyclopedia series is for you. This show is produced by the Hartman Media Company All rights reserved for distribution or publication rights and media interviews, please visit www dot Hartman or email media at Hartman Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate or business professional for individualized advice. opinions of guests are their own. And the host is acting on behalf of Platinum properties, investor network, Inc. exclusively.


Today’s guest is Brittney, a long-time team member of the Jason Hartman network. Brittney shares her journey, from working for Jason 13 years ago to being a client. She talks about the first property she bought and the fantastic news that came before her first tenant even set foot in the house. Jason also points out the benefit of renegotiating your real estate deal as you go through time.

Announcer 0:02
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multimillionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in 1000s of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on Now, here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 0:53
Welcome to Episode 1688. And it is a pleasure to have someone back on the show you’ve heard her on before. But this time, she is coming on for a different reason. Actually, she’s coming on to share her client case study. And that is our longtime team member, Brittany Roberts. Britney. Welcome.

Brittney 1:12
Thank you. I know this is my first visual podcast I’ve been on before audio. But this is my first

Jason Hartman 1:19
audio only we actually are on zoom so people could see this on the YouTube channel. But certainly on the creating wealth podcast, it’s there. Britney, you’re coming to us from Chicago. And you started working with us back 13 years ago, that was in our office back in Orange County, California. Did you ever think this job would last this long?

Brittany 1:40
I think so. I’m thankful that it has I’ve learned so much. But at the time, I had just graduated from college. I don’t think I was thinking past maybe a year at the time, you know, you know, when you’re 22 years old, and I was happy to land a job during the time and, you know, because that started a recession time. Right? jobs were kind of hard to come by and learned a lot. I mean, it’s I think that’s kind of when at least one of the roller coasters started with real estate and oh, it sure did. That

Jason Hartman 2:12
was right on the precipice of the Great Recession. So I got a front row seat to the you. You saw all of that in the real estate business, for sure. You went to Vanguard University, majored in public relations, and we hired you to do some public relations work for us some PR, and we wanted to get out there in the media and get media attention. But it turns out, you didn’t really end up doing much of that you ended up doing all sorts of other things, right?

Brittany 2:39
Yeah, I’ve worn lots of hats. Over the years, I’ve done marketing, I’ve done design I’ve done what haven’t I done? I feel like it’s a time we had, you know, many people, it was a booming office, but lots of people working. And we kind of downsize over the years and then you know, grew again. So I don’t think there’s much I haven’t been technically an investment counselor. I’ve sourced some properties. And but that’s probably one of the only roles that I haven’t done. That’s

Jason Hartman 3:07
true. Fair enough. Absolutely. But So today, we want to sort of share this with you not to talk about your history with the company. But let’s touch on that a little bit. Because I think it’ll be interesting because clients always want to know the kind of the origin story, right? But we’re talking about your client case study, because you actually became a client last year, closed on a property and had some really surprisingly good news that you just shared yesterday on our messaging group, and I wanted to share that today. So where was this property?

Brittany 3:40
This property is in Coleman, Alabama, the little in between, like Decatur, there’s Tuscaloosa, Montgomery, you know, it’s kind of all in the middle of those bigger cities. But it’s a pretty big city itself. It sounds pretty small. I hadn’t heard of it before, but it’s a decent size. And it’s growing. A lot of tourists go there for I guess the lakes that kind of goes back and forth between the second and third cleanest lakes in the US. So a lot of people go there for the lakes and the outdoor attractions. Only, like a mile from one of the lakes.

Jason Hartman 4:16
So how much was the property?

Brittany 4:18

Jason Hartman 4:19
And when did you buy it? Because it took a while to close? Right? Yeah,

Brittany 4:24
I started looking at properties serious. I mean, I’ve been looking for years, but a little over a year ago, my husband and I are like Alright, it’s time. Let’s buy and then COVID so we drove we looked around kind of we have some markets near us here. Close like in Indiana. So we looked at some there. We probably fell out of some serious you know, we were trying to put contracts on at least to one got snatched up really quickly as we were trying to turn in the contract. Another one we were under contract for a while the inspection didn’t go great. So we ended up back Out of that one, and then we went under contract in January for the one in Coleman.

Jason Hartman 5:05
Okay, so it took a few months to get it closed, you originally thought in the performance said that it would rent for I think you said yesterday 915. Is that correct?

Brittany 5:16
Right. So it took a while to close only because it was a new build. Yeah. 950 is What was projected, which was pretty conservative, obviously. But the property manager there was pretty bullish, and was like, You know what, I think this can go for more. So we listed it at 1100. And within two weeks, we had we had several offers or several applications and quality tenants within the first couple of weeks. And it was, you know, they moved in two weeks later. Sure. So

Jason Hartman 5:46
your rent was more than 15%? higher than expected. Right? Yes. Awesome. Sound Effects? Yeah, that’s really great. Brittany. And, you know, I think when you said that in our message group yesterday, I really thought that, you know, wanted to share the point. And one of the properties I sold recently, one of our clients bought it, he’s renting it for way more than I rented it. And he sent me the thing and, you know, showing it for rent, and I said, Hey, I’m now I’m a little jealous. Why did I sell that? It is really amazing how much pressure there is in the marketplace. To see rents go up. Obviously, prices have been increasing a lot. But the rent thing is a little more opaque. And let’s talk about why because I think it’s really important that listeners and investors understand the opacity issue in the real market. Number one, rents lag, they go up slowly. And they do that because typically, they’re on one year lease renewals, and they can’t raise the rent, except in those one year intervals. But owners, when they have that property, the tendency is to want to keep the tenant and not raise the rent too much. So they will make the mistake of being really conservative on those rent increases, not really understanding the market, not really understanding how short and scarce housing inventory is. And they’ll give them in a booming market, a measly $25, or $50 rent increase. Now, granted, we don’t like tenant turnover normally. But sometimes the tenant turnover really is a good thing. Because if you raise that rent 200 or $250, you might find that the market will totally accept that rent, just lickety split. And that tenant that is currently living there may not be able to afford that house any longer. The market may have passed them by sadly, but that’s just the way it works. Okay. And so you may have to return in it. But that may be the best thing that ever happened to you. So I just want to say to people listening, don’t be too scared of returning your property. There are investment groups, and apartment syndicators, who literally have that is their business model. They buy a shabby apartment complex. And, frankly, I’ve done this twice myself with my own investments. They buy a shabby apartment complex, they fix it up, then they re tenant the units one by one, when leases end, they fix it up. And you’ll find that that newly renovated unit will go for $200 more than the old unit. They call it the classic unit versus the new upgraded in Orange

Brittany 8:42
County where office was before that was happening quite a bit when I was there.

Jason Hartman 8:46
Yeah, yeah, it happens all over the country all over the world, I’m sure but in the US, you know, it’s much

Brittany 8:51
to say to that you get a higher quality tenant, you know, if you’re going up 200 $250,000 a month, your tenant pool can generally be from

Jason Hartman 9:01
when these apartments, they’ll wait till the leases expire one by one. And they’ll just you know, do some minor renovation to the unit. And then that unit will be up way above the price of the units next door to it quite literally. And it’s the same exterior, it’s just the interior is different. And I’m not even saying you have to fix up your properties. I’m just saying these rents are a lot higher than you think folks, and the landlords have a lot more leverage than you think. Because housing is in such scarcity mode right now. So raise your rents. If you don’t raise your rents outright charge pet rent charge for extras. If your property has some kind of storage unit on it. You can charge extra for some things now and then, and we’ve talked about that on past episodes. But Brittany got $150 more than expected on the first rental and probably you could have been gotten a little bit more right based on all the offers, and maybe

Brittany 10:03
I didn’t. So in this area, there’s a small row of new homes. So I don’t know if I wanted to go too much higher than the other ones that are renting forward just to keep maybe the tenant happy. But yeah, maybe even more, we’re thinking 1150 to start, but we settled on 1100. Yep, good.

Jason Hartman 10:19
So you got a lot more than the 950 you were expecting. So that’s great. And, folks, when you’re looking at some of these properties to buy, you’ve got to realize that some of these rents are just understated, or they’re undervalued, you know, like my own property that I sold to one of our own clients, you know, I had it rented for like, $200, less than he’s renting it for. So shame on me, not a very good landlord all the time. Sometimes, I could do better, I could pay more attention to my own portfolio, you know, it’s the shoemaker with no shoes, right? That old story, too busy working for other clients. And sometimes I got to pay more attention to my own portfolio. So that’s true. But Brittany, when you came to work for us, let’s go way back 13 years now, when you came to work, originally, you weren’t looking to get into real estate, that wasn’t one of your particular interest. You had a public relations major, you wanted to do marketing and PR work, which you’ve done for us for many years. When you got around it? What were some of your initial thoughts, you know, you went to some of our conferences, talked to a lot of clients, and the investment counselors and so forth. What were you thinking back then?

Brittany 11:28
I was a young pup at the time.

Jason Hartman 11:30
You’re still young, but well, you know, I

Brittany 11:33
was just so so fresh, so wrong, as far as you know, just jumping into the workplace and to finance and investing. And, you know, I was eating it up. I loved every minute of it. I love going to the conferences, learning as much as I could talking to clients, I’d say the client testimonials and the case studies. I mean, those are always a favorite. Right? And they were for me at the time, they kind of still are now, just hearing real life stories. But here I am, 13 years later, finally doing it. You know, I probably looking back, you know, like you say, you know, I wish I would have done it two years ago wish I would have done three years ago,

Jason Hartman 12:07
or 10 years ago.

Brittany 12:09
It’s true. And I remember at the time, there’s $5,000 down properties. That was the big thing at the time. And obviously that’s not now but I wish I would have snagged one of those up even with my little money that I had at the time.

Jason Hartman 12:22
Yeah, no question. We all have our shoulda, coulda woulda is, you know, we all we all have that. And it’s like the old saying, What’s the best time to plant a tree 20 years ago, the second best time today, you know, you got to just put your foot in the water and start somewhere, right? And everybody can only start where they’re starting. But once you get into this, I promise you, it’s addictive. And it’s addictive in a very positive way.

Brittany 12:47
Jason dadri question. I think inflation just like, you’re just the fact that you hammer in the idea of inflation. That’s probably what hit me the most. And what I took out initially is just the fact that you know, your debt over time, inflation just destroys it. And I think that was what really at least kind of hooked me in. And obviously I’ve learned a lot deeper and wider, you know, in my knowledge since but that’s probably one thing that I first remember the light bulb going on?

Jason Hartman 13:16
Sure. Yeah. By the way, folks, if you see our graphics out there, Brittany creates a lot of those graphics, she’s got a very good eye for design. And she created a great new one for us inflation induced debt destruction graphics. So thank you for that. Britt because it looks awesome. You know, let’s also talk about inflation in the sense that not only does the inflation destroy your debt, but let’s look at the real price of properties today. And I think this is interesting. Now, we talked about the coulda, shoulda, woulda thing. But when you look at it in some other ways, it’s not as bad as you think. Right. And I’ve been talking a lot lately on the podcast and the YouTube channel about how nobody has been forcing any of us to store our wealth, whether it be big or small, in dollars over the past 10 years or 20 years, we could have stored that in gold. We could have started in oil, we could have started, you know, for all for the last 12 years or so in cryptocurrencies, we could have started in silver in corn futures in soybeans and coffee, you know, whatever any commodity on earth could have been our storehouse of our wealth. Most people think of everything in dollars, even around the world, not just in the US because the dollar is the reserve currency of the world. But we also always need to look at not just the price of the property and the prices have gone up enormously. And that can be very discouraging for some who think Gosh, am I buying at the peak? am I paying too much? I wish I would have done it 10 years ago? Yes, of course I get it. I understand that. Okay. But remember, it’s also about the payment on the property. And that’s the way most people really buy a house, one of our clients that you know, all too well, because he used to come into the office, Brittany, that’s drew Baker. He’s been on the podcast many times. He just bought a high end property for himself and his family in cornado, in Southern California, San Diego, Erie, Coronado Island. And he keeps sending me messages, you know, since he bought that property last week, saying, I can’t believe how cheap the payment is, it’s incredible. And he said this today, by the way, let me play this message for you. This is really, really telling, because I was looking at the the like amortization schedule of a $1.5 million loan in 30 years, you only pay back like half of it in interest. So like, if you borrow $1.5 million, and pay it back in 30 years, you only pay like seven or $50,000 in interest. I mean, so in 30 years, you don’t think you can make 50% of your money? I mean, hello, how much is how much is inflation going to be? 30 years? It’s probably gonna be way more than 50%. So yeah, free money. So Isn’t that incredible? So three decades, and you borrow 1,000,005, and you pay back? $2,250,000? That is absolutely incredible, right? That you only have to pay $750,000 to use that money for three decades. Until 2051. That’s just incredible. It really,

Brittany 16:24
interest rate was so low.

Jason Hartman 16:25
Yeah, yeah, it’s absolutely amazing. So Brittany created a logo for my new economic index, called the H ci or the Hartman comparison index. And what it does is it compares a lot of things. Okay. So 21 years ago, in the year 2000. If you wanted to pay your mortgage, not in dollars, but in shares of the s&p 500 index, the most commonly used gauge for how’s the economy doing right, they just look at the s&p, maybe it’s GDP, but but the s&p is a really good measure. So it would cost you 11.12 shares of the s&p to pay your monthly mortgage payment based on the interest rate at the time, and the price of the medium priced house at the time. But today, just 21 years later, it only cost you 3.03 shares of the s&p to pay the monthly payment. So is it cheap, or is it expensive? It’s cheaper, okay. Now, let’s look at this in the mortgage payment based on the number of hours worked at the average wage. So that same mortgage payment, in 2021 years ago, it would take you 69 hours of work to pay your mortgage. But today, it only takes you 48 hours of work. So it’s cheaper today. Now, mortgage payment and hours worked at minimum wage. Well, most minimum wage, people aren’t buying a house. But in case they were right. It’s a good comparison. In 2000, it took 192 hours at minimum wage to pay the mortgage. Today, it only takes 165 hours. So when you look at it like that it’s cheaper. But does that mean you shouldn’t have bought a house back then? No, you would have made a lot of money. Because when the price goes up on the house, you get that in real dollars. This is just the monthly payment and the carrying cost. And one of the beautiful things about income property that I always say, and what I absolutely love about it, well, many things I absolutely love about it. But one of them is that you are never stuck with a deal you agree to when you buy the property, you always get to renegotiate the deal along the way. So for example, 21 years ago, interest rates were higher than they are today. 10 years ago, they were higher than today. So as you go through time, you just keep renegotiating the deal. And what do I mean by that you simply refinance the property, use my refi till you die program that I’ve outlined on other shows, and you extract cash from your property, hopefully buy more properties without cash, and you lower your payments. As rents are increasing. It’s just an absolutely beautiful asset class. Nothing else behaves like income property.

Brittany 19:24
Yeah. And that’s one thing I’ve learned over the years to just how creative you can be you know, not depending on how your life is your you know, risk tolerance, you can kind of structure it a lot of different ways. Yeah,

Jason Hartman 19:38
yeah. It’s really just a super flexible, multi dimensional asset class. So that’s what people love about it. Britt, anything you want to say to people listening who haven’t started investing, and the reason I really wanted to have you come on the show is because this took you a while. Now. It’s not like you weren’t busy with other things. You know, you got married, you had a beautiful wedding. I was there. You moved around. A bunch, you had three kids. Okay. So you know, you’ve been busy with a lot of other stuff. But you know, just what do you want to say to people who are thinking about it or are just barely dipping their toe in the water. And

Brittany 20:13
I would say, even though right now you may not be able to pull the trigger, maybe you can, you know, I’d say if you can pull the trigger, do it. Because, you know, again, even looking at prices, and just things from last year, you know, I drool, you know, look at looking at that, but just set some goals and really try to work towards that and achieve it. And it’s pretty neat. Once you get into it, you know, I’m still pretty fresh. I just had my first tenant, but I’m already you know, looking for others, like you said, it’s addicting, and just mapping out your 10 year plan and seeing what that could be. It’s really exciting.

Jason Hartman 20:53
Well, Brittany, thanks so much for joining us. Really appreciate it. And, folks, if you have any questions reach out to our investment counselors. You’ve heard Brittany on the show before, but she was never speaking as a client like she is today. And so it’s just great to to share that story. And congratulations on getting about I don’t know about what’s a workout to maybe 16 17% higher rent than you expected. That is just phenomenal. So congratulations on that and happy investing to you Brittany and to everybody listening, and we will be back with another episode in two days.

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


In this Flashback Friday episode, Jason Hartman shares how to handle late rent and eviction for long-distance self-managed properties. Then, Jason and his mom talk about their road trip through several markets, including Cleveland, Cincinnati, Columbus, Nashville, Birmingham, and Dallas. They also discuss minimalist management philosophy in creating bulletproof rental properties.

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 0:16
Welcome to creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine self made multi millionaire who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities, this program will help you follow in Jason’s footsteps on the road to financial freedom, you really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:05
Welcome to the creating wealth show. This is your host, Jason Hartman. And this is episode number 389. Thanks so much for joining me today, I kind of feel like I haven’t been with you in a while, at least not directly in that we’ve played a lot of interviews with guests and so forth, but not that many where I’ve just kind of been talking to you. So I’m really glad to just be talking to you today and going over a bunch of issues. And I’m actually on the way to the airport. I’m here in the south in beautiful Gulf Shores, Alabama, and mom is with me, she’s taking me to the airport. The first thing I wanted to say is, since I announced my mom’s medical condition on the show several weeks back, thank you so much to all of you, I guess we’ve got a lot of doctors in the audience. So we really appreciate the calls and the emails and the advice we got from you. So thank you very much for that. And I’ll give you a little update as to what has happened since then. Here’s Mom, mom saying hello.

Jason’s mom 1:54
Hi, everyone. I just want to say thank you also for all of the concern that Jason’s audience seem to show about my carotid artery operation. And just want to let you all know that everything turned out terrifically Well, at the Cleveland Clinic, that is just a class place to go. If you have everything anything wrong.

Jason Hartman 2:18
Good stuff, I would totally agree. The Cleveland Clinic is an incredible operation. I was very impressed. So with all of that, you know, real estate is kind of in our DNA. What happened is I actually flew to Cleveland to meet my mom there. And she drove up there. And well, I was in Cleveland, we were there for about a week with her recovery and so forth from the surgery that went very well, as you just heard, and I met with our Cleveland, local market specialist who actually is one that we’ve been working with for quite a while in another market. He formed an alliance with a group up in Cleveland, and I met with him and I looked at their properties. And I got to say, I did not think I would like Cleveland very much. We have shied away from a lot of the previously blighted markets. We’re still shying away from the real blighted ones like Detroit. But you know, I was pleasantly impressed with Cleveland, I really was It was amazing. Now, I was impressed with all of the extensive downtown redevelopment projects, I was impressed with the properties and the cash flow on those properties. I was impressed with the rehab again, we’re working in Cleveland with the same provider we’ve been working with for many, many years in another market. So you’ll hear more about that. And you’ll hear more about his partner in the Cleveland market that’s doing the direct business more on that to come. I did shoot some video, and I’ll share that with you on our YouTube channel. And maybe we’ll even play the audio track from some of that video, we might even do it on this podcast time permitting, because one of those audio tracks is really just a conversation while the other videos are looking at properties. And so the visual helps, but for the conversation, we can probably just play the audio part of that video on the podcast here today. And then mom and I after looking at Cleveland, Oh, Mom, you got to share the funniest thing. And I was very concerned about you, you know, during the surgery as I was pacing around the waiting room and so forth there at the Cleveland Clinic, but I knew you were okay. When you were in the intensive care unit. And you demanded your iPhone. And what were you doing on your iPhone? I actually took a funny picture of you. Why don’t you talk about that?

Jason’s mom 4:22
Well, I had the operation the second or third day of the month.

Jason Hartman 4:26
It was the second it was July 2.

Jason’s mom 4:27
Okay, it was July 2. Anyway, you know, the rents are supposed to be in my bank account on the first day of the month. So I was simply calling those that I didn’t think had paid yet that weren’t registered in my bank to pay the rent immediately.

Jason Hartman 4:42
I know my mom’s been on a few shows before everybody and you’ve heard her talk before. She’s the I call her an extreme do it yourselfer. She’s not a do it yourselfer. She’s an extreme do it yourself or that mansion in which you live you probably would have built it yourself if you could have

Jason’s mom 4:58
I could have gotten rid of all of it. Help.

Jason Hartman 5:00
Yeah, I tell you building a house isn’t a nightmare project. So I would never recommend that to anybody. But you know, that was your childhood dream ever since you saw Gone with the Wind as a little girl. But anyway, what you do that I think is kind of interesting is number one, you self manage all your properties, you don’t use managers, and you self manage from a long distance, you have properties as far away as about 2000 miles or so. And then you have closer properties that are within maybe I don’t know, 6080 miles, Biloxi, Gulfport, that’s where you’ve got one, you’ve got another one in Tuscaloosa, I think right? Yes. Those are the closest, do you have anything in Mobile, Alabama? No. So those rental properties, what you do that’s interesting is you have all your tenants deposit the rent into your bank account. So you bank with a big national bank, and they’re responsible for going to the bank and depositing the money into your account on the first. And I remember when you were in the intensive care unit, and this was literally I mean, look, folks, I tried to stop her, I tried to take the phone away, she wouldn’t have it, it’s just you have to know my mom understand that. You’re not gonna, you’re not gonna stop her from doing anything. And so you had a sheet of paper there. And you were looking at the deposits and you had a pencil and you’re writing down on a sheet of paper, which ones had deposited and you discovered that OF ALL your rental properties for people had not made their deposit, and you were calling them on your iPhone from the ICU where they strictly say that you’re not allowed to have phones in there?

Jason’s mom 6:28
Well, actually, it was only three people, the bank had kind of made a mistake on one of the tenants deposits, I couldn’t quite recognize it. But they corrected that the next day. And the tenant told me that they had definitely deposited, and they were telling the exact truth. So it was only three people that had deposited it immediately.

Jason Hartman 6:48
What strikes me as interesting. And again, if you use property managers, you don’t have this opportunity. But I remember listening to you talking to your tenants on the phone. And what strikes me as interesting is how I think that because you have this kind of a personal relationship with them. Of course, as a business relationship, you’re not friendly with them, so to speak, you’re not getting too close to them, in other words, but because they know you and they view you as an actual person, rather than sort of some sort of nameless, faceless institution, I feel that you exert some more pressure over them to get them to pay and to pay quickly. Do you agree or have anything to say about that,

Jason’s mom 7:24
I just make it very clear that I cannot tolerate late rent payments, or when they sign that lease. And they know that I expect and demand that my rent be paid the first day of the month.

Jason Hartman 7:36
So tell the listeners kind of how you handle that and what you say to people and things like that. And by the way, folks, we’re gonna cover a lot of other subjects in this show. So in this episode, so I’m just going over a few things here that struck me is kind of funny with mom. But But tell us tell the listeners how you handle that what you say to them?

Jason’s mom 7:54
Well, I simply call them and say, you know, hi, whoever it is, on the other end of the line, I don’t see your rent in my bank deposit yet. And is there a problem? Or did you already put it in or what is going on? And they tell me what has happened? And I say, look, you know there’s a $60 late fee, if you don’t have the rent in there the first day, I really do not want your $60 I simply want your rent on time, when will the rent be put in the bank? And they tell me? And if it isn’t in there on that first day of the month? I say well be sure to put in the $60 for the late fee.

Jason Hartman 8:31
Okay. And do they usually do that with a cooperative and put it in?

Jason’s mom 8:35
Yes, have most of them all do that there is one tenant that does not do that. And that all of those $60 late fees will simply be depth deducted out of their security deposit when

Jason Hartman 8:47
they leave. Okay, so now you did have a problem, though, that was kind of stressing you out on one of your properties. And this is a long distance property again, it’s about 2000 miles away from you. So it’s far away. And you actually called up a real estate agent. I think you were calling a century 21 office and, and kind of described for the listeners that whole story. And that happened this month. You know, these are unusual, but it happened to happen this month, you happen to be in the intensive care unit at the Cleveland Clinic, which I think is ridiculous that you were doing this. I don’t know. Maybe that’s what keeps you alive is you have a purpose. You know, we you knew you had to recover from surgery and recover quickly because you had to collect your rent. So it’s kind of like Victor Frankel’s Man’s Search for Meaning. You know, another version of it, the modern version.

Jason’s mom 9:38
Well, what happened is that this tenant is now we’re in the eviction process, and the candidate had moved in a girlfriend and he simply didn’t pay so I called a local real estate agent. And I told them the situation and I asked them to what they please go over there and just check and see if the place looked like If it had been abandoned, if tenants were still living in there or what? Anyway, the gentleman, very nicely did go over there. The realtor, the realtor and his he was there, someone was coming out of the door, and it happened to be the girlfriend. And I said, Please let me speak with her. And so she just took his phone and took it in the house to get to the poor. he’d lost his phone, it was ready to call the police to get his phone back. And she carried out a 10 minute conversation with me about when they were going to pay rent and all of the details. I said, Please now give that man back his phone. I talked to the realtor.

Jason Hartman 10:40
This is hilarious. It’s like a reality show. You know,

Jason’s mom 10:44
I talked to the realtor A few hours later, I called him and said, I wanted his address, I wanted to send him a check for his for his work and helping me out. And he refused the check. And he says that’s just my job to give really good service to people. So I thought that’s a great guy. And I will certainly go back to him when I need to. Yeah,

Jason Hartman 11:05
so so the realtors You know, there’s what you’ve got to realize, if you want to self manage your properties. And if you want to be, you know, an extreme do it yourselfer like my mother, I mean, the vast majority of our clients, you know, and I’m talking vast, vast majority, maybe, you know, 95% of our clients use property managers. And, you know, I do it both ways, myself some of my properties I self manage. And as I said to you on many episodes, for a long time now, I was happily pleasantly surprised that I could do this from a long distance. I never thought that was achievable. And I, for our members, I taught a whole webinar on that topic. And I’ve talked about it on the podcast as well, in prior episodes about long distance, self management of your property itself. There are advantages and disadvantages to each. What you’re hearing now is from a an extreme do it yourself are so so good. Anything else on that?

Jason’s mom 12:02
No, other than the fact that I have now done all of the eviction preparation work, and

Jason Hartman 12:08
in turn, so So how do you handle a long distance eviction like that, without a property manager, tell us what you do. You go online, you find an eviction service, etc. You tell us what that’s about and how it works and how much it costs?

Jason’s mom 12:21
Well, first off, I do file a three day notice to pay rent or quit because I know all of the details. And I then hire a process server, which costs anywhere from 30 to 50, or $60, to get a thing served, then you send the proof of service to the return to the attorney. Now you can go online and just Google eviction services, you always want to get a firm that specializes in evictions don’t get a firm that does every other kind of legal work, just evictions online.

Jason Hartman 12:55
So there are lots of law firms out there they are technically law firms that are eviction services that are like an assembly line. They’re they’re a mill, and they just process evictions and deal with tenant issues like crazy. And one of the things I say when I talk about self management is that sometimes your property managers will actually do this process themselves, you know, they will go and they will post a three day notice right on the door, sometimes they nail it right to the door. And it’s kind of embarrassing, you know, for the neighbors to see that. And they will actually do all of this and they will handle the eviction, they will show up in court, they will take it all the way through getting your judgment against the tenant, which you can later collect on, or at least try to collect. And I’ve talked a lot about that a lot of those judgments are a lot more collectible than people think. In fact, when you were online today, I saw on your computer screen mom, when you were online looking at eviction services, I saw that there was like a banner ad there on that website that said, we want your old judgments. And so a lot of these services and a lot of other people out there will actually buy these judgments from you. Now, of course, they’re going to buy them at a discount. So if you have a tenant who owes back rent or has damaged the property, and you’ve got a judgment against them for say, $2,000. I’ve never sold off a judgment like this, but I would assume that these services will buy the judgment from you and do all the collection themselves for maybe 5060 cents on the dollar, depending on how big it is, how collectible it is, etc, etc. But you can just sit there with a judgment and wait and collect eventually too. And those judgments do accumulate interest. So this can actually be kind of a good investment. Oddly, and if that tenant ever tries to get an auto loan, or apply for credit somewhere or someday buy a house, that prospective lender will usually say, Hey, you got to pay off this judgment before we’re going to give you a loan. So don’t just assume because the tenant is broke today or they’re a deadbeat today, fortunes change. And that won’t stay the same forever. So what else happens in the eviction service? Tell us about that. Any Anything else? You did you hire the attorney on that one already?

Jason’s mom 15:08
Yes, he sent me a couple of forms to fill out. And his price for an eviction and Riverside County is $670.

Jason Hartman 15:16
Now, that’s pretty expensive. Actually,

Jason’s mom 15:19
the prices went up, I think about a year ago or within a few months ago, because it was usually around $599. Something like,

Jason Hartman 15:29
well, I’ve heard of people hiring them for a lot less than that. I’ve heard of people getting them for two $300. You know, I bet you the now those are old properties that are in the Socialist Republic of California. And I’ll bet you Although I do not know, this is just a guess that part of that has to do with the fact that California is such a tenant friendly state. And it’s just harder to evict people there. You know, one of the reasons, we don’t recommend it as a market.

Jason’s mom 15:57
You know, I don’t know, in some in some counties, it. Los Angeles County has a different price. And I think San Bernardino County has a slightly different price. And Riverside County has a slightly different price. So it depends upon which county you’re operating in.

Jason Hartman 16:14
Have you ever done one? Did you do one here in the south where you’ve got your southern United States properties?

Jason’s mom 16:20
No, I’ve never done any eviction here.

Jason Hartman 16:22
And your cash flow is so much better here, too. You got to you got to see my mom’s strategy. Now look, folks, you know, of course, your family’s never going to really listen to you too much. But now, now I can see that you should see her expression right now. Here we go. Again, rolling the eyes, but selling those properties, those properties that she’s had for decades, okay, from the 70s 80s 90s, maybe about some of the 90s I think he did and selling them on 1031 exchanges, and exchanging those into other properties in more tenant friend or more landlord friendly places, I should say, and you know, with much, much better cash flow, that would be a great strategy for you. But speaking of that, let’s talk about some of the markets we saw because we took a road trip after your surgery, they let you out of the hospital, after two days in ICU and one day or one night, I should say in the regular room in the hospital where we watched a fireworks from your room. And it was pretty good. Actually, Cleveland had I don’t know how many fireworks displays did we see there maybe 1315 fireworks displays and a beautiful sunset. The Cleveland Clinic is like a hospital that sort of on the Swank Enos level, almost as the W Hotel. But with the service of a Ritz Carlton was just totally impressed. And I know you are too. And so we watched fireworks there and you checked out the next day. And then we we drove around Cleveland and number one that was super impressive. But then we took a road trip. And we went to Cincinnati, we looked at properties, we went to Birmingham, we looked at properties, we went to Nashville, and then back home to Gulf Shores, Alabama. And then I took off to Dallas to go look at some discounted mortgages, discounted notes, and we’re thinking of offering that to our investors. So we’ll talk about that on a future episode in more detail. But it’s interesting to talk a little bit about Cleveland if you would mom. And then let’s talk about maybe the other highlight would be Birmingham. I’ll talk a little bit about the properties I looked at in Dallas. And, and then we’ll kind of wrap up here.

Jason’s mom 18:20
I was really, really, really impressed with the city of Cleveland. I had it in my mind that it was one of these old steel kind of rust belt cities, blighted, blighted area. Wow was I impressed downtown, beautiful, beautiful displays of flowers everywhere and darling restaurants and shops. I just couldn’t get over how lovely it looked. It was it was incredible. And then the drive that we took along Lake Erie, or all of those big beautiful houses were I mean, some of them were just like castles. I was just blown away.

Jason Hartman 18:59
They’re like, you know, those are like the old money, probably old industrial money, homes. And they were they were very impressive.

Jason’s mom 19:07
But there were also beautiful neighborhoods that these weren’t castles, but they were beautiful big homes, just one house after another huge big lawns. Everything was green, lots of trees, flowers, just a lovely sight to drive around.

Jason Hartman 19:23
Amazingly, you know, some of these former Rust Belt cities are really finally getting it. They’re not doing the idiotic thing. You know, the the big government liberal thing where they drive all the businesses out like, like California has been for so many years. And they’re getting it. I mean, there are a whole bunch of incentives to move your business to Cleveland. They’ll give you free real estate, they’ll give you free warehouses. And I mean, one of the things that just I couldn’t believe it, you know, we went to the Rock and Roll Hall of Fame. We have lunch downtown. We had dinner downtown the night before that beautiful restaurant what was that called Blue nose or something?

Jason’s mom 20:01
I think it was blue point or point blue. And then there was, it was blue point. Yeah, there was a horse with carriage that you could drive around the city with

Jason Hartman 20:10
there. There were a few of those, remember and remember my dog Coco, who’s in the backseat here.

Jason’s mom 20:14
More than one of them. Definitely.

Jason Hartman 20:16
Remember her Coco freaked out thinking that horses a big dog, and she didn’t know what to think about. But, but that was amazing. And it was so clean. I didn’t see a single homeless person anywhere. Now maybe it’s just too cold to have many homeless people. But it wasn’t cold when we were there, of course in the summertime, but it is other times of year. And I mean, I was just amazed. I did not think it would be that nice. It certainly Wasn’t that nice. Last time I was there years ago.

Jason’s mom 20:47
And there was one charming area called Little Italy, with all of the cables out out on the sidewalks and the tablecloths and people eating out in the evening, it was just just totally charming. I was

Jason Hartman 21:02
I liked it a whole bunch. Okay, let’s switch gears. And let’s talk about our next real big property stop. I mean, we did some others. But you know, these are the major highlights we’ll give you. And that was Birmingham, Alabama. Now, we’ve been doing business in Birmingham for a while, we stayed at that beautiful Westin Hotel in Birmingham, and that whole new area of redevelopment there, that was really, really nice, shops, restaurants, it was gorgeous. It was really nice. Then we went out with our provider who had been working with for a long time, we saw some of the homes that you the listeners, our clients have purchased and rented and some that are in escrow or under contract, I should say and, and you know, you haven’t closed on them yet, we saw some of those and took some video. And the thing about Birmingham is that there are different management styles, different rehabbers, or local market specialists that we work with have a different style of doing business. And you know, one of the things I say is that this is a very fragmented industry, everybody works a little differently. That’s what keeps the institutional investors largely out of our business. I know we’ve been talking about hedge funds and private equity being in the real estate business, but they don’t like it very much. And they’re not really staying and they’re not here to stay. Because it’s just too fragmented. for them. It’s It’s not easy for them, like other institutional investments that offer lower returns, but when it’s not your money, your return is not that critical of an issue. Okay. And that’s how they think is they just get paid to manage capital, right. So Birmingham, the key thing there is our local market specialists, there is what I call the minimalist manager. What I mean by that is that these properties are really designed and the rehab is done in a way, in such a way so that the property is kind of bulletproof, if you will, where there’s just not that much to break. And, you know, I was thinking about all the properties I own and have owned over the years. And the things that break and the things that I get, you know, calls on or, you know, the property manager shoots me an email on asking me, do I approve this expense to fix this or that? And I couldn’t believe our manager, our local market specialists there who’s also a property manager. You know, Mom, do you want to talk about some of this minimalist management that you you, by the way, loved it, okay, I was a little bit less enamored of it, the new but the more I think about it, the more I think, gosh, you know, you really could have nearly expense free properties with this style. What are your thoughts?

Jason’s mom 23:33
I was impressed because if you don’t have a garbage disposal to fix,

Jason Hartman 23:38
or a dishwasher, you know, they said they actually prefer properties with no garages. And if it has a garage, they usually take the garage door out and just make it a room. Because it’s less, it’s less things to break, you know, there’s never going to be a garage door to repair. There’s never going to be a garage door opener to repair things like that.

Jason’s mom 23:57
Yeah, and no, no, no, a microwave oven to replace. I just love the whole concept of this minimalist type of thing. It reminded me of houses that were built in Los Angeles in the 1940s. They didn’t have all of these great modern improvements, you know, all of these kitchen packages, the stove, the refrigerator, the microwave, the garbage disposal, that wasn’t in existence in Birmingham, and those would be great houses, the rent might be lower, but you’re not going to spend all of that money fixing them up and hiring plumbers to go out there.

Jason Hartman 24:31
Well, the rent really is quite good. I mean, these are lower middle houses, okay. And so the typical deal there that we looked at where you’ll buy the property for maybe 55 to $65,000. I mean, there are you know, this fluctuates, but this is what we kind of looked at that day, and it will rent for about 1.2% of the value, maybe somewhere in that range. So your $60,000 property will rent for $800 a month. And it’s a minimalist deal. So again, the tenant doesn’t have very high expectations, they get a single family detached home, and they get a yard front and back. And they get three bedrooms and one or two bows.

Jason’s mom 25:14
And another nice aspect of those homes is because they are the older homes is that they typically have hardwood floors in. So hardwood floors are much more desirable than carpets. And you don’t have to keep replacing the carpets. Yeah,

Jason Hartman 25:27
a lot less maintenance there. So that’s the minimalist style of management and what it means. No garbage disposals, no dishwashers, no microwave, no garage, and obviously no refrigerator, washer and dryer, the tenant supplies their own. And the tenant, you know, can treat the dishwasher, just like any other appliance, you know, they they don’t, a lot of times expect a washer dryer or a refrigerator. So you know, they can they bring those, and they can bring a dishwasher to you know, there are dishwashers that are mobile that are, you know, not built in, when I

Jason’s mom 26:05
said the rents are lower, they’re not lower in their lower in the rents that you would get in California. But in relation to the prices that you pay for those houses, you are having positive cash flow, I mean, great positive cash flow. And the point is that you get to keep most of it because you don’t have to spend it all in repairs.

Jason Hartman 26:24
Yeah, good stuff. And we’re gonna be touring, by the way, slated for mid May be late September, but our little rock property tour by the time you hear this, I’m pretty sure it’ll be on the website at Jason Hartman calm. So there’s another great market that you can look at. And I just, you know, we’re kind of running out of time. So I think I’m gonna skip telling you about our Dallas tour. I mean, not ours as a company, but my Dallas tour. And I’m not going to tell you about discounted notes. And those kinds of opportunities in this show, because we’re already at about 30 minutes here, but I do want to tell you go to Jason Join us for our little rock creating wealth seminar, and property tour. And that will be in mid to late September. More details to follow very soon. But you can register and get the early bird pricing at Jason in the events section.

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