Jason Hartman starts off the show today with a reminder: housing is NOT at an all-time high when it comes to payments (which is how people base their decision to buy), and housing is still where it’s at.
Then Jason has the first part of his client case study with Scott, from Washington DC. Scott owned a bunch of retail property previously, but recently sold all but one of them and shifted his focus toward residential real estate. Jason talks with him about why he made that decision, what the process was like doing his 1031 exchange, how his experience with property managers has been, and more.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:52
Welcome listeners from 165 countries worldwide. This is your host Jason Hartman with episode number nine 159 959 thank you so much for joining me today as we have yet another client case study. A lot of you met Scott, and maybe Kelly, at several of our events, Scott was at meet the masters. I don’t believe Kelly came with him. But they are a young couple that is doing great things with their real estate portfolio. You’re gonna hear about it today. They have moved from shopping centers, to single family homes. And I know what some of you might be thinking, why would you do that? Don’t you want to own a bunch of shopping centers and be a bigwig? Maybe not, you know, housing is where it’s at folks. Housing is where tap that is where you should be. I’ve told you all the reasons over the years over the last 14 years I’ve been saying you know, they can always outsource all the office jobs offshore. They can outsource them Manufacturing offshore, they can outsource the retail to the internet. And all of this has a huge impact. But everybody still needs a place to live. It’s a fundamental human need. What are the three fundamental human needs? Food, clothing and love? Happy Valentine’s Day by the way, everybody, it is Valentine’s Day. No, it’s actually food, clothing and shelter, and food, clothing and shelter. But I will tell you I was kind of hoping the day here today would fall on a 10th episode show because I have a special Valentine’s Day episode for you. And I guess we will run that is episode number 960 coming up, remember every 10th episode every show that ends in a zero, we run something of general interest in Hey, love is of general interest right to all of humanity. Well, almost We will run our Valentine’s Day show a little late. But hey, it’s better Nathan lover. I mean late than ever. We’re gonna get to our case study today. That’s what we’re gonna do. That’s what we’re gonna do. But first, I want to tell you a few things. The good old National Association of Realtors, you know them, that largest trade group in the world with like 1.4 million members. Yeah, they’re big. They’re big. We’ve had their chief economist on the show before. We’ll have him back again to talk about stuff but they’re out with some new research as they are all the time. today. They just published that nearly two thirds of us housing markets see home prices hit an all time high. While housing inventory hits an all time low. And I know what some of you are thinking. Is it a bubble Jason is Little Bubble Pop. No, it’s not a bubble yet, but it will be eventually. So sit tight. Stay tuned. I’ll let you know when I think it’s a bubble. But hey, what do I know? I don’t even know. Nobody knows. You know, nobody knows. The head of the Federal Reserve doesn’t know, the President of the United States doesn’t know. NAR certainly doesn’t know. JOHN burns doesn’t know Jeff Meyers doesn’t know Jason Hartman doesn’t know. But you know, we can get some clues here and there can’t wait. The question is not what is the price of the home? The question is, compared to what is it an all time high compared to the monthly mortgage payment on the home? Or is it an all time high compared to the price of the home See, there in lies the problem as you know, because you are a sophisticated A smart investor, because you listen to my show, you’d have to be smart and sophisticated to listen to my show. Otherwise, you wouldn’t be able to keep up with the superior information we are. We are sharing here. Okay, so Hi, I don’t know, I get kind of goofy sometimes don’t I? So people buy house on a payment, not a price. In fact, they don’t care what the price is. If the payment is low enough, that’s what they’re buying. They’re buying a payment. So it is not at a all time high based on the payment. And then you have to ask, geographically, where are you talking about? Two thirds, two thirds of us housing markets? Well, is that of the Case Shiller 20? Or is it all 400 ish housing markets nationwide? And that is the question we need to ask. Right? We need to know this stuff because the Case Shiller is here. heavily loaded. In fact, three fourths of the Case Shiller 20 are cyclical, bubble oriented, crazy markets that I wouldn’t touch with a 10 foot pole. In fact, where do you think that saying came from? Do a lot of people carry around like, in the old days when someone came up with a 10 foot pole saying, did people carry around 10 foot poles and decide not to touch things? I don’t know. It’s Goofy, funny saying, right. Okay, so, consumer satisfaction research. That’s boring. Who cares about that? You know, these groups are always doing surveys to say how great they are. Right? I’m not gonna share anything with that with you. But this one’s interesting also from an AR. housing affordability declined from a year ago in December, moving the index down 2.3% moving down 2.3% from a year ago, and this is just cember to December obviously, it’s it’s not December anymore as we know, because, hey, there’s a clue. It’s Valentine’s Day. We know that’s not in December don’t leave. So yeah, housing affordability declining, but still in the linear markets, it’s not far off. housing affordability is still pretty good. And that’s why inventory is so low and the market is booming. In the cyclical markets, though, man, there’s going to be a bloodbath. Some people are gonna get hurt, they’re gonna get hurt. I’m telling you, watch out. You know, we’ve got this event coming up in Silicon Valley, March 3, San Jose, hope you’re going to be there and join us for Jason Hartman University. Go to Jason Hartman University COMM And one of our clients, Greg, who was at meet the masters of course, and many of our other events. He sent me a voxer message this morning and he said, Jason, I will be there on March 3 in Silicon Valley and I am Trying to get some of my California friends to come and hear what you have to say. And I just can’t peel them away from thinking now, he didn’t exactly say this I am I’m using some poetic license. So let me run with it. Because this was the gist of it. I can’t peel them away from the fact that they think they are all brilliant geniuses, because they speculate on a house in a cyclical market, and the price went up. And you know, the old saying, you’ve heard me say it. I don’t know if this is actually an old saying like that 10 foot pole thing. But at least I say this. Everybody’s a genius in a bull market, aren’t they? Everybody’s a genius in a bull market. A rising tide floats all ships. You’ve heard that one right. I didn’t make that one up that everybody’s a genius on bull market that could be made. I don’t know. I’m not sure. I’m not gonna take credit because I’m not sure I deserve credit. But anyway, you know, if I was Bill Clinton, I would take credit for everything, even though I didn’t do it. If I was Obama, I would too. So I picked on the democrats check. What else can I do today? Okay, yeah, we can ever client case study. We talked about some NAR stats. Those are interesting course. I look forward to seeing you in Silicon Valley, San Jose, March 3, Jason Hartman calm or Jason Hartman University COMM And this is a great event. Well only have it once this year, I think you will learn the math of real estate, you’ll learn how to do the math. In fact, that’s another thing that Greg said to me. He said, You know, these California people, they just don’t know how to do math. Now. He didn’t mean that broadly. But if they knew how to analyze a real estate deal, they would never invest in these total fluff crazy nutty markets. what goes up must come Down. Hey, that’s an old saying to like that 10 foot pole thing. So yeah, just remember that the higher they fly, the harder they fall, all of these markets will eventually fall, how much longer can they go? Nobody knows for sure. But believe me, they’re not going to go forever. So that’s what you got to know about that. So linear markets, where the conservative, prudent real investors invest, that’s where you want to be. Let’s go to part one. And let’s talk to Scott about how he went on his real estate investing journey that started just 10 years ago. That’s it in 10 short years, just did an exchange exchanging one of his commercial properties for 30. I think 37 Oh, no, not on the exchange. He bought some others from us before the exchange, and then a bunch more during the 1031 exchange. So it’s good stuff. The most tax favored asset class in America. The most historically proven asset class in the world. And guess what? You can find those those great things at Jason hartman.com slash properties. Jason hartman.com slash properties. Alright, Jason, stop talking. Get to the guest part one plant case study, Scott and Kelly, you’re gonna love this. Here we go. Hey, I want to bring to you another case study. We have a couple of wonderful clients that volunteered to be on the show. They’ve got a big story and just a great outlook and attitude on real estate investing and the long background in in the income property investing world from commercial to residential. So we’ll talk about that transition now. It is Scott and Kelly. They live in Washington, DC. And Scott, welcome. How are you? Hey, Jason. I’m excellent. How are you? Yeah, good, good. It’s good to have you on the show. Thank you for coming on and sharing your story. Give us a little bit of your background, you and your wife. And you know, just kind of tell us about that. And then we’ll dive into your story.
Yeah, sure. Kelly and I are kind of your typical, hardworking, well educated people. We went to graduate school, we got jobs in the corporate world. And then when the real estate market crash came along, we came across an opportunity to buy a portfolio of shopping centers. And so in 2009, we acquired five shopping centers, and tried to shepherd them through the real estate crash. And we were able to do that. And recently, we’ve been selling off the shopping centers and converting to a more residential. Mm hmm.
Jason Hartman 12:42
Cool. So Scott, first of all, everybody’s gonna, you know, they’re begging the question that everyone’s begging task probably is, how did you get the money to acquire all those shopping centers? That’s a pretty good head start, isn’t it? Or no, you know, sometimes, these kind of stories can surprise you a bit.
We get lucky this is a person that I had worked for doing their bookkeeping when I was in college, and in contact with them over the years. And when the real estate crash came, this individual was really looking forward to retiring and selling all the property. And suddenly, they weren’t able to. And so they were looking at holding a portfolio of shopping centers through another business cycle. And the way it was looking is gonna be quite a long one. And so I was just having a conversation with this person and said, you know, if you really want to sell those things and retire, why don’t you sell them to me? And so he did. And he sold Kelly and I the entire portfolio. No money down. Wow. Oh, my gosh, that’s fantastic. What
Jason Hartman 13:45
What an amazing story. So when you say you worked for him, was he in the business of being a landlord or was there another business? What do you mean by that?
Yeah, he was fully in the business of investment. Real Estate, okay, and I was just doing his bookkeeping and collecting rents from tenants while I was going to undergrad.
Jason Hartman 14:08
And fantastic, what an amazing story. So here is the secret, then folks, the thing you can take from this is go to work for some big time real estate investor, do the bookkeeping, so you know the numbers. And then when the next recession hits, see if you can buy it. It’s great story. Totally awesome. So these were, you know, retail shopping centers. So interesting, you know, during the Great Recession, were you worried about the retail Apocalypse, as they call it now? Did you see it coming? I was just kind of wondering, what was your outlook? What was Kelly’s outlook on that? At the time?
Yeah, we were definitely concerned. We had, you know, careers that were based on, you know, graduate degrees and all this that we’d been working on for decades, or about decade and a half. And we had to make the decision to give up on both of those careers and go full time into it. Managing shopping centers. So yes, we were very concerned about all the risks associated with that. But in the end, we found that we didn’t have that much difficulty. I mean, retail definitely changing. But all neighborhoods need a barber and a beautician and a nail salon and a liquor store and those kinds of things and the kind of neighborhood strip centers that we have. they’ve survived. Okay,
Jason Hartman 15:21
right, right, because they don’t have the big box and the other stuff that’s affected by the online, online takeover retail. And, you know, I gotta tell you, it concerns me, the typical thing that happens in every business is you get whenever you get some big player, they’ll come in and essentially buy the market by undercutting it. auto companies do this, you know, Uber has done this. Yeah, I mean, you know, it’s a common practice in business right? By the market. Even if you have to run at a loss or, you know, just very low profits, by the market, kill your competitors and then raise the prices and abuse your customers. You know, that’s sort of a typical story. So that concerns me very much about, you know, big centralized power like Amazon. Any thoughts on that just as a tangent?
Yeah, absolutely. Yeah. These tech companies are able to run at a loss for years and years in a row. And somehow their stock price just goes up. And they’re able to generate more funds from investors. And so it really would concern me if I was a grocery store, and Amazon was coming in to the grocery market. I would be very concerned because, you know, a local grocery store chain just isn’t able to raise money that way. Yeah.
Jason Hartman 16:33
Right. They don’t have the scale. That’s what’s sort of perverse about the marketplace in the ways of venture capital system works and, and so forth, isn’t it?
Oh, absolutely. And you know, it’s scary being a small business person, when you’re going up against corporations who, you know, have tax advantages that maybe small business just doesn’t have, or the ability to borrow funds at rates are much lower than small business has always been scary, but you kind of hope that being nimble and taking Your own talent and really putting it into something full time that you’ll be able to find a way find a niche in the market. And we were able to do that. Yeah,
Jason Hartman 17:09
yeah, good stuff. Okay, good. That’s obviously a tangent. But it does concern me for I mean, for the customers from a customer perspective them mostly, you know, why and when did you get the idea that you should sell the shopping centers, or at least some of them and then buy residential properties, buy single family homes and tell us about that evolution?
Sure. Well, it was never our goal to be full time owners of shopping centers. It’s just an opportunity that was too good to say no to that we decided to take on. Really what we want to do is just have a nice life and not work too hard. And these particular shopping centers took a lot of effort to run. Part of the reason for that is they were in parts of town where it’s hard to hire professionals to come and do the management for us. And so we had to do our own property management and So part of the reason that we’re selling the shopping centers and exchanging them for single family homes, is that we’ll be able to get property management with these portfolios of homes, so that we don’t have to do so much work ourselves. Right, right. Okay. Okay, good.
Jason Hartman 18:13
What did you do? And when did you do it? Well, I guess maybe the first question is, when did you discover I guess you discovered my podcast, you you and Kelly came to a couple of events. Tell us about that.
One thing that happens when you don’t have a real estate background and you instantly buy, you know, very expensive portfolio of real estate. realize you don’t know anything about this field you have to learn so I didn’t really have friends in the real estate field. So I was looking for resources. And podcasts was really something that I could do on my own schedule, and get information about the real estate market without having to you know, know any individuals or pay for classwork or anything like that. Just really convenient. Since we bought this portfolio, I started listening to your podcast in 2009. And we were sold The idea we really like the idea of turnkey single family, especially as a way to grow our portfolio as time went on. And so in 2012, we bought our first property in Memphis for your group. Now, Kelly was not as excited as I was at the time about it. So I had to convince her so I had to invest with my own money. So I actually use my IRA. Mm hmm. And purchased a single family home in my IRA. Mm hmm. And it’s worked out great.
Jason Hartman 19:28
So okay, this is interesting. So your wife wasn’t excited about it. So she says, Hey, use your own money in your retirement account that you had before we if you want to do it, honey, put your money where your mouth is. Don’t put my money there.
There’s, there’s not a lot of money. That’s just mine, you know? Yeah. But and this is, you know, I think a lot of Americans probably work this way. But my my retirement fund is something that I squirreled away on my own I really thought it was gonna work out and to prove the point. You know, I went and I bought a house. Yeah. And it worked.
Jason Hartman 20:07
Yeah, yeah. Good stuff. You came to our Memphis one of our Memphis property tours. Right. And you bought one property. That’s, that’s it. Just one. Initially. I just bought one.
Okay, and then the next year, I think we bought one more. Mm hmm. And then the year after that, we bought two more and then the after that we bought another two more.
Jason Hartman 20:28
Okay. What are those all Memphis by the way? Were you staying in that same marker? Ah, man. Okay. Okay, so you just kept doubling down in Memphis for a while. And what happened the year after that you were about to say?
Yes, sir. That was last year. And so last year, we bought 12 in Memphis. We bought 15 in Jackson. And we bought four in Oklahoma City. Okay, cool.
Jason Hartman 20:48
So you’ve got through our group. Now Scott, what do you have about 36 properties or something like
Jason Hartman 20:55
Okay, good. And what happened last year. As it was the big change of acquiring all these additional properties,
they really happened on the commercial side, we saw that interest rates look like they’re starting to go up. And commercial real estate is valued primarily by the cap rate, or the return rate that people can expect when they purchase it. And so when the interest rate goes up, that will deteriorate the value of the shopping center, as far as your ability to sell it. And so we saw interest rates coming up, they’re still low at the time last year. So we decided to sell the shopping center and switch over into residential, primarily because residential prices are still a bit low. I think there’s a lot of opportunity to pick up value there. And also, it looks like homes are going up in value kind of quickly. Whereas shopping centers are going down in value as the interest rate rises. So it’s just a good time to take advantage of the difference between the two markets.
Jason Hartman 21:55
I couldn’t agree with you more By the way, I think that’s very insightful that the rest rental market just has a much better future than retail properties do. We talked about the retail Apocalypse, obviously, you know, most people understand what’s going on there. But at the end of the day, you know, Scott, like I will say everybody needs a place to live. And that is just not going to change. Right?
Absolutely. As you know, the markets were buying in a robust markets, they’re the population is stable and growing. And the values are stable and growing. It’s not like we’re just buying residential anywhere. We’re buying in good markets, right. You know, what are the other benefits? Jason is with our shopping centers. They’re all located in one geographic area. Mm hmm. But with this residential, we’re able to diversify across three different markets,
Jason Hartman 22:43
right. So you’ve got you’ve reduced your risk by diversifying like that. That’s one of the other good reasons it’s good to not have, you know, like one lump of an expensive property, or, or anything like that, because you can definitely diversify geographically. Real Estate is local, as I like to say, certainly not my saying that’s an old saying, but but Yeah, it does. It does allow you to do that. But you know, Scott, I mean, you and Kelly, as you were thinking of doing a 1031 exchange on, you know, shopping centers, and you were also, you know, just buying real estate before you did the first exchange, you could have done anything. I mean, you could have adopted numerous different strategies you live in Washington, DC, that’s obviously an expensive cyclical market, why not just invest right around the corner from where you live?
Well, you know, we try to invest for the investment makes sense. And so in the case of the properties that we acquired from you guys, we were able to make sure that we get a nice return, that they’re in good solid markets where we know we’ll get that return over a long period of time. And we have property management in place. We don’t actually have to do the work ourselves to run the property right.
Jason Hartman 23:59
So Let’s talk a little bit about property management with the shopping centers. You did your own management By the way, what do you still own in terms of retail properties? And what did you sell? Did you only sell one of the centers are two of them.
We sold three of them last year, we sold one in years gone by so we’re just down to one last shopping center. Okay,
Jason Hartman 24:18
got it. Got it. Yeah. And by the way, isn’t the 1031 tax deferred exchange? Just a beautiful thing?
It’s so great. Yeah, it’s gonna do so much good for us. Having done this exchange last year. I’m just thrilled. Yeah, good, good stuff. You don’t even realize some of these benefits until you do it yourself.
Jason Hartman 24:37
Yeah, the benefits for depreciation are just amazing. And I did it last year. If I were to do it in 2018, it would be even better. And you mean because you got to restart the clock on your depreciation and plus the residential properties have a shorter depreciation schedule. It’s about 25% shorter, which means you get more tax benefit more quickly. Right.
Right. And the I have my investment is probably not going to be 40 years long. So in the case of a commercial depreciation schedule that almost certainly never get to the end of it. But with the residential, I’ll be able to get a lot more capture a lot more depreciation, right? Right. If there’s a
Jason Hartman 25:15
couple of newbies listening to the real estate game, depreciation, makes income property the most tax favored asset class in America. It is the most wonderful benefit. And it’s such an oxymoron, that you can have appreciation and make money on that. And you can have depreciation and save a ton of money on that at the same time. It’s It’s such a great, great asset class. It really is. You did that exchange, you’ve shortened your depreciation schedule. Before we talked about property management. Before we started this, this recording for the show, Scott, you were telling me about how your exchange went and you know just sharing a couple stories about working with our network. I thought that was pretty interesting. Did you want to share that with the listeners.
Well, luckily, when you’re selling commercial real estate, the timeline for selling a property is quite long. So we were under contract and still had 90 days to go before we got to the actual closing of the commercial property. And so I had a few extra days to do some property tour. So I got in contact with Sarah, my investment coordinator over there. And we went and visited our I went and visited a few markets and got to know property managers got to see their product, and I was pretty sure I knew which markets I was going into, on the closing day. On the closing day, I had 45 days to identify my properties. And within a week, I’d identified the properties in Oklahoma City and in Jackson, Mississippi, but I still had quite a bit of capital leftover that I need to allocate. And I was planning on allocating that to certain market and the vendor the provider of the homes actually went through bankruptcy and the bankruptcy was announced. In the newspaper, just before I signed my sales documents to purchase that portfolio. And so I spoke to my attorney and they said, well, being a 1031 exchange, you can’t be guaranteed that you’re going to be able to buy these in case there’s some kind of action in the foreclosure court. And so I actually had to back off of a rather large investment, just a couple weeks into my selection process. Right, I found a new market. And I was all set to reinvest with this other company, another provider, this time in Memphis,
Jason Hartman 27:32
right, another one of our local market specialists.
Yeah, I had lined up another rather large portfolio, and I was getting ready to sign to purchase these. And I showed it to the bank I was borrowing money from and they said that they didn’t want to finance any new home purchases. So they’d never said that to me back when they’re giving me the commitment, the loan commitment, but when it came time to identify houses for these portfolios, The financing company I was working with actually didn’t want to do the deal if they’re brand new homes, construction. And so once again, I had taken the time to identify these homes. And then the last minute, I had to abandon my plans. Wow.
Jason Hartman 28:14
Yeah. So were you were you? Were you worried? I can’t really describe how worried I was. I was very worried. I like to say that I aged about two years and that 45 days, okay, so let me just explain this to the listeners. So this is because, you know, you have these tight deadlines, to complete 1031 tax deferred exchanges. And if you don’t, you know, for example, like you could lose some of the properties you were buying and not be able to acquire them or identify them, and you would just have to pay tax on the, the amount of money you didn’t reinvest. Okay. So it’s not like the whole thing was off, but anything outside of the exchange is going to be taxable. So you want it to not have any tax liability and training. For all of the gains from the sale of the shopping center into the new single family homes you were buying, and this is the problem you’re describing. Go ahead.
Yeah. So I, you know, especially when you’re dealing with large sums of money, and the tax rate comes out to something like 23.8%, it can be really scary. So I was looking at about 10 more days left in my identification period. And I was calling Sara and I was freaking out. And she did some good digging for me, and put me in touch with a provider in Memphis, and I was able to allocate the final 800,000 in our purchase, with just about seven days left in our selection, period. Mm hmm. And so that worked out great. That provider basically saved me. They gave me all their inventory for the next two months. Just let me buy it all at once. Yeah, lo and behold, three months later, we closed on all that property all in one day. Right, right. Yeah.
Jason Hartman 29:56
Yeah. You know, you’re reminding me of a story. Not this part. Specifically, but we had some clients a few years back and we talked about their story on the show, they sold a another single family home that they’d inherited it was in California, it was about two and a half million dollars. And then they purchased, I think 36 or 38 homes through us on the exchange, you know, income properties, obviously, I shouldn’t call them homes, their investment properties, but but single family homes, they were pretty amazed that we were able to help them pull that off. You know, that’s all there’s a lot of properties to acquire in one swoop like that really quickly, especially in a market where, you know, the market is obviously tight, right, and things are selling like hotcakes. I mean, there’s very little inventory, so that can make it really worrisome. I’ve done a few exchanges over the past few years. And personally, even though I’m in the business of doing this, I have the same problem. You know, I was really worried that I couldn’t complete the exchange and I don’t want to get stuck paying the tax on the capital gains from the the relinquished properties. Yeah,
yeah, good stuff. It can be serious. Yeah. But you know, I don’t think this opportunity really existed before companies like Platinum properties were around, right? If I were to try to go out and use the MLS to purchase 31 single family homes so nightmare and try to negotiate on all 31 on and try to get them all inspected and close, it would never happen. It’s completely impossible. Yeah. And especially with the financing I used, I had to be able to close on at least half a million dollars at once at the same closing on the same day in order for them to do the financing. Right. I tried to do that with you know, 31 different single family home. Oh god sellers,
Jason Hartman 31:44
you would have never happened. Yeah, that’s that’s really amazing how you share that story. This will be continued on the next episode.
Thank you for listening and happy investing. Hey, I hope you’ll join me in San Jose on March 3. As we We host our Jason Hartman University event. Now this event is for the real practical hands on interactive education on income property investing, where you will learn how to actually do the math, how to evaluate the deals, we will go in depth into this subject of how to analyze a real estate deal. And once we do that, we’ll talk about how to build a portfolio, how to properly structure a portfolio, how to diversify it, how to sequence your mortgage financing, and it is a fun event. We do some gamification. You’ll meet a lot of people because you’ll be working with the people in the class, and it’s a one day event. You can check it out at Jason Hartman University comm Jason Hartman University comm we’ve been doing this event for about three or four years, and people absolutely love it. We’ve done it in San Diego and Salt Lake City. Now we’re doing it in San Jose. We’ve done it other places as well. I just can’t relate Where offhand, but it’s a great event and we try to do it about once a year. I asked her we did it in Oklahoma City. This time we will be in San Jose Silicon Valley on March 3. Jason Hartman university.com Jason Hartman University comm Get your tickets today, and we’ll look forward to seeing you in Silicon Valley on March 3. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional and we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using, and write a review for the show, we would very much appreciate that and be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
Jason Hartman starts the show reminding us that the best insurance is a high loan balance. He welcomes client, Adam Jackson, on the show today to discuss how in five years he was able to get 14 properties with infinite returns. Adam shares his journey and discusses his career from the USMC vet to his work in the aerospace industry.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multimillionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:53
Welcome to Episode 1541 1541 today, we’ve got a fantastic Stick client case study and you are going to want to learn from how this guy did it. We’ve got our client, Adam Jackson on with us. And he’s been investing with us for the last five years and get this, almost half of his portfolio is now in the infinite return phase. He’s a former Marine, and now in the aerospace business, and just doing a little investing on the side, and this is the beautiful thing about income property, you can acquire the asset and then you can get all your money back as if you sold the asset, but you don’t have to sell it. You can still own the asset and still get the returns from the future of the assets performance. After you received all your money back. That is fantastic. Isn’t it Alright, so in our intro portion today, and by the way, this guest will be in two parts. So we will have him today and the second half of tomorrow but the first part you’ve got yours truly. And I’d like to start off with a quote. And this quote is a Shakespearean quote. So what does the Bard have to say to us? Well, in Julius Caesar, act four, comes this gold nugget of wisdom. There is a tide in the affairs of men, which, taken at the flood, leads on to fortune omitted, all the voyage of their life is bound in the shallows and in miseries. On such a full sea. Are we now a float, and we must take the current when it serves or lose our ventures. That’s good. I mean, Shakespeare talks weird. We all know that right? But really, really an incredible quote. And it just really goes to show us that so many times, we are faced with such incredible opportunities. And you know, we just finished our team call and we were talking about our clients who had purchased properties through our network over the years and people that purchase properties 10 years ago, eight years ago, five years ago, three years ago, even a year ago, have made great money. But you know, what’s interesting about that? Is that the same time there were people saying 10 years ago, eight years ago, five years ago, one year ago. Oh, the bubbles gonna pop on. I’m gonna wait until they were saying this three months ago. What am I talking about? I’m gonna wait I’m gonna keep my powder dry. I’m not gonna buy anything yet, because I’m gonna wait because it’s going to all collapse. And then I’m going to buy everything when it collapses. Yeah. Good luck trying to time the market. It sure seems like every brilliant market timer would have been out in force in March. That was only six months ago, folks, well, five months ago, depending on how you look at it, and they would have said, Wow, we’re in a pandemic. Yeah, the markets gonna collapse. Now again, you know, I’ve said this, we’re in the third inning here, folks, we got a ways to go here. But look, just buy properties that make sense from day one, and that is your insurance. You can ask for a better insurance policy than that. Just buy properties from that makes sense from the day you buy them. And you’ve got a very nice insurance policy. Now there are other forms of insurance policy included in your properly structured properly purchased real estate deals that follow Jason Hartman’s 10 commandments of successful investing, and even the next 13 of them up to the 23 commandments, but you only really have to follow the first 10. And you’ve got all sorts, all sorts of insurance. One thing I say is that the best insurance has a high loan balance. Well, that’s going to come true again here, folks. Our heart goes out to the people affected by the recent hurricane. And I’ve got an article in front of me Of course, this pushes up the prices of commodities, which are already more than high enough, right. This article says hurricane Laura Wallops areas with high mortgage delinquency rates. Wind surges hit over 150 miles an hour in Louisiana with dead Damage estimated in the billions. Insurers will have to fork over billions of dollars to pay for the damage that property owners incurred from Hurricane Laura last week. By the way, just a side comment, this wasn’t my point. My point will come in a moment. But my side comment is in every time you see one of these hurricanes, or really any natural disaster for that matter, sometimes, many times actually, it is an example, in another odd way of Joseph Schumpeter, the economist Joseph Schumpeter, his creative destruction. Now, it’s not very creative, admittedly, but it’s destruction. And sometimes, and I know this may sound cold and heartless and awful. But sometimes when you step back, and you look at the big picture, you see that a lot of this destruction was actually good for the people whose home was destroyed. Now, nobody will feel that way in the thick of it, certainly not. It’s terrible. But many of these people, and I’ve talked to them over the years and some of them are clients, like in Hurricane Katrina, I remember one of them. property was completely wiped out. And at first he thought, This is terrible. But then, but then he got his insurance payout. And a developer bought the property, because they were doing an assemblage assembling a bunch of properties to build a high rise where these little single family homes used to be. And that is an example of, in a way creative destruction. Because he made a ton of money off that deal. Okay, you wouldn’t think it you’d think oh, you know, it’s terrible. It’s tragic, right? A lot of times, tragedy seeming tragedy can turn out to be Really, really positive thing. And you’ve all seen this before in your own life. You all can think of examples in your past, where one thing, you know, a lot of times it’s a relationship, right a relationship that ended maybe you got dumped. Right? Maybe you got dumped, and you’re sad about that. And then you realize later, Oh, am sure glad I got dumped, because that can make room for someone a lot better. Right? And a lot of times, it turns out exactly that way. So you know, it’s, um, one of the key things in life is the concept of gaining perspective, perspective, perspective perspective. You got to stand back from the canvas of your life and stop focusing on one or two brushstrokes. And as the old saying goes, look at the big picture, you’ve got to look at the big picture in that big picture, it can turn out to be much more positive, much more positive than you think at the time. So hurricane Laura, okay, here’s the thing. As I’ve always said, the best insurance is a high loan balance. The best insurance is a high loan balance. I promise you, there will almost assuredly be a bailout. It’s common votes. It’s always coming. It’s always coming. But guess what? What will be the bailout for the people who own their homes free and clear? I bet it will be nothing. Okay, Jason, you’re overdoing it on the sound effects chill out. You know, it’s like a kid who gets this new toys new sound effect machine. It’s not new, but I just pulled them out of the drawer the other day. And so I’m liking the sound effects. So There will undoubtedly be a bailout program coming for the people who have mortgages and likely it will be a moratorium on mortgage payments, a forbearance program of one sort or another. It’s common folks. It’s always coming. And that’s the thing. You know, you’ve got everybody right now asking, Well, you know, I don’t know, I think the economy is going to crash, the housing market is going to collapse. Everything’s going to get really bad. Because what happens when all these moratoriums and what happens when all of the bailouts and what happens when the extra 600 bucks goes away, etc, etc, etc. Let me tell you what happens in today’s world. And I know you know, normally normally normally if the world were rational, I would never hang my hat on this. Now looking over at the hat on the top of my bookshelf, because in Florida, you know that Sun’s pretty hot in the middle of the day when you’re walking the dog Got to wear a hat. Especially because my hair is getting so thin. When does the cure for hair loss going to be invented? I’m waiting, I’m waiting. Otherwise, maybe I’ll shave it. Maybe I’ll just shave the head someday. Anyway, tangent alert. So you see all these people, you know, and they’re all worried about this, that and the other thing, but I think we really are in an era where we can hang our hat. hang our hat on the idea that there will be another bailout program coming. And certainly, as long as Jerome Powell is head of the Federal Reserve, Uncle Jerome is like the man with the goodies. Wow. More so than maybe any other Fed Chair. I mean, a lot of others. And you know, our email newsletter that will go out this week. I’ve been writing that and you know, I’ve been looking at and researching Fed policy over the years For that newsletter, this next one is going to be good folks, be sure you’re on our email list. Just go to Jason hartman.com. And make sure you’re subscribing I’m really dedicating some effort to that. I never really did before, I’ll be honest with you, really dedicating some effort to it, and our email newsletter that’s going out this week is going to have a lot of good content. So make sure you’re on the list, go to Jason hartman.com, put in your email address somewhere anywhere doesn’t matter. You’ll get on the list, you’ll get our email newsletter and make sure you whitelist us check your junk folder because sometimes they get filtered. That’s just the way it is, you know, the powers that be want to censor you when you’re talking about and by establishment. They don’t like you bagging on the Federal Reserve or questioning the establishment, which is what we do here. By the way, folks, we do that in case you haven’t noticed. Anyway, I’ve been researching that and you know, the fed you still really only have very blunt policies to deal with these these various crises. And now it has just invented so many really sophisticated tools. I mean, they all sort of at the end of the day come down to the same thing. Hashtag money printing. But, you know, the tools they have are much more Um, well, they’re much more, I guess I want to say they’re subtle. In a way either. I don’t know. I don’t know. I don’t know how to explain it. And I don’t know. I just don’t know what to say. But read the newsletter. It’s all there. Okay, what else? What else? Well, I think we probably better get to our guests today. really a wonderful interview. This guy was a great guest and, and Adam, we really thank you for being our client and really impressed with what you’ve done. So thanks for coming on the show. I know we’ve got a couple more client interviews, booked client case studies. And if you’re out there listening, and you want to come on the show and share your case study, we would absolutely love to have you you’re certainly invited on and All of our listeners really love to hear these stories. So a couple of announcements before we get to him. Number one, we have for our empowered investor inner circle, we’ve got our first private meeting this Friday, you should have all received an email on that with the link to the zoom meeting. And also this Friday, we have a meeting for all the people who purchased the asset protection program. Okay, we really wanted to do a deeper level kind of advanced meeting on that, where we can really dig in, take more of your questions. And you should have also received an email on that. Be sure to join us for that on Friday. And we look forward to seeing you there. A lot of you have asked about the empowered investor inner circle. We’re going to have a webinar on that soon and open it up to our broader audience. So thank you very much for your interest in that. So that’s coming, you know Rome wasn’t built in a day. No, Rome was not built in a day. You know, it takes us some some time to get all this stuff together. But we’re doing it we’re getting there. So it won’t be long before you’re invited to check out the webinar and then join the inner circle group and we open it up to the meet the Masters attendees first, but we’d open up to everybody in the audience soon. If you want to check out the asset protection webinar, go to Jason hartman.com slash asset you can check that out. And yeah, I guess that’s it for today until we get to our interview here with our client. Let’s go through a case study and let’s hear about how he created infinite return on almost half of his real estate portfolio in five short years. Five short years. Awesome. Awesome. Awesome. Okay, here we go. Hey, it’s my pleasure to welcome one of our clients back To the show for a third time and that is Adam Jackson. He was on about three years ago. He’s in the aerospace industry. He’s a USMC, combat veteran. Thank you for your service, Adam, by the way, he spent a two tours in Fallujah. So it’s probably got some amazing stories there. He’s celebrating his fifth year as a real estate investor. And he’s about to close on his 14th property. And he, he voted with his feet and moved his wife and four kids out of the Socialist Republic of Connecticut, right? That’s right. Can not California to Orlando, Florida, so he’s, he’s my neighbor not too far away. Adam, welcome back. Thank you for coming back on the show and sharing your client case study story. These are the best shows and by the way, anybody out there listening who wants to come on share their story, we would love to have you because listeners just love hearing about real people doing real great things. So congratulations. Now you’re basically dollar cost averaging, you’re not timing the market, which I think is fantastic. And you talk about how you’re getting infinite returns on almost half of your portfolio. Now, what does that mean?
Adam Jackson 17:14
Yeah, so basically what that means is, I purchased a lot of the property’s over four years ago now. And since that time, they have not only had the loan paid down, based on what what I was collecting and rent and how that gets paid down by the tenant, but also the properties have experienced a decent amount of appreciation actually more than I thought they were going to experience. So in what’s kind of funny is that at the time when I was purchasing these, everybody was saying, oh, interest rates are great, they’re probably not going to go any lower. They probably won’t be like this ever again. So you better do it. Now. What what, and there was good reason to think that by the way, there was I don’t fault anyone and I fully believed it myself. Right? Yeah, don’t do but Fast Forward four years, and Now the interest rates are even lower. So you combine that with the loan pay down in the appreciation, I’ve been able to basically pull out at least as much cash as I’ve put in sometimes more, in some cases, as what the original downpayment and closing costs were, and my payment has only gone up by a very minimal amount, sometimes 20 bucks in some cases, that is amazing. So, so congratulations on that.
Jason Hartman 18:28
So before we dive in, too deep, Adam, give us a little bit of your backstory, if you will, of course, would love to hear about your career in aerospace. And, you know, what’s going on there. And I think you have, you know, some thoughts about how that’s a signal as to what’s going on with the economy as well. But you know, maybe start by when you probably discovered my podcast years ago, what When was that? What year was?
Adam Jackson 18:52
So I would say would have been 2015. Okay, at this point, yeah. So it’s been about five years now that I’ve been listening to you
Jason Hartman 18:58
and I remember you tended our meet the Masters event about three years ago, I think the 2017 event. Did you attend other events as well? Yeah. Well,
Adam Jackson 19:07
I’m not sure if that was with Ron Paul. or so. No, that
Jason Hartman 19:10
was 2008 20. Oh, okay.
Adam Jackson 19:12
So I went to that I’ve been to prophets in paradise actually the most recent one in Orlando. Oh, you a Memphis property tour. And then the most recent virtual meet the masters.
Jason Hartman 19:23
Excellent, excellent. Good stuff. So 2015 and why did you get the bug? What what interested in you in real estate or, you know, income property?
Adam Jackson 19:32
Yeah. Well, I was always somebody who religiously contributed to a 401k, a Roth IRA, saving for retirement, living below my means, and that sort of thing. And in the back of my mind, there, there was always this feeling of, well, how am I really going to save enough? I mean, I mean, realistically, it was it just didn’t make sense to me.
Jason Hartman 19:53
How would nobody ever got rich saving money?
Adam Jackson 19:56
Exactly. And so I started to embark On this personal development phase and really kind of into this program, and I listened to all the classic personal development mentors and things like that, but I ended up listening to a book called seven, seven years to seven figures. I can’t remember who wrote it. But basically, it started talking about real estate. And then I thought it was really interesting, got really into that started to read and read and read. And then I searched for podcasts. And you were really the first one that came up and once I started listening to it, I just never stopped.
Jason Hartman 20:31
Yeah, by the way that that book you mentioned. That’s Michael Masterson. He’s been on the show. That’s Pena, so that’s not his real name Michael Masterson. It’s Mark Ford. I that’s a great book. I also read that book. I’ll tell you his book that I like even better is called and I think you practice this in the military By the way, the concept and sounds weird. of ready fire aim. That is a great book of Michael Masterson.
Adam Jackson 21:00
I have read that one. That’s a great one. Yeah,
Jason Hartman 21:02
I like it. But I mean, obviously, you went through boot camp and all of that stuff. You know, when shooting, I hear that some of the training, you know, that, like the marine training is, is this concept of ready fire aim? Because I understand that if you actually think about it, if you overthink the shot, you’re less accurate than if you just fire. It sounds counterintuitive, but and I don’t know if you remember that from any of your training a long time ago, but I just thought I’d mentioned that because another another military that told me about that.
Adam Jackson 21:35
No, I mean, that’s absolutely true. Now Now, when you’re when you’re sharpshooting or when you’re on the target range, yes, like you will make small adjustments, you will take a shot, you’ll see where it landed, you might adjust your windage or elevation. But I mean, I can definitely relate this more to what my job was in the military, which was on the one tank and those are all using cruiser, fully automatic weapons. So typically what we do, there is You start firing and in with all the information that you have, you take your best first shot or burst. And then from there you walk it to that target if it’s if it’s off at all right, right, the concept does hold.
Jason Hartman 22:13
That’s a great metaphor for real estate investing. And, you know, I think you know what I’m going to say, Adam, because a lot of people, you know, I mean, we have investors who are advanced investors, wealthy that are, you know, buying up portfolios of properties, but we also have brand new people that are thinking about doing it. And you know, some of them get in this trap where they want all the information before they do it. And you can never, ever have all the information. So your example of operating the Abrams tank, is you’ve got to fire, get the information from where that shot lands, and then adjust. And that’s how life is right. It’s that the law of life and investing and whatever is that whole process of doing something getting into information from it using that information to do it better than next time. Right? I would definitely agree. And also, once you finally engage, okay, you engage that target. A lot of times what happens is you end up finding information out there might have been certain conditions with that scenario that you were unaware of that first meet, maybe had heard about them, maybe you had trained for them. For instance, the fact that I bought properties going back to real estate, and four years ago, I mean, I didn’t know if the interest rates were going to go lower. I could have never imagined that I didn’t know if the appreciation was going to happen the way it did. I mean, I invest for you. So there’s all these other factors that you can eventually take advantage of with the information that you learn after you get started. Yeah, nobody can know all the information or how it’s going to work out in advance. You’ve just got to jump in and do it and adjust adjust along the way. That’s the only way anything in life works. I mean, that’s the way surgery works when a surgeon goes in and does surgery, right? It’s the way everything works. You just cannot know everything in advance. You’ve got to give up that need for certainty, and just go do things and and, you know, I like to say, cultivate what I call rational recklessness.
Adam Jackson 24:17
I like that.
Jason Hartman 24:18
You got to be a little bit reckless, you know? Yeah. Good. Anyway, go back to what you were saying. So, you were talking a little bit about timeline and things like that. And I interrupted you.
Adam Jackson 24:27
So? Oh, yeah, I guess this would this would just kind of go back to what I was doing with the properties as far as the approach of just consistently buying and not actually timing the market, not actually, you know, waiting for any significant kind of downturn, ebb and flow. Just Just continue to do this, getting control of the asset as soon as you can. And let it go to work for you. BMB the trajectory is incredible.
Jason Hartman 24:56
Absolutely. So get in control of the of the real estate. As soon as you can, and then let it work for you and then make those course corrections, right.
Adam Jackson 25:05
And it doesn’t take very long. I mean, again, only four years, I had more of a seven to 10 year plan, which I thought would have been realistic maybe for some sort of an exit plan or some sort of harvesting equity. But it happened even sooner than I thought.
Jason Hartman 25:18
Good stuff. Yeah, that’s awesome. So which markets are you in? What metro areas?
Adam Jackson 25:23
Yep. So I’m currently in Memphis, Jackson, Mississippi, also Jacksonville and Ocala. Hmm. So you’re good to know. Yes. So they’re, they’re nice and local. I can drive to those within an hour. I know not everybody has that luxury, but but that was definitely a selling point for me. And also Talladega, Alabama,
Jason Hartman 25:42
okay, good. Good stuff. And you live in Orlando? That’s correct. Fantastic.
Adam Jackson 25:47
So how did it start? I mean, you listen to the podcast, and then where was your first property? So the first actually what I did was I bought three properties right off the bat in Memphis, okay. And Those have actually proven to be some of my my best stories, some of my best winners. Yeah. I mean, ever since then I’ve really enjoyed the Memphis market. I can tell you though, what I did was I was going through the pro formas from a Memphis property tour, not it was really like three years ago at this point. And I could not believe the deals the way that the the way the pro formas looked, you know, they’re just the amount of cash flow and the rent to value ratio. But I was told that even years prior to that they looked even better.
Jason Hartman 26:32
Yeah, I can tell you that it’s, it’s never too late to start and the deal I’m still finding deals that look great today. So yeah, absolutely. I agree with you, and you use property tracker to to track your portfolio. And are you also using it to evaluate new deals. So you know, it certainly makes you hone in and you’re very familiar with the way that first year projection looks on the performer. You know, you’ve learned how to That works. And by the way, anybody watching or listening, if you go to Jason hartman.com, if you do one thing and one thing only, go watch that free 27 minute video on the front page of our website, it’s totally free. It will teach you how to read and understand every single number on that performer. And it’ll really teach you how to evaluate a real estate deal. And it’s probably the shortest best course on real estate investing ever. And it’s free. So 27 minutes, there you go. But yeah, so at the time when you were buying those properties, Adam, did they feel expensive to you?
Adam Jackson 27:36
Well, being from the Socialist Republic of Connecticut,
Jason Hartman 27:39
they call cheap, right, right.
Adam Jackson 27:41
Because they were barely in the six figure range. So they did seem fairly inexpensive to me. However, I would still have to make a 20 to $25,000 investment. So I think that maybe just kind of getting over that, especially with a Roth IRA at the time. I think that the contribution was 5000 or 5500? And, you know, probably something similar to that with what I was doing with the 401k. So, you know, obviously it’s a bigger investment, but the thing is, is that the money starts working, the the currency starts working for you immediately. And you don’t have to put it off. So yeah, I wouldn’t say it was inexpensive, but still a good chunk of change to me at the time. Mm.
Jason Hartman 28:24
Okay. And you know, what were some of the good and the bad things that have happened to you over the years, you’ve been investing for five years, you’re up to 14 properties in all the markets you mentioned. So congratulations on all of that. You know, you said you were surprised pleasantly surprised at how some of them have performed and that the appreciation you’ve gotten. So that’s awesome. But there have been some lessons along the way. I’m sure some things you have probably some regrets. I’m guessing. Any thoughts? The real world picture is what we want to paint here.
Adam Jackson 28:56
Yeah, sounds good. Well, I mean, I can tell you right off the bat, I have zero regrets. Only because anything that happened that might have been to the negative was actually offset by the lesson, you know. So I definitely learned an important lesson. Through those negatives, I can tell you that at the time that when I was going through and harvesting all this equity to dump back into the other three properties that I’m firing just in the last few months, I can tell you that those properties performed very, very well in general. And I think a lot of that might have had to do with with where I bought and what I bought, but I can tell you that the cash flow has been pretty solid for the most part. And now I have had some some issues. I think it’s very important to stay on top of your management. I think that if you have some sort of a charge that you need more detail on or maybe you just want to question for certain reasons, I think it’s very important to stay on top of the management. Demand those answers you know, demand the answers demand pictures are real. Yes,
Jason Hartman 30:00
absolutely, absolutely like that.
Adam Jackson 30:03
I can’t hammer that home enough. Yeah. And don’t be afraid to. I mean, if you have to, I mean, have a healthy amount of tension. If you have to do that, and let them know that you’re not, you’re not afraid to take your service or your business elsewhere. I
Jason Hartman 30:18
absolutely couldn’t agree more. Now to that end. And, you know, we’ve, as you know, have been really pushing and teaching people how to do self management, long distance self management, which, you know, like I’ve said many times, if you asked me if that was possible, 1314 years ago, I would have said No way, but it’s totally possible. And, you know, we have all these great tools to do it nowadays. And, you know, we just launched the empowered investor, inner circle, and all of that stuff, too. You know, our goal is to help, you know, thousands and thousands of investors really take control of their properties by doing self management. And the amazing thing I find is that sometimes because you get at third party that intermediary that middleman out of the way. It’s actually easier. It actually takes less time. Now it sounds like you’re not doing any self management yet, but you’ve probably thought about it. I don’t know. Are you
Adam Jackson 31:13
self managing? I think I’ve thought about it a lot. And actually, I was very, very close to firing property manager at one point to do that. And then we ended up improving the situation. So I didn’t actually do that. It has been on on my radar, and that’s partly why I bought in Florida, although I’ve had no issues there, of course, so but that’s definitely something I would I’d be willing to entertain. I think it’s a it’s a great thing to do.
Jason Hartman 31:38
Yeah, just the fact, Adam, that you, you know, hopefully we’ve conveyed to you that you have the confidence to do that. It puts you in a different negotiating position. When you’re asking for justification for an expense from your property manager. You know, now you can do it hopefully with some more confidence with some more guts to say Look, if I need to pull the plug and get another manager or just self manage, you know, I know there are options, right? And it’s gonna just make you a more powerful confident investor. Right?
Adam Jackson 32:10
Absolutely. And I think it’s kind of funny because I’m seeing parallels between my read my initial reluctance to actually purchase a property. And now fast forward four years, or maybe even a little bit more. Now I’m sort of at that same Crossroads with, okay, well, now, do I take these matters into my own hands? Do I take the plunge into self management? Mm hmm. So that’s one of the one of the things I’m definitely thinking about. Yeah. But But you know, like, going back into the portfolio, some of the good some of the bad again, most of those properties have performed very, very well. I’m at infinite returns on on many of them. I can tell you though, actually, this is a good story, my worst performing property. I finally I purchased it three years ago, and it was at the lower end, so I’m probably close. To like to maybe a see property, and I finally had my first month of cash flow in about two years. So think about that. I mean, that I finally got it stabilized, I think. But what’s funny is that when I look in my property tracker, and I look at the overall return, I’m still looking at a double digit. It’s a 15% return. Right. So you know, it’s funny, because you, you have alluded to or talked about in detail in the past, you know, if the deal only goes half as well, is it as it’s projected? Yeah. You still get these double digit returns? Yeah. All right. And that’s what I’m seeing here, you know, between appreciation tax benefits, but but the lessons I think that’s that’s priceless. So, absolutely. One bad egg, though, I think, yeah, one may get one at some point.
Jason Hartman 33:49
So your worst deal is 15% annual return on investment. That’s right. I love it. Yeah, that’s the worst deal, folks. It only gets better
Adam Jackson 33:59
to believe Yeah, I wouldn’t have believed that myself. Yeah.
Jason Hartman 34:04
And that’s, that’s a lower that’s a lower end property in terms of what we sell and what’s in your portfolio, right?
Adam Jackson 34:10
Yeah, it’s a lower end property. But I can tell you that I have another lower end property, I only have two in the portfolio. And that has been outstanding. I have a I have a section eight tenant in there. And the rent comes in like clockwork, there’s hardly ever a repair, the tenants are all leasing up. But that’s another thing. I’ve received so many renewals on leases this year. It’s just incredible. So you know, I can tell you that all the properties that I have There are currently leased, and I collected every rent last month including back rent from a property that was missed from the previous month.
Jason Hartman 34:47
Okay, so that’s a good question. So at the time of recording now, you know, we’re sort of in the midst of the lockdowns are spotty as some areas some not, but you know, every world’s mass right now. Right? There’s been a lot of talk about rent strikes and eviction moratoriums and stuff like that. Has everybody been paying your rent all the way through this? Or is that just last month that you were referring to? Or tell us about the experience on rent collection?
Adam Jackson 35:14
Okay, so that would be specific to last month. I can tell you, though, that everything has been very, very consistent. I mean, there might be one property that I don’t collect rent on for a given month, or maybe it’s going through a turnover. But that’s generally the average I would say one property out of the the double digit properties that I own. My I might miss the rent for some reason or another. But, you know, I just thought it was a testament to a lot of a lot of the fear that has been out there. And I remember months ago, we were we were wondering, I mean, okay, let’s build up the reserves. This could be bad, but you’ve been you better hang on to your hats. And I think this is just a testament to the fact that every property that I have is currently leased. The the leases are being renewed and last month in particular, I collected every rent.
Jason Hartman 36:06
Yeah, that’s fantastic. So the asset is just much more resilient than most people think. Adam, I want to go back to that comment you made because I’m not sure everybody really understands it on your worst performing property, and how, you know, some people in the income property investing game and the real estate game, they think they’re losing when they’re actually winning. And the reason they think that is they don’t know how to do the math, they just don’t know how to calculate it. They don’t understand that like an iceberg. You know, most of it is below the surface of the water. And there are all these things giving you return on investment because it’s a multi dimensional asset class, and they don’t see it, you don’t see it right away. Sometimes you don’t see it until the end of the year when you keep the books on it or when you do your taxes and you get a big tax deduction. or whatever, right. But speak to that a little bit more and maybe help our listeners understand that a little bit.
Adam Jackson 37:06
Yeah, I’m actually glad that you brought that up just because recently, I had spoken with another investor who purchased a property. They tried doing it for only one year and had a major repair. This was just somebody outside of the network, and they did it on their own. And it basically wiped out whatever their projected cash flow for the year would have been. And I think it was at that point. I mean, I basically told them some version of what you just said, how there’s just a lot happening underneath the surface, right. And I took it upon myself to go in and really do a deep dive on my returns and the calculations there. Now, at the time of the I guess it would have been 12 properties I had, I was looking at roughly $3,000 a month in cash flow, which I think is pretty good. I think that those numbers are pretty solid. But what I did was I took into account the appreciation, I took into account the loan pay down. And then projected tax benefits. This is not include inflation paying down the value of the debt or anything like that. And that $3,000 turned into between 15 and $17,000 per month for the total return. So it’s actually pretty amazing when you look past the cash flow, what’s really going on, especially if you leverage these properties at a five to one or four to one, you’re really looking at some incredible returns.
Jason Hartman 38:33
Yeah, yeah, you are, you are. And because you get, you know, like people, most people just look at the cash flow. And they think, I mean, I remember there was a comment on one of my YouTube videos the other day, I didn’t have time to respond to this skeptic, you know, but I’m not going to convince him I just give up on some of these people. They just don’t get it. You know, you’re either gonna get it or you’re not gonna get it right. But this one guy watched the video, I guess. And, you know, he commented, how is this possibly worth it? I’m gonna buy a property and get 200 off A month. So what? And it’s like, oh my gosh, if you just took the time to understand, I mean, what you know, to that guy, like, I want to say, Okay, look, I’m not gonna try and explain anything to you, or teach you how it works or how to calculate return or anything. Just ask yourself this simple question. How is it that you know, and I know because everybody knows them, right? So many people who created a lot of wealth through income property, yet, you probably don’t know anybody who did that in the stock market or buying gold or, I don’t know, maybe Bitcoin if they timed it, right. But you know, I don’t think that’s a sustainable investment. How do they think it works? You know, because they certainly have looked around. And they know lots of people have become very wealthy through income property, yet they still don’t take the time to understand it.
Adam Jackson 39:52
I think a lot of this has to do with the infrastructure around what we look at when it comes to Wall Street, and the The conventional wisdom as to what investing actually is. Yeah, I mean, I know that we’ve all talked about this, but income properties are outside of that system. So there’s no one that’s going to be pushing that. But But again, like you say, the wealthiest people are the ones who either have made their fortunes in real estate, or who put their money in real estate, and there’s good reason for that.
Jason Hartman 40:20
Yep. Abby, you’re absolutely right. You’re absolutely right. This will be continued on the next episode. Thank you for listening and happy investing. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
Jason Hartman hosts Ross Wordon to discuss his property plan. Ross discusses how he started at an Etsy store in today’s client case study. Ross Worden started a fast-growing business from an Etsy store. His early interest in real estate sent him on an investment quest. He discusses how he became educated by listening to over 500 episodes and after purchasing his first investment property, created a 10-year plan to get to 93 properties. Jason and Ross look at his current portfolio and his plans for growth.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multimillionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:54
Welcome to Episode 1531. You know, I’ve been talking to you about how we’ve been working on developing some handy dandy calculators for you. Of course, we have a software company, property tracker, and real estate tools, you know, great, great software apps, iPhone and iPad apps Mac app available to you as well. But just some little calculators to do some quick stuff. Well, the one we’re going to talk about today is not a little one, actually, it’s a it’s a spreadsheet really more than a calculator. But it is super handy and powerful. And we are going to endeavor to make this one public. But this time, I can only say that your investment counselor will have this calculator available. What we did is we we took the calculator that our client, Ross Warden was nice enough to share with us and we elaborated that’s not the right word, Jason. We didn’t elaborate on it. We expanded on it. We improved it. We took his great idea. And we embellished it. I don’t know, what’s the right word? I don’t know. But anyway, we made version 2.0. Okay, so as our client our Ross is describing today, in his case study of how he plans to get to 93 properties. And that’s a pretty awesome goal for a young guy like this. I’m just so, so proud of him and what he’s done so far, and what he’s going to do, when he says, something’s gonna happen, it’s gonna happen because this guy is a Dewar. And that’s great. He joined us for our venture Alliance trip in Hawaii about a year and a half ago, and shared that this spreadsheet with us, we presented it at meet the masters. Since then, even we’ve made a few more modifications and improved it more, and your investment counselor will have this available to you. If you don’t have an investment counselor with our company. Reach out at Jason Hartman calm COMM or by calling one 800 Hartman, again, that 800 number only works in the US I understand we have, of course, listeners in 189 countries worldwide. If you are outside of the US, just go through the website, Jason Hartman, calm and inquire anywhere, any form on the website and we will get you an investment counselor who can run this calculator for you. They can do a screen share meeting with you and really show you the visuals and it’s just, it’s really awesome, I must say. But ultimately, the plan is to make this available on our website so that you can go plug in your own numbers and play with it. So that will come it will come. A couple of quick announcements before we get to this great client case study number one for meet the Masters VIP ticket holders. Remember your two bonus implementation sessions. The first one is this Thursday night. It’s Thursday, August 20 at 8pm Eastern 5pm Pacific. And then the second one is the following week, we sent you all an email today with the secret link for that. And then the for those of you who purchased the meet the Masters recordings, those will be done very soon. We’re just putting the final touches on them now. And we’re going to have a really nice portal for you to go in and access those and also an audio download. So you have the videos and the audios we really wanted to do this nicely have it indexed for you, you know, lots of others would have simply shared the link and not edited it cleaned it up. Chapter rised it if that’s is that a word chapter rising? I don’t know. Where’s that word? Jason chapter rise. I think chapter rising as a word. Yeah. Chapter rise, we’ve chapter it. Boy, that applause just goes on too long, doesn’t it? So and then we’ve got our live stream coming up on Sunday. on our YouTube channel and facebook, as well. So our live stream is there on Facebook at the Jason Hartman comm Facebook page. And on YouTube, just type Jason Hartman and you’ll find our channel and you can join us for the live stream every Sunday. That’s coffee talk. That’s not ta okay. It’s tea. Okay, caught coffee talk. So join us for that every Sunday. We had a great one last week. And by the way, you can watch the replay on the YouTube channel, so or on Facebook as well. So that’s available to you. Okay. Without further ado, let’s get into this session with the client case study with Ross talking about the calculator, and I think you’ll enjoy this. So here we go. It’s my pleasure to welcome Ross Warden to the show. He is one of our clients and he is doing a great job. And I just love to see young investors with big plans and this is no good. exception. If you’re watching on video, we will be sharing a little spreadsheet for you. So you can see his great plan to take over the world as a real estate investor. And we’ll go into that, but if not, I will share it with you here on audio. And I think it’ll be very insightful and enjoyable for you. Ross, welcome. How are you? I am excellent. How are you? Jason? Good, good. It’s good to have you on the show. And thanks for coming on. You know, the listeners always tell me they love to hear client case studies. And anybody listening. If you are one of our clients, and you want to share your case study story, please reach out to us through Jason hartman.com or at one 800 Hartman because our listeners would love to hear from you and not only give you 15 minutes of fame, but probably 2025 minutes. As it works, you know the old saying 15 minutes of fame, right? Good stuff. Well, I Ross start off, give us a little background. Where are you located?
Ross Worden 6:55
I am in Columbus, Ohio.
Jason Hartman 6:57
Excellent. And you joined us for our prophets in paradise event in Hawaii, just about a year and a half ago, I guess that was right.
Ross Worden 7:05
Yeah, beautiful. I was there for the conference and for the kind of mastermind retreat after that. So it was it was a fun time
Jason Hartman 7:11
that that’s what I was gonna say you were there for the venture Alliance retreats. So thanks for joining us for that. And that was a lot of fun. And I tell you, I miss travel. It’s who knows when we will be really traveling again, in any real way. I was looking at the TSA statistics this morning. And it it’s shocking, travel is coming back. And that’s encouraging. But it’s literally only 17% of what it was this time last year. And and that’s with a comeback. So travel is increasing for sure. But way, way way down, but you know, let’s talk a little bit about your business and background because I think it kind of relates to travel and, and that’s why I wanted to talk about it. So before we get to business, a little background. Did you grow up in Columbus, Ohio?
Ross Worden 7:59
No Actually, I’m from Findlay, Ohio, the northwest part of Ohio. I came down to Columbus in 2005 went to school at Ohio State University and graduated in oh nine with a degree in Industrial Design. Okay. And then did you do a Masters in Germany? Because you said you studied in Germany as well? No. So Germany is well known for their product design acumen, I guess. And I studied there for three months 2008 I believe it was and that was just a short stint was in my undergrad. Got it. Got it. Good stuff. Okay. So you did industrial design and then for your did you start your business right away out of school or no, it took me a while to figure out what I was doing with my life. And who really does figure it out. Right, right. No, I I worked in an industrial design or product design consultancy here in Columbus for about six years, but about two or so years into that I discovered that I had kind of an entrepreneurial gene, I suppose. And started pursuing just kind of a side gig to start paying down student loans and that sort of thing and hopefully, you know, get out of debt and kind snowballed. I turned out that I really, really enjoyed entrepreneurship and had just a passion for growth and personal growth and business growth and wealth growth and just kind of everything associated with that lifestyle. And so I really went deep into that I ended up quitting my full time job to pursue my own business full time in 2016. And that’s, that’s where I am now. That’s the path.
Jason Hartman 9:21
Okay, great. So tell us about your business. You know, I’ve been to 87 countries and, and you’ve traveled a lot and your business relates to travel. So now we’ll circle back to that. And then let’s talk about real estate investing.
Ross Worden 9:33
Yeah, very much so. So I think your observations about everyone wanting to travel but they can’t travel right now is very relevant to my business. So my business is called conquest maps. We make high quality pinnable travel maps that you put up on your wall, put pushpins on to keep track of where you’ve been where you want to go. Very simple concept. There just wasn’t what I was looking for when I wanted one for my wife and I so just given my skill set, I decided to figure out how to make it myself had a lot of criteria. For my business intentions, I guess and so I made a handful more, put them up on Etsy. And they sold and I guess long story short, I kind of reinvested all of my profits for the next four or so years. So now we just help travelers who want to see more of the world. We help inspire their, their adventures, and, and that sort of thing. And all through travel maps and travel related home decor. So it’s been a really fun thing. But particularly right now, nobody can get out. And so they’re thinking more and more about all the places that they want to go. So of all of all businesses, I think we’re in a fortunate spot, because while revenue took a serious hit, when the stock market was taken a big hit there, things have come back a lot and people are really they got the wanderlust right there. They’re really hoping to get out and they’re thinking about where they want to go. They want to put those pins in the map. And it’s been an interesting time. We’re struggling to keep up right now, in all honesty, so the best problem to have,
Jason Hartman 10:53
right, yeah, yeah, I was just gonna say that. I think people really do have serious wanderlust right now. More than Normal I mean, your generation millennial generation and you’re 33 years old, has very much wanderlust much more into experiences over things. But that travel has just been halted. So I would imagine a lot of people are dreaming of places to go when when, when times changed a little bit for sure. But with your background, in your degree in Industrial Design, and in here’s a stereotype, but it’s a positive one, you know, your age, it’s a surprisingly like low tech item. What do you think about that? speak to that if you would, it’s not a piece of software. It’s not a website. It’s a map that you hang on the wall and stick tacks and do right.
Ross Worden 11:42
Yeah, exactly. It’s a simple thing. But you know, regardless of all the tech things happening at the end of the day, people are always going to live in a home much like you preach right. And when you have a home when you have your, your own space, you want to put things up in it that represent you your lifestyle, your your desires. In life, and I think this is always going to be relevant, it doesn’t really matter if there’s a better or different or whatever, whatever solution out there, you can track your travels in 100 different ways. But at the end of the day, it’s just really, really awesome to see that map hanging up there to be thinking about it all the time. It’s when people walk into your house, you automatically have a way to discuss something interesting. Hey, I’ve been there, or Hey, I wanted to go there today. It’s just super interesting and super easy. And it just, maps are just cool.
Jason Hartman 12:28
Yeah, good. Like maps? I think so too. I think so too. What other kinds of products do you make? Besides the travel maps? You travel it related decor you said?
Ross Worden 12:37
Yeah, sure. So like Canvas prints, that sort of thing. Travel related artwork. We do like wall decals, vinyl decals, by far and away. The most popular things is our pinnable travel maps, though. So that’s that’s the leader. All right. And we’re known for is Etsy your main outlet for sales or is Amazon not at all? Not at all. That’s where I started. It was a very different landscape back there today. 2013 when I launched the store, now our best places our Shopify store our website, so conquest maps calm. Okay, so
Jason Hartman 13:08
that’s good because that means and you know, we’ve had Carmen on the show talking about Amazon being an Amazon seller and so forth and all the massive, terrible, disgusting abusers that Amazon and other big tech companies just abuse people like crazy. So you have your own store and your own distribution channel, which is great.
Ross Worden 13:27
Yeah, good. I would say yeah, I’d say I don’t know. 60 70% of our sales, especially now are coming through our website. We are on Amazon and we are on Etsy but we say own the vast majority of our customer base, which is far better, it’s better for them and it’s better for us. So it’s it’s a good thing.
Jason Hartman 13:44
Yeah, good stuff. Good stuff. Okay, let’s switch gears to real estate investing. So when did you become interested in real estate investing?
Ross Worden 13:53
To be honest, I would say sometime in high school. Oh, just like me. I was 16 book. Yeah. Yeah, I think I stumbled across a book called guerilla real estate investing. Hmm. And I read it. And I was just really interested, I never really understood the stock market like really, I mean, I get it. Now I’ve researched and all this stuff, I get it now, but it never quite clicked to me. It didn’t resonate. And so I just real estate just made sense intuitively. So I always kind of had it lurking in the back of my mind. But you know, the time when I started my business, I started this particular business because I started it with $500. I didn’t have any money I needed to get out of debt. And so real estate was a very far off dream. But now that I’ve got, you know, some revenue coming in, and I don’t, and I liquidated my 401k. There was not that much in it. I have nothing in the stock market now except, like probably $1,000 in a Roth or something. Right. And yeah, it’s just like, this was the goal I was working towards. I met you at a conference and I think, I don’t know, maybe three or four years ago. I just wasn’t ready for it. At the time. I was mostly interested in only building the business figuring that out, but it’s like, I locked that in the back of my mind. Like I need to circle back to this And when I found that it was time to actually start thinking about investment and retirement, which is not totally a philosophy I subscribe to anymore, right? I was like, Okay, now it’s time to really listen to Jason’s podcasts really dig into that. And that’s totally what I did. I’ve probably listened to 500 or more of your podcasts. Wow. Yeah.
Jason Hartman 15:15
That’s fantastic. Thanks for listening. So, did we meet at one of our conferences or someone else’s conference?
Ross Worden 15:22
No, is actually so you just had Ryan Moran on your podcast. So I joined the tribe for a while there. Actually Carmen was at that conference. I think I don’t meet her there. But yeah, you heard that and so
Jason Hartman 15:33
good stuff. So so we met at one of Ryan’s conferences, then. Yeah,
Ross Worden 15:37
yeah. It was a great
Jason Hartman 15:38
conference. Richard. Good stuff. Good stuff. So you’ve got five properties now. And you’ve got big plans to get to well on the spreadsheet, 93 properties, which is an ambitious goal, and I think it’s awesome, but you’ve spaced out very nicely over time to where it’s doable, you know, As the old saying goes, goals. should be just out of reach, but not out of sight. They should be a stretch, but still realistic at the same time. And I think that’s what you’ve really done. You’re exactly the philosophy. You’ve got a I mean, listen, you’re in the business of maps. Okay? And here you’ve got a roadmap to get to that hundred property goal. Why don’t we share screens now? And you can show us the spreadsheet and let’s take a look at that. This is really exciting.
Ross Worden 16:28
Yeah, sure. So this is obviously a dramatic oversimplification of what’s happening happening but this is this is basically my plan. So after that conference are the conferences that I went to back in 2018. I got my feet wet there in December, just dove right in got a property 2019 I bought two this year, I bought two and the goal is to buy one more and you can see the pattern here. 12345 basically every year, I’m increasing my quantity goal for target every every time so next year, I plan Do for the following year five, the following year six and so on. Around this time, that’s about year seven, my hope is to start
Jason Hartman 17:07
which is, which by the way, I got to translate this to audio. So this is now the chart starts from 2018. And now we’re at 2025. So this is seven years in. And as listeners may know, when I teach the refi till you die concept, we talked about the seven years based on the rule of 70 twos, the portfolio goes up in value by 50% at a modest 6% appreciation. So you could do a refinance there. You could do 1031 exchanges. There are lots of options here. But what we’re looking at is we see one property purchased in 2018, two in 2019, three in 2020. That’s this year, by the way, if you’re listening to this show, two years hence I just want to understand This is 2020. Now, for next year in 2021. And you know, four properties a year is a modest goal, people can do that they do it all the time through our network, five, in 2022, you’re just increasing it by only one property each of those years. Okay, so now, so seven in 2024, eight in 2025, your seventh year in as a real estate investor. And then what happens because now you’ve added a row to the spreadsheet, and and there’s a one underneath the eight. What does that mean? That means, in theory with that appreciation, or, you know, that’s the point at which I feel like it’s either a 1031 exchange or a cash out refi. So in theory, I should be able to with the money I’d previously invested in that first property in 2018, extract enough out in some capacity to buy an additional one that I’m not putting new capital into the system with. So that’s basically taking by one in 2018 and adding another one to represent that in 2025. Okay, and the same thing will happen in your saying you can buy the extra property, because you’re simply refinancing or doing a 1031 exchange on a on maybe a two for one, you might, you know, by then Ross, you probably be able to do a couple of two for ones. So a lot of your increase in purchase, like if you’re saying you’re going to buy eight properties that you’re which is two per quarter, you know, you might be able to just simply do that out of the portfolio without even putting in extra money. It’d be amazing. It’s very
Ross Worden 19:39
much like your how you explain the goals. I feel like this is kind of the well, I won’t say conservative roadmap, but relative to what it is. It’s a fairly conservative roadmap. And then yeah, if it gets better than all the better, that’ll accelerate the process. But
Jason Hartman 19:53
the nice thing I like about your your roadmap is that you’re growing at a rate of only one property. per year on that top line. And that’s very modest. You know, I see people, investors come in and they got these crazy goals. And, you know, I wish him the best, I hope they achieve it. But you know, they’re just not very realistic. This is a plan. That is, you know, it’s based on smart goals. It’s simple, and it’s attainable, like you, you could actually do this. Now, it’s the properties don’t depreciate very well, then you’re gonna have to rely on some income growth from your business to support your habit, if you will.
Ross Worden 20:37
Yeah. And that’s, that’s very much part of the equation. You know, I’m going to continue building the business or businesses as time goes on. And so while I don’t exactly know totally how this is all going to come to fruition, it’s all mapped out within part of that plan and the business continuing to grow and to support this. So yeah,
Jason Hartman 20:55
in the end, you know, that’s the other thing I want to say about investors with goals or people with any sort have goals. You never know how, at the beginning, you will never have all the answers at the beginning. Nobody ever does in any venture in a relationship, a marriage, a business and investment portfolio. You just don’t know. Nobody knows. We all have to, to some extent, throw caution to the wind, jump in with some degree of blind faith and just work through it. Obstacles will come up that you’ve never imagined. The world will throw stuff at you that you’ve got to overcome. But you know, that’s really good for someone’s intellect, their character, their self discipline. Yeah, that’s, that’s great. Okay, so, on the top line, we’re still growing at only one property per year. Very modest goal, okay. But on the bottom line, it 2025 we add that extra property we talked about Then take us through those last four years there of the of the plan, because you grow at it two properties the following year to what we’ll call extra properties. Do you have a name for that? Or, or maybe self funded properties? Yeah, we’ll find all that portfolio funded. Exactly. Yeah. So so the thought there is, if I can split my properties, after seven years, one property into two properties, my 2018 property, as we just discussed, becomes another property. So I add that in down here, my 2019, both purchases, those become two additional properties. So I still have those two, and then two more because I refined or whatever the case. And so all of those are getting essentially split and added added back in for these last four years. So 2026 there’s an additional two on top of the ones that I’m funding from actual investment, I guess I’ll call it outside investment of my own cash, three in 2027, for instance, To 2028, and five and 2029, on top of my sequential incremental increases, I guess throughout that time period as well. So at the end of 2029, represented over here is 93 properties, the monthly I’ve made the very simple assumption of $200 in cash flow per month on property, all of all of those properties and again, realistically, by the end of all of this, I should be doing a lot better on many of these by then probably with an annual income of this 220 or $223,000. Basically, the total investment required to do this is 2.3 million for all of these, it does not include the portfolio funded properties. Can you hover over the total investment so I can see your formula? Mm hmm. Okay. So that is you’re basically saying $30,000
Ross Worden 23:55
through acquisition, right,
Jason Hartman 23:58
so $30,000 per equity. position, right? Okay. Now in reality, you can get properties for 20 25,025. You can do pretty good downpayment and closing costs 20,000, you’re getting some more marginal properties, and we’re talking about downpayment plus closing costs. That’s the number, and he’s going with 30,000. So that’s nice and conservative. Now, I would say Ross, that you go from 2018 to 2026. I would say you can probably get all the way to the 2026 number, possibly on a self funded portfolio where meaning and this is rough, so forgive me on this. I’m just looking at this for the first time today with you. But if you can make it to buying the to getting to eight properties per year, yourself in other words with your own investment, I bet that one in two Thousand 25. And the two extras we’ll call this self funded in 2026. I bet you can pick up those, almost undoubtedly having the portfolio portfolio funded properties, meaning so no extra money out of your pocket to actually acquire those properties.
Ross Worden 25:18
Yeah, that would be amazing. So what I’ve calculated here, I just deleted those, you can see all of the properties $200 a month cash flow should spit out just shy of $90,000 a year. So that tells me I can at least buy about three properties with my assumptions per year with just the cash flow.
Jason Hartman 25:36
Wow, that’s fantastic. This, you know, you know what you’re really showing our audience Ross is the incredible compounding effect of just staying the course. Compound compound. You know, Einstein said that compound interest is the eighth wonder of the world. We’ve all heard that quote. And this is really an example of that compounding effect. Many of us have heard Heard, or seen the little illustration where they show? If you take a penny, I think that’s how it works. You take a penny and double it every day for just 30 days, you have over a million dollars. But the amazing thing about that is that on day, like 28, you don’t have much money at all. You know, and you really get to that amazing leap that exponential growth in just the last couple of days. And that’s that’s sort of what you’re showing us here. So
Ross Worden 26:32
that’s exactly it. I’m gonna pass on quite an inheritance. Yeah, if I can, if I can follow through with everything. Yeah. Well, you got it. Give Kids Yeah, two, two right now and one on the way actually, congratulations.
Jason Hartman 26:43
Yeah, those kids are pretty lucky. Yeah. Thanks. So 93 properties in 10 years. That is just an awesome plan. And I really appreciate you sharing that. Tell us more.
Ross Worden 26:56
Yeah, sure. Here’s a really cool tidbit about what I’m working on here. Right here around the the 2025 2026. Mark, that should be approximately the financial freedom mark. Basically, unless I choose to reinvest it, I could cover in theory, all of our living expenses around 2025 2026 with a reasonable, quite reasonable lifestyle as well.
Jason Hartman 27:21
So in seven years, on a very conservative portfolio growth, you’ve reached Financial Freedom Day. Yeah. And tell us what that number is, though. What’s the revenue? I believe I use the assumption of about $12,000 a month or I’m sorry, not even. So with bass living expenses, that sort of thing. It was like right around 7000 or something is, is our expenses seven 8000, right. And so you can see right here in 2025, our monthly revenue is $7,400. Right? But wait, there’s more. Because what we didn’t say is number one, you didn’t project any increases in cash flow, right? There’s no this is again, there’s no risk. To increase, okay, which is which is great. You’re being super conservative here. And at that point you have 37 properties in seven years. Yeah. Yep. That’s awesome. Really, really good setting.
Ross Worden 28:13
Yeah, very, it’s where so maybe it’s worth mentioning this is basically my only investment philosophy at the moment, but much like you’re well aware of with Patrick Donahoe, for example, I work with his team. I layer in whole life insurance policies. And as you mentioned, it’s good to keep 4% at least as backup cash reserves for these. And that’s where I store all of that. So it’s growing it, maybe 5% or more. Yeah, especially if we see all the inflation here pretty soon, right? And that’s where I keep all that liquidity and so it’s going to be my safety net for all of this as well. That’s a very important thing to keep in the back of one’s mind when they’re investing in this I have to be very safe. Yeah. And so I keep at least 12 months you know, that’s that’s way more than is necessary, but with the business and all of my liabilities on being as you can guess can Conservative with that approach. Sure. Yeah, that’s fair. That’s fantastic. Ross.
Jason Hartman 29:03
Yeah. Thank you so much for sharing this. What else would you like people to know? Or say? Or? I don’t know, if I asked you the sort of fundamental question you may have sort of answered it another way. But But why real estate, you said you never really related to the stock market. Any other things you want to say about income property that makes it
Ross Worden 29:22
makes it the choice for you? So to be honest, I’ve dabbled with, you know, the only only possible stock or mutual fund or whatever type of approach would be dividend investing. And I actually did that I put about $30,000 or so into the stock market a couple years ago, just to start seeing what that would be like, and it just, it wasn’t very good. And I think it was, I don’t know, a couple years ago, but the stock market started to taper off a little bit and it lost value. I’m like, this is absolutely terrible. I’ve never been a gambler in my life. I never even like playing $5 poker games with my friends. I’d be the dealer, right? So I just bailed. I totally pulled everything out. And I’m like, nope, this is this is what I’m gonna put into it. properties. And so I think especially getting to know it far better with how you explain things and just sticking with a philosophy. I mean, there’s a lot of investing perspectives out there, even within real estate. But I’ve just stuck with your philosophy. It’s just, it’s too good to argue with, you just really can’t argue with that there’s always an offense with with what is it the five or so facets of the benefits of investing with real estate? You just absolutely can’t beat it as far as I’m concerned. Now, I will be the first to admit that, you know, I’m 33. I’m a young investor. There’s a lot that I haven’t been through, there’s a lot that I don’t know. But all we can do is make the best option with the information that we’re given. And I’m making what I feel is a very, very good decision for the future of not just, you know, my life, but my family’s life and the generations to come within my family. So I feel very confident and very excited. I mean, this just makes sense to me. Obviously, I built this simply in a spreadsheet, but the numbers resonate. I understand what’s going behind. going on behind the numbers, but it’s it’s tangible stuff, right? It’s actually a property with people living in it. And it’s an it’s a thing. You can look at numbers with stocks and everything, but it’s just, they’re totally arbitrary to me. You don’t have any control, right? Either way. It’s always scary to me. I’m typing. I’m a business owner. I’ve got to control things. And this also works for
Jason Hartman 31:19
good. Yes. commandment number three, thou shalt maintain control. And that’s that’s really good. Ross, what, what markets are you invested in?
Ross Worden 31:28
So currently, I’m only in Memphis. And right now is about the time that I’ll be branching out just because of how complicated 2020 has been already. I may just go ahead and buy the next one this year in Memphis, but moving past that I’m looking at, Oh, I can’t remember I’ve been talking with Evan on a couple of markets, but I’ll probably branch out to somewhere else. I’ll just have to get the next LLC set up and there’s just a little more complication that is not really that big of a deal. It’s just things are busy, right.
Jason Hartman 31:55
It’s a crazy time we’re living in but you know what, if the end of the day All those protesters need a place to live. At the end of the day, you know, the commercial properties have been shut down. And the home has become the center of the universe. And you’re in a low density market. I was just talking to someone about, well, it was a actually a tech support person with Apple. And I asked her if she was helping me with my computer. I said, Are you you know, I’m curious. Rebecca, are you are you? Are you at home now? Are you working in the office? And she said, only a few people are in the office. I’m at home. And the people that this was interesting, by the way, you’ll you’ll appreciate this because one of the things I’ve talked about in my pandemic investing presentation is and we’re going to talk about this in our upcoming meet the Masters conference in depth is how elevators and mass transit are the two danger zones, but the and she mentioned the elevators specifically, she said I don’t want to get in an elevator and she was talking about that a little bit. But she also said that the people that couldn’t work at home, the apple employees that didn’t have the option to work at home, or those who had roommates, because they couldn’t provide the security, this, you know, it’s not just a secure connection, but it’s a secure computer. And you know, I signed up a few years ago for like a data service for real estate that, you know, would be helpful to us. And they sent an inspector to my house. And they said, I have to have an office with a locking door locking file cabinet, a paper shredder, not that I ever print any of this stuff anyway, but you know, it’s just kind of an old fashioned thing. And I can imagine like, if I had a roommate, they probably would have turned me down and said, No, you can’t have our service. And my mom did that, you know, for a tenant screening service that does credit checks because she self manages all her properties, and they came to her house. And that was the same thing you know, do you live alone? You can’t have a roommate and subscribe to some of these things. And that that was interesting. So literally you’ve doubled the amount of housing demand in the world if roommates have to split up like double double the market right right there so
Ross Worden 34:19
yeah about the divorce is hot
Jason Hartman 34:21
right? Don’t you don’t even need any divorces just roommate divorces? Yeah. And I think this is just an amazing time for us as real estate investors, investors following this specific plan that we’ve you know, we’ve outlined and you’re you you’ve bought into it and and thousands of other people have, thankfully so. Yeah, I think I think we got good years ahead. And in boring suburban real estate and linear markets, right? Yep.
Ross Worden 34:47
Yep, absolutely. I try to I try to get my my family members convinced. And you know, I’m pretty gung ho on it. Yeah. It’s exciting for me, and I think I understand it reasonably well at this point, too. So I love to kind of explain it and answer questions about it. My family and friends asked so well, yeah, Randy trying to spread the message. I guess after listening to 500 episodes of
Jason Hartman 35:05
my podcast, you’re probably a pro.
Ross Worden 35:08
You know, you know, it’s funny, Jason is I listened to them at one and a half or two acts. It’s actually weird to have this conversation here you at normal
Jason Hartman 35:14
speed. I’ll talk faster. Just for you. I’ll talk faster. That’s funny. That is weird. So are you self managing any of your properties?
Ross Worden 35:24
Not yet? Not yet. I do fully intend to eventually. But yeah, I’m, I’m self managing a business. So I don’t really have the time as well as you know, two to three kids shortly. So right, but financially, it probably will make sense. Evan turned me on to stessa. And I use that for a lot of the financial tracking and stuff that’s been really helpful. So I don’t I don’t see it being too complicated. Yeah, I mean, I do want to transition to that eventually. You know
Jason Hartman 35:48
what, and like I’ve said before, and everybody has to get their own comfort level with self management versus having a manager but I literally think it takes less time self managed. Now that may not always be true, because you never know what What’s gonna come up, but, you know, the tenant just doesn’t bug you that much, you know, because they’ve got to maintain that sort of relationship with you. And the tenants are so appreciative, like, I just, I just replaced an air conditioner in one of my properties, which, that wasn’t cheap, but you know, but it’s amazing. The tenant helped me, like, they went and found several contractors, they had them, come over to the house, give bids. And then I said, Who do you think we should go with that, you know, the prices are a little different, but they’re not that much different. Just tell me who you felt comfortable with. And they said, Oh, I don’t remember the name of the vendor. So I’ll just call it ABC air conditioning. They were much more professional. And they showed up on time and you know, they were neat and clean and they just seemed like they were running more professional operation and coincidentally, they were the cheaper one. So we went with them. And I also, you know, I asked the air conditioning contractor, you know, are you going to include a thermostat A new thermostat with the air conditioning replacement. And they said, Yes, we’ll include that. And I said, you know, I’d really like to upgrade the thermostat and get a Wi Fi connected thermostat for my tenant. And I thought this is going to the tenants will love this, right? It was like a nice surprise gift for them. But what it also does Ross is it lessens the wear and tear on my air conditioning unit. Because when they’re away, they don’t have to run it, they can control it from their smartphone. And so it won’t run all the time. It won’t run as much. And it won’t, you know, because they can set it to start running at a higher temperature. When they’re ready to come home. It doesn’t run in big heavy spurts, which put a lot of wear and tear on the unit. So I think that’s good for everyone. And I literally ordered the thermostat on Amazon. I shipped it to the tenant, I have all my tenants addresses in my Amazon account. I shipped it right to them. They said Oh, we got it and we’re gonna have a guy install it and then I got $100 off from the vendor, because I didn’t use their thermostat. And so literally, it was a $35 additional expense. The tenants love it. It’s got a real cool screen on it shows the humidity, the temperature, and you know, it’s all smartphone Wi Fi controlled. So
Ross Worden 38:17
solid investment. Yeah, that’s awesome. That’s awesome. So good stuff. Hey, thank you so much for sharing your plan with everybody really appreciate it. And anything else you’d like to say? Just to wrap it up? No, not other than I appreciate how genuine and transparent you are. I’ve learned a lot from you and your show. And you know, it’s really good to actually go and meet you in person. There’s there’s a lot of as you literally say yourself a lot of shady real estate people here tonight. So, you know, I really believe that you’re in it to actually help people and I feel like you’re a very trustworthy person. And I just appreciate all that you’ve done to help people and help me and on this journey. So I’m excited for the future. Good stuff. Well,
Jason Hartman 38:55
thank you so much. I’m honored to be your guide and you know, Our team will be here to help you through life and death through 93 properties. So all right, Ross, thanks so much and happy investing.
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
In this episode, Jason Hartman focuses on property management education. He discusses why you should identify weak spots in all your investments and create safeguards against them. He discusses that property managers tend to be the weakest link in your income property investments. In the second segment of the show, Jason continues on the topic of management with a client case study with Muthiah. They discuss issues he had with a vendor and how he was able to get support.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:53
Welcome to Episode 995 995. Guess what, we’ve got a special treat for you With Episode Number 1000 something I’ve never done before. And as there is a thunderstorm out, and it is raining some badly needed rain here. I love storms. You know, it’s like God putting on a show. It is thundering and lightning out there. It’s really cool. But I will give you a clue about Episode 1000 coming up here is the clue for Episode 1000. We’re only five episodes away.
Jason Hartman 1:44
Okay, we better shut that off quickly because you know, there are copyrights and so forth we have to respect but yes, Episode 1000 will be none other than fabulous. Colby callay right and that is her most famous song bubbly. I interviewed her yesterday. Great interview She was really awesome and talked about her music career and how she started it in such a unique way online. You know, of course the music industry is massively changing. So we’ll talk about that as well as how she writes songs and I just love singer songwriters. There’s too few of them nowadays, but it’s a lost art largely, but Colby callay, along with a fairly small number of others in the music industry are still singer songwriters. So it was great to interview her. And as you know, Episode 1000 is a 10th episode show. So we go off topic and we don’t talk about real estate investing per se, but I did ask Colby Kelly what she thought about real estate investing. You can hear her answer five episodes away. Well, actually four after you’re finished listening to this one, right. So a lot going on in the world. First of all, the self management revolution property management, getting the middleman out dis intermediation the power to The investor. Remember, I am a consumer advocate, I am all about the empowered investor empowering you. So you can get better returns, have an easier life, make more money with your real estate portfolio, and just have it all work better. And that is why we teach people how to self manage, because we have done our research. And you know, I’ve been doing this for what, 14 years now the nationwide investing thing. And before that I was in traditional real estate as a low information investor for many years before this. Now I am a high information investor, because I not only taught myself when I started getting out of my little sandbox in Southern California, thinking I was an investor but really I was a speculator a gambler. You know, I made some money for sure, but could have done a lot better. Had I been a linear market investor And invested for ROI, yield, cash flow, call it what you will. But this is the right way to invest. This is what really being investor is all about. Okay? It’s what it’s all about. So what we have discovered in our research, listen to this, folks, we have discovered that 39.7 2.1 5.17% of all property managers suck. Yeah, they suck. Almost 40% What was that number again? play it back, Mr. Podcast Producer, because I can’t remember what I just said. Obviously, I just made that number up, right? Yes. You know, I made it up. Don’t hold me to the 39% ish number of property managers that suck. They suck. And some of them are just downright crooks. And we don’t want you to fall victim to that now. Hey, listen. The question we’ve always got asked herself is what What question Do we have to ask dear listeners, we have to ask ourselves compared to what? Compared to what? Compared to Wall Street? Well, Wall Street sucks even more. Yeah, I know I’m talking slang here. But sometimes it makes more impact to talk that way. As Tony Robbins who drops the F word every other sentence, it’s really kind of repulsive. Honestly, Tony, I think we got your point. Yeah. So property managers. They’re the Achilles heel of our business. There are some great ones out there. Certainly, most of them are in between mediocre and lousy. You know what, we just want you to have more control. We believe in direct investing, you get the middleman out of the game. Think about it in the real estate game. When we invest for the long term, right? These buy and hold rental properties, the most historically proven asset class in the entire world. We only really have one intermediary The property manager and we are drilling down, finding ways to disintermediate them when appropriate when possible. Not always, if you have a good property manager, Hey, keep them they’re fine. They’re great. But if you have one that’s mediocre or lousy, fire them, you’re fired. I think our president said that right. And he said it a lot in his cabin endured quite a bit of criticism for it. Some is probably legit. But, you know, sometimes you have to shake things up, drain the swamp. Yeah, you know, drain the swamp and replace some of the people in the swamp with some other swamp dwellers.
Jason Hartman 6:42
You know, it’s almost impossible not to have swamp dwellers. You know, it’s just it’s just the way the political environment works. The way the system works, the establishment works. I mean, what is Trump supposed to do? You know, hire people that don’t know their way around the financial system. I don’t even know if that’s really possible to do do that. Right. So, I don’t know, a lot of his criticism against him is warranted, but he definitely deserves some credit haters. You haters need to give him some credit, too. We have Do you know that they believe I heard this on the news yesterday, they believe that the next unemployment report, well, officially, and I know the official statistics aren’t accurate, but at least we’re comparing apples to apples, right? It’s a benchmark, that’s all it is. It’s kind of like my scale in the bathroom which I rarely use and I probably don’t need to use it that much. But you know, when I step on my scale, it’s got those little electrodes in the bottom that shoot some electrical current that I can’t even consciously feel through my body to tell me what my body fat composition is my hydration level and of course my weight and something else tells you something I can’t remember anyway. Oh, you’re like bone mass index or something like that. Anyway, look at that thing is an accurate I know it’s not accurate. I know. The scale in my bathroom that cost 79 bucks and test your body fat is not accurate. I get it. But there are some things you can do to make it a little more accurate like never use it before going to the bathroom. Always go to the bathroom first have an empty bladder. And also do it at the same time of day. Do it with clean feet. Clean feet, yes, that will make the scale more accurate. And if you do that, you will have a relatively decent benchmark. Now what does a benchmark do? It tells you the compared to what question it doesn’t compare to dunk in your you know, letting every ounce of air or I should say cubic inch of air maybe or cubic centimeter that even be better of air out of your lungs and dunking yourself into a tank of water. It’s very hard to do that. That is a more accurate test than my scale. But it’s a benchmark right? And if we do it at the same time of day in the same way, every day and we do it over time we establish a pattern That’s what we want to do with our investments. So one of the best decisions I made when I got into this business 14 years ago, okay, is I decided you got to have a consistent benchmark. And that’s why we use the property tracker software. Go to Jason Hartman comm click on the resources page, get a hold of it. It’s very handy software. And we use it as a benchmark. If you go to Jason hartman.com slash properties, you will see the performance there static. If you use the software in our subscriber, you get the non static version, right, you can manipulate the numbers change the assumptions, right, but you’ve got to have a benchmark. And so many people in our business are out selling and promoting properties with no good benchmarking data, right. They don’t impute a real vacancy rate, the numbers change of the assumptions change. How can you evaluate this stuff? You can’t it’s just too hard to evaluate. things with fluctuating benchmarks. Okay, you can’t do it, you gotta have benchmarks. So that is a very, very important thing to have a benchmark and abide by the benchmark. So when you come and join us in Philadelphia on May 19, after registering at Jason Hartman comm slash events, or Jason Hartman creating wealth calm if you want to get directly there, you will learn how to benchmark better, right, and we will play the portfolio builder game that formerly we never did it the creating wealth event, we only did it at the Jason Hartman University event. But that is so popular and people liked it so much. We’re actually adding it to the creating wealth program that we will do together. Only one time this year. It’s the only one we’ve got planned on May 19 in Philadelphia. So join us go to Jason hartman.com get registered for that. And today, we’re going to do some complaining some rather serious He’s complaining now, I want you to ask yourself compared to what? Remember, the other investment choices out there in the marketplace are either I mean, of course, this does not cover everything I know there’s more. Either you can invest in this highly speculative stuff like precious metals, or cryptocurrencies that aren’t backed by anything at all talk about the ultimate Fiat, right. It’s cryptocurrency. You can invest in those things purely speculative, they produce no income. Strictly, it’s buy low, sell high. That’s the plan, Stan, good luck with that one. A lot of people have lost a lot of money with that plan. over the ages right over the millennia, buy low, sell high. Hey, you might be right. And you’ll win, but you might be wrong, and you’ll lose and you have no other recovery method. See, we were talking to one of our web development teams today. By the way, they are not a customer of ours. We just hooked up with this company recently. And we would love to be spending this money We are spending with all these outside vendors in our own ecosystem. So if you have a service that you can provide to us, we’d love to support you and keep it all in the family. You know, nepotism is good as long as you keep it in the family. Well, I’m talking about our customer family here, right? So go to Jason Hartman comm slash ask and tell us if you’re a blogger, writer, video producer, an audio editor? Do you specialize in search engine optimization or web design? Or are you a programmer? We got a lot of super smart clients out there. If you are looking for some freelance work, let us know. We’re just maybe we won’t do it today. But we’ll keep you in mind and in the future, we’ll do it. So Jason hartman.com slash ask for that. Anyway, talking with the software people today we had a two hour conference call with several people on our team and their team, you know, and we’re on the zoom meeting. And one of the things you always want to try and avoid in business In life with systems of any sort, is this concept right? the fewest points of failure possible. You don’t want a lot of points of failure. The old saying a chain is as strong as its weakest link. So as you apply this to investments, right, what is the weakest link? Well, certainly a weak link for any investment would be for it to be one dimensional, a one dimensional asset class like the speculative things, the precious metals, the non dividend paying stocks, or the cryptocurrencies, right, those are one dimensional, it’s buy low sell high, then you’ve got two dimensional well, that includes dividend paying stocks, and it includes other investments that might pay a return to investors a dividend pref rate, whatever. But then you’ve got in most of these things in the vast majority of things, you’ve got intermediary party risk, right? So you want to disintermediate because when you disintermediate you get more more control and you get better returns and you get fewer people with their hand in the cookie jar. Folks, look, commandment number three, thou shalt maintain control of my 10 commandments that without a doubt resonates with the most people, thou shalt maintain control. Three major problems when you relinquish control you might be investing with a crook, Allah Bernie Madoff WorldCom you know, I just watched a thing about Bernie Ebers recently, and you know, you got Enron WorldCom global crossing, I mean, you know, the list is like endless, right? All of these right, MF Global, blah, blah, blah, etc, etc. There’s a zillion of them. Then you’ve got the ones who are doing it legally, right. And they’re, they’re legally putting their hand in the cookie jar and they’re taking some of your money, right? You’ve got these property managers, that litigation that I’ve been in with results property management now called Quincy property management, Kansas City, Missouri, and now they branched out they got a big lawsuit from a bunch of their employees for a hotel they own. I mean, these people are taking advantage of people, okay, it’s just wrong. And in all these years of litigation, they still can produce any document that clears them. But will you win in court? I mean, who the hell knows it’s a crapshoot. You know, it’s the mood of the judge. You know, the attorneys, technicalities loopholes. You know, I’ve been watching this show, maybe you’ve seen it, it’s called Better Call Saul. Right. And he’s this kind of sleazy attorney, but I don’t know if he’s really sleazy as this character develops. You see, the guy actually seems to be a kind of like me, right? Like a person who’s a fighter for the underdog, which I love that because I used to be an underdog I spent half my life as an underdog. Whenever I see someone taking advantage of the underdog or bullying someone or you know, and there’s a lot of financial bullying out there. It just really bothers me. I want to be a consumer advocate and stick up for them. So you got these intermediaries and they’re the property managers in our world is the only one but you know, a wall street type investment, right? Even if it’s two dimensional, never multi dimensional, like income property, but two dimensional, where you get your profit from buy low, sell high if it works out for you. And maybe you get some dividends along the way two dimensions of profit, income property, multi dimensional many dimensions of profit, right? At least five. And so you’ve got this, but the one last point of someone with their hand in the cookie jar is the property manager. It’s the only last bastion right? We’ve only got one hurdle to clear with our income properties. And if we self manage them, or do better yet the hybrid approach that I recommend where you self manage on the monthly basis, but you manage the tenant turn and hopefully you will minimize those with your without a property manager. you minimize the turn with an agent or a property manager offering unbundled all a carte services to handle the term between the old tenant and the new tenant. And that is the best plan out there. That’s the best way to go. So we’ve discussed that on many episodes, we’re gonna do a little complaining today. So please don’t take this as too negative, I want you to ask yourself compared to what, throughout this interview, it’s a case study with one of our clients who’s been on the show before. He’s a great client. I think he’s up to like 21 properties now. That is Messiah. We’re gonna play about half of his interview today. And then on the next episode, we’ll play part two, but remember something you know, I’ve been accused many times of being a complainer and I want to just submit to you that I know
Jason Hartman 17:34
you shouldn’t be negative right? Yeah, ultimately, I’m I think of myself as a rather positive person. But sometimes I get complaining complaining is that a word? I had a girlfriend years ago. Name Laney Laney complaining Well, I never told her that But hey, we still broke up anyway. She She was not a complainer, but I’m a complainer people say that sometimes. Right. You’re a complainer. I would submit to you complainers are the people who change the world. Was Gandhi a complainer was Martin Luther King a complainer was George Washington and the other Founding Fathers of the country of the United States. Were they complainers? They were all definitely complainers. In fact, I remember a lot of these original complainers about England, they were complaining about England. They had a big Tea Party, didn’t they? Yes, they did in Boston Harbor. And those complainers. Well, they changed the world, didn’t they? for the better, I would submit to you the thing that came out of that the Constitution and the papers, the founding documents of the United States of America, which makes it such a special country. Hey, listen, folks. I know we got listeners from 165 countries around the world. I’m not some America freak. Okay. I’m just lucky. Okay to happen to have citizenship here. There are certainly a lot of other great countries but the US is pretty special experience. Okay, at the time, the only experiment before the US that really kind of had it right was the Magna Carta. Okay, where you actually gave people rights against the government. And that’s a very unique concept in human history. Okay. And, you know, at least up until recently, I don’t know, you know, I don’t have any specific data on this. But up until I’m gonna say 3040 years ago, the US was the only country on earth with the word happiness, the word happiness in its official chartering documents. Try that on for size. That’s pretty cool. So we’re going to give you the first half of this interview, just in the interest of time, we’ll play the next half on the next episode. And remember, compared to what, there can be difficult sellers, there can be difficult property managers, but we want to empower you against them. We want to empower you and make you the empowered investor. That’s what we’re here for. You know, we want Want you to have as much control as possible with as little involvement and responsibility as possible. Now listen, if you’re going to have control, you’re going to have some responsibilities. But again, what we do here is we make that easier. So hats off. We’ll see you on the 19th and Philadelphia. And maybe we’ll even see you the next weekend in New York for the venture Alliance mastermind. Go to Jason Hartman comm for more info about these, Let’s welcome our wonderful client, Messiah, who’s going to share some of his story with you today. In part one, here we go.
Jason Hartman 20:42
Want to welcome back a returning guest that is our wonderful client and now friend of the show Mutharika few months ago, I recommended when Messiah was having some problems that he file a complaint against the seller and property manager of his property and he did it He got some justice he got some recourse out of that. So very exciting. This is something I want to recommend to everybody listening, be the empowered investor, be an empowered investor, be an empowered consumer, do not be a victim. So there are ways you can hold people accountable without without having to go out and hire a lawyer and taking them to court and dealing with that whole mess because that is just a mess. And it usually doesn’t work. And I’m telling you that from my own experience, but you know, there are some other things you can do. We’re here to talk about those today. And and remember something else before we dive into this, an ounce of prevention is worth a pound of cure. an ounce of prevention is worth a pound of cure. Another old saying like that I used to hear from my aunt burness is a stitch in time, saves nine stitch in time saves nine so you know that’s another thing we’re doing. Talking about today, right? And Matthias is going to share a couple of best practices, learned the hard way from mistakes he made that now you know, he will never make those mistakes again, the real world University of hard knocks the school of hard knocks, and then we’re going to talk about what you can do. Even if none of that works, the prevention doesn’t work. Okay, so, so Messiah. Welcome and thank you for sharing your story with all our listeners, we really appreciate it. You’re welcome. So what happened,
I bought a couple of properties in Alabama. And one of those properties that I bought turned out to be a big disaster, the property had a pool and never own the property or the pool, just wanna have a pool and that brought some problems along with it. One of the mistakes I made I hope others will learn from this is to make sure that you conduct a home inspection when I’m when I say a home inspection or a home inspection the entire property I mean, not just the home in my case, I did not inspect the pool, which turned out to be a problem later on. There was some problems with the line. As the fool and so on. So, it’s important to make sure that you get a complete inspection. And after the inspection is done, and the seller has done the repairs, you need to send the inspector back to go back and re inspect it to make sure that the absolutely backed up.
Jason Hartman 23:14
That is a good best practice. So, two things there that we’re saying just make sure everybody caught those. Number one, generally speaking, try to avoid properties with pools. It’s not a hard and fast rule, they certainly can be more desirable. So you know, for the hassle and aggravation of this whole extra system and potential piece of liability of course, it could be worth it if it pays for itself and then some, but most properties won’t have a pool. Okay, but you know, here and there, you’ll see one with a pool. That makes sense as a good rental property. Okay, so I’m not saying yes or no, I’m saying mostly No, but you know, not completely. So the first thing is if you have a pool remember, in addition to your normal home inspection, you must also have a pool inspection and that is going to Be almost for sure that it’s going to be a completely different inspector that specializes in pools and pool systems. So, have a pool inspection. The other thing is when you have because you must always have a home inspection. When you have that home inspection, there will almost always be punch list items, you know, and you can decide as the empowered investor and the buyer yourself, but if they’re, you know, just minor little items, you can just let them go and trust that the seller is going to take care of them. If not, though, you must have a re inspection, you have to pay an extra fee to have the home inspector go back to re inspect the property and make sure that all of those repair items are done before you close on the property. Okay, and if they are not done, do not take a promissory note from the seller that says they will do them later. The only thing I would accept is money held in escrow In other words, part of the sellers proceeds held in escrow. If they somehow for some reason, can’t get those repairs done before closing, then the closing attorney, the escrow the title company, they withhold part of the sellers proceeds that requires a mutual instruction or at least your signature before those funds can be released and make sure those funds are adequate. So for example, if they say, Well, you know, the property needs a new water heater, right? And, you know, say you determined that a water heater is going to cost, I don’t know, 700 bucks, right? Then, you know, you withhold 700 at least, you know, maybe a little, probably some extra, okay, because you never know what else you might discover. So if they agree to withhold $1,000 after the closing of the deal, and you control that money that you know, can’t get released to them until it’s fixed, then you’re going to be okay, that’s your insurance, okay, but don’t just accept a note There’s no money behind it, you know, Show me the money as Jerry Maguire says, okay, so Messiah.
Okay, go ahead. That was the very first thing. You know, the next key point for me was this is something that’s always, you know, ever since I started buying property through the network, it’s been something that I’ve had success and proper with the property management company, you know, I mean, all these property management companies have this standard contract that they have you signed, you know, I think it’s important to read that properly. And so you know, what you’re getting into these also important to have a good relationship with the property management company. And I know it’s a good idea to go with the company that the seller recommends, but I think that they have a beneficial interest. And so I would just shop around if you have time to look at other property manufacturers, but you need to work with somebody you’re comfortable with because they could make it very difficult for you. Going forward by not crediting your account I’m not communicating with you properly. A lot of things and you know, and Jason play honestly, or last two years. This is just My opinion, I could be wrong with this based on my experience. So the bigger the company is, the more layers there are in the company, it’s very hard to deal with them. And you can get lost in the shuffle. I mean, I’ve got properties with something that manage thousands and thousands of properties and they’re just too many layers. Okay. Okay, so more bureaucracy, right. So there’s a trade off for that. And I’m not sure which is best. there’s sort of two kinds of companies in the world. on each end of the spectrum. There’s the big company that supposedly supposedly, okay, has really good systems. You know, they’ve invested more money in technology
Jason Hartman 27:37
and software and they’ve got protocols and got business processes, hopefully that are more established, right. But they’ve got more bureaucracy, right. So that’s the big company concept. It’s good and bad. Okay. On the other side of the spectrum, there’s the small company that is, you know, kind of winging it. Okay. In some ways But, but they’re hungry. I mean, in theory, they’re hungry. And they’re really gonna just give you a great service, right to try and make a name for themselves and, and try and get bigger, right? You know, that’s whatever, but entrepreneur wants us to be bigger, right? And so it’s kind of two ends of the spectrum. And you know, the experiences both either they can go either way with either one, the small guy, it’s sort of not as efficient in a lot of ways, usually, the solopreneur, or the small office with three people, you know, versus the big company with 30 people, you know, I don’t know, I don’t know what the right answer is. It just all depends,
you know, like, no, Jason a while I was trying to say was, look, I think it’s important to make your expectations very clear to the property management company from the very beginning, right, so they know you’re not just passively sitting back and, and then accepting whatever it is, they credit your account. If they do that. $500 or $10. You don’t know why they did nothing. You need to question these things. You know, you need to look at your statement. You need to look at your owner’s portal, and why did you do that? Light. Why is this my response to the attendance response early? And you know those questions, I think it’s important for investors to ask the property management company so that next time, they know that, hey, you know, maybe we should be more careful.
Jason Hartman 29:14
Let me mention a few things here. So first off, I don’t want any of you listening to be the easy customer. I don’t want you to be a pushover. Okay? You know who you are. On the other end of the spectrum. If you’re a pain in the ass, I don’t want you to be too much of a pain in the ass either. Okay? Because, you know, it’s like neither of those people gets very far in life, right? The difficult person, nobody wants to work with them. And they will just put up their hands and say, go somewhere else. Right. The pushover gets taken advantage of all the time. So I think the answer is somewhere in the middle. Right? You know, I would if there’s a continuum, between the totally difficult, impossible client and pushover everybody listening when it comes to dealing with property managers? I want you to be 6560 65% toward the more difficult person I want you to be aware empowered investor. But here’s the thing. You can have high expectations without being a jerk. Okay being a jerk just won’t get you anywhere in life. Okay, you know that always backfires. You know, there’s it’s just doesn’t work, okay? But you can still have good expectations and high expectations. When you were talking about the contract Messiah and the importance of reading it. The importance is way more than reading it, reading it as the first step. The second part is negotiating it. So just because the comment, hopefully you read it, so thank you for saying that. A lot of people don’t even read this stuff. Okay. The thing I want you to negotiate folks, is I want you to negotiate the latitude and this is not new information. I’ve said it on the last, you know, 900 and something episodes okay? But negotiate the latitude, the property manager has to charge you for stuff. So again, they will have these standard clauses in those contracts and they need them. Okay, but just how much to what degree they need them as the question. So the clause will say, in case of an emergency, in other words, a pipe is break, you know, pipe broken, there’s water leaking everywhere, you know, the property manager has the right and you want them to have the right to go over and stop the leak to stop further damage. Right. Okay. But then the next thing will be those sort of optional repairs, the tenant calls and complains about something stupid, like I saw an ant on the kitchen counter, or the light bulb burned out, you know? No, you don’t. That’s ridiculous. This is ridiculous stuff. Right? And I want you to look at that clause the way it’s written very carefully. Okay. The discretionary spending plots, where it says the property manager has the right to control In their discretion, up to $200 per incident of money that they can deduct from your your check. Okay? The funny thing is mkhaya when it comes to like my mom has been on the show several times and you’ve heard her and commented about her, you know, she’s self managing. She’s like an extreme do it yourselfer, and I really am starting to be a real believer in self management, but she doesn’t spend hardly any money on her property. Some of these property managers, they’re just giving away your money. It’s ridiculous and you got to stop them from doing that. Do not be a pushover, okay? Just say this clause, I’m going to limit it to a per month amount, not a per incident amount. First off, there’s a difference between per incident and per month. So the tenant could call twice in one month and say, Hey, Well, today the garbage disposals broken, and then you know, next week, some other things broken right, and suddenly if the property manager Conduct $100 per incident, you lost $400, you just got to eliminate that discretion. It’s not necessary. The duty, though, on you, the investor is that you have to be available and communicative and responsive. Okay, so if that tenant calls about something and says this or that is broken and needs to be fixed, first of all know what you’re actually obligated to do. Okay, you’re not obligated to do everything, you know, the tenant has some responsibilities to okay. So that’s the number one thing. And then the number two thing is you must communicate and approve or deny requests quickly. Otherwise, the managers go say, Hey, we need discretion because I couldn’t reach you for two weeks. And by then the tenants really unhappy, right. But the bottom line is, I’d really recommend people consider self managing, it’s much easier than you think. And we’ve done a lot of shows on that over the years. Anyway, so per incident, and per month, I want you to make it a purchase. month limit of no more than $200, ideally less. So don’t just read your contract, negotiate your contract with your property manager or just self manage, and you can take them out of the equation completely. Okay,
go ahead, right? Yep. Just let me play the devil’s advocate for just a second, you know, property managers that manage hundreds of properties. They have this standard contract and in spite of what they said, I’ve gone back and renegotiate. But they’ll say, Well, look, we can make this change for you. We’ve got hundreds of contracts, we can just change it for you that would screw up our whole system, you know, we don’t have the resources to track your particular property and say, it’ll probably comes up and you know, for some reason, so that it
Jason Hartman 34:43
can you can take your business elsewhere in the place I’d really like you to take your business is to self management without a manager at all. See, there is a inherent conflict of interest with property managers. You’ve heard me say this before, the conflict is that they’re trying To serve two masters, and you know, the rule in life is you can’t serve two masters, you can either serve the investor, which is technically the obligation is to the investor, or you can serve the tenant, you can’t serve both. So the property managers will be liberal in spending the investors money as much as they can usually get away with it in order to make the tenant happy, because you know, what the tenants do, when they’re unhappy, they go to Yelp and they start writing bad things about the property management company. And you know, it’s interesting, whenever you hire a property manager, I want you to go to Yelp and read the reviews now. Look at we all know reviews are a lot of them are false. Okay, you know, they’re false good and bad, because their competitors, you know, will write bad reviews about them that are fake, and their employees will write good reviews that are fake to it. So where’s the truth? Nobody knows.
Jason Hartman 35:58
but it’s probably some We’re in the middle. That’s why you just have to not look at the star rating necessarily. But you have to actually read the things and see if they sound legit and just evaluate them with your brilliant human brain. You know, that’s why we got these great brains, they work pretty well most of the time. And so that’s one thing to do. But if the property manager has a bunch of bad reviews, and they’re from tenants, I don’t know that that’s necessarily the worst thing ever. Right? If they’re from investors, that is really bad. If there’s a bunch of investors saying, Oh, this property manager is terrible, you know, they they ripped me off or this or that, or the other thing that I really get concerned about, if they got a bunch of bad reviews from tenants, because they’re a little more strict with the tenants. That doesn’t necessarily bother me as much. We’re complaining right now. But compared to what is the question, compared to a wall street investment, or some investment in some fund, this is way better, at least hear, you know what’s going on and you have some control. Yes, when you’re a direct investor With the plan that we outline, you’re going to feel the bumps in the road. But you know what, at the end of the day, you’re going to have a lot more money, okay? Because when you buy the mutual fund or the stock or invest in some fund that’s buying apartment buildings or something, you don’t feel the bumps. But guess what? Someone has taken all your money, and you just don’t even know about it. Okay, here, at least you can see it right, and you can control it. So that’s what we want you to do is become an empowered direct investor. You know, that’s commandment number three, thou shalt maintain control. This is about being a direct investor and getting those higher yields because you’re in control. This will be continued on the next episode. Thank you for listening and happy investing. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
Jason Hartman begins off the episode with Doug to talk about portfolio makeovers. They go into the idea of long-term investing and the fallacy of passive investment. Doug pulled out of the real estate business and missed out on profiting as a result of short-term thinking with his investments. In the interview segment, Jason finishes the second half of an interview with Muthiah. Muthiah explains why he had to file a claim against a vendor and how we got restitution. Jason talks about a Hall of Shame he’s created and why it’s important to file complaints even if they won’t help you at the time of your complaint. This is the benefit of a network.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:52
Welcome listeners from 165 countries worldwide. This is your host Jason Hartman with Episode 997 Episode 900 97 Yes, that’s right. We’re only a couple episodes away from Episode 1000. That’ll be a 10th episode show. So we go off topic, discuss something of general interest, and we will have Coby callay, the famous singer and songwriter on that show Episode 1000. Coming up, I can’t believe we’re here already. And I can hardly wait till we get to Episode 5007 thousand. And we will get there folks. By the way. That brings me to another point. We did have a little bit of a problem with our iTunes feed. If you are listening to the podcast on iTunes. We had a bit of a an issue with it last Friday. Thank you all the listeners who reached out to me on email and voxer and told us about that problem. We appreciate that. I think we’ve got it fixed now. But one of the fixes that we had to implement was to make it so not all of the episodes show up in the feed. now know that you can always get all of our episodes And if an episode doesn’t show up on Monday, Wednesday and Friday, like clockwork, hey, you know, Mussolini said at least the trains run on time, right? To take it from a dictator, if it doesn’t show up, you can always just go to Jason Hartman calm and find the show. But we always appreciate you letting us know if there’s an issue with our feed. We think we’ve got that pretty much fixed now, but just wanted to inform you of that. So we are going to talk today with this is a two part show. We’ve got part two of our interview with mithya, where we talked about solving problems and a client case study of moving from challenges to overcoming those challenges and getting them fixed. And speaking of overcoming and moving to a better scenario, something that I created many, many years ago, was called the portfolio review. And then part two of that was the portfolio makeover and we are going to bring this back in a bit. Much better version, we’ll call it version 4.0. Maybe it’s not 2.0 version 4.0. And if you would like to meet with me in Philadelphia, on Sunday morning, the 20th after our event, we’ve got our conference there, the creating wealth conference on May 19. I will be doing personal, individualized, private portfolio makeovers and portfolio reviews. And we’re going to talk a little bit about that today. Because our client and friend who you’ve heard on the show, before, Doug has taken and really, really improved these spreadsheets, the tools that we use to do this review and make over dramatically, and he’s going to talk to us about that today in the intro portion. Doug, welcome. How are you? Good, Jason. Good. It’s good to have you on so just to give a little history because you are a client case study in and of yourself. Oh, yes. We’re not really talking about that today. But when did you first discover My podcast and start buying properties. It was right here. What? 10 years?
Yeah, maybe So yeah, I first discovered your podcast in 2008. I started buying properties in 2009. And you know, I got a couple properties go on and then I encountered just a few just biblical disasters. I think I had a property management company that took place a tenant that just totally tore up my property.
Jason Hartman 4:22
No, no, Doug, we’re with Mu theia. Today, we are talking about negativity and problems and overcoming them. So let’s not overwhelm the listeners otherwise nobody will ever buy a property. But yeah, folks look at like I always say, this is not a free ride, okay. There’s, there is no, folks, if someone is telling you that there is a passive investment, even if it’s money in the bank, they are lying, lying, lying. probably all have heard of Gary Vaynerchuk. The outspoken business person not talking about real estate, but he just Totally rips into all these people out there selling these businesses that are supposed to produce passive income. It is BS. There’s no such thing as passive income. But there are things that are easier than others. And that’s what we have. We have the most historically proven road to wealth. But Doug, yes, biblical disaster. Go ahead.
So yeah, so what happened was right, I started going pretty good. And then I kind of sputtered for a while. And now I’m really coming back. Yeah. And so I think the portfolio review and portfolio makeover process is something that I’m running both academically and for myself and looking at how I want to redeploy some of the equity capitals that I have in various places throughout my financial life. Yeah. So it’s great topic.
Jason Hartman 5:42
Yeah, good stuff. You know, what saddens me about your story a bit is that when you had this problem, where you got discouraged about the tenant that beat up your property, and you had the bad property manager, and by the way, folks, like I said on the last episode, dis intermediation get rid of these prices. property managers in less, they’re good ones, just get rid of them try self management with our hybrid approach that we’ve talked about on many episodes, I am convinced that this is the way to go, you know, I just look at the way people self manage versus having the managers and it’s just easier. So you know, get the get the middleman out of the way and make your life easier. I really think that’s the way to go. Unless that middleman is really good and really adding value, which some of them do, and they’re great. But if they’re not great, then just try it the other way and many episodes on that I won’t go into today. Doug, the thing that saddens me about your story is that when you have those challenges, it was just as the market was turning coming out of the Great Recession, and I know you sold one of those properties. And Ma’am, if you would have held on to that even though you had that bad experience, you would have made a lot of money. So sorry about that.
No, that’s all right. You know, there’s only two good times to plant a tree you know, the best time is 20 years ago and the second best time is now
Jason Hartman 7:00
So yeah, that’s a great thing.
I can’t go back 20 years you know, I was gonna say cuz yeah if I could go back to 2009 the first thing I do would be buy bitcoin but then the second thing would probably be to pick up more properties.
Jason Hartman 7:11
Remember, when you and I, you were on stage with me at meet the Masters in Irvine, California many years ago, and we were talking about Bitcoin. And people in the audience, I remember asked, What is Bitcoin? And I think the price back then was about 70 bucks. Now, look at folks, you know, that I do not recommend cryptocurrencies or speculative investments. I mean, look, maybe, you know, if you want to take 5% of your net worth, and gamble, I think that’s an okay strategy because, you know, the risk reward ratio, if you’ve got a few bucks, it’s just not a big deal. If you lose it, it’s not gonna affect your life. But if you win big, it could affect your life, right in a very positive way. So I think that’s fine. But yeah, so I know shoulda coulda, woulda, as always Everything in life is that way. You know, it’s the human condition should have could have whatever right but yeah,
remember? Yeah. When I first heard about Bitcoin it was on an econ podcast, I think it was it was trading at about $40. And people said it could grow to be like, maybe 500.
Jason Hartman 8:13
Yeah, right, right. And here we are 8000 or something like that. Right. But we’re down from almost 20,000. Right. So yeah, that’s crazy. Well, one of the things that helps cure the human condition, if you will, a little bit here is the portfolio review and the portfolio makeover because as we go through life, we keep getting our emotions tilted. Don’t we buy things that happened to us, you know, if we have a bad tenant, or a bad manager, you know, this upsets the apple cart, but one of the things that helps us keep on track is simply doing the math, right. And a lot of people with income property, they’re winning, and they think they’re losing simply because they Don’t know how to do the math even when really bad things happen. Okay, biblical disasters, if you will, amazingly, you know, you add it all up at the end of the year, and it can surprise you, you still won, you know, because the question is compared to what compared to the s&p, you know, it’s gonna do maybe 8% a year or something like that. I mean, it’s pretty easy to make 8% with income properties, you know, that things would have to go really, really bad to only make 8% all in with income properties. So we’ve got to look at what we have now and what we could have and how that affects our overall plan. Go ahead.
Oh, no, I was just gonna say on the SMP side, say you can make 15% per year but then two years will be a mirror. Yes, it but then two years before you’d retire, there’s a 45% market correction. Well, all those gains don’t mean anything to you now. And so, so yeah, I think that’s one of the other things that’s really important about a portfolio review, is it gets you to redistribute your equity. Because then what that does is it distributes your risk. Because whenever you get high concentrations of equity and you know, one investment type or another, you end up having more and more risk there. And so the more you’re able to dissipate your risk, the more you’re able to insulate yourself when disruptions happen, because the thing is, right, weird stuff is going to inevitably happen, you know, if you’re playing the game to win, which means you’re playing it actively. That means you have a lot of things that go, okay. You’ll have some biblical disasters, and you’ll have some great triumphs. And if you get to down whenever something goes terribly wrong, then you’ll never be in long enough to win. good points.
Jason Hartman 10:37
I agree. I couldn’t agree more. And the interesting thing is our minds are predisposed toward negativity. So we could have a portfolio of say 10 or 20 properties. And if one or two that would be 10%. In either case, goes poorly, that like derails the whole plan where we’ve got these other nine or 18 properties that are You know, maybe five or 10 of them, you know, I’ll take that half, I probably should have just stuck with one, number nine or 10 or 20, you know, are going pretty well. And a few are going great. And then we’ve got this one that goes bad. But the interesting thing is just part of the human condition, the one that goes bad is the one that derails the whole plan, because of the way our minds react, emotionally to things. And that’s why it’s important to just do the math and look at the spreadsheet, right? And look at the performer and know what’s really going on that grounds us I would say it grounds us right, is that a fair statement?
It is and I think one of the things that’s really important too, even with bad experiences and losses is that you know, anytime you’re doing something passive so like, say your buy and hold or and you put your money in the SMP and it rockets up. Okay, that’s great. But what have you learned that you can repeat in the future? No, the answer is nothing.
Jason Hartman 11:56
Yeah, good. Good. No, no, here’s what you learned. You got lucky. Yeah.
You know, you learned that you got lucky. And one of the things that I think that’s good about something a little more active, like an investment property is that as you go through it, you’ll start learning to make good decisions. And then those decisions are repeatable, and they’ll actually increase your performance in the future. The problem with being too passive is that you don’t learn from your successes or failures. So you don’t have the ability to get successively better as you gain experience, right? Being a 10 year passive investor or a 50, or passive investor makes no difference because you’re just writing the market. And if the market goes down at the wrong time, you have no recourse. There’s nothing you can do about
Jason Hartman 12:38
it. It just it just happens. You’re just a it’s, it’s like playing a sport versus watching a spectator sport. Okay, you can’t do anything, you know, either your team’s gonna win or lose. But if you’re playing the sport, you can change your strategy. You can try harder. You can do things you’re actively involved in, engage in You’re becoming a better person by playing the game. You’re not becoming a better person by watching the game. In fact, I would argue that you’re becoming a much worse person by watching the game you’re probably getting a beer belly number one, you know, and lots of bad things come out of that. Right I think that metaphor of the spectator sport is probably pretty valid and I know you like spectator sport so
I was gonna say yes, yeah now reminded me of all the time I’ve spent yelling at the television for refs at basketball games in the Portland Trailblazers, we’re losing in the fourth quarter.
Jason Hartman 13:31
Yeah. How did that work for you? By the way?
I swear there’s a part of me that thinks they can hear me.
Jason Hartman 13:38
Yeah, absolutely. That’s funny. Hey, we’re gonna have to wrap this up for this episode to get to our guest Messiah and do part two of his interview from last week. So, Doug, thank you so much for sharing this on the next episode. What else are we going to cover on this? Because there’s some really good takeaways here.
What we’re going to cover is the whole idea of ritual. Turn on equity and how you can use some of the tools that the big corporate finance folks do to optimize your own portfolio. And then you’re going to bring it back to how you’ll be doing portfolio reviews with people who come to creating wealth in Philadelphia so that they can use the same same techniques to make themselves wealthy instead of just making corporations wealthy.
Jason Hartman 14:21
Sounds good to me. Sounds good to everybody. Okay, thank you so much, Doug, for joining us on this. We’ll talk to you on the next episode with part two about portfolio reviews and portfolio makeovers. Go to Jason Hartman comm and click on events to join us in Philadelphia or the New York event the following week. Let’s get to part two of move fire. And remember, when you hear about this negativity in real estate, and the problems and overcoming them because there are problems, this is not a free ride. There’s no such thing as a passive investment. Remember to always ask yourself, compared to what that’s the important question for everything in life compared to what, you’ll feel the bumps in the road more in this investment because you’re a direct investor, but at least you can do something about them. And you can act and fix things. And that’s what we’re talking about here today. So let’s get to Matthias. And his story is great. So let’s go ahead and transition over that. And Doug will talk to you in the next episode. Thanks, Jason.
Jason Hartman 15:33
I’ve got some property managers that like, I mean, literally years go by and there’s not one deduction other than their management fee. I got others that man it’s like every other month, there’s this that this piddly thing that piddly thing. You know what? My mom the do it yourselfer extraordinaire, you know who’s been on the show many times talking about her best practices. You know what she does? The tenants she just gets the tenants to agree to fix stuff. When you’re self managing as a direct investor, you can actually talk to the tenant, and you can set expectations and you say, look, you are not living in a big institutional apartment complex where you’re crammed together with 100 neighbors, okay? This is your own home, it’s a single family home. So, you know, I know that you don’t own it, but think more like an owner, you’ve got to do a little maintenance here. You know, this is not a big institutional apartment. We’re not going to send an exterminator out, you know, every week, we’re not going to change your light bulbs for you. This is a home, I expect you to take pride in it, and, you know, get involved and, and take care of things. And this is what I’m about to say is probably not even legal. But I’m gonna say it anyway. But I’ve heard managers over the years are not managers, but in fact say to me things like, well, this is why I always ask them if they’re handy.
If they like to fix things, you know, you know,
Jason Hartman 17:11
it should almost be a test, you know, you give them a test. Well, you know how to fix a sink?
You know how to unclog a drain? You know?
Jason Hartman 17:22
Actually, I don’t think I don’t think being unhandy or handy is actually a protected class yet, under the Fair Housing rules, but it probably will be something
like but some of these property managers you know, I know that the ones in Quad Cities I think they actually put out a video they want these tenants watch the video on what they need to do. So they don’t come back and say, Well, I didn’t know how to turn the main water off when I left this and that some basic things they actually had them watch a video so and then they haven’t signed off on it as well. So if there’s any issues that comes up as a result of them, not having watched the video or not, not having followed with the video instructed them to do it and they’re held responsible. No, getting back to your mother, I love your mother, you know, I spoke to her, you know, during the last meet the masters and, you know, she sets the expectations at the very beginning, and there’s no fooling around with her, you know, you, she lets them know, hey, if I don’t get the rent by the first, then I’m going to send you the, you know, the three day notice. So they don’t fool around with somebody like that, that sets the standards of the very, very first time that you know, they don’t pay the rent and cheeses and don’t notice, you know, and then so then from that point on, they take it very seriously. So that’s why I’m saying when you when the property managers, you know, you just set the expectation, hey, look, I’m watching my account, you know, I want to make sure that, you know, if you’re going to adopt something, I need to know what it is.
Jason Hartman 18:38
I agree, you know, you you need to do that. But I tell you, it just the more and more I do this, and you know, we’ve done thousands of deals. Okay. I’ve been doing this a long, long time now. Okay. You know, just in the nationwide turnkey business what what is it? Is it covenant? Well, it’s almost 14 years I think now right? And or maybe it is 14 years. You Talking to thousands and thousands of investors. Just the more I think about it, the more I see it, the more I think that you just have this inherent conflict of interest with property managers, you just self management more and more as the way to go. But, you know, if you have a good manager, it’s great, but few managers are great, you know, I mean, some of them, you know, there’s a continuum right? There. Some are okay, some are great, some are terrible. Okay, so move. I know, just out of curiosity on the self management thing, have you ever done it considered it? How many properties Do you have from us now?
Well, I have about 20 properties right now.
Jason Hartman 19:40
Hey, listeners, don’t you love that Messiah doesn’t even know how many properties he has. That’s cool. You got so many You don’t even know.
How many do I have?
One so I have 20 right now?
Jason Hartman 19:54
Yeah. Okay. Okay. You had 21 Okay, got it. Okay, so Mutharika Did you self manage anyway, Never no no no i did they know what not these but you know before I started investing I owned a condo and I self managed at that point that was many years ago but you know I did that on my own wasn’t that great you know pretend would come up to my work and start screaming you know it just want to say yeah, but but CNC with this self look at I self managed when I was a local investor. You know, I self managed everything. Okay. And then I self managed long distances. I’ve told them the show before, you know, but I never had any tenants coming in screaming I never had any calls at one in the morning. All of this folklore you hear it just never happened to me. Okay. I did have this one guy. He was the funniest guy ever. In the 90s. His name was Hugo and he lived in my property in Rancho Santa Margarita. And he used to come in almost every month he had his members only jacket on. The guy was just he was just funny. And he’d come in every month and hey, Jason, is you go Sorry, the rent is late this month, he was late almost every, almost every month, you know, he come in to go in, he always had an excuse and he was just the guy was just so funny. My assistance Karen and Denise Houston. See you go come into the office, you know, like, it was always the fifth of the month, it was never the first. You know, he always handed me a check. But you know, it was, it was fine. It’s no big deal. Anyway, I’d consider self management but Messiah, we want to get to the thing of course, and it’s my fault because I’m blabbering here. Let’s talk about holding these people accountable when you get a truly bad actor. And look at folks, I don’t want you to think this happens all the time. It doesn’t out of thousands and thousands of transactions. You only get a few of these, okay? But it’s just the law of large numbers. You’re gonna get a few Okay, there’s there are bad people out there. There are bad actors. There are people that will be good for a while and then they become bad. They sort of take the relationship for granted they you know, the Napoleon I always try to remind myself and humble myself with this great quote by Napoleon. You know, Napoleon finally met his Waterloo, right? That’s the story. That’s how history tells us. And Napoleon used to say, the most dangerous moment comes with victory. The most dangerous moment comes with victory because we become complacent, we become arrogant, and we start missing things. And you know, as humans, we must never do that. We’re gonna have victories in our life, and that’s great. But we never ever want to become complacent. Okay? And that’s what happens with these property managers. You know, they get busy, and they get successful, and, you know, they just forget to appreciate it. And it’s just part of human nature. It’s not a good thing. But it’s a real thing. You know, and sometimes there are just some downright crooks out there, just some real scum, okay. And you got to hold them accountable. So what I did is I sent you my whole of shame resource list, which by the way any of you can get by going to Jason Hartman calm and reaching out to your investment counselor, if you don’t have an investment counselor, just fill out any web form at Jason hartman.com. And they’ll get it to you. And, you know, this is the list of agencies that you can simply file a complaint with for free, whether it be the real estate commission, you know, the contractors License Board, different agencies, okay. And it’s certainly by no means a comprehensive list, but it’s a good start. And, you know, this is what you pay taxes for folks. You’ve got these free government resources, these regulatory agencies, and I want you to use them, I want you to use them to file complaints against bad actors. So that at the very least, maybe you won’t get justice out of it, but you probably will. You probably will, because they’ll send them a letter saying, hey, look, complaints been filed against you fix it, that’s what usually happens. And then when they don’t fix it, they take the next step, they might suspend their license, they might sanction them, you know, the government has, you know, has unlimited power virtually right. You know, maybe they won’t pay attention to your complaint. You know, maybe it’s the first one that came in about this bad actor, and maybe they got to accumulate a couple of complaints, but they as that file grows, and there’s three complaints, four complaints, five complaints, you know, this regulatory agency is probably going to come down on them. And that’s a good thing. And you know, what, even if it didn’t help you directly, it helps the next person, okay? So really, you know, become the empowered investor, don’t be a victim. And then the other thing you can do is an online court system, like I referred you Messiah to people claim. I had them on the show, not on this show, but on my free court show and I’ve got a similar passion project startup that I’m working on called free course. That’s free court.com you go check it out. It’s an online court system. And people claim has been operational for quite a while now. You filed a complaint on people claim. And that’s what did the trick you did the administrative complaint with the regulatory agency also. Right. Tell us about what I did. And what happened?
Well, I mean, I found you based on your recommendation and filed a complaint with the Alabama real estate commission as safely as for you, yeah. Yeah, I know, they told me that they investigated it. And then they said that they already shut down the property management company that this is affiliated with this particular company, but they couldn’t do anything to this company and sold me the property because they were operating under a different entity was not a real estate was not under the under the guise of a real estate company. And so they didn’t have jurisdiction over them. And so that’s why they couldn’t do anything, but they did tell me,
Jason Hartman 25:48
you know, what we’ve got to do in this country, Messiah. And look, folks, you’re not gonna like this because a lot of you asked about asset protection, and you’ve heard Garrett Sutton on the show, talking about that and all that. stuff, but I’ll tell you something we really need to in this country re examine the way people are allowed to use entities to screw people over. Because especially in the big corporate world with, you know, with these bigwigs, I mean, it’s just disgusting what they do, but anyway, that’s sort of another tangent obviously,
you know, that’s a very valid point because you know what it is right after even though they got blind and they got suspended, the property manager company got suspended. These guys went back change the name of the company and incorporated somewhere in some other state, and they continue to do business even in Alabama is still selling property in Alabama, but under another name, I mean, you know, this just unbelievable.
Jason Hartman 26:43
Yeah, no, I know it’s a sad state of affairs, but anyway, it is what it is. Okay. So, but the thing that did work for you, though, you got some justice, and they actually folks, this story ends with, they actually bought the house back. I mean, that’s a pretty big deal. Okay, they actually took it back and gave you your money back move higher. So I’m being a spoiler there. But so Mutharika, what happened. So you you went to portal claim calm? My recommendation, you’ve you basically filed a case, right in the online court.
Right. Yeah. And there were people that are offering to help me even through the people court. They kept saying, hey, how can we help you? Have you? Have you heard anything? Have they ever settled with you, and so on. And so I kept updating the complaint online saying, this is what’s happening, they have not responded. And then I think from there, and they kept posting negative reviews on them. And I think eventually it got to them and they said, Okay, look, we’ll buy your back. And I saw then at that point, when they said, like, I said, I need to be made hold. Now, whatever I paid, I want you to pay me back. Plus, I need you to pay back the foundational damages that will cause is one $8,000. Right, plus, plus the closing costs on the buyback. So I mean, after all of that, I think I’ve made pretty much the whole I got out of it. So that was good.
Jason Hartman 28:02
Yeah, right. Right. Yeah. Good. So it worked through people claim, but it might have worked through the regulatory agency, they did respond to you. And they did on a separate matter. Shut down their property management company. Yeah. It wasn’t because of your complaint, but it was because of someone else’s complaint. Right? Exactly. Good. Good, accurate, folks. And they knew about this company. They knew what the reputation of this company, they said, We were familiar with this company, we shut them down because they had unlicensed agents, leasing properties and making false promises. Exactly. Everything. I said, What happened to me. So yeah, that was like, like you said, it is as you know, even though I didn’t you know somebody else in front of me and file a complaint. I came out to them and it just put more pressure on them to change their ways. It’s a compounding thing. Folks, do not be a victim. Be the empowered investor. And do your duty, you know, with AI, you spent a lot of time on this, but I want to tell everybody, you do not need to spend a lot of time on it. Okay, you can do this stuff. You can file a complaint with any one of these agencies on my list again, you want that list, Jason hartman.com. If you already have an investment counselor just asked them for it, they’ll get it to you. And, you know, do something. hold these people accountable. I don’t want to say it’s just for you. This is your duty as a citizen. Okay. You know, it’s like making a citizen’s arrest when you see someone doing something bad, right? Or it’s like that Seinfeld episode about the What do they call it the Good Samaritan law? They went to jail on the last Seinfeld episode, because you you have to be a good Samaritan. You know, I think it’s our duty. You got to do it. Okay. You got to try and hold these people accountable and make them do what’s right. So anything else people should know before we wrap it up, and I
think that people should just not sit passively whether it’s you know, when they’re buying the property or whether they’re doing the property manager or loading on seller, they just got to be actively involved at all times. I don’t think it’s, you know, I sit back and just think everything’s gonna be fine. I think it’s important to be an active participant. Yeah,
Jason Hartman 30:17
yeah. I couldn’t agree with you more. Thank you so much for sharing your story. I’m glad you got justice. And, folks, if you’ve been taken advantage of, this is what we’re here for. Tell us so we can help you. So we can fight for you won’t fight for you. Is that commercial used to say with that lawyer? I’ll fight for you. See, it’s where I grew up. So I’ll fight for you. There Parker got me 2.1 million. You know, that guy supposedly has no legs. That’s I don’t think I’d saw my legs for 2.1 million but adjusted for inflation. Maybe it’s better now. Anyway, see that commercial when I was a kid, but folks, do not be a victim. Let us help you. We can provide resources we can put pressure on these people. If someone’s done, you’re wrong. This is what we’re here for. We’re here to help you. And that’s, you know, one of the things we provide ongoing support for life. So reach out to us. If you have an investment counselor, Jason Hartman, calm, if not Jason hartman.com. We’ll get in touch with you there. And if you do have an investment counselor, just reach out directly. Messiah. We’ve talked a lot about a lot of negative things today. Can we end with anything positive? How do you like real estate investing? Is it good?
Absolutely good. No, there are a lot of good property managers out there a lot of good sellers out there, just a few bad apples, you got to filter out that’s all you know. I mean, there’s a lot of good people out there. Otherwise, how would you know people continue to invest in this property. There are some good people out there. You just need to find them. That’s all. I mean, on your own podcast, people try to you know, make it look like they’re really good. But you said earlier that hey, you know what, when people are hungry, they’ll really do everything they can do to provide you the best quality service and everything else. But what happens is when they get nice and fat, you get a bite, you
Jason Hartman 32:03
know, it’s it’s the most dangerous moment comes with victory. So keep them on their toes and don’t let them get too fat. You know, this is actually one of the informal things that we do. Okay, is that when we start to notice a provider becoming too busy, or if they do something bad, like we had another bad apple recently and I don’t know if he’s, uh, you know, sometimes you gotta judge it like on a deal by deal basis, some things can go wrong, right? It’s not as important of what happens it’s more important, like how they handle it, and what their attitude is about it, you know? And so, when something happens, like you know, it sort of reveals a person, okay, there’s an old saying, people are like tea bags. You don’t know how strong they are until you put them in some hot water. So sometimes, you know, we we noticed that it Some of these people, you know, thing goes wrong. And it’s like, we will just sever the relationship, or we will just punish them and stop referring business for a while and put them in the penalty box. And, you know, this is what we are constantly evaluating. And this is why it really does take a human component, you know, you cannot do this with a website. Okay, this is a high touch, high service business. That’s just what’s required because we got to be engaged with these people, make sure that we’re holding them accountable. So anyway, you know, I really thank you for sharing your story. There are a lot of good people. This is the most historically proven asset class in the entire world. It is a great thing, buy more properties. But you know, when you have a problem now and then you got to do something about it. And the goal of this talk with Messiah was to empower you so much. I I thank you so much for sharing your story and coming on and helping other investors. That’s the Really great have you and you know so many people listening have met you at our live events and they’ll continue to do so. And we hope to see you at some future live events. Okay, so thanks for joining us.
It’s Thanks for your support. Jason, I appreciate yours and Carrie support and your whole network. It’s really been very beneficial to me and, and a whole lot of others. I encourage everyone to use your resources that you have, but thanks. Yes, well, thank you and happy investing everyone will talk to you on the next episode.
Jason Hartman 34:27
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes.
Jason Hartman 34:32
Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional and we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
Jason uses this 1001st episode to thank his listeners and clients. He goes through listeners’ journeys in real estate. We hear struggles and also successes in their real estate investing. Clients also give us insight into their experience working with Jason’s network.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:58
It’s my pleasure to welcome Dr. Ron Paul to the show my pleasure to welcome bill whittle to the show. It’s my great pleasure to welcome Brian Tracy. It’s my pleasure to welcome Amity slays. to the show. It’s my pleasure to welcome Cliff ravenscraft to the show. My pleasure welcome Chris Mayer back to the show. My pleasure. Welcome, Craig AR Smith to the show. My pleasure. welcome Senator Byron Dorgan to the show. It’s my pleasure to welcome back a great guests. We had him on the show a while ago, and it’s Mr. Dan Millman. It is my great pleasure to have Dr. Denis waitley. On the show with us today. My pleasure to welcome a returning guest back to the show. It is Mr. Doug Casey’s My pleasure, welcome, Eve right to the show. It’s my pleasure to welcome Frank McKinney to the show my pleasure to welcome Dr. Gary Chapman to the show. It’s my pleasure to welcome Doug Conant to the show. It’s my pleasure to welcome a returning guest and that is Mr. George Gilder. My pleasure. Welcome, great panelists to the show. It’s my pleasure to welcome Jim Rogers my pleasure to welcome john gray to the show. It’s my pleasure to welcome john Lawrence Alan to the show my pleasure to welcome john Lee Dumas to the show. It’s my pleasure to welcome john Malden to the show my pleasure to welcome john McAfee to the show. My pleasure to welcome Jonathan bender to the show. My pleasure to welcome Dr. Kelly McGonigal to the show. My pleasure welcome Matthew hooked The show pleasure to welcome Melissa Francis to the show. My pleasure. Welcome Kevin Armstrong to the show. My pleasure to welcome Meredith Whitney to the show. My pleasure. Welcome, Nick Bilton to the show. It’s my pleasure to welcome pat buchanan to the show. My pleasure. Welcome Patrick Byrne to the show. My pleasure to introduce it No, take it. It’s my pleasure to welcome Noam Chomsky to the show my pleasure to welcome Peter seller to the show. My pleasure to welcome rich Carl guard to the show. My pleasure to welcome Robert Kiyosaki back to the show. My pleasure welcome Steven Kotler to the show. My pleasure to welcome t harv eker. To the show I pleasure to welcome congressman Todd Akin to the show. It’s my pleasure to welcome Vitaly Katz Nelson to the show you’re welcome Zack Bissonnette to the show. My pleasure. Welcome Ray Boris to the show. Welcome Pope Ronson to the show. My pleasure to welcome Robert Greene to the show. My pleasure to welcome a name that you are all very familiar with. And it is Mr. Steve for my pleasure to welcome Tom Kramer to the show. My pleasure to welcome back a returning guest and that is Danielle DiMartino. Booth. It’s my pleasure to welcome john burns back to the show. My pleasure. Welcome an old friend of mine and that is Mr. Jeff Meyers. My pleasure to welcome back a returning guest and that is my friend Ken McElroy. It’s my pleasure to welcome back a returning guests. That’s Dr. Lawrence Cutler pleasure to welcome a longtime returning guests back to the show. That is Mr. Harry dent
Jason Hartman 3:07
Welcome to the creating wealth Show Episode 1001. Yes, 1001 We made it. We had Episode 1000 with Colby Kelly on Monday. And by the way, listeners, thank you for all of the kind emails and voxer messages and web form entries to our website and all of the comments congratulating us on episode 1000. We really appreciate that and I absolutely love doing this and we will keep it coming. We will keep all the great content coming for you until we get to Episode 2003 thousand and onward and upward to infinity and beyond, as Buzz Lightyear would say. So today, we are going to give you a reader’s digest, not a but many Reader’s Digest client can studies? Yes, you’ve heard us do many client case studies over the years. Well, what we did is we just pulled out a few comments from several of them, not all of them by any means. And if we weren’t able to squeeze yours in time permitting here, please forgive us. We had you on the show before and we’ll get you back in the future, I’m sure. And we so much appreciate learning from our listeners, our investors, our clients who share their experiences with all of you on the show. That’s really nice of you to do so. And if you haven’t done so yet, here is your invitation please. We’d love to have you on the show. Have you share your experiences, your best practices, your tips, your tools, your apps, your software that you like to use as a real estate investor, and a better informed investor of any kind. And someone who is going to beat the financial system scam? Yes, Wall Street, the modern version of it. Organized Crime, we do much better than that here is direct investors in the most historically proven asset class ever income property. So hey, today, we’ll do our kind of mini and our big variety of client case studies here in just a moment. I am in Fort Lauderdale today and on my way tomorrow to Philadelphia, I know I’m going to be seeing several of you in Philadelphia at our creating wealth seminar. So I’m looking forward to that. And then I’m staying back east in New York for the rest of the week. And we’ll be seeing all of you venture Alliance members and many guests. This is one of our biggest venture Alliance mastermind meeting so far in New York City on Memorial Day weekend. So I look forward to seeing you there. And next week, I think we’ll air this on Monday. I’ve got a really good guest coming up. I recorded this episode last week, and it was fascinating. You’re going to love it. And then of course, Friday, we’ve got our flashback Friday as well. So We are onward and upward episodes 1002 1003. And from there, Boy, that’s a lot of episodes. And again, thank you so much for all of the congratulations boxers, and email messages and so forth. I really appreciate it. It’s very nice of you. Let’s just hear a bunch of clips from various client case studies that we’ve done over the last 13 years on the show. And here they are.
Thanks for your support. Jason, I appreciate yours and carry support in your home network. And it’s really been very beneficial to me and, and a whole lot of others. I encourage everyone to use your resources that you have, but thanks, thank you.
Those who have understood that’s the paradigm has changed. And that perhaps we need to do something that’s counterintuitive. Like being in debt, which obviously we have all been told is a horrible thing. You know, maybe it’s those few early people who understand that and witness that. So perhaps the people who are more sensitive to risk or more risk averse, or I don’t know what the perfection is. But the canary in the coal mine, if you want, and, and this is perhaps what you are in like you have been. I am surprised, Jason right now that’s basically what we are saying is not yet more mainstream. I’m not saying that this should be, or that this should already be what everybody’s thinking that but that so few people are thinking that or at least that’s so few people are vocal about it. So perhaps it’s just a well kept secrets and those who know we don’t want to talk about it. But I’m very surprised because this is so much against the mainstream of what you’re reading in the paper.
I first started reading the rich dad books, and that led me to looking at different motivational speakers and I’ve stumbled on Jason’s podcasts about seven years ago and then from then I was hooked in after listen to him, and I really Gotta sold on his philosophy on how he looks at the market and real estate in general and I wanted to jump in seven years ago but I decided to open up a few businesses that they went pretty well but you know, I live in New York so a lot of expenses over there. So those way not as according to plan so now I’ve saved my money up again and I’m here
working with the local market specialists went really well feel like they was able to get the type of property that I wanted and and happy with with the price and the rehab job and the tenants have gone well,
trying to sell a house in 2010 and I just got a little frustrated with the potential buyers I was meeting and so I decided just to turn it into a rental. I currently own five properties the one that I did originally live in I own three in in Little Rock as well as one in Mississippi. I am in those markets because I was super impressed with the turnkey operators that I met and super impressed with the renovations that they did the property The management that they had and basically it was one stop shopping and everything was in place when I basically I showed up with my money. I kept investing in real estate because I realized it was just an awesome way to build my wealth. Not a lot of effort on my part basically, once again, show up with the money and see my money make money for me. I found Jason through my friend Elizabeth and been super impressed love his passion, love his enthusiasm, and not to mention seems extremely knowledgeable.
I always have had an interest in investing in general and educating myself about different types of investing. And I’ve always kind of come back to real estate in general because of all the things that we we discuss on your podcasts all the time. I read, you know, a lot of real estate books and I think a lot of people probably talk about that Rich Dad Poor Dad book which opened up some some new thoughts in my head, especially the actually the 1031 exchange they mentioned in that book. And my medical partner is the one that actually turned me on to you. network because he he had invested with you. And that’s how I came specifically to see your podcasts. I spent a lot of time educating myself before diving in. The method that I hadn’t started my investing with you was was through this 1031 exchange,
I started investing in real estate to supplement our retirement for the cash flow process. I currently own 10 properties, and an additional 10 with my husband. So 20 total, we found the creating wealth show Jason Hartman, my husband going on the internet and looking around for something like this.
Well, I’ve always wanted to real estate I just didn’t want to deal with tenants and all the phone calls so I just never got into it. Then when the market really went down in 2008. That’s when I started listening to radio and I heard you on radio. And Tesla decided to do it because I your method works with the world how to deal with tenants and issues that come up even though I do deal with it. It’s not the same.
Just about mid 2011. I was I was leaving command I just taken over a position in a great job at the Naval Academy, a two year position there and had a lot more free time than I did on my submarine as you can imagine, and I was searching for a way to shift active income and passive You know, I’ve read Robert Kiyosaki books over the years I really just, I mean, they just spoke to me, Rich Dad, Poor Dad, and most of the others, you know, he’s prophesy it all just made a lot of sense to me. So I was looking for, you know, following his model of shifting and to, you know, passive cash flow income, and I’m a mechanical engineer. And the thing that made most sense to me, you know, not buying the coin laundry machine, although i think that that facility may be a great idea too, but for me, it was about real estate and buildings. And so, I was looking into that you happen to have a great podcast and I started listening in the teens I think it was and I’ve certainly listened to all of them. And I just kept gotta become a junkie with that I you know, so forgot my first property in the end of 2011 and St. Louis, I bought a few more there. I’m up to eight. And my wife Susan is today. In fact, we’ll we’ll get her first three, and we’ll she’ll be at six by the end of this month. And hopefully if all goes well, we’ll have Susan topped out. And then we’ll go back and start focusing on Gary again.
The reason I invest in real estate is because I was previously doing a 401k and put my money there. And doing other, you know, traditional retirement plans that just doesn’t work didn’t work for us for 1015 years that we were doing it and was looking for something different. So I was doing a lot of research and listened a lot of podcasts, and found real estate as being a much better avenue for creating wealth and creating cash flow. Our first investment property actually happened by accident because of not being able to sell a previously owned house that we had, and moving out of that area. So I mean, it turned out to be a really good thing for us. So after that, that made me really interested. The first intentional investment property that we purchased was in Florida. I found Crude oil show and Jason, by him being a guest on another podcast that I had been listening to. It was about creating passive income. And he was a guest on that show and as impressed with his his knowledge. So from there, I made my way to his podcast. Right now we have a total of 10 properties. We decided to go all in I mean, we’ve been doing 401k and other traditional retirement plans and investments that most people come from with with really terrible results for lots of years. So I was okay, so we actually liquidated, everything we had in our 401k is paid the penalty on all of that, and are doing much much better with real estate and very happy about it. But I think it just comes down to being comfortable with the education. So I felt like we there’s plenty of information out there about real estate, there’s lots of people with great track records. And so I think if you follow a path of success, that it’s a lot easier to replicate and duplicate. So
I felt like I was following other people’s paths of success, so I felt comfortable.
I started researching on real estate investing About three or four years ago, two years ago, I was lucky enough to stumble upon the podcast when I was doing a search. I listened to you for probably three or four months, but I was hooked after the first episode, just everything from the real estate information, politics, the philosophies, the economics in about three or four months, I decided, you know, I’m going to put my information in and see what Platinum comes back with. So I plugged my information in on the website. Oliver contacted me a couple of days later. And by the way, he has been a tremendous resource for me, just pointing me in the right direction, especially as somebody with no prior experience to real estate investing, but he definitely pointed me in the right direction, helped to educate me and help to show me different sources of information where I can better myself as a real estate investor. One thing that happens when you don’t have a real estate background and you instantly buy, you know, very expensive portfolio of real estate real estate don’t know anything about this field you have to learn. So I didn’t really have friends in the real estate field. So I was looking for resources. And podcasts was really something that I could do on my own schedule and get information about the real estate market without having to know any individuals or pay for classwork or anything like that. Just really convenient. Since we bought this portfolio, I started listening to your podcast in 2009. And we were sold on the idea we really liked the idea of turnkey single family, especially as a way to grow our portfolio as time went on. And so in 2012, we bought our first property in Memphis, for your group. Now Kelly was not as excited as I was at the time about it, so I had to convince her so I had to invest with my own money. So I actually use my IRA and purchased a single family home in my IRA, and it’s worked out great.
I’ve been investment for about two years. I have six investment properties. One in Kansas City. Three Memphis and Trinidad, Iran. Oh, I started to invest because I listened to Jason’s podcasts. I said, it makes sense to me. So I make a very quick decision. I think maybe in one month I decided I attended the meeting masters event, back to sans six thing. And then I start to buy property systems. Before that, I’m trying to do some study on stocks. But that makes sense to me. So I hold a lot of cash I didn’t deploy to the stock market. So finally, I get to the teachers podcast, everything he said, makes sense to me and I have a lot of agreement with he his opinion. So I decided to kick came to the event in the masters and then I decided to make the investment. I think the first thing is real, you have a real good return. It’s not a scam. But if it’s true, be careful. What I recommend is join a network like Jason’s network and get some education and then start to buy the properties. Don’t wait too long.
The markets we’re buying in a robust market there the population is stable and growing and the values are stable and growing. It’s not like we’re just buying residential anywhere. We’re buying in good markets.
What I’ve learned is you like to mention be area agnostic is one of your commandments in that I love that. I like to look at this is also be when it comes to real estate investing, be age agnostic, who cares what age you are, you can start doing this in 19 like you did, you could start doing this in 20s you can start doing in your 50s I started my 50s
so I got in interested in real estate investing You know, I’m actually my backgrounds in finance and I. So I have a pretty strong background, but more so in what’s been traditional investing. And it’s funny that we’ve been touting diversification for so long and it’s been like that mix of stocks and bonds. And I really felt like after all this time preaching to others that you know, this should work for them. It wasn’t even working for myself and thought that I really need to venture out and, you know, real estate investing just it, it definitely interested me. It wasn’t something that I struggle with, but it was, you know, something that I don’t know I got excited about right away, it made sense to me. And so it’s more so of creating that team and you know, knowing how to go about it. That was my biggest challenge and figuring out because with traditional investing, you can figure out an ETF or a mutual fund, you do online research. This took a lot more effort. I know that I can’t do it solo, I need to come up with a good team and a good approach. So I found Jason I was listening to not his podcast, but one that he spoke on. And it was just at that time it was just trying to learn. I’m like, well, you sounded pretty smart. So I’m going to listen to his podcasts. So, you know, I actually listened to his podcast well over a year. And then I would say, you know, I don’t know it was more so just thinking, I don’t know. It just seemed like it was interesting, not necessarily something that would be right for me. And then all of a sudden, everything clicked and it was right for me to take the steps and really figure out what Jason is all about and, and the more of the program and to see if it worked for me.
I started listening to the podcast did that you know, for probably a couple years before I connected with your investment counselor, Sarah, she did a great job of kind of holding my hand through the process is probably one of the the more needy clients she worked with, but ended up buying my first property in 2011 in Atlanta, and then waited a couple a few more years until my next one, but 2014 purchased in Memphis. And so that’s where I am at this point.
I’ve been following Jason’s company ever since 2007. I went through a seminar in his Newport Beach office by fashion Island. And I’ve been listening to his all his podcasts since then. Always wanted to buy some more. But a couple years ago, we went on the property tour in Cincinnati. And it was great. We love Missy and her team. And we actually sold our Texas property and did a 1031 exchange with to admit these properties in Hamilton, Ohio, and it was and they’ve been working out great for us ever since. And this just in 2017. Yeah, last year. We sold our home in Chino Hills that we lived in for 25 years raised Her family and all that. And we’re taking all our proceeds and going all in and rental properties. And the funny thing is we’re kind of following Jason’s lesson to the tee. And it’s working out great for us, we’re not going to buy again, in California, we’re renting actually, in Newport Beach, California. I got into real estate investing, because I’ve been a student of the stock market for years and years, and it just doesn’t seem to make sense to me anymore. Besides what Jason says it just, it just seems like the guys at the top, make sure that they win and you don’t win, which, you know, it’s just I feel the same way even before Jason said that. And the fundamentals don’t seem to make sense to me. But there are fundamentals in real estate and income property investing that aren’t going to be able to be changed by high frequency investors or anything like that. It’s the fundamentals are there and they’re gonna stay there. I’m fine with income properties, you know, the slow and steady approach
basically, found by creating wealth podcast by searching iTunes. And immediately I resonated with your message, you know, the great return on investment, significantly significant reduction in taxes, steady income that could eventually replace my corporate job income. Also, what I found very powerful is along with that message, I was impressed by the high caliber of your guests. And I remember listening to economist investors, lawyers, authors, basically people who could present their expertise and allow me to judge their response against your message. So as an example, when you talk about inflation, your your ideas about inflation going up over the next few years, I could vet that message against your guests and, and be sure that what you were saying made sense. So that was very powerful to me.
If you’re that kind of person, and you’ve got the capital and you’re a great negotiator, you’ve got great people skills. You You could probably be a success. flipper, but it’s like a job. Right? If you’re not flipping, you’re not making money. And that’s why I prefer income property because you just make money every month.
Well, I like real estate just because I like the benefit of being able to have a mortgage pay off real estate over time so that when I retire, I have something I like the fact that it’s boring. I want to be able to be entertained and travel and do a lot of things in my retirement. And that boring investment of real estate allows me to do that.
Well, it was never our goal to be full time owners of shopping centers. It’s just an opportunity that was too good to say no to that we decided to take on. Really what we want to do is just have a nice life and not work too hard. And these particular shopping centers took a lot of effort to run. Part of the reason for that is they were in parts of town where it’s hard to hire professionals to come and do the management For us, and so we had to do our own property management. And so part of the reason that we’re selling the shopping centers and exchanging them for single family homes, is that we’ll be able to get property management with these portfolios and homes, so that we don’t have to do so much work ourselves.
I think when you combine the concepts of this inventory shortage, the fact that there’s still a runway and the fact that you can’t use a standard tool to really figure out what the heck is the price of the value of houses and when it’s really good that you’ve got those investment counselors like can kind of help you navigate the waters because as much as we’d like to just automate everything it really does take knowledge experience and an overlapping of you know, some some helping hands if you will, to make sure that you’re investing in the right way
from the initial market. Recommend buy from from yourself from the truth and if the prophecy right through to the leasing process with the property manager. Everyone has been just totally professional. In the communication is excellent, especially with being such a long distance away, communication has been fantastic. And even after leasing a property Platinum properties have kept in contact to check everything’s okay.
The people that I’ve been introduced to from Sarah, the people in the markets, to the financing people, property managers and your local real estate experts, they’ve been just more than helpful. I mean, seriously, and that’s why I’m back for more, I’ll be buying more properties this month. And as you point out, it’s a little bit of work upfront, really the works up front and later on as with my other properties, it’s really not too bad. And the returns are just outstanding. The downside? It’s not that significant. Yeah. So I think it’s a just a wonderful program and doing a great service for people. So I would just like to add that
my goal is maybe get into real estate also to help my friends do what I’ve been able to do before asking me about it. So and spend more time with my family and hopefully grandkids by gotten married three years now. So maybe in the near future, we’ll have record the ticker.
2012 is when we did our first purchase. I think 2011 is when we started. You know, attending meetings, probably 2010 is when I started listening to podcasts. My husband was a little ahead of me. So he’s probably, you know, late 2009, early 2010. And you know, we’ve just obsessively listened to you. I think you’re on episode 300. At that
time, though, I do very much credit you with getting me involved in real estate investing. I had tried to do a flip originally that went sideways. And I ended up having a condo that I had rented out after that after a bad flip. And I realized that being a landlord wasn’t all that tough. And eventually, I found you on the web. And that really got me into real estate investing.
Jason Hartman 26:50
So thank you for that.
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On this Flash Back Friday, originally published in October 2016 as episode 734 Jason hosts client and guest Brian. Brian discusses his journey into real estate investing and complements Sara, his investment counselor who walked him through the buying process. He has properties in Atlanta and Memphis and is at the point where he can refinance. Jason and Brian discuss his option of refinancing or doing a 1031 exchange. Jason gives him tips on how to use his IRA to save on taxes and gives his recommendations on real estate investing.
Jason Hartman 0:00
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present, and propel you into the future. Enjoy.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. Here’s your host Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:06
Hey, I want to welcome one of our clients to the show. He’s got a great case study if not as a real estate investor than as a podcast listener because he’s been very loyal. And I’m very grateful for that. He discovered my podcast back at Episode 50, of the creating wealth show. So he’s been with us a long time. He has some investing ideas and questions and started his own website around it because he likes the asset class so much. And I want to just welcome Brian How are you?
Excellent. Thanks for having me on.
Jason Hartman 1:33
Good. It’s good to have you on and you’re located in Palo Alto, California. Is that correct?
Actually just moved up to San Francisco a couple years ago.
Jason Hartman 1:40
So you really like low priced real estate than I take it right?
I like paying high rent. How about that? Yeah.
Jason Hartman 1:49
Me ask how much is your rent? And do you know the value of the property you live in now or are comparable value for it? Because I bet you’re getting a pretty darn good deal. Believe it or not?
You Yeah, yeah. Well my rent is 2500 for a nice two bedroom here in San Francisco, which is actually a pretty good deal.
But it’s it’s a two unit building I think last it might be like 1.4 million somewhere around there for your side or both sides for both for homebuilding.
Jason Hartman 2:20
Yeah. Okay. All right. Well, that’s that’s still a good deal. So if yours is worth 750 then you have a point three RV ratio approximately about point three, three. So that’s a great deal. Congratulations. Like it’s not that great a deal. Yeah, good stuff. Well, hey, you discovered am I creating wealth podcast back at Episode 50. Thank you for listening all these years. What got you interested in real estate investing,
tracing it all the way back? I actually think it was a book I was assigned in high school to read which Rich Dad Poor Dad, and I don’t, you know, didn’t think much about it at the time, but I feel like those ideas really sink in and out. coming out of college and finding my first first job, I was, you know, wondering what I should do with my money and kind of revisiting a lot of a lot of what I picked up way back in high school.
Jason Hartman 3:11
I have to say, Brian, it’s kind of amazing that they actually assigned that book his high school reading, or are you somewhat amazed by that?
Yeah, absolutely. It was a one semester econ class that everyone had to take. And we weren’t we there were, I think, three books we got to decide between and that’s the one I chose. And I gotta say, it was a good decision. Not sure if I knew it at the time, though.
Jason Hartman 3:35
Yeah, the other two were probably like, you know, the Communist Manifesto and socialism for dummies and,
and you pick the right one.
Jason Hartman 3:44
I’m just, I’m just making a jab at our school system in our educational system, but never mind. Okay, so so Rich Dad, Poor Dad. You know, that’s been the inspiration for a lot of real estate investors for many years now. So that’s fantastic, and tell about your journey, you know, yeah, you bought a couple of properties. And when did you start? And just wherever you want to take it? Absolutely. So yeah, I started
listening to the podcast did that, you know, for probably a couple years before I connected with your investment counselor, Sarah. And yeah, really, she did a great job of kind of holding my hand through the process. I probably one of the more needy clients she worked with, but ended up buying my first property in 2011 in Atlanta, and then waited a couple a few more years until my next one, but 2014 purchased in Memphis. And so that’s kind of where I am at this point.
Jason Hartman 4:45
Yeah, fantastic. And tell us about your experience with with picking the properties and dealing with renting them managing your managers. Good, bad, indifferent. Share it with us if you would.
Absolutely. It’s it’s a little bit all over the map.
As far as the property management side but the you know, working with the local market specialist went really well I feel like I was able to get the type of property that I wanted and and happy with with the price and the rehab job and the tenants have gone well, the property management still still learning because you know, I don’t have too many years of experience and don’t have too many data points to look at but in Atlanta, I’m working with a very small property management team and update to people who do everything.
Jason Hartman 5:39
Yeah. And and some that can be good or bad. You know, the bad part of small is they don’t have as many resources the good part is small is hopefully you’re getting some really good personalized service and ambitious person who really wants to grow their business. So, you know, that can that can kind of be one way or the other, right? Yes,
yes, I know who to talk to, which is really the the that makes it The flip side is the Memphis properties through more of a large, more institutional manager. Yeah, exactly. And they have, you know, I don’t know how many 50 people on their team who do everything and it gets moved from division to division and you know, you’re not sure exactly who to talk to when it’s, you know, they’re doing the walkthrough and then they’re doing the rehab and then someone else is, is showing it to tenants. And there’s not, you know, there’s not that one person who, you know, has the whole vision of it. So, right, right.
Jason Hartman 6:33
Got that sort of delegation of labor type concept. Yeah, the bigger company idea. Yeah,
yeah. So so still learning the pros and cons of each and which I prefer and definitely early in the in the journey, but it’s good to get get these two viewpoints. Yeah,
Jason Hartman 6:49
yeah, definitely. So did you have some questions about refi or 1031 exchange, or did you just want to kind of share some of those experiences with our listeners?
Yes. I want to ask, I have, you know, that property that I purchased in 2011 in Atlanta, and quite a bit of equity has built up, which is a good thing. And congratulations, yeah. And looking to put that to use. So, you know, sometime maybe in the next six months thinking about either doing a refi pulling some money out and, you know, putting it back into another property, or maybe a 1031 exchange where, you know, again, sell, sell that property and purchase two more, and
Jason Hartman 7:33
that that gets to be Yeah, this. This is one area, Brian, and I’m really glad you brought this up for our listeners, because I have mentioned it on a few of the more recent episodes of the show. And you know, I’ve always promoted the idea of refi till you die. It does have a minor flaw to it, though. And the minor flaw is that when you have the good news of a highly appreciated property, like your property in Atlanta, where equity has really built up, usually The rents Of course, don’t keep pace. That’s the typical way that it works in real estate, and your rent to value ratio gets out of whack. So the question is, do you do the refi to die plan? Which is still a good plan? Or does it make sense to do what I’m calling the 241 plan, and that’s where you sell that property on a 1031 tax deferred exchange, and buy two more. Now, we had a guest on the show recently, who works with us who bought three more, I’ve done the two more several times. Recently, I sold a big apartment complex and bought another big apartment complex, a bigger one and mobile home park. And that was last year I did that with one of our clients, who’s my partner in that deal. I did another property own single family home and purchase two more and then I’m doing that again right now. So that’s the two for one plan, but you know, you might even make a three for one who knows. Tell us about your Atlanta property. What do you pay for it and what’s it worth now
I paid up about 82,004 85 and it’s haven’t run you know, comps or anything like that, but I’d say it’s probably in the range of 100. Hundred and 5000. Maybe maybe higher, you know, but Zillow, certainly higher but I don’t think it’s much beyond that.
Jason Hartman 9:14
I bet in the next six months, you’re going to capture some more appreciation because I don’t think that the screams you need to do anything yet. I think that’s still just hang tight and, and don’t do anything quite yet. You said 105,000. Right. Right. We’ll make sure I heard that correct. What’s it running for? Is it running for about 850 900? It’s at 950. Okay, nine, you know. Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. That’s pretty good. I i and did you put a lot down on that or do you have a lot of equity? What’s your loan balance? loan balance is 60,000. Yeah, okay. So if you do refi you could buy one, maybe two more properties without refinance, I think you need to let it go a little bit longer. And I know you said you were going to do another six months or so in it. Maybe longer than that, before you do anything I unless you have a, an adjustable rate loan that you want to get rid of, or a high interest rate loan on that, that is not screaming that you need to do something yet. But I think it’s good that you’re thinking about it for sure. Is there a Is there a reason that you’re really thinking you want to do something? Or are you just kind of thinking about it?
I’m really just thinking about it, how to get into more properties and put that put that money best to use? It’s? Yeah, I mean, as far as the equity is probably over over 40%, you know, getting to 50% and that’s probably right around the time I would want to think about there doesn’t need to be that much accurate equity in this let’s, let’s put that better to use. Right, exactly. And here’s one of the other things to consider when when people are either considering the refi till you die Or the two for one deal. And that two for one is, you know, obviously just an expression, right?
Jason Hartman 11:06
It could be three for one could be one for one, you know, I’m just giving an example when I say that, but on the two for one deal, when you sell the property, you really will have all of that equity available to you to buy more properties. On the refi, you’re going to be limited to the refinance, cash out refi loan to value ratio, which is probably going to be around 75% LTV, so you’re not going to get much money out of it on the refi till you die. But on the on the sale, you’ll free up all the equity except the transaction cost, obviously. And you probably need to bank on somewhere around 8% for that on the sales side. And then your transaction costs on the purchase, depending on the type of financing and the area in which you buy the property is somewhere in the neighborhood of three, three and a half percent, about there probably. And so that’s what you lose on the transaction cost but it’s less than you then what Don’t get on the loan to value ratio limits on the reef on the cashout refi. And I’m sure you’ve, you’ve thought of that. Right,
right. And another I mean, another benefit of doing the reef eyes to get a lower interest rate. So, you know, maybe it wouldn’t pull, you know, maybe I’d get 15,000 or 20,000 tops back, you know, spending cash out, but would also have a locked in lower interest rate, which is appealing to me as well.
Jason Hartman 12:30
Right. Right. Okay. So that’s a, I’m glad you brought that up. That’s a very good point. So what is your interest rate? Now? Do you know it offhand? And you know, have you looked at rates for new financing because getting a lower rate? You know, when you when you do this, the two for one, you automatically get to refinance? Right? And
so I believe that one’s at 5.5%. So you should be able to get under five right should be able to do better.
Jason Hartman 12:54
Yeah, right. Yeah, absolutely. Good. Good stuff. Yeah. Yeah, you know, I think it’s good that you’re Thinking about it and what are you leaning toward? Do you have a preference?
For simplicity sake, I’m leaning towards the refi. But the 1030 ones appealing to especially, you know, if I were going to purchase right now, I probably wouldn’t be looking in this Atlanta area. I feel like, you know, it has had some pretty good appreciation and might be looking at slightly more. I know, it’s not a cyclical market, but maybe more linear types. So, you know, that that would be another advantage there.
Jason Hartman 13:31
Yeah. And I would classify, and I’m sure you’ve heard me say this, I would classify Atlanta as a hybrid. Now, I wouldn’t have before I would have said it was linear, but it obviously had some pretty good appreciation and you would enjoy that along with many others. So I would currently say it’s, it’s really kind of a hybrid market. So you’d get into a more linear you’d improve your cash flow. And like looking at the announces of that, if you bought two more, so you’ve got 950. Now, in income, I’m just saying gross, obviously. There’s expenses, mortgages, debt service, etc. But just if you look at it from a very simplistic point of view, $950 per month now, what do you say paid for it again? 82,500 82,500. You could buy two more on the refi. And I bet you could bring that that gross income up to about 1800 dollars per month, you’re probably you’re probably looking at properties on our site and thinking the same thing I bet. Right, right. Yeah. Yeah. Good, good stuff. Okay. Well, any other thoughts or questions about that particular scenario?
No, it’s really a win win. I’m just trying to figure out which, which way is best.
Jason Hartman 14:36
Tell us a little bit about your website and what you’re doing with that.
Yeah, so I started website rental mindset calm just to share my experience, what I’m learning and, you know, share my story. Hopefully, can can show it’s not. It’s not too hard to become a real estate investor and that more, more young people get into it because I feel like it’s really the best place where Someone with a 15 2030 year timeline can can really benefit.
Jason Hartman 15:05
And it’s a lot better than the other options out there, isn’t it? Absolutely. It’s, it’s really scary. You know, I’ve been listening to on Audible, some of the rich dad books recently. And I’ve had Garrett Sutton on the show several times. Tom wheelwrights book, tax free wealth is pretty good, too. I really have been enjoying that one lately, although taxes are never, you know, like my favorite subject, but we’ve all got to pay attention to it. And it’s amazing how anti retirement plan those guys are. They’re just not into any sort of qualified plans. Really. Tom’s a little bit more into the Roth plan. But I think overall, at least my take from it is that they don’t like the plans at all. They would just say go out and buy investment properties and, you know, keep it at that. I’m not quite as down on on the qualified plans as they are, but I do see their reasoning for it and it makes sense. One of the things I’ve always said is that with real estate In a self directed IRA, you basically have a tax efficient vehicle inside a another tax efficient vehicle. And of course, he can’t, you can’t get really desirable financing inside your plan like you can outside of it. But, you know, it’s not bad. And I don’t know, I just I don’t know that I would go so far. Say I had $100,000 in a self directed IRA, right. I don’t know if I would go so far as is cashing it out, paying the penalty, paying the tax and then investing with that money. They’re pretty against it. I was kind of surprised at how anti qualified plan they are. You know, if you read any of the other books,
no, I really haven’t and
Jason Hartman 16:41
get let me make a recommendation to you and the listeners. Garrett Sutton’s book loopholes of real estate is excellent. At our last venture Alliance meeting. I gave that book to everybody, all our venture lions, mastermind members, were all kind of reading it together. We have sort of a book club where we sort of examine different books, and that’s been enlightening to get other Investors take on it. But
yeah, I’d recommend it. I’ll have to read that one. Yeah. I’m hoping to do some some of the book reviews on my website as well. So
Jason Hartman 17:07
yeah. Oh, that’s a that’s a great idea. Great idea for content. And the one thing I would say is that some of the ideas Garrett has in there I don’t agree with I think they’re a little no fan skerritt. I think they’re a little old fashioned. But you know, by and large, I think it’s a great book. It’s really, really interesting. And I love the way he writes and tells stories and gives funny examples of different people in situations. And he always kind of gets his little, little jab at the government in there. It’s really funny. It just sort of noticed that so yeah, good stuff. Any other thoughts or questions you want to share, Brian? That’s it. Thanks for having me on. Okay, good. Well, hey, thank you for being on and thank you for being a client and a listener since episode number 50. Way back there. This episode will air in the 700 range on that show, and we might hear it on some of our other shows as well. You also attended meet the Masters back in 2010. It looks And did you attend our Atlanta property tour in Memphis property tours? Or are those just the properties you bought?
Those are the ones I bought? I’ve still still never seen them actually.
Jason Hartman 18:09
Oh, okay. Yeah. How do you feel about that, by the way? And how did you feel about that? Initially, when you bought it was that scary to buy sight unseen, that first check is definitely scary. I’m not
gonna I’m not gonna say it wasn’t, but be I, you know, I can can rationalize it. And I’m not a real estate expert. And so I don’t have to do the property inspection. And I hope that I am hiring people who are experts. And double checking that so. So yeah, I think it’s, it’s worked out great. And I’m gonna continue to do it.
Jason Hartman 18:43
Yeah, good stuff. Good stuff. Well, Brian, thank you so much for joining us today. Good luck with your investing journey and your website. And it’s great that you’re an evangelist spreading the word about the gospel of real estate investing. So we all appreciate that because it’s it’s a great thing and thanks for joining us. Thanks. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman. Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
Jason Hartman hosts Evan Moffic for a client case study on short-term rental properties. They discuss inflation and the benefits of tax deductions. Jason illustrates how you get paid to borrow with your mortgage and low-interest rate. Evan discusses how human nature doesn’t think long-term and how real estate investment portfolios are long-term. They end looking at Bernie Sanders’ plan for the US.
started listening to the podcast did that you know for probably a couple years before I connected with your investment counselor, she did a great job of kind of holding my hand through the process. I probably one of the more needy clients she worked with, but ended up buying my first property in 2011 in Atlanta, and then waited a couple of few more years until my next one, but 2014 purchased in Memphis. And so that’s where I am at this point.
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 bed involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:19
Welcome to Episode 13 at 91389. I’ve got Rabbi Evan Moffitt, our client here with us. And Evan, you just got a phenomenal deal on a short term rental property you bought through our network. And I thought I would just ask you to share that not only did it appraise for more than expected, but you also got a phenomenal loan on it. Is that correct?
Rabbi Evan Moffic 1:48
Yes, I did. Jason and I just, I mean, I can’t I know we’re going to talk about some substantive things, but I can’t thank you enough. I would have never known about this deal found about this deal had it not been for you and I actually think this one, the could potentially be life changing. I mean, I’m getting this beautiful home with a 3.5% interest rate, I can’t even, I can’t even imagine it myself. And it’s already rented out for months on end. I mean, I look at the schedule, and it appraised for given that you structured the deal. So that essentially, we’re financing the furnishings purchase. So the furnishings cost about $30,000. But they’re included in the purchase price, so we don’t have to lay out cash. And even though the furnishings are included in the purchase price, it still appraised higher than the purchase price,
Jason Hartman 2:35
you get the maximum leverage on that. Evan, do you mind if I play a couple of the messages you left me? I was going to do this on the show without you and did ask you if it’d be okay. You said yes. But I think it’s better if you’re here because you can comment for the listeners on you know what your thoughts were about this property as you were finding out this news is that okay, absolutely.
Rabbi Evan Moffic 2:57
I just want to let you know, just got the amazing And for my short term rental on St. Augustine, I’m so excited about and praise. Okay, minute for 75 we’re paying for 69. Wow. And the genius of how I got cut off again from the phone. You said how you structure these deals is the 469 price that we pay includes all the furnishings. So essentially, if we assume 30,000 for the furnishings, I really paid for 39. And the appraisal came in at 475. That’s awesome.
Jason Hartman 3:29
Well, congratulations. And and that is that is just wonderful to hear. Excellent. And
Rabbi Evan Moffic 3:34
you know, and I also want to thank Doug, I mean, Doug, your investment counselor, I mean, he brought this to my attention. You know, it’s amazing how investment counselors help you think of things you would never think of. I mean, it’s really and help you see things you would never see. Tell us.
Jason Hartman 3:52
Tell us about that conversation with Doug. I mean, did you originally reach out to us to buy a long term rental property and then Doug told you about the short term rental properties or, you know, what was your original? You obviously listen to the podcast, and then you reached out to us. But tell us how that conversation with Doug went down?
Rabbi Evan Moffic 4:12
Well, it was really he Yes, I was on the list for for long term properties. And Doug sent out an email. And he had highlighted this property and said, You know, this is a great deal that came across my desk, take a look at it. I was not looking for short term rentals. I mean, I’d always had in the back of my head, maybe I’ll, you know, eventually get a second home and, you know, want to live in a warm climate at some point. So I always was thinking about it. But then I saw this and I started reading about I said, you know, this checks off all the boxes, it’s in a beautiful area, I know the area, and it’s a perfectly structured for short term rentals. So essentially, I can purchase a second home and have it paid off for me and earn a profit for it at the same time. And, and so all of that kind of came together. So really, I wasn’t looking for one. And then Doug also explained to me how when you were work with local market specialists, you urge them to really figure out ways that we can maximize the leverage. So that that’s the way Doug put it. So we’re putting the least amount of money out of pocket. And that’s not intuitive. That’s not intuitive for most people, but it works well for investment property. So all of that I hadn’t thought of that. Yeah, it was really getting educated our
Jason Hartman 5:22
mandate Dave Ramsey be damned. Oh, he doesn’t know what he’s talking about.
Rabbi Evan Moffic 5:28
He’s great. He’s great for people that are massively in debt. Right. Hey, you know, that’s a blessing.
Jason Hartman 5:33
Dave. Listen, Dave Ramsey is great for like the lower middle class. Yeah, he really does help those people that get themselves into credit card debt. They, you know, they spend money on the appearances of wealth, that new car in the driveway as he talks about, you know, and he’s great for that. But when it comes to investing, he’s just clueless like, it’s so it’s so shameful, how bad his advice is. You know, when you have income property being such a wonderful debt friendly asset class. And you can use that, that really cheap, long term fixed rate debt that you basically get paid to borrow now, Evan, let’s talk about that for a moment. You know, we’ve heard a lot in the news about negative interest rates. Yeah. Okay. And you locked in on that short term rental property Not only did you get it appraised for what what’s that 35,000 more than you pay right, essentially. Okay, so your your appraisal is $35,000 above your purchase price. And again, some appraisals go the opposite way folks, right is a market where appraisers are really finding it hard because properties in many markets are appreciating quickly and it’s hard to find comparables. This I was worried that
Rabbi Evan Moffic 6:48
I was weird. My my mortgage broker was I was on his case, he was getting annoyed with me but it worked out. Yeah,
Jason Hartman 6:55
yeah. Okay, so so that but then you were excited because you locked in 3.5% more 3.503 point 5.5 Okay, 3.5 let’s do a little little analysis on that for a moment. Okay, the feds target inflation rate is 2%. Okay. And that is their stated goal to have 2% inflation, okay. Now, we all know that the government maligns the numbers through waiting substitution and hedonic indexing, okay. And I’ve talked about that extensively in the past, then they have something called the core rate, where they malign again, because they basically take out food and energy, saying that food and energy are too volatile. So they shouldn’t be used in the core rate when you hear them refer to the core rate or that or what they call core inflation. Okay? That’s what they mean. That’s stripping out food and energy. Okay. So, look, there are different CPI is and there’s this, that and the other thing and there’s a lot of ways to slice and dice. But I’ll just read you something right from the US Bureau of Labor Statistics right now. Okay. Consumer Price Index 2019. Year in Review, from 2018 to 2019. consumer prices for all items Rose 2.3%. Now, this is the official number. You don’t believe it’s understated, dramatically go to shadow stats, calm look for my episode with a founder of shadow stats calm by going to Jason Hartman calm and just searching shadow stats in john Williams. Right john Williams. Yeah. And he calculates the real rate of inflation. It’s definitely higher than the government says, but whatever. For this discussion, we’ll just use the official rate which is understated, okay, and it’s gonna make your loan still look awesome. Okay. So over that period, food prices increased 1.8% a start Slightly larger percentage increase than the 12 month increase of 1.6% in 2018. food at home prices. So in other words versus eating out, I guess, right, increased point 7% in 2019, continuing the trend of modest increases, blah, blah, blah. So basically, what they’re saying is that the number is 2.3%. Inflation, the official number, Shadow stats, I haven’t checked it lately, but john Williams, their shadow stats calm will probably tell you that the rate of inflation is somewhere around six or 7%. I’m just guessing from knowing him. Okay. So you’ve borrowed the money at 3.5%. Now your interest is tax deductible as you know, right greatest it because this is a second home as a short term rental. Okay. And you know, we mostly have long term rental properties, but we have You know, a small amount of short term rental properties we offer as well. I do want to give my cautionary statement again. Airbnb has yet to go through a recession, it has never seen a recession. It’s a young company, this huge boom in short term rentals, you know, that could be that could change when we go into a recession, which we eventually let
Rabbi Evan Moffic 10:22
me say something else about that. Because if, if you are if one of the listeners here is inclined to buy a short term rental, you must go through the Jason Hartman You must go because what I learned in purchasing this property is, you know, St. Augustine has a lot of Airbnb ease and short term rentals, but a lot of certain areas are zoned differently, so you may have to pay an HOA in a certain part St. Augustine beach, they only give 100 short term rental licenses right when you work with a local market specialist that you found. They know exactly where the best returning short term rentals are. With the lowest exec, no Hoa costs, and where you can easily get it set up in a tax favored area. So don’t just go buy it on your own, I learned that Oh yeah, you go, you gotta be
Jason Hartman 11:11
very careful because the short term, you know, cities and homeowners associations attack these things like crazy. So you could be really left holding the bag if you if you don’t, yeah, you know, if you’re not careful with where you’re buying a short term rental property, for sure. So, look at you’ve got long term rentals in your portfolio, we view that as the core of anybody’s portfolio. But hey, you know, we’ve got some good short term rentals. So go to Jason Hartman, calm reach out to your investment counselor, one 800 Hartman, and we’ll be happy to help you with long term rentals or short term rentals or a mix of both for your portfolio. Going back to this this beautiful mortgage, you got a beautiful, beautiful mortgage. I sound like Trump. It’s a fantastic it’s a beautiful mortgage. We’ll talk. So, so weird. his vocal style, but you 2.3% inflation and the interest is tax deductible. So everybody’s tax brackets a little different. And they’re, you know, it’s based on adjusted gross income, of course, but let’s just call someone’s tax bracket 40%. Okay, combined state and federal tax bracket of 40%. Okay, so now if you live in California, yeah, if you live in California, you’re going to be close to 50%. Okay, probably, yeah. So So here’s the deal. Okay. What we’re going to do is we’re going to take 3.5 this is what I’m doing in my calculator, and I’m going to take times 40% that is 1.4%. Okay. So in other words, 1.4% of that interest is your deduction. Okay, you gotta go. You get to write that off. And if inflation Is 2.3 Now I’m going to take 1.4 plus 2.3. This is really heavy math folks keep up with me. That is 3.7%. Okay, now you borrow the money at 3.5. I want the listeners to realize if you never rent that property out, if that property sits vacant, and maybe you just use it for a family vacation once or twice a year, and it sits vacant the rest of the time and earns us zero income. It is very likely. Okay. I mean, I don’t even want to say it’s very likely it’s absolutely true. I think I can say that safely. That you are literally getting paid to borrow that money. You’re getting paid the borrow, the interest rate is 3.5%. And inflation plus tax deduction is 3.7%.
Rabbi Evan Moffic 14:00
Why doesn’t everyone invest in income property?
Jason Hartman 14:03
This is the question puzzles me they don’t understand. They don’t understand them the absolute beauty of it, it really, really is incredible. Any other thoughts on that? And let’s talk about our, our friend, Bernie Sanders.
Rabbi Evan Moffic 14:18
I mean, you know, my main thought is, you just got to take action. And I’ll tell you, I mean, I got nervous, even through the whole process, and in part of buying a new construction, which this is, is, you know, it’s it’s a long waiting period, right? And of course, you know, we’re human beings, we get nervous, and I did there were times I’m like, Oh, am I doing a good thing? And, you know, you just have to have a kind of bias for action. And I think I just asked that rhetorical question, why don’t more people invest in income property, because it takes a little bit more thinking outside the box. You know, your normal retirement plan will just put you in these mutual funds and you know, soso investments, whereas you actually have to think for yourself to invest in income property. But the rewards are so much better, right? That I really hope that more and more people do it. I mean, we’re kind of on a mission,
Jason Hartman 15:08
that we are on a mission. It is the most historically proven asset class in the world. It’s the most tax favored asset class in America. It’s the most debt favored asset class in America. This is self liquidating debt. You’re basically doing a leveraged buyout. And as you can see, in Evans example, getting paid to borrow the money. Now, when you add in income to that property, it just gets phenomenally better. But even if you never have a penny of income for three decades, you paid to borrow the money. Okay? Yeah. Oh, yeah. In Think about it. Let’s just do that math. Let’s do one more thing with that math. Okay. Let’s say that the real rate of inflation is not 2.3% but it’s 6%. So now I’m doing six plus 1.4. Remember, that was the text action. Okay. That is 7.4. Okay, minus 3.5, which is the interest rate, that means you’re getting paid, paid 3.9% to borrow the money. The bank is paying you every month. Well, the bank inflation, the government, the IRS is essentially paying you to borrow that money. Even if you never earn a stitch of income from it. It’s just incredible. You know, that’s how you can even justify the way that the Chinese and the Russian investors and the Middle Eastern investors from around the world with money park their money in these terrible real estate investments in the US. A lot of them I was talking about that yesterday on the show, you know, they’ll buy a crappy high rise condo and they’ll just leave it vacant. And they you know, they just look at it as a place to park some money offshore in a safer political environment like the United States. So it is yeah, it’s something
Rabbi Evan Moffic 16:57
I was trying. I was thinking yesterday. why more people don’t invest in income property. And I think, you know, there are multiple reasons, but one of the key reasons is we are not built to be long term thinkers. And I think that it’s in our DNA, you know that we would save our life in the short term because we didn’t know what happened next, you know, we could be attacked by a saber toothed tiger, right. And it’s so much easier when we’re surrounded by CNBC and constant, you know, stock market do this stock market did that. That’s how we know we think, yeah, that’s what
Jason Hartman 17:27
you can just write a check to one of those firms. It’s they make it so easy to take your money, but Wall Street, Wall Street’s major job is to separate the middle class from their money, you know, where are all the clients yachts?
Rabbi Evan Moffic 17:44
So one of your tasks Jason and one things that podcast helps us do is to think more long term, right? You know, I think we can all appreciate how wonderful an investment income property is. But what prevents some people from doing it is this sort of short term focus, so it’s constantly being able to Think long term, right? That’s right makes a huge difference. And you
Jason Hartman 18:03
know, you’re very right. As humans, that’s not our DNA, you know, as we evolved over the aeons. Our point was to survive the day. That’s what that’s how we think is we are just animals, okay? And, you know, our goal is to get something to eat, to get some sleep, you know, maybe to have sex, to procreate for sure to be protected and have shelter, right. That’s essentially how we think. And beyond that, it takes a lot of intelligence to play the long game. And it takes a lot of delaying of gratification. So let’s switch gears because I know you’ve got to wrap it up and you got an appointment. Let’s talk a little bit about Bernie Sanders. Okay, so you can start your you’ve been thinking about Well,
Rabbi Evan Moffic 18:52
I mean, I he’s the front runner right now. And look, he’s very he’s charismatic, but it’s it’s really I do think that we need sort of a an education and that kind of reminding people of how wonderful capitalism is, of course, capitalism has downsides every, you know what? Churchill’s what a Winston Churchill say about democracy. It’s the worst political form of organization except for everything else. Right? You know, and I think, you know, capitalism is difficult, and I think but Bernie, is this. I mean, he’s almost Uh, what’s the right word? Like a populist who is who is trying to rub make people feel miserable? Yeah. So that he can implement some crazy ideology that’s failed everywhere else and where are the thoughtful democrats? Where’s like, you know, somebody saying this is insane. This is insane. I’m plenty of people my congregation liberal conservative, but I want people who are liberal to say, this guy is totally off the rocker. Yeah,
Jason Hartman 19:51
he is. He is. He is a delusional old man. I do. I must say I like the fact though that Bernie Sanders And Elizabeth Warren are out there, because they are drawing some attention to the banksters the criminal banksters and the crooks on Wall Street. And I do like that. I don’t think they have the solution. But I, I supported the Occupy Wall Street movement. Okay. Remember, you know, most of my friends would, you know, they thought what a, you know, liberal or something? No, I’m not. I just like the fact that they are exposing the criminality going on at the highest levels of our our socio economic world. It’s absolutely pathetic. Now, that same kind of criminality is going on with Bernie Sanders and Elizabeth Warren, because, you know, Elizabeth Warren is wealthy, Bernie Sanders could be considered wealthy too. Now. I don’t have three homes. Yeah, he has three houses. He has it. He’s a beautiful home on Lake Pontchartrain. You know, neither of them are populists. Okay. Elizabeth Warren. I just saw a video of her the other day getting off a beautiful private jet. They’re living off the dole of the public’s money. Okay, it’s your money, folks. Nancy Pelosi is like the biggest offender in the world. I mean, she’s
Rabbi Evan Moffic 21:12
she’s extreme. Her husband was in private equity. Right? Yeah.
Jason Hartman 21:16
Yeah. And and in her abuse Use of Military Aircraft Carter round and her bar bill, you know, I mean, it’s just the bee’s knees are just beyond the beyond. That’s
Rabbi Evan Moffic 21:27
absolutely. You know, Jason, what you said before? And I, you said, you’re not an optimist, you’re not a pessimist. You’re an opportunist. Right. And so I think with Bernie, in some ways, let’s just assume he wins, maybe horrible for the future of our country, but some of our investment properties may do very well. There’s probably a lot more inflation. I mean, he’s gonna spend like crazy and if He forgive student loans, you know, a lot of our tenants probably have student loans. I know mine do. You know if those are forgiven, you can raise rents or people may want to buy home so home prices will rise. mean.
Jason Hartman 22:00
Yeah. Right side. Absolutely. I agree with you look at just align your interests with the powers that be. Look in the evidence. They’re all spenders. Trump is a spender. You know, Bush was a spender. Obama is a spender. Bernie’s a spender, Elizabeth suspender. They’re all spenders. They’re all buying votes to curry favor, and Bernie will spend more. But, you know, they’re all just big spenders. And what does that mean at the end of the day, it means more money creation, more fake fiat money created in the world. And before we wrap it up, I’m looking at a Yahoo Finance article. And we’ll put a link to this in the show notes. of there’s an interesting graph here of what Bernie Sanders big plans will cost. You ready for the seven? I don’t know if you have it in front of you, either, but it’s absolutely insane. listeners. Are you sitting down And are you realizing how much inflation will occur under a spending program like what Bernie Sanders is proposing? He proposes a total of additional spending new spending every single year of get this 4.93 trillion with a T trillion dollars a year, almost $5 trillion a year in new spending. That is unbelievable. I mean, look, what what is it? What is our debt up to now like $23 trillion? Yeah, yes, our deficit is about a trillion a year or something like that. You know, we have unfunded obligations over the next 15 years or so. According to Laurence Kotlikoff, who’s been on the show and has probably done the deal of it. Yeah, it’s been on a few times and have like 220 trillion dollars this month. absolutely cannot be paid. But can you imagine if our deficit every year goes from $1 trillion to $6 trillion a year? Yeah, this is every year,
Rabbi Evan Moffic 24:11
I believe. Unbelievable.
Jason Hartman 24:13
He wants to spend an additional $3.2 trillion on Medicare for All. He wants to spend another trillion on the green New Deal. He wants to wipe out student loan debt and have college for all. Now, the interesting thing is, I don’t understand how this number is in higher because it says 220 billion dollars, but the student loan debt alone is like $1.4 trillion. So I don’t actually expect his numbers to add up. Yeah,
Rabbi Evan Moffic 24:42
it’s insane. Good point. Good point. Yeah. I mean, it’s, as you said, it’s so easy to spend other people’s money right. You know, I see this as a leader when it’s not when it’s not your money. You get a trillion here, trillion there. Yeah. And I mean, this is why would we expect I mean, Medicare is amazing. It does great things for people, but there are lot of problems. I mean, I had an injury recently. And I, you know, had was spent a couple nights in the hospital when I looked at the bill, which forced I didn’t have to pay most of it. It is absolutely insane. Why don’t we do something about those costs? Rather than just spend more money?
Jason Hartman 25:14
I know it’s crazy. And listen, this is no Trump promo okay. But I mean, give him some credit for what he is doing. It’s good like this, this new bill where hospitals have to disclose prices, like da, white horse, white devil, we always had that. It’s crazy that, you know, they can be so opaque with all this stuff. So that is wonderful news. But at the end of the day, look at we just calculated your loan, how you’re getting paid to borrow on that loan, if any kind of spending like Bernie Sanders goes through. This just has inflation written all over it, doesn’t it?
Rabbi Evan Moffic 25:56
Right. Oh, yeah. Oh, yeah. I mean, look, just think back to Roosevelt. I mean, in the you know, of course, we had World War Two there, but you know that the inflation since Franklin Roosevelt is what it’s like 9090 I mean that the dollar lost 95% of its value.
Jason Hartman 26:11
Rabbi Evan Moffic 26:13
So I mean, absolutely. And, you know, the beautiful thing is I, I would characterize myself as an optimist, that America, the, you know, we always survive. I’m not worried about the future of our country. But, you know, why would we make, there are so many things to look forward to, as you talked about, you know, the technology that’s possible in the next 10 years? Why don’t we put our best foot forward instead of going back into, you know, programs that never worked in the past? Yeah,
Jason Hartman 26:39
yeah. No, it’s, it’s crazy. Yeah, you can’t make this stuff up. Like Margaret Thatcher said, the problem with socialism, is that eventually you run out of other people’s money. That’s right. That’s right. All right. Right. Well, Evan, thank you for joining us today. listeners. Thank you for joining us as well and until tomorrow, we want to wish you all happy Investing, go check out Jason hartman.com or call us at one 800 Hartmann and get educated. It’s always it’s always great to have you on the show and hear from you. And we appreciate this client case study along with a little Bernie Sanders commentary. There, Jason. All right. Thanks again. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe. So you do not miss any episodes. We look forward to seeing you on the next episode.
Jason Hartman finishes up a two-part interview with Drew as they continue discussing self-management. They go into some economic headlines. Then Jason discusses a tweet from Peter Schiff and how interest rates are impacting the economic landscape. He gives listeners suggestions on what they can do in the current economy. Lastly, Jason discusses ways to collect rent and what its worth beyond the dollar amount you receive each month.
I’ve been investment for about two years. I have six investment properties. Why in Kansas City? Three Memphis and 22 rock? Oh, I started investing because I listened to Jason’s podcast. I said it makes sense to me. So I make a very quick decision. I think maybe one month I decided attended the Mythbusters event, back to some six thing. And then yeah, I started to buy properties since then, before that, I’ve been trying to do some study on stocks, but doesn’t make sense to me. So I hold a lot of cash I didn’t deploy to the stock market. So finally, I get to the Tetons podcast, everything he said. makes sense to me and I have a lot of agreement with he his opinion. So I decided to kick came to the event in the master And then I decide to make the investment. I think the first thing is real, you have a real good return. It’s not a scam. But if it’s true, be careful. What I recommend is joining a network like Jason’s network and get some education and start to buy the properties. Don’t wait to learn.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will Help you follow in Jason’s footsteps on the road to your financial independence day, you really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 2:14
Welcome to Episode 1189 1189. Thank you so much for joining me today. I’ve got drew back on the show. First off, let’s make sure we talk about how the internet works and how we’re all becoming more like ourselves. But I don’t want to forget before we do that, let’s go to Peter Schiff for a minute, you know, he’s the master of the soundbite. As I always say, I would not be investing with him I lost money investing with him, would not recommend it, but he makes some very good points. Now, a recent tweet from him. It says between 1800 and 1900, the US consumer price index fell by 50%. In other words, deflation, right? So we had 100 years of deflation. This includes the Gilded Age, the strongest period of economic growth in US history. If falling consumer prices were good, then why does the Fed think they would be such a problem now? and 107 people retweeted this at the time I got the screenshot. And it got 339 likes. So what say you to that drew?
Well, I think it would be a major problem, even though I liked the tweet. The problem is, is that the whole system is based on debt. And back in the 18, and 1900s. The whole system was based on savings and investing and not borrowing up to the hilt. So if you have deflation in a leveraged economy, it’s a death now. So I think that it’s well intentioned and I think that it is something that needs to happen. I mean, the markets are done. Desperately crying for deflation because, you know, you have a 30% increase in GDP over the last decade, and equities have run up 300%. So, the system is crying saying we need some deflation. And you know, the printing presses keep going, but I agree I held it. Wait, wait a
Jason Hartman 4:21
second. I just want to parse out some of your statements there. You said 30% GDP growth in the last decade. 300% equity price growth in stocks. Right. So right, you’re saying that’s out of balance, right, that multiplier of 10? Is that what you’re saying?
Yeah. And I mean, if you look at the central bank’s I mean, you know, 10 years ago, nobody, maybe except me, predicted that the feds were going to pump $10 trillion into the system. And so you look at where that money when is it when got parked on the balance sheet of these big banks, that it never touched? bottom rung of people. And so you have issue with just the fact that that money is now just sitting on the balance sheet and the banks are paying zero percent in interest. But if you try to get a loan, they’ll charge you, you know, for a car and they’ll charge you four or 5%. So they’re taking that big spread. And the only people that benefit from it are, you know, executives and all that money is getting shoveled into the stock market. I mean, I was reading something that one of the I think it was like one of the Icelandic countries live in Norway. I don’t remember at the last dis Scandinavian countries,
Jason Hartman 5:33
Yeah. Well, they took their sovereign funds and invested it all in stocks.
$18 billion, and the last couple months in December, that could have gone the other way. Oh, well, you know, the thing that’s so nuts is you have all these retirement pension funds that are issuing bonds to buy equities. I mean, it’s crazy.
Jason Hartman 5:59
That is That is what you’re saying is that is highly risky behavior, right? That’s what you mean by that. Oh,
yeah. Sorry. I might be talking a little shop here. So sorry. I’ll try and make it more clear.
Jason Hartman 6:11
So, in other words, they’re issuing bonds to raise money to buy stocks. Right. That is, yeah. breeziness
that is Yeah. Well, the thing is, is that you have artificially low interest rates that the Federal Reserve has created. So it creates all these bizarre unintended consequences, right, because it incentivizes bad behavior.
Jason Hartman 6:36
investment, you know, absolutely.
You know, so it’s like, I think that’s the problem with Peter Schiff is like, he is so right. But the problem is that the government is so wrong that it creates this situation where someone like Peter Schiff, who should be right isn’t under that’s my job.
Jason Hartman 6:54
Yeah. Peter Schiff in the rest of his ilk, the other gold bugs And the doom and gloom, Murs, and all the rest, right? That whole crowd right in Listen, you know who I want to include in this gym records. Okay? Jim Rickards, his books are awesome. Okay, I love them. They’re super interesting. They’re really wonky too. And, you know, a lot of that’s just way above my pay grade. But they’re always predicting the end of the world, and it never happens. And, you know, the problem with all of these guys, is they just do the math. And it’s not just the math. There’s so much more to it than that. You know, there’s so much more to it than the simple idea of, Oh, we’ve got too much debt. But that’s just like the same people like that idiotic Berkeley Professor I had on years ago. I don’t think he was on this show. I think I had him on the holistic survival show. But, you know, he kept saying, well, the world’s overpopulated blah, blah, blah. You know, I’ve heard that Malthusian thing for, you know, a couple hundred years, right? We’ve been hearing that they don’t know when it’s actually overpopulated I, because I asked him the question, I said, Well, how do you know that 7 billion people are too many people? And he says, well look at all the environmental damage, right? And all this stuff. And I said, Well, okay, fair enough. But how do you know that one of those 7 billion people isn’t going to come up with the solution to our problems? Why don’t you view them as a resource, rather than a cost? People are not only a cost, they are also a resource. And how do you know that the planet can’t sustain 10 billion, or 20 billion or 40 or 70 billion people? You don’t know because it’s never been done before. And that’s the problem with all of these guys. They don’t know how much debt is too much. They don’t know how many derivatives are too much, because it’s never been done before. So it’s fair enough to say hey, it’s grand experiment and Michael really
Jason Hartman 9:02
but nobody knows. Nobody knows.
Yeah. And I mean, I think you I think me, definitely Peter Schiff thought that the everything bubble would have already cracked a little bit by now. I mean, it’s it’s pretty insane I mean what is the longest economic expansion in history? So I mean just based on statistics everyday marching forward gets closer to the next downturn. So you know that analogy of a stop clock is right twice a day or
Jason Hartman 9:34
twice a day. Yeah,
yeah. So I mean, I think that there is some merit there and the debts going to be an issue. And you know, we’re right now playing musical chairs while the Fed raises rates and keeps taking chairs out. So eventually you’re going because we have a debt based system. You know, the whole issue is, is that eventually people are not going to be able to service the debt up a quantitative tightening. So I don’t know what’s going to happen but I think that when you people, look at the last recession. I think the last recession had a lot more to do with the people on Main Street, as you know, they’re getting their homes taken away. And of course, that had nasty implication of the banks being insolvent. But I do wonder in the next recession who’s going to get hit the hardest? Do you have any thoughts on that? Well, we shall see right now, right now, interestingly, in terms of the real estate markets, in many places around the world, certainly around the country, the wealthy are getting hit pretty hard, because these high end real estate markets are getting. I don’t want to say hammered that might be a little too strong, but they’re definitely getting hit. Okay. And, yeah. Well, I have I have a theory about it. I don’t know if I’m new. You’re right. But my theory is, is that the next big issue is going to be a global issue with everyone outside the US because we have the world’s reserve currency. So as people attempt to get more and more dollars globally to service their debts, because that’s what everybody wants and needs, I mean, a lot of these places have created their own private loans based on dollars. So it’s going to be a liquidity issue. And some people foresee a short squeeze on the dollar as that problem unfolds. So you’re going to have higher rates here, everyone else getting tortured. I heard in China that they like lowered the reserve requirements for dollars, and they’re only paying out like half as much in dollars. Now, without scrutinizing it in the system, the banking system, so they’re running out of cash. And as they try to peg their, you know, currency to the dollar. It’s creating all these issues in their system. So I think that China does have the appearance of abundance, but it’s all based on debt. And I mean, you we were talking about Kyle,
Jason Hartman 11:55
Kyle, you know what, we don’t have time to do the Kyle bass video today. So we’ll do it for Another episode but now we did it on Monday, I went through that myself, I went through the first two thirds of that video, which are excellent. By the way, he makes some great points. Andrew, you and I will cover that on another episode, the last third of it. But the point being that he talks about China’s faulty statistics, and the smoke and mirrors economy, the Wall Street economy versus the main street economy is really the point he’s making. And when you said China’s running out of cash, I think you really meant to say China is running out of dollars US dollars, reserve currency, dollars that they can spend abroad. You know, cash is they can create their own
Chinese cash, obviously, right? Yeah. Talking about dollars. Yeah,
Jason Hartman 12:44
yeah, good point. Okay. Hey, we got to wrap it up. But I just wanted to touch on that topic real quick, because we did say we would, and that’s about the way you know, this point. I think maybe I’ve talked about it before, but this one concept is pretty interesting. And I think People really need to think of this. When we look at how, you know, in many ways we consider the country to be very divided and, you know, people to be have really strong opinions about this political thing or that political thing or that candidate or the other one. And what’s happening Drew, and we talked about it off air before this is this, the way the algorithms work? And what we see on the internet, never before in history, have we had a situation where we are so much becoming more like ourselves. And I realized this about 20 years ago, when the company double click had a bit of a scandal, a privacy scandal years ago. You know, we’re seeing all this content that is served based on our profiles of what we look at our viewing habits are surfing habits, our buying habits, etc. And all these marketers are pushing content toward us ads toward us based on our own habits. So we don’t even see the rest of the world anymore. I talked about how you can’t hear the dogs that don’t bark, and boy, our opinions, our whole life, our whole worldviews are shaped by these patterns we have and we keep seeing more of the same in our various news feeds, ads served up to us anything. So do you want to make
a comment on that before we go, Drew? Well, yeah, you know, I think it’s kind of a little toothpaste in terms of what you’re talking about. Because you have on one side, you have this issue where, you know, it’s a little bit of an echo chamber and confirmation bias where anytime you go on YouTube or any search results, you know, as it learns more about you, it refines its what it feeds you so that you’re like the mouse clicking on for more food, right what interests do right but at the same time, those large search engine are manicuring and censoring information while they’re selling your privacy at the same time? So you have this weird situation where they’re censoring certain voices classifying it as hate speech, which I think is so broadly defined. So scary. Yeah, that’s nice. Yeah. So it’s like filter. Yeah, I find it ironic that you’re not allowed to think a certain way. And the thing is, is that when you create this situation where certain people are not allowed to have certain ideas, I think that creates a far more dangerous situation, because it pushes those people out to the fringes and creates these nasty consequences. Where is if you let people have opinions in the public, they are going to get retaliation and feedback, maybe retaliations the wrong word but they’re going to get feedback that’s, you know, going to refute their bad ideas. But I think that’s kind of issue that’s going on right now. And so we have to kind of define these public spaces, these public forums, are these platforms that are monopolies like anytime somebody gets big enough to compete against these Google Amazon Facebook type situations, they just get bought out by them or crushed. No, it’s like, it’s kind of like that Mexico thing. Do you want silver or lead? You know, do you want to be shot or do you want to get the money and leave? And so when these monopolies have control of the online marketplace and common area that people communicate, and they don’t allow that freedom that we are deserving, you know, in the Constitution, me as a libertarian where I think that like you know, private companies have a right to do what they want with their platform.
Jason Hartman 16:48
Not these these, these, these companies are not private companies anymore. They are square and they are bigger than many countries. We are living in an era of tech tyranny. These companies are disgusting. And they need to be held accountable. They are way too big. And Drew, like I’ve talked about before, they either need to be regulated like utilities, they need to be split up under antitrust laws into smaller parts. And or they need to make their algorithms public and open source so everybody can see them.
Well, yeah, I mean, the thing is, is that like, what if the utility company the phone company didn’t like what you’re saying on the phone, so they decided to turn off your phone service? I mean, that would be a scandal. And the thing that’s so disgusting Is it like recently I think Facebook Banned a few people and they shadow banned them or what know what they did was they sent out a press release, saying, here’s a bunch of people that we’re going to ban. And they sent us the press on a policy that they couldn’t talk about it beforehand. I don’t know what it’s called. We’re basically they say it’s like something we’re announcing this, but you can’t tell the Public till this date. And so they told all the press, they were going to ban these people before the people that even been banned. And then and so then they banned them. And the thing that’s ironic is they didn’t follow their own terms of service. Yeah. So it’s this kangaroo court that they determine the outcome.
Jason Hartman 18:20
Yeah. You know, I remember many years ago, I registered a domain name because I was so upset with the abuses of homeowners associations. So I registered the domain name and I was going to go on my one of my little campaigns against all of the, you know, evils that Hoa is commit, right? And how, you know, these are like these unchartered governments that you basically have very little recourse against them. And boy, the tech companies, the big tech platforms are so much worse. And it’s something we got to watch out for folks. We got to pay attention to this. It’s important It’s really important stuff
that circles back to real estate. I think doing self management, the thing that I’ve kind of considered is that these customers that I have, they’re renting my properties. This is other people call them, I love it, you call them customers, other people call them tenants, they will make sure you consider them customers. Yes. Well, you know, the thing is, is that, you know, with the property management company, before, the accountability was only one direction, if the tenant didn’t pay on time, they got a late fee. There was no accountability for the property management to perform. And so, you know, the thing is, is that the way I try to handle it is like, if they have an issue, I’m accountable to be timely, and the same way I expect it from them, right. So you know, in the ways that these tech platforms don’t abide by their own rules. You know, I think it’s always important to have that golden rule when you know, dealing with someone and I think that the repercussions of not having that approach will ultimately lead to its demise, yeah.
Jason Hartman 20:02
Well, let’s hope so, you know, there’s a lot of women about this now, around the world, you know, the European Union has caught on Facebook just got nailed with a big fine, things are changing. So let’s keep up the talking talk to everybody needs to be talking about this stuff, because it is vitally important to the future of our world. These companies have done great things, but they have also committed great abuses. And you know, talking about the real estate thing, yeah, it’s, you know, it’s the golden rule. Okay, do unto others as you would have others do unto you. I mean, we have just lost sight of that in our culture. You know, I’m constantly saying it’s an amazing time to be alive. But at the same time, as far as the culture goes, it’s a disaster. I mean, it’s just I am not impressed with the culture war in the way it’s going home. Fully the pendulum will swing back throughout history it usually has, you know, it goes too crazy one direction, then it, you know swings back the other way and it needs to swing back a bit. Because there’s some really bad cultural stuff, you know, this quick buck, instant gratification mentality is just, it’s just got it and it’s it’s
one thing certain certain things about the past we can reminisce on and certain things about the future are going to be bad. But the thing is, is always a given take, you always have certain things that are bad from the past and certain things that are good from the past. So you have to consider that the same as with the President. So it’d be sort of cherry pick out the data. There might be a trend there but you know, you have to also like you say be happy for where you are now. So it is an amazing time to be alive, I will say is definitely and you know, I’ll leave the listeners with one other thoughts. If you’re thinking about starting your real estate investing career or You’re thinking about expanding the size of your portfolio, you know, a year from now, two years from now, five years from now, you will be happy looking back and saying, Hey, I’m glad I did that, you know, so get started or expand your thinking on your your portfolio’s and your activity there it’ll it’ll be to your benefit or even save your life. But I was gonna say, I was listening to an investment type video and I thought something that was interesting was they said that your investment time is more valuable than your money because when you consider the compounding effect, is really you want time when your side and so if you let a decade roll by you don’t do anything, versus doing something you’re gonna look like a genius if you’re done something I mean, and so, if you pick one of these asset classes that produces income, and you’re not speculating, you have to consider this as like a little business but also something that you’re investing herself in And, and then you’ll reap the reward. So I’m right there with you.
Jason Hartman 23:05
It is amazing how and I remember Earl Nightingale many years ago giving me that example of the airplane versus the cruise ship, right? We get in a commercial jet, and we fly it may be 555 miles per hour. We get on a cruise ship and we sail along at 20 knots. And the cruise ship though it just it’s so consistent. It’s so persistent. Just 24 hours, seven days a week. It keeps chugging away. And you know, before you know it, you’re at the airport, right? You have a few drinks, you enjoy some of the onboard activities on the ship, and you’re at your new port. And it seems slow, but it’s so consistent. And it’s really it’s like income property. It’s just always working for you. It’s just always chugging away. Basically Think of it this way again, I’ve mentioned it before. But if you’re qualifying tenants, based on the concept that they can’t pay you, more than 33 to 40% of their income can’t be spent on rent every month, then you basically have them working for you every month for 33 to 40% of the month. They are working for you. They’re giving you all of Wow. I mean, isn’t that an amazing way to think of it? You know, that that’s the typical rent to income ratio that’s allowed by landlords, they don’t want a tenant to go above 33 to 40% of their income every month on rent. I mean, can you imagine that? It’s like if you own 10 houses, you have 10 households, giving you 33 to 40% of all the income there.
You have 10 part time employees are paying You
Jason Hartman 25:00
Yeah, and you and you don’t have to manage them as much as you’d manage regular employees if you have a business, and they don’t get to just walk out the door and quit and steal your client list and steal your intellectual property and your trade secrets. Believe me, I deal with this crap all the time in my business, right? It’s just such a great asset class. It’s just always chugging away. So I want you to think of it this way investors every month, the first 10 days of the month, go to you, the landlord, right for all your tenants. Maybe the first what 13 days of the month go to you it’s it’s 40% of their income, right? So that’s pretty awesome.
Isn’t it true? I’d never thought that way. In fact, what I had done in the past was I figured out like, and I can’t remember what it was, but I just thought about how much rental income I have. And I divided by 24 hours. And I’m like, it’s funny how this stuff is working for me while I sleep. Yeah, I remember what it was, but it was more than a minimum wage job for sure, you know, and just somebody is they’re constantly, you know, churning out income. And I love the idea of sort of reinvesting dividends that you get from your rental properties. And you know, maybe right now, if you have a small portfolio, you might only be able to get one property every few years. But as you start to scale up, you might be able to start getting one property for two years, and then every one year, you know, so it is exciting when you’re able to make bigger moves as you move further along. But yeah, time is the most important thing.
Jason Hartman 26:39
It is no question. You know, I never really thought of it that way. So just taking a calculator out right now, if you have a 1200 dollar a month rent on your properties, then you divide that by 30 days, that’s $40 a day and rent and if you divide that by 24, that’s $1 66 per hour. You’re getting in a Rent. So every hour, that money is coming in. Now, you some of you listening might be thinking something crazy. And I just want to, I want to hold that thinking for a moment because what you might be thinking is, well, Jason, well Drew, what are you talking about? That’s not the amount of my positive cash flow. That’s the gross rent. I hear you, I get it. But the way you should think of it is by the gross rent. And here’s why I say that, because you got that asset. With debt. You bought that asset, probably not for cash, and you only put up maybe 20% of the cash. So the other 80% was finance. And remember, the big boring idea that we shared at meet the Masters just a month ago or so was the idea of equity build up the idea of amortization, the idea of that return on your investment that most people don’t even see, when the principal pay down of that mortgage happens over time, you get the what I call the R o A, not ROI, not return on investment, but our Oh a. And that’s the return on amortization of your loans, where the tenant is constantly paying them down for you. It’s a pretty incredible asset class and has so many awesome characteristics. Drew, thanks for joining me today. Yeah. Thanks for having me. All right. Happy investing everyone. We’ll talk to you tomorrow. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website
and our general website heart and Mediacom for appropriate disclaimers
Jason Hartman 28:54
and Terms of Service. Remember that guest opinions are their own. And if you were require specific legal or tax advice or advice and any other specialized area. Please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
Jason Hartman gives us a client case study on this Flash Back Friday episode. He welcomes Vernon Grant to discuss some of the investment properties he purchased with the network. Grant compares the New York City real estate market to Tampa. Then he discusses how to use equity to maximize returns. Jason goes through his strategy, “refi-til-ya-die.”
Jason Hartman 0:00
Be sure to check out our cyber monday sale. It is going all week long. It will end soon, but it’s our best deals of the year at Hartman, education calm. That’s Hartman education calm where all of our info products and educational products are half price for Cyber Monday. Our best sale of the year Hartman education calm. Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is hand picked to help you today in the present and propel you into the future. Enjoy. This show is produced by the Hartman media company. For more information and links to all our great podcasts visit Hartman media.com.
Welcome to the creating wealth show with Jason Hartman you’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most hits. Historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:39
Welcome to the creating wealth show, episode number 809 809. This is Jason Hartman, thank you so much for joining me today as we do a another case study. Yes, we have one of our clients on with us today. And we love it when our clients come on the show and share their experience the good, the bad and the ugly aspect. questions and get them answered. So if you would like to be on the show, just reach out to us and let us know. If you’re working with one of our investment counselors now you can just reach out through them. Or you can just reach out through Jason Hartman calm, and we’d love to put you on the show, and answer your questions here, your experience, etc. Of course, you can always reach me on voxer as well. My voxer name is Jay heart 88. Jay heart 88. If you just have a quick question there, which we may play on the show, we don’t always play those on the show. But sometimes we do. Sometimes they’re a little hard to organize, and too many of them come in and I can’t keep track of them all. But I went to flickable. I tried, I gotta get back on that and start playing those on the show. Anyway, yeah. Let’s get to our guests today, and do this little client case study. I hope you enjoy it. And one of the things I want to remind you of, and we talked about it here on this interview with our client, is that the ideal thing In terms of properties where you don’t have good rent to value ratios, the ideal thing, if they’re really far off is always to sell them, do a 1031 exchange if necessary. So you have tax deferral, and then buy less expensive properties with better rent to value ratios, that would be the first choice. The second choice is to refinance them, because at least if you refinance them, you get control of that equity. you’ve engaged in the practice that I call equity stripping, which is a very good practice, so that your equity is no longer lazy money. It’s not tied up in the property, you can use it you can do some good with it, and you actually lower your risk. I know this is counterintuitive for many people, and we’ve talked about it many times on the past 808 episodes. Just keep that in mind. Selling doing if necessary at 1031 tax deferred exchange, which By the way, a word of caution here and remember that I am not a tax advisor. I’m not a lawyer, always seek competent. And it’s not easy to find competent, by the way, always advice when it comes to this stuff because taxes and legal questions are particularly complicated. And one of the things that people are sometimes surprised by is that they can have a property that they are selling for the same price. They bought it, but they’ve taken a big tax write off for many years, and that tax write off is the the best tax benefit, because income property is the most tax favored asset class in America. And that is called depreciation. It’s a non cash right off, it’s a phantom right off. It’s a wonderful, wonderful tax benefit. But remember, if you’ve taken that tax benefit for the last five years, and you sell the property for the same price, you bought it for Then Hey, you gotta pay that back. And that’s called depreciation recapture. So even if you’re, if you think from a very elementary understanding that you’re just breaking even, you’re really not, you’re really making money. And and this is the thing with real estate investing because it’s this wonderful multi dimensional asset class, income property, the most historically proven asset class in the world, a multi dimensional asset class where we’re we earn our profits, we earn our returns from many dimensions. With that in mind, a lot of people they just, they’re making money, they’re winning the game, and sometimes they think they’re losing because they don’t know how to keep score.
Jason Hartman 5:48
And that’s what we teach you to do is keep score on the show, keep know how to keep score, and of course, go to real estate tools.com for some excellent tools that can help you keep score. And help you be a better investor go to Jason Hartman calm listen to or really watch that free 27 minute video that we’ve got on how to analyze a real estate investment that can be very, very helpful in learning how to keep score. And so part of keeping score is knowing that you’ve received this tax benefit for in that example, I just mentioned the last five years. And if you sell the property for the same price, you bought it for, hey, you’re going to have some depreciation recapture potentially, right? And so you still might want to do a 1031 tax deferred exchange. So that is something very important to keep in mind. Okay. So in either case, we let’s get to our guest interview today. And if you’re out there, you’re one of our clients. We’d love to have you on the show as well. Just reach out to your investment counselor, or contact us through Jason Hartman. com or contact me through voxer at Jay heart Eight. And we’d always love to have you on the show. Anyway, here we go with our client case study.
Jason Hartman 7:12
It’s my pleasure to welcome one of our clients back to the show. Well, first time for this one, but we’ve had many clients on the show over the years and we always like to share these talks with you as sort of case studies and also have them ask some questions and so forth. And all of those questions apply to many of you listeners as well because many people have the same questions and are thinking along the same lines about stuff. And I just want to welcome Vernon grant. Vernon How are you? I’m well thanks and yourself. Good Good to have you on the show. And you’re coming to us from New York City area. And it’s great to have you and you have really been helping your your parents out with their real estate investing it sounds like and and doing some of your own.
Vernon Grant 7:58
Give us a little background if you would So, I’m an engineer by trade, but
Vernon Grant 8:05
I went into business for myself in 2001. And I’ve been continuing that until today. And now I have a little bit more time that I can help my parents out with their investing that they started in the 90s, I would say, and I like a lot of your ideas, and I would like to put what they have to good use to, because what they have already is growing. But I think you can do a lot better based on your stuff.
Jason Hartman 8:41
Yeah. Well, that’s it. That’s a great topic. When did you discover my podcast?
Vernon Grant 8:45
Actually, I was listening to Ryan Moran’s podcast.
Vernon Grant 8:52
Freedom Fastlane I’m not sure if you remember it.
Jason Hartman 8:55
Yeah. I’ve been on a few of Ryan’s shows. So yeah,
Vernon Grant 8:58
yes. And so It was quite a while ago that I heard about your podcast, but I just was so busy, I didn’t have the time to listen. And within the last, I would say two months, I have been so many episodes of your podcast, it’s so great. You have so much good knowledge, you know, so many people, they will pick and choose information that they wish to share. But it’s not the big picture and you give such a clear big picture you tie in so many things to the market. And what if and what if and what you should do in those situations and you’re you’re quite conservative with how you invest. And so I mean, it just makes so much sense.
Jason Hartman 9:48
Well, I appreciate it. Vernon thank you and I’m glad you liked the show. So you you’ve been bingeing on the episodes, any idea how many episodes you’ve listened to.
Vernon Grant 9:58
Oh, man, at least A couple hundred.
Jason Hartman 10:01
Yeah, good, good stuff. Well, I hope you don’t get sick of me anytime soon. But you’re probably sick of me already. And you went to college for computer and electrical engineering. And then, and you were also in the Marine Corps for eight years as well. Yeah. Yeah. So and then you said you started your own business. So in 2001 what kind of businesses that
Vernon Grant 10:25
well was automotive accessories, so you know, people hooking up their cars to go faster and look different and all of that stuff and I was really into that scene. I still love cars. However, I wanted to try to shift gears because you know, as the economy changed, things changed with the industry and although I love cars, it’s just not that great of a business and more and and you know, we will We’ve made a lot of money. And in the crisis, we’ve lost money. And so again, you know, with your strategies, even in those different markets, I could have been making money. So I don’t want to lose it anymore, so to speak,
Jason Hartman 11:15
let’s not miss any more opportunities if we can help it. So your father was a property manager. In fact, he was managing director of a property management company in the 80s and 90s. So you’ve got that background in real estate and that interest, it sounds like
Vernon Grant 11:30
yeah, I mean, I’ve been around it so much. You know, there have been times where he had to go back to Manhattan at like 3am because some commercial property that he’s met in managing some crisis happens and so I’ve been in it and even his father was a realtor as well. So I like it. I just hadn’t had time to wrap my myself. around it and and digest all the information because there’s a lot of information, but thank goodness in this day and age, you know, it’s so readily available. Yeah,
Jason Hartman 12:10
good, good stuff. Well, sounds great. Well, tell me about some of the questions you have. And you know what, what you’re thinking of doing. And let’s outline some strategy here because you’ve got a couple of different moving parts, and I think we could, you know, align those really well for you.
Vernon Grant 12:27
Okay, so, we’ve already identified a few properties that we’re getting, but my main question is, my parents have a particular house that they want to retire in. And when they bought it in 96, it was they purchased it at approximately $195,000. And now it’s worth about 424,000. So they’ve got quite a bit of equity in there and
Vernon Grant 13:00
I’m not sure which
Vernon Grant 13:03
direction will benefit us best keeping in mind that you know, they still want somewhere to go to vacation and have fun and or live for several months out of the year. So I want to take that equity out and do something with it or do a 1031 exchange but I need your advice as to which one might be best.
Jason Hartman 13:29
Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. Okay, so the $424,000 property I believe that’s in the Tampa Florida area. Is that correct? Yes. Okay. And your parents are living in that area. Are they living in New York or kind of both or what?
Vernon Grant 13:53
They’re still living in New York. Okay,
Jason Hartman 13:56
so they live in New York and they want to retire in the potential In the Tampa property, right? Correct. Okay, good. So do they own a home in New York? Yes, they do. And how much is that worth?
Vernon Grant 14:08
That is about the same. About the same
Jason Hartman 14:13
425,000. Same price. Exactly. Okay. And what what’s their target date for retirement?
Vernon Grant 14:22
Vernon Grant 14:25
my mom will definitely retire within the next year. So they want to move not maybe right away, I would say within the next four or so four or five years.
Jason Hartman 14:36
So is the property in Tampa rented out now?
Vernon Grant 14:39
Yes, it is.
Jason Hartman 14:40
Okay, and how much rent are they getting? Well, I actually I can tell you, okay, without without knowing. I’m gonna guess that they’re getting somewhere in the ballpark of maybe 20 $100 a month. Wow, that’s really, really good is 20 222 You know, I was gonna say 2200 and I just didn’t want to be too aggressive but you know, they paid 195 for it so they’re basically getting about a point five rent to value ratio. Yeah. And Vernon Isn’t it amazing? You know, I have tried this little parlor trick all over the world. And it doesn’t matter what city what language what currency. You know, it can be Paris, France, it can be Hong Kong. It can be you know, Tokyo, it doesn’t matter where it is. It could be LA, you know, it can be Tampa, Florida, or Miami or anywhere Boston, it doesn’t matter numbers or numbers, right? The ratios are always about the same. It’s incredible. You know, if you’ve got a property that’s worth $424,000, you can convert that any into any currency on earth, and that rent to value ratio. Not Not withstanding, you know, rent control or communism or you know, something like That, right? But if it’s in the free market, it’ll generally be just about the same ratio. So it’s it’s truly amazing to me, it really is. I remember I was in Belize once looking at properties down there. And this has nothing to do with those properties because I wasn’t interested in them. But I was talking to a wealthy insurance guy, about his business and so forth. And he, I talked about this on a former episode, and I don’t even remember where he moved from now. But, you know, he, he and his family had moved, and they were renting a place in I think, Miami if I’m not mistaken. And they said it was worth I think they said it was worth 1.3 million. And I said, Oh, so you’re paying about 4000 and rent and he said, How do you know and I, you know, I just know
Jason Hartman 16:49
it’s amazing how well that works. So listeners that let that be a lesson that it’s all about ratios and those ratios hold hold true and in every language Every currency, every geography, it doesn’t matter where so it’s really amazing. Okay, so they’re getting 2200 for their, their Tampa property, and it’s worth 400 and let’s just call it 425,000. And they’re renting it now. So is do they have some attachment to that property? You know, like, when did they buy it? 1996 I guess did they ever live there? Or was did they just turn it into rental and say, Hey, you know, in 20 years we’ll retire here was that they’re thinking that’s exactly what it was in 20 years. We’ll retire here. Okay. All right. So, I mean, from a pure numbers perspective, I would definitely be selling that property. And you know, when they retire, they can buy another property and that retirement thing is a moving target, you know, they might not retire in the timeframe they’re thinking and they might find a better property, they might pick a different area, you know, I don’t know I mean, all of this stuff is such a move. Target and there’s so many opportunities and the world is changing so quickly nowadays that, you know, from a purely investment standpoint, that property definitely does not make sense, right? Because, as you well know, I would like to see them get 1% per month. So again, for 425,000 invested capital, I’d like them to get, you know, $4,250 per month, not 2200 per month. That’s just a pure numbers angle. It doesn’t include psychology, it doesn’t include sentimentality and emotions and various things like that. Of course, you can’t quantify those things very well. But then the other thing they’ve got to think about is the property in New York. Of course, when I probably wouldn’t do anything with that because it would be too upsetting to their life, you know, unless they want to move and they don’t like it. If they if they want to move then I would sell that one and and pay 20 $200 to somebody else to Have the equivalent home, you know and live in New York until they retire. There’s also a question of kind of timing the real estate market because that New York market is such a frothy, cyclical market. Right? And it’s die as I always say, it’s very difficult Vernon to time any market. I would certainly say it’s, you know, it’s on the verge of being overvalued. Okay. But again, who knows, you know, that could that could, you know, if if the Trump economy really does boom, and the money loosens up, I mean, that that frothy market could go on for years more. I’m just saying that today. From a fundamentals perspective, it’s out of whack and we all we all know that. Okay. Did you have a deeper question here, like
Vernon Grant 19:52
so. They are also old school mentality. So it takes a bit of convincing To to let them know that, you know, it’s not about we get the property and you pay and you pay till you pay it off. Which is what they still, you know, especially my mom, she has that that mentality. She’s a nurse, by the way. So you know, she’s, she’s been working at the same job for like 40 plus years, and that they just want to pay it off. So if I introduced to them an idea that they’re going to have to pay for where they live again, it has to be, I have to offer them something more than Hey, you, you have to pay your monthly mortgage on this place on this new place. So whatever it is
Jason Hartman 20:45
yet the hard thing in life, especially for old school, people that are thinking like old school way, which, by the way, they’re not wrong. They’re just out of sequence with the times right there. plan worked great when it all started to not work was post 1971. When we went off the gold standard, then the game really changed because the lending standards changed. Money got easier and inflation reared its ugly head. And the game just totally changed. That was really the the inflection point when it all happened. The hard part, as you’ve heard me talk about on the show, Vernon, to get people to understand and in any area of life, not just investing is that you can’t hear the dogs that don’t park. They never look at what what might have happened, or what didn’t happen because they did or didn’t take another path. They only see what they did. They didn’t see what they didn’t do or what they could have done. That’s hard for the human mind to think that way. And it’s it’s that old thing you can hear the dogs that don’t bark
Vernon Grant 22:00
I’ve heard a quote sorry to cut you ever heard a quote? That that reflects that same thought that you can’t see past the choices you don’t make?
Jason Hartman 22:09
Ooh, that’s a good quote. Who said that one? I like that.
Vernon Grant 22:12
Jason Hartman 22:14
I like that. Let’s let’s find that I got I’m gonna I’m gonna search that. That’s a good quote. You can’t see past the choices you don’t make. Really good. Thank you for sharing that one. I like that one. I almost like that one better. It’s it’s more understandable than you can hear the dogs that don’t bark. But anyway, yeah, you can’t see past the choices you don’t make. So it begs the question, what choices are your parents or many other there are 10s of millions of people in this very similar situation, right? When choices aren’t they making? Well, they’re choosing not to sell $850,000 worth of two properties and do 1031 exchanges where they could buy Eight single family detached homes and diversified markets that would net them around while not net, I want to say it’s really gross, but its net. Also, I’m kind of thinking of it differently than myopically people would think of it from an accounting perspective, but it would just get them 800 or $8,000 per month in income, right? And then they could turn around and rent the place they live in and pay 2200 for that one. Right? Because in New York, or or Florida, it’s the same deal. You know, it doesn’t matter. Right, right. Right. They could rent that equivalent property. They’re living in now for about 2200 a month in New York. And then when they moved to Tampa, they could also do the same thing. But most people’s mind say, Well, hey, if I’m renting, I’m throwing money away. That’s how everybody thinks of it. That’s how I used to think of it too. But when they the choice they didn’t make is they chose not to get $8,000 a month. For that same value of real estate,
Vernon Grant 24:03
right? I mean, it’s it’s also the tools that they have you, you can’t really understand a thing if you don’t have the tools to understand it with, right?
Jason Hartman 24:16
Yeah, you know what that reminds me of? It’s kind of like the concept of vocabulary. Now, we’re going on a little tangent here, but when you know certain languages have, you know, fewer words from which to choose. So it literally limits the populations ability to think and, you know, an educated people or children, for example, you know, they have a smaller vocabulary, right? So they, they that that’s their vocabulary is literally the tool with which you can think and if you have a big vocabulary, you can think more thoughts. You literally can’t think of thought that you can’t express usually right? And so if there’s not a word for it, then, you know, it’s very hard to think about it right. So,
Vernon Grant 25:06
yeah, yeah. How do you express it? That’s why we come up with labels for things and containers to put things and classify things. So we can understand them. Yep.
Jason Hartman 25:15
Yep, no question about it. And, you know, props to the English language, the most widely spoken language on Earth. It’s also the largest language with about six 700,000 words, I believe, where if you look at like French, Spanish, Italian, I think they’ve all got around 150,000 words. So a lot fewer tools. And the reason English is that way, is you know, not because English is so great or anything, it’s just a language that happens to adopt and sort of suck up a lot of words from a lot of other languages. You know, we have all sorts of foreign words woven into the English language, right? And I guess other languages don’t do that as much as English does. So it’s just kind of interesting. Tangent alert. tangible area. But okay, so the other thing they could do, if they don’t want to sell those properties, because I know that, you know that, that mindset that, you know, your parents have, my mother has that same mindset is when you sell something, it’s like you lost it, right? You gave it up, right? And that mindset is very hard to, to, you know, kind of argue with, right. So the other thing they could do is they could do refi till you die, right. And that is another option because at least they could get that equity out and make it work for them. Do you know what kind of debt they have on the properties if any, or have they paid them off for
Vernon Grant 26:44
I’m not sure about the Florida property I I know they’re still paying for it, but very minimal amount. And I know the one in New York, I did recently convinced them to refinance it. So refi cash out. So that’s how we’re getting those extra few properties that I was just mentioning to you. And now I’ll be at the Memphis tour, by the way.
Jason Hartman 27:10
Oh, good. Hey, I look forward to seeing you at the Memphis property tour with that, boy, I’ll be in Memphis in six days. I haven’t even it’s right around the corner. So we look forward to seeing you there. And by the time people listen to this, that will have probably already happened.
Vernon Grant 27:26
So we’re going to buy about three properties with that
Jason Hartman 27:29
with the equity. Okay, how much are you pulling out to buy the three properties?
Vernon Grant 27:36
I think so far total it came out to about 68,000 that we have to put down. That’s not
Jason Hartman 27:44
bad. That’s all. Basically for $68,000 you can buy three properties you’ll gain or they are you are, you know both of your guest. Gain diversification because you’ll be in a totally different market right that which will be good. Those three properties should produce somewhere in the neighborhood of, you know, 2700 to $3,000 per month in income, right?
Vernon Grant 28:08
Yeah. Okay, good cash flow, actually,
Jason Hartman 28:11
yeah, fantastic. And once once your parents see, you know, sometimes you got to do it to really internalize it or understand it, you know, in your, in your gut. Once they see that, and they actually do that deal. And they see that look, here, we’re getting $1,000 per month for each of these properties, for example, and I’m just pulling out around number I don’t know the exact properties you’re looking at, then, you know, they’ll think well, these three properties with only $68,000 down, we generated a gross of $3,000 per month, they’re going to be thinking, well here, we’ve got $425,000 in this property in Tampa, and all we get is 2200 a month.
Vernon Grant 28:56
And it’s only breakeven sometimes,
Jason Hartman 28:59
so That will probably go a long way and getting them to see the light, if you will, you know, and I know it’s it’s hard, you know, I mean, I take my own mother’s example, the countless conversations, have, you know, slash arguments that I’ve had with her about this stuff? You know, it’s funny, too. This is the funny thing. Another funny thing about the way the human mind works, and I don’t know why it’s this way, it just is. But we will trust a stranger, a total stranger, more than we will trust her own friends and family, the people we know well, and I don’t know why that is, you know, there’s an old saying familiarity breeds contempt. And even if we love these people, or you know, like them really well, there’s a familiarity we just don’t respect that as much as we respect someone, you know, at
Vernon Grant 29:54
a distance. It happens all the time. Even like, let’s say my dad, if he’s having some medical issues like with eating and stuff like that, because I’ve taught myself so much about health and so on. I tell him, okay, this is what you should eat. And this is why you’re having this problem because you’re doing this and he not listening to me at all. And then one day he goes to the doctor, the doctor tells him, that’s when he changes. I said to him, what is it because I don’t have a PhD or an MD, and that’s why you don’t listen to me. Come on. I’ve been telling you this for years. Yep,
Jason Hartman 30:34
yeah, no, you’re right. But even if you did have a PhD and an MD, you still would be family and he would not listen to you. That’s so true. It’s just it’s just the way I don’t know why that is. It’s just, there’s all kinds of these funny quirks about the way the human mind works, but it just is just an odd, odd thing the way it works. So just a reminder, you’re listening to flashback Friday, our new episodes on published every Monday and every Wednesday. I think with your folks that that refi plan is really going to help when they see those three properties performing. Now, are those going to be all three in Memphis? Or are those if you purchase those properties yet or don’t tell me about that
Vernon Grant 31:20
we’re under contract. So we’re just getting our approvals stuff. We’re already pre approved, and we just need all the paperwork and so they can run them by the underwriters.
Jason Hartman 31:30
Okay, good stuff, and where are those properties?
Vernon Grant 31:33
Those are all in Memphis. Okay. So after you do those three in Memphis, if they’re, you know, if they decide to sell one of the two properties, and by the way, I didn’t ask you Do they own any other properties? Yes, they do. They own a couple pieces of land. And one other property but that property, you know, they lost some money on it. So they’re just, it’s rented and the prices re appreciating again. So we’re just waiting it out.
Jason Hartman 32:04
Tell us a little bit about that one.
Vernon Grant 32:06
Well, one is actually also an
Vernon Grant 32:10
in South Florida that is near Tampa.
Vernon Grant 32:16
And I forgot exactly
Jason Hartman 32:18
how much is it worth? Do you know that the metrics on it what it’s worth and what it rents for,
Vernon Grant 32:22
not what it rents for, but I do know they purchased the 105 and the current value is 89.
Jason Hartman 32:31
Okay, so it’s gone down in value, and that one is probably got a pretty good rent to value ratio. So oddly, that one that they lost the money on is probably the one that they may be most likely should keep. However, I have a feeling and I don’t know this, but I have a feeling that that’s a condo isn’t it?
Vernon Grant 32:53
It absolutely is.
Jason Hartman 32:55
And I don’t like condos unless they’re very good deals. I just don’t like condos. And there been a lot of condo problems in various areas around the country. And in look listeners, I don’t want you to hear me say that I’ll never do a condo, I will do a condo. It’s just got to be a much better deal. Okay, there’s got to be something to offset the fact that it’s a condo. Okay. I just don’t like condos, they have a whole new set of potential problems with them. Okay, so that one, you know, that probably rents for around 900,000 a month I
Vernon Grant 33:28
bet right? Yeah, I’m thinking it because I remember seeing the numbers. It was like anywhere from eight to nine.
Jason Hartman 33:34
Yeah, so so that’s, that’s fine in terms of rent to value ratio. Now, the one thing we didn’t explore on any of these properties, by the way, is the debt structure on them, you know, what is the as they say the capital stack, right? You know, if you have a high interest rate loan on one, or an adjustable rate loan on one and you know, maybe you have a low interest rate on another, these things can also influence your thinking on selling or refinancing or, you know, when you refinance, if you’ve got a very low interest rate first loan on the property, occasionally, it’ll make sense to put a second loan on it, sometimes not. So there are there are numerous factors here, right? We, you know, I just want to make sure everybody knows that. Maybe the age of the property, the location, you know, properties. Some areas in Florida, for example, have really high insurance cost properties in New York have really high property taxes, right. So, you know, there are multiple things to think about. And in New York, you might be in a rent controlled area, and that’s really bad as an owner, but it could be really good as a tenant. So there are all kinds of other dimensions, but what were you going to say?
Vernon Grant 34:48
I was going to ask what so I am assuming that the advice would be the most optimal thing would be 1031 exchange, correct?
Jason Hartman 34:58
Oh, yeah. The 1031 exchange Is is the way to go for sure. Because it allows you to basically trade properties all your life and deferred for defer the gain. And, you know, listeners also need to be very mindful. I was looking at one of my properties I’ve been over the past several years, I’ve been reworking my portfolio and selling some properties and trading them for others. And so I’ve got this one property in an old market. We used to do Mobile, Alabama, and it’s been very good to me. I bought it when there was something called the go zone going on. And you hear me talk about that on the old episode. Yeah. And that was a tremendous tax benefit. Like so many government policies that eventually turned into a mess because the you know, so many investors got attracted there that the properties became overvalued and we stopped recommending it but our our clients who got into the go zone early enough, did very well and including me, you know, this particular property is only worth about the same as well. I purchased it for, but because I had such tremendous goes on tax benefits, I would I would potentially sell it and breakeven, but I would really need to do a 1031 tax deferred exchange on that property because, and I asked my accountant, I said, Hey, dude, what’s my depreciation recapture on this property? And guess what he said, then by the way, this property’s worth about $170,000 give or take. But if I sold that outright, and just broke even on paper, by the time the tax consequences came up, I would get at $98,000 in depreciation recapture on which I would have to pay taxes. Wow. So, you know, in a way you can get kind of trapped into this real estate game, which isn’t all bad. Okay. It’s actually quite good. But you’ve got to really think of it and, you know, people make mistakes sometimes and they’ll sell a property thinking, Hey, you know, I’m just breaking even or I’m making 20 grand, it’s no big deal, I’ll just pay the taxes on the 20 grand. No, you’ve already taken a bunch of tax benefits over the years here that you got as a deduction. And now, if you don’t do a 1031 exchange, you got to recapture those and pay them. Okay. So things aren’t always as simple as they look. So be careful. Always consult a tax advisor, and make sure you have one that knows about real estate. Yeah, certainly. Very, very important. So any other thoughts or questions you want to share with the audience?
Vernon Grant 37:42
At what point do you know if it should be a refi till you die versus 1031 exchange?
Jason Hartman 37:50
Well, really what tells you that is the rent to value ratio? And on both of those properties, ideally, if there was no Sort of life hassle factor or emotional factor involved from just a cold pure numbers standpoint, I would definitely be selling those properties. Okay, and doing 1031 exchanges, but I do, of course understand there are other considerations. So, you know, those those are there are other factors to weigh in there. And, you know, if your folks are going to retire in two years, it’s looking like the markets going to continue booming pretty well. I mean, that’s what most people think, I think, you know, the money money supply is flowing into real estate. For all the Trump reasons I’ve mentioned on prior episodes of, you know, our for him being our first real estate president, you know, eliminating or softening, Dodd Frank, etc, etc. If they’re going to retire in two years, just stay put make life easy and keep that New York property you know, it’s only two years not a big deal. Right. And, and but, but I would really consider selling the Tampa property.
Vernon Grant 39:01
Okay, and I guess purchasing another one that they like somewhere to live down there.
Jason Hartman 39:07
Yeah, or three or four more and, and then they can buy back into that market or they might really decide they just want to rent because maybe that’s, you know, that’s not their final perfect location. Maybe it’s not their dream home, maybe they want to have some flexibility, you know, maybe they want to go on a cruise for a year or travel I mean, renting is just so, so, so much easier, you know,
Vernon Grant 39:31
and that’s true. You don’t have all those costs that you have to worry about. Yeah, yeah,
Jason Hartman 39:36
no question about it. It’s it’s really quite easy to be a renter, you know, and you don’t have to unload a property, you know, you can just give 30 days notice and move out. You don’t have to show it and have people invading your privacy and it’s just much easier. There’s a lot of hidden costs in hohner homeownership to upkeep and all that stuff. A lot of times They’re spending working on their house and going to the hardware store and when you’re a renter, you just you just live there. No, it’s much easier. So, all good stuff to think about but Vernon Hey, thanks for coming on the show and sharing your story and your parents story with us. And you know, hopefully they will listen to this podcast if you can get them to do that. And I hope it helps them and we will look forward to seeing you at our upcoming creating wealth seminar and Memphis property tour next weekend.
Vernon Grant 40:28
No problem. Thank you so much for your help and time.
Jason Hartman 40:31
My pleasure, happy investing. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an approach We’re professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.