To start the show, Jason Hartman introduces Buydown and gives his thoughts on whether it’s better to buy a rate down or put more money down. He also explains how points work and how they affect your loan amount. Afterward, Jason plays a recording of his session on SWOT, aka Strengths, Weaknesses, Opportunities, and Threats, as they apply to real estate.
Announcer 0:00
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Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution. Real estate investors.
Jason Hartman 1:03
Welcome to the creating wealth show. This is your host Jason Hartman Episode Number 692 692 on the road to Episode 700, thank you so much for joining me listeners around the world. Today, our guest will be none other than that guy who is always going off on what’s he going off on? tangents. Yes, that’s good old Jason Hartman yours truly.
And this is a recording from a live talk that I gave on a SWOT analysis, SW ot story strengths, weaknesses, opportunities and threats as they apply to the most historically proven asset class in all of the world. And that is income property, income property. So we’re going to talk about what are the strengths and you know, we’re always talking about the strength. So actually, when you hear this recording, you’re not going to hear that much about The strengths. There are so many more than I cover in this SWOT analysis because it’s the most historically proven asset class in the world. Of course, you know that already because you’re listening to the show and you get it. It’s better than the modern version of organized crime known as Wall Street. Yes, the modern version of organized crime, the one that makes Al Capone that’s the old gangster, the Chicago gangster, the mafia guy, right? It makes him look like Mother Teresa in terms of the amount of money but Wall Street scoundrels are stealing. And you know, there was just another big scandal on Wall Street. Maybe we’ll have time to talk about that for a moment before we get to our guest our live recording of yours truly talking about SWAT. But before we do that, I want to talk to you about something called a buy down. And this is something that you may or may not want to use. As you are purchasing and financing your income properties, and maybe even your own home, it can be a very good deal. It’s not always the best thing to do. But we as long term income property investors, we like to buy and hold and usually say, hey, try and buy and hold your properties for how long? 27.5 years? Yes, why 27.5 years. So you can run the depreciation schedule, because income property is the most tax favored asset class in America. And 27.5 years is the depreciation schedule on commercial properties. It’s longer, it’s 39 years, so it’s not as good on those commercial properties. The residential investment properties have a shorter schedule, which means you get about 25% more time. benefit, because you get to depreciate them over a shorter schedule, which means more tax benefits sooner. And with the time value of money concept that we all understand because we listen to the show, and we’ve talked about it before, with the time value of money $1. Today $1 saved today is better than $1 saved in the future, because inflation will make that future dollar worth less money. And it’s not just inflation. It’s also the opportunity cost of what you might use that dollar for today, that could help you grow that dollar versus having it in the future and not being able to use it today. So it’s not the time value of money concept isn’t just about inflation. It’s also about opportunity cost. And remember, when you have money tied up in savings accounts, Home Equity, equity and income properties or rental properties or investment properties in a mutual fund in an s&p 500 index in bonds God hopefully you don’t have bonds those absolutely suck as I predicted they would. They’re really terrible now they’re actually more terrible than I thought they would be what I predicted that many, many years ago and talked about bonds, that’s a subject we should really do an episode on in and of itself, that bond subject. And when you don’t have use of that money, to put it to its highest and best use, that represents an opportunity cost. So you don’t ever want to have lazy money. You don’t want to have money tied up in things that isn’t providing the highest and best return on investment. You want to get the maximum ROI. So by downs, what is a buy down? A buy down is when you as a borrower, when you’re financing a property have the option to pay More loan points up front. Now why would you want to do this because you can buy down your interest rate in doing so. So points 1% of the loan amount. That’s a point. That’s what I didn’t know, when I went to my first real estate seminar at age 18. When the speaker got up there and he was talking about points, I thought, What’s a point? Well point is just 1% of the loan of the loan amount of the amount financed. So if you have $100,000 loan, one point would be $1,000. You have the option to prepay and pay more points and lower your interest rate. See points are really just prepaid interest. points are prepaid interest. So for example, if you’re going to buy a property to flip it, and instantly resell it, your goal as the buyer financing That property would be to pay zero points. Because you, you will only be paying interest for a very short time on that, that loan. And so it’s better to take a higher interest rate. And maybe pay say you’re a flipper and you’re getting hard money loans out there, right, which hopefully you’re not in that, you know, it’s not our thing too much. We do a little bit of it, but it’s not our main thing. Our main thing is buy and hold investing because, as I’ve always said, I’ve noticed just over the many years, I’ve been in the business, that the people who who do the flips, they have spending money, but the people who buy and hold the properties and build big portfolios, they have real wealth, and hey, spending money ain’t bad, but I’d rather have real wealth any day of the week. Okay? So points are just prepaid interest. So if you were doing a flip, for example, and you were thinking, well, gosh, I’m going to flip this property really fast. I know No, I’m gonna sell it in a month hardly gonna own it for any period of time at all. You might be willing to pay 16% Yes, I did say one 6% 16% interest with no points over maybe 10% interest with two points because points are prepaid interest. And if you’re only going to keep that loan for a very short time, it’s going to cost you more money to pay a higher point value or prepaid interest. Now let’s get look at the example that we might face. And I have to be frank with you. I don’t think these examples are very compelling, but I’m going to share them with you anyway. So I just got a quote from one of our lenders who if you talk to any of our investment counselors, they can refer you and I wanted to have totally accurate up to date pricing. So all of this is his math. And it’s his, his his point chart. Now when when you get alone an iPhone Several mortgage companies over the years I don’t own one now but I, I’ve owned several over the years, when you get a loan, what they call par meaning the rate being at par that means no points are paid at all. So at par, the rate today, according to him on an investment property is about and it depends on the loan to value ratio, your credit score the whole package, okay, understand that, but the rate he quoted was 4.875%. at par, meaning you don’t pay any points, that’s the rate you’ll get 4.875% of course rates are subject to change without notice. Okay, so if you wanted to pay one point, and by the rate down, you would get a rate of 4.6 to 5% 4.6 to 5% with one point point or $1,000. Now, what would be the difference in your mortgage payment on a $100,000 loan? So in this example, say you purchased a $125,000 property, and you put 20% down. So you got an 80% loan to value ratio, that means your loan amount would be a nice even $100,000. And I point would be a nice even $1,000. The payment at par at 4.875% would be $529 per month. Wow, that’s cheap. Oh, wait. Ah, yes. We have some of the lowest rates in history right now. Are you taking advantage of that? Are you stocking up on these low cost 30 year fixed rate mortgages, they’re huge assets to us as investors. I hope you are. I hope you are. Okay. So with no points, your payment would be free. 529 per month, if you pay one point and by the rate down, your payment would be $514 per month. So taking the difference of what how much would that be? Well, it’d be 15 bucks a month less your time horizon to recoup, the cost of the extra point that you bought the rate down with would be 60. Approximately, I’m rounding slightly here about 66 months. Okay, before you would break even, that’s five and a half years. Now, I do have to say that buy downs that I’ve priced and actually done myself on my own portfolio over the years have been better than this. This is not as good as what I thought I would get. This time horizon is a breakeven point in five and a half years. Not bad if you’re going to keep the property for 27.5 years, or if you’re going to keep the property for eight years. It might may well be better to pay the extra point and by the loan down.
Jason Hartman 12:07
But usually I see the time horizon here of about three and a half years. Usually it’s a little better than this. And I don’t know if buydown pricing is just not as good as it used to be. Or if maybe our particular lender that quoted these rates, doesn’t have the best buy down pricing? I do not know the answer to that question. I’m really just wanting you to think about this. I’m wanting to give you an example of how it can be. Now the same deal, let’s just do some other math here. If you took that same loan, and you bought it down with two points, in other words, $2,000, your payment would go down to 499 per month, you would save 30 bucks a month, and your time horizon you can see how it would basically be the same right? So that doesn’t change anything but it does change if you change the law. to value ratio. So let’s do one more example here. And let’s go with a 75%. LTV or loan to value ratio, meaning on the same house, your loan amount instead of being $100,000. It would be $93,750. Okay? And that par because you’re putting more money down. Now, more money down is not the same as a buy down. You do, in most cases get a lower interest rate. If you put more money down. Well, of course, there’s less risk to the lender. So they’re better collateralized if you have more skin in the game, and they’re going to give you a lower rate as an incentive to put more money down. So if you put that extra 5% down, what is that that’s about $7,000 or a little less than 7600 6250 bucks extra down payment, you would get a rate of 4.5% Which would bring your payment right down to $475 per month. But remember, you have a lower loan amount here, you’re financing less. So what does that do? Well, the disadvantage is you’re going to get less leverage on the deal, you’re not going to have as much leverage. And because you get it because you listen to my show, you know that leverage is an extremely powerful tool, and used prudently and properly. It is a fantastic thing. I always say debt is my favorite four letter word. No, it’s great. I mean that in a positive way. I love debt. As long as it’s not consumer debt. I want debt. I want lots of real estate debt. In fact, there are old sayings that say things and you know, forgive me if I don’t get this exactly right. But I this is not my saying. I’ve just heard it out there. They say the amount of money you owe on your real estate today will be the amount of gain you have in I don’t know what they say like five years. or seven years or something like that. And so the theory behind that statement, or the thesis of that statement is that if you owe a million dollars, today on your real estate, that you’re going to gain a million in, I don’t know, seven years or something like that. I can’t remember the exact example they use. Having more debt is better, because you get more inflation and two step destruction, you get more leverage, you get less opportunity costs, because why? Well, you have more money freed up, heck, you could buy a whole nother property with that extra money, right? For example, if you’re putting that extra 5% down on this property, well, you do that four times with four properties. And hey, you could have just purchased another property and have a larger portfolio. So there are things to think about here that are important issues, and leverage, a very, very powerful tool. Okay, but looking at this example, you Your interest rate goes down to 4.5%. Now, what here’s a good comparison, what would it cost you? Here’s a good question. What would it cost you with an 80%? LTV or loan to value ratio getting the higher leverage amount to buy that rate down? Or is it better to just put more money down? It’s a great question. Jason, thank you for asking that. Great question. Oh, you’re welcome. That was a good question. Too bad. We don’t have stereo it sound like I’m talking to you in different ears. We always make the show as mono. So we’re more flat and boring, right. But if that was in stereo would have been kind of good. Anyway, so it would cost you 1.5 points or 1500 dollars. So you could either pay or you could you could get the higher loan amount and pay 1500 dollars, to have the same interest rate that you can get for free or at par with 5% more than that. So looking at that difference, the way we analyze that is we say, Okay, I can either put down an extra $6,250 in downpayment or I can simply pay 1.5 or 1500. dollars more in points, and I can have the same rate.
So, that’s an interesting analysis. And frankly, it’s hard to analyze that I’m not a mathematician. And I don’t exactly know how to weigh that out. Because you get less leverage, you have more opportunity costs, you have a lower loan balance, that’s why your payment is lower. It’s not just the rate, but your rate is also lower. So these are sort of amorphous questions. You can’t exactly answer that one. But on the buy down, you can answer that pretty scientifically, because all we’re looking for there is our breakeven point, what is the time horizon to the breakeven point? So let’s just look at one Example then we’ll go to our guest Jason Hartman. Oh, I get punchy sometimes when I do this, you know, by the time you hear this recording, I will be in Fiji. I’m recording it here in Scottsdale, Arizona, where it’s hot, but it’s a dry heat. I will be in Fiji at Tony Robbins Resort by the time you hear this, hopefully not getting bit by too many mosquitoes. But living with passion and hearing all about Tony’s great techniques in terms of life and wealth mastery. That’s the name of the events I’m going to there. More on that later. 4.5% no buy down at par for free at the 75% loan to value but what if we were to pay $1,054. Now let’s even do more. Well, what if we were to pay two points 1800 and $75 more, we could buy down our rate by a half a percent. So it would go from 4.5% To only 4% for a fee, a buydown fee of 1800 and $75. So what happens to our payment? Okay, the first payment is $475. god that’s so cheap. It’s mind boggling. You really got to stock up on these long term fixed rate mortgages. They’re a phenomenal asset. So the new payment at with the buydown is 448. So let’s take 475 and subtract 448 and that is $27 a month. And what do we want to do next, folks, you already know the answer. We want to take 1875 which is the amount of the buy down that’s what two points will cost you. And we want to divide by $27 and we get 69.4. That represents the number of months to your break even point. Now we take that and we want to divide it by two Well, so we know the number of years, and that’s 5.78 years. So interestingly, do you notice that on the lower loan to value ratio where you’re putting 25% down, the break even point is longer. Interestingly, in other words, paying more points on that deal is a little bit less valuable, you get less bang for your buck on that pie down than you do on the higher leverage buy down where you’re only putting 20% down on the property. So that’s kind of interesting. But again, I want to tell you that most of the buy downs I’ve seen and done over the years are a little bit more desirable on this, and I haven’t shopped for them in a few years. So the price of them just may have gone up. That may be what’s happened. Look at the deals, you know, I love it when you hear these real estate gurus out there, and there’s such a Bunch of crooks, half of them, half of them. Maybe 80% of them are crooks.
And they say things like, air never been a better time to invest in real estate. Ah, that’s wrong. That’s not true. Of course, there was 1972 was a lot better. 2010 was a lot better. I’m sure the deals ain’t as good as they used to be okay, to use slang. Obviously, this is not bad. I mean, if you can break even in five and a half years, this may well be something you want to consider. If you think that you are really going to hold these properties for the duration. If you’re going to keep them a long time, which if you’re following my plan, you probably will. That’s the likelihood. Now I move my portfolio around once in a while, but most of it is long term buy and hold stuff. As you know, and I’ve talked about this on recent episodes, I do some 1031 tax deferred exchanges. I sell One property and I get to in the exchange, hey, that’s a great deal. There are lots of things you can do move things around. But by and large, you’re going to keep your property more than five and a half years, based on the scenario I’ve outlined here today, it would make sense to really consider the buy down. Why do I say it? I wouldn’t absolutely do it. Okay, because obviously, you can just do the math and know you will definitely break even in five and a half years. Well, the reason I don’t say definitely do it is because of that opportunity cost issue. And that time value of money issue. Look, if you have to pay an extra $2,000 on the buy down. You do that 10 times on 10 properties, and you’ve got just about enough money to maybe buy another property, depending on how you finance it. It’s all complicated, of course, and how you sequence your mortgages and there’s a whole zillion other little issues there. But you know, look at it. learned about inflation from a fantastic economics teacher that I had when I was a young boy. And his name was wimpy. And he was on a cartoon. Yes, Popeye, you may know that, okay. And wimpy was on Popeye and wimpy taught me something about inflation. And he taught me something about opportunity cost and the time value of money. How did he do this? Well, this little cartoon character, I wonder if he even knew he was teaching me this. And here’s his famous saying, When be and I’ll try to impersonate him wimpy the cartoon character on the Popeye cartoon when he would say, I’ll gladly pay you Tuesday for a hamburger today. So he would always try when he was like this deadbeat and he would always try to get a hamburger today, but to pay for it later. wimpy understood the time value of money. Right. So there’s your little economic life From a cartoon character, how do you like that? We Yeah, you know, we do really sophisticated stuff on this show. Don’t wait. Alright, well, let’s jump over to the live recording, talking about the SWOT analysis, strengths, opportunities, our swings, weaknesses, opportunities and threats SW OT, make sure you visit Hartman education comm for some great educational products that go into tremendous depth. And they are unlike the podcasts Look, the podcast is a fantastic way to learn. But with a podcast, it’s more like reading a newspaper or a magazine or watching the news, right? It’s, it’s this and it’s that and it’s this hodgepodge of ideas. But if you want more structured stuff, get some of our courses, get our jQ Jason Hartman university course and you can get that at Hartman education comm or some of our products at Jason hartman.com either one and our meet the Masters recordings, you can get those there as well. Hartman education comm or Jason Hartman comm check those out. We’d love to have you take advantage of the many many of you have, be sure you’re subscribing to the show so you don’t miss any episodes. And thank you so much for your views on iTunes, Stitcher, radio or whatever podcast platform you’re using. We really appreciate the nice reviews and the kind words and if you haven’t reviewed the show, we would very much appreciate it if you do. Thanks for listening to this little intro on buy downs. And now let’s talk about the SWOT analysis.
First, we’re gonna start off with something we’ve only done once. And that’s a SWOT analysis. How many are familiar with SWOT? Yes, SW ot strengths, weaknesses, opportunities and threats, both the internal and the external threats and opportunities that come with real estate investing. And of course it covers the strings. These are internal things internal In our case, 2d investment, and they’re positive things. The weaknesses are internal factors, but they’re negative. And the opportunities are outside. They’re external. And they’re positive. And the threats are obviously external, but negative. So as we dive into this, let’s break this down and look at some of the strengths of income property as an asset class. You know what I say? It’s the most historically proven asset class in the world. Income property is the most historically proven asset class in the world. And one of the great things about it is that it’s so fragmented, right? You’ve heard me talk on the podcast before about what? embrace the fragmentation, right? embrace the fragmentation. And this is something that frustrates a lot of people when it comes to income property. They don’t like the fact that it’s fragmented. They think, you know, why can’t this be simpler? Why can’t it be easier? Why does my property manager in Orlando do that? things differently than my property manager in Atlanta. And they do things differently than my property manager in Memphis. Right. So that’s one of the frustrations we constantly hear from you. It’s it’s one of the things that really bugs people, why can’t it be more standardized? Why can’t it be more refined, more simple? Well, we are trying to help with that. And when Fernando speaks this weekend, he will talk about a big step that we took to that end to help you that we have never announced before, you’re going to hear it here. First, a big step that we took in the world of software just about a week and a half ago. Okay, so you’re going to hear more about that, especially tomorrow, when we go over that in detail. So that fragmentation, as I always say, it is the opportunity the fragmentation is the thing that keeps the income property are the big institutional investors out of income property that preserves the opportunity For us, for the regular middle class investor, okay, the fragmentation increases returns, because the institutions aren’t in our game. Now, how many of you have ever thought about or invested in or looked at? So that’s a pretty broad category, right? commercial property? How many of you consider that or done it? Okay. fairly small number. Okay, commercial property, right? If you look at these institutional commercial properties, and usually that’s in the category of anything over about $4 million and above, institutional investors will accept really low, really, frankly, crappy returns on their investments. The reason is they have so much capital deployed, it’s deployed in a more, quote, perfect type of market, deployed in a more perfect market in the sense that all of those investments are underwritten. There’s a word for you they’re underwritten. So when one of these big commercial real estate investment firms looks at a deal maybe it’s a big apartment complex or a big mobile home park, or a big self storage facility or office building or whatever they quote, underwrite the deal. And that means they do some due diligence on it. And they kind of investigate it. And they have this common language, and this common format for discussing the deals and the best investment group for this type of thing of underwriting and having a common language. Who would that be better than commercial real estate, the best group of people out there, it would be Wall Street. They’re the best at having a common language and an understanding of how things work. In fact, companies on Wall Street have the common standard, not that they follow it or anything for accounting. What do they call that they call it gap, generally accepted accounting principles gap. So the more refined and the more perfected and the more standardization there is in any investment, the lower the returns on that investment.
And the more fragmented and the more imperfect. And the more unstandardized The higher the returns. And in the world of residential style real estate investing of single family home type investing, it’s really imperfect. This is a totally fragmented market. And in the US, it’s less imperfect than it is around the world. Okay, I met someone from Brazil this morning that you’ll you’ll be talking to not Fernando, he’s from Brazil too. But another guy on Giovanni’s team. And, you know, you’ll meet him on the bus and when we’re touring properties, and so forth, and he talks about how he helps Brazilian investors buy property in the US. So let’s compare residential real estate now. To resume in the US compared to residential real estate around the world, I have looked at property in so many different markets around the world and say that the US real estate market is a very special real estate market. Because the data that’s available on us real estate is much more comprehensive than it is around the world. You know, this whole concept of an MLS. A multiple listing service is a US concept. Now other countries kind of have this but it’s not to the extent that we have it in the US. And we have things like Zillow and truly and so there’s much more data available in terms of public records and knowing what a property is worth here. So it is more perfect than it is around the world, which is a good thing because you can feel more safe in your investment and also it’s been subsidized by the government since the Great Depression, and so forth. But the fragmentation is just you Huge, this is a big deal. It is a huge opportunity. To some extent it’s kind of, you know, towards that direction on the continuum of the Wild West concept versus Wall Street or even commercial real estate. So here’s an example from Wall Street. How many of you own stocks? Why do you own stocks? Wall Street is the modern version of organized crime. Okay. So if you own a stock and let someone name a company they own stock in and that they know what it’s trading for somewhere around what it’s worth now, apple, so apples like 110, right? Anybody own Apple one, really? So you own Apple stock, right? If it’s trading at 110. I want you to do this experiment. You know, say you’re with Schwab and you trade online with Schwab Cola, the the rapid Schwab and they’re really good Schwab is a great company. By the way. Really helpful, they answer the phone, and they’ll help you. And I just want you to call them up and say, hey, look, I know that my Apple stock is trading at 110. You know, but I’d really like to see if I can get more money. Can you do a little extra marketing and a little extra promotion and you know, put a coat of paint on it and see if you can sell it for 150. You can’t do that right because of the perfection of the market. The market is perfected, it will only trade for what it trades for period. Same with gold or silver or any of the precious metals. It’s a perfected market. Take the metals for example, that becomes more imperfect in the field of numismatics. Okay, rare coins. They’re made out of the same precious metals, but they become more imperfect because of their art value. Right. And so this is true. This is the advantages. It’s one of the huge strengths of income property in the residential market, the one to four unit market as An investment, the fragmentation, it’s huge. Believe me, this is a big deal. Now there’s another aspect of this fragmentation that I want to mention to you. When you’re looking to buy a property that might be a single family home, or a four Plex or a duplex. When you’re looking at this asset, you look at it through the eyes of an investor. And when I got into this business of nationwide real estate investing 11 years ago, the first thing I decided I had to do is standardize the data, data standardization. And so we do that if you look at Jason Hartman comm, you’ll see our properties presented in a standardized format. So here’s a huge advantage for you as residential income property investors, you buy the property like an investor, but if you decide someday to sell the property, who you gonna end up selling it to another investor, you’re going to sell it to a homeowner and owner on.
And the likelihood is you’re going to sell it to an owner occupant who looks at it through rose colored glasses. They look at it from an illogical emotional perspective in a fragmented market. And they always view remember, I was in the traditional real estate business for many years. Okay, that’s, you know how I did most actually most of my career has been in that field. I worked for REMAX for many years. I, you know, worked for century 21 when I started for about nine months and then I worked for REMAX for 12 years. Okay. I can tell you that when people look at a house that they want to buy to live in as an owner occupant, they look at it through the process of elimination, and they look at it through the process of scarcity and comparison to what else you know, they have out there in the marketplace and their expectations. When someone calls on a property and they’re considering living in it. They have one goal when they call Before al gore invented the internet, we have this thing called the newspaper. Okay. And, you know, we’d place ads in the newspaper, and people would call or they’d see a sign in front of the house. And they’d call on the property. And when they call you, they have only one goal. And the goal is to eliminate the property to move on to consider another property. It’s simply a process of deduction, elimination. That’s how a homebuyer things. And so when they do that, they have this, they have this view of the world, and it’s out of scarcity. And what motivation do you think is more powerful for humans? Is it the possibility that I might gain something or the possibility that I might lose something?
Definitely fear of loss far more powerful. In fact, just test yourself, you know, go into a transaction and you know, say Well, you know, if someone takes advantage of me in the deal, and they overcharge me by 100 bucks, you know, how long does it take you to earn 100 bucks, especially if you’re in your own business or you have a little of your own business on the side, right, you can earn 100 bucks pretty quickly. But if you check out the hotel and your hotel bill overcharges, you 100 bucks, you’re gonna be mad, right? And it’s just the way we operate. We operate this way out of scarcity out of fear of loss. Because for eons before this, that’s how our world was our world was not abundant, it was scarce. And, you know, maybe over the last hundred years during the Industrial Revolution, we have the first time in human history that we’ve actually had abundance. And so our minds have not adjusted to the new world at all. We can earn the hundred dollars a lot faster than we can bitch and complain about losing it, right. That’s just the way our minds are. And so we take advantage of this. And even if we don’t sell our property, the whole marketplace is operating like this out there. You know, when you sell a commercial property, it’s sold by a strict measure of cap rate, capitalization rate. In other words, the income the property produces. So, fragmentation, huge strength, huge strength don’t minimize that leverage. The leverage offered on a residential income property is much better than the leverage offered on a commercial property, a commercial income property. So that increases our return on investment. And it’s the most tax favored asset in America. And taxes are the single largest expense in our lives. We live in Florida. So we’re a little lower, though, right? Isn’t that good? So those are some of the strengths of income property. Now, there are many other strengths, okay, any any strengths you’d like to share or discussion on this or questions on this real quickly? Okay, weakness. Why does it suck? Okay? I’d say the hardest part is the management part. Management is so critical when it comes to income, property investing, management, management management. In fact, this is where it all falls apart for most investors on the management. Would you agree with us? How many of you own investment property now? Yeah, most of the room, okay. Is the management The hardest part? Yeah, it can be. I mean, sometimes it’s not if you have a great property manager, or better yet a great tenant, the management gets pretty easy. And you know, most tenants are pretty great. And we’re going to talk about the three different or really four different classes of income property and how those tenants differ this weekend. And so we’ll talk about that as well. So management is difficult. Of course, tenants can abuse your property, and that’s a weakness, rent collection or vacancy, another weakness. Okay, so I think these weaknesses are pretty self explanatory. questions or thoughts on weaknesses? You know, feel free to have interaction here, you know, but Okay, maybe not, you know, usually takes a little more coffee, it’s like after the second break, you know, everybody really wakes up. Okay. So moving on here to opportunities. Well, the opportunities are huge. I mean, this is the most historically proven asset class in the world. So the opportunities well inflation induced debt destruction. You know, I love this thing, right? inflation induced death destruction. It reduces the real value of the mortgage and increases the nominal value of rent and the nominal value of the property. Nominal means a name only. That’s just the name of something. And real estate, as a hedge against inflation, in and of itself, is okay, but it’s not that great. It’s when you leverage that hedge that it becomes great and when you outsource the debt, that that leverage cost you that it becomes great, because then the tenant is paying that debt for you. And hopefully they’re paying you a little extra every month. Okay, so the time we can go back, you know, the the ship has left the dock, so to speak, right. And so we can’t go back, we can only start where we are now. And how many of you have heard me, you know, share that great, great poem, The Reluctant investors lament. I talked about it on the show, you know, written in 1977 when everybody thought real estate was so overpriced in 1977. Okay, we always think that we always think that that’s just the way it is. But regression to replacement cost is different, in my opinion from appreciation. Regression to replacement costs simply means that if you can buy the property for below the cost of construction
And when you buy it below, see, remember, when you look at the performance that we’ll be looking at this weekend, it shows you the cost per square foot. And the cost per square foot. I don’t know exactly, maybe Giovanni’s team can share this with you better than I. But the cost per square foot in in Orlando is probably somewhere in the neighborhood of $80 per square foot, I’m just gonna guess somewhere close to that. So if you can buy the property below the cost of construction, but here’s the thing that Performa doesn’t tell you. It doesn’t include land value. So if you look at the typical hundred thousand dollars, single family home, the land value is probably somewhere in the neighborhood of $20,000. So to find out the real cost per square foot, you have to do a different calculation. Okay, and why don’t we just do this right now while we’re talking about it. Okay, so you got your pen. Do you have your smartphone with your calculator, we’re going to take the typical hundred thousand dollar house We’re going to assume a $20,000 land value. So it’s $100,000. Land is 20,000. This is pretty simple calculation. I know $80,000 is the improvement or the structure sitting on the land, right? Okay, so let’s say that this house is 1400 square feet. What’s 80,000 divided by 1400? Okay, so $57 and 14 cents, right? Is that we said, we’ll just call it 57 $57. If it cost you $80 per square foot to build that house, did we buy below the cost of construction? Yeah, we did. Okay, if a hurricane comes along, or a fire comes along and destroys the structure, depending on the type of insurance you have, the insurance company may pay you the full cost to rebuild it, or they may pay you a depreciated value on it but If it’s $57 per square foot, and it costs $80 per square foot to build it, that delta between those two is built in equity. Now, I understand completely that you may not be able to turn around and sell the property for more than that. But that equity is kind of hanging there. And this is a great safeguard. It shows you that in addition to the potential for future appreciation, before you get to appreciation, the first thing that happens is regression to replacement cost. And when Carrie It was kind of funny how you introduce me because you said, you said, Jason looks at every house as a commodity, right? See, I’m really at heart A commodities investor, we invest in the commodities, but when they’re labeled as real estate, when they’re labeled as income property. It brings special characteristics to those commodities that we don’t get anywhere else. You can go on commodities exchange and buy lumber, copper wire, petroleum products, glass, steel all the ingredients of a house and get three decade long, artificially low fixed rate financing. And you can’t take those commodities once you encumber them without good debt. Okay debt being my favorite four letter word. Okay? Once you encumber them with had debt, you can’t turn around and outsource that debt to a tenant and say hey, you pay my debt for me. special characteristics of income property for sure. So regression to replacement costs happens before appreciation. When you see the market turn and prices start to come back. The first thing you get back is the regression to the replacement cost. In other words, this $57 per square foot house going to $80 per square foot, the replacement cost and after that you get appreciation Just think about that concept. Okay, and ask me about it this weekend. It’s it’s pretty awesome. And then you have appreciation. Okay, so that’s the last one. Okay, what are the threats? overall economic collapse, certainly a threat. And you know, that could change everything.
A few years ago, well, now several years ago, time flies when you’re having fun. We had the worst economic collapse in seven decades. The Great Recession and that’s a wild card. Okay. But I think for many reasons income property is probably your best hedge here. Most people think it would be gold or silver. As you know, I’m definitely not a gold or silver bug. I would far rather own bullets and food and water than gold and silver. Okay, those are far more practical and you can barter with them. And you know, cigarettes and vodka not bad either population decline this This one is tough. And you know, I think everything I’ll share with you this weekend, it’s pretty reliable, you know, it’s pretty darn reliable. But if the population declines, all bets are off. all bets are off. I can’t do anything about that. And I have no solution. And this is why when you look at areas like Detroit, the poster child for big government disaster, when you look at areas like Detroit, you just can’t fix that. Because when the population declines, it’s just over. Okay. And when you look at this on a national level, and you look at countries like Japan, that’s their problem is their population is in decline. You look at Western Europe. That’s a huge problem. You look at Russia. Putin is paying people to have kids. Okay, I think it’s $7,000 get paid to have kids. You look at places like what was my other example? It was a good one China. Oh, yeah. China Thank you. Their their one child policy, absolute disaster and now they’ve reversed it thankfully. Okay. So population decline over there’s no solution for that. Thankfully though in the US we’ve had we have pretty fast population growth, okay. And in the markets when we’re in and the markets we recommend, I mean they’re attractive places to live right. So, so this probably won’t be a problem. Okay. And then other threats any other threats? No. Okay, so let’s talk about how to mitigate these. Number one, spread your risk along multiple properties and multiple markets. Okay, obviously diversify. That’s one of the 10 commandments, thou shalt diversify. You want to have all your eggs in that income property basket, maybe not all of them, you’re probably not gonna listen to me anyway. But I think it’s the best thing going. It’s the best best thing since sliced bread. Okay, so diversification and the law of large numbers, the law of large numbers. So increasing the total number of units or doors in your portfolio creates economies of scale. And it actually reduces your risk quite a bit. So if you have, you know, if you have 25 homes or doors in your portfolio, 25 units in your portfolio, and four of them are vacant, and 21 of them are occupied and paying, you know, your risk is a lot lower than if you have two units, right? It’s the law of large numbers.
Announcer 49:38
I’ve never really thought of Jason as subversive, but I just found out that’s what Wall Street considers him to be. Really now How is that possible at all? Simple. Wall Street believes that real estate investors are dangerous to their schemes? Because the dirty truth about income property is that it actually works in real life. I know I mean, how many Do you know not including insiders who created wealth with stocks, bonds and mutual funds? those options are for people who only want to pretend they’re getting ahead. Stocks and other non direct traded assets are a losing game for most people. The typical scenario is you make a little you lose a little and spin your wheels for decades.
Announcer 50:21
That’s because the corporate crooks running the stock and bond investing game will always see to it that they win. This means unless you’re one of them, you will not win. And unluckily for wall street. Jason has a unique ability to make the everyday person understand investing the way it should be. He shows them a world where anything less than a 26% annual return is disappointing. Yep. And that’s why Jason offers a one book set on creating wealth that comes with 20 digital download audios. He shows us how we can be excited about these scary times and exploit the incredible opportunities this present economy has have afforded us. We can pick local markets untouched by the economic downturn exploited packaged commodities investing, and achieve exceptional returns safely and securely. I like how he teaches you how to protect the equity in your home before it disappears and how to outsource your debt obligations to the government. And this set of advanced strategies for wealth creation is being offered for only $197. To get your creating wealth encyclopedia book one complete with over 20 hours of audio, go to Jason hartman.com forward slash store. If you want to be able to sit back and collect checks every month, just like a banker. Jason’s creating wealth encyclopedia series is for you.
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Jason Hartman starts the show by sharing a CNBC article about homeownership numbers being at their lowest point in history, which is good news for investors. Then, he proceeds to talk about The Greater Cincinnati market that is available to property tour attendees. Jason shares that local townships offer favorable tax situations and are only a 30-minute drive away from major cities in Ohio. He also discusses large employers in the area that offer positions at many different pay grades, which means a diverse portfolio of A, B, and C class properties beneficial to real estate income property investors.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Announcer 0:13
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution. For real estate investors,
Jason Hartman 1:03
This is Jason Hartman, thank you so much for joining me today as we have something to celebrate, yes. Something to celebrate something I’ve been predicting for many years. We’ve been seeing it happening for many years. So it sort of stopped being a prediction, I guess, at some point and became just a trend, a trend that we were monitoring and noticing. But I’ve got more good news on that trend line. So here it is. You’re ready. All right. That is homeownership. Yes. homeownership you think I’m probably going to say something like, Hey, isn’t it great news. The economy is recovering, things are going well. And homeownership rates are up or they’re increasing. But no, that’s not me, the contrarian that you know, and hopefully love Maybe love to hate. I don’t know, which hopefully it’s you just love. And that’s why you’re listening to the show. But even if you don’t like me, Hey, thank you for listening anyway. And thank you for telling your friends about the show. You know, I’m not exactly a stranger to controversy now. So homeownership rate is near its lowest point in history. Yes. wonderful news for you. For all of us investors out there. It’s great news. And again, we predicted this a long time ago. We commented on the trend all along as it was happening, and it continues to happen and continues to be great news. So here are the stats and this is a CNBC article. By the way, we’ve got a guest from CNBC coming on the show. Soon that might even be our next interview. I’m not sure. We got George Gilder coming back. He’s a phenomenal genius that has all kinds of interesting things. To say about the economy and technology and how the two of them go together, so I don’t know what we’re gonna play for our next show, but we’ll keep that a surprise. It’s only two days away after all. But yes, this article about homeownership is phenomenal. And it really ties in with our guests today. And you know, this interview with our guest today, I gotta say, I don’t think I did a great job on this interview. It wasn’t one of my better interviews, but I think you’ll still find it valuable even though your host wasn’t at his best. See, I’m making that disclaimer in in advance. Yes. But hey, Jason Hartman, on his worst day is better than most of his competitors on their best day. How do you like that for cockiness?
Oh, okay. Oh, boy. I’m really making a lot of enemies today or tonight. Okay, anyway, I’ll shut up with my silly cockiness. But here we go. So, CNBC article homeownership near its lowest level in history. This is April 28. So it’s very recent here. Home Sales may be rising but home ownership in the United States is heading down once again. After gains in the second half of 2015. The homeownership rate fell. Yes, fell dear listeners to just 63.6% seasonally adjusted in the first quarter of this year, according to the US Census Bureau, homeownership hit an all time high of 69.4%. Back in 2004, that was the silly george bush ownership society idea. Lyndon Baines Johnson remember, Lyndon Johnson Well, I don’t remember him because I was. That was before my time, but I do watch history. I read history, and all that kind of stuff. Or for our feminist listeners, her story Guess why is it his story? Could be her story? Maybe it should be just our story. Hey, that would be the right word. It shouldn’t be history. It should be our story. Our story, see, yeah, there you go. I bet you heard that here first just thought of it. Okay. So yes, the LBJ had the idiotic, Great Society, which obviously turned out to be a disaster. Some people may think differently, but they’re just wrong. And then George Bush, he had the ownership society and that turned out to be a disaster. Maybe the point here is that central planners should stop trying to plan what kind of society we should have. And that should be determined by us little people, US Beyonds, you know, we can decide what kind of world we want ourselves without a bunch of government intervention, right? Both of those turned out to be big disasters and way back to good old FDR. Okay before those other two and you notice we’re going on both sides of the aisle here, folks. We got a republican and two democrats we’re talking about right. So back to FDR, his idiotic ideas those didn’t work either. That was only salvage by World War Two the the largest public works project in all of human history. Again, war is a bad deal. Of course, it’s terrible. It’s destructive. Why would anything destructive ever be considered? Good? I mean, it’s crazy to me that people think war is good for the economy. That idea is that’s pathological. That’s crazy. Okay, that’s crazy. But like having a cup of coffee, or an espresso shot. It gives it instantly gives a jolt right but the the comedown is never good. It’s crash. Okay. Anyway, back to the article because we are host He always gets off on these damn tangents, you got to stop that. All right, so 69.4% back in 2004 under the program that bush set in motion and it was completely stupid, but really Clinton actually, why not blame a democrat when you get the chance. Clinton really set it in motion with the Community Reinvestment Act, actually, that was back to Carter, another Democrat.
But then again, you could blame Reagan because he deregulated all the smells, and that was a disaster to the point here is you see the common theme no matter what side of the aisle you’re on politically. Let’s get the big hand of Big brother out of the pie, and let the free market determine things instead of government intervention. So we talked in the past and we predicted that Several meet the Masters events ago that every 1% decline in the homeownership rate would bring about 1 million. Yes, that’s actually a big number, 1 million new tenants into the rental market. Wow, investors rejoice 1 million new new tenants for every 1% decline in the homeownership rate, and yours truly has predicted or has hoped for a homeownership rate of around 55%. I just, I just kind of think that’s where it should be. I think that’s the appropriate amount. I think if the if the intervention was reduced by the government and the government sponsored entities, Fannie Mae, Freddie Mac, then the homeownership rate would fall to somewhere in the 55, maybe even 50% ballpark and think of what we have happened there that would bring about 9 million more people into the rental market. This idea that having this huge homeownership rate is good for society and good for the economy is simply not true. You’ll never hear this from any other real estate agent except myself. Probably. It’s just it’s just an idiotic idea. homeownership is not necessarily better, not necessarily owning lots of investment properties. Yeah, that’s good. That’s really good. You know, I love that. All right. The article goes on to say that that 69.4% rate in 2004, during one of the biggest housing booms in history, of course, it was a central planner induced boom, not a market induced boom. That was also when mortgage lending lending was arguably at its lowest looses sorry, loosest level in history, very promiscuous those mortgage lenders were. Now they’re kind of prudish nowadays. They’re not so promiscuous as they used to be right? The homeownership rate is now just one 10th of one basis point higher than its all time low in the second quarter of 2050. So it ticked up ever so slightly in the past year, economists continue to point to a recovering job market as fuel for growth in the housing market. But for young Americans, just having a job does not translate to home ownership. Whoa, I could go off on that for 15 minutes. But you know what, let me bite my tongue and continue high levels of student loan debt, tight mortgage underwriting standards. I told you they were prudish. Okay, those more wonders and overheating home prices all are all contributing to very low homeownership rates among the nation’s youngest workers, homeownership, among those aged 25 to 34 is nearly 10 percentage points lower than it was a decade ago. Wow. Do you realize how significant that is? So a decade ago for people 25 to 34 that homeownership rate or from a decade ago has dropped 10%.
Jason Hartman 11:45
That’s frickin huge. It’s like golf. Yeah, golf. Remember I told you about golf properties and golf courses on a prior episode. Do you know that? I mean, if you enjoy vested in a golf course, or spent a bunch of money on that country club membership. You’ve probably been hurt pretty bad, because golf in terms of the number of rounds of golf in the past decade has declined by about 35% that is ginormous. So all those people with those golf course homes, you know, homes on golf courses really beautiful to look at for sure. And if you play golf, hey, even better, but the millennial generation, they don’t have the time or the money to play golf, that this is just not their sport, and apparently neither is homeownership. See how those two ideas almost tie together? You can almost make anything tie together if you’re just creative enough and persuasive enough. Okay. First time homebuyers are still barely 30% of today’s buyers. Traditionally they comprise 40% of homebuyers rental affordability remains a big problem in many places. And that makes it harder to save for downpayment said. And we have this guy on the show before. Jed Galco. He’s been on the show, an independent economist and senior fellow. Oh, I guess he, I guess he changed jobs. Cuz that’s not who he was with. At the time. He was on our show, an independent economist and senior fellow at the Turner center for housing innovation at the University of California, Berkeley. Wow, a lot of Central planners there at Berkeley. That’s my mom’s alma mater, Berkeley. And my mom said lou dobbs was a socialist when I quote, my absolute love for his book war on the middle class. Great book, you must read that book war on the middle class. You obviously know the article does not say this, right. Okay. My mom went to Berkeley in the 60s and says Lou Jo, Lou Dobbs is a socialist. Mom, I don’t know where you get that. But whatever. Okay, we’re still seeing relatively few first time homebuyers because young people are buying homes later than they used to some of this long term shift toward marrying, and having children later in life. Hey, I talked about that on a recent episode about the how maybe it’s actually better to have kids later. Oddly, counterintuitive, right? But that’s why I talked about that article because you can’t hear the dogs that don’t bark most of the time, right? The profound impact of things unseen. Some of this back to the article, Jason, some of this is that the recovery has been slow among young adults. Most Millennials are still on the young side. For homeownership in Now, remember the millennial generation the Gen Y cohort, can be segmented up to right into the older and the younger of that time. The graphic cohort, the largest cohort in American history, almost 80 million strong, bigger than the baby boomers. I know we have many baby boomers listening. But Gen Y is actually a bigger generation and look at how your generation changed the world, change the country for sure, but even change the world dramatically, while Gen Y is going to change it even more in completely different ways, because they are saddled with huge debt in terms of student loans, not dischargeable in bankruptcy, no second chance debt slave for life. They’ve got a whole different mentality. They saw their parents get burned in the housing market and their very formative years. They like the sharing economy. They’re used to Uber, they’re used to Airbnb, they’re used to Lyft. They’re used to all of these sharing economy type concepts. They like portability, it’s just a different world for them, okay? It’s just a completely different world. So this may be because renting is so expensive, and because the expected migration of babies Baby Boomers from their larger houses in the suburbs to rental homes has been slow to take off due to the recent recession and historic crash and home prices. Well, you know, a lot of those prices, they’ve really come back in a lot of places, pretty much to the same level almost. I mean, that’s we’re not too far off from where we were before in many, you know, it depends on the price segment depends on the geography too long a concept to discuss right now.
But yeah, you know, that’s what Harry dent predicted. And he’s been largely wrong about that, by the way, Harry dent, huge fan of his work. He’s been on the show many times, as you know, but he’s been largely wrong about the bust in the mcmansions. And his latest book, I think it’s his latest at least unless he’s he pops out a lot of books. So maybe I’m not up on his latest but the demographic Cliff a fascinating book, and he talks about the real estate crash coming up and he’s the he is not called Right at all. So maybe he’s going to be 10 years behind the curve in that I don’t know we will see. But again, a different subject. Okay, finishing the article here, household formation is now increasing, but two thirds of it is on the renter side. Yay investors today think about that. household formation is now increasing. Okay. But literally two thirds 66% of it is in the rental market. In other words, these people forming households, two thirds of them are renters. They’re not buying this is it’s it’s an amazing time to be alive. But it’s an even more amazing time to be a real estate investor.
Yeah, who just one third of new households were owner occupied homes. homeownership is highest in the Midwest. Well Remember when CONSUELO MACK was on the show? And Meredith Whitney, and we talked about how they feel that the Midwest is their favorite emerging market? As if it’s a country the way they say that. But yeah, we’re doing a lot of business in the Midwest for sure. And you know, I’m doing a 1031 exchange right now I’m deciding where I’m going to buy Am I going to buy in Ohio? Am I going to buy in Memphis again? Am I going to buy in Chicago? I don’t know. I’m gonna buy a couple, three more houses. We’ll see. homeownership rate is highest in the Midwest, where houses are cheapest. And its lowest in the west where houses are most pricey. And by the way, that makes total sense. Those people must be listening to my podcast, because in those pricey markets, you’re much better off being a renter. Okay. Hey, if you haven’t yet, and many of you have and thank you, we appreciate your business. We appreciate you buying our stuff. So Hartman education.com. We’ve got that sale, a little less than two weeks. To go Hartman education comm you can get a bundle of the online courses for meet the Masters, the last two of them both this years and the prior years. And you get Jason Hartman University Jq all bundled in at a spectacular sales price. absolutely spectacular deal. So take advantage of that. Because time is limited false scarcity, absolute BS in terms of all those internet marketers that say, Oh, it’s a limited time offer, but yet it’s a digital product. You could sell it a billion times. Yes, I could, too. But hey, you got to have some incentive, right? And if that’ll make you get off the dime, and buy those very excellent products, then that’s what I’m going to do. I’m going to use that same false scarcity idea. We don’t do that with real estate though because real estate really is scarce. In fact, Let me just tell you two things before we get to our guests today and talk about the Cincinnati while the Greater Cincinnati market where we have a property tour coming up and you should register and join us for that. Jason Hartman, calm click on the events section, you got early bird pricing on that. But two things number one, one of our clients recently kind of talked one of our other clients out of buying a property. And he said, Hey, I didn’t mean to rain on your parade. And I said, don’t worry about it. Because those properties that this one guy was thinking of buying, they will sell to somebody else. There is no problem with selling properties. Now Now granted, if it was back in the doldrums if it was 2008 2009 Yes, I’d be upset that you talk the guy out of buying, but not anymore because the the challenge now is getting inventory The inventory sells almost all of it sells. And if it doesn’t sell it’s, it’s not a good deal. So that’s fine. We don’t want that. We don’t want the bad deals to sell to our clients. And then someone else asked me, Hey, you know, if I buy a whole bunch of properties, will you give me a better deal? And if I if if you buy a whole bunch of properties, you’re just taking inventory away from our other customers that will buy them anyway. So I’d love to say yes, bulk discount, you know, if you want to buy 40 properties, but it doesn’t matter because real estate has a built in scarcity. That’s why it’s so valuable, as what was it well, Rogers or Mark Twain or someone like that, not through like each other, but said, buy land, they’re not making any more of it. But you know, when you combine it with my packaged commodities investing concept, it’s really, really something. So check out the great properties at Jason Hartman calm in the Properties section, you’ll love them, they’ll pretty much all be gone. Before you know it. Our Ohio provider has agreed and you’re going to hear from her in just a moment. She’s agreed to hold some properties back for our upcoming tour. We always have to do this for our property tours. Join us for that because you’ll get the creating wealth in today’s economy seminar, as well as the property tour. Great time a lot of you have registered, I hope to see a lot more of you there. And check out Hartman education comm for our really big sale. And let’s go to our Cincinnati, Ohio market profile.
Hey, listeners, I know you’ve heard me talk a lot about one of our fantastic managers. You know, you’ve heard me say many times, I would rather have in a team and a B market than an a market and a B team any day and I used to sort of consider this market. A B market but it’s gotten quite a bit better recently in the last couple of years. And we’ve been in it for maybe three years now. And that is the Cincinnati Dayton metro area, you know, you know, Ohio. Now there are still some very blighted areas of Ohio, that we are not recommending. But we’ve got some good stuff here. We’ve talked about it before, but with our upcoming property tour, I thought we’d get our local market specialist back on to talk about that. And you’re gonna learn some stuff about property management during this interview. So even if you’re thinking, you know, I’ve got I’ve got the three to five markets that Jason always recommends. See, isn’t that weird? I talked about myself in the third person. Yeah, I know. That’s terrible. That guy Jason is always recommending diversify in three to five markets. Even if you’re already diversified enough. You will want to hear this interview because our LMS in this market is very good at property management. So let’s dive in. How are we doing? In the Cincinnati Dayton Metroplex nowadays,
Local Market Specialist 24:03
we’re growing like crazy. So it’s really exciting right now.
Jason Hartman 24:06
Well, that’s good to hear. Nope. So, you know, this has sort of been considered, over the years, many areas of Ohio have been considered kind of blighted and, you know, certainly not as bad as Michigan. That’s really a tough one there. And especially in the Detroit area, of course, but other areas of Michigan too, sometimes. And we’ve done some very successful business in the Grand Rapids metro area that’s been really good for us. So that’s kind of surprised me as well. I just financed a property in Kalamazoo, Michigan. You know, there really is a place called Kalamazoo. And so some of these markets are becoming pretty attractive. Now. What What do you tribute that? I mean, has the government become more business friendly or what’s what’s going on?
Local Market Specialist 24:51
I think that governments have definitely become more business friendly, and specifically the unincorporated areas, Ohio still has a lot of areas that are considered townships which are not cities, which have some very fair, favorable tax benefits. For example, the Westchester Liberty township area, which is one of our fastest growing areas, has had GE Aviation move in over 2000 employees into their new location inside of Butler County. And they did that and left Cincinnati and a couple of other markets because of this paper bill tax situations.
Jason Hartman 25:25
Mm hmm. No, good. Okay. So, Butler County is one of the areas you like quite a bit, although you do go a little bit outside of it in different directions, especially north of it. Why is that so special? Well,
Local Market Specialist 25:39
for many years, everyone’s been moving to the suburbs. And Butler County is really a suburb to two large cities. On the south side. It’s a suburb to Cincinnati and on the north side, it’s a suburb to Dayton. And people like the wide open spaces, the good schools, the great places to go out to eat but many times they’ll work in the city. And it’s 70 miles from the north end of the county to Dayton. And about the same 17 miles to Cincinnati, and Ohio, that’s a 20 or 25 minute commute because traffic isn’t as horrific as it is in some areas. So it’s a very reasonable commute in people like having more room to move around. That growing population is another thing that makes it attractive for investors and for tenants will talk to us about the tenant
Jason Hartman 26:27
who is that target tenant in your properties.
Local Market Specialist 26:31
Typically, in our B class properties, we’re looking at someone that has a two year degree or better. That’s very median income. The median sales price of homes in Butler County is about 120,000. It goes up or down depending on which end of the county you’re in. But at that price, you know, that’s a $700 a month mortgage or 995 to 1095, and a rental payment. So that’s very reasonable and very close to that 1% rule.
Jason Hartman 27:00
To find a, b, and c in terms of price range, and I mean, of course listeners, you need to understand this is somewhat subjective. There’s no question about it. You can’t, the houses don’t come with labels A, B and C. Yeah. That’s, that’s not like in the paperwork, okay? But define that if you can for the listeners and define those A, B and C level prices in your markets and tell us if you have a favorite
Local Market Specialist 27:25
Sure, I think in our marketplace, and a 50 to $80,000. Home is typically a C class property, a B class property depending on which city you’re in, because of course, some cities have higher median income. So those homes are a little more expensive, but a medium be priced home is 80 to 120, or 80 to 140. And then an A class property is always 140 or above. So each of those homes kind of have a plus and a minus. Of course you’re a class homes have tendency to have greater appreciation. But remember, Ohio is a millennial market and you can’t eat appreciation. My favorite is a combination of the B’s and C’s. And then if you’re buying 10 homes that I think everyone should have an A class property. So my choice would be to seize six or seven B class properties and then one a class property on the end.
Jason Hartman 28:22
Okay. All right. So you define that right in the same market have, I talked about diversification in the three to five metro areas. So if yours yours would be counted as one metro area and Memphis would be another Atlanta would be another, Indianapolis would be at another, but you say right within your area, people should diversify into different classes of property. Hmm.
Local Market Specialist 28:45
I think so. And those were my recession lessons that when we saw people starting to move and downsize, they did that at different times. For example, your C class properties which were your tenants that probably had this one a savings account, those went vacant. First, your B class properties that took six months to a year before the recession really hit them, they were a little more responsible had a little larger savings accounts. And our a class properties. It was almost three years into the recession before we saw those even hitting the market as far as foreclosures, because many of those people had either decided to sell and or moved out of the home and and gave it back to the bank before the recession hit them the hardest. So by diversifying your portfolio within either your marketplace or your price ranges, then if another recession would happen to hit, you have a little more diversity.
Jason Hartman 29:42
Yeah, right. Right. Okay. And so those different classes of workers will get may affect it in different ways, or I should say laid off in different I mean, that’s the idea behind it. Right, exactly. Okay. Well, I want to circle back to a little bit more about yourself. Marking the major employers and all that good stuff. But our clients over the years have been impressed with your property management. And we’ve had many clients buy in your market. Tell us some of your your best practices for property management,
Local Market Specialist 30:15
I think your single best is your application, because we call that the honeymoon period, when you’re on a honeymoon, a tenant will give you or a potential tenant will give you all the information that you could possibly ask for. And you may not think you need all of that information today. But if the tenant starts falling behind, it’s always nice to have mom’s phone number if they’re a younger tenant, because they really don’t want mom to be called twice, so they become more responsible. And we’ve found that by asking a lot of questions, and then verifying all that information on the application really starts off the relationship, right? If we can screen the tenants to where we have weeded out anyone that has had a bad history, then we don’t have to worry about that. In the future of them repeating that history, because we know people have tendency to repeat that habits.
Jason Hartman 31:05
Mm hmm. Yep, that is true. no guarantee of future results. But you know, the past what else? Can you go by type of thing? Yeah. Got it. What else on management,
Local Market Specialist 31:16
I think holding them very accountable. We have a very strict policy rents due on the first light on the fifth eviction notice on the sixth 100% of the time, and that doesn’t mean we’re going to evict the tenant, it means that we’re telling them that they’re on notice that if they don’t pay, that they will be evicted. And by the first month that they’re late by starting that process with them, then they know you’re serious. You’re not mom and pop that’s just going to forget about it. They have to pay their rent every month on time. And then we will take their money up until the time of the set out because we don’t want the property to be vacant. And we want them to learn their lesson but absolutely holding them accountable by walking through that eviction process very quickly. teaches them that they have To chaos first,
Jason Hartman 32:01
what else though in terms of that, I mean, the reason I’m kind of, I mean, all property managers will say that they’ll all come on the show and say, well, you you got to be firm with your tenants, you got to teach them that they need to pay the rent, etc, etc. You know, of course, where everybody agrees with that. But it doesn’t always happen in practice. Why doesn’t it happen? Why is it so frustrating for some?
Local Market Specialist 32:24
I think they don’t communicate. And today, we use a program called AppFolio to communicate with our tenants, which allows us to text them, email them, call them by telephone, and do electronic billing, which you have to keep up with what the current trends are. On the other side, we still mail we do snail mail, to the people that don’t have access to email because we know that they’re in a different class of people. I think the other thing that attracts the best tenants is to make sure that you have the best looking property when you put it on the market. And that means it’s clean, it’s fresh, it’s painted It looks nice, it smells nice. Because if you put a stinky ugly property on the market, you’re going to get a stinky, ugly person that’s willing to take it. So we try to make ours the shiny Penny, the prettiest one on the market to attract the right kind of tenant. I think that’s really the first step.
Jason Hartman 33:15
Okay, anything more you want people to know about management before we kind of circle back to the market and talk about some of the big employers and so forth.
Local Market Specialist 33:23
I think that, you know, looking at longevity of tenants, our average life right now is about 3.4 years. And we spend a lot of time identifying what’s going to the asking the next question that says, what would make you want to stay in our property longer. And we’ve been very successful this year with asking tenants to go from a one year lease to a two year lease. And a one year lease is our neighborhood normal and two years is not normal. But after they’ve been a tenant for a year and they’ve been consistently good. We’re asking them to then sign a two year lease which will extend the life of that tenant, which is really We’re all looking for we want people that move into the properties, pay their rent, and don’t move out and take care of it.
Jason Hartman 34:05
What do you think about rent increases, though? See, in the reason I asked this question is, some property managers say, Well, hey, we don’t we really minimize turnover. But if you don’t have some vacancy, you’re just not charging enough. Right? Would you agree with that philosophy? Or?
Local Market Specialist 34:23
I don’t, I don’t necessarily agree with that philosophy, because I know that a vacancy will cost you at least one month’s rent, if not two in a year. And if you can extend that over three to four years, then at five years, you may want to ask yourself that question, but keeping that property occupied for at least the first three to four years, I think is important to your cash flow. And if you raise the rent 10 to $20 a month, it’s not going to make up for that month, a vacancy that you’re going to have when the tenant turns over,
Jason Hartman 34:54
no rent increases or every couple of years. I mean, We’d like to see our clients get a Performa rent increase. So you know if they can raise the rent 4% annually on average, I think that’s pretty great.
Local Market Specialist 35:09
I think you have to absolutely look at it. And we look at it by demand in that marketplace. You know, if and what is currently available in the marketplace at that time, if we have a flood in one neighborhood vacancies, then we’re not going to raise the rent in that specific neighborhood. If we’re renting very quickly in that neighborhood, then we’re going to look at raising the rents there, but we raise anywhere from 3% to 10%. Depending on the neighborhood,
Jason Hartman 35:36
can you raise 10% and keep the tenant or you’re retaining at that point? I mean, I can’t imagine most tenants are gonna do a 10% increase.
Local Market Specialist 35:44
It depends on when they rented the property. You know, if they’ve been in the property for a number of years and haven’t had an increase, then that’s very normal for them. Hmm,
Jason Hartman 35:53
yeah. Okay. We’re really working. Tell us about this, this sort of typical tenant.
Local Market Specialist 35:59
Well, when we were Talking about that median income. We’re looking at a lot of teachers, nurses, government services workers. Some of our largest employers are Cincinnati Financial Corporation, GE Aviation, the larger school districts. We have Miami University and Oxford, which is a very large school that employs a little over 3000. So there’s and then there’s the healthcare, which is absolutely exploding in our county right now. Because in the last 30 years, hospitals were all built in the old downtown areas. So with the shifts of population to the counties, to those suburbs. Now, the hospitals are all moving out here. So we’re seeing a huge surge, and employment and that’s everything from the cleaning people to the doctors and nurses.
Jason Hartman 36:49
Okay, so healthcare workers, that’s good, that’s stable, it’s in demand. What else should people know about that target tenant?
Local Market Specialist 36:57
We have a large steel manufacturing firm. called aka steel that employs a little over 2400 in Middletown, aka steel is the largest steel rolling mill in the nation today, and is a fortune 500 company. You know, many times we look at manufacturing, we think, Oh, this is the rust belt, but AK steel is a fortune 500 company. So it’s not quite that old rust belt that many people thought of. Mm
Jason Hartman 37:21
hmm. Okay. And then are they those people are running C and B class properties probably most of the time, right?
Local Market Specialist 37:28
Actually, they’re A and B class properties because the steel workers make 70 to $90,000 a year so
Jason Hartman 37:34
Oh, counterintuitive. Ah, okay. What else we
Local Market Specialist 37:38
have an Ikea in Westchester. And Westchester is one of our growing areas again, because of it being a township. And we’ve just recently opened the Liberty center which is the area that the property tour is going to be in the Liberty center over the next year is going to employ over 3000 people. That is everything from hotel workers to foodservice. It’s one of those live work, eat places where there’s everything in one spot.
Jason Hartman 38:06
Right, right. And I love that, you know, when you sent over the pictures of the hotel and everything, I thought, wow, this is nice.
Local Market Specialist 38:13
It’s only been open for about eight weeks now. So you’re going, it’s really going to be nice,
Jason Hartman 38:19
good. Well, let’s talk a little bit about the property tour and what you have planned for us. As soon as it gets a little closer, you’ll be holding some inventory back for our tour attendees. One of the problems we commonly run into on tours is we don’t have enough inventory of properties for people to purchase. It’s a good problem to have, but it is a problem nonetheless. I mean, it’s a good problem for us to have may not be seen as good for the customers. We want people to have a decent selection of properties. So talk to us about inventory and kind of what areas we’re going to see and and then we’re having dinner at your beautiful home on Saturday. I can’t wait.
Local Market Specialist 38:56
Yes we are. That’ll give us a chance to socialize. To meet all of our team, because many times when I’m out, especially at your group, it’s only myself and maybe one other person. Most of our management team will be at the dinner. So they’ll have a chance to meet everyone that makes the process work from the project managers that work the rehab to the property managers that are ultimately those people that make you continue to get money every month. And then, we’re going to start at the Liberty center. And I know we have some great education planned, and a break for a fabulous launch. And then we’re going to get on the tour bus. We’re going to see at least six properties. We’re going to look at the A, B and C class homes, so you can see all what the differences is. differences are and then we’re going to look at them in a couple different phases of rehab. We’ll probably see one stinky one that makes you know why we work so hard to make them nice. Some that’s in the middle of rehab so you can see what’s actually going on the detail in the rehab. We, we do, and then we’re going to see a number of finished homes that will be available for you. available for your customers only.
Jason Hartman 40:08
Okay, okay, good. Good stuff. Okay. Well, any other thoughts you want to talk about about your market as we wrap it up?
Local Market Specialist 40:16
No, I think we’ve covered all the great things. I mean, the growing population is important because you want your rental property to be in demand. We have extremely low unemployment. And I’ve always had that throughout the recession. We’re right at 4% right now. And you know, the demand for rental properties.
Jason Hartman 40:33
It’s basically full employment. Yeah,
Local Market Specialist 40:35
yes. Absolutely. And that means your rental properties are full and in demand, and that’s what we want people that can pay.
Jason Hartman 40:43
Yeah, good stuff. Good stuff. Okay. And the property tour, go to Jason hartman.com. That way you need to fly in on Friday, June 3. You can either fly out Sunday night, June 5, or Monday the sixth. We’re gonna have a great time you’ll get the hotel booking. Link after you, you book and we have a discounted room rate their beautiful hotel like you said it’s only eight weeks old as of as of now. It’s 125 per night, I believe was that the rate? That’s correct. Yeah, good, good stuff. I’m sure you’ll have a fun time. One of the best things I love about these property tours is getting to share so much knowledge with our attendees. You know, we learn from our clients, you guys teach us a lot of stuff. It’s our job to sort of assimilate that and then feed it back to all the other clients. I just love doing that and we could have so many meals together. We’ll be having three meals together on Saturday and two meals together on Sunday. So it should be a fantastic property tour. And I’m just looking forward to seeing everybody there. Go to Jason Hartman calm, click on the event section. At this point based on registrants, we still have early bird pricing. But the price goes up is when we have more registrations and as the event draws near, so register as quickly as possible, and we look forward to seeing you on Saturday morning, June 4 at our Cincinnati area property tour. It’s gonna be a great time. Thanks for joining us.
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This show is produced by the Hartman media company All rights reserved for distribution or publication rights and media interviews, please visit www dot Hartman media.com or email media at Hartman media.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate or business professional for individualized advice. opinions of guests are their own. And the host is acting on behalf of Platinum properties, investor network, Inc. exclusively.
Today’s guest is Greg Saylor, a corporate software engineer who listened to the Creating Wealth Podcast. He now has six income properties earning him $4000 in monthly income. Greg shares what got him started in real estate investing and the details of his first income property deal, including the flaws. They also talk about property taxes, debt to income ratio, planning for additional expenses, and having a reserve fund.
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Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. Here’s your host, Jason Hartman with the complete solution for Real estate investors.
Jason Hartman 1:03
Welcome to the show. This is your host Jason Hartman episode number 665 665. And today we’ve got a great show for you. We’re going to have a client case study. Yes, it’s our client, Greg Saylor, who purchased six properties in six months, six in six. And I think you’ll really like his story, six properties in rapid succession. And he’s doing great with him and you’re going to hear firsthand his story of how he looked at alternatives and came to real estate, because it is the most historically proven wealth creator in the entire world period. There’s nothing this good. I mean, everybody has access to it. It’s just it’s just such a great thing. So a couple things before that. I want to make sure listeners that you have made our Relationship official Yeah, are we go and study, I hope so, what you need to do is make sure you press that subscribe button in iTunes or whatever podcast platform you’re using. To make sure you do not miss any episodes. We’re coming at you three times a week, every Monday, Wednesday and Friday. And occasionally, we might slip a little announcement in there on a an alternate days, so you don’t want to miss any of that stuff. We got some great stuff coming up for you been doing a lot of good interviews. I did one today that I think you’ll like and just a lot of a lot of good things coming up. I gotta get the schedule all outlined for our upcoming episodes as we move toward episode number 700. Whoo. That’s a big deal. 700 Wow, we’re getting up there. And remember, overall, I’ve got about 3000 podcast episodes out there with all of my other shows. You know, I rarely mentioned these others. shows, so of course the longevity and biohacking show the jetsetter travel show. on that show we talk about expat living. We talk about all kinds of interesting stuff, offshore investing, which ain’t so great tell you the truth. I’ve certainly looked at that up, down sideways. And we’ve just never found anything internationally. That makes as much sense here as it does in the good old US of A Gosh, holistic survival show. If you’re feeling depressed, do not listen to that show, because it might push over the edge. It’s definitely not the optimistic stuff. But you know, there’s two sides of the brain. We’re all we all have a positive and negative side, right? I was gonna say we’re all bipolar. No, unfortunately, we’re not all that. But we all we all have ups and downs. We all think of the positive and the negative. And it’s interesting. I’ve been reading this book, and it talks about what I’ve talked about on the show before many times, which is that constant Have What will you do more for Will you do more and this is such an important part of how we think as humans and how we invest as real estate investors. Because what will you do more for? Will you do more to go and earn 2535 4045 even percent on your on your money by investing it in income property the most historically proven asset class or will you do more to save some money? Will you do more to avoid loss or to gain something? What is the stronger motivator in our psychology Well, since we have been conditioned by aeons of scarcity, our mentality is always to preserve, to conserve, that is the that is the way we operate in fact, I was reading another book and I can’t remember they they use a funny phrase. Oh yeah, here it is. Cognitive misers. Yes, we are cognitive misers. So even with our own brainpower, we can serve. Because, interestingly, the brain compared to the rest of our body doesn’t weigh very much. But you know, it takes like 20 or 30% of the energy that your body uses. That’s pretty amazing. If you think about it, our brain is very greedy when it comes to energy. And if you think about it, we’re kind of lazy as people. I mean, that’s just the general propensity of of all of us. I think, I mean, I get I’m certainly get this way. I hope you share that with me and you do.
Jason Hartman 5:53
I hope it’s not just me, I guess I’ll say, but we don’t want to make a big effort to think Earl Nightingale used to say that will Go around when we have a problem last are neighbors what to do our families what to do our parents or children or uncles or cousins? You know we’ll look at our horoscope we’ll do everything. But the last thing we’ll do is sit down and he said, with a pen and paper and actually think the problem through, right? actually think the problem through and that’s because of this propensity to conserve, to conserve our energy to conserve even our thought energy. We are cognitive misers. That’s what the that’s what the experts say. And I was gonna say that’s what the psychologists say, but I don’t know if it’s a psychologist or a biologist or a physiology. I don’t know. I don’t know exactly what experts said that But some experts said it Trust me. Oh, anyway, so so we will do more to avoid loss than to gain insights. Certainly I noticed this in my own behavior all the time. For example, when I shop for clothing, one of my favorite places is Nordstrom Rack. I think Nordstrom Rack is a pretty great deal. And it’s funny. It’s just funny. Yeah, this is, I mean, time is money. And we will search around online and look for the best deal on something. But when it comes to desire for gain, because the gain is speculative, and the conservation is not it, that is also speculative, by the way, but it’s not as speculative is that as the possibility of gain. So we will take the old saying, a bird in the hand, is worth two in the bush, right? A bird in the hand is worth two in the bush. And so because we’ve had scarcity throughout our history as humans, we still think that is the world in which we Live, and it’s not we live in this world of massive abundance, even in bad times, even living under Obama anism. Yes, oh bomb unionism, slight communism, but it’s got a different flavor. What will they call it? If Bernie Sanders becomes president? Well, he’s probably not going to we’re either going to have a very weird, loud, boisterous guy, you know who I’m talking about Mr. T there, or we’re going to have the criminal known as Hillary Clinton. Yes. That will probably be our two choices. It’s always it’s always that we don’t really ever get a choice, do we? We always have to just vote for the Yep, you guessed it the lesser of two evils, right. So given that one, you know what my decision is going to be listeners. But again, certainly not my favorite. My favorite was discovered FIDE A long time ago, and that was Mr. Rand Paul, of course, Ben Carson, us and kind of an interesting guy. We had him on the show before. We’ve had quite a few presidential candidates Austin Peterson, the Libertarian candidate, john McAfee, of course, another Libertarian Party candidate for President. I don’t know who’s leading. I mean, Rand Paul endorsed john McAfee, on the Libertarian Party side. I don’t know we’ll see who’s living. One of our clients said a great thing to me today. She’s so funny. I just cracked up when I heard her say this. We were boxing back and forth. Yes, that’s you, Michelle. And she says, it gets lonely being libertarian in the San Francisco Bay Area. That was the funniest stay.
Oh, God, she really made me laugh on that one. But yes, it does get lonely being a libertarian sometimes, but I tell you, it is rising that ideology, I’d say probably has a stronger foothold. than it has at any time in my lifetime, at least I would say that Ron Paul, Rand Paul, Ron Paul, the father, of course, he was surprisingly popular with Generation Y with the millennial generation. Now, hey, you know, folks, we’ve talked a lot about Gen Y, by the way, and the fact that they’re going to make great renters they’re going to be renting for a long time. This is the reason why we’re seeing such strong rental demand, virtually everywhere in the country in virtually every market. We did a call today with our local market specialists, not all of them, but most of them. We had about 25 people on the line. And we were talking with our different teams in Indianapolis and Memphis just all over the place, you know, all our different markets, right? I don’t need to explain Little Rock, Arkansas, etc, etc. So anyway, we had them all on conference call today. And the first thing I did is I went around the virtual room. And I asked them all what was going on. And without Well, I actually cannot say in all fairness without exception, because there was one exception.
Virtually all of them 2424 out of 25 said, inventory shortage, really tough to get good inventory battling to get inventory, way more buyers than sellers, etc, etc. One of them said they weren’t having too much of a challenge with inventory. So kind of interesting there as we went around. Jason, what was your point? You’ve gone all over the board. Presidential candidates, there’s no choice. Lonely libertarians in Northern California. That’s kind of like being Sleepless in Seattle. Inventory shortages. I don’t know what was my point? Maybe someone can write me and remind me and I’ll talk about it on the next episode after flashback Friday, of course. So, a couple things, make sure you subscribe to the podcast. We so much appreciate your reviews of the podcast on iTunes or Stitcher, radio, whatever your podcast platform is, go and review the show, make sure you’re subscribed so you don’t miss any important episodes. And we very much appreciate your ratings, your reviews, and telling your friends about the show to spread the word so they can join us as we get toward episode number 700. We got a big sale going on. Before we get to our guests here. I want to tell you about this because we just launched it and you probably haven’t. Now, here’s the thing at Hartman education comm our new little website Hartman education.com just my last name, education comm Hartman education comm we used to just have one point There. Now we have three Yes, we have the meet the masters from 2015, the meet the masters from 2016. And the first ever j h you live or Jason Hartman university course, from San Diego. Now I know a lot of you listening have attended all of these events, right? So if you’d like to get a copy of the video or the audio download, look people I know that you don’t always need to see this stuff. Sometimes you want to download the audio have it with you so it’s portable. And then if there’s something in there that strikes your interest, or the speaker mentions a visual aid, and you want to see that, then you can just go back to a very well organized portal with these three courses. And you can log in and you can watch the video at your convenience. So super handy course. I’m really happy. This is the first time we’ve had these all online. And we are kicking it off with a big huge sale. Yes, a big sale. So normally, each of the meet the Masters courses are 497 apiece. And the Jq live is 297. But bundled together, we normally sell this for 1197, which is basically 100 bucks off, it would normally be what 1291 all together, but for a limited time. What will be the limitation here? See, when you’re in the marketing world, you got to create this false sense of scarcity. And folks, let me tell you, this is complete bullshit. Oh, Doc, you’re not supposed to swear on this show. It’s complete BS. You know, I’m a little punchy here or not. It’s it’s the end of the day. had a big day here. So Yes, you’re not supposed to swear on the show. We are a clean family friendly show here. So Well, most of the time, anyway. And normally These are 1291 if you buy them separate 1197 if you buy them together, but for a limited time, because we got to have some urgency, we got to create urgency, right? Otherwise, you’re never going to get off the dime and make a decision. So what is the limited time gonna be for a limited time? What should be the time limit for this sale?
Oh, yes, shut that thing. Okay. That just goes on way too long, doesn’t it? How about if we say for the next week? Yes, one week sale on this? Well, maybe we’re better make it a little longer. Because what if you’re not What if you’re not caught up on your episodes and you haven’t listened to them all? Let’s make it. Let’s make it two weeks. Let’s make it a two week sale. Okay? For two weeks, you can get all three of these for only 797. And that my friends, is a great deal 797 all three courses, audio and video beautifully well organized. We got a great little online university sort of website for that. So check it out. Take advantage of that. Hartman education comm also we’ve got our Ohio property tour and creating wealth seminar coming up. That’s going to be fantastic Cincinnati area, Jason hartman.com. Click on events, check out the details for that and join us a bunch of you have already so we’re looking forward to seeing you there. And that is coming up in early June. So check that out. Without further ado, let’s get to our guest a client case studies Six properties in six short months with Greg Saylor. It’s my pleasure to welcome a another case study a case study from one of our wonderful clients. We love hearing from you. And we would appreciate having any of you on the show. Let us know if you’re interested in being on and sharing your story. This is where the rubber meets the road. These real stories from clients really inspire our listeners. It’s my pleasure to welcome Greg Saylor. Now, let me tell you a little bit about Greg. He is a software engineer. He’s in the cybersecurity field for big corporate enterprise applications. And he started investing with us just about five months ago. So he’s pretty new at this and we love to hear from investors at all levels, even investors who haven’t started their journey yet. Once in a while that’s really interesting, or maybe they just started or they’re just a few months in like Greg or there’s several years in and they’re veteran And investors and they can tell us the good, the bad and the ugly about investing.
So let’s just dive into it and welcome Greg Saylor. Greg, how are you?
Greg Saylor 18:09
I’m doing really well. Jason, thank you so much for inviting me on the podcast.
Jason Hartman 18:14
It’s good to have you and you are closing on your sixth property. That’s you’ll have a six pack next week, right?
Greg Saylor 18:21
That’s right.
Greg Saylor 18:23
Yeah, I’m really happy about that. I couldn’t, couldn’t be happier with how things are going good,
Jason Hartman 18:28
good stuff. Well, it’s new. So there will be bumps in the road and problems. I’m just gonna warn you. It’s not all roses, but I’m glad to hear. It’s all going well, it’s mostly roses most of the time. So first of all, what got you interested in real estate investing? I mean, I’m sure over the course of your life, you’ve you’ve done and tried a bunch of things, maybe stocks, maybe maybe you work for a publicly traded company and you have stock in that company? I don’t know. But what’s the interest with real estate?
Greg Saylor 18:57
Well, actually, I do work for a publicly traded company. Right now, but I’ve never really done much investing. I mean, the 401 k thing. I did try to trade stocks a few times, and quickly discovered that when it comes to trying to time things, I’m just not good at it. And I can’t. Some people might have that skill. It’s not one that I possess. And the other thing, I guess, I’ve always had an interest in real estate. It seems like I think everybody says that, but you know, it’s always I’ve always just been fascinated by it as kind of a necessary human need, you know, and we’ve moved around a lot when I was a kid. So I never really had, I guess, a kind of a stable place to live. I, my mom, you know, tried to buy a house at one point and succeeded at that, but then we lost it. And so it’s just kind of always been sitting back there that this made sense, but I didn’t know how to make it work. You know, that’s kind of where I came from? And I said success in anything else, you know?
Jason Hartman 20:03
Well, well, let me first tell you, Greg, I, you mentioned that when you were referring to the stock market, that you weren’t good at timing, and just to make you feel better, nobody’s good at timing, no matter what they tell you. And here’s how you know, all of these fund managers, all of these different mutual funds, and I don’t just mean fund managers out of mutual funds. All of these different advisors, there have been numerous surveys on them, that by and large, none of them beat the index funds. So they’re, they charge big management fees. And you can pretty much get the same result. It’s been this has been this has been documented over and over for decades, okay, and you’ve probably heard this stuff, you can get the same result by just buying that index just by the s&p 500. If you’re into stocks in the first place, and I think stocks suck, you know that it’s the modern version of organized crime. But don’t feel bad if you say you can’t time the market because nobody can. The people that do it full time that made it have made a career out of it can’t time the market either.
Greg Saylor 21:09
Yeah. And then you have all these shenanigans that are going on behind the scenes in the stock market to probably have a whole many our discussion around some experiences I’ve had with that. But you’re exactly right. I finally just put my 401k into the total market index fund. And I think it’s good to have that. But I started investing in real estate, you know, last November, in the stock market, I managed to lose about $20,000 between November and December. So,
Jason Hartman 21:41
yeah, you could with $20,000. As you now know, having purchased six properties, you could buy another property. Exactly right.
Greg Saylor 21:48
And, you know, I, yeah, that’s it. I mean, I like cash flow. I think cash flow is really, really compelling. Because I just like everybody else, I can’t find the market. So why even try my perspective at this point?
Jason Hartman 22:08
Yeah, absolutely. But even if you could time the market, it doesn’t mean that you’ll win the game, but doesn’t mean that you outperform good solid income property investments anyway. So yeah, very, very good points. Okay. So Greg, tell us what you did when you started getting interested in real estate investing? Because you knew you could you could do better there than you could in the stock market. What do you do first,
Greg Saylor 22:33
I kind of knew I started looking around locally in California. And it was sort of, I guess, the same sort of general direction that I took when I bought my property, which is I started looking for properties that seemed like they would make sense.
Jason Hartman 22:50
Now. Does that mean the house you live in?
Greg Saylor 22:52
Yeah, that’s right.
Jason Hartman 22:53
So you don’t you do own your own home. And just so the audience knows you live in the Bay Area, San Francisco Bay. Right, that is correct. Okay. And whereabouts Do you want to be more specific I mean, it’s a deal of in San Jose or where
Greg Saylor 23:06
I live in is up in the unincorporated part of Alameda County. And in Hayward, which is right about halfway between San Francisco and San Jose, or kind of near Oakland on the East Bay. But that’s so when I was looking at buying a property. Of course, I was living in San Francisco at the time. And I just started, you know, expanding my search until I found a property that had the amount of land that I wanted, that was something I could afford, that I liked, and that put me into Hayward. So as the same kind of thing with investment property, I started looking in areas I knew and I just kept expanding and getting bigger and bigger, bigger. Finally, I realized I was up in Chico of all places, looking at you know, rental housing for college students. And I’m thinking I really want to get into that not really a and they didn’t even make that much sense. There’s like kind of subtle There has to be another way there has to be another way to invest in real estate. And that’s when I started listening to your podcast and a couple of other podcasts. And, you know, I knew it wasn’t gonna be California. I knew it had to be somewhere else. I just was trying to find a solution to that.
Jason Hartman 24:17
Right, right. And by the way, you know, there are no other podcasts on real estate investing to ever listen to. So, we are the only one.
Greg Saylor 24:27
Certainly my favorite.
Jason Hartman 24:28
I would like to think of that. It’s, it’s not true, unfortunately. But yeah, good stuff. So you started listening to the podcast, and when was that? I mean, your first purchases were in November of last year about five months ago. How long did it take? How long were you educating yourself listening to podcasts. And then before you did your first deal,
Greg Saylor 24:49
I would say about 45 days, but I listened to a lot of podcasts. I have quite a commute between my house and work. So I have, I’d say about two hours a day so about 10 hours a week. A listening to podcasts. So it, I got through quite a few of them pretty quickly. And then I called and left him a voicemail and Oliver called me back, we had a very nice conversation. And I just knew it was the way for me it made sense to me the investment vehicle makes sense. It’s not complicated. I mean, the transaction might be a little complicated, but the investment itself makes a lot of sense and seemed relatively simple, you know?
Jason Hartman 25:33
Yeah, yeah. And you know what, I’m so glad you mentioned that because I find that a lot of these different investment promoters out there who are promoting whatever type of investment, they hide things through complexity. And the world is not a really complex place, as it might appear on the outside, you know it. Sometimes the simple things just are the best I mean, the concept of just owning a property renting it to someone. I mean, there are things you have to know, no question about it. We saw a lot of time on this podcast talking about many different aspects of real estate investing. But overall, I mean, you don’t you don’t have to understand the Fibonacci curve, or all of these crazy things these Wall Street guys would have you understand, you know, some of these other investment schemes out there. It’s just, it’s just not really that complicated is that it’s just a simple workable thing. Right.
Greg Saylor 26:29
Yeah. I mean, there’s like the acquisition. I mean, there’s, you know, a number of players involved, of course. So it does get a little bit, you know, not I would say cumbersome, a little, you know, there’s movie pieces during the acquisition piece. But after that, you’re right. I mean, it’s, for me, it’s pretty straightforward. Yeah, they’re organized the tenant, the insurance, property management. That’s maintenance. What else is there? Really?
Jason Hartman 26:53
Yeah, you got about six components, I’d say you know, 567 components depending on how you look at it. Depending on whether or not you have a homeowner’s association, so there are a few moving parts, but it’s a really small number of moving parts in comparison. So what was your first property? Which, Which one did you buy first?
Greg Saylor 27:11
Yeah, let me add one more thing. And the other thing is that those moving parts are ones that I feel like I can have influence over. By Dolly my insurance carrier, I can go get a different one. I don’t like my property manager, I can get a different one. So I think that’s like, if I want to raise the rent, I can raise the rent. If I need to lower the rent, I can lower it. You know, it’s that having that flexibility in all the dimensions i think is a good thing.
Jason Hartman 27:36
Doesn’t it feel nice to be in control of your investments?
Greg Saylor 27:39
Yeah, it really does. Yeah,
Jason Hartman 27:40
it just makes such a difference. It really does. Yeah, good. Good stuff. Okay. So your first deal. Tell us about that.
Greg Saylor 27:47
It was in Indianapolis, it was a duplex. And actually, I had in mind that my first three properties are going to be duplexes because of the way that the lending, lending works as the first four properties that are duplexes are 25% down. And then after that, they go to 30%. So I kind of wanted all of my after for, of course, the single family homes go to 25%. And I just wanted to keep it putting 25% down on my properties. So I loaded up on the duplexes for the first three, because I have my primary home, which was number one, and then switch to single family homes.
Jason Hartman 28:26
So Indianapolis was one duplex or you bought a couple of them there.
Greg Saylor 28:31
I bought two in Indianapolis,
Jason Hartman 28:32
and where those new construction or resales
Greg Saylor 28:37
I’m sorry, do you mean like rehabbed or,
Jason Hartman 28:39
oh, no, what were they were they brand new or from a builder? Or were they, you know, rehab. I mean, all of our properties, pretty much our rehab. So that kind of goes without saying, but or were they resales where they already owned prior to you’re buying them?
Greg Saylor 28:53
Oh, I bought them from your network. From
Greg Saylor 28:58
yesterday, were rehabbed
Jason Hartman 29:00
Okay, good, good stuff. And so you’ve closed on those properties probably by now, I’m sure. And you’re closing on your sixth property next week. So tell us about the process of buying and, and how that all went and getting them closed and so forth.
Greg Saylor 29:16
Well, it was it was pretty smooth. I mean, I’ve I had some issues early on with, I was working with a lender that you guys did not recommend, or hadn’t recommended. And I didn’t like how that was going. So I asked Oliver, and he suggested some other folks that you guys recommended and that just went because greatly simplified everything.
Jason Hartman 29:43
What was what was the problem with the the first lender that you didn’t like so much?
Greg Saylor 29:47
It was just kind of a lack of communication, you know, as a new somebody new to investing. You know, I just didn’t know there’s a lot of questions out here. You’d have answered and I was not getting clear answers. You know, it could be me, you know, sometimes, you know, people could communicate differently. We were just not communicating well with them whether it was my fault, their fault? I don’t know. It just wasn’t a good. Sure.
Jason Hartman 30:18
Yeah, absolutely. And one of the things I say frequently is that investment property financing is a specialty. So going to the person that did the purchase of your home or the refinance on your home, it won’t necessarily work out very well. You really got to have someone who specializes in financing investment properties. It is a different thing, even though even though those investment properties are residential properties, in other words, they’re four units and under, it’s still a different deal. It’s really it really is a specialty we’ve, we’ve we’ve seen that all too many times over the years.
Greg Saylor 30:55
And actually, on that point, I know I’m reflecting back on this because it’s so new if you’d asked me this Two or three years from now, I probably would have completely forgotten about it. But at the same time, I was closing on two properties simultaneously those two duplexes actually holding on three properties simultaneously, I started three investment properties simultaneously, and decided to throw into the mix to refinance my primary residence. That was a mistake, because as soon as they were getting like close to ending the refinance my primary residence, all of a sudden on the soft credit pool, they saw the credit pool from another lender. So it was like, now they want documentation on all the investment properties I was buying. So it’s like
Greg Saylor 31:37
it was an interesting December was an interesting month. Yeah,
Jason Hartman 31:41
yeah. The stuff to do there. Definitely. Okay. So you got those properties financed in you got them closed. Tell us about whatever part you want about the property management about getting tenants, just whatever you’d like people to know.
Greg Saylor 31:58
Okay, so I guess I’m a software engineer. So I’m kind of a numbers guy. And, you know, I’m going to be looking at some of the things you call it property manager. I’m gonna be looking at that software soon. But you know, I started building these spreadsheets in the spreadsheet here has gotten bigger and bigger and bigger and it’s becoming increasingly difficult to track this but
Jason Hartman 32:20
yeah, use property tracker makes it so much easier. You’re not doing that yet. Hmm, not yet. Okay, that’s what I’m gonna bug you about. I want you to use that because you’re gonna find it’s so much easier to to keep track of your properties when you use that software.
Greg Saylor 32:37
Yeah, so I guess I’m kind of in I don’t want to say negative thinker, but I as my profession, I kind of look for problems. Right. So some of the i’d edited a couple of like minor snags along the way. And you know, don’t I’m not trying to be negative here, but the like on the I know,
Jason Hartman 32:58
we will listen we want it to be realistic? Like, yeah, one of the things we really try to do, Greg is, is provide real transparency. Other people out there will hide the flaws. Look at this is there are problems, I’ll be the first to tell anybody. It’s not perfect. But like Winston Churchill said of either democracy or capitalism, it’s just better than everything else. That’s all. That’s the only thing I say. It’s better than everything else.
Greg Saylor 33:24
So one of the things that I found, like, when I’m looking at properties, using your website that I found a little tricky was the providers. Some of them put 20% down, other ones put 25% down, they put different interest rates in there. And it doesn’t really translate to what interest rates I’m able to get. So I that’s why I had to build the spreadsheet right there because I needed to be able to take that numbers, put them into my spreadsheet so I could see what the actual, you know, numbers we’re considering the financing. Right, exactly.
Jason Hartman 33:57
So that is a terrific point. it. And that’s one of the reasons I want. Well, for the first part of that is, all of our investors need to number one, embrace the fragmentation, like I say, because that’s what keeps the institutional investors out of our business. So you do have that fragmentation, which is annoying. I completely get it, right, because you have one, one group in one area that does it one way and another group in another area does it another way, right? Yeah. So there’s fragmentation but standardize your data as much as you can by using our system the the property tracker property shopper system on the Jason hartman.com website. But the second part of it is, is that if you actually subscribe to that software, you can change the assumptions and you can make it all dynamic. It’s static when you’re looking at our website and we are working on an upgrade to that. But I’m not going to say that’s coming anytime soon. You know how software projects go in your business? But then you can Those numbers and you can make them all 25% down. Like you said, You wanted to have them all be consistent, like that are all the same interest rate or whatever you want. So yeah, good point.
Greg Saylor 35:09
Yeah. So it’s so basically I told you where I had this spreadsheet where I could enter four or five numbers. And, you know, I would use your website, your website gives you a great, kind of, should I should I look at this further, kind of, right. I mean, I can figure that out really quick from your website. But then I just take horrified numbers, punch them into the spreadsheet, I got three properties that look attractive. And I’ll punch them into my spreadsheet and figure out which one, you know, for their members looks better. So it’s kind of like the filtering that I can do on your website is really good. But there’s just another it’s like the due diligence, I guess.
Jason Hartman 35:45
Yeah, absolutely. Okay, good. Good. So tell us what else happened. What did it tell us more about the experience.
Greg Saylor 35:52
Okay. So, in addition to that, I kind of have this view of risk, I think around these around my properties that as long as I have, let’s say, good solid, let’s say really conservative single family homes, that Windows I can afford to take some other risks like with duplexes or with maybe properties in a little bit lower rent, lower grade neighborhood, you know, as long as I have that good foundation of good performing conservative, you know, really good properties and I can, you know, take a little bit more risk in some other areas. So I’m, I’m, as you would say, I think, independently owned and operated so I, you know, can take a little bit more risk in my life perhaps. So, the third duplex I bought in Chicago, and it was in a not not a very good neighborhood of Chicago and section eight tenants, but it’s been a really, really good performing property. But the trick there I think was a property manager that knows how to deal with those tenants in that area. That is like was critical for me. So I did a lot of betting on that particular property manager and wouldn’t have felt as comfortable doing that, for example, in Indianapolis, just based on, you know, not there’s anything wrong with any of the property manager there. They’re all wonderful, but it’s just experience with that type of tenant.
Jason Hartman 37:27
Right? It’s a it’s a specialty. Yeah,
Greg Saylor 37:30
no question about it. Good. And then I switched to the single family homes. I bought one in Memphis. That’s number four. And then, hopefully next week, I’ll be closing on another one in Memphis, and another one in Columbus, Ohio.
Jason Hartman 37:42
Fantastic, Eric, congratulations. Why did you pick the certain markets you picked and what was behind that? I mean, you could have picked different markets. Why that was.
Greg Saylor 37:51
It. I think it’s coming back to a bit a little bit of my view of risk, which I can’t even really argue regulate Well, it’s just sort of this innocuous thing that I wanted to be in, you know, a few different markets with different types of properties in those markets. And I liked all of these markets. I like all of these areas. I don’t like. Columbus is probably the easiest one, I guess. But that’s because I was surprised by the property taxes they’re liking. In Chicago, the property taxes are high, as we all know, but the rents kind of support that in Columbus, not so much. But I feel like Columbus is.
Greg Saylor 38:35
It’s coming around.
Jason Hartman 38:36
Yeah, I agree with you. Oh, Ohio isn’t as blighted as it used to be. I I’m not as hopeful about Detroit. But but the Ohio markets that were actually really pretty blighted in years past they’ve, they’ve come around quite a bit. I mean, when I’ve been in Columbus, Cleveland. I mean, I just I’ve been pleasantly impressed. I really didn’t expect to think as highly of those markets as I did until I, you know, till my last visit before my last visit to them, you know, and I reported on that on prior podcasts, but
Greg Saylor 39:11
and I should say, as well, you know, I lived in Indianapolis for many years, and made many road trips to Chicago and Columbus. So I was a little bit more familiar with those areas as well. So I can’t say it was conscious Lee, looking at those markets, because I was familiar with the area, but that might have been an unconscious factor. I don’t know. But But, you know, it’s like, I looked at all the markets. I looked at, you know, Atlanta, you know, all the markets and those ones just resonated with me. in Columbus. I like, like you just said, I think I just, I like the way that city feels for some reason, you know?
Jason Hartman 39:51
Mm hmm. I agree with you. No, I agree. I agree. Good stuff. Okay. What else do you want people to know about the experience, just Anything else? The question I haven’t asked you,
Greg Saylor 40:03
I would say,
Greg Saylor 40:06
another surprise that I had along the way. And I feel like I’m being so negative. I don’t mean that but was, you know, property taxes. I’ve been a bit surprised a couple of times with property taxes. So I think it’s worth for me I just added as part of my workflow, whatever you want to call it, to just double check the property taxes.
Jason Hartman 40:25
I think that’s very good advice. And one of the constant battles we have, and property taxes, I would say are one of the hardest ones to hold local market specialist accountable on is they generally speaking, they are not conservative enough on the numbers. You know, they’re salespeople, okay. They want to sell properties. And we are constantly as they upload properties to our website, and we make them do the uploading so that they have to make the representation about the property and its performance and you know, it’s pretty objections and so forth. But one of the things that we’re constantly battling with him is, you know, estimating rents higher than they should be, we want them to rein it in and be more conservative. And that’s one of the nice things about having a someone like us that offers an area agnostic approach. And we’ll tell you, if we think they’re, they’re being too optimistic on those numbers. But one of the hardest ones for us to check and know is property taxes, because that’s a complex thing. And it varies by the municipality. So just always take whatever they tell you and just assume it’s not going to be quite as good as they tell you. Okay, that’s the first thing. But the second thing is and I talked about this on a recent show, about the Chicago land area. Of course, when we talk about these markets, we’re not being specific as to city we’re talking about metropolitan areas, okay. So everybody understands that, even if property taxes go up quite a bit, given their financial payrolls in the Chicago or the Illinois area, I should say the whole state. I think the numbers still work out pretty well. I mean, I took our performers and change them based on a 1020, even a 30% increase in property taxes. And those deals still look pretty good to me.
Greg Saylor 42:21
Yeah, I’m baffled in, in kind of a good way how the properties are performed. And just the general quality of the rehab work that is done there. I’ve just been really, really blown away by it. You know, I would think my brain tells me that a property in those areas at that price point with those property taxes wouldn’t perform, but we run the numbers they perform really well. Mm hmm.
Jason Hartman 42:46
Good, good stuff. No, it is surprising. And I think that has the chance to really be more of a hybrid market, where you could see some decent appreciation, as opposed to the more linear markets that just sort of chug along and appreciate more moderately, so That’s another benefit of it.
Greg Saylor 43:01
Yeah. And let me get this knocked out as well. Because I’ve said, I’ve said a couple of things about, you know, the, your website and some of the things we just talked about. But, you know, being a software engineer, one of the things we deal with is normalized data a lot. And you guys have done a remarkable job of that there’s other providers out there that are in multiple markets, they do not do nearly as good of a job as you guys do. So even though I have a few, but I’ve called almost due diligence items or not even and there’s minor, but they’re, you guys do a really good job of getting us, you know, a good idea of what a property’s gonna look like, if we were to buy it.
Jason Hartman 43:40
Yeah, yeah. Good. Thank you. We really, you know, that’s the first thing I said, when I got into this business. Many years ago, as I said, look at goddess standardize the data, because I was trying to do this myself. And I didn’t have anyone to help me. I mean, that’s why I started this business. His back in 2003 2004 I wanted to become a nationwide investor. And I mean the data I would get Greg It was like I had to be a detective work for every deal. It was just crazy the amount of detective work I had to do and I had to assemble things into my own format. And it drove me absolutely nuts. You got to standardize the data. So that’s absolutely imperative.
Greg Saylor 44:26
Yeah, I couldn’t agree more and the other thing I would put out is where’s it gonna go with this? Oh, I’m in terms of the property of course I track all my income and expenses in you know, month by month and I’ve been pretty surprised that the properties haven’t just met the Performa they’ve actually exceeded the Performa So, in general, like after, after anything is all said and done. I think the numbers you guys put up there are actually pretty conservative.
Jason Hartman 44:57
Yeah, that’s what we try to be. We just want you to Have a better experience than what we say. But even if you don’t, even if those numbers come in short, it’s still gonna be pretty good, you know, compared to whatever else you might do, I would say I would hold our, our deals up against anything else you could find, you know,
Greg Saylor 45:15
so and then here’s a real example, like the Chicago property, which I mentioned wasn’t in such a good neighborhood. But I kind of knew that I knew I was taking a little bit more risk with this property.
Greg Saylor 45:26
It we need to put a fence up, right? There’s
Greg Saylor 45:30
no say not good activities going on in the backyard at night. So we need to put a fence up, which is something that we probably wouldn’t have to do. I wouldn’t have to do if I say we, I mean, the property manager and I were in Milan that we should probably wouldn’t have had done in any of the other properties that I bought. You know, it’s just little things like that that can but ya know, it’s just a risk that I kind of knew going into that
Jason Hartman 45:53
right and so, plan for some additional expenses. Be conservative on your numbers have a result fund. That’s all good advice. Very, very good points and tell us what are your plans for your investment portfolio? I mean, you know, you got into this because you wanted to earn a higher return on your money, of course, and maybe the overall goal of financial freedom and leaving the corporate world someday, I don’t know what what are your plans?
Greg Saylor 46:20
That’s an interesting one, because I really enjoy the work that I do. But you know, it’s, for me, growing up really poor, has had sort of this odd psyche, I can’t really explain it, but it’s sort of almost a fear of losing everything that I’ve had my whole life. So, to me, this is kind of more about redundancy, about redundancy of income stream. So if something does happen that has already had very positive impact on that, you know, I already feel more relaxed, just generally speaking, and you know, things are getting better, baby I don’t know if I should say this, but you know, the income that I’m getting for these properties just kind of blows my mind. I’m generating close to $4,000 a month from these six properties. Wow, that
Jason Hartman 47:12
is fantastic. Yeah, that’s what those are. Those are all based on 25% down. Yeah. Yeah. Wow. Yeah, you’re doing great.
Greg Saylor 47:20
Yeah, you be happier with this I’m like, really blown away by it. I mean, that’s that’s not county maintenance and things may come see loss. That’s, that’s how I kind of rate my goal progress, I guess is looking at the income, but then not counting vacancy loss or maintenance. That’s how I kind of track my goals, I guess. You know, yeah. I attract performance. I track my goals.
Jason Hartman 47:44
In terms of goals. Do you have a certain number of properties you want to buy?
Greg Saylor 47:47
I think it depends on what’s gonna happen after property number 10. I’m not sure. I know there’s some solutions out there but I’m still not real happy with the ones I’ve seen either
Jason Hartman 47:59
in terms of finding answering more than 10 properties, right?
Greg Saylor 48:01
That’s right. Yeah, yeah. And and the other thing that I’ve noticed is, you know, the debt to income ratio, or personal debt to income ratio is actually a really important factor in financing. And what I always thought is that as I buy more properties that I’m going to have income coming in from the property and expenses going out with it, my debt to income ratio is actually going to go down. But that doesn’t happen. It actually goes up, I suppose it depends on where you start in the debt income curve. But the way numbers averaged out, it actually kind of keeps creeping up with every property purchase. And I think that number needs to be less than 43%. I don’t want to speak for anybody but so it’s, you know, I’ve been, you know, I count for that on my spreadsheets now to just to make sure that if I’m looking at a property that it’s not going to my debt to income ratio is going to be okay with that,
Jason Hartman 48:51
right. Okay, good, good stuff. And so you’re going to get to your 10th property, and one solution because you don’t like the finance thing out there for more than 10 properties is to just get married and have your spouse buy 10 more.
Greg Saylor 49:08
There you go. Okay, now you’re just teasing me, Jason. There you go. Yeah, good.
Jason Hartman 49:13
There’s a creative solution, Greg.
Greg Saylor 49:17
Actually, here’s another creative solution I thought of, I don’t know how all this would play. But, you know, one has the flexibility to relocate. My understanding is you can buy one primary residence a year.
Jason Hartman 49:29
Well, yeah, but that’ll that’ll be a slow process. But yes, you can do that. Absolutely.
Greg Saylor 49:32
Yeah. So yeah, I’ll definitely be hitting, you know, 10 properties this year. So it’s, you know, in less than a year, basically, I would have filled out my conventional financing. So,
Jason Hartman 49:44
yeah, good, good stuff. Well, Greg, it’s been fantastic. hearing your story. Thank you so much for sharing it with the listeners. Just, you know, anything else you want to say to wrap it up?
Greg Saylor 49:54
I just want to give another shout out to Oliver because part of the due diligence that I do is of course, looking at the neighborhood. And he gave me a lot of really good ideas. And I found some on my own to about, you know, kind of how to like make it back to risk. You know, I want properties, some in good neighborhoods, I ran some I actually want some properties in some less than great neighborhoods. And some things I used to look at that are what’s around the property, like, Is it just a bunch of liquor stores? Or are there movie theaters? Are there other things like, you know, as they kind of go up the scale, there’s like more entertainment type things around the property. And then you get into a really good neighbor, you gotta like golf courses and things like that. So I kind of use Google in a very large way just to figure out what’s around the property and get a sense of, you know, is there a Home Depot nearby or Lowe’s nearby, you know, that kind of stuff. And I think that’s been really helpful for me, and of course, just walking around the street, the technology that’s out there now To be able to look at a neighborhood is just phenomenal.
Jason Hartman 51:04
Yeah. And soon as soon we’re gonna be able to dispatch our personalized drones out to do that for us, too. So it’s, it’s a great, it’s an amazing time to be alive as I always say.
Greg Saylor 51:15
It certainly is. Yeah, it’s done. Personally, thank you to you and all that you guys do. I know you guys work really hard on on everything. And I’ve been an incredibly fortunate benefactor from that.
Jason Hartman 51:29
So well, thank you so much. We appreciate your business and appreciate having you as a client and hope that we can help you build an awesome financial freedom portfolio. So thank you.
Greg Saylor 51:38
Thank you so much.
Announcer 51:41
I’ve never really thought of Jason as subversive. But I just found out that’s what Wall Street considers him to be. Really now How is that possible at all? Simple. Wall Street believes that real estate investors are dangerous to their schemes? Because the dirty truth about income property, is that it actually works in real life. I know. I mean, how many people do you know not including insiders who created wealth with stocks, bonds and mutual funds? those options are for people who only want to pretend they’re getting ahead. Stocks and other non direct traded assets are a losing game for most people. The typical scenario is you make a little you lose a little and spin your wheels for decades. That’s because the corporate crooks running the stock and bond investing game will always see to it that they win. This means unless you’re one of them, you will not win. And unluckily for wall street. Jason has a unique ability to make the everyday person understand investing the way it should be. He shows them a world where anything less than than a 26% annual return is disappointing. Yep. And that’s why Jason offers a one book set on creating wealth that comes with 20 digital download audios. He shows us how we can be excited about these scary times and exploit the The incredible opportunities this present economy has afforded us. We can pick local markets, untouched by the economic downturn, exploit packaged commodities investing, and achieve exceptional returns safely and securely. I like how he teaches you how to protect the equity in your home before it disappears and how to outsource your debt obligations to the government. And this set of advanced strategies for wealth creation is being offered for only $197. To get your creating wealth encyclopedia book one complete with over 20 hours of audio, go to Jason hartman.com forward slash store. If you want to be able to sit back and collect checks every month, just like a banker. Jason’s creating wealth encyclopedia series is for you.
Announcer 53:53
This show is produced by the Hartman media company All rights reserved for distribution or publication rights. And media interviews, please visit www dot Hartman media.com or email media at Hartman media.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate or business professional for individualized advice. opinions of guests are their own and the host is acting on behalf of Platinum properties, investor network, Inc. exclusively.
In today’s episode, Jason Hartman is joined by Fernando and Oliver to talk about self-management options for your income properties. They agree that a great property management company is valuable, but it’s also helpful to know about self-management options. They also discuss maintaining a good relationship with your tenants, best practices to improve home interiors without spending a fortune, and companies who use technology to save you time and money through automating tedious tasks.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Announcer 0:13
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution. For real estate investors,
Jason Hartman 1:03
Welcome to the creating wealth show. This is your host Jason Hartman episode number 729 729. Thank you so much for joining me today, as I am sitting in the car, so pardon, the audio quality won’t last long, because we’ll get into the main portion of this show, which will be a replay of our self management panel from our recent Real Estate Software with real estate tools. That was our joint event with real estate tools and my company. We talked about technology for real estate investors and self management versus professional property management. And Fernando and I happen to meet here today in Mesa, Arizona, at a little income property Expo. And we thought we just report on that real quickly in this intro portion here. Before we get to the main part of the show, Fernando, welcome. How you doing? I’m doing great,
Fernando 1:56
Jason, nice to be here.
Jason Hartman 1:58
Good to have you. And so we made up with this this little Expo. Then we just decided to walk out and record this intro here sitting in my car which is soon to be your car. That’s true. tell everybody about that. We’ve done a lot of business together Fernando you and i
Fernando 2:18
i i wasn’t much of an electric car fan but after being here with you and seeing how cool your car is and you know a lot of the pluses and some minuses but I think mostly pluses I made up my mind that this is the next step in going from my my current you know Audi based car with the combustion engine to go into an electric vehicle as powerful and as interesting as the Tesla is really as sexy
Jason Hartman 2:50
as the Tesla sexy as a sexy looking car. It is a great so Fernando bought my car yeah smallworld so first Fernando was a client. And he bought a bunch of properties, of course, and then he came to work with us then to get together last year, we bought that real estate software company real estate tools. And then he says, You know what? Why don’t I buy your Tesla from you? And so we just struck a deal. And now he’s gonna be ending up owning this car soon.
Fernando 3:21
So I like to have you pay for the, you know, the depreciation.
Fernando 3:27
You know, it worked out well. Yeah.
Jason Hartman 3:30
I definitely took the depreciation hit. Never, ever, ever consider an automobile and investment. It’s a terrible deal. No matter which way you slice it. But hey, let’s tell the listeners about some of the things you know, we just spent the last hour or so walking around visiting all of the exhibitors we talked to every one of them we we talked to a company that offers Nationwide Insurance. We talked to a company that has a high tech locking mechanisms for properties. I’m really sort of excited about that one. I know you are two because that lends itself well to self management of our properties. And we talked to some vendors that do paving and things like this. There’s a lot of apartment, people here. Gosh, the hard surface flooring. That was a pretty good deal, huh? Yeah. Yeah. So so in your properties, Fernando, you’re converting, I believe all of them as am I, whenever I have a make ready, and it’s time to just get rid of the carpet and install new carpet. I am not doing carpet anymore. I’m doing hard surface floors. And you can do this for around $2 per square foot. Talk to us about what you’re doing. And while you’re paying a little more than that, right,
Fernando 4:39
yeah. So so we just met with a vendor in this Expo, income property Expo. And their prices are excellent. I mean, what I think what he quoted was $2 a square foot installed. Yeah, for plank vinyl, which is, you know, going back to what you said I’m trying to standardize in my properties in not used carpet in US plank vinyl throughout the entire property playing final lasts a long time. And you know, as we’re discussing here, it’s not that expensive and they have so many different textures and colors, you can really spruce up your place with a pink vinyl and make it look very sharp and not spend as much money in, in if it’s gonna be there throughout your house and last forever. It’s definitely a good investment. So bear to anything else you could do.
Jason Hartman 5:29
Yeah, and so cost wise here. Here’s the approximate difference, at least from this vendor. You know, if you have a 1500 square foot house, this is about $2 per square foot and you can put it in every room and I really recommend that you don’t cut up your house with a bunch of different floorings number one, it’s over complicated. Number two, it really doesn’t look good. I think it looks the best when you just have one flooring throughout. And in my opinion, it should be the lighter plank vinyl lighter colored version of it. I think the darker color gets dusty, it shows the scuffs a little bit more. And it also makes the house look smaller when it’s darker. So I like the lighter look definitely kind of like the Apple Store. You know, if you’ve been doing a store, you know, they’re looking here, they’re gonna update that. So this will not be timeless By the way, it’s the Apple store as of today, not tomorrow. But this plank vinyl is really good. And this guy quoted that at $2 a square foot and carpet at $1 19 per square foot. So a buck 20 a square foot, well let’s just take thousand square foot house 1200 dollars for carpet throughout and obviously wouldn’t do carpet throughout but just to compare apples to apples and the playing vinyl 9000 square foot house can be $2,000 to do that. I think that extra $800 in that example, is very well spent for the long run because you’re just not going to have the make ready issues down the road. You know it becomes nothing is indestructible but you know finger a speech kind of an indestructible house right?
Fernando 7:07
No, I mean that the plank vinyl is easy to replace if there is one, you know they come that’s why it’s called plank Vanu vinyl comes in planks and if you need to replace one plank, it’s very easy to do.
Jason Hartman 7:18
Just cut it out with a big exacto knife. Exactly. And the installation is very simple. There’s different kinds of playing final but there’s there’s a version of it that they sell at Home Depot that you start with a pair of scissors, you know, just just a heavy duty pair of scissors, and it’s not even glued down. It’s really easy to install. Now, these prices are excellent. I wish this vendor was national but I think he’s local. And you know, here’s in Arizona, I know that Home Depot sells for $1 79 a lot of their lower plank vinyl that I’ve looked into. So by the time we get that installed, you know it will cost a few a few dollars or square foot so his his prices are really good. And here’s the thing folks look at. Don’t let your property managers mark this stuff up a whole bunch, or don’t let them choose the most expensive vendor in your market. Look at you can get this stuff. The great thing about the world today is that we are in the world of the empowered investor, you can go online and you can find this stuff. And the new benchmark is $2 a square foot for plank vinyl. So if you can get it for close to that, that’s what this guy’s price was. But you know, if you can get it for 210 a square foot even, you know, to 15 to 20 a square foot you’re doing pretty darn good, I think. Okay, so that was one thing. And what we want to do is make the long term cost of these properties lower. So if you inherited or purchased a house with carpet, well, I don’t think many of our investors are inheriting these properties, but I don’t know why. Yeah, well, you’re inheriting it from somebody. Yes. But you know, you bought a property and it had partial carpet. Get on a track of replacing with this plank vinyl. I think that’s a very good decision. And I think you’ll be much happier in the long run your house will be more bulletproof. Yes. So that’s good. Now, the other thing is these locks. And we’re going to talk about this in the upcoming segment here in just a moment. But again, the empowered investor, you can self manage properties. The lock technology, I think, has been comparatively to smartphones and all of these great things we have. I think it’s been pretty slow to evolve honestly. But it is it is right upon us. Where we saw a lot today what was that called Kiko QK, low kV Oh, yeah. And I think it’s by Quick Set is the manufacturer. So ke vo and what this lock is is a Bluetooth enabled electronic lock. And it was pretty neat the way that worked without Having a Wi Fi or a cellular receiver and transmitter in that lock, right? It’s simply a Bluetooth. transmitter receiver. Right. Right. thoughts on that?
Fernando 10:11
Yeah, yeah. So I think that’s halfway, you know, from an investor’s not
Jason Hartman 10:15
there,
Fernando 10:16
but pretty close. Yeah, we had an interesting session with with the guys at the booth. We got the whole demo. Yeah, we gave it to them. And we gave them a piece of our mind as far
Jason Hartman 10:28
as what we would like to see as investors. We’re never clinical.
Fernando 10:34
And, you know, they’re doing something neat, which is a Bluetooth enable electronic lock in essentially, your smartphone can control the lock as long as you’re within, you know, 30 feet or so of the lock. And you obviously can communicate with the lock via smartphone. But what we want is, you know, we’re not at the property, the properties that we own when there’s a make ready, they’re vacant, and we are probably thousands of miles away from the property. So We want because we invest where it makes
Jason Hartman 11:01
sense exactly, not where it’s convenient to have a lock and key, you know,
Fernando 11:06
we don’t live near the property so that we want to make sure that that lock can communicate with with the software that controls the lock via a cellular connection. We don’t want Wi Fi, because we don’t know the house is vacant and maybe doesn’t even have electricity. So that has
Jason Hartman 11:22
to have Wi Fi so it needs cellular, but Fernando, it’s not that bad. You know, this is this does more than you led them to believe you gotta tell them a little secret. So here’s the way this chemo lock works. Okay. And I know sometimes on the show, we talk about big, elaborate macro trends in the economy, and big, elaborate investing philosophies. Now we’re just being a little practical today, folks. So we’re talking about some nuts and bolts stuff. You know, on a future show, we’ll talk about the big, you know, elaborate stuff, you know, the big philosophical stuff. But here’s the way this works basically, with the Kibo lock you can provide access to Contractors Repair people, prospective tenants, prospective agents and property managers that you might want to hire. So they can look at the property and insurance agent, whatever, right? And here’s the way you do it. It’s pretty cool, even though it doesn’t have everything Fernando wants, which I agree, I want all that too. But it’s, it’s a step in the right direction. And so here’s the way it works. You download an app to your smartphone, and you can control that lock via Bluetooth. But you can control it via Bluetooth, sort of as a proxy through somebody else’s phone. So that person is local. So it might be say, a painter, and you say, hey, go paint this house for me or go give me a quote on painting it. The painters got a smartphone, and you tell them to download the Kibo app, which is a free app, they can just download in the App Store. And then you basically link over the internet. With their app, and you basically give them through the internet a key to that lock, and that key has an expiration on it. And as soon as they open that lock with their smartphone, you get a notification saying a lock was open, so you know exactly what time they opened it, and what time they locked in. Okay, so that’s pretty cool. Even though there’s no Wi Fi or cellular, it works through Bluetooth as a proxy.
Fernando 13:28
Okay, of course, we need to, we need to see how it works in real life, as we all know, to make a connection via Bluetooth with your car can be very frustrating when you have multiple devices. And so when you lose when you when you have a Bluetooth enabled car, where you’re trying to connect your phone, oh yeah, a car. Yeah. And if you have multiple devices, you know, there’s there’s issues that I can imagine with the tenants, I’m able to have the Bluetooth enabled or not making Right, well
Jason Hartman 14:00
remember the lock is a regular key on it. So your regular tenant will probably just use a key, okay. But you can use the electronic functionality of it too, right? And so like, what I can see happening is, the person downloads the app, they get the key from you virtual key, and then they go to the door, and it won’t work, because maybe the Bluetooth on their phone is turned off. Right. Like, sometimes I forget to turn mine on. Like, why is it? Well, Tom, yeah. And so, you know, there, it’s certainly not perfect. Okay. But you know, the point is, investors Look, it’s an amazing time to be alive. And these technologies are progressing to empower us all more, so that we don’t have to be beholden to a property manager, and we can manage and run our properties from around the world. It’s it’s truly amazing how you can do this nowadays. And what you’re going to talk about in the upcoming panel that we’re about to play the recording from is about these Lock boxes that do that, right? And so stay tuned for a moment and you’ll hear more about that without boring them on this lock subject and the flooring too much. And what else do we want them to know from from this any takeaways today, nursing homes are far more complicated than they want one of my friends who promotes assisted living, I think that’s a great idea. But like anything, you gotta be a specialist. And it’s much more complicated in real life and all the promoters make it sound. I hope I’m not that guy, by the way, because I constantly talk about,
Fernando 15:33
I think what we need, we need to tell him tell anybody that is scheduled to host a booth in an expo that you must know about your product. You’re gonna get customers that become aggravated very quickly. I think you had that experience today.
Jason Hartman 15:49
So on one of my apartment complexes, I wanted to do some repainting why and then my mobile home park, same thing, you know, because the blacktop is looking pretty ratty. Okay. And I walk up to the booth and well, you know, how much does it cost to do a parking lot? What’s the price per square yard? And they don’t know. It’s mind boggling. Well, and I understand completely depends on the condition, right? Is it level ground? Is it all? You know, do we have to do a bunch of move some stones and rocks? And is it all Alligator, as they call it? You know, with the, with the, you know, the way it breaks up over time? I get it. I get it, I get it. But where does it start? You can’t even give me the starting cost. Are you kidding? Like,
Fernando 16:33
it’s a secret. Yeah. Well, he says he did. He truly did not know.
Jason Hartman 16:37
We looked at some screening services that was kind of an interesting discussion with as a tenant screening service. Yeah. Also. The other thing I just want to mention to you and testers, I you know, this one is something I have not talked about very much over over the past 728 episodes, but, you know, I really want you to consider adding a little color to your properties in the interior. I think, you know, having an accent wall that has a color on it would be a pretty good thing. I think it would be attractive to tenants. When that home is vacant and they’re looking at that. I just think that really lightens it up. I remember a bunch of my properties and offices. When I had regular real estate offices, and I had, you know, homes I was living in that I own. I would paint this beautiful color. It was Ralph Lauren Molina red or Malaya red, I can’t remember. But it was gorgeous. And all the other walls I just leave them alone, but I just do one wall in that color. And people constantly commented on how beautiful that was. And the Ralph Lauren, you don’t want to buy that brand because it’s outrageously price, but every other paint vendor just copies it and they give you this exact same color. And you want to do this with again to make your properties more durable eggshell finish paint or lotion. Finished paint, because flat paint scuffs up, and it looks so bad so quickly. You want your properties to be durable, it’s slightly more expensive, not much, but doing the eggshell or low sheen paint is a I mean, talk about lowering the cost of ownership over time and properties. Fernando you’re nodding your head like crazy.
Fernando 18:21
Oh yeah, no, I agree 100% because with with eggshell, the low sheen finish you can there’s a good chance of you being able to use literally wipe off some of those marks on the wall and not not have to do
Jason Hartman 18:35
painting a painting or
Fernando 18:36
the only issue. The main issue with with the these lotion paints, including eggshell is that the touch up is very tricky because over time, the sheen changes. It mellows.
Jason Hartman 18:48
Yeah. But the idea is you don’t have to do touch up in the first place. rightfully, you know, because it’ll last one. I remember my last house in Orange County that I sold in what tooth 2011 I had eggshell paint on there and I lived there for seven years and that paint look pretty good the day I moved out. Now, of course, the new the new buyer did repaint, because I went over and saw them afterwards. But, boy it I couldn’t believe how durable it was.
Fernando 19:14
Yeah, really? That’s definitely the right choice.
Jason Hartman 19:16
Yeah, good stuff. Well, hey, I think we ought to get to our segment today without going too long here. Be sure you go and check out Jason Hartman comm for some great properties. And check out Hartman education comm for some great educational products. Several of you have expressed interest and a couple of you have signed up for the venture Alliance. We’ve got our next meeting coming up in the beginning of December, tentatively planned for our hometown here, Scottsdale, Arizona right here locally. So that’s going to be a great event. more to come on that check out venture Alliance mastermind for details on the venture lions high level mastermind group and let’s get to our segment where we talk about some Management on this great panel with Fernando and Oliver.
Let’s talk a little bit about managing your property manager versus self management. We’ve got Oliver and Fernando here to talk about this. You’ve got 70 units. Now, you said a very interesting thing to me at I think it was the last week, the Masters maybe the one before possibly. And what you said is you said some of your self managed properties are easier than your property manager properties. Really? Yes.
Expert Panel with Fernando and Oliver 20:32
Tell us about that. So there’s different aspects of it. One of them is just because you have a property manager doesn’t mean necessarily that the properties are on cruise control. You have to look at the statements you have to approve items you have to be on top of items that look suspicious on the on the statement. There’s time evolved in talking to your property managers. And if you add all of that up, compared to self management does play a role into which one is easiest thing.
Jason Hartman 21:05
So how many units are self managed in your portfolio? And how many are property managed by manager? So actually
Expert Panel with Fernando and Oliver 21:10
I have I have two little things that you don’t know about. All right, that’s gonna be
Jason Hartman 21:14
pretty huge. I can’t wait to hear from you. And we’re gonna hear.
Expert Panel with Fernando and Oliver 21:17
So I prior to in the last midterm, so I had about 10 properties that were self managed, and most of them were in Austin, Texas. Austin was a good choice is a good choice for self management. Because the tenant pool in Austin is the B plus there’s a lot of tech industry in Austin and the properties that are that I own, there are BB plus properties and therefore, those those tenants are easier to deal with a lot of them. They are tech savvy. If there is issues, they can do some of the research they sometimes can fix the properties themselves. They use the mail, you know, they, they can communicate well, they’re, they’re easier to deal with
Jason Hartman 21:58
the basic concept there is a more simple sophisticated tenant is easier to deal with. As long as they’re not a lawyer. I had a lawyer call me up. He said, my wife and I want to rent a property and we have two dogs. And we’re both lawyers. I’m sure you don’t want to rent two lawyers and two dogs, right? He said that not me. I didn’t say anything. But he does. Yeah.
Expert Panel with Fernando and Oliver 22:20
But the most interesting aspect of it is that the dynamics when you’re self managing in this sort of B to A type, tenant pool, the dynamics are just different in that, the tenants tend to ask for a lot less things and they tend to be self reliant, which means that you have less issues. A lot of times the tenant will say, oh, send an email, because they use email and like some other transit tenant, and they’ll say, you know, there’s a problem with the AC. What would you like me to do? I already checked, and there’s a local guy here. If you don’t have anybody available, maybe I can call the local guy.
Jason Hartman 22:57
That’s how my Houston tenant was self managed. But he just he did all the work. It was amazing. Yeah.
Expert Panel with Fernando and Oliver 23:02
So I smiled and I said, Oh, please contact the guy and let me know, you know, reimburse you whatever is needed. There was another case where there was a leak in the flooring got wet. The tenant, you know, took out the part of the carpet that was wet and called somebody to see if that could be addressed and was not just telling me what the problem was, but also provide well being so right there, which is just awesome.
Jason Hartman 23:26
Okay, so here’s the thing that happens with self management. So first, let me just tell you what happened to me and on the road to self management. I had a Texas property property manager wrote a letter on getting out of the business. I’m not gonna be doing property management anymore. And so I had Karen, my operations manager at the time researching other property managers. It was a market that we weren’t very active in. Okay, at the time, she started researching other properties manager, she found a couple of them said, you know, made some suggestions. I was just busy and I did not get around to actually hiring a property man. Senator, following month, I get a check in the mail with a nice note. Hi, Jason, I heard that I should send the checks to you right now. This is your tenant on so and so’s Street. And he wrote me a nice note, right? And he says, If you need anything, he says this to me if you need anything. Here’s my number and email address. Right. And he stayed there for about, I think, three and a half years. And he was awesome. I couldn’t believe it. I just after receiving checks from the tenant directly for get this property I’ve never seen a tenant I’ve never met. Right? I just thought it was a phenomenal experience. And what I kind of realized, and I know a lot of you are thinking, well, I can’t self managed properties from a distance. Well, two things about that. Number one is in the vast majority of cases, except for maybe annual inspections. How do you think your property manager knows if there’s something wrong with the property? The tenant tells them all right, it the tenant is the monitor of the property, okay? Not the manager or the manager. doesn’t live there. Obviously,
Expert Panel with Fernando and Oliver 25:01
I think ultimately what it comes down to is really setting the expectation up front as much as you can with that tenant. So in terms of, you know, setting the expectation of when something does go wrong, these are the steps to take, whether it be send me a text right away, or if not, send me an email have some sort of correspondence. And if you even if you want, you can even set the expectation of if it’s under a certain amount, for example, like 100, or $200, you can go ahead and do so if you know and if we have any issues with it thereafter, then we’ll take care of it. And there’s very easy ways to actually to credit the tenants with certain programs, that we can
Jason Hartman 25:36
make a deal with a tenant saying that they have to do the repairs under a certain dollar amount. I mean, I know landlords that do that all the time. See, here’s what the other thing that happens with self management is that the tenant has the social pressure of maintaining a relationship with you, and you’re going to attest to the site now. Okay, so the tenant needs to maintain this good relationship with you as the owner With a property management company, ABC property management, they just sort of act like they asked for everything. Oh, I saw an ant in the kitchen, you better send an exterminator over, you know, a light bulb burnt out, I’ll come and fix it, you know? And and when it’s when it’s a person that they’re dealing with, and they know you’re an owner, you’re the owner of the property and they have that social pressure of needing to maintain that relationship with you. They literally at least in my experience, they just don’t ask for that much.
Expert Panel with Fernando and Oliver 26:31
It’s similar concept when you go on vacation and you stay in a large hotel. Any little thing that goes wrong you feel at least I don’t feel
Jason Hartman 26:38
you don’t feel bad about asking Yeah, you don’t want him to come fix
Expert Panel with Fernando and Oliver 26:41
but if I’m stay fight, I’m doing a home exchange or staying in somebody’s home. You know, you you have a different relationship with that person almost embarrassed to say certain things and he just fix it. Yeah. So that is that is definitely a true You are a tenant in soy Am I
Jason Hartman 26:58
interestingly at the moment We both rent I love renting because, well, we have to touch on why right? Okay. So, you know, when you rent a high end property, it’s such a good deal because the rent to value ratio just gets all out of whack and the delta between these two are just mind boggling, right? You rent if your property is under $200,000, you should probably own it. If it’s over $200,000, that delta gets bigger and bigger. And if it’s $2 million, you’re definitely better off being a renter. But what about that? were you gonna say about repairs? Right?
Expert Panel with Fernando and Oliver 27:34
I can I can see that dynamic playing with myself as a tenant. If I have an issue with the house, and I’ve met the owners and I know them. You know, I fix it myself before I’m thinking of asking them it’s almost embarrassing.
Jason Hartman 27:49
If you lived in some big institutional apartment or you had a property management company managing that property. You would no hesitation or hesitation. Yeah, it’s interest. Interesting. Yeah.
Expert Panel with Fernando and Oliver 27:58
Yeah. All right. So Two updates that I wanted to talk to you about. I think it was either last meet the masses or two years ago where we talked about that flat fee concept. You remember that
Jason Hartman 28:10
two years ago, two years ago, a year and a half early.
Expert Panel with Fernando and Oliver 28:12
Right. So I actually have that in place with my property manager in St. Louis.
Jason Hartman 28:18
Ah, so what tell us what the deal is, right? So percentage Did you read it? So I have
Expert Panel with Fernando and Oliver 28:22
eight buildings in St. Louis for plexes, two for plexes and the rest of duplexes and I was being negotiated about 8% monthly fee for property management, plus the lease the normal lease up fees and you know, some percentage of maintenance that they charge on top of the regular repair. So this is the old deal old do you know that’s what most property managers do? I wasn’t too happy with this property management company. And I decided to switch over to some other property managers that I had a relationship with. Previous to the to the one that I have in St. Louis. And I negotiated with a property manager a flat fee that in cludes the regular monthly fee, that property managers charge in my case 8% includes all the lease up fees, the renewal fees in any other of the nickel and diamond type of fees that you might see in a regular property management me negotiated a rate of 12% that would cover the entire everything. Yeah, the whole thing.
Jason Hartman 29:23
What about on the late fees, everything.
Expert Panel with Fernando and Oliver 29:25
So this is a In
Jason Hartman 29:26
other words, they get 12% of the late fee, and you get the rest instead of them keeping it all Exactly.
Expert Panel with Fernando and Oliver 29:31
Okay. Right. Interesting.
Expert Panel with Fernando and Oliver 29:33
So it’s a very simple equation. And we just started about three months ago. Mm hmm. And the deal is that as I add more properties, so So what I’ve done is I’ve tried this model with one building, and if it works, well, I’ll be moving over some of the buildings from my traditional property management agreement to this new model.
Jason Hartman 29:56
So this is what I had suggested at meet the Masters to 2015 that the property management fees and we talked about it with our local market specialist meeting on Friday before this event, I suggested that it’d be a flat concept where instead of having clients feel nickel and dimed that they actually pay a higher percentage. I didn’t name what that percentage was. It’s just whatever people agree to these are not fixed by law. You know, they’re it’s competitive market, obviously, but actually pay a higher percentage, but know what I call garbage fees, no lease up fees when a late fee is collected from the tenant because we want to have the interest be aligned between the tenant and the manager when a late fee is collected. The manager doesn’t keep it all, as they mostly do. It is split on that percentage. So if it’s 12%, then 12% of every dollar that comes in goes to the property manager, but nothing else. No renewal fees, no lease up fees, no late fees in the sense that they keep at all, which it doesn’t feel like that’s a charge to you the owner, but guess what, your tenant is your customer, we got to remember that our tenant is actually the one paying the money right? They’re our customer. You know, you don’t want to make the manager predatory on the tenant. In that example you don’t want to give them too high a motivation to be collecting late fees, because then your tenants gonna be unhappy and you’re gonna have higher turnover rate. And that’s not gonna be good right? You want your tenants to stay along time my opinion
Expert Panel with Fernando and Oliver 31:26
this works even better with multiplexes because now instead of having what you see the movies Yeah, exactly what you see the Canadian we go to the cinema anyways, it works even better with the four plexes duplexes, etc. Just because you’re now having that one set rate instead of having to essentially manage and look after each expense for every one of those units. Like Tell us a bit more about how much time and how much less stressful it is when you’re reviewing those statements. Everyone right
Expert Panel with Fernando and Oliver 31:52
and also in the same vein, because these are the most the transit tenants and the ones that have the highest turnover There’s a lot more lease up type costs either release or new tenants turnover. So having a flat rate works in my favor for those sorts of properties. So so you’re
Jason Hartman 32:12
really excited for the lower rate lower like C plus properties, C properties, right? It’s better, you don’t think I would work on the A’s. I mean, where you have managers in the B properties.
Expert Panel with Fernando and Oliver 32:23
I mean, I haven’t tried to put too much thought into it. But as Oliver mentioned, the amount of decisions that you have to make and how much of those charges you have to watch out for it, just it’s, it increases with the lower quality tenant, right? So having a flat fee works in the in the landlord favor. Yeah,
Jason Hartman 32:41
good, good. And I think it aligns your interest with the property manager. One of the real problems that may not have occurred to you yet, and it took a while for it to really occur to me is that there’s a concept in business and in law that you can’t serve to masters, for example, if you hire an attorney, they can’t work for you. And the other side too, even though sometimes it might feel that way. Technically, they can’t be working for the other side and for you at the same time, because it’s a conflict of what a conflict of interest, right? The property manager sort of has this inherent conflict of interest. They’re really serving two masters, because they have to serve the investor owner of the property, but they also have to serve the tenant in a way. Why do they feel like they have to serve the tenant? You might think? Well, they do. Because the tenants, they get angry, and they go online and they start writing stuff on Yelp, okay, or wherever. The property manager does not want that to happen. And they don’t want complaints with the Better Business Bureau and whatever. Even though the Better Business Bureau is a bit of a joke. If you ask me. They don’t want that. So they have to serve two masters, the investor and the tenant. And I find that a lot of times the property managers, they’re reluctant to take legitimate fees out of the tenants security. deposit. Do you find this to be true at all?
Expert Panel with Fernando and Oliver 34:02
Not so much that but I can see. I can see where where that would have. Yeah,
Expert Panel with Fernando and Oliver 34:06
yeah, I definitely agree. I mean, there are a lot of tenants out there or property management, especially whenever any of you have any type of make ready, watch what they put into that scope of work, because you could essentially dispute some of those items so that they actually be withdrawn from that security deposit. as Jason mentioned, they want to stay in the good favor of the tenants so that way, they don’t get bad reviews. Some of the best property management companies I’ve worked with have horrible reviews on Yelp, and some other outlets out there. But ultimately, just bear that in mind whenever you’re doing your due diligence and your research online.
Jason Hartman 34:39
And interestingly, you say some of the best you’ve worked with have horrible Yelp reviews because they’re fighting for the owner. Exactly. And those reviews are probably from tenants, right? I mean, they may not be owners could review them too. Of course,
Expert Panel with Fernando and Oliver 34:49
exactly. Just meet with them as if you can otherwise just do your due diligence in terms of interviewing them asking the right questions.
Expert Panel with Fernando and Oliver 34:56
Jason talks about this all the time. If you have a problem. Manager and you have good chemistry with them. If they’re doing a good job, you don’t have issues, keep them. Yeah, you know, they are worth their weight. And I do have one one property manager in particular that goes on cruise control. Very few interactions with them. They work very well. So not touching that at all.
Jason Hartman 35:17
In other words, it’s cruise control for you, not them, because they’re doing their job.
Expert Panel with Fernando and Oliver 35:20
Yeah, right. On the other side of the spectrum, we talked about self management. So the next update that I wanted to bring up is in Atlanta, I had a property management company that was managing about 25 of my properties. And I was painting traditional type of arrangement with them, I was paying them and negotiated down to 7% monthly fees, but they had all kinds of other fees and stuff. It was actually closer to eight or probably more, at least on the fees, not counting the lease operator, that sort of stuff. But they weren’t doing a good job. Be very careful with quote unquote property managers that are nothing more than dispatchers. They should be Solving problems, not just passing the problem on to you. Yeah, right. And it really it got to a point that there were in this case, there were two people that working in this property management company, one of them was terrible at this issue, where the the initial come up from the tenant in the property manager would not provide any solutions when the communication would come to me simply
Jason Hartman 36:25
pass the problem.
Expert Panel with Fernando and Oliver 36:26
Yeah, please advise. Yeah, right. My immediate reply, Okay, tell me more about it. How much is it gonna cost are there different, it was always the same type of conversation. It got really old very quickly, in I looked at the amount of money I was paying to them. And there’s plenty five properties at a standard type of property management, roughly 40 $500 a month.
Jason Hartman 36:47
Well, 25 properties, were a nice account for them a
Expert Panel with Fernando and Oliver 36:51
very nice account. As I mentioned, there were two people working in this property management company and I got along pretty well with one of them, which I had a relationship with in the past. Through through another property manager company and I wanted to know, if there was a better way to do this, could I self manage these properties? In what? what I decided to do is to give an ultimatum to the property management company. And I told them that they had to cut their fees by 50%.
Jason Hartman 37:21
Wow, to 20 $250. Yeah. You can’t say that when you’re only paying the manager $90 a month, just so you know, it’s just not gonna have more leverage, okay.
Expert Panel with Fernando and Oliver 37:30
Yeah, in the, you know, you know, would you would, I will be willing to stay, you know, working with you if you cut your fees by 50%. And if you don’t, what I’m gonna do is I’m going to self manage the properties. I’m gonna transfer the properties under the LLC that owns title on the properties, and I’m going to hire an assistant to help me with the issues of property management
Jason Hartman 37:56
for 20 $250 a month for 4500 dollars a month, you could pay someone 60 grand a year almost?
Expert Panel with Fernando and Oliver 38:03
Well, it gets better than that. Yeah. When I do the math with how much time they actually spend, I asked the property manager, how many hours a week do you actually spend on these 25 produce? Well, you know, so so spends five hours I spent about, you know, five hours, maybe 10 hours a week. So I did the math. So I mean, if I paid this guy, you know, 30, or I don’t remember what the what the exact rate was, I would actually pay 1500 dollars a month for property management services through through an assistant compared to 4500 that I was paying to the Yeah, to the traditional group. Oh, I got that guy’s attention. It was it’s a small property management company. So he called me the next day and, you know, he I think I have 50% margin in my business, you know, what do you think you’re doing and blah, blah, blah, blah, blah. And I was very calm and I said, Look, you might have the wrong business model. Yeah. You just might not realize that the the industry is changing right under Yeah, they
Jason Hartman 39:00
don’t it’s a really old fashioned business, unfortunately,
Expert Panel with Fernando and Oliver 39:03
in he was he was, you know, telling me that he could not hold the account. And, you know, there was no way that he could make this work and would have to end the agreement at the conversation lasted about five minutes. Yeah.
Jason Hartman 39:16
You know, so now you’re self managing.
Expert Panel with Fernando and Oliver 39:17
Yeah. So we started this, three months ago, three months ago, there was a clause, a termination clause that was in a contract that required me to stay with them for 60 days. So the 60 days expired, and we transferred over the properties. And now we use that folio as part of the communication with attendance and track of Have
Jason Hartman 39:39
you bought a subscription to App folio? Yeah,
Expert Panel with Fernando and Oliver 39:42
how much was that? 250 a month,
Jason Hartman 39:44
$250 a month. So. So if you want to really build a good sized portfolio and self manage it, you can just use that yourself. Okay. For example, you don’t need to be in the property management business, but you can take advantage of the software. They use that’s what property managers use fully a lot of them the the, the checks get directly deposit into my own bank account as opposed to stay in a few days with a property manager
Expert Panel with Fernando and Oliver 40:09
using cozies for them so cozy I use for 10 other properties. And that’s cozy is another company that we, we love, we love and we had them meet the masses before they do rent collection really well and they set up accounts with the tenants and in have direct deposits coming into your account days after the payment is done. And it works really well.
Expert Panel with Fernando and Oliver 40:33
They can actually also screen the tenants too, which helps immensely because your credit score will show up their employment history. Also any type of criminal record will also show up on some of these reports that you’ll just go to cozy.co it’s not.com.co. And it happens seamlessly and only takes about four or five days to actually get your checks deposited. So for anyone who’s self managing, that’s definitely
Jason Hartman 40:55
so when you self manage, you get your rent faster, like my mother, the Extreme do it yourselfer? okay and I disagree with her extreme do it yourself or philosophy but a little bit of do it yourselfers. Okay. She’s like a hawk. I mean, I remember I was at the Cleveland Clinic with her and this might be a little overkill. I was trying to take the phone away from her. And she’s literally in the recovery room. Coco and I are there visiting her. Yep, that’s you, Coco. Were there visiting, you know, they let the dog in the recovery room, which was kind of cool. Um, and all the nurses fell all over the dog just loved her. It’s the first of the month and she’s looking to make sure her rents are in her bank account, because she makes the tenants responsibility to go to she’s with a national bank, okay? And the tenants responsibilities go put the money in her account on the first and if it’s not there, she’s on it. So versus having a property manager, you might not get paid till the 20th of that month because they’ve got to collect and do their process and the check has to clear and then they send the check to you or they deposit direct deposit hopefully in your account. If you’ve got a good property manager. They’re worth weight in gold, I mean an income property. Because gold isn’t that great, as we’ve discovered. But, but if you’ve got one that’s just not that good. You know, you might try self managing. Sometimes when you do things directly, it’s actually more efficient than having someone else do it. Like if you look at two US presidents right, and one that I kind of consider to be a pretty bad president, one that I consider to be a pretty great president, Jimmy Carter versus Ronald Reagan. Now, this was way before my time, I wasn’t even born yet. But I hear about them and watch some documentaries. And so you know, Carter was like this. He did everything himself, supposedly, which wasn’t really true, but that’s the image he liked to portray the common man thing, right. And Reagan was like an executive. He was more like a delegator. Right? And some things, it’s just easier to do them yourself. And if people try to tell you, oh, well, Jason, you got to delegate this. They say to me, right, you said this to me. And sometimes it’s true, it should be delegated. But sometimes it’s literally just easier to do it yourself. With technology that we have nowadays, a lot of times it’s easier. I mean, look at the example of you go into some usually older executives office, and occasionally you’ll go into their office and there’s no computer on their desk. It’s kind of shocking. Why have a secretary for that? Are you kidding me? Like, you know, to type an email. I mean, just that’s just so inefficient. It’s just easier to do it yourself to now have a third party. So sometimes it’s easier you take out the middleman and go direct, but I think you really hit on it. It depends on the type of tenant. Yeah,
Expert Panel with Fernando and Oliver 43:32
if it’s a and b tenant, probably much easier. If it’s a C tenant, you know, it’s not as easy to self manage it. I know most of you listen to the podcasts. There are a ton of companies that you bring up in interview the executives of these companies and the owners, and they tell you about the services that were traditionally done by property managers
Jason Hartman 43:58
like all hearts, I’ll start
Expert Panel with Fernando and Oliver 44:00
services cozy. We just mentioned that or rent Lee calm, which does the lockbox and stuff, we have the national eviction podcast that you had the other day, all of these pieces that were under the umbrella of a property manager can be done more efficiently with all of these companies. Yep, you know, directly. And that’s what essentially self management is, is the ability to be able to create accounts and have these companies work directly with the property in this case or with me or with the, with the bank for direct deposits and that sort of thing and make it happen for you, instead of having a property manager be the minimum
Jason Hartman 44:36
in the beginning of the internet era, the first.com bubble that happened shortly after but you know, late 90s, early 2000s the big word in the tech world in the internet world was disintermediation, right, getting rid of the middleman, and you know what you can deconstruct a lot of this stuff and it’s sort of all a cart now that you really can do it more easily yourself. And one of the visions that Fernando and I have with real estate tools is to create this platform that in my dogs moves like a cow, it’s hilarious. Did you hear that way back there? Go Go. What do you think? Yeah, there she is. He’s behind Fernando there. So one of the visions we have is to create this platform that empowers investors to self manage, and if they have a manager empowers them to work better with their manager, it you know, they get the choice of how they want to do it. One thing I wanted to say about Oliver’s comment and it’s really related to cozy is that there is a big sea change happening in the world of renting a property and you need to know about it, because it matters to you as investors probably matters more to the tenants but it’s just important to think about this and how it’s going to play out over the years cozy just did a big deal with the National Association of Realtors. There are other companies doing big deals to work on this type of stuff. And the concept used to be and still is largely where when a tenant because remember, we’ve got to understand their experience have the tenant experience, not just our own experiences the landlord when the tenant goes to look at different properties, and they see one that they like to rent, they fill out an application with that individual owner, and they pay them an application fee, you know, that will cover the cost of the credit report plus, frankly, make the owner a lot of money. Usually a lot of owners make a bunch of money screening tenants, frankly,
Expert Panel with Fernando and Oliver 46:33
that’s how close he makes money. Yes, because their collection is free, but they make money on the report.
Jason Hartman 46:37
Yeah. And on the float how much they charge for the reports for the tenant. You know,
Expert Panel with Fernando and Oliver 46:40
I think it was like 35, maybe $50.
Jason Hartman 46:42
That’s pretty, pretty cheap, frankly, compared to some they charge 250 it’s absurd and yeah, really kind of ridiculous. One of the sea changes that’s happening is instead of tenants applying for individual properties, they now go to one centralized place like cozy and they create a tenant profile and I I did this myself as a tenant on Zillow, where I basically went in fill out a profile put in, you know, here’s my income. Here’s my whole scenario. And then if I get these alerts for properties, I, it just says, send, you know, send your report to the manager or the landlord or the owner, right? And I just click a button, and they get my report. And they call me right back because I say this looks like a pretty great tenant. Thank you. And, and so that’s the way it really should be. So what does this mean to us? Well, we don’t know yet, frankly. But one of the predictions I would make is that this is becoming a much more fluid liquid frictionless market with landlord tenant relationship. That means that it will be easier for tenants to search for new properties and find new properties. And that’s the same way with things like jobs. In the old days, people’s resumes weren’t perpetually online, but now they are with LinkedIn. Everybody’s always available for job. And if you’re married, everybody’s always available for an affair on Ashley Madison. Okay, you know, it’s like, no one ever. The deal is never solid anymore. It’s kind of a terrible thing, in a way, right? So it’s much more fluid and dynamic. And that’s what’s gonna happen with tenants. I think it’s gonna be a lot easier for them to shop. Oh, yeah. And that’s going to work for us sometimes and against us. Other times. Yeah. But certainly, if we want it to work for us, we have to be using the modern technology, because that’s where the tenants will find us. versus if they’ve got to go, they call up about a property, and they see an ad on Craigslist or something. And, you know, they say, well come by, take a look, fill out an application pay me an application fee versus ours. They’ve just done a cozy profile and we’re using cozy and they can just easily apply to us, right? We make it easier for the tenant, make it easy for our customers to do business with
Expert Panel with Fernando and Oliver 48:56
us and even viewing properties. I mean, did you talk to a renter Yeah, on your podcasts or no? Yeah, I’m pretty sure that the ones with the lockbox where you can get a real credit card.
Jason Hartman 49:05
That’s the one where I sent you that I think I sent you a voxer message from the IMF conference.
Expert Panel with Fernando and Oliver 49:09
Yeah, that’s better. Yeah. Yeah. So we are using rampy in one property in Austin. And
Jason Hartman 49:16
actually, wait, do you hear this? This is awesome. Okay, explain to them how it works. It’s so awesome. It’s an amazing time to be alive.
Expert Panel with Fernando and Oliver 49:23
So really rent Lee essentially puts lockboxes into homes, and you have access to the home by providing your credit card information. As a tenant, you can view the home on your own. You don’t need a property manager. You know, you just sign up online and you can go and check out if you like the property or not, you know who was there because they have to give their credit card in order to to get there. And it’s very convenient to get these reports that come online and you can, you know, see what the activity is. You can see if you’re showings are going well. It’s a very interesting model. The piece I think that Remley still needs to work on is the the boxes can be placed in the home, but they don’t physically deliver the boxes to where you have right properties.
Jason Hartman 50:17
So you can’t really do it yourself. You could use TaskRabbit
Expert Panel with Fernando and Oliver 50:21
TaskRabbit. Or you can use a tenant the previous tenant so that’s why we should write is this Can you put this lockbox there?
Jason Hartman 50:29
And what do you ship it to them? Do you have them in your house? Or do you ship it directly from currently
Expert Panel with Fernando and Oliver 50:33
at least sends it to them?
Jason Hartman 50:35
Isn’t? Isn’t this amazing? Do you see how empowered you are nowadays? I mean, once you have that, folks, are you awake? You shouldn’t be amazed by this. Do you know how difficult it was to do all this stuff before? You need more logistics that
Expert Panel with Fernando and Oliver 50:51
you could just couldn’t do it? Yeah. Have
Jason Hartman 50:53
you had enough Coffee? Coffee is a superfood.
Expert Panel with Fernando and Oliver 50:57
Okay,
Expert Panel with Fernando and Oliver 50:57
this coffee is great because it’s
Jason Hartman 50:59
this coffee is fresh. Good here usually hotel. Actually like this coffee pretty well,
Expert Panel with Fernando and Oliver 51:04
usually it sucks. But But the key thing so if you’re right this is awesome because once you have a lockbox
Expert Panel with Fernando and Oliver 51:10
that is controlled remotely, you can have people that contractors go out there and do avails on your property or do make readies or move out or move ins, you now have control. And that’s what the like the property managers that that’s where I had the argument with that guy in Atlanta is that he does a lot of changing. Yeah, you know, it’s it’s not that hard to put a lockbox and the control here, you know, via a mobile or mobile device. It’s
Expert Panel with Fernando and Oliver 51:40
just to give you an example for that as to how easy it can be. We had a we had a completely remodel, we had to take some carpet out and put laminate floors. And we actually had the entire job done without a tenant or anyone actually being present at the house. We coordinated everything via Email. So there’s
Jason Hartman 52:01
no, no property manager, nobody to let them in just thing.
Expert Panel with Fernando and Oliver 52:06
amazed. It was absolutely, um, it was unbelievable the first time we’ve really done that seamlessly. And you know, the the person that was there just called me up, took pictures of the place and have the job done. Also, you know, before and after pictures, it was quite easy. Ultimately, I think what we’re all getting to here is there are so many different mediums out there to really self manage, and it can be quite easy no matter where you are in the world. Up in the Canadian, Arctic or down over here in California, Canada. We do have internet up there. We actually do, yes. But ultimately I, you know, get into yes back to some of this is that you really can do it. For some of you that are getting into this for the first time. self management is not really something I would recommend. That’s my personal recommendation. I would definitely suggests getting in getting a property management lease for the first year maybe to seeing how it’s really done, seeing what type of expenses typically come up with your property. And then if you decide to take the plunge, go forward and try it out with one property, and then add on more as you feel more comfortable.
Expert Panel with Fernando and Oliver 53:16
Yeah, I second that I did not start with self management. I thought it was much it would be much easier to just learn first with the existing provider. So when you you guys purchase a property in there’s a provider of property management that comes along with the provider, it’s probably a good idea to start out with those. And you can always change property managers. I’ve done that over the years in self management and in different property and
Jason Hartman 53:42
you haven’t been that many years in this. You’re four years in right four years. Yeah, over the years. He says you got a lot of properties so it’s like dog years.
Expert Panel with Fernando and Oliver 53:56
mistakes you make in the video, the
Jason Hartman 53:58
more they are doggy which is a great Point, fail fast. Don’t be afraid to fail, but fail forward and just learn from it quick. So when you have these experiences, like if you’re newer and you’re not into this self management idea and you think we’re crazy up here, right? Which we might be crazy, okay? It’s not perfect. There are some real pitfalls that can happen with self management to assume that the experience you have with your property manager is them, teaching you to be a manager. Okay, view it like that. They are your free tutor. You know, you’re paying them to be your manager, but you’re going to learn about property management.
Jason Hartman shares why he chose real estate for his career of choice and the biggest mistake he made and how it affect his life. He also talks about keeping property managers on a short leash and the top 3 qualities a real estate investor should possess to succeed with the buy and hold strategy. Live events offer investors an opportunity to meet other investors who are successful using the long-term buy and hold strategy, hear about real-life examples of the acquisition process, and learn the tips and tricks that can make an investor’s life easier.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Announcer 0:12
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 from Real estate investors.
Jason Hartman 1:03
Welcome listeners from around the world. And thank you so much for joining me. This is your host Jason Hartman with episode number 705 705. So glad so many of you have stuck with us for a decade. I talked to two listeners, just in the last few days. I don’t know time goes so fast. Was it last week or just in the last couple days? I’m not honestly sure. But it was recently. How’s that? Who said they have been listening to the show for 10 years? A decade of listening to a complete idiot like Jason Hartman. Gosh, how can you do that? Well, no, just kidding. He’s not that dumb. Anyway, we will keep the content coming and help you build great real estate portfolios, and make sure that you avoid as many mistakes on your road to financial freedom as possible. And we’re going to continue that topic. Today, as we’ve got one of our investment counselors you’ve heard from before Oliver Oliver, you there. Hey everyone.
Oliver 2:05
Yes, I am here, Jason and we’re here to help you,
Jason Hartman 2:08
obviously and Oliver is coming to us from San Diego, California, sunny San Diego. And it’s a lot cooler than Phoenix right now. You know, it’s just kind of miserable here right now. I don’t remember it being this bad.
Oliver 2:23
I’ve got to say, Jason, it’s pretty nice here. We’ve got the nice ocean breeze. La Jolla is still calling your name though. No way I’m not going back to those ridiculous oppressive taxes.
Jason Hartman 2:33
And you know, the other thing I really didn’t like about living in San Diego or California in general, is that the crowds everything’s just so high on the hassle factor and I mean, I can imagine you know, like for our listeners who live in LA or New York City or Oh my god, it’s just too hard. You know, I like going to places and getting parking spots and not waiting in line and getting into restaurants without a big weight and in in high end densely packed populated areas resources are scarce. And I like them when resources are a little bit more abundant. So, but yes, the heat is pretty miserable. I’ve gotta admit, the air quality’s miserable you know kind of thing you get in living in Scottsdale or any place like this in the summers you get a little bit of Cabin Fever it’s sort of like how people implement climates back east must feel during the winter. We kind of get it out here to in a different way. I mean, it’s you can go out but it’s it’s not very pleasant outside. It night at night. It’s okay but in the daytime oh my god just you got to stay in.
Oliver 3:37
I’ve got to say I lifted you know, I’m from Canada and I live there you know, just about my entire life. And during the winter, it got really cold as you know, you’re not really up there all that much. But minus 30 minus 40. was pretty typical where I was at, and Kevin fever you definitely get it because you’re indoor the vast majority of the time so you tend to try and head down south whether it be San Diego Caribbean, Mexico just about anywhere to get away from the cold for at least a week or two.
Jason Hartman 4:04
Yeah, that’s true. But I gotta tell you something, there is one benefit to places like that. And if you’ve noticed this, folks, you know, this is a theory that I developed a long time ago, when my mother sent me to upstate New York in ninth grade, which I really hated her for that at the time, but ultimately, it was a good experience. I think it was good for me. She sent me to live with my grandparents in upstate New York and ninth grade. And I went to the same school, she went to Letchworth Central School, which is the school out in the boonies. I lived with my grandparents on a dirt road. And I went to school there and I couldn’t believe how much smarter the kids were in Podunk, rural upstate New York than they were in Los Angeles, California. Okay. And I’ll tell you my theory. The reason they’re smarter is because In in places with inclement weather, people stay inside and they read more stuff, you know, in places like Southern California or Arizona eight months of a two thirds of the year our weather is frickin awesome here I think it’s the best in the world. Not right now but two thirds of the year, really three fourths of the year it’s it’s pretty phenomenal here in places like this where it’s beautiful all the time you’re outside and you’re not reading and learning you’re out socializing, bike riding, doing you know nice cool things but you don’t get a smart you know, if you’re, if you’re stuck back east in the snow sitting at home, you’re gonna read some stuff and develop your brain a little more.
Oliver 5:41
Am I wrong?
Oliver 5:42
I don’t know. I think that Yeah, there’s different ways to be looking at that because as a Canadian, you know, I was out there. I’m skiing. I’m out doing I’m on ski doos. I’m out. doing you know, snowshoeing around. If not, you’re going to like sugar cabins. There’s so much you can do you Even though it’s minus 30
Jason Hartman 6:02
It’s a sugar cabin.
Oliver 6:03
So in French, it’s called like a gingerbread
Jason Hartman 6:06
house.
Oliver 6:08
It is in the woods, but it’s not some mystical place. It’s a little bit different essentially where they go and they, they they tap maple trees and they, yeah, they do the whole sugar process essentially go to this place. And you have you know, a whole maple syrup fest essentially you have a whole breakfast and then you go outside you do these things on on the snow where you get essentially like pure taffy from the from the trees, and they show you the whole process and it’s fun. And you know, you get the whole family out and it’s a it’s a good time.
Jason Hartman 6:37
Okay, cool. Well, we do have to actually talk about real estate investing, which is the show so I won’t debate this forever. But I will I will bet that you were not outdoors as much as people in say Southern California or Scottsdale where I live, you know, or So Cal where I grew up, that’s where the weather’s just really awesome all the time. I bet that wasn’t as often Can I just bet you people in that kind of weather stay inside more but hey, Oliver, I don’t know. Maybe that’s the reason you’re not as smart as the rest of your peers up there.
Oliver 7:09
Oh, you’re gonna punch me well put it this way they haven’t moved down here. Yeah.
Jason Hartman 7:19
They’re either developing their brains or they’re really dumb for staying in that cold weather I you know, I don’t know which But anyway, you kind of you kind of left that opening wide open. I had to take it. So.
Oliver 7:31
Okay, let’s move on.
Jason Hartman 7:32
Okay, grill me, and you can get back at me Go for it.
Oliver 7:36
Maybe we’ll have maybe we’ll have a Jason Hartman Rose one of these days. Well,
Jason Hartman 7:39
you can roast me on a lot of things. So you did a interesting little project. I had no idea you were doing this behind my back nonetheless. But you reached out to a bunch of your clients and started surveying them on all these questions they had and that’s what we want to talk about today. What your investor clients are thinking out there. Hopefully we’ll get time I want to share a story from one of your clients, you know who I’m talking about. I’m not gonna mention his name that we met with. And he’s, I’m sure listening at Starbucks a couple weeks ago, a few weeks ago, actually, he’s working on buying 23 properties from us now. And I just want to talk about that Chicago gun control thing, because I thought it was so interesting. Go, tell us what you did. And what questions did the investors come up with?
Oliver 8:27
Alright, so I reached out to a number of my, my clients, and I’ve got some really, you know, some really smart people. And they’ve got some really specific client questions, but some of them also, are those
Jason Hartman 8:39
smart people from cold climates,
Oliver 8:41
you know, they’re from all over the place. I do not.
Oliver 8:46
I don’t I don’t look at it that way. I essentially see that we’re all incredibly intelligent just to start with, by the by the fact that he listened.
Jason Hartman 8:54
Oh, to add to my earlier comments, right, and you Of course, nothing is always true. They’re just sort of trends. But listen, the people that live in the warmer climates, maybe they don’t study and read as much, but they have better bodies because they’re working out and they’re, they’re showing off their skin a little bit more, and they’re probably happier. Okay, so, advantages and disadvantages to each there. There are certainly lots of studies that show living in bright sunny climates affect moods and they make you happier. So there’s give and take for everything.
Oliver 9:32
Does that mean that if you move down here from the cooler climates your IQ is going down? Is that the correlation here? Well,
Jason Hartman 9:39
I don’t know if your I agree. I guess maybe you’re getting a little lazy intellectually, but you’re happier and you got a better body. How’s that?
Oliver 9:48
I think that’s another Jason Hartman theory. book, but
Jason Hartman 9:53
I have a feeling I’m gonna get some flack on that. Someone’s gonna say, Well, isn’t that like racist or something?
Oliver 10:00
No, it’s not.
Oliver 10:02
God, I swear you can’t
Jason Hartman 10:03
say anything in America anymore. It’s ridiculous. Well, okay.
Oliver 10:08
Jason, if you were running for president, what would be your slogan?
Jason Hartman 10:12
My slogan would be I’ve offended everybody by now. So I’ll never get elected.
Oliver 10:20
Well, I still think you would get some votes.
Jason Hartman 10:22
My I listen, I can’t run for president because to run for president. You have to be well, not to run but to be president. You have to be born in the United States. And I wasn’t born here overweight. Neither was Obama. Oh, here we go with another tangent. Oliver, get to these questions.
Oliver 10:42
All right, back to real estate here. Alright, so to start off, Jason, why did you start in real estate I mean, you had so many different avenues you could have gone through when you’re studying in California and Southern California where he grew up in Newport, so many different things going on at that period of time. Why real estate State
Jason Hartman 11:00
I just when I saw that infomercial at age 16, and after growing up poor and I grew up in Los Angeles, by the way, I lived as an adult in Orange County but grew up in LA, when I saw that infomercial for Robert Allen, the real estate guru who has questionable stuff going on, you know, he’s typical real estate guru guy. But you know, that really inspired me and got me very interested in this real estate stuff in it. It seemed like it was very accessible even to me, the poor kid from LA, and I got his book, I read three chapters, I put it down, my mom picked it up, read the rest, got really interested. And she said to me, You know, when I was 18, I was about to graduate from high school. There’s this real estate seminar in Anaheim. Why don’t you go and I went, I rounded up nine of my buddies from high school. They were all there Friday night, and then only one of them was left by Saturday morning, everybody else went to the beach. And by Sunday afternoon, when the thing was wrapping up, I was the only one that stayed the whole weekend, because I just wanted it more than they did. They were more comfortable than I was. They had better lives. They had parents with more money. You know, I, I wanted to have that. So that’s why I was I think I was just more motivated. And, and that’s one of the things that I think when you’re less comfortable, you’re more motivated. And so that’s why luxury can kind of be the wall to apathy. So we always have to guard against that in our lives. Because luxury and comfort make us complacent. Generally, as humans, you know, we won’t try as hard. And so sometimes intentionally making ourselves uncomfortable, I think that can can motivate us. So something to think about but but that’s that’s really what got me interested in it. And my first year of college when I was 19 years old, I got my real estate license just because I wanted to learn the basics. And then when I was 20 years old, I bought my first rental property and I made money on it and then I bought another one and another one and then kept buying properties. And I just love it. I think it’s the most historically proven asset class in the entire world, as you’ve heard me say before.
Oliver 13:07
Yes, quite a few times, but Okay, so you know what that said, other than the, you know, one of the answers, which would likely be I would start I would have started earlier, if you could go back in time and give yourself one piece of wisdom or advice,
Jason Hartman 13:24
what would what would it be, it would be to buy properties that had cash flow rather than properties that were speculative. See, I called myself an investor for all those years that I was buying properties in Orange County, California. And those properties really looking back never made much sense. Even though I made money on a lot of them. You know, they just really didn’t make sense because the cash flow never worked. They never made sense as an investment the way I view them today, as a much more conservative investor now and a much more prudent investor today, but remember commandment now Five, Thou shalt not gamble. The property must make sense the day you buy it or you don’t buy it. And that’s the
Oliver 14:07
key. I couldn’t agree more with you, Jason. Just give an example. I met someone the other day, and he bought in San Diego in the northern county and Carlsbad area, he bought a house for about $475,000. And he told me, let me
Jason Hartman 14:21
guess it rents for rents for 2000 a month.
Oliver 14:25
He’s got about 20 $500 a month for it. That’s That’s pretty good. The big thing he told me is that, you know, it’s actually worth 500 on paper, like, well, that’s fantastic. How much would you put down? He said, I put down about $250,000. I said, Are you crazy? So we got to talking about this. I said, Why are you doing this? So we’ll listen all over in 10 years from now, it’s gonna go up to 900. I said, Are you kidding me? I really just couldn’t really believe what I was hearing.
Jason Hartman 14:54
He might be right. It might go up to 900,000, but it might not. And that’s the problem. If you just buy for yield, if you just buy for cash flow, which, by the way, in those of you who’ve been to my live events, you hear me dive into this much more deeply. Cash Flow doesn’t necessarily mean you’re buying for positive cash flow or a certain amount of cash flow per month, because that’s all dependent on how much money you put down on the property and it gets all murky. You’re buying for rent to value ratio, that’s the proper way to analyze an investment and the rent to value ratio on that $500,000 house even though he got a bargain on it potentially. Maybe he’s right, maybe got it under market, which Hey, congratulations. It’s renting for a point five RV ratio, when you’re your target is right around a 1%. It’s double that. So literally, here’s how silly we get as investors and Listen, I’ve been guilty of this too. So I’m not just saying other people doing this are dumb. Well, I guess be out there they are dumber I’ve been done to put it that way. Okay. But the concept when you hear these people saying, Well, I don’t want to buy anything that’s far away from me, I want to buy something close to me. So this guy you’re talking to probably lived in San Diego, I assume. And he bought a property in San Diego as an investment. Right?
Oliver 16:16
Is that true? By the way? It’s actually an odd he’s actually he’s from lived in New York, and then came down here and then saw this and hoping that it’s going to be doubling. But who knows. Maybe that goes to your words, your theory, Jason, and about warmer and cooler climates. I don’t know. Who knows?
Jason Hartman 16:34
I don’t know. But let’s not go back into that one. It’ll take too long to discuss that and I, but here’s the thing. Think about it. Think about if you live in San Diego or LA or Orange County, the cost of buying a property that is near you physically, okay, is basically in that equation and that example, you just share it all over. It’s costing you 20 $500 a month. month. Because if you spend $500,000, on any property you see on Jason hartman.com, you’re going to get around $5,000 a month for it, versus a $500,000 property where you have no diversification, you just have one rather than five, okay? And you only get 2500 a month for it. That’s basically a cost of 20 $500 per month for you to buy a property that’s near you. Okay. If you, you know, in the example of you live in Southern California and that properties in Southern California, that’s what a lot of people do. So, the question is, how bad could it go for you to not lose 20 $500 a month. So say for example, you buy these five properties for $500,000, the same amount of money invested. And you have properties now in two or three diverse, prudent cash flow or entered good rental value ratio markets, right? And in that case, you’re you’re basically gaining 20 $500 per month and say for example, every property, you have a property manager who’s a crook, and they’re ripping you off to the tune of 100 bucks a month. They’re making up some fake repair or overcharging you for something to the tune of 100 bucks every every single month. You’re gonna lose $500 You’re still $2,000 ahead. Do you see how Yes, you things can go wrong? Yes, property managers can stick you they can nickel and dime you they can rip you off. But the amount of damage is so much less than the amount of damage that people don’t even see because you can’t hear the dogs that don’t bark when you’re investing in that Southern California market for example, or that Miami market. Good or that Boston Market or New York or, or, you know, whatever you get the idea, just that expensive market that makes no sense. So that’s the point I want to make to people. So essentially,
Oliver 19:11
look for rent to value ratios that makes sense. We look for that at least that 1% as being one of the big criteria is here.
Jason Hartman 19:21
Yeah, yeah, get get the have the target be that 1% number per 1% of the value per month. 500,000 brings you 5000 per month. Okay, that’s the deal. All right. Here’s one of our questions from from one of my clients named Blake is asking more specifically about property management. And when you have a tenant in place, and essentially you’re trying to come to an agreement with the property managers, and you tell them hey, we’ve, if any type of repairs over X amount, for example, $250 I want to know about this. Contact me before, don’t do not go out there. So what Blake is saying you He wants to authorize that repair. And I would say, absolutely look at folks. And we’ve talked about this on past podcasts. This is a great question Oliver. And Blake, thank you for saying that, Oliver, because I’m glad you brought this up. And I haven’t talked about in a little while. But certainly we have on past episodes, there are two types of discretion your property manager has, okay. And remember, a lot of people self manage their properties, and we can teach you how to do that. That’s part of the content in the Jq or Jason Hartman University members area. But the deal is that the property manager has discretion and they need this discretion to fix anything to prevent a an emergency from becoming worse. So say for example, a pipe breaks and they need to call a plumber on an emergency basis to get them out there to stop the leak. Okay, your property manager needs discretion to do that. Okay. But what they often asked for that they that is not required is a bunch of discretion for either monthly or per incident type of repairs. And there’s a difference between monthly and per incident. Okay, a
Oliver 21:19
big difference.
Jason Hartman 21:21
So the first thing I want you to do is when you get that property management contract, I want you to read it and understand it. Look, folks, you have got to be a good manager of your managers, that is your responsibility, and we’ll help you do it. But ultimately, it’s your property. So this falls on you, you got to read your contracts. And the thing I want you to consider negotiating in those contracts, is I want you to say to the manager, look, I am not going to agree to a $250. Or even worse a three or $400 per incident, not per month. By the way, a lot of times it’s per incident, discretionary budget for you the manager, because I’m really reachable. And you can just email me or you can send me a text or smoke signals telephone calls. voxer would be the best way to communicate ever invented in all human history. Make your manager use voxer. Because it’s the best way to communicate ever. You can do that. And they can reach out to you and say, hey, look, something broke, we need to fix it. It looks like it’s gonna cost $200. And then you can say yes or no or get another quote. And I want you to make the manager send you a written quote, if it’s, you know, if it’s a more expensive item, not if it’s 50 bucks, don’t, you know, don’t don’t worry about that. But you should have discretion, and I think you should cap these discretionary items for the manager to maybe $200 per month. did not say per incident, I said per month, because during a month, they could have two incidents. And suddenly there’s $400 from your rent is gone at their discretion. And you got to watch this Don’t, don’t give them that much. I mean, keep them on a short leash as the saying goes. And the responsibility you have if you want to make their leash short is you’ve got to be available. And you’ve got to respond quickly to communications about stuff like this. I personally, I make mine $100 per month. I don’t want to see anything more than $100 per month, discretionary coming out of my rent check, unless they contacted me and I approved it. And if it’s a big item, tell them you want three written quotes in here. Let me tell you one more thing about written quotes or written estimates. I call them quotes. Because if you call them an estimate, that means it’s just an estimate. I want to quote Okay, if I can get it But you don’t want it on the property managers letterhead, or just in an email from them saying, Hey, we sent the vendor out there. And they said it would cost $325. Well, who’s the vendor, I want this quote from the vendor on their document. And their document, of course, would have their name at the top, you know, Joe’s Air Conditioning Repair, and it would have their address and their phone number. And you could just call Joe up and say, Hey, Joe, can you do any better on this? Part of this is really a matter of setting the tone with your manager and making them understand that you are paying attention. And once you kind of train them to that you don’t have to do it forever. Usually, you just have to do it at the outset. Or the first time there’s an issue. Make sure they know you are and you are a an astute, aware investor who’s paying attention. Who’s not going to get nickeled and dimed. Okay, exactly. why this is such a huge topic as well as because investors out there, we’re really here to help you, we want to make sure that your investments are performing well. We also want to ensure that your cash went on your properties that you are that your funds aren’t being gobbled up by all these little expenses here and there. So now, Jason, one last thought on this over here is what happens when your managers just goes out there? And if you’ve got $100 cap per month, if they’re out there spending two $300. What would be your recommendations on how to deal with that, other than just changing property management companies? Well, first of all, if it’s in the contract, they can’t do it. Okay? Because they have to follow that contract. I mean, look, they don’t have to people can just ignore contracts, but that’s not gonna happen too much. Okay. And this is one of the other things is that we provide a lot of leverage over these managers because we’ve sent them a lot of business. So look, if you have a problem with your manager, I mean, not if it’s a little thing, okay. But if it’s an ongoing thing or it’s a big thing, contact your investment counselor at at our company, and they’ll help you with it. I mean, all over Look, you’ve helped clients that bought a property from you a long time ago. And they reached out to you and they said, Hey, you know, I got this problem and, and you know, sometimes you just cc them on an email, and Oliver or Sarah or Carrie or Fernando or whomever, whichever investment counselor can just chime in and say, Hey, I don’t think this is right. And when they see that there’s some oversight going on. And especially when that’s oversight from us, who gives them a lot of business. It matters to them, and they’re going to take better care of you.
Oliver 26:40
Exactly. I can’t say how right you are there. Whenever there are issues that come up that we need to get involved with. We are there for you. Were there for you to help you the clients. Yep, good stuff. Okay, next question. Now to move on to our next question over here. This is maybe a bit more of a personal one. I’m not sure if it relates to real estate it probably does but what would you say is the biggest mistake you made? And how did it impact your life? Oh my God, we
Jason Hartman 27:07
don’t have enough time for mistakes. There are too many, too many to list. I don’t know even where to go with that one, but I bought a jet a jet plane. Yeah, so you should you should have known me then. No, I bought a jet. But I never took delivery of a jet because during the Great Recession, the company making the jet Eclipse aircraft went out of business. They went bankrupt. And it’s really what I talk about when I talk about pooled money assets or pooled money investments. When when you’re investing in a stock a bond or a mutual fund. This is really kind of the same thing. Because what happened in that Eclipse deal is the the executives basically skimmed a bunch of money off the top okay. I mean, look, I believe they did and other people believe they did. It’s, I don’t know that it was ever litigated or proven. But, you know, certainly they were paying themselves, they took salaries, they probably took bonuses. A lot of investors were very upset about it. Right. And and when I say investors, I say that because a bunch of people, a couple thousand people put down big deposits on those planes. And then the company went BK and never delivered the planes. And so that’s what happened to me and I lost a bunch of money.
Oliver 28:31
What would you call your jet?
Jason Hartman 28:33
Oh, I didn’t have a name for it, but never thought about that. We I didn’t get that close to delivery, unfortunately. But yeah, so so you know, the old The old saying if it flies, floats or the other F word. It’s better to rent than buy.
Oliver 28:50
That’s what people say.
Jason Hartman 28:51
And I also had a big yacht too. I had a 48 foot boat. And that was a huge waste of money. So you know, just rent these things. You know?
Oliver 29:00
Have them on demand don’t buy you don’t need just like we did at the venture Alliance back in San Diego, we rented this huge yacht that was,
Jason Hartman 29:07
you know what you just get on and off of it, you don’t have to clean it, insure it, maintain it. You don’t have to deal with anything, it’s so much easier. So just rent stuff, sharing economy, you know, assume we’re not even gonna own cars, we’re just gonna do sharing economy type on demand, transportation, it’s just, it’s kind of crazy to own stuff in some ways. The point is, you want the usability of stuff, and you want to be able to use it and control it or not necessarily actually own it yourself, because with ownership comes a bunch of responsibility. Now, of course, I don’t mean that for investment properties, but in a way, you could argue all over, that you don’t really even own your properties if they’re leveraged because you only own maybe 20% and the bank owns 80%. Now they don’t really, um, in in the real sense, but they’ve put up 80% of the money. And you control 100% of the asset. It’s a beautiful, beautiful thing. So in a way, it’s, it’s kind of like having an option on the other 80% that you didn’t even pay for, you know, they they loaned the money on it. And guess what? you outsource the responsibility of paying that to a tenant, you, you outsource the debt to the tenant. It’s a beautiful, beautiful, incredible equation.
Oliver 30:24
It definitely is. And that’s why we are in it.
Jason Hartman 30:28
We love it.
Oliver 30:29
Here’s another one for you, based off, you know, we, you’ve been doing this for about 12 years now. And obviously, you’ve been able to help a lot of people on the way. And we’ve been able to hear from these great clients, you know, many times on the podcast or at our events when they come and you know, obviously what I’ve noticed is that our greatest reviews always come from our clients. But you’ve been able to impact so many people’s different lives across this time. Based on everything you’ve done so far. What would you say that you are most proud of?
Jason Hartman 30:58
You know, I’m really proud proud of our business model and our team, our people. I think we’ve just got a fantastic team of people, of course, you included our other investment counselors, and our other staff members who’ve been with us for many, many years. It’s just, it’s the type of environment where people and I know this sounds totally trite. And if you don’t know us, and you’ve never done business with us, probably sounds like total BS, okay? But you guys really care about the clients, and you go to bat for the clients. And I just love that. I remember years ago during the Great Recession when Sarah came to me one day and, and she and she was having a hard time, you know, things weren’t going very well. And she was just kind of getting started in the business and, and she came to me one day when we had this big expensive overpriced office back then, you know, Class A office building in Orange County. She came to me and she said, Look, you know, I really like this because I feel like we’re really helping people. We’re really, you know, we’re really doing something good. And I thought, that’s when I knew I had a really good person, because she wasn’t just in it to make a sale. You know, she really had to believe in something and a lot of people are doing things they believe in, but a lot of people just aren’t, you know. So it goes both ways. And I just love our team. And I love that. I don’t feel like I have to manage all of you, you you self manage, you really do, you know, I don’t have to look over anybody’s shoulder and question their ethics, or worry about my reputation being soiled by one of my team members, because I’ve got really good team members that really care and they’re always going to do the right thing. Now, it hasn’t always been that way. We’ve certainly had a few bad apples over the years and I will mention one not by name. But maybe six months ago, I was talking to one of our clients. They had an investment counselor from the past. In our company, and they said, I think all he cared about was himself. And but those people don’t last at our company, you know, because they’re just the quick buck mindset just doesn’t work.
Oliver 33:13
Now, I definitely know that if anything, Real Estate’s definitely more for the long term patient. One, most definitely.
Jason Hartman 33:18
So I’m really proud of our business model. I’m really proud that we’re helping people self direct their financial future. I’m really proud that we’re taking money away from the crooks on Wall Street, the modern version of organized crime, and I’m really proud of our team. And and, you know, I guess I should add that I’m really proud of our clients too. We’ve got so many fantastic clients that look, folks, if you have not been to one of our live events, and by the way, we have one coming up. And Oliver, maybe you can talk about that because you’re helping us plan it. I recruited you to do that, which I
Oliver 33:54
think was a little bit better decided. I had
Jason Hartman 33:57
to give you I had to I had to bribe you a little bit. But, but if you haven’t been to one of our live events and you haven’t met our other clients, and met our team members, but really most importantly, our other clients, that will be an event, you know, meet them. They have no agenda. They have no stake in saying anything good about us, right? But you’re going to come and you’re going to hear good things. You’re going to see real people following our plan. Real people, please come to our live events. Let me tell you something. With the prices, we charge our live events, we if we’re lucky, we break even, okay, we do not make money on live events. All right. They are generally a loss leader for us. We do them because we want to have that high touch approach. So that several times a year we’ll have an event where you can come and meet us and you can meet our clients. And you can see that this is real. This is not some pie in the sky. infomercial I was just reading on one of these real estate forums today about someone who got burned, because they bought this $41,000 program from this real estate guru. And they got nothing for it, that person could have purchased two properties with that money. You know, and it’s just so sad.
Oliver 35:19
That’s a, unfortunately a theme that appears to be going on over and over and over again in all these different events all over the countries all over the world. All over the world. There you go. And the biggest thing is, you know, sometimes I speak with clients that are brand new, or they listen to the podcast, and they’re like, hey, Oliver, you know, I really want to get involved, but I’m really hesitant. I mean, I have either purchased or lost money in buying into some program out there. And what I always tell them is the biggest benefit that you can do is come to an event here, you will be able to meet people that may have one to maybe 2030 or 40 properties that have done it. They they’re just you know, normal people. They’re great people. They’re all But it just goes to show you that it really can be done. And it really is possible. So just come to an event for those of you that, that I know you, you know, my voice come to an event I’m talking to you specifically first time investors come to this.
Jason Hartman 36:16
Absolutely, yeah, absolutely. Okay, so let’s talk to them about our event real quickly. And then maybe we’ve got room for one final question after that. So this event is in Phoenix, and we’re just getting the hotel all synched up. So we’re gonna announce the the actual venue soon, but we’ll have a very nice event. It’s two days. It’s something where you’re going to learn about how to use software to evaluate your real estate deals, and track your portfolio and help manage your investments really valuable. It’s a totally new event for us. We’ve never done an event like this before. It’s it’s a completely new concept and events for us, of course, For those of you who have been following us for a while, maybe been to many events over the years and we have a lot of repeat people coming to our events, you know, that we have are creating wealth event, you know that we have our Jason Hartman University event. And you know that we have our meet the Masters event just once a year. Our next meet the Masters I think will be our 18th meet the masters. Wow. Why? Well, because we used to do it twice a year. Okay, now it’s too hard to plan. So we only do it once a year, because a lot of work. That’ll be right around January. But this event will be right after our venture Alliance event. And so it’ll be September 10, and 11th. In Phoenix, September 10, and 11th. In Phoenix, it’s just going to be an awesome event over anything else you want to say about that.
Oliver 37:43
It’s gonna be great. It’s gonna be fun, you’re gonna be able to learn, we’re gonna have a bit of a different format. This time we’re going to do a bit of a q&a panel, we’re actually going to walk you through a typical buying procedure, I guess you can say from Australia. apprentices for acquisition. Yeah, exactly. And on the panel, what’s really going to be helpful to is we’re going to have the the property managers as well as the providers. They’re the ones that are actually doing the rehabs on these homes, you’re able to then ask them a bunch of questions that that may have come up on some of your properties that you want to know, you know, how would this property manager that may be a little different in a different market handle this? Or what would they have done for me that maybe the other one ones,
Jason Hartman 38:23
let me tell the listeners something about this event. So one of the things we are attempting to do with this event is take a little bit of the weight off our meet the Masters event, because I think last time when we did meet the Masters in La Jolla, San Diego, California area, last January, we had we had too many speakers and it was too rushed. So we’re planning to have four local market specialists at this event. And we’re gonna we’re gonna evaluate for markets. We’re going to do it mostly in a panelist format, so rather than letting them get up there and speak and their speaking ability is sometimes good, and sometimes it’s bad. Okay. Elizabeth, one of our wonderful clients who’s a venture Alliance member, and helping us plan our Seattle event for venture Alliance, which is the weekend before this, by the way, she said, Jason, let me come out and train your speakers please. And, and the other speakers are great, but the local market specialists are not speakers, okay.
Oliver 39:25
I can’t wait for Elizabeth to do this. I guess he’s gonna be awesome.
Jason Hartman 39:28
But we’re gonna do this as a as a as mostly panel discussions. And we’re going to have property managers, their local market specialists who acquire properties that you can buy, so you’re gonna have it’s like, it’s kind of a combo software event and Buying Event. And you know, like best practices in acquiring investment properties event. So income property software plus Buying Event, it’s at Jason hartman.com. Check it out early bird price right now. 297 per person, which is going to go up as the event gets Closer. So register immediately at Jason Hartman comm slash events, Jason hartman.com slash events. I think you’ll really enjoy that. Oliver, one final quick question.
Oliver 40:13
All right, one final quick question. I’ll keep it short. We can leave you on for another time. It’s what is your most prized possession and why?
Jason Hartman 40:19
Well, that would have to be my dog Coco. But But dogs should not be considered property. You know it because they are like human beings. But anyway, that’s the way the court system looks at them. But one state court I read an article last week, they actually ruled that dogs are not property. They’re, they’re sentient beings. Of course they are. They’re totally emotional and incredible creatures. But yeah, so if it had to be a possession, since it’s considered a possession, it would be my dog.
Oliver 40:50
All right. Do we have time for one more?
Jason Hartman 40:52
Well, I have to make one announcement about that. Coco will be at the event in Phoenix Coco Hartman, my dog So you’ll definitely want to come just to see
Oliver 41:02
for now amazing. We all love cocoa. Awesome. Okay, what? One more go. All right, one more here. What do you think the top three most important qualities are real estate investors should possess or develop to become and remain successful when utilizing the buy and hold strategy,
Jason Hartman 41:19
really internalizing the 10 commandments, my 10 commandments of successful investing, number one, number two, being willing to delay gratification for something bigger in the future and having the patience to do that. And number three, which kind of dovetails into that that one is managing your emotions, you will hit bumps in the road, there will be times when this is not easy. There will be times when you think, gosh, is this really working? Do I want to give up you’ve got to understand how to keep score. So many investors are winning. Yet sometimes when something bad happens like you got to replace an air conditioner. Or a tree branch falls on the roof or whatever you have a bad tenant you have to evict. So many investors are winning when they think they’re losing. And they think they’re losing just because they don’t know how to keep score. They don’t know how to do the math. They don’t know how to properly analyze their investment, and all of its beautiful multi dimensional characteristics. So that’s one of the things frankly, you’re going to learn at the event we just mentioned on September 10, and 11th, in Phoenix, so come to that.
Oliver 42:32
Exactly. And for those of you new listeners for the 10 commandments, you can find those that our websites had Jason.
Jason Hartman 42:38
Yeah, absolutely. Good stuff. Hey, Oliver, thanks for these questions. And I know you’ve got more of them. We’ll do them on a future
Oliver 42:44
podcast. Okay. Fantastic. Great speaking with you, Jason. All right. Take care. Bye, bye.
Announcer 42:50
I’ve never really thought of Jason as subversive, but I just found out that’s what Wall Street considers him to be.
Announcer 42:57
Really now. How is that possible at all?
Announcer 43:00
Wall Street believes that real estate investors are dangerous to their schemes. Because the dirty truth about income property is that it actually works in real life.
Announcer 43:10
I know I mean, how many people do you know not including insiders who created wealth with stocks, bonds and mutual funds? those options are for people who only want to pretend they’re getting ahead
Announcer 43:22
stocks and other non direct traded assets or a losing game for most people. The typical scenario is you make a little you lose a little and spin your wheels for decades.
Announcer 43:33
That’s because the corporate crooks running the stock and bond investing game we’ll always see to it that they win. This means unless you’re one of them, you will not win.
Announcer 43:43
And unluckily for wall street. Jason has a unique ability to make the everyday person understand investing the way it should be. He shows them a world where anything less than a 26% annual return is disappointing.
Announcer 43:58
Yep. And that’s why Jason offers over one book set on creating wealth that comes with 20 digital download audios. He shows us how we can be excited about these scary times and exploit the incredible opportunities this present economy has afforded us.
Announcer 44:12
We can pick local markets, untouched by the economic downturn, exploit packaged commodities investing, and achieve exceptional returns safely and securely.
Announcer 44:23
I like how he teaches you how to protect the equity in your home before it disappears and how to outsource your debt obligations to the government.
Announcer 44:31
And this set of advanced strategies for wealth creation is being offered for only $197 to get your creating wealth encyclopedia book one complete with over 20 hours of audio go to Jason Hartman comm forward slash store. If you want to be able to sit back and collect checks every month, just like a banker. Jason’s creating wealth encyclopedia series is for you.
Jason Hartman 44:47
This show is produced by the Hartman media company All rights reserved for distribution or publication rights and media interviews, please visit www dot Hartman media.com or email media at Hartman media.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate or business professional for individualized advice. opinions of guests are their own and the host is acting on behalf of Platinum properties investor network, Inc, exclusively.
This Flashback Friday episode is a casual and impromptu conversation between Jason Hartman and Investment Counselors Ari and Sara. They talk about the last Creating Wealth Boot Camp, some investing insights, and a “case study” article from The Financial Freedom Report. In addition, a client also shares his experience in creating a high ROI in this market.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts visit Hartman media.com. Hey, this is Jason Hartman, thank you so much for joining me. Do you know what day it is? Yes, it is flashback Friday, or you hear the best of the creating wealth show and you hear some good prior episodes, some good review. Remember, we’ve got almost 500 episodes out. And you know what? iTunes doesn’t even hold them all if you’re an iTunes listener, if you are listening on Stitcher thank you for joining us. So we want to bring you some good review stuff now. What’s interesting about flashback Friday it’s a little scary for me I gotta I gotta be very very candid with you on that. Because you the listener, you get the chance to hold my feet to the fire. Did I make any predictions? Was I right? Was I wrong? I’ve been I’ve been right about a lot of things, but I’ve been wrong about a few. But it’s flashback Friday and we will give you the uncensored Best of the creating wealth show with a prior episode. So let’s dive in. Here we go. Remember, this is not current, it’s flashback Friday.
Announcer 1:20
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 industry. Day, you really can do it on Now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 2:09
Hey, I don’t know if you saw the article in CNN Money and it says Real Estate’s new problem. Not enough homes. Just as I have been predicting for about three years now, I knew that when construction came to a standstill, the inventory hangover would be gobbled up, the population is increasing rather dramatically. We’re having some of the biggest birth years since the big birth years during the baby boom, post World War Two and the inventory hangover is being gobbled up pretty quickly. So my prediction again, by the end of 2011, early 2012, we are going to see a rather dramatic shift in the inventory problem. We do have anywhere depending on who you listen to from two to 7 million homes in the potential foreclosure pipeline. However, many of those homes you must remember are currently occupied. It’s not like These are new homes being built that suddenly hit the market just because they’re foreclosure all this is is a moving around of occupants. So maybe the people that live in those homes now move to a another home, again, filling existing inventory, but the construction machine has basically stopped and you’ve got to remember that it takes a long time to ramp up that construction machine. So again, our philosophy ba package commodities investor tie up three or four decade long as I’ll talk about in just a moment fixed rate financing, let your tenants lead inflation that is coming. It is definitely coming pay off the loans. And by the way, I just wanted to address the inflation deflation issue. And we’ll go into this more detail in future shows. But I’ve been debating with a friend of mine who’s a very knowledgeable guy who has been talking he’s kind of becoming a bit of a deflationists actually, and I think the overall big trend is definitely inflation. And what is faulty about the deflationists argument in my opinion, is really hinges on two major things. Number one One they say things like the government, the fed the Treasury, whatever, it’s sort of all three of these cannot possibly print enough money to offset the deleveraging that is occurring. Well, I beg to differ with you, because there is no limit to the amount of money they can print, look at Argentina, look at Zimbabwe, look at all of the other examples throughout history where the fiat currencies have become totally worthless. So inflation is an unlimited prospect, there is no limit to the amount of money they can print. The number two thing is they say they’ll say things like, you know, there’s $40 trillion of potential deleveraging but that assumes that everything will be deleveraging and everything will be defaulted upon. And that is just simply not true. Now, some of it will, some of it already has and that does create deflationary pressure, but nobody knows how much of that will ultimately be de leveraged or defaulted upon. So this deflation argument just really doesn’t fly with me. So anyway, enough of that. I’ve got Sarah and are here. We wanted to You have a little debrief on our boot camp that we had last Saturday. Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. So Sarah, what do you think of the day?
Investment Counselor 5:15
Hello, everyone. The day was great. We had a lot of guests from out of town which was nice. I want to thank our two guests from Hawaii nyota and Emily, thanks for coming out. Yeah, we
Jason Hartman 5:25
had people come from all around we had East Coast we had why I don’t think we’ve ever had any people come from Hawaii to our bed before heavily. I don’t think so. Well, I want to say mahalo, mahalo and Aloha.
Investment Counselor 5:36
We do have some Hawaiian clients though. Fantastic.
Jason Hartman 5:40
So I want to come visit Can I come and hang out with you for a while Hawaii, what a beautiful place, but I wouldn’t invest there. It’s a little too expensive. The RV ratio is not good.
Investment Counselor 5:49
And gas is definitely not cheap. So I also want to thank Ozzy from New Jersey. He’s been a longtime podcast listener and changed many, many emails. So it was great to put a face with the name
Jason Hartman 5:59
tag. Are you What do you think of the day? Good afternoon, Jason. The well being so funny with these Greetings, by the way, you know, whenever we get together, folks, don’t we get a little goofy. It’s just funny how we are. Okay. We’ll be a little goofy today. Go ahead. Yeah, no, the weekend was great. Actually, there was a lot of new clients there. I don’t think anyone there in the room actually currently owned an investment property. So it was a really good education for them. A lot of people enjoy the inflation talk. Well, I think I think my mom was kind of an interesting guest. We’ve never had her speak at an event before have we? No, I think everyone liked her because everyone heard the podcast with her on it, and they really wanted to see her in person. In fact, that was a good idea to have her come out. I think that was fantastic. Yeah, she flew out from Alabama and talked a little bit about her investment property experience. And I think the big message there is, keep the faith keep moving along the same path. That’s really what it’s all about. In regards to the number of people there The room was packed. We had expanded from one section of the ballroom to two sections, and there was one left that we didn’t take and looking back just like masters weekend, we probably should have taken it because we could have certainly used all three sections of the ballrooms, folks, we really got to ask you, please register for our events in advance, give us notice we can plan better and do a better job at that. If you do.
Investment Counselor 7:11
Yeah, another one of our guests, actually, a real estate broker in San Diego came out. And you know, I always wonder, you know, when, when real estate professionals come out, you know, what their intentions are in coming to our seminars? And you know, are they spies? You just never know. But no, it was great meeting you, Richard, I know you’re a podcast listener as well. And you know, Richard said that no one does what Jason does, his teachings are money in your pocket. And I think that was just great of you to say that.
Jason Hartman 7:38
Yeah. And I appreciate it. All the kind words also at the break from you as well. And I’m glad that we’re gonna get your wife listening to the podcast now too, because, because I know that she was complaining that you were paying more attention to my show than to her so you don’t want to do that. That’s not good for marriage. Right. This is a team sport. I wanted to give a shout out to Phil Are Texas. Yeah, Phil, that was awesome. He came out. And a lot of people really enjoyed that market listening about it and all the deals that are going on there. And I think a lot of people got a lot out of that. Yeah. And we also had Jennifer Furman for us talking about investing with your IRA and the Roth conversion to the topic is very, very hot topic, no question.
Investment Counselor 8:20
And we are going to give Jennifer more time to speak next time, because we just had a ton of questions. So if any of you are listening and attended, and you have more questions for Jennifer, let us know. We’re happy to put you in touch with her. And
Jason Hartman 8:30
we’ve had her on the show before too. So I heard some more detail there. So I want to also thank one of my clients named Matthew for bringing Jason eyes some fantastic t shirts. Those were awesome. By the way. The first one, the one Well, he gave me two of them, but one of them I just I love it. It was hilarious. And it’s a it’s a great looking t shirt. And by the way, his t shirt company is called Chai America. Yeah, so we want to say that on the air if anyone wants to get one of those, but it was a picture of Tim Timothy Geithner and Ben Bernanke. He said You’ve got those two guys that are totally messing up our economic world here. And, and the caption says the Dukes of moral hazard. I love it. That’s awesome. Those are great. So thank you very much. Yeah. Thanks, man. Thanks again for that. Those were awesome, folks. One of the things I really want to talk to you about today is the concept of these income property bonds. That’s kind of our little trademark term income property bonds. So call them IP B’s. All right, like ICBMs intercontinental ballistic missiles. Okay. And what does that mean, Jason? Well, what an income property bond is, is is a property that is usually a lower priced property in a very stable linear market with a fantastic RV or rent to value ratio. And I’ll give you a great example of one and we have these in several markets, but one of them that has been very dependable for many years and we have a lot of happy clients in is good old Indianapolis. I know we’ve talked about it before, but let me give you an example of a specific property we have right now. Alpha I cannot stress to you enough. If you’re interested in one of these properties, you have got to act lickety split. Because these properties go they’re just gone right away multiple offers constantly on this property. I’ll give you the rundown. Okay, and I know you guys will have comments on it. So get to that in a moment, but built in 1999. It’s a foreclosure property. It’s a single family home. Again, we’re not crazy about condos here. This is 1200 square feet, it’s $59,000. It does need some minor rehab that will cost about 70 $800 your total cash into this property is just over 25,000 bucks. It’s $49 per square foot, it would cost you almost double to rebuild that same house today. Okay, so you’re buying it far below the cost of actual construction, the projected rent is 950 per month positive cash flow is listen to this 40 $184 annually. On a $25,000 investment, so I just want you to notice what a bond this is. This is better than the crummiest junk bond out there on the market. This cash on cash return. I’m not talking ROI, I’m talking, no appreciation, no additional financing. None of the multi dimensional characteristics of a real estate investment like tax benefits 17% cash on cash return, the cap rate here is projected at 12.5%. Folks, you can’t beat a deal like this in a quality market. Now granted, I know you may have heard these other groups peddling junk properties from the loser city of Detroit properties that are being bulldoze to the rate of 10,000 homes. This is not a junk property in a junk area. These are yuppie ish communities. These are quality properties. These are properties that have a potential for appreciation in the future. Your overall return on investment here is projected at 20 8% annually, and without the multi dimensional characteristics 17% annually, that’s just a phenomenal opportunity. Just look at it like a bond, compare it to a bond, where a normal bond, you might earn three to 5%, a junk bond, you might earn nine to 12%. If the company stays in business, if you’re lucky in your savings account, you’re going to earn 1%. If this only works out half as good as projected your eight to 9% that’s just a no brainer deal. Well, I gotta tell you, Jason, I do a lot of researching and I’m sure you too, can attest for that. I do know that already. Because you are constantly emailing me articles and constantly emailing all kinds of, you know, interesting stuff. Some of it’s a little off the beaten path. I will definitely say, Yeah, well, I love the source information. And I see a lot of websites, a lot of companies out there selling beat up properties like you’re talking about and they’re selling them for 4050 $60,000 a year. 40 years old. I see the properties these companies are recommending And one of my former tenants actually bought a couple properties from them. And you know, I’m thinking, what is this guy thinking? You know, I obviously did not get through to him here. He’s looking at a property in Detroit that is, so it’s an older house. I mean, I saw the property on the website, and it says that the after repair value of that house was like 110 $120,000 for a house built. I can’t remember offhand. I think that was built in the 50s. These are a little 1100 square foot house, folks, I don’t know. You know, I’m no expert on Detroit. But I do know that I hear stories all the time of people buying houses for $1 $1 people buying houses for $500 that the city is just dying for you to take over the house so someone will pay the property tax bill and someone will mow the lawn and keep the house secure so that it’s not invaded by gangsters. I mean, there are areas in Ohio and Michigan that are absolute disasters. Well in your What I want to point out Jason is that you’re putting $25,000 down on this property and you’re leveraging your money to get alone. Yeah, the bank’s putting up the other 75%. So here’s what a lot of people don’t understand. Some people might see a house in Detroit, Michigan for 25,000 and say, well, I’ll just pay $25,000 in cash. Just a reminder, you’re listening to flashback Friday, our new episodes are published every Monday and every Wednesday. Can you explain the difference between not having a loan versus having? Well, you know, it’s definitely better. You know, and we all know this and all the regular listeners know this. It’s definitely better to have financing on the property because you have a partner, but there are some times where paying cash makes sense, and that is in an area like Indy or any area where you have really low price properties that become those income property bonds. Now, these don’t really exist. The income property bonds don’t exist in much in some of the sexier markets where the properties are a little more expensive. Cuz the cash on cash return isn’t so good and you need the leverage to amp up the return your cash flow will still be decent, it won’t be as high. But when there are these little inexpensive properties, you can pay cash those lend themselves very well to investing with your IRA or 401k. And they just work really well inside a plan. Because inside a plan, the financing is not quite as good as it is outside the plan. So if you already have your four loans or your 10 loans, and you’re maxed out on financing, here, it does make sense to buy with cash. But overall, given the choice, sorry, to your question to interior point, I would rather have a loan on the property, I’m just saying, if you’re maxed out on financing, then the income property bond really becomes something of interest and you want it to be in a quality area. Look, everybody listening has heard the three main things about real estate location, location, location, right and there are some areas that look Heck, I could be wrong, but some areas that I just don’t think have any future and I think one of those areas is really Detroit.
Investment Counselor 16:00
Well, and I’ll, I’ll bring this up because you mentioned Detroit. I had a client, Colin, he’s been on my email list. I don’t know for two years. He’s attended many of our seminars. And he calls in and he says, Do you have anything in Detroit? And I said, No, please don’t buy in Detroit.
Jason Hartman 16:15
We get the call from these groups that want us to sell their inventory in Detroit. I mean, it must have been twice a week.
Investment Counselor 16:21
Well, that’s exactly what I told him. I said, Look, if we thought Detroit was a good market, we would recommend it. We can recommend anything we want.
Jason Hartman 16:27
Area agnostic, we can go anywhere we can recommend. Look at I’ve looked at properties in numerous countries, we could recommend Romania, we could recommend Panama, we could recommend Detroit. We can recommend Lansing, Michigan, anything you want. But we’re not there because we don’t like it. We don’t think it’s good. We don’t have faith in it. And remember, we have to live with you clients through the life of the investment and the story has got to work because we’re going to be here to service you were going to be here to take care of you. We are attached to the deal. We’re not just selling books about tapes and sending you on your way.
Investment Counselor 17:01
Well, I’m just to finish my story here. So he calls anyone interrupting you interrupted me many times.
Investment Counselor 17:10
Okay, this is not morning talk. Okay.
Jason Hartman 17:12
So anyways, they might be listening in the morning. You know what I said before we started recording everybody. Oh, just interrupt me. So I’m guilty as charged. I asked why. Why is it that morning talk shows like TV and radio are so different than nighttime shows. Why is it that in the morning, they always have these chatty people talking and telling jokes and laughing? What is it people can’t wake up? I mean, in the morning, I’d rather just listen to regular news or music. I don’t get it. Anyway. Dangerous is a morning show.
Investment Counselor 17:45
So the guy calls he wants to Detroit. He’s a longtime listener attended many seminars. And he says, Look, your strategy doesn’t work for me. He says I’m retired. I’m 78 years old. I’ve been investing all my life and I just have a bunch of cash. It’s not doing anything. And so I suggested indeed to him and you know, long story short, that was about a month ago, he contracted and closed on his first properties and the rehab phase. And he called me the other day just to kind of check in. He says, I can’t wait to buy more properties in Indiana. I’m so glad that, you know, I chose Indy. So
Jason Hartman 18:14
I mean, you know, that’s a quality city. It’s not a disaster like Detroit. This just doesn’t work. And the other question we’ve talked about on prior shows we always get is, you know, what about California? Look, folks, we’ll be recommending California in the future, I am sure. It’s just gonna get a little bit less expensive because it still doesn’t work. The state has way too many problems. They had a bit all these states that are sort of the more socialistic liberal states. They’re collapsing upon themselves. I mean, look at what a couple decades of that has done to Michigan. It’s a disaster. California, look at what a couple decades of that has done to California total disaster. So let it equalize. Let it hit bottom, then we’ll recommend it. Nobody really knows where the bottom is for sure. But we don’t think we’re there yet. For sure. They said That was a recent article, I should have had it with me to talk about here. But that article that our local market specialist in Indianapolis sent us the other day was showing that Indianapolis was the number one most affordable market in the country based on income to home price ratio. And the worst market in the country was Riverside, California, an area that many investment groups are recommending, just like Detroit, you notice we’re not recommending those. One thing I want to say real quick about the seminar question that came up a couple of times was people were saying, Well, what kind of weather do these cities have? What kind of dangerous Do they have as far as storms and floods and earthquakes? And if people are looking at the markets, good question. They’re all different, right? every area has got something California has wildfires and earthquakes. And I’d say if you’re gonna choose a natural disaster, the worst of all is earthquake, because earthquakes total destruction and insurance for it. is rarely held and very expensive. And there’s a huge likelihood that if there was a giant devastating earthquake, none of the insurance companies could pay the claim no matter what. But no matter where you go, whether it’s Indianapolis, East Coast, West Coast, South north, you’re gonna have something to deal with snow West also hot. Yeah, yeah. So So I would say that’s not a big deal. People just need to get over that. Yeah, they do. Because every area has something
Investment Counselor 20:23
well, and you don’t have to live there. There’s plenty of people that already do. Well.
Jason Hartman 20:28
One thing I get from Californians is, is Houston that’s been a very good market for us and I own properties there. And we’ve done a lot of business in Houston in the past, not doing quite so much now, because we haven’t been sourcing really good inventory when we do recommend it to you. But everybody says about, here’s the whacker, and here’s dinner, just awful, the traffic is bad, etc, etc. It’s sprawling metropolis megalopolis. And you’re right. But look, 6,000,005 6 million people live there. So somebody lives there. Well, it’s a disease that Brian Tracy calls Excuse me. Excuse itis people make excuses to not buy in these places because they hear things and they’re not living there. So good point. Yeah, sounds like paralysis of analysis and other disease
Investment Counselor 21:10
well, and just to wrap this conversation up, and I have to run but exactly what I said laughter yoga again, actually, I am
Jason Hartman 21:18
hot yoga, you have such a hard life,
Investment Counselor 21:20
hey, I have a one hour conference call on the way to hot yoga with the client. So we need more flexible. So what I wanted to just say kind of in closing and you know already sort of alluded to, but I noticed in the seminar that there were several clients that have attended the seminar before or maybe they’d been on my email list. I’ve exchanged emails with them over the last two, three years. And you know, I’m looking at recent, you know, nobody in that seminar had purchased through us anyways. And I just want to say Don’t look back in a year from now and say, I wish I would have purchased when the interest rates were low, and there were so many foreclosure opportunities. I mean, so many of those people I’ve been talking to for so long and they can do it they just for whatever fear factor is involved. They just haven’t pulled the trigger and I hope you don’t look back a year from now and wish you would have taken advantage of these opportunities. Yeah,
Jason Hartman 22:06
don’t be the I coulda shoulda woulda that’s just a very sad place to be in life. If you live in the past you become senile. If you live in the future, as Denis waitley says, You’re on someday I’ll like I apostrophe lol like I will do it today. Make it your Now look, we are not saying that real estate is going to start wildly appreciating anytime soon. We don’t think that we’ve never we’ve never said that. What we do think though is that there is a high risk of interest rate increases and there was just these Treasury auctions are not going very well. And that’s directly tied to mortgage rates, folks, you gotta tie up as many packaged commodities as possible little houses in good areas and diverse markets that are sustainable, self sustainable, and what else are you doing with your money in the meantime? I mean, you know, the stock market, the stock market is becoming very volatile again, I heard a prediction yesterday. The s&p is going to be around seven to 800 from a very reputable guy who I’ve interviewed on the show, and that the Dow was going to 8000 I predicted 6000 we got to 6400. So we got close. Hey, you want to just share that testimonial? Before you go, Sarah, that was kind of interesting. I thought,
Investment Counselor 23:16
well, let’s see. 30% the price. This is on the seminar 30% the price and 3,000% the helpful information of a Robert Kiyosaki seminar. Yeah, and then in parentheses, it says, point 3% the sales pitch maybe less.
Jason Hartman 23:31
Yeah. And what was the who was the star of the show, though?
Investment Counselor 23:34
Oh, the star of the show, of course, puppy.
Jason Hartman 23:37
That’s my dog, puppy, the ROI dog. You’ve heard them in my newsletter. He writes a column in there from time to time and Puppy was there at the Masters weekend and at the creative world boot camp we just had.
Investment Counselor 23:47
Yep. And so Thanks, Matt, for that little comment there. I know you’re a listener of the podcast.
Jason Hartman 23:51
Thanks, man. We’ll see
Investment Counselor 23:52
You, you’re one of you’re already registered for masters weekend in October. So I’ll see you then.
Jason Hartman 23:57
Awesome. Hey, by the way, we have several people registered for masters In October, be sure to take advantage of that early bird pricing. Remember, it does escalate as you go on and time to plan in advance. Next, creating wealth. bootcamp is July 31. That’s a Saturday. I also want to tell our listeners, they can purchase the creating wealth in today’s economy home study course website. And you guys, if you can’t make it to our seminar, you got to buy that because it’s just like being here, but you can listen to on your own time, you can read the materials on your own time, and it’s fantastic. It’s a great way to learn. Yeah, the creating wealth home study course is fantastic. It comes with a complete transcript, the audio files as well as the PDF of the workbook as well the PDF file so you get all three of those. And that’s on our website. Jason Hartman, calm great point already. Already. It looks like we lost Sarah, she’s off to yoga to learn how to become more flexible. Okay. The other thing is, so we’ve got the next bootcamp on the 31st wanted to talk a little bit about one of our clients who just got a fantastic loan modification. And I tell you folks, if you are not asking for your baby allowed, I mean, why should all the banks and the Wall Street firms get the bailouts on your tax dollars and you not take advantage of that get a loan modification on all of your properties? If you can these sometimes take a while. You have to be a little persistent, but it’s well worth it. And I’ll tell you how worth it. It was for one of our clients, check this one out. Her rate was 7.3%. I think it was 7.3 to five, I’m not mistaken. And this was a B of a countrywide Bank of America countrywide loan modification and they lowered the interest rate to 2%. Well, that’s Yeah. 2% for five years, she sent me the documents. I read them 2% for five years, and then listen to this. They extended her loan for 10 years. Wow. They took the maturity date from 2038, which was a 30 year loan originated in 2008. And it’s now not due until 2048. Wow, okay. Her payment is dramatically lower. This property is now super positive cash flow. It has turned a sow sow property into a fantastic deal by nothing else happening, but the loan modification. Thank you for listening to the creating wealth show. This is Jason Hartman your host and we appreciate you following the show. We have many, many episodes, hundreds of episodes and some of the older episodes have been archived and placed in our members section. And that applies to this one. So we include a sample that’s about 25 minutes long. And then for the rest of the show, you can go to our members section at Jason Hartman calm many of the other shows are still in their full length complete version. However, some of the shows like this one are in our member section where you can hear the show in its entirety. And again, you just need to go to Jason Hartman calm and you can get the full show there in the member section plus a whole bunch of other great members benefits and resources when Whether it be documents, forms, contracts, articles, other video and audio content, just a great resource, so be sure to join as a member at Jason hartman.com. And thanks again for listening to the creating wealth show.
Jason Hartman 27:26
This show is produced by the Hartman media company All rights reserved for distribution or publication rights and media interviews, please visit www dot Hartman media.com or email media at Hartman media.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate or business professional for individualized advice. opinions of guests are their own and the host is acting on behalf of Platinum.
To begin the show, Jason Hartman and Oliver celebrate clients who have purchased several income properties and those who use their self-directed IRA’s to make the most of their retirement accounts. Jason also talks about how real estate investors should manage their properties or manage their property managers and also provides tips to make your properties bulletproof from a rental standpoint.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Announcer 0:13
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution. For real estate investors,
Jason Hartman 1:03
Welcome listeners from around the world. This is your host Jason Hartman coming to you from a very stormy and rainy Scottsdale, Arizona today. God is putting on a big show for us. You know as much as nobody really loves summer in Arizona. I gotta tell you I love monsoon season because we have some of the coolest swankiest storms ever. And the cloud formations are just awesome. I’m just a huge fan of weather. I don’t know if anybody else out there agrees with me. But I love weather phenomena. It’s just it’s just really interesting to me for some odd reason. So if you didn’t in the last 710 episodes, know that about your host now, you know. Anyway, this is your host Jason Hartman episode number 711. And I’ve got all of her here with me coming to you from San Diego, California. Oliver, how you doing?
Oliver 1:57
Hey everyone doing great. Thank you, Jason. I’ve got to say there’s no monsoons going on here in San Diego.
Jason Hartman 2:02
Boring boring boring you all you have there is high taxes and crowded places. Well, you do have the ocean.
Oliver 2:10
You can add in the beautiful beaches, the oceans and everything that comes along with that.
Jason Hartman 2:14
I’ve been there done that, but okay, I do agree with your lesson when I lived in La Jolla for for my seven month stint to get my tax break. I would go and try to watch the sunset every day I could. And they were they were beautiful many times although, interestingly, Arizona has is considered to have the most beautiful sunsets. And I don’t know exactly why that is. I read an article about it, but can’t remember. It’s just really interesting sunsets here in the desert. You know, the desert has interesting skies. You get that once in a while in California. And when you do, it’s spectacular because it’s over the ocean especially but it’s really interesting. So yeah, we were getting some water here and we need it badly. In fact, water You know, there are a few documentaries about this that are interesting. And as you probably know About your host folks, I love documentaries. I’m a Netflix documentary addict. I’m constantly watching them. There’s some interesting ones about water and you know, water may well be the next gold. They call it blue gold. It’s a big deal. And obviously, obviously, the entire human race needs it. But the problem is, if you’re thinking about, well, should I invest in water? The problem is you have to invest in a company that has something to do with it. And you leave yourself susceptible to violating commandment number three, which is thou shalt maintain control. And the three primary problems there are, you might be investing with a crook, or you might be investing with an idiot. And assuming they’re honest and competent, they take a huge management fee off the top for managing the deal. So maintain control, be an income property investor, and that is how you can best control your financial future. Don’t relinquish control to somebody Be a direct investor. And speaking of which, before we get into some of the meteor content of today’s show, come to our event upcoming in Phoenix. Brittany is going to absolutely hit me over the head if I forget to announce that we have a raffle, folks, we have a nice little raffle. And we’ve done this before on prior events, we’ll give away a few free tickets. And all you need to do is go and enter. It’s super easy as go to Jason hartman.com. Slash raffle. Jason hartman.com slash raffle and just enter in a whole bunch of you have already purchased tickets. If you’ve already purchased a ticket and you win, we will refund your money or did I say refund without? I think I did. It’s refund with a D Thank you make another cup of coffee still this morning. But we will refund your money. And if you haven’t purchased a ticket yet, you might just win. So Jason Hartman dot com slash raffle it takes a whopping 30 seconds to enter. And for a bonus entry, if you tweet your entry on your Twitter account, you’ll get two entries. So there you go, pretty cool. Jason hartman.com slash raffle. And we’ve got to announce and congratulate some of our direct investors who are not relinquishing control of their financial future, to some guy that went to a great school, who’s wearing a nice suit, in a beautiful class, a office building. That, by the way, is probably owned by an insurance company. Just so you know, insurance companies love to invest in real estate. That’s their primary investment, I’d say. And so you’re not going to give your money to that guy. Were in the nice suit at Merrill Lynch or Ameriprise or Charles Schwab or whatever now beautiful office, you are a direct investor, you’re going to be in control, and we help you maintain control in a better, more systematized way. So, Mary Ellen and guy. Now these are just Olivers clients. We’ve got several other investment counselors, as you know, but we’re just talking about all of our clients behind their back on the show today. They’re gonna they’re gonna hear this pretty soon. I think they’ll hear it. I bet they will. They’re regular listeners. So congratulations to Mary Ellen and guy purchased nine properties. Tell us about them. Oliver. Yeah, they purchased nine properties from us. They started with us only about nine months ago. They came on nine properties and nine months you
Oliver 6:32
got it, they came.
Jason Hartman 6:34
Hey, let me interrupt you for a moment, Oliver. Look at folks think about it. You can have a baby in nine months. And that kid will cost you about $250,000. Or you could buy nine properties and that’ll probably cost you about $250,000. So you decide, but if you have a kid by those nine properties, because hey, that’ll pay for their college education. It’ll you know It’ll be a great you know, create a legacy here. We’re not doing this stuff necessarily just for ourselves, although we’re gonna get, you know, a comfortable life out of it. We’re doing it to create a legacy as well. So,
Oliver 7:12
yeah, go ahead, it definitely will create a bit more of a legacy for you. And I think this is probably the only podcast online where we’ll hear the comparison between nine months of having a baby or nine months and birthing our own a nine houses.
Jason Hartman 7:26
Yeah, well, you know, we make odd comparisons. We take the financial world and bring it into the real world a twist on it.
Oliver 7:33
Yeah, put a foot put a funny twist. So Mary Ellen and guy started with us about nine months ago, they came on to our Florida property property tour back in I think that was September of last year.
Jason Hartman 7:45
And we were in Orlando. Yeah. Yeah. They started there. Listen, listen to the podcast, went on to the property tour bought three homes right away. Then they came to our meet the Masters event in January in San Diego. Got another Actually, shortly after the event, they actually went out to Memphis took a tour there went out to Little Rock, bought another bunch of properties out that way. And now they’re actually they’ve already purchased their tickets amongst one of the first ones to buy their tickets for our next Phoenix event. So this just goes to show how been involved and how really getting to some of these events and meeting our providers meeting us. getting in contact with some of our other investors really does make a difference in terms of giving you momentum and moving forward. Yeah. And you know what, that’s why I would say, listeners, you’ve got to come to some live events come and there is just a whole nother dimension that occurs if you’re just sitting back listening to the podcast, hey, we appreciate you listening. But come to live events. We have had people come from Australia, New Zealand, Japan, England, in different places in Europe, Canada. I got kicked out Give me a break. That’s not that far away. Hey, listen, we have people at this event that we are having in Phoenix. We have people coming from, yep, Phoenix to. So wherever you live, get to some of our live events really meet other people, other clients of ours. So you know that we are the real deal. We’ve been doing this a long time. We’ve got thousands of clients, and we’re going to take good care of our clients, as always, and by the way, we’re going to talk about a little rent back challenge here or not rent back but rent ready challenge. And how, you know, in this case, we can’t really take credit, the client kind of took care of themselves, but I want to tell you all about it. So you can, you can understand how to do it for yourself to, you know, just meet our clients, shake hands with people have some private conversations with them. You know, of course, you’ll hear us up there giving the presentation and so forth teaching you about going through the mechanics of property investing, teaching you about using software to evaluate and manage your investments, all of these methods practices as a real estate investor. And by the way, this is September 10, and 11th. Coming right up just a little more than a month away. We’ll do all that for you. But the one of the big benefits is you’re going to get to talk over lunch or at the break or, you know, whenever to other people who are actually doing it investing with us. And you know, we are trying to be just as transparent as we possibly can. We want you to hear the good, the bad and the ugly. This is not perfect, but it’s just better than everything else, at least everything else I know of income property, the most historically proven asset class in the world. So yeah, come to a live event. And I think also, like Oliver says, For your own motivation, it will give you a lot of motivation. When you see other people doing it. You get to meet them in person and hear their stories that will really add a whole new dimension to your investing. So
Oliver 10:57
Exactly. hear their stories, and also hear about Some of their strategies that they’re implementing, I mean, sometimes I’ve got, you know, a couple husbands working full time, the wife is at home and she’s taking care of the kids. And granted, that is a full time job in itself.
Jason Hartman 11:13
That’s a more than full time job.
Oliver 11:17
I’ve noticed a we’re coming up with strategies on how to get them qualified in order to start putting properties in their names. So that way, both individuals can actually acquire their full nine or 10 properties conventionally financed in their with the reason you say nine is because they might already own a home. Exactly.
Jason Hartman 11:33
So 10 each exactly 10 H, but yeah, yeah, absolutely. And so that there’s some good strategies and you will learn we learned tons of stuff from our clients, and we try to share some of it here on the podcast, of course, and definitely at our live events too, because we have our clients share and talk to the audience and and also just through their questions, so yeah, yeah, good stuff. Okay. So they’re coming to the Phoenix event. So you can meet Mary Ellen and guy there. They’ve got Four properties in Memphis, one in Little Rock, and one in Mississippi as well and good stuff. Okay, so what about Scott, all of our eight properties in the last one and a half months, Scott, congratulations. You are jamming eight properties in one and a half months. Wow.
Oliver 12:17
And a month and a half. That is huge. It’s a ees purchase a lot of properties with us here in a very short period of time. He really he’s a he’s living in the Birmingham area. He’s already got a couple of rentals there. He heard about us, went on a quick property tour and went ahead and purchase four properties at on that property tour alone. Fantastic. And then we decided to start diversifying a bit. He picked up another property in our new port, Richey area, and then another two in Memphis.
Jason Hartman 12:46
Fantastic. Good, good stuff, Scott. And then we’ve got Tomas, who I met with with you just about a mile a month, month and a half ago and, you know, I wonder if he would mind if I share that. Chicago story he shared with me.
Oliver 13:01
I don’t know if I remember the Chicago story, right?
Jason Hartman 13:05
It was about being carjacked.
Oliver 13:07
Oh, yeah. I mean,
Jason Hartman 13:09
yeah. He goes on to tell me this. This has nothing to do with real estate directly. But he goes on to tell me about this story about how he was in Chicago and got well not carjacked. But motorcycle jacked, right. And, and someone in this bad area came up to him and the person he was riding with, you know on motorcycles with a gun and said, Hey, give me all your money. Right. And and I I told him that he was making that story up that that was impossible it could not have possibly happened. Because guns are illegal in Chicago. I think
Oliver 13:50
this story may have occurred 20 or 30 years ago, too. Did you all get what I’m saying?
Jason Hartman 13:56
No, doesn’t matter. It’s very strict. gun control laws. The point being that criminals that’s my punch line. Okay. Anyway, I I think that went over kind of like a lead balloon, you know, and the whole gun control argument but
Oliver 14:12
Yeah, a little bit let’s go ahead and congratulate Tomas. He’s He’s purchased seven homes in the Memphis market recently he’s got a fairly diversified portfolio already as is. So he wants to go ahead and focus on one of the nice Midwestern areas. He’s got some fantastic really nice B plus a properties out in that that market and he’s just looking at acquiring some more there and also expanding to a new market here probably sometime soon
Jason Hartman 14:37
When I saw the expression on his face when I said that that could have never happened. He was like meant for a movie. I mean, it was such a great expression. I just loved it and he just cracked up after I said that. That was an awesome story. He’s working on another big multihomed purchase at least last I checked, you of course have a more recent update than I Oliver, but yeah, he’s doing a great job investing. And he’s, he’s a very successful entrepreneur. So but you know, again, the idea is, look, if you have that awesome corporate job, or maybe not so awesome, but at least you’re earning a lot of money, we’ll put it that way. And if you have a situation where you’ve got a business and that business is kicking out money, folks, you’ve got to diversify. Don’t have all your eggs in the basket of your business, a lot of entrepreneurs make this mistake, okay? So you’ve got to diversify outside of your business into a more stable asset class, your business may be awesome. If you stick another 50 or hundred thousand dollars into your business, you may see a really quick return on that because businesses typically will give you a more instant gratification. But But the thing you pay for that the risk you take with the business side of it, is that businesses are obviously far more volatile. So they’re great in some ways, but in other ways, they’re not as good. So you’ll want to get some of your chips off the table and outside of your business into a different investment. And obviously Tomas with his situation. He’s just doing an awesome job of that. So he’s going to be a big time real estate investor, and I’m very impressed. So good job, Tim.
Oliver 16:20
What about Margaret? Margaret, she, she’s relatively new on the scene. And she’s been listening to our podcasts. She actually told me when we first started chatting about six months ago, hey, Oliver, I’m starting at, I think it was podcast number 200. And I’m working my way up. I was like, oh, wow, that is fantastic. She told me she’s essentially done, you know, about a 50 or 75. In two or three months. I said, Wow, that’s, you know, that’s amazing. I said, probably worth those starting from where we’re at right now and sort of working your way back to that way. Just so that way. She’s gotten some of the more relevant information because otherwise she was asking about some of the property tours that we have in Phoenix and I was like, No, no, we’re not in that. area at right now. Anyways, I cannot believe that. So starting in Episode 200 going down episode at the time probably I don’t know where were we at the time maybe 660 or something like that just kind of guessing. And Margaret Yeah, you deserve an award because you’re still listening to me.
Jason Hartman 17:20
So thank you very much for listening. I, I’m sure I have offended you many times by now. I’ve set a lot of stupid things and you’re still listening. So you certainly deserve an award for putting up with me.
Oliver 17:33
But definitely and we actually got a chance to meet with Margaret as well. She came on to our our Ohio property tour about a month and a half ago. She loved our provider, she put a property under contract right away and just been sort of working with her in terms of implementing some of that strategy and getting some properties in her name to apply and get more conventional financing.
Jason Hartman 17:57
That’s fantastic. Well, good stuff. Good stuff. Margaret, congratulations and thank you for listening to the show.
Oliver 18:05
Little sound effect there. Okay, what about Nick and Denise? Nick and Denise? Yes. they’ve they’ve purchased about four properties with us already. One in the Columbus market a couple in Memphis and then they use their self directed IRA to buy one and Chicago. Fantastic. Yeah,
Jason Hartman 18:21
self directed IRA is the way to go. I absolutely love my self directed IRA. Before I did that many years ago, I can’t believe the difference. I mean, getting control of your retirement funds is just a major advance. For any investor, you’ve got to have a self directed IRA for sure. And, and we can help you set one up, we can refer you to different providers who, who do that. So yeah, that’s absolutely a must good stuff.
Oliver 18:49
Congratulations. And for those of you out there that don’t know this yet, you can get financing through your self directed IRA. So just ask us ask me as your investment counselor about how We can help you with them.
Jason Hartman 19:01
Great. Absolutely great. Nick and Denise. Fantastic. And then Michelle, who is a client, but she is also teaching part of the program coming up our, our software weekend that’s coming up in Phoenix that we talked about September 10. And 11th. Michelle is great. She’s actually a professor. So she knows how to teach tours. I just get up there and you know, tangent. And so she’s been building a fantastic portfolio and what what’s the latest with her?
Oliver 19:31
Yeah, she she’s in the the Bay Area, she went ahead and did a refi on her home. She’s got that all taken care of. And now we’ve got a number of properties under contract with her in Memphis, we also got some going on and in the Chicago market as well. So we’re looking looking forward to closing on all of those here soon. And probably getting involved with with maybe another market or if not, we’re sort of going to win see once these close and then sort of strategize from there. So where to move forward.
Jason Hartman 20:01
Good stuff. And Michelle, of course, was on the podcast about maybe, I don’t know, I want to say 1015 episodes ago, she came on the show and shared her story. so fantastic. Michelle, Congratulations and good for you. Good job. What about Michael?
Oliver 20:16
Yeah, Michael, Michael and Michelle. They actually came to our meet the Masters event in January. And I’ve been working with them. They started with their first purchase in March. And since then, it’s almost been a one a month type of thing. So since March, they’ve put one property under contract almost every month. So now they’ve totaled about five properties with us. And we’re just again, using that same sort of strategy. Putting X number of properties in Michael’s name, why properly number of properties in Michelle’s name and just really utilizing financing right now at these super low rates. It’s It’s amazing,
Jason Hartman 20:53
good stuff. That’s a great way to do it. You know, mortgage sequencing and mortgage planning is a very important part. Have this and we’ve done several episodes talking about that before. Of course, we can help you with that directly. any of our investment counselors can help you with that. So good stuff. Let’s just wrap up here. Talk about Adam, Dave and Greg. Greg is doing a fantastic job. He’s been on for Oliver. Give us an overview of that. And then we got a dive into some content
Oliver 21:20
here. All right, Adam, been working with them for about a month now. He’s already put four homes under contract. So congratulations, Adam. David, we’ve been working together now for about, I think six months. He’s already when he’s already purchased about five houses. And he’s looking at expanding his portfolio here quickly. And Greg, we’ve had him on the podcast before. He’s the one that went from just about zero dollars to about $4,000 in passive cash flow, and about seven months, which is amazing. Yeah, that’s fantastic. Good, good stuff. Well, congratulations
Jason Hartman 21:52
to all of you and all of our other clients. You’re just doing phenomenal things out there. We are so impressed with you. We appreciate your business. We also love to learn from you, and love to get you on the show. We’ve had many of our clients on the show over the years. We just thank you so much. So that’s that’s great news. Good job, good job to our clients and
Oliver 22:10
gratulations. Guys.
Jason Hartman 22:13
Okay, all over. Let’s talk a well, a little bit on the event. Just note that room block is almost sold out. So what happens is, when you go to Jason hartman.com, slash events, and you register for the event, you are emailed the hotel information, we’ve got a room block at a special rate, only 129 per night, and this is a resort, okay? And so, you know, it’s if you want to bring your family to one of our events, this would be a pretty fitting event for it because there’s lots to do. There’s a big, you know, big huge pool area. I think there’s water slides and
Oliver 22:48
stuff. There’s water slides, there’s mini golf, there’s even a lazy river. And for those of you that are thinking, oh my god, this is a resort is there going to be a $50 Resort fee per night? The answer is no. We’ve already got that taken care of and It’s included in that 129 per night rates.
Jason Hartman 23:02
Yeah, I can’t stand when hotels do these resorts, a little extra nickel and dime charge. So yeah, good stuff and then you also in addition to getting in on the room block rate, you also get early bird pricing so hurry because that is going fast and the price will escalate very soon. So get in on that Jason Hartman calm slash events. Let’s talk about make readies when you change tenants now, you know one of the practice a lot of our investors like to do is number one, minimize tenant turnover because of course tenant turnover is costly. You want to keep your tenants for a long time, but at the same time, you don’t want to be too soft on the rent. You’ve got to raise your rents. Okay, so this is a fine line. It’s a balance. A lot of our investors are doing two year leases. Sometimes they’re doing a two year lease at the same price. Or sometimes they’re doing a two year lease with an escalation built in for the second year. And mostly with a tenant. This is not very hard. To get by, because the tenant, their their mindset is what do I have to pay now? versus what do I have to pay in, you know, 13 months from now, right? And so if you do a $1,000 a month lease, for example, on your one, and then the second year, you say, well, the lease will be $1,030 a month. So you do a 3% increase in that example, the tenant will probably agree to it No problem. Maybe even and I’ve given you this target before, but of course, it depends on the economy. It depends on everything depends on interest rates, depends on housing supply depends on a lot of factors that we’ve talked about in prior episodes. But I always say the target is see if you can raise it 4% annually, so that would be a $40 increase. You want to raise it enough to where you can get a good yield out of your property, but not too much where it really incentivizes the tenant to move. So what I’m saying is, if you do a two year lease, I think you can be softer on those escalations, where is you might do that to your lease at a 2.5% or a 3%, increase 25 $30 rather than $40 or 4%. In that example, because you’re not going to have any turnover, you’re not going to have a make ready in between tenants, you’re not going to have a month or more of vacancy, and it’s going to be a lot easier. You’re not gonna have any lease up fees, and things like that minimizing tenant turnover is very important. On the other side of that equation, though, you hear some investors and some of our local market specialists, I think, wrongly, brag about how low their vacancy rates are. And all over you know what I’m going to say here, don’t you? If your vacancy rate is too low, meaning your properties are just occupied all the time. You’re not raising the rent enough. Okay? The vacancy rate should be a target number. It should not be you No puffing up your chest and bragging about how you’ve got 100% occupancy and you never have a vacancy? Well, the reason for that is probably because you’re not raising your rents like you should. Okay, so the best practice here is to have a target vacancy rate. So if you have a portfolio of 10 or 100 properties, and you have a vacancy rate of somewhere around six to 8%, meaning your occupancy rate is 92 to 94%, you’re doing pretty darn good. Now, you What you don’t want is you don’t want a vacancy rate where it’s what’s called an economic vacancy where tenants just aren’t paying you or on the other hand, or you have that vacancy rate, where you’re just not being a good manager or your managers not being a good manager, your property manager, and sometimes we self manage. Sometimes we manage our managers and you want them to market your property as well. You want to maintain your property as well. So you minimize vacancy rates. Okay. So this is all a balance, right? It’s all a balance.
Oliver 27:08
Jason, that’s some great advice that you just provided there. And I’ll just add on a couple little things here. Investors, when you’re looking at your properties pay attention to when that lease is the lease end date is going to be, and I’d say at least a month, or if not even two months before then speech, your property management company, make sure that they’re touching base with the tenants see where where the tenants at and to touch on Jason’s two year lease. People love options, including tenants, they love options, I’d say as a property manager, provide the tenant with two options either an option one which would be for example, like a four or 5%, let’s say a 4% increase in rent, if they only want to renew for one year, or if option two, which would be a two year lease where you essentially just raise the rent 2% per year.
Jason Hartman 27:59
So that would be really soft increase,
Oliver 28:02
soft increase, but also it but if you don’t get
Jason Hartman 28:03
the security as a lead exactly dance, it’s worth doing softer increases, okay? So these are all things that you just have to weigh out. Each property is different, each tenant is different. Everything is an individual circumstance. And that’s why real estate does not lend itself real well to statistics, which is what we actually also wanted to talk about today, but we’ve run out of time. So we’re gonna have to save that for a future episode because what we’re going to talk about all over, we’re gonna get you back on the show real soon here. It’s not going to be far away. And we’re going to talk about market indexes these indices, like Case Shiller, or the federal how they’re the various government indexes for real estate prices and rents and vacancy rates and whether there’s appreciation or depreciation, all important stuff, which we will definitely get to on a on a future episode, but obviously We can come back to that vacancy rate issue a little more in just a second. But let’s talk about the make ready issue. Look, folks, your job as a real estate investor is to either self manage your properties, okay? Which, you know, we’ve taught you how to do in many past episodes. And in our members section at Jason Hartman calm we actually have some private member’s calls just about that topic about self management from a distance, which is a can be a great practice. But if not, you need to manage your managers and don’t take everything they say is the gospel question them, you know, it’s like those bumper stickers used to see on really cheap crappy cars in the hippie generation in the 70s. And a little bit in the 80s. You know, it was question authority, right? And, and you do need to do that, because just just recently with one of our clients and this is this kind of stuff, we want to feed back to you so we so appreciate clients sharing their stories with us so we can share them with everybody. yalls and we can raise the bar in terms of best practices for management. And in this example, the manager, they were between tenants and the manager wanted to charge them a bunch of money for a make ready? Well, the client actually went to the property and got this make ready done for about one third of what the manager wanted to charge. And most of that, well, really, the vast majority of it came from the tenant security deposit. So here’s another thing I want to explain. And this is one of the reasons I do like self management. Because although you know, a good manager is worth their weight in gold, as I’ve said many times before, but one of the advantages of self management is you don’t have this inherent conflict of interest that you get with a property management and they can’t help it. It’s not the property managers fault. It’s just the way the system is. So property managers have to serve two masters if you will. They have to serve the tenant and try to keep them happy. And they have To serve the owner, the investor and try and keep them happy, right? So a lot of times, the manager does not want the tenant to get upset with them and go online and start writing bad things on Yelp about them or whatever, right. And so, in this case, they try to keep the tenants happy. And sometimes that’s at the expense of the owner, the investor. And they’ll say, do this pay for that don’t take anything out of their security deposit when you really should be taking stuff out of their security deposit. So what I’m saying is, I’m not giving you any hard and fast rule of yes or no this or that. I’m just saying, question authority. Run it by us. Don’t take everything as the gospel from your manager, okay. And don’t be a doormat, okay? Now, our local market specialists are gonna hate me saying this, right? Because it’s contrary to their interest. But look, I know who my customer is. And my customer is you the investor who’s listening to me right now. It’s not the manager. So Any thoughts on that?
Oliver 32:01
Yeah, definitely. Something seems out of line, especially in a make ready or even in a maintenance or repair item if something seems absolutely insane. And in this case, it was the client messaged me. He emailed me He’s like, Oliver, how does it look to you? And I was like this. This is not ridiculous, totally ridiculous. I had no idea. So I definitely got involved. And what I would say to you guys out there to investors, speak with your investment counselor, ask them just ask them for their opinion on if something looks absurd, because chances are, if you think so it is. And then once they see that once the property manager sees that we’re now or we there’s some oversight going on, they’re probably gonna maybe take a second look at what it is that they sent your way. They’re going to you want to make your property you know, it’s like riding a horse. I remember when I was a kid, and I was at summer camp in Malibu. I wasn’t rich, but I did go to summer camp in Malibu a couple times.
Oliver 32:57
That is definitely a bit more privileged.
Jason Hartman 33:00
Yeah, that’s, that’s white privilege, actually. Yeah, yeah. That’s what the democrats would say white privilege. What you didn’t hear is that I was living in a one bedroom apartment where my mom was sleeping on a convertible sofa in marvista, which was a terrible area at the time. I hear that’s gotten a lot better now, because it’s gentrified. But at the time I lived there was pretty rough. So here’s the thing I want, I want to give you another best practice for your properties. And this is going to cost you a little bit more money, not much a little bit, but I want you to think about making your properties bulletproof. Now, I don’t really mean bulletproof. Okay. But what I mean is make your properties durable. And here are two great ways you can do that. Number one, when you repaint any of your properties, or if you’re involved in the initial painting of them, where you’re, I mean, you’re not painting yourself. I’m just saying you’re hiring the painter. You’re instructing the property managers to what to do. I want you to put either eggshell or low sheen paint on all the walls. For the cheap way to do this everybody will just use flat paint. Okay, now these are not eggshell is not a color by the way it’s a finish, okay? And it’s a very durable enamel like finish. Now in the olden days, you would only put this type of paint on your like the enamel paint, they called it back when I don’t even know if they call it that anymore. But that would be in the kitchens and bathrooms only because it’s you know, it’s waterproof right? But now you put eggshell paint or low sheen paint on all the walls not just on the baseboards and the and the doors and the woodwork or the kitchen and bathroom. You put it everywhere. Okay, and your painter might charge you a little bit more for it. It’s a little bit more expensive, not much at all. But I’m telling you that stuff is so durable, you know you get a scarf or a scrape on it. You just wipe it off okay in fingerprints, you Don’t have to do repainting and touch up painting. One of my houses, eggshell paint looked beautiful for like eight years, okay, on one of these houses, it’s a great investment. So eggshell or low sheen paint finish throughout. I mean, you don’t need it on the ceilings, okay, but everywhere else All right, that’s one rule. And then if you come to the place where you ever have to do a new flooring or red carpet, I want you to consider spending a little more money to put in the vinyl plank wood looking flooring, okay? Because this stuff, it just makes your house durable. Everything is moving away from carpet carpet is an old fashioned concept. You want hard surface floors in your houses because they will last and last and last. And if on the the reason people a lot of investors like this wood plank style, and by the way, I would not do the dark colors. Okay, that’s a personal preference. A lot of people do this dark wood and it looks dusty very easily. And I think it makes the house look too small. Okay, I just wouldn’t do the dark color. But that’s my opinion. But you do this wood. And if part of it needs to be replaced, they can literally come in with an exacto knife and cut that piece of vinyl out, okay, or whatever it’s made of, it’s not exactly vinyl maybe, and just lay a new piece in there with glue, instead of replacing the whole floor. It’s just a really easy repair and it just goes in like a like a board like a piece of wood would be if it were really a wood floor. So do those two things, make your properties more bulletproof in the long run? That’s gonna save you a lot of money. Okay, it really is.
Oliver 36:42
Yeah, it definitely will. And for those of you that have properties under contract, if you know that they’re they’re currently rehabbing them during the renovation. I would just, I mean, if you’re open to spend a little bit more money as the provider as your as a local market specialist, hey, how much would it cost if I were to implant vinyl and get that estimate, I think it’d definitely be worth it.
Jason Hartman 37:04
Yeah. And you can do that throughout you know a lot of people are doing the hard surface in all of the rooms except the bedrooms, I would just do it everywhere. Just do it everywhere and try not to have multiple different things like tile in the kitchen and the plank vinyl looking stuff through in the other rooms, try and just have one type of flooring throughout it makes your house look a lot larger. Okay, so just a couple tips for you there. And the other thing I’d like to say on that since we are talking about it, I would not be too scared of throwing in an accent color on a wall. Okay, you know if you take one wall and I used to use in some of my houses that I personally lived in and some of the offices we used to have this Ralph Lauren eggshell finish. I think it was called Malaya or Molina red. Oh my god, that was gorgeous. That color was it was like art on the wall. Okay. It was beautiful and it doesn’t have to be the actual Ralph Lauren paint which of course will cost you a fortune. They just mimic the color in any paint brand Sherwin Williams whatever. But Ralph Lauren Molina or Malaya I forgive me I can’t remember red. And I think you can do an accent wall I you know, it doesn’t have to be that color. That’s just an example I’ve done and many many compliments on it. But then if you’re a functional a person, they say don’t do red in the bedroom because it makes you awake. Okay, bedrooms are for sleeping. And well, one other thing. This is a family friendly show. Yeah, exactly. listening to the podcast. That’s the other thing you should do in the bedroom. Yes, absolutely. But you don’t want read in there but in our living room or kitchen area or something I can really jazz up a house. I think it’s nice. And one of the services I want to remind you about that we had on a as a guest on a prior podcast is the service called we go look, we go look calm. For 69 bucks. They’ll go Take a look. And make sure your property’s done the way your manager or whoever Told you it was done. Okay, for 69 bucks. So if you’re not sure that they really put in the paint First of all, make sure it’s on the quote, you know, it’s written in there so you know what you’re getting. And you can just have we go look go out or the home inspector if you’ve if you’re dealing with a home inspector in the process of a rehab, so lots of different best practices there. Just wanted to share them with you. Oliver, thank you so much for joining us today. Everybody. Go to Jason Hartman comm slash events and register for our upcoming event in Phoenix. If you want to win a ticket, you can try that at Jason Hartman comm slash raffle and win a ticket as well. Thanks for joining us, everyone. Happy investing.
Oliver 39:46
Thank you, everyone.
Announcer 39:47
I’ve never really thought of Jason is subversive, but I just found out that’s what Wall Street considers him to be.
Announcer 39:55
Really now. How is that possible at all?
Announcer 39:56
Simple. Wall Street believes that real estate and vectors are dangerous to their schemes. Because the dirty truth about income property is that it actually works in real life.
Announcer 40:07
I know I mean, how many people do you know not including insiders who created wealth with stocks, bonds and mutual funds? those options are for people who only want to pretend they’re getting ahead.
Announcer 40:19
Stocks and other non direct traded assets are losing game for most people. The typical scenario is you make a little you lose a little and spin your wheels for decades.
Announcer 40:30
That’s because the corporate crooks running the stock and bond investing game will always see to it that they win. This means unless you’re one of them, you will not win.
Announcer 40:40
And unluckily for wall street. Jason has a unique ability to make the everyday person understand investing the way it should be. He shows them a world where anything less than a 26% annual return is disappointing.
Announcer 40:55
Yep. And that’s why Jason offers a one book set on creating wealth that comes with 20 days. Download audios. He shows us how we can be excited about these scary times and exploit the incredible opportunities this present economy has afforded us.
Announcer 41:09
We can pick local markets, untouched by the economic downturn, exploit packaged commodities investing, and achieve exceptional returns safely and securely.
Announcer 41:19
I like how he teaches you how to protect the equity in your home before it disappears and how to outsource your debt obligations to the government.
Announcer 41:28
And this set of advanced strategies for wealth creation is being offered for only $197 to get your creating wealth encyclopedia book one complete with over 20 hours of audio go to Jason hartman.com forward slash store. If you want to be able to sit back and collect checks every month, just like a banker. Jason’s creating wealth encyclopedia series is for you.
Jason Hartman 41:58
This show is produced by the Hartman media accompany All rights reserved for distribution or publication rights and media interviews, please visit www dot Hartman media.com or email media at Hartman media.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate or business professional for individualized advice. opinions of guests are their own. And the host is acting on behalf of Platinum properties, investor network, Inc. exclusively.
In this episode, Jason Hartman is joined by professor and property investor Michelle. She talks about driverless technology, Capitalism.com podcast, and the end of privatized prisons in the U.S. Jason and Michelle also discuss useful property tools such as the Evaluator app, Property Tracker, and Property Fixer, which would help investors evaluate properties, manage portfolios, and analyze property flips.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Announcer 0:12
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. Real estate investors.
Jason Hartman 1:03
Welcome to episode number 716. And thank you so much for joining me today. This is your host, Jason Hartman. And we are we are getting up there in the numbers, I tell you a 716 Thank you for being with us for so many years, so many listeners have been with us for a long, long time. And I hope you’re one of them. If you’re new to the show, then dig in and feel free to go back and listen to what we call the back catalogue. There’s a lot of very useful information and, and look, it’s just a small assignment. It’s only 715 episodes. So dig in as much as you like. I’ve got with me, Michelle Hawkins back on the show she was on several episodes ago. She is going to be teaching part of our upcoming event in Phoenix on September 10 and 11th. It’s a first time for this event, where we’re going to be talking about using software to become a better real estate investor in terms of evaluating your investments. That’s the first step right, knowing what you’re getting standardizing data, and then also tracking your investments on an ongoing basis. software can really make the whole thing so, so, so much easier. It’s amazing. Michelle, welcome. How are you?
Michelle 2:23
I’m great, Jason, thanks for having me.
Jason Hartman 2:25
Good. And give our listeners a sense of geography. Where are you located?
Michelle 2:29
I’m in Santa Clara, California, which is the heart of Silicon Valley,
Jason Hartman 2:33
Silicon Valley, a famous place where they don’t make any silicon anymore. By the way. I don’t think I actually I think Intel Intel has, is that a fab that Intel has their I mean, you may not know this, I don’t know it. But they have an office there. Of course in Santa Clara. Silicon Valley is a bit of a misnomer nowadays. Because that manufacturing is mostly done somewhere else. But it’s, it’s certainly the high tech capital of the world, isn’t it?
Michelle 2:58
It is well, it says Designed here in this area usually Yes, exactly.
Jason Hartman 3:03
You know, it’s kind of that American philosophy of we think and they sweat. In other words, the idea being that we outsource manufacturing offshore, to more friendly, more business friendly places that don’t have OSHA and the EPA and all that stuff to deal with. And then you have this whole group of people that actually thinks that, you know, China can be polluted, but we got to have really strict environmental regulations here is if we don’t, as john F. Kennedy said, very fittingly, he said, we all breathe the same air, you know, as if it doesn’t circulate around the world, but less we go on a tangent how Michelle? Right. Yes, this may be a tangent. A little alert a little bit. Yeah, a little bit. Oh, gosh. Well, hey, before we dive in and talk about the upcoming event, which I am so excited about. Since you are a professor You’re probably going to be, you’re just going to totally out organize me, I just know this. So this event is probably going to be very organized and very nicely done, folks, if you’ve been to our events before, and you know, you kind of felt that a little bit of it was kind of off the cuff. Well, you’re right, it was this event will probably be much better organized, at the very least, for Michelle’s part of it, maybe not my part, but for Michelle’s part. So we’ll dive into that in a moment. And also, it’s a Buying Event. So we’re going to have several of our teams there are local market specialists as well. But Michelle, before we jumped on the air today, you mentioned Pittsburgh, something big is going on there, isn’t it?
Michelle 4:46
Well, there’s just that new article that came out talking about autonomous vehicles. Yeah, somebody I know likes to talk about those.
Jason Hartman 4:57
Yeah, that that would be yours. Truly, and I tell you folks, this is all coming so much faster than many people think this announcement that Michelle’s mentioning is is an LA Times article. And of course, it’s spread all around the media because all syndicated Luber is about to start giving rides in self driving cars. Yes, the robot cars aren’t coming. The robot cars are here. The article says a fleet of Fords and Volvo’s capable of driving themselves is fully equipped and ready to hit the streets in Pittsburgh within not months, not years, not decades. But within weeks. Yes, within weeks, these cars will be deployed by Uber, the ride hailing company, gosh, I guess that’s a new way. Oh, that. You know what, Michelle, that’s interesting. They use that phrase, the ride hailing company. We used to call this ride sharing And I guess, if there’s not a driver in the car, which is eventually where it’s going, obviously, it’s a ride hailing company where you’re hailing a machine. You’re not sharing a ride with a person. So that’s an interesting distinction, a change in vocabulary there. Experimental robot cars already Prowl streets and highways. But in this case, Uber customers will be in side. Wow. It’s an amazing time to be alive, isn’t it? Yeah,
Michelle 6:33
definitely. I think it’s really exciting because actually, one of the things I don’t like about Uber is that I don’t know who I’m getting in the car with. And if I’m traveling by myself, that’s always made me feel uncomfortable. So this actually, I think, is fantastic.
Jason Hartman 6:49
Well, just in comparison, though, you know, I always like to ask compared to what I mean compared to some stinky dirty taxi. As a woman. You didn’t feel a little more company In an Uber x or Uber black car than you did in some dirty, stinky taxi, the old case, I don’t know, maybe, you know, maybe I mean, look, taxis were marked cars rightly so. I don’t know. You know, that’s an interesting question. I, I as a guy, I felt safer in an Uber. But tell me what you think about that?
Michelle 7:19
Well, I don’t know, the taxi system was just had been around forever. And, you know, who knows how much those folks are vetted and supposedly Ubers drivers are also vetted, but it just seemed like it was more of a company. You know, it just seemed like it had more structure behind it. Whereas an almost anybody could be an Uber driver.
Jason Hartman 7:39
So yeah, fair, fair point. Fair point. Yeah, that’s interesting. So last night, as I mentioned to you, I went to see Star Trek with Fernando and his family, and he’s got two boys, ages 12 and 14. You know, one of the things he says that’s really a burden as a parent is showing referring the kids around to various activities and so forth. And I said he didn’t know the answer to this. I said, you know, okay, can you just, you know, one of the younger boys doesn’t have a smartphone, the older one does. I said, can’t you just have them download the Uber app and jump in an Uber? I mean, I would have done that as a kid. If we had Uber. We didn’t, obviously, but I went all around on my bike. My mother had no idea where I was most of the time. But that was a different era. You know, five years ago when I was a kid. 10 years ago, actually, it was 10 years ago, I think, I don’t even know if that’s legal. Like, would you get arrested? And would your would your kids be taken away by child protective services if you allow a 14 and a 12 year old hail an Uber? I don’t know if the Uber driver or the Lyft driver would pick them up I you know, they they probably have their own requirements, but I’m just kind of wondering, do you your parent, do you know the rules on that?
Michelle 8:57
You know, I don’t know the legal rules. I do know that I know of of a specific child. I think he was around 10 years old who his parents sent him on an Uber to a rehearsal. So I know it’s been done. And I know that there are companies that cater specifically to, you know, driving children around. But
Jason Hartman 9:16
yeah, what I know about those, I
Michelle 9:18
don’t know what they’re called. I mean, they’re usually they’re attached to a specific program, where, you know, if you want your kids to have the after school tutoring, they’ll pick them up from school, take them to the tutoring center, and then maybe even take them to your house. I’m not sure there’s there. You know, there’s always an entrepreneur out there. Yeah, coming up with these ideas, but, but I have two daughters. And so as much as I hate to say it, it, it feels different to have daughters.
Michelle 9:45
And I would not stick them in a car on their own. Just how old are your daughters? They are seven and 10.
Jason Hartman 9:53
So when they’re 16 with me, okay, or I you know, I’m sort of wondering what’s the What’s the rule on that? parents out there, chime in if you want, give us some feedback told
Michelle 10:05
I told the older one I said, when you turn 16, you are getting your license, end of story because I don’t want to drive around anymore.
Jason Hartman 10:13
Right. So maybe it’s safer to be driven than to drive themselves. That’s a strong possibility, you know, because there are other factors with driving themselves, right. But that’s, yeah, definitely interesting. I tell you, if I ever have a daughter, I will lock her up in the house until she’s 35. But she won’t be able to go anywhere. Just kidding. But yeah, it’s this is really amazing. The article goes on to say that Uber is accelerating its plan to replace its 1 million. Wow, that’s insane. Talk about talk about job creation. And then as Joseph Schumpeter, the economist talked about creative destruction First of all, the creation of 1 million jobs. That’s that’s what Uber is created. That’s, that’s incredible. And then, you know, we’re not even talking about Lyft and the other ride sharing companies LY ft, by the way, which is great. I love Lyft I absolutely love Lyft and I think the drivers like Lyft better, but less we get on a tangent on customers. Yeah, and customer Oh, you do like it better to write.
Michelle 11:22
And I’ve heard from my millennial students, they like it better.
Jason Hartman 11:25
Yeah. Lyft is kind of a friendlier company. I think, you know, it’s just a different culture. So I tried to take Lyft whenever I can, because as much as I love Uber and the innovation, I want Uber to have a competitor. So the market has competition. And Uber is obviously much, much bigger than Lyft. So that’s important. But you know, they’re they’re accelerating. It’s accelerating. It’s planned to replace 1 million Uber human drivers with robots as quickly as possible. Uber chief executive, Travis Callen ik I think that’s how you say that said it. It said in a Blog Post Thursday, he also announced a partnership with Volvo to work on driverless car development and the acquisition of auto that’s Oto a driverless truck technology company. I was just reading an article about them the other day. What they do is they retrofit big trucks, like semi trucks, big giant trucks, and make them driverless or self driving. And they said, they are going to be close to the point pretty quickly, where the truck I’ll say in quotes driver can be sleeping in the cab, just taking a nap as the truck a semi truck drives itself. And they said there’s never been any mishaps with their system. So it really is obviously very amazing. It’s why I purchased a Tesla last December, there has been one fatal Tesla accident that their technology I believe was at fault for and that’s that’s when a tractor trailer pulled in front of the car and car didn’t recognize it because the the for the three or four feet below the trailer was open. But it you know, the sensor didn’t sense that hey, you know there’s the whole car’s got to clear the space here, obviously. And the driver was just I’m sure decapitated. It’s pretty terrible, but he was watching a Harry Potter movie. So he probably shouldn’t have been doing that either. But yeah, while he was driving, so, so why are we talking about this, folks because it has a huge impact on real estate. As I’ve said before, the three primary rules of real estate have always been always throughout history. Back to the cave days when we were living in caves have always been location, location, location, and driverless technology, autonomous vehicles make location less meaningful than it’s ever been in human history. And there’s another huge factor obviously, because we just talked about 1 million Uber drivers being replaced by robots. There is the whole question of employment or unemployment, and what AI, robotic technology, all of these incredible technologies that make it an amazing time to be alive. What do they mean for jobs? Will your tenants have jobs? I just did an interview for a new podcast that I was actually hired to host called for capitalism calm. It’s my friend Ryan Moran’s kind of passion project to save capitalism for Generation Y. He’s a generation wire. And he believes that they’re leaning towards socialism. I did a show for them recently. That was about the destruction of capitalism through artificial intelligence. And I you know, I don’t know how this is all gonna play out. It’s it’s pretty weird but a huge industry globally. Is transportation, as so many of our listeners have pointed out? If we’re going to have rental properties, our tenants probably need to have jobs. Well, you know, if you’re renting to section eight tenants, a lot of them don’t have jobs. They’re just on, quote, disability, unquote. It’s amazing how many young people are disabled nowadays because the government pays them to be disabled. But you know, that’s what gets rewarded gets repeated. Right?
Michelle 15:23
Definitely.
Jason Hartman 15:27
Have you noticed I’m doing all the talking here?
Michelle 15:29
Yes, but you you’re really good at it. Jason.
Jason Hartman 15:33
Sorry, Michelle. Here, I asked you to come on the show with me and then I don’t shut up. Hmm.
Michelle 15:40
I would say I would say we’re more than leaning towards socialism,
Jason Hartman 15:45
or galloping Gordon.
Michelle 15:46
Yeah, with full speed ahead.
Jason Hartman 15:48
As Howard gruff says we’re galloping toward it. And I love what you said to me when we first met. You know, of course, you’re a podcast listener to the podcast and a client of ours. And then you’ve gotten involved with our real estate. Tools company, and you’re doing some great work with real estate tools. And that’s why you’re teaching part of the course coming up in Phoenix in September. But the greatest line ever was what you said to me. Do you remember? Do you know what I’m going to say, Michelle, about that?
Michelle 16:15
I do. It’s lonely being a libertarian in San Francisco.
Jason Hartman 16:23
It really is. It’s lonely being a libertarian in San Francisco. How many of them are there? Is your husband a libertarian?
Michelle 16:32
Yes. Okay.
Jason Hartman 16:33
So there’s two at least
Michelle 16:34
there’s two that I know of. Yeah.
Michelle 16:37
have met in the Bay Area. I know one other. Actually. Actually. Well, I, I do actually belong to a very tiny book club. There’s four of us in there for ladies who are all objectivists.
Jason Hartman 16:52
So wine Rams? Yes. So so we get together and we talk about books and novels and politics and blah, blah. So there’s at least five that I know of and you probably contemplate the question the somewhat rhetorical question. Who is john Galt? Your club, right? Yeah, where is he? Where? Yeah, that question nowadays is where is john Galt? We certainly need some john Gold’s in the world, don’t we? But very interesting stuff. Tell us about the event coming up in tell us some of the stuff you’re going to be covering. You have See, you actually know how to educate people. Unlike me who just rambles on and on. You have some great ideas for how to present this information. I love some of the stuff we talked about a few days ago when I was in Jackson Hole, Jackson Hole, Wyoming, share some of that with listeners.
Michelle 17:45
Well, I’m going to be doing two different presentations. The first one will be on our iOS apps. The most relevant one to your listeners is probably the evaluator app. And what we’re going to do is we’re going to take an actual proform that you might get from any provider, maybe if you’re out shopping on your own, and you get a pro forma, and it tells you certain information. But a lot of times it doesn’t tell you the whole story. It doesn’t answer every question that you might have. And so origin map,
Jason Hartman 18:16
left something out. Yeah, imagine Can you believe it?
Michelle 18:19
So, so we’ll go through the exercise of actually plugging in the numbers and filling in those gaps. And along the way, just explaining, you know, why certain things are important to know and what types of things you can be thinking about and evaluating as, as an investor. And then we can also, you know, take a look at that, and also, some of the variables, you know, we can play around with them and do you know, conservative or more optimistic scenarios so that you can ask yourself, you know, if even if it’s under, you know, sort of a worst case scenario, is this still a good deal for me? And if the answer is yes, Then why wouldn’t you go for it?
Jason Hartman 19:02
Absolutely. That’s great. You know, Michelle, when I got into this business back in 2004, and what I mean is not the real estate business, of course, I was in back in that in like, I don’t know, 1911 or something. It’s a long time ago, but into the nationwide investing business. Two of the decisions that I think I was very fortunate to, to make and make good decisions on this right away. Or number one, I knew who my customer was, it was the investor, not the provider of the property is not the seller. And number two standardizing data data standardization is a critical critical thing as an investor because as I was shopping around trying to do this myself, and I’m basically I got into this business and created these, these companies that that do this to become my own customer because it was so difficult to buy properties nationwide, the the the level of absolute incompetence out there was mind boggling. And the kind of junk that you would get from these different sellers of property in all of these different formats. It’s like you had to be a detective every time to just analyze a property to underwrite a deal. And the the amount of questions back and forth in the emails back and forth and the the detective work, it was beyond the beyond. I just couldn’t believe it. And so that back in 2004, that’s really one of the first things I did data standardization. So you standardize your data. And you’re a lot less likely to make mistakes when you’re choosing a property. And so you had this great idea, which is to take some different performance from some different companies out there, and then put them into our software and standardized them and see if they even have the complete info there for you to standardize in the first place. Right, right.
Michelle 21:05
Well, yeah, a lot of them they leave out maintenance or they leave out vacancy. And they just have a little note at the bottom saying, Oh, you should take that into account as well.
Jason Hartman 21:16
Right, you might want to think about those extra cost. That changed the whole dynamics of the bill. And maybe it’s not as good as it looks. Exactly.
Michelle 21:23
Yeah.
Jason Hartman 21:24
Yeah. Amazing. Amazing. Okay, good. Good stuff. What else are you going to be talking about?
Michelle 21:29
Well, we other presentation for me is on the online software, which is property tracker. And that software is designed for really managing your portfolio once you’ve purchased it. You can also evaluate the purchase beforehand through that software, but then afterwards, it helps you to manage them on an ongoing basis. And so we get a lot of questions just around you know, how do I input all the information? How do I, you know, input the data as it’s coming in, you know, on a monthly basis. This. So we’re just gonna walk participants through that step by step and show them how to do it.
Jason Hartman 22:08
Now, what about home flippers? We’re not really into flipping as a philosophy. We’re into the buy and hold stuff. Are we going to talk about our other app? property flipper?
Michelle 22:18
If we do have time?
Jason Hartman 22:20
Yeah. A fixer. So he changed the name of it. Yeah, right, right. Yep.
Michelle 22:24
Yeah. If there’s time, sure, we can definitely take a look at that app as well. Yeah,
Jason Hartman 22:28
so we’ve got a little app that makes it really easy. And I know we’re not talking to most of our audience here. But there are a few of you out there who are into the flipping thing. We’ve got a little app for your iOS device, iPad, or iPhone, that helps you analyze flips really quickly, and see if they make sense and see how much money you might make on that deal. So we can do a little short demo on that one, hopefully, too. So good stuff. And then we’re going to have our providers there from three or four of our markets, that we’ll be talking about the different properties they have. And and Michelle, you had a good idea for that to take some of those properties and kind of analyze them in some different ways, right? Yes. Well, we thought we could take some of the properties that they’re going to have for sale and put that into property tracker and take a look at it. Try different scenarios. And, and see if it’s see if it’s a deal. be critical of them, right. be critical of them. Yeah, yeah, that’s great. It’s so nice to have the freedom of not being attached to any one property or any one market to be able to be property agnostic and area agnostic, because we have this variety of inventory that people can buy. So it doesn’t have to be in any specific market or it doesn’t have to be any specific local market specialist or type of property or anything like that, right?
Michelle 23:49
Yes. Can I tell you Jason, one of the things that I really appreciate about you and your company, is actually the level of transparency that you have that you can go on your website and you can really see the inventory that your company is has gathered. But you’re very honest that it’s not perfect. It’s just better than anything else. So as the investor, you know, you’re not just being sold this really rosy picture, you know that you have to do your due diligence, you have to do your own evaluation.
Michelle 24:24
And I just really appreciate that.
Jason Hartman 24:26
Yeah, thank you. I appreciate that. And no, you can’t tell anybody that. You just did. Yeah, no, I appreciate that. Michelle, and thank you. You know, we’re just here. Our big goal is help people move their money away from the modern version of organized crime known as Wall Street, they, the modern mafia, that that does a great job separating people from their money. We want to help people become direct investors so they can be in control. Since my head is getting really fat right now and I can barely fit through the door, can I read two nice testimonials we got this week. Of course, real quick. These were on iTunes and they were reviews for the podcast and I, I so much appreciate any of you listening, please go write a review for the podcast. We really appreciate that. We try to read them on the air as much as we can. But there were two nice ones this week. One from Mark Cropper. Thank you, Mark. Appreciate that. It says great insights. It’s a five star review from a man who practices everything he preaches. Well, just so you know, that’s not really true, but thank you. I don’t practice everything I breach. Sometimes my my own worst enemy. But thank you for saying that from the man who practices everything he preaches. Very interesting and informative talk about real estate investing and beyond keep producing these helpful podcast Jason, they are valuable. Thank you, Mark. I appreciate it. And then the next one was great straightforward advice, information and knowledge. This one. It’s not they don’t really say the name. So I don’t I think it’s Evan. But it might be a typo there. I’m not exactly sure. But it’s a five star review. And it says Jason has grown and evolved over the years. And his podcast mirrors this. Jason, I love your podcast. If you want to learn about real estate, politics and life, listen to this podcast. Jason is a knowledgeable fellow, a funny dude. And if you can get beyond his rants, which I particularly get a positive kick out of, then you have to listen to this podcast. Thanks again, Jason. So thank you for that. I appreciate it. We will keep churning them out until we get to Episode 30 562. That’s when we’re gonna quit. I think 3562 Do you think that’s a good number to quit on Michelle? No. Okay. All right. All right. Hey, um, in other news here real quickly, just I want to actually give some credit. Yes. redhead I want to commend and pat on the back. Our president, Mr. Obama, who I don’t usually give any credit to. But I think he’s done like four good things in office. And this is one of them. And it is. And this is a Business Insider article, but I saw it in a bunch of places. And the media says, the debate over private prisons is masking the real problems with America’s prison industry. So you can debate that all you want. But the Obama administration has said that they are going to move away from privatized prisons, in terms of the federal government, and I hope states will follow because as much as I love capitalism, I don’t think capitalism works in areas where you incentivize people to take away people’s freedom or to kill them and what I mean by killing them I mean, the war machine, the military animal Real complex. These are areas where capitalism, it doesn’t work so well. Don’t at least that’s my opinion. You know, when I first heard of privatized prisons in the 90s, I thought they were good idea. I thought, yeah, let’s outsource this to private industry, they will do a much better job than the government, you know, they’ll be more efficient, it’ll be less expensive. But unfortunately, as that great book I’ve talked about in the past, the greatest management principle in the world, probably written back in the 80s, by Michael lebeau, or Michael above. And the the thesis of the book is what gets rewarded gets repeated, and the prison population has skyrocketed and laws have become more draconian, they become stricter, because there’s this whole industry that is incentivized by finding reasons for people to break the law so they can be imprisoned. There’s a whole nother industry, the military industrial complex that finds reasons to go to war, because it’s very profitable. And that’s the central bankers, of course, are in on that deal. They have been for a long time. So yeah, I don’t want to see prisons privatized. I want to let that one go back to the government. Am I crazy? Michelle, what do you think?
Michelle 29:13
No, I don’t think so. I mean, even as a libertarian, we recognize that there are certain areas where we do need government. It’s not a no government philosophy. It’s just limited. But there are certain functions that are the primary responsibility of government. And I would definitely say, you know, law enforcement and incarceration would be some of those things.
Jason Hartman 29:34
Yeah, yeah. And like Iran says the government has to maintain the monopoly on the ability to inflict violence, because occasionally you need to, and that needs to be only the government that does that. And in a way privatized prisons are inflicting in a sense of violence. You know, the government needs to maintain the court system. And these are things that even Iran says, you know, what? Government needs to do. So I agree. And, you know, infrastructure in general needs to be the government’s responsibility. But please get the hell out of everything else in our lives.
Michelle 30:12
That would be great. I mean, talking about the prison population exploding, you really have to talk about our drug laws. And I know that’s a tangent and a whole can of worms, but it’s just really a national travesty, I think with
Jason Hartman 30:24
what’s going on. It is it really is, you know, drug addiction needs to be treated as a social and a medical problem if he asked me, yeah, we got to stop incarcerating people for that. So you know, I’m gonna give Obama some credit. He’s hardened a lot of nonviolent drug offenders. Now, I haven’t looked at individual cases. I hope I’m not sorry for saying this. This move by the DOJ away from privatized prisons, I think is a good one. And, you know, it’s we’ll put it up there with you know, the five good things Obama’s done in eight years. I’m not exactly a fan in case you haven’t noticed, but I’ll give him credit where it’s due. I’ll never forgive him for Obamacare for disaster that’s already falling apart. So it’s just epic disaster. Yeah. Yeah, we can talk about that on another show. But I know we got to wrap it up. So Michelle, thank you for joining me.
Michelle 31:16
Know. Thanks for having me. Yeah,
Jason Hartman 31:17
a couple another quick announcement, folks. We’ve got a great event coming up just in about, I guess what is that about 10 days away in Seattle, our venture Alliance weekend. That’s on Labor Day weekend. And if you’d like to join us for that, check out venture Alliance mastermind calm for the software and buying event, which is the next the following weekend, September 10, and 11th. Go to Jason Hartman calm, click on the events section and join us for that. There’s still the second tier of early bird pricing for that event. And I know some of you missed out on the first early bird tier and you were kind of bummed about that, but the room is filling up. You got to register ASAP Jason hartman.com slash events. And we look forward to seeing you there. Michelle, thanks again for joining me.
Announcer 32:06
I’ve never really thought of Jason as subversive. But I just found out that’s what Wall Street considers him to be. Really now, how is that possible at all? Simple. Wall Street believes that real estate investors are dangerous to their schemes? Because the dirty truth about income property is that it actually works in real life. I know I mean, how many people do you know not including insiders who created wealth with stocks, bonds and mutual funds? those options are for people who only want to pretend they’re getting ahead. Stocks and other non direct traded assets are a losing game for most people. The typical scenario is you make a little you lose a little and spin your wheels for decades. That’s because the corporate crooks running the stock and bond investing game will always see to it that they win. This means unless you’re one of them, you will not win and unless Luckily for Wallstreet Jason has a unique ability to make the everyday person understand investing the way it should be. He shows them a world where anything less than a 26% annual return is disappointing. Yep. And that’s why Jason offers a one book set on creating wealth that comes with 20 digital download audios. He shows us how we can be excited about these scary times and exploit the incredible opportunities this present economy has afforded us. We can pick local markets, untouched by the economic downturn, exploit packaged commodities investing and achieve exceptional returns safely and securely. I like how he teaches you how to protect the equity in your home before it disappears and how to outsource your debt obligations to the government. And this set of advanced strategies for wealth creation is being offered for only $197 to get you’re creating wealth encyclopedia book one complete with over 20 hours of audio go to to Jason hartman.com forward slash store. If you want to be able to sit back and collect checks every month, just like a banker Jason’s creating wealth encyclopedia series is for you.
This show is produced by the Hartman media company All rights reserved for distribution or publication rights and media interviews, please visit www dot Hartman media.com or email media at Hartman media.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate or business professional for individualized advice. opinions of guests are their own. And the host is acting on behalf of Platinum properties, investor network, Inc. exclusively.
At the start of the show, Jason Hartman is joined by a long-time real estate investor, Drew. They talk about the pitfalls of trying to time the market, bulletproofing your properties when you first purchase them, and what happens when you over-diversify your real estate portfolio. Then, Jason plays a recording of the self-management expert panel to answer questions such as the difficulty of finding tenants when self-managing properties, best communication tools to use with tenants, and how to facilitate move-out inspections and handle legal infringements.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Announcer 0:12
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 we estate investors.
Jason Hartman 1:03
Welcome listeners from around the world. Thank you so much for joining me. This is your host Jason Hartman with episode number 731 731. We are going to have the second half sort of a q&a session that I think you’re going to get a lot of information out. This is a meaty high content q&a session from one of our live events. We’ll have that coming up in a few minutes. But first, I wanted to do a kind of a roundup circling back with one of our prior investor case studies from several years ago, you might remember the young gentleman in his 20s, who was on the show, back maybe I want to say about five years ago, maybe four years ago, I’m not sure. He was talking about how he had his own business and how he was buying rental properties in Indianapolis and then in Memphis after that, and over the years, he’s had some definite bumps in the road. It hasn’t always been easy for sure. But he left me a nice Vox message about two weeks ago. And he said, You know what? I know I’ve complained now and then but overall I’m really happy because I just checked the value of my property on Zillow. And he was super happy. And that was drew and drew is a new father. Well, relatively new father, since he was on the show last he got married and had a kid. And he talked before about his warehouse in Laguna Beach. And that’s where I am. I’m with him at his warehouse, because he was kind enough to take in some boxes for me, and I’m picking them up out here after being in San Diego for a couple of days. And so we are in Laguna Beach, California.
Drew, welcome back. How are you?
Drew 2:42
Hi, welcome. Thanks for having me. Yeah, sure. Beats being 106. England. It’s a, it’s a little cooler here. A little cooler, but still pretty hot. So we’re in the canyon right now. But yeah, thanks for having me on the show.
Jason Hartman 2:56
So what’s been going on with you the past few years with your investments business has grown dramatically. So congratulations. Yeah, yeah, great business.
Drew 3:04
Yeah. So I mostly sell stuff on Amazon. That’s kind of that business has kind of exploded for me and you sell printer cartridges. That’s your main thing, right? Yeah. So when I started, I kind of focused on customers that were small businesses and quickly learned that really where the money is, and where the least amount of complaints are, are the people that have the deep wallets, who buy larger cartridges that go in commercial machines, and mercial printers, commercial printers that do banners and blueprints and that sort of thing. So I sort of focused more on that inventory, you know, then the $20 cartridges so these cartridges might be $250 rather than $20. So I’ve kind of explored that, you know, built my website, so if you have a plotter, feel free to go to my website.
Jason Hartman 3:50
I didn’t know this was gonna be self promotional, but Go For It Ain’t Safari.
Drew 3:53
Yeah, ink safari.com. So Ink safari.com and it’s a small
Jason Hartman 3:59
He’s a shameless self promoter here. We wanted to talk about your real estate investing.
Drew 4:04
But yeah, so my, my real estate investing was kind of interesting. I had bought four properties and in Indianapolis, and that kind of gave me the money to, here’s what happened really, I wanted I’d save a bunch of money to buy a house in California. And since I’m self employed, once the economy fell out, I had probably about 50% of funds to put down on a house in California. And I found that since I’m self employed, and I’m really self employed, I’m not, you know, stated income self employed, that a lot of issues I was having was no everyone laughed when they wanted to lend me money.
Jason Hartman 4:43
Hey, they don’t want to let you qualify for loans. So your investments actually on the investment side, I mean, that’s kind of what kept you from buying a house for a little while. Yeah,
Drew 4:51
you know, so I ended up buying a house I bought a house in 2013. And we bought a house in Old Town orange, which is a smaller All area walking or walking to the sir. You know, like the
Jason Hartman 5:03
university there’s,
Drew 5:04
there’s like, you know a bunch of antique shops and restaurants it’s a cute area but we moved from Laguna Beach inland because you can’t buy anything. Yeah. And Laguna Beach you know, if you want you get crap shack for a million dollars and now they’re it’s 1,000,005. Now they’re Yeah, now they’re about 2 million so. So we bought a house out there and actually did really well even we probably would that was the luck.
Jason Hartman 5:25
That was it. It was up to us about your investment property. Okay, so those are the sensible cash flowing properties. And here’s one of the things I wanted to say about that. I just met one of our other clients who many of you have met. He’s also my partner in a couple of properties. We own together some large properties, a mobile home park and an apartment complex. And many of you met him his name is Steve at some of our events, maybe at our meet the Masters he was at the one last year but the year before last. And I pointed him out in the audience and I know several of you listening may have talked to him. But here’s one of the things he said drew and I think that’s kind of interesting. It goes was in line with your story. He said that he was talking with a real estate expert who compared buying a property in San Jose, California in 1986. Okay, like before that well before, a lot of the Silicon Valley boom, I mean, certainly there was some of that going on back then. And then comparing it to buying a property like St. Louis and some other of these linear markets, and how much more money you would have made on that property. But I said, Wait, Steve, are you really doing the math right? Because the Silicon Valley property in San Jose, back in 1986. And listen, I remember 1986 and I, I remember, actually, I was dating I this gorgeous Canadian girlfriend from Vancouver, and I dropped her off because she came down to visit me in Southern California. We drove up the coast and went to San Francisco and stuff like that, and I dropped her off at the San Jose airport. And I remember that’s the last time I saw so remember how I was
Drew 6:59
feeling leaving Long Distance short term.
Jason Hartman 7:01
Yeah, well, it wasn’t that short term here. But anyway, here we go on another tangent. Right. Okay, back to real estate. But I remember consciously thinking of, you know, how San Jose was and the Silicon Valley market back then. And it’s, you know, for a long time when a high flyer of markets, right, but even back then your rent to value ratio was only point 4% versus 1%. So, yes, you would have made a lot more money in appreciation on the San Jose property, but you would have been feeding in all these years, okay. Because, you know, you you would have received six tenths of a percent less money and income every month for all those decades, versus what you receive on a St. Louis property, for example, or a Chicago land property or a Memphis property. Yeah, that’s the
Drew 7:55
more I think a lot of it comes down to timing. I think there were more a longer period. of opportunity possibly in these other markets that you recommend. Then maybe in California, like I’ll give you a perfect example, when we lived in Laguna Beach, we were living in a four Plex that they bought in 2010. For 810,000. we’re
Jason Hartman 8:13
renting it you’re renting, okay. And
Drew 8:15
they had an eight, an eight, four Plex for $810,000. They probably put, you know, 50 grand into fixing it up. So all together, you know, let’s say they were in there for 850. The house next door to me in orange, that’s a two Plex sold last week, basically, for 830. So about the same amount of money. So a four Plex at the beach versus a two Plex inland. So the price is that same place in Laguna Beach is probably worth 2.5. And they bought it for 810. So but nobody,
Jason Hartman 8:49
there’s two things though. Nobody knew that was gonna write right it was speculative. Yeah. This is what I always say, look, lots of people get lucky and these high properties, they don’t view them right, their brain gets all cloudy and foggy and turns to mush because the property basically becomes because the cash flow is so crappy, it becomes a forced savings program where they for, you know, 10 years are supporting that property, either by not getting the the cash on cash return they should have received. You can’t hear the dogs that don’t bark or nobody, nobody looks at the profound impact of what didn’t happen. And what didn’t happen is they didn’t have a self supporting property or a cash flow positive property with good return on invest. Yeah, I think that that’s what didn’t happen what they didn’t notice. They had the forced savings program, and they think, Oh, God, the value went way up. But you know, and that’s great. And they got their their windfall, but they’ve been supporting it for a long time in a forced savings program, which in a way look at for undisciplined people at the very least. least some real estate is a four saving program, right? It’s like, Look, you don’t have a choice, you have to contribute to Social Security. Now we know that’s a big Ponzi scheme, of course. But if it were a legitimate savings program, as it was designed to be originally, that’s what sometimes your real estate can be, because it’s not easy to pull the equity out and spend it like in a checking account.
Drew 10:21
Yeah, I think what’s there is there’s a couple factors here. I mean, when I bought my properties in Indianapolis, you’re looking at, you know, a house that I bought for 50 grand, and I probably put 10 grand into it, you’re gonna make everybody very jealous, because you can’t repeat that nowadays.
Jason Hartman 10:38
No, you can, but it would not be a property like what he got,
Drew 10:42
yes, I I bought in these clustered neighborhoods where they were all built fairly, you know, 2005 2006. And so they’re all new builds, and boom, bust, boom, bust time, so everyone that got in there bought at a bad time. So there was a Since most people paid put nothing down, there was an incentive to walk away, because they had very little skin in the game. So since there was such a gluttony of inventory, you know, I sort of was able to buy something below the cost of construction. So I’m buying it, I’m probably getting close to like a 1.7 return on investment of the RV ratio. Whereas like, probably if I bought in Laguna Beach, my RV ratio would be point seven. And if I bought it the best time ever, ever, ever, ever,
Jason Hartman 11:32
it’s the best time ever and we’re gonna beat you would have been point five probably like, Yeah, no, no. prices were the lowest Yeah, most depressed and the rents were the highest as a ratio.
Drew 11:41
Yeah, probably. Yeah. Between. Yeah, I think that, okay, something like that. So, you know, and the thing is, I wasn’t I couldn’t buy a house in Laguna Beach, and I couldn’t get financing. So the ability of me being able to buy a house was how much money I had as cash in the bank. So I sort of was doing this thing every six months. I would just scrap And save and do as best I could.
Drew 12:03
With cap, I know you buy finance, I bought a rental property with cash and then the rent that I was getting from those rental properties paid for my rent in Laguna. So, you know, then I grew up and moved to move to a house
Jason Hartman 12:18
and got married, got married. So
Drew 12:20
I think the one lesson that I learned along the way that I would just encourage people to do is that when you buy the property, make sure you have a buffer to add improvement value to the property when you purchase it. So I’ll give you an example. A lot of these houses that I bought, they needed carpet replaced, and I hadn’t saved up quite enough money to the only thing I could do is just put in kind of the cheapest carpet you could get to get a renter. But let me just
Jason Hartman 12:48
because one of the things we may actually have that on this segment, I can’t remember. But one of the things, folks and I talked to this Steve about this at lunch, I want you to start bulletproofing your properties In the long run, it’s gonna be a lot less expensive in the short run it’s gonna cost only a little more yeah so the example being vinyl plank flooring and eggshell or low sheen right throughout small difference, but it can it can make those turns a lot less expensive and
Drew 13:17
I don’t think Jason Jason we haven’t talked about this so I’m this is not on the air. Yeah, this is this is not this is not a coordinated effort, but I completely agree with Jason. I went and every single property once the property management company said this carpet needs to be replaced. Here’s the bid for you know, here’s the bid to replace $1 square foot it costs you know, 1500 dollars to replace the vinyl. Replace it with carpet. I went with vinyl plank flooring 500
Drew 13:46
Yeah, vinyl plank flooring, you
Jason Hartman 13:47
know, and it’s well it’s it might
Drew 13:49
be more than that. But yeah, it’s it’s it’s way worth it because if it’s two times or at the most three times of replacing cars anymore, okay, well the thing is, you can Buy vinyl plank flooring now for about the same amount as carpet well,
Jason Hartman 14:03
little, little,
Drew 14:04
little little more because of the installation. We did.
Jason Hartman 14:06
We did the comparison on the last show Fernando and I were at a on the Wednesday show not the flashback Friday. But Fernando and I were at a real estate Expo and the prices we got there were you know decent rental type carpet a buck 20 a square foot vinyl plank $2 Yeah,
Drew 14:24
that’s what wasn’t quite double. And yeah, that’s that’s true. You can get the cheap stuff for a buck but I wouldn’t recommend that spend $2 get the nice stuff. So it doesn’t you know, and the thing that’s nice about vinyl plank flooring, it has a residential warranty usually lifetime. It’s extremely simple to install. You could do it yourself, but you’re probably not there. And what’s also really nice about it is it’s waterproof so it can seamlessly go from the bathroom to the kitchen to the living room and just try and just do one flooring throughout your house. Don’t have tile here and vinyl plank. Bear and just have it all the same, it looks much better. It doesn’t cut the house up. And it’s a lot simpler when you need to do a replacement and take the exacto knife and cut out one of those pieces of plank
Jason Hartman 15:11
to put another one in.
Drew 15:12
Yeah, so I kind of systematically went through each one of my properties and replaced it and kind of upgraded as I went and added, you know, added value to the house and added you know, what would be rental, a little bit more rental income to cover the gap because people it has a nicer appeal inside. And so I call it you call it What did you call it? I call it baby proofing. I call it a bulletproof baby proofing.
Jason Hartman 15:38
Yeah. So that’s our babies, aren’t they?
Drew 15:41
Yeah, and I think it’s actually really helped in the rehab in the, in the in the rent ready beds. You know, so I recently got a rent ready bid, and it was probably half of what it would have been if I had carpet.
Jason Hartman 15:54
So. So look at as the next time any of you have a make ready that you need to do Then, you know, just do get the eggshell paint in there. And that’s the finish, not the color. That’s just the finish the the good paint that you can, you can wipe it off with 409 are fantastic. And it’s clean, it doesn’t scuff up very easily or anything and get the get the vinyl plank type floors and make your properties more bulletproof. So that’s a good lesson. But Drew, look, we got to get to our segment. And it’s funny because you said you didn’t have anything to say. It’s been 16 minutes we’ve been talking right. Okay, so but here’s what I wanted to tell people is, I think one of the big lessons from your experience as an investor. I mean, you’re excited about investing again now, but you had some years where you were getting pretty discouraged where you were looking at it like this and I remember talking to Katie, your wife about it, where it’s like you can make so much more money focusing on your business than screwing around with these little rental properties. You know, that was kind of the attitude for a while. But what you don’t notice a lot of times and this is the thing investors is what is kind of happening happening behind the scenes. Yeah, there is some real wealth being created for you there. Because the properties are like a big cruise ship. It goes very slowly. You know, the business is like an airplane, if you’ve got a successful business, okay, and it’s going from place to place really quickly, the cruise ship is just chugging away real slowly. It’s only going 20 knots, but it gets there, you know. Alright. So I think that’s the lesson I kind of wanted to share.
Drew 17:25
Yeah, so I, you know, there’s, there’s, you know, there’s obviously active income and passive income, if you want to call it that, and my
Jason Hartman 17:33
bubble wrap. Yes.
Drew 17:34
Yeah. So there’s plenty. There’s plenty of that here. Your injuries were on. But, you know, and so I kind of have changed my tune a little bit. And, you know, you need to focus on both because, you know, one is going to pay the bills now, and one will probably pay the bills later. That’s kind of what I’ve focused on. And, and so yeah, I am interested in investing in the future and Jason always tells me Not to time the market but it seems quite frothy. Well I
Jason Hartman 18:04
mean depends on where you live in California it’s
Drew 18:08
crazy but but yeah I’m I’m sort of waiting for the where the smart money will go and trying to sort of see I gosh I wish I bought some silver back when it was 14 but I know you’re not a gold bug but
Jason Hartman 18:21
precious 20 now Yeah, yeah precious metals are overrated But hey, silver was at 46 that’s truly $7 and they all said then it was going to 75 but it never did
Drew 18:31
yeah it’s I don’t be a speculator
Jason Hartman 18:34
cashflow investor, folks. That’s that’s really the rule and and you know, I know you’re trying to time the market, but I’m telling you, I’ve never seen a market timer win in the long run.
Drew 18:45
No, and honestly, the thing is, is I think I was pretty good at timing the market last time. Oh, you
Jason Hartman 18:52
back then. And that’s 2020 hindsight is 20 in the Ruby, and of course you made a fortune
Drew 18:58
yet. So I think I time the market. Well, but here’s the here’s to your point is that my plan of buying a house in California at the bottom was I got blindsided by some unknown factor. And I couldn’t buy a house at the bottom I wanted to but I couldn’t because they were lending money out. So I kind of had to change my change my plan. So, you know, now I’m trying to figure out where to throw the dice now and I don’t know what do you think
Jason Hartman 19:25
don’t throw dice invest for cash flow. That’s what I think. But here’s, here’s one of the things you got to realize about that. You were trying to buy property when nobody was buying, and you did that with some rental properties. You got what you got seven or nine rentals, ultimately, yeah, I have a eight Okay. And then you’ve got your house in which you live. And the reason it’s the bottom of the market. One of the reasons is that the the lending just contracts dramatically and the amount of available financing. It just evaporates from the market. The banks got very conservative Obviously, they were very scared to land. And people were very scared to buy. So that’s that’s what goes on in a contraction. And we got to wrap this up. But did you have one final comment there because we got to get to our segment Actually, we always go too long. You know what I’m going to do? I’m going to never announce that we’re going to have a guest or a segment and I’m just going to go on and start talking and if I shut up soon enough, we’ll play the segment but that’s what I got to do.
Drew 20:26
Yeah, so I don’t know if I have any other thoughts for you but I’m I’m interested in keeping my eyes open I had a friend send me a property in little rock that looked beautiful that I’m
Jason Hartman 20:36
little works pretty great, most landlord friendly market in the country.
Drew 20:39
Yeah, that was that was interesting. That perked me up, you know, I was looking at Was that your friend Aaron?
Jason Hartman 20:44
Yes. Yeah. Aaron Colson and I was looking at us at our last event.
Drew 20:48
And I you know, and I was looking at some properties in Indianapolis again, and I kind of was actually gonna put an offer in on a place recently and come to find out it was in a bad area, so I kind of ended There was a place in Memphis I was looking at so I’m still kind of keeping keeping the pulse on things, but I’m waiting for the next next downturn whenever that
Jason Hartman 21:08
don’t try and time the market. I’m telling you, there, it probably is another shoe to drop, folks, I have said that many times the economy is pretty weird. There’s a lot of crazy stuff going on out there. But remember, our philosophy if you’re following it, and I hope you are, is linear markets, which will be far less affected by whatever happens in the economy. Yeah, they’ll be affected but far less and I think not as
Drew 21:36
they’re not as volatile. You know, and the other thing too, is like I we bought in a time that’s completely irrational The other way you know, it was completely crazy. Everyone was, you know, jumping out of the ship. So I think some of the deals now are, you know, if you look at these houses, I mean, I can’t believe you can buy a house for $100,000 and
Jason Hartman 21:55
rented for 1000 a month.
Drew 21:56
That’s That’s pretty good. You know, and, and one other thing and I’ll just kind of leave it at this is I think it’s really important that when you look at an area that you’re going to invest in, I think, you know, Jason has kind of come around to this that that you buy in, I buy in four packs. So like, if I buy in an area I’ll buy, I’ll try to get a crew, a couple of them. So I just don’t get diversified to into non existence like I want to buy in packages. So you want to
Jason Hartman 22:25
have a little chunk here.
Drew 22:27
Yeah, you know, and, and, you know, I call the property management company recently. So I was having a problem getting a hold of somebody. And I said, Hey, I have four properties with you guys. If I don’t get a call back today, I’m gonna start looking for another property management company. So
Jason Hartman 22:39
you have some leverage. That’s good. Yeah.
Drew 22:41
So you know, and then I get a call from the owner and he explained that, you know, I didn’t get your call at five o’clock on Tuesday, and I’m sorry, and you know it, we worked it out. It was fine. But
Jason Hartman 22:51
you have some leverage. Yeah, it’s a good thing. Yeah. One of the things I freely admitted is that I the one of the mistakes I made is I over diversified. So three to five markets at least three ultimately, no more than five. And of course, depends how big your portfolio is. So let’s do we got to get to our q&a. Okay, one more, you know, he has one more
Drew 23:10
comment I can tell Well, yeah, I will kind of in wrap up is that I’m sort of trying to find where the next places that people want to be. So where do people want to live? I say like, does this tap does this city have cancer? Or is it in the infancy? Is it blighted? Or is it? Is it a place that’s attractive? Is this is this place? Does this place have cancer? Or is it in its infancy? And so I’m trying to find, you know, the next Austin, the next Portland, the next Seattle try to see where this where the money is going to go? And so I think that’s kind of what I’m gonna look into.
Jason Hartman 23:48
Yeah, interesting stuff. All right. Well, hey, our panel. Let’s finish that this is actually the q&a portion. And I think you’ll find this to be very interesting. You may actually hear Drew’s friend Erin on This because I think he had some of the questions that you’re going to hear here in a moment. And let’s just jump to that. And in the meantime, check out Jason hartman.com for our properties and some of the areas Little Rock is on there that drew mentioned Indianapolis, of course, and Memphis where he owns properties. We will look forward to talking with you on the next show. We also are about to make an announcement it’s not too far away. Now Drew’s climbing up his shelves here to get boxes. That’s funny. By Drew, we will be announcing our meet the Masters event pretty soon here. So stay tuned for that announcement.
Let’s get to the rest of our panel session. And the all important QA Any questions? Yes, name and city,
Recording of self-management panel session 24:49
larger Union City, Michigan. I just wonder about finding tenants when you’re self managing because when we were at meet the Masters, it sounded crazy to self manage, but the short time later, it’s Sound, we can do it.
Recording of self-management panel session 25:01
Because we’ve learned a lot from our managers for sure. Let me tell you one
Jason Hartman 25:05
self management pitfall, I don’t want to forget to say this Okay, then we’ll have him answer the question is, be careful, you know, when that property is vacant number one, insurance will make this difficult for you. Because some insurance companies will not give you insurance certainly not give you a reasonably priced insurance if you don’t have a manager, okay? And they also limit the amount of time they will insure a vacant property unless you pay a fortune. So if it’s vacant for a long time, it can start getting costly. I had
Recording of self-management panel session 25:35
to I had to educate an insurance company just the other day
Jason Hartman 25:38
you had to educate an insurance company. Well,
Recording of self-management panel session 25:40
I could manage properties across the country. Yeah. You want to get me going? You know, I just okay here all the different companies in the business. I gave them like 100 things that they probably didn’t care about. But they were asking they were wondering the same thing you know, you know, is this for real, you’re living somewhere in the property. Is there somewhere else in the capture about this? But you know, people will catch up? You know, it’s a What was your original question though? He said some tenants?
Recording of self-management panel session 26:11
Sure, there are many, many ways that you can actually find tenants without having a property management company. For one, you can actually hire a property management company, you actually hire 2345. Exactly. You just tell them up front, I’m not looking for property management service, I need to find a tenant, they may be a little more inclined to actually provide tenants to some of the properties that they currently have. But for example, like James, they turned out 100 potential renters last month, you know, they definitely have a need. So you know, they would charge you probably a bit of a higher lease fee than what they would charge their their actual clients. But that’s one way. Another way is, you know, you can actually post you know, there’s obviously Craigslist and you can put your stuff on Zillow and whatnot. And I think through cozy now they actually have a plugin where you can screen we can actually post your your your your property and have it on some of the some of the different outlets they have available. That’s obviously an extra feature and added costs. But yeah, those are definitely some of the ways
Recording of self-management panel session 27:09
at folio works. Similarly the one that I’m using for the Atlanta properties, they have a feature where you can syndicate you, you they make it easy for you to create a web page with the property for marketing purposes, and then you syndicate that through all of the you know, rentals COMM And Zillow and
Jason Hartman 27:29
it’s basically like it creates a little website for you on your property. Right. Oh, one other thing about that is make sure you have good photos of your property. Okay. And this is probably going to happen the best opportunity is when you buy it, okay, so get a set of good photos, make sure they’re properly labeled in your computer so you can find them and I think it is well worth hiring a literally This is a specialty a real estate photographer to take photos for you because they will come with a wide angle. And you know, you need a set of really good photos of each of your properties. That’s super important.
Recording of self-management panel session 28:06
There’s a company called z inspector calm, Jason, you probably know about these. I’ve heard of that. That’s what they do. Okay?
Jason Hartman 28:11
Yeah. What, how much does it cost? I don’t know.
Recording of self-management panel session 28:15
Okay. Do your tenants have your phone just from Scottsdale? Do your tenants have your phone number? Or do you create a separate phone number just for the property management side,
Recording of self-management panel session 28:23
what I do for the Austin tenants, they have an email address, I just created a Google email address with the name of my company. And they’ll send an email through that we also created there’s a company called grasshopper. And grasshopper is a company that allows you to create your own phone number. And you can then give that phone number to the to the tenants. And then through the website. You can have all these options on what happens when somebody calls that number. Your messages are forwarded to your phone or whatever. So I have both
Jason Hartman 29:00
So here’s one of the things I want you to think of too. One of the things Fernando could do with that is he could set up an email address for maybe all the properties in one geographical area. And if he had a relationship, and he probably does with like a handyman in that area, or a TaskRabbit person or someone who’s just a, like an assistant that you pay, just pay for play, that email could go to you into that person like Austin, Prop, Austin, you know, Fernando’s, Austin properties@gmail.com, right? And that address could go to multiple people, right? voxer could be another great tool for this to know. So lots of ways you can distribute the communications and guess what, they’re free. These are free tools. A lot of
Recording of self-management panel session 29:48
grasshopper I think, charges a nominal fee. Yeah, 1015 bucks a month. You can have like five different extensions. So you can actually have the same phone number and five different properties,
Jason Hartman 29:57
four or five different states. For Indianapolis, please press two for Quad Cities you know if you need, you know service for your quad cities property press two, you know exactly.
Recording of self-management panel session 30:09
If ever you do add your tenants onto boxer, you can actually do so with just using your email address. You don’t have to give them your phone number. Just
Recording of self-management panel session 30:16
an FYI. To answer your question directly. No, I don’t give out my phone. I hate getting calls. Kevin from Indianapolis. Just want a quick question about the assistant side of things. Have you hired that person? And if so, what kind of what did you look for? Who did you look for? And was that person experienced at all? Or is that something that you’ll be looking for? What kind of things would you be looking for? So the assistant that I hired in Atlanta had property management experience, and he’s an accountant. He’s an older person, and he was with a financial it’s kind of a special case is what I’m going to get it. He He knows how to deal with tenants. He thinks like a landlord. So it’s kind of the right person to handle high stress situations and But the decisions are mind at the end of the day, he just pre filters a lot of stuff. And as I mentioned in the beginning of the talk, when he brings up an issue he already thinks of, you know, solutions to it. And it’s not just the dispatcher, so that makes a huge difference.
Recording of self-management panel session 31:17
Kelly from Washington DC. So I actually have several questions. So I’m gonna have the mic for a second. How do you handle move out inspections when the tenant leaves?
Recording of self-management panel session 31:28
So the last house we had a move out inspection on what we did what the assistant did is there’s a company called vineyards calm, which we’ve I think we’ve mentioned that before in the meet the masters and they specializing make readies, getting property ready for the next move out. So they coordinated with the tenant a time for them to go to the property, inspect the property in part of their services is to provide a list of repairs that are needed. So that becomes Our move out inspection and then you can feel it we have forms that you can pull from the web or move out forms and then those forms can be sent to the tenant later on with whatever deductions are present
Jason Hartman 32:14
in Fernando vineyards, we discovered them at the note conference it no worthy, right. CG. CG Okay, all right. Okay,
Recording of self-management panel session 32:22
good. Yeah, he just yeah, just to elaborate a bit on vineyards, they provide a fantastic service. So you may be thinking, Oh, how do I get a make ready done? How do I turn the property over? How do I get a painting and everything else, then yours is fantastic company, they actually do all of that for you. Or they’re ripping out floors and doing full paint jobs. Even if you want to put a new roof on if needed, they’ll actually do the whole thing for you. Just bear in mind that if you do use an ala carte service like that, you will be paying a bit of a premium. It’s pretty obvious, but just get ready for that.
Recording of self-management panel session 32:57
I don’t remember how much I paid sorry. Yeah.
Recording of self-management panel session 33:02
Yeah, yeah, they’re expanding fast. But that’s one option. I use Angie’s List quite a bit. Angie’s List, you know works well in many markets, they have specials all the time. And you can hire a plumber for 200 bucks and they’ll go and take care of whatever that issue is. Sometimes those work really well also gives you a chance to filter out some providers, some contractors that don’t do a good job.
Recording of self-management panel session 33:30
And the importance of using some company like Angie’s List is that they come somewhat pre qualified. There’s, yeah there’s reviews on there and everything else and oftentimes they have specials but the biggest factor with that is if you were to just find someone off Craigslist or awesome website and you don’t really know who they are, and you provide them with the lockbox info, everything else they can easily go in there, steal all your appliances, everything because they know the property is vacant, and then just head off and you never hear about them again. So just be careful.
Recording of self-management panel session 33:58
Amazon is also getting into To that service provider business, if you search for a particular appliance, you know, they’ll
Jason Hartman 34:04
suggest and they’ll do the installer and installer. So if you need a new ceiling fan, you can buy the ceiling fan on Amazon and get it installed. But I was super excited about that idea, but the prices are too high. You know, like are now yeah, hopefully it’ll really start to become competitive. No.
Recording of self-management panel session 34:21
Okay, second question. There are so many legal aspects to management, how do you handle things like evictions or giving 24 hour notice for a contractor to get access and all of these aspects of of, you know, legal, legal things.
Recording of self-management panel session 34:36
I haven’t had any interesting talking about self management that I haven’t had any horror stories. There’s the wood here is what on my self management properties, so I haven’t had to choose what to do. But one well, you know, we Jason just interviewed Novick. Nationwide eviction expert that can handle part of that process. That would be one option. But if I had to do it, I would proceed the same way with everything else, I would just search for companies that specialize in that particular part in hire them all a cart for that particular job.
Jason Hartman 35:19
Half of the time, we don’t know how empowered we are, and how many resources are out there. It’s amazing how a lot of the time the property manager, all they do is call an eviction service. You can call them direct, they’d be happy to have your business that’s why I did that podcast about it. So you know, some some property managers actually go to court and do the evictions themselves. But a lot of them just outsource it. You can just do it.
Recording of self-management panel session 35:45
Yeah, sure. I mean, the eviction notices and things like that are certainly one part of it. But I was thinking of like, okay, the plumber is coming in tomorrow and you have to give tenants 24 hours notice notice post on the door kind of thing. I don’t know if that’s what
Jason Hartman 35:59
you do. I don’t think there’s a requirement to post it on the door. No, there maybe there are inside it might depend where
Recording of self-management panel session 36:04
Yeah, we just sold a property in Phoenix and the amount of notice, you know, official formal received verified notice that we had to give to tenants just in the process of selling it was. Well, you can do that by email. Okay. If they confirm that they’ve received the email, yeah. But if the tenants not, you know, checking, then you have a problem. Okay, do you ever worry about veil lifting suits if the tenants have information about you personally?
Jason Hartman 36:32
In other words, piercing the veil of if you have an entity like an LLC, that’s what you mean, right? That’s a veil lifting suits. losses. Yeah. So that shouldn’t matter legally, if you’re managing your entity, right?
Recording of self-management panel session 36:48
Yes. And no, I mean, I’m aware of it, but I’m not. I don’t think I treated any differently because it’s self managed versus not. You know, we have life liability insurance. I mean, that’s kind of the first level of protection. And the LLC is set up for asset protection, and I do the best job I can with, you know, keeping accounts separate and, you know, not giving any ammunition for any potential lawsuit. And that’s the best I can do, I think for now, without going to extremes and complicated anything else.
Recording of self-management panel session 37:24
One last question. Do you find that you’re managing enough that you qualify for the real estate professional material participation time?
Recording of self-management panel session 37:32
I do, but I’m not. I decided that for 2014. It didn’t make sense for me to become a professional. I didn’t have enough losses in order for you to capture the benefits of real estate professional needs to have losses,
Jason Hartman 37:46
passive losses
Recording of self-management panel session 37:49
in your real estate business and real losses, passive losses.
Recording of self-management panel session 37:54
And
Recording of self-management panel session 37:56
so the answer is yes, I do qualify. I have enough I qualify. from a legal perspective, but it’s not to my advantage, at least it wasn’t 2014. I’m doing 2015 taxes in the next month or so. And preliminary discussions with the CPA didn’t seem like that would be also helpful. In as times go as time goes by, at least given my current situation, as the rents keep going up and depreciation stays steady. I’m not going to see losses from that perspective, unless I have lots of repairs and that sort of thing. But if things just go as, as they have been in the data that I’ve shown, the tendency is for me to have increasing incomes steadily, which again, goes against capturing the benefits of being a real estate professional. So you know, right now, I’m not, you know, not qualified. I’m not going to be checking that box in the in the tax return.
Jason Hartman 38:55
Last question over here from Tempe
Recording of self-management panel session 38:59
awesome. And, Oliver, you’d mentioned in vetting your property managers asking the questions, what is the one question that I should definitely be asking?
Recording of self-management panel session 39:12
That’s almost like asking a potential mate. What’s the one question the one thing I should know about you?
Recording of self-management panel session 39:19
Is there one question you standardly? Ask
Recording of self-management panel session 39:21
every single or I mean, I don’t sure
Recording of self-management panel session 39:23
how many. Yeah, man, what an interview what I would definitely ask. It’s not just the one question asked a slew of questions. But amongst one of the most important ones is how do you vet your tenants? And what kind of questions you ask them? What’s the criteria that the property management company has to actually bring tenants into into the some of your homes? That’s one of the most important factors some tenants I mean, some companies only look at like the three X Factor so does the rent is the rent Elise, you know, a third of the overall gross income that they bring in every month. If so, is yes, and you’ll get that check mark, and they allow the tenant to potentially rent your home. Whereas other property management companies will actually draft up a budget with the tenant. And that’s more of a specialized service. And only few companies really do that. But if anything that provides a heck of a lot better property management, in my opinion, because then you actually get a qualified tenant that knows exactly where their accounting is, where their budget is, and they know what they can really afford. And if they can’t afford the specific property that they’re looking for that property management company will actually give them something else that they can.
Jason Hartman 40:35
And that’s kind of a service that is more likely to happen in the lower end C class properties where they’re going to do that budgeting thing.
Recording of self-management panel session 40:43
You know, actually one of our providers, James actually does that for all of them ABC. And that’s included, not a service added but some of their property management companies probably do that as a bonus thing. Good stuff.
Recording of self-management panel session 40:58
So one thing that I would just say Add to that it’s a question but you have to answer that yourself by looking at the project property manager and the contract and so on. You really want to know that they are aligned with your interests. It goes back to what Jason said before. If they’re going to make money when you do make money, then it’s to their best interest to to do the best job they can. So if they have a lot of fees that have to do with that are easy for them to abuse without you making any money off of that, then that’s a red flag.
Jason Hartman 41:32
Thank you so much. That was just a wealth of information.
Jason Hartman is joined by Investment Counselor Sara at the beginning of this episode, where she shares her experience closing on three properties in Memphis. Jason and Sara talk about the competitiveness of the real estate market, rate locks, and the commodities that make up a house that is independent of any currency. Afterward, Jason interviews Dr. David D’Ambrosio. He talks about his experiences with the 1031 Exchange on properties in the Orlando and Indianapolis markets. David asks Jason if it’s feasible to do a cash-out refinance if you can get a sizable amount of cash, then they proceed to discuss the deferred down payment option and equity stripping.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Announcer 0:13
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution. For real estate investors,
Jason Hartman 1:03
Welcome to the creating wealth show. And thank you so much for joining me. This is your host Jason Hartman with episode number 738 738. Again, thank you so much for joining us listeners from around the world. We are going to give you a client case study today. We love it when our clients come on the show. And here one of our many doctor clients is on the show, talking about his investing journey, the past, present and future. And we’ll talk a little bit about equity stripping. We’ll talk a little bit about 1031 exchanges. We’ll talk a little bit about the investing mentality with Wall Street with other investments with doctors and other professionals, and just a whole gamut of things. So I think that’ll be interesting to you. But first, for the intro portion. I invited David who is our client case study today Dr. David D’Ambrosio. I invited his investment counselor in two Talk with me a little bit about him and help introduce him. Sarah, welcome. How are you?
Sara 2:04
Hey, Jason. Great. Thanks for having me. It’s good to have you back on the show. And you
Jason Hartman 2:08
just closed on three properties of your own, I think, right?
Sara 2:12
I did. Yeah, I went with properties in Memphis this time around, and I was super excited and eager to get them closed. I want to get them leased up before the holiday season comes around and things are looking promising there. So, yeah, I bought two with one provider and one with a different one. So I’m going to try out two different property managers so I can compare and contrast and, you know, keep them honest.
Jason Hartman 2:38
That’s good. That’s a good plan. Yeah. We always like to try and have that customer experience. You know, I purchased a couple properties in Memphis last year, a couple more this year. You know, we’re we’re practicing what we preach and having those same experiences that you’re having. Interestingly, you would think and this is oddly to me. You know, it’s just sort of interesting that this doesn’t really seem to be true. You know, you would think we are insiders, Sara, you and I would get like special treatment from these local market specialists. I don’t think we do unless, I don’t know. It seems like a pretty normal experience. You know, I don’t think they they bend over backwards for me. They probably consider me to be a pain in the ass. Oh, I said the word the a word. Yeah.
Sara 3:30
Well, it’s funny because I feel the same way. In fact, we probably get a little less attention because they expect that we know what we’re doing. So it’s kind of like you’re signing the contract, you’re on your own. counsel yourself, you know, but, you know, funny enough when I was, you know, ready to pull the trigger and I had my financing lined up and I was starting to look at inventory. I was looking at a few different markets and it really my decision just came down to what was available, and I actually lost out on two properties to my own clients because I didn’t pull the trigger fast enough. You know, someone came in from under me and asked for the contract before before I did. So, yeah, I would definitely didn’t get any special treatment. If anything, I learned how to make a quick decision.
Jason Hartman 4:15
Yeah, your your shame on you, Sarah, that your clients are more decisive than you
Sara 4:22
are maybe, you know, maybe they just saw the deal before I did. I you know, I don’t know. But the third one that I that I finally got. I remember seeing it hit our website in the morning. And I hadn’t even gotten out of bed yet. You know, I’m, I’m notorious I, I don’t follow the rules. And I you know, check my email first thing in the morning, which I know you’re not supposed to do that. Right. I do that. So yeah. Guilty. So I was checking my email and I saw this awesome house. And I’m like, oh, I’ll just call you know, I’ll just call the LMS. local market specialist, after I take my kids to school. And then I thought, you know what, I bet you This one’s gonna sell so I call them right away. I hadn’t even got out of my PJs yet. And sure enough, right after I asked for the contract he got an email from somebody else that was interested. So you know, it’s it’s a little competitive right now to you know to find that that great deal.
Jason Hartman 5:15
No question. It definitely is in listeners. That’s maybe one of the biggest things you learn from this episode today. Did you catch it? What Sarah just said, Sarah Where’s PJ’s to bed? That’s the big that’s the big takeaway from today’s episode, PJ’s?
Sara 5:32
Is that is that a problem?
Jason Hartman 5:34
Yeah, I don’t know. You know, whatever. But we want you to post a picture of your PJs on the Jason hartman.com blog. Okay. Wait, we should put it in the show notes. Because you know, who really says PJ’s anymore. That’s not a kid or a parent talking to a kid. I guess you’re a mom. So okay, that’s
Sara 5:56
if you’re lucky enough to be one of our venture Alliance members. You might me walking around the halls in my PJs searching for a water bottle.
Jason Hartman 6:05
There you go. Yes. As Alliance members, we’re kind of a more intimate group for sure. That’s no question about that. But that’s what I love about it too. It’s great. Good stuff. Well, hey, Sarah, you wanted to share a an opinion that you have on rate locks on when someone should lock in their mortgage? Or if they should at all right, when they when In other words, when they apply for a loan to buy a property? Should they lock the rate? Or should they let the rate float and you had something you want to share on that? Right?
Sara 6:35
I do because I had some clients come up against this and then it happened to me and and the problem was, so I put the properties under contract before the rehab was done, and that’s happening more and more these days. And so the property was still being renovated and the lender said, you know, when do you expect these to close? Okay, you know, the rate locks good for 30 days. So based on the closed date, you know, they lock the rates. I said, you know, that’s Fine. Well, what ended up happening was that, you know, and this happens all the time, the rehab took, you know, just a little bit longer and, you know, you have to schedule your inspection and then and then things come up on the inspection report and then you got to send the construction crews back and then you got to send the inspector back out. And that all adds time to your, your, your closing process. So, so that happened to me and I was pushing up against that rate lock exploration, which kind of forced me into a situation where I was like rushing to close and it made me like a little uncomfortable with my closing because I ended up having to get the local market specialists just to put in writing that, you know, they’re going to provide me with a clean inspection report after I close. Ideally, you want to clean inspection report before you close. So it just I think it just caused a little unnecessary rushing around and stress to the process. And what I learned is that if I would have just not locked the rates, I probably would have Still gotten the same rate, if it only closed a few days later, I probably would have ended up closing, you know, maybe one week later that I did, and everything would have been fine.
Jason Hartman 8:09
So of course, of course, the risk though is if rates are climbing, you could end up paying a higher rate. If you don’t lock right.
Sara 8:17
You could but but you could also be paying extension fees on the rate lock. That’s what I you know, they charge like a daily rate. So, you know, you get the, you get the lower rate, but then you’re paying a fee and I, you know, I take the time to like, do the math and figure out what’s the, you know, what the best way to go because the rates didn’t go up anyways for me, but yeah, that is the risk, the risk is, you know, your rate might go up a little bit. They go up and down a little bit every day. So right.
Jason Hartman 8:45
And then basically what’s interesting about what Sarah just said, is that you see how in essence, when you pay for a rate lock, you’re in essence renting the money, or you’re optioning that money because that money has has to be available at that rate. And that’s why you pay for it, you know, you pay a certain amount, and then you pay a daily rate for extending it after that interesting. Yeah, just wanting to have you know, and really, that goes to kind of my broader point. And we’ve talked about this on past episodes, listeners, but the concept of, you know, money just like anything else, and it shouldn’t even be called money. In our case, it’s currency. Right? But it’s just a commodity. It’s just like coffee beans or soy beans or copper or anything, any or lumber, you know, everything’s just a commodity, okay? And that’s how I want you to look at the world and just understand that all those commodities have a price and those prices fluctuate and there’s a certain amount of demand for those commodities and there’s, there’s a whole supply and demand market for them and, and when I talk about commodities that are the ingredients to a house, or an apartment building, copper wire, glass, steel, lumber, concrete, petroleum products, etc, etc, etc. You know, these are not they’re independent of any specific currency, whether it be the dollar, or the Euro, or the yen, or the real or whatever, right? They have intrinsic value. And we think that’s a good thing. So just lest we get off on a tangent, but I just wanted to kind of bring that up again. And, and by the way, I think this next episode for flashback Friday is going to be the Donald Trump episode. There’s so much controversy about that guy. Right now. I think I’m gonna do the Donald Trump episode on the next flashback Friday. Okay, so listeners Be sure to catch that one.
Sara 10:36
Do you know how many times I’ve like typed on my Facebook and then just deleted my comment is that you just can’t even
Jason Hartman 10:45
it’s kind of not worth all the hate, you know. So anyway, but I’m Gary Gary Johnson is looking awfully good. The Libertarian candidate, folks, if if we’re ever going to have a third party, I know everybody’s always concerned. I’m gonna wait motorboat you know, but we got to do it. Someone’s got to do it at some point. Okay, we you know this two party system is just a total scam I mean look at both of these clowns we have running It’s crazy. But one one’s worse than the other and I would happen to say that that’s the clinton clown. But they’re both. They’re both Yeah, they’re both pretty cloudy for sure. All right, so in addition to rate locks and politics and commodities, and PJ’s, anything else before we get to your client and share this case study, Sarah?
Sara 11:37
Oh, well do i do i go on another rant about Obamacare. I mean, I took my son to the urgent care yesterday and I didn’t even stay and get him seen. I couldn’t get it a same day appointment. So I went to urgent care. I cannot believe how overcrowded and understaffed Kaiser was. It was unbelievable. And that was the rant that I took. And then I just said, You know what, forget it.
Jason Hartman 12:02
Not gonna post it’s only it’s only gonna get worse. I mean, my insurance cost has gone up about 35% since Obamacare, look at if you if you regulate or tax something more and you know, in this case regulation but regulation is just a form of tax, okay? Because it’s a burden, right? If you burden something more, you’re gonna get less of it. And so this means we’re going to have a lower supply of healthcare in all its forms, whether it be equipment, pharmaceuticals, actual practitioners, you know, doctors and so forth. And it’s interesting, we’re interviewing a doctor right you know, he’s gonna have a lot of opinions about this our case study today. It’s Obamacare is it’s it ain’t gonna work, folks, even even even good old slick Willie, Bill Clinton said Obamacare was a mess, so that I thought that was interesting coming from the same side of the aisle, even Bill Clinton so what do you Sir,
Sara 13:00
I just said that it’s just my one of my biggest fears is you know, the healthcare industry and it’s it’s a scary it’s a scary thing. You know, when you take your, your kid into the ER, I mean this was last year I remember taking Alissa into the ER with shortness of breath, and she has a history of asthma. But back in the day, when you take a child into the ER, and they have shortness of breath, they get seen right away to decide, you know, if, if they needed urgent care that moment, or they can wait 20 minutes, I had to wait 30 minutes just for the initial, you know, triage I guess they call it. So it’s really like, it’s really scary to me with, you know, with kids and a family and I’m sure it’s scary for a lot of other people. But what does this have to do with real estate? I don’t know. I just,
Jason Hartman 13:44
you know, it has to do with the cost and political issues and, and people that say politics, you know, I get these, like I got this review. I thought this was funny. By the way, Mr. reviewer, I’m sure you’re listening, who posted a review on iTunes and said Fox News for real estate investing. I thought that was totally creative. So, thank you for the review. You know, it’s kind of a half hearted compliment. I understand that. But you know, this is not I mean, I don’t I’m not a fox news guy. I don’t even have TV. So number one, I don’t watch Fox News. Except when I’m maybe in a hotel room I watch mostly cnn because that’s what they have political stuff, you know, influences. It’s a big part of real estate investing, folks. So, you know, this is not irrelevant stuff. I know, most of you understand that. It’s relevant. But a few people think it’s irrelevant, and it’s not. It’s very relevant. Obviously, it’s an election time right now. So we won’t always be talking about it that much. But, you know, it matters. It’s something that definitely matters. So anyway, without further ado, let’s get on with our show here and shut up and quit rambling before people write me more. More reviews about Fox News for real estate investors was hilarious. And that was very creative, I must say. Very creative. Check out Jason hartman.com we’ve got the new website up, it does have several bugs it launched just yesterday, the property section, we’re going to dramatically improve that, by the way, that’s on our roadmap here, and dramatically improving a bunch of other things and functionality and so forth. And doing a lot of things with the website. So look forward to that. We’ve got a really good web development company helping us nowadays. Check out the educational products in the store there or at Hartman education COMM And then we’ve got another venture Alliance meeting coming up at the beginning of December. So check out venture Alliance mastermind comm we’re pretty sure that’s gonna be located right here in beautiful Scottsdale, Arizona. So that’s an easy easy trip for most people. I know a lot of you out there have been asking me about the venture Alliance mastermind group and, and considering joining and I tell you, it just keeps getting better and better. The comments from our last meeting in Seattle, people said to me, Jason, you really up leveled this one. The speakers were great. We Had some awesome speakers come in and, and we’re just gonna keep trying to make it better and better. There are some really big names in real estate here in in the Greater Phoenix metro area. So for our Scottsdale event, I’m going to try and get a couple of them to come in and talk with us. These are people who have been on the show who you’ve heard of, you’ve probably read their books. They’re quite famous. And nobody is confirmed yet. So I can’t mention any names, but I just tell you, I’m working on it. Okay, folks, I’m working on it. All right. So Sarah, thank you for joining me for the intro. Let’s get to our case study and talk to your client, David, and hear about his investing journey.
Sara 16:36
Yep. Thanks, Jason.
Jason Hartman 16:39
It’s my pleasure to welcome one of our clients to the show. It’s David D’Ambrosio and he is located in New Jersey, and has an interesting story about his journey as an investor and some of his next plans and talk a little bit about his recent 1031 exchange and so forth. David, welcome. How are you?
Dr. David D’Ambrosio 16:58
Great, Jason. Thanks for having me on. Good. Hey, thanks for coming on.
Jason Hartman 17:01
It’s great. How long have you been listening to the podcast?
Dr. David D’Ambrosio 17:04
Probably a little bit over a year. So I’ve listened. I went back, though, when I listened to the older, the older ones that I could get my hands on as well. So I’ve probably listened to me, I would say probably about 300. Wow.
Jason Hartman 17:19
And you’re not sick of me yet. Well, thank you. That’s great. Good stuff, good stuff. Give us a little bit of your your background and, you know, tell the listeners what you do for a living and kind of let’s just dive into your journey as an investor. Sure,
Dr. David D’Ambrosio 17:34
sure. So, I am a physician, I’m a I’m an oncologist, a radiation oncologist specifically, and I’m the son of an immigrant. So I feel like I’m living the American dream, or as long as that’s gonna last who knows, but 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 We, we discuss on your podcasts all the time. And 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, Jolla, Tansy is the one that actually turned me on to your network because he, he had invested with you. And that’s how I came specifically to see your podcast. I spent a lot of time educating myself before diving in. And
Jason Hartman 18:40
the method that I hadn’t started my investing with you was was through this 1031 exchange. So you were interested in investing and you had a great immigrant story. I love that and, and by the way, just to comment on your American dream as long as it last comment, I think we all unfortunately and it really is no laughing matter. Seeing the country taking the road direction in so many ways. But, you know, at the end of the day, it’s all a game of comparison. Right? It’s not a question of whether America has gotten better or worse. Yeah, you know, that’s that’s part of it. But it’s just, you know, compared to what is always the question. It’s always a relative thing. Where’s your family from, by the way?
Dr. David D’Ambrosio 19:17
So we’re all we’re from New York City. Originally, my father, my father came over on a boat into Brooklyn. And then I grew up in Queens, and I live in Jersey now.
Jason Hartman 19:28
Yeah, but we were originally like you say the immigrant story. That’s why I asked
Dr. David D’Ambrosio 19:32
what part what part of Italy My father was from a little town north of Naples.
Jason Hartman 19:36
Good stuff. Well, fast forward. Now. You You learned a lot about investing and listened to 300 of my shows or so. So thank you for that. And you did a 1031 exchange now. So what did you sell and what did you buy in that
Dr. David D’Ambrosio 19:51
exchange? Sure. So so that story, the story with that was that actually the house that I had grown up and my parents had retired A few years ago, and they were looking to sell the house. And my original plan was they were selling it to me. Obviously, I was getting a son discount. But my plan was actually to keep that house and rent it in New York City. And I would have had maybe a little little bit of cash flow, if I had done that. But that’s when my eyes were opened, kind of at the same time, I was listening to your podcasts. And I realized that if instead of renting out long term, if I sold it and did a 1031 exchange, that I would, I would greatly improve my cash flow. And also my overall investment by instead of just having one switching that over to multiple properties.
Jason Hartman 20:43
So so you sold that property, and when did you sell it
Dr. David D’Ambrosio 20:47
the end of last year, towards the end of last year,
Jason Hartman 20:50
and you did a 1031 exchange on
Dr. David D’Ambrosio 20:52
that, right? Correct. So I transferred that into four properties in Orlando that I bought with You know, the the cash that I got out of that and put into those four new houses was enough that I was able to put even more than 25% down. So it was really it was really a very good deal for me. Obviously not having to pay the tax on it was a big thing too. Right right. Yeah,
Jason Hartman 21:23
good good stuff. So all in Orlando now, it’s interesting you didn’t you didn’t want to split those up and get like get into two different markets there. I know you’ve got some other properties. Where else do you own or did you feel you were diversified enough already? You
Dr. David D’Ambrosio 21:37
know, I have I have four properties in Indianapolis as well. I really, really like the Orlando market because I feel like they’re we’re in a unique situation there that the value is so good for for cash flowing. And I think there’s a lot of upside potential. For appreciation. I ascribe to your philosophy I’m not an appreciation investor, but thought that it was a good idea for me to try to split split myself up by putting more more of my portfolio there. I think I’d like to get into one more market. But I’m things are still settling down with that. But that was my thought process with Orlando was, seemed to be a nice, a nice combination of good cash flow, but also the potential for some appreciation down the line.
Jason Hartman 22:25
Right. Absolutely. And I think that’s a good decision. You know, one more market get into three total, you just be super nicely diversified. So yeah, that’s definitely a good idea.
Dr. David D’Ambrosio 22:36
The other you know, the other issue with that, too, is these 1031 exchanges, when you’re doing in general are a little complicated, but when you’re trying to go from one property to multiple properties, it can get pretty, it can get pretty hairy. And if I was trying to if I was trying to make sure that I had placed the setup in more than one more than one location, I think I really would have complicated things for me with all the deadlines that are involved.
Jason Hartman 22:58
Yeah, that’s true. Through with the exchange. Did you have any trouble fulfilling your exchange? Were you worried at any point? I mean, the last two I’ve done I did. I did. Well, I did two of them last year. Actually, I shouldn’t say the last three exchanges. I’ve done two of them last year and one this year so far. It’s it’s been kind of difficult. I’ve been worried, you know, coming down to the deadline on those exchanges. I, I did make it on all of them, thankfully. But I was worried that I might not because it was a little bit hard to find properties.
Dr. David D’Ambrosio 23:29
Yeah, I was definitely worried about it. But what I did was you’re allowed to you’re allowed to name I don’t remember the exact rule. I think you’re allowed to name 250% more value of additional properties, not just the ones he takes. So when I’m when I made my list, I picked about 10 properties, six more than the ones that I actually wanted. So in case any of them fell through for whatever reason I could, I could still pick up the other ones so I didn’t have to lose out on any of it.
Jason Hartman 23:56
Yeah, I know. They keep you the IRS won’t let you just hide them. To find the whole world, you know, I wish you could just give them a big list of properties. But they’re, they’re too smart for that they, they only let you I think it’s 200%. Possibly it might be I don’t know, it might be 250, I can’t remember. So in other words, if the value of the exchanges, say $500,000, just to use a semi round number example, then you could identify $1 million worth of property if the rule is 200%. By the way, don’t quote us on that, because neither of us are sure we can remember. And then you only have to close on 500,000. In other words, to to meet your requirement. So in other words, half of the deals could fall through, and you would still meet the requirement and make the exchange without paying any capital gains tax, and you would have that nice deferral in there. So
Dr. David D’Ambrosio 24:48
yeah, right. Because you only have 45 days to do the identification, which you have six months to close so you could cast a wide net and then narrow it down later. Exactly. The other thing, the other thing I did realize about the exchange was I thought that it the cash that you had to reinvest, I thought it was only the capital gains, but it’s actually all the cash that you get from the sale. So I had put some money into renovating that house while I was renting it. And I know that it was a big deal, but I just for your listeners, you you have to spend all the cash, you can’t take any cash out from that sale, you have to spend it all even if it’s not a game, and you have to use at least the same amount of debt that you had on the initial on the initial sale.
Jason Hartman 25:32
Well, it’s pretty awesome tax advantages. What do you see in your profession with with other doctors and so forth? Are they are they really into real estate? You know, this is something that I mean, highly paid professionals like yourself have just got to build real estate portfolios because obviously you have a giant tax problem. And, and, you know, thankfully you have great income, but I see a lot of professionals, doctors, lawyers, well lawyers don’t even make Not much money anymore a lot of times unfortunately for them, but they’re just not really doing this. They’re not they’re not getting tax breaks for themselves and, and given 40 some odd percent of their money away to the government. It’s just tragic, really,
Dr. David D’Ambrosio 26:12
it’s extraordinarily frustrating to try to educate people because it’s, you know, these, these are people, men and women that devotes such a large amount of their time to educating themselves and helping people but they don’t really have any, any real financial IQ. I can’t tell you how many times I hear people talking about, you know, I call my stockbroker, and this market crash, and I just sold a bunch of stock. And, you know, I feel like half the time I’m on a soapbox telling them you have got to invest in real estate at least two or three times a day on talking to people about it, trying to get other people involved, it really, you know, it really is an absolute no brainer with the tax advantages. You know, not to mention, these returns that you’re getting on your cache when you leverage it or just, they’re better than anything else out there. And particularly Okay, sure, yeah.
Jason Hartman 27:01
lever leverage can become very addictive that’s for sure. Yeah, it’s it’s really incredible. Were you one of those people though because you’re your partner in your business the other doctor you work with approached you and said hey, you should be real estate investing. Are you really open to it? Or were you were you one of the skeptical doctors out there?
Dr. David D’Ambrosio 27:20
Oh, I was I was always open to it I just wasn’t sure how to go about it. And he’s really he introduced me to the concept of of your model where you don’t invest locally. I was always thinking I would buy some some houses near me and you can’t cash flow in New Jersey or New York. It’s there the the property taxes here are ridiculous. tell tell us
Jason Hartman 27:42
about that for a moment. Yeah, your taxes in New Jersey are some of the high I think it’s the highest property taxes in the nation, don’t you?
Dr. David D’Ambrosio 27:51
I’m embarrassed to even say how much my property taxes are my property tax on my house that I live in is a mortgage payment on Boy it’s it’s it’s a mortgage payment on probably six, six of my houses all together. Wow. Yeah, yeah, it’s bad. Crazy.
Jason Hartman 28:11
That’s crazy. Yeah, it really is. Anyway what were you saying before I got you on the tax tangent the property tax Tim,
Dr. David D’Ambrosio 28:17
I was just talking about how a lot of you know a lot of physicians are just not educated, educating themselves about finances and you know, I try to I try to talk to friends and colleagues about getting involved in this and all I think you were asking about how I got interested specifically. I was so i was i was saying I was always interested in in real estate but I wasn’t sure how to go about it because you can’t cash flow here. And my partner, my partner Julia Tansy told me you know, check out this Jason Hartman guy so I you know, I started listening to your podcasts and I, I haven’t stopped but the whole you know, go into buying houses in other cities where they make sense Just well first of all I was on I was when I first looked at it, I couldn’t believe how much cheaper it is to live in other parts of the country growing up in New York and living in New Jersey, for the some of the houses that I that I own in Florida would, you know, would probably be four times the amount if they were here.
Jason Hartman 29:17
Yeah, it’s it’s really incredible. I always wonder why doctors have that rap. You know, they, they say doctors are notoriously poor business people. And I think it’s because they’re, you know, is it is it like the science, you’re a scientist? And scientists just don’t think Usually, I mean, some of them do, obviously, like yourself, but they don’t think you know, in the world of finance and money, it’s just a kind of a different it’s kind of a different thought process or something. Right.
Dr. David D’Ambrosio 29:44
Yeah, I think that’s part of it. But I think the other part of it is the whole the whole way. Doctors typically think which is that we, we it’s it goes on, unsaid and understood that we have a fiduciary obligation that we do the right thing for our patients. And I think We assume that people that are trying to quote unquote, help us invest our money are looking out for our best interests. And they don’t have the time or the inclination to really delve into that and educate themselves about it any better than, you know, then they do. Unless they have somebody that turns them on to it.
Jason Hartman 30:18
Yeah, that’s an interesting point and Wall Street, just as such a better job of marketing than the real estate industry does. I mean, my industry is terrible at marketing they have, they have the most historically proven asset class, you know, the real estate people, they’ve got the best asset class, and they’re just lousy at marketing it and Wall Street has a really mediocre to terrible asset class, and they’re fantastic at marketing it. So I think that with professionals and with highly educated people, the Wall Street world kind of it just appeals to them because it’s, you know, you can go see a guy wearing a nice suit and you know, he’s got a degree from a good college. Whereas a lot of real estate people, they didn’t go to college or they’re certainly not dressed professionally A lot of times, and you know, it’s sort of like a mom and pop industry, but it’s, it’s such a good investment. It’s such a good asset class. It’s just a strange part of our society. It’s always baffled me to some extent, you
Dr. David D’Ambrosio 31:16
know, it really, it’s, it’s not, it’s not sexy, like the, you know, the the guy on Wall Street, you know, spending $1,000 on a bottle of champagne. But I bet you if you look at his account versus an account of one of your clients, you’re gonna see a lot more wealth in there,
Jason Hartman 31:30
agree with you, unless the guy buying the thousand dollar bottle of champagne on Wall Street is an insider. Now he probably has a pretty good bank account, and he probably owns a lot of real estate. That’s the irony of it. You know, the irony of these insurance companies that sell annuities and products like that is that they’re all investing in real estate with that money. It’s just it’s just such an irony to me that they take their insurance premiums and buy real estate, you know, especially office buildings, they seem to love it. office buildings, you know, large institutional investors, obviously. And I just thought that was really kind of kind of just a total irony, you know, the way that that works, but it is the way of the world it is the way the world. Do you have any questions for me that maybe you know, some of our listeners might want to want to get answers to as well?
Dr. David D’Ambrosio 32:19
Well, you know, I think a big question for me is, where do I go from here? You know, I’m almost at my limit with traditional mortgages. And I know that there’s some, you know, there’s we always talk about or you always talk about, and I read about how there’s these portfolio lenders that will lend you above 10. But it’s almost like this kind of blackbox where, how bad are the rates when you go above 10? Should I just stop at 10 and wait and just do keep doing 1031 exchanges? That’s kind of what I’m struggling with right now is where to move from here?
Jason Hartman 32:55
Yeah. So if you’re at your 10 limit if you’re married and your spouse can qualify If your spouse has to have income and so forth, then you can do 10 more that spouse can do 10 up to 10 more, which is which is great. But whether or not you can do that, and you get to 20 properties that way, there are still some pretty good portfolio loan options out there some community banks that will finance you and I tell you the rates aren’t bad. I just talked to one this morning, actually, that will finance pretty good rates. Now, it’s it’s only fixed for seven years in their case. And I think there’s somewhere in the in the high fours. I mean, I don’t know that’s not bad. Okay. And it’s certainly not as good as 30 year fixed at four and a half percent. I know, but it’s certainly not bad. I mean, have a seven year fixed and maybe by the end you do a 1031 exchange or there’s a refi opportunity or if the rates are insanely high and you have cash, pay it off, you know, what should we you know, I’m not a fan of paying things off, but There are some times when it can potentially make sense. So
Dr. David D’Ambrosio 34:04
well these these local lenders though it’s my impression is that they they really tend to want to lend to local people like would they went, let’s say, for instance, I wanted to buy a property in what is it the Quad Cities there? Would they lend to someone living in New Jersey, but was buying property in the in their state? Well, no,
Jason Hartman 34:22
you’re gonna you’re probably gonna go to the bank in that market. Okay. You were you’re buying Yeah, and these are these local community type banks that make really a lot of some big really sensible loans. You know, they do financing. That’s just logical. It’s not dictated by the government and, and, well, the government sponsored entities Fannie Mae, Freddie Mac, you know, that sort of pseudo governmental entities, I’ll say, it’s not dictated by them. In that sense, you know, they’ll they’ll do some really logical loans with usually 25% down and they’re not going to be 30 year fixed. Because they can’t sell them off on that secondary market, but seven year fixed maybe 10 years if you’re lucky, and the rates very reasonable. I mean, I think this is a very good option. And then after that, you can decide, do you go to a B to R or Lima one, we had a representative from Lima one at our last event in Phoenix, they do some really logical, sensible loans too. They can do some good things for you as well. And there, there are some good options out there you just it takes it takes a little more digging, and they’re a little more fragmented, if you will, in terms of the choices and and making decisions, but but they’re not too bad at all. Not too bad at all. Still still good.
Dr. David D’Ambrosio 35:40
When you say seven year fixed, it’s still a 30 year amortization,
Jason Hartman 35:44
yeah, 30 year amortization and it will become adjustable rate in seven years. And the reason they have to do that is because they’re not selling it off to the secondary market. There. They’re probably keeping it on their books or they’re selling it to a Another investor not rather than this big secondary market, Fannie Mae and Freddie Mac that has very specific guidelines.
Dr. David D’Ambrosio 36:08
So let’s say you did something like that, right? And you wanted to do a refinance of that into a more, can you do something like that where you refinance into a more traditional loan? Are you still constrained by that same 1010 property limit?
Jason Hartman 36:22
Oh, no, because we don’t know what the rule will be in four years, or seven years, or five years or six years or anything in there, right. So the lending climate may become more liberal by then, or it may become more conservative by then. But the nice thing is, you’ve got seven years to watch and evaluate. And you’re hopefully going to get a really nice return on your property for those seven years. You could sell the property, you could refinance anywhere in between there. You know, when in the old days, you could get an unlimited number of Fannie Mae and Freddie Mac loans, but post financial crisis, they first cut it down to four and then they raised to 10. And they’ve stuck with that 10 number for quite a while. But who knows that may become liberalized, you just never know what the future will bring in terms of financing options. And the other you do have a risk, though, obviously, I mean, you know, goes without saying, but I’ll say it, you have interest rate risk, right? So the rates could go up, and then you’ll be paying a higher rate. But if they do, and, again, there’s always lag time in here. But if they do, you’ll probably see substantially higher rents, and lower inventory of new housing being built. The problem is there is an adjustment period, there’s a lag time to this. So for example, if rates spike up tomorrow, it’ll take a couple of years for rents to adjust inventory to decline. And that’s the part that kills investors. And this is why the prudent investor in the long run I believe always wins the game because they can Write out those adjustment periods, those storms were the people that bought high rise condos in Miami or San Diego or overpriced property in California or the Northeast, you know, they don’t have that luxury, that they can ride out that adjustment period that that storm that lag time when everything is adjusting, but but it ultimately always does adjust, it just takes a couple of years to see it happen.
Dr. David D’Ambrosio 38:26
Do you think that it’s prudent or sensible to do a cash out refinance, if you can get significant money out through due to the debt paying off or it appreciates a little bit? If that means you’re going to take away your cash flow on a monthly basis? Or is that more of a personal decision? I guess? Well, I’m
Jason Hartman 38:45
probably gonna say absolutely, yes. But here, here are the questions I would have. What is the rate on that underlying mortgage you’re refinancing, compared to what are the rates today, on the new loan you would be getting You might well get a lower rate or a similar rate. And then I would say definitely take the cash out, because the point is not. And this may sound really odd, and it takes you kind of got to get your head around this listeners, okay, because I know a lot of you are going to say this is imprudent, and it doesn’t make any sense. And what are you talking about? I’ve heard it all before, but in a way, in a way, it’s not really about cash flow. Oddly, what it’s really about is rent to value ratio. Okay. So for example, if someone told you, you could control 100 million dollars of real estate tomorrow, that had very good metrics, very good rent to value ratios, it rented for 1% per month, but because of the financing on it, it was fully encumbered and had zero cash flow. Would you So want to own $100 million worth of real estate? Absolutely, yes, I hope you’d say that right? The reason you’d want to do that is because you have other multi dimensional things that will make you wealthy with that real estate portfolio. You don’t have to get monthly cash flow, what you really want is a good rent to value ratio. And this is going to be a bit of a long answer as my usual answers are I know I’m never been accused of being short winded, but in the old days, when before the Great Recession, you know, some some would say I was imprudent recommending this strategy. But we used to talk about something that I called the deferred down payment, okay. And the reason there would be a deferred down payment is number one, the market was appreciating very quickly, and rents take a while to keep up and adjust to the appreciation there they lag appreciation which always seems to happen faster. And you could buy properties with no money down. Okay, so the question was, and this equation I used to show this at my seminars on a spreadsheet, I use, you know, and I don’t have it in front of me, and I don’t remember the exact example. But the concept is this, that, you know, if you put 25% down, for example, the property could yield you, maybe $300 per month in positive cash flow. But if you put nothing down, you would be zero cash flow, or you might even have negative cash flow. Now, the lenders won’t even let you do this anymore. But in the old days, they would, and a lot of people listening will say, well, Jason, isn’t that the reason we had a crash? Well, not exactly. Not on these types of properties. That wasn’t the reason. The reason was, is that people were using this strategy to buy stupid properties in Southern California or elsewhere. That never made sense. Anyway. Because they had bad rent to value ratios, that’s how you can tell if the deal makes sense not by the cash flow, but by their rent to value ratio. Okay, so the the time horizon on this equation, this deferred down payment equation was that it was basically about nine years. So, if you get your $300 a month, or you get zero per month, in the in the difference in the amount of money you put down if you just kept that money in the bank and drew on it at a rate of $300 per month, and I you know, I don’t remember the exact number. So you may be doing the math and saying, well, Jason, that’s not nine years, but the example I used to show it was nine years based on the interest rates back then, and based on the rent to value ratio back then, and based on the down payment options back then, it was basically a nine year breakeven point. So I would rather have my 25% in the bank. In other words, your cash out reef You have control of that cash, then how that $300 a month in positive cash flow. I mean, that’s an easy decision for me to make in that way. I would rather have the property more leveraged with less cash flow, but more money under my control in in the bank or giving me the ability to buy more and control more real estate. Does that make sense to you? Or do I sound like I’m crazy
Dr. David D’Ambrosio 43:24
now that that makes that makes a ton of sense? Absolutely not answer the question. Sure.
Jason Hartman 43:31
You always really want to lean in favor, and it depends on the climate in the market. So no answer is ever completely simple. But you always want to lean in favor of the idea of equity stripping, pulling the money out of the property, having control of the cash, and still having control and ownership of the property. That’s the beautiful thing about real estate. You can acquire the asset, put some money down to acquire it, and then later get on Hold your money back out in still own and control the asset.
Dr. David D’Ambrosio 44:04
I mean, can you do that?
Jason Hartman 44:06
Yeah, and you don’t have to pay tax on that borrowed money that you took out? It is a absolutely beautiful, beautiful asset class I absolutely love it for for not just that reason, but many others as as you know. So good stuff. So what are your plans? Next, you’re gonna get into the third market. It sounds
Dr. David D’Ambrosio 44:22
like right? Um, yeah, I’m gonna, I’m gonna think about it. I’ve, I listen to the podcast on the Quad Cities. So I’m looking at that a little bit. I’m probably gonna pump the brakes, pump the brakes, since I did so much this year, and maybe, maybe do something early next year, but I don’t want to wait too long because I know the interest rates at some point are going to start going off.
Jason Hartman 44:42
It seems like they would have to doesn’t it? It’s just, it’s just
Dr. David D’Ambrosio 44:46
I’ve been saying that for five years. I’ve been saying it for 10 years.
Jason Hartman 44:49
So I’ve been wrong on my interest rate predictions, but I tell you interest rates are very, very difficult to predict because they’re basically They’re basically set by Fiat, you know, by Federal Reserve and government policy overall, the best place and I want to get them on the show. I don’t know if it’s the best but you know, it’s it’s well known in the world of interest rate and banking is a newsletter called grants interest rate observer. And I want to get a representative from that group on the show. haven’t done it yet, but they seem to have some pretty good insights into interest rates. But again, it’s a roll of the dice. Nobody really knows not even Janet Yellen at the Federal Reserve. She doesn’t even know what she’s gonna do next quarter always so we shall see. But David, thank you so much for being on the show and just sharing your story with our listeners and in your experience, and we appreciate your business and just want to wish you continued success and happy investing.
Dr. David D’Ambrosio 45:47
My pleasure. Thanks for having me on.
Jason Hartman 45:50
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