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In this episode, Jason Hartman plays a recording of a Q&A session from a Creating Wealth seminar. They talk about the process of finding and vetting a Local Market Specialist and how to find the right balance between property portfolios. They also discuss the different benefits that investment counselors provide to investors and the best ways to utilize them.

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

Announcer 0:13
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution. For real estate investors,

Jason Hartman 1:03
Welcome to the creating wealth show, episode number 803 803. This your host, Jason Hartman, thank you so much for joining me today, as we are going to go into about 20 ish minutes of a clip from a live event that I did, where I’m doing some q&a with the audience. And this is just happening after I explain and talk again about my big discovery, my risk evaluator, which I have covered on prior episodes, so I’m not going to replay that again. So just know that if you’re not familiar with the risk evaluator It is one of my great discoveries that I have never heard any other real estate expert talk about. It is solely my idea and it took me 19 years in the real estate business to discover it. It is based on what I call the LT ratio, the land to improvement ratio. And I had just before you come in on this clip, explain that to our live audience, and then took some of their questions. Also remember, when you need tax, legal or other professional advice, that you seek out the appropriate professional, I will always want to remind you that I am not qualified to advise on tax or legal matters, they are complicated. I will give you basic ideas, I will give you my understanding, I will give you my experience, but tax situations and legal situations and really any situation, of course, is individual. So it requires individualized advice from professionals in those particular fields. So please seek that out. Just use what I talked about on the show and at our live events and what you might talk to our investment counselors about as a guideline as a way to initiate a conversation with The professional who can go deep into your situation and give you their vast experience and wealth of knowledge. So I was want to say that to you, boy this weekend it is now Sunday evening. And I am just coming off a wonderful weekend with our venture Alliance mastermind. We do these quarterly meetings and this one was here in Las Vegas and we just had an awesome, awesome weekend. I must say I’m, I’m very tired. It was a great, great time. We had a we had pre meetings starting Friday morning. And then the actual formal venture Alliance meeting started Friday evening at seven where we we played it, we had some fun and partied and played golf at Top Golf here in Las Vegas. If you have not done Top Golf before, it’s really fun. You know, I’m not like any big golf or anything but this is this is kind of a fun, new fangled form of golf. If you’re not familiar with it. It’s called Top Golf and very seemingly successful company. That is a Got centers all around the country. And then we were at the Wynn and encore hotel just beautiful venue in this gorgeous boardroom. We started Saturday morning with our business meeting did a little masterminding breakfast together. We had the former governor of Nevada, the longest serving governor of the great state of Nevada, speak to us, Bob Miller. And he spoke for about an hour and took q&a from the audience and taught us a lot about the history of the state of Nevada and Las Vegas and how people get business deals done in Nevada and you know about the the mafia and the casinos and then how Wall Street came in and how Steve when of course, we were at Steve Wynn’s hotel, the Wynn hotel and encore hotel and how he financed his first property and became this, you know, mega mega successful hotelier and, and real estate developer and talks about his burn rate in his first big project finance with really high yield well, otherwise Known as junk bonds, and how his burn rate in that property his expenses were get this a million dollars. Nope, not a million dollars a month. Not a million dollars a year. Not a million dollars a week. A million dollars a day. Yes, the million dollars a day. And it was just really interesting having the governor speak to our small group we had about oh, I think we had 22 people in the room. We were in this gorgeous boardroom in the Wynn encore hotel. And then we had Jason Hanson, come in and speak after that. And He is a former CIA operative, that teaches class called spy escape and evasion. He demonstrated on himself how to break out of duct tape, zip ties, handcuffs, all kinds of things and some interesting self defense stuff. You know how to know if you’re being followed how to evade people following you whether by foot or car, whatever. And it was just really fun. Fascinating It was like James Bond came to give us a seminar and and that was super cool. And then we do our skill shares our hot seats, and then we broke for the afternoon we went ziplining and Las Vegas. Oddly, you may not know this has a couple of the world’s best zip lines really. The one we did was where we flew like superheroes. You know, like Superman flies right on our Well, you know, in a hardest, you know, on our stomach like laying down flat and you know, you put your arms out in front and we started it. It’s seven storeys up and flew down this awesome zip line and that was just a lot of fun. We got a lot of great pictures of that and really fun time, had a great lunch before that and then had some drinks afterwards and walked around the crazy Fremont Street experience the FSC in Las Vegas in downtown old Las Vegas. And that was a lot of fun. And then we got together for a beautiful formal Dinner at the top of the world restaurant that literally is at the top of the world. It’s at the top of the stratosphere. And you know a lot of times those kind of places aren’t that great, the food’s not great and they’re kind of touristy but this one is really good it got great reviews on Yelp and and we had a group of 24 people at dinner and just had a wonderful time and had drinks afterwards in the nightclub there and I wasn’t at this part but some of the group have worked. They were having more drinks at the Wynn and encore hotel and, and there’s just so much masterminding and so many great ideas being exchanged, you know, and then this morning, Sunday morning, we met back in the boardroom at at the Wynn and just masterminded, we went around and everybody shared all the great books and newsletters they’re reading and the podcasts they’re listening to and what they learn from them and I just thought I thought what what a stimulating conversation. What a brilliant group of people We did some skill shares and hot seats and one of our local market specialists that was there, he shared, how he uses creative visualization, to increase his productivity and get what he wants in life and for his family and his business and, and he talked about his productivity hacks and his bio hacks that he’s using to hack his biology and hack his productivity and manage about 300 employees and all of his businesses. So that was just phenomenal. And people went around the room shared skills. One of our hard money lenders in the room, Mike, he got up and he talked about some new funds that he’s starting to do hard money lending and invest in properties and you know, how yields are compressing and what’s going on in that market, what’s going on in the lending market and financing properties and deals and Wow, it was just an amazing weekend. People did hot seats they brought to the group challenges they’re having and, you know, opportunities they’re having and you know, what should I do? How should I deal with it and, and you know, for five minutes they explained the problem or the opportunity or the challenge or whatever it was and then the group went around and and gave suggestions and asked questions that drew them out and illuminated the situation and help them better handle that opportunity or that problem. It’s, you know, could be good could be bad. Whatever it is the mastermind group, that’s the power of the mastermind and and we had lunch at a beautiful new Benihana restaurant here and you know, we were all around the, the the grill as they were cooking and you know, if you’ve been to Benihana you probably have and you’ve done the what is it the sash, one grill or the tap on grill or the bachi grill. I don’t know what it’s called Anyway, you know, they throw the knives around and do all kinds of cool things. But, but, you know, I looked at the side of me and there was my friend Pat talking to Jeff And, and you know, they’re they’re part of the venture lions mastermind and they’re talking about, you know, saving money on taxes and making money on deals and, and then I looked at the other side of me and there’s Gary and Fernando and you know, they’re they’re talking about stuff they’re doing along with john and, and his wife and it was such a great stimulating, bright, engaged group of people. I just absolutely love the mastermind concept. So, our next venture Alliance mastermind event will be in Chicago, and it’ll be in about three months. So look for more information about that if you’d like to join us and right now, of course, in just about three weeks, we’ve got another Memphis property tour coming up. I think you’ll really like that we’ve got we’re going to focus this time in Memphis on brand new construction, brand new investment properties. So check that out. That’ll be the the major focus of this property tour. And, of course, I’m doing my creating wealth seminar. They’re where I talk about what I talked to this audience about where you’re going to hear this live clip in a moment. The risk evaluator inflation induced debt destruction, what Trump means to all of us in terms of our investments, and a whole bunch of other things, how to select markets, guys, you know, and by the way, today, I have to tell you, is the anniversary, March 12. By the way, the anniversary of the first time I did the creating wealth seminar, my creating wealth seminar, that and the first one was in Newport Beach, California. And it was in 2004. Today, back in 2004. So what 13 years ago, and I remember that day well, so I’ve got that coming up again, in just about what really, I guess two and a half weeks in Memphis, we’ll be doing it there. So I hope you join us for that. Go to Jason hartman.com. Click on the events section and get your tickets for that event. Check out the properties while you’re on our website as well. And make sure you’re talking to our investment counselors if you’re interested in buying because not all properties are on the website. I hate to say that but the inventory is moving so quickly nowadays, it’s hard to keep up with and you’ve just got to you’ve got to be talking with our investment counselors. Don’t just use the website only work with your investment counselor at my company that will help you get the good deals, you know, game right when they come up, boom, boom, boom, because they’re they’re just gone fast. We are bringing a couple new providers online. So we’ve got more inventory one of those new providers was with us all weekend and, you know, we use that as a as a way also for the venture Alliance group, that mastermind group to bring value to you. Even if you’re not in the group. They are kind of this. Well, I hate to use a Bette Midler phrase put the wind beneath my wings, right. That’s a great song. By the way. The wind beneath my wings and the wind beneath your wings because they were with a couple of our local market specialists this weekend and it prior venture Alliance weekends and, and they were vetting them and learning about their business and you know, kind of vetting it out and, and hanging out with them and, and you know, I mean, for better or worse I’m not a huge drinker. But alcohol is a bit of a truth serum you know, you can kind of tell a lot about people’s character because alcohol it magnifies it right just like money does you know, Earl Nightingale the later on Nightingale one of my early mentors at age 17. He used to say, money is like alcohol, it makes a good person better and bad person worse. So, you know, when you’re hanging out in these casual environments at the venture Alliance weekends and you know, having a couple drinks with people, you know, you you really get a flavor for what they’re liking. their businesses like what their attitudes toward customers is like, and, you know, where is it rather, you know, what, what are they? Are they the, the quick buck? Turn them and burn them type of person? Or are they the person that, you know really has a long term vision for their company, their business, their life, their contribution to society? You know, these are all things that you just learned by hanging out with people in casual environments. And so that’s just so critically important. And that’s, that’s what the venture Alliance did for you this weekend. By the way, dear listeners, of course, we have many, many thousands of listeners. And we only had a couple dozen people here in Las Vegas this weekend, vetting some of our local market specialist for you. So they are the wind beneath their wings. So I thank you to the venture Alliance for helping me do that because I can’t do it myself. You know, it’s only one person’s intuition. It’s only one burst. opinion, it’s only one person’s perspective. But, you know, you get another two dozen people there to help you think things through and that things and just a lot more perceptions. And so that’s super valuable to me, it’s super valuable to you, and will continue to provide that value to you. So hey, without further ado, let’s get to this live clip. But do be sure to go to Jason hartman.com, the Memphis property tour and creating wealth seminar is almost sold out. I don’t have the exact headcount on that lately, but I know we’re we’re only a very small number of tickets away from calling that sold out. So do get your ticket quickly. So you can join us in Memphis, and check out the properties and all the other great stuff at Jason Hartman calm and of course, if you’re not an actual subscriber, be sure you subscribe to the podcast, so you don’t miss any episodes. We also appreciate your reviews and your ratings of the show. So thank you for that.

And let’s go to this little live clip. Okay, so Kerry, I just wanted to ask you a little more about markets and, you know, different local markets specialists and some of the vetting that you do, maybe just to talk about that a little bit. And, you know, you guys might have stuff to add to that. What else do you want to say about that? Maybe?

‘Q&A clip’ 16:21
Well, I could I could talk about the process. So we get you know, we find the market so we’re all we all collaborate. Hey, what about this market? What’s this market looking like? There’s new projects coming in Orlando and Memphis. You know, maybe we should look at this neighborhood or see who’s out there. Or we’re getting referrals from someone so we’ll set up you know, phone interviews screen them ask them all their different questions, get them through their property management, you know, see how legit they are? We Google you guys, don’t worry and make sure we check you out. And then we slowly start them will upload their properties on our site, but we won’t give it to the whole public yet because Cuz we want to work through the kinks and make sure things are gonna run smooth and, and some of those that we’ve put up on our site that you don’t see, but we have on the back end, they haven’t worked out, which is good because we didn’t, you know, open it up to everyone. We wanted to see who could handle who could handle the waters out there with them. So those are some of the back end things that we do that you might not know until we might be working with someone for six months. And now they’re just on the podcast, and now they’re new. And you’re thinking, where’d they come from? Well, we’ve been with them and running the numbers and they got to work with us to you know, not just their system has to work, but they got to know how our structure works. And so those that come on board, we have a good good momentum with them and good relationships.

Jason Hartman 17:45
Yep. So what what she’s pointing out is a lot of times, we don’t put them on the podcast right away because we want to kind of test it first. And some client has got to go first. Okay, always right. And they’ve got to buy in there. First, and we’re really judging a lot their communication skills. And you know, are they responsive, if they can’t even some of them can’t even communicate, it’s mind boggling. And then some don’t like to pay us either for the referral, which isn’t a good sign, because usually, they’re not going to be around to handle warranty items, either if they don’t pay, you know, these are all things that we’ve just learned to deal with over and over throughout the years. It’s kind of amazing how they come and they go, and some come back around. And, you know, later like, Dan in Kansas City, you know, he wants to get in again, but he didn’t do it right the first time six years ago, so I don’t know if he’s gonna be back in right.

‘Q&A clip’ 18:42
So that’s not even getting a friend acceptance from me on LinkedIn.

Jason Hartman 18:48
Oh, not Facebook. That’s a connection on LinkedIn. Right? Yeah. Right. A Twitter follower. Yeah. That’s for Twitter. Okay, cool. So Other questions? Yes. Aaron? And who’s got the mic?

‘Q&A clip’ 19:03
Pretty good. What’s the overall philosophy when building a portfolio with having a blend of the appropriate you know, a properties B, C’s and DS, having that right striking the right balance? I have my sort of philosophy about it. I would love to know yours personal actually, all four of you guys. philosophy on that?

Jason Hartman 19:20
Well, first of all, I think it just that’s sort of your decision. If you want all A’s or B’s or C properties, you know,

‘Q&A clip’ 19:27
yeah, well, you know, what I straight up ask, you know, what’s your goal? What do you want to get out of it? Do you want to get the the cash flow, right now, what are you looking to gain? Because, you know, if you go in the in class A, you’re not going to get, you’re going to barely hit that 1% Rv ratio with that cash flow. And then you have your B’s which is kind of a steadier, you’re going to have some cash flow, but not as much appreciation and then C’s, you’re going to have higher maintenance, but then classy, you have higher maintenance, but more cash flow. So you leverage them out and then it’s like you said it’s all up to you, you know, do you want to go I would say if you’re going to go to right now get two B’s and and then you can up it to two A’s and then two C’s and diversify with the classes, but also in markets, you know, make it a follow all around blend of, of what you can expect to you know, if What if you buy those two bees, but you don’t like them, you know, you don’t want to straight up then do 10 bees right away, you want to kind of gradually see

Jason Hartman 20:30
your feet in the water.

‘Q&A clip’ 20:30
Yeah, what’s gonna work for you and in which management company’s gonna, you know, take you to the next step of, Okay, I see you do have bees, I’m gonna go to your A’s or vice versa, right.

Jason Hartman 20:42
And so, in addition to what Kerry is saying, it’s how much involvement Do you want, you know, ROI means return on investment. But we in the venture Alliance mastermind group, we came up with a new one, we also think it means return on involvement. So if you’re willing to be more involved You can probably get a higher return on those seed properties but your it’s going to take more attention than a property’s generally in these are of course generalizations they’re going to be less than that I say a less yeah less involvement. Okay, see properties who might be in the doghouse? There you go over

‘Q&A clip’ 21:18
anything that maybe you don’t know? I don’t it’s ultimately how easy Do you want it and if you if you’re okay with being more involved and focusing 100% of your time on real estate and your ultimate goal is maximum return on investment and you don’t have a full time job, you know, what not, if that’s what your goal is, and that’s what you’re gonna focus on. I mean, you probably want to maybe go into the stuff that’s going to be higher return on on investment, and if you’re someone that has a full time job that you’re like, Listen, I only have a couple of hours a week to maybe look at this you know, I definitely steer you away towards the the B B plus a properties because those are typically speaking you know, generally the ones that will be a little less headache.

‘Q&A clip’ 21:57
Yeah, keep in mind when when you buy properties in Higher rent range, I think the the rents tend to go up accordingly. They they go up a little bit more when you buy,

‘Q&A clip’ 22:06
tenant quality goes up with higher rent you mean right,

‘Q&A clip’ 22:08
the tenant quality, but over time, I think the rents increase faster. Oh, yeah. Okay. And then sometimes, and again, there’s no guarantee it depends on the market, and we don’t have the crystal ball. But sometimes those nicer properties in nicer areas appreciate better over time. So it’s like all over said, or Carrie or one of them said, you know, do you want your cash flow now? Or, you know, do you want a little cash flow now and maybe a better potential for rent in Greece and appreciation later? And I think, I think the ultimate answer is, you know, one, diversify geographically but also in the types of properties that you get. So maybe you start with, you know, get a few solid, a area properties and, you know, then you add from there, depending on your comfort level. Good, good.

Jason Hartman 22:53
Gosh, I had kind of a question based on that, but go ahead and Matthias, who, by the way, he’s going to be on the podcast soon. We recorded live Cuz that was a rant at that point. I think I was ramping that up. Anyway,

‘Q&A clip’ 23:06
I just wanted to mention to everyone about a different kind of leverage that, that has not been spoken about. And that is, you know, I’ve

‘Q&A clip’ 23:15
had a fair number of exchanges with property managers by email and

‘Q&A clip’ 23:23
and lenders. And I think that it’s important to point out there’s an intangible benefit that comes from letting these people know that you’re working with the Jason Hartman investment team and I always copy carry on all the emails that I sent out and, and I think it gets a little bit more attention because they know that someone is watching from the other side. And I think it’s important to know that you, your questions will be answered, they’ll take a little bit more seriously. And if they screw up often enough, they’re not gonna be on their network anymore. So I just wanted to point that out.

Jason Hartman 23:58
Yeah. carries like the Principle. It’s like taking, you know, copying the principle on the email, right? Yeah. Be careful what you say.

‘Q&A clip’ 24:09
So, I’m really new at this. I really don’t know what I’m doing yet. But as wondering how, like, in 15 years after you purchase the property, if you have like a really major

Jason Hartman 24:22
that microphone keeps going in and out. I don’t know what’s wrong,

‘Q&A clip’ 24:26
changing the roof and stuff like that, how that can affect

Jason Hartman 24:29
your overall. So her question because it kept cutting out is if you own the property 15 years, and then you have to replace a roof, right? How can that affect your ROI? Well, obviously negatively, because it’s a cost, right? And it’s a it’s an expensive one, you know, it’s a cap, that’s a capex a capital improvement cost, rather than a maintenance costs. If you patch the roof that’s maintenance. If you replace it, that’s a capital improvement. So that is definitely negative. You know, you can kind of amortize do some charts on this, you know, typical life of various components of the property and budget for those expenses in advance. This is what, you know, homeowners associations, for example are supposed to do is that they have reserve accounts for capital improve large expenses like that. And so they know that in 20 years, you’re gonna have to repave all the streets in the common areas, right? Or you’re gonna have to redo the pool. And so they have reserve accounts, they just accumulate over time for that purpose. Okay, so, yeah, you do have big expenses like that and be prepared for them. If not financially, mentally know that, hey, how old is that roof getting on my house?

‘Q&A clip’ 25:48
Right? That’s, that’s one of the things I love about new construction. They don’t always pencil out very well on paper. The day you buy them, they don’t look like they’re going to cash flow very well. But You have a lot less maintenance. And hopefully by the time you know the house needs a new roof, you may be able to just maybe appreciate it and you could 1031 exchange, you know, you sell it to a homeowner and maybe the homeowner is willing to overpay come in. And you know, they want to be in that school district and they’ll put the new roof on and you can pass that expense to somebody else.

Jason Hartman 26:20
And and the roofs on new homes will you know, a lot of those are pretty sturdy roofing materials. So they last a long time.

‘Q&A clip’ 26:27
So one of the things to bear in mind with that is, remember, I always tell my clients to remember the initial performance sheet, we had allocated roughly five, maybe six 7% towards maintenance. Well, it depends on the age of the process depends on the use of the property, so it really ranges. But sometimes you may go, you know, four or five years without using that full percentage range. But then 10 years comes down the road, you’re like, oh man, I’ve got to spend two $3,000. Now to replace this. Just bear in mind that essentially if you didn’t have to use it during that time, you essentially saved it up and you will use it at one point. So Not to freak out too much. Yeah.

Jason Hartman 27:01
kind of be ready for that stuff. Hey, by the way, I didn’t say this before, but I should have just say your first name and the city you’re from, if you would. So Aaron from Aaron from Irvine. All right. Yeah. That means now you can ask a question, one bank account for all the properties or a separate bank account for each property. Good question. I wonder what Fernando does. And I don’t know the answer, but I do one bank account for all the properties in that entity. So if I own it in my personal name, that’s just, you know, a bank account in my name, right. If it’s in an LLC, and there are several single families in that LLC, one bank account for all those properties. I don’t think that’s that hard. Some people say one bank account per property. I think that’s your I think it’s overkill. Yeah.

‘Q&A clip’ 27:50
unless those Wells Fargo, they’ll do it for you.

Jason Hartman 27:53
Yeah, if you read that article yesterday or the day before, did you hear about Wells Fargo? Oh yeah Ross I think you’re the one that gave me that link originally, Wells Fargo has basically been found guilty of opening up ghost accounts for people and they fired 5300 employees and paid like 180 $4 million fine to the government so that’s Yeah, you might have accounts you don’t even know you have to so you know, it Wells Fargo. But then for the larger properties like the apartments I own and mobile home park, those have one account for that whole property. Okay, but for single family, one account all the properties for me,

‘Q&A clip’ 28:29
what do you do? I do the same thing as he does. Per LLC. Mainly, yeah. And then one catch all, which is for the personal stuff that I started out with?

Jason Hartman 28:40
Yeah. Okay, good. So question back there, Fernando. Did you guys have anything to add to that, by the way,

‘Q&A clip’ 28:47
if you the only thing to add to that is Emily, I know that this is something that Fernando is where does is if you want to have it per state if you have a bunch of different properties in different states for now, if you want to elaborate on that, but essentially if you have a bunch of properties in Georgia or you know, Tennessee, just have them per state?

‘Q&A clip’ 29:06
Is this an LLC question? Because that was actually my question is how do you with many, many properties like that? How do you structure entity management to reduce your risk?

‘Q&A clip’ 29:15
I do it that Oliver said it’s broken out per state. Now that doesn’t mean that that’s the recommendation that depends on who you ask, they’ll give you a different answer. If you ask a lawyer that makes money off of creating LLCs, he’ll tell you to create one per property and one bank account per property. And, you know, you have to be comfortable with what you do. Obviously, you might not want to go on either extreme where you have one big LLC that contains all properties, but honestly, the answer can vary so widely and depending on who you ask that it becomes hilarious at some point. So in my case, it was more organic, you know, as I was building a portfolio and just turns out that I was, you know, buying properties in this state. It made sense To me to have an LLC for that state. When I was working with a particular bank, when I purchased a set of properties for a particular bank, they wanted a single purpose LLC for those properties. And fine, you know, that’s made sense. And it turns out that that’s what I kept. So, you know, it really it’s up to you on what you’re comfortable with it at the end of the day, there’s many different ways of doing it.

Jason Hartman 30:24
Just to speak to that a little bit. Last week, we had our venture Alliance mastermind that’s like my mastermind mastermind group, right. And I’ve talked about on the podcast, so we had our meeting in Seattle last week. And I gave all of the attendees the Garrett Sutton book loopholes of real estate, which is very good. There’s a couple things I disagree with him on that sort of old school thinking a little bit I think, but Garrett has formed some entities for me, I think he’s, he’s great. And his prices are very reasonable too. But just when you start forming all these entities, life gets complicated quickly. Okay, I’m just going to warn you because the problem Come up when you first of all, if you live in the Socialist Republic of California, you’re pretty much screwed. Okay? because what they do is they essentially want you to domesticate every entity you have in their state, even if the property is in a whole nother state, and literally and Fernando, you and I talked about this, if you have a mailing address in the Socialist Republic of California, like I do, they could try to, they could try to make that your tax Nexus just because you have a peel box there. Even if you don’t live there, it’s insane. Like the property is not in California, the person’s not in California, and you literally just have a mail service in California that receives your mail, boom, you might be in that tax Nexus, where they charge you $800 per year per entity, okay? And you know, a lot like Garrett will say, you know, put your entity your LLC in Wyoming. But then the problem is depending on the state where you own the property, you Got it domesticated in that state? Maybe? Maybe not. It’s complicated. Okay. But his book is great, I’d highly recommend it. There are a few things I disagree with him on. One is, you know, like Fernando said he, you know, to anybody selling something is going to tell you form as many policies as you possibly can, right? Because another way that the attorneys make money off stuff is by being a Registered Agent, and you have to pay annual dues for that, and all of that stuff. Also, he says, just one sec, I just want to finish my thoughts on that Garrett book. He’ll say, Don’t buy properties in your IRA. And Tom wheelwright, who’s like another Rich Dad advisor on tech stuff. I don’t think the IRA thing is that great. I think it’s better than stocks for sure. But they’re really kind of like down on it. And I think they overreact to that. It’s not that bad either. Oh, and then you’ll say don’t buy properties, you know, far away from home. And that’s just old school thinking, you know, because the problem is, it requires you number one to learn Live in the best market in which to invest, which probably you don’t, okay? So if you live anywhere in California, it’s not going to be a good place to invest from a cash flow perspective, if you live there, no matter where you live in the state, or if you live in South Florida, or Northeastern markets that are any expensive market is not gonna make any sense from a cash flow perspective. You’re not an investor, you’re speculate. You’re a speculator, you’re a gambler. And then the other thing is, even if you live in the best market in which to invest, say, you all lived in Memphis, okay, or Orlando. And, you know, we think we’re Indianapolis, and those are all great markets to invest, right? But if you do that, and you want to buy all your properties close to home, you’re still not going to be diversified. And you should diversify into at least three markets. So you know, this is like old school thinking back in the day when you didn’t have any tools. When there weren’t companies like ours that help you do this. Yeah, I agree. I would only buy locally. But nowadays, it’s just a different world. You didn’t have before. Google Earth back then. You didn’t have Zillow, you didn’t have us. You know, you didn’t have these different business models and tools that have been created around that. Did you

‘Q&A clip’ 34:09
agree 100%. It always amazes me. Every so often every week or sometimes two. I see companies popping up that do Pease do a piece of the property management or the real estate, the income property, investment, philosophy. And because you have all of these resources that didn’t exist 20 years ago, it’s easier than ever to be able to manage properties from anywhere. I travel all over the world. And there’s there’s no issue whatsoever. As long as you have internet connection. You need that. Yeah, but that’s about it.

Jason Hartman 34:44
See it really the key turning point was when al gore invented the internet. That’s a joke. Some of you did not laugh. Anyway, Al Gore is a joke. Okay. What were you gonna say?

‘Q&A clip’ 35:00
Just about saving some of you some money. It’s a bit of a, I guess, quote unquote hack. I’ve been able to save a lot of my clients money just by doing this. For those of you that have registered agents, just do a quick search in the area, find the cheapest one and then go back to your registered agent and see if they’ll match it price. Yeah, the clients, my clients have saved hundreds of dollars on this every year. So just do that make note.

Jason Hartman 35:22
Just ask them to match the price. Yeah, one firm that I used to use, and they’ve been on the podcast, I do not use them anymore. Definitely not ever again. They were just I was paying out rageous fees for registered agent and entity maintenance where they’ll do your minutes every year and your filings and stuff and it was just such a ripoff. So I moved a lot of that over to Garrett Sutton’s office much, much better deal.

‘Q&A clip’ 35:46
And you should do the same thing with your property insurance or your homeowners insurance, their property management companies. You just shot them against each other.

Jason Hartman 35:56
That’s the way free market capitalism works. It’s a good thing. Tilburg Sanders. Okay, any other questions? Yes, over here.

‘Q&A clip’ 36:04
As a new investor, why would someone use an investment counselor? I don’t I’m not extremely clear on what it is that you actually provide or why it is that I as a new investor would want to use you.

Jason Hartman 36:16
Yeah, good question. So first of all, it doesn’t cost anything. It’s free. We make our money because we get referral fees from the local market specialist in that market. If you were to find the property yourself directly, you’re still going to have all that in there. Okay, you’re still going to have a broker or an agent in there, probably okay, most of the time. But secondly, and this is really what my vision of getting into this business was back in 2004. is when I was when I was selling my company that I talked about earlier. And I went to these financial services firms, I thought, the great thing about the Wall Street stuff as they make it so easy, they will let you just walk in and give them money. And they can put you into a variety of investments. Well, why Couldn’t there be a real estate company? We have the best asset class, but a really in this industry a really bad sales force. Because it’s all local realtors, they don’t think like investors. They’re not area agnostic. They’re totally attached to their one market. And we’re not attached anyone market. We’re area agnostic. So is if you buy in any of our markets, from any of our local market specialists, we’re going to make money. Okay, we’re area agnostic. So any of the markets you buy in, we’re still gonna make money, right? So they’ll be impartial with you in terms of what market you should invest in. When you talk to our local market specialists, they’re going to be motivated to sell you their market only. Okay, so the difference?

‘Q&A clip’ 37:47
Yeah, and, you know, we’re working with several investors at any given time, so we’re getting constant client feedback on property management, lenders, you know, the market specialists You know, who communicates well, who goes the extra mile to repair a refrigerator that was broken 30 days after close versus one that, you know, Fred over here had an experience with.

‘Q&A clip’ 38:14
One of our market specialists that we fired, and this was the straw that broke the camel’s back is Oh, hey, she got the same, right,

Jason Hartman 38:22
the straw that broke the camel’s back.

‘Q&A clip’ 38:26
So, you know, we had, you know, a few complaints over the year and this was on the property management side, and this was one of our Birmingham providers. And, you know, Fred came to me and said, geez, you know, I just closed it had been, I don’t know, 30 days or within 30 days, and there was like, a little hole in his door, maybe the back door. And there was one other thing with the property. What was the other thing? The hot and cold? Yeah, the toilet was producing hot water. And so I I said to Fred well, Those are two really easy fixes. I’m sure we can call this provider and you know, get those fixed. And they didn’t do it. I mean, that’s like the only provider that I’ve ever heard of that I can think of in nine years that would not you know what he said? He said, Well a squirrel probably chewed through the corner of that door. And I just about last night, you know, you know what I was upset, marbles. marbles. I was gonna say something.

Jason Hartman 39:30
I don’t know if everybody knows the inside joke. So I was tea Sarah cuz she always gets the saying a little bit different than, you know.

‘Q&A clip’ 39:38
Things are better.

Jason Hartman 39:39
Yeah. shoot yourself in the foot or shoot yourself in the shoe.

‘Q&A clip’ 39:44
In the summertime, shoot yourself in the sandal. Okay, so anyways, we did go to bat for Fred. And we were not successful. And so we stopped working with that provider, although we removed the properties from our website,

Jason Hartman 39:59
and we got in a big hurry. with him,

‘Q&A clip’ 40:00
he got in a big argument with them and on boxer and I think you were on that thread. Yeah, it was. I mean, it was just it was kind of embarrassing. You know, I felt that you should play

Jason Hartman 40:10
the boxer thread on the podcast. Another lawsuit? Oh, great. So what I need,

‘Q&A clip’ 40:17
and that doesn’t mean that Fred has a property that’s not going to perform, you know, he may switch to another property manager. And in fact, he did. And, you know, we helped him we gave him some contacts in the marketplace. And so sometimes you fire the local market specialist, or you fire a property manager

Jason Hartman 40:33
and occasionally fire the client.

‘Q&A clip’ 40:35
We have fire clients.

‘Q&A clip’ 40:38
You might be looking at a property all this is going on, and you might have been looking at those properties. So that provider in fact, we did have clients that were you know, inquiring, and you you may have already, maybe we took them off the website and you didn’t notice but maybe you were already communicating with them, or maybe you purchased two years ago and you went back to them directly to buy another one, which this just happened with that provider and you happen to call them Say, Hey, can I just want to get an extra set of eyes and ears on, you know, how is this provider doing? And I might say, Wait, you know, this is what’s going on, maybe you should look at another market or another seller in that market. So that’s we leave provide value as a network, I think I mean, you help us as much as we help you guys because we’re getting that feedback. And we can make decisions based upon your valuable feedback.

Jason Hartman 41:25
And hopefully, we can exert, exert some real leverage over them. And that’s what Messiah was mentioning earlier. You know, we hopefully that local market specialist views it as Look, there’s a carrot out here, and there’s a lot of business coming. So I really care about this relationship. Okay, some of our local market specialists, they’re probably making a million dollars or more a year off of our referrals. Well, they definitely are making over a million bucks a year. And so they’re not going to screw that up. I mean, they’re just, they’d be crazy to mess that up. Right. versus doing a one off deal. That’s why when I tried to do this myself back in 2004 I had no leverage. I couldn’t get anybody to do anything even returning a phone call seemed like a chore sometimes, right? Because I go to this mark, and I’m like, hey, I want to buy two houses, or like, I don’t care.

‘Q&A clip’ 42:11
Just, Lindsay, just to elaborate on that we’re ultimately here to really help you help all of you, the investors. And really without you guys, this would really be happening. The other thing too, is there are other companies out there that will charge 510 50 I’ve also even seen up to $100,000 to coach you for maybe six months or a year on how to do exactly what we’re doing. And then when they find out about us, we’re like, what you guys actually helped me and for free, yeah, free. Like, yes, there Josh sort of drop and, you know, they’re very happy because now they can use that money to buy more properties.

Jason Hartman 42:45
Yeah. Education nowadays is almost free. Okay. Someone had asked about coming to one of our events and, you know, said, Well, why do I have to pay to come to your event, what you’re paying to come to our events. It’s like nothing We lose money on these events, okay? Where we make the money is because we’re a real estate company, right? That’s just a huge difference because we’re tied to the actual property, right? In the sense that what we say at the seminar has to come true in real life. Well, you know, at least has to come true at the time you buy, right? admittedly things have bumps in the road, or you’re not gonna buy properties and we’re not gonna stay in business. And that’s, that’s the key distinction. I have had so many people and you remember that, like many of these over the years, that have come, they’ve been in one of our seminars and, you know, buy lunch, they they walk up and they say, you know, I just spent $43,000 on this guy’s guru coaching program, and I just finished it and I felt like I got nothing. I learned more before lunch from you for free, or for cheap, you know, 200 bucks, or whatever it was, you know, it’s just you just don’t have to pay a lot for education. Use your money to buy actual properties, you know, for 40 years. thousand dollars, you can buy two properties. And you

‘Q&A clip’ 44:02
should thank Jason for charging for his events because otherwise anybody could come and all those people that are next door selling juices. they’d all be here.

Jason Hartman 44:12
Armando montelongo people would be here. Yeah.

‘Q&A clip’ 44:16
Yeah. So.

Jason Hartman 44:17
Okay, any other questions? Maybe one more. Okay. Or two more. We got two more and then we’ll wrap this up this panel

‘Q&A clip’ 44:25
from Carrie from Irvine. So I’m just curious between among Sara, Carrie and Oliver, what is the difference between working with any of you? Do you specialize in specific type of markets? Are you a specialist? Or do you specialize in certain types of

‘Q&A clip’ 44:43
investors?

‘Q&A clip’ 44:44
Where are your areas of expertise and,

‘Q&A clip’ 44:47
you know, who is the best person to go to?

Jason Hartman 44:50
That’s a tough one. That’s a tough one. Okay. And and Fernando, by the way, do you have to include him in that? I mean, I can answer that one. They all Do all the markets, there’s not enough markets that you need to specialize. Our specialist is the local market specialist at the back of the room, right in that various in those various markets. And we have many more of them besides the the few that are here. But they all handle all of the markets, okay. And they all handle a variety of different types of clients in different situations. So it would be sort of impossible to say you only work with certain type of client and you work with another type and you work with another type, because the clients grow and change over the years. So,

‘Q&A clip’ 45:34
yeah, and the way it works, I mean, to be honest, you guys go on a round robin through our system when you put your name and number in and it just gets automatically assigned. But the one thing you should know is that we all bring something different to the table, and we collaborate. I mean, we do a team call every single month. We do our venture Alliance meetings. We had a team meeting yesterday. You know, so if you ever need access to a Anybody, I mean, we all work together. So, all the way up to Jason I mean, on that issue, usually I can handle property management issues on my own. But on that issue, I was just so upset for the client that I mean, you can ask for it at the break. I got Luke Jason and and I did what he asked me to do, I started a boxer thread, and got everybody involved. And so in our Birmingham guy hates Fox.

Jason Hartman 46:24
He says, I don’t want to talk on here because guess what it’s recorded. And everybody can hear it. I love it. He always wanted to just talk to me, you know, like, I’m gonna fall into the conspiracy of let’s just make money. You know, I you know, I want a business that last right you know, so,

‘Q&A clip’ 46:41
but I mean, if there’s a there’s a question that I can’t answer all of our can answer. And we know Jason has the answer. We’ll go get the answer for you and refer you to the to the right person.

Jason Hartman 46:50
But a lot of times you guys have the answer. You teach us a lot of stuff. And part of our job is to assimilate the knowledge we learn from you that you know, when you have a question problem in a certain market with a certain provider, they’re all talking about this on our voxer thread every day, you know, Carrie will say, Oh, you know, guess what I’m having a problem with so and so they’re not returning our call. And by the way, on our last deal, they didn’t pay us yet either. And then we start to get worried about, you know, their financial condition and so forth. And so yeah, this stuff is officers

‘Q&A clip’ 47:20
really helped actually, you know, all say, hey, Sarah, who did you use in this market for an IRA or Hey, Oliver, how did it work out with your client in that situation? You know, because I’m kind of going through the same thing. So we we work together, and it’s really nice, because I think she left the building here, but yeah, and why to use an investment counselor? Well, because we’re working there to support you guys. I mean, we’re supporting each other. But we’re supporting you guys. And and there’s things that we can help you with that you wouldn’t know. You can’t Google that situation. You know, we’ve gone through it or someone’s gone through it up here already, so we know where we can help guide you to the right steps to take stuff. Okay, we have one more question.

‘Q&A clip’ 48:02
Joe from Idaho. Idaho is not a city. Well, you just won’t know. 500 people that live

Jason Hartman 48:11
you don’t really I know by the way, Joe from Idaho Canadian say that. I’ll meet him at conferences where you from Canada? Oh, really? There’s a banner? That narrows it down. And

‘Q&A clip’ 48:23
I it’s really that a lot of people in America have no idea where the majority of the cities they

Jason Hartman 48:28
don’t know the difference between Vancouver and Toronto.

‘Q&A clip’ 48:30
They have no idea. I’m not kidding. I mean, how many how many people here can tell me their capital Canada? Ottawa, lift your hand? Alright, 780 of

Jason Hartman 48:42
us here. Okay, Americans aren’t that smart.

‘Q&A clip’ 48:45
Damn Canadian snob. So So when we say Canada like okay, cool Canada. That means you’re probably friendly. Say I live in a poll or something.

Jason Hartman 48:55
What do people buy from us they buy that they live in houses now. Who says

‘Q&A clip’ 49:01
that’s maybe a Jason Hartman thing?

Jason Hartman 49:04
A boot house whose Canadian girlfriend she called it? I remember one time we’re eating dinner. And she says, Pastor I never heard anybody say that before. It’s pasta Sherry. Anyway, yeah.

‘Q&A clip’ 49:20
Okay, Joe from Idaho.

Jason Hartman 49:24
Do you like it? Do you like pasto or just Idaho potatoes?

‘Q&A clip’ 49:31
So I just being new, I just could you maybe walk us through the steps of how to utilize you guys the best and what that process would entail to, you know, pull the trigger and buy that first property there. Sure. I’ll go ahead and tackle that one. Essentially, we’ll have our intro call. Start out, see where you’re at financially, what your goals are, what your expectations are, and from there, we will then identify other a certain market. But alongside of that tangent to that, I want you to use you to one of our preferred lenders get your pre qualified and then move forward from that point. See what that range is that you qualify for, you know, if it’s usually 80 to 130 or so that’s where the majority of the houses tend to fall and, and almost everybody qualifies these days for for that. So, you know from that point we’ll then identify that home and then put you under contract. And then usually expectation is 30 to 45 days. From there, we’ll close you’ll get a fully rehabbed house and fingers crossed, majority of time, it’ll be tentative by the time that we close or if not shortly thereafter. And we sort of help you along the whole process. That’s essentially like a six step breakdown, but there’s a lot that happens during all of those different steps. And then repeat that over and over and over again. Anybody else on that one?

Jason Hartman 50:50
We’ll wrap it up. Okay. Thank you all give them a big hand.

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This episode of the Creating Wealth podcast is about a case study with client Vernon Grant. Jason Hartman gives investment guidance on how to handle Vernon’s parents’ properties. Jason looks into both properties, their rent-to-value-ratio (RTV), and their existing debt structures. Jason also talks about the New York market, depreciation offsets, refi-til-ya-die option, and renting.

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.

Jason Hartman 1:03
Welcome to the creating wealth show, episode number 809 809. This is Jason Hartman, thank you so much for joining me today as we do a another case study. Yes, we have one of our clients on with us today. And we love it when our clients come on the show and share their experience, the good, the bad, and the ugly, ask questions and get them answered. So if you would like to be on the show, just reach out to us and let us know. If you’re working with one of our investment counselors. Now you can just reach out through them. Or you can just reach out through Jason hartman.com. And we’d love to put you on the show and answer your questions, hear your experience, etc. Of course, you can always reach me on voxer as well. My voxer name is Jay Hart 88 Jay Hart 88. If you just have a quick question there, which we may play on the show, we don’t always play those on the show, but sometimes we do sometimes they’re a little hard to organize and Too many of them come in, and I can’t keep track of them all. But I went when applicable, I tried, I gotta get back on that and start playing those on the show. Anyway, yeah, let’s get to our guest today and do this little client case study. I hope you enjoy it. And one of the things I want to remind you of, and we, we talked about it here on this interview with our client, is that the ideal thing in terms of properties where you don’t have good rent to value ratios, the ideal thing, if they’re really far off is always to sell them, do a 1031 exchange if necessary. So you have tax deferral, and then buy less expensive properties with better rental value ratios. That would be the first choice. The second choice is to refinance them, because at least if you refinance them, you get control of that equity. you’ve engaged in the practice that I call equity stripping, which is a very good practice. So that your equity is no longer lazy money, it’s not tied up in the property, you can use it, you can do some good with it, and you actually lower your risk. I know this is counterintuitive for many people, and we’ve talked about it many times on the past 808 episodes. Just keep that in mind, selling, doing if necessary at 1031 tax deferred exchange, which by the way, a word of caution here and remember that I am not a tax advisor. I’m not a lawyer, always seek competent and it’s not easy to find competent, by the way, always advice when it comes to this stuff because taxes and legal questions are particularly complicated. And one of the things that people are sometimes surprised by is that they can have a property that they are selling for the same price they bought it but they’ve taken a big tax write off for many years, and that tax write off is the the best tax benefit because Income property is the most tax favored asset class in America. And that is called depreciation. It’s a non cash write off, it’s a phantom write off. It’s a wonderful, wonderful tax benefit. But remember, if you’ve taken that tax benefit for the last five years, and you sell the property for the same price you bought it for, then hey, you gotta pay that back. And that’s called depreciation recapture. So even if you’re, if you think from a very elementary understanding that you’re just breaking even, you’re really not, you’re really making money. And this is the thing with real estate investing because it’s this wonderful multi dimensional asset class, income property, the most historically proven asset class in the world, a multi dimensional asset class where we’re where we earn our profits, we earn our returns from many dimensions. With that in mind, a lot of people, they just, they’re making money, they’re winning the game. And sometimes they think they’re losing, because they don’t know how to keep score. And that’s what we teach you to do is keep score on the show key and know how to keep score. And of course, go to real estate tools.com for some excellent tools that can help you keep score, and help you be a better investor, go to Jason hartman.com. Listen to or really watch that free 27 minute video that we’ve got on how to analyze a real estate investment, that can be very, very helpful in learning how to keep score. And so part of keeping score is knowing that you’ve received this tax benefit for in that example, I just mentioned the last five years. And if you sell the property for the same price you bought it for, hey, you’re gonna have some depreciation recapture potentially right? And so you still might want to do a 10th 31 tax deferred exchange. So that is something very important to keep in mind. Okay, so in either case, we let’s get to our guest interview today. And if you’re out there, you’re one of our clients, we’d love to have you on the show as well just reach out to your investment counselor, or contact us through Jason hartman.com. Or contact me through voxer at Jay Hart 88. And we’d always love to have you on the show. Anyway, here we go with our client case study.

Hey, it’s my pleasure to welcome one of our clients back to the show. Well, first time for this one, but we’ve had many clients on the show over the years. And we always like to share these talks with you as sort of case studies and also have them ask some questions and so forth. And all of those questions apply to many of you listeners as well because many people have the same questions and are thinking along the same Lions about stuff. And I just want to welcome Vernon grant. Vernon How are you?

Vernon Grant 7:05
I’m well thanks and yourself.

Jason Hartman 7:07
Good. Good to have you on the show and you’re coming to us from New York City area. And it’s great to have you and you have really been helping your your parents out with their real estate investing it sounds like and, and doing some of your own. Give us a little background if you would, yes, well, I’m an engineer by trade, but

Vernon Grant 7:29
I went into business for myself in 2001. And I’ve been continuing that until today. And now I have a little bit more time that I can help my parents out with their investing that they started in the 90s I would say and I like a lot of your ideas and I would like to put what they have to good use to because what they have already is growing But I think you can do a lot better based on

Jason Hartman 8:04
your stuff. Yeah. Well, that’s that’s a great topic. When did you discover my podcast?

Vernon Grant 8:09
Actually, I was listening to Ryan Moran’s podcast.

Vernon Grant 8:16
Freedom Fastlane I’m not sure if you remember it.

Jason Hartman 8:18
Yeah. I’ve been on a few of Ryan’s shows. So yeah,

Vernon Grant 8:21
yes. And so it was quite a while ago that I heard about your podcast, but I just was so busy. I didn’t have the time to listen. And within the last, I would say two months I have been so many episodes of it’s so great. You have so much good knowledge. You know, so many people, they will pick and choose information that they wish to share. But it’s not the big picture and you give such a clear, big picture. You tie in so many things to the market. And what if and what if and What you should do in those situations? And you’re you’re quite conservative with how you invest. And so I mean, it just makes so much sense.

Jason Hartman 9:12
Well, I appreciate it. Vernon Thank you. And I’m glad you like the show. So you’ve you’ve been bingeing on the episodes. Any idea how many episodes you listen to?

Vernon Grant 9:21
Oh, man, at least a couple hundred.

Jason Hartman 9:25
Yeah, good, good stuff. Well, I hope you don’t get sick of me anytime soon. But you’re probably sick of me already. And you went to college for computer and electrical engineering. And then, and you were also in the Marine Corps for eight years as well.

Vernon Grant 9:41
Yeah. Yeah.

Jason Hartman 9:43
So and then you said you started your own business. So in 2001, what kind of business is that?

Vernon Grant 9:49
Well, it was a automotive accessories. So you know, people hooking up their cars to go faster and look different and all of that stuff and I was really into that scene, I still love cars. However, I wanted to try to shift gears because you know, as the economy changed, things changed with the industry, and although I love cars, it’s just not that great have a business and more. And, and you know, we’ve made a lot of money and in the crisis, we’ve lost money. And so again, you know, with your strategies, even in those different markets, I could have been making money. So I don’t want to lose any more, so to speak,

Jason Hartman 10:39
let’s not miss any more opportunities if we can help it. So your father was a property manager. In fact, he was managing director of a property management company in the 80s and 90s. So you’ve got that background in real estate in that interest. It sounds like

Vernon Grant 10:54
yeah, I mean, I’ve been around it so much. You know, there have been times where He had to go back to Manhattan at like 3am because some commercial property that he’s met in managing some crisis happens. And so I’ve been in it and even his father was a realtor as well. So I like it. I just hadn’t had time to wrap my myself around it and and digest all the information because there’s a lot of information, but thank goodness in this day and age, you know, it’s so readily available.

Jason Hartman 11:33
Yeah, good, good stuff. Mo sounds great. Well, tell me about some of the questions you have. And you know, what, what you’re thinking of doing and let’s outline some strategy here because you’ve got a couple of different moving parts, and I think we could, you know, align those really well

Vernon Grant 11:50
for you. Okay, so, we’ve already identified a few properties that we’re getting but my main question is My parents have a particular house that they want to retire in. And when they bought it in 96 it was they purchased it at approximately $195,000. And now it’s worth about 424,000. So they’ve got quite a bit of equity in there. And

Vernon Grant 12:24
I’m not sure which

Vernon Grant 12:27
direction will benefit us best keeping in mind that you know, they still want somewhere to go to vacation and have fun and or live for several months out of the year. So I want to take that equity out and do something with it or do a 1031 exchange, but I need your advice as to which one might be best.

Jason Hartman 12:51
Okay, so the $424,000 property I believe that’s in the Tampa Florida area. Is that correct? Yes. Okay, and we Your parents are living in that area. Are they living in New York or kind of both or what?

Vernon Grant 13:05
They’re still living in New York? Okay.

Jason Hartman 13:07
So they live in New York and they want to retire in the potentially in the Tampa property. Right?

Vernon Grant 13:13
Correct. Okay, good.

Jason Hartman 13:15
So do they own a home in New York?

Vernon Grant 13:17
Yes, they do. And how much

Jason Hartman 13:18
is that worth?

Vernon Grant 13:20
That is about the same. About the same

Jason Hartman 13:25
125,000. Same price. Exactly. Okay. And what what’s their target date for retirement?

Vernon Grant 13:34
Maybe

Vernon Grant 13:36
my mom will definitely retire within the next year. So they want to move not maybe right away, I would say within the next four or so four or five years.

Jason Hartman 13:48
So is the property in Tampa rented out now? Yes, it is. Okay, and how much rent are they getting? Well, I actually I can tell you, okay, without without knowing. I’m gonna go Guess that they’re getting somewhere in the ballpark of maybe 20 $100 a month. Wow, that’s really really good is 20 222 you know, I was gonna say 2200 and I just didn’t want to be too aggressive but you know, they paid 195 for it so they’re basically getting about a point five rent to value ratio. And Vernon Isn’t it amazing? You know, I have tried this little parlor trick all over the world. And it doesn’t matter what city what language what currency. You know, it can be Paris, France, it can be Hong Kong. It can be you know, Tokyo, it doesn’t matter where it is. It could be LA, you know, it can be Tampa, Florida, or Miami or anywhere Boston, it doesn’t matter numbers and numbers, right? The the ratios are always about the same. It’s incredible. You know, if you’ve got a property that’s worth 420 For thousand dollars, you can convert that any into any currency on earth. And that rent to value ratio not not withstanding, you know, rent control or communism or you know, something like that, right. But if it’s in the free market, it’ll generally be just about the same ratio. So it’s, it’s truly amazing to me, it really is. I remember I was in Belize once looking at properties down there. And this has nothing to do with those properties because I wasn’t interested in them. But I was talking to a wealthy insurance guy, about his business and so forth. And he, I talked about this on a former episode, and I don’t even remember where he moved from now. But, you know, he, he and his family had moved, and they were renting a place in I think, Miami if I’m not mistaken. And they said it was worth I think they said it was worth 1.3 million. And I said, Oh, so you’re paying about 4000 in rent, and he said, How do you know and I you know, I just know Amazing how well that works. So listeners that let that be less than that it’s all about ratios. And those ratios hold hold true. And in every language, every currency, every geography, it doesn’t matter where so it’s really amazing. Okay, so they’re getting 2200 for their, their Tampa property, and it’s worth 400 and let’s just call it 425,000. And they’re renting it now. So is do they have some attachment to that property? You know, like, when did they buy it at night? 96 I guess did they ever live there? Or was did they just turn it into a rental and say, Hey, you know, in 20 years we’ll retire here was that they’re thinking or

Vernon Grant 16:41
that’s exactly what it was in 20 years. We’ll retire here. Okay.

Jason Hartman 16:45
All right. So, I mean, from a pure numbers perspective, I would definitely be selling that property. And you know, when they retire, they can buy another property and that retirement thing is is a moving target, you know, they might not retire on the timeframe, they’re thinking they might find a better property, they might pick a different area, you know, I don’t know, I mean, all of this stuff is such a moving target. And there’s so many opportunities and the world is changing so quickly nowadays that, you know, from a purely investment standpoint, that property definitely does not make sense, right? Because, as you well know, I would like to see them get 1% per month. So again, for 425,000 invested capital, I’d like them to get, you know, $4,250 per month, not 2200 per month. That’s just a pure numbers angle. It doesn’t include psychology. It doesn’t include sentimentality and emotions and various things like that. Of course, you can’t quantify those things very well. But then the other thing they’ve got to think about is the property in New York. Of course, when I probably wouldn’t do anything without because it would be too upsetting to their life, you know, unless they want to move and they don’t like it if they if they want to move, then I would sell that one and, and pay 20 $200 to somebody else to have the equivalent home, you know and live in New York until they retire. There’s also a question of kind of timing the real estate market because that New York market is such a frothy, cyclical market. Right. And it’s, as I always say, it’s very difficult Vernon to time any market. I would certainly say it’s, you know, it’s on the verge of being overvalued. Okay. But again, who knows, you know, that could that could, you know, if if the Trump economy really does boom, and the money loosens up, I mean, that that frothy market could go on for years more. I’m just saying that today. From a fundamentals perspective, it’s out of whack and we all we all know that Okay, did you have a deeper question here, like,

Vernon Grant 19:04
so they are also old school mentality. So it takes a bit of convincing to to let them know that, you know, it’s not about we get the property and you pay and you pay till you pay it off. Which is what they still, you know, especially my mom, she has that that mentality. She’s a nurse, by the way. So you know, she’s, she’s been working at the same job for like 40 plus years, and that they just want to pay it off. So if I introduced to them an idea that they’re going to have to pay for where they live again, it has to be, I have to offer them something more than Hey, you you have to pay your monthly mortgage on this place on this new place. So whatever it is

Jason Hartman 19:57
yet the hardest thing in life Especially for old school, people that are thinking like old school way, which, by the way, they’re not wrong. They’re just out of sequence with the time’s right? Their plan worked great. when it all started to not work was post 1971. When we went off the gold standard, then the game really changed because the lending standards changed. Money got easier and inflation reared its ugly head, and the game just totally changed. That was really the the inflection point when it all happened. The hard part, as you’ve heard me talk about on the show, Vernon, to get people to understand in any area of life, not just investing is that you can’t hear the dogs that don’t bark. They never look at what what might have happened, or what didn’t happen because they did or didn’t take another path. They only see what they did. They didn’t see what they didn’t do or what they could have done. That’s hard for the human mind to think that way. And it’s it’s that old thing. You can’t hear the dogs that don’t bark.

Vernon Grant 21:11
I’ve heard a quote sorry to cut you. I’ve heard a quote that that reflects that same thought that you can’t see past the choices you don’t make.

Jason Hartman 21:21
Oh, that’s a good quote. Who said that one? I like that.

Vernon Grant 21:24
Yeah. Oh, remember?

Jason Hartman 21:26
I like that. Let’s let’s find that I got I’m gonna I’m gonna search that. That’s a good quote. You can’t see past the choices you don’t make. Mm hmm. Oh, really? Good. Thank you for sharing that one. I like that one. I almost like that one better. It’s it’s more understandable than you can’t hear the dogs that don’t bark. But anyway, yeah, you can’t see past the choices you don’t make. So it begs the question, what choices are your parents or many other there are 10s of millions of people in this very similar situation right? When choices aren’t they making? Well, they’re choosing not to sell $850,000 worth of two properties and do 1031 exchanges where they could buy eight single family detached homes and diversified markets. That would net them around. While not net I want to say it’s really gross, but it’s net. Also, I’m kind of thinking of it differently than myopically people would think of it from accounting perspective, but it would just get them 800 or $8,000 per month in income, right. And then they could turn around and rent the place they live in and pay 2200 for that one. Right? Because in New York, or or Florida, it’s the same deal. You know, it doesn’t matter. Right, right. Right. They could rent that equivalent property. They’re living in now for about 2200 a month in New York. And then when they moved to Tampa, they could also do the same thing. But most people’s minds say, Well, hey, if I’m renting, I’m throwing money away. That’s how everybody thinks of it. Now, I used to think of it too, but when they the choice they didn’t make is they chose not to get $8,000 a month for that same value of real estate.

Vernon Grant 23:14
Right? I mean, it’s, it’s also the tools that they have for you, you can’t really understand a thing if you don’t have the tools to understand it with, right.

Jason Hartman 23:27
Yeah, you know, what that reminds me of? It’s, it’s kind of like the concept of vocabulary. Now, we’re going on a little tangent here, but when you know certain languages have, you know, fewer words from which to choose. So it literally limits the populations ability to think and, you know, on educated people or children, for example, you know, they have a smaller vocabulary, right? So they that that’s their vocabulary is literally the A tool with which you can think. And if you have a big vocabulary, you can think more thoughts. You literally can’t think a thought that you can’t express usually. Right? And so if there’s not a word for it, then, you know, it’s very hard to think about it. Right? So,

Vernon Grant 24:17
yeah, yeah. How do you express it? That’s why we come up with labels for things and containers to put things in, classify things. So we can understand. Yep,

Jason Hartman 24:27
yep, no question about it. And, you know, props to the English language that most widely spoken language on Earth. It’s also the largest language with about six 700,000 words, I believe, where if you look at like French, Spanish, Italian, I think they’ve all got around 150,000 words. So a lot fewer tools. And the reason English is that way, is you know, not because English is so great or anything, it’s just a language that happens to adopt and sort of suck up a lot of words from a lot of other languages. You know, we have also sorts of foreign words woven into the English language, right? And I guess other languages don’t do that as much as English does. So it’s just kind of interesting. Tangent alert. Alert here. Yeah. But okay, so the other thing they could do, if they don’t want to sell those properties, because I know that, you know that, that mindset that you know, your parents have, my mother has that same mindset is, when you sell something, it’s like you lost it, right? You You gave it up, right? And that mindset is very hard to, to, you know, kind of argue with, right. So the other thing they could do is they could do refi till you die, right. And that is another option because at least they could get that equity out and make it work for them. Do you know what kind of debt they have on the properties if any, or has they paid them off or

Vernon Grant 25:55
I’m not sure about the Florida property. I I know that still paying for it, but very minimal amount. And I know the one in New York, I did recently convinced them to refinance it. So refi cash out. So that’s how we’re getting those extra few properties that I was just mentioning to you. And I’ll be at the Memphis store by the way.

Jason Hartman 26:21
Oh, good. Hey, I look forward to seeing you at the Memphis property tour with that. Boy, I’ll be at Memphis in six days, I haven’t even it’s right around the corner. So we look forward to seeing you there. And by the time people listen to this, that will have probably already happened.

Vernon Grant 26:37
So we’re going to buy about three properties with that with the equity.

Jason Hartman 26:43
Okay, how much are you pulling out to buy the three properties?

Vernon Grant 26:46
Ah, I think so far total it came out to about 68,000 that we have to put down

Jason Hartman 26:56
that’s not bad. Not so basically for 68 thousand dollars, you can buy three properties, you’ll gain or they are you or, you know, both of your guests gain diversification because you’ll be in a totally different market, right, which will be good. And those three properties should produce somewhere in the neighborhood of, you know, 2700 to $3,000 per month in income, right?

Vernon Grant 27:20
Yeah. Okay, good cash flow, actually,

Jason Hartman 27:22
yeah, fantastic. And once once your parents see, you know, sometimes you got to do it to really internalize it or understand it, you know, in your inner gut. Once they see that, and they actually do that deal. And they see that look, here, we’re getting $1,000 per month for each of these properties, for example, and I’m just pulling out around number I don’t know the exact properties you’re looking at, then, you know, they’ll think well, these three properties with only $68,000 down, we generated a gross of $3,000 per month. They’re gonna be thinking, Well, here, we’ve got $425,000 in this property in Tampa, and all we get is 2200 a month.

Vernon Grant 28:08
And it’s only breakeven sometimes.

Jason Hartman 28:11
So that will probably go a long way in getting them to see the light, if you will, you know, and I know it’s it’s hard, you know, I mean, I take my own mother’s example, the countless conversations, had, you know, slash arguments that I’ve had with her about this stuff. You know, it’s funny. This is the funny thing. Another funny thing about the way the human mind works, and I don’t know why it’s this way, it just is. But we will trust a stranger, a total stranger, more than we will trust our own friends and family, the people we know well, and I don’t know why that is, you know, there’s an old saying familiarity breeds contempt. And even if we love these people, or you know like them really well There’s a familiarity, we just don’t respect that as much as we respect someone, you know, at a

Vernon Grant 29:06
distance, it happens all the time, even like, let’s say, my dad, if he’s having some medical issues like with eating and stuff like that, because I’ve taught myself so much about health and so on. I tell him, okay, this is what you should eat. And this is why you’re having this problem because you’re doing this and he is not listening to me at all. And then one day, he goes to the doctor, the doctor tells him, that’s when he changes. I said to him, what is it because I don’t have a PhD or an MD, and that’s why you don’t listen to me. Come on. I’ve been telling you this for years.

Jason Hartman 29:45
Yeah, no, you’re right. But even if you did have a PhD and an MD, you still would be family and he would not listen to you. That’s so true. It’s just it’s just the way I don’t know why that is. It’s just there’s all kinds of these funny quirks about the way the human mind works, but it just is just an odd, odd thing the way it works. So I think with your folks that that refi plan is really going to help when they see those three properties performing. Now, are those going to be all three in Memphis? Or are those? Have you purchased those properties yet? Or don’t tell me about that

Vernon Grant 30:20
we’re under contract. So we’re just getting our approval stuff. We’re already pre approved, and we just need all the paperwork and so they can run by the underwriters.

Jason Hartman 30:30
Okay, good stuff, and where are those properties?

Vernon Grant 30:33
Those are all in Memphis. Okay.

Jason Hartman 30:35
So after you do those three in Memphis, if they’re, you know, if they decide to sell one of the two properties, and by the way, I didn’t ask you Do they own any other properties? Yes, they do. They own a couple pieces of land. And one other property but that property,

Vernon Grant 30:55
you know, they lost some money on it. So they’re just, it’s rented and the prices re appreciating again. So we’re just waiting it out.

Jason Hartman 31:04
Tell us a little bit about that one.

Vernon Grant 31:06
That one is actually also in,

Vernon Grant 31:10
in South Florida that is near Tampa.

Vernon Grant 31:16
And I forgot exactly

Jason Hartman 31:18
how much is it worth? Do you know that the metrics on it, what it’s worth and what it rents for,

Vernon Grant 31:22
not what it rents for, but I do know they purchased it at 105. And the current value is 89.

Jason Hartman 31:31
Okay, so it’s gone down in value, and that one is probably got a pretty good rent to value ratio. So oddly, that one that they lost the money on is probably the one that they maybe most likely should keep. However, I have a feeling and I don’t know this but I have a feeling that that’s a condo isn’t it?

Vernon Grant 31:52
It absolutely is.

Jason Hartman 31:55
And I don’t like condos unless they’re very good deals. I just don’t like condos. And there have been a lot of condo problems in various areas around the country. And, and look listeners, I don’t want you to hear me say that I’ll never do a condo, I will do a condo. It’s just got to be a much better deal. Okay, there’s got to be something to offset the fact that it’s a condo. Okay. I just, I just don’t like condos, they have a whole new set of potential problems with them. Okay, so that one, you know, that probably rents for around 900,000 a month? I

Vernon Grant 32:28
bet right? Yeah, I’m thinking it because I remember seeing the numbers. It was like anywhere from eight to nine.

Jason Hartman 32:34
Yeah, so so that’s, that’s fine in terms of rent to value ratio. Now, the one thing we didn’t explore on any of these properties, by the way, is the debt structure on them, you know, what is the is they say the capital stack, right? You know, if you have a high interest rate loan on one, or an adjustable rate loan on one, and you know, maybe you have a low interest rate on another, these things could also influence your thinking. on selling or refinancing or, you know, when you refinance, if you’ve got a very low interest rate first loan on the property, occasionally, it’ll make sense to put a second loan on it, sometimes not. So there are there are numerous factors here, right? We, you know, I just want to make sure everybody knows that. Maybe the age of the property, the location, you know, properties. Some areas in Florida, for example, have really high insurance cost properties in New York have really high property taxes, right. So, you know, there are multiple things to think about. And in New York, you might be in a rent controlled area, and that’s really bad as an owner, but it could be really good as a tenant. So there are all kinds of other dimensions, but what were you going to say?

Vernon Grant 33:48
I was gonna ask what so I am assuming that the advice would be the most optimal thing would be a 1031 exchange, correct?

Jason Hartman 33:58
Oh, yeah. The 1031 exchange Is is the way to go for sure. Because it allows you to basically trade properties all your life and defer defer defer the gain. And, you know, listeners also need to be very mindful. I was looking at one of my properties I’ve been over the past several years, I’ve been reworking my portfolio and selling some properties and trading them for others. And so I’ve got this one property in an old market. We used to do Mobile, Alabama, and it’s been very good to me, I bought it when there was something called the go zone going on. And you hear me talk about that on the old episodes. Yeah. And that was a tremendous tax benefit. Like so many government policies that eventually turned into a mess because the you know, so many investors got attracted there that the properties became overvalued and we stopped recommending it but our, our clients who got into the zone early enough, did very well and including me, you know, this particular property is only worth about the same as well. I purchased it for, but because I had such tremendous goes on tax benefits, I would I would potentially sell it and break even. But I would really need to do a 1031 tax deferred exchange on that property because, and I asked my accountant, I said, Hey, dude, what’s my depreciation recapture on this property? And guess what he said. So then by the way, this property’s worth about $170,000 give or take. But if I sold that outright, and just broke even on paper, by the time the tax consequences came up, I would get at $98,000 in depreciation recapture on which I would have to pay taxes. Wow. So, you know, in a way you can get kind of trapped into this real estate game, which isn’t all bad. Okay. It’s actually quite good. But you’ve got to really think of it and, you know, people make mistakes sometimes and they’ll sell a property thinking, Hey, you know, I’m just breaking even or I’m making 20 grand, it’s no big deal, I’ll just pay the tax on the 20 grand. No, you’ve already taken a bunch of tax benefits over the years here that you got as a deduction. And now, if you don’t do a 1031 exchange, you got to recapture those and pay them. Okay. So things aren’t always as simple as they look. So be careful. Always consult a tax advisor, and make sure you have one that knows about real estate.

Vernon Grant 36:34
Yeah, certainly.

Jason Hartman 36:36
Very, very important. So any other thoughts or questions you want to share with the audience?

Vernon Grant 36:41
At what point do you know if it should be a refi till you die versus 1031 exchange?

Jason Hartman 36:50
Well, really what tells you that is the rent to value ratio? And on both of those properties, ideally, if there was no The sort of life hassle factor or emotional factor involved from just a cold pure number standpoint, I would definitely be selling those properties. Okay, and doing 1031 exchanges, but I do, of course understand there are other considerations. So, you know, those those are there are other factors to weigh in there. And, you know, if your folks are going to retire in two years, it’s looking like the markets going to continue booming pretty well. I mean, that’s what most people think i think that you know, the money money supply is flowing into real estate. For all the Trump reasons I’ve mentioned on prior episodes of, you know, our for him being our first real estate president, you know, eliminating or softening, Dodd Frank, etc, etc. If they’re going to retire in two years, just stay put make life easy and keep that in New York property. You know, it’s only two years not a big deal. Right. And, and but, but I would really consider selling the Tampa Bay Florida property.

Vernon Grant 38:01
Okay, and I guess purchasing another one that they like somewhere to live down there.

Jason Hartman 38:07
Yeah, or three or four more and, and then they can buy back into that market or they might really decide they just want to rent. Because maybe that’s, you know, that’s not their final perfect location. Maybe it’s not their dream home, maybe they want to have some flexibility, you know, maybe they want to go on a cruise for a year or travel. I mean, renting is just so, so, so much easier, you know,

Vernon Grant 38:31
and that’s true. You don’t have all those costs that you have to worry about. Yeah, yeah,

Jason Hartman 38:37
no question about it. It’s it’s really quite easy to be a renter, you know, and you don’t have to unload a property. You know, you can just give 30 days notice and move out. You don’t have to show it and have people invading your privacy and it’s just much easier. There’s a lot of hidden costs in homeowner homeownership to

Vernon Grant 38:55
upkeep and all that stuff.

Jason Hartman 38:58
You know, a lot of times They’re spending working on their house and going to the hardware store and when you’re a renter, you just you just live there. No, it’s much easier. So, all good stuff to think about. But Vernon Hey, thanks for coming on the show and sharing your story and your parents story with us. And, you know, hopefully they will listen to this podcast if you can get them to do that. And I hope it helps them and we will look forward to seeing you at our upcoming creating wealth seminar in Memphis property tour next weekend.

Vernon Grant 39:28
No problem. Thank you so much for your help and time.

Jason Hartman 39:31
My pleasure, happy investing.

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Jason Hartman starts the show by sharing why you should immerse yourself in the most historically proven asset class, income property. He breaks down the multiple dimensions and the various factors that prove that income property is the best investment class. In the client case study segment, Jason Hartman interviews Ani Wee. She starts by talking about how she came upon the Creating Wealth Show. She also tells her story of monetary and portfolio growth from her income property investments.

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Jason Hartman 1:04
Welcome to the creating wealth show listeners from 164 countries worldwide. Welcome to episode number 824 824. This is your intrepid what exactly does that mean? intrepid? Yeah, well, I don’t know. Am I intrepid? This is your host, Jason Hartman. And thank you so much for joining me here today. I just got back from another brunch over at Tony Shay’s house. Yeah, Tony Shea, the founder and CEO of Zappos. He has these interesting Sunday brunches at his very unassuming trailer park here in Las Vegas. And he does them every Sunday. Really a very generous guy to host everybody there. And you know, it’s an interesting crowd to say the least. Tony Shea is definitely a hipster. So, going to his brunches. It’s probably not what you would expect from a billionaire. And he is likely the most popular man in Las Vegas. He’s redeveloping the whole downtown and really doing some phenomenal stuff. So I just love it and you, you may have read his book Delivering Happiness or, you know heard about all the corporate folklore about Zappos and amazing customer service they have and so forth. And, and then he sold the company to Amazon, you know, did incredibly well. And then he’s using his money to do all kinds of cool things in the city and, and other stuff as well. So that’s the one thing I want to say. I just want to remind you of that, you know, when I was in Peru a couple years ago, I remember I did a show from there, or at least an intro from there, and maybe you’ll catch this on a flashback Friday episode, or you’ve already caught it. And you remember what I said there? Because the group I was with in Peru, one of the hotels they put us up in was, it was so beautiful. I mean, it was just, it was spectacular. And a couple of us were just so impressed and we went down to the front desk and count out that like you know, and of course hotel room prices are all over the board. I know y’all know that never pay the rack rate for a hotel. You can always negotiate a hotel price. But you know that that hotels was so gorgeous and and like in the closet, you know, they had four bathrobes, two women’s bathrooms, two men’s bathrooms, you know, so you could take your pick of different styles. And I mean, it was just it was phenomenal. It was a phenomenal hotel. And I have stayed in some gorgeous hotels over the years. But this one was phenomenal. And it just came to mind. And what I said when I was recording the show that day, is take care of this money thing. Take care of this money thing. It’s a thing, right? It’s a thing in all of our lives. And we’ve just got to take care of it. And look, I grew up poor. I did not have money at all. And you know, money isn’t everything. As the old saying goes we’ve all heard it but it is something is definitely something and you would have to be completely in love. Sure, and jealous and green with envy as the saying goes, to deny that money isn’t something it is something it matters. It matters in our world. It matters to capitalism to freedom to being able to do good in the world. And I just kind of thought of that again today because I was looking at all this stuff Tony Shay’s doing and it’s just really phenomenal. And also, I am going to be talking to you in the upcoming weeks from Europe. Yeah, I’m going on another trip to Europe. And, you know, speaking of that money thing again, it is I mean, look, I like getting a good value better than anybody. Okay. And, you know, I got a very good deal on my airfare. I can’t believe how cheap it was really. And then I upgraded You know, my class a little bit there. But I don’t like to waste money either. Right. But you know what I’m thinking about my first trip to Europe as an adult, right when I rented a car drove around with friend and You know how a couple of different trips to Europe just really, or anywhere in the world for that matter, I’ve been to 80 countries now how I just always try to economize and stuff like that. And you know, I’m thinking Isn’t it just so freeing not to have to think too terribly much about money right hey, look at even billionaires and I know a few billionaires and many many deca millionaires and, and sent them millionaires couple of those to deca means more than 10 million and sent them means, you know, like 100, right? More than 100 million. So, you know, even they like getting a good value. They don’t like just wasting their money, especially if they didn’t come from money, you know, then they appreciate it more because they remember how their life used to be usually and that’s one of the one of the good things, but it’s really just a it’s much more efficient for you to live in such a way where you don’t stress about money. So take care of this money thing. That’s the First thing I want to say on this episode today, and we’re going to talk to a client of ours, a client case study on IE we, who will be with us in a moment here. You know, her story’s interesting, a single mom really did some phenomenal things in real estate. You know, she talked to me the other day, and just went on and on about how, you know, listening to this one specific podcast episode of mine, changed her entire life, changed her entire life, listening to that one episode. Now, what could change your entire life? You know, what do you want to do in your life that could completely change it? I would urge you just get to that breakthrough point. I mean, for example, if you’re listening to the show, and you’re thinking, Well, you know, I’m on the periphery, right? You know, I bought a couple of properties, but I’m not like really doing it, right. I’m not really building a big portfolio. And maybe that’s what you want to do. Hopefully it is because income property is the most historically proven asset class in the world, right? It is. And that’s what we, we teach you about here a little bit of business and life success stuff as well on the creating wealth show, but it’s mostly about income property investing, of course, it’s the most historically proven asset class in the entire world. So what do you need to do to get more immersed in that whole thing immersion get immersed in it? Well, one of the things you could certainly do, as a shameless self promoter, I will say is join the venture lions mastermind that will get you more immersed because you’ll be hanging out with some friends that are really going after it. They’re going after life in general. But certainly after building good real estate portfolios, come to our live events, when we have live events, come to them come to all of them. And by the way, if you’re a venture Alliance member, those are included with your membership. But that’s a really important thing. You know, get yourself more immersed. That is a key thing in life in immersion be immersed in, in the thing you want to do more and more very, very important. Now, I want to talk to you about crap rate. I mean cap rate. Now, for this episode for the first time, I’m going to call it crap rate. And it’s not the rate of how much crap you’re willing to tolerate or anything like that. I’m calling it crap rate, because I see some clients making a big mistake, focusing on the crap rate for a property, the capitalization rate, cap rate, capitalization rate, obviously, you know, I’m kidding, right? I’m making that word up crap rate. But why shouldn’t you focus on the cap rate? Why is it you know, look at we have never promoted this metric that is commonly used in commercial real estate, where they are used to making lower return on investment for many reasons we’ve discussed on many prior episodes. In commercial real estate, they’re used to using cap rates. Why is it the thing in commercial real estate? Well, in commercial real estate, it’s much harder if you’re buying a big building a big office building or you know, hopefully not a big retail center as the retail apocalypse is in full swing as I predicted it would be 20 years ago, more than 20 years ago. I remember going to a presentation at the Pacific club, a swanky private club in Newport Beach, California, used to be a junior member there. I remember hearing a presentation from some retail brokers who were talking about commercial real estate and I said, Hey, you know, this internet thing, I think it’s gonna turn into something. You know, I said this 20 years ago, before anybody really knew what the extent of that would be, obviously, right? But I said, Don’t you see this putting downward pressure on shopping in the physical world? And they said, Well, no one guy got him to kind of come around, you know, he was an old time. Made a ton of money in, you know, in retail properties. And I got them to kind of come around and see my point of view on that. And I’ll bet you nowadays, he really sees my point of views 20 years later, because the retail apocalypse is upon us. And we’re going to talk a little more about that and what it means to our tenants, our tenants need to have jobs to rent our properties. Well, actually, they don’t really need to have jobs, because they could be on the dole and have section eight government handouts. But that’s another type of investing. So not necessarily good or bad. By the way, you know, a lot of people will do very well in section eight, and some people hate it, I find that there’s not much middle ground there, as I’ve talked about before, but back to the crap rate, because that is where we were going, the risk of being on a tangent here before we get to our client case study interview. The crap rate is not that meaningful. Why you know what I’m gonna say, right? You know what I’m gonna say, because it doesn’t include a couple of very important things. It doesn’t consider appreciation, and it doesn’t consider leverage. And see in commercial real estate. Typically, of course there are every By the way, I wanted to make a disclaimer, everything I ever say on this show ever, there is an exception. There’s always an exception. No rules or laws apply universally, including this one, including this one does not apply universally, even the universal law is not universal. And so typically, commercial real estate does not appreciate as well as the good old humble single family home, talked about that analyzed it, many other episodes not going to go into it here. So that’s one thing. The other thing is, the financing is not as good on commercial real estate as it is on residential real estate investments. So if you’re using crap rate, and you’re comparing it to say, buying a Walgreens on a triple net lease buying the property a Walgreens leases from you or an office building or something like that that would not be an accurate comparison. Crap rate is not a very good metric for the residential real estate investor, what you should look at is the overall return on investment. So when you go to Jason Hartman comm slash properties, and you look in our properties section, and you look at the overall return on investment, that is the key metric, that is the proper number to look at. Now, if you want to look at something close to crap rate, okay? Look at the cash on cash return if you want, okay, but, you know, I’m telling you, again, you can’t compare that to other investments, because it doesn’t give you enough information. It’s not multi dimensional enough now, even the overall return on investment does not include a couple of things. It doesn’t include money. A trademark mouthful phrase that you can’t say 10 times fast, even if you try really hard. In fact, maybe we should have a contest who can say this 10 times fast, and you’ll win a prize, inflation induced death, destruction, inflation induced debt destruction, inflation induced debt destruction, blah, blah, blah. Okay, so that’s the metric that of course cap rate doesn’t include, but even the overall return on investment doesn’t include inflation induced debt destruction, the hidden wealth creator in real estate investments. Additionally, what else doesn’t include well, none of the returns on any of our performers, look at the overall lifetime value of your property portfolio. When you get the advantage the huge advantage by the way of the 1031 tax deferred exchange, when you rebalance your portfolios when you do the 241, or the 341 rebalancing of your portfolio, and you take advantage of the 1031 tax deferred exchange So you get to reinvest all of that capital without paying tax. You sell your business, you sell stocks, you sell bonds, you sell that mutual fund, you’re gonna pay tax, you got to pay the government, before you get to reinvest the money. With income property, under the 1031 tax deferred exchange, you can reinvest the whole thing that is beautiful, not your post tax dollars, you get to reinvest your pre tax dollars. phenomenal, phenomenal deal. None of it includes that. So if you’re going around and you’re comparing even the overall return on investment, which looking at Jason Hartman calm in the Properties page, you know, typically you’re going to see overall return on investments and of course, this is a performance of course, it’s a projection Look, just assume it’s not going to work out as well as projected, okay, it might be better. I mean, it happens better many times. In fact, the client he studied with Coming up, you’re going to hear a story that’s way better than what’s on our Performa. Okay. When you hear Ani we’re talking a few minutes here, okay, but just assume it’s not gonna be as good as that cut it in half if you want and take that projected 35% return and cut it in half 17.5% but just know that even the 17.5% which is phenomenal it’s truly amazing and those of you new listeners who don’t believe anything I say and think I have no credibility and think I’m crazy and I’m, you know, the hokey broker that’s about to go to jail, right because you don’t know how to calculate return on investment yet because you haven’t listened to me teach you that. And by the way, you should go to Jason Hartman calm and on the front page. Watch that free video we have because that really leads you through reading the Performa and understanding the numbers in 27 minutes for free. You can learn to be a great deal analyzer. Okay. Rate deal analyzer and that’s a critical component. But yeah, even the overall return on investment does not include the benefit of inflation into step destruction which is huge. You know that from those of you who’ve been to my creating wealth seminar or my jQ Jason Hartman University live seminar, or have listened to the show and heard me talk about that, you know, that’s very significant. It also does not include the tax benefit of the 1031 tax deferred exchange, which plays out over time, even internal rate of return IRR the holy grail of metrics does not include that either of those things. Okay, so there you go. All right.

Hey, without further ado, because I risk the already this intro is getting very long and I have a whole another part of the show for you. Our interview a client case study with Ani, we so let’s listen to Ani and hear her story. It’s a great story. And she is one of our clients from Alaska. how unique is that? So here is Ani Hey, it’s my pleasure to welcome another client back to the show and this will be a client case study with a listener and now client from Anchorage, Alaska of all places we don’t have that many listeners in Alaska, but it’s always great to have one and I have been to Anchorage and Fairbanks before and through the Yukon Territory as well up in Alaska and Canada A long time ago. It’s very beautiful up there. And our client is Ani we and Ani. Welcome. How are you?

Ani Wee 17:32
I’m doing very well. Thank you, Jason.

Jason Hartman 17:35
Yeah, well, it’s good to have you on and I just loved it when one of our investment counselors introduced me to you the other day. It was so great to hear your story and I I just always love to hear someone tell me I changed their life. And that’s always great, hopefully for the better. I think so in your case, it sounds like but give us a little bit of your background. First of all, what do you do for a living?

Ani Wee 17:58
Yeah, I work with Federal government as an auditor, and that’s, you know, most people with it’s basically accounting work pretty much all the reconciliation of schedules and, and doing audit. So I think we’ve done for close to 10 years now and I’m I’m pretty happy there.

Jason Hartman 18:19
Good stuff. Did you grow up in Alaska?

Ani Wee 18:21
No, no, I grew up actually is I am from Taiwan, the Republic of China. I relocated to America when I was 16. I went to a boarding school in Michigan and then I just settled down and went to college in a different state and then I moved to Alaska, actually for the job.

Jason Hartman 18:45
Okay, so that’s I was gonna ask you, how did you end up in Anchorage, Alaska, you know, that’s sort of an out of the way place. Give us a little insight before we talk about your real estate investing story, because I think a lot of the listeners will be interested you know, not a lot of people go to Alaska. I have been and I feel very fortunate to have been there and you know I did an Inside Passage cruise from Vancouver I’m on the way there and then on the way back I did some back country stuff and I remember going to was it Denali Park I think and, and, and seeing all of that and you know, just gorgeous up there, obviously. But hey, I was there. Actually, I gotta tell you something funny. I have a picture. I gotta find this picture. It would be great for a Facebook flashback Friday or Throwback Thursday of me standing on the Alaskan pipeline at midnight, and it’s his Brightest Day. Because I was there on the longest day of the year, the summer solstice June 21. And you know, it really messes up the sleeping patterns. I remember we were in that famous fish restaurant you have there Simon and Seaford I believe it’s called. That’s when I really loved Alaskan halibut and discovered it and I thought it was about six o’clock and I looked at my To watch it it was 10pm

Ani Wee 20:04
for me, because a lot of times I have to, I really have to have a military clock here otherwise, I have a hard time remembering whether that’s two o’clock in the morning or two o’clock in the afternoon. And because the light is you know, summertime is all 24 hours available, much more so in Barrow, Alaska, which is the northernmost northernmost town here in America, rather than anchorage anchorage is a little south and it’s a little easier in terms that they like to recognize what I did when I lived for many years in Barrow Alaska and and and that was a challenge for me to try to figure out what exactly what time is exactly the time am or pm. And so you so you,

Jason Hartman 20:52
you lived way up there. Wow, that’s just amazing. And so do a lot of people use the military clock the 24 hour clock up there.

Ani Wee 20:58
A lot of people Do because it’s easier to know, you know, like two o’clock in the military time will be 14 hours. So it just easy to recognize because you can, you know, get him can trust your sense of time from that. Our darkness a lot of places. Yeah. And so yeah, it’s a lot easier. Yeah, absolutely you cut out for just a moment but I think people got the message. It’s very hard to recognize time with that. So I mean, you you you work for the government, you’re an auditor. Tell us a little bit about your real estate story, I guess. How did you happen to come across my podcasts a few years back in a into a I was going through a personal divorce at the same time, the market crashed. So I had a lot of questions about the economy at large. And so I was looking for answers in with the alternative media has led me to share Just website, website and website and podcast. I started to listen to him. And pretty soon I remember he did an interview with you. And, and I, I, it resonated with me. And because I am I was listening to a lot of messages given to me by people who are more of a golden silver invest investment. And, and, and a lot of people were telling me that, you know, in terms of the global economic crash, real estate will be a liability more than an asset. So a lot of people were advising me to purchase heavy metals, such as gold and silver versus metals.

Jason Hartman 22:50
And the interesting thing about all those precious metals people on E, they have the right premise, and their arguments are correct. They just don’t have the right Conclusion I’ve been very as you know, from listening to the show, I’ve always been very fascinated with them, but they just they just don’t get they don’t get the whole picture.

Ani Wee 23:10
Yeah, I definitely resonated with your idea that about, about precious precious metals, I use precious metal more as an insurance policy versus an investment strategy. And so, and before I think before I ran into your podcasts, I was just finding real estate I was I started the real estate investing actually because of the book Rich Dad Poor Dad by Mr. Kiyosaki. But then I didn’t really know what I was doing so I would buy it I suppose I would, you know, like, say for my neighbor died of breast cancer. I bought her her condo which is just right next to mine. I live in a multiplex. And I just went and pay cash for it, you know, I just didn’t really think about levering June or anything because in my world where I came from, people tend to pay for things in cash and they don’t have the money they just don’t buy. So so it was very strange to think to hear you talk about leverage, because it was the antithesis is what how I was brought up you know, and then I keep listening I just I said well, you know, having the sale please keep an open mind because it is true using leverage you can buy more so I made some fairly investment just you know, buying condos and one I hearing Anchorage Alaska, but they’re not as lucrative and investment now looking back after having heard your podcast for several years, I look at my old investment, real estate investment I realized there really not generating very good, you know, income for me. But today in the meantime, fortunately, during that period of time, I just happened to live in the area where we have a lot of military personnel wanting to move out of base. So despite the fact, condo investing wasn’t the greatest investment I can think of, but it wasn’t the worst investment either, such as no putting your money in a CD account. So, so I ended up breaking even I later sold a condo and then move the investment to Florida instead. So I first started purchasing property from you. I think after hearing your podcast for several years, into a one, three, that’s when I decided to purchase a property from your network.

Jason Hartman 25:57
Yeah. And so the first property you bought through us had was a duplex, right?

Ani Wee 26:01
Yeah, it was, um, you interview this gentleman named jack and, and I mean, I heard many, many interview before and I don’t really know why I just really liked the interview. And so I went to your website and then I noticed there’s a duplex I say, oh, multifamily, because most of the properties on your property when you know on your website is single family. Yeah. So there was the first time I saw a duplex and there was two Oh, a, he looks you know, kind of new and so I started doing some research around the area and I discovered an issue with Chinese drywall. So I called up Sarah and then she gave me the name of jack so I contacted him I discussed about this duplex, so I purchased it from jack Lee for some da thousand dollars. At the time. I didn’t really have the money because my money were all tied into it. condos I bought a couple investment condo plus I live in the condo myself and most Alaskan You know, a lot of a lot of Alaskan like condos just because it’s really hard to do maintenance.

Jason Hartman 27:18
Alaskan winter it’s very difficult. Yes.

Ani Wee 27:21
Yeah and on top of that there’s you know and then the problem with a condo is always the condo view and it’s which is pretty hefty, maybe about three $400 a month. So but at the time, you know, I that’s what I did. So I, I talked to jack I said them, you know, he I think originally was listed for 80,000. And I said if I pay cash, you know, he agreed to take some TA. So I just went to the bank and for the first time they’ll put a cut in line with equity equity was what I call a line of equity loan against my condos as I didn’t have a mortgage because I was paid for cash. So Got a low interest loan and pay jack and bought the duplex from him.

Jason Hartman 28:05
Now that one, that one just about doubled in value, right. Did you did a cashout refi. I believe on that.

Ani Wee 28:10
Yeah. Well, I continue listening to your podcast afterwards and then you know, jack secretary, Laurie manages to manage the condo until jack decided to retire So, so I bought it in somewhere in April 213. I just recently maybe around like January of this year, I did a cashout refi or it was appraised at $150,000.

Jason Hartman 28:38
And you are How much did you say 89,000 70,000 78,000? Well, so yeah, that’s fantastic. Congratulations that doubled in value. And and you bought a bunch more of them, right. Didn’t you buy?

Ani Wee 28:51
Yes, I did. I and the reason why I only did I did a cash out refinance because the rent has also gone up. I would have Soda if the rents stayed as $100 per side each month, but the rent had gone even, you know, a 50 per sign each month from from 500. So it was not really a good idea to sell, even though I was getting getting a lot of offers. People write me postcards or letters for wanting to buy.

Jason Hartman 29:25
By that by the way, folks, if you don’t have investment properties, yet, if you haven’t started your investment career yet, you’re gonna start getting and it’s such a great feeling, isn’t it to every month on all of my properties, I get constant postcards and letters from people saying they want to buy my property. And I just know that I am controlling the world’s most valuable commodity income property, you know, in the whole world pizza path to your door, you know, there’s such a limited supply of it. It’s just a wonderful position to be and to be that the seller you know, you in the driver’s seat when you’re the seller, and or the owner, I should say, you know, hopefully you’re not selling them, but you know, occasionally we do sell and when we rebalance our portfolios, but yeah, isn’t that a great feeling though?

Ani Wee 30:11
Yeah, it was. I know I never gotten any postcards. Well, my Alaskan condos, even you know, but but I was starting getting postcards for this particular duplex many postcards. And I decided not to sell and then I just continue to rent them, you know, just rent it out. And I used the proceeds of the money to purchase I think one more property, a single family home for $10,000 in Fort Myers. This time, the duplex that was sold to me by jack back into a one three was located in a server for Myers, Florida, although Lehigh acres, so and so I bought a I know I didn’t really leverage Either I just I just put to put them, you know, cash down, just make the transaction faster. And but I, I was very, I was very surprised by the appraisal record of 100 $150,000. And then later on I attribute to the fact the fact that for my or area has the number one job growth or number two is one of the top at least top 10 in the nation for job growth and population influx. So, if you tell you though, if you talk to any of our clients that bought properties back in, and I love how you say the numbers, you always go to Oh, two, row eight and so 2008

Jason Hartman 31:44
you know, but any of our clients that bought, you know, anywhere in the last seven years, I mean, they have just cleaned up, you know, it’s incredible the kind of appreciation they’ve had. And that leads to the next issue. You know, generally as you know, from To the podcast, and as all our listeners know, we believe in buy and hold investing, you know, why would you sell an asset that produces 2025 30 35%? Or even, you know, 40 45% return on investment every year, right? That’d be crazy, you know, when you look at the overall return, because it’s a multi dimensional asset class. And, you know, if you want to look at those, go to Jason hartman.com, click on Properties and look at the actual performance if you’re not familiar with how we calculate all that, but, you know, we generally believe in buy and hold, but occasionally the properties appreciate so much and, you know, that’s a great problem to have, okay, it’s a great problem to have. You really do need to rebalance your portfolio because the the rents the income never keeps up with the appreciation. You know, it’s always out of sync a little bit. And, and so I would ask you, and this is an interesting part of our case study for the listeners. Today, your property you bought it for the first one that you were talking about here, the first one you bought through us, you bought it for 79,000. And it appreciated to 150,000. Now, what is the rent on that? And do you remember what the rent was when you bought it and what it is now, for example, like it was a comparison there.

Ani Wee 33:18
Yes. When I bought it into a one, three front jack, it was $500 on each side, so it will be $1,000 1000 total.

Jason Hartman 33:27
Okay, so a little better than 1% rent to value ratio, and you acquired it at acquisition.

Ani Wee 33:32
Okay. And now it’s a city, so I’m getting 1700 dollars a month.

Jason Hartman 33:38
Wow, that’s fantastic. Those rents have gone up very, very nicely. And you know what, you don’t need to sell that property. Don’t don’t don’t feel you need to do that at all because you’re still getting better than 1% rent to value. I would even almost question I wonder if it’s worth more than the appraisal you got. You know, maybe it’s we’re really worth 161 71

Ani Wee 34:00
According to the appraisal report because they use different methods to come up with their figure, according to the appraisal report, so you say use the rent method, it would be appraised at maybe around 168,200 70,000 but then but then the appraiser decided to use a more conservative cost approach or some other approach and then he came up with 150,000 but yes if you look at the it’s on a quarter acre lot he has a septic and a well probably not exactly If I had known he has a septic and well and and sometimes he does involve more work when you are

Jason Hartman 34:43
Yeah, those aren’t that’s not ideal, by the way.

Ani Wee 34:45
Not ideal, but it was better than a lot of properties have it so

Ani Wee 34:50
yeah, so I bought it and I have a little repair, you know, with the wells and the septic tank, but it’s not nothing big. Nothing major happens. I think I had to change your oil pump one time but it but I think that the area has a lot of potential and I got a lot of yellow postcards

Ani Wee 35:13
you know that

Jason Hartman 35:15
yellow postcards a famous yellow postcard please sell your host to us.

Ani Wee 35:19
Yes and interest and I think that the people who who are truly investors knew the intrinsic value of the duplex because of economic development in that area. And and demographic studies like Mr. dent has done also indicated that a lot of really really dense area they like to move to a warmer climate and Florida is considered a very desirable area. And I think for Meyer Cape Coral the hikers happen to be without any major industry in essence pollute, you know, pollution control. There’s really no pollution. There’s no heavy industry. The area is, you know, enjoy some sunny weather, which is almost like the opposite of Alaska.

Ani Wee 36:10
You know, a lot of stuff. It’s the

Jason Hartman 36:12
it’s the polar opposite of Alaska almost. Pardon the pun. Yeah.

Ani Wee 36:18
So I just attract that baby boomer population, you know that, like, yes, 10,000 people reach their 65th birthday, every day now and just more and more people moving in isn’t?

Jason Hartman 36:32
Yeah, it’s amazing for sure. Okay. So I want to make sure I mentioned a couple things. So the listeners get some more education out of this. You talked about the appraisal. And you know, I’ve talked about this in the past, but just for everybody. There’s three basic methods of appraisal. There’s the comparison approach, which applies to condos and single family homes, mostly, there is the income approach, and you talked about how the appraiser did the income approach and wanted to appraise it, basically. For more money, but then he got more conservative on you. And he did the cost approach. So three basic approaches comparison, income approach and replacement cost approach. Okay, just so the listeners know that because I didn’t want to gloss over that it was an important point.

Ani Wee 37:17
Yeah, that was it. And I think because of the vendor wants the most conservative approach, so that’s, that’s why he chose and so basically how it works is that one side of the duplex, one tenant pays the mortgage, the property tax, and the insurance. And the other side is pretty much pure cash flow unless I have a shoe repair related issue such as replacing washer dryer or issues with the garbage disposal. But but it’s, I’m not self managing it I have a property manager and my property managers name is Kevin and and I find him extremely reasonable Because, because I learned from your podcasts, you know, to scrutinize the property management agreement. What I have found is that seven is also a real thing. bester he’s not just a property manager. He’s not just a realtor. He’s also an investor. So he has experience in all three area. So he immediately agree with me that the lacing should be split 5050. So, so that, you know, a lot of time when you look at a property

Jason Hartman 38:30
of the agreement, they want to keep the late fees. We’ve talked about that before, and I don’t I don’t like that. Yeah, yeah. Yes, folks. You know, one of the things I want to tell you is that don’t be afraid to push back a little bit on property management issues. You know, you can negotiate, read that contract, don’t give them too much latitude on discretionary repair items, because there’s just a funny thing about life, that when you give them a lot of latitude, they tend to take it. So and we’ve talked about that many times in past episodes, you got to be in control of your property management experience. Okay, so very important,

Ani Wee 39:06
very important. And the second thing I like about him is that he doesn’t charge me the markup fee for repair. So those are the two things and interchange for for that I agree to make payments on all the repair directly to the vendor. So save him a little bit of paperwork and that also give me some level of control if I you know, and I can contact the vendors directly. So I it’s

Jason Hartman 39:30
an expensive repair, ask for more quotes and call them a quote, not an estimate, you know, in your emails and your discussions. Granted, it may not come out exactly that way but calling it a quote will help you in case you need to argue with them later. But only you know, I want to ask you how many units do you have now total in your portfolio?

Ani Wee 39:52
Well, because I was so happy with my my duplex investment in Lehigh acre. I Later on purchase for more. So I have a total five duplexes. I also so that’s 10 yeah 10 and then I also own two single family homes in the area where Kevin Manik 1212 properties and then you own your own condo and the one next door to you, right? I sold the one next to me but I, what I did is I bought another one from your network in Jackson, Mississippi from a gentleman named Brad and I, you know, again, I heard your interview with Brad fall I decided that’s interesting opposite strategy because he’s a, I consider him more of a specialist for section eight housing at a time so. So it was a $50,000 investment in a single family home in Jackson, Mississippi, and it produces a $725 a month on rent, and I know that When I purchased that property I knew the appreciation of, you know, in Jackson, Mississippi would not be as high as in Lehigh acre or four miles is pretty much just a cash flow.

Jason Hartman 41:15
Yeah, that’s a much more linear cash oriented market. I agree. Yeah, absolutely. Absolutely. Good stuff. Well, what are your plans? Next on E? You’ve got I guess what that sounds like it’s about 15 units now total. Right.

Ani Wee 41:29
Right. Yeah, I have. I have one. I have two more single family home in Arizona, that that I purchased prior to becoming a podcast listener. And, and those were purchased in tool kit, tool 11. And tool 12. Oh, you You did good. On those two. We were back in the Arizona

Jason Hartman 41:52
market a little while it got too expensive. So we stopped recommending it but in Phoenix, you know, that’s a sort of a hybrid model. it, so it gets a little expensive at times, and then we’ll stop recommending it. And, you know, throughout the cycles, we’ll go back in and recommend it for a time and, you know, if you’re, if you’re there and you have properties, just keep them. I mean, you’re stabilized, you know, you’ve got, hopefully a good tenant so forth.

Ani Wee 42:15
Yeah. tenants and different property manager. And then on top of that, you know, I had really cheap debt at a time, because when I was in Toy 11 and 2012, the interest rate were 375 for 30 year mortgage 3.3 point

Jason Hartman 42:34
seven sighs

Ani Wee 42:35
Yeah. And, and then now the ones that I purchased in the high and the rest of the youth house, Southwest Florida, there was a 4.75. So so the debt in Arizona at the time was considerable, considerably cheaper. So I think talking to Sarah about at some point, I would need to do it again. 31 exchange because the rents in the area didn’t keep up like Florida. The rents in this little Arizona town that I purchased real estate pretty gone up but they didn’t go up as high as the rent situation in Florida but this Florida situation is kind of abnormal because that’s the for Meyer has a number one ranking increase in I think in 2014 to a one five out of the whole entire nation. So for a while my already don’t Iran also increased all the time when I purchased it. I think at a time when I purchased it into a lab and I was only getting maybe about seven 750 but now I’m getting 1150 currently, so it has gone up but then the property South has even gone higher

Jason Hartman 43:53
is the rents the rents will never keep up with with a with a hybrid or definitely not a cyclical appreciation market, you’re always behind on the rent and rents they lag because they’re one year leases because the comps aren’t good for rental values. You know, it just it just doesn’t it’s a much more fragmented market you know, there’s just not a an exchange of data. When it comes to sales prices. There is a true exchange of data in the multiple listing service and at the county recorders office, but that’s not true on rents, and that can work for and against you as an investor. And you know, we’ve talked about that on past episodes. Ani we’ve got to wrap up though, but you know, I just wanted to ask you kind of In conclusion, you know, any thoughts you have for investors, anything you want to share with them before we wrap it up?

Ani Wee 44:42
I think it’s important to make up your mind, buy real estate for and wait, don’t wait to buy real estate. I think it’s important and then also to I would consider duplex investing side by side duplex. Because even if you change, you lose a renter, you still have another renter paying the mortgages and property tax, and insurance that will make it a lot easier for you to hold the property. And another thing I realized was my single family.

Jason Hartman 45:23
Let me let me just comment on that for a moment on if I can, and I don’t mean to, like totally disagree with you there or anything. I think the plexes are okay. But I’ll tell you something, you always get a better quality tenant in a single family home in the single family homes. Generally, although listen to your story, which is a great story. They generally appreciate better than the plexes and you know, we’ve sold lots of duplexes, triplexes, and for plexes, and then some big apartment complexes from time to time to, you know, you can do that same diversification with two single family homes, right? So I just don’t want people like totally go overboard on that idea. I’ve heard that argument a lot. There’s a lot of people out there that sell for plexes and develop them and say well, you know, one’s vacant you only have 25% vacancy. If you have a single family home and it’s vacant you have 100% vacancy yes you’re right I get that but you know, you can have for single family homes okay. So

Ani Wee 46:20
yes, you know, and what I have found is that with my single family home, even though I may have four or $500 a month on cash flow, but when a tenant move out, pretty much all the cash flow will put into updating the paint the carpet, a lot of state so and I think you should and the multiplex I think you should be very selective Personally, I don’t like triplex or four Plex because I think too many renters can gang up on the property manager. They do ganging up

Jason Hartman 46:55
on Yeah, that’s the other thing I meant to say even in duplexes they’ll do that they do when those people get together. Talk settings can become difficult for you.

Ani Wee 47:03
And so you have to be very selective. I don’t like the up and down kind of duplex. I only buy side by side, because it gives a little more sense of independence. And, and so I think you need both. I think we do need you know, duplexes, single family homes once you have a pretty good mixture. But you know, you got to start somewhere, right.

Jason Hartman 47:32
We’re all about diversification. So yeah, totally, totally hear you there. Yeah, it’s

Ani Wee 47:37
a family home and just kind of, you know, use that as an example, to learn, you know, as a starting point because, truthfully, I don’t think I would have learned as much about real estate investing, if I didn’t buy it, and then start making mistakes. But I would say pretty much all the silly mistakes. I have made my tenant basically paid for them. Oh,

Jason Hartman 48:05
isn’t that great? I love that comment on he that’s a great comment. All the all the silly mistakes you made your tenants basically paid for them for you. Isn’t that beautiful? we outsource our mistakes and our debt to other people called tenants

Ani Wee 48:20
Love it Yeah. And then you learn and then and then you’ve been making a decision you know, by the time when I moved to, to a one three out but I know when I start purchasing real estate outside Alaska, I already made a lot of mistakes that I can and pay for. So when I look at something I will be able to see why that’s a better investment than the one I made before. But if you don’t have any investment, real estate investment, you will not have the opportunity to learn to make mistakes and learn from it. And then you will not be able to tell which one is a better investment. I think you just have to get get it started somewhere and with the help of your investment counselor And then move forward.

Jason Hartman 49:01
Very good advice, Ani Wee from Anchorage, Alaska.

Thank you so much for joining us today and sharing your your client case study with our listeners. And I’m sure everybody learned a lot from you. So thank you listeners out there. If you’re a client of ours and you want to come on the show, reach out to us and let us know we always love to hear these case studies stories. So, Ani, thank you very much for sharing. Thank you. Bye bye. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional and we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

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Jason Hartman welcomes client and venture Alliance member Elisabeth Embry. They talk about their new podcast, Women Investing Network, which focuses on unique opportunities for women investors from a woman’s point of view. They also discuss cash-on-cash return, loan to investment ratios, the Trump presidency’s tax plan, and the Seattle market.

Announcer 0:01
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.

Welcome to the creating wealth Show Episode Number 820. Seven, eight to seven. Thank you so much for joining me today. This is your host, Jason Hartman. And I’ve got a returning guest with me today. And that is our client and venture Alliance member, Elizabeth. And maybe we’ll talk about a little client case study with her again, we did one on that before, but really, we want to talk about some other things, as well as the new podcast that Elizabeth is co hosting with me, Elizabeth, welcome back. How are you?

Elisabeth Embry 2:26
I’m terrific, Jason. Thank you.

Jason Hartman 2:28
Good. Good. It’s good to have you. So since I mentioned the new podcast, why don’t we just get that out of the way mentioned it now. And it’s all about the when right w i am what does that stand for?

Elisabeth Embry 2:40
It’s the women investing network and I couldn’t be more excited. We’re helping women win, in investing and in life. The types of guests that we have our focus on strengths and strategies around career corporate entrepreneur, business, family communication. health, wellness, longevity. There’s a wide variety of things. But also, there’s the element of real estate investing. That is the cornerstone of the show. And it’s turning out really well. I’m super excited about it.

Jason Hartman 3:13
Good stuff. Good to hear. And by the way, I didn’t mention you are coming to us today from beautiful Seattle on the Pacific Northwest. So I just want to make sure our listeners knew that

Elisabeth Embry 3:23
You say beautiful, but we’re going between we’re vacillating between downpours and sunny skies

Jason Hartman 3:28
So well, when it’s when it’s sunny. Seattle’s beautiful. Of course, you and your husband, Neal were kind enough to co host us when we brought the venture Alliance mastermind to Seattle. That was what three trips ago. They’re all running together. Now. We’ve done so many trips together

Elisabeth Embry 3:43
So much and there is so much fun. But you know, that trip was great because we really lucked out with kind of perfect skies and later September early.

Jason Hartman 3:52
Yeah. Yeah. Really nice. Good stuff. Well, good stuff. Well, hey, Elizabeth. We want to dive into a few topics today. You know that Last week, I discussed crap rate on the show. And, and it’s not really that bad, I just kind of thought of that off the top of my head there. And what I meant by that is not crap rate, but cap rate, okay? And how cap rate is not a very good metric. Again, it’s used a lot in commercial real estate. But it really shouldn’t be used in residential that much, because it doesn’t tell the whole story. And we want to know more, we want to tell a more complete story when we talk about real estate investing. And today, why don’t we talk a little bit about a better metric than crap rate or cap rate. And that is cash on cash return, although that doesn’t really tell the full story either. But I think it’s a little better than cap rate. But you know, talk to us about that if you would, because you’re you discussed this on the wind show. And so that’s why I wanted to bring it up.

Elisabeth Embry 4:53
Yeah, absolutely. It’s it’s interesting because everybody, every time I interact with a different provider, a different You know, Real Estate Group with different finance group, they always calculate everything differently. And so one of the things that I really like is in your property tracker tool, you’ve got the in the pro forma, you’ve got a very consistent way of showing the cash on cash return. And so for me cash on cash return is a great way of at a glance, determining if this is the good next potential investment for you. So it’s the cash on cash return is a calculation of all of your expenses and the generate the actual cash flow that you’re going to get and divide that by the initial years, all in monies. And so, so that includes not only the amount of money that you’re putting down, but the money that you’re that you’re using as your closing to get the total number. What is that the numerator or the denominator, the money, the number that you’re dividing, and then the cash flow that you’re getting? You need to be thinking about not only the the rent that you’re going to be getting, but you need to be thinking about your vacancy rate. You also need to be thinking about your your expenses, such as your property management expenses, and your maintenance fees and your insurance and your taxes. And that generates your all in operating. Profit net profit.

Jason Hartman 6:21
Okay, so here’s the thing about cash on cash return, if the property goes down in value, which I don’t think it’s going to happen anytime soon, given the market conditions, they’re just nuts. But you know, hey, there are cycles, right? But again, we’re into the linear markets where you don’t have those big swings, but you do have a little minor swings, not versus the cyclical markets where they really do swing and it can get really ugly. So if the if the value of the property goes down, but you as the investor are able to maintain the same income and expense ratio, then your cash on cash return will be consistent. Okay, sometimes in a down market, the value can actually decline. But as I talked about in the three dimensions of real estate concept, which we’ve done on many other shows, the rents will actually increase because the people are not going, you know, motivated. The the renters are not motivated to jump into the housing market, when prices are going down, which actually, they ought to be contrarians. And that’s exactly what they probably should do at that time. Right, but they don’t. So you can actually see the rental market strengthen, as you see prices drop. So your cash on cash return could get better in a down market. And so could your cap rate basically, too, and that’s the interesting thing. It doesn’t include appreciation. Okay. And, but it does include leverage cap rate doesn’t include leverage, right? Mm hmm. Yeah. Okay. So what else do you what what metric Do you like to go by? And why?

Elisabeth Embry 8:02
Well, for me I like to look at, because I’m, I’m lucky enough, I guess that I that I no longer can get Fannie Mae loans. And so I’m having to do commercial lending. And so I’m just looking for what the actual percentage of cash flow that I’m going to be getting over my mortgage. So I don’t know what you would call that. But basically, what’s my net? What’s my net cash flow compared to the total price and so I don’t know if that’s a specific calculation, but I, but I have a literally a 46 column spreadsheet that I do to try to not only look at opportunities, but track how my properties are flowing. And, and so really, I’m looking for cash flow over total money outlay, but not in year one, I’m looking at the actuals that I’m getting after there’s a true pattern established. And so for me that first year, it’s anybody Guess it’s after really seeing how the the true track rate, if you will, of the properties are performing over years. And what I’m really surprised with is even though I’m buying in linear markets, Jason,

Jason Hartman 9:16
you know, the appreciation in linear markets use

Elisabeth Embry 9:19
linear market. there’s a there’s a, there’s a good deal of appreciation that I’ve been able to realize over the last, you know, just since 2012. That’s really when I started investing, I think, and the amount of appreciation that I’ve been able to see to see the true ROI is kind of exciting. Yeah,

Jason Hartman 9:38
yeah, it really is. It really is. Well, welcome to the most historically proven asset class in the entire world. And that’s income property, right. By the way, how many properties Do you have now, Elizabeth?

Elisabeth Embry 9:49
So we have 50. We’ve got another three coming online soon.

Jason Hartman 9:55
So you’ll be up to 53 right? That’s correct. That’s right. And actually, we should In the interest of full disclosure, we are on the verge of making you and a couple of other key people that some of our listeners know when they’ve heard on the show before shareholders in the company, minority shareholders. So I know you’re liquidating a couple of properties to do that deal, right?

Elisabeth Embry 10:15
That’s correct. That’s correct. And that’s what’s that. See, that’s what’s really cool about this portfolio is, even though I’ve only had it for a short period of time, and this is why I’m so intimately familiar with the amount of depreciation that’s that’s occurred, I can actually liquidate and even though you know, normally when you sell a property, oh, gosh, you know, I’m gonna have to pay closing costs, I’m having to pay, you know, back the tax some of the tax depreciation that I was able to write off before I’m having to, you know, pay fees to fix it up and even so, the portfolio is performed well enough that the for the properties that I’m selling, you know, I’m able to retain just a chunk of money beyond my initial investment. So I’m pretty excited about that. And I’m excited about the opportunity of, you know, becoming a shareholder in this company. It’s, you know, it’s obviously a great company I, I think quite highly of it. And it’s, it’s done well by me for sure.

Jason Hartman 11:11
Yeah, good, good stuff. Well, we appreciate your business and appreciate you being a client and appreciate you being a venture Alliance member, and the guest on the show today as well. So that was interesting about, about the cash on cash return, folks, I think that is a better metric than cap rate. But again, the metric I favor is just the overall return on investment. So I like looking at the rent to value ratio. That’s my quick rule of thumb, as I go in, you know, am I getting that 1% rent to value ratio, that I get it, okay, or somewhere in that neighborhood? That’s the first that’s the first cut. And then just looking as you look at Jason Hartman calm and you click on the property section, you can see those performances and the overall return on investment, the projected overall return on investment is in bold, because I think that is the most accurate thing. And as I mentioned on last week’s show, when I went off on my rant about crap rate, you know, I talked about how even that overall return on investment does not include some very significant benefits. So it’s really, potentially much higher than that. And what I said back then, just to refresh your memories, because it’s been a week, is I said that it doesn’t include the advantage of owning and rebalancing that portfolio over the course of your life. So that you can do a 1031 tax deferred exchange, and reinvest all of those dollars, not the post tax dollars, not paying Uncle Sam not paying the government first. You get to reinvest at all. You don’t get to do that with stocks, with businesses with bonds with anything else. It’s special in real estate or income property. Now, actually, I shouldn’t say you don’t get to do it with anything else. That’s actually not true. There are some 1031 exchange opportunities with things like air airplanes. But the problem is those actually really do depreciate your real estate, hopefully appreciate. So, you know, you have depreciation there and it’s real in the real estate, you know, it’s hopefully not real. And then also, I think you can do it with cattle and stuff like that, but I don’t own any cattle. So, you know, I don’t know about cows and stuff like that. So

Elisabeth Embry 13:27
that’s funny.

Jason Hartman 13:29
But anyway, that’s that. Okay, so let’s talk about a couple of other things. First of all, I wanted to ask you, Elizabeth, about just kind of generally, you know, and I gotta say this, I’m gonna put you on the spot a little bit here. When Trump won, you were bummed out. I mean, you were bumped. Elizabeth is like one of my liberal friends. Okay. And she she has said she’s given it up and now she’s a libertarian. So welcome to the Libertarian Party, Elizabeth.

Elisabeth Embry 13:55
Thank you, Jason. And thank you for putting me on the spot.

Jason Hartman 13:59
You didn’t know I was gonna bring this up did Yes. Okay, but but I wanted to ask you, because you know you were just like devastated when Trump won. I know you’re not a fan and I’m the jury’s out for me. Honestly, I know people probably think I’m a Trump fan, but that guy worries me. He’s reckless. Okay. Yeah, you know, he could start world war three on his frickin Twitter account. Okay. I don’t know about him.

Elisabeth Embry 14:22
Literally, literally.

Jason Hartman 14:24
Yeah, the jury is out on Trump. If you asked me, you know, whatever.

Elisabeth Embry 14:29
I’m slightly encouraged by the tax. Now. I haven’t seen any details yet. But, you know, the conversations around the tax laws that he’s talking about. They potentially could be really beneficial for

Jason Hartman 14:42
phenomenal if the tax rate for small companies goes from 39% to 15%. Oh my god. Do you know what’s gonna happen? It’s gonna be insane. You don’t be

Elisabeth Embry 15:00
But certainly companies can put more money into r&d, they can afford to hire more people and take bigger risks. And I think that that’s the bigger risk than the RND parts, I think are the most exciting for me, because that’s when we’re going to get true innovation starting to occur right now people are having to, you know, because they’re giving away 35 40% of their money to, you know, to taxes, right? So they have, they have to be really conservative about the decisions that they’re making, even for large corporations. But you know, you get 20% back and all of a sudden, now you have the money to really start expanding people, you know, on the more liberal side of things might be going, they’re just gonna, you know, stockpile all their profits. companies don’t actually work on just stockpiling profits, although Apple might be the exception to that, right. They’re seeing a lot of cash. But most companies actually need want and need to spend them the large portion of their monies. In r&d, so that they can determine what is going to be the next product that’s going to just really hit

Jason Hartman 16:07
mine that might change the world. Right, you know? Yeah, there’s no question that look, you know, it’s always a decision of you give it to the the entrepreneurs, the citizens, the people, or you give it to the government, and who do you think is going to manage that money better? Well, I think we all know, regardless of what side of the political aisle we’re on, you know, that individuals, individual people, and individual businesses are probably gonna manage it better. Not always. But you know, it’s I just don’t think, you know, sending that money to Washington DC is a very good way to go. And you know, people are saying, well with it with a Trump tax proposal, you know, it’s going to increase the deficit now. Maybe it will, maybe it won’t, maybe it will for a time and then it’ll change and of course, this is the old Laffer Curve supply side economics trickle down economics. reaganomics type discussion, right of, you know, increasing economic activity by lowering tax rates and look at even if it doesn’t, I mean, this may sound really irresponsible and kind of against my anti Keynesian philosophy. But you know what, even if we just run more deficits, it’s like we are so beyond the beyond already, with these with with deficits and debt in this country. As long as we can keep the biggest military in the world, the biggest brand, you know, and all the other advantages we have in the US. I think we’re gonna be fine. I mean, you know, it’s like, the question you always got to ask yourself is compared to what I mean, America, yeah, it’s all messed up and we’re running it into the ground but compared to what, it’s all just a game of relativity. It’s it’s not it. There’s no absolute in this. There’s only a comparison of here’s the US versus country. A B. See the and I think, you know, the US is going to keep its reserve currency status for a long, long time, and probably prosper for a long, long time. So I’m not that overly concerned about deficits. And I normally wouldn’t say that, but it’s only because we’re so beyond ridiculous already that there’s no way we can pay it back. We’re just gonna have to inflate our way out of it, you know, it’s the way it’s gonna be.

Elisabeth Embry 18:27
Well, I think the point that you’re bringing up is you’ve got to work within the process in order to change the process and then order for you to realize traction, if you will. And so taking advantage of real estate tax opportunities makes real estate the right income that drives the action for people to invest more in real estate, which then provides housing for you know, for a very large population, right.

Jason Hartman 18:53
Then that is why it is the sacred cow of the tax code. Yeah, people are worried that you know, Under every new administration, right, you know, well could they might want to say take this benefit away or that benefit away? I guarantee you Well, I can’t guarantee you this, but I bet you, I won’t guarantee you but I will bet you that even if they take one, perk away in real estate tax code, they will add another and you know, say for example, 1031 exchange goes away. Okay, well, there will be an adjustment in the market for that, right? Everything equalizes. It does take a few years for to happen, though. That’s the part that kills people. But I bet they’ll give us something else. I mean, look, if they took the 1031 tax deferred exchange away and lowered the mortgage interest deduction for homeowners. Hey, I would love it, Elizabeth, if they would take away the mortgage deduction for homeowners, because that would make them all much more likely to rent. And guess what? I’m a landlord. So that’s fine with me. You see, things always equalize. Right?

Elisabeth Embry 19:58
Yeah, absolutely. Absolutely.

Jason Hartman 20:01
So but what is your The thing I was I was bugging you about, like being bummed out about the Trump win. But what is your sentiment? Now, if I can ask you because, you know, you were pretty, like gloomy there for a couple of months, I

Elisabeth Embry 20:16
would actually say was going through a true depression, much like massage, much like country, and not necessarily like you like many of your closest friends. Right? I realize you have a lot, a lot of friends on both sides of the aisle. So that’s not necessarily a fair statement. But, you know, there was the fear of the Elisabeth Embry, right, there was a lot of the fear of the Elisabeth Embry and quite frankly, the rhetoric that that Trump and to a lesser degree Pence, you know, spewed during our sorry, communicated during the campaign.

Jason Hartman 20:51
Spirit is okay. You know,

Elisabeth Embry 20:52
honestly, it was is really scary. And I think that everything is Trump. I don’t know what the quote was the other day. was something like, I didn’t realize it was gonna be this hard.

Jason Hartman 21:04
Right? Right. He’s getting here you’ve got the guy with possibly the biggest ego on the planet, right? Donald Trump. And you know, he’s kind of getting a little humble. I think this was good for him. Yeah.

Elisabeth Embry 21:17
And you know, honestly with Kellyanne Conway and and once the Nazi guy O’Bannon

Elisabeth Embry 21:28
Stepping away

Jason Hartman 21:30
Oh my god people you heard that Nazi guy. Yeah.

Elisabeth Embry 21:37
I The thing is what I’m really what I believe is Trump is realizing that the job is a lot harder than he thought, even if with the whole, you know, a house and senate on his side in theory. You know, he is realizing that politics are a little more challenging than he expected them to be. I think that he’s still trying to drive forward his promises. And for me, I’m not seeing a whole lot of traction on the good ones or the bad ones. I’m honestly hopeful about the tax promise, but the rest of them about, you know, put up a wall immediately. There’s these all of these

Elisabeth Embry 22:18
these lawsuits that are getting thrown up and I find it

Jason Hartman 22:21
this is the thing, folks, isn’t it? Great. I mean, you know, a couple great things about it. Elizabeth, this is a bit of a tangent. So please hold your thought there. Remember, we were going to say, but you know, the first thing and I said this at the meet the Masters event, of course, you were there. Yeah. That was what I started with is is so inspiring, really to see, regardless of your political spectrum and your beliefs, to see Trump and Obama walking together, you know, during the inauguration and, you know, Trump waving Obama off in the helicopter and so forth. I mean, the orderly transfer of power you we should all be so grateful that we you know, it We live in a western country, right where you have that you should all be so grateful that there’s no military coup there. No, there’s no bloodshed. You know, it’s all just, that’s just so impressive. And then the other part of it is that, you know, even with Trump’s rhetoric and all this stuff that you didn’t like, okay, and many people didn’t like about half the country, it’s about equal. About half the country hated them, half the country loved them, or at least liked him enough to vote for him. You know, he can’t get he can’t he’s not a dictator. Okay. You know, we’ve got three branches of government, we’ve got all kinds of people people have to be accountable to you can’t just do what he wants, which is good. Yeah.

Elisabeth Embry 23:40
Yeah. You know, I was surprised at how quickly they they pulled out the VP breaking the ties and, you know, the nuclear option when it came to the Supreme Court. But even so, things are moving a lot slower than he’d expected, which gives me hope, and the reason why gives me hope says it’s giving him time to reflect and really understand. So yes, people wanted to vote an outsider and they wanted to change the system, but you have to understand the system enough in order to change it. And so now he’s getting some, you know, some learnings, you know, some opportunity to figure it out. Hopefully he’ll be, you know, smarter, wiser through the end, like, let’s face it, the guy’s a great business person, like no matter how much support how many people have really authored, you know, or been the ghostwriter for, you know, his books or what have you. He’s been smart enough to get this far in business at this point. And so I’m sure he’s gonna have to, he realizes he’s got to adjust change that political leaders are different than business leaders. And so I’m encouraged and like you said, the system is there to

Jason Hartman 24:53
honestly just to keep him in check. You can just do what he wants

Elisabeth Embry 24:55
to keep status quo to right so the rule of eminence domain, you know, where people want to bust up the land between Mexico and Texas or Mexico and California, what have you, you know, all those land owners are immediately throwing up red flags and saying Absolutely not. Right. And so it’s a very long legal process, you know that we’re going to be speaking about 25 years from now, but right that

Jason Hartman 25:24
possibly, possibly. Yeah. Interesting stuff. Interesting stuff. Okay. So that’s just an interesting whole thing about that the Trump perspective, but what I mean, are you optimistic now? I mean, do you see that, like the real estate market, the economy, they’re just booming. I mean, it’s insane. What’s going on? Like, I’m just super optimistic about the Trump economy. I know not

Elisabeth Embry 25:49
a counterpoint. I’m very optimistic that the that the positive direction that Obama

Jason Hartman 25:58
Obama credit

Elisabeth Embry 26:00
Continuing. But I mean, let’s face it, Seattle has been on a massive upswing even in 2008, where we had a sharp decline from the housing market. Right. It’s it’s started to push again through the roof and it’s gone well past its 2008 norms in the housing markets. I think that there’s the last report, I thought there was 60 major cranes, you know, like, like large scale development cranes employed in the us right now. 32 of them are in the Seattle area. Wow. I know. It’s not crazy. Yeah.

Jason Hartman 26:32
So whenever you whenever you go to a place where the national bird is a crane, okay. That is the sign that a bubble is coming. I don’t know exactly when it’ll be there. But, you know, it’s just there’s like too much development, right, there’s just this overbuilding and you just know it all. It always goes in that cycle. So you are probably selling your personal residence at the right time in Seattle, or, I don’t know maybe it’ll be a year or two early but it would be to say at some level You know that bubble is there, right?

Elisabeth Embry 27:01
Oh, absolutely. I mean, for me, I’m I’m fiscally conservative, and now’s the right time a, I’ve seen the 10 year cycles, you know, time and time again, having worked in, you know, in banking at Washington Mutual before the, you know, the spike in the boom and the bust. And you know, having been in the Seattle area since the late 80s. And it’s coming in now. How is that gonna play out on what the rest of the rest of the nation? I don’t know. It’s something interesting. Part of the reason why the Seattle market is so pushed up, is because the Chinese investor is getting pushed out of out of Canada, they’re getting an increased tax.

Jason Hartman 27:48
Vancouver, Vancouver was a big a big Chinese market, but what’s going on with the increased tax? We’re going to say there,

Elisabeth Embry 27:55
oh, yeah. So um, so in Canada They’re there they agreed to implement or they’re talking about implementing an additional 15% tax for out of country investors in like Vancouver and Victoria, which means that that Chinese investor will really shift even more so from that expensive market where they’re all there. They’re taking massive hits from their profit and deploying that more into the US.

Jason Hartman 28:27
Yeah, that’s gonna cause a money flight out of Canada. No question about that.

Elisabeth Embry 28:32
Well, and this is why people ask me, Well, why don’t I invest locally? Why am I not a local landlord. And the reality is, my cash flow is so much higher my exposure is so much lower on when I invest in these linear markets, you know, through companies like you right, where I’m getting a great, a great portfolio of opportunities at a great price. And again, using the 1% rental value Looking at the cash on cash, but really calculating the overarching ROI, and for me also looking at the cash flow after all expenses to make sure that I can make a living. And I so it’s good.

Jason Hartman 29:11
Yeah. Yeah, I mean, you know, when I talk about the risk evaluator model, which by the way, you know, that’s always something good to review, go to Jason hartman.com. and type in Hartman risk evaluator, and listen to some of the podcasts I’ve done on that topic, but it’s just amazing how much lower the risk is, when you buy in these linear markets that are the you know, the cash flow oriented low land value, you know, in other words, they have good LTI or land to improvement ratios. Again, when you buy a property, two major components, one is the land, the other is the improvement or the house or the apartment building sitting on the land right. So LTI, meaning land to improvement ratio, I coined that term. Kind of dovetailing on the concept of LTV, loan to value ratio. that most people have heard of. And it’s amazing. If you look at like your place in Seattle, your personal residence, by the way, do you know offhand? Or can you just calculate it real quickly? While I’m yapping? What the cost per square foot is at your lowest price, Elizabeth?

Elisabeth Embry 30:15
Sure. Oh, yeah, I’ll calculate it because I don’t know. I mean, we’re not some of the market yet. So it’s not that

Jason Hartman 30:23
I know but just at the price, you’re going to list it out. And and so you really see that your risk is so much lower investing in these good solid linear markets we recommend and you can see all those markets at Jason hartman.com. Click on properties. And you’ll see the eight or so markets that we’re mostly active in. We do have some other markets we do a little bit of business and but those I think eight or nine that you see there are the most active right now. And it’s really hard to lose your shirt in those markets. If if the trend reverses and things go the other way. Two reasons, you know, this is all about sustainable investing, not just one reason, but two reasons. The first one being the LTI ratio being very favorable land to improvement ratio, when that construction cost is high as a ratio to the land value that puts a floor on any potential losses. It’s like a stop loss, if you will, right in the stock market, a stop loss. And then the other part of it is that the cash flow is so good, that you know, even if the property goes down in value, you know, you can just maintain it, you can you’re never in a position, hopefully, where you’re ever forced to sell a property at the wrong time. That’s what sustainable investing is all about my philosophy of sustainable investing. Never be forced to sell a property at an inopportune time. Did you have that square footage

Elisabeth Embry 31:56
depending on how we price it between probably like two 65 to 300

Jason Hartman 32:02
Yeah, per square foot. Okay, so your house to rebuild your house now it would be more expensive in Seattle, I would venture to guess that the cost of construction to rebuild your house would be somewhere around $125 a foot in Seattle. So you can see that you’ve got a lot of land value in that property. Okay. Yeah. You’re saying that is not a good market to be in? Well,

Elisabeth Embry 32:25
quite frankly, the market is appreciating 1% per month. That’s insane.

Elisabeth Embry 32:31
And so I’m calculating now my, one of my Memphis properties.

Jason Hartman 32:35
So you’ve got properties in Memphis, Indianapolis. I think you have Atlanta

Elisabeth Embry 32:39
to $60 $62

Jason Hartman 32:43
Isn’t that incredible? Yeah, surprise. Memphis.

Elisabeth Embry 32:48
Yeah, Memphis property. And again, it’s the replacement property that we’re paste. The replacement cost of materials is pretty static. It’s the labor that really, I think drives A lot of fluctuation Okay, so

Jason Hartman 33:02
so you’ve got the Seattle property at $300 a square foot, you’ve got the Memphis property at $62 per square foot. If that Memphis property burnt down today, it would probably cost you 75 or $80 per square foot to rebuild it, okay? If the Seattle property burned down, it costs you $125 to rebuild it, but you’d have or you know, somewhere in that ballpark, but you’d have an expensive lot And yeah, it folks this philosophy makes sense invest in these boring linear markets that you don’t hear about on the news you know, all the all the markets at Jason Hartman calm slash properties, and you’re just much less volatility, much better cash flow, and you can diversify geographically be in several markets. So Elizabeth, I think you and Neil are making a good decision selling your house. I hope it doesn’t double in value after you sell it. Otherwise, you’re gonna then you’re gonna think No, that wasn’t so good, but Well,

Elisabeth Embry 33:59
honestly. We can look at my the price of my Amazon stock after I sold it, which is now I think at almost $1,000 a share.

Jason Hartman 34:08
So, you know, I used to work at Amazon, by the way. Yes, absolutely

Elisabeth Embry 34:11
work there for four years and I work there. relatively early in the company’s history. They worked there for four years. I,

Jason Hartman 34:20
what was your position at Amazon, by the way?

Elisabeth Embry 34:23
Oh, so I was a senior manager for product and program management. So I worked in two different groups. And so I had a team of Gosh, I don’t know like 20 ish people. And I my first position I was in the ordering, flow, or manage all of the programs. So basically, the whole of the Amazon e commerce engine sat on the work that my team did for everything. And the second decision I had was it was in a product line and it was It was a fascinating role that I learned a lot but it’s

Elisabeth Embry 35:05
the role today I think would be equivalent of a director at most companies.

Jason Hartman 35:10
Good stuff. Good stuff. Yeah. So just wanted to kind of I mean, your your backgrounds in tech and software and project management and you had a big team at T Mobile that you manage. What a couple hundred people or something.

Elisabeth Embry 35:21
Yeah, yeah, about 200 people and you know, it was funny because I think a stress was the same. They were very different types of stresses. You know, their products were, were really exciting. And Amazon a, I really enjoyed that time.

Jason Hartman 35:37
Good stuff. Well, hey, Elizabeth, we’ve got to wrap it up. But thank you for joining us today. And the women investing network podcast is out there so you can find it on iTunes or any podcast platform, just newly launched please go listen, rate review, subscribe to that show, and of course to this show as well and we will talk to you on the Next episode.

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Jason Hartman welcomes Gary Pinkerton back to the show. Gary talks about his tenant turnover experiences and how he reduces “tenant turn” without spending a lot of money. Then, Jason and Gary discuss the benefits of two-year leases with built-in rent increases and how a service like Home Advisor is an inexpensive way to self-manage. They also talk about investor culture and why immersing yourself can make you the best investor you can be.

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.

Jason Hartman 1:04
I want to take just a moment to tell you about renter’s warehouse and award winning property management company that services over 13,000 investors with over 18,000 properties nationwide. They are the only residential property manager rated by Morningstar. Their centralized model with local staff provide trustworthy support across multiple markets. These experts track all aspects of your property and never try to profit from maintenance repairs. Plus you’ll enjoy flat rate pricing and warrantied tenants up to 18 months. Check this out for a free three month property management trial. exclusive to Jason Hartman listeners visit renters warehouse.com slash Jason again that’s renters warehouse comm slash Jason Welcome to the creating wealth show. This is your host Jason Hartman with episode number 836 836. Thank you so much for joining me today, as I am happy to be back in the good old US of A Yes, I have left the land of scarcity and lack and that is the European continent. I know. It may be a surprise to some of you that I say that but, you know, from an economic only standpoint, I am only talking about economic and standard of living. I am not talking about culture and history and lifestyle, but only from the economic standard of living kind of kind of point of view. America is the land of abundance and Europe, where I was born, is the land of scarcity. You know, it’s like every time you walk into a hotel room, you got to put that stupid card and the light switch to get the electricity to go on. Every day. You know, the cars are small, the houses are small thing is little, you know, like you take a shower and the little water heater that heats the shower water runs out. It’s just the land of lack. You know, folks, if you live in the US, or Canada would be included in this, or, you know, many other countries, of course, you just, you just don’t know how lucky you are, you know, it blows my mind, again, that the Obama and Bernie Sanders crowd wants to make America more like Europe. I just don’t get it. It blows my mind. I mean, look, I was born in Europe. I’ve been to Europe a zillion times. I love going there. But America is the land of abundance. Now, of course, the waistline of Americans is too abundant. And in the end, you know, that’s there. There are problems with it. It’s not all good. But I just tell you the free market, the abundance thinking is such a important part of your success as a real estate investor and as a person in life in general. Today, I want to welcome back to the show, our client and venture Alliance member, Mr. Gary Pinkerton, former nuclear submarine Captain Gary, welcome. How are you? Thanks. Thanks, Jason. I really appreciate it. This has been two or three times I’ve been on but and it’s always humbling, but I you know, I feel like it’s a it’s an awesome experience. So thank you for inviting me back. Well, thank you for joining us. And yeah, so you retired from the Navy? What about a year ago now?

Gary Pinkerton 4:29
Pretty close. Yeah, I stopped. Stop working. And officially it was August 1, but almost exactly a year ago when I finished in uniform.

Jason Hartman 4:36
Well, during the Great Recession, you know, we heard a lot about people being underwater. You used to be underwater too.

Gary Pinkerton 4:42
I did. I did, but it wasn’t an accident. That was on purpose.

Jason Hartman 4:45
That was on purpose in that submarine. I that’s just such an amazing thing. You know, Gary, I tell you, we have got to line this up as a venture Alliance weekend trip. You got to take people onto a submarine sometime we got to make that work. Somehow,

Gary Pinkerton 5:01
yeah, you know what I could, I think we could totally do that just as a tour and I could guide the tour who would the whoever’s on duty on the ship would probably appreciate me doing it instead of them doing it. But, you know, it would be a great opportunity to kind of add just some personal insight to it, I think it might be great to or anytime that we line this up near one of the coasts, we could do that.

Jason Hartman 5:20
I definitely want to do that. And, and you know, what we’ve got to do, as part of our this would be a great venture Alliance mastermind photo op, is if we could, you know, have one of our venture Alliance members stand in one of those keys. And another one you see at one of the keys, you know, in the movies, how you turn the key to launch the nuclear missiles, can we launch a couple nuclear missiles just for fun? No. And in fact, we’re

Gary Pinkerton 5:43
not even gonna get that photo, I don’t think but it’s a good idea.

Jason Hartman 5:46
Well, they do it in the movies. It looks pretty neat how they do it, you know? Is it really like that, by the way, is like the you gotta turn two keys are a key. It’s probably not like that anymore. It’s pretty

Gary Pinkerton 5:57
close, because there certainly is a whole lot of redundancy. And backup and more than one person involved, which many of you think about it as it now I’m a private citizen with some with a family here. And I’m really happy the fact that there’s a whole lot of backup before, you know, before we make those kinds of decisions. So yeah, it’s pretty similar.

Jason Hartman 6:13
Yeah, well, interesting, very interesting stuff. Well, hey, Gary, you said something to me today that I thought was really important. You know, we were we were using boxer and boxing back and forth. The best way to communicate ever invented in human history. voxer. We were doing that this morning before we started recording the show. And you said that you wanted to talk about something that’s really I think, super important to real estate investors. borrow a phrase from poker thinking of Keith, our venture Alliance member who’s a professional poker player, and it’s called the turn the turn. Okay. Anyway, that’s important to a real estate investor, because this is the area where yet you just lose money and it’s on the tenant turn. So it We’ve talked a lot about this over the years, of course, but it begs the question, what can we do to number one, keep our tenants longer. Number two, make those turns between tenants. I’m talking about the time between the tenant when you may have to do a make ready to get the property ready for the new tenant. This is something that can really eat up, you know, eat up a lot of your return on investment, and, and the turn is vitally important. So the first thing on the turn, I think we want to say to our listeners and investors is don’t have the turn. Okay? Sorry. So, try to avoid the turn completely the tenant turnover and keep the tenants there, but don’t do that. At the risk of being one of these dumb landlords that doesn’t maximize yield, there’s a balance between these two, right. You want to increase rents, but not enough to motivate the tenant to move Obviously, so maybe, let’s talk about that. But then let’s also talk about what can we do to make our properties more bulletproof. So that it’s cheaper so that you don’t have to spend a bunch of money on the turn. And the other thing is we have this constant issue, Gary, of the property managers if you’re not self managing your properties, okay? Now, this is something that if you’re self managing, you’re not going to run into it as much, as long as you’re not wimpy with your tenant. Don’t be wimpy with your tenant, okay? You know, be a business person and have expectations for them and make them live up to it. And here I’m talking about security deposits, okay. But with property managers, we have this inherent conflict of interest. You know, there’s an old saying you can’t serve two masters, right. And property managers kind of do serve Well, two masters and then themselves. So they serve the owner. That’s truly their client. Okay, that they have the fiduciary obligation to, hopefully that’s a fiduciary obligation. I don’t know if it truly is in every state, but it’s an obligation because the owner is the one paying, right and that’s who the contract is with. And but then they also have the tenant. And, you know, they don’t want their name all over Yelp, and all these complaints sites, when they are aggressive, or maybe not even aggressive, but force, they’re the tenants to uphold their part of the bargain. So if they, you know, if they damage the property, the property manager can be reluctant to charge the tenant for repair items. Okay. And this is one of the reasons I really like self management, one of the many reasons I do like it, you know, and maybe whatever else you want to talk about. And of course, you’re a very experienced investor, you’ve got many properties that you’ve purchased through our network. And you know, you’ve been investing with us for years. So tell us about some of your thoughts and experiences on the turn.

Gary Pinkerton 9:58
Yeah, so I’ve had quite a few recent experiences. I’ve also had a lot of conversations with Fernando and everyone I think is very familiar with Fernando and he and I, it’s really funny. My hat is off to that guy because he and I went to the venture or excuse me, the meet the Masters in 2012. And we were both basically starting right there. I went a little bit different direction with a couple investments, syndicated things that I participated in, I wish I hadn’t, I didn’t lose a lot. But you know, kind of long story short, and then I’ll get back to the property management, Fernando went directly in the properties and has, you know, quite a few more. And so he’s seen this a lot more than I have. And but I’m starting to see quite a bit of the term as well. And I think to kind of generalize things, what seems to happen when you get a recent rehab property and a B class kind of neighborhood, whether it be a you know, a four Plex, or a duplex or even a single family is that there’s this churn at the very beginning, because you don’t always have the best tenants in there. But the thing is that when you do get that really good, dependable tenant, eventually it may take the second or third time. Then when you get that tenant, you got to recognize that you have that time And you don’t really want to lose the tenant. And they will typically stick around on their own because that makes them a good tenant. And, and so there’s a lot of churn at the very beginning on a property it seems. And then you settle into I had somebody for five years, and then I had somebody for two years, and then, you know, maybe was another one year one, but then I jump back in and I get a three or five. So it’s really important to find that person, and then do things that is necessary to hold on to them. But also, as you pointed out, don’t be wimpy. Don’t be a bad business person. So, for example, I have a class a building in San Antonio that I bought before, you know, I joined the network several years ago, I had a tenant there, that was really good. But the market had, you know, she was there for two years and this spring it came due for her to renew her lease and she said, Listen, I just haven’t been keeping up with the rental increases. So I actually lowered her rent not raised but lowered it by $50. that put us about 150 under market, but it’s a class a building. So that’s not a large percentage. It’s like less than 10% and I let her renewable That year but we did a two year lease so the next year was higher. And and so that helped me not have to have a 1500 dollar turn. It helped her not have to spend money to move and most importantly, I had been to the property recently. I knew she was taking care of it well, so it was it was a win win for everyone if you go to like uh, you know, I have a property in St. in Memphis for example. And you know, I have several properties there and this is a bad egg but I have several good eggs. This one I got in October and put a 24 month lease on and so now we’re approaching six months in the

Jason Hartman 12:33
tenant right right there is one way to decrease the turn is to destroy your leases. Okay, it works right? Well, yeah, it does nothing, hey, nothing always works. Okay. But just as a general rule, I believe you should try and do two year leases on your properties. Okay. And if you want to, you can build an escalation into that contract. It doesn’t mean you’re leasing for you know, say the property is leasing for thousand dollars a month doesn’t mean you’re committed to $1,000 a month for two years. You just say the first year is $1,000 per month and in the second year is $1,030 per month. Okay. And that’s pretty easy to do, you know, to have an escalation built in. That’s maybe, you know, 3%, right. 30 bucks. So yeah, go ahead. So two year leases first first first rule. Yeah.

Gary Pinkerton 13:24
Right. And I like the idea, right. And this isn’t a new idea, but I like and have had good experience with the concept that you always want to and you’ve said this a lot, Jason that you always want to have your clients with the understanding that rent will go up each year when it’s renewed because the market economy inflation is going to go up in most areas, right. So a small right your tenants or tenants

Jason Hartman 13:45
and, and get them that’s a very good Gary, get them used to that like you’re training them, okay? Even though it’s just a minimal increase. You’re putting it in their mind right, planting that seed That’s just normal. That’s what happens rents go up. Okay.

Gary Pinkerton 14:04
Right. And this one property 24 month lease, recently rehabbed. I mean, it was newly rehabbed in October, and the tenant never wants paid on time, right? So we knew from the beginning, my wife, Sue does, you know the books for this, and she kept telling me, Hey, we’re not gonna want to keep this tenant around. But the other thing, she said, this was really insightful. She said, that, hey, the management company, in this case, and this is not uncommon, the management company is keeping all of the all of the late fees, which is fairly standard. But again, it goes against this idea of the manager and the owner having our interests aligned, because what’s his

Jason Hartman 14:45
conflict of interest? I hate that part of it. And we’ve spoken out about that a lot, you know, and what we mean there, folks, is that when the management company keeps 100% of the late fee, well, you know, Follow the money, right? What’s their motivation gonna be? It’s gonna be to, to make the tenant pay late fees and that makes them predatory on the tenant. Okay? It’s like incentivizing them to have this bad relationship with a tenant. Now tenants are late, okay? I mean, that happens. But you don’t, you know, you don’t want that to be such a high profit motivator for the management company, you know, $50 late fees every month 5% of say $1,000 rent, right? You know that. That’s a big difference, when the management fee is only 100 bucks a month, for example, or 90 bucks, and they get a $50 late fee. Well, you know, they’re gonna almost encourage that they’re gonna train them to be late. And then the tenant feels like they’re getting ripped off. You don’t want the tenant the tenant ultimately, you you’ve mentioned it, but like is you’re not really your client. But you said client and they are your customer. Okay? So you want to have that relationship good. You don’t want the tenant to feel like you’re getting ripped off every month.

Gary Pinkerton 16:04
Right, exactly. And so and Sue even mentioned, he’s like this guy is paying later and later every month. And so he would scrape together 150 $200. And 100 of it would go or 75 of it would go to the management fee. And then he would leave there dejected, and you know, upset that he has scraped that together, and it didn’t pay off even half of what I owe this month. And so you could just see it happen. Well, eventually here in the beginning of May, we get a notice from the the property manager, and this was our first indication that that the place was raking said, Hey, your property’s vacant. Here’s your make ready, and make ready was 20 $300. And the place just got rehabbed in in October. Now there’s some contributing things to that. One of them is that they made the client as sorry I said it again. They made the tenant the customer very upset every time he had an experience with them and he did no favors and trying to keep that property in good shape. But But also, you know, there were some mistakes on the rehab that, you know, should have been things that should have been done that were fixed in this round. And it was a fresh set of eyes from the management company didn’t happen to be the same company that did the rehab. So, you know, some of that 2500, I will admit is, you know, stuff that needed to be done at the beginning, but about 1500 of it really wasn’t. So if we go Jason, back to where you were, you know, we were talking about what incentivizes the management company, they, you know, they placed the first tenant got paid for that, they got a ton of late fees, they’re going to get a really nice, you know, 15% markup on all of the make readies. They’re going to get to place another tenant. So, you know, that’s fairly tough. And I think the way around that, again, some of this when you get a new property, you just have to keep working and making sure that you know, maybe you get involved and who they place there and ask them questions. I do that often. So I think, you know, you just turn through but but how do we prevent that from being expensive, I think is one of the things I want to talk about, right that that term? Yeah,

Jason Hartman 17:59
yeah, no question. about it. Okay, so did you know I want to make a comparison as you were speaking, Gary, about your experience with the property managers in the late fees? Do you know what some of these property managers are? They’re kind of doing they’re basically running almost like a payday loan business. Yeah. Or a payday check cashing business that’s not, you know, cashing your check in a bank, right? Where these fees are just exorbitant, and these people live hand to mouth, you know, a lot of them and there are a bunch of very expensive financing options, you know, that the term predatory lending comes to mind because almost what it is where, you know, these, these people are not financially sophisticated, and they’re just trying to get by and, you know, you put them in a position where your tenant is basically spending five to 10% extra per month, just because they’re late on the rent and is this vicious cycle, you know, I almost sound a little bit Like a socialist here, you know, but but it’s really it’s not fair. You know, it’s not fair, I’m gonna stick up for the tenants. It’s not fair to the tenants. So one of the principles that we constantly talk about here on the show and in all of our teachings is you’ve got to have an alignment of interest, okay? And if you if you don’t get control of the relationship, and you do decide to have property managers, which is fine, there are some great property managers out there. And there are some bad ones too, no question like anything. But if you don’t get control of that relationship, either by self managing or just controlling the property management agreement and relationship there, and making sure things are in alignment, you know, your interest and your tenants interests, and your managers interest should be in alignment as much as possible. I won’t go into that because we’ve talked about that deeply could take you know, another hour, but you know, in past episodes Did they or go to Jason hartman.com? You can search terms like that property management, flat feed property management alignment of interest. You there’s lots of discussions about that on prior episodes. But But yeah, how can we minimize cost of that, that tenant turnover when you have it?

Gary Pinkerton 20:17
Well, I think first, you know, the customer’s always right, right? And you can’t always say the tenant, give the tenant whatever they want. That’s not really what I mean. From the managers perspective, the owner is a customer and the tenant is a customer, as you commented, they kind of work for two people. So I try to prevent the vacancy if I can do that to begin with as an example, and then I’ll get to how do we minimize the cost, but I have a property in St. Louis, a very good tenant, and they’d been there on a two year original lease, paid always on time, very, very good tenant, taking Nice, nice care of the property, but it had a roof issue. So over water damage over time. Some door hinges need to be fixed and You know, some other pretty, you know, minor things re cocking the bathtubs. And so they basically said, Hey, we’ll sign another lease, we’d rather not increase because there’s problems here in the property. And I said, Well, I if I, if you don’t sign again, then I’ll be able to fix all those properties and raise the rents substantially quite a bit above what they’ve paid. And, and so we kind of came to basically an agreement, they said, Well, we can’t afford to raise it, you know, to the market rent right now. So instead of me paying 2000 to 2500, to do a turn on a property that it’s been quite a while, so it would probably cost that. I said, Hey, I’ll take care of the highest priority items for you kind of a mini turn cost. And then they went up partway in the rent, and I got to retain a really good renter, so that that book is not yet published, but I’m hoping that that’s how it comes out. It seems like that’s where it’s going, as far as you know, as far as what can we do you guys have already Jason, you’ve already talked to you and Elizabeth both about some really good options and I’m starting to put those into place. You know, so the the wood laminate floor is a great option. I even had a property there in St. Louis where we were gonna put that in but that extra expensive 1500 dollars my property manager said, Hey, you know the guy who does that make readies for us just recommended that we just pull the carpet and we paint it because that’s standard for the properties where we are here in this location. So I think being able to you know, having a good conversation with a manager that that you trust and that you have good rapport with. They will save you a lot of money because they know the area they know what’s expected when the tenant the potential tenant comes in looking to rent your property.

Jason Hartman 22:33
Yeah, okay, so that’s all very good stuff. So you want to make the property the physical condition of the property as bulletproof as possible. And you’re referring to our our client and venture Alliance member has been on the show Elizabeth Embry, who by the way is hosting a another show the women investing network, so check that out as well and fast

Gary Pinkerton 22:51
as possible.

Jason Hartman 22:53
Yeah. And she’s doing a great job with that. But Elizabeth talked about the you know, the laminate floors that the flooring. I mean, you know, it’s an amazing time to be alive, right? new material sciences, better flooring that’s much cheaper to maintain over the long haul. It’ll cost you a little more than carpet in the initial part, but in the long run, it will be a lot less expensive. So I did one of my houses in San Antonio, you know it came up it was like six, seven years I owned it and never replace the carpet or anything and it was finally just time to do it. Once this last tenant moved out. It was about $1,000 more and I did the entire house in the wood laminate, and that house has now got bulletproof flooring, okay, you know if there’s a tear in that flooring, it’s really easy to fix it and replace it. I don’t think you should do the dark flooring. I think you should do kind of a middle tone. Okay, color is an issue. Of course you know when it’s dark. Number one, it shows all the dust and number two makes the rooms look smaller because darker rooms look smaller, of course, and lighter rooms look larger. And then the other thing that I’m a huge fan of is on the paint, you either do low sheen paint, or you do you know, the more like enamel ish paint, okay, eggshell is the name of the finish, not the color, there’s a shell is a color, but it’s also a finish. Okay, so low sheen or eggshell finished paint and rather than flat paint on the walls which scratches and in just any little thing looks awful, okay, on the flat paint you do the low sheen throughout the house, you know, on the walls and the scuffs and scratches and fingerprints, they just wipe right off, you know you can just clean or any household cleaner, you can just wipe it off. And those walls become very durable. And I just think back to one of my own houses in which I lived the last wall actually the last house I lived in that I owned back in Orange County, California, which I I talked about when I teach people about the LTI ratio and the Hartman risk evaluator. That’s the house okay. I lived in that house for seven years and I put a shell finish paint on it and that paint looks good for seven years and I was not easy on it. Okay. So you know make the walls bulletproof and the flooring bulletproof by doing those two things, okay? That will really reduce your your long term costs. So you got to spec that out, you know if you’re, if you’re buying a property today and that local market specialist in our network that you’re buying from, you know, they do different types of rehabs right? And they always want to deliver you the house at the lowest price, but you may want to tell them look, I would like to spec this house at a higher level I want to, I want to spend, you know, 200 bucks more and I want low sheen paint throughout. Okay, and I don’t know what the exact cost will be but you know, it’ll be a little more and I want to do the laminate flooring, the sort of wood looking laminate flooring throughout in Have any carpet and make it a lot less expensive. So I think those two things are very valuable.

Gary Pinkerton 26:07
I agree I agree and the only other thing I the two other I guess quick things again kind of market dependent, but I have a couple markets San Antonio and and for whatever reasons St. Louis, there are areas where the air conditioners every year have substantial problems, air conditioners and heating systems. And so I’ve gotten into a routine where I pay for that I’m sure everyone has experienced where some local either your property manager or if you’ve ever used a heating service, that then they contact you but they offer this you know this come check it out at the beginning of the season very nominal fee of $75 or $100 or something. I’m using that now because the when when your conditioner fails or when your heating system fails, it’s when the when Mother Nature has tested it and it’s tested every other one in the area too. So you will pay out the nose your tenants will be extremely unhappy because they It’ll be delayed in getting response because they’re busy with every other house that just got tested. So I do that now. And I’ve gotten good experience and haven’t had the crises that I had every year before that. And then the other thing I would say is don’t be hesitant to use a service, something like home advisor, I love home advisor. I’m self managing a property in San Antonio, Texas from New Jersey. And I use homeadvisor all the time. And it’s incredibly inexpensive. Tell us how you use it. What do I use it for appliances, a stove broke a dishwasher broke. I’ve used it to have a gentleman work on replace, you know, the control valves in a bathroom. So just really for any maintenance service. I simply just put in what the problem is and the zip code and you can choose whether you want people to call you immediately. That’s typically what I do and three different people providers will give me a call a couple of them then we’ll head out to the property. There’s no sometimes there’s no visit charge. So it’s not a big commercial about them but there’s there’s other stuff services available. But don’t be hesitant even with the sure there are

Jason Hartman 28:03
no and of course, Angie’s List is one of them. The problem with Angie’s List, at least last time I was using it, I don’t really use it anymore. It was all localized by zip code, you know, and we’re, we’re nationwide investors. So, you know, we’d have to join Angie’s List in each of our markets where we own properties. And and that’s, you know, Gary, that’s one of the great things too nowadays, you can do this with a couple clicks of the mouse, right? You can, you can basically run your real estate Empire, you know, nationwide, yourself, and there’s so much transparency now that was not there. Think of all I want everybody listening to think of all of the 10s of millions of real estate investors over the last few decades that have made fortunes investing in buy and hold rental properties. And they didn’t have this kind of ease of use and transparency that we have today. It is an amazing time to be a real estate investor. You don’t need to rely on, you know, some estimate from a property manager or a contractor. You can easily compare things. No one can be su anymore about the cost of a garbage disposal or a cost of whatever, because you can go to Home Depot’s website and you can find out yourself.

Gary Pinkerton 29:22
Yeah, exactly. And that’s what I was going to say, Jason is that I would not hesitate with those services available like that. And the great experience that I’ve relayed to you that I have every time with this, I wouldn’t hesitate just, you know, checking you’re doing this even when you have a property manager, for example, in that property that went vacant early. One of the things on the make ready was that the dishwasher scene seems to be broken, probably needs replaced. And when I asked them, could you explain that? They said, Well, we couldn’t get the door open. And so their estimate was $450 plus 15% markup and I said that’s okay. That’s okay. I’ll take care of that myself right now and I haven’t yet achieved That the persons coming next week, but what I fully expect is that the door was stuck, you know? Or even if not, it’s still going to be far less expensive for me to put a brand new one in, then have them go do that. So it was simple. Again, it was a click of a mouse. So just another thought on how you can reduce turn by just a little bit of personal involvement that took me 10 minutes.

Jason Hartman 30:18
Yeah, and yeah, you know, it man, I might even take you less than 10 minutes to you know, it’s really, really amazing. Just have the discipline and the initiative to do some of this stuff. And at the very least, it is going to, you know, we’re all about the empowered investor, right, giving you the tools, whether they be the software tools that you can find it like real estate tools.com Okay. The software company Fernando and I purchased a couple years ago. So you know, great tools there. The other tools you can find at Jason Hartman, calm and helping you be the empowered investor. And one of the things you do even if you don’t actually take any of these To the finish line, if it’s just an email, in, here’s an example of how it plays out, you get an email from your property manager or your tenant. And it says this and that and a lot of your tenants, if you’re self managing, you’ll find your tenant to be incredibly helpful to you, where they will do a lot of the legwork for you. It’s amazing to me how well that works. You know, the tenant, a lot of times, you know, they’ll say, Hey, I already called someone and, and they’re coming over to look at this, you know, this repair item, right? And the property manager might say, Hey, we got a complaint from the tenant, you know, we need to fix this and you know, then they have someone go out and take a look at it. If you simply go to Home advisor or you go to, you know, the Home Depot or the Lowe’s website, and you look up this item and just copy the link and paste it into the email and say, Well, I checked the Home Depot website, it looks like we can get this part for you know, $52 and 36 cents, right there. The property manager or the tenant are going to be, wow, this guy’s on the ball, okay? And even. And here’s a little secret, even if you’re not on the ball, you want to fake it till you make it. You know, you want to make them think you’re on the ball, that you are a sophisticated investor who’s not going to put up with a bunch of crap and overcharges and you’re not going to pay through the nose, you’re not lazy, you’re gonna click your mouse a few times, and do a search or two on whatever it is, and you’re going to be the empowered investor. Okay? Simply by sending that one email that you will change the nature of the relationship that you know that email that shows Look, you’re not just taking their word for it, you’re checking things, okay. And that’s gonna make you a much more successful investor.

Gary Pinkerton 32:55
Absolutely. So I promised to the audience that I will keep checking in This I mean, reducing the turn is kind of becoming a passion for me because I think it’s important, you know, very simple numbers if you were making, you know, nets $250 a month on a property. And you were in this process where where it was because it was the property managers best interest to turn it every year, not even offer a renewal, you know, then then you would be, you know, setting up to to make $3,000 a year, right? Well, if your turn is 2000, every time because you haven’t thought, you know, closely about how to reduce that. That’s not a very good profit. And there’s a lot of other dimensions to real estate that make it very valuable. But that one cash flow would not be a good one in that scenario. So we have to figure out how do we extend this out to two or three years between turns? And how do we get that turned down to 1000? Maybe 1500. I think it makes a huge difference.

Jason Hartman 33:46
Yeah, very, very good point. Well, Gary, I know we were going to talk about a couple other things today, but we have run out of time, as as, as usual, but I think this is an important topic and thank you for sharing your opinion. Case Study as a as a client, with our audience again, we really appreciate it. And we’re gonna have you back on soon. We’ve got a couple of news items we want to talk about about the, the disappearing middle class about Mr. Zuckerberg, the biggest invader of privacy in human history besides the folks at Google. And what he thinks I, you know, I think he’s got political aspirations. I can see a Zuckerberg presidential candidate. And he’s, I want to I want to talk about his universal income stuff. You sent me an article on that. That’s fascinating. And we like to talk on the show about the macro and the micro things, okay? Because they’re both important, you know, the big picture stuff, societal government, political, and then the detailed tactical stuff like reducing the cost of tenant turnover. But Gary, before we go, you know, I just want to ask you about some educational stuff real quickly, and maybe share your thoughts on investor education with people Because you, like so many of our clients have been really just very motivated about sort of being in the culture, if you will, staying in the loop, coming to events and being really involved in and we’ve got two events coming up and you’re coming to both of them. We’ve got our our venture Alliance mastermind event and, and you were like, I think our third member of the venture Alliance that’s coming up in Chicago in June. So it’s, what about three weeks away, I think. And then we’ve got our Oklahoma City, Jason Hartman University, Jq and property tour combination coming up, first weekend of July. What are your thoughts about those two events?

Gary Pinkerton 35:40
Well, venture Alliance has been a really, really stretching process for me, you know, from all aspects, you know, I mean, it’s not inexpensive and you did that on purpose to stretch people and it’s certainly you know, worked in my case, you know, especially three years ago when we started this are two years ago and so it has caused me to stretch it’s caused me to raise my The game and, and the people have gotten around have been far more what I’ve learned from them and shared and the experiences has been far more than you know, any monetary cost, it’s meant for me and I think everyone else who tries this would would experience the same thing. So I certainly invite everyone to come join us in the bigger our group gets the more value that gets added to every one of us. So I’m one of the most motivated people out there. You know, trying to tell others about it get people to join us because I’d love to have a bigger group even I’m learning a ton here and getting a lot of value, but it would be better. You know, if I just think about Keith and and Chad, you know, Keith being our, you know, our poker player and Chad, one of our local market specialists the most the two most recent and john, I mean, my gosh, some great people that I’ve learned a ton from so venture Alliance, really awesome. On kind of on the other side, more on the basics, go to school stuff with JJ University, and the area tour there in Oklahoma City. Very excited to go back to that. But for me, you know, repetition is the mother of success. And, you know, Zig Ziglar had a quote and I know you his, you may know his quotes better than me. But it was something like you can change your world or you can change your results by what you put into your mind. And so I go to those kinds of events to conferences to education events that you put on Jason, for two reasons, one, because for that, quote, by what I put in my mind, so if I’m, if I’m continuously putting that information in my mind, thinking about it going over how it why this process makes sense, then it keeps me focused on that. And it kind of keeps me on target. But it also you know, refreshes things that I’ve forgotten in the past or, you know, paths I wanted to go down but kind of got distracted. But then the other quote about you are the sum total of the five people you spend the most time around Well, I want to spend Yeah, that’s right. I want to spend my time around guys like you and adventure Alliance, but also people who are long term investment, wealth creation minded and everyone in that rooms like that. So for me, it’s amazing. It’s rejuvenating for me, but it’s also That repetition of learning. You know,

Jason Hartman 38:02
when we had our venture Alliance mastermind weekend on Jekyll Island, Georgia, the the birthplace of the Federal Reserve and so we had G. Edward Griffin speak at our last meet the Masters event. He’s been on the show several times as well. They the author of the creature from Jekyll Island book, but I’ll tell you one of the things that my mom said my mom came to that event. I think that’s the only venture Alliance event she’s been to. But she said she said to me afterwards, she said, Jason, you know, this group you have is so stimulating. They’re constantly like reading books and going to conferences and learning things and, and they’re just, they’re just so engaged in life and she just said she couldn’t believe how stimulating that that was to to sit around the boardroom table. But interestingly, in the room, where they founded the federal reserve the Federal Reserve room at the Jekyll Island Hotel and resort or resort in club or whatever it’s called, where we stayed. And she said, her mind was just expanded from that, that meeting. And that’s what the venture Alliance is all about. So, you know, up your game, I mean, you know, get take it to the next level, check out venture Alliance mastermind.com for that, or, or just go to Jason hartman.com. Click on events, you can find information in both places. And we’d love to have you involved in that you can always come as a guest to those events on a one time basis. Of course, the property tour and Jason Hartman University event for the weekend in the first weekend of July on Saturday and Sunday, are in Oklahoma City this time so you’ll see properties properties are in short supply. inventory is very scarce.

Gary Pinkerton 39:46
That’s for sure. Certainly for true. That’s certainly true.

Jason Hartman 39:50
No question about it. But we’d love to have you join us for both of those events, folks. So check those out. Jason hartman.com and venture lions mastermind calm and in Gary. Thank you so much. for joining us today appreciate having you on the show and appreciate you being so giving and willing to share your your personal experiences and your your case study as a client. We appreciate that. So thank you.

Gary Pinkerton 40:11
Absolutely. Thanks so much. I look forward to round two when we finish up what we’re going to talk about.

Jason Hartman 40:15
Alright everybody, we’ll talk to you on the next episode and happy investing. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice of any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to To make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

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Jason Hartman and Investment Counselor Oliver are on the podcast to talk about current market conditions, the importance of attending live events, and a solid foundation of linear markets. They break down the benefits and gave an example of how to get rich with linear market properties. They also discuss why it’s good to have a portfolio that includes a smart mix of linear and hybrid market properties to continue to grow your wealth no matter the economic climate.

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

Jason Hartman 1:03
Welcome to the creating wealth show this your host Jason Hartman with episode number 845 845. Thank you so much for joining us today, listeners from around the world in 164 countries. We’re always glad to have you and we appreciate you following the show, referring people to the show rating and reviewing the show on whatever podcast platform on which you’re listening. That is much appreciated. So it is a hot hot day here in the no income tax state of Nevada. I’m here back in Las Vegas from my whirlwind trip in New York City. And that was a busy busy week in New York City. I’ll tell you a lot of interesting things I did there. And one of the things I was talking about when I was talking about my visit to the Tony Awards, it’s just so interesting how how like hypocritical this whole Hollywood crowd is and you know how this kind of elitist mentality of everybody else should do all this stuff. But you know, we we the elite class, we’re not gonna follow any of this stuff. So it’s just kind of ridiculous. And, you know, all of you listeners are smart. And you know, you get it, you know, but you get an outsider occasionally that listens to the show. And, you know, they pop in for the first time, and they don’t just know what they’re talking about. And so they, why do you say that? That’s ridiculous, you know, but it’s not ridiculous, folks. It’s, you know, there’s this old concept, lead by example, practice what you preach. And that’s what we try to do here. When it comes to real estate investing. You know, we’re very transparent about what’s going on in the company, what’s going on? what I’m doing with my personal investment portfolio. I talk about that all the time. And it’s just really I think the way to be I think it’s the way to live. You know, Abraham Lincoln, I remember I think it was Abraham Lincoln, maybe Miss attributing this quote, a long time ago, he talked about how, if you always tell the truth, you don’t need Have good memory. And the older I get the worst my memories getting. So you know, there you go. It’s just interesting. So back from New York back in Las Vegas, but it is so hot here I there’s a heat advisory this weekend’s gonna be like 115 degrees. But pay, you know, with all the money you save in taxes, you can afford a lot of air conditioning and a lot of trips to cooler places. So that is one of the big things that I really recommend if you can do it, if you can plan your life out, maybe you can’t do it now. But in a few years, see if you can get yourself living in a no income tax state. The lower tax jurisdiction makes a huge difference. The lower or zero tax jurisdiction makes a huge difference in your overall wealth accumulation. You know, you do that for 510 years, and the compounding effect. Remember Einstein called compound interest, the eighth wonder of the world of not paying taxes because You know, income property, of course, is the most tax favored asset class in America. But also if you can set up your, your jurisdiction, as such, it can really, really help you grow your wealth a lot faster. And that’s what we’re all about. So today, I thought I’d bring one of our investment counselors back on the show. And that is all of our Oliver. Are you there?

Oliver 4:20
Oh, you bet. I’m here, Jason. It is fantastic. Great to be back on the show. I know. It’s been a little while.

Jason Hartman 4:25
Yes, it has been a little while. So I’m glad to have you back. And I just thought I’d ask what is going on in your world, give our listeners some insight into the real estate investment marketplace. What I want to do is just give people some, you know, sort of firsthand on the ground, no boots on the ground type of feedback because you are talking with clients every single day. You’re helping them find good quality investment properties in all of the different markets in which we work and recommend. And you know, you’ve got your finger on Paul says all of our investment counselors do kind of what are people saying out there? How’s it going? Let’s just kind of dive into some of those topics.

Oliver 5:08
Well, Jason, it’s been a very, very busy year. So far, clients have just been very hungry for properties. They’re very excited about the markets that we’re into. And what I’ve noticed is there’s a definitely a snowballing effect. But I’ve seen as that as the client start to roll in and maybe pick up one or two properties, when they start to really see this happening. When they’re accumulating that cash flow every month. They see those monthly deposits come in and they start to get excited. They see it, they start to get excited, they see this really happening. And that’s the biggest thing is that some of them may have come into it. non believers or maybe just a little skeptical, they decide to you know, maybe put their toe in the water, try it out with one or two properties. Once they see it’s working. They just dive right in. And I’ve got some fantastic clients that have really taken a dive, really taking the plunge. Now one client His name is Adam, he’s in Connecticut. I’ve been working with him for only nine months now. And he is already on his 11th property and cash flowing over 30 $500 a month.

Jason Hartman 6:11
That’s fantastic. You know, you come into this as either a believer, a non believer, or maybe you’re just kind of agnostic, you’re not sure, but you’ll try it out. So you buy your first property, and hopefully it all works out. Well, this is far from perfect. Be the first to say that there are problems and and you know, hopefully you don’t, you know, that’s the thing. When you get those problems, right in the beginning, rather than waiting five years to have your first like bad tenant, for example, or surprise repair bill that can really derail your plan. You’re gonna have problems, okay. That’s why we have reserves. You know, I say that at least 4% of the value of your portfolio should be cash in the bank reserves. So if you have $1 million worth of properties, you should have 40,000 dollars in the bank as reserves for vacancies and eviction, surprise repair bill, whatever it is, but it does become very addictive. And it’s amazing because it’s a multi dimensional asset class, the returns you can earn now, what you said there for your client in Connecticut that has now purchased 11 properties and, you know, we’ve got people one or two properties in the beginning, you know, some come right into it and say, I want to buy two dozen properties, some people, you know, buy a lot more than that, okay. But 30 $500, you know, people to the to the uneducated listener, who may be just popped in and is hearing the show for the first time they might be saying, well, 30 $500 11 properties big deal. How are you going to get rich doing that? I make 15,000 a month in my day job. Well, there’s more to it than that. Okay? Because, like the iceberg that sank the Titanic. There are A lot of it is underwater, you don’t see it. It’s not readily obvious. You’re simply talking right now about cash on cash return. That’s it. There’s more dimensional return from the investment than that. There are tax benefits. There’s equity pay down. There’s inflation induced debt destruction. You know, there’s the power of leverage because with to create that 30 $500 a month in positive cash flow. And you probably don’t know this number offhand, Oliver, so you’re not gonna probably be able to answer it, maybe you do. But how much do they he actually have to put into that portfolio to buy those properties. And that, I want you to make the point of what you said to me before we started recording from our Memphis property to her recently, you talked about how the downpayment is not money you’ve lost. So anyway, tie those two together because I think those are instructive.

Oliver 8:56
Definitely. In terms of my client, he’s had to put in Anywhere between off the top of my head, I think it’s about 150 to about $200,000 or So somewhere in that ballpark.

Jason Hartman 9:06
Again, no one’s gonna be impressed hearing this now, because a 30 $500 a month $150,000 in really big deal. What’s great about real estate,

Oliver 9:18
there definitely will be people that will say that there’s no doubt about it. The most important thing, this is something that really came to light after speaking to one of our lenders at the Memphis event. one really important thing to notice, and let’s use the example of a house that’s $100,000. All that a lender is required right now 20% down payment, plus the closing costs. So I want to give the example of that $20,000 that’s going towards the downpayment, plus, let’s say $5,000, in closing costs, what I’m really want to make apparent to the listeners is that $20,000 you put into the property that doesn’t ever go away, that stays that that’s part of the equity that you now own in the home. What you are essentially paying for these houses is that $5,000 closing cost these that that’s pretty much what you’re doing to acquire this house.

Jason Hartman 10:09
The rest of the rest of it is money in the bank so to speak, right? It’s just exactly that that’s the savings account, because that’s equity. But I do want to kind of correct you on one thing. You said that that downpayment on the property never goes away. Now, it can go away, because the market can, you know, depreciate and that equity can evaporate, however, the likelihood is that it won’t happen. And even if it does happen for a period of time, it will come back in even greater quantity as history has proven over and over and over again.

Oliver 10:46
Exactly. Jason. So with that said, there’s such a drastic difference between the linear markets that we’re in where even if the market did take a pretty big hit and went down, let’s say 10% compared that to the coastal cities where the average price of the home like that In California, in San Diego, the average price of the home is $750,000. If that went down 10%, that’s 75 grand, that’s a lot of money. Not just that, but the rents here don’t make any sense. Whereas the big difference is that in these linear markets that we’re in, even though the prices may go down a little bit, you’re still going to be renting the house for almost the same amount that you were renting at the previous year. And even if it did go down a little bit, you may take a small hit on your overall cash flow. But that’ll go up as the years progress. And as you hold on to that property, the only time that you’ll actually lose is when you sell that asset. If it’s if it’s not cash flowing, you know, it’s a different story, but these will still be cash flowing, even if they did take a 10% hit.

Jason Hartman 11:40
Yeah, no question about it. So the linear markets much safer. Our plan is a very conservative plan as a, you know, regular listeners now, and that’s a that’s a very good point. Okay, so, so the only real cost of acquisition when someone buys a property are the closing costs because those are a cost of The transaction, so you lose those, your down payment is not an actual cost. And that’s a, that’s a good way to look at it. That’s simply savings. So if you’ve got money in the bank Now, let’s say you’ve got $200,000 in the bank, and you put that $200,000 into properties and you buy eight properties with it, for example, then the only part of that money you’re going to spend on those properties, and I say spend in quotes is the closing costs, the downpayment is not an expense, that is just moving the savings from the bank account to the equity account in the properties. So very important. It’s a capital account as it were in the financial, you know, parlance. Okay. So, God was looking for a word there, you know, and

Oliver 12:52
the other the other good thing too there, Jason, to remember is those closing costs are depreciable. Right?

Jason Hartman 12:58
Well, some of them and you Write a lot of them off, but that’s a complicated discussion. Okay. So talk to us about some of your clients and like what they’re doing. So that’s one.

Oliver 13:09
That’s one. I’ve got another couple of clients are a great couple, Michelle and Michael, they are now on their 14 property. I’ve been working with them for about a year and a half and they’re doing excellent, awesome. I’ve got a few other clients. His name is Frank, and he’s in Pennsylvania. He bought his first property with us about two months ago. He was so excited after the close of his first one, he waited about a month or two, he got us some cash flow. He’s so excited to move forward again. He bought two more, right away. I’ve got another few clients in the Colorado Springs area, and they I’ve got a few military clients and their captains, and they’re making some good income and a lot of savings. And they’re just moving forward with it. They see it, they understand it, and they just move forward with it. They’re the engineering types of the lot more the analytical type What I’ve noticed is there, they look at the numbers, they aren’t as tied to the emotional aspect to it. And they look at the numbers. They say this makes sense. Let’s do this all over. And we just, you know, we went ahead and move forward and I’ve got a few clients over there. they’ve purchased four properties. I’ve got a couple, they bought two properties in Tennessee. In addition to that, I’ve got one I’ve been working with one of our clients set then he did an intro for us a few months ago. From Yeah,

Jason Hartman 14:26
it was great to have him on the podcast and he also chauffeured us a very long distance trip. And that was very cool.

Oliver 14:33
Yeah, that was really nice a year we really intense

Jason Hartman 14:36
happens happens at doctors I recall. Yeah,

Oliver 14:37
that’s right. He is a doctor. He’s got a very, very busy schedule. So for him as soon as I start to explain all of this, he came to our meet the Masters event, and then he came to our Memphis event, and he’s also already signed up for our Oklahoma City Tour event. Oh, hey, we’ll see him in Oklahoma City again. Yeah, coming in. A couple weeks, few weeks, exactly, just two more weeks. So there’s still tickets available. And make sure to Find out a little plug that says

Jason Hartman 15:01
three weeks, actually. About three weeks. Yeah, right after Fourth of July. Yeah, we’ll look forward to seeing you there. And you can go listeners to Jason hartman.com. Click on events and get tickets for our Oklahoma City. Jay Chou live Jason Hartman University live event, good educational event where we dive into the deep numbers and we’re gonna have some panel discussions. Then of course, we’ll have a property tour of Oklahoma City as well and a bunch of great meals together and a lot of fun. Those are really fun events. So yeah, good, good stuff. Okay. So tell us more.

Oliver 15:32
So one more thing I want to stress. The second is that he is a doctor, he’s super busy all the time. And when he understood the concept, I mean, he’s only he’s already put six properties under contract and close on half of them already in the last four or five months now. And he understands that his time is incredibly valuable and he wants to make that harder and capital work for him. So he’s just dove right in and I’m you know, that’s just he’s done a fantastic job. Yeah, that’s great. Another few clients, I’ve got Craig and Sara over and Idaho, they’ve already they jumped in as well they put three properties under contract. And we just closed on two out of those three. So congratulations. And Brandon. He’s a, he’s a, he’s up in the northern county of San Diego area. And he came to our Phoenix event last year, he was the lucky winner of the contest came to the event. And then he just followed up right after the head, came to our meet the masters and to the Memphis tour and he’s already closed on his fourth property.

Jason Hartman 16:33
Fantastic. Yeah.

Oliver 16:34
All these clients are just doing fantastic, fantastic work here. And then congratulations. Yeah, that

Jason Hartman 16:39
is this becomes very addictive, you know, income property, the most historically proven asset class in the entire world. And it’s really amazing how, after just a few short years, you can really start to see a real difference in in how you grow your wealth. So yeah, that’s fantastic. Congratulations to all of those clients. And we of course, we have many more. That’s just a few of them all over. I don’t know if you want to mention anybody else. Just one more.

Oliver 17:04
There’s one individual. He came down. He was in the San Diego area. He called me up. He was very skeptical about all of this. He told his wife about us. And she was very skeptical as well. I said, Listen, you guys are gonna be in San Diego, let’s meet for coffee. I met with them. I don’t usually do that very much with clients just because everyone is across the, across the country in the world right across the world. Really. That’s true. And so I met with him his wife, and he had three kids with them as well. They’re doing a whole coastal tour, met with him, I showed him some properties. He decided to go ahead and dive right in and he purchased one property already with us. And he’s just sort of on the sidelines waiting for the cash flow to come in. And then he’s really excited to move forward with the second and third property here shortly. So sometimes, you know, getting that face to face is great because it allows the client to put that face name to a face and just really be okay with it and move forward with

Jason Hartman 17:57
this fantastic good stuff. Well, that’s Great, talk to us a little bit about like market conditions, and kind of what you’re sensing out there when you’re working with all of our different local market specialists, and in all of the different markets around the country, where we do business, you know, give us give us a feel for what, what challenges are going on with you, with our clients, with the inventory providers, the local market specialist, just kind of an overview of what’s happening out there.

Oliver 18:24
Overview is that, again, you’ve heard this repeated over again on the show, inventory is tight, it’s tight across the board. We’re working incredibly hard at getting more inventory opening up some new markets. That’s generally the the big thing is it’s almost a it’s a bit of a race to the website. I’ve got some of my clients they’re checking on the website maybe five or six times a day sometimes. And they’re just looking for our inventory seen what it is that we have available. I’ve got some clients I brought in for example, like the Florida market, they were really happy with their with the returns and at the moment We just don’t have much inventory there. And again, this is a common theme that I’m seeing is sometimes we’re in markets when it makes sense to buy in, and the property’s cash flow. Fantastic. But then, you know, if the prices appreciate to the extent where doesn’t make as much sense anymore, you know, we’ll take a bit of a break from that area. And then in terms of other problems, what I want to say is, listeners and clients do not get discouraged. Whenever you see an expense come up on your property, don’t get discouraged, know that you’ve allotted a certain amount to cover those expenses during that year. So if you see an expense for maybe two or $300, don’t worry about it. It’s, it’s okay, you’ve allotted a certain amount for this per year. Obviously, if it’s an expense that you think is questionable, feel free to touch base with your investment counselor, ask us about it, see if it’s a reasonable cost. If it’s not, you know, then we’ll definitely bring it up with the local market specialist. But overall, that’s generally What it is that what I’m seeing right now in terms of, you know, potential issues. It’s just the overall market condition being quite tight right now.

Jason Hartman 20:09
Yeah, it definitely is one of the things that I think people should know about overcoming adversity and the challenges sometimes is right out of the gate. Nowadays, a lot of people have this huge issue and discouragement, and that is that they can’t get a property, it’s just very hard to actually buy a property, you know, you’d think, hey, I’ve got money on the customer here, you know, sell me a property. I want that one. I want that one. I want that one. But you may not be lucky enough to actually get the property is it’s, it’s, it’s difficult. And it reminds me of when back when I was a traditional real estate agent. There There are people in the traditional real estate business that Do you know, different types of work and one one type is what’s called expired listings. So just give an example And I’ll tie this into buying a property, right? Because when a when someone has their house for sale and the listing expires, certainly this is very rare in this type of market where everything selling with multiple offers and so forth. But, you know, depending on the market cycle, you’ll have a lot of expired listings. And there are some real estate agents that just really go after this. And it’s like their specialty, you know, they go after expired listings. So they see them expire in the multiple listing service. And then they call up the owner and say, Hey, you know, your old agent sucks. Why don’t you list with me? Well, hopefully they don’t say that. That’s not too professional. But, but you know, they talk about why why don’t you list with me I can sell your property, blah, blah, blah, you know, this whole the whole sales pitch. But here’s the problem. Sometimes it is very difficult to actually find that owner and find their phone number and and get in touch with him so that you can try and get them to list with you right and here’s your The thing you always notice, occasionally the phone numbers just in the multiple listing service, because that’s the phone number that all of the real estate agents use to call that owner to say, hey, I want to, I want to show your home to a prospective buyer. That’s when it’s on the market. And sometimes, the listing agent just leaves the number in there. After the listing expires. And the owner, the seller is getting a million phone calls the next day, right. But sometimes, the agent is smart, they take the number out. And you know, it’s very hard the owners totally unlisted. The only way to find them is go over knock on the door, they may not be home, whatever, right? here’s the here’s the lesson. Okay? And this is how it ties into buying investment property, the harder it is to buy to find that owner, okay, the fewer people who are calling them, right, the fewer agents you’re competing with, if it’s that way for the real estate agent, right? So the same is true When you deal with anything as a real estate investor, you know, the higher the bar, the higher the barrier barrier to entry, the harder it is, you know, the harder it is to qualify for the loan to buy the property, you know, maybe you’ve got to pick multiple properties and you’re going to lose a few before you get one. And you’ve got to jump through a whole bunch of hoops to qualify for the loan. Well, all of those barriers, all of those difficulties that we perceive as difficulties as real estate investors actually preserve the opportunity for those who are more persistent. You know, there’s, there’s a couple old sayings here, right one is the meek shall inherit the earth. We’ve all heard that old biblical saying, right, but the other one is, things may come to those who wait, but only the things that are left over by those who hustle,

Oliver 23:53
okay.

Jason Hartman 23:55
Thank you. Things may come to those who wait and patience is certainly a virtue, but only Other things that are left over by the ones who hustle. So you know, this does take a bit of work, it’s much easier to go in and give $500,000 and just write a check to a guy at Charles Schwab or Merrill Lynch or Ameriprise or any of these financial services firms. But they’re their whole offer just it’s lousy. Okay? You just don’t hear of anybody who has created, who’s not an insider who’s created any significant wealth. taking the easy road of doing that, yes, you have money. And I get that, you know, when you have money, you feel like you should be in the position of power in the catbird seat in the driver’s seat. You’re the one with the money, who has the gold makes the rules As the old saying goes right? And, yeah, it’s not always so easy to deploy that money. And the harder it is to deploy it, the fewer people are willing to make the effort and go the extra mile. So my advice here in the lesson This little kind of tangent rant here is is that you combine money, you combine capital, with persistence, okay? And you put those two things together and boom, magic happens. Because one barrier to entry is you got to have the capital to invest, right. And so that excludes a lot of the world. A lot of the people that don’t have the capital, but the other barrier is you’re not just going to be lazy about it. Like the masses, the masses of people will just go give their capital to the financial advisor, and you’ll be put into those lousy Wall Street investments where the insiders get rich and everybody else gets like a mediocre return. Right? So the other barrier is persistence, tenacity, you know, being willing to jump through some hoops to get the properties and to qualify for the loans. And then to do With the occasional issues that come up afterwards, so you combine these two things, capital plus effort, and the effort isn’t really that big, it’s just bigger than these very mediocre investments on Wall Street. So, so that’s a distinction. I mean, all over. Have you had any clients who just kind of say to you, hey, look, this is, this is hard, you know, I’m just gonna give up. I mean, I got all this money to invest. It’s burning a hole in my pocket. But then, you know, they’re like, this just too difficult to try and buy properties. Jason, I’ve got a couple of examples for you in that realm. So first, number one, as you mentioned, persistence, I’ve got one client, his name is James who then he’s in the San Diego area as well. He’s, he’s recently closed. Well, as you can

Oliver 26:53
see, he’s helping his father in law, pick up some properties, and we’re gonna have a conference call this weekend. And I just want to just emphasize the whole idea that right now, if the property does not have an exact 1%, rent to value ratio, I mean, this one has like a point nine, five or something like that, but the house is gonna be undergoing a roughly 25 to $30,000 rehab. So I just want to emphasize that there’s, it’s, it’s more than just the price of the home and just more and more than the overall rent to value ratio. As important as that is, it’s more than just that. It’s going to be undergoing, you know, tons of work. So just want to emphasize that, and when you’re talking about going to the bank, giving the financial planner, your half million dollars in cash to invest. You’re definitely right, Jason, that’s one of the easiest things you can do. Whereas on the opposite side, if you were to start picking up properties, maybe you review your monthly statement, every you know, maybe takes you 20 minutes every month, based on the number of properties that you have. You know that that does require a bit of time at work. Your overall returns are going to be so much higher. I mean, I’ve got one client She recently or should not, it shouldn’t become a client, she decided to just go ahead and use the funds, which was almost $300,000 that she was going to get from the sale of her primary home and put them all into the stock market. And I probably spent 15 hours with her over the phone going over all the different scenarios. And yet, she still just did not want to do it. And that just blows my mind when people do that.

Jason Hartman 28:28
Well, I think I think one of the myths is that there is a such thing as a passive investment. And if you’re investing in the Wall Street assets that stocks, bonds and mutual funds, first of all, you’re probably doing it at a huge peak of the market. Now, I know, some might be saying, Well, isn’t that true in real estate, too? I don’t know. I think it’s true in the cyclical markets in the California markets, the South Florida markets, the expensive Northeastern markets. Yeah, I think there’s definitely a bubble. I’ve talked about that many, many times. And Who knows how long the bubble can keep going. But we’re definitely in bubble territory. There’s no question about it. At some point, it will pop, but not in the linear markets. I mean, these linear markets, you know, what you just said was very telling Oliver point nine five rent to value ratio. Really, that’s phenomenal. I mean, the fact the fact that you can get even close to point one means that we are still on solid ground, the fundamentals of good quality, linear market, conservative real estate, buy and hold real estate investments. Make sense? Hands down, you know, here, here’s how, you know, you’ll know if you’re, if those markets ever get into bubble territory, when those rent to value ratios get below point seven, meaning that that hundred thousand dollar house only rents for $700 or 650 per month. Yeah, as an example. And it probably means the house has 200,000. And it rents for 1300 per month is what I really should have said, because the house appreciates, but the rent doesn’t in that example, then we are getting to bubble territory, okay, but we’re not even close to that rent to value ratios are still very good. We have very sound funtom fundamentals in the markets we recommend. Now granted, the cyclical markets are way out of whack. Okay, I wouldn’t touch them with a 10 foot pole. Granted, and even though we don’t recommend these markets in this type of investing, but if you listen to some of my old podcasts, and you’re listening to all the flashback Friday episodes, where you just go back into my back catalogue and you got 844 episodes you can listen to, you’ll hear me talk about in 2010 how gosh, you know, it’s pretty tempting to be buying a property in Southern California. And those those prices have skyrocketed. Okay. So, you know, it’s, yeah, it’s, um, the fundamentals are still good. I mean, what’s like the worst rent to value ratio you’re seeing on any of the properties we have all over. I think

Oliver 31:11
the worst one is probably, it’s probably about a point seven, five. And that’s predominantly because it’s new construction. And it’s expensive.

Jason Hartman 31:22
Yeah. And it’s and new construction, you’re paying a premium for the new construction, expensive, new construction properties. And, you know, but they’re, you’re kind of buying something else. Because when you’re buying a new construction, even if you’re in a linear market, the new construction property is more likely to act like a hybrid. So it’s not just the market. It’s also the property type the property class. In a new construction property, you know, you’re getting a class a property that is likely to appreciate better than a Class C property, but Class C property will have better cash flow. So You know, what is the answer? Well, the answer is to have a mix in your portfolio. Okay? Not a mix of, you know, don’t be thinking you’re an investor in these crazy, outlandish, overvalued markets, but have a mix of properties in good linear and hybrid markets that are maybe some a class, you know, new construction type properties. And those aren’t going to have the good cash flow, but they’re going to have a better appreciation potential, and certainly lower maintenance costs. And then you blend those with B and C type properties that offer much better cash flow. And I think that’s a really good strategy. And then you diversify geographically into three, at least three, but not more than five of our linear and hybrid markets nationwide. And you’re going to be in good shape. You know, it’s part of the 10 commandments of successful investing.

Oliver 32:53
Those are excellent commandments. By the way, we should do another flashback Friday. I know you’ve already done a bunch of them on there, but they’re very, very good reminder. Yes,

Jason Hartman 33:01
yeah, yeah, they are that that’s the thing that really keeps you on track, you know, is the 10 commandments of successful investing. So good stuff. Well, hey, Oliver, we got to wrap it up. I know you’ve got to go, you got to pick up your wife at the airport. And I just want to say join us for our Oklahoma City event GHQ live Jason Hartman University live and a property tour in Oklahoma City. I think you’ll really enjoy that. That’s coming up right after Fourth of July the first weekend. And you can go to Jason Hartman, calm slash events for that one. And then also join us for the venture Alliance group. I know it’s short notice we’re just a few days away from that by the time you’ll hear this, but we are meeting in Chicago, we’ve got our biggest venture Alliance planned in terms of attendance so far, and that’s going to be a fantastic weekend event in Chicago. Those are our kind of our high end mastermind events. And by the way, Oliver, I just want to give a shout out to this great book. I just finished Everyone’s heard of Napoleon Hill, right? You know, he’s the very famous author who wrote, Think and Grow Rich right back in like the 30s. I think it was, well, his other book that I just finished it was released as a something he wrote, like 70 some odd years ago, but it just was released in 2011, sort of narrated by Sharon lechter. Okay, who’s been on the show several times, and she’s one of the co authors of the rich dad series. This is by Napoleon Hill. It’s called outwitting the devil. The secret of freedom is the secret to freedom and success. I just finished that on audio today. It’s excellent. I couldn’t believe how good it was. outwitting the devil by Napoleon Hill. It is a relatively new book by a guy who passed away a long time ago. And it’s just it’s phenomenal. I love the audio version because it has Sharon’s voice. It has another narrators voice. It’s just really well done outwitting the devil He talks over and over, he repeatedly mentions the power of a mastermind, you must be in a mastermind, you must choose by design, your friendships and your associations in life that is so critically important. Like Jim Rohn said, and I’ve said it before, we’re the average of the five people we spend the most of our time with our income will be the average of those people’s income. And it just happens and that’s why you need to be in a mastermind group. So check out venture Alliance mastermind calm on short notice if you can join us in Chicago. We got room for I don’t know, two, three more people we could still fit in probably check that out. Venture Alliance mastermind COMM And also on Jason hartman.com in the events section as well. Oliver, thanks for joining us. any

Oliver 35:48
last comments before you go? Definitely. If you’re out there, you’re sitting on the sidelines. And I spoken to you before maybe he’s spoken to another investment counselor, get a hold of us stop making Money sit there for you. Get rid of that lazy money and start making it work for you get a hold of us. We’d be happy to strategize on coming up with a plan on helping you do so. Otherwise happy investing for sure. all over the country and all over the world.

Jason Hartman 36:18
Excellent point, Oliver. Well, thank you. Yep, happy investing to all listening. Thank you so much for joining us today and we will talk to you on Wednesday just a couple days away.

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This episode of the Creating Wealth podcast was recorded during the Oklahoma City JHU Live event. Jason Hartman talks to new income-property investors, David & Gina Nelson. They share how they built their wealth by investing in income properties. They also discuss the value of understanding the linear, hybrid, and cyclical markets. Lastly, they convey their appreciation for the transparency and support they have received from the Jason Hartman Investment Counselors.

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.

Jason Hartman 1:04
Welcome to the creating wealth show. This is your host Jason Hartman with episode number 854. And I am doing something I have never done before. One time on a prior episode, I was on the plane recording an entire episode on Southwest Airlines. And now I’m doing something different today. We are actually at the jQ Jason Hartman University live event in Oklahoma City. And I am walking back with a couple of our wonderful attendees. They agreed to come on the podcast last night when we were at dinner. So let’s introduce yourselves and tell us where you’re from.

David/Gina Nelson 1:39
I’m David Nelson. I live in Folsom, California, currently,

Jason Hartman 1:44
right by Folsom Prison where Johnny Cash did his famous concert right?

David/Gina Nelson 1:49
Exactly, yes, fabulous place.

David/Gina Nelson 1:51
Okay, and Gina Nelson and why for 21 years here. He forgot to mention that I was married to him.

Jason Hartman 1:59
There you go. Good stuff. Well, we are walking along here walking back from lunch to the hotel to continue the day. What got you interested in real estate investing?

David/Gina Nelson 2:09
Yeah. So, Jay and I have been looking at doing something different after becoming entrepreneurs in the business side.

David/Gina Nelson 2:17
And because we began to

David/Gina Nelson 2:18
realize that the the societal norm of working 40 hours a week for 40 years, and putting all your money into an IRA, which you’d have very little control of, didn’t make any sense to us anymore. So we decided we needed to take more control of our lives and in the form of investing in real estate and do something different wealth building. And it’s it’s not something that we would have done even a year earlier. So the timing was perfect for us.

David/Gina Nelson 2:46
When when Khan introduced us to it, and

David/Gina Nelson 2:48
then we bought our first property in Atlanta, Georgia, and that’s worked out great. We bought several in Memphis and we have a couple in Ohio. But anyway, it’s

Jason Hartman 2:55
the first one. The first

David/Gina Nelson 2:57
one we bought April 2016. Yeah, and that was that was great. And so it really, like I said, and what’s really, really critical is that I loved I found out that I really, I really love the business side, I really love the analysis of looking at real estate, and making those decisions and running the numbers and keeping track and, and about to use property tracker for that. And it but that I found out that that was really something I was passionate about. It’s it’s I haven’t been really passionate about something work, you know, income related in years. So this has been a really different, different mindset shift for us.

Jason Hartman 3:40
That’s fantastic. Well, you know, since you’re a couple, do you sort of divide up the work? Do you have different areas of interests when it comes to real estate investing?

David/Gina Nelson 3:48
Hi, well, David’s really been kind of spearheading all of the real estate. I’ve learned a lot just from him, but I got to come out to Ohio to Ohio property tour and that’s when I got to actually go beyond just listen to your body. And actually see you in person and and really learned

Jason Hartman 4:02
so much more. Well don’t forget the highlight you met Coco. That’s correct. That’s the dog.

David/Gina Nelson 4:07
And you know, we just fell in love with the area with the property managers. And then the trust of being able to, to look at this as a as an idea of investing became so much more of a real reality for us. Again, we both were corporate rats, we’re, you know, got master’s degrees and have done what our parents taught us to do, which was invest in put more than 75% of our assets, and, you know, IRAs and in the stock market. And as we started reading books and educating yourself and listening to Jason’s podcasts, we realized that that wasn’t necessarily going to get us where we wanted to go, we were watching our investments just completely go the opposite direction. And so this became much more exciting, and it kind of opened the lid of what was possible for retiring earlier and being able to just really have a portfolio that’s completely different than I’d say, 90% of the folks that have been in our life. I mean, they they think we’re crazy. They don’t even can’t get their heads around this concept of what we’re doing,

Jason Hartman 5:04
because they’re all putting all their money into their 401k. And just doing that traditional Wall Street thing that we’ve all been conned into doing, right? Yeah, good stuff. So in terms of investing, and you know how you feel good about it now? Do you feel really good that you have more control over your life now? Does it feel that way?

David/Gina Nelson 5:24
Yeah, I think so. Definitely. But before there was no end to the corporate race for us, it was just keep working, keep working. And if we hit 65, and we’re healthy enough, hopefully we have enough to retire on. And that was putting all the trust in somebody else. And so being able to be around like minded people, see how they were investing, see the tax benefits, all the things that we’ve learned, I mean, absolutely have hundred percent more control than we used to have.

Jason Hartman 5:50
Yeah, this is what it’s all about, folks, be a direct investor. commandment number three, thou shalt maintain control. It’s a very, very powerful if for no other reason than it It just feels good. If if the returns were as low and crappy as they were on Wall Street, I’d still rather be in the real estate investment business because you know, at least you’re in control and you don’t feel like you’ve relinquished your future to somebody else with a with an ulterior motive. So what what other things would you like to tell people about your investments or your your philosophy or approach to real estate investing?

David/Gina Nelson 6:23
Yes, I’d love to hit that one. Um, what I’ve learned is you like to mention be area agnostic is one of your commandments in that I love that. I like to look at this is also be when it comes to real estate investing, be age agnostic, who cares what age you are, you can start doing this in 19, like you did, you could start doing this in 20s you can start doing in your 50s.

Jason Hartman 6:46
I started my 50s. I’ll tell you our oldest client is 86 years old when he started so now he’s got to be about 93. And man, he’s a retired doctor and just wanted to build a portfolio for his grandchildren. I mean, I wish I had a grandfather like that, but Oh, well. But yeah, you know, it’s never too late to start. And the deals, of course, are never as good as they were in the past. You know, you always have to buy something that has good value, and wait for it to play out. But that’s, I love what you said about the age thing. It was very good.

David/Gina Nelson 7:19
Yeah, um, and I, you know, it’s, it’s really, it’s really kind of morphed into our children starting to pay a lot more attention. My son at 99. You know, he’s starting to listen, actually, my son started listening to your podcast. And he’s 19. And he, like, bought his first vehicle with cash. He’s, he and I explained to him about how, you know, he listened to you. He knows what good debt is. Now consumer debt bad. Yeah, you know, but so he’s, I, you know, he’s on his road. I said, if you get out if you get in your 20s, with your first property, kind of like Brandon’s doing.

Jason Hartman 7:54
Brandon is one of our venture Alliance members and clients who’s here at the event,

David/Gina Nelson 7:59
right, and he’s in military guy to and he’s

Jason Hartman 8:01
now 30 and he’s got I think seven properties. Yeah,

David/Gina Nelson 8:04
if you do that you he’ll be I told him, you’d be a multimillionaire you’ll have a million several million dollars in assets by the time you’re in your 30s and doing it methodically and doing the daily disciplines and doing it and never not quitting and, and learning and actually learning. Like us. You said Jason is, you know, we didn’t have analysis, paralysis or paralysis of analysis, I should say. When we started this process, we I listened to podcasts for about a month and I said what the heck I started learning on my first job was Sarah, she was awesome. Investment counselor Sarah Lisicki. She was phenomenal and and then like Michelle Hawkins and people like that we met and Steven Lockwood and those guys they they helped us open our eyes to you know, taking money out of our actually putting less money on our for our coat for one case where the company matches only to that benefit and putting the rest aside for buying real estate. So that’s what we’ve done. It’s been fantastic.

Jason Hartman 9:04
Excellent, excellent story. Okay, so now we are on northeast Second Street here in Oklahoma City. Which way do we go to get back to the aloft hotel where, where we have to finish up the afternoon. By the way, I’ll just tell you, I’ll sort of interrupt the flow of the your story in your case study for just a moment and say that at lunch here today, we played the portfolio builder game that we do with the Jay Chou events. Let’s cross the street here. And how do you like this, folks, this is a very homespun podcast we’re talking about crossing the street. On the show. The portfolio builder game requires people to break into teams and take a batch of properties 10 properties, it gives them a budget of in this case today, we play it different each time. But today, it was $150,000 and a limit of five, Fannie Mae Freddie Mac, conventional loans, and then you have to optimize it for different things. For example, buying the most real estate, right? The biggest portfolio, you have to optimize it for the best cash flow, optimize it for geographical diversification, for ease of management. So there are several optimization strategies. And that’s one of the one of the sort of frustrating questions I get asked over the years all the time, as you know, well just tell me the best properties to buy and buy them. Right. But you can’t do it that simply because it depends what you’re looking for as an investor and what you want to optimize for. Right. So yeah, what other thoughts? Do you have just anything you want to share?

David/Gina Nelson 10:34
I just wanted to say one thing before Gina grabs up.

David/Gina Nelson 10:38
She let me tell you how critical This is, is having some support system not including Jason Hartman University folks, but my mice, my amazing spouse has been the biggest supporter of mine and biggest encourager, and I wouldn’t been able to do without her. So she is by barn on the biggest impact in my life. So

David/Gina Nelson 10:57
well, to kind of piggyback on that, I just was gonna say that The whole idea of the support team is huge because we didn’t know anything about real estate. We were not realtors, we just, you know, we were just homeowners. And so the whole idea of investing was really foreign to us. And so you know, even to sit with this group that we’ve been with today and do this project over lunch, which was really eye opening to have different minds kind of putting their input in and telling us, oh, no, we got a look at this variable or no, let’s look at this variable instead. And all of that was just really very helpful for me to kind of look at the portfolios and go Okay, now now, what are we looking for in the next five properties?

Jason Hartman 11:32
Excellent. So as we board the elevator, this is like a, we’re giving you the visual tour here, as we push the up button on the elevator, and that’s what this is about moving up in life. So it’s a good metaphor, you know, we’re Upward Bound with real estate investments. But yeah, you know, the point of that portfolio builder game is there’s not really a right or wrong answer. It just makes everybody think, and I think that’s that’s the point of it. So it’ll be interesting when we get back in the room to have everybody Talk about each team leader will present which properties they chose and why. So both of you are believers in higher education? Well, I think you are, at least you did the higher education route, you both have master’s degrees. You’ve heard me criticize the college conspiracy a lot on the show, of course, because and I don’t think education is bad by any means. I think it’s wonderful. I just think it’s massively overpriced. But there is a way to combat that. And using income property investments to fund higher education for your kids, right? Tell us what you both do for your occupation. And then talk about that strategy if you would.

David/Gina Nelson 12:38
I’m a clinical social worker. I worked for Kaiser and the pallet as a palliative care social worker. And on the side, I have a side business and I’m a health coach.

Jason Hartman 12:46
Fantastic. So you probably see some, some pretty difficult experiences in your business and palliative care, I bet.

David/Gina Nelson 12:54
And it’s, you know, and it’s like everything like every corporate job. It’s a commute every day and a long day. I’m emotionally and the mindset is very different in that environment than when I’m around people that are investors and are really looking at building wealth for themselves in the future,

Jason Hartman 13:10
more a more positive environment,

David/Gina Nelson 13:12
a more positive, a, you know, a lot more exciting and people don’t understand when I say I’m gonna retire at 45 next year, they go, what do you mean by that? I said, Well, you know, we have a plan, we have a plan. You know, I believe in higher education. Absolutely. I’ve got my master’s degree and I want our kids to go to school, but at the same time, we have some so many friends whose kids have come out and had $200,000 in student loans and, and we needed to have a solution and a plan for how we were going to help pay for that. So they didn’t end up like that. That is excellent. That is excellent. Okay,

David/Gina Nelson 13:40
what do you do? I’m actually in the computer science field. I got a computer science degree back in the 80s. And I you know, but to piggyback on what Gina was saying, I’ve been an IT supervisor for years in the healthcare field. But you know, and was planning on doing that into my 60s and and living off our great 401 K’s. God knows what those would have done. But now what we’re really looking hard at is with Gina was saying with so many people graduating with literally six figures in debt and higher than mid six figure, it’s crazy. We said, we are not going to allow that to happen to our youngest daughter. So what we’ve decided to do was we’ve been building our portfolio and looking not looking at cash flow really, probably harder than maybe some of the other metrics. Although we look at cash on cash we look at, we look at ROI, but we’re really looking at that, as we will get 10 doors and have $36,000 in cash flow for the year an annual obviously, and that will pay for my daughter’s college. So that that was that was our that’s our plan right now. And we’re well on our way to doing that.

Jason Hartman 14:49
Congratulations. That is awesome. That is totally awesome. Good for you guys. That that’s fantastic. You know, one of the things that’s been, I think interesting to people here is that we you know, we talk about income property and how it produces a multi dimensional return on investment. Unlike many other assets that are either one or two dimensional at the most income property is multi dimensional. And a lot of this return on investment is sort of like the iceberg. It’s below the surface of the water and you don’t necessarily see it unless you know how to really think about it and analyze it. And I think that’s been I don’t know if that was an aha moment for you this weekend. But it has been for other people I know because they’ve told me and you mentioned that cash flow is just one of them. So you know, it’s there. There are many metrics you need to look at and understand as a real estate investor. What do you think about that? iceberg concept, like most of the iceberg being below the water when it applies to income property?

David/Gina Nelson 15:42
You know, I learned well, I’ve always learned something at one of these events. But um, but I think for me, you know, again, the, it’s changing the mindset of the corporate, you know, you’re just gonna go one way and you know, we were getting killed in taxes being six digit salary, folks, you know, on the W twos, we just had no other way. to diversify and and, and find, you know, other options so so being able to have the property and learn about depreciation and inflation, deflation, all these things. I mean, it’s it’s been really mind boggling to me to see how valuable it has been for us as we’ve collected more properties and really diversified our portfolio. It’s changed our financial situation drastically.

Jason Hartman 16:21
Yeah, that that is excellent that it has but it is. It’s so true that typical corporate thing, it’ll just leave you for it. So sort of simplistic do this basket of stocks, your 401k blah, blah, blah, and it’s so unfair to because earned income, you know, you’ve both got six figures plus salaries, and earned income is taxed at the highest rate, and it’s the hardest job to write to do the typical corporate job. It’s unfair from two perspective so you know, breaking free of that is definitely what we’re here to help people do and I love how you have a plan and you’re really talking about like, you know, like Fernando said before, the financial Independence Day. Right, right.

David/Gina Nelson 17:01
Well, you know, what was gonna say just also, I forgot to say, and we live in California. So we live in a very cyclical market. And so, you know, one of the things that’s been the greatest value for us being exposed to Jason Hartman has been, just to understand what a linear versus a cyclical market looks like. And for, you know, some of our friends that flip houses and try to time the market and all that, you know, that was something that we never were, you know, we weren’t real estate people, we have a clue how to do that, or to actually do that well. And, um, so having something in the, you know, more, you know, linear environment has been very helpful for us to be able to pick those things up and diversify and not feel like we had to come out with, you know, $400,000 to buy a house because some of the other areas have been more affordable for us, and yet, they’re all producing positive cash flow, which has been amazing.

Jason Hartman 17:44
Yeah, so just for those of you who don’t know, Folsom, where they live is up by Sacramento, California. Very hot real estate market, very cyclical, very expensive now at this part of the cycle, but that’ll change I promise. There’s always a cycle and you You know, you could you could risk it all on one flip. I mean, you know, because the properties are so expensive. And you know, like you said, having to put $400,000 down to buy a property. That’s just a real risky deal. If you time that flip wrong, that could ruin your right. Yeah. So yeah.

David/Gina Nelson 18:15
So I did piggyback on that we, I mean, it’s like, an example that we had a $500,000 house that was not fixed up in our neighborhood, a three to 1700 square foot.

David/Gina Nelson 18:27
I mean, what it’d be where’s that where’s the basis for that supporting that value? It’s, it’s, it’s there isn’t one so

David/Gina Nelson 18:34
so that that’s why we were and what what we’re doing now, by building this wealth in real estate is we’re also decreasing our exposure in the stock market at the same time because I took a look at this in February of 2016. And I said 80 over 80% of Jean, my, our personal wealth was in real estate market. I said stock market, sorry, sorry, stock market. Thank you for that was in the stock market. And I said we have very little control over that, and thou shalt maintain control. So we’ve really been working hard this past year to responsibly divest ourselves of that where we can. And so, you know, I took one of my previous employer pensions, cashed it in and bought two houses with it. And it’s like that because I have control of that asset and not looking at some fund manager who wants to make his bonus and doesn’t care what happens to us being at the mercy of them so yeah,

Jason Hartman 19:28
and and since the subject of timing came up, you probably either by accident or on purpose or timing that fairly well because the stock market is looking very overvalued at the moment.

David/Gina Nelson 19:39
Absolutely. And what I you know, and there are corporate related 401 K’s we can’t really can’t do a whole lot about right now. We’re doing everything we can to maximize it without throwing any more money than we have to in it. But I’ve moved like a quarter like a bunch of my money into guaranteed returns because I know the crash is coming. Everybody else says it is we just don’t know when. So I’m going to minimize the damage that can happen there. And then when I can get at it, I’m going to take that money and it’s going to go into real estate.

Jason Hartman 20:10
Excellent point. Excellent point. Well, we got to wrap it up in case the listeners haven’t noticed we’re back in the room where where people are meeting and you’re probably hearing some chitchat and laughter in the background as we come back from lunch here and reconvene but just any final thoughts you know, maybe just a final thought from either of you. Thank you so much for being on the show today really appreciate it. It’s always listeners love hearing these stories of real people that are doing it rather than me talking about it in theory, you know, right. I mean, my knees practice too, but it’s so nice when you hear different perspectives, you know, certainly so so we’ll just wrap it up with any final thought I give a quick

David/Gina Nelson 20:45
one here. And if if you’re you know, out there and you’re you don’t know where to start, get a mentor. Every every bit of success I’ve had in business and in corporate, I’ve found a mentor. Jason Hartman is an amazing mentor. He’s transparent Everybody I’ve met through his organization has been transparent and honest and ethical in it, you, I, they, they, they tell you about the exposures upfront, you know, it’s, it’s on you, you’re gonna have to learn how to do this, there’s going to be things that can happen that you can’t control. But finding that mentor is crucial. And we’ve found, we found it here. And we’re, we plan on being this for very many years to come.

David/Gina Nelson 21:22
Well, and just for us, I mean, it’s it’s listening to podcast, educating yourself and not getting stuck so much in the details of all the education because at some point, you have to pull the trigger and take a little bit of a risk, which was, you know, kind of out of our comfort zone. But when you do that in an environment with a whole, you know, with the team, like Jason has you feel much more comfortable with it, the risk seems less than it would be of us just being completely on our own. And it’s been just an amazing journey of growth, personal growth for us, you know, to really kind of open the lid, what’s possible.

Jason Hartman 21:51
Excellent. Well, thank you so much for joining us. I will just wrap it up with a quote. Well, two of my favorite quotes, the one I shared this morning is that Zen saying to know What not to do is to not yet now, like you said, you have to pull the trigger and you just got to do things and figure it out as you go and iterate and change course as you go. But the other one, I thought was a really great quote too. And it’s I hope I don’t mess this up but because it’s just from memory, but it basically goes something like successful people make decisions quickly, as as soon as all the facts are available and change them very slowly, if ever unsuccessful people make decisions very slowly and change them often. And I think that’s just critical. You know, those two quotes are exactly what you said. One more thing I want to mention for you listeners, go to Jason Hartman comm slash contests. This is a new thing. So listen up. Jason hartman.com slash contest. There is one product that I think is probably the best product Apple has come out with in the last five years. And that is the apple EarPods those little wireless earphones and I absolutely love those things. There’s like a six week wait to get them. I bought For myself waited six weeks for it to come. They came. I’ve been using them for a couple of months now. And I’ll tell you, you talk about education a lot. If you want to be able to listen to more podcasts and education more easily, those air pods are phenomenal. It’s amazing when you cut the cord how convenient it becomes. And so I bought one of those to give to our audience. So Jason hartman.com slash contest, enter the contest there and just answer a couple quick questions and we’ll put your name in and we will raffle those off to one lucky listener. So that’s it for now and we will talk to you on Wednesday for the next episode. Thanks for listening and happy investing.

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In this episode, Jason Hartman talks to Drew Baker about essential topics to income property investors. They discuss how the IRS’s tax code does not correctly account for inflation. Jason’ explains Inflation-induced debt destruction, his ultimate investing equation. Later we hear from Andrew Baker about his experience with investing in income property.

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.

Jason Hartman 1:03
So you’ve heard my rants about how our financial system is rigged, and I’ve interviewed hundreds of experts to back up those claims and help you align your investments with the most powerful forces in the world, governments and central banks. I’m also using a perpetual wealth strategy with my income property investments that you should check out. It has enhanced the security of my liquid assets, boosted overall ROI and shifted money away from the banksters my friend Pat Donahoe, who’s one of our venture Alliance members, runs paradigm life and he has a free report that you can download at be your bank.com that’s B your bank comm check it out today. Welcome to the creating wealth show, episode number 875 875. This is your host, Jason Hartman. And I want to say welcome and thank you To our listeners in 164 countries worldwide, yes, 164 countries someday maybe the entire globe will be listening to the show. I don’t know probably the folks in North Korea won’t be listening anytime soon. And maybe not the people in Myanmar, formerly Burma. Probably we don’t have any listeners in Cuba, I suppose. But yeah, 164 countries. That’s pretty darn cool. And you know, this is the most amazing time to be alive as I say, right? Because Never before have we had it where so many people can talk to so many people and the exchange of ideas in this very vibrant time in which we live is just nothing, nothing short of amazing. But at the very same time, I don’t know if any of you saw the the movie I think it was called idiocracy. That was kind of a funny one, but a bit sad at the same time. at the very same time, we have this sort of class of people who are just sort of feasting off the system leeching off the system, not very motivated to improve themselves not very motivated to grow just sort of getting by, you know, luxury is the call to apathy. As the old saying goes, I originally heard that at age 17, from Dr. Denis waitley, one of my early mentors. It’s it’s kind of a real dichotomy that we live under nowadays, but maybe we’ll talk about that a little bit on today’s show and talk about some, of course, real estate investing ideas arbitrage, some other things, house prices in in different things, not just in dollars, or euros or whatever currency in which you happen to be most acquainted with, but also maybe in precious metals like gold, and some other stuff like that. But I want to also announce the winner of our Amazon Echo contest. Alexa, what time is it?

‘Alexa’ 4:03
The time is 2:30pm.

Jason Hartman 4:05
I don’t know if you can hear that. But Alexa said it was 2:30pm. And that is on Sunday afternoon. So, the winner of our Amazon Echo not Alexa. contest is Jake Blair. Jake Blair, you are the winner of the Amazon Echo. And thanks to all of you who entered, we appreciate that. And we’re gonna keep running these cute little contest. I know, they’re just a little sideline, but you know what they do? You give us such great questions and such great feedback and things like that. So I hope to get a little time to share some of those questions and feedback from the entries. today. We also have a new thing we’re doing, I have been studying. And I haven’t talked too much about it on this show. But on one of my other podcast I have done several shows on this topic. But I have been studying the world of short term rentals for many years. And I want to study this a little more deeply. You know, I consider myself to be a rather careful and sometimes over analytical person, and I’m trying to overcome myself. You know, there’s a great quote, I think it was by jack Paar who said, life is one long obstacle course. With me, as the chief obstacle, we’re all our biggest obstacle sometimes, you know, that’s the way I am sometimes I overanalyze things. Well, mostly I overanalyze things and agonize too much and worry too much and do all of that kind of stuff. So anyway, this is a topic I’ve been studying for years. And that’s the topic of short term rentals. Many of our clients have asked us about them. We have many clients that you know, do the long term rental thing and you know, they have a short term rental or two on the side. And they’re, you know, doing business on Airbnb or VR Bo or any other short term rental sites out there. So what we want to do is Get together a little Council. Yes, a council of people who are in the short term rental business, and we will for you volunteering so graciously for our little Council. We will offer you some cool things. We will offer you some exclusive access to things at our events, maybe dinners lunches, that not everybody’s invited to and you know, give you some recognition, maybe do some panel discussions, have you on the podcast, whatever. So here’s what you do. If you have experience with short term rental properties, go to Jason hartman.com. Slash str. Doesn’t that sound cool? We gave it an acronym str short term rental, go there and apply to be on our little Council. And tell us about your experience with short term rental properties. Now, this isn’t for anybody who’s interested. It’s only for people who are experienced. The idea is We want to have this counsel impart their experience to those of you who are interested. Okay. And what I always say is, some of the greatest learning that I ever get is learning from you, our clients and our listeners. That is the greatest learning of all. So we’ve got one of those people on the show today to help me with today’s show. And he was just on and he’s back, because he’s a friend of mine, and he’s a client, and just an all around interesting guy. And that is Mr. Drew Baker. Andrew, welcome back. How are you?

Andrew Baker 7:35
Hey, thanks for having me.

Jason Hartman 7:36
Yeah. Again. I listened to me ramble for quite a while there before I introduced you. Yeah, you forgot you forgot I

Andrew Baker 7:43
was online.

Jason Hartman 7:46
Yeah, I know sometimes I got so much going on.

Andrew Baker 7:50
It’s hard to remember all that stuff. But hey, you and i, you recommended to me a really interesting Peter Schiff interview. our listeners know that I had Peter Schiff on On the show a long time ago, I sort of have a love hate relationship with this guy. I invested with him. And that was a disaster. He lost a fortune of my money. And his people, his advisors didn’t even seem to give a damn. I mean, like, almost antagonistically apathetic, it was pathetic. So I would definitely not invest with him. But man, that guy is super intelligent. He is I call Peter, the master of the sound bite. And he can just ramble on and on forever. And anyway, I was watching this YouTube video with him that you recommended. And Andrew, you know, he brought up a lot of interesting stuff there. Was there anything that was particularly interesting to you that you might think would be interested to or interesting to our listeners today? Well, this, this was, you know, Joe Rogan, the Joe Rogan experience. This is Episode 1002. And Peter came on about three years ago and sort of talked To the audience, and this audience is not really doesn’t get a lot of economists or investor types on. So they’re sort of not exposed to this sort of thing. And Peter came back on and was invited on originally because he went and spoke to all the protesters on Wall Street. You know, the 91% of you have Occupy Wall Street and had a video that was so interesting that Joe Rogan had him on the show. So you know, on this recent show, Joe or Peter and Joe sort of fleshed out things like the minimum wage, the wage gap between men and women and their thoughts on that to the government and housing and, and so it is very interesting how the housing market and you know, Joe kind of doesn’t know all this stuff. So Peters kind of giving him his expos a and I believe Joe is a market guy. He endorsed Ron Paul. So he’s kind of Onboard but has sort of a more liberal influence because he’s in Hollywood, and he has, you know, act or stuff on a show. So it was interesting kind of having Joe see both sides of the field and, and kind of have Peter kind of give him a monologue, which was brilliantly done about, you know, kind of his philosophy and

Jason Hartman 10:21
just really fears ppps people say I’m long winded.

Andrew Baker 10:26
I didn’t know how much energy Peter has on the show is just and how direct he is just

Jason Hartman 10:34
pretty interesting. So So what was so you know, talk to us specifically, though, about, you know, some of the topics I mean, I love that stuff about minimum wage, you know, minimum wage has got to be the stupidest frickin idea ever. And anybody who believes in minimum wage has no understanding of basic economics. It is just a it is a terrible idea. And you know, that’s the Uh, you know, I pick on the left the most on the political aisle I pick on the right to, you know, because I’m definitely not a Republican, I left the Republican Party quite a few years ago. But you know, the left is just so myopic. I mean, I don’t know if they’re like trying to hurt people, you know, it’s this old idea of like, you know, you create a problem. So you can look like the hero and come in and solve it, you know, and ride to the rescue, here comes the cavalry. But never mind that nobody noticed that the cavalry in quotes, created the problem in the first place, so that they could look like the heroes. And that’s the funny thing. You know, when I had steve forbes on the show, he talked about how the government always seems to somehow occupy the moral high ground in life. And that’s so true, but it’s so it’s such a bad belief. It’s so false. It’s just not reality that the government should somehow occupy the moment moral high ground. And this this concept of minimum wage creates massive unemployment. It creates massive crime problems. I mean, I don’t think Peter even talked about this. But you know, if if anybody in the world, you know, if if they’re offered five bucks an hour to do a job, and someone else will pay them $6 an hour, they’re going to go take the $6. Right? Obviously, they’re going to do what’s in their own best interest. And is if there needs to be this other third party that needs to come in the deal and say, No, you can’t pay the guy $5 an hour. That’s just the dumbest idea ever. So now that $5 an hour guy, instead of being hired is replaced by a robot or he’s you know, he’s just not hired at all. And the group’s since we’re, you know, talking so much lately, this country seems to be like addicted to the subject of racism. Which is completely ridiculous. Look up Morgan Freeman. I mean, the first time I’ve ever agreed with Morgan Freeman in a while is his topic on, you know, race relations. He’s absolutely nails it, you know that we got to stop counting people and calling people by their race. You know, he says in this interview, he says, I’m not Morgan. I’m not a black man on Morgan Freeman, you know? Exactly. You know, everybody should be judged as an individual. And the smallest minority on earth is the individual right? Like iron. Rand says,

Andrew Baker 13:31
exactly. That’s he beat me to the chase. Yeah, if you’re not going to protect minorities can’t starting with an individual, then you certainly can’t protect, you know, minorities on the whole, because the minority of one trumps everything. So

Jason Hartman 13:47
it absolutely does. Yeah,

Andrew Baker 13:49
yeah. I think Peter talked about on this on this podcast, which I encourage your guests or your people listeners to take a listen to it was just how you’re right. It’s his mandate in unemployment. If somebody comes to the table and doesn’t have any skills, they should not be paid a living wage because they don’t have the money, because they haven’t come with the skills to sustain that. So, you know, like with me and I lived at home, I got a job, I walked to my first job, saved enough money to get a car, then I was there because I want to get a job that was higher pain. And, you know, I discriminated my employer, I said, Okay, I don’t want you know, you’re not going to pay me enough. I don’t like my manager, I’m going to leave. Whereas, you know, and Peter talked about how businesses don’t have those sort of rights, that you know, politicians have stripped that away. So the employer can basically never sue the employee and how unfair it is to you know, that he talks about how discriminating, you know, you discriminate with your relationships with other people. And, you know, the idea is some if some business wants to discriminate, and they want to endorse it Terrible idea, the first person that should protest it is the one who wants to protect, you know, protect the rights of others. So if somebody wants to make a bad decision, they’re going to pay the consequences in the marketplace. And it shouldn’t be from a politician trying to you know, so it was really interesting. And he talked about how there’s so much skepticism with the businessman and the decisions that he makes, but no one wants to ever scrutinize the politician and his wanting to get rich off politics, and how the whole system is totally been manipulated to make people’s outlook be so skeptical of the entrepreneur who’s trying to you know, add value to something whereas the politician comes in and takes $1 in and gives 10 cents out the other side. So it just gets tied up in their little, you know, maze of, you know, handshake doors. Yeah, absolutely.

Jason Hartman 15:55
You know, I want I want everybody to consider this. This is one of the concepts That changed my life. As a real estate investor as a person, it is just critical to understand. And that’s the difference between context and content. And this speaks to your point, but as usual, it’s going to be roundabout so get ready, okay? But the concept is that, you know, people who are brainwashed, don’t know they’re brainwashed, and I, I will freely admit that we’re all brainwashed including yours truly, in some way. There’s no question about it. Okay, we all have our bias and prejudice and, you know, our thoughts and we think we’re right, and we, you know, look for con what’s called confirmation bias to we find all the things and sift them out in the world that support our viewpoint, and then we parrot them back to other people and keep believing them even more. Right. So, you know, this is something humans do, okay? It’s probably a old survival skill. And and you know, but the content text content is that you know, fish, they don’t know they live in water necessarily. I don’t think I don’t maybe they do, but they don’t think much about the water probably, because the water is just there all the time. That’s the context of their environment. And, you know, last night I was watching reruns of that show Criminal Minds, okay, on Netflix and, and the Criminal Minds show and I used to be a huge fan of 24 I used to love that show, and binge watch it and I, you know, stay up till four in the morning because I had to see the next episode. It was crazy. It was like a total addiction. And you know, in all these shows, always they portray the government is the hero. Okay, now, granted, you know, I’m certainly glad we have police and SWAT teams and, and the, you know, behavioral analysis, you know, that is at the FBI to catch criminals and so forth. But it’s just funny like nothing is ever You know, in the vast majority of any show you’re going to watch is about how the government has biases and does bad things. Because it’s just a bunch of people. That’s all it is. And you know how they mess things up. It’s always them with unlimited resources coming to the rescue, to solve all of our problems and save the day. And you know, where else this has done extensively in in movies and TV is in the business of law. And your your wife is a lawyer, so maybe you want to speak to this one Drew. She works for the public defender, and you know, like, courtroom dramas, and they all they all make it look so good. And like, you know, in the vast majority of relationships I’ve had with the legal system and lawyers has been pretty lame. Actually, I’ve been pretty unimpressed. It’s like the worst service I get of anything in my life of anything that I buy is legal

Andrew Baker 18:58
service. expensive.

Jason Hartman 19:00
Yeah, it’s it’s outrageous. Yeah. It’s probably because it’s over regulated by this infrastructure of the court system. And it’s just so overcomplicated and the government is not the hero folks. They’re portrayed like that.

Andrew Baker 19:15
It is funny because when, when people ask what my what my wife does, and I tell her, she’s an attorney, I mean, we have to hold that back a lot of times, because if we’re just having conversation with someone, it’s instantly a chilling effect, because people because everything is so over litigated, and we’re just the culture of suing over frivolous stuff, just because the the harassment of just the suit require the outcome because it’s so costly just to litigate that the penalty is done at the time that the suit happens.

Jason Hartman 19:50
Imagine, imagine if lawyers if that field were unregulated, okay, now, everybody might be freaking out right now and thinking Are you nuts? What if people do didn’t have to go to law school. What if you could just hire your best friend who was really good at debate, and really good at, you know, proving something to go into court for you and be your advocate and say, Hey, Your Honor, you know, this person did this and that, and it’s wrong, and we should win the case. But instead, it’s this highly over technical, highly over regulated environment where really almost nobody is winning. The lawyers aren’t winning. I like people think the lawyers are winning, but most lawyers I know don’t like their job very much. And they it’s not like they’re making a fortune. And certainly the clients don’t seem to like the system. It’s an industry that’s just ripe for disruption. And again, you see, like during the financial crisis, right, everybody on the left said, Well, we got to regulate these companies more. No, we need to regulate them less. We need to regulate the financial companies less The reason the financial Companies became too big to fail is because the government gave them a monopoly. The same way through regulation of say, for example, and I know this is a far out idea, and some people are gonna freak out and think I’m crazy. Drugs, okay, drugs, right? Look at what’s happened with these you have these massive amount of killings, this massive amount of crime and these drug cartels that are the most vicious, violent, disgusting things, because the government regulates the drugs and the illegal drugs and gives them a monopoly the same way. I’d like you to try and see it this way. The same way they give the criminals on Wall Street, a monopoly through regulation. Okay, that’s the that’s exactly what happened. You’re not going to start a new bank and compete with Goldman Sachs or the criminals at Wells Fargo. I mean, I was just listening to Left wing marketplace, you know, episode about what Wells Fargo and gamble. Wells Fargo has got to be the most crooked frickin bank out there right now. during the crisis. It was BFA and then Chase and and now it seems to be wells. I mean, it’s just like scandal after scandal, these criminals, and nobody ever goes to jail. The company gets fined. But all you’re really doing when you find the company is punishing its shareholders. They didn’t do it. They didn’t do anything wrong. You know, it’s it’s the people who run it. They don’t get fined individually. They just take their shareholders down, not down the whole wisdom. You know, what we’re going to say about Wells Fargo?

Andrew Baker 22:44
Well, I mean, I think the issue there is, you know, blaming over regulation, it’s actually both things because the business you know, the business has an influence on the politics of these big corporations. So they manipulate the laws to benefit them. And then through lobbyists

Andrew Baker 23:00
Yeah,

Andrew Baker 23:00
yeah. And then, you know, a certain outcome happens because the government colludes with these corrupt, you know, these businesses that corrupt them through the money and the power that they, you know, the politicians assume and, you know, that manifests itself in its donor. So, I mean, the problem is, is really the way to solve this is by just making the power of the government smaller, because, you know, it’s, it’s, you know, power corrupts, I guess so. And absolute power corrupts absolutely.

Jason Hartman 23:31
It’s the same. No question about it, no question about it. Hey, Drew, let’s take a couple of Q and A’s from the contest real quickly. I just want to get a couple of these done, because we’ve got quite a stack of questions that are needing answers from our contest that we’ve been holding the last two months. So Kevin Wilson, said, you know, when, when asked, What’s the favorite thing about my investing philosophy, just started listening to Jason’s podcast. Enjoy content so far. The other question was, what advice would you give yourself? back in? 2008? Okay, and I picked 2008. Because a good question, because, you know, that was right in the midst of the financial crisis. Right. And, you know, what advice would you give your 2008 self? Right. And Kevin said, focus on income producing properties. And, you know, that’s sort of a general answer, but very, very true. Julie bat said, paper thing about my investing philosophy, investing in deals that make financial sense today, not based on speculation in the future. Oh, thank you, Julie. That’s commandment number five, Thou shalt not gamble. So don’t invest for appreciation, invest for solid fundamentals and those come down to cash flow. Her advice for her 2008 self would be starting an Amazon FBA business and invest the profits in real estate. Drew you’re in the Amazon business so

Andrew Baker 25:00
I that’s Amazon FBA is very familiar to me. Yeah.

Jason Hartman 25:06
Good stuff. Tim Keeley says favorite thing about my investing philosophy. Let me see his his instant gratification when you get property that cash flows. It makes sense the day you buy it. So same kind of thing. Julie said commandment number five, a financial education and tax policy class wrapped into it in entertainment package how tricky? Yeah, I try to make it entertaining. So thank you, Tim. And then advice for 2008 self Oh yeah. This is one of our providers that we had problems with in Chicago and that is Mac Mac industries. Do not invest with Mac after 2017 and buy as many properties as you can where it makes sense. Don’t be chicken to look at remote properties across the country. I think that’s all great advice. don’t invest with Mac. They were good for a while and then they then They went bankrupt. So they turned bad on us. And

Andrew Baker 26:03
were they builders, what were what were they?

Jason Hartman 26:05
They were rehabbers. They were rehabbing properties in Chicago and doing management and the the property management just went to hell in a handbasket. We started to see some early signs of that and stopped recommending clients. And then shortly thereafter, it was in the news that they declared bankruptcy on a reorganization basis, which isn’t necessarily bad, but I think they were probably doing some unethical things. So we had a conference call for all our clients who purchase through them and you know, have been trying to help them through it and you know, it seems to be working out. Now. That’s the thing about income property investing folks. Remember, you’re a direct investor. So you notice the bumps in the road. When you invest in a fund in a you know, a mutual fund or a stock or a bond. You don’t see the bumps. On the road most of the time unless they’re hugely significant, for example, if you invested in Samsung, okay, which is like one six of South Korea’s economy, I think I just heard that. It’s huge. If you invested in Samsung, and then they got sued by Apple, not once but I think twice and they I think they lost both times Apple just killed them got a giant couple of giant judgments against them. And and that was in the news, that’s a bump, you would feel you would know it right, because it’s a big bump. And you know, if you were a shareholder, I’m sure that affected your stock value. But there’s all kinds of little small bumps You don’t even know about, you know, lawsuits, sexual harassment, patent infringement, little things. competitive landscape, that that changes in that investment that you just don’t even you’re not even aware of, but it gets treated. for you as the investor in, you know, mediocre or even terrible returns on your investment, and that’s a bad deal when you’re a direct investor when you follow commandment number three, you know, you’re you’re investing directly. And so those bumps you feel them. And one of the important things about being an investor and Drew, you’ve certainly felt bumps in your investments we’ve talked about them many times over the years is to control your own mindset, your own emotions, so that you don’t let them get the best of you and you keep focused on the long term. I’ll remember years ago when I was having when I owned a traditional real estate company in Irvine, California that I later sold to Coldwell Banker. It was like every bad thing that could have possibly ever happened happened to me It felt like I mean, it was just the worst experience of my life. That company So I bought it in 1997 started to turn it around took a huge risk and tripled the size of the office. And you know, went from class C to class, a office space, very expensive move. And then guess what happened? The franchise or decided to sell the company and the whole franchise network fell apart. So everybody was wondering, well, what’s the what’s the brand of the company going to be? You know, what’s going to happen? Are you going to change the name of the company? Are you going to go with a different franchise like everybody else? Nobody wanted to work there. And when you’re in a real estate brokerage business, the business you’re really in is recruiting agents who are good agents who can sell properties and have a good client list right? It’s not really selling properties directly. You know, they do that you Your job is to recruit them. And and then, shortly after the hat, guess what else happened? 911 mean you And we moved into this incredibly expensive new office 911 happened. Nobody wanted to come to work. Nobody wanted to buy properties. It was terrible. I mean, it was like, but I, I remember my friend Jay, I said, What should I do? You know, he said, these words, he said, Keep your eye on the ball. Keep your eye on the ball. And I’ll never forget that. And I just put my nose to the grindstone as the saying goes, and I kept working. And you know, a few years later, Coldwell Banker bought the company, and it was a pretty good deal. So, but I could have easily given up and I could have not kept my eye on the ball, and been overcome by all my problems, and that wouldn’t have been a good deal. So

Andrew Baker 30:44
why would you Why would you have back to their previous question? Did we answer the what would you do 10 years ago to give yourself advice is it is it just because I have a couple thoughts? I don’t know. Well, that’s,

Jason Hartman 30:55
that’s not an answer. He it’s just their statement. So this So, everybody you didn’t enter the contest Did you? drew? No, I don’t see your name on here. Sorry, you didn’t enter? Do you already have an Amazon Echo?

Andrew Baker 31:08
I don’t. But I I see him on sale all the time on Amazon. So I probably should buy one.

Jason Hartman 31:13
You gotta get one. They’re great. I have three of them in my house. I love it. But yeah, it’s just a statement. You know, don’t invest with Mac, buy as many properties as you can. where it makes sense. And don’t be chicken to look at remote properties across the country. So that’s good. Tim, you’re being area agnostic, and that’s the great stuff. Okay. Michael Gerber bossy, is that how you say that? My favorite philosophy of his is refi till you die refi till you die. And we’ve talked about that on other shows before. And his advice to his 2008 self would be you can write out a bad market if you have a positive cash flow, and enough money in reserves. Yeah, great advice. So yeah, I only add to that positive mindset, being willing to delay gratification, and then of course positive cash flow and good reserves. Okay, last one here, Drew and then we will move on. Jonathan Lindsey says his favorite philosophy of mine that he likes is the straightforwardness of Jason Hartman his 10 commandments of successful investing. They’re easy to understand and follow the underlying slps standard operating procedures think for success. And then his advice to his 2008 self would be educate yourself sooner on real estate and by slash invest in multifamily property ASAP for a kickstart. Now situations are different in my life limiting my options for investments due to marriage, family primary residence. These factors limit willingness to move back into apartment style living, even if I own it. Hey, you don’t want to be the name Bring your tenant anyway, Jonathan. So I think what you’re saying is like the old idea of like, buy a duplex and live in one and rent the other, right? I don’t know. I’m not sure exactly what you mean by that. But you don’t want to live next to your tenants. Anyway, don’t do that. If that’s what you’re saying, so, good stuff. Well, Jake Blair, you’re the winner, contact your investment counselor, and we’ll get your addressing your address and ship out the Amazon Echo. And we’ve got a whole bunch more questions. We will share on an upcoming episode. Drew. What else did you want to talk about? Maybe on the shift video or anything in general, you know what you were talking to me about? off air is you were just in Laguna Beach today Laguna Beach, California, beautiful place. And you were talking about the price of a house in gold?

Andrew Baker 33:48
Yeah, you know, well, first of all, I was going down to Laguna on Sunday, and you know, colleges started back up because I live in a little college town in England. And so I thought it would be a great time to go but apparently everybody was Going to the beach. So it was just so packed and crowded. And, and it’s I guess there’s a heat wave over here. But yeah, I was I was on the front, I was on the drive talking to a friend and I was just telling them how it seems like, since the government just manipulate the money supply and how in the last, you know, 50 years they’ve hijacked the money money used to be based on gold. And, you know, it was the the constitution it says that, you know, that the government can only mint you know, gold and silver, you know, so money was represented by gold, and how they’ve transitioned that’s a little tender and and what the consequences of that are. So I was telling him, a friend of mine, I said, you know, it’s funny, if you bought a house for $100,000, and then in 10 years, you end up selling it for $200,000. Well, you’re talking about money here. What is that in a more static asset? So it’s, you know, like, let’s say, I know gold is you talking to you’re talking about currency currency rather than Ronnie

Jason Hartman 35:00
Yeah And let me just distinguish that for the listeners for a second. So, currency you know whenever when you look in your wallet and you see those dollars you should not call them money, they are not money they are currency okay currency is a you know a made up construct money the concept of money is that has intrinsic value. Currency never has intrinsic value, it only has value by force because the government basically has, you know, guns more guns than you do. And they say this is something you will be required to trade in. If you open a business and you say, you know, I have a bakery and I’m only going to sell my you know, my bakery sell, you know, coffee cake. I’m only going to sell it to people who want to pay me and gold. You will go to jail because the legal tender laws say that you have to accept dollars okay? And so money and currency are very different things. Just understand that distinction. But go ahead.

Andrew Baker 36:06
Yeah. So, to the analogy, if you buy a house for hundred thousand dollars, and you sell it for 200,010 years later, if you’re basing that in $1, the government is controlling that transaction completely. And so what’s the real price of the house? What is it really done? Is it that the government has debased the money by by 50%? Or by 40%? Or what how does it relate to something that’s more static? So if you take the full picture, and you sell the house for $200,000, the government, you know, basically rubs its chin and says, Look, there’s $100,000 of profit here that’s been gained. But if you’re basing it on the dollar, and you have to pay capital gains, the reason that has gone up in value is because they have debase the currency. If this were a business, they would go to jail for fraud because they are debasing the money and then taking the back end of the of a chunk of the appreciation which was caused by them debasing the currency. So, right.

Jason Hartman 37:05
Isn’t that a great system? They Yeah, no way. But wait, But wait, there’s more. Wait till the IRS comes along. Go ahead.

Andrew Baker 37:13
Yeah, exactly. jail or something. So,

Jason Hartman 37:16
yeah, so they No, no, no, no, that’s not what I’m talking about. I’m talking about, you know, we’ve had Dan Ammerman on the show many times and probably need to get him back. It’s been a while. But Dan Ammerman does a really good job at illustrating some of these concepts. Remember what I’ve said to all of you listeners before and Drew, I’ll let you kind of finish and make a point on this. But just to tee it up a little bit. is is that the IRS, the tax code does not properly account for inflation. In some, in most ways, this hurts people. Okay, and the IRS Come on, they know exactly what they’re doing. Because in Drew’s example, you buy the house for $100,000. You sell it for $200,000 and then your cash capital gains tax if you don’t do a 1031. tax deferred exchange is based on the hundred thousand dollar gain. So that sucks because the value of the money has declined. And that’s why the value, not that we shouldn’t even use the word value, it’s not value. It’s the number, that arbitrary price is there’s a difference between price and value. It’s the price, the price went up, but the value didn’t necessarily go up or it maybe it went up to a smaller degree than the price, but you get taxed on the price. You see how the IRS just totally screwed you. But sometimes it works for you. Okay, the fact that the IRS doesn’t know how to account for inflation, or they do but they didn’t figure it out in every way. But drew Go ahead.

Andrew Baker 38:51
Well, I’m curious how is it that they how is it that they don’t know with regards to the you know, how is it How is it that them not accounting for Inflation helps the individual would this just be was low interest rates or what?

Jason Hartman 39:04
It no it helps on on the the concept with interest rates as many times will literally be in a negative interest rate environment. And depending on what you think the rate of the rate of real inflation is, okay, not the government quoted official, manipulated statistic, okay. understates to stick with real inflation is 5%. And you can borrow money at four and a half percent, you’re already making a half a percent before anything else happens, because you’re borrowing it at a negative interest rate below the rate of real inflation. But also, when I talk about my inflation induced debt destruction concept, that’s beautiful, because the IRS doesn’t account for that, and neither do most people. So in the example you gave 10 years go by you buy the house for $100,000 you sell the house for $200,000. And if the debt on that house has been debased by inflation to safe man, you know, I’m these are obviously real numbers, they’re just off the top of my head, but $50,000 in real value is now the loan balance. Okay, so now you’re you’re really making $150,000 Okay, in paper, but if you do a 1031 tax deferred exchange, and you roll that money into another property that’s maybe in an area that has a better chance to appreciate more, or in you know, you turn it into two houses instead of one. So you get a better cash flow obviously, right? Then you are you are beating them at their own game. Okay. And And what if you borrowed that money at a negative interest rate or even at par? Meaning, you know, the real inflation rate was four and a half percent and you borrowed it four and a half percent, but you outsource the debt obligation to a third party called a tenant, you didn’t even pay your own debts. Okay? This is where it gets into what I call the ultimate investing equation where you have so many multi dimensional things we didn’t even talk about the tax benefits you got along the way. We didn’t talk about positive cash flow or anything else.

Andrew Baker 41:26
Yeah, it was great. I got my got my taxes done and it’s it’s amazing how that depreciation is a gift that when when you get your taxes done because any profit that you have gets very closely to be matched by the by what the depreciation is. I mean, I know that’s not true for everything but it is funny how the tax code really is beneficial to those that want to invest in real estate. And you know, I took my first shot at buying some stocks and I did pretty well because the timing but I think You know, anybody that had invested right before Trump became president would do all right. But, but then I ended up selling it because I knew that the prices were going to change. And it was amazing how once I did the math, how much risk I took, and how on board factor and yeah, once you factor in the, the, what you gave to the government, you realize, oh, gosh, why did I take all this risk? You know, whereas if you invest in real estate, it’s like the tortoise and the hare, you know, it’s probably better to be slow and steady and, and methodical about what you do than to gamble,

Jason Hartman 42:35
no question about it. And that’s the unfortunate thing about the system in which we live. The government has basically pushed people into high risk investments, that no would not be there because they can’t earn any yield off their savings in real dollars. If you put your money in a CD, you know, with older conservative people should be able to buy bonds and put their money in You know, a laddered cd portfolio right in the bank certificate of deposit. But with with real inflation and the artificially low rates we have there, they get killed, they can’t do it. And so they pushed all kinds of people into this. But the one point I wanted to make is that when you have a big gain in something like a stock, just remember the government hasn’t collected their share of that yet, and it’s very significant. But also, when you have a bump in the road, and you get hurt on a real estate deal, and you think, Oh my god, this is terrible. My property’s been vacant. My tenant, you know, beat up the house and I got to spend this money to make it rent ready again. And you know, look at folks, real estate or income property is not immune to problems. It definitely has problems. I deal with them constantly and I hear about them constantly. But what you aren’t remembering about the problem you’re having trying to get you to look at it from both sides is that the government is also your partner on the downside. Okay, so if you have a, you know, a $3,000 disaster, and you’re all depressed and sad about it with your property, but you know, remember when tax time comes around, the government’s gonna cover about 40% of that depending on your tax bracket and what state you live in, if you, you know, this is where it’s actually good to live in a place like the Socialist Republic of California that taxes you to death because you get a bigger deduction. Not that that’s a good reason to live there, but

Andrew Baker 44:34
I feel so much better now.

Jason Hartman 44:36
Yeah. Didn’t they make you feel better? I just wanted to cheer you up.

Andrew Baker 44:39
Yeah. Thanks, boy. Great. Now, let me get my checkbook out.

Jason Hartman 44:43
Yeah, that’s right. Right. It’s it’s just not as bad as you think because the government is there to be your partner through good times and bad it’s like a marriage right?

Andrew Baker 44:53
Through Glade is funny because you know, the thing I found with the, you know, the properties I had is just, it’s really a three legged stool. You have to have a good deal what you bought, you have to have a good tenant, that’s going to pay the bill. And you’re going to have to have somebody good that can manage it. And MIT, maybe that’s you, maybe that’s a property manager. But, you know, you have to realize that you also have to manage your property manager. So, you know, and hopefully, if you get a good one, that job is less intense. But I have really seen a turnaround in certain markets that I’ve changed property management companies where now I’m getting, you know, 20% more in rent, I’m getting a better quality tenant. And, you know, we’re partnered together, whereas I think some property management companies, and you’ve mentioned this on previous shows, the incentives are so skewed, that they have an incentive to do a bad job. If they get a bad tenant. You know, they get a big rent, you know, they get a portion of the rehab, you know, and they get a big lease up there, right.

Jason Hartman 45:56
Brand new lease out of alignment. A lot of times that’s the problem. Yeah. Sometimes these lease fees are more than they’ll collect in the entire year in their, in their, you know, percentage commission for managing the property. So this is why we have talked extensively about self management, it’s something that’s definitely worth considering, like I said before, if you have a good property manager, just leave it alone, you got a good one, but some of them, you know, they’re good for a while, and then maybe they’re bad later, or vice versa, you know, and you just get rid of them and try it. Just try self management. And you know, but don’t do it without an education. Okay, got to listen to my episodes where I’ve talked about it and learn about it. And you’ve got to have some experience I would not do it as a new investor, a new investor should not do self management. Although that’s all I ever did. I mean, when I bought my first property when I was 20 years old, I self managed and you know, with nationwide investing when you’re remote and you’re not near the property, You definitely need a an agent or property manager to do the lease up for you in the transition between tenants, but you don’t necessarily need them to collect the rent every month, you know, you can self manage that part of it pretty easily.

Andrew Baker 47:13
Yeah, the self management thing I’ve never quite wrapped my head around. I mean, I think it’s a good idea if you could give it a shot. And if you can find the, you know, the magic Mojo to make it happen. And I think what’s the benefit of it is that, you know, the tenant is less likely to call the landlord with these chronic, constant nagging, because it’s, you know, like someone constantly complaining to their boss or something, it’s gonna eventually look bad on you, but if there’s an intermediary between you and the owner, you’re gonna you’re gonna you’re gonna everything this light bulb burnt out, you know, that type of thing, I think is the strongest argument for self management. I think with me, I just don’t have enough time. I you know, And I think the Jason Hartman family style of doing everything yourself is admirable. But I don’t know that I would be the best property manager, you know, and I think you know, I’m better at dealing with my business and getting that to be more efficient than trying to reinvent the wheel remotely. And so I think for certain people, you know, maybe you’re retired, maybe you have more free time, or, you know, or maybe you’re just more of a hands on person and you need to have that satisfaction. I don’t know, what are your thoughts on that? I totally get it. But

Jason Hartman 48:34
I wanna, I wanna, I want to say something to you with that. Okay. That was my thinking, too. Okay. And it was the thinking of Fernando, who’s been on the podcast many times and many of you were at our meet the Masters a couple years ago, when the jaws dropped of everybody in the room when Fernando, who has 70 units said that he’s got I think, he said like, 25 of them are self managed and I was interviewing him on stage and, and he said that, you know, we were talking about how much time it takes to deal with the different properties, how do you manage a portfolio that large etc, etc. And he said the self manage properties take less time I was there than I probably manager. Were there. Yeah.

Andrew Baker 49:18
Okay. Yeah. And he ran the numbers.

Jason Hartman 49:20
The room got really quiet for a moment when he said that, and I think the property managers in the room were a little upset about it. Didn’t want him to say that. But But you know, that’s the look at folks. Think about this in any area of your life. Okay. There are things that it makes sense to delegate and things that are just better to do yourself sometimes. And sometimes having a intermediary a third party in there, just slows the whole process down, makes it more expensive and less efficient. And it puts things out of alignment. Okay. You know, They’re there. They’re older and I hate to make this an age thing. Okay. But, you know, look, it’s kind of a common stereotype, okay? Sometimes I’ll go into an office of a, you know, very seasoned executive in an older person who’s, you know, already made it many times over in their career, and they’re, they’re a big shot. And there’s, there’s no computer on their desk. Like, really? In 2017, you don’t have a computer on your desk, and I’ll ask about it as Oh, no, I have a secretary. Oh, my God. Are you kidding me? Like, seriously? That’s just a ridiculous mentality to me. Isn’t that Warren Buffett? Doesn’t he do that? I think that’s that’s something wouldn’t surprise me. But he also doesn’t pay a secretary enough because she has a higher tax rate than him apparently, which is not actually true. People have debunked that myth. Many times. It’s more because Warren Buffett is cheating

Andrew Baker 50:59
you He’s not cheating, actually. But he’s just using the loopholes. You know, you know, Warren Buffett just left wing hypocrite, okay, but but I like his investing philosophy of value. I mean, I love Warren Buffett in some ways, even though I’m giving him a hard time here, the value investing philosophy is a good one. And it’s my philosophy, I just do it with a real estate with income properties. So I agree with that, you know, it’s just easier to do a lot of stuff yourself, you know, yeah, when he talks about how, you know, money managers just take most of the profit. And, you know, a lot of times these index funds if you just invested in the index fund, and you didn’t have the, you know, the, the monkeys throwing darts at the, at the newspaper trying to pick stocks, you do much better just if you invested in an index fund, because, you know, they have, you know, if you pick a money manager, they take one, two, sometimes even 2%, whereas if you’re picking an index fund, they take a fraction of 1% but I think the problem is, is that, like you said, you just don’t have as much control. And to me, I think why I had such hesitation for such a long time invested in the stock market is like, I don’t feel like I really own anything. I mean, maybe I do I own like a piece of paper or some small, I own this small part of a company, maybe, and I’ve no say over anything. And, you know, and so thinking about just owning a house, you have a lot of say over what you want to do, I have say over what I want the flooring to look like. And you know, you know, and sometimes the property managers might say, Hey, this is a bad idea. I wouldn’t do this. And you can hear they’re here in the mouth and say, Man, I think you’re wrong. I don’t want to pay you to replace the carpet every year. So I’m going to go this direction instead. And try it out on one of your properties and then make a value decision for the next thing but with your friend talking about earlier, the question about what would you do differently in the last 10 you know, if you knew in the 10 years, I think the mistakes I make I’m glad I made them. I mean, some of them, you know, yeah, I guess it could have worked out better. But

Jason Hartman 53:05
yeah, I’m glad but but I really look back Yeah.

Andrew Baker 53:08
More assets I accumulate those smaller decisions or smaller mistakes I made in the past would be much more magnified if I hadn’t learned that lesson in the future when I’m dealing with more money. So I don’t very good way to think very good way to think. Yeah, I agree. So yeah, that’s, you know, like, I remember when I was younger, I collected baseball cards when I was in elementary school, and I think I’m so thankful I wasted money in that direction. You know, or, you know, in the Beanie Baby type. I didn’t do that. But I’m saying that type of mentality of those fads because getting wrapped up in that type of thing and spending all that money in that way. If I do that, when I’m in elementary school, well, what are we talking about here? A couple hundred dollars, if I’m doing that as an adult, and there’s a lot of adults that invested in baseball cards in the 90s or whatever, think about how much more of an impact it made on their finances. You know, I spend 50% of my money when I’m you know, making $100 a month versus, you know, maybe more money you know, the ticket number obviously, the lesson was learned at a much cheaper price.

Jason Hartman 54:22
And it was also learned at a time that the lesson couldn’t sink your ship. So you know this also that’s for some reason you made me think of dating when I was listening to you talk about this you know, when you’re young as long as you don’t do anything that will be a permanent mistake. You know, there’s there’s always this you know, single guys always say this, why do these women like these losers women always like losers? Well, they like the bad boy right? You know, the James Dean bad boy type, right? That there’s a certain traction right? And, you know, look at your daughter can afford to go out with that guy when she’s young as long as she doesn’t make a big permanent mistake, right, like marriage or pregnant Yeah, but you know, you got to learn some things and have some experiences and do it when it can’t ruin your life, you know, and

Andrew Baker 55:09
I think that’s a great point. And there’s a philosophy guy named Sam Harris, who is kind of a complete different end of the spectrum for me, he’s this atheist, you know, philosopher, and kind of, kind of looks at the world differently than I do. But I respect him because of his thoughtfulness when he approaches stuff. And he talked about how the decisions of life most decisions are not permanent. And I think when you’re younger, you approach things thinking, like, Oh my gosh, this is gonna have such a ramification in the future. When you because you’re looking at the past. And really, most of life decisions are reversible or aren’t as big of a decision in terms of you try to get out of it than you think if you get a bad if you buy a bad house and you know, or whatever. Maybe that’ll have a bigger impact on your you know, On your portfolio, but you know, you can sell it, you could, you know, fix the problem, you can wait it out. And so I thought that was real interesting that a lot of times the hesitation and like you were saying the hurdles are yourself. And really, I think my biggest thing is that I didn’t take more risks. I was too conservative, and I think you kind of echoed that same sentiment. So,

Jason Hartman 56:26
you know, because I think it’s better to make a decision and be wrong than to be right. Never making the decision. Right. So yeah, right, right. Right. Better to do something imperfectly than nothing flawlessly, you know, the people, the people that get on in the world and the people that become the biggest successes, you just notice that over time, are the people that fail fast fail forward, but they’re not afraid to fail. They, you know, they cultivate what I call and I coined this term, so far as I know, rational recklessness, and, you know, I teach this Because I need to learn it myself. I’m pretty conservative. And I find that my being conservative really hurts me in a lot of ways. I need to just be a little more reckless and I’m, I’m just not that way by nature. And so when I say cultivate rational recklessness, the reason I’m saying it is because I need to learn it. And there’s a great book I had him on the show. His real name is Mark Ford, but his pen name is Michael Masterson. And he wrote a book called ready fire aim. It’s phenomenal. read that book. Ready fire aim. It’s, you know, great book and and watch the movie with Jim Carrey. Yes, man. And that’s really about the same thing, you know, cultivate rational recklessness. I just find that the deals I sit on and think about and agonize over the wording in the contract. It would have been better if I just did the frickin beyond you know, got a little reckless some You know, the deal would have just been better.

Andrew Baker 58:02
Well, it’s funny when you look when you look at the deals you did in the past I think you scrutinize that like with me, I’m scrutinizing the the ratios, and the prices and all that stuff. And I am looking at at in today’s dollars, and you go back and you’re like, well, geez, if I had bought anything in 2003, if I bought one of the worst deals ever, I mean, I’d be doing great. People would be saying, Wow, you’re the smartest, you know, to exploit this

Jason Hartman 58:29
guy in the room.

Andrew Baker 58:31
I mean, doing something that might be a couple degrees off, and not in your favor, quickly that gap gets filled in by, you know, time. And, you know, so I think that’s what I sort of learned. And I think another thing too, is just not getting a cheap haircut. You know, I don’t want a cheap haircut and buying something that might be the best what what does that mean? What do you what do you mean when you say that? Yeah, so I use that as kind of Have a cheeky way of saying that like trying to get the best price for something is not going to always benefit you. So, you know, if I go try to find the cheapest way to get a haircut, it’s probably not going to work out in my favor. You know, you probably want to spend a little bit more and get something that will, you know, obviously benefit you. It’s

Jason Hartman 59:20
It’s funny you say that because I just did that myself, you know, ever since I got my haircut. No, no, no. Well, I cut my hair a little bit one time. That didn’t work out too well. But, uh, I ever since I in when I lived in Newport Beach, you know, in Orange County, I had an expensive haircut place and I actually took you there one time. And yeah, and and I used to go and pay, you know, 3540 bucks for a haircut right. And then when I moved to Arizona, I didn’t have any place. So I went to I started going to Great Clips and I loved it because that app I could just get my $13 haircut. It was great. But I actually when I got back from Europe, I needed another haircut I was you know going for like a month. I went online and I found the best place supposedly in Las Vegas. And I went to it right the number one rated like salon by Elle Magazine, and I went there and I paid 40 bucks for a haircut and you know, it really was better. So, yeah,

Andrew Baker 1:00:18
you know, yeah, getting a $20 haircut is different than getting a $7 haircut. I guess that’s, you know, the, maybe the point. But, but yeah, you know, one of the places that maybe the numbers were better for where I bought and, you know, paying maybe 30% more for a nicer house kind of seemed to me out of, you know, out of sorts because of just how much more money that was going to tie up. But you think about those jewels that are in your portfolio of either homes or what and the things you usually overpaid a tiny bit for, I think ended up kind of being your more favored assets being the things that you know, you’re more proud of and you You know, sometimes, you know, the cheaper deals do make more sense. But, you know, I hear you talking about,

Jason Hartman 1:01:08
like, when you started investing with us, when was the first year you bought from us like was that 2009 or 2008?

Andrew Baker 1:01:15
It was 2009 or 10. I looked in 2008 actually to buy a place with you guys. And I, you know, we were friends for a couple years before I ended up. And I’ve always, you know, before I met you, I was very interested in that, but, you know, by the time buying property became accessible to me after college, it was 2006 you know, 2007 So, by the time I came to the market to buy something, I just threw my hands up and said, heck, no. And you know, I had friends where all their parents chipped in and four people bought a house together at the height of the market condo in Costa Mesa. Yeah, basically, and just the whole thing imploded, and I had friends that wanted to have me going on deals with them and I just said, I’m This is amazing. And you know, and then right when the bubble was starting to pop, I was looking at places and the prices just kept going lower and lower and lower. So I think the first place I bought was in you know, you bought a Indianapolis

Jason Hartman 1:02:11
Yeah, yeah. And so so you were buying initially you were buying like Class C properties. You were buying the cheap stuff from us. And then yeah, you’ve upgraded your, your you’re buying more Class A type stuff now. Right?

Andrew Baker 1:02:24
Yeah. So when I first started, you know, I think, I think some of the deals that I bought, were based more on price than on quality. And so, you know, I, a lot of these neighborhoods that I bought in were, everything was built at the height of the market. So anyone who bought in that neighborhood bought at a bad time. So the whole entire neighborhood was on fire, metaphorically speaking, in terms of bailing out so some of these neighborhoods didn’t do as well as others. So some of them managed to recover and others you know, basically failed. So, two of the places I bought there were more in the BCS zone. And you know, I had to, and and those do well, I mean, they do are right, but the ones I’m more proud of are the ones that paid a little bit more for that were in the nicer area, you know, a newer home building track, not every place went underwater, and they were all built in like 2000 you know, like, I think 2004 so there were some people that didn’t get caught up in you know, walking away. But um, but yeah, they, they’ve done, they’ve done great and I’ve noticed recently that the rent values have gone up dramatically and I and at first I attributed this to having good management and picking good people. But I’ve noticed that some of the newer homes that I’ve leased up, Kenny more than the ones that for the tenants that have been in there for a couple of years, I mean, I’m getting a couple 100 $150 more maybe 10% more in rent, so I have noticed as price They’re become less affordable. The rents have just gotten so much stronger. I don’t know if you’re seeing that. But in certain market rents are definitely stronger. But Drew, the rents are not keeping up with the prices. It always goes that way. It’s always the prices lead and the rents follow and a couple years from to catch up, Drew, you know what we got to go on for an hour and five minutes now, this episode is getting way too long. So I gotta just

Jason Hartman 1:04:25
have you back. Can you remember where we are? You want to make a final point. Let’s wrap it up.

Andrew Baker 1:04:29
I’ll let y’all like I would leave your listeners to rest for here. So we’ll, we’ll come back to the table. Maybe in a couple of weeks or so.

Jason Hartman 1:04:37
Good deal, good deal. Hey, everybody, go to Jason hartman.com. And click on the events section and join us for our upcoming meet the Masters event we have never had ever and I think this is like our 19th meet the Masters now. We used to do it twice a year now we only do it once a year. We have never had such strong ticket sales. So early. Because one of the reasons that we got some phenomenal early bird pricing so Jason Hartman calm in the event section, take advantage of the early bird pricing on meet the masters of income property our big event and this will be our biggest ever it’s a beautiful property in La Jolla, California San Diego area in January Get your tickets now so you can save on the price and this is going to be the biggest and best meet the Masters we’ve ever had. We have some paid speakers really good paid speakers this time as well as our teams and property management people flying in from around the country as well. So

Andrew Baker 1:05:39
yeah, it’s a great event I I love going to them when I get a chance. Just the ability to network and meet some of your vendors meet some of the people and shake their hand that you’re doing business with. Definitely gives you more in the long run and and and there’s people that I’ve had a chance to own and other ones In the same markets that I do, where we can kind of compare notes and talk about what we’ve learned and putting a price on that. I mean, you really can because it’s definitely been helpful.

Jason Hartman 1:06:10
Good stuff. Yeah. No, thank you drew. And the other thing is meeting our clients and hearing their experiences, the good, the bad, and the ugly, you know, sitting sitting at lunch and, and talking to our clients who’ve been doing it a while, you know, learning from them sharing experiences, that’s just really, really helpful. That’s why we do live events. We don’t just have a podcast, you know, we, we do many live events, and this is our biggest one. So meet the masters of income property in January early bird pricing, Jason hartman.com. Click on events and get your tickets today. Drew, thanks again for joining me and talking about all these random topics. And we will be back and have you back on the show in the future.

Andrew Baker 1:06:51
My wife’s tired of hearing about this. I got it. I got a bed somewhere.

Jason Hartman 1:06:56
Good stuff.

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

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Jason Hartman starts the show by talking about being an empowered investor. In the interview segment, Jason hosts his Aunt Joan, an incredibly successful real estate investor who, together with her husband, owns more than 70 single-family homes around the Sacramento, California area. Joan shares how she started into real estate and gives advice about property management and keeping your tenants on your side.

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

Announcer 0:09
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is hand picked to help you today in the present, and propel you into the future. Enjoy.

Announcer 0:25
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:16
Thanks for joining me today where you will hear a Thanksgiving interview of my aunt Joanie. And I finally got her to come on the podcast. And you know, the reason this is interesting is because, as a child, my aunt and uncle in Sacramento, Joan and john, they really really influenced me a lot in my thinking about real estate investing, as they were accumulating properties and it seems like every time we would go up there, for whatever reason, whether it be Christmas or Thanksgiving or just for a visit some other time of year, I, you know, my mom and I would go around with him and See all these houses they owned and we were constantly looking at houses, I guess that’s why real estate is in my blood. Joan claims to own over 70 rental properties. She would only say over 70 I have a feeling it’s quite a few more than that. But it’s pretty amazing if you think about it. And one of the things I’ve been focusing on a lot lately is this concept of alignment. And that’s really our theme for our upcoming meet the Masters event, there will be many talks and much focus on the concept of being an empowered investor. And one of the themes here is how, you know, how do you get empowered? How do you become an empowered investor? Well, number one, you follow my 10 commandments, but especially commandment number three, you maintain control, you don’t go and invest in someone else’s deal. Now, this is also interesting because it brings If the concept of well when you don’t maintain control, you know, the problems there, you might be investing with a crook, you might be investing with an idiot. assuming they’re honest and competent, they take a huge management fee off the top for managing the deal. And I was talking recently with a provider, a local market specialist in the Phoenix area A couple of weeks ago, and they said that they were going to open up a new fund to help people invest in single family homes. Get this, okay. I mean, this is such a crappy deal. It’s, it’s not even, you know, it’s not even on my radar, okay. And they said they thought that they could return eight to 10% to the investor investing in single family homes. And I said, well, and they, they, they claimed that they could cure a lot of the problems that single family home investors have and, you know, they do fund investing and you know, like to go money together and get people to invest in funds. And of course, we all know the problems with that. But the interesting part is, when he says, Well, we think we can return pretty consistently eight to 10% by buying and fixing and renting out single family homes within this fund. And I said, well, gosh, eight to 10% is a terrible return. I mean, you and I both know that investors can make 2030 40% annually, all things considered on their prudent good, smart, single family home investments. And I said, Well, why would an investor do that? And he, his answer is, well, you know, they’re just some investors that don’t want to deal with anything. And I thought, you know, that is amazing. If you just figure out how to deal with some stuff. It’s not that difficult, okay, it’s really not that difficult. You can triple or quadruple or make a return of five times, what they were suggesting would be a good return of eight to 10% annually. So just mind boggling here, right? But part of the problem when you maintain control when you follow commandment number three that presents some new challenges, and all of you listening notice, it brings on some new responsibilities that you, the investor have to deal with. Well, one of the ways and one of the things, we’re going to focus on it meet the masters and you’re going to hear in my interview with Aunt Joan, who owns over 70 houses. And by the way, I want to just do a little math for you, because she claimed to having 62 of those over 70 we don’t know what the exact number is over 70 she’s being modest. I have a feeling it’s a decent amount over 70 but I just don’t know, I was used to think they owned about 100 hundred and 20 homes. But if you just take a $450,000 or let’s just Make it more conservative. Let’s take $400,000 is the average value of those homes. Now when the market got really bad see they did it the old school way when the market got really bad in Sacramento, California, and we had the financial crisis. In some areas, I remember reading a stat that Sacramento was down 48%. And Diane, Joan doesn’t think her portfolio was down that much. Let’s say it was, you know, only down 30 or 40%. That’s still a pretty big loss, okay, which could have been prevented through diversification. But, you know, this is the old school way. It’s the old school way of, you know, buy a bunch of houses in your neighborhood, manage them do a lot of elbow grease, you know, go around to the houses all the time spend, you know, a lot of time doing that, but it does have some pretty big rewards, even the old school way. And you could accelerate this dramatically with refi till you die with inflation induced debt destruction with my risk evaluator formula and with diversity vacation, okay, but still and Uncle john and Joan did pretty pretty darn well for themselves. So let’s take $400,000 times 62 free and clear homes, okay? And that gives them a net worth, just from that real estate portfolio of $24,800,000. And I don’t know how many more than 70 and Joan and Uncle john own, but I have a feeling that’s a decent amount more. So just from their real estate portfolio, they’re probably worth 25 to $30 million. I mean, look at the number of people who are retiring broke. All they did is the simple old school form of keep buying houses, rarely sell them and manage them well. So back to this concept of alignment and empowerment. If You have your interests aligned in your investment portfolio, you are going to be an empowered investor. And when I was 17 years old and I discovered Denis waitley Earl Nightingale, Zig Ziglar, Jim Rohn. Those are basically the people who brought me up. You know, they were pretty good influences on me as a wayward teenager, and really, really made a huge difference in my life. Well, one of the things Denis waitley used to always talk about is win win. And later, the late Stephen Covey talked about Win Win or No Deal in the Seven Habits of Highly Effective People. And this concept of Win Win is a great concept. So as an investor, we would probably think, Okay, well, I’m gonna hire a property manager. And I’m gonna have the property manager, manage my, my properties, and then I need to make sure that The deal between my property manager and myself is a win win deal. Okay, and that’s one layer of it. But I say, you really need to go on to one more layer. And then where there really are more layers, but at least one more layer. It needs to be Win, win, win, so that you as the investor win, okay? your property manager wins, meaning your interests are aligned, and then your tenant wins so that they’re going to stick around and want to be a good tenant. Win, win win. Now, where does this stuff get out of alignment? Well, I’ve been focusing a lot on this lately. And I have as you probably know, a couple of apartment properties. Two are in Phoenix one recently sold and I heard from one of my partners on one of those deals. That our property manager was charging the tenants, a lockout fee. So for example, if one of your tenants in this apartment complex, lost their keys or locked their key inside the house inside the apartment building, they would charge them $150 to let them back in to the property or make them a new key. That is absurd. And my partner called me and he was pretty irate about this. And I agree with him completely. It was our manager that you know, who we bought this apartment building on partnered with was doing because he said almost exactly this. He said, How is your tenant going to feel if their rent is $700 per month, and they’re charged $150 to get back in their unit. So this is an example of non alignment where the manager is basically screwing your tenant over and your tenant is not Not going to want to be a good long term tenant in the property. The same person who’s saying we can return eight to 10%. Buying single family homes inside of a fund, you know, non alignment all over the place here non alignment, not win win. So this is the kind of deal you want to avoid. You want to make sure it’s a win deal for you a win deal for your manager and a win deal for your tenant. Your tenant is your customer. If you own a business, if you had a restaurant, you would want your customers to come back, right. And you know, you need to insist that your customers pay the bill. And when they don’t pay the bill, your rent in other words, or when they don’t take good care of your property. You need to be firm with them and make them live up to their part of the bargain. That’s their part of the deal. Remember, you’re listening to flashback Friday. Our new episodes are published every Monday. And Wednesday, but it goes too far when your manager is basically screwing your tenant over. And this gets completely out of alignment. And that’s one of the reasons I do like the concept of self management. So I’m working on some tools that can make it much easier for you to self manage your property and buy all a CART services from your manager, your property manager rather than whole complete services. The way traditional property management game is usually played, and by all ecard services from local real estate agents, it is amazing to me that you can really really and I’ve done it many times, self manage a property you’ve never seen. That has a tenant you’ve never met from 2000 miles away, or it doesn’t matter. It could be 8000 miles could be 200 Miles doesn’t matter the distance the point is property you’ve never seen an attendant you’ve never met, you can actually do that. And in our member section, I did, I believe two of our monthly members only conference calls on self management. And I’ve done some podcast episodes on as well. But I went pretty deeply into it in the members section, and all those calls are available, if you just join for a whopping hundred and 20 bucks a year, and you get some big fat discounts. In fact, if you’re coming to meet the Masters, you can recoup more than your membership fee, if you just join first, and then you buy your ticket for me the masters. Okay, so check that out at Jason Hartman, calm and listen to the self management conference call. It’s all recorded, it’s in the archives there. And it really would be a good opportunity for you also, go to the website and in the little screen bar, just type self management. And you can see all of the prior podcasts and some blog posts on the website about self management. And the whole focus here is become an empowered investor. Follow commandment number three, and then take on these additional responsibilities. When you do follow commandment number three and increase your returns dramatically. But you make these responsibilities easy for yourself. So you get the best of all worlds. You create a win win win deal. You you capture much, much higher returns than investing in some fund or some pooled money asset where you might be investing with a crook, or you might be investing with an idiot. And even if they’re honest and competent, they take a huge management fee off the top for managing the deal and you make the deal a win for your tenant. That’s what aunt Joan is going to talk about in this episode as well. So I think you’ll enjoy this interview. We did have a few times that guests were coming over for Thanksgiving and rang the doorbell at my mom’s Southern mansion. And Coco, the dog started barking. So, excuse those, hopefully our editor got a lot of those out of there. And anyway, this is really interesting to hear from someone who has accumulated over $25 million, I estimate in net worth, just being a very simple old school real estate investor. And you can do it much, much better than this. With some of the new techniques, the risk evaluator, the rent to value ratio, I mean, and Joan is getting lousy rent to value ratios, the refi to die concept, and the concept of inflation induced debt destruction. Those are the major things missed in the old school investing concept. So you can take this, what she’s done and amplify it dramatically. Maybe you can triple it, maybe you can quadruple her results. Okay, maybe you can do even better than that. Make sure you get your tickets for the upcoming meet the Masters event in January, where we’re going to share all of our experiences and tools for you to become the empowered investor. Do that at Jason hartman.com. Now, the pricing is going up as more and more people register and we get near to selling out. So here is aunt Joan, with a Thanksgiving message for real estate investors. And Joanie, how are you?

Aunt Joan 16:46
Just fine. Thanks. Okay. Join Gulf Shores.

Jason Hartman 16:49
Okay, good. Well, thank you for coming on and recording with me today. And I really wanted to, you know, just have you share with the audience a little bit about your tremendous success as a real estate investor. And, you know, my first question for you is, when did you start investing in real estate?

Aunt Joan 17:09
Probably about 1975 or 78 1978.

Jason Hartman 17:12
Okay, so 1978, you started in real estate investing? And why did you start investing in real estate? What was it? I mean, look, tell them a little bit of your background. My mom’s been on the show before. So, you know, growing up on a farm in upstate New York, what was that? Like? Just, you know, briefly?

Aunt Joan 17:33
Well, it was a lot different from the world that I’m living in today, of course, and I didn’t have any ambitions about getting into the real estate market at that time of my life. However, when I came out to California, I went to UC Berkeley, and I majored in two fields. One was real estate and the other was personnel, human relations management,

Jason Hartman 17:57
human resources, human

Aunt Joan 17:58
resources. Yes. So I’ve come to use both of them. Uh huh. And you have to use the Human Resources sub part of it when you are choosing tenants for your properties.

Jason Hartman 18:11
Yes. And so my mom also went to Berkeley, and you are her older sister. Yeah, just by a couple of years there. And she had she got a degree in social welfare loss. Not quite so usually

Aunt Joan 18:23
lately, when she decided she didn’t he was all sick about after a

Jason Hartman 18:27
while. Right, right. So I mean, that’s funny, Berkeley in the 60s and a degree in social welfare. You would think my mom is a flaming liberal, but she’s definitely not kind of funny. But okay, so. So you went to college? And how long would you say it was after college before you started investing in real estate?

Aunt Joan 18:51
Probably about

Aunt Joan 18:54
maybe 10 years or so. 10 years

Jason Hartman 18:56
or so. Okay, great. So why why are we here? State I mean, what did you do? Well, we were

Aunt Joan 19:03
at that time, we were in that restaurant business. And we had absolutely no tax write offs. And we we needed to have something to to defer some income. And so we bought our first house in Sacramento. And just little by little, we kept acquiring more and more the, we had come from the very expensive San Francisco, San Francisco peninsula real estate market. And when we get up to Sacramento, things were so cheap, so to speak, that we just but sort of crazy.

Jason Hartman 19:47
A couple comments before you go on. So number one, listeners, you know, I always like to say that income property income producing real estate rental property is the most tax favored asset in America. So in Joanie here. Really became interested from a tax perspective. And then you look at the relativity concept. I

Aunt Joan 20:07
talked about the theory of relativity as it applies to real estate investment. And so you lived in a very expensive place, even back then in the 70s. San Francisco was very expensive. Oh, we were in Hillsborough, actually, which is even more expensive over the over the top, you might say, and then coming up here, or coming up to Sacramento, I kept looking at these houses these charming, darling little Craftsman houses. And I couldn’t believe how inexpensive they were. And so the more I looked, the more I said, Wow, why don’t we buy one? And so we bought our first one. I

Jason Hartman 20:47
don’t know what your first property that you ever bought. Was that a home in which you lived for you know, john? Yeah, it was a rental. It was

Aunt Joan 20:54
around home or home.

Jason Hartman 20:56
You didn’t buy your own home first. That’s

Aunt Joan 20:58
no excuse me. We bought our own home for a while, we also bought a home in San Mateo first before that, we bought a home in Hillsboro first I’d mean afterwards but but I mean now in terms of the investment prop part of it. We bought our first one I really and Sacramento.

Jason Hartman 21:17
Okay, great. Okay, so so the theory of relativity concept is that you came from that very expensive real estate market in the San Francisco Bay Area. And then moving to San Sacramento, everything looked really cheap. Everything looked really inexpensive. And so what happened there is it you know, things really worked back then probably the cash flow actually back in those days work pretty well. Okay. And well,

Aunt Joan 21:46
well, that’s sort of I yes and no. The point was in terms of in relation to the San Francisco Hillsborough Hillsboro market prices in Sacramento, where extremely inexpensive, but at the same time, the rentals were considerably lower. And so we were never, in most situations in a case of penciling out,

Jason Hartman 22:14
okay, in terms of cash, and even even then California didn’t really work from a cash.

Aunt Joan 22:21
That’s right. That’s right. And so but at the same time, I never wanted to buy in lower or lower property areas because I just didn’t want to have the problems connected with somebody my rentals and and very low income property. So

Jason Hartman 22:40
I agree with you. That’s one of the deceiving things and I talk about that on the show a lot. Is that is that in lower price markets, you know, those deals look good on paper, but in reality, with the collection problems and the eviction problems, they just don’t work. So whatever city you’re in, I think you should be just Low the median price is the kind of ideal, okay, so if you’re in $150,000, median price marketplace, or even a sub market doesn’t even have to be the whole city or the metro area, then you know, if you’re doing something at 120,000, that makes sense that works because you’ll have a decent quality tenant in that kind of a scenario.

So okay, now, just to give entice our listeners a little bit, Antonie, where are you now how many houses do now?

Aunt Joan 23:32
Well, a little over 70 that’s over 78. Most of them are single family residences. We have a few duplexes and we have one four Plex, but I’ve never gotten into the apartment situation.

Jason Hartman 23:47
That’s, that was my next question for you. How come you stuck with single family homes all those years? Why? Why was that the thing? Why not? Why not apartments? Well, we

Aunt Joan 23:59
just heard a lot of horror stories about renting apartments. And we just wanted to stay away from that and deal with families living in single family houses.

Jason Hartman 24:11
Yep. So this is one of the things folks, you know, look at I own apartments myself, I have two apartment complexes now. And I had three before I sold one of them a while back. And then I have a bunch of single family homes too. And I’ve definitely done both. I’ve done, you know, many more single family home deals than apartment deals in my career, but you know, the apartments, they can be good. And I know everybody, a lot of investors, they kind of have their eyes on Oh, I’m going to do this big stuff and do big apartments and, you know, I’m going to be big and I’m going to build an empire and all this. And you know, that’s great. It’s ambitious, it’s wonderful. But apartments are more complex, for sure.

Aunt Joan 24:54
And they can make too many troubles. You tell us about

Jason Hartman 24:57
that. What do you think about that?

Aunt Joan 25:00
For one thing, you have to make sure you get a good manager. And that can be a very, very hard thing to do. And then you’re really at that managers mercy if he decides to take another job, you’ve got a major problem.

Jason Hartman 25:16
You’re, you’re talking about like a resident manager. Yes. Right. Yes. Yes. Right. Can I it’s usually a tenant that lives on the properties on the property. Yeah. So if you have over

Aunt Joan 25:27
six units or eight units, something like that you have to have some live in person.

Jason Hartman 25:32
There may be a California roll to that is no, I don’t I don’t know those rules state by state. But it sounds like something they would do in the Socialist Republic of California because there’s a rule for everything. You know, when you look around the country, every lawyer you will talk to in every part of the country, in every business person you talk to in every part of the country when it comes to the legal climate in laws, California. New York always have their own set of additional laws on top of everybody else. So they’re like the like, like if, if if the rest of the country has, you know, X number of laws, California and New York have 50% more laws, right? Like, that’s crazy. you’re rolling your eyes. You know this. Okay, so what else did you hear about apartments?

Aunt Joan 26:22
Well, I I’ve just heard quite a few horror stories. In fact, we had a manager of our restaurant whose wife was a manager of an apartment house. And I just heard many tales from him. And I just realized that I didn’t have the time or nor interest to get into a possible situation. And you know, look at

Jason Hartman 26:45
apartments or like my second favorite real estate investment after single family homes. I’ll just state that for the record. And then, you know, I like the idea of mobile home parks. I’ve tried to do many mobile home park deals they have never completed One and I kind of like Self Storage I do not like office. I do not like retail property. I do not like industrial property. So housing housing housing is worse and I put in the single family homes you get generally speaking a much better quality tenant.

Aunt Joan 27:16
Yes, you do. Yeah. Well, also in our four Plex, of which is just a one bedroom, four Plex, we get excellent quality homes there. We have, yes, we just have a professional people are no pets, no smoking, that type of atmosphere, and that works very well.

Jason Hartman 27:35
Okay. Now, tell us about some of your property management practices. I mean, I remember the funniest things growing up as a kid and I tell you, if you asked me where I put my keys, I couldn’t tell you, but if you ask me what happened 20 years ago, I can tell you, because I have a funny memory like that. And I remember all of your funny little property management practices, you know where you would give your tenants colored envelopes, the kind of envelopes that a greeting card comes in, you know, like a happy birthday card. I

Aunt Joan 28:05
know it’d be, there would be a long legal colorful card in very bright cars. And so when these would come into the peel box, we would know that those are our rent checks. Yeah.

Jason Hartman 28:18
Okay, good luck getting those calls. Yeah. One other property management things would you like the listeners to know about?

Aunt Joan 28:27
Well, I frequently encourage people when they come, they’ll call our office and say, Are you a property management firm? And we’ll say yes, we are have our own properties. And they said, well do Don’t you? Wouldn’t you work for us? We say no, we have enough on our plate just doing what we do. And we really just take care of our own properties. But people especially if they’re running their property for the first time, they want someone to take over and they’re nervous and they’re frightened about To the prospect of doing this, and so we have a branch out to the point where a lot of first time renters or landlords, we’d give them a course. And the courses expanded itself over years. That was about two and a half years, two and a half hours long. And at the end of the session, depending on how many questions I asked if the baby three and a half hours, but there there’s pretty much a full fledged landlord.

Jason Hartman 29:28
So do you charge for this property? Yes.

Aunt Joan 29:31
Very, it’s a very minimal price.

Jason Hartman 29:34
And I didn’t even know you were doing this until today told me just

Aunt Joan 29:38
it’s charge $189 100 meters, and we give them all sorts of materials that they need. We don’t give them leases, but we give them

Jason Hartman 29:47
all sorts of materials. Oh, really? Okay, cool. Good, good stuff. I think we ought to, we got to record that and turn it into an info product and sell it at my website at Jason Hartman calm which reminds me I you know, I’m always forgetting this We are having a black or not a black friday special, but a cyber monday special on all our digital products next week, or after you hear this, we’ll probably get it going this weekend. You get 40% off all our digital products. This is our biggest sale of the year. It’s our cyber monday sale, you know, the retailer’s do Black Friday that online, people do Cyber Monday. So that will be available, I believe until December 4. Okay, so it’s just a few days long, and 40% off all the digital products at Jason Hartman calm. But john, we should add your course to

Aunt Joan 30:42
our hours is a one on one here, you know, so it’s difficult,

Jason Hartman 30:46
however, you’re so sure. So some of the tricks of the trade.

Aunt Joan 30:50
Well, let me tell you something that we learned not at all at first, but

Aunt Joan 30:56
maybe 10 years into doing this. We’ve been doing this for at least 30 30 3040 years, about 10 years into doing this, we realize the fantastic necessity of having house rules,

Jason Hartman 31:11
house rules. So tell us about house rules. Now there’s a movie Cider House Rules for your house.

Aunt Joan 31:19
Well, any rate, and we expand them as things occur in our residences. Yes. And and some people when we’re going over these, they’ll think that that maybe we’ve had some wild dreams in the middle of the night. But all these things that have happened, all these households are based on actual situation to the record. Okay.

Aunt Joan 31:42
Well, for example, we,

Aunt Joan 31:45
most of our houses in the Sacramento or at least in the market that we’re in, want to have hardwood floors, and the whole world loves hardwood floors. However, there are a lot of people who have no idea how to take care of hardwood floors, and so it’s very important that they have pads under larger pieces of furniture and small little pants that you can just paste on to the small things like coffee tables and chairs.

Jason Hartman 32:11
The average age of your houses, your houses are older.

Aunt Joan 32:14
Yes, right. What’s our, I guess make our oldest ones about 1916.

Jason Hartman 32:21
But so that’s like 100 years old is your oldest house?

Aunt Joan 32:24
Yes. Yes. And our most modern house is 1960. Wow. So

Jason Hartman 32:30
1960 is the newest? Yes, yes. So that’s 50 years. 34 years old. Wow.

Aunt Joan 32:38
But but in the market that we’re in, everyone wants to have houses with character. Okay. And my real estate agent when we were doing this, she says, Tony, why are you wanting these old the moldings that was her expression? And I said Sally, I love these older movies. And I said, I think a lot People like these Holy Moly folders these are these are Craftsman houses with little with ironing boards that come out and little mailboxes with fancy little grow work and maybe no holes at the front door you open up a little door and see what’s outside lights and things like that. Okay

Jason Hartman 33:20
definitely houses with character you know the one of the funny things is I can always tell your houses like if I just drive down any of the streets in which you own properties. I can tell which ones are yours because of your address placards. Yes. Right. Those are that’s like

Aunt Joan 33:35
your trademark. Right, right. Right.

Jason Hartman 33:38
Yeah, so that’s kind of neat. Do you want to talk about that at all? Well okay, so what other tricks of the trade house rules that’s interesting I most of our investors number one, they don’t have houses that old and number two, they’re not micromanaging them that much. So any tips for like the national the nationwide investor? I mean, you know what you you did The old school way. Now nowadays people are diversifying technology allows them to do that geographically and be in multiple markets and so forth. So what what are some of the problems?

Aunt Joan 34:11
Well, the other thing that’s very important is to have a very good background crew that can take your rental problems. And we don’t just have a handyman, who does it all. We have electricians, we have plumbers, but we have contractors, everyone is a specialist in his field. And this is very important. So things get done properly. Right. And we even have a fence person. I mean, we probably can name 15 different traits of specialists that we use. Right, right.

Jason Hartman 34:47
And you know, those people are getting repeat business from you.

Aunt Joan 34:50
Oh, yes. And they take very good care of us. Yeah, especially, especially the plumber, right.

Aunt Joan 34:57
He has all of our houses number one And then whenever we give our landlord course, we first recommend him. What do I want to do when I’m going to stop doing this? Because sometimes I don’t want to cut off my finger to, to where?

Jason Hartman 35:15
Exactly. Because his business is getting easy might get too busy for you. Yes. Right. So, you know, here’s one of the things that’s interesting. One of the strategies that I haven’t talked about very much on the show that I want to recommend to our investors who want to build big portfolios is your strategy. And I want to take your strategy and recommend that people do it in three different cities where they can if they want to, if they want to have a portfolio of say, you know, say it’s 60 houses or more, you know, get 20 in each city, okay? I want them to diversify you you did it the old school way, you know, and that’s fine. But the new school way is different. versified in like three different cities, okay. But the thing is they can get some economy of scale when they have 20 houses in each of those markets. Yes. And the other thing they can get is they can get certain vendors, like you just mentioned to really take good care of them.

Aunt Joan 36:16
Yes, because they know that I’m going to be calling them up maybe two times a week right

Jason Hartman 36:21
now with an issue. Yeah. Now, the other thing they can get is they get this sort of, I’ll call it bumper pool or pinball type concept. And the thing I’m trying to convey here is, you know, the ball, it sort of bumps around there. And what I mean by that is you have a semi monopoly in your market, where if a tenant is looking in that area, they’re looking at a few of your houses usually and you have some control over rental prices, where you can start trashing the rental market and you can improve the area and make it look better and bring the values about them, right?

Aunt Joan 37:00
Well, we have a website. Should I tell them? Yeah, sec sec, Reynolds calm sec, our end als calm

Jason Hartman 37:09
nobody else being a promoter at

Aunt Joan 37:12
any rate people that weekly we hear people say I go to your website all the time I don’t know if they’re trying to really buy a rental house or they’re trying to see how some some nice furniture arranging tips are. But some people say, Oh yes, I love your website, and it is done very well. And so we at first we were just putting our own houses on our website, but that pretty soon it when we got everything rented up, we were out of inventory. And we had this nice, big website. And so people kept seeing this and they crossed up and said, Well, how about putting our house on your website?

Jason Hartman 37:54
So now they want you to manage their properties and you only do it for your own right

Aunt Joan 37:58
right but but but we Help market their properties. Oh really? Oh yes they love it. And in your ears, we have these magnificent pictures, maybe 20 pictures at a small three bedroom, two bath house or maybe a two bedroom one bath house. And backyard pictures for an Eric pictures. Outdoor pictures app in the pictures are sell the whole thing. And my son is responsible for doing that. He has a real gift of photography.

Jason Hartman 38:30
That’s my cousin.

Aunt Joan 38:31
Yeah. And then we have a little blurb on the side with nine boards for describing the house. We put the price on, we put a nice big picture on and then they then there’s a button you say inside pitch. Also, we also put a satellite map on and a rental application. And so people are reading our houses from afar very frequently. I can’t tell you how many houses we’ve read at this last summer where people have been in New York Los Angeles, Florida, Michigan, renting our house

Jason Hartman 39:04
without even maybe having seen them. Right. Right. That’s great. That’s awesome. And talk to us if you would about your I mean, your your strategy is pretty much the old school strategy of pay off your mortgages, right? Yes, you have all your houses free and clear now.

Aunt Joan 39:20
They’re just about eight that we don’t have that are free.

Jason Hartman 39:23
So So, so you, you have a little over 70 but let’s just use 70 for round numbers. So you’ve got 62 of them free and clear. Yes. Why couldn’t I have been your son? Boy, your kids are gonna inherit a nice, nice portfolio there. Okay, so 62 free and clear. And your average price in Sacramento has got to be in those but 400,400 and now that that’s when the economy This is why I like diversification because Financial Crisis A few years ago, Sacramento basically got cut in half.

Aunt Joan 40:04
Yes. But here’s the thing. Interesting thing, most of our property show in this East Sacramento, and land Park areas, which are the really the best areas in town. And so our properties, they changed. Yes, they did. They went down, but nothing like what would happen in the outskirts. Now,

Jason Hartman 40:23
tell us what happened in rent with rents. So during the financial crisis, and this is the odd thing. Now, I don’t know what you’re going to say here. Tell me what you’re going to say. But I think I know what you’re going to say.

Aunt Joan 40:33
Well, naturally, rent went down some support, but we didn’t. I don’t know by by in terms of percentage, but maybe 15%, maybe even 20% in somebody’s been, like by surprise, there were there were a lot maybe 10%. You know, depending some houses are very rentable, and some houses are maybe a little harder to it. It also depends exactly

Jason Hartman 41:00
when you catch them, like if that if that lease comes up for, you know, for re renting and the tenant moves. And it’s during the depths of the financial crisis, like the worst time of all, when you know, the value of your house went from 450 to 225 never it never happened. Right? No, no. But, you know, that might be the 15% down, and then you know, the rest of them 10% now, yeah. And what are your numbers like they’re, you know, for house that’s worth I mean, is your average house about 450,000? Ha

Aunt Joan 41:34
ha between

Aunt Joan 41:38
three of 335 to maybe 450.

Jason Hartman 41:42
Okay, so also 450 is the height.

Aunt Joan 41:44
Well, I am actually more than that, but

Jason Hartman 41:49
comparison, I’m talking about the palace in which you live, okay, which is a palace. So, it’s right near where ronald reagan live when he was governor. So

Aunt Joan 41:59
it’s called the family For a nation of

Jason Hartman 42:00
fabulous 40s, the fab 40s. That’s the streets in Sacramento where they live. And I’ve been there many, many times. Now. Um, so what does that tell us about your rents? You know, for a house, that’s 330,000 and a house. That’s 450,000. What are those rent for? Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every

Aunt Joan 42:23
Wednesday. Well,

Aunt Joan 42:26
I mean, I can tell you, yeah, I can guess and

Jason Hartman 42:29
I’ll probably do,

Aunt Joan 42:30
actually, a lot of our two bedroom, one bath, little cracks, which can be anywheres from 1000 square feet to maybe 1250 square feet.

Aunt Joan 42:41
They probably the minimum price is 1695. Okay,

Jason Hartman 42:46
and that house is about 330,000.

Aunt Joan 42:50
It could be 332. Maybe three, maybe 400.

Jason Hartman 42:54
Okay, okay, so it’s how much did you say the

Aunt Joan 42:57
1695 might be the My rock bottom price,

Jason Hartman 43:01
okay, so 1695 a month for 330 to $400,000. So you’re getting about point four 2.5 Rv or rent to value ratio.

Aunt Joan 43:12
Right. But then the tenants do not just pay the the rental price. They also pay the city utilities, which Sacramento has a very unusual situation. Five services are all wrapped together into the utility

Jason Hartman 43:28
of course they pay the utilities. That’s normal. They do that everywhere. I mean,

Aunt Joan 43:32
that wasn’t the customer in Sacramento. Oh, no.

Jason Hartman 43:35
You would pay for tenants utilities. I never paid attention.

Aunt Joan 43:38
I’m not talking about smud I’m not talking about gas electric. I’m talking about water. sewer in three garbage cans.

Jason Hartman 43:45
Yeah, I never pay water. And in most places water and sewer go together. And then trash pickup. I never pay that either. For anything,

Aunt Joan 43:53
right? Well, non cargo used to be it used to be this situation in Sacramento. One change that

Jason Hartman 44:01
you know you did because of you.

Aunt Joan 44:05
As a user, we don’t we don’t pay that for it. So they pay that. However, we had a real quick lesson in that having the tenant send it into City Hall, because we found out some of them weren’t quite so bad chances, and we got acute liens on our property. So

Jason Hartman 44:22
because those weren’t paid they like hate when they do that, by the way, some cities do that if if the tenant doesn’t pay their utility bill. In some cities, most don’t do best, but the few do, they actually lien the owner and the owner becomes responsible for a lanky tenant, right. Tell us about late fees and eviction policies and I want to make a note and Joanie, we said you said I said How long are you going to talk for it? He said it was about three or five minutes 3430 minutes. So we’re not going to do our guests. This will be a whole episode unto itself, but it’s really This is great information. I love hearing it again. You know, this is the old school style of investing. And it’s it’s awesome. I mean, you obviously created a ton of wealth with it. What about how do you deal with tenants when their rent is late? And with evictions and stuff like that? Now you’re in California, which is not landlord friendly at all. That’s true. Yeah.

Aunt Joan 45:20
And so the idea is to try to get into a situation where you’re having to evict someone. In our earlier years. We made some wrong choices and tenant selection. And this happened. But I think that in our total experience, we’ve had no more than four evictions.

Jason Hartman 45:39
Are you kidding? I’m not kidding. And what happens is your average tenants say,

Aunt Joan 45:45
I’d say two, two years, maybe two, three years.

Jason Hartman 45:48
Okay. So two or three years is here so you don’t your vacancy rate and with the turnaround.

Aunt Joan 45:54
Our vacancy rate is like to tip

Jason Hartman 45:57
Yeah, yeah, but what I’d say to your listeners, listeners is your rent is too low. See, we’d like to get 1% of the value every month, you’re only getting point four 2.5% of the value, but that’s how California is. I mean, you know, that’s just the way it is in California.

Aunt Joan 46:12
Well, we find that tab.

Aunt Joan 46:16
Right with proper tenant selection. That’s, that’s the most important thing.

Jason Hartman 46:23
Yeah. Okay, so tell us about general selection. What are your practices there?

Aunt Joan 46:25
Well, we we have to make sure that they’re properly employed, they’ve been there a little while, and that their rent is that exceed at least a third of their income.

Jason Hartman 46:41
Also,

Aunt Joan 46:43
we just look at the we always check landlord references. And we also always run credit checks. And those are pretty good indicators right there. When you do the credit check, do you do an unlawful detainer check and a criminal We know that we used to, but we found out that this was completely empty. Was that

Jason Hartman 47:06
you just do credit only? Yeah, we just do credit. Okay, and what do you charge for an application fee? $30 $30 if we’re married or single or no, it’s $30 per person. Okay. And you probably only pay about 10 bucks per person to run there, right?

Aunt Joan 47:22
Maybe that but then it’s our time Yeah. And and pay for and then we get to get back to the landlord or to whoever we’re running them for, you know, and so dollars a deal. And some people will not some of our customers who, you know, they’re not anything to do with our ownership, but they just come in as a way of life and to run credit checks, and they will not move until they get our report on the credit checks. And we get what you mean by that. I don’t understand that. They will last for the last Many years, we always insist on writing credit checks.

Jason Hartman 48:04
Well, I would think that would just be

Aunt Joan 48:05
standard practice that well, we for a while, we didn’t do that with everyone, but now we do.

Jason Hartman 48:12
Oh, really? You do? credit checks? Well, okay. Now your your philosophy is let’s prevent the eviction. Okay, that’s right. Let’s not get there. So how do you how do you prevent the eviction from happening? I mean, that’s an amazing I want to I want to just say, that is an amazing property for evictions with 70 houses, and all the years you’ve been doing this. That’s amazing. So how do you prevent it?

Aunt Joan 48:36
Well, for one thing, we made sure that people

Aunt Joan 48:40
were that gainfully employed Yes. Right. And, and that sort of thing. And then we tried to keep people happy. You know what they have a report that there have a sewer stoppage or whatever, we try to get a problem for somebody over there right away. And we also in our house rule type reasons. I have several ways to Make sure that they don’t have plumbing problems. We have a certain we have a whole list of things that that to put down garbage disposal, and we also do drains, bathrooms and that and dishwashers and

Jason Hartman 49:14
that whole that whole subject but how would you How would you check that? How would you know if they did it if they put out what our Q tip like say q tip or

Aunt Joan 49:22
like things about the plumbers.

Jason Hartman 49:27
Yeah, they don’t make when they Yeah, well that’s interesting. Okay, so any other points on preventing evictions tenant selection house rules How do you when they’re late on the reg I mean certainly people must be late on the rare

Aunt Joan 49:42
we always have so people that are late player there’s just like

Jason Hartman 49:46
they’re it’s sort of just their ways.

Aunt Joan 49:48
It’s that’s we just what I’ve said my assistant, our eyeball wrench but in and she says she’ll say all but the usual

Aunt Joan 50:00
About four or five.

Jason Hartman 50:01
Okay, so out of 70 you only got four or five there later.

Aunt Joan 50:04
Yeah. Okay. But I mean, some of these people that are running us for us for

Jason Hartman 50:09
10 years me out.

Aunt Joan 50:11
Yeah, we know that. Okay,

Jason Hartman 50:13
so what do you do with them? What’s your policy? how strict? Well,

Aunt Joan 50:17
first of all after the rent is due on the first we have a grace period from the first to the third after the third. It’s due, it’s late. And we don’t use punitive practices here and charging some huge a late fee. We charge $25 that’s pretty Wow, that’s light. Uh huh. And here’s the thing after the fifth day, if it’s not paid after the fifth day, then there is an additional charge of that one is $25. But $5 per day until the rent is paid in full. Joan, for for a rent it’s 1600 to $2,000 a month. You are easy.

Jason Hartman 50:58
Yes, not Not bad at all. I mean, that’s a cheap late fee.

Aunt Joan 51:02
Right? That is it? We do you’re okay

Aunt Joan 51:06
with that.

Aunt Joan 51:06
We’re okay with that. I guess we, because most of time people pay really well, I believe we, we don’t have that much of a problem. Okay, good, good.

Jason Hartman 51:16
Okay, any other? Just, you know, as we kind of wrap up here, you know, we’ve gone like 13 times longer than we thought we would. So what? What other things would you like people to know about real estate investing? You know, why real estate? I mean, you, you know, after all these years, do you still think it’s the greatest thing? I mean,

Aunt Joan 51:39
I do. I know my husband is into stats and a little bit of the balance but I mean, ease into investments like that. But I really like we all say we’re doing a thing. It’s a very tangible thing. And it pretty much depends on yourself and your efforts is throughout the whole thing works. Yeah, and Do we have such a very small vacancy fee? And we have a minimum of problems because we have most of our properties in very good areas. And we have just a high caliber of

Jason Hartman 52:12
tenants. Do most of our tenants work for the government? I don’t Sacramento is the capital of California. So

Aunt Joan 52:22
not not most of them, but quite a few do

Jason Hartman 52:24
more government related.

Aunt Joan 52:26
Uh huh. We have probably the medical profession. We have in terms of just the Sacramento itself. We have six major hospitals within five minutes. Yeah,

Jason Hartman 52:39
some of our ears are like that. Houston’s got tons of medical, you know, medicals, pretty good because those people make good money.

Aunt Joan 52:47
And these

Aunt Joan 52:48
places keep expanding. Yeah,

Jason Hartman 52:50
right. Yeah. You see the medical the medical industrial complex.

Aunt Joan 52:53
You see the Med Center looks like a five star hotel.

Jason Hartman 53:00
Yeah, it really is. Okay. Good. So anything else about real estate or

Aunt Joan 53:05
no, I’m happy we got into it. And my husband was always opposing it. And I would see what house for example, and he says he would come by and he says, I would think this house needs to be

Aunt Joan 53:18
skip loaded.

Jason Hartman 53:20
Like tore down,

Aunt Joan 53:21
like, like, yeah, removed

Aunt Joan 53:24
earlier. And I’d say, john, I took it just needs a little TLC. And when we were first started out, I didn’t even want to

Aunt Joan 53:35
be involved. If a house near plots, doors that were working in a few things like that. But after a little while, we got into all sorts of things and problems and of course, we got workers to handle these problems. And so we got very adventurous with then we got into kitchen remodels, bathroom remodels, adding rules to properties and then taking when you add rooms to them.

Aunt Joan 53:57
Oh yes, but

Aunt Joan 53:58
we’ve done a lot from making them from twin ones into three and to sell because we have a very, the whole world wants to live in these type of items. So it is 1920 houses are not exactly suited if someone comes in with children in a couple and then and then they want an office to sounds fantastic.

Jason Hartman 54:21
Yeah, good stuff. Well, Antonio, thank you so much for sharing this with my listeners today and it was just great to have you on the show. Thank you so much. Well, there you have it, folks. That is the word from my rich aunt Joanie. And don’t wait to buy real estate buy real estate and then wait. And you know, you just gotta stay at this and you know, let time and all these great factors just be on your side and you know, you just can’t help them make a lot of money in real estate. I think she has one more thing to say here.

Aunt Joan 54:54
Yeah, and in even with these ups and downs in real estate, people will say wow, Real Estate is lost on this much money. I said yes, but I’m not selling. Why do I care? Right? Yeah. So yeah,

Jason Hartman 55:07
you treat it as as a value investor like the Warren Buffett philosophy applied to real estate value investing. You hold it for cash flow. You don’t be a speculator just buy them and hold them. You know,

Aunt Joan 55:20
despite this by philosophy, yes. Is that in all of our lives? We’ve only sold two houses. Wow.

Jason Hartman 55:27
Wow. Yeah. Yeah, that’s, that’s I regret most of the houses I sold. Yeah, I should have just kept them. Yeah, no, I agree. I agree. Well, good stuff. And Tony, thank you so much, and happy investing.

Announcer 55:41
I’ve never really thought of Jason as subversive. But I just found out that’s what Wall Street considers him to be.

Announcer 55:49
Really now. How is that possible at all?

Announcer 55:50
Simple. Wall Street believes that real estate investors are dangerous to their schemes? Because the dirty truth about income property, is that it actually works in real life.

Announcer 56:00
I know I mean, how many people do you know not including insiders who created wealth with stocks, bonds and mutual funds? those options are for people who only want to pretend they’re getting ahead.

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Jason Hartman 57:57
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Jason Hartman 58:35
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On this Flashback Friday episode, Jason interviews David Porter, an Income Property Investor from Indianapolis, Indiana. They talked about borrowing money, the economy, and cool technologies. David also gave an update to the audience on his big successes with Jason’s company.

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 0:25
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on Now, here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:15
Thanks so much for joining me today. Gosh, the holidays are keeping us all busy, aren’t they? And I just got back yesterday from Sedona, Arizona and the Grand Canyon. And by the way, as I mentioned on the last episode, we did get that helicopter ride for free mom and I because we went to the timeshare presentation. And that was quite interesting. I tell you, like if there is any industry where they have the concept of sales down to a science, it is timeshare sales. I mean, those people are good. It’s they make it difficult to say no. So I would warn you if you have a low resistance to sales people Don’t go to one of those presentations, because you’ll probably end up owning a timeshare. And those aren’t a very good deal. That’s, that’s for sure. They’re they’re just not a very good deal at all. But we had a beautiful helicopter ride through Sedona and through the energy vortexes and that was really interesting. And then mom and I went to the Grand Canyon, and Gosh, I’ll tell you, it was so cold up there. I’m a wimp when it comes to cold. How about you I know a lot of our clients live in, you know, the the northern part of the country, whether it be the Northeast or the Pacific Northwest, which isn’t quite as cold but you know,

Jason Hartman 2:40
I cannot do that cold stuff. It’s just um, I you know, it’s hard. I think after living in California in Arizona, you become pretty wimpy, too cold. So, anyway, but the Grand Canyon Okay, so before we get to our guest today, which by the way will be our client, David Porter. Who will tell you now he was on the show a long time ago. And he talked about the free lunch metric, just a very impromptu interview years ago. And he wanted to come back on. So I recorded this episode with him. And I think you’ll really like it, him being a guest. And he talks about how he is up about $700,000 on his properties. So, you know, folks, this does work. It really works in real life. I know imagine that. Something that can really work in real life. And it’s kind of amazing when I think of it looking back on my career and all the years I’ve been in the real estate business. I have you know, I know of no way to exactly quantify this. If I believe me, if I did, I’d be bragging about it left and right. But I’ll bet you I have made thousands and thousands of Thousands of people, well, maybe not that many thousands, but like, under 10,000 people, okay, so thousands and thousands. I guess that would be, because if you had the third thousand smelled up, I don’t know, is that still under 10,000? I’m not sure. But anyway, I have made several thousand people a lot of money. And if you multiply the amount of money that they’ve made, you know, whether it be $100,000 or $50,000 or a million dollars on their, their real estate deals with me over the years. Gosh, I mean, that that’s really kind of incredible to think of it. And, you know, look, it’s, I’m not really taking credit for that because I don’t deserve the credit. Okay. I mean, I guess I personally do maybe I’ve inspired some people to do deals. Maybe I’ve convinced them. Maybe I’ve dragged them across the finish line. I’ve certainly done all of that. Maybe I got To stop whining about little problems and look at the big picture and stick with the program. So, you know, that’s what I’m here for. I got to play all those different roles. And it’s funny because when we were in Scottsdale at the mastermind meeting a few weeks ago, I was there with Carrie, on our team and Sarah and Fernando, who’s just joining our team, that he’s actually still technically a client. But I think he’ll be joining our team here pretty quickly. It’s interesting because Sarah said, you know, we were just kind of out with the group having drinks one night and Sara jokingly said, You know, I think I need a T shirt that says investment therapist. You know, we call our our people investment counselors, and, but maybe a better word is investment therapist because we all need a little bit of therapy sometimes, don’t we? We need someone to, you know, get us out of our grungy A moment, we all get the grungy ease once in a while and sort of want to slip back into bad habits or bad behaviors or bad thoughts and not look at the big picture and go with the program. And what does this have to do with the Grand Canyon? You know, I know i a lot of times sound like I’m going off on a tangent, and admittedly I do do that. But it does have something to do with it. Because there’s this fabulous biography of Richard Nixon. Remember Richard, Richard Nixon, for those of you who are under Well, I’m not saying you were alive at the time he was around as President, but those of you who are under 30, listening, Richard Nixon, he he he was, he’s a former president of the United States. The late Richard Nixon, he passed away. I don’t know what about 15 years ago, maybe. And quite a controversial guy. Obviously, he was known by some by his opponents as true tricky Dicky, tricky Dicky Richard Nixon. Um, but you know, did Nixon was in many ways a pretty amazing human being. I mean, look at, I don’t know if he was a crook or not remember the famous speech words that are not a crook. And then he had the the checkers speech. That was another famous talk of his where he talked about his dog checkers and how his wife Pat didn’t have a mink coat, but had a nice wool coat. You know, they weren’t, in other words elitist. And, boy, if you compare it to our, our Emperor today, oh, Emperor, I mean, our President, Mr. Obama today, you would have to say that the comparison is pretty stark. I mean, you know, that guy lives like a prince. You know, like a king. It’s amazing. This is America. We do not have kings and queens here. You know, we do not have elitist here. Well, yeah, apparently we do. We’re not supposed to Nancy Pelosi, we’re not supposed to have elitist here. And and Mr. Obama, same same goes for you. But you know we do when we have people abusing the system on both sides of the aisle. Okay. This is not even a partisan thing. But interestingly, Richard Nixon’s fantastic book in the arena, it’s really good, okay. And many years ago, I read it, and he talked about his his first trip to the Grand Canyon as a child. And I can’t remember exactly how he said it. So I’m not going to repeat it exactly how he said it. But, you know, as he was ending the book, he talked about all of the ups and downs he experienced in his life and his political career, and how you cannot understand or appreciate The highs, the winds in life until you’ve experienced the lows. And in the great little book by Kahlil Gibran, or Gibran, I said to Brian Kaluga Braun the profit, which is a fantastic little book, by the way, if you haven’t read the profit, it’s an easy read. And it’s got all these, you know, little short chapters on little subjects, whether that be on, you know, money on, children on eating and drinking on what else is in there on love, you know, on all sorts of, you know, these life topics that are important to us all, of course, you know, there’s a chapter on giving. one chapter in the Prophet is about, I think, sorrow or pain and sorrow. And it talks about how sorrow carves us out. And these bad things in life that hurt us, where we’ve experienced In slow points in our lives, you know that that carves out a part of our soul, if you will, I mean, I don’t know of a better way to say it. And I don’t have the book, the profit here handy, so I can read it to you because it is a fantastic book. But that carving out allows us to contain more joy. So if we haven’t experienced lows, we can’t appreciate highs. That’s the moral of the story. That’s the message. And you know, I think when we look around at these totally eff up, I’m not saying the word so you don’t have to bleep me, Mr. editor. These totally eff up celebrities, you know, these people who had it kind of easy and all you know, fame and fortune came to them probably early in life and it probably came rather easily. And, you know, they get addicted to drugs or they commit suicide or, you know, experienced this great depression and we’re all supposed to feel Sorry for the minute, you know, frankly, I think it’s hard to feel sorry for them. But you know, I it at the same time, it is probably quite legitimate, although I cannot relate, I have not experienced this, and probably none of you have. But when all of this is given to us too easily, and when we don’t have hardships when we don’t have to earn our way when we don’t have to earn our keep in life, you know it, that’s not good for us. It’s not good for the human being, we’re not made to deal with that properly, I don’t think or at least very few of us are. And, and and so, you know, that’s the message I think of the Prophet, that chapter in that wonderful book, The Prophet, and also in Richard Nixon’s book, where he talks about his visit to the Grand Canyon and I believe he said he was seven years old and he thought nothing could be. And I was at the Grand Canyon yesterday. So this reminded me of it of reading Nixon’s book. And he said, he thought nothing could be more incredible than looking down into the Grand Canyon from the southwest rim. He thought, you know that that was just incredible that the size the enormity of the Grand Canyon, I mean, you know, this wasn’t my first visit there yesterday. I’ve been there a few times. But it’s just amazing. I mean, it’s so grand. It is so big. It’s hard to comprehend, really very hard to comprehend. And Nixon said in his book, he said, he thought nothing could be more incredible than that view from the southwest rim until he hiked seven miles down. Maybe he was seven years old. Maybe it was seven months. Miles, I don’t know where it could be remembering that wrong. Maybe it was both seven and seven until he hiked down and looked up. And when he hiked down and looked up from below from the depths, then he could truly appreciate one of the seven wonders of the world. And so, you know, that’s a good metaphor for for earning our way for experiencing hardship for dealing with hardship and overcoming hardship. I think that’s an important message. And Nixon also, toward the end of the, in the arena book, quoted Sophocles the poet, and he said, are the philosopher and he said, Sophocles, 2000 years ago, said, one must wait until evening. In order to see how splendid The day has been, one must wait until evening to see how splendid The day has been. So our appreciation or gratitude for life, a lot of it comes from contrast. You know, and I’m just calling it contrast. That’s my word for it from contrast from seeing, you know, experiencing highs and lows. And and that is a good thing. So when you experience hardship, you know, there’s obviously a lesson in hardship for sure we can learn a lesson from all hardships, but also, not just the actual lesson of what can I learn from this? What can we learn from this gives us contrast, and it gives us depth that carves out our soul and makes it able to contain more joy. People who haven’t had that hardship. They just usually have a hard time dealing with or appreciating success, don’t they? Back to my you know, my comparative And when I talk about celebrities who got it all too easily and you know just many times become really amped up human beings, you know, spoiled children same kind of example, you know, don’t spoil your kids. It’ll ruin them. You know, I definitely was not the least bit spoiled when I grew up, unfortunately. And I always I always say to my mom, mom, we have jokingly I said, Mom, look I turned out okay, so you know, you can spoil me now because it won’t mess me up. And so So anyway, that that was an amazing thing to see the Grand Canyon yesterday and recall Nixon’s great insight into you know, the depths of life and the highs and the lows and the contrast between the two and appreciating victory when we have it. And we can’t appreciate victory unless we’ve had some defeat and some hardship and Nixon you know, love them or hate I think he’s a good guy or bad guy I you know, I don’t really know. But he was pretty insightful, pretty insightful, pretty educated, pretty well developed person I can certainly say that. So very interesting comparison there. Okay Hey, if you don’t have your tickets yet for meet the Masters get them now again we’re almost sold out. And you know we’re not selling out as easily this time because you know it’s the first weekend of January. So we probably are well the first weekend after the holiday weekend so we know we’ve had a few people say that you know, I can’t travel that quickly because I’m going to be away for New Years. That prior weekend and I got to be home for this weekend. So you know, take advantage of that and still get in on some early bird pricing. That normally wouldn’t be there pretty late in the game here and join us for meet the masters. We have got a jam packed with lineup for you. And by the way, I’m pretty sure we’re going to have, although it is not totally confirmed yet one of the alternative lenders there from either the private lending arena or the hedge fund and private equity arena. So that’s something you have asked for you have asked about and we’re I’m pretty sure we’re going to have someone there representing that. So if you’re looking to refi till you die refi till you die, that’s one of my philosophies. And if you’re looking to do that with your properties, that will be a very good opportunity for you to learn a lot more about that. At this meet the Masters event, of course, we’ve got, you know, the contract for deed stuff. Diane Kennedy CPA talking about asset protection and tax shelters, and just some really this is going to be the best meat The Masters event I’ve ever put on. And it is our 16th one. So it’s sweet 16 and you’re just going to love it. It’s going to be an awesome, awesome event so don’t miss it. Also, again, many of you been asking, we will be hosting dinner on Saturday evening, not Friday. This is a change from our normal schedule. I one of our Memphis area providers is hosting a dinner I believe on Friday night for their clients. So you know, don’t feel bad. That’s not our event. Okay, that’s just coincidence, just timing it because a lot of people a lot of their clients will be at meet the masters. And so get in touch with them or your investment counselor to make sure you get included on that. And then we are having a team meeting on Friday night with our speakers and presenters, so that we can make sure we are coordinated and we are putting on an awesome event for you. So dinner on Saturday. Evening as our treat, no organized dinner on Friday other than for the Memphis people and our speakers of course, and we will just start Saturday morning 8:30am 8:30am on Saturday morning and we’re going to go pretty late into the evening. We’ve got just a jam packed lineup for you on Saturday and then on Sunday we will go from 8:30am till 6pm Okay, so Saturday and Sunday all day and, you know, Saturday evening a little bit as well. So join us for that go to Jason hartman.com Get your tickets check out some of the great properties we have there. already some of you without even having a show on it or anything it masters or purchasing investment properties in some of our new areas that are on the website at Jason Hartman calm and you know available to talk to your investment counselor Of course or investment therapist at our office. They’ll be glad to help you with those. So let’s get to our guest, David Porter, as he gives you an update from being on the show several years earlier about his property portfolio and how he’s up about $700,000 on on these properties, so I think you’ll like it. Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday.

It’s my pleasure to welcome one of our clients back to the show. He was actually on a long time ago, I think it was maybe, I don’t know, five or six years ago, when he started investing with us and his name is David Porter. And it’s a pleasure to have him join us today. Dave, welcome. How are you?

David Porter 20:44
Great, Jason. It’s great to be back with ya. And yeah, I think it was probably a good five years ago when I last you Indiana

Jason Hartman 20:51
podcast. And I remember that day all too well. I remember that I was rather stressed out sitting in my office. And your investment counselor Sarah, kind of came into my door with you. And I was thinking like, please don’t bother me. I’m so busy right now. And then, and then Sarah said, Jason, you gotta hear his story. This is David Porter, her client, and you just got to hear his story. And it was a really cool story of, of, I think your first investment property that you got from us in Indianapolis. Right.

David Porter 21:25
Right. Well, you know, it’s so funny, you know, since Jason, do you think when we first met, the economy was crashing? Right. It was 2008. Yeah. And yeah, so some of these foreclosure opportunities were developing. And yeah, I purchased my first property through you guys in Indiana.

Jason Hartman 21:46
Yeah, good stuff. And then and then you started buying up Indianapolis you were kind of like quite the real estate mogul there and I don’t really know what’s what you’ve done all these years. I know Sarah has been in touch with you but but I haven’t specifically I hear about you once in a while. But, you know, tell us how it all went and what you’ve been doing and so forth.

David Porter 22:05
Yeah, for sure. So, um, yeah. So let’s see, we got started. I just looked at some records before we got to talk in here. We started talking late. Oh, wait, I purchased my first property in Indianapolis in March of 2009. Uh huh. And that was an unbelievable and you think about it now, because prices have gone up a lot since then. But for $85,000 in that foreclosure market, we picked up a 3000 square foot five year old home in the suburban very, very nice neighborhood. Right. And it’s incredible that so that property today is running out for like 1250. Right? Yeah.

Jason Hartman 22:45
Yeah, that’s fantastic. So one of the things that I was talking about on the podcast way back then, and you know, I’ve talked about it many many times since then. I’m probably boring my listeners saying the same stuff over and over, but it was the concept of buying below construct Cost Exactly. And it was also the concept I’ve talked about a lot that I call regression to replacement cost. And you you have a background in financial services and then in the transportation business shipping and trucking companies and so forth. And and by the way, I want to ask you some insights because those are really interesting barometers about the economy sure and global and and national trade and so forth. So maybe we’ll get to that but you bought this house I thought you paid like 89,000 for that house and it appraised or your insurance. No, I think it was your insurance company told you you had to insure it for like what 240,000 or something

David Porter 23:41
yeah. Oh, yeah. Exactly that your memory is very, very good. Those numbers are almost spot on. And and that was the story repeatedly because I bought after that eight more properties in Indianapolis. And when you think about it, at first, I was okay. The insurance companies made a mistake. You know, they Trying to charge me too much and all that kind of stuff. But you know, it kind of makes sense when you think about it because to rebuild and go out and buy all the lumber and steel and recreate a 3000 square foot house, it’s gonna cost you a couple hundred thousand dollars doesn’t matter what you paid for it. So that’s that’s kind of their thinking and and that’s what I had to do. I mean, I shopped it around.

Jason Hartman 24:21
Yeah. Wow. And so so you bought the house for 80 85,000 or 89,000? Yeah, at 85. Okay. And the insurance company told you you had to insure it for 240 was is that my dad’s

David Porter 24:33
real close? Yeah, I don’t remember the exact number but it was like to 40 to 50 something like that.

Jason Hartman 24:38
So it first that probably upset you. You’re thinking, Why do I have to pay insurance on such a large amount when I only paid 85,000 for the house, but the insurance company was thinking if that house burns down, that’s what it’s gonna cost us to rebuild it. Right.

David Porter 24:53
Right. Well, as mad as I was the only thing that would have been worse if they would say no, we’re only going to insure it for 50,000 because You overpaid for

Jason Hartman 25:02
Yeah, that wouldn’t have been good. Yeah,

David Porter 25:05
yeah. Wait, you’re the way you put that, you know, was really a great way for me to think about it. And, you know, there there were blood in this. There was blood in the streets at that time, right. I mean, again, the economy was falling apart. People were very concerned about what what’s going to happen. You know, I’m telling my friends, hey, I’m buying these houses in Indiana. So I’m here in California. They’re like, okay, Dave, you’re buying houses in Indiana. That’s really strange, hot, you know. And so they probably thought you were crazy. Right? They thought I was crazy. Absolutely. And, you know, I didn’t know of course, at the time that we were buying these homes over the course of the next really three years. You never know if you’re buying at the bottom or really where you’re at, but I had a lot of, I’m a very conservative investor. I don’t like a lot of debt. And I felt it was a very conservative investment because based on what I knew the rents were And the rental market was relatively strong, despite everything else, because everybody was losing their homes and the rental market is still a great place to be. Even went down 10% or whatever. I mean, how much more? How much lower? Could it go, given the fact that I’ve got this plot of land in a nice suburban area, and relatively new construction in good size? Right? How far low how much lower? Could it go? couldn’t go to nothing like a stock,

Jason Hartman 26:24
right? Yeah, I agree with you. And even if it did, you’re still really, I mean, a prudent cash flow investor, right? So cash flow is the name of the game. If you do the capital appreciation, hey, you know, I’ll take it you’ll take it that’s the icing on the cake. But you know, either way, cash flow is a pretty reliable thing. I mean, it’s it’s not perfect, it does change but right, it doesn’t fluctuate a lot. You know, these these investors that are, well they call themselves investors. I call them gamblers. But you know, who invest in these high priced markets just waiting for something incredible to happen. I don’t know why I think they’re, they’re in trouble. You know, that’s, you know,

David Porter 27:05
that’s speculation, right. And, you know, one of the one of the biggest regrets I have in my real estate career is like the first house I bought to live in, in California went through one of its down markets, and I sold it at a loss and wrote a check to, to leave. And I wish I would have just held on to it. I’m sure you’ve heard that a million times. But other than that, I’ve never sold a property. You know, I think that, you know, there’s only so much real estate, you’re not making new real estate and if you have a property in a solid area, that’s a great long term investment, and you talk about cash flow. So my whole strategy around this is really to create a nice income stream a nice passive income stream to take me eventually into retirement.

Jason Hartman 27:49
Absolutely. Well, I think you’re doing a great job at that. So tell the listeners if you would, Dave, how many properties did you end up buying in Indianapolis or you know, the greater metro area Indian, right.

David Porter 28:00
So bought nine all together and the greater Indianapolis area.

Jason Hartman 28:06
And what gave you you know, you saw the blood in the streets. I mean, back then you were in the shipping business. So you were in the container shipping businesses I recall. And that was experiencing a downturn. I mean, global trade was suffering. I used to read articles and I remember asking you about this about how, you know, the there were just empty shipping containers everywhere. And, you know, it wasn’t even wise to run these these big freighter ships because, you know, there was just so little trade. I mean, it was a scary time, what what gave you the confidence to invest back then,

David Porter 28:43
you know, it was really, it was the best place to go I felt at the time with with your money. So I had a career in shipping for about 20 years at that point. And so you’ll learn here I’m not a very good market timer, and 2007 I left the transportation business to go into financial consulting, you know, for investors were putting together portfolios of stocks, basically mutual funds for high net worth investors. And at the time, I heard your commercial. I mean, things were just falling through the floor, you know, Lehman Brothers, everything was happening at that particular time. And I was just kind of, I was just kind of curious, there must be another way, you know, and when I when I thought about, I learned about the approach and when I saw again, you know, these, these assets, that in some overbuilt markets that had taken just such a hit, but the rents had stayed solid and my goal was rents. My goal was the cash flow to if my welfare would be independent of the value of The underlying asset really, as long as the rents held up, and I really liked that idea, because if you think about a stock portfolio, mutual fund portfolio, you know, the rule of thumb for advising clients for retirement is you can take out about 4% of your portfolio per year. And that’ll last you’ve, you know, well into retirement, perhaps even, you know, 3040 years, things like that they’ve run a lot of back testing. There’s no guarantees with that, but that’s kind of safe. So when I looked at the kind of the kind of income I was going to generate with a portfolio of houses, I would need much more money invested in mutual funds to generate that equal amount of income. So that’s the way I looked at it, what would I have to invest in order to generate a certain amount of passive income, and the real estate was clearly the winner at the time. It was just kind of fact based and Seeing the market was so beaten up I didn’t see a big downside even on the value of the asset itself.

Jason Hartman 31:05
Yeah, I agree with you. Well, when you were buying the properties in Indianapolis and I know you did some other stuff too, which maybe we can get to sure but um, when you were buying those, were you paying cash for them? Are you getting financing on them? I can’t remember I think he may have mentioned it on the on the show we did a few years back but

David Porter 31:25
well, it was a combination of the two and at the time I went into this Jason I had zero debt in my life but zero debt and honestly and

Jason Hartman 31:36
you met me and you got it Yeah, right. I you know, I have done my job.

David Porter 31:42
Yes, but I’m still conservative. My cash flow is paid off several these properties. But what I did is I honestly I just had some other property that was owned outright. And basically if you were credit worthy at the time, you know, they were throwing money at you at very low interest rates right? historically low. So I did take out a loan, and I’m paying on it still today. It’s 3.49% fixed interest for 30 years.

Jason Hartman 32:11
You know, until recently, Dave, you have been getting paid to borrow that money for sure. Yeah, I would say and I have to admit as much as I don’t like admitting this or even even having it be this way, that inflation is actually pretty darn low the last year now, it was definitely higher in the last few years, but it’s it’s calmed down. I’m really surprised and

David Porter 32:36
I don’t you listen to the podcast regularly. Not regularly, but sporadically. I’ve listened to a couple dozen of them over the years, so I haven’t heard any recent ones. Yeah, yeah.

Jason Hartman 32:44
And you know, I’m just I’m just surprised inflation isn’t higher. I’m surprised interest rates aren’t higher. I think that inflation is coming back though. I will tell you that I don’t think I don’t think we’re gonna see it. Low for very long.

David Porter 32:58
It’s it’s not gonna last for forever. You know, I did hear you interviewed Richard Duncan. Mm hmm. And he’s one of my favorite He is my favorite economists. And even he is brightest he is. And he does this full time. You know, are we going to die a death of ice deflation or hyperinflation? Right? I mean, it’s hard to tell. And neither one of those scenarios is very good. But clearly what we’re doing isn’t sustainable. So, you know, I don’t know,

Jason Hartman 33:28
who the heck knows. I mean, I, you know, it would be sort of possible to really predict economic scenarios with some accuracy if it wasn’t for central bank and government intervention. Yeah, I mean, you just never know what they’re gonna do you know, you can they just interfere with markets and they pervert the whole thing. So you can’t you just can’t predict stuff very well because of because of them. I mean, you can think what would they logically do and you can sort of predict that but it’s, it’s still You know, it’s it’s difficult.

David Porter 34:01
I don’t think we’re operating in a logical world right now. And and Richard Duncan puts it real well, and I think he said on your podcast, and and when I was in this is really what broke my heart when I was in the financial services industry as with a very good firm, they they were thinking about things that they weren’t speculating in stocks or penny stocks. I mean, that kind of thing was a pretty conservative approach. But, you know, people would like to think that they’re investing in capitalism, but they’re not investing in capitalism. And as Richard Duncan says, so well, it’s statism. And that’s to your point. What is the what’s the government going to decide to do with the banking system? What’s the reserve requirement were they going to do with interest rates, all these things, throw stocks for a loop, and it’s your you know, what you’re taught in school, and I have an MBA. I’m a finance major, and that’s my training. They tell you that you evaluate stocks by the value of the earnings of the company. Well, I wish that was the case. It’s not the case. That’s part of the equation.

Jason Hartman 35:05
It’s more by the story, right?

David Porter 35:07
Yeah, yeah. It’s the story. And it’s what the government decides they’re going to do with their policy and how that’s going to impact the particular industry. Yeah, that’s just ridiculous. And there’s no way to factor that into a spreadsheet, right?

Jason Hartman 35:18
Yes, I agree with you. So what exactly was your background in financial services? I mean, were you were you an advisor, or did you work with clients and help them invest their money?

David Porter 35:28
Yes, I was. Yeah, I was a registered investment advisor. And yeah, so we dealt with high net worth clients and we put together portfolios of index funds. So within the world of investing, that’s a pretty conservative, reasonable, well diversified way to go. We had all types of portfolios that would be in alignment with somebody’s age and risk tolerance. Basically,

Jason Hartman 35:51
ladies and gentlemen, what we have here is a defector.

David Porter 35:58
I still have a foot in a car And I, you know,

Jason Hartman 36:01
I’m glad you came over to the other side.

David Porter 36:03
Yeah. Yeah. And I am too in. And so, you know, going back to the, you know, my investing in real estate story, what I came to realize, largely With your help, and I can honestly say if I hadn’t, you know, attended some of your sessions and had some of the conversations and read some of your material, I wouldn’t have thought about it this way. But, you know, having untapped ability to borrow, having that ability to borrow and not utilizing it is kind of like, you know, sticking money under your mattress. And, you know, it’s maybe it’s even worse than that, because you don’t even get the money. So, what I did is, you know, I took that ability to borrow, and I put it to work in a very, very, very conservative way. And it was clear to me that my income stream would you know, more than pay for any debt service that I would have in addition And you get all the benefits of, you know, what our tax code allows us to do with those interest payments. So it really helped me a great deal. So I I don’t borrow as much as I could borrow. And I’m comfortable with where I’m at. I’m still in a very conservative position. But so what I did is I took some money out of property holdings I had and paid cash for a number of properties in Indiana.

Jason Hartman 37:25
And so you didn’t really completely follow my plan. I mean, I would have said letter everything

David Porter 37:30
up, you know, because, because

Jason Hartman 37:32
it’s kind of counterintuitive, you know, like, I think the more conservative position is actually to be the borrower. You know, and I know I know that goes against the grain of what a lot of people think I completely get it, you know, I used to, in the old days think pay everything off and, and, you know, I remember having this conversation with a friend of mine, we were on the board of a cancer charity in Orange County, California, where I used to live Then, and her name is Catherine. And I remember that, you know, her parents were in, you know, had some financial hardship. And I remember, you know, thinking, gosh, they were losing their house, they had this gorgeous home and in Mission Bay Area, and they were they were going into foreclosure. And I remember thinking that, you know, the thing to do is to just pay off your own home. So at least you own that. And, you know, all the other investments could be leveraged and you might lose them, but you’ll never lose your house. Right? But the reality is, you know, we have a perpetual lien on all our properties called property taxes, and in some cases, maybe a second lien called a homeowners association. And, you know, those those agencies or the their investors because people buy tax liens as a tradable asset. You know, they look at those in a predatory fashion. If you’ve got a lot of equity, you’re a target, you know, so I don’t like having big equity in real estate even though you know, I do own some properties, with With equity, but if I couldn’t ever the more Believe me, I would.

David Porter 39:03
So you’ve taken so you know, I’m kind of in between where I was and where you are now,

Jason Hartman 39:09
move the needle a little

David Porter 39:10
bit move at you moved a lot really, you know, so it’s worked out well. So and then also with

David Porter 39:17
with platinums help, I went into Arizona. And so that’s a different market. Right? Yeah. That the time that I went to Indiana, he said, Dave, you were causing me so you need to get more diversified. You’ve got too much in Indiana right. And so in you said Indiana is like a bond, you know, you shouldn’t expect a lot of appreciation there but it seems like the rents are pretty stable and so it’s good for that if that’s what you want to have and that is clearly what I was looking for. right the the income the stable long term income, but you know, the Phoenix market as you well know, and you’ve taken good advantage of got beat down awfully hard and, and I think the dynamics of that market are that you know, you’ve got the weather there. And a growing, growing economy and it attracts people. And if you look at the demographics of North America, I knew that people were going to be coming back to Phoenix again. And so we bought a couple of properties in suburban Phoenix Gilbert. And those have worked out extremely well. So not only from a thing I love about Phoenix or Arizona is a property taxes are low, the insurance is low. And I did get some really nice appreciation on those properties as well.

Jason Hartman 40:31
Yeah, you know, Phoenix is a very desirable city. It’s kind of it’s now that I’ve lived here for a little over three years, you know, it’s kind of a gem. A lot of people don’t know about it when, you know, people from California that live in Orange County where I used to live and La where I grew up as a kid. They think I’m not, you know, but and I asked him like, when’s the last time you were actually here? You know, this is a really nice place. We’ve got super swanky restaurants and you know, All kinds of nice things here. It’s, uh, you know, other than other than three or four months when it’s a hot but it’s a dry heat. It’s a pretty nice place. Although right now, it doesn’t make sense from an investment standpoint, it’s just too expensive. It’s a it’s a hybrid market. You know, it’s it’s not like Indianapolis has a linear, virtually the whole state of California and you’re in Southern California, right? That’s right. Yeah. You know, that’s, that’s a cyclical market. So Phoenix is in between the two. But right now, you know, we’ve moved in and out of Phoenix a couple of times, and sometimes it just gets overvalued, and or at least, maybe I don’t even want to call it overvalued. I just want to call it where the cash flow isn’t good enough for a sec. And that was one of those times

David Porter 41:45
Yeah, yeah. But I’m holding on to those properties there. And I think that basis as well. So yeah, it’s it’s it’s worked out very, very well for me. So and then on top of that, we have a couple properties that I’ve held for a long time in in California. So yeah, so I’m a happy real estate investor. Good for you. Good for you.

Jason Hartman 42:05
Well, um, one of the things I wanted to go over was that concept that you were talking Oh gosh, forgive me. I can’t remember. I’m having a senior moment here. So I can finally say I’m having senior moments. That Are you over the line now? No, I’m not over the line. The AARP is still a long ways away, I’m glad to say for you. But oh, gosh, it was something that you just mentioned. And it was the concept of debt, or I don’t remember. I’ll remember after we finished the talk here today, okay. Yeah. But um, but what are what are your thoughts, you know, with? Now you’re in the you’re in the trucking business now. Right. So do you like what do you do exactly in the truck? Yeah.

David Porter 42:47
So the company that I’m associated with in Southern California, we do local trucking and a large part of what we do is taking domestic shipping containers to the railroad. From all the warehouses that are unloading all these containers that are coming in from China and Vietnam and Japan and Korea and so forth, right? So, we, we do a lot of local trucking shuttling goods, essentially from the harbor to the railroad most of the time. And then we also do consolidation deconsolidation, some, some warehousing work as

Jason Hartman 43:22
well. Okay, so you have your bit, your industry has a really good barometer on the economy. I mean, you know, what the volume of trade looks like, where it’s coming from, where it’s going to? Are there any thoughts that you have or ideas that you just want to share? And maybe we can just hash them out? I just

David Porter 43:42
yeah, I guess, you know, I mean, what I’m noticing, so we deal with a lot of the large retailers from all over the country because the goods that we’re picking up here, they wind up in Chicago, New Jersey, Atlanta, Dallas, Memphis, wherever, for the large retailers and it seems seems to have been a strong retail season. I mean, at least they ordered a lot of stuff. I don’t know if it’s going to sit in a warehouse on the East Coast somewhere or not. But I can tell you in previous years, we haven’t seen this level of activity. This what we call peak season and shipping is the season from basically Labor Day up until just after Thanksgiving leading up to you know, Black Friday there and all the shopping that gets done. That is the busiest time of the year and this peak season was it was unbelievable. It was extremely busy. I haven’t seen it as busy for many, many years. And are most of these goods coming from good old China? Yeah, yeah. Well, especially in California here. You know, our, our manufacturing zone is called Tijuana. I mean that there are nobody’s making anything here, right? What ships out of here is brought in from overseas or just over the border. Mexicali or Tijuana? And then we can think NAFTA for that, for better or worse. Exactly.

Jason Hartman 45:06
Yeah. In the what are those called the mckaela? Dora zones? Right, exactly. I remember ross perot talking about them in the giant sucking sound.

David Porter 45:14
sucking sound. Well, he was he was right about that.

Jason Hartman 45:17
He was he was right about a lot of things. I, I wish he would have been elected as nutty as he seemed. I think it would have been the only guy that would have actually shaken things up and made something different.

David Porter 45:28
You know, it’s funny, I voted for him the first time and then I voted for him the second time, and he kind of got a little off kilter there with some of his theories about the republican dirty tricks committee trying to ruin his daughter’s wedding and all that and like, you know, even if that was true, I wouldn’t say it.

Jason Hartman 45:42
That makes him sound like a paranoid freak. Right. Exactly. Yeah. Well, very interesting. So, um, you know, there’s a lot of talk about how China is really beginning to slow down and they are suffering. And, you know, years ago, you used to hear people like Peter Schiff. And others like him, the sort of the doom and gloom community talk about this concept of decoupling how you know, China will decouple from the United States meaning that they will create their own middle class and their own consumer base. And they all have countries around them that trade with them, and they won’t need us anymore. And when they don’t need us, they will stop buying our treasury bonds, and our interest rates will skyrocket and we will be dead. But the exact opposite has happened oddly, right. It’s it’s really interesting because they just have not been successful in creating their own middle class. Well, they’re in their own consumer base. Right and and the people with money their upbringing over here

David Porter 46:46
actly and that that’s great for this real estate situation we’re talking about

Jason Hartman 46:51
great for this everything situation.

David Porter 46:53
Yeah, yeah. And the stock market as well. So yeah, and for what I read about their their real estate market, you know, Things are you know that the bubble is finally at least some airs coming out of it now, right. Yeah. So it’s interesting. I mean, my my view on that, you know, Peter Schiff, he’s interesting. I like I read his books and but, you know, I think maybe he’s a little bit got too much invested in that gold camp. Yeah. all that type of stuff. I agree.

Jason Hartman 47:23
I agree the gold camp really has has gotten it wrong most of the time.

David Porter 47:28
Well, you know, they’re, they’re gonna be right, you know, when they say broken clocks right twice a day,

Jason Hartman 47:33
right. I love it.

David Porter 47:35
I don’t discount entirely. I think that over time I do. I would not be surprised to see all that come to fruition over time. I don’t think it’s going to happen, you know, by 2020 or anytime real soon. I mean, we just heard some statistics recently how China, their GDP is going to surpass RS earlier than what everybody had expected prior to 2020. Some measures of that are coming Enemy would show that there our economy is in fact larger than ours right now. So I think that over time, you can kind of see how the trend is going and what the direction is. But nobody wants to piss off their largest customer. And that’s us. Yeah. Right. And, you know, it’s, it’s, for better or worse, it is kind of hard to bet against the United States. In the long run. I do have some very serious concerns about, you know, this house of cards we have with the, you know, the our debt situation and all that. I don’t know how that’s going to play off. But again, going back to Richard Duncan, I hate to keep quoting him, but this could continue for much longer than what most people would think it could continue. Japan has shown that I mean, their economy is not like the model economy or anything, but people would certainly rather hold yen than say rubles right now and people thought Russia was the way to go not long ago. I know.

Jason Hartman 48:53
I know. I just think I just think that is illogical and unfair is that maybe the United States finds itself in a Really impressive place in history and has benefited from a lot of that. So I, you know, is is mismanaged as easy as it is in so many ways I think they can kick this can down the road for decades long.

David Porter 49:14
That’s exactly right. You know, and so to prepare your entire life are something that, hey, it could happen, China could make some nutty announcement next year. I kind of doubt it, but it could happen. But I would tend to agree with you sometime after 2020 we’ll be well into retirement and who knows you can’t live your whole life in fear. Yeah, I agree with you. I agree with you. But the interesting thing is about China and we don’t have to, you know, talk about this forever,

Jason Hartman 49:40
is that with China, you know, as soon as they start to maybe gain a foothold, say things go really well for China, you know, then they’re going to be facing this this really huge, ugly demographic problem. And and that’s the same thing that is is really behind what’s hurting In Japan so much, or at least, inhibiting their recovery is that they just don’t have any young people in China, China has just far too big a male population, not enough females. And you know, the one child policy in 10 years, they’re going to be looking at a really tough demographic problems. So if they ever hope to get any real social safety nets there, I just don’t know that that’s ever going to happen. I hope it goes well for them. I mean, listen, you know, it would be nice if the whole world would just prosper. And we’d all live in harmony, it’d be great. But, you know, if you’re comparing countries, and like you say, it’s really tough to bet against the United States. I just don’t know how you can really do it.

David Porter 50:44
Yeah, it really is. But one thing that is very interesting, and I’m sure you’ve read about this, how China and Russia are getting away from reading outside of the dollar of the reserve currency of us. So the thing that saved us I think the only thing that saved us that can’t save a Greece or an Italy, nobody will allow them to indefinitely print their money and accept it. You know, we’ve got this, this weird license that allows us to do that. Other people can’t do that, or they would be fine, too. So I don’t think it’s that we’re so smart are so great or whatever, I think you put it well, we’re in a unique spot in history. I think we’re allowed to do that. It’s kind of a relic of what we used to be. It’s not rational or logical. We do get to do that. And it saved our butts. Nobody else gets to do that.

Jason Hartman 51:34
Yeah, I agree. I agree. We’re just we’re just kind of, you know, we worked. We worked our way through the Industrial Revolution. And we won that game. And now we’re just kind of lucky.

David Porter 51:47
So yeah, let’s just hope we could catch up. There are some neat things going on right now. I’ll throw out a book to have you happen to have read rate. Kurt’s Wiles abundance.

Jason Hartman 51:58
Oh, well, that’s actually Peter Diamandis Nice. Yeah, thank you and see they talk about Ray Kurzweil a lot in there. But and Steven Kotler was actually on the show. I love that book. It is amazing. Yeah. And it leads me to another question. But what were you gonna say about that?

David Porter 52:14
Well, as you say, there is lots of reasons to have hope. And and there are with the advances in technology and the speed that things are moving along, people don’t even realize, you know, you’ve got Moore’s law, and the technology is increasing every year and a half or so for the same cause. And we’re at a point now, initially, you were making exponential gains in what we’re capable of doing and what we’re going to have access to, and that’s can provide a better standard of living for everybody. And I think that the next 10 years is going to be just an amazing time for us. I think so too, for the whole world. The whole

Jason Hartman 52:49
world is going to benefit from this. Because, you know, now we’re in a position where we have what I like to call the democratization of everything. Yes, and You know, other than the Wall Street cronies and the crony capitalism and the unholy alliance between, you know, government and mega business I’m not even gonna call big businesses mega business, okay? Whether it be pharmaceutical companies or the banks or whatever, right. And and Elizabeth Warren, you know, I’m definitely not a democrat but she gave a great speech that I just posted on my Facebook page, and you know, where she just outed all these, you know, criminals with Citibank and, you know, criminals I’m losing using that word loosely, obviously, but just my humble opinion. Okay. And, you know, it’s just a total scam, what’s going on, but the, the, the technology is just leveling and flattening and flattening the earth. I mean, crowdfunding is 3d printing all of these things, gene sequencing. You know, last night I watched a TED talk about this. Have you heard of this Kickstarter project for this glowing plant,

David Porter 53:57
though? No, I don’t know about though.

Jason Hartman 53:58
It’s mind boggling. Basically what you can do is you can go to a website now and you can do this today. And you can design for better or worse. You know, it is scary. I’ll admit it’s you know, Frankenstein, whatever, okay? But you can design your own life for made of whatever DNA sequence you want. You can put your credit card in. And you basically this website helps you make the blueprint and you can order this life form and the UPS guy will deliver it to you. And and someone did that and made a glowing plant. And it’s a Kickstarter project. They raised a ton of money, and they hope that ultimately trees will replace streetlights. I mean, just fathom that for a moment. It’s incredible. Like, it’s unbelievable. Google it. It’s amazing. It’s an amazing time to be alive.

David Porter 54:52
In like, you sit so the everything is leveling out. Take another great example. I was listening. They’re talking about this Sony hack. situation with North Korea

Jason Hartman 55:01
right that’s scary

David Porter 55:03
for for those that I haven’t found my way onto it but you know this is dark side of the internet that you can get to to do the dark net. With I heard yesterday was that if you were I wanted to do that it would cost us about $1,000 to find somebody in Russia or China that will do that for us. Wow, to take down a corporation for 1000 bucks. When they started to talk about this I thought the person was gonna say $10 million or something like 1000 bucks you could do it so it is mind boggling now

Jason Hartman 55:35
now it you know it also might cost you your freedom and your life. Oh, yeah. Yeah, right. Wow. That’s that’s mind boggling. It really is. Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday. The power is moving to the people and it is it is really, really cool.

David Porter 55:57
Now one

Jason Hartman 55:58
thing though, I want to ask you Because you’ve got so much familiarity with shipping is and in the book abundance, they talk about it. And I’ve been talking about it for years on my show, but 3d printing is that going to move a lot of manufacturing back to the US, you know, and it’s not for mass production. I understand 3d printing is for more like artisan type production. And there’s a great book I read last year when I was in Europe, and it’s by Chris, Chris Anderson, who’s written three great books that I know of, he’s the editor of Wired Magazine, and I believe he owns Ted now the conference and, and the book is called makers and it’s all about 3d 3d printing revolution. And, I mean, you know, are those are those ships not going to be needing to come here quite as much because we’re just going to print stuff. I read an article yesterday where we we basically emailed a wrench to one of the astronauts at the International Space Station. What I mean by email, this email the design for the 3d printer they have now in four hours later, he had a wrench in his hand made of matter made of atoms.

David Porter 57:10
Is that amazing? Yeah, it’s incredible. So I’ve sat in some of these conventions I go to in transportation and logistics, and that’s a very real thought. I mean, so it’s not gonna happen real soon. But, so, to you, it kind of has two questions. Is 3d printing going to have a big impact on shipping? Yeah, I think it will in time, I think it will in time. And the second part is a lot of things are coming back again with the dynamics in China wages are increasing their it’s they’re calling it nearshoring. So it’s not necessarily coming back. The United States although son is but a lot of its going back to Mexico. Some stuff. It was in Mexico and those McCulloh doors move to China now it’s coming back.

Jason Hartman 57:53
Wow, really, it’s really quite fascinating what’s going on around the world. I mean, what an amazing time to be Live and there’s just just sit back and witness all of this stuff. You know, I mean, certainly we got our share of problems. But you know, like I say, technology might save us all.

David Porter 58:09
Well, I think so too. And I think that, you know, for our kids, I really believe that there will, there’s never been a better time to be alive in terms of, there’s never been more opportunity for everybody. I mean, you can be the the poorest poor person, maybe not the poorest purse, but if you have access to the internet, you’ve got unlimited education and access to information and role models and

Jason Hartman 58:34
anything at the Khan Academy. It’s free, you can you can learn. You can get 10 PhDs at the Khan Academy for free, you know, it’s amazing.

David Porter 58:42
And so that’s just it’s just tremendous opportunity. And I read where they’re predicting within the next 10 years we’ll have our first high school billionaire, right we already have plenty of kids that dropped out of college to become billionaires. But imagine a high school kid becoming a billionaire that’s not just because our currencies debase but Be careful creating real value. And yeah, so it’s it’s it’s amazing time there’s unlimited opportunity out there. Yeah, there’s problems. But you know, Jason, you’re younger than me. But when I was growing up, and you probably heard some of this stuff, too, I literally in my elementary school, my elementary school teacher in third grade told us, you know what, I don’t think you guys are going to leave live to see 30 because there’s going to be a nuclear war. Wow. What kind of maniac you would you would totally get fired? I think probably justifiably so. Because that was a ridiculous thing to say to young kids. But that’s the you know, that’s what we’re worried about nuclear annihilation, the Cold War, all this crazy stuff. There’s really, you know, we’ve got these terrorists and you know, this type of thing, but not massive nuclear annihilation is a very real possibility.

Jason Hartman 59:50
Yeah, that’s like, there’s always something to worry about. There’s always something to worry about. But hey, I want to just before you go, I want to just ask you about real estate for a moment. So, um, do you have you estimated your returns on your portfolio? Or have you been tracking that closely? Or do you just like collecting your checks? And you know, you don’t think about it too closely. I’m just gonna carry it.

David Porter 1:00:14
Yeah, I tend to do it each year, you know, as I’m getting the taxes done. I can tell you that. I can tell you that, you know, we don’t just over the last 10 years, which is really kind of my real estate investment timeline outside of personal residences and vacation properties that we use for our family and so forth. We’ve seen, you know, a seven digit, you know, well, I shouldn’t call that because that can apply up to $9 million, but over a million dollars and just appreciation and then the return that we’ve earned. Again, it could have been much greater because of, we didn’t choose to use a lot of leverage but When I’ll tell you this when I was running my numbers when we did the when I was doing my analysis in terms of what I was going to buy routinely, my returns with a moderate amount of leverage, not very much leverage was 25 to 30% annually. Yeah. And that was only assuming a 4% annual appreciation and I have received much more appreciation than that. So I haven’t figured it out in terms of what’s my appreciation, really, the right way to think about this, I think is what’s your appreciation, Ben, what’s your cash flow, Ben, and what’s your think of that cash flow in terms of the tax advantages that you’re getting? Because here’s the other thing, the great advantage of these properties that we bought in for closure, you get your statement from the county, and it gives you your assessment and the value of

Jason Hartman 1:01:51
your property tax assessment.

David Porter 1:01:53
Yeah, property tax assessment. The 80% of the value was in the building. Right. So you get depreciation on all that. And so I’ve I’ve had some very nice sessions with my CPA, because these properties I get to depreciate so much, I get to depreciate so much, it’s totally legitimate. I’m using the documents that the government’s giving me and it’s so it’s a very much a tax advantaged return. I’m not paying any taxes obviously on the appreciation and on my cash flow, I’m getting a nice depreciation benefit.

Jason Hartman 1:02:29
depreciation is the depreciation is the holy grail of tax advantages it is it makes income property the most tax favored asset in America by a long shot. I mean, I don’t know anything even close because it’s a phantom write off it’s a non you don’t pay anything to get that Yeah, your property could go up in value, have positive cash flow. It doesn’t the way the IRS looks at it, you’re still losing money, which is good in that sense. You know, I don’t want to ruin that.

David Porter 1:02:57
Yeah, it’s a it’s a beautiful thing. So if you Go back to the bond analogy that you gave me all those years ago. It’s almost like a municipal bond. Right? I mean, you get those wonderful tax advantages. So, you know, the other thing I want to share with you to Jason was you know, the kind of the experience of being a real estate investor as a person that has a full time job a family of three kids and you know, on the go, you know, some people like okay, Dave, you’re buying these odd estate properties. First of all, that’s nuts. You know, how are you gonna ever see your properties? And the my answer to that has been well, I’ve had rental properties in California, and they are like in the same city I live in and I very rarely went by there. If you got good property managers, and you’re kind of managing your property managers and my management, my property managers and consists of calling them when I see I have a vacancy, or sending them chocolates a Christmas each year, I don’t spend a lot of time doing it.

Jason Hartman 1:03:56
You send them chocolates. Wow. I never give anything to my managers. That’s where they like you better.

David Porter 1:04:03
You know, my Prop, I’ll give you a great example. And this was a property manager that one of your local market specialists turned me on to, again, this was in Indianapolis. I was I wasn’t happy with my insurance premiums out there. And so your local market specialist is one that turned me on to the property management company property management company turned me on to a Insurance Group that allowed me to package all these properties and reduce my insurance premiums by 50%. net market with and I wish I could remember right now, but it was I checked it out at the time very high rated insurance companies. So um, you know, they they can take very good care of you. I want them to like me more than the other landlord that they have when they have one tenant and two houses to decide except, you know,

Jason Hartman 1:04:50
I think maybe we’ll get some chocolates from

David Porter 1:04:51
Yeah, exactly. Let me get that chocolate benefit. Yeah. So um, you know, it’s been, I spend very little time on those because I do use property managers. I’ve gone the other route and tried to manage them myself.

Jason Hartman 1:05:05
You did self management from a distance because I do both. And I’m just shocked that I could even do that. How was your experience? Well, it’s like you weren’t keen on it.

David Porter 1:05:15
I wasn’t well, I try to be a property manager here on the properties in California. And what happened is when it started to go south, I wasn’t going by the properties enough. And then when it started to go south, quite honestly, I didn’t quite know what to do as far as this whole taking people to court stuff and all that. And that

Jason Hartman 1:05:34
was what happened. What do you mean, did you have an eviction?

David Porter 1:05:37
Yeah, I had an eviction. And so what happened is, at that point in time, I just found a property manager. I said, Hey, get me out of this mess. And then you can manage these properties from now on, and that’s what we did. And it’s worked out great. I think these people learn their seven or 8% or whatever it is that you’re paying them. For me now Muay Thai is retired guy and I you know, and I like doing that stuff fine. What I would. So the work I think, with getting these investment properties is really in deciding which ones you are going to buy and doing your due diligence in that regard. Certainly, you were a big help your team was a big help and helping me to locate the appropriate markets that had good returns in certain areas within those markets and all that. But even after that, you gotta decide, okay, which house are you going to buy? Right? And, but I actually really enjoy that process. And again, with all this technology we have, you can drive down the street, you can look in your neighbor’s backyard, you

Jason Hartman 1:06:34
can do it in Google Maps you can read on the street.

David Porter 1:06:36
Oh, I do. I did it. Every single one of them in one of the earlier podcasts I talked to I would look at the schools with the whole situation with the schools. Dave, I forgot you

Jason Hartman 1:06:47
are the guy that created or it discovered the free lunch metric. Do you remember this? I remember naming it that it was such a good idea. You feel free to tell the listeners it’s on the old podcast, which I’m sure Still posted. You can find it at Jason Hartman calm and or maybe on iTunes. I don’t know if there’s old ones on iTunes I think they drop off after a while I gotta check that but but it’s on our website I’m sure it’s still posted. But that was a great idea that you did tell tell the listeners about yeah so really what that you know everyone has their own view on the types of properties they want to invest in. And you know what there’s a need for section eight housing there’s a need for penthouses, and there’s a need for solid single family residences, which is what I was looking for, and I didn’t really want any trouble. So what I looked at was, what was the percentage of of children in the local school that qualified for free lunch. And so if it was below 50%, it was an area that I was comfortable with. Now the houses that we purchased I always wanted to think of it as you know what i would live there or my kids I would be totally comfortable and happy with them living there. And and I’m very proud of our Real estate portfolio, I think they’re very nice properties. And I’m proud to own them. And I think we provide a very nice housing arrangement for people. So that that kind of just was one of those tests for me a litmus test if less than 50% of the kids in the local school, get free lunch, I was happy with it, I consider it to be a reasonably solid Economic Area. That’s a good metric. So like you said, there’s a there’s an investor and a property type for everybody. Yeah, you like the A property’s kind of a nicer properties, right. And we have those we have B properties and we have C properties, right? Honestly, the C properties, they have the great numbers, but they they do the tenants are just more flaky, they’re just more difficult to deal with. So the thing I say about see landlords is it’s gonna require probably a little more of your attention, and it’s going to require you to manage your emotional state better, because you’re just gonna have more trials with C type properties, you know, yeah. And, and we’ve got them all, we used to only do a Type A and B type properties, we got into the C stuff, because just a lot of our clients wanted it. So, you know, they can take their pick and you know, you’ve got your pick and your model and it works for you. So that’s awesome. I love it. Yeah. So

David Porter 1:09:15
that that’s kind of that’s worked well for me. But you know, with the, you know, there were some of these properties that I bought that I hadn’t, I certainly had never seen them because they were out of state. I may have driven through the general area. And I didn’t go to see him for a couple of years after the fact. I mean, it happened. And I’ve talked to people about that. They’d say, you know, how can how can you do that? You know, how can you just trust that everything’s okay, well, I didn’t just trust I did my research. I can walk through the house virtually I can walk through the neighborhood virtually I know everything about the schools. I know everything about the crime report in the area, I can pull all and I did pull all that information up. What I would ask them though, is what about these companies that you’re investing in in your Mutual funds and that you’re buying, do you know what’s going on? If you sit at the board of directors meeting, do you know how if they’re about to get sued or their middle of the lawsuit or they’re considering being bought, or they’re going to buy something, or there’s some legal problem, or they’re or the the CEO just is about to get nailed for some huge sexual harassment?

Jason Hartman 1:10:17
Yes, sir. If you don’t know this stuff,

David Porter 1:10:20
yeah, I know more virtually on my fundamentals of the investment on this real estate. If I never ever go there, people who goes if they own Apple stock, they’ve been to Cupertino and visited with them. They don’t do that. But they’ll have no problem putting 50 hundred thousand dollars in Apple stock. I know. And so, people really need to understand, you know, how they’re thinking about things and everyone hears the nightmare land, you know, tenants stories,

Jason Hartman 1:10:46
like the one story right but everybody’s had Yeah, discourage them, you know? Yeah.

David Porter 1:10:50
But it’s, uh, you know, I don’t know my tenants. They don’t know me. I’ve got great property managers. I spend way too It’s really just the accounting stuff, you know, I spend an hour a month on it. And it’s not a big deal. And it’s just an investment. I’ve been very happy with

Jason Hartman 1:11:08
an hour a month for how many properties by the way 13 rental properties. So 13 rental properties only takes you an hour a month. See, I tell people, and I know this is high, but occasionally if there’s like a problem property, it will, it could suck up a little more time. So I just tell people assume one hour per property per month. So you got 13 I’d say 13 hours a month, but you only spend an hour a month for all 13 properties.

David Porter 1:11:30
Hmm, yeah, I mean, there I had fortunate good fortune, I guess. I mean, I just don’t have big piles up by tenants. I mean, you know, you’ve got the occasional dishwasher air conditioner. It’s an email in the middle of other stuff I’m doing so yeah, do that. No, get another quote. It doesn’t take much time. Once you’ve got them established and you’ve got the property manager taking care of it. I don’t see how it could take me 13 hours a month.

Jason Hartman 1:11:54
Yeah, I agree with you. I agree with you. I think you know, as humans I mean, we certainly are I’m sure we all do this, I know I do it, I’m sure you’ve done it at times, and everybody listening probably has to, we all kind of get in our own way. And we sometimes micromanage stuff or Yeah, you know, we get upset about something and then we just get all freaked out about it. And, ya know, when it sort of just occupies our emotions, and we go dump on other people. It’s not exactly a good quality, but you know, we all have to admit we’ve all done it. Well, you

David Porter 1:12:24
know, I’ve been more than willing to pay whether it be property managers or an initial stage, you buy these properties that aren’t new properties that need a little bit of rehab. Now, you know, my brother in law, who is a client of yours, I referred him to you, he kind of had a different approach. He took vacation time he flew down there he helped rehab the properties he’s more he’s a hands on

Jason Hartman 1:12:45
guy.

David Porter 1:12:46
Yeah, a little more handy type guy. I I didn’t want any kind of experience like that. Right?

Jason Hartman 1:12:50
I mean, either I don’t know we don’t do that stuff.

David Porter 1:12:53
You know, he slept in the property when my gosh, he’s like my mom out there working on it, and Payton’s stuff, but he likes it. And so God bless him. He’s that’s what he likes to do. And that’s, that’s what he should do them. But I consider that to be like some type of torture and I

Jason Hartman 1:13:09
do that that’s called work and I don’t like work like that.

David Porter 1:13:13
To me, it’s all about passive income. And so we’ve developed that. And that provides some nice benefits from paying down some of these. And not only that, but we’ve used the proceeds to invest in another business, which is actually doing quite well right now and generating more passive income. So it’s just been really good all the way around.

Jason Hartman 1:13:33
Good for you. That’s awesome. Well, so just to recap, and I’m keeping you along here, but this has just been a great conversation. So thank you so much for coming on the show. But um, you so you’ve had you’ve made over a million dollars in appreciation, and how many years when did you start what do you do certain 2009.

David Porter 1:13:51
So that would be starting in 2004. If you look for Okay, yeah.

Jason Hartman 1:13:58
So you started with us. I mean, Was your California stuff? Right? Yeah, yeah. See that? Arizona, I take it, you know, it’s hybrid. But you gotta be careful. You don’t give it back. Well, you bought early enough that you’ll be okay. But if someone were to buy today or in 2006 in Arizona, they could eat it.

David Porter 1:14:15
Right. Yeah. Right. Right. Right. California to you know what, and I think you say there’s no such thing as a bad route. You know, there’s all these different markets all over the country, right, and everyone rises and falls in. That’s the great service that you and your team provide. Right? Which market makes sense to be in right now? Based on what your goals are?

Jason Hartman 1:14:37
Right? Yeah, absolutely. That’s, that’s what we do. That’s what we watch for people. And, you know, the comparison though, is those indie properties gave you much better cash flow than the California and even the Arizona properties.

David Porter 1:14:49
Yeah, they absolutely those. Those are going to be hard to beat from a cash flow perspective. And that’s really what I was after. And I’ve been very pleased with the stability that 10 base the economy there. And you know what, because we did buy at the time that we bought, we’ve gotten, you know, much greater appreciation than one would expect normally to get in Indianapolis, I think you can still buy in India and do real well from a cash flow

Jason Hartman 1:15:12
state. Oh, yeah, no Indies, India is still good. The prices are definitely higher than they used to be, but, but you can still make your cash flow numbers there. And that’s why it’s kind of our perennial market. I mean, we’ve got other markets that are great, too. But I know MD MD has been a very good market for us. I’ve, I’ve personally made a lot of money in Indy myself buying properties there. So I love it. It’s good, good stuff. Well, Dave, that’s a very inspiring story. And thank you so much for sharing it with our listeners and coming back on the show again, I really appreciate it and it was just great talking to you.

David Porter 1:15:42
All right. My pleasure, Jason.

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