Jason Hartman plays a Flash Back Friday episode originally aired on Creating Wealth Episode 514. He starts the show by reading a letter from a client that discussed a great experience during the Memphis Property Tour. Later he introduces one of the network’s clients’, Philip. He discusses his real estate journey and portfolio. Philip explains how when he started he was hard-money lending. He gives us insight into some mistakes he has made along the way and some key lessons he’s learned.
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 0:11
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is handpicked to help you today in the present, and propel you into the future. Enjoy.
Announcer 0:25
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:15
We have got a great story a case study, in an interview with our client who’s been a client of ours for many years. His name is Philip Sullivan. And he’s just a great guy and you’re going to hear his story. Quite literally, I think this is fair to say it is a rags to riches story. He has done an incredible job investing, starting out really just kind of looking dreaming wanting to get into this game, and he’s just done a fantastic job at it. You’re going to hear his story firsthand here in just a few minutes. A couple things. First of all, I really really appreciate listener engagement. So I love that we love to get emails from you. We love to get reviews on it. tunes and Stitcher Radio, of course, you know, we just appreciate engagement. So thank you for that. However, I do have a request. But first before I make my request, I will make a confession to you. I cannot type very fast I use the the hunt and peck method of typing. It’s been a really a huge handicap in life. Gosh, should I even admit this? I will. in eighth grade, we had electives. And one of the electives you could you know, you could choose for electives or the way my school worked in Los Angeles, California. You could choose for electives, and that throughout the school year, and they’d be you know, what, eight weeks each or something like that. Typing was an elective, and I took typing class, and I dropped out being an
Jason Hartman 2:49
idiot, because I thought that well, typing is for secretaries and I’m not gonna be a secretary. But little did I know, typing would be a very much in Man skill as the computer revolution took over. So yes, I am showing my age. Of course, you know, we had computers at my school, but not many people use them. I didn’t really use them. Yeah typing, I dropped out of typing class like a fool like a moron. Ever since then it’s been a huge handicap. In fact, I will bet you If I knew how to type Well, I probably would have earned a couple million extra dollars by now. Little design, no email would dominate the world and boy, it’s a huge handicap. It really is not being able to type well, and I do use dictation and I like it pretty well. However, if you’re using dictation on your smartphone, I use it on my iPhone or on your computer. I use it on my Mac. I gotta tell you something. You could really ruin a relationship with that dictation stuff. If you don’t look carefully, and I don’t always look carefully when I dictate things because it comes pletely misconstrues words and meaning sometimes. So, hopefully that will evolve and get better and better. So my request for you is this, instead of sending me an email, please go to Jason Hartman calm, or if you’re listening to not the creating wealth show and one of the other shows, say, for example, the show’s ever rebroadcast on another one of my shows, you can go to Hartman media.com, where all of my shows are either one either website doesn’t matter. And use the little send voicemail feature, it is super easy to use, and send me a voicemail that I can play on the air. And you know, it’s just rather than email me reading an email and then these issues are pretty complex. A lot of these questions that that you asked, it’s much more lively and better for the show. If the listeners hear it with your own voice and your own inflection. The meaning has a multi dimensional aspect to it It when it is voice rather than the written word. Please send me your questions. I love your questions. I appreciate your questions. I appreciate your comments so much. And please use the voicemail feature many of you have. And I just want to remind you, please do it that way. Okay. Also, you can schedule an appointment with me at Jason Hartman comm slash Jason, as a caller to call into the show, really, if we are able to have a dialogue. That’s the best form if you have a complex question, because anytime you ask a question, I may need to ask you a question. And we may need to drill down on a point further than we can in a asynchronous non real time type of format, where it’s either a voicemail or an email, but again, voicemail is preferred. Please leave your voicemails there, or schedule an appointment, call into the show and we’ll talk real time and I can answer your questions there. So that would be great if you use that awesome little feature. Well, I am off to Europe here in a couple of days. I am going to a conference there. And I’m also going to have a little fun little vacation time. Of course, I’ve been to Europe many times on this trip. I’m going to England, I’ve been to England before, so I’m not going to be able to claim another country stamp in the passport. I’m going to Croatia. And there are a couple of years ago as you heard on the show, but I think this time, I will get to at least one new country that will be Ireland possibly have not been to Ireland. There are a couple of countries around Croatia that I can probably visit to. So you know, want to get another stamp in the passport and be able to say instead of I’ve only been to 74 countries. Yeah, I know only that’s kind of a ridiculous statement. Maybe I’ll be back in a couple of weeks and I’ll be able to tell you, I’ve been there 76 or 77 countries who knows we shall see we shall see So I will be broadcasting from my Europe trip and telling you about some of the insights. I always love to get some real estate insights from these markets, as I did a lot a couple of years ago when I was in Croatia, Spain, a couple other countries talked a lot about that in the show and in thought it was pretty relevant and fascinating versus what we’re facing today in the US good perspective on investing. And so look for that. upcoming episodes. We’ve got some fantastic upcoming episodes. Some more case studies, like today’s episode, some more interviews with clients, just some great stuff. And that leads me to I want to make an invitation, Gary, I’m not gonna mention your last name. But Gary, you’re listening. I would like to invite you to be on the show. I want to read a little share a little note that you sent me about the Memphis property tour and thank you so much for your kind words and sending this note I just thought it was really good. I wanted to share it with the listeners, but I’d love to have you on the show as well. And I’m not sure if you’ve been on before. Maybe you have I can’t I just can’t remember. You know, we’ve only got like 500 and some odd episodes behind us. So it’s hard to remember all of them, even as I am the one recording them. But this note you sent me a few days ago about the Memphis property tour. It said, Jason, I had a great time last weekend, I always get motivated to get back on track with investing when I attend your events, so easy to get distracted with the other demands of life, my favorites, getting to know the two providers in other words, our local market specialist, the ultimate reason for going and it was more than achieved. Graceland. I have to admit I thought it was going to be extremely cheesy. And I’m Graceland of course is Elvis’s home that he’s talking about. But I was blown away. It was a spiritual experience walking through that mansion, immersed in his Elvis Presley’s life with my iPad storyteller. I had no idea how dedicated he was to philanthropy, and to being together with friends and family, enjoying life. Truly inspirational and a complete shock for me. Really enjoyed sharing the bus with your mom and reliving Elvis’s era through her eyes. What a gem Your mom is. And by the way, it happens to be Mother’s Day. So thank you, Gary. That’s a great thing to say and Happy Mother’s Day to all those moms who are listening, eating barbeque, my favorite in a car museum. My favorite could not have been better spending time learning from Fernando. What inspirational and giving individual By the way, Gary, I got to say so true. Fernando has been a wonderful client and a wonderful addition to our team. We’re so happy to have them, hearing the investing stories of others.
Jason Hartman 9:45
It is really helpful in keeping all the bumps of rental property investing in perspective, when you are reminded that it is not just your world, where evictions, leaky roofs and property damage occur. Thanks again, you provide an incredibly valuable service. Gary, Gary, thank you so much for the kind words and the nice note, really appreciate it. You know, folks, I just cannot stress enough. I know we’ve got thousands of people listening, and millions and millions of downloads of the show, and people in 164 countries around the world listening to this show, whatever you can do, you know, we’ve had clients fly in from Asia, Europe, South America, just all many places around the world to our events. Please make it a priority to attend one of our live events. Come and meet me in person, meet our team in person. And most of all, meet our clients, meet our clients, hear from their stories, hear from them, directly hear about their experiences, their triumphs, their tragedies, you know, this is hardly perfect. We have ups we have downs, but overall, the trajectory is up, because income property is the most historically proven asset class in America, if not the entire world. I’m just gonna start saying it’s the most historically proven asset class in the entire world. Because I think it is I’m pretty sure it is. And if anyone disagrees with me, call into the show, and let’s talk about that topic, because I’d love to hear some opposing viewpoints on it. But anyway, without further ado, go to Jason hartman.com. Check out upcoming events, check out the properties, check out the home study courses. There’s some great stuff there become a member so you can get on our monthly members only calls with Jason Hartman University. There’s just a lot of great stuff at the website. So that’s Jason Hartman calm. And without further ado, let’s hear from our client. A great story from Phillip Sullivan. Here we go. Hey, it’s my pleasure to welcome one of our clients to the show, and that is Mr. Phillip Sullivan. Remember, you’re listening to flashback Friday. New episodes are published every Monday and Wednesday. I met him several years ago, he was a podcast listener and came to one of our events in Southern California. And he’s just got an awesome story. And I gotta tell you, listeners and Philip, this is way overdue. We should have had him on the show a long time ago. Many of you have met Philip at our events before he was at the last meet meet the Masters event that we had in January. And you know, he’s just a great guy, and he’s got a great story. So, Philip, welcome. How you doing?
Philip 12:30
Hey, Jason, how are you?
Jason Hartman 12:31
Good, good. It’s a it’s great to have you on the show. Like I said it. This is long overdue. We should have done this. Two, three years ago.
Philip 12:38
I think I was The Reluctant podcaster. So
Jason Hartman 12:40
You were a little reluctant. I had to twist your arm a little bit, but I just hit you up today and sent you a note and you said yes. So I thought let’s do this. This is awesome. Well, a, you got a really great story. And I just wanted you to maybe take the listeners through it and let’s talk about some of the tips and tricks that you know you’ve learned over time. Yours as an investor and stuff like that. So it all started with you found my podcast right? Tell us tell us how it evolved.
Philip 13:08
Yeah, I discovered your podcast. I think back in the winter of oh seven so right before the crash and and so I started listening I think in December in a series I heard it I was like, Man, it’s good. So I I just started going through all of them and I’ve actually heard all of your podcasts every single one of them. Yeah, I think so. Wow.
Jason Hartman 13:33
So you 2000 2007 and you found you just what did you do find the podcast on iTunes just searching real estate investing or
Philip 13:40
no? What’s your first event in I think 2008 I think and and yeah, I went there to your crazy wealth. Show there and didn’t didn’t invest for a little while. Because with my work, I fix Hail Damage car. So I tried travel all over the US. So it was kind of hard for me to, you know, think about investing in real estate while I was traveling. So then I started thinking about hard money lending. And so I started doing that with your Georgia provider. In 2012, the 2011 Yeah, this fall oil. Right.
Jason Hartman 14:20
And I think I remember your first deal, you know, you didn’t start out with an actual real estate deal. You started out by becoming a lender on real estate. And I think your first deal if I recall, and you know, correct me because I’m may not remember this correctly, but I think it was like a small $40,000 hard money loan. And you probably got, I assume something like 12% on that deal. What was that about? Right? Was that your first first deal with us?
Philip 14:46
Yeah, I think it was, it was 12%. And then I quickly, there was another provider. There Phoenix who is doing 12% plus a $500 upfront fee, throwing back to The Georgia provider and asked for $500 up front plus 2%. And they matched it. So I stuck with them and did a bunch and alongs with them actually became one of their primary, you know, money sources at one point. And yeah, so that’s how I got started in real estate.
Jason Hartman 15:20
Yeah, fantastic. Good. And so how many loans did you do? Because most people would come to us they start out by buying properties. You started out by doing loans. How many loans did you do before you did your first real estate deal where you actually purchased our income property? Probably. I don’t know. Maybe like 10 or 15. Like that, that helped you just build up more and more capital and you have your own company. So you were working your business at the same time and, and when did you acquire your first income property?
Philip 15:50
Buy my first property was, I think, the spring of 2012. So yeah, yeah. Bye. property in a kind of east of Atlanta. And and that like first property actually turned out to be one I had I was forced to sell because the HOA we had gone over the number of real property. Oh, yeah, the neighborhood. So I had I had to sell it actually, they sued me actually. You Boy, that’s amazing.
Jason Hartman 16:19
And by the way, let me just explain to the listeners what happened on that deal. So this is another one of the reasons I really despise condos. But this is not a condo we’re talking about but it’s just, it’s even they get more strict. It’s unusual that we see this in single family homes, but you see it more in the condo townhome thing, but basically, an HOA can believe it or not dictate, you know what the rental requirements are, how long or short properties can be rented. And you know, some of our clients are toying a little bit with like the Airbnb thing or, you know, doing renting their properties on short term rentals and some Hoa is just completely won’t allow that some cities even have problems with it, you know, they can restrict they can say we don’t want more than, you know, 10% renters in the community or 20% or whatever the number they pick is. So yeah, that’s, that’s amazing. So, you sold that one was the market going in your direction by the way it definitely was an appreciating market and I made I think I made about 20,000 on that property. So, okay, so it turned out nothing to complain about
Philip 17:31
early. It turned out good. And after my first one, I am I quickly gain confidence. And I saw how, you know, basically simple it is the purchase properties. And so I quickly just started buying more properties after that. And since I was funding the deals, you know, I saw everything up front so I would pretty much just, you know, pick once I wanted to keep it or or just
Jason Hartman 17:56
land on it and it’ll be gone and gone out. Okay, let me let me mention something about that. So we we’ve had this kind of odd scenario happens sometimes, you know, in every product, there’s a supply chain. Okay. You know, with real estate, there’s a supply chain too, right? So did you I’m wondering, and we have this happen a few times and probably happened a few times with you, too. But I don’t know yet. We’ll see how you answer the question. Did you actually lend on a property to our local market specialist, and you were the hard money lender, they rehab the property, then you bought the same property on which you made the loan for them to acquire and rehab it. Did you do that? How many times did you do that one? I yeah. I did it most the time it was Oh, really? That’s that that was the way you did it most of the time. Hmm. So you really knew the ins and outs of that deal. I mean, you saw the margins that the rehabber or the local market specialists was making on the deal and, you know, you were the lender, so you got paid, you know, maybe somewhere in the neighborhood of 12% to loan the money. And then you bought the property and turned it into an income property and kept it Right. Right. Okay. Do you want to expand on that idea a little bit? Or is there more to
Philip 19:10
it? Well, I just think that if you can, and I kind of like doing this, basically, I like to, you know, concentrate at this point on one market mostly. And, you know, if you can do the lending, it’s nice, because you get to know the area, you can see the process, what’s going on. And you get to see, you know, these properties up front, and you get to pick the property that you want. And I just think if it’s, you know, an advantage, and
Philip 19:38
I think it’s a good way to go if you can do it.
Jason Hartman 19:40
So you started in 2000. And you met us in two, well, you learned about the podcast 2007. You came to an event in 2008. You started saving money building capital, and then you started lending and you did quite a few loans on properties, and then you purchased your first property, and it was one on which you lent so and you did it that way a bunch of times. So how many properties do you have now?
Philip 20:06
Yeah, well, I got my first property 2012. And then so I ended up getting seven in Atlanta. And these are these are like that little bit higher end houses in the 140 to 150 range. And then I got my eyes closed my first triplex in Kansas City. And that’s one of those nice ones. And then I’m under contract on three other triplexes in Kansas City. And two for plexes. And Little Rock, no fantastic.
Jason Hartman 20:43
You’re You’re becoming you’re building an empire. Congratulations. Yeah. So you mentioned on and this is really kind of one of the one of the tips you know, and one of the things maybe listeners want to hear about and we honestly within our company, we Really wrestle with this? Okay, and you know, for a long time Philip and you probably have noticed this the changes in our inventory of properties over the years because I’m sure you’re, you know, going to the website and looking at the properties we have listed online. Like when you first came in contact with us, we would do in pretty much all kind of class A maybe a little bit of class B type nicer properties. And of course, you typically get a much better tenant in those properties. But you know, typically also your numbers aren’t quite as good at least on the on the face of it. Okay. Have you have you stuck with you said, Atlanta, Little Rock, we’re all speaking in the City, Kansas City. Okay. So in those three markets, have you stuck with the higher priced income properties and when we say higher price, by the way, folks, we’re talking 150,000 it’s not that expensive as real estate goes. But you know, we do these you know, low priced cash flow oriented markets. And that, that is Sort of class A for our type of world that we’re in? Have you stuck with that? Or if you’ve done some of the lower end, like Class C type properties? And if so, you know, what differences have you noticed?
Philip 22:10
Yeah, I’ve only stuck with no class a type, you know, higher end houses. Because I was really trying to maximize my leverage, you know, per mortgage for Fannie and, and that was my main reason that’s God’s trying to maximize the amount of leverage I get. I wouldn’t be averse to getting a lower price houses, but that’s what I was trying to do. And that’s why I really went to Kansas City because the each mortgage was so high, basically a 400,000 for a family mortgage. 30 year fixed for five and a quarter is just great. And you really got me into the idea of going into debt. Fixed, right?
Jason Hartman 22:50
Yeah. Right. Exactly. Exactly. Know that long term fixed rate debt is pretty darn appealing. It really is. So with your first property That you, you know, resold rather quickly, you made $20,000 on that one. And you had some loans, you were making some money on the loans, you’re working in your business. How did the other properties go? As you went along, and I’m kind of wondering why you stuck with the nicer side, the class a type properties?
Philip 23:20
Well, it was mostly for the leverage. And I was thinking that the nicer houses might see better appreciation, and you know, the houses in the 141 50 range, and this is prices in 2012 2013. So they’re a little low at that point, these houses are now worth around, you know, 171 75 now, so I was looking for that appreciation, and then the good leverage, and I ideally having good tenants and for the most part, I have had good tenants, but I’ve had two that just walked off, you know, in just this last semester. So it can happen, it can Within the house, I guess,
Jason Hartman 24:01
right, right. So how did that go? Did you recover from the security deposit? Or was it? Was it over the security deposit? And if so, did you pursue a judgment against the tenants and send the collection? Or what happened with those? Well, you know, we want to hear about the bad experiences, too. It’s not all rosy folks.
Philip 24:17
Yeah, they had a property management, place a judgment on them, and hadn’t collected any money yet. But um, yeah, I got their deposit. And you know, that helped to fair. So it was it wasn’t too bad.
Jason Hartman 24:33
So when things like that happen, you know, what did you think Did you Did it ever occur that maybe this real estate thing isn’t really the right thing to do? And you know, you’re just going to give up are you still are you or did you just kind of keep the faith and keep going and moving forward.
Philip 24:47
I really just wanted to keep moving forward because I knew there were just bumps in the road. But you know, one thing that is one lesson that taught me a little bit with with the particular houses rehab, is, I think it’s worth getting an inspection on each property. I didn’t get inspection on any of them. And I think it is worth getting inspection home. I definitely
Jason Hartman 25:10
agree with that. You should get inspections, Philip,
Philip 25:14
for sure. I think one thing to look for is the roof. You know, what stage is that roof? And you know, how old is it? You know, how much life can you expect out of it? I think that’s, that’s pretty big enough. And it’s a big expense. It’s going to come on. Oh, yeah, no question. No question.
Jason Hartman 25:31
It’s going to come up eventually. In fact, I just sold one of my properties. That was a North Carolina property because, you know, I knew I wasn’t too far away from hearing about a roof. And you know, and then and then the buyer that purchased it from me and I did a 1031 exchange and bought two properties in Memphis actually, by selling that one. But the buyer that purchased it from me Of course they hit me up after their inspection and said hey, you know this gonna need a roof and I said thing that I know, that’s why I’m selling. That’s one of the reasons and, you know, I’m not I’m not giving you any more money, okay, you gotta just take it like it is us, you know, you you saw that the roof was old when you bought it. So you know, that’s a that’s that is what it is and they still went through with a deal and bought it. And I usually say, you know, keep your properties 27 and a half years, kind of jokingly because that’s the depreciation schedule. And if any of you listening have properties older or not older than but that you’ve owned longer than 27.5 years, you really really, really, really, really should consider selling them because you’ve run your depreciation schedule, and it just makes sense to get another property and start that schedule. Again. The property doesn’t need to be new, it just needs to be new to you. And one of the great things is you can do a 1031 tax deferred exchange and exchange it and not pay the tax you just defer the tax and definitely so I think the roof is a very good point because roofs are not Cheap that is one that’s probably you know, probably the most expensive item. I mean, I don’t know. There can be other things occasionally too but those are sort of surprise things the roof is one you know about two other things. One was definitely get termite treatment on each house. And that this is something I didn’t think about no one really talked about it. And I did that for all the houses you mean a preventative preventative treatment, right? Or like, Yeah, tell us about that. I mean, how much did that cost? What kind of treatment did you get?
Philip 27:30
I got a five year bond. And I think it was $500 is normally more I got to deal with the recommended vendor who does it. Eat tree eat cow so I got a really good price. And, and then it has $125 renewal fee per year,
Jason Hartman 27:51
after after the five years or each year during the five years each year during the five years you know that also depends on what area you You’re in. So you know, some areas are much more prone to termite issues and I think Atlanta would be you’ve got a lot in Atlanta. What are the age of your properties? You know, you’ve got these properties Little Rock, Atlanta, Kansas City, what what age range? Are they usually
Philip 28:15
they will be Atlanta houses are all in 1987 to, to like, early 2000s. And, and then the Little Rock properties with the two four plexes or the 1970s I think. And then the Kansas City multi units are all new construction. And some of them are getting started yet sir.
Jason Hartman 28:38
Right, right. Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday
Philip 28:48
in which do you have a favorite out of the three markets that you’re in or, or maybe another market that you’re looking at? I’m not really the I like the appreciate Atlanta, you know, with the houses, that I’m gonna like the cash flow from Little Rock in Kansas City with multi units. So I think it’s just a nice portfolio all combined. Really?
Jason Hartman 29:10
Yeah, kind of diversify it and spread it around like that. Do you think you’ll move into another market? I mean, I think three is enough. But you know, I’d say to people, they could do up to five, or you gonna just keep kind of doubling down in those areas that you’re in?
Philip 29:24
Yeah, I think I’ll I’ll probably just double down there’s I mean, I might be tempted by some other market that something attractive comes along, but um, I would be okay with just staying in those three markets early.
Jason Hartman 29:36
How long have you owned in Little Rock? And the reason I asked you about Little Rock in particular, is because Arkansas is the most landlord friendly state in the country by by a longshot. And it’s really, really landlord friendly. So I’m kind of curious to see how your experience plays out there over the years. It’s probably too new to tell. But how long have you owned in there now? Have you been it’s been a year yet or More than a year now. I’m actually just under contract. I haven’t actually made the purchase yet. Okay, okay.
Philip 30:06
Yeah, yeah, I’ve got a lot of contracts right now.
Philip 30:08
Yeah. So what do you think about that market? I think I think it looks good. I mean, it looks stable to me
Philip 30:16
and I’m not really expecting appreciation much but do like it from a stability standpoint and with units that all have their full price so you know, I like the idea of having properties rented to people with lower incomes and more middle class incomes not not just concentrate on one income but have multiple income.
Jason Hartman 30:40
That’s it. So what we’re talking about there is you’re you’re not only Phillip segmenting, you know what I would say take the most historically proven asset class and diversify geographically because all real estate is local. And you’ve been to so many of my events and listened to every single podcast which by the way, you deserve award for that, you know, you’ve heard me say this stuff a million times, but you’re not just diversifying geographically because you know, all real estate is local. Right. But you’re also diversifying in terms of market segments by having those different income ranges in your portfolio. Right? There’s different types of tenant classes. Yeah. So it as the economy, you know, if it gets worse or better, here, you’re more covered that way. It’s more more say, I agree with you. And the other thing that people will notice if, if things do get really bad again, at any point, the thing that they’ll notice is they catch people on their way down. I mean, it’s not as positive of an environment but you know, you’re providing housing to people who are moving down the economic ladder, you know, in bad times, and in good times, you’re providing housing to people who are moving up the economic ladder. So you know that that’s why we like the properties that are below the median price in any given market. It. And by the way, I got a comment on your Atlanta stuff, because last year, I mean, it’s about 10% appreciation in that market. You’ve done phenomenally well. Yeah. Yeah. I don’t know, if you even know that. Do you keep track of the prices of your properties? Or, you know, I kind of tell investors not to worry about that too much, because it’s really a cash flow game. But Gosh, it’s nice when appreciation does happen, right?
Philip 32:23
Yeah. I don’t really but I did. Look, I did look a few months ago, really, for the first time. And that’s what I saw some of the houses were worth getting to 170 what I paid into 144 Mm hmm.
Jason Hartman 32:35
Yeah, that’s great. And are you leveraging your properties or you paying cash for them? I paid cash for them up front. But I did a cash out refinance on every single one of those. So Oh, you have you completed those cash out refinance? Yeah, okay. Good, good. And what what’s your thing with management? Do you always use the property manager or do you self manage or do you have a blend in your portfolio? Or you’re, you know, self managing and using professional managers.
Philip 33:03
Yeah, I use property management for all of them.
Philip 33:06
I’ve been, you know, I’ve been happy with it really. And I’m really kind of excited about the property management can see with your provider there, because I think it’s gonna be really good from what I’ve heard from other clients. Mm hmm. Good, good stuff.
Jason Hartman 33:23
As you know, I had some problems with the Kansas City property manager A while back. I think you know about that story. We’re working on that one. And I, I kind of try to wait till these things sort of play out completely before I talk about them on the show because I just, I don’t have enough to say really yet. But more to come on that one. Do you have any tips that you want to share is you know, in terms of how you manage your portfolio, how you keep track of it, how you deal with property managers, your philosophies on financing, just any part of it that maybe we haven’t discussed yet.
Philip 33:57
One day, I thought I was with an HOA
Philip 34:02
You know, we buy a property, you have to want to make sure you know who the HOA is, you know, a name or a name or a phone number. Because if you don’t, you’re definitely going to at some point by now,
Jason Hartman 34:13
yeah, I know what you’re about to say, I think Yeah, like I did. I did on a couple of properties, maybe even two or three, and got, like fees, collection fees and stuff. So let me explain that to the listeners. Let me just elaborate on what you’re talking about. And they interrupt me if I’m not talking about the same thing, but I think I am. And this has also happened to me. Okay. This is the reason we say everybody should go to the USPTO, the Post Office website, okay. And every I think it’s every year for $1 is all at cost where you can do it for free. If you just go to the post office and pick up the little paper form that it’s like a little postcard sort of thing that you you just put in a mailbox and they do it always forward the mail to yourself from every one of your properties, because it just invariably is going to happen probably with the homeowners association, the HOA, but it could also happen with the tax collector, or the insurance company or the lender, and you do not want this to happen is that they will send the statement to the property rather than to your address. Then they’ll say, Hey, you know, your association fee which you really only owe $300 in fees now, because you didn’t pay it and you didn’t even know it was due, right. You didn’t pay it, you know, you now owe a $650 because we’ve tacked on late fees and a legal fee and some of this kind of stuff. So really, really, really be careful of that. It’s it’s one of the little minefields that you’ve got to plan for. Do that forwarding address. Now, just understand to the forwarding address goes by name. So it won’t affect your tenant in the property at all, okay? But if you purchase the property in the name of an entity like say you set up an LLC, you should forward both your personal name. So in your case, you know, Philip Sullivan, or ABC LLC, right when you do that, because that will really, really help prevent this kind of problem. And one of the other things that some of our clients have been using very successfully is these virtual mailboxes. And there are several services that offer this where they, it’s really helpful to organize yourself and make it a lot easier. What they do is they receive your mail just like you know, a p o box would or the UPS Store would, but they open it and they scan it and they put it on to a web portal that is password protected. And you go in and you just look at your mail online. If there is a check in there, you can actually instruct them to deposit that check to, you know, whichever of any various accounts you might have. And they’ll actually deposit your checks. It’s pretty cool. Do you use something
Philip 37:14
like that? No, I know. That sounds that sounds nice.
Jason Hartman 37:17
Yeah, I can give you the names of some of them, you know, whose I’m using one. It’s really great. This is Fernando. He just loves it. And, you know, they deposit all his checks. He showed it to me. And the last time he was on it several months ago, when I happen to be near him on the computer. He said, Jason, you got to use this look, he’s just going through his mail. It’s just on the screen. You know, he didn’t want to open anything. You know, so it’s great, you know, and it’s sort of amazing. The whole postal system doesn’t work that way, frankly, because it should, but that’s a different discussion. Yeah. Let me give a couple names for the listeners on that. Okay. One’s called Virtual post mail. And that’s virtual post mail.com. Another one I did all I did is I searched it well while you were talking. Okay. ones called traveling mailbox comm traveling mailbox calm. And another one is called us global mail calm. And another one’s called post scan mail calm. There’s a whole bunch of them out there. So just you know, put it in a search engine. Notice how I did not say Google just my own personal thing, put it on being and in search it just search virtual mailbox, you’ll find a bunch of companies offering this service and it’s, it’s cheap, and it’s great and especially for someone like you who’s traveling a lot because your business takes you to all these different locations. So Oh, yes,
Philip 38:42
Yeah, that’d be very handy.
Philip 38:43
goodwill Philip, your
Jason Hartman 38:44
story is super inspiring. And I thank you so much for sharing it with our listeners. What’s next for you? What are you what are you planning? Where are you going to be buying your next properties you think?
Philip 38:54
Probably either a little rocker Kansas City, but most likely Kansas City. Maybe construction. multifamily.
Jason Hartman 39:02
Yeah, good, good stuff. And when you say multifamily, you’re talking about, you know, for plexes, triplexes. That kind of stuff. Right, right. Yeah. Well, again, thank you so much for sharing your very inspiring story. We appreciate your business and appreciate having you on the show to.
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Jason Hartman 40:36
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Jason Hartman plays a Flash Back Friday episode from November 2016. He hosts Gary Pinkerton to help breakdown the article, 27 Charts That Will Change How You Think About the American Economy. They discuss the US economy related to productivity, demographics, or inflation. Later they discuss the incredible opportunities that await real estate and income property investors.
Announcer 0:00
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present, and propel you into the future. Enjoy. 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 1:07
Welcome to the creating wealth show. This is your host Jason Hartman with episode number 749 749. Thank you so much for joining me. I have talked many times before about how the next 10 years of demographics and psychographics. In other words, people state of mind, not just demographics, and also economics, how they Bode so well for us as real estate investors. How there is this tsunami, this tidal wave, this absolute avalanche of great news for us as real estate investors coming out the rental market over the next decade, maybe longer, really, really, maybe this is a 15 to 20 year, maybe This is a decade and a half, two decades of phenomenal opportunity for us as real estate investors. I don’t know, it remains to be seen, but certainly the near future, the next three to five years and I would even venture to say the next five to seven the next decade. It looks pretty darn sure that we are in a phenomenal, phenomenal position as real estate investors, investing in the most historically proven asset class in the entire world income producing real estate. Well, here’s a recent survey and I believe I shared a little bit of this with you on a prior episode. But I’m going to go into a little more detail this time, because we’ve got one of our clients coming on the show today. And that is Mr. Gary Pinkerton. Yes, Gary Pinkerton, the now retired Navy submarine Captain Yes, this guy can actually run a nuclear reactor. Pretty cool, huh? He’s gonna be back on the show today, talking a little bit about some different issues in the economy, some different data that I think you’ll find interesting, and a bit of his client case study as a real estate investor. So I think you’ll like that. But before we get to that, this is about the American savings rate. And again, this is one more piece of evidence, just proving how phenomenal The opportunity is, for us, for real estate investors for income property investors, and it is overall sad news. But you know, me, I am a realist, I am realistic about this stuff. I do think it’s an amazing time to be alive. There are so many incredible things going on. And at the same time, there is this divide There’s the digital divide. There’s the economic divide, there’s the concentration of wealth divide. There are a lot of problems, obviously at the same time, and this is one of them. But as the Chinese say, crisis is an opportunity riding the dangerous when every problem is an opportunity. In the Chinese language, the symbol for crisis is identical to the symbol for opportunity. So literally translated, crisis is an opportunity. Riding the dangerous wind is the way that works, right? And so this is a crisis, but it is an opportunity for us as real estate investors is an opportunity to serve a huge segment of the population. And when you hear a couple of these stats momentarily, you’re going to see that this segment is ginormous, ginormous. Yes. No, that’s not a word listeners. I know it’s not a word. It’s one of those made up words, but it’s ginormous. That would be gigantic and enormous. Put together. There you go. I don’t think you need me to explain that bit here. But anyway, I’m kind of a literal person. Okay, so 62% of Americans have under $1,000 in savings. And this is a survey who did this survey here? Well, it’s on go banking rates go banking rates calm, which I guess is website like bankrate.com It looks like and they’ve got some cool charts here, colorful graphs that illustrate all this stuff. But let me just share with you the first one before we get to our client, Gary Pinkerton and our guest today and talk to him. Okay, so 21% do not have a savings account 21% of the population mind boggling, okay? 28% have zero dollars, I guess they have an account but they have no money, or maybe no money to speak of in the account, maybe they have a nominal amount of money in that account just to keep it open. It’s counted that way as zero dollars. 14% have, hey, this is considered Great. Now I’m sure people listening will think this is you know, no big deal, right? But 14% of the population over $10,000 $10,000 or more in savings. Okay, let’s go to the bottom rung. Again. That’s the top rung over 10,000 10,000 or more, just the minimum balance requirement 9% of the population less than $1,000 in the bank. In savings 13% of the population 1000 to 40 $999 10% of the population 5000 to 9000 999 5% of the population 14% of the population with 10,000 or more. Can you believe that? That means that 62% of the American population now assume, of course, this is the adult population we’re talking about, you know, a little baby wouldn’t be counted in this right. But 62% of the population have less than $1,000 in savings. Do you think they’re going to be able to move into the homeownership pool anytime soon? Do you think they’re going to be homebuyers? Not likely, folks. This is a market is a market of opportunity. It is a market that needs to be served. Hopefully, our country will get its act together. And we will start moving away from these idiotic left wing policies that I would argue, because we’ve had five decades of left leaning policies in this country. Okay, forget about who the President is right? Just look at the Congress, the Congress has largely been controlled by the left for the better part of five decades. And in many ways, you can argue that this problem relates to our left leaning social policies, because it causes an anemic economy through government spending, through inflation, admittedly low in recent years, but overall over the last five decades, very high, especially since 1971. You know what happened in that year, of course, went off the gold standard. So this is just mind boggling. It really is showing once more, once again, that there is a massive opportunity and a massive market that needs to be served for us and by us as real estate investors. Okay, without further ado, let’s get to our guest today. Let’s talk to Gary. We’re going to talk about some charts and some data and a little bit of case study. Make sure you visit Jason Hartman, calm, make sure you check out our new website, by the way, if you haven’t done so yet, its newly revised website. If you looked at it too early, there were a lot of things that we fixed on it. So go take another look. Maybe you looked at it too soon. But take a look at it. Lots of great resources there some great products in the store, and also at Hartman education calm and we are planning a phenomenal venture Alliance weekend in very easy to get to Phoenix. One of the well voted actually the first Not one of the friendliest airport in the United States, which I would agree with. I love the Phoenix airport. It’s it’s real, real easy, really short lines really fast to get. Get in, get out. It’s a great airport. Love it there. So join us in Phoenix for the venture Alliance weekend. That’s the first weekend of December visit venture Alliance mastermind calm or Jason Hartman, calm click on events. And make sure you join us for that you can come as a one time guest, or you can join. We’ve got a couple of great new members and we got some fantastic speakers that we’re lining up for this event. One of them an excellent guest who’s been on our show before, I’m not going to tell you who he was. But he was phenomenal, really amazing insights on the economy and the markets. He will be speaking at our venture Alliance event in Phoenix, first weekend of December and we’re going to have some other fantastic guests. speakers and some fantastic, fun first class events. So be sure to join us venture lions weekend, first weekend of December. Let’s go to Gary. Hey, it’s my pleasure to welcome one of our clients back to the show. He is also a venture Alliance member. And that is Mr. Gary Pinkerton, who sent me a fascinating article on vox.com last week, and it’s entitled 27 charts that will change how you think about the American economy by Timothy Lee. And this is just a fascinating group of charts. Gary has picked out some of his favorites he wanted to chat about and maybe ask me some questions about sci fi, see if he can stump me on any of these. Always have an opinion, even if it’s wrong. That’s my disclaimer. And Gary, welcome back to the show. How are you?
Gary Pinkerton 11:53
Thank you very much. I’m doing great and I’m really looking forward to talking again, I always love being I think this is my third one, maybe second one. I think I did an intro With you, if I count that it’s the third one, but really enjoyed each time and certainly love talking about these topics.
Jason Hartman 12:05
Yeah, yeah, that’s it’s great to have you back on the show. And Gary, give our listeners a sense of geography. You’re an East Coast guy. Where are you located? Exactly. So
Gary Pinkerton 12:12
I’m in New Jersey, Belmar New Jersey, which, if you’re ever heading up the New Jersey Turnpike, you’ll see the the turn for six flags and 195 and it says shore points. And so we’re basically halfway between New York City and Atlantic City. They’re on the coast of New Jersey, just a beautiful place. And it was the epicenter for Hurricane Sandy a few years ago.
Jason Hartman 12:33
Yeah, man, massive, massive rebuilding project there for sure. But you’ve been a venture Alliance mastermind member from the beginning and I thank you for being involved in venture Alliance. It’s it’s been great to have you there. And you always contribute such great stuff and you’ve got such a good financial mind and, you know, very analytical. You are a recently retired Navy submarine captain. So you you know how to run a nuclear reactor in your spare time, right?
Gary Pinkerton 13:00
I do I’ve done a few of those. Yeah, it’s, it’s not the easy work, but it’s certainly challenging. And you know, very satisfying, you know, just a great, a ton of great memories. I just finished Actually, my 25th reunion at the Naval Academy saw a bunch of submarine buddies as well as you know, just pilots and surface warship guys and Marines and some great Americans that I’d kind of lost touch with so great times, but you did do some times in nuclear reactors.
Jason Hartman 13:25
Wow. That’s That’s amazing. And you know, the the sad thing about that whole deal with your, your naval career for me is that whenever I want to ask you questions about these nuclear submarines, you can’t tell me anything, because it’s all secret. It’s all classified. You know, you won’t tell me how deep you go, how fast you go.
Gary Pinkerton 13:44
It’s just nothing. Right? Well, the good news is that the longer I’m out the less relevant I become. And you know, I’m getting older like all this right. So eventually they’ll think I’m seeing I’m I’ll be able to type answers. There you go. There you go. Yeah,
Jason Hartman 13:55
that’s how you’ll blow your security clearance. Okay. Got it. Got it. Hey Gary, what got you interested in real estate? And how long ago did you discover my podcast and become a client?
Gary Pinkerton 14:06
So it was 2011. Just about mid 2011. I was I was leaving command I just taken over a position and a great job at the Naval Academy, a two year position there and had a lot more free time than I did on my submarine, as you can imagine, and I was searching for a way to shift active income into passive You know, I’ve read Robert Kiyosaki books over the years, I really just, I mean, they just spoke to me, Rich Dad, Poor Dad, and most of the others. You know, he’s prophesy it all just made a lot of sense to me. So I was looking for, you know, following his model of shifting and to, you know, passive cash flow income. And, you know, I’m a mechanical engineer, and the thing that made most sense to me, you know, not buying the coin laundry machine, although i think that that facility may be a great idea too, but for me, it was about real estate and buildings. And so, I was looking into that. You happen to have a great podcast and I started listening in the team I think it was and I’ve certainly listened to all of them. And I just kept gotta become a junkie with that and of your real estate guys radio, I listen to them quite a bit as well. And I, you know, so I first got my first property in the end of 2011. In St. Louis, I bought a few more there. I’m up to eight and my wife Susan is today In fact, we’ll we’ll get her first three and we’ll she’ll be at six by the end of this month. And hopefully if all goes well, we’ll have Susan topped out and then we’ll go back and start focusing on Gary again.
Jason Hartman 15:32
Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. And then what you’re referring to is the 10 loans for each spouse, the 10 Fannie Mae Freddie Mac loans for each spouse, I got a question for you about living on a submarine and working on a submarine. Maybe you can actually answer this one and I have a feeling I already know the answer. Are you able to download my podcast or When you’re underwater, so
Jason Hartman 16:03
technical No, not very far underwater. You know, we consider periscope depth underwater. And, and we can actually do that nowadays, in certain circumstances. So it’s when you’re basically on training missions. You know, you’re not someplace where you need to be really covert to me, we do have satellite capabilities. And yeah, so I mean, we can get internet, we can, you know, chat back and forth with family members. Now, it’s totally different than it was 20 years ago when I started this process.
Jason Hartman 16:28
Yeah, that’s great to let all the people you know, in the military, be more in touch with their families and so forth. That’s, that’s gonna really be a morale booster. I’m sure. So that’s, that’s fantastic. Well, hey, these 27 charts are fascinating. This is just a really interesting article, you wanted to talk about some of them with our listeners, you’re an economics wonk, and you’re really into this stuff as EMI, which ones would you like to go over? And maybe let’s pick a few of them and talk about them.
Gary Pinkerton 16:54
So I think we should talk you know, just about the first few and then we’ll jump forward a little bit but the first one is, you know, number one is is kind of an eye catcher probably on purpose. But he says he starts things off here by saying that, yes, America still makes things and you talk, he’s talking about the manufacturing sector, real output, he shows, you know, a trend from 1987 to the present. And as you would expect, you know, it went down pretty substantially in 2008, and nine, but it’s backup, and it’s at the highest level of production, since they started recording in release. And so since the beginning of this chart in 1987, and I think that does surprise people. But I believe also that I’d be interested in your thoughts, but but I think the perspective is that, you know, no one works in industry anymore. And that’s somewhat true, because no, he talks about it, because it’s automated, right, right, the efficiency of the companies. But, you know, the bottom line is that America is still producing quite a few goods. Right, right.
Jason Hartman 17:47
So the if you look at the manufacturing job sector, it is suffering dramatically, but if you look at manufacturing output, it’s still very strong. So this is the this is the paradigm of automation and robotics and technology in general. And what it may be leading to, is the fact that, you know, even even some of my most and I shouldn’t say as the fact that but maybe it is a reality, a harsh reality that some of even my most libertarian friends are beginning to face is that maybe we are going to have a large segment of the population that is just permanently unemployed, or are massively underemployed. And maybe the government will have to provide a living wage of some sort to these people to keep the the world stable. But, you know, that isn’t as bad as it might sound because all of this technology makes goods so much less expensive, that you know, maybe you can do that for a lot less money. And and then it goes to the question of, you know, my investing philosophy that is, you know, I say inflation is The home run. That’s the best of all scenarios. But a lot of this is anti inflationary. The monetary and fiscal policy, very inflationary technology is its opponent, it is not inflationary. So we shall see which way it will go. But there’s a couple charts that actually relate to that as well. Right, Gary? That’s right. Yeah.
Gary Pinkerton 19:18
So one of them is, you know, even just going to chart to still talking about manufacturing. You know, it shows that the, the jobs in the service sector have been steadily climbing while the jobs in manufacturing are flat or going down a little bit. Even while you know, US population is growing. And my question was, is that really bad? You know, kind of back to your comment, I’m not sure it’s bad. You know, manufacturing jobs are not, you know, a dream in my opinion. I’ve done a few of them and they’re hard work and people don’t live really long lives and, and in general, they don’t enjoy you know, the back and be back breaking work that comes along with that. So, you know, people will often reminisce about The good old days I’m not sure they were good old days in the factories, you know?
Jason Hartman 20:03
Yeah, that’s a very good point and many experiments and issues and labor unions and child labor and the Hawthorne experiment and working conditions and so forth, speak to a lot of that point that you raised about manufacturing jobs. The other thing that says if you look at the other side of this issue, and you look at it not from the producer and the the job and employment side, but you look at it from the consumer side, generally speaking, manufacturing jobs to me represent needs, but largely not completely, but largely they represent things people consider necessities or needs, you know, having a car having clothing, having a house having all the all the goods that we buy, right, but services really represent once and they represent a higher level of lifestyle. So when it comes to massages and going out to eat at restaurants, You know, concierge type jobs and in all of these service oriented jobs, even the Lyft and the Uber driver, these are sort of higher level things. They’re, they’re things that really indicate a degree of progress in that life is getting better. And and people are more prosperous. I mean, I was talking to my mom somewhat recently about the obesity epidemic. And she says, you know, Jason, maybe it’s just the fact that just people go out to eat so much more often. I mean, when she was a kid, nobody ever went out to eat, you know, you just didn’t do that. It was way too expensive. And when I was a kid, certainly the restaurant world was not nearly as big as it is today. And so that represents a huge growth in the service sector. Right. I mean, would you agree with that, you know, like service jobs are are a sign of prosperity, I think
Gary Pinkerton 21:50
I agree. And, and it’s prosperity and a lot of those being typed elective, elective type services that you that you go for, like you like you mentioned, you know, Being able to ride around in an Uber, but they’re also, I think, an indication of longevity because I think there’s a lot of service industry coming from, you know, all of the retired baby boomers and for those older than the baby boomers that need those kinds or desire those kinds of services and have the ability to pay for them, you know, I mean, the the cruise ship industry right now is booming. Some of it, I think, is because of, of lower fuel costs. But I think a lot of it is the fact that the people who want to go and travel now are still healthy enough to do it, have, you know, service providers to help them through that and thankfully have the financial ability to do it. And you know, cruise ships are a service industry. So, you know, I think as you look around, it’s an indication like you said of a wealthier, healthier, happier society. I don’t think this is a bad thing.
Jason Hartman 22:44
You know, very, it’s, it’s an amazing time to be alive. Okay, so anything else you take from chart number two, manufacturing employment is dwindling, while more and more people provide services
Gary Pinkerton 22:58
now? I don’t think so. You know, there’s a, there’s a couple more that relate to that. And those are number 12 labor force participation rate. And then kind of lumped them together. And then like 15, you know, teen summer employment is and then both are, you know, are dropping off. And, you know, I think the labor force participation rate that’s somewhat to do with, you know, the the crash that we had in 2008, and nine and the one in 2000, both of them caused a significant drop. And clearly, we haven’t come back from that, but, but again, I think it’s about increased efficiency as well, right now, you know, in the industrial world, and I think people are struggling a little bit we have this impression that service jobs are lower income jobs, and their jobs that, you know, you know, are behind on beyond having to do that kind of a job. And I think that’s unfortunate. I think service jobs provide a great benefit, like we just talked about, and and I think if we could change the mentality on that and perhaps change the pay structure for that. Well,
Jason Hartman 23:57
I think one of the interesting things about that is You know, when you talk about service jobs, most people think of Oh, working in a restaurant or a coffee shop or something like that. They don’t pay very well, those jobs, certainly. But, you know, it’s not that we have have to just talk about this as though it’s two things. It’s either a service job or a manufacturing job. What about a corporate job? What about a management and middle management type of job? You know, the information worker, the people working in the offices, right? They don’t fall into either category, and those tend to be higher paying jobs, and they tend to be more pleasant jobs than manufacturing or service, I would say, you know, they’re using the brain more than the brawn In either case. Yeah, I agree. And, but, you know, regardless, chart 12 people have been dropping out of the labor force since about 2000 is a bit of a disturbing chart. You know, if you follow that arrow further, I wrote Greece at the end of you know, of that, that arrow where, you know, for whatever reason, the labor force, whether it be entitlement, whether it be disenfranchisement, whether it be Taxes are so high, they don’t bother. You know, that is the direction I think America is moving on this chart and the direction of Europe, where, for whatever reason, people don’t go to work. And that’s not a good thing. That’s very unfortunate. And, and folks, the labor force participation rate is far more accurate than the unemployment rate. Because as we’ve talked about, many, many times, and I’d say the guests that spoke to this the most was john Williams, the founder of shadow stats calm website, I would highly encourage all of you to visit shadow stats calm, which is, you know, sort of made its name on the, you know, the reality behind the numbers that the government is publishing. The labor force participation rate really shows you who’s working and who’s not right. Whereas the unemployment rate because people fall off the unemployment rolls. That is a very misleading number. So let’s just share some actual numbers here. Okay, in 19 Well, let’s take 1997 ish to 2000 It looks like we had a labor force participation rate of 67. And now it’s down to less than 63. And the last time it was this low was, you know, we’re in the era where the misery index was created in the 70s. In the mid 70s. Things were very, very tough back then, obviously. Yeah, it’s just interesting to look at this, isn’t it?
Gary Pinkerton 26:21
Yeah, it is certainly is. And hopefully we turn that trend. But the other thing to kind of keep in mind, and I learned this in, you know, in my master’s program, my engineering master’s program is you have to take charts with a grain of salt, meaning that you kind of need to know what’s behind them, like, you know, what the data set was, what the entering constraints were. But But the other part is that, you know, the scale on these things, you have to look at it and kind of evaluate it. I mean, this, this looks like a very dramatic scale. But I mean, a very dramatic curve. But if you look at it’s gone from 59 to 67%, which is substantial with a country this large, but it’s not like it. I mean, if you first look at anything, oh my gosh, we were at 10, we went to 100 and we’re back down to 50 or so. You know, it’s not But that’s one of the old how to lie with statistics things, you show someone a chart, and depending on the scale in which they did the chart, they can make it look much more dramatic than it really is. So that’s a very good point A to that are on real estate. Jason, I thought we ought to touch charts 18 and 19. Right back to back and 18 is the current recovery is an urban recovery. And it shows it breaks up the chart into four different groups, communities of less than 100,000, between 100 and 500,000, between 500 and a million and then over 1 million, and what it shows early 90s. The most of the growth was in the very low population areas. Hmm. You know, in 2000 2006, it was pretty flat and low across the board. But then now the trend from 2010 to 14 following the mortgage crisis, all of the growth has been, you know, in the larger cities.
Jason Hartman 27:52
Yeah, that’s, that’s interesting, you know, and this is a really complicated one to look at because one of the other issues that you have is some of these Actual cities have grown like growth begets growth, right? And so if you look at where I spent most of my adult life in Orange County, California, I remember when I first started selling real estate in Irvine, California, the population of that city was like 70,000. Okay, and, and those are misleading too, because the cities are contiguous, you know, they’re right next to each other and you go from one you go from Irvine, to Newport Beach to Irvine, to Santa Ana Irvine to Tustin or Mission Viejo or whatever, it’s like, you’re in the same place, you know, so, so some, some metro areas are isolated where there’s a distance between them, there’s a buffer of nothingness, if you will, and then there’s another metro area, right. But when they’re all clumped together, it really makes it hard to do statistics. But I would say I you know, and I don’t I haven’t kept up with it, but I guessing that the, the size of the urban population now is about 220,000, or something like that. So, and I could be wrong about that. By the way, maybe maybe under 200 I’m not sure. It’s interesting to look at this. Yeah. So this would would would lead one to believe that the the growth is in the cities, right? In the in the bigger wealth. This is county size, right? Yeah. Yeah. And, and, you know, if you look at it on County, like LA and Orange County are right next to each other, you know, you don’t notice when you go from one to the other, it’s there. They’re completely adjacent. So it’s hard to tell, but go ahead with what you’re saying.
Gary Pinkerton 29:25
Well, what I was gonna say is that, you know, this really speaks to the the logic behind what you do and your company, and that you pick areas that are surrounding major cities, where, you know, it’s it’s ruling up or outside the city enough that the numbers still work. But you’re close enough to the city to grasp this, you know, population and job growth. You know, people can still commute from where we’re buying properties around Atlanta, or you know, where I bought properties in St. Louis, or, you know, the other major cities that were concentrating on, they can still go into weather large growth is occurring for jobs.
Jason Hartman 30:03
Yeah, yeah. So they’ve still got the the the job opportunity without being in the inspect in the expensive market. And Gary, you know, I think this is like the ultimate formula. I don’t know how expensive it is where you live, but I know your property taxes are some of the highest in the country that I do know, in New Jersey, you know, when you can live in a place that offers a good economy, a good entrepreneurial environment, good entertainment options, good weather, and you can do that inexpensively. You know, I mean, look at the difference between like, and we were not doing anything in this market lately, because it just got too expensive. But relative to the comparison I’m going to make it’s incredibly cheap. And so I would compare Denver and Austin, right two cities that we’ve done a fair amount of business in both a little too expensive now to be recommending to our investors, but compare them to a place like say San Francisco, right. These are both called creative class cities. As is San Francisco is dramatically better values. And I just think that the Uber high priced cities are I don’t think they have as good a future is relatively speaking to the low price cities that have a lot of the same offerings, you know, and people are very mobile nowadays, as we’ve illustrated before, but you know, any thoughts on that?
Gary Pinkerton 31:23
No. And and, you know, over a million in a county is not a lot. Right. So this is not just York City. I think there’s great counties here that demonstrate again, that I just believe. I think you’re right, I think there’s a lot less opportunity in the super Uber rich, large cities. But I think this this chart speaks to, you know, the strategy that we’ve been using for many years with your company, I think it’s great.
Jason Hartman 31:47
Yeah, let’s talk about inflation adjusted housing prices.
Gary Pinkerton 31:52
I see. So what I did, Jason is I went back and looked at this and here’s a case of chart that includes tremendously more information. Right, so this one goes back to 1890. Most of them have been at 1980s or 1990s, maybe even 2000, very small sample size. This one is, you know, since they started recording this information 130 years ago, and I took inflation and adjusted it by 1% higher than they show here, and essentially this thing flattens out and the guy’s argument goes away. His argument is that, since you know, World War Two, the that housing prices have consistently climbed, and he even calls into question whether the 2008 2009 bubble was significant or not, I mean, you can even look on his chart and it was huge. So, that’s a kind of a weird argument to make. But, but even just, you know, his point is that you can see kind of an upward trend, but for that many years, you know, we’re looking at 70 years if you just add 1% to the reported inflation, it flattens this thing out completely.
Jason Hartman 32:52
Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday. I tell you I have a lot of disagreement with Robert Shiller. And this is, of course, the Yale economist. And the Case Shiller index is named after him. And he’s written several books. He talks about irrational exuberance. He took Alan Greenspan’s famous quote, and talks about that and he doesn’t really give the whole picture on a lot of things. And I think that can be kind of misleading some of his data is great, of course, but the thing that is so misleading about charts like this, is that it assumes that the house is the same house see the house in 1890 I’m just going to venture to guess I’m gonna make a wild guess here is not as nice as the house in 2010.
Gary Pinkerton 33:49
Right and by the benefit included the outhouses part of the house.
Jason Hartman 33:52
Yeah. Right, exactly. So it’s not as nice a house for sure. I mean that the houses today are much more energy efficient. Well, they even have energy. My grandmother in upstate New York rest her soul. But when she was alive, and I used to go visit there, I mean, all the wiring all the electrical wiring was on the outside of the walls, you know. So you would see wires running around the inside of the house to an outlet. And because the house was built before electricity was wired into homes, and so the homes are obviously much better. But here’s the kicker. And if you look at like one one stat I hear a lot is that you know, American Americans are just living much more prosperous lives nowadays. And they’ll say the average house built after world war two in the baby boom was about 900 square feet. And the average house today is like 2200 square feet. Okay. But you didn’t talk about the density of that house. You didn’t talk about the fact that that house post World War Two was that a third of an acre or a quarter acre lot in you know, famous suburban places like I’ll take Lakewood California, as an Example, which is a long beach area, Long Beach, California where I went to high school. You know, you compare that to today. And yes, you might have more square footage on the interior of your home. But you’re living in a townhome or a high density cluster home with zero lot lines. So there there’s more to everything than meets the eye, isn’t there?
Gary Pinkerton 35:19
Absolutely. there absolutely is. And I thought that was a fascinating one. And you certainly cannot discount the bubble that shows even on on this inflation adjusted chart, but but I believe that that consistent climb that it shows from the 1970s on ironically, if you add 1%, like I said to the inflation adjustment, it’ll flatten that out. And what I meant by ironically, is that that’s where we started messing with the consumer price index, right? That’s where we started taking out volatile things. Shadow stats will tell you that it’s a couple of percent higher than that and when you add that in, you know it’s flat. It’s just following home price inflation is long term with the exception of you know, the 2008 bubble there. It’s just fine. inflation.
Jason Hartman 36:01
Yeah, fascinating stuff. You know, I A long time ago and I wish I could find that episode I did an episode on this where I, I played part of an interview that was on I believe on Bloomberg News. Tom keen on the economy. He’s interesting. Reporter I really liked his stuff. And I actually played part of it on there where they interviewed the Fed chair, who was who was it? It was right before? Gotcha. It was no it was before Greenspan and it was before. You know, the guy that broke the back of inflation of I was talking about I can’t think of his name right now. Volcker, Paul Volcker. Thank you. Little senior moment there. It was before paul volcker. There was a Fed chair in there for just a couple of years. And he was talking about how they started manipulating the numbers and how they started using weightings substitution. hedonic ‘s all of the ways in which they understate inflation and that was that was fascinating. I got to find that one in plate as a flashback Friday episode because it’s it’s really interesting to hear it right Right there from the inside as to what went on, but that, yeah, good stuff. It’s an old one. It’s up there somewhere. But finding it is another another challenge. Okay, so do you want to talk about chart number 20 at all, Gary? Uh, I was housing prices have grown a lot faster than construction costs,
Gary Pinkerton 37:17
right. So one of the things I was going to do is say that this is a tribute to I’m not sure. Jason haven’t really talked about yet. things changing in your life, but it came to mind to me the turtles. And you’ve mentioned this before in the past that, you know, some have actual masses around them, like geography mountains and things that cause prices to rise. Water around New York City song, we just manufactured them, like one that came to mind for me was Las Vegas where they have famous, you know, they have endangered turtles that we’ve decided that will prevent you from, you know, expanding and so home prices go up and places like that as well.
Jason Hartman 37:54
Yeah, right. Right. So in other words, you’re talking about constraints on building right? That cost As housing prices to go up a lot faster than real construction costs.
Gary Pinkerton 38:03
Exactly, exactly. So that’s, that’s one huge part about this, I believe.
Jason Hartman 38:06
Yeah, yeah. And and this is something by the way, just to tell the listeners, what this chart shows is it shows from 1980 to 2012. And you see during the bubble period, you know, 2004 to 2006. Ish, or while the run up started happening in 2000. But you see that house prices, real house prices adjusted for fake inflation statistics, so everything’s got a, you got adjusted price, right. But they went up dramatically faster than construction cost, right. And that’s what this chart shows, which is quite interesting. But that doesn’t tell the whole story. And I think that’s Gary’s point. You know, correct me if I’m wrong, Gary, but in places where you have constraints on construction, that’s what causes places like the Socialist Republic of California to have these incredibly high prices and my opinion that I’ve stated many times before, when I talk about the self driving car and the how geography is less meaningful than it’s ever been in human history, it’s still meaningful, it’s just less meaningful. I think this kind of thing will be under attack. It’ll still be there, it’ll still be a factor. Of course, everybody would rather have a home on the water in Newport Beach or La Jolla or wherever then England have it right. But I think that’ll pretty much be unanimous. But will the will the Delta be as large as it is today if transportation becomes a lot cheaper and a lot easier self driving, ride sharing etc. and and also technology like virtual reality, then that’s a that’s another component. You know, I believe that delta will will compress now I think you’re right, but this is a nice chart when you’re talking about the the concept of land value and, you know and cost of construction. It shows that those The laminate blue line, the real housing prices, essentially the changes in land value, right? I mean, you know, the people that will pay a premium for a specific location over what it costs to build on that location, right. But here’s, here’s the amazing thing about this chart, though that point is well taken until you get to the peak in, you know, according to this chart, it would be about 2006 or seven. I think it was really before that. But there’s always a lag in these stats anyway. And then you see the dramatic fall of real housing prices. But you see real construction costs increase during that same period, the red line versus the blue line. And I almost wish the listeners could see this, this is really telling. So you see that land prices, when there’s a bubble, just get this massive run up, and they’re, they’re artificial. It’s just built on a tulip bulb mania, you know, it’s built on a mob mentality of scarcity mentality that doesn’t Have any real intrinsic value? And this is why the Hartman risk evaluator i think is a very valuable lesson here, it took me 19 years to discover is that you should be investing in low land value markets because you don’t have that type of volatility. Isn’t that Isn’t that fascinating how you see the blue line dropped sharply and the red line continues to go up?
Gary Pinkerton 41:24
Right, right. It absolutely is. And it kind of drives it home. It’s such a visual chart. You know, it’s something to remember, I think, when you start looking at different areas to invest. Yeah,
Jason Hartman 41:31
that’s amazing. That’s amazing. Any others you want to share before we wrap it up, Gary?
Gary Pinkerton 41:35
Yeah, so 2424 is one that shows the way Americans retire is changing. And this one is not really probably news to most people, but it shows the difference between the percentage of Americans that are covered by defined contribution plans or you know, 401k IRAs, self funded, if you will, and then those that are covered by defined benefit, which is just a pension. system and this, this chart is really one of those things that I’m kind of dedicating my, you know, the next part of my next chapter of my life towards and with Patrick Donahoe paradigm life is trying to get people in a position where they don’t fall victim to this, because this is a tragic, you know, occurrence. And you can see that it’s been happening since we started, you know, since we made that shift in the late 70s, early 1980s. And it’s just getting worse and worse. And there’s a comment at the bottom, he says that, you know, this shifts a lot more risk and responsibility on to the employees. So back, you know, with a pension system, which is really just an annuity, that company would outsource to someone like an insurance company, the commitment to pay income to their previous employees in retirement for the rest of their life, and so that that individual had quite a bit of security there. But it became expensive to the companies and they found an opportunity they found that the Congress would allow or that the government’s would allow them to shift this over to the employee. And so I would argue that it doesn’t shift more risk. I think it’s just all the risk to the individual because, you know, recent studies, you know, in 2015, there were a couple really big studies that showed that and he talks about it in here as well. But now that actually goes over to the next chart. The median family has just $5,000 saved for retirement and those Wow, that is that is so scary. Yeah, it is just mind boggling when I hear those studies about how the average person in America has this. And I don’t know the amount but this tiny little amount of money in their in their bank account. It is just shocking. But you know what it means? It means they’re going to be renters for a long, long time. So you know, I find that to be, you know, pretty rough, pretty, pretty harsh statement about how many people are going to be completely beholden on the US security system. No less than 10% of the people right now that are over the age of 55 have more than 130,000 saved and 130,000 with today’s interest rates, if you’re planning to use you know, Spend down of your retirement money is just a couple hundred dollars, you know, a month. So it’s not a good plan. And it’s something that’s going to result in people, as we said, being really beholden on social security and also working probably longer than they originally plan.
Jason Hartman 44:14
Yeah, yeah. But you know, I mean, it’s terrible. That sounds and I agree with everything you’ve said. I don’t know that working longer is a terrible thing, either, though, you know, I mean, the concept of a 65 year old retiring, that really needs to be redone. Now, granted, you know, that’s a sign of how things aren’t going as well as they should be. Right. I agree with that part. But also, I just think in general, as I’ve said many times before, working is good for you. You know, it’s good to be a productive member of society. It’ll make you live longer, you’ll you’ll be healthier. And and you know, you should work longer I mean, you can Yeah, when when the when the arbitrary 65 number was created on average. I think they said, and Gary, you’ll know this better than I will, as your next career. I’m sure you’ve studied this a lot. But you know, people lived about four years in retirement, right? They live to 69. Now they live 20 years, 30 years. And, and that means we got a plan for that we got to invest for that, for sure. But also, you know, I think working is good for you.
Gary Pinkerton 45:21
I agree completely. I think most people should Well, all of America should reevaluate what we think of as retirement. And I think perhaps retirement is maybe a change in lifestyle, if you want to transition into, you know, a little bit more travel or, you know, I mean, to everyone, it’s different. But I think, you know, this process of today, you know, baby boomers have the ability, and many of them have done this, you know, the first 20 years of their lives has been consumed as obviously being a child and learning, going through education. You work for 30 years, and then in your mid 50s, you have a mass enough and have the ability to retire. And if you retire after 30 years of work,
Jason Hartman 45:58
that’s if you’ve done it right Right, you know, and it’s semi right. Hopefully that even sooner but yeah,
Gary Pinkerton 46:03
right. So 20 years not working 30 years working and the ability to do another 30 or 40 not working, if, you know, the advances in health care continue, that that’s just not a survivable model for our society, you know, to contribute for 30 and not contribute for 50 or 60. Plus, it’s just hard on the individual, like you said, you know, that, that the people who live really long lives in general, I think the studies will show are very active, right, you know, and both physically and mentally,
Jason Hartman 46:26
their their work, they’re always working on a project, you know, they’ve always got something going on. And I think that’s very, very good and very stimulating. So folks, look at if you’re listening to this, and you’re thinking you’re at retirement age, and you’re complaining about how bad things are, because you, you know, you have to keep your job as a greeter at Walmart. Quit complaining, No, I’m just kidding. I doubt any of our listeners are greeters at Walmart. But it’s, it’s good to work. I think that is just good for you. Maybe it’s part time hopefully it’s freelance type work where you can make your own hours and you know, you can take a month off here and there if you want, but people should be working a good year 10 years longer and by choice not by necessity just by choice, because they they want to be engaged and involved. So yeah, good stuff. Good stuff. Did you want to talk about any others before we wrap it up? There’s some amazing charts here.
Gary Pinkerton 47:18
Now, I think those are the highlights, you know, those that certainly covered, you know, the major trends, and I would say personal economics and real estate and, you know, the job market and, you know, I think they’re, as we said earlier on, there are some things that can sway studies like this, you know, he cobbled together some amazing charts from many different studies and locations and, and so it’s a challenge for him to put them all into one article. But I think if it told a great story, you know, and I think it’s a eye opening story on a lot of these charts,
Jason Hartman 47:49
it really is it really is Gary, give out your website.
Gary Pinkerton 47:51
So my the best website to find me is paradigm life dotnet backslash about and then backslash Gary Pinkerton and I just wrote an E book there. cover some of these topics and I’d love to pass that to anyone who would find abuse. Is that ebook available. There it is, sir.
Jason Hartman 48:06
Okay, fantastic. Gary Pinkerton client, venture Alliance member and former submarine captain and hack economist. How’s that? Focus on hacker economist. Yeah, absolutely. That was a very interesting discussion. Thank you for joining us today and we appreciate your business and appreciate having you on the show.
Gary Pinkerton 48:23
Thank you. It’s a pleasure.
Jason Hartman 48:26
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. write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
Jason Hartman hosts client Bruce Weyer for a client case study. Jason got a message from Bruce a few months ago after the pandemic started. Bruce gave an interesting update on the lumber market. Jason reminds us that real estate investing is an investment in packaged commodities. They go through the staggering numbers that his long-time lumber family business has never seen before. He explains the impact on the real estate market specific to new construction. He also gives us insight into his real estate journey and his experience with Jason’s network.
Announcer 0:09
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 1:00
Hey, it’s my pleasure to welcome a another one of our clients for a client case study. And that is Bruce weyer. It’s good to have him here. He’s coming to us from northern area of Florida. He’s in Jacksonville Beach right now in his office, you probably heard me talking about it. A couple of months ago, he was the one who was kind enough to send me the insider newsletter that I’m holding up right now, if you happen to be looking at a video version, the lumber Market Report, this is the random links newsletter, and this is kind of the inside of the lumber market. What does that mean for us as investors? Well, of course, you know, it’s all about packaged commodities investing, as I call it, and lumber is a huge component of housing prices and housing construction. So we’ll talk about that a little bit as well as his case study in his background. Bruce, welcome. How you doing? Hey, Jason, thanks for having me on. It’s definitely good to have you. You know, I almost was wondering, just want to tell the audience if they’re watching on video, we did not coordinate our shirt colors. No, we certainly did not worry about that. We’re both wearing red shirts by coincidence. Bruce, first of all, you’re in the lumber business now because that’s a family business. And I know you said your I think your father wants to retire. And he said, You lived in Southern California. Dana Point to be specific. And so that’s where I’m from that general area. And you were kind of in the movie business and the infomercial, business and all of that stuff. And and then you moved to Florida to get back into the family business. Tell us a little bit about your background.
Bruce Weyer 2:34
Yeah, sure. So I was out in Dana Point, California, as you just mentioned, and once I was out there, I was just kind of hanging out surfing and having a good time. And I started going to college and graduated from Cal State Fullerton and decided to go into the media industry. And I got really lucky, right. Right off the bat, actually our mutual friend Aaron Colson again, he introduced me to
Jason Hartman 2:57
it on the podcast. Yeah,
Bruce Weyer 2:58
yeah. He’s also been on the podcast. He’s a good buddy of mine from Orange County. He introduced me to a guy in the Teamsters union. And that guy was nice enough to introduce me to some people in production. And I got really lucky to work on some network television shows, like scandal, mistresses with Alyssa Milano and some feature films like fast and furious and McFarland and Horrible Bosses, too, and just a bunch of different stuff. But I got really lucky getting into that right out of the gate. So work there for about four and a half, five years in LA working in Hollywood, all the major studios. But once my wife and I decided to start having some kids and kind of settle down, that was a big rat race that I was trying to get out of, and that that’s what led me back into Orange County and kind of the infomercial, commercial production area. There’s just a lot more of that going on in Orange County. Where is the feature films and network TV shows is all happening right there in the Burbank Hollywood area.
Jason Hartman 3:53
Yeah, Los Angeles. So you did live in Los Angeles probably then move south to Orange County, Southern California. We’re talking Southern California here. Probably lived in LA before though, right?
Bruce Weyer 4:03
No, I didn’t. I was commuting the whole time since Well, I was I was doing production. So our call times were either really early in the morning or weird times in the day. So I wasn’t necessarily like finding that grinding traffic all the time, even though it was a problem. But I will say that was the only good part about commuting up there is I would go up there at that really some off times to work on shows whether they were night shoots in downtown or whether they were just studio shoots on the stage or whatever we were doing.
Jason Hartman 4:30
What did you do in the movie industry?
Bruce Weyer 4:32
I started off as a production assistant, which was just like the very entry level guy and then I started working myself up to assistant director and production coordinator and I kind of exited as a associate producer slash producer.
Jason Hartman 4:46
Good good stuff. Okay, so then you got into the infomercial side of the business. And you know, anybody in real estate has certainly seen enough infomercials. In fact, when I was 16 years old, I’ve told this story before but I I saw an infomercial. And it got me intrigued about real estate investing. So that that’s kind of funny now, if the company you worked at I don’t know if they did real estate infomercials, they did a lot of product. infomercials. I know. But I’m jealous about that business a little bit. And, you know, interestingly, I was at a conference last week and one of the speakers there was Ron Legrand infomercial Guru is you know, and that is a big risk, big money business potentially. Because a lot of shysters and scam artists, no question like in anything to give us a little insight into the infomercial business, if you would,
Bruce Weyer 5:35
yeah, it was, uh, you know, I worked with a lot of good people, they were very professional, I worked for a company called script to screen and we handled some pretty big accounts, you know, we were doing Gibson, headphones, they came out with their first bluetooth headphones. And those were, or I should say, wireless headphones. And that was a really big deal. And everybody knows Gibson because of the guitars. And we worked with shark Ninja, and they make all of those great vacuums and instapot cooking thing. So it was a lot of houseware items. And some of it was definitely pretty hokey stuff that we were doing, because they were infomercials, but at the end, they were we were starting to do like, you know, little 15 second, YouTube pre roll in advertisement clips. So we would do everything from a little 15 second ad to full 20 3028 minutes and 32nd full on half hour infomercial. And it was kind of nice, because we would have, you know, like nine months of writing the script and designing the sets and lining up our actors and doing all that and then we would go shoot it for a week. So that I like that a lot better because it got me off of just being on set all the time, when I was working in LA in Hollywood, it was just like, you know, 12 to 15 hours a day walking around, actually shooting doing production. Whereas on the infomercial side, you know, I was involved in the pre production, the actual production and then post production for a while and then we would even buy the media time to air the infomercial on wherever we were airing it. And for however long we were going to air it for and and develop the websites as well, because there’s a whole back end of websites and distribution that has to happen with all that. So it was very interesting to see kind of behind the curtain on that whole deal. Sure.
Jason Hartman 7:14
Yeah, it is. So you didn’t do any of the like guru type infomercials like Carlton sheets or anything like that. Did you
Bruce Weyer 7:20
know really, we worked a lot with shark ninja we did the I don’t know if you remember the ninja coffee bar was Sofia Vergara. She that was like a really big talent that they landed a few years back. We did all the creative and shot the production for that. So that was pretty cool.
Jason Hartman 7:35
Interesting. Good stuff. Well, hey, let’s move on to the lumber business. Because this obviously affects real estate investors. And I want to talk about your investing experience as well. How long ago did you find my podcast? Probably I was just about to move back to Florida. So this would have been 2016 summer 2016 maybe fall of 2016. Okay, good stuff. Good stuff. You probably heard me talk about you know, packaged commodities investing and stuff like that. And when when you sent over this, this fantastic report, just with some inside info on the lumber industry. I mean, it’s unbelievable what’s happening right now give us an update on the market and what’s going on.
Bruce Weyer 8:16
It’s unbelievable what’s been happening. It was everything It was so really cool to see the supply demand shock that you were already talking about from March but it hadn’t hit my industry yet. So we were just kind of chugging along and we’re going through this pandemic and everything was going really well and obviously Florida, the demand is huge. Everything that we do is his Southern yellow pine in the Florida market and that’s all of this specific pine that goes into the framing of the houses Southern
Jason Hartman 8:44
yellow pine it’s called
Bruce Weyer 8:47
if you’re driving around Florida, Georgia and you see pine trees in the lumber industry that is called Southern yellow pine. And that’s what goes into the trusses the floor, Joyce’s the panels that the studs and everything they do use some spruce pine for but just for logistical reasons and freight they use the southern yellow pine because that’s what’s here. And basically, you know, some of the mills they started having some employees come down with COVID and they had new policies and they just couldn’t be running like they were normally running. The efficiency wasn’t there so the supply that they were producing was lowered and the demand was through the roof with interest rates being very low and everybody leaving the major metro areas come into Florida. The prices just started to creep up first and then they just started to really skyrocket to the point where you know one of the largest lumber providers is called West Frazier and they took about five Mills completely off the market. I mean they wouldn’t even sell to us we’ve been buying lumber from them and paying them within 10 days taken a discount on every truck that we bought from them for 42 years and they just went completely off the market. Now they went off the market because they didn’t have supplier or their their Mills so they’re producing supply. They are producing supply they’re receiving the logs. And then they’re they’re milling those into two befores, two sixes, two bites and everything. And the reason
Jason Hartman 10:07
you wouldn’t think that would be like an effective business, though, I mean, they could continue to operate during the pandemic, right?
Bruce Weyer 10:12
I think they had people going down. And the other thing was is they had oversold their contracts. So instead of renegotiating some of their contracts, when people that are buying contract lumber and saying, Hey, we’re in a pandemic, we need to serve the open market, as well as service the contracts, they told anybody that wasn’t a contract, that, hey, we just can’t sell you right now. And then that really, the thing about that was, is that put the pressure on all the other smaller Mills that we also deal with that don’t have any contracts with anybody. So then those guys just got completely bombarded. And it really rocked the lumber market.
Jason Hartman 10:48
So I predicted and I think we’ve seen this just a little bit, at least I started watching the lumber futures market more closely after reading your newsletter. But that has abated a little bit, right? It’s a little better now. Right? Because that it’s a little getting a little more equal. I mean, it’s not equal, but it’s better than it was right?
Bruce Weyer 11:08
It’s better than it was they’re now starting to quote and starting to ship a little bit more, but still, the prices are, you know, so take a to before number two common 16 foot truck, right? people bought those all the time. Normally back pre pandemic, those were probably somewhere in the mid four hundreds, mid 500 per thousand board feet, they’re still up over $1,000 per thousand board feet right now. So it’s still double doubles. Yes, Double, double.
Jason Hartman 11:34
Okay, Wow, that’s amazing. So even now, as things are starting to get a little more semi normal, or they’re moving in the normal direction, there’s still it’s still double the price, still twice as much. Wow, no wonder the cost of construction has gone up. And the builders have been raising their prices like crazy. Now, you know, I talked a lot many years ago during the Great Recession, you know, back in 2008. So 12 years ago now, about what I call regression to replacement cost. where, you know, what I used to say is, when a piece of wood cost, what a piece of wood is worth again, meaning that, you know, houses were selling below the cost of construction for a short time. And that had to fix itself in regression to replacement cost is not the same thing as appreciation, because appreciation mostly takes place in the land value, not in the construction ingredients, or the packaged commodities. Now we look at the price of this. And it’s just absolutely crazy. I would assume that’s true with many other building materials as well, although I haven’t had time to do much research on it. But obviously, lumber is a giant component. So what do you see happening in the future, Bruce,
Bruce Weyer 12:50
I think prices are going to continue to hold at this level, especially in the two before market. So the two by sixes have started to decline. They’re nowhere near where their price equilibrium was months ago. But they have started to decline some but the two before market is still holding very steady. I mean, you can’t you call to get a quote on a truck of random length truck that’s like eight foot through 16 foot. And a lot of Mills still won’t even quote it.
Jason Hartman 13:15
Why don’t even have they just they just don’t have anything to sell. So why give you a quote right now? Wow. And why would there be a difference in two by sixes and two by fours? Any particular reason for that?
Bruce Weyer 13:25
They use in two befores? A lot more than the two by six.
Jason Hartman 13:28
Yeah. Okay. But I would suggest markets already set up. So it supplies more two by fours too, right? Because that’s kind of the basic ingredient.
Bruce Weyer 13:36
They do. But certain Mills cut for certain dimensions more some some Mills kind of cut towards the water links more. And that’s kind of their wheelhouse and some length some mills are cutting for strictly two befores. And we kind of that’s our job is to weave all that together. Yeah,
Jason Hartman 13:50
yeah. Wow. Incredible. Incredible. So is there any relief in sight for this? Or will it just continue to increase? And by the way, let me just hold up this chart. I’m just literally holding it in front of the camera. Pardon the low tech here, folks. But you know, you get it. There is the chart from the newsletter. That’s absolutely mind boggling. And you know, here, you know, I actually read this on the podcast before is the market overview, the narrative portion, but will anything give us relief from this? Or are we just looking at higher lumber prices for a long time? Well,
Bruce Weyer 14:27
it’s hard to tell. So I was also the guy that sent you the email about David Weekley with the homes going completely off the market, right you know, if they just completely stopped selling the home, so everybody’s buying, you know, 30 and 90 days out. Well, if we get 90 days from now and you have people and builders like David Weekley or Elon are saying, Hey, we’re not going to take a new order because they just can’t price in the increases fast enough to pass it along to their customer. Well then the housing starts and the permits issued will all fall and then the demand will fall just because they’re not entering a new order. So that could offset it. But I doubt that’s gonna happen because, you know, we’re in Florida and interest rates are low and people are getting the hell out all those towns and coming down here,
Jason Hartman 15:11
right but you don’t just apply to Florida Do you?
Bruce Weyer 15:13
Yes, we’re strictly Florida Yep. For your for your stuff.
Jason Hartman 15:17
So a homebuilder orders the lumber through you, or are you considered a broker?
Bruce Weyer 15:23
We’re wholesalers and we actually don’t sell the builders, we sell to trust companies we sell to distributors, so we’re selling to people that are treating lumber, like Great Southern wood or Boise or Robbins manufacturing, and then those guys are then selling to the builders. So we’re, we’re literally buying from the mills that are creating the product and Okay, you know, because the home builders, they want it in such a specific way that we’re not doing that we’re literally buying truckload quantities, and we’re shipping those to a distribution company or a trust company where then the builder is putting in an order with the Trust Company for a specific neighborhood specific home model that they’ve created. Okay, makes sense. Makes sense, with your investing since we’ve been talking about Florida, because that’s the lumber subject. But with your investing, you just purchased two properties through a network in Florida and you also purchased to out of state right. Tell us about your portfolio. Yep. So I originally started in Dayton, Ohio. And the only reason I’ve been listening to you for a while and I called up Sarah and I said, Hey, I know there’s nothing on your website and Dayton. But this is where my wife is from the Cincinnati Dayton area in between there. And I’m a big fan of Tom wheelwright as well. And he says, Hey, you know, buy somewhere where you can go and use it as a write off and all this other stuff. And I’m kind of keep my it’s a arm’s length away from me. So I went and bought a duplex in Dayton, Ohio. And that was the first thing that I purchased there, and then ended up buying a four Plex in Dayton. And then now I have two duplexes under contract and Palm Coast.
Jason Hartman 16:54
Good stuff in four we started today, you had talked about a bit of a strategy there. So why don’t you share that with the listeners?
Bruce Weyer 17:02
Okay, so part of my strategy is, you know, Jason, what you’ve taught me a lot is that part of what I’m purchasing, or one of the main things I’m trying to obtain, is the largest loan size, I can at the lowest interest rate for the longest amount of time I possibly can. So, you know, I started off with the duplex because it was really a low number, and I was just trying to get my feet wet. And then I moved up to the four Plex. And then now I’m going with the new construction duplexes, because I’m trying to get as many doors as I can, under the 10, Fannie and Freddie loans that I have with the highest loan amount. So if I try to go out and buy that single family home for $100,000, while while I think that’s a good deal, really I want those 10, Fannie and Freddie loans to be locked in at the biggest numbers I can,
Jason Hartman 17:52
I can handle? Absolutely, absolutely. So you’re doing you’re trying to do more of the more expensive properties earlier in the game. Because you want those really good loans. And we call this mortgage sequencing, by the way, we talked about this strategy years ago, but not lately on the show. And, and you want to get as many of those in the highest possible loan amounts for that first 10. Now, if your wife is working, you know, she can qualify as well. So you know, I don’t know if she is, but it’s 10 loans each spouse, so you’re not limited to 10, you can do 20. But yes, you know, both parties do have to qualify. So if if one isn’t working, then it’s not gonna work. But good. So um, so why Palm Coast?
Bruce Weyer 18:34
Again, that’s kind of close to my house at Palm Coast is only 40 minutes away from me. I feel like one of the hardest things for me in choosing all these is I’m looking at your website, I’m getting kind of Sarah’s hot sheet and I’m looking at everything. And judging my opportunity cost I feel like is, is really difficult because I’m like, Hey, I could do this deal here in Alabama, I could do this here over here, and I’m not really sure what to do. So really, I called them up and I said, hey, what what market Do you guys really like and you think has a good chance for appreciation? And, and then after they found out where I live, they said, Hey, man, just makes sense for you invest right down the street from you, you know,
Jason Hartman 19:08
but don’t be limited by that. Okay? I mean, you’ve got your wife’s hometown, or something, investments, and then not too far from you, you know, you don’t want to be excluded from a good deal, because the deals more important than the location. You know, that’s just something you want to keep in mind. Are you gonna do a third or fourth or fifth market? You know, we say invest in at least three, but not more than five. Are you going to put another one on there?
Bruce Weyer 19:33
Yes, definitely. Cash is becoming a little bit of an issue at this point, because I just did the two and those are routed about $300,000 apiece. So I got to come up with the downpayment for both of those. Yeah, I definitely plan on it. You know, I’m going to try to close on both of these Palm Coast in this coming spring. And then No, that was another thing that I was going to mention is the cares act. We talked a little bit about that beforehand. So now that I’ve listened to you for a few years I’m all chips in, you know, I’m not doing the whole, hey, let me just give money out of my income that I’m creating now into an IRA or 401k and put on a blindfold and hope I wake up and 35 years and it’s all good, right? I’m just not doing that. So we decided that philosophy good. Yes, I know. So it’s a little bit. It’s not really that scary. But I feel like when I talk to my peers about it, they’re going, what are you doing? You’re you’re listening to some guy on a podcast, and now you’re liquidating your IRA. And I’m saying, Yeah, that’s actually exactly what I’m doing. His name’s Jason Hartman. Here’s the link to one of these things. And that’s Amen. Yeah. Good. Good deal.
Jason Hartman 20:39
So to be specific, what you’re talking about there is are you borrowing money from your IRA, without penalty? Or what exactly is your your Kerouac strategy there or use your liquidating? Because, you know, Tom, Tom wheelwright and Garrett Sutton, both both of those authors are really just not fans of these plans at all. They’re not his I don’t hate them as much as they do. But I don’t think they’re great, either. Okay, so I’m like a little more in the middle than both of them are. But what are your thoughts?
Bruce Weyer 21:14
Yeah, I basically agree with Tom, we’ll right. And I feel like we’ve been fortunate enough. My wife is a registered nurse. And she has been for the last 15 plus years. And you know, she’s getting matched money. She’s working for these great companies. And it’s been building and all that it’s been great. But now that the cares Act came along, they said, Hey, listen, you can take out up to $100,000, with no 10% penalty, and you can also pay the tax on the income from whatever amount you take out over the course of three years instead of getting hit in the first year. Which that’s actually how I say that quadplex, you know, and I said, Hey, you know, if we’re going to be in a bad situation, with this pandemic, and everything going on, at least that’s a silver lining that’s coming out of it, and I’m just going for it.
Jason Hartman 21:57
That’s great. That’s a great deal, you’re gonna do much better in the properties, I am sure that is I’m sure of anything. And one
Bruce Weyer 22:03
other thing that I wanted to talk to you about, or at least mentioned to us, you know, you always say that these deals always look better in the rearview mirror. Right. So I’m trying to take a macro view on this. And even if I do take a little bit of a hit on getting my money out of these IRAs, on the sums that I’m taking out, Jason, once I’ve had that principle paid down, the appreciation goes up, and I have the cash flow coming in, you know, seven, 810 12 years from now. And I look back, I’m gonna say, Man, I wish I bought more of those things. Right. So I completely agree with you on that philosophy that I’ve heard you stayed on the podcast.
Jason Hartman 22:36
Good. Good. I’m glad you like it. Any other questions or thoughts or things you want to share about your own investing plans or experiences?
Bruce Weyer 22:45
Yes. So you had mentioned sometimes taking, acquiring these properties for as little down as possible. So I’ve actually been borrowing on the duplex and on the quad Plex, I own I borrowed private money. And I put down about 10 to 15%. And I held those for a few years. And then when the interest rates dropped as low as they did, I’ve been refinance them. So I was borrowing the money on the quad Plex it was at seven and on the duplex, it was at six and a half, and I just refinance both of those down to 4%. Hmm. And my question is, and I’m going to do the same thing on the two duplexes on the Palm Coast, I have a deal where I can get into both of those at 15%. Down. Mm hmm. So my thought is, is just, you know, hey, make the tenant do the work. If I can acquire an asset for 15% down? Yes, I get a little bit less cash flow each month. What are your thoughts on that?
Jason Hartman 23:39
Oh, I think that’s, that’s great, you know, the only thing you need to consider is the cost of any mortgage insurance that might be required, and the cost of any difference in interest rate, and that, or difference in points and points or just prepaid interest. So it’s the same idea, but that might influence you. To some extent, of course, always, we like as much leverage as possible, as little down as possible. But, you know, if you’re paying a giant premium for that privilege, then you may, you may want to think twice about it and put a little more down, it’s only 5%. So, you know, occasionally I’ve seen to where, you know, even I will say put that extra 5% down, you just have to analyze the loan and the opportunity cost of that money. That’s, that’s really,
Bruce Weyer 24:31
yeah, yeah. Well, that’s kind of the plan that I’m going with is, you know, put as little down as I can while I have the opportunity to do so. And if I need to, like as you say, you know, renegotiate the deal as I go along. Yeah, that’s it’s amazing. And oh, another thing I was talking to you about was my primary home you know, I bought in St. Johns County in 2019 and July of 2019 for 460,000. dollars, and then at 3.75. So but 20% down to 460 at 3.75 locked in for 30 years, I just refi. I did a cash out refi on that three weeks ago, where they newly appraised my property at $530,000. And I got a 2.875 rate for 30.
Jason Hartman 25:23
Awesome. That is phenomenal here. We need sound effects for that. That’s how good it is. Yeah, well, Isn’t that incredible? So you got a 30 year asset there on all of those properties, you know, acquire as many of those assets as you can. That’s the thing to do.
Bruce Weyer 25:42
And I got to thank you for that. Because honestly, I feel like I’m just like doing Black Ops stuff behind the scenes. I’m listening to a podcast, I’m talking to Sarah on the west coast. And I’m like pulling the strings and doing all this stuff. And the people that I in my peer group or my neighbors and other people I’m talking about, there’s not, they’re just really not doing what I’m doing.
Jason Hartman 26:00
Well, you know what, you don’t want everybody doing what you’re doing, because they’ll they’ll make all the great properties. So there’s enough real estate investors out there who get it, don’t worry about that. Sure, there are, but yeah, try to try to convince them and help them. But you know, some people just get at someone. And usually they won’t, in a conversation or soundbite they’ve got to be interested themselves. And they’ve got to not trust the current system we’re all hypnotized with, which is that you know, that 401k IRA Bs, the Wall Street Bs, you know, you got to make your own way. And that’s the that’s the only way to do it. And income properties is the best way to do that. As, as we both know. And probably everybody listening knows. So Bruce, this is, this is awesome. Thank you so much for sharing all of this. Anything else you want to share? It could be about anything, the lumber market, the construction market, your own story? Any questions as we wrap it up?
Bruce Weyer 26:58
No, not really. I think I’m just going all chips in on the lumber industry. You know, I got to thank my friend Aaron copal said, I’ll tell you a quick story. We were standing on the beach with our surfboards. We’re about to go surfing at the beach. And Aaron goes, Hey, I’m gonna fly out to Little Rock, Arkansas next week, and look at buying an investment property. And I had never really heard the idea of the philosophy at all. And I was like what and we’re literally putting wax on the surfboard feet in the sand and not to get a surfing and I just thought about he goes, Yeah, man, I’m just gonna buy a house and have a tenant pay off my debt. And I remember when he said that, I was like, that’s a really good idea. is a good idea. I need to check that out. And, and then it was just kind of all downhill from there. And here we are.
Jason Hartman 27:40
Oh, yeah, good stuff. Good stuff. That’s, that’s great to hear. And folks, just to elaborate on Bruce’s point there. Remember, I’ve said it before. But think about how significant this is, you know, a typical renter will spend 33 40% of their monthly income on rent. So literally, about 10 to 14 days per month. They’re literally working for you to pay off your mortgage. Isn’t that like what other? What other business Bruce? Is there? were some customer spends that high a percentage of their income with this business. There is no other business. It’s not Amazon. It’s not Apple Computer. It’s not not going to Vegas and spending money in casinos. I hope not, at least, you know, nowhere else do they spend as much money as they do is with their landlord. Their landlord is their highest. You know, it’s their it’s the big store. It’s where they spend most of their money. So that’s that’s fantastic.
Bruce Weyer 28:46
And I’ve been that guy I was doing that out in Dana Point California, we could either rent where we wanted to live, which was a block off PCH, and Dana Point and be able to go surfing and have a good time or own where we didn’t want to live which was out there in Riverside, Yorba Linda. And you know where I’m talking about? Yeah,
Jason Hartman 29:02
I definitely know where you’re talking about. And you know what, though renting a place in Dana Point probably wasn’t a bad deal, because the rent to value ratio was in your favor. As long as you own other rental properties to compensate for that rent you pay. So that’s, that’s the point. Awesome. Thank you so much for sharing the story. We really appreciate it. And thank you for your business too. And happy investing. Thanks again.
Bruce Weyer 29:25
You got to Jason, thanks for having me on.
Jason Hartman 29:32
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Jason Hartman starts the show with client Naresh to look at the beginning of his journey in income property investing. Naresh explains why he is also investing in the stock market and cryptocurrencies. He also gives listeners insight into his next rental property purchase.
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Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the company LEED solution for real estate investors.
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One of the unique strategies I implemented a few years ago fit with my 10 commandments of successful investing, especially number eight, thou shalt borrow to accelerate wealth and reduce risk. And number 10 thou shalt only invest in tax favored assets. So my money grows tax free, and I can leverage down payments. My friend Pat Donahoe his team at paradigm life got me started, and I have a few accounts with him now. Check out this perpetual wealth strategy at be your bank.com
Welcome to the creating wealth show, Episode Number 925, nine to five. This is your host, Jason Hartman, thank you so much for joining me today for another episode. We have a few things on tap for you today. We are going to talk a little bit about the five year plan because you don’t have much time to enter that contest. But we have a client case study here with us who will touch on it His five year plan he’s been on the show before, we will talk a little bit about the GOP tax plan. We will talk about interest rates, where are interest rates going very impactful for real estate and the three dimensions of real estate, as I like to call it. And we’ll probably talk a little bit about the dollar and what it means to people around the world. So welcome back a returning guests no rush, how you doing?
Naresh 2:27
Doing awesome. Jason, pleasure to be back on and this time as a client? Yes, it was a client last time I was on I think you were
Jason Hartman 2:35
client last time, but I don’t know I could be wrong about that. You’ve got now two investment properties in your portfolio. And you are engaged to be married. So congratulations, nourish. How are you about 27 now
Naresh 2:48
now I’m turning 29 at meet the Masters coming up in January. Yeah,
Jason Hartman 2:53
I know. Isn’t it cool that you are spending your birthday with us and with Ron Paul actually. So that That’ll be pretty cool. That’ll be a good birthday present for you. We appreciate you coming out on your your big day. So good stuff. Well talk a little bit about your plan now you know you’re renting an apartment I last time I checked at least I don’t know if you change your housing situation. you’re renting and you’re buying investment properties. Now most people your age especially engaged to be married, would be thinking, wow, I gotta buy a house. I gotta buy a house without the proverbial white picket fence. Or at least a little condo or something. You know so the wifey and I can live in that. What are your thoughts?
Naresh 3:34
Well, Jason, I’ve been listening to you for many many years your podcasts I’ve read your materials. I live in Florida and Florida I know is a pretty good market, relatively speaking housing market and you do cover Jacksonville Orlando, New Port Richey or Port Richey. But where I live in the heart of Tampa Bay, the properties just don’t.
Jason Hartman 3:58
Yes,
Naresh 3:59
exactly. Yeah. Exactly, you run the numbers, you crunch the numbers. I mean, it’s it’s actually kind of crazy. A friend of mine bought a course it’s a waterfront penthouse. So it’s going to be overpriced, but cost about $600,000. And the rent that he would get out of that would be less than $2,000 a month.
Jason Hartman 4:17
But you he could get 2200 for that. I’m just guessing. I’m just guessing but those
Naresh 4:23
21
Jason Hartman 4:23
Yeah, it still does work. Yeah, yeah, you’re upset that
Naresh 4:26
let’s be conservative and say are liberal and say 2200. It still doesn’t work. Not that I want to move to a waterfront penthouse. But the properties the places that you want to live in and start a family. Those are right now overvalued. Now, that was not the case. Five, six years ago. Now, I didn’t live here five, six years ago, and I didn’t have any money. Five, six years ago, I was just out of college. Duke University. Right.
Jason Hartman 4:51
You went to Duke? Yeah, I was. I was finishing up my master’s degree, what, six years ago? Yeah, six years ago, five, five years, five or six years. So nourish To give a little background a little context for you, you got your masters at Duke, where’d you do your undergrad?
Naresh 5:04
undergrad was at Syracuse University. So you know
Jason Hartman 5:06
Syracuse and upstate New York and then Duke for masters good stuff. Good stuff. So what are you doing being our client and working for us? I mean, by the way folks nourish has been on the show before and just if you didn’t listen to those old episodes, no fresh books guest for the podcast and does some other odd things for us. In fact, I was teasing you the other day in Russia talking to someone else about you and and saying no, Russia, you know, because Andrew zetland, who you booked as one of our speakers that meet the Masters, he dubbed you as the fixer. I love fat. I just love that. When I when I had him on the show. He’s of course the Moneyball economist. He’ll be speaking at meet the masters. I said yeah, no rush is the fixer. And so I was telling someone else about you. And I said, Yeah, you know, you need to like smuggle arms and the North Korea, no rush. You need to
Naresh 5:57
you need to
Jason Hartman 5:59
get in Athlon on your podcast nourish you need to book them for meet the Masters nourish. You just got to do all these funny odd things, but you worked for a Gora financial and Porter Stansberry before a lot of our listeners now know him and know them. We’ve had a lot of those guests on the show over the years but really got an interesting background you’re very well networked. You’ve authored several books now maybe we’ll touch on one of them because it kind of is interesting for this conversation. But you don’t want another day job do you? I asked you that when I saw you recently I said hey nourished you ever want to get a corporate job again? And you said no way?
Naresh 6:34
Well, Jameson, I don’t know if you’re a member, but the first time we spoke, it was because I believe it was Brittany who your listeners know reached out to Stansbury which is where I was working. I helped launch the Stansberry Radio Network, which is now back in action and Porter Stansberry has his own podcast. I think I was a first person you had been trying for years to get in touch with Stansbury and nobody responded. And I was the first person who actually responded With my email address and phone number, and you gave me a call, and when I was talking to you, this was five or six years ago, when I was talking to you on the phone, you told me about your company, and you said, You used to have an office, you had to use to be a bit corporate, you had, you know, 30 some odd employees, but you cut all that, and now everything’s virtual, and you’re making a lot more money and you own all these real estate properties. And you’re traveled to 100 countries, or however many 81 you have
Jason Hartman 7:28
no rush you you’re just really loose with the statistics. So I had like, 60 Well, in my old company that I sold to cold, why’d like 64 people working for me 64 I think at the time of the sale, and that was a huge hassle babysitting job, I kind of hated it. But I love some things about it, too. Then in you know, the other iteration of this business there nationwide real estate investment business. You know, I had many, many people working for me in offices and so forth. And, you know, it’s just I felt like I was being like a facilities manager. too, I just, it was like, every day, there’s some new issue with a landlord or the office space or, you know, the tenant above us has a pipe that burst and it’s flooding our office. It’s like, these are all just distractions. You know, I just, I just want to do my work. I’m so passionate about it. I love it. And so yeah, we went virtual in 2012. And everybody likes a better and I remember the app Foursquare, this is just a commentary folks on how times are times they are changing, who said that Bob Dylan, I think, and we’ll get back to nourishes client case study here in just a second won’t be a long tangent. But you know, this is what I talked about. And this affects income property investing and it affects the way your tenants think, and the way prospective homebuyers think because I have talked about this before and it’s purely an anecdotal observation, and I’ve dubbed it the portable society. Okay. As we’re all living in the sharing economy, technology has enabled everybody to geo arbitrage as Tim Ferriss called it, I had dinner with Tim Ferriss about two months ago in Austin. You know, people can live anywhere they want now that it’s not about the physical space anymore. It’s about the intellectual property that’s going on between your ears, okay, that’s what it’s about. And it’s about the power of the network that you have. And those kind of resources. That’s what we offer to our clients. You know, having a big office is sort of irrelevant. Like, who cares? No, nobody really cares. And so this affects you as a real estate investor. Well, why Now this may sound minor, okay. But everything I said plus this one. So I have noticed that my own personal household, all of the stuff I have, you know, there’s this whole movement about called the tiny house movement and this movement toward minimalism and so forth. And I’ve noticed that all of my stuff is just getting smaller and smaller and more powerful. You know, in the old days, I mean, I’m, well, I used to be at least a bit of an audio file, right love music. Okay. And by the way, folks, I have excellent taste in music. Just so you know, you’ll hear that I meet the masters. You know, all of my like, electronics are so small. All of my computers are so small, they’re so portable. Now, you know, this stuff used to be big. I used to have a big rack of Denon components and big speakers. And now I can just pick up and move so easily, you know, and I can live anywhere, the stuff that I really need, even though I have way more than I need is really not that significant. You know, like you could fit it all in a pretty small space and it’s easy to move around. So this is the portable society concept. And it intertwines with the sharing economy concept with the Airbnb s and the VR beos and the Uber and Lyft and all of these sharing economy concepts, like if you live in many cities, He’s now you used to always own a bike. Now you don’t even need to own a bike. There are all these sharing economy bikes dams everywhere, where you can rent bikes, you don’t need to own a car. There’s all these really unique modern sharing economy or not even sharing economy, all of them. But just you know, like rental car options now where you can walk up to cars you can find on your phone, in virtually every neighborhood. This is very big in Austin. I can’t remember the name of it, but they got those little smart cars, you know what I’m talking about. You can just walk up to a car you don’t even own and, and your phone will open the door and start the car. And you can just rent it by the hour. And you know, do your errands and you’re done. Just park it anywhere. And someone else will just pick it up anywhere wherever you leave it. It’s an amazing time to be alive.
Naresh 11:46
Well. So five, six years ago when we spoke I didn’t know about any of this and Uber wasn’t around back then. For example, Airbnb wasn’t around, but you actually opened my eyes because you told me how you got rid of The office and your virtual. And you also Matt, I don’t want to be liberal with the statistics again, but you said something like, like you were the CEO of eight different businesses. And I was just like, what I was trained my entire life to, you know, go to school work for a company get a job. Yeah. And so it just kind of blew me away like, Whoa, you can live the dream in a penthouse, who I think you were in Arizona at the time, living in a penthouse, and it just opened my eyes. And five, six years later, I don’t want to say that I am up to your level by any means. But I bought my first income property a few months ago and looking to buy many, many more over the next couple of years. Yeah.
Jason Hartman 12:43
And you’ve got your other you’ve got your other one under contract now. That’s awesome. Yeah. And so let’s talk a little bit about your five year plan. But folks, the message here is that some of us really get like this. We just have old ideas. And the world is like changing all around us. And some of us don’t even realize it. You know, I’ll give you an example. I mean, I have many friends and I noticed this is right and they’re not much older than me. Okay, these but these are the younger baby boomers. Okay. Thankfully I’m a Gen X or barely okay, but I I’m a Gen Xer, okay. And in a rush, you’re a millennial. So these are the different demographic cohorts, but they just, they have very old fashioned thinking, like, it’s all about the big space in the status like nobody much cares anymore about status. You know, there are all these people that I know that are still talking about this, like these old paradigms. They’re just don’t apply the world just does not care. One of them and nourish Hey, listen, you spent a lot of time and money on this is the college degree paradigm. Okay? You know, you went to a prestigious school, you know, hey, You did it. It’s done. But you probably wouldn’t do it again today, I assume, right?
Naresh 14:04
Well, I’ll say when I have kids, it’s going to be a completely different scenario. And you’re absolutely right. I actually think that it depends on the personality. Jason, I think for people like you and me, college can be a complete waste of time. I mean, it’s great for partying, it’s great for, you know, other things. But when it comes to business, making money, the future doesn’t really add a whole lot of value, and 30 years, 20 years, 30 years from now, when you know, hopefully I have kids and they’re getting ready to go to school, it’s going to be a very, very different,
Jason Hartman 14:36
it’s a very different world, the world is changing faster than it’s ever changed. Geography is less meaningful than it’s ever been in human history. And what this means for investors, one of the many things it means is it means that rentals are becoming more and more and more attractive. And I want to talk about this in a moment after you finish Your comment, because I’m really good at interrupting you. Apologize. But one of the things this this also integrates with is the GOP tax plan. And I want to play a little video about that just a sort of a funny video that I think the listeners will enjoy. But yeah, just finish up on your thoughts. And then let’s jump into the GOP tax plan. And let’s talk about interest rates a little bit too.
Naresh 15:24
Okay. Well, I want to go back to the real estate thought really quickly. And then we’ll get into the GOP topic, but I’ve been investing for nearly 10 years now. I started investing when I was in college and it started with the stock market because that’s just kind of the norm here in this country. It’s oh you have money that you want to play around with invested in stocks. So I got started around the financial crisis time. And then I got introduced to new out newer asset or other asset classes like gold and silver precious metals, and then through you I got interested in real estate. And I can say as of right now I’ve only been a client for maybe six months, but I’ve been able to sleep much better at night with my real estate investment than I have been with the stock market with cryptocurrencies with, even with just putting money I’ve tried just putting money in a CD or a savings account. And I’ve just seen better returns with real estate. And I haven’t really lost any sleep maybe an hour or two during the buying process. But outside of that, it’s, you know, knock on wood, things have gone really, really well. And I think the problem in this country is in the education system, the financial, you know, the finance professors in college, for example, they don’t talk about real estate, I had no clue and go, you know, I’m a pretty qualified individual. I had never learned about real estate investing until I met you and started listening to your show. And it wasn’t until about three years after I met you and started listening to your show that the light bulb went off and I said, You know what, let’s stop paying so much. attention to the stock market. And let’s start looking at real estate. It’s really a really awesome way to get cash flow and to preserve wealth. So Wall Street now you know,
Jason Hartman 17:11
good good i got i had you with ROI. Like, yeah, give the Jerry Maguire movie you had me at hello? Had Yeah.
Naresh 17:21
And you know the money let’s say, you know $1,000 home, I could put that money in a CD and I’m getting 100 bucks a month
Jason Hartman 17:28
$100,000 home you meant to say,
Naresh 17:30
yeah, I’m sorry $100,000 home. And if you put that money in a CD, save 2% CD, that’s what 200 bucks a month, you can put that in the stock market and you have no idea what you’re going to be getting moving forward because stock market could crash or if you put it in a individual stock, you have no idea where the stocks gonna go. crypto currencies, I mean, I’d probably be
Naresh 17:54
looking at all gyration you’d
Jason Hartman 17:55
be you’d be up 1,000,000% and then down, you know 700,000 percent in like a day. Exactly.
Naresh 18:03
Like, it’s too much, you know, and and we’re not doing those, Jason to at the end of the day, I think all of us are getting into investing because we just want to be happy and live, live free lives and you’re not free putting $100,000 in cryptocurrencies and you’re seeing 40% swings every two or three hours. Yeah, you’re
Jason Hartman 18:23
gonna be you’re gonna be stressed. You know, I think people that speculate don’t call it investing because it’s not investing that speculate on cryptocurrencies or even you know, cyclical markets or anything, okay. There’s sort of a little it’s a risk of offending people. Okay, this is not like a slam, but look, we all have we all do this, okay. Every human being on Earth would love to get something for nothing. Okay, so, I’m not saying that I’m any different than anybody listening, okay, I’m, I’m just like you, you know, we’re all human. We all have the same Thinking about things in the same psychological makeup. Basically, it’s all the same. But you know, it’s kind of dishonest, right? To do something that’s just totally speculative. It’s sort of like waiting for your ship to come in rather than swimming out to, right. There’s not a legitimate capital creation that you know, has a multiplier effect of creating wealth in the world. It’s just gambling, okay? It’s just total gambling. That’s all it is. The other part of it is, is that you’re going to have, at some point, PTSD, post traumatic stress disorder, okay? Because one day and I don’t know when that day is gonna be, you’re gonna lose a ton of money. Okay, it’s coming, it will happen. It already happened with Bitcoin. Okay, people lost their shirt a couple of years ago. And now the bubble is much, much bigger. And the thing that interestingly, nobody He is talking about is how this whole thing becomes a super cumbersome disaster as it grows, because the electricity and the computational power to process a coin transaction or to mine a coin is unfathomable. It’s fake work. It’s environmental destruction. And look at it if someone was actually using this in commerce, I would believe in it much more. Okay. Yeah, I know overstock accepts it big deal. Naresh, you book, Patrick Byrne on the show. He’s great. Love him. And I’d love to be wrong about all this stuff. I’d love to be wrong. I’ve said that a million times. But the whole thing starts caving in on itself at some point because the weight of just processing a trade of me transferring a coin to you or vice versa. takes like a week of energy. That it would take to run a house for a week. That is totally unsustainable. Okay, it’s nuts, it’s nuts. And then to mine a coin, it takes even more. So this whole thing is just it’s craziness. It’s absolutely, folks we are living through tulip bulb mania. and to a lesser degree, we’re living through that in the stock market. to a lesser degree, we’re living through that in the cyclical real estate markets that you know, the high flying markets on the west coast in South Florida in the expensive Northeastern markets, expensive trophy markets around the world we’re living through that in the linear markets not so much those are the markets we like obviously so you bought your first two investment properties in Memphis nourish, and that’s a very linear boring market. So not part of bubble Ville. not part of bubble though you don’t have irrational exuberance Do you nourish
Naresh 21:54
I used to I suffered from that has two or three years ago And I’ve kind of learned maybe if my brains matured more and I am fine with knowing exactly how much and cashflow I’m going to be making every month, and like you say, appreciation, I don’t even think about it. There could be a real estate crash and as long as my tenants and they’re paying the rent, I’m happy. You’re planning to hold long, long, long, you’re happy as a clam and folks, clams are always smiling. So they’re very happy. Okay, bad humor. I’m just not good.
Jason Hartman 22:29
Okay, I will not be taking up comedy anytime soon, folks. Let’s talk about your recent trip to Colombia. There’s an interesting piece of education here for people who, you know, we got to get onto the GOP tax plan too. But the cryptocurrency thing or so you know, you got all these people that believe that the dollar isn’t backed by anything. I’m so sick of hearing that. See money. Well, what do you think cryptocurrency is? Total Fiat just because it’s not Fiat by decree or authority of any government. It is decentralized. I love that about it. Okay? It’s still Fiat nonetheless, because it has no intrinsic value what so ever. Now the dollar has intrinsic value because it’s got a long, long history. And it’s got a huge, huge military behind it and a huge brand called America behind it. The American brand is, is the world’s biggest brand. It’s bigger than Coca Cola. It’s bigger than anything, nothing is bigger than the American brand. No brand has more value than the United States of America brand. And I’m not being some kind of patriot saying that I’m just it’s just the truth. It’s reality, okay. may not be that way. In 500 years, we will see maybe the Star Trek Federation will have the biggest brand by them. But, you know, today, the United States owns the world’s biggest brand and its currency is the dollar. That’s the extension of the US brand. So you just got back from Colombia, you were in where meta gene as they say not meta gene meta gene. I think the gene meta Gene metazine. Tell us about it. So we’re there like beautiful women everywhere because I’ve never been to meta gene or Colombia at all. And my cousin married a Colombian girl. I’ve had a few friends that have like, moved down there and live down there, you know, single guys and, you know, I don’t know. Tell tell us about tell us about how hot the girls were before we talked about the value of the dollar. Well, you’re engaged, but I’m single. So I need to know this. Yes.
Naresh 24:33
I’ll be quite frank. This is no bias here. But I was a bit disappointed in the local women disappointed meaning kind of like a que I have several friends who moved out of the United States. They moved to meta gene. And they told me about how amazing it was it was paradise and you know, the women are cheap. It is a flu.
Jason Hartman 24:55
As long as you don’t get kidnapped, you’re pretty good. kidnappings are down. 72% in Colombia
Naresh 25:03
Okay, go ahead. And so I guess I might have gone in with with high expectations but I actually think that where I live in Florida, I found better looking women especially near the because I live near the water and that you know, pretty much on a beach. I found the woman here to be.
Jason Hartman 25:20
I’m moving to Tampa now. Okay, and before you know, every everybody listening is gonna think we’re totally shallow and stupid here. So, or sexist one or the other because God forbid everybody’s a sexual criminal nowadays, but some really are sexual criminals. So I don’t want to minimize that. Okay. And we just had the election with good old Roy Moore who lost I guess he hasn’t conceded yet. But that was yesterday, literally. So it looks like he was definitely punished for that. Maybe he is a bad guy. I don’t know really, you know, haven’t followed the story much. So what happened to your friend in Colombia, there was a robbery right Columbia is known for this. What was available to the robbers What was left? What did they take? What did they take? Tell us about that.
Naresh 26:04
So this is quite interesting. As soon as we got to Colombia or two, we had tour guides, and you know, you’d brought up the crime and the safety issues. So we had tour guides or essentially taking care of us, not necessarily our bodyguards. And so, yeah, there was one guy in our group who got robbed. He had his full, you know, he had electronics within he had his wallet, he had a lot of different things. But the only thing or the only item that was taken were US dollars. And it wasn’t even a lot of US dollars. It was, you know, maybe 15 $20 not even a $20 bill was like a 10 with a bunch of ones.
Jason Hartman 26:45
Okay, so the 10 five ones was taken. So $15 us is what they took. And what they had available to them was over whatever over 1000 pesos, I think, and it
Naresh 26:57
wasn’t, it was it was more probably more than that. 50,000 pesos maybe how much? What’s the version? I have no idea what the conversion is, by the way on the peso, you know, 50,000 would be about, okay. $16 and 50. Okay, so they didn’t take the pesos at all. They just took the dollars, no electronics taken, no pesos taken. Really nothing was the only thing was US dollar. So our tour guide, they warned us ahead of time and they said, the US dollar holds a lot of value not just in midday gene or in Colombia in general, but in South America as a whole. And they said it’s even worse in Venezuela. I don’t know
Jason Hartman 27:34
if I’ve ever even better or you should say maybe not worse. Is that not even the right word? But Venezuela Oh, my God, they’d love to have us dollars I’m sure but they’d probably love to have guns and bullets more than anything. And you know, food Venice. What’s happening in Venezuela is just absolutely tragic. It’s completely disgusting. So okay, nourish. So that’s an interesting story about the strength of the US dollar. That is the lesson the almighty dollar. This interviews run into Little bit long, so we’re gonna stop it right here. We’ll pick up the rest of the interview on the next episode of The creating wealth show.
Jason Hartman 28:13
Welcome to meet the masters of income property investing. I’m your host Jason Hartman. Join us in beautiful La Jolla, California on January 12 through 15th. This is your chance to meet the masters of income property investing. Learn from an amazing collection of experts all in one room. You’ll meet a ton of local market specialists, mortgage lenders, tax professionals and investment specialists such as Jeff Myers of Myers research, and john Byrne’s real estate consultant. Learn from Robert Kiyosaki Rich Dad advisors Ken McElroy, his real estate investment expert, and Garrett Sutton is attorney who specializes in asset protection. Find out what leading economists are predicting for 2018 including Danielle DiMartino booth, founder of money strong LLC and Andrew zachman. From Moneyball economics. hear from leading entrepreneurs how to maximize your income streams, you’ll learn unique financial strategies from Patrick Donahoe of paradigm life, and how to give birth to a brand from Brian Smith, founder of UK Australia brand. This year also features a very special guest, Dr. Ron Paul, former Congressman, presidential candidate, and staunch advocate of liberty. Right now you can upgrade your ticket to include VIP access and a dinner with Dr. Paul. Enjoy a fine dining experience and fascinating conversation. Seats are limited so upgrade your ticket today. Ask questions and learn why real estate is the most historically proven asset class. Armed with new information, you’ll have the confidence to take massive action as the saying goes, don’t wait to buy real estate. buy real estate and wait. Surround yourself with like minded People and build friendships that will last a lifetime. share strategies and tips with other investors and hear about their successes and struggles. Make 2018 the year you decide to achieve your dreams. Real estate is a proven way to create true wealth within your lifetime and achieve long term financial independence. Don’t wait. Join us in La Jolla. Reserve your seat today.
Jason Hartman 30:40
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own and if you require specific legal or tax advice or advice and any other specialized area. Please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
Jason Hartman looks at a potential market crash but not in the housing market. He welcomes Russ Munson in the interview segment to do a client case study and discuss Russ’ story about a legal battle with Apple over trademarks and a Pear logo. Russ talks about his journey into real estate and how it has supported his food business.
Announcer 0:02
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multimillionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:53
Welcome to Episode 1553 1553 We’ve got a guest today, one of our clients actually who’s going to talk a little bit about his real estate investing experience. But also he’s going to talk about something interesting. And it is another form of this abuse and bullying by big tech. I tell you folks, you might think why is Jason talking about this so much on a on a real estate investing personal finance show, because it is important. This is like one of the major issues of our time, when we search for something with a company that controls somewhere around 70% or more with YouTube, talking about Google, of course, of the world’s search traffic. We never know what we don’t see, you know, search results. When we log on to Facebook. We never know what doesn’t show up in our news feed. You can’t hear the dogs that don’t This is a big deal. Now, this example today is an example of trademark trolling. Well, you’ll be the judge. I don’t know, that’s my opinion, I could be wrong. But you’re going to hear a pretty harrowing story here from one of our clients I and also you can talk a little bit about his investments and how it made it possible for him to start his company and gain financial freedom by starting to invest in properties with us, maybe, I don’t remember but maybe 910 years ago, something like that. So he’ll tell the story in just a moment. But before that, you know, I think a lot of people are making a huge mistake out there, and I’m hoping I can save you from it. Now listen, I am looking for this deal, too. We are in a pandemic. And everybody is out there thinking well, not everybody. I say that figuratively, of course, it’s figure of speech. But many people are out there thinking, well, there’s going to be a market crash. The economy is in trouble. Yes, you are right. But this is very uneven what’s going on in the world right now? And a lot of apartment owners and other investors are talking about this phenomenon look on the screen, apartment rent collections continue to decline. And that is true. But the question Remember, you listeners and viewers and followers have called it I didn’t name it this. You’ve called it the Jason Hartman question. I’m flattered. I love it. I’ll take it. I’ll take it for sure. That question is, if you’re a regular follower, you know, compared to what, compared to what we have to realize first, that no apartment owner, no real estate investor ever collects 100% of their rents. It just doesn’t happen. They have economic vacancy, and they have physical vacancy. Now physical vacancy is of course when the property’s vacant and no one’s paying you rent. Economic vacancy is when the property He is occupied, and they’re not paying rent and you got to kick them out. Right. But there’s been so much talking concern about the eviction moratoriums and all that stuff. And, you know, the forbearance and you know, the owner generally just passes it along to the lender, right? But, folks, you got to realize something. This issue is largely an issue of larger, mostly institutional apartment investors. Now, I’ve owned a couple large apartment complexes, 139 units, 125 units, I’ve got a mobile home park now that’s 120 units, and we’re building some single family homes on that land on the park because we’ve got some waterfront area there, where we’re not gonna have mobile homes, we’re gonna have single family homes, and when we’re gonna sell those, but retain the land lease so interesting stuff you can do. So you know, I’m in this world and I know lots of people who are I just interviewed the founder of a very large apartment. Investment Company and they do some, they play in some other asset classes as well Self Storage, etc. And they do business in seven states. And, you know, we went into this in depth fuel here that episode, folks, if you’re looking for this big crash in the housing market, I don’t think you’re gonna find it. And if you do, if you do, it will be a result of much higher interest rates. And I want you to realize something, so you don’t miss the opportunity. Because many, many millions of people have missed great opportunities. Now most people aren’t missing the opportunity right now. And maybe it’s an anomaly. Maybe the skeptics and the doomsayers the people that have been calling the end of the world for the last 2030 years, you know, the bad news sells, right? Maybe they’ll say, well, Jason, it’s just an anomaly what’s going on right now? Yes, there’s a housing boom, yes, prices are rising, but it ain’t gonna last. Maybe there’ll be right, maybe, but will they be right based on the price of the property or the cost of ownership. And those two things are significantly different. Just want to remind you that people buy a property based on the payment based on the mortgage payment. Almost nobody buys it on the price of the property. And based on the mortgage payment, housing in the markets we like now this is not true of all markets, is actually cheaper today than it was in 2006. In terms of a monthly payment, the price is higher. Yes, that is true. And you see all these people that have a shallow understanding of the market. The talking heads on CNBC now, I don’t mean to pick on CNBC. They got some great coverage on a lot of things. But any news station, any major media outlet, where they’ve got to condense things into a small soundbite, or they don’t look at issues deeply, and they don’t have a deep understanding, they’ll say things like, well, if you’re looking at housing prices in 2006, at the prior peak, and you know, they differ on when the peak was fine and dandy, depending on what market you’re looking at what sub market, what price range, blah, blah, blah, you know, you can peel that onion a lot of ways, but they say, housing prices are higher now than they were then and look what happened then we had a big crash. Okay. What what’s the monthly cost of ownership? You never bothered to consider that, do you? Right. And that’s the true cost of housing. That’s the true price of housing is the monthly cost, not the overall cost. Also, they never bothered to look at the underwriting standards. On those loans, well, sometimes they do. I won’t say never figure of speech, you know, you got to use a finger. Yeah, to do some generalizations and some stereotyping to make things simple, you know, easy to understand, right? But they usually don’t consider the underwriting of the people holding those mortgages. And the underwriting standards today have been very conservative in most cases. You know, I know there are some low down loans, but even with the low downpayment loans, the underwriting standards have been tight. Okay, by enlarge tight, it’s not like it was last time. So if you’re looking for that, you know, 2008 crash, you’re probably going to miss the opportunity there. And by the way, that was my dog moving. Did you hear that? She moves like a cow. Yes, dog makes very funny sounds. And sadly, my dog is not feeling well. So please pray for her quick recovery. very worried about it, I could show you a chart, but I don’t have it handy of mortgage credit availability. And you will just see how hard it is to actually get a mortgage right now. And how hard it’s been over the last several years, showing that the banks are underwriting very carefully. So if you’re looking for all those defaults Not going to happen, except they’re going to happen here in the commercial real estate market. Now, not all classes have commercial. Here’s another faulty thing people do. They miss classify it and they call it commercial in quotes. Well, what does that mean? What type of commercial property? Where is it located? Is it office space? Is it retail properties? Is it industrial properties? Is it self storage? Is it gas stations, like you know, there’s a zillion different types of commercial property. And then there are many locations and price ranges and different types of asset classes. lots of ways to divide this up a lot of segments What needs to happen? But generally, the two hardest hit asset classes in the commercial real estate world, of course will be office space and retail properties, especially in trophy, tier one cities. New York, San Francisco, LA, and to an extent, Boston, Seattle, San Diego, you know, to a slightly lesser degree, Portland, etc, right? All of these places very hard hit civil unrest, no ability to socially distance concerns about contagion, etc. Right. Here’s the question people should be asking is they should stop worrying about the market itself and look at the knock on effect, because all of these commercial properties, they have mortgages, and those mortgages are tied to securities, various securities but especially bonds cmbs commercial mortgage backed securities And as these mortgages default, and the bankruptcies mount and they’re already mounting these companies filing for bankruptcy, and we’re gonna see a lot more of that it’s gonna get a lot worse before it gets better. But it’s just Joseph Schumpeter, my favorite economist, his concept of creative destruction. This was happening anyway. COVID 1984 simply accelerated that trend. So, as we see that there are going to be massive defaults on these commercial mortgage backed securities. And guess who owns those well, life insurance companies, pension funds, university endowments, and private investors like you potentially, you know, you might have those in directly, you might have direct ownership or they might be in some fund that you own and you don’t even know it. That’s going to hurt. That’s the thing people should be looking at. But when we look at retail sales overall, look at this chart if you’re watching by the way Through not I’ll explain it to you. It says us retail sales return to pre pandemic levels, monthly retail and food services sales in the United States, seasonally adjusted, which is the better way to do it. According to the US Census Bureau, that’s where this chart is from. The August figure figure represents an advance estimate based on subsample of Census Bureau’s full retail and food services sample. And it basically shows a slight upward trend where you’ve got $537.52 billion in sales in August. And yes, you know, you go back a few years and even if you go back two years, it was as high it did take a dip during the lockdown phase. And we you know, we still have lock downs in many areas, but overall, it’s up. Now, it’s not up in physical stores. It’s up online. Of course, you already know that and we’ve talked It ad nauseum on prior episodes. So let’s go to our guests. But I do want to remind you that we have our version 2.0 of our asset protection and estate planning webinar. And that’s available to you at Jason hartman.com. Slash protect Jason hartman.com slash protect a more advanced webinar that you guys asked for. So we aim to please and we provided it our lawyer, went back to the drawing board, redid his presentation and made a more advanced version based on a lot of the questions you asked for those of you hundreds and hundreds of you that attended the prior webinar. So Jason hartman.com, slash protect, like protect your assets, and Jason hartman.com slash protect for that. And without further ado, let’s go to our guest and let’s talk about his real estate investing case study. As he started with us somewhere around 10 years ago, I think and also So, this trademark trolling, well, you decide it’s trademark trolling. I think it is by Apple, one of my am one of the companies I really admire. In fact, I’m using their products right now and spend an awful lot of money with that company. All right, here we go.
Jason Hartman 14:19
It’s my pleasure to welcome one of our clients back to the show, and that is Russell Brunson, or Russell Johnson. And he was on the show before talking about his client case study as a real estate investor. But today, we’ll touch on that. But today we’re going to talk about something else. And that is an aspect of the tech tyranny that I keep talking about. As you know, I am a consumer advocate, and I have a very big distaste for bullies. When I hear stories, like you’re about to hear, I really get upset about them. You’re going to hear about a tech giant, the largest company in the world and that is Apple. Computer a company that I, I use their products. Most of us do have long thought of myself as a fan of Apple, but I’m definitely becoming less of a fan. And this story is one more step in that direction moving the needle away from my interest in Apple. You know, I used to really like Tim Cook and thought he was doing a great job. But some things I’ve really called that into question lately, and this is yet another part of that story. Russ is a CPA. He also has a company that he started, that is now being bullied by Apple. So you’re gonna hear that story and hear a little bit about his real estate investments and how we got to this place. Russ, welcome. How are you doing?
Russ Munson 15:41
I’m doing well. Thanks, Jason, for having me on. I’ve been listening to your podcast for years. And so it’s fun to be on again. Yeah, it’s great to have you.
Jason Hartman 15:48
It’s great to have you. When did you first start listening to my podcast, just out of curiosity,
Russ Munson 15:52
I started right in the middle of the Great Recession. So when the housing collapse was happening before I was just searching on fire Test players for best real estate podcasts landed on yours. And it kind of guided my investment philosophy and a lot of the decisions that I made in terms of my own investing, and been a big fan of, of yours ever since.
Jason Hartman 16:14
Good stuff. Well, thank you. And thank you for all your business and your referrals. We really appreciate that, obviously, tell us how your investing involves a little bit and how it funded the business you have now.
Russ Munson 16:25
So I started, I started picking up just a couple of houses locally, I live in Utah during the Great Recession when everything was basically free. And I just saw I was in the mortgage business at the time. And it was obvious to me that when the cost of buying a house was less than the cost of building a house, unless you had a massive population decline, like something good was going to happen to the prices of those when I was mostly investing at the time with the properties I was purchasing just for appreciation. And then I started listening to your podcasts and started learning about really the value of some of these other markets other than my home state and Utah. And I just didn’t really have the resources to branch out of Utah. I just released I didn’t think I did. And so I connected up with an investment counselor at your company and started acquiring properties outside of Utah. I started in St. Louis, a couple of duplexes and for plexes there, and then I bought several properties in Memphis and several family members properties in other markets and started the cash flow machine, I guess.
Jason Hartman 17:26
Excellent. Excellent. Well, good for you. So you started investing with us when around 2008 or nine or so back?
Russ Munson 17:33
I think my first property probably would have been 2000. It might have been 2009.
Jason Hartman 17:39
Yeah. So 11 years ago, then it’s 2020. Now, so just in case you’re listening to this five years from now, so you never know.
Russ Munson 17:49
a time or two?
Jason Hartman 17:49
Yeah, yeah, you definitely have. Well, you started in the Great Recession, which was a good time to start times of economic uncertainty or times that create a lot of opportunities. And I think now we might be seeing that again. So without going down that rabbit hole, which would take a long time to discuss, I want to just get to the story a little bit. So you began investing with us that enabled you to fund a business. Yeah, that’s right. Okay. Tell us about.
Russ Munson 18:18
Yeah. So I was investing in real estate on the side of my main job, I was a CPA work for a large bank. And at the same time, my wife was actually building a food blog. And I was kind of helping figure out how to make money from the food blogging business. And we got to a point where we were able to make that business very successful. And I was able to quit my full time job from the combined income of the food blog and the real estate business. And when we got into that, like our food blog really took off since to the rise of Facebook, back when Facebook was first starting to go big. And we got millions and millions of followers on Facebook and had a ton of traffic In order to build a business there, and then shortly after we built that business, the Facebook algorithm turned against us. And it started to erode our traffic and try to keep users on Facebook instead of on the content provider site. And so we had kind of a really rough experience there figuring out how to monetize the content based business when in control, so,
Jason Hartman 19:23
Yeah. I know that’s the problem with today’s world. I tell you, these big tech companies are just bullies and we’re obviously going to get into that today. They can just ruin people’s lives and you just have no recourse at all. It’s so unfair. That’s why we need we need these companies to be split up. We need a broader marketplace. So there are choices. So there’s more variety. It’s indeed this would have never been allowed post Industrial Revolution, you know, post robber barons, Carnegie’s Melanie’s, Rockefellers, etc. And now we have that again, because there’s so much better at lobbying and Basically faking that they’re in other businesses that they’re really not in. Because right who Google Google does this extremely well, by the way, you know, folks, have you ever wondered why Google is in so many businesses that make like no money that are complete failures? It’s not, they’d like to say, well, they’re experimenting, they’re trying to get into this market, they’re trying to compete. The real reason is, so they can dodge the antitrust bullet. That’s why they do this. They have no interest really, in a lot of these businesses. I don’t think I mean, look at this, my view as an outsider, obviously. So, you know, maybe they think differently, but I don’t believe them. So they say, Well, you know, we’re in the self driving car business, we’re in the search business, we’re in the, you know, this business for that business. And, and we don’t dominate any of these things. You know, we’re in all these businesses, right? And so, so they’re able to dodge that bullet plus the fact that they spend a zillion dollars on lobbyists, and they get all the laws written in their favor. It’s just a complete scam. So hopefully, this is going to change But if you want to share your screen and show us your business, so we can get the background and then let’s see what’s happening. We’re gonna look at Legal Notices, and really kind of dive into this. I think it’ll be fascinating to you.
Russ Munson 21:13
Yeah, it’s really interesting, the arguments, they’re not monopolies. I mean, it’s hard to imagine there have never been bigger companies with more market power in the history of the world. And if they’re not monopolies, I don’t know how we define it. It’s an interesting, interesting situation.
Jason Hartman 21:29
When when these companies have gdps, larger than many countries, I think you can call them monopolies by them. Right. And the fact that they all work together, and they curry favor with the government by becoming proxies for the government. Think also about this listeners and viewers. The government is not allowed to impede your right to free speech under the Constitution. Of course, we know that is the first amendment, but a private company can censor your speech. And it’s a private company becomes a proxy for the government. And that’s how they curry favor with the government to get laws written in their favor and allow them to pay little to no taxes because they have all these offshore companies. It’s a complete scam. I mean, this is just a complete scam. Hopefully this will move the needle and they won’t take the show off the air because they definitely censor this kind of stuff. What kind of food blog was your wife doing?
Russ Munson 22:33
Yeah, so our food blog that we built was called super healthy kids. So it’s a blog dedicated to helping parents have the resources they need to feed their kids healthy food instead of junk food to kind of battle their kids desire for chicken nuggets and mac and cheese all the time. And get them eating and developing healthy habits.
Jason Hartman 22:52
Right so so there you’re gonna you’re gonna piss off a lot of big powers. McDonald’s isn’t gonna like you very much, right?
Russ Munson 22:59
So Our Facebook pages tend to be full of controversy about people sued religions. So right, it’s very interesting to put a good way to put it. Yeah, but what we kind of did was super healthy kids, I mentioned that we have seen kind of how those big companies, big tech companies, algorithms could make it so that you aren’t really in control of your business. So we decided at that time to start building some sort of content delivery system that wasn’t in control of big tech companies that we could extend to other food bloggers to build their businesses on. And so that’s how this business that we are running into problems with apples was formed in that company’s called prepare, as you can imagine, in our view on thing that’s interesting to think about here, as we kind of walk through what we do with prepare is how dissimilar the services the nature of the operations of what we’re doing are from a computer technology business. there’s virtually no way that these two Businesses can be confused or be considered competitors. So it’s kind of an interesting background for this, what we do with prepare is we create a connected cooking experience, so that you can store all of your favorite recipes in one place. And you can use basically all of the content that you like to consume on the internet without the advertising infrastructure that bothers you will use the content, and that your use of that content will benefit the content creator directly. So we have a paid version of prepare called prepare gold, where subscribers can pay $59 a year to be a member. And we then share that revenue directly with the content creators. And that’s kind of exactly our view of how some of these tech companies should work. They don’t share their revenue.
Jason Hartman 24:48
What is the content creator someone with a recipe?
Russ Munson 24:51
Yeah, so in the example you can see here, this recipe from super healthy kids if I were following super healthy kids on prepare, I would have access to their content. in a format that doesn’t include display advertising from that food blogger, that’s really kind of a cumbersome thing to cook from a phone when the ads are jumping all over the page, right? We’ve solved all of those content problems. And then as a user, you can see if you’re, if you’re not a paying user, which how I’m logged in. Now, it’s not a paying user, you can view that content on the blogger site. If you with those advertisements. If you decide to pay, then you can view any of their content with no advertisements and we then send that money back on to food blogger. So
Jason Hartman 25:33
So first off, I want to be a content provider because you as you may have heard on the podcast, I’m a little bit into cooking now. It used to be that the best thing I made for dinner was reservations. But I’ve gotten better especially with these lockdowns and so forth. And I tell you, I make the world’s best salad ever really. like nobody makes a salad better than I do. Okay, so I gotta give them recipes on your site go
Russ Munson 26:02
Awesome. Well, we’d love to have you as a content creator. And that would kind of highlight that we could, we could have an eat like Jason meal plan that people can subscribe to and be fit like you. So and that’s really kind of the idea behind prepare. It’s it allows you to create cookbooks, to store even your own family recipes. So you can, for example, create your own cookbooks with all of your family recipes, I share my family recipes, you can do your meal planning. And you can even send your grocery list directly to Walmart to do your shopping so you don’t have to go to the store anymore.
Jason Hartman 26:37
Oh. Yeah,
Russ Munson 26:37
we basically just hide all the things that you need to put from home successfully into one solution. And that’s really what prepare was about that having it not be a tech company that isn’t caring for everyone who’s involved in that transaction. The content creators involved in the transaction prepares involved in the transaction, and the consumer is involved in the transaction and we’re really trying to do right by everyone.
Jason Hartman 27:00
So so your investment counselor posted something in our private group about how this was happening to you this this burgeoning legal battle with Apple. Then a couple of days later, I actually saw it in the mainstream media. I saw a story about you. And I thought, this is our client. Now what are you going through what what is apple? What is their problem with your company?
Russ Munson 27:25
When we started prepare, we filed for a trademark for this pair icon. It’s a it’s an icon that clearly represents a pair. It’s usually used in the color green, it looks nothing like an apple whatsoever, used to represent a meal planning and cooking business. And the fact that it looks nothing like an apple is why this has gotten so much media attention. So when we filed for our trademark, unbelievably this will tell you how the legal process in the United States works in January of 2017. We went through the whole process with the trademark approval board and We finally got our trademark approved in fall of last year, where the trademark agency of US government said look, there’s no conflicts here. We’re going to release this trademark.
Jason Hartman 28:08
And so that’s the USPTO. The Patent and Trademark Office.
Russ Munson 28:12
That’s right.
Jason Hartman 28:13
Yep. I have many trademarks. I know them well. Okay.
Russ Munson 28:15
Yes. So they gave us the all clear and published our trademark for other companies in the world to look at and see if they had a problem with it. And on the last day of the window to oppose our trademark, Apple didn’t file to oppose our trademark they failed to extend the date that they could oppose our trademark and then repeatedly filed to extend that date as far as they possibly to make this as difficult as possible for us to bear the burden of and keep us in limbo as long as possible. In practice they do with all of the trademark opposition’s they do.
Jason Hartman 28:47
Yeah, apples to apples in a big fight with fortnight. I don’t know much about that story. I haven’t been following it, but they’re in a big fight with him too. So the article that I saw in the mainstream media was basically It said something to the effect of Apple to start up, change your logo or else that was, I believe, right? So they’re telling you that their logo is an apple with a bite out of it. Your logo is a pear with no bite out of it looks nothing like their apple. But I guess Apple is claiming the rights to all fruit. Yes, or the rights to vegetables too. If If I opened a company called broccoli or you know potato would they be suing me I mean,
Russ Munson 29:35
I wouldn’t put it past them but it’s very clear that they what they described in their legal action, and I’ll show you what their actual legal action says it says consumers encountering applicant that’s us Mark are likely to associate the mark with Apple. Applicants Mark consists of a minimalistic fruit design with a right angled leaf, which readily calls to mind Apple’s famous Apple logo and creativity. Looking for a commercial impression? And then they show a side by side that clearly shows no similarities between these two logos other than what they described. They’re both fruit and they both have leaves.
Jason Hartman 30:11
Now No, no wait. Now when you file for a trademark, there are I think 40 classes under which you can classify your trademark. And some of the classes you can tell the government designed over us because they’re kind of odd. Like what I want to trademark My name is trademarked for example, right? Jason Hartman is a trademark, okay? I can trademark it under like one class or multiple classes. And the classes are a little bit funky. You know, they don’t make sense to at least the layperson, but you’re not a computer company, right. You don’t want to make cell phones, iPhones, smartphones, or computers or hardware. You’re selling recipes.
Russ Munson 30:53
There’s no competition whatsoever. And in our class description, we’re in the same class in terms of creating software. But if that is what makes us competitors, and everyone creates software, I’m sure you create. There’s no company that doesn’t create software anymore. But our class description describes it as software for meal planning, and recipe management. And Apple, interestingly, isn’t even. They’re not even contending that they’re in a competing business with us. In terms of the class, they are saying that, because they have the Apple Watch and the Apple Health app, that somehow they may eventually end up in the recipes business. And so they don’t want consumers to be confused between those two.
Jason Hartman 31:36
Okay, now, do you have an app in their app store?
Russ Munson 31:39
We do? Yes. Okay. Have an app in Apple’s App Store and in the Google Play Store,
Jason Hartman 31:43
and what was the app? What is the app called?
Russ Munson 31:47
The apps called prepare? So that’s the name of our company.
Jason Hartman 31:51
They approved your app.
Unknown 31:53
Yeah, there’s no problem. We follow all of the App Store guidelines completely.
Jason Hartman 31:57
How long ago did they approve your app?
Russ Munson 31:58
We’ve been in the app store since September of 2017, for years,
Jason Hartman 32:04
okay, so for three years and how long ago did you first file for the trademark
Russ Munson
in January of 2017?
Jason Hartman 32:12
Okay, so they approved your app, and they saw the design. The logo is on the app, I’m sure, right.
Russ Munson 32:17
Yeah, yeah, logo is the main app icon.
Jason Hartman 32:20
Do they threatened to kick you out of the app store? Also?
Russ Munson 32:23
No, they haven’t made any threats about the App Store. They are just saying that our logos are confusing and that we need to change ours. They’re demanding that we change our logo and abandon basically the brand that we’ve spent the last three years building and that they have a right they believe they have a right to control our intellectual property that we own and have developed.
Jason Hartman 32:47
Now, did you file under multiple classes for the trademark?
Russ Munson 32:51
We did? Yeah. We thought file under kind of a social media type class that is basically electronic communication class and under a software development class for meal planning software.
Jason Hartman 33:02
Okay. And they agree that you could if you abandon the software class, well, I don’t know if you’ve had this negotiation with them or if you’d be willing to do it. But did they agree to stop harassing you if you would abandon the software class and maybe keep the others are.
Russ Munson 33:21
So Apple has made no requests of us regarding the abandonment of our class, they have focused entirely on this concept of that consumers are going to be confused between our logos so they’ve made no contention regarding us, changing the class and things being better. They have solely repeated to us and reiterated to us that our minimalistic fruit design with a leaf is confusingly similar to their apple. And when we when we got that information, I mean just honestly reads kind of like an onion article. We have a just belief that media is the site with these phony stories.
Jason Hartman 33:59
With the phone.
Russ Munson 34:02
There’s no way that any rational consumer could think this. So we thought, well, when we go talk to Apple, then we’ll obviously be able to straighten this out because there’s more of a story here, then we’re reading in this filing of their son. The answer’s no, there’s not. They’re really contending that pears and apples can’t coexist without consuming, confusing consumers.
Jason Hartman 34:22
Do you know if there are any other examples of other fruit logos that Apple has had problems with?
Russ Munson 34:31
There are. So they have this is not we’re not like a random target here. They have come after. In our research, we found more than 40 other unrelated fruit icons and logos that Apple has opposed the vast majority of which just don’t respond to Apple’s opposition and lose their trademarks. And very, very rarely does somebody decide to fight apple. That’s actually what spurred us on to want to fight apple in this case. It’s so this such a ridiculous claim. And it’s being done over and over and over again, regardless of the fruit, their claims against oranges, bananas, apples, limitless numbers of them, it’s hard to even imagine if Apple were to want us to change our logo, how we can change it in a way that it wouldn’t be violating their, their brand from their perspective.
Jason Hartman 35:21
So I have litigated cases where the other party is just either a crook or a bully. And, you know, I know that if I look at I have resources, I can afford to stand up to them, but other people can’t. And I look at like their litigation history, and I’ve heard the other complaints from other consumers that just never bothered to take them to court. I feel that it’s my duty to do something. Because if you don’t stick up to them, who’s gonna do it? They’re just gonna keep rolling over everybody. So I really applaud you for doing that. Of course, I’m not a legal expert. Neither are you. But this just Seems on its face like to a common sense layperson, that this is an act of just bullying you know, they they’re a trillion dollar plus company. I mean, they know they can just throw their weight around and, and just roll over and destroy companies like crazy. It’s ridiculous. Here’s what this article says, By the way, and I saw this on Newser. Mainstream Media by then. Apple two small startup calling, ditch that logo or else the tech giant Sue’s prepare over its logo. Have you guessed it, a pair? No to small startups. Try not using a fruit logo, Apple might get mad. The tech behemoth has again filed suit over a fruity logo. This time against a five employees startup called prepare that advertises itself with the image of a green pear entrepreneur reports which by the way, entrepreneurs was in a big lawsuit with a friend of mine years ago. And one they bullied him into submission because he was using the word entrepreneur, which incredible wasn’t like it was an entrepreneur. I mean, this is unbelievable sometimes. Okay, and it says now Russell Munson, the recipe apps founder has posted an online petition. You can see the prepare logo here and there’s a link to it and seeking people support, quote, it’s it’s a very terrifying experience to be legally attacked by one of the largest companies in the world, even when they have clearly done nothing wrong on quote. He writes, we feel a moral obligation to take a stand against Apple’s aggressive legal action on quote, his petition has more than 63,000 signatures so far.
Russ Munson 37:48
Wow. It was a few days ago. We’re up to 175,000 now.
Jason Hartman 37:53
Oh, so you’re showing the petition on change.org?
Russ Munson 37:57
Yeah, this is a petition that we’ve we’ve seen Apple actually in received no response to this. In fact, we sent this petition. And we honestly assumed that when they saw the public outcry about this, because millions of people have seen our logo side by side, and nobody is confused, we thought, you know, maybe they’re making this legal argument, really, I think people will be confused. So let’s use our millions of social media followers with our food blog, to run that experiment in the real world. And no one is confused. There’s nobody has gone into an apple store and asked them if they can help them make dinner. It hasn’t happened. So we, we and by the same token, nobody has tried to buy a computer from us since this whole thing came to light and became public.
Jason Hartman 38:45
So you’re not selling many computers with pears on them? Hmm.
Russ Munson 38:48
No, believe it or not. We haven’t stepped into their business at all. Yeah. And we thought that they would respond to this petition saying oh, well, they’re a rational actor in a way and would look at this and say, okay, there’s There’s no confusion. Let’s drop this, it’s not worth the PR nightmare that this is. And we have learned from our attorney speaking with their attorneys that not only are they not dropping it, they’re doubling down, they’ve now filed an opposition against our trademark in Canada as well. And they’re doing their best to make this as expensive and painful as possible for us to keep our logo.
Jason Hartman 39:19
You know, I’m not familiar with the world of the big corporate world, I’ve never worked in a big corporation, I don’t really understand how they operate. You know, you just kind of wonder if this kind of stuff makes it to the desk of like a human who’s actually thinking versus lawyers who are just incentivized to, you know, do their job, right. extract value from people. You know, that’s what that’s what some of you do, like, just Tim Cook, for example, as a human being know about this. And if this makes it to his desk, or a meeting with him, would he just be like, like a rational person and say, you know, this kind of ridiculous I think we should just let this go.
Russ Munson 40:01
I hope that would be the case that if you could get through to other other people inside of Apple, I think they’ve intentionally designed the system so that you can get through. So they have not responded to the comment requests of dozens of reporters who have reached out to them not a single comment requests has been responding to their stances to just ignore this and and left legal pathway with us.
Jason Hartman 40:27
So they have they actually served you with a lawsuit. I mean, the article says they sued you, but I it doesn’t sound like they have Yeah,
Russ Munson 40:33
yeah. So in the trademark proceedings, what they’ve done is filed a notice of opposition, which is a document they filed with the USPTO that we then have to respond to if we don’t mount an aggressive defense of their opposition, we automatically lose the right to use our logo.
Jason Hartman 40:50
And so I had that happen once in one of my trademarks. You know, I have many businesses and my main thing is the real estate business but you know, I’ve other businesses too, and I felt a clothing trademark years ago. In a clothing company that was like 100 year old clothing company, opposed my mark. And, you know, we went back and forth. I spent some money and they finally relented and let us have our mark, because we weren’t competing with them. But that at least was clothing to clothing prices so different, that it just seems like a stretch. Again, I am not a legal expert folks, so I can render a legal opinion. And you know, the law is complicated. Of course, it’s super complicated, but
Russ Munson 41:31
yes, certainly is. And I think there are some structural problems in the law that facilitate this sort of behavior where it puts large companies at an advantage over small companies, probably because that incentivize additional legal fees to be set. You know, Apple can have their attorneys file, dozens and dozens of these opposition’s every year, knowing that maybe 10 5% of the people on the other side are going to Spend the minimum $50,000 that it’s going to require to fight them all the way to the end. Yeah. And it doesn’t matter to them. It doesn’t matter at all. But it matters to those dozens and dozens of businesses for whom $50,000 to defend it is an extraordinary amount of money.
Jason Hartman 42:17
And believe me, it could cost way more than $50,000.
Russ Munson 42:22
That’s the minimum to get something like this, right?
Jason Hartman 42:24
Yeah. Yeah. I mean, apple, I’m sure has the best lawyers on planet Earth. And they pay them a fortune. They have giant law firms with tons of resources, research resources, research capabilities, just, it’s just insane. I mean, the, the, the level at which they can fight it’s like, you know, it’s like the US going to war with some dumb little country that has no military. Right. You know, it’s just, it’s not a fair fight. And that’s that’s the problem with the legal system that says,
Russ Munson 42:55
Yeah. Yeah, that’s a fight that by default, we lose. So there’s no, there’s no option to not defend, you either quit or defend. And there’s no second Review Board. There’s no common sense person that looks at this to see, oh, if you don’t have a case, then you’ll have to pay the legal fees. If you want to take this frivolous lawsuit through, there’s no, there’s nothing there. It’s just just your attorneys lawyer up,
Jason Hartman 43:17
see what you know, you know, Prager, you, or Prager University, sued YouTube slash Google slash alphabet, whatever you want to call them. And I don’t know the status of that case. But they claimed that Google or YouTube was, you know, down ranking their videos in the app store because their videos are conservative and Google, Google is liberal. Okay, as most tech companies are, and you know, I don’t know where they got with that. I assume they probably didn’t get anywhere with it because of the way the system works. And this, they just have everything in their favor with their lobbyists there. They can write law, they don’t have to fight the law. They write the law, okay. When they have lobbyists, an army of lobbyists. Have you and the reason I’m Saying that is because I’m wondering, do you have any inkling or any suspicion that because of this problem, that Apple is down ranking your app in their app store, they control the audience that sees your app? Because they control the App Store.
Russ Munson 44:19
They do
Jason Hartman 44:20
it at least they don’t control the internet. Okay, at least not yet. And so they can’t control who sees your website, necessarily. But they certainly can control who sees your app. And they can in
Russ Munson 44:33
inside of the App Store, we truly have no evidence that they have done anything within the app ecosystem to punish are out in connection with this. In fact, the the message getting out there like the support of hundreds of thousands of people has been extraordinary. We’ve had so many people downloading the app and using it having a good experience that there’s at least we’ve we’ve turned lemons into lemonade hear if I can still say that and just use a friend. I should probably be extra cautious. Yeah, we’ve been able to turn lemons into lemonade here. And I don’t have any suspicions that the other side of Apple, the technology side of Apple is, is somehow punishing us.
Russ Munson 45:18
Which is good. Hopefully they’re not. So that’s, that’s good. I’m gonna download your app right now. So anything else you want to tell us questions I didn’t ask you. You know, just let us know. And by the way, I want to invite any representative from Apple that wants to come on the show and tell their side of the story. Okay. You know, we’re open. I have people that disagree with me constantly on the show, you know that Russ, because you’ve been listening for a while. I have people that I wouldn’t even come close to agreeing with on my show. You know, we’re always happy to hear the other side of the story. You know, anybody from Apple? certainly welcome to come on and tell their side of the story. So go ahead and anything I didn’t ask you.
Russ Munson 45:54
And the only thing I would say in closing is I hope that the fact that there’s somebody standing up to Apple inspires other people to do so, you know, one of our missions, that super healthy kids is to raise healthy kids. And that includes them having healthy social and emotional habits. And one of the main things that’s part of that is developing the character to be able to stand up to bullies stand up to injustice and do the right thing. Even when it makes you uncool or unpopular, it’s going to be incredibly expensive. It’s just important that our world is filled with people who will stand up to bullies to gamble, who are willing to take advantage of other people. And I hope this inspires some people to do the same.
Jason Hartman 46:35
I hope so too. And you know what, the way I look at it in business, is I look at some of these things that I have to do is just inefficient things that really don’t always make sense economically. Sometimes they do. But I look at them as if nothing else. It’s like charity work. Okay, you know, I donate money to charity. And sometimes you have an additional expense. That’s Like for the greater good of the industry, the community, the human race, whatever, right? And, and so I totally understand what you’re saying there. Thanks for sharing your story with us. And I wish you the best. Thanks for sharing your investing story with us. You were on the podcast one other time before talking about real estate investing and how that’s helped you. So, you know, but this is more about the pair, the apple Who would have thought, it’s not David and Goliath, it’s the apple in the pair.
Russ Munson 47:31
So believeable was a pleasure to be on. I really appreciated all of your advice over the years, and there’s a lot of wisdom in your podcast and it’s been a real benefit to us and helped us create a financial position where we can build a business and do the things that we’re doing. So good stuff.
Jason Hartman 47:47
Yeah, yeah, it’s my pleasure. And I hope that this show does not get censored in some way. What you you have to fear with the powers that be you know, there’s the the power of the world to show elections and just everything to, you know, start or end wars is in the hands of a few giant tech companies. It’s It’s unbelievable the power they have. So, you know, let’s let’s hope they they follow Google’s old saying that Google has certainly not followed. That is don’t be evil, you know, right. All right. Well,
Jason Hartman 48:20
good luck, Russ. Thanks for sharing the story. And by the way, give out your website. Is it prepared calm?
Russ Munson 48:26
Yeah, free care.com p p, e AR like the fruit, calm and stuff.
Jason Hartman 48:30
Alright. Thanks again.
Russ Munson 48:32
Thanks, Jason.
Announcer 48:38
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Jason Hartman starts the show discussing Journey Capture, a Journey tribute band that played during the Meet the Masters event. In the interview segment, Jason continues a two part conversation with clients Sue and Gary Pinkerton. Sue gives some tips on self-management and also discusses why real estate is not a passive investment.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Announcer 0:13
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:03
Welcome listeners from around the world. This is your host Jason Hartman and I’ve got a special surprise for you today. You know, we always try to tread new ground occasionally and we are doing that in this episode number 938 Episode 938. So thank you for joining me today. And you know we have meet the Masters coming up on Saturday. It’s just a few days away literally. And I have to tell you something about myself that you may not know. It is something I am not allowed to share on the air with you at risk of a lawsuit. What is this that you don’t know about me? Well, you may not know that I have incredibly good taste in music. I’m a big fan of music. I absolutely love music. We have hired a tribute Japan to Play journey for ESET meet the masters. And I have got the director and the bass player here with me. He is a classically trained, truly professional musician. I’d like you to meet Giorgio Giorgio welcome. How are you? Oh, thank you. I’m doing great. It’s an honor to be here tonight. And we are. So looking forward to the show and providing an amazing experience for everyone. Well, we are looking forward to it too. You know, this is the first time we’ve ever done a musical performance at any of our events, or you know, including meet the masters. We do several different types of events every year. We’re super excited. And you know, when I was looking for musicians, I thought who doesn’t love journey? In fact, I’ll tell you a kind of a funny story. I had a little spot in my life several years ago where I lived right next to ASU and I kind of felt like I was going to college. It was really fun for a little, a little few years. In my life there, I remember I was hosting a big giant party one night. And I had, I don’t know, probably 200 people in my swanky penthouse right by ASU and I accidentally, I fiddled with the stereo system and a journey song was playing, and I accidentally turned it off. And that was a huge, like it just ruin the mood. And one of my friends Darren yelled out the funniest line ever, he said, Nobody ever turns off journey. I thought that was I thought that was a great line. What inspired you guys, Giorgio, to do tributes to journey I mean, such a great band. I remember seeing journey as I mentioned to you in the Rose Bowl years ago with 90,000 people. Just amazing. I’ve seen them a couple times in concert.
Giorgio Giorgio 3:49
Why journey? You know, that’s a great question. Well, interesting enough, just a little background about me, which kind of brings us to where we’re at now. I have a jazz background and I have played a lot of jazz, a lot of fusion jazz. I actually even played with the great Frank gambali, who’s probably the foremost fusion jazz guitarist in the world today. And so, what I love playing along with classical and jazz and conventional contemporary music is I love progressive music. I love music that has great heart and emotion and drive. And that’s why I love journey so much. Yeah. And so what inspired me is years ago, I Tucson journey and the second I heard them, I just fell in love them. I go, these guys are amazing. The music is amazing. They’re so prolific, and they bring you to a better place. I think I’m into a lot of music, but you know, compared to some of the other like, either British progressive rock groups or American progressive rock groups. To me there’s something about tourney that says everyone apart. Yeah, so so I just thought literally got into them and learn their material really well. And then a few years ago, I said to myself, you know what, I want to audition for attorney terrific parent. And so I auditioned with my current group, who audition literally about 15 players. And I got the gig, probably because I knew the material better than probably most of the other ones that the additional people that that came. So that’s kind of how that all came about. And the beautiful thing is, we don’t just play the music. It’s not like playing like if you’re in a top 40 band or something like that. We’re all accomplished players. We all have graduated from conservatories. And we take it very seriously. But we have so much fun in the process. And so I think what we do is our goal has always been to, if you close your eyes, can you hear the difference between the two? And a lot of people have said, kind of hard to tell the difference. So that so that’s an honor. Right? Right. If we’re getting people to that point, then we’re doing our job. Yeah, you definitely are.
Jason Hartman 5:59
Well, you know, I have To tell you, I think that jazz musicians are likely and you know, correct me if I’m wrong about this. I’m not an expert. I’m just a consumer. But I think jazz musicians are probably the most technically talented musicians out there from a technical perspective for sure. I mean, you know, of course everybody has their own taste in music musics a very personal thing, obviously. But jazz is a you know, it’s a it’s a technical type of music. What would that be a proper characterization?
Giorgio Giorgio 6:28
Absolutely. You know, it has so many nuances and different avenues. And the chord structures and in a lot of complex most jazz is very complex. And you know, it’s not just like playing a 145 progression as you would call a music where you’re going to a one chord to four core to a to a five chord or whatever the case may be or another progression is 13625. With jazz, you can go from one you know from a six eight rhythm to a three four rhythm change. Just instantly and so that is quite complex. Yeah. To master that. It takes a while. Yeah. Right. So that’s a wonderful compliment. Thank you. And that’s the beauty of it is to always be challenged and, and be inspired at the same time.
Jason Hartman 7:14
The interesting thing about tribute bands, I mean, of course, there’s a lot of hacks out there that aren’t professionally trained like you guys are. And you know, I can’t wait to see you guys live Saturday night and you’ve done some big gigs. I mean, you recently played for the city of Fullerton in front of 15,000 people and we’re honored to have you play for our little our humble group. But you you’ve done some some big stuff. You’ve got some good stuff on your resume, and I’ve watched your videos and they’re great. Tell us a little bit about some of the gigs you’ve done.
Giorgio Giorgio 7:45
Yes. Well, we did New Year’s, we did a great new year’s festival for the city of Fullerton. There was about 14 to 15,000 or so people. It was a great event very, very festive and had fireworks and you know, but you know, again, A lot of journey fans and we got a really great review from from the city. And they actually are. We’re in the process of scheduling another event so that’s always good when you’re called back. That’s awesome.
Jason Hartman 8:12
And also you open for Eddie money, I believe, right? Oh, yeah, we open for any money and to me tickets to paradise.
Giorgio Giorgio 8:20
Yeah, he’s the funniest guy ever. I mean, he came, it was kind of interesting story. He came into our dressing room after we finished soundcheck and we talked for probably two and a half hours and he kind of talked about these great stories, you know, experiences in his life and how he got discovered. And you know, he was like really just kind of like hanging with a musician, so to speak, a very humble guy, hilarious, really insanely funny guy. And it was it was a great show. And so that was an outdoor event, a huge festival during the summer. And I loved it. It was phenomenal.
Jason Hartman 8:55
And you also got to hang out with journey last year, didn’t you? You went backstage and
Giorgio Giorgio 9:01
we were actually invited to the Irvine Meadows which was the second to last show or last concert of the great before they were called concert venue. And so we actually got to bought it backstage. And the drummer, my drummer from turning captured Scott Brooks and I spent the entire show two and a half hour show. We were literally about six feet away from them in this special area like VIP area, and we saw the whole show and then after the show, we hung out with journey in the green room and talked about equipment and history and experiences. And we met the new lead singer are now
Jason Hartman 9:45
they discovered him on YouTube. karaoke story
Giorgio Giorgio 9:53
Yeah, yeah, the lead singer that superseded Steve Perry when Steve Perry left. He had a voice hit something when happened to his voice. They had to replace him quickly. And they and Neil Shawn, the lead saint lead guitarist, was looking on YouTube videos. And he saw or now Panetta, in the Philippines. He was in a band journey tribute band. And they called him up. And he thought it was a joke. But eventually they flew him first class to I think San Francisco is some Sound Studio. And he was he was in San Francisco for about a week. And he auditioned. And ironically, he didn’t do a really good job the first time out, but they they kept on working with him. And then I think after the second day or third day, he nailed it. And it was, He’s unbelievable. Such great, great energy. He’s very humble guy, too. So he’s really been an asset. I can’t believe he’s already been with the band. 10 years. Yeah, good. So Wow, that’s amazing. Time does fly. Yeah. I want to make sure and we got to wrap it up because we’ve got an interview to do for the rest of the show here. But I wanted to introduce you before everybody comes to see you on Saturday. And I can’t wait to see you guys there. I want to put in a couple requests. Okay, now now listeners if you have any requests for any, any journey songs and they do a few other things too. So my go off and do something besides journey as well, a little bit. I want to request stone in love. And don’t stop believing you got to do this don’t don’t stop believing, of course, right? And we’ll see if all of our investors in the audience can sing. Don’t stop believing, you know. Okay,
Jason Hartman 11:32
well, we will we will accommodate those requests. Absolutely. We could do every decade of the hits from the from the literally from the 70s to the 80s and the 90s. Until Steve Perry left and we even do some Steve Perry tunes just for fun. And then even some of the new stuff with arnelle Panetta so we’re here for you guys. We’re going to do an amazing show. It’s gonna be a memorable night. Yeah, we’re looking forward to it. So everybody come in to meet the masters. Reach out to your investment counselor and tell them your journey request and we’ll we’ll submit them to Giorgio in his group and, and see if they can line those up for you and we’re looking forward to a real good night too. It’s the first time again we’ve we’ve done a musical performance but we really want to make this a part of our events. I’m super excited to have you guys Giorgio thank you so much and you know any anything else you want to say before we jump to our interview for the rest of the show today?
Giorgio Giorgio 12:31
pleasure speaking with you tonight Chase and thank you so much and we are going to rock this Saturday. Awesome. Any of you who don’t have
Jason Hartman 12:39
tickets and want to grab a last minute ticket? Hey, go to Jason hartman.com slash masters Jason Hartman comm slash masters and grab your last minute tickets. We’ve got a few left elite is sold out. And you know, I probably have to say the IP is sold out although I have to check with Carrie on our team on that but but we definitely have Jen admission tickets left, we’re just going to have a great time for three days, it’s going to be awesome. And for those of you who already have tickets, make sure you download the conference app. So you have the schedule, the speaker BIOS, their resumes, a whole bunch of resources documents that we’ve loaded into that. And we’re going to continue to load more documents in the PowerPoint presentations, all kinds of good stuff for you. So be sure to download the app. We have sent you an email with the link to download the app. So be sure to get that Hey, everybody, we got to jump to the second half of Su and Gary and their and their client case study and get to the good part of their real estate investing journey. And I just want to say before we do that, everybody, don’t stop believing. We’ll see on well on Friday morning, but Giorgio will see you in your band on Saturday night. So thanks for joining us.
Giorgio Giorgio 13:52
Thank you so much, truly enjoy edit.
Jason Hartman 14:01
So now that you’ve had some time with these properties and with your portfolio, share some best practices tips, if you will, for dealing with property managers. I don’t think you self manage anything. But certainly self management is probably something you’ve considered. I think the two of you, Sue and Gary have maybe listened to every single podcast episode I’ve done. And by the way, we’re almost at 1000 at the time of this recording, so yeah.
Gary Pinkerton 14:31
I’ve listened to all of them numerous times. Because I’m helping you with kind of some of the flashback Friday stuff. So lots of stuff there. My first comment on the self management Gary, I actually do self manage that four Plex f original property, we self manage that entire building for a while, and I found it to be amazingly easy, and I won’t go too much into mine because Jason and I covered that on a previous episode. My thoughts, I would love to hear yours. One of the things I was going to mention at the end of the journey, Jason is that Susan, as you said, had finished up her full time job, and is now becoming the real estate professional to run our properties. And it’s pretty amazing. But she knows more, and has probably more lessons now at this point about managing the managers than I do. Mm hmm.
Jason Hartman 15:14
Good stuff, Suze, share some of those with us if you would.
SUe 15:16
So we self manage the single family residence in Oklahoma City, because that was a newer construction. And then we still self manage, I believe two of the units in the four Plex kind of just got to where it was time for a tenant turnover. And, you know, we weren’t really clued in on the background checks and you know, all of that kind of stuff for new tenants. So he handed over two units to property management down there. But otherwise, you know, kind of, I just find sometimes you do have to, you know, I’m still spending some time managing the managers, because I find that things will slip through the cracks, you know, and I’ll use our Memphis as an example one of the houses is a section eight property, and we weren’t getting paid the section eight portion one month it was less than the normal than the next month, it was nothing. And it took me to say, Hey, you know what’s going on here? Why is this going on and to get on the property manager and to look into it. And then, you know, that ended up being a four to five month ordeal. And, you know, we got Sarah involved and all that. It came out, okay. But you know, we were good for a couple months. And then you know, now we just had another issue for a month. And so I do find that I can’t just take their numbers and put them in my spreadsheet.
Rea 16:39
You know what they’re
Jason Hartman 16:40
doing? Yeah, you gotta pay attention. But you know what, I’m curious. Both of you have talked and this is one of the things I really value is transparency. And I try to share on my show, and I think everybody that’s listening for a while will completely agree with us. Hopefully, that you know, I’m just really transparent, the good the bad and the ugly because You know, when you are just upfront about it, people’s expectations are set correctly. And I find that makes my life a lot easier. Frankly, I’ll say it’s even for a selfish reason. But to an outsider who’s maybe happened to catch this is the first episode that they listened to, right? And they’re thinking, Well, why would I want to deal with this with all this problem? You know, I’ll just put my money in the stock market or keep it in the bank or something. You know, it sounds like a lot of headaches. Can you guys address that is why would you be excited about it? After all this, right,
Gary Pinkerton 17:35
we’re trying to drive away the competition.
Jason Hartman 17:37
Okay, got it. Got it. You don’t want other investors buying properties? Right? You’re trying to turn them on? Yeah.
Sue 17:44
Oh, I was gonna say it’s because when when you have that month, where everything goes great, and you’re just like, that’s why I do it. Because, you know, had minimal maintenance calls. Everyone paid their rent on time. And then I fully realized like, all my cash flow that month, and I’m just like that There you go. Now it’s like a game, like, how many months in a row? Can I? Can I make this happen? Right?
Gary Pinkerton 18:05
Yeah. And and for me, it’s about one of the things that’s important is that that the investor learns how to keep score correctly. And I’m kind of repeating, you know, something that you’ve talked about a lot. But when you correctly keep score, it’s not just about the cash flow. And in fact, you know, the being able to offset the depreciation of the dollar to offset inflation. It’s huge, especially when you do it leveraged, right. So I talked when we were at Oklahoma City, Jason Hartman university that, you know, the numbers that are on all of these properties that we were looking at are in the 30s and 40%, total return on investment. And that’s actually what we’re still seeing with our properties, because of the multi dimensions of it. Right. And, and so, yeah, you know, your comment about you feel every bump in the road. It’s a fractionalized industry. It’s going to keep a lot of people from joining it, but what
Jason Hartman 18:53
about IT industry is what I’m gonna say. Yeah, yeah. Yeah. One of the things let me just call that Gary for a moment. One of the things I say Is that, you know, this is a common frustration with investors Hey, it frustrates me everyday to is that it’s a very fragmented industry, you know, everybody’s doing stuff a different way your property manager in, in one city will do it differently than in another city. One of my sayings is embrace the fragmentation because that fragmentation is what makes it very difficult for the institutional investors to get into the game. Now, granted, we all know they’re here to some extent, but in comparison to the overall marketplace, the institutional investor component in the business of buying and holding and renting single family homes is like nothing. Okay. You know, you can say, okay, invitation homes has, you know, 50,000 homes or whatever they have now, right? And that sounds like a lot. But in comparison to the overall marketplace of 15 million or so. Single Family property, residential properties owned by small investors. They’re nothing, okay? They’re nothing. Yeah, and if this was not Frank Did like that goldman sachs and Warren Buffett, and every and your Berkshire Hathaway, I should say, you know, or and every other institutional investor would be in this market eating our lunch. Okay. So it’s good that it’s fragmented. That’s what keeps them out. They it’s hard for them.
Gary Pinkerton 20:18
Exactly. Yeah, exactly. What I was going to say is, it’s some of the stuff that I’m going to talk about it that incredible opportunity to talk and tell our story that meet the Masters is that you know, this opportunity for I mean, we are both extremely bullish that we’re on the right path, and that a lot of Americans need to take this path, because it until you develop part of your personal finances that enables you to have consistent passive income and offset any concerns of inflation. You’re never really going to have the ability to go off and do what you want. You know, I mean, there’s no bank account big enough in my opinion, that will do that for you. But if you have something that keeps up with the changing economy keeps up with inflation. It gives you have the freedom to go off and you know, step off the treadmill of life and do stuff you want to do. I mean, the reason we’re bullish on it, I mean, I think Seward agrees because of the freedom that it creates for our family.
Jason Hartman 21:09
Yeah, and pardon my crass language here, but it just sounds better to say it this way. It doesn’t keep up with inflation. This kicks inflation’s ass. It does it in two ways. Of course, inflation reduce debt destruction, which, you know, regular listeners all understand very well by now. But also just leverage basic leverage, because, you know, you outpace inflation on a five to one ratio. It’s a beautiful, beautiful thing. So and then you have other dimensions where you earn return on investment as well. So yeah, good stuff. Good stuff. Yeah. You know, Gary, you just can’t do it. And But see, the thing that I would argue and I’m sure you know, I don’t know we’ve never talked about this before. Over the years, you’ve been clients, but you know, I’m sure you guys have invested in stocks and bonds and done all the sort of Wall Street pooled asset stuff and you You know what that stuff, it’s like, you have to totally pay attention to that.
Jason Hartman 22:03
I mean, anybody listening who thinks they can give their money to some financial planner, or even put it in an index fund, they are crazy, you have got to pay attention that you’ve got to read, you’ve got to learn, you’ve got to watch CNBC all day, even then, it’s so out of your control, you really have no idea how you’ll do. But you know, I always say there’s no such thing as a passive investment. And let me share a small example. This is not a major example. But it’s worth talking about. Even the bank is not a passive investment, because, of course, your money is getting destroyed by taxes and inflation. We all know that. But, you know, I have some bank accounts that you know, I just spread money around in different banks, and, you know, I don’t want to go over the FDIC $250,000 limit. And so you know, I just never do anything with them. They just sit there right I you know, I have a little bit. I admit, I have some money in the bank because I honestly don’t have enough time to deploy it. Okay, sometimes, and I do my real estate investing, I do hard money lending. And so I get this, you know, notice, like, you know that we think your account has been abandoned. You’ve got to sign this letter and fill out this paperwork. Otherwise, we’re going to let this treat to the state. And I’m like, Are you kidding? There is nothing passive here. Oh, like even a bank account. There’s an example. Right? So yeah, right. It’s, it’s,
Sue 23:33
I’m not really
Sue 23:37
we’re off on a tangent here by now but
Sue 23:41
back in
Jason Hartman 23:41
before real estate investing, you know, before Gary got on this kick, and then he got you enrolled in it. What did you do? Were you were you not the money person was Gary the money person or there we both are, you know, were you looking at your 401k and the stock market and that kind of stuff?
Sue 23:57
Yeah, we would both do it. Keep an eye on it. And we were just, you know, kind of mutual funds because, you know, we thought we could just invest in it and not really have to pay attention to it, right? Because you’re investing for the long haul, and we’re not buying and selling, and hurt me now. So that was where we were, you know, put as much money into your 401k as you could, or Gary had the Thrift Savings Plan. And so that was what we did. And then you know, and I know, Gary has told the story before, you know, my parents are retired now, but yet my dad is constantly like, Am I gonna have enough money to make it through you know, he’s only in his 70s how much longer you know, am I going to need this money for and you know, so it just kind of all circles back to not wanting to have to worry as I get older that I’m gonna outlive the money. Yeah,
Jason Hartman 24:48
yeah. So as a as a health care person, that you are you gotta, I’m sure agree with this that the biggest problem a lot of people are going to face and it’s a good one is too much life left at The end of the money because people are sadly, because of obesity and diabetes and all this stuff. You know, life expectancy actually has gone down slightly in America for like, the first time ever, I believe I just read that. But overall, I am I think it’s an amazing time to be alive. And as you’ve heard me say, and I think that that is going to take a real turn with some of the longevity technologies, longevity sciences that are just, it feels like they’re on the verge of making some red majors, right? Yeah, yeah. So yep, better.
Sue 25:36
You know, hopefully, age expectancy will go back up, and then you know, what are you gonna do work into your 70s or work into your 80s or 90s or 100?
Jason Hartman 25:46
You know, like, if you listen to Ray Kurzweil, he says, We’re gonna have things that you know, clean out our veins and arteries. And yeah, it’s amazing. I mean, all this stuff that’s right around the corner. It’s pretty cool. credible good stuff. Want to share any other like another best practice before you go and let’s kind of wrap it up or anything I didn’t ask you about that you want to share?
Gary Pinkerton 26:08
Well, Jason, most importantly, I just wanted to say thanks for having us on. Thanks for helping lead us through this journey of five to six years. I mean, it’s been just incredible for us. Like we pointed out earlier, we shared some complaints but I think that’s because we’re type a people and you know, your mom has commented once and you’ve laughed about we’ve laughed about numerous times your mom’s comment that she complains all the way to the bank about her section eight tenants. Yeah. But you know, at the end, when you look at those B class or even your C class or and the a class will be at the end of the year, if you spend time to actually keep score correctly, you’ll be amazed at the impact and then everything got so much better with the new tax changes. So I’m very very bullish on this. I can’t wait to you know, kind of share our experience and talk about what I do you know, meet the master. So this next couple of weeks coming is going to To be amazing.
Jason Hartman 27:00
Yeah, good stuff. Well, thank you so much for sharing Sue Gary, we really appreciate it. It’s always great to have case studies. our listeners love it. And they love to hear from real people that are doing real stuff that have real challenges, real highs, real lows, you know, you know, it all kind of works out in the wash. So, you know, I think the key, the key thing is just understand, go in with realistic expectations. There will be problems. It’s just part of life. It’s, you know, we’re all adults. We know it’s not all a bed of roses. Hopefully we learned that by now. And God, you know, you just got to be persistent and work your way through it. That’s what you do with anything that you want to see come to fruition. So, so thank you both so much for sharing with us today. We appreciate it and we’ll look forward to seeing you as soon as meet the masters. Thank you. Bye.
Sue 27:52
Thank you.
Jason Hartman 27:54
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. Welcome to meet the masters of income property investing. I’m your host Jason Hartman.
Announcer 28:48
Join us in beautiful La Jolla, California on January 12 through 15th This is your chance to meet the masters of income property investing. Learn from an amazing collection of experts All in one room, you’ll meet a ton of local market specialists, mortgage lenders, tax professionals, and investment specialists such as Jeff wires of Myers research, and john Byrne’s real estate consultant. Learn from Robert Kiyosaki Rich Dad advisors Ken McElroy, his real estate investment expert, and Garrett Sutton is attorney who specializes in asset protection. Find out what leading economists are predicting for 2018 including Danielle DiMartino. Booth, founder of money strong LLC, and Andrew zachman. From Moneyball economics. here from leading entrepreneurs how to maximize your income streams. You’ll learn unique financial strategies from Patrick Donahoe of paradigm life and how to give birth to a brand from Brian Smith, founder of Australia brand. This year also features a very special guest, Dr. Ron Paul, former congressman presidential candidate and speaker On advocate of liberty. Right now you can upgrade your ticket to include VIP access and a dinner with Dr. Paul. Enjoy a fine dining experience and fascinating conversation. Seats are limited so upgrade your ticket today. Ask questions and learn why real estate is the most historically proven asset class. Armed with new information, you’ll have the confidence to take massive action. As the saying goes, don’t wait to buy real estate, buy real estate, and wait. Surround yourself with like minded people and build friendships that will last a lifetime. share strategies and tips with other investors and hear about their successes and struggles. Make 2018 the year you decide to achieve your dreams. Real estate is a proven way to create true wealth within your lifetime and achieve long term financial independence. Don’t wait. Join us in La Jolla. reserve your seat today.
Jason Hartman begins today’s show illustrating the effects of inflation on investments. Later he discusses the upcoming Meet the Masters of Income Property event and what participants can expect. In the interview segment of the show, he hosts Sue and Gary Pinkerton to go over their real estate journey. They discuss why they started investing and how their first property went terribly wrong. Even with that negative experience, they continued strategizing mortgage sequencing and later describe successes they have had.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Announcer 0:13
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:04
Welcome listeners from around the world. Thank you so much for joining me. This is your host Jason Hartman with episode number 937 937. As you’ll notice, the last episode in your feed is not really an episode, it was just an announcement about our upcoming event. And I want to just say, thank you all you are really testing us. You’re making us work hard with all these last minute registrations. You know, you try to order the name badges early, and get everybody in and then you get 20 more people that want to come at the last minute. Are we the only real estate conference going on in town? Or this year? I don’t know. It must be maybe we’re just the best. Yes, we are just the best. Anyway, we are honored to have so much attendance and have all of you coming. If you are joining us this weekend, and I hope you are Be sure you check that last episode. And also check your email because you received an email from us with the app download link. Great little handy dandy app, a lot of you have already downloaded it. We can tell because we’re watching, yes, there is no privacy anymore. We can tell how many people download the app, and what pages they’re most interested in, in that app. By the way, I want to tell you, there is a lot of stuff in that app. So make sure you go through all of the different pages and the documents we have up there. And we will keep adding to them in real time. So one thing that’s interesting before we get to our client case study today, but I just thought I’d share this little article. It’s about technology. And the two companies that really revolutionized the world of technology are of course, well, there are many, but the two famed companies that started in garages in Silicon Valley, Well, you know what they are? Well, actually a lot of companies started in garages in Silicon Valley. Hewlett Packard was one of them. But that’s not who I’m talking about. I’m talking about good old the to Steve Jobs and Wozniak with Apple Computer. And then Bill Gates and Paul Allen with Microsoft. Right? Well check this out. A little article that I thought was interesting. It was about how Apple is going to do a code release. And I guess they’re going to release the code of their big flop. What was their big flop? You ask? Well, it was back in 1983. I remember this as a kid was Lisa, the Lisa computer. It was a big flop named after Steve Jobs daughter. Hopefully he likes his daughter better than the the computer. At the time. I know he had a strained relationship with her and, of course, the late Steve Jobs we are talking about obviously, but what’s interesting about it is this when I read this article, I wasn’t thinking of Real Estate Investing, or anything like that any of the great financial stuff we talked about, but it’s this right? So the Lisa computer adjusted for inflation today would cost you ready for this? It would cost $24,700 in inflation adjusted dollars. Now that’s only based on what it’s based on the official rate of inflation. So think about it, folks. I have a feeling that almost but not all of you, almost all of you listening, were alive with us in the world in 1983. I’m just guessing. Okay. And as such, you can think about this right. The example I give a lot on inflation and do stet destruction is based on a 1972 homebuyer and they were living in their home, and you saw the way they just massively benefited from inflation. And Pat, in fact, in that example, which we might talk a little bit about this weekend that meet the Masters in that example, they literally got paid. They got paid to live in that house for three decades, while they have that mortgage at 7.37%. And if it’s a rental property, it would have been dramatically better. So, a lot to know about that. But that’s just interesting. You know, most people hate the passing of time. And I mean, that in the sense that look, you know, we all have to surrender the things of youth, right? Our bodies don’t work as well. We look in the mirror we don’t look quite as good as we used to, you know, that’s, that’s the whole reason I’m doing this so that all of you can retire. While you’re still good looking. Hey, I’m a little punchy, because, well, it’s so dark. Count, it feels so late. It’s not really that late. Alexa, what time is it?
Alexa 6:05
It’s 8:23pm.
Jason Hartman 6:07
See, it’s not even that late, but it feels late when I’m recording here anyway. So yeah, I get a little punchy later in the day, right. But you’re thinking that’s the way it is all the time. Okay, so one of the things I will be sharing this weekend that I’m really excited about, I’ve been working on it for a few days now, is these core beliefs that we all need to have as investors. You know, back in 2004 2005, I released my 10 commandments of successful investing. And then years later, I added another 10 so we have 20 official commandments of successful investing now. Well, I thought I’d do something a little more random at this upcoming meet the masters and just release a whole slew of core beliefs and I’ve been jotting them down all day today for you Well, not jotting, typing actually. You know, what’s a shame my teachers in school when I was in school back in the day, they used to say I had such good penmanship. And now when I try to write something freehand, I can’t even write anymore. It’s terrible. Because I type everything. And you know what’s even worse about that? I suck at typing.
Jason Hartman 7:24
I am the slowest, worst typist ever hunt and peck method. It’s a disaster. It’s really bad. So another reason that I appropriately hate email is my lack of typing skill. Yes, I did not know that we would need to type as much as we do. Okay, anyway, rambling here. I apologize. Let’s get back to work, Jason and get back to work. We’ve got a really good case study today. We’ve got a husband and wife case study today. Yes, we’ve got both of them on the show. So you can hear two points. View. And that is Gary Pinkerton, our client who has been on the show a couple of times, but we brought his wife Sue on the show as well. And so I think you’ll really like this interview now, I must warn you, I must tell you something first that he reveals, but he did not reveal it, Gary, I’m talking about he did not reveal it in this case study right away as you’re hearing their real estate investing story. The first house they bought, that did not work out very well. They didn’t buy it from us. Okay, that property, they did not purchase it from us. So I was glad to hear that. But I do remember. And as he started talking about the story, you know, I probably talked to him about this years ago, but I forgot and we just did the interview. You know, I must admit that I almost almost never prepare for an interview. you’re all thinking I can tell. That’s why your show stinks. It’s terrible. Okay, well, I don’t know, most of you keep listening. So I guess you like my stinky show. So yes, I’ve only prepared for a few interviews over the years. And one of them was the first interview with Bill airs. Yes, domestic terrorist, the man who made Obama interesting interview nonetheless, that was a really interesting interview. I think it was one of my better interviews. And I did prepare for that one, because I really didn’t know enough about the guy, the guy that they said made Obama. And you know, I’m certainly not an Obama fan. But I wanted to, I really wanted to dive in on that interview and see what he said. So I did actually prepare for that one a little bit. A couple of others. I did a little research before interviewing the guests. But I did not talk too soon, Gary at all before this interview about what we would talk about, we just dove in and started yapping away. He does reveal that he he purchased this property from another party outside of our network. But what’s interesting about that, is that we actually He tried to work with this same vendor for a very short time years ago, the guy in San Antonio and I was he was talking about it, I knew who he was talking about. So yeah, interesting point, small, small world. For better or worse. It is a small world, especially in my business, this little cottage industry of dealing with income properties nationwide, very cottage industry, not many people in it. Very small world, very hard to find good local market specialists. But when you download the app for this weekend’s conference for meet the Masters, you will see the list of a bunch of our local market specialists who are attending and at this upcoming event. We have more than ever, we have the largest group of local market specialists ever and Why? Well because we really have to do our job. And essentially our job? Well, one of our many jobs is to be a turnkey property aggregator. That is our role. Well, it’s one of our many roles, in addition, providing education support, and a terrible podcast. Okay. So, you know, we’re the host gets on tangents all the time. That is one of our big jobs to be a turnkey income property aggregator right, and to line these properties up. So in order to assemble enough inventory of properties, for all of you who are coming this weekend, to purchase to find good investments, we had to invite a lot of local market specialists. So yeah, you’re gonna see quite a crowd there. But the nice thing is this time, we’re doing it better because we have almost 300 people for this weekend. It’s our biggest ever. We have exhibit spaces for them. You can sit down at their desk spot with a table, you can go over documents, paperwork, pro formas, we’re going to be putting performers and PowerPoint slides from any of the speakers right into the app. So that’ll be super duper handy for you. And remember, we are live streaming this event. So if you can’t make it, get a live streaming ticket. Now, let me tell you, just a couple quick things before we get to our client case study today and our guest, Sue and Gary Pinkerton. One is that we will live stream this weekend, and you can buy tickets for the live stream at Jason hartman.com. Also, you can grab a last minute ticket to come in person, we would love to see you in person. That’s always the best way to do it. And several of you have asked they’ve said, Well, I can’t come. And you know what, I can’t watch the live stream because I’m busy that weekend. Well, yeah, that’s why you can’t come I get it. I get it. I get it. So will we have a product that you By where you can, you know, watch all of the sessions and all the speeches and so forth, and get some materials and so forth like that, I want to say 85% chance, we will have a product that you can actually buy after the event. However, I do want to tell you one thing, we do not have the rights to include ron paul in that product, in our negotiations with his people, we could not obtain the rights to share his talk on any products like that. So that will be the one thing missing. You will see Ron Paul, on the live stream that we have the right to. And then of course live you can obviously see him if you come in person, but on any product. It will exclude Ron Paul, but it’ll have all the other sessions. So I just want to let you know that look for that in the future. And, hey, I am rambling again. So let’s get to it. Case Study and hear how they really did a great job on their path. As real estate investors, they are building their own Empire right now, over the last several years they’ve been doing it they, I believe came to our first meet the Masters in 2011, I want to say but they’ll tell you on this interview, had a very hard time with the first property like I did with my first property that I purchased at age 20. You know, just decided that this is the right thing to do. And they kept going, and they turn that property around. And there are other properties have been good experiences, and they are really doing a great job at it. So I’m very proud of them. And without further ado, here is the interview. Hey, it’s my pleasure to do another client case study today and you’ve heard from one of our guests, but Not the other. So we’ve got a husband and wife, real estate investor team here today, and it’s Gary Pinkerton Captain Gary Pinkerton, who you heard from before on the show. And then his wife Sue Pinkerton. And they are 49 and 47 years old. They met in Connecticut where Sue grew up. Both of them are engineers. But Sue also became a nurse. They’ve got two boys, Jake and Ryan, Jake is 16 Ryan’s 13 at the time of this recording, and they’ve got 17 properties in five states, they’ve got two more under contract, which will bring them up to 19. And then I guess another one is being built. So that’ll be 20 and all with our primary residence. I want to talk to them today about their real estate investing journey, but also specifically about something they are doing a very good thoughtful job of, and you’ve heard me talk about this several times over the years, but that is the topic of mortgage sequencing. They are doing a very good job with mortgage sequencing. So let’s Go ahead and dive in soon. Gary, welcome. How are you
Sue 16:02
are doing good. Thank you.
Gary Pinkerton 16:04
Thanks, Jason. Always good to be on your show.
Jason Hartman 16:06
Good to have you on the show. So what kind of engineer Are you
Sue 16:09
have a chemical engineering degree from Villanova?
Jason Hartman 16:11
Oh, fantastic. And Gary, are you mechanical engineer or electrical? Or what are you
Gary Pinkerton 16:17
mechanical? And then I got a nuclear engineering after that.
Jason Hartman 16:20
Nuclear Engineering. How cool is that?
Gary Pinkerton 16:23
I learned how to build nuclear reactors that’s really, really useful in America today,
Jason Hartman 16:27
you guys are really doing a great job of accumulating properties and building your portfolio. So hats off to you on that. Like I said in the intro, the mortgage sequencing is something we got to dive into, but first, so can you tell us a little bit about what inspired the two of you to get into real estate investing? I think you came to us in 2011 bought your first property then and and then attended your first meet the Masters in 2012, if I’m not mistaken, but give us a little background.
Sue 16:55
So I think Gary was kind of the first one to spearhead that I’m not sure what really turned out onto it. But he he was ready to, you know, kind of jump in with both feet. And the first property we purchased was a four Plex in San Antonio. And then I believe he went to meet the masters. So then he was kind of all in our first property was a huge disaster doing great now really good now and kind of if we could have seen into the future, we probably would have bought a couple more. But, you know, had a really rough road in the beginning. And I’ll admit, you know, I was the naysayer, I’m like, this is not gonna work. This is ridiculous, because the experience was really bad. And you know, Gary’s like, Nope, I’m not, you know, I’m sticking to it. I’m following these this guidance. And, you know, here we are, what, just a mere five years later, and I have 10 properties that I’ve purchased in the past two years. And you know, Gary’s almost fulfilled his 10 for the mortgages. So, you know,
Jason Hartman 17:50
I got to tell you something to comment on your first property. My first property was a disaster too, and I have mentioned this before, at the risk of repeating myself, I just looked back on my life, that first rental property that I purchased that crappy little one bedroom condo on in Coventry lane in Huntington Beach, California. That was a terrible disaster had to evict the tenants. They destroyed the property. I did sell it, and I made some money selling it right away. You know, I just got rid of it after that. And I could have so easily given up I could have just said, I mean, I was only 20 years old after all right? You know, I could have easily just decided, hey, this whole real estate thing is for the birds. It doesn’t work, blah, blah, blah. And I guess you had your first experience was negative in the beginning, but it turned into a positive. So let me just ask you, I know you’ve had some good experiences with your other properties. But the one first property that was difficult, that specific property turned around and that went well later is that we’re saying are you are you talking about the whole portfolio?
Sue 18:54
No, I’m so that specific property. It took a good three years for me Be even closer to four before it finally, you know, really turned around. And, you know, as we look back on it now it’s doing very well it’s in a good area that’s continuing to grow. And, you know, we would say, oh, we’d like to buy more, but now we’re kind of priced out of it. So
Jason Hartman 19:17
yeah, that’s the other thing. If you just simply have the tenacity and persistence to buy and hold the properties. You can almost bank on this cycle. I mean, it’s not a perfect thing. But the cycle generally speaking, I mean, if you ask anybody, as far as appreciation goes, and remember, it’s a multi dimensional asset. So it’s not just about that, because rents a lot of times are counter to appreciating their their appreciation, their non correlating right, as we talked about in the three dimensions of real estate, but essentially, seven of every 10 years are good. appreciation wise, three are bad. So you got a 70% chance if you just hang on You’re going to do very well, right? So if you do nothing else, except just be persistent, and follow that simple quote of mine that I, as always inspired me by I believe jack Paar, who said, success is largely a matter of hanging on after others have let go. Success is largely a matter of hanging on after others have let go. You don’t have to be as smart as anybody else or as lucky or advantaged or have inherited money. Just hang on after others of like, oh, and you’re probably gonna do pretty well.
Sue 20:33
Right? Yeah. And Gary was the one who was he was very persistent because our issues came it was a new construction. So all our issues revolved around the builder and the issues that he was having. So I mean, we didn’t even get to tenants until like, year three,
Jason Hartman 20:49
right. So crazy stuff. Crazy stuff. Gary, any comments on that? Oh, general comments.
Gary Pinkerton 20:55
One thing I think it’s important to say is that that property, I did not get to the Platinum property. Hester and Howard. And it’s what actually drove me to the network. We’ve had problems, you know, not equal to that one. But we’ve had some substantial challenges, even in the last year with rehab projects that didn’t go well, but mainly with bad property management. And those we did get through the network. And the reason I came to your network, is because I spent a lot of time understanding the people who were involved as specifically you. And I felt like I could trust this group, right. And we were like minded. And I believed in the idea that you bring, you know, some weight behind some ability to help us get resolution and you did, and that’s case specifically where we had problems in Memphis. It’s all been resolved, our money was recouped, probably beyond what I expected. So that’s really one of the points I wanted to make is that event, even though it did turn out very well and my wife was very patient with me to get through that it actually did change the course of our investing. And so much quite a bit for the better. And the other thing I want to mention, Jason is all the guys out there and I say this on my on my podcast that you have to listen to your wife’s intuition because it is dead on. I sent her a text once a photo of the property under construction, and it had the builder who turned out to be pretty rough and the real estate broker guy, you know, their version of our investment counselors standing in the picture. I know that I know that we’ve
Jason Hartman 22:25
seen Antonio that you bought that property and you know, we were trying to do a deal with him. And we’re glad we didn’t. But yeah, yeah,
Gary Pinkerton 22:32
yeah. I sent her a picture and she said, Wow, what’s up with those two? They look pretty chummy. Like they’re very good. It’s together nice. And yeah, that’s a weird thing to say.
Jason Hartman 22:40
Yeah. Right on. Yeah. Yeah. Well, women’s intuition is, is very reliable a lot. It’s not perfect. Like, nothing’s perfect. But you know, there’s it’s definitely to be considered, there’s no question about it. No question about it. Good stuff. Okay. So what came next in your journey? So you bought that one in San Antonio. Thankfully, you didn’t buy it from us that way. was a tough one. It did turn around ultimately. So that’s good. And then you just kept buying more now, you came to the your first meet the Masters, I think in 2012. Is that correct? That’s right. Okay. Okay. So that was probably in Irvine, California. I assume that’s when we were doing them there. Right. And then what properties Did you buy next flight? What was after that and and were you were you still buying more? I’m curious. Were you continuing to buy your properties? Well, you were having the bad experience on that first one that you bought from that weasel in San Antonio.
Gary Pinkerton 23:32
Well, like Sue was saying I was moving fast like a freight train. And she was doing a decent job of holding me back. But I did end up buying four properties total, while five properties excuse me five properties. Three were ended up being in St. Louis through the network. The other one that I bought was from the same guy, the same broker, at least not the builder, thankfully, in Houston. It was a model home it did very well. But it was kind of in spite of The real estate broker I used. So my point two and you wanted to get to that mortgage sequencing stuff. At the time, you got more money, I want to say that you could put like 20% down on the first floor, and then you had to go 25% down on on subsequent ones. And I think he could only get six at the time. So I was really, really focused and all the conversation at the time was about buying the most expensive properties early. So I was very focused on, you know, having the higher down payments on the first properties, and that’s why I got that four Plex and then model home, which was a pretty expensive new construction.
Jason Hartman 24:35
Right, right. So let’s talk a little bit about this mortgage sequencing discussion, because that’s one of the things that we really did a lot. We talked a lot about this several years ago, that it was important to, you know, if you’ve got that w two job, you’re an employee, which that’s the what the lenders love. They just love loaning money to traditional employees versus entrepreneurs. And then You want it to be since it was counted on the number of loans, not the loan amount. You wanted to try and stack up the more expensive properties if you could with those loans, right. What’s interesting in this mortgage sequencing conversation is, is how you Gary retired from your career as a Navy submarine captain. And then Sue has, I believe, recently retired from her career. And now you’re in a position where you’re I assume your income now is commission based income, I’m not sure Gary, and then Sue is probably going down that road that way too. So you’ve really done some real thinking about this. You’ve really considered the way you’re going to manage the mortgage sequencing and the acquisition of different properties by different spouses, you know, like you bought yours, and then Sue bought others under her name and talk about that either one of you who wants to take that on
Gary Pinkerton 25:58
Yes, sorry. About how I ended up being the owner of the Jacksonville new construction.
Sue 26:04
Yeah, so well how many you had like four or five, I think right. And then that was about the time you were retiring and going to the commission based sales job. And then I had gone back, I was working part time I’ve gone back full time. And so then that was when we shifted over to my 10. We put our primary residence only in Gary’s name to free up some, I guess I would say leverage for me, and then we bought what four or five and Memphis three in Jacksonville. And then I was supposed to do a new construction in Jacksonville, but we got a little antsy with my leaving my job. And then buying in Oklahoma City actually just bought just before the property tour, but I didn’t see the property at that time. And so that’s kind of my class a premier property in my portfolio. The Jacksonville new construction got delayed. Then So Gary ended up picking up that one just because it was a is a nice looking property and in a nice area down there. So right.
Gary Pinkerton 27:09
Yeah, that’s so you got six in your name in Memphis and then we had the three rehabbed ones in Jacksonville. And all you know, those are great properties. And then there was a new construction in Jacksonville, two finishers out but it was like all new construction, it was delayed a month or two. And when they told me that, I was trying to figure out how to break the news to sue and she calls me it’s and basically the drive that commutes the one hour commute to work was another ugly one and she’s like, that’s it get this last house bought, I’m quitting. And so I said, Well, we need to look for a new property then because this one is not going to be ready. So in the end, I’m a proud owner of a Jacksonville property and she has one nice one in Oklahoma City. That’s how we got into that market.
Jason Hartman 27:49
Okay, so I’m not getting why the Jacksonville thing is like, supposed to be funny. Is it because you didn’t intend to get into another market? or Why?
Gary Pinkerton 27:58
Well, no, it’s just that it was in her name and it was not going to be ready. It was delayed another about a month, a month and a half. And she wasn’t going to work that long, it was clear that she was leaving. So if we were going to get the 10th one, we weren’t gonna be waiting on that property. So I called Aaron Chapman who I absolutely love as my lender. And because I call him the closer and this is an example of that story. I said, Aaron, I understand I’m asking a lot, but we need to move this property from Sue’s name to my name and we’re going to put another one in hers and close it in the next three weeks. And we achieved that.
Jason Hartman 28:29
Yeah, okay. Okay, good. So, so time was the essence to do that below as well. Right? I got it. Right. I got it. Okay, good. Good. Okay. So anything else on the journey of acquiring more properties? And you know, maybe what, what made you pick certain markets or properties, you know, any particular like, did the investment counselor steer you to one or the other or did you kind of what was your thinking about why you should pick Memphis and St. Louis and Jacksonville Over in the and I don’t know, if you own properties in India, I can’t remember where your properties are. But you know what caused you to pick what?
Gary Pinkerton 29:06
Well, the first at the beginning, I really liked the product that was offered in Texas. And so I kind of ended up there plus Texas was a really strong, you know, market at the time. And I mean, it is now it’s just a little overpriced, of course, but then I liked St. Louis, because the numbers looked amazing on the, you know, the BC class properties there in St. Louis. And I learned, you know, that numbers look really good on BNC and, you know, perform often as as high as that, but St. Louis was near where I grew up, and I knew that city very well in Memphis is not that far from where I grew up. But I think so you had some, some strong input, I think on Jacksonville and Oklahoma City, and I think we’re both just kind of comfortable with Memphis, but what are your thoughts on Jacksonville and, and OKC?
Sue 29:51
You know, I kind of take a different perspective when I’m looking at the markets, you know, and I’ll think well, you know, what, I live there, you know, what kind of house would I like to see Or so I tend to go more towards the, I would say the B type properties, you know, kind of more middle of the road, you know, Gary’s very willing to deal with the C class properties and even the older properties. I like something a little bit doesn’t have to be brand new. I just like a little bit newer, you know, so that’s kind of where we went. And, you know, as far as the areas I think, you know, we were just following you and you had been in Memphis and Gary had been on the Memphis property tour, and I think he texted me like, Hey, I just bought this house and there’s a few more that look good. So, you know, we just kind of moving around, you know, following your advice of the three to five areas, you know, and then you know, we like Florida, Jacksonville. I think the three that we bought Gary, those just kind of popped up, right. So we found that we were really looking at, we’ve talked to Sarah and we said that hey, we’re kind of interested in Port Richey and
Unknown 30:53
also Jacksonville. So we like the her parents live here in Florida. We see Florida is one of those markets that has a little bit room for kind of a blend of upside and the cash flow still make sense. But Sara, you know, it was on her radar now. And shortly after that she sent us an option to get three that were kind of come in as a package. So we grabbed those. So, I mean, Sarah has been very helpful. And Sarah and Sue, I think are very similar in what kind of properties they would get. I think I think Sue’s newer stuff is very similar to what what Sarah has in
Jason Hartman 31:20
her port, right? And remember that if you’re listening to this podcast episode, years from now, which you may very well be on a flashback Friday or just listening to the back catalogue. This may all change in terms of markets, and you know that but yeah, the idea is the principles of investing in the psychology of it. Those pretty are pretty darn consistent over the years. I mean, a lot can change, but there are sort of some fundamental I don’t want to say absolutes, but they’re almost absolute, you know, almost I mean, they’re, you know, it’s like the old saying, no rules or laws apply universally including this one. This We’ll be continued on the next episode. Thank you for listening and happy investing.
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Jason Hartman 32:55
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Jason Hartman hosts his mom, Joyce, and a client, Drew, to discuss their respective property management approach. Drew is in the process of going towards self-management but currently uses property managers. Joyce is an advocate of self-management and answers some of Drew’s questions, including those about tenant relationships, longer tenant retention, rent collections, and many other aspects of management.
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Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:04
Welcome to the creating wealth show. This is your host Jason Hartman episode number 952 952. Today we have part two, with my mother and our client drew Baker. They’re actually both clients. My mom is actually a client. Just so you know, she is the extreme do it yourselfer. And drew has, I believe 10 properties Now in addition to his own home with property managers, I take a middle ground on this, as you know, I think the hybrid approach is the best approach. I do want to mention two areas of potential danger and pitfalls. And this is if I haven’t pointed out enough in this, I do think a hybrid approach is a good idea for many people, not all people. You’ve got to have some experience and you can get some experience by beginning your investment career having property managers and learning from them what they do well what they do poorly etc. Just a couple of pitfalls. Areas number one, occasionally, you will have difficulty with insurance for self managed properties, insurance companies, you know, they feel the kind of safe one size fits all benefit or situation is to just have a professional property manager. And sometimes they require that to get a certain rate. So your rates might vary, and companies might vary based on whether or not you’re self managing. That’s one thing I don’t know if I pointed out in this interview, I do want to point that out. So check that carefully. You know, make sure that you are always when you have an insurance policy, you are filling out applications correctly telling your insurance broker the correct things and you’re not misleading them in any way. Okay, so that’s obvious, goes without saying should go without saying at least. And then the other thing is, I’m the most tender and I guess risky part of this is the turn. I believe it’s the term Over, I think collecting rent on a monthly basis, it’s actually quite easy. A lot is made that it’s a big deal. I’ve never found it to be any big deal. And all the times I’ve self managed over the years, I find that to be the really the easy part, the tenant turn is the more difficult part. And that’s where you’ve got to pay attention. You’ve got to make sure you hire a property manager on an all ecard basis, or a real estate agent on an all a carte basis. And you’ve got to really hold them accountable and make sure they’re doing the things. They meet with the tenant who’s departing. They check the property, they send you photos, they do the final walkthrough as they move out. You make sure the utilities are on in between. If it’s a cold climate, and you may need consider winterizing the house pay attention to that. That’s another area where you know you could have a pipe break or something like that look at I know, we’re talking about all these complexities and difficulties. But look, income property is the most essential Quickly proven asset class in the entire world, you got to know what you’re doing a little bit, you got to pay attention, you know, my philosophy, there’s no such thing as a passive investment. So, you know, just learn a few things, pay attention to a few things and you’ll be fine. Okay? It’s the most historically proven asset class in the world. It’s a multi dimensional asset class, where you earn return in many ways, versus the Wall Street, the modern version of organized crime on Wall Street, where they’re skimming all the profits off the top, and all of the other pooled money investments out there, income property, the most historically proven asset class in the entire world. So that said, note the things that I’m mentioning, so be careful on the turn. Ideally, you’re hiring a property manager to do all a cart, lease up and walk throughs in and out and things like that between tenants. But the best thing is to keep your tenants for a long time. And when you self manage a lot of times, you can do that more effectively than you can with a property manager. And we’ve talked about that over the years. If you’re a member of our j h, you can find out about that at Jason hartman.com. And if you’re a member of that, we have a couple of conference calls where we go in, in depth on self management. And we’ve talked about this many times over many years. There are prior podcast on it as well. So here we are with another one. Today is part two. So we will dive into that. By the way, next week, we’ve got some exciting shows coming up for you also flashback Friday tomorrow. But next week, we’re going to talk about slicing pie, as it applies to real estate investors, how you can equity share and share profits in income property investments with partners and do it very effectively using this wonderful methodology called slicing pie. We had the founder of the slicing pie methodology speak at our venture lions mastermind event in Chicago a few months back, it was quite interesting. So we’re going to talk about it as it applies to income probably I think you’ll like that that’s coming up next week, as well as a bunch of other great stuff. And remember, for the Ice Hotel trip, we got a couple more spots left. Venture Alliance and non venture Alliance members are eligible for this trip. The information on that is at Jason Hartman, ice hotel.com. I know it’s a long domain name. Jason Hartman, ice hotel.com that’s the world famous Ice Hotel in Sweden. This is a bucket list once in a lifetime trip. So consider joining us check it out. Jason Hartman Ice Hotel calm. We’ve also got our San Jose Jason Hartman University event ja to live in San Jose on March 3, check that out at Jason Hartman calm and let’s go to part two of hybrid property management. Here we go. So one more about how you deal with tenants on an ongoing basis. I mean, rent collection problems, repair problems. Those are the things people are concerned about. What else do you want to share?
Joyce 7:10
Well, I have some people, which, again, if it’s Los Angeles, I get all of these vendors from the apartment Owners Association. They just have hundreds of vendors. And they know you’re not dealing with Miss little housewife who stays home teaches and bakes cookies. They know that because you’re part of the apartment Owners Association, that you are going to get a better price. And if you don’t get a better price, you simply turn around and call the apartment Owners Association and tell them about it. So there’s painters, there’s electricians or plumbers, there’s everything. And that is very, very helpful to me for the properties that are in Southern California. Otherwise, you simply have to go online and I also get tell them phone books, which is kind of like ancient things that aren’t online, you always can look in the Yellow Pages and find people, again, you just make those 10 phone calls, and you get a good price. It’s a lot cheaper to help a lot of people come to you and give you bids, rather than you taking three bids and trying to get a decent price.
Jason Hartman 8:26
Yeah, right. So you you get a lot of phone calls.
Jason Hartman 8:30
Yeah, you get a lot of people out to that property. Now, here’s another self, man. Two things I want to say. Number one is, you know, we obviously don’t recommend investing in overpriced Southern California. But these are properties that you bought, you know, decades ago. So you still own them. And I haven’t convinced you to sell them on 1031 exchanges yet and buy 20 more properties. So that’s one thing. We’ve talked about that on other shows, so we won’t go into it here. But the other part that’s interesting is that the tenant when it’s occupied, you’re referring To the tenant turnover in between tenants and the make ready. But when the property is occupied, the tenant does the work for you. It’s amazing to me, like I have literally had tenants in my self managed properties, call me and say, Hey, the air conditioning isn’t cooling. It’s not coming out cold anymore. And I already called, and I got a couple of bids on fixing it. And I said, well just email them to me. And I’m like, they’re doing my work. For me. It’s incredible. They’re at the property. I mean, the nice thing about not living near your properties is you can’t go over and meet anybody. So the tenant or the real estate agent or the property manager hired for all carte services during the tenant turn, or even not. We’ll help you do that. One of the things I’ve done effectively and I know my mom has is I’ve used local service providers like realtors and property many managers to just do things for free. Because remember, you’re a potential customer for them. They want your business, they’ll go over and take a look at your property. Mom, I remember, I was with you one time, when you were on the phone with a realtor who was going to look at your property for you and tell you if the tenant had moved, like you didn’t hear from the tenant, you didn’t get the rent. And so you asked this realtor to go over there and the realtor saw the tenant and handed her cell phone to your tenant. They were like in the driveway or something of you know, talk about that a little bit. They idea of getting people to help you out local people.
Joyce 10:39
Yeah, I can’t remember that too much. But I do remember taking
Jason Hartman 10:45
it was the best
Joyce 10:47
Bond. Yeah, but, you know, lots of times, I will ask a realtor, if I am having I haven’t had problems lately, for quite a long while as a matter of fact, but sometimes when you’re doing an eviction You have to know if that tenant has left or not, because you don’t want to travel there, you know, until, and so I’ll just ask the realtor to go by and take a look and see if the tenant is still living there or not. And of course, that realtors quite happy to do so, because she thinks she’ll get a listing to sell the house, or at least she’ll get a listing to rent out for you.
Jason Hartman 11:23
Right, right. And so there’s a whole army of people out there that are more than willing to help you and provide services to you some for a fee and some for free just as a goodwill gesture to try and get business. Okay, so talk to us about evictions a little bit when a tenant goes bad. I want you to talk about retaining tenants because you have your tenant stay a long time in your properties mom, and then that in the best thing is to retain them of course, and to not have a lot of turnover. But the second thing is to handle evictions. Well, if they turn out to be deadbeats, talk to us a little bit about that if you wouldn’t how you handle those things.
Joyce 12:00
Okay, well, if the rent is not there, first, I have a process server for $35. Do a three day notice to pay rent or quit. And you don’t have to wait the three days. If you have one of those terrible clauses it you know, not late until five days, the first day that the rent is not there in your bank account, you email that form or fax that form to the process server and have that process or service. Okay, that makes your tenant know that you serious on top of everything. And once they get that legal notice that attitude changes almost magically. Good. Yes, you don’t get that rent, within three days. Just start to eviction, because you know what, a bad tenant will only get worse and worse and worse. So it’s imperative that you get Get out as soon as possible.
Jason Hartman 13:02
The concept being you know, you’ve all heard it with, like, if you have children or pets, if you give an inch they take a yard. Right. So, yeah,
Drew 13:10
I have a question. I have a question. You know, I think that that might work on paper. I don’t know how that works in practicality. You know, if somebody I know everybody the dog ate their homework, but, you know, sometimes things in life happened where somebody lost their job, and they need a little bit of flexibility. I have maintained a new philosophy that zero tolerance, it’s an impersonal thing, I’m gonna have to just go through I need to do what makes sense for me. And it’s not constantly making exceptions. But Joyce, is there any flexibility because I think when you have a more direct line of communication with tenants, and you’re being you know, friendly and trying to make them happy as a tenant, since they’re your you know, they are your customer. You’re right, yeah, I mean You can’t just kick them to the curb in every situation. But I don’t know, if you have any flexibility or what how your approaches because my issue with the property man doing it self management style is that if you’re now having a relationship with the tenant, is it awkward at all to raise the rents on them? Because that now feels like you have this relationship that now you’re sort of, yeah, we get it good.
Jason Hartman 14:26
We can through the, you know, how does it feel? So, I’m not maybe that’s like 10 questions in one, but give me your thoughts. Let me tee that up a little bit. It’s counterintuitive, true. It’s the opposite. A lot of times, because the tenant has the pressure of pleasing you, of maintaining a relationship with you when it’s some third party property management company, man, they’re just taking all they can get. They’re gonna ask for everything and object everything when they have to maintain that relationship with you personally. They want to be careful they want To maintain a good relationship with our landlord. Go ahead, mom.
Joyce 15:03
Okay, Drew, there are certainly cases, and especially if that tenant has been there for a long time, that you are certainly going to cooperate with that tenant. What I’m talking about if that this was a new tenant, and if that rent isn’t there, like within, say, the first six months that they’re in your house, okay? You send that three day notice to pay rent or quit via Process Server immediately. And pretty soon, you’re going to train that tenant to have that rent their honor before the first day of the month. Okay? That’s really important with a brand new tenant. But when a tenant has been living in your house for six years, for two years in things do happen. Okay. So definitely you’re going to give some consideration to that tenant. I’m just talking about that you get rid of your property manager. All sudden, the tenant doesn’t pay his rent. Right? So the first six months are really critical.
Jason Hartman 16:09
So it’s the probationary period deal with that tenant. Yeah, you set the tone. Yeah, that’s training them up to your standards. You got to set the tone.
Drew 16:16
Yeah. What I do like about kind of the approach is that you’re sort of training your tenant because I think the issue that I have with the property manager is, even though Jason It sounds like you have a great property manager in Florida, I find it very hard to teach an old dog new tricks these property manager I know and pinion they have their box, and if it doesn’t fit in it, they just are like,
Jason Hartman 16:42
totally agree.
Drew 16:43
Both of your point I think attendance is much more flexible than a property manager.
Jason Hartman 16:49
I agree. And the property manager will lie to you or shade the truth, at least sometimes, and act like it’s the tenant demanding something when it’s really useful. them, because you’re you don’t have a direct line of communication. The other thing I wanted to say a few minutes ago about that concept is that when you make it the responsibility of your tenants to deposit the money in your bank account, you got to have a national bank account, obviously, you know, with a big national bank. But there’s other ways they can do it cozy. As you know, there are other options too, when you make it their responsibility to do that every month, you are on top of it, you are attached to it very directly. And you know, the first is the first, a property manager will, you know, send you the rent on the 20th after the check clears and they process the payment, and sometimes the property managers late and one property manager does one thing and another does another thing. And it just gets all confusing. The way my mom does it, it’s clear. The first is the first there’s 12 times a year that you’re going to look online and look at your account, make sure those deposits are there. And that’s the end of the discussion. It’s just really clear.
Joyce 17:59
Okay, so Look at three or four of my tenants now regularly deposit the 20th or, you know, any time before the for right now.
Unknown 18:11
Yeah, it is funny because I was really kind of happy with one of the property managers because they promptly deposited on the first and what I realized was they were depositing
Jason Hartman 18:21
the prior month. Yeah, right. Exactly. I know.
Drew 18:24
Yeah. Yeah. So I there is there is something to be said about that. Now Joyce, how do you handle you know, raising the rent when you know, you’ve now had kind of a personable experience with the renter and do you build that expectation and early or how does that work? Because you know, one of the properties i have i’ve had a tenant, they’ve been great for five years never complained. And I was a little leery about raising the rent because I hadn’t done so he was never ready. I roll my mind mentality well, you know if you if you pull comps in the neighborhood, You know, it’s not like rents have gone bananas. And there is argument that you know, I mean, I think we’re at the Masters event meaning masters, which was great. I think one of the property managers was talking about, you know, the reasons why tenants leave. And one of them is for, you know, they find something cheaper now, not saying you should never raise the rent in five years, that was a mistake on my part because I wasn’t a hawk. But you know, I’m not sure on your end as far as self managing, and in general, you know, how do you set up that allocation? And what if you What if you haven’t raised the rent, let’s say in a five year period or a few years, like, Is it too late to do that? Tell me what you think.
Joyce 19:43
Okay, Drew.
Joyce 19:46
There’s a good chance you might lose that senate if you haven’t raised the rent in five years, when finally you decide to do that, because again, you have to train your tenants to your way of doing business like the guy to have the rent there. before. First day of the month, and then look, every year your taxes get raised every year your insurance costs more money. And you know what? You’re always going to have to spend some money on a hot water heater, a new refrigerator, a toilet, or whatever. Okay, so you have to have some money paid into that. You have to give him a raise What’s in here? There’s just no question. But the way I do it, is I go on to Zillow and Trulia. And I look and see what the rentals are for the area. And if you can’t decide yourself, call a local real estate agent and ask or call two or three of them. So you get a really good idea as to what the price should be. Now your property manager doesn’t ever want to raise the rent, because they don’t want to have to go to the hassle of finding a new candidate.
Jason Hartman 20:55
That’s interesting. And we’ve had we’ve had the debate about that before as to whether Not, that is the motivation that you just outlined with a lower rent, right? Or the motivation is to raise the rent too high so that the tenant leaves so they can charge you a lease up fee again. And I don’t know what’s true, nobody really does, because nobody knows what’s in anybody else’s head. But I’ll tell you something. When you self manage, you remove any of those kind of conflicts of interest. It’s, you’re going direct. Go ahead, Drew.
Drew 21:25
I want to throw a real life scenario that happened with me, and I think it’s kind of a to the point of the conversation. I had a property and the tenant was unhappy with the management company, I think over late fees, or they weren’t getting what they wanted. So somehow, they managed to find my information. I still don’t know how they did. I asked them and I didn’t get a clear answer, maybe through the county recorders office. They can they can
Jason Hartman 21:51
find it. It’s big data man. They found you can find anything.
Drew 21:54
They called me. Yeah, they called me and said, Hey, we’re unhappy. We’ve had this issue and property managers and getting back to us when they’re charging me a late fee. What do I do Bubba? So I kind of became this like party now added to the mix. So one day it was Thanksgiving. Okay. And it was the night of Thanksgiving. The ceiling fan had fallen off the roof when it was off the ceiling. All the drywall, all the insulation, everything had just dumped in their master bedroom. Wow. Jason is a huge
Jason Hartman 22:31
I never heard of something like that. Yeah, go ahead.
Drew 22:34
Wow. Yeah, well, apparently the builder or the person doing the rehab did not use the correct drywall screws or something. And there was some sort of issue in that regard. That was not meant, you know, was obviously impossible to know.
Jason Hartman 22:48
So what’s the question? What’s the question?
Drew 22:51
Yeah, so the question is, it’s Thanksgiving. This has fallen onto the tenants master bedroom, it broke their TV and you know, They said their their wife was afraid and all this stuff and I’m sitting here having to deal with this, you know, looking at the Thanksgiving dinner going, I don’t even know what to do. The question is, is like, now when I talked to the property management company, they had, you know, hey, we’ll get somebody out there, we’ll fix it. The tenant is like, hey, how much are they charging you? I can have my uncle do this. And oh, who’s gonna fix my TV? And it just became this real weird situation where they wanted Well, that’s that’s
Jason Hartman 23:31
insurance. The TV is insurance. That’s an insurance claim for the TV at least if not the ceiling fan to but the TV is definitely an insurance, you know, that’s their insurance first and your second I can answer that one for you. Okay,
Drew 23:44
okay. Okay. That was taken care of, but I guess that so they want to have their uncle do the job and they’re trying to bargain with you. And, you know, when you have a property management or hiring someone real that’s not part of the that doesn’t fit in the box. So it’s The tenant is trying to kind of cut corners. And you know, I don’t know how to deal with that. How do you do just tell the truth?
Joyce 24:09
The first thing, I think, because you, you have that property management company, that has got to be their responsibility for fixing it. I wouldn’t deal with a tenant because you don’t know the debit from Adam. You have no clue if they’re responsible people. If the guy is a real good, Handy guy, you have no clue, because you’ve never met them and you’ve had no relationship with them. So you’ve got to let that property management company handle that problem. And then I would get rid of that property management company.
Drew 24:43
Yeah, well, my main question, Well, my my, my hypothetical was more like, this is your home. This happens to you. You don’t know their work and they’re trying to bargain with you and my uncle can do the work for cheaper than this other person. I had to do the bid. You know,
Joyce 24:58
the question is it I don’t know. No, that cannot. And so I can’t try. You can’t do that.
Jason Hartman 25:05
Yeah. Because you may have a bigger mess on your hands. That’s another reason for self management. So there you go. Because then you’ll know the tenant, you’ll know who you’re dealing with. I mean, my aunt Joan, who was, of course, another speaker at meet the Masters, you know, she’s got, I think, now like 80 properties or so, and has always self managed everything. But you know, admittedly, what my mom is doing and what am Joan is doing is kind of old school. But I think there’s a lot to be said for it. I think, folks, we got to wrap up. We’ve been talking for a long time here. But the point is, I really believe that the hybrid approach is the thing to do. You have someone help you a property manager or a real estate agent, all a CART services, just to do the lease up. Here’s what they do. Again, let me just say this, okay, because we’ve gone into a lot of this that you don’t need to do while you’re listening. They they handle meeting the old tenant, they do. walkthrough of the property, they send you a bunch of photos, they help you determine what to give back and what to keep from the old tenant security deposit, then if any rent ready stuff needs to be done, and hopefully it doesn’t. But if it needs to be done, they line up the repair people, the painter or the whatever, and they have them get the house ready. And then they do the marketing for the new tenant, they screen them, and they’re responsible for all of this. And then they lease it up and they transfer the keys over. And they By the way, they also give you pictures of the house before it’s delivered to the new tenant. So that you have pictures to see that everything was now fixed, right? And then the new tenant when the next rent is due on the first of that following month, they pay you directly. This is the best system if you asked me, okay, and you know, I don’t do it with all of my properties. I do it with some, but oddly, these tenants they just don’t bug you like everybody thinks. One thing. I do want to close with We didn’t get to the tenant retention question, although drew asked a little bit about increasing rent and Mom, you said that you train people to expect rent increases, which I think is a very good policy, even if it’s a small rent increase, get them in the habit of knowing every year there’s a rent increase. Okay. But the longest tenant and we’ve talked about this on the show before you’ve ever had one of your properties, is the guy that’s been there since 1989. He got a bought the house by now, his mortgage would be paid off, right. But you’ve had some other tenants that stay a long time. What is your average tenancy before you do a turnover and what are some of your other like long tenants Mom, how long have they stayed?
Joyce 27:42
I think 5 6 7 years. Mm hmm. Yeah, it’s pretty typical. There’s an area I believe that valley where the lower class of the tenants and during the 2008 910 11 years, I had turnover because tenants lost their jobs.
Jason Hartman 28:00
So they weren’t they were moving around.
Drew 28:03
Okay, do you think that this style that you have? Does it change at all? Or do you have? Would you have a different approach? If it were in a class neighborhood versus a C class neighborhood? Or Jason, do you recommend? Do you think that you might have better success in a more affluent areas than you would dealing with people that are maybe a little bit more of a lower economic status? When you think about that? affluence? misnomer?
Jason Hartman 28:27
I mean, you know, a and b properties are generally the easiest to manage C and D properties are harder. But go ahead, Mom, what’s your answer?
Joyce 28:34
I think one of the things that you learn when you do the lease up if if the person is handy, or what kind of work he does, and sometimes that counts for a lot or just, I have a tenant in Northport and a lot of things went wrong with that house because it was a really cheap builder. And she It was very intelligent woman and she’d get estimates or she Have her ex husband do the work. And because she was smart, and she was good, I trusted her with a lot of things. And she saved me money. But that only comes with knowing that tenant,
Jason Hartman 29:11
amazingly, the tenant will do a lot of this work for you. And I don’t mean that they’re necessarily swinging the hammer, okay, but sometimes they are, I mean, that they will meet the repair people, they will screen them, they will get some quotes for you. They will save you a lot of time. I mean, I’ve had tenants call around and find the best vendor for me, I’ll end up paying for the thing, but they’ll say hey, I think I found you the best deal on this repair or that repair and this I can do myself, but you know, they’re trying to get brownie points with you. They’re trying to get like extra credit sometimes. And you know, make you know, they’re a great tenant, and you know, they want to help you out. They got to maintain that relationship. When you have the property manager in the middle. It’s not that way. It’s different. So look, let’s wrap it up. We Going on very long. This is
Drew 30:01
why I have I have my last question. Really important. I want to know Jason, would you want your mom to be your your landlord? No. Okay, Joyce Joyce, would you want? Would you want Jason to be your tenant?
Joyce 30:18
Well, I wouldn’t mind if I if I didn’t know him this my son.
Drew 30:24
I had to ask. Sorry.
Jason Hartman 30:24
Oh, that’s fun.
Unknown 30:28
He could afford my rent rate. Yeah.
Jason Hartman 30:31
Oh, that’s funny. That’s a funny question. But the point is, look, if you have a great property manager, they can be worth their weight in gold, a great property manager is great, but a mediocre or a lousy property manager, you know, you might want to consider the self management. I’m not saying it’s for everybody. It is for some people. If nothing else, you learn some stuff from this. We’re gonna have to split this into two episodes because this interview is so long. But I just want to thank drew and my mom. Thank you. So much, you guys for sharing some of the stuff.
Yeah, go ahead.
Joyce 31:03
Can I just say something to drew? Sure, you know, Drew, if you have five properties in, say, Indianapolis or something,
Jason Hartman 31:10
you got six there and four in Memphis? Yep.
Joyce 31:12
Okay. You know, you might really consider just totally self managing, because you could go there when I have to re rent a house. If it doesn’t work for one tenant, they always say, Well, do you have anything more in the area? Do you have any more houses? And in Moreno Valley, I’ve got four houses. So if another two houses up for rent, you know, I can show them that house. That becomes a real good point for you. You would know that neighborhood, you’d begin to know all of the good vendors. And you just might want to just
Jason Hartman 31:46
let me let me say something about that. This is a strategy I’ve talked about. See when you make the mistake like I did of over diversifying, you don’t have that if you’re going to buy or you already have, you know 20 properties 30 properties say that’s your your portfolio goal at this point, right? Don’t over diversify. If you can get 10 in each of three cities, you’re gonna have that what I call the pinball effect, like a pinball machine, right? They can bounce off one and go to the other. And, you know, you can start to actually influence comps in the market and rental rates, ultimately, sometimes. So I think that’s a good goal to move toward. And that’s another thing to think about, folks, we got to wrap this up. We’ve been on for an hour and 10 minutes here. So Drew, and my mom, thank you very much for sharing some of this stuff. It’s been just a very casual discussion today. Many of our interviews are much more formal than this, but I really appreciate you sharing this stuff. So thank you and happy investing to all
Joyce 32:49
good luck, Drew.
Drew 32:51
Thank you.
Jason Hartman 32:53
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes, be sure to check out the shows. Pacific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice 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.
Hybrid Property Management Strategy with Joyce and Drew
Jason Hartman brings on two guests, his mother Joyce, and client Drew. THey discuss their experiences with property management. Joyce is an advocate of self-managing and gives tips on how she has become successful at doing so. Drew discusses using a property management as he doesn’t feel ready to step into self-management. Jason brings up the idea of doing both, in a hybrid set-up.
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 951 951. Thank you so much for joining me today. This is your host, Jason Hartman. And we are going to do a show with three people today. We’ve got our client drew Baker on the line, and our other client, my own mother on the line. We are going to talk about self management. There are a lot of misconceptions in this area. And I want to clear some of those up today. Drew has several properties. He has property managers for all of them. My mom has several properties, and she’s self manages all of them. So we’re going to go into this great, maybe great debate today about these different concepts and different ways to deal with self management and how that opportunity is available to you. But first, a couple quick reminders and announcements if you were at meet the masters of income property. Thank you so much for joining us for that Go to Jason hartman.com slash photos. Jason hartman.com slash photos and get your photos. And if you are into voyeurism. You can go there too. And check out the photos of everybody else. How do you like that? Check that out. And for the Ice Hotel, we’ve got another registration. Congratulations to Jeff and Shannon who are joining us for the bucket list Ice Hotel adventure in Sweden. We need a few more people to greenlight this trip. Check out the details at Jason Hartman Ice Hotel calm Jason Hartman Ice Hotel calm. Also we’ve got another event coming up a J. Jason Hartman University in San Jose, California Silicon Valley, and that is coming up on March 3 very exciting event. We haven’t done this one in quite a while. We only do these about once a year. Let me just explain kind of the overview of some of our events just real quickly before we get our two guests going. Hear, basically we do a couple different kinds of events. We do our annual conference meet the masters of income property. And at that conference, I don’t talk very much. That’s basically a conference where we have a bunch of different guest speakers. And you kind of know what that’s about, probably because I’ve been talking about it lately. Then we have our creating wealth, one day seminar, okay, creating wealth. And that’s my core content that I’ve been teaching for 14 years. And we’ve had thousands and thousands of people come through that it’s sort of philosophical in nature, philosophies, mega trends on investing, things like that. And then we have Jay Chou. And we added Jay Chou, Jason Hartman University A few years ago, because people were requesting some real interactive content. They wanted to know how do i do the math of investing? How do I keep score? How do I decide which properties to buy in which properties not to buy? How do I figure out the calculations. And so this is a very hands on event where you will need a pen and paper or maybe a pencil, and you will be writing and you will be doing the equations and analyzing investments. It’s a very interactive event. So that’s what Jq is, this is on March 3, early bird pricing at Jason Hartman calm in the events section. So grab your tickets today. We’ve only got 15 tickets available at that early bird price. So we do have a partner on this event selling tickets for us as well. A local Ria Real Estate Investment Group up in San Jose, and so they will be selling tickets as well. These will sell very, very quickly. So Jason Hartman, calm in the event section for your tickets for that. So first of all, Mom, welcome. How are you? I’m fine. Jason, it’s good to have you back on the show. You’ve been on several times. And people always love it when you’re on the show and have You’ve spoken meet the Masters as well with my aunt Joan, your sister talked about the way you guys built and manage your your real estate portfolios. And then we’ve got drew Baker Drew, welcome. How are you? Hey, thanks for having me back. It’s good to have you. Good to have you and drew thanks for setting up the three way call. You know, folks, a lot of things bugged me in life. I complained a fair amount. I know that horse leaf blowers are one of the biggest evils and scourges in modern history, modern life. The other one that just amazes me and shocks me on a daily basis is What a pathetic piece of junk Skype is. We’re talking on Skype now. And it has the world’s worst user interface. And every time they update the program, it gets worse. But it does have a benefit. It has very good sound quality when it works. So I drew had to set up this three way call because for whatever reason, Skype cited it Didn’t want to do a three way call today. It’s mind boggling. Anyway, enough of my pet peeves. But you know what else really annoys me? Maybe you guys will have a comment on this. People that drive really loud cars and motorcycles. I mean, how is that legal? to have these incredibly loud vehicles that I can hear in my high rise when I’m trying to sleep? They make noise, they echo for blocks and blocks around. It’s crazy. Do you guys agree with this?
Drew 6:29
I’ve heard that there’s a strategy behind it to say that they don’t want to get hit.
Jason Hartman 6:3d
That’s for the motorcycles. But how do you explain the obnoxious cars that are modified? And you know, and they modify them so their exhaust is really loud? It’s just obnoxious, frankly. But yeah, I know the safety
Drew 6:46
every time somebody drives by like that. I just look at them and say out loud, Wow, you’re so cool. In irony, because it’s such a joke. It is really a joke, mom.
Jason Hartman 6:56
Now you have allowed car only because it’s an old car. My mom and drew have the same philosophy on automobiles, they drive them forever and get a lot of value out of them.
Joyce7:06
Why should I throw away something that works perfectly?
Jason Hartman 7:12
Well there,
Drew Baker 7:13
I’m just the steady horse. I want to just stick with something and drive it till it dies. And it’s our creature of habit. So why change it? If it ain’t broke? There you go, there
Jason Hartman 7:22
you go. Well, there is something to be said for a rational amount of frugality in life. I agree. But hey, both of you are pretty darn wealthy. I gotta say that much. You both have, you know, had different issues and frustrations with your property portfolio. And that’s what I want to talk about today. Because drew every time you come to me and talk about a property manager problem. I talked to you about how the hardest part of our business is property management. It’s where the rubber meets the road. It’s challenging, and I have recommended to you self management and I would recommend For a lot of people now, look, folks, this is not for the newbies. If you don’t know anything, don’t self manage, right away, learn some stuff from your manager, learn about management. But my mother has been self managing her real estate forever. And I always self managed my local properties when I was strictly investing locally. But now that I invest across the country about 10 years ago, and I’ve told the story many times, I became an accidental self manager of a property I had never seen, and with tenants I had never met. And I still haven’t seen that property. And you know, I have self managed very successfully, actually, several of my properties for years at a time. And the self management thing I think, is really something to consider. You know, in every area of life. Sometimes, it’s actually easier to just go direct and cut out the middleman Sometimes it’s better to delegate things, I admit, but sometimes it’s better to just do things yourself. Right. And with management, audibly, it might be counterintuitive to some except my mother. My mother is an extreme do it yourselfer. That’s what I call you an extreme di wire. Okay? She’s self manages everything and she’s got properties in several parts of the country. So I just wanted to compare and contrast these two approaches for bet. So Drew, you’ve always had managers you started buying in Indianapolis, how many years ago did you start and how many properties do you have now?
Drew Baker 9:37
I started in 2010. And it was sort of a funny thing because I’d saved up a bunch of money to put a down payment on a house in California. And when the prices went in half, I had enough to put about half down for a house. And since I was self employed, everybody just looked at you and laughed. If you were thinking you were going to get a loan, so I took the money and bought investment properties at a state that required cash only deals because they were all bank foreclosures through your network and I’m up to 10. Now, so
Jason Hartman 10:09
congratulations. I picked in Indianapolis and I have four in Memphis. Okay, so six in Indianapolis four in Memphis. And I remember you were buying stuff. I mean, you got some good buys on stuff back in 2010. So did everybody else, you know, of course, and I think the first property you bought I remember that property in Indianapolis. It was about what 55 $60,000 something like that.
Drew Baker 10:32
Oh, Jason, how dare you know, I got some. I got some amazing deals. all the places I bought in Indianapolis were between 40 and 50,000. Wow. Wow. All fairly new construction. You know, I think my prep my crown jewel was I got a four bedroom, two bath 1400 square foot house, you know, built in 2003 and I got it for 40 grand.
Jason Hartman 10:59
Oh my Got it. And so that was that was that was really a class a property, wasn’t it? I mean, it’s an adult in 2000. No, Class B.
Drew Baker 11:07
Yeah, I would say the problem is that with these areas that everything was built at the height, the market sort of evolved where everyone that came in got foreclosed on. So the neighborhood is sort of a little bit destabilized. But you know, build isn’t a build. So you got an A house, but you know that the neighborhood is probably more of a C plus neighborhood. Right? Right. Hey, house,
Jason Hartman 11:32
because because, because they were giving loans to everybody who could fog a mirror. Yeah, absolutely. So thanks for sharing that. And Mom, tell us about your situation. I mean, you were investing all around Southern California. And then you move. And I finally even though you never listen to me, I finally got you interested a little bit in investing in some of these lower priced markets. And you’ve got a couple of properties in those markets. Right. Alabama, Mississippi. Yeah.
Joyce 12:00
I do. And I had property managers for both of them. And the happiest day was when I got rid of those property managers.
Jason Hartman 12:10
I love it. And folks, I want to tell you, you can be free of property managers too, if you want. But there’s an interesting thing and I think I want to, I’m gonna take the middle ground in this discussion between the two of you on one corner, you know, if it’s a boxing match, we’ve got my mother who’s the extreme, do it yourselfer. And in the other corner, we’ve got Drew, who has property managers for all of his properties. But Drew, since I know you, you’ve been a client for many years and a friend before that. You are a do it yourselfer in many other areas of your life. So I don’t think you’re like afraid of doing this but you do have questions about it. And so I’m in the middle of all kind of referee this discussion. And here’s what I want to just start with to make the conversation faster. I do a hybrid selfie. management approach. That’s what I recommend. So the hybrid part comes when you need to get a new tenant, when you’ve got a tenant that is moving out, and you’re between tenants. That is the part where I believe you should always hire a real estate agent, or better yet a property manager just to simply do the lease up between tenants. Now really, you give them a little more responsibility than the lease up itself, okay? Because of course, in order to do the lease up, they need to meet with the tenant who is leaving, they need to get the keys from them. They need to go and say hi to them. They need to do a walkthrough of the house and take pictures and send them to you. So that you see what condition the house is in when that tenant was leaving. And you know, they can help you determine how much of the security deposit you want to give back and so forth. And you need to send the tenant away letter saying, Hey, you know, your security deposit was 1500 dollars, but I kept $300 for this, that and the other thing, and you need to itemize that. And there is, by the way, a time limit on that security deposit letter, I think in California, it’s like three weeks around the country, it’ll vary. So just know that and then you get the real estate agent or the property manager, doing all a CART services, all a CART services, if they’re a manager, okay, where they will screen that tenant, they will take applications they will advertise the property, etc, etc, and you will pay them strictly to do the lease up. Now, if you had a full property management contract, what that would include is them receiving the rent every month in handling everything. Okay? So this is understand. My opinion of this is it should be a hybrid approach. Now, Mom, the funny thing about you, and I loved I loved it. I thought it was hilarious when you said it. You said it from the stage it meet the masters. I think I was bugging you or someone had asked a question about why do you do all this yourself? You do it 100% yourself. You don’t get the help of anybody except maybe some free help from a local realtor occasionally and, and you can comment on that. And you said, Well, I’m retired. I don’t have anything else to do. I thought that was so funny. You carry comment on that?
Joyce 15:24
Well, yes. Because, you know, it just keeps you kind of active in in the game. When you’re retired, you have to go to all these stultifying women’s luncheons and raise money for charity and that is the most important thing in the world. So I like I like to begin business.
Jason Hartman 15:43
Drew, does that just make you laugh with my mom? It’s hilarious.
Drew Baker 15:49
Yeah, I love it.
Jason Hartman 15:51
You’ve got to go to all these stultifying women’s lunches.
Joyce 15:56
I mean, you have to do something with your life.
Jason Hartman 15:58
No, of course not. I
Joyce 16:00
think that’s a little bit boring to me. Yeah,
Unknown 16:03
yeah. Good.
Jason Hartman 16:04
Well, I agree. You know, I have zero interest in ever retiring. You know, I think he’ll the people that live the longest are the ones that keep themselves busy and occupied and stimulated. So I love that you do that mom, I think it’s great. But it doesn’t mean that you need to deal with every little thing on all your properties. But Drew, what were you gonna say?
Drew Baker 16:24
Oh, I just was gonna say I remember one time that’s an April Fool’s. You said you were gonna retire?
Jason Hartman 16:29
Yes, I did. I did write that on Facebook once. Yeah. Anybody who knows me knows that. That ain’t never gonna happen because I have you know, I don’t care how rich I get. I like working you know, you got to do something. You got to stay engaged with life very important thing and in my opinion. But mom, tell us about some of the issues and things that you deal with self managing your I mean, your self managing long distance, and you are the extreme do it yourselfer. Tell us a little bit about it.
Joyce 16:58
Well, let me make it suggestion. First off to drew crew, there is a wonderful organization called the apartment Owners Association in California
Jason Hartman 17:10
and the country by the way, just go ahead.
Joyce 17:13
Okay. Well, the one that I particularly belong to is the one in California, it’s $79 a year. And with it, you can run your credit reports, and every form that you ever need in the world to do everything legal is a part of that association. Plus, they send you a monthly magazine with all sorts of interesting articles. One of them is cases by you know, a landlord eviction attorney, and it’s just fabulous advice. Okay. So that would be that if you’re going to self manage, that would be the first thing I would suggest that you do.
Drew Baker 17:51
Okay. Great.
Jason Hartman 17:52
Apartment owners associations are not just for fun, go online. It’s a old usa.com Okay, so apartment owners associations aren’t just what they sound, the name is a little deceiving. I just want everybody to know that they have these all over the country. My mom happens to be a member of that one just because that’s where she used to live in Southern California where I used to live and spent most of my adult life. Let me just give you a little context here to for the conversation. We of course have sell properties nationwide through our referral network. Drew lives in orange, California in Southern California. My mom and I grew up in Southern California and Los Angeles and Orange County. That’s where both of us started investing. You know, she was investing when I was a kid. And then when I grew up, I started investing there too. And I found it to be very speculative. And I wanted to invest in better sort of cash flow oriented properties. So you’ve heard me talk about that before. But just a little context there. The apartment Owners Association, the associations all around the country that they have Have are for any type of properties. So it’s the name is a little deceiving. If you own single family homes, you know, you can still join an apartment Owners Association. And my mom does everything herself. So she runs the credit for the prospective tenants herself, does the background checks, and you can get that service yourself. I am not suggesting you do this. I think for our investors, the hybrid approach is the right approach to have. So let’s talk about that a little bit. Drew, you have questions and concerns about this. And I’ve said a lot about it. Talk to us about some of your questions and concerns and let’s just answer them for you.
Drew Baker 19:40
The first thing is, is I think it’s important to just basically started off with some assumption that you know that you’re not going to live near the property. I know you guys have some property in Orange County, or at least did or LA County. And it was
Jason Hartman 19:52
I wanted to say By the way, my mom now lives in Gulf Shores, Alabama, so she doesn’t live in Southern California anymore, of course. Neither do I. Okay, so she’s she’s across the country, just so you know. Yeah. But she also owns property in Alabama and Mississippi. And even the Alabama property’s not near her home, but go ahead.
Drew Baker 20:11
Yeah. Okay, so yeah, so you’re not you don’t live near the property, you’re not particularly handy. So it’s not like you can go over there and change the light bulb or whatever. She’s
Jason Hartman 20:19
way more hands than you might think. But go ahead. Okay
Drew Baker 20:22
All right. Okay. All right. Well, okay, maybe we’ll change the light bulb we can handle, you know, doing something more complicated, maybe. And you’re not afraid to make mistakes, you know, so make small mistakes, but you’re very afraid of making a big mistake. And then obviously, there’s exceptions to every rule. So, you know, you have to be flexible, because you’re basically a small business owner when you’re having to deal with a tenant and the tenant as almost like your employee, so you have to have some sort of business he feels to approach this and be successful. I hope so. That’s kind of the assumptions I think are fair to make. Starting off. Yeah.
Jason Hartman 21:00
And Mom, you know, if you didn’t do the lease ups on your properties each time, really, I think the rest of the stuff you do is really quite easy. So I’d like to talk about that. I see, I think the area that, like I said, the hybrid approach, hire a property manager to do the lease up, they will probably woo you, and court you to try and get the ongoing account because that’s the part that’s easiest and most profitable for them, I believe. Okay, but you don’t want to do that you want to have the tenants send you the rent every month. So mom, talk to us about how you do that. I love the way you do it. It’s super simple. You make the tenant responsible for just putting the money in your bank account. And you look online, and you’re really on top of it. You know, every month on the first you look and see if those deposits were made. Talk to us about that.
Joyce 21:56
Well, the first thing before that happens you have to let that tenant know that you are an absolute stickler for getting your rent on or before the first day of the month. And that’s what makes it easy. Well, I do that when I meet with a tenant, of course, you want to let the real estate agent handle that? Well, the first mistake they’re going to make is that they’re going to give the tenant that grace period in the reef. And so when it says, you know, when the rent is due, you cross out that grace period thing and you say zero days, and then you inform the tenant, that the late fee will be $70 if the rent is not there in your bank account rather on the first day of the month, and it is $5 each day until the rent is paid in full.
Jason Hartman 22:52
Okay. Let me say something on this. Let me say something on this. The laws regarding late fees do vary, but yours is actually in Not that bad mom, you’re actually kind of easy about it, remember it meet the Masters, when one of our property managers said it’s $25 per day. And I asked them, and that was in Memphis, by the way. And I asked him, I said, Is that legal? And he goes, Yeah, it’s legal. So, you know, you’re gonna have a tenant pay out pretty darn quick. If it’s 25 bucks per day. That’s expensive. So what you’re saying is that a lot of the leases have a boiler plate in them that say, you know, rent is due on the first and on the fourth, you’ll be billed before Yeah. Which is kind of silly when you got to stop doing that. Yeah,
Joyce 23:35
right. That’s just ridiculous, because that means you’re always going to be chasing your rent, right? My rent are typically in my bank account the first day of the month. Mm hmm.
Jason Hartman 23:47
Right. Okay. What else do you deal with on a monthly basis? Because again, my recommendation in this whole discussion, just make sure you hear me is that the owner the investor, the landlord deal With the tenant on the ongoing monthly basis, but not on the lease up in the screening, I think that’s the hard part. So you delegate the hard part and do the easy part yourself. Your tenants, you know, Mom, everybody talks about how, oh, you’re gonna get a call at three o’clock in the morning that the garbage disposal doesn’t work. I mean, I never get those calls. That’s just complete. Like,
Joyce 24:22
that’s ridiculous. First of all, that’s ridiculous.
Jason Hartman 24:25
Tell us about that. Your tenants bug you all the time. This is what people envision. No.
Joyce 24:30
Yeah. Okay. No, the longer you have the tenant, the less hassles you have with that tenant because they start regarding it as their house and they start fixing things. So you never get those. The garbage disposal is clogged, the toilet is clogged. And besides your lease states very clearly, that any garbage disposal that is plugged up because the garbage disposal works perfectly when they take over the house. That is their response. ability to call the plumber, because they’re the ones that put the bad stuff down. It’s the same thing with a toilet. The same thing with changing light bulbs. The same thing with a yard. They’re responsible for watering for growing, edging, trimming, all of those things are clearly spelled out in the leaf. And you do not get those kinds of calls. That’s ridiculous.
Jason Hartman 25:21
I know. It’s kind of like all the lawyers that talk all about this asset protection, you know, this huge need for more asset protection. You know, what if the tenant does a slip and fall? I have never heard of that lawsuit ever. I mean, I hear people talk about how it could happen. And it could I admit that, but I’ve never heard of it actually happening. Mom, have you ever had a slip and fall lawsuit or has a tenant ever actually sued you for anything other than you know, like a dispute in the rent or an eviction when you’re trying to evict them?
Joyce 25:53
No, they’ve never.
Jason Hartman 25:55
And how long have you owned a rental property for 40 years now? someplace, you know, his stuff is just folklore. A lot of times this is just mythology folks
Joyce 26:05
about 1980. I would say,
Jason Hartman 26:07
okay, since 1980, you’ve owned rental properties and a tenant has never sued you drew questions. Oh, I was just gonna add a point of humor. So my wife growing up the bottom unit, the kind of bottom two bedroom apartment that she she lived in a house where the top unit was the main house and the bottom unit was the granny flat and her grandma slipped on the front porch and had fractured her hip. And her parents said, we’ll sue us because that way you can take advantage of the homeowners association.
Drew Baker 26:43
That’s the one that I’ve only heard of. So grandma.
Jason Hartman 26:47
Okay. So mom with this ongoing monthly, you know, rent collection, repair issues. Do people call you and say there’s some answers cockroaches in my house, you know, send over a pest control company. Do they do that kind of stuff?
Joyce 27:05
It’s not my responsibility to do pest control, planning. And you know, you’ve had the company come in, you know fumigated, okay, type of thing. That is a tenant responsibility. That’s my judgment. Okay. And I will not I had a tenant in Canoga Park, who, after three months, she said, the dog got fleas in the backyard. And I said, Well, most people have their backyard sprayed when they have pets. You know, it’s just not your responsibility.
Jason Hartman 27:38
Yep. So here’s the other thing, Andrew, you know, and all the listeners, I’ve talked about this many times when it comes to the self management discussion. The property manager has an inherent conflict of interest. A lot of good property managers will get complaints on Yelp on you know, online, right? Because they’re tougher. With the tenants, you got to notice whenever you’re looking at a property managers reviews online, who are they coming from? Are they coming from owners or tenants? The property manager is inherently and I feel a little bit bad for them. They’re caught in the middle. So they’re trying to serve two masters and you can’t serve two masters. That’s the rule of life, right? It’s an inherent conflict of interest. So they will tend to maybe be soft on the tenant, costing the investor or the landlord or the owner more money, because they don’t want the tenant to go write bad things about them online. You know, they don’t want to argue with a tenant about stuff so they’ll give your money away. It’s kind of like these liberal politicians, you know, they give other people’s money away so that they can be seen as the nice guy like their frickin Robin Hood or something. You know, it’s it’s ridiculous. Talk about like, the late Ted Kennedy. Oh, he was such a nice man. No, he was a person who stole money from some people and gave it to other people to buy their vote. He’s uh, you know, I mean, how is that generosity? Yeah, everybody’s generous with someone else’s money aren’t they? Crazy? Less we digress. Well
Drew Baker 29:10
don’t let him drag you don’t let him drive you to a party. Yeah,
Jason Hartman 29:13
exactly. So, oh, Haha, yeah Chappaquiddick Chappaquiddick.
Joyce 29:19
Why don’t we talk about if a toilet needs to be changed or some particulars, then you might have in mind drew something.
Jason Hartman 29:30
Drew ask ask the extreme do it yourselfers. Yeah.
Drew Baker 29:32
What what I think the important thing is to say I think we’ve already touched on it a little bit. But Joyce, I’m curious. Step one, you have a vacant property. What are you doing? are you flying and putting getting posters and putting them up in the neighborhood? Yes, you know, how are you executing that to get the tenant if you’re not using a management company? I want to start there and then we’ll get into now you have a tenant. But first, how do you have a vacant property? How are you terming the unit and how are you getting the tenant?
Joyce 30:03
Okay, well, this is because I’m doing this all of my all myself and I come to Los Angeles or I go to Gulfport, Mississippi or I go to Northport, you know, Alabama and before I go there, I line up painters and gardening people because I don’t expect the property is probably going to look kanak ready. And so instead of wasting time, I will call 10 different painters and I will make appointments with them every half hour or so now you can’t control when they show up, but they will all give you estimates on painting that property and at the end of the day, you will know what’s a good price for painting that house and what isn’t. And I’ll also have gardening people show up and tell me getting the place you know shaped up what what this like to close. If you think you’ve got plumbing problems, call and have five different plumbers show up. You handle all of that stuff the first day. And in your phone call prior to ever arriving at the property, you say I will be in Los Angeles on January temps. And I would like to meet with you at such and such time. And if we can agree upon a price, you need to be able to go to work immediately or the very next day, because you don’t want to spend a lot of money on motel bills. So within three days,
Joyce 31:40
have no strangers over the band, because those people want to go to work immediately. Right.
Jason Hartman 31:47
And this is the part everybody that I am saying you delegate This is what the real estate agent or that property manager will do for you in the tenant turn but there’s Magic things about what my mom does I disagree with her doing all this herself. But you know, it’s like her retirement fun, I guess. So, whatever, you know, to each their own. But you know, one of the things I will say is, my mom gets great deals on stuff and drew you get great deals on stuff too. And I’ll just share a personal example. I didn’t even know this I didn’t realize that I have a very good property manager for some of my Florida properties. Okay. You know, I’ve been with this property manager for years. She’s great. Okay. And this is how I decide whether I’m going to have a manager or not. If they’re good, I keep them if they’re marginal or they’re terrible. I get rid of them and self managed that’s sort of how I make my decision. Kind of by default whether I’m going to do it right. And so the other day she reaches out to me I’ve got her trained now to use voxer that’s another thing that makes things very convenient. She reaches out to me on boxer says, Jason, your property on I can’t remember the address, but your property, it needs a new refrigerator and I bought Her back right away. And I say, I didn’t know I owned a refrigerator there. And she says, Yeah, you know, all our properties. They have refrigerators. Okay, well, fine. She says, and it’ll be $870 or something. And I said, That’s ridiculous. I’m not paying $870 for a new refrigerator. I said, you know, maybe we should just go to the tenant and say, we’ll reduce the rent by 10 bucks a month, and they buy their own refridge. And she was like, Oh, no, we can do that. Blah, blah, blah. You know, it’s ridiculous, right? And I said, Well, that’s just too much money. So somehow magically, she finds a better deal for me. And the next deal is, well, I’ve got this one. It was returned this refridge there’s a mom and pop appliance shop here right nearby. And this refrigerator is returned. She sends me pictures of it looks beautiful, looks perfect. Right? And you can get it for $350. It’s basically new under full warranty. It was just returned and my guy will pick it and install it and get rid of the old one for 160 bucks. I said, that’s fine. I’ll do that. But the hundred and $60 is too much. I’m happy to pay 350 for the refridge then somehow that refridge sells out from under me and I’m a little bummed out. Then she finds a new one. Brand new one on sale with delivery included. And disposal. The old refridge included, okay, from I don’t know, maybe it was Lowe’s or something I can’t remember. She sends me the link and the whole price all in for everything brand new, beautiful. refridge was like $460 Isn’t that amazing? Just because I resisted and didn’t accept what she told me. This is one of the things I’m saying, look, folks, I’m a wealthy guy. Okay, I got more than enough money, okay. But why waste it number one and number two, it makes you better to go through the exercise sometimes and push back a little bit. And you’ll be amazed just by asking a couple questions. Suddenly you See $400 It’s amazing.
Drew Baker 35:04
Yeah, one time I had a tenant who wanted a security door, you know, others have wire mesh doors on top of their door because they felt like they heard that there’d been a local break in or something. And so the property management came to me and said, it’s going to be $300 to do this. And I said, Well, if they want to add some security door to the front door, that’s their prerogative. I mean, that they rented it as is. And I said, Well, you know what, okay, I’ll do it. We can add $10 to their monthly rent, or I’ll split it with them, you know, and so they ended up going with a split, and then I thought that was fine, because they’re adding it to my property. So I shouldn’t have to pay for some of that,
Jason Hartman 35:43
in theory, it’ll improve the value of your property. Right. And so that’s the other principle I want to say and Mom, I I kind of doubt you do this, but I’m willing to do it like Drew. I did that deal on that first self managed property in San Antonio, Texas, where I didn’t know the property didn’t have a great garage door opener. And you know, the tenant sends me a note with the rent when my property manager gets out of the business, suddenly I’m self managing by default. That’s how it happened property I’ve never seen tenant I’ve never met. And he says, you know, I’d really like to get a garage door opener. So what I did is I basically said, Look, if you will pay, I think, I can’t remember the amount so forgive the exact numbers here. But I think I made a deal with him. If he would pay like $15 a month more in rent, I would buy the garage door opener, and he actually installed it. He was a super handy guy, and he installed it Now I know what some of your thinking you’re thinking, Oh my God, that’s gonna create liability. You know what if he gets hurt installing it, you’re gonna get sued? Yeah, I guess so. That’s possible, but it didn’t happen. And so here I am basically financing his garage door opener. And in about 14 months, he paid me back for it and I improve the comp, the value of the rent overall. So You know, there are lots of options here. Yeah, make deals. Don’t be afraid to make deals with your tenants. A lot of times they want to improve the property. And you know, improving your property is okay. They’ll help you finance the improvement many times. This will be continued on the next episode. Thank you for listening and happy investing. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman. Mediacom for appropriate disclaimers
Jason Hartman 37:34
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 the Sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
Jason Hartman hosts Brandon Cook, a young member of the Venture Alliance Mastermind. Cook describes his journey into real estate and insight into his growing income property portfolio. He talks about the challenges of investing and gives us some of the rewards as well.
Announcer 0:02
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:52
Welcome real estate investors, lifelong learners curious people. This is episode code number 971 971. And this is your host, Jason Hartman, thank you so much for joining me today, as we do another one of many client case studies. Now I know a lot of you really like hearing from young people that are doing good things in the world. And this one is certainly one of those. Our client and youngest venture Alliance member Brandon cook. We just realized he hadn’t been on the show before. So he’s on today, and he’ll share his story with you and how he’s investing and started very young and he’s been coming to our meet the Masters event and really all of our events for many years now. I just saw him in San Jose at our Jq live Jason Hartman University live event just a couple of days ago. So he’s on the show today, and I think you’ll enjoy it but couple of housing stats for you some of the latest stats This is from our friends at NAR National Association of Realtors. I used to be a member for many, many years. They publish a lot of stats, you got to take them with a grain of salt, because, hey, they’re out promoting their agenda. So just understand that but hey, stats are stats, I’m assuming the stats are accurate. They do some good research. So thanks to them for this data today. So home sales, home sales are very strong. They are ticking along at a an adjusted rate of 5.38 million looking like what’s gonna happen. The median price is about $240,000 just in December Now remember, there’s always a lag in these statistics, a lag because is it you know, it took so many years for NAR to finally come around. And create a pending sales index which I could never understood what took them so long to get to this, but they finally did it. This is not pending. Remember, things have to close. And then they have to get the data from all of the various county recorders and the places they get data from the MLS systems. And so there’s always a lag time in this stuff, understand, lag, lag lag, the stats are almost always 60 to 90 days behind. So literally, when you’re hearing about housing stats, they are number one, they’re never localized enough. That’s the first problem. But number two, they lag like a whole quarter a quarter of the year. They’re a quarter behind many times. So this is from December. New Home Sales, reporting in at 625,000. When we look around the country, and we look at January, and we look at the median number of days on the market, right? The red hot places are mostly the usual suspects, but not completely, not completely the usual suspects. They are mostly the cyclical high flying markets with glorious highs and ugly ugly lows, lots of bankruptcies and foreclosures during the bad times. And home sales are clicking along at a very very rapid pace in places like the Socialist Republic of California. Washington State very hot Oregon, not as hot but still moving well Nevada where where I live in the no income tax state of Nevada, Utah, very hot Colorado very hot, but oddly ready for this one. This one is outlier, where our friend Rand Paul is from his dad spoke at our meet the Masters event Ron Paul, right. He was one of our keynote speakers. Kentucky, Kentucky market homes are selling in less than 31 days, less than 31 days. And looking around the country, you know, most of the country, it looks like things are selling in 46 to 60 days. That’s the vast majority of the country. So that’s kind of interesting to look at that stuff as well. So what we have coming up in the world, what do we have coming up? Well, we’ve got our first Northeastern event coming up, Carrie and I just got off the phone with our national Yes, we’re moving up in the world. We now have a national accounts manager. We are looking at locations in Philadelphia. We may not pull that off. By the way we may end up in Washington, DC In May, working on event in Washington, DC or Philadelphia in May, so more to come on that. And then also our venture Alliance mastermind in the Big Apple, New York City in May as well, of course, sooner than either of those is the Ice Hotel coming up in just about a month. Well, a couple days less than a month. That’ll be just great. A bucket list once in a lifetime trip to the Ice Hotel in Sweden. So if you’re interested in that, let us know. We may if we’re lucky, be able to get you a room. And ice cold art sweet. Yes. One night in there one night in the warm room. Don’t worry. People don’t die in these rooms. They they live but they are really glorious. It’s just a such a unique thing. Look it up. Don’t google it because Google is evil. Bring it, bring it bring the Ice Hotel in Sweden. And check it all out. It’s really neat. So what is the most expensive market? Well, I just got back from they’re the most expensive housing market in 2017. We just had our Jason Hartman University event there in San Jose. Technically it was in Sunnyvale, but San Jose, Sunnyvale Santa Clara, that Metro. The price of Whoa, whoa, whoa, whoa. $1,270,000 Do you know what the cheapest market is the least expensive housing market? Cumberland, Maryland, weighing in at just $84,600. That actually kind of surprises me. I mean, not in a really blighted area in the inner city of Detroit. I guess not because it’s always a metropolitan area. It’s always an MSA. You know, it’s just like voting districts. Right. You’ve heard the term Jerry. meandering right? Well, the gerrymandering concept of course, if you forgot what it was, you probably learned it in school. That concept is where the Democrats and the Republicans, they will cut things up to try and get the election to work in their favor right? They do this because the republicans absolutely suck at public relations. And they never seem to get their message across the democrats always seem to own the message even though their philosophies the less desirable of the two. Not that either are that great. You must be a libertarian because it’s the only way to be it’s the only honest answer in politics. But anyway, our misnomer that we have a binary system because, hey, the powers that be want us to be arguing with each other all the time, right? They would make you think because the democrats are much better at campaigning, and much better at public works. They would make you think that Oh, those evil republicans are doing all the gerrymandering, right? No democrats do it too. They both do it. You know, it’s, it’s just the way it is. So gerrymandering is pretty much like the essays, but the EM essays, so far as your humble host knows, do not change every four years or every two years in an election cycle. But, but they do cut up in odd ways, where you get good areas, bad areas, maybe that’s the reason Detroit wasn’t the lowest price homes or some funky area and, you know, North Dakota, right, or something like that. Just because, you know, you’ve got a lot of very nice areas on the outskirts of the very bad inner city of Detroit, right. So that’s what happens there. Oh, okay. Well, hey, let’s get to our client case study. And let’s look at young people doing Great stuff. And also remember that we have a junior membership now, a just newly announced Junior membership for the venture Alliance available. Prices nice. So you younger members, we want to get you involved. We want to get your new thinking we want to get your excitement and enthusiasm for life in the venture Alliance. We just think it’d be fun, so that’d be good. We’d love to have you What else? Oh, yeah, book recommendation. I’m always going through tons of books, tons of books. As far as just audio books alone. I probably do a good hundred and 50 of those a year. So average of maybe three a week. I’m always learning stuff. It’s almost like a compulsion and addiction. It’s like OCD. I must be learning. abl always be learning always be learning. Well, an oldie but a goodie. You know, I’m always telling you, you had got away Watch old movies, and you got to watch old TV shows, and even read old books. You got to do this. So you gain a perspective, for many reasons, not the least of which is to watch how far society has fallen. Yes, it is an amazing time to be alive. But in many ways, society is just falling apart. I don’t know whether I should be an optimist or a pessimist. Some days, I just don’t know. But mostly I’m an optimist. So there you go. The famous the late, great, Peter Drucker, the management guru of the century of the last century, right. An amazing, amazing person. You know, I haven’t studied his stuff for several years. I check in with his his works once in a while, and they will live forever because they are brilliant, brilliant, brilliant. Peter Drucker was a brilliant man. No question. Anyway, the effective executive, well, that was really good. Now it’s about management, but really not relating to property management. Or it’s related to corporate management, but it’s also related to self management. And I don’t mean that in the sense of self managing your properties, I mean, managing oneself, right self management, Peter Drucker, highly recommend it. Really good stuff, not about real estate, but about management and life. And it’s interesting to go through that material and it’s just so old fashioned, but in a good way, in a good way, in a very positive way. So Peter Drucker’s effective executive, I would highly recommend, so not a real estate book, but a good one nonetheless. Okay, let’s dive in and talk about a plank case study. Today with Brandon, here we go. I’m looking forward to sharing with you another great case study today and I love it when we have our younger clients, Millennials, Generation Y, that is really making a difference in their own lives and the lives of others, inspiring us to be better investors and, and just better all around people. Brandon cook who is on With me today is our youngest venture Alliance member he joined right as a founding member right in the beginning a long, long time ago. It’s just great to have him here. He’s a fighter pilot in the Navy. He’s the only guy I know that knows how to land and take off on an aircraft carrier. Brandon, welcome. How are you?
Brandon Cook 13:50
Hey, Jason. I’m great. It’s really good to be on the show.
Jason Hartman 13:54
Yeah, I can’t believe that through all the years we’ve known each other that we haven’t had you on the show before. I mean, you’ve spoken a few words here and there, like in a venture Alliance event when we’ll pass the mic around. But we haven’t really done a show about your journey, you know,
Brandon Cook 14:08
like small appearances, but nothing, nothing dedicated then on some of the other, the other shows in the Hartman Media Group, but not this one. So I’m looking forward to a good discussion.
Jason Hartman 14:18
Yeah. Well, it’s good to have you on thank you in advance for sharing your story with clients. And it’s really quite inspiring. Because, you know, I remember seeing you way back in maybe 2009 or 10, eight, nine years ago, maybe more even at some of our meet the Masters events back in the old days. When did you discover my podcast, for example, and how did you get involved with us and what was the start of your interest in real estate?
Brandon Cook 14:45
Well, as far as my interest in real estate that came from reading, Rich Dad, Poor Dad reading some of the other Kiyosaki books and he lists different asset classes. Real Estate interest me the most because it was something I knew I could go on deployments with. It would still kind of keep around and you know, I wouldn’t if I did a small business as soon as I went on my first deployment in the Navy, it fall apart so I was looking for something passive and more proven system. And then that’s how I found you. You were one of the first companies that I basically sought information from, believe it or not, I found you in print. Can you believe that? I don’t know. I don’t know if he still marked it in print at home. I don’t
Jason Hartman 15:26
really not really we we don’t really advertise at all anymore. But what did tell me what you found. I found
Brandon Cook 15:32
an ad it was an ad in in like an Entrepreneur Magazine are so I was in a bookstore and saw a small It was kind of like in the back pages where they put like 12 ads on a page, you know, there was your role there. facia, you know, item properties investor and when I went home and googled you, I think it was Google but yeah, yeah, it wasn’t it was like
Jason Hartman 15:55
this was around back.
Brandon Cook 15:58
Yeah. 2009 Okay. I found the creating podcasts. And when I did I subscribed. I remember the newest show was get this episode 48 Oh my
Jason Hartman 16:11
gosh. So as we speak, Episode 959 is being released today. And you know, I don’t know when the listeners will hear this obviously they may hear away in the future we may be in Episode 1700 by then. But Episode 48 was the first show you heard that is amazing. Oh my god, what was I talking about? And did I make any sense?
Brandon Cook 16:36
It was it was I can’t remember. I mean, it was some of those early shows had a lot more core content, real estate. And I loved it. So I didn’t just start from there. I went to just episode one and just listened through that. Wow, I think it took me to, you know, Episode 60 before I had caught up and then then I was just listening to each one. It was one a week or one every two weeks. back then. And now I’ve been listening to you ever since the first event I went to was at the it was Hyatt Regency in Irvine. It wasn’t in the room.
Jason Hartman 17:10
Yeah, it was in that room. I
Brandon Cook 17:12
remember that. stadiums audience style room. It was it was a side room, maybe? I don’t know. 35 to 40 attendees.
Jason Hartman 17:21
Yeah, yeah. Yeah, I remember that. I remember when you were there. And I think the one you were at was the one where one of our clients and he’s probably listening, and I’m gonna forget his name. Sorry, but he actually made a song. For me. He made a song out of my 10 commandments, and he brought his guitar. And he flew out from I believe it was North Carolina, and he performed the song about the 10 commandments and refi till you die. Like principles. That was awesome. We got to find the recording of that. It was so great.
Brandon Cook 17:53
Yeah, that was it. That was the first event I bought my first property with you. Shortly after that. Meet the Masters in Phoenix, and then just started buying one per year to kind of today where I have six rentals.
Jason Hartman 18:07
Yeah, absolutely fantastic. Okay, and so you’re 31 years old. So young guy, you bought your first property in Phoenix that that wasn’t where the meet the Masters was. I just wanted to make sure that was clear to the listeners. That was back when we were recommending Phoenix. So you made a lot of money on that property because Phoenix went up, we can’t recommend it anymore, because it’s too expensive. Now,
Brandon Cook 18:29
that was a great property. If I could have afforded 10 of them. I would have, you know, obviously hindsight is 2020. But it’s because it was so cheap. way below construction. Nearly half. I mean, I think I remember doing the math, it was like $42 a square foot that.
Jason Hartman 18:45
Oh, my gosh, you can’t do that anymore. Yeah.
Brandon Cook 18:49
And here I am trying to figure out how to get a mortgage for the first time because I’m at this point on 23 I believe 23 or 24 and You know, had never been a renter my whole life and was kind of nervous. I’m like, What is going to happen with this? I’ve never seen this property. But, but honestly, your educational material gave me that confidence to go on. That’s fantastic.
Jason Hartman 19:14
You know, Brandon, you’re definitely one of our youngest clients starting at age 23. I mean, you’re not the youngest anymore, but we’ve got some young clients, but 23 is pretty young. That’s just awesome. That’s just awesome that you, you did that. Obviously, it’s working for you. So that’s just great news. Now, the other interesting thing is, you got your family involved with this. I think you got them involved. Maybe they got you involved, I don’t know. But your mom and your dad come to our events. I’ve met them both several times. And tell us about that. What are they doing?
Brandon Cook 19:44
Sure. So my dad was the first to hop on board the real estate bandwagon. I took him I think my second meet the masters. I took him with me so and he went to nearly everyone after that there was a year To in there that he and I both missed, but for the most part we’ve been been an ever meet the masters. My mom’s more recent. She just came to this last one in January. And as far as properties Yeah, I convinced my dad took him a little bit to act. You know, and I have talked to you about this, I think, at one of the property tours, you know, just said to Jason, my dad, he, he understands the material. But taking that first step jumping into that first property, it’s a big obstacle, big barrier for him. And honestly, I think, especially with your young listeners, that’s probably an obstacle that they have is well, it’s always the first one that’s ours, isn’t it? Yeah,
Jason Hartman 20:42
it is. And, you know, maybe Brandon, you know, because you’re a fighter pilot. Maybe you can draw some comparisons. Of course, everybody thinks being a fighter pilot is like super cool. At least I do. We all saw Top Gun and you know, you guys have this great coolness image being fighter pilots. For sure.
Brandon Cook 21:00
It’s not like the the I can assure you.
Jason Hartman 21:03
I believe you, I believe you. Yeah, I believe I believe that. But I’ve never been able to break the sound barrier and you have so I’m a little envious, okay. I want to break the sound barrier sometime. Here’s the question though, with real estate income property investing getting off out of your comfort zone to buy that first property, that’s the hardest. And I think there’s this tendency among everybody with everything in life is that a lot of us we want to learn about everything before we do it. And a lot of it, you just got to actually do it. Right. Right. You know, can you learn how to fly a fighter jet in the classroom and ground school? No, at some point, you got to actually fly right. And I think there’s some parallels for like first time investors Of course we have a lot of people that aren’t first time investors, you know, that own dozens and others. And dozens of properties now. But the first one, it’s kind of the hardest, you know, speak to that a little bit,
Brandon Cook 22:05
you know, back to the classroom versus getting in the aircraft. You’re absolutely right. In fact, I would say, sometimes we try to do too much academics and not enough execution of what you know, if you like your if you wait to 100% solution and knowledge before you act, you’ll never do anything. And I haven’t read anything that says this, but just a gut feeling is that younger generations and millennials and younger, I think this is going to be a worse problem for those generations because we grew up in the information age where information is so easily shared and you can binge read you can go ahead and knowledge and not in actually execution. So as a fighter pilot, you know, you have to be able to scan quickly. If the solution is there, then you pull the trigger. Mm hmm. You You know employ the the missile or bomb or whatever it is you’re doing. I’ve also heard the other kind of analogy that’s like, people that will aim forever, you know, Ready, aim, aim, aim, aim and never fire. Right. Yeah. So, I guess, with my background with being a fighter pilot going through that training, I think absolutely that helped helps me in my investing, and soon my entrepreneurial endeavors. Mm hmm. Of course gonna become knowledged in what I can, but I’m gonna go for a 90% solution, realize I’m gonna still make mistakes, most likely, but it becomes time to do
Jason Hartman 23:33
Yeah, all real life education and real life training is on the job, if you will. So it’s on the job of being a real estate investor. It’s on the job of doing anything you’ve got to actually do there is a certain learning that comes by doing only and, you know, look, I kind of hate to use this comparison already because it’s a family friendly show. But I’m sure everybody listening has made love before. Okay, could you read about that in a book and understand it? No, you know, there’s no way to read about that academically, right? You just have to actually do it. Right. You know, I think that’s kind of a it’s actually a pretty good comparison. I hate to bring up that, you know.
Brandon Cook 24:20
Speaking of love, you know, it’s Valentine’s Day. You didn’t mention that in the intro.
Jason Hartman 24:25
I know but but they’re not gonna hear. They’re not gonna hear this for probably a couple of weeks.
Brandon Cook 24:30
Do bachelor guys talking to each other on Valentine’s Day? I can’t think of anything more lonely.
Jason Hartman 24:36
I know, man. Life is. Life sucks.
Brandon Cook 24:40
Yeah, Valentine’s Day. Yeah, that’s what all the single guys say. Yeah. Well, I don’t
Jason Hartman 24:45
know. I think it depends. I think as far as the related like the Valentine’s Day episode that actually goes out tomorrow. So you know, folks, you will not be hearing this obviously on Valentine’s Day. You’ll be hearing it in a couple of weeks. Okay. But the Valentine’s Day episode that goes Tomorrow as Episode 960 is a good follow up to when I have the author of the Five Love Languages on the show, which was a good Valentine’s Day episode too. But what was I gonna say about that? Oh, yeah, I think people who are either married or in relationships I’m guessing this is nobody knows, because you never get any real data on this. I think people in relationships and marriages they kind of toe the company line if you will, and they want to be good people and so you don’t really get like honest data about how is it you know, what’s the like, and then there are the complainer they’ll just complain Oh, it’s terrible or my wife or husband this or that. But I think the 20 to 25% of them that are happy are probably like the luckiest people on earth. Because that’s just you know, it’s life’s greatest gift. Possibly, you know, maybe children also. So, yeah, anyway, little sideline there once we get off on a tangent
Brandon Cook 25:58
overcoming the analysis paralysis and acting and and to bring it full circle, although that was maybe an obstacle for my father at first he is in two property area. He owns two and he’s getting into his third right now. And my mom has I think she has one and is in escrow on her second and then my sister with her brother in law are on five or six in Memphis. So yeah, it is a family affair now and it works in our conversations at you know, home for the holidays talking about this real estate things awesome works. That’s awesome. Hey, Brandon, how old is your sister? My sister’s 32. We’re nearly a year apart. Yeah.
Jason Hartman 26:38
So she’s a year older than you and she’s accumulating quite a few properties too. It’s interesting that the kids are buying more than the parents. Yeah,
Brandon Cook 26:48
it’s kind of interesting. Yeah. Yeah. They, the parents were victims of the conventional model. They been employed their whole lives diligently contributing to a money market. It counts and, and of course, that doesn’t really secure your retirement, especially in an inflationary environment. We’ve, you know, come to discover
Jason Hartman 27:08
well, right, yeah, no, that’s definitely what most people do. And we’re trying to talk them out of that, that standard plan. So that’s good. But when you were talking about learning versus doing basically, that’s what it came down to, you reminded me of two things. Number one, one of my favorite quotes, let me see if I can remember it. Because something like this successful people make decisions quickly, 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, you know, that’s the thing when you just go for it to some extent, and you force yourself to get out of your comfort zone to be uncomfortable, you know, and you just get in there and you look, you know, look, I’m a capable person. I’m gonna figure it out. I’m not going to know everything before doing this, there will be some mystery, but I’m just going to jump in and deal with it as best I can. And those are the people that just went in life because there’s just a certain amount of like, extra credit you get from life or, you know, points, you just get a certain amount of points and wisdom from actual action. It has like its own inherent value. And it also reminds me of one of my favorite books by Michael Masterson. That’s his pen name. And I had him on the show. It’s called ready fire aim. And that’s what you were talking about. And I, I heard, you know, one of our clients, Doug Guttenberg, who’s been on the show before and you know, Doug Brandon, yeah, he was in the Navy also. Or maybe it was the Marines I think was the Navy. He talked about how, when you learn to shoot, that’s actually the technique because the way your brain works, and maybe you can speak to this, you actually have to Fire almost before you aim. And I know that sounds completely weird, but he explained it really well to me. I don’t know, maybe you got some of that in your military training, and you can speak to it.
Brandon Cook 29:11
Yeah. Yeah, I also think that what he maybe also talked about there and that example was that you can dry fire or shoot without, you know, pull the trigger, work on your grip, you can do all that without a bullet in the chamber. And you’ll be smooth all day, but then as soon as just the cartridge is is put in the breech and you know, that you’re actually going to send around downrange. It changes your, your technique, it’s like, psychologically, you know that you’re actually going to shoot the gun, and it changes and I see that too with my pilot training as well. We’ll do just dry runs with no ordinance all day as soon as we have ordinance coming off the aircraft or shooting the gun. We don’t fly as good of a profile a weapons delivery profile. So there is that there’s that psychological element where reading it in the book and visualizing it is important. You’ll be a perfect investor in that realm, right? You move actually executing, it’s gonna be different. You’re gonna make mistakes and think back and go. I can’t believe I made that mistake. Right. And that’s okay.
Jason Hartman 30:18
Yeah, we all we got to just do things in life, I always say, and my saying is cultivate rational recklessness. Be willing to be a little bit reckless in your actions, because otherwise you’ll just never take any actions and you’ll be textbook smart. You know, you know, the world’s full of educated derelicts as the same goes, Brandon, what have you learned over the years as an investor as a young investor, share, like any tips, you have any technology, you use applications, organizational techniques, and it just anything you want to share?
Brandon Cook 30:51
Yeah, sure. I learned, man. There’s a lot that I’ve learned that I can’t even think of. It’s, I would say productivity is something I I really, really struggled with early on. Maybe that’s a product of the information age to that kind of lack of focus or not distraction to the idea. So when I initially started investing, I was severely disorganized. I was not keeping track of my books. So I didn’t know where money was going in and going out. And I started doing my own bookkeeping. And I think that is a must. Everyone should either do their own books, or even better you pay someone to do your books for you. Because if you’re going to be a investor and an entrepreneur, you’re more or less you’re making decisions, leadership decisions, and working in teams. You shouldn’t be pushing paper and in the mechanics, that’s not really the life of an investor or a business owner. Real Estate Investing is kind of running its own little business.
Jason Hartman 31:52
It’s definitely a business. Absolutely. Yeah,
Brandon Cook 31:55
it becomes it’s kind of on business. Even if you have property managers, So I think that was it was a mindset shift, I think, for me initially was to learn how to delegate and learn, you want to have good records, and then make decisions based off good reports, you know, so early on doing books and and having my income statement, having my balance sheet and reviewing them once a quarter was an absolute must a, I was stalled until starting that
Jason Hartman 32:26
what we’re using, but it’s, it’s
Brandon Cook 32:31
moving away from again, QuickBooks is the standard and I’m not going to learn QuickBooks, I’m going to pay someone to start doing that for me, but it’s into it as well. So it’s gonna move over very easily. And I just recently started using the property tracker as well, so I can actually track more investment specific.
Jason Hartman 32:48
Yeah, so So in other words, Quicken or QuickBooks is used for the General Accounting, but property tracker is used for the specifics of managing the real estate itself, managing the leasing calendar, the insurance calendar, you know, the taxes, you know, helps you do your taxes. It’s just a great tool. I love property trackers. So that’s that’s good. Okay, good. Well, we got to wrap it up. But you know, just any other comments you want to share with our listeners. You know how why to do it. We want to talk
Brandon Cook 33:19
about pension Alliance.
Jason Hartman 33:20
Oh, that’s right. Thank you for the reminder. Yes, just quickly, with Brandon’s help. So thank you, Brandon, for helping on this. You were one of our founding venture Alliance members, we developed a junior membership to welcome some younger blood into the venture lines. So if you are under 35, you can join the venture Alliance now for $5,000 per year rather than the normal fee of 8000. For two people, it’s 7000 per year if you’re under 35 versus 10,000 for the normal fee. So Brandon, hopefully now you’ve talked to a couple of our clients about this right
Brandon Cook 33:58
now I have it Oh, okay. Nice. Yeah, no, yeah. Okay. Now Yeah, I had some issues with contact numbers. I had a number that was bad and, and I was looking to get another couple. So stay tuned for some of you I will be reaching out just to explain how much value I pulled from being in the venture Alliance and also answer any questions about kind of the normal flow of our weekend and things like that. And I, I didn’t mention that in my case study earlier, but I was able to join for the very first event and it was very valuable for me to surround myself with other business owner who will really with business owners because I don’t have any business other than my six rentals. Being an entrepreneur is about being creative and about surrounding yourself with others and overcoming obstacles. And that’s all you know, all we talked about at the venture alliances. It’s a positive weekend. It’s a positive event. And so I’ve felt honored honestly to be in the presence of the other members. And I thought, well, this would be a great opportunity if, if more younger of your clients could get on board. Yeah,
Jason Hartman 35:06
we’d love to have more younger investors in the venture Alliance. That’d be great. And venture alliances our elite mastermind group. It’s a lot of fun. Brandon, you joined us at our first event in San Diego. You went to Dubai with us and Jekyll Island in Newport, Rhode Island. You’ve been on all the trips, right? Have you missed any of them? I miss Chicago. Chicago trip. Okay,
Brandon Cook 35:29
God, I came in for the last day. That’s right. Yes, I had another weekend engagement. But yeah, other than that, I’ve made every single event. It’s been fun.
Jason Hartman 35:37
Good, good stuff. Well, thank you so much for being involved in venture Alliance. And if your peers are out there listening Brandon, your younger peers who are interested in real estate investing and entrepreneurship and and just having fun and going on neat trips. And you know, once in a lifetime experiences, join us go to venture Alliance mastermind calm, Brandon. Thank you again for coming on and Sharing your your story and your case study with us. We appreciate it. appreciate being on as well Jason, thanks. Happy investing.
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