On this Flashback Friday episode, Jason interviews David Porter, an Income Property Investor from Indianapolis, Indiana. They talked about borrowing money, the economy, and cool technologies. David also gave an update to the audience on his big successes with Jason’s company.
This show is produced by the Hartman media company. For more information and links to all our great podcasts visit Hartman media.com.
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is hand picked to help you today in the present, and propel you into the future. Enjoy.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on Now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:15
Thanks so much for joining me today. Gosh, the holidays are keeping us all busy, aren’t they? And I just got back yesterday from Sedona, Arizona and the Grand Canyon. And by the way, as I mentioned on the last episode, we did get that helicopter ride for free mom and I because we went to the timeshare presentation. And that was quite interesting. I tell you, like if there is any industry where they have the concept of sales down to a science, it is timeshare sales. I mean, those people are good. It’s they make it difficult to say no. So I would warn you if you have a low resistance to sales people Don’t go to one of those presentations, because you’ll probably end up owning a timeshare. And those aren’t a very good deal. That’s, that’s for sure. They’re they’re just not a very good deal at all. But we had a beautiful helicopter ride through Sedona and through the energy vortexes and that was really interesting. And then mom and I went to the Grand Canyon, and Gosh, I’ll tell you, it was so cold up there. I’m a wimp when it comes to cold. How about you I know a lot of our clients live in, you know, the the northern part of the country, whether it be the Northeast or the Pacific Northwest, which isn’t quite as cold but you know,
Jason Hartman 2:40
I cannot do that cold stuff. It’s just um, I you know, it’s hard. I think after living in California in Arizona, you become pretty wimpy, too cold. So, anyway, but the Grand Canyon Okay, so before we get to our guest today, which by the way will be our client, David Porter. Who will tell you now he was on the show a long time ago. And he talked about the free lunch metric, just a very impromptu interview years ago. And he wanted to come back on. So I recorded this episode with him. And I think you’ll really like it, him being a guest. And he talks about how he is up about $700,000 on his properties. So, you know, folks, this does work. It really works in real life. I know imagine that. Something that can really work in real life. And it’s kind of amazing when I think of it looking back on my career and all the years I’ve been in the real estate business. I have you know, I know of no way to exactly quantify this. If I believe me, if I did, I’d be bragging about it left and right. But I’ll bet you I have made thousands and thousands of Thousands of people, well, maybe not that many thousands, but like, under 10,000 people, okay, so thousands and thousands. I guess that would be, because if you had the third thousand smelled up, I don’t know, is that still under 10,000? I’m not sure. But anyway, I have made several thousand people a lot of money. And if you multiply the amount of money that they’ve made, you know, whether it be $100,000 or $50,000 or a million dollars on their, their real estate deals with me over the years. Gosh, I mean, that that’s really kind of incredible to think of it. And, you know, look, it’s, I’m not really taking credit for that because I don’t deserve the credit. Okay. I mean, I guess I personally do maybe I’ve inspired some people to do deals. Maybe I’ve convinced them. Maybe I’ve dragged them across the finish line. I’ve certainly done all of that. Maybe I got To stop whining about little problems and look at the big picture and stick with the program. So, you know, that’s what I’m here for. I got to play all those different roles. And it’s funny because when we were in Scottsdale at the mastermind meeting a few weeks ago, I was there with Carrie, on our team and Sarah and Fernando, who’s just joining our team, that he’s actually still technically a client. But I think he’ll be joining our team here pretty quickly. It’s interesting because Sarah said, you know, we were just kind of out with the group having drinks one night and Sara jokingly said, You know, I think I need a T shirt that says investment therapist. You know, we call our our people investment counselors, and, but maybe a better word is investment therapist because we all need a little bit of therapy sometimes, don’t we? We need someone to, you know, get us out of our grungy A moment, we all get the grungy ease once in a while and sort of want to slip back into bad habits or bad behaviors or bad thoughts and not look at the big picture and go with the program. And what does this have to do with the Grand Canyon? You know, I know i a lot of times sound like I’m going off on a tangent, and admittedly I do do that. But it does have something to do with it. Because there’s this fabulous biography of Richard Nixon. Remember Richard, Richard Nixon, for those of you who are under Well, I’m not saying you were alive at the time he was around as President, but those of you who are under 30, listening, Richard Nixon, he he he was, he’s a former president of the United States. The late Richard Nixon, he passed away. I don’t know what about 15 years ago, maybe. And quite a controversial guy. Obviously, he was known by some by his opponents as true tricky Dicky, tricky Dicky Richard Nixon. Um, but you know, did Nixon was in many ways a pretty amazing human being. I mean, look at, I don’t know if he was a crook or not remember the famous speech words that are not a crook. And then he had the the checkers speech. That was another famous talk of his where he talked about his dog checkers and how his wife Pat didn’t have a mink coat, but had a nice wool coat. You know, they weren’t, in other words elitist. And, boy, if you compare it to our, our Emperor today, oh, Emperor, I mean, our President, Mr. Obama today, you would have to say that the comparison is pretty stark. I mean, you know, that guy lives like a prince. You know, like a king. It’s amazing. This is America. We do not have kings and queens here. You know, we do not have elitist here. Well, yeah, apparently we do. We’re not supposed to Nancy Pelosi, we’re not supposed to have elitist here. And and Mr. Obama, same same goes for you. But you know we do when we have people abusing the system on both sides of the aisle. Okay. This is not even a partisan thing. But interestingly, Richard Nixon’s fantastic book in the arena, it’s really good, okay. And many years ago, I read it, and he talked about his his first trip to the Grand Canyon as a child. And I can’t remember exactly how he said it. So I’m not going to repeat it exactly how he said it. But, you know, as he was ending the book, he talked about all of the ups and downs he experienced in his life and his political career, and how you cannot understand or appreciate The highs, the winds in life until you’ve experienced the lows. And in the great little book by Kahlil Gibran, or Gibran, I said to Brian Kaluga Braun the profit, which is a fantastic little book, by the way, if you haven’t read the profit, it’s an easy read. And it’s got all these, you know, little short chapters on little subjects, whether that be on, you know, money on, children on eating and drinking on what else is in there on love, you know, on all sorts of, you know, these life topics that are important to us all, of course, you know, there’s a chapter on giving. one chapter in the Prophet is about, I think, sorrow or pain and sorrow. And it talks about how sorrow carves us out. And these bad things in life that hurt us, where we’ve experienced In slow points in our lives, you know that that carves out a part of our soul, if you will, I mean, I don’t know of a better way to say it. And I don’t have the book, the profit here handy, so I can read it to you because it is a fantastic book. But that carving out allows us to contain more joy. So if we haven’t experienced lows, we can’t appreciate highs. That’s the moral of the story. That’s the message. And you know, I think when we look around at these totally eff up, I’m not saying the word so you don’t have to bleep me, Mr. editor. These totally eff up celebrities, you know, these people who had it kind of easy and all you know, fame and fortune came to them probably early in life and it probably came rather easily. And, you know, they get addicted to drugs or they commit suicide or, you know, experienced this great depression and we’re all supposed to feel Sorry for the minute, you know, frankly, I think it’s hard to feel sorry for them. But you know, I it at the same time, it is probably quite legitimate, although I cannot relate, I have not experienced this, and probably none of you have. But when all of this is given to us too easily, and when we don’t have hardships when we don’t have to earn our way when we don’t have to earn our keep in life, you know it, that’s not good for us. It’s not good for the human being, we’re not made to deal with that properly, I don’t think or at least very few of us are. And, and and so, you know, that’s the message I think of the Prophet, that chapter in that wonderful book, The Prophet, and also in Richard Nixon’s book, where he talks about his visit to the Grand Canyon and I believe he said he was seven years old and he thought nothing could be. And I was at the Grand Canyon yesterday. So this reminded me of it of reading Nixon’s book. And he said, he thought nothing could be more incredible than looking down into the Grand Canyon from the southwest rim. He thought, you know that that was just incredible that the size the enormity of the Grand Canyon, I mean, you know, this wasn’t my first visit there yesterday. I’ve been there a few times. But it’s just amazing. I mean, it’s so grand. It is so big. It’s hard to comprehend, really very hard to comprehend. And Nixon said in his book, he said, he thought nothing could be more incredible than that view from the southwest rim until he hiked seven miles down. Maybe he was seven years old. Maybe it was seven months. Miles, I don’t know where it could be remembering that wrong. Maybe it was both seven and seven until he hiked down and looked up. And when he hiked down and looked up from below from the depths, then he could truly appreciate one of the seven wonders of the world. And so, you know, that’s a good metaphor for for earning our way for experiencing hardship for dealing with hardship and overcoming hardship. I think that’s an important message. And Nixon also, toward the end of the, in the arena book, quoted Sophocles the poet, and he said, are the philosopher and he said, Sophocles, 2000 years ago, said, one must wait until evening. In order to see how splendid The day has been, one must wait until evening to see how splendid The day has been. So our appreciation or gratitude for life, a lot of it comes from contrast. You know, and I’m just calling it contrast. That’s my word for it from contrast from seeing, you know, experiencing highs and lows. And and that is a good thing. So when you experience hardship, you know, there’s obviously a lesson in hardship for sure we can learn a lesson from all hardships, but also, not just the actual lesson of what can I learn from this? What can we learn from this gives us contrast, and it gives us depth that carves out our soul and makes it able to contain more joy. People who haven’t had that hardship. They just usually have a hard time dealing with or appreciating success, don’t they? Back to my you know, my comparative And when I talk about celebrities who got it all too easily and you know just many times become really amped up human beings, you know, spoiled children same kind of example, you know, don’t spoil your kids. It’ll ruin them. You know, I definitely was not the least bit spoiled when I grew up, unfortunately. And I always I always say to my mom, mom, we have jokingly I said, Mom, look I turned out okay, so you know, you can spoil me now because it won’t mess me up. And so So anyway, that that was an amazing thing to see the Grand Canyon yesterday and recall Nixon’s great insight into you know, the depths of life and the highs and the lows and the contrast between the two and appreciating victory when we have it. And we can’t appreciate victory unless we’ve had some defeat and some hardship and Nixon you know, love them or hate I think he’s a good guy or bad guy I you know, I don’t really know. But he was pretty insightful, pretty insightful, pretty educated, pretty well developed person I can certainly say that. So very interesting comparison there. Okay Hey, if you don’t have your tickets yet for meet the Masters get them now again we’re almost sold out. And you know we’re not selling out as easily this time because you know it’s the first weekend of January. So we probably are well the first weekend after the holiday weekend so we know we’ve had a few people say that you know, I can’t travel that quickly because I’m going to be away for New Years. That prior weekend and I got to be home for this weekend. So you know, take advantage of that and still get in on some early bird pricing. That normally wouldn’t be there pretty late in the game here and join us for meet the masters. We have got a jam packed with lineup for you. And by the way, I’m pretty sure we’re going to have, although it is not totally confirmed yet one of the alternative lenders there from either the private lending arena or the hedge fund and private equity arena. So that’s something you have asked for you have asked about and we’re I’m pretty sure we’re going to have someone there representing that. So if you’re looking to refi till you die refi till you die, that’s one of my philosophies. And if you’re looking to do that with your properties, that will be a very good opportunity for you to learn a lot more about that. At this meet the Masters event, of course, we’ve got, you know, the contract for deed stuff. Diane Kennedy CPA talking about asset protection and tax shelters, and just some really this is going to be the best meat The Masters event I’ve ever put on. And it is our 16th one. So it’s sweet 16 and you’re just going to love it. It’s going to be an awesome, awesome event so don’t miss it. Also, again, many of you been asking, we will be hosting dinner on Saturday evening, not Friday. This is a change from our normal schedule. I one of our Memphis area providers is hosting a dinner I believe on Friday night for their clients. So you know, don’t feel bad. That’s not our event. Okay, that’s just coincidence, just timing it because a lot of people a lot of their clients will be at meet the masters. And so get in touch with them or your investment counselor to make sure you get included on that. And then we are having a team meeting on Friday night with our speakers and presenters, so that we can make sure we are coordinated and we are putting on an awesome event for you. So dinner on Saturday. Evening as our treat, no organized dinner on Friday other than for the Memphis people and our speakers of course, and we will just start Saturday morning 8:30am 8:30am on Saturday morning and we’re going to go pretty late into the evening. We’ve got just a jam packed lineup for you on Saturday and then on Sunday we will go from 8:30am till 6pm Okay, so Saturday and Sunday all day and, you know, Saturday evening a little bit as well. So join us for that go to Jason hartman.com Get your tickets check out some of the great properties we have there. already some of you without even having a show on it or anything it masters or purchasing investment properties in some of our new areas that are on the website at Jason Hartman calm and you know available to talk to your investment counselor Of course or investment therapist at our office. They’ll be glad to help you with those. So let’s get to our guest, David Porter, as he gives you an update from being on the show several years earlier about his property portfolio and how he’s up about $700,000 on on these properties, so I think you’ll like it. Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday.
It’s my pleasure to welcome one of our clients back to the show. He was actually on a long time ago, I think it was maybe, I don’t know, five or six years ago, when he started investing with us and his name is David Porter. And it’s a pleasure to have him join us today. Dave, welcome. How are you?
David Porter 20:44
Great, Jason. It’s great to be back with ya. And yeah, I think it was probably a good five years ago when I last you Indiana
Jason Hartman 20:51
podcast. And I remember that day all too well. I remember that I was rather stressed out sitting in my office. And your investment counselor Sarah, kind of came into my door with you. And I was thinking like, please don’t bother me. I’m so busy right now. And then, and then Sarah said, Jason, you gotta hear his story. This is David Porter, her client, and you just got to hear his story. And it was a really cool story of, of, I think your first investment property that you got from us in Indianapolis. Right.
David Porter 21:25
Right. Well, you know, it’s so funny, you know, since Jason, do you think when we first met, the economy was crashing? Right. It was 2008. Yeah. And yeah, so some of these foreclosure opportunities were developing. And yeah, I purchased my first property through you guys in Indiana.
Jason Hartman 21:46
Yeah, good stuff. And then and then you started buying up Indianapolis you were kind of like quite the real estate mogul there and I don’t really know what’s what you’ve done all these years. I know Sarah has been in touch with you but but I haven’t specifically I hear about you once in a while. But, you know, tell us how it all went and what you’ve been doing and so forth.
David Porter 22:05
Yeah, for sure. So, um, yeah. So let’s see, we got started. I just looked at some records before we got to talk in here. We started talking late. Oh, wait, I purchased my first property in Indianapolis in March of 2009. Uh huh. And that was an unbelievable and you think about it now, because prices have gone up a lot since then. But for $85,000 in that foreclosure market, we picked up a 3000 square foot five year old home in the suburban very, very nice neighborhood. Right. And it’s incredible that so that property today is running out for like 1250. Right? Yeah.
Jason Hartman 22:45
Yeah, that’s fantastic. So one of the things that I was talking about on the podcast way back then, and you know, I’ve talked about it many many times since then. I’m probably boring my listeners saying the same stuff over and over, but it was the concept of buying below construct Cost Exactly. And it was also the concept I’ve talked about a lot that I call regression to replacement cost. And you you have a background in financial services and then in the transportation business shipping and trucking companies and so forth. And and by the way, I want to ask you some insights because those are really interesting barometers about the economy sure and global and and national trade and so forth. So maybe we’ll get to that but you bought this house I thought you paid like 89,000 for that house and it appraised or your insurance. No, I think it was your insurance company told you you had to insure it for like what 240,000 or something
David Porter 23:41
yeah. Oh, yeah. Exactly that your memory is very, very good. Those numbers are almost spot on. And and that was the story repeatedly because I bought after that eight more properties in Indianapolis. And when you think about it, at first, I was okay. The insurance companies made a mistake. You know, they Trying to charge me too much and all that kind of stuff. But you know, it kind of makes sense when you think about it because to rebuild and go out and buy all the lumber and steel and recreate a 3000 square foot house, it’s gonna cost you a couple hundred thousand dollars doesn’t matter what you paid for it. So that’s that’s kind of their thinking and and that’s what I had to do. I mean, I shopped it around.
Jason Hartman 24:21
Yeah. Wow. And so so you bought the house for 80 85,000 or 89,000? Yeah, at 85. Okay. And the insurance company told you you had to insure it for 240 was is that my dad’s
David Porter 24:33
real close? Yeah, I don’t remember the exact number but it was like to 40 to 50 something like that.
Jason Hartman 24:38
So it first that probably upset you. You’re thinking, Why do I have to pay insurance on such a large amount when I only paid 85,000 for the house, but the insurance company was thinking if that house burns down, that’s what it’s gonna cost us to rebuild it. Right.
David Porter 24:53
Right. Well, as mad as I was the only thing that would have been worse if they would say no, we’re only going to insure it for 50,000 because You overpaid for
Jason Hartman 25:02
Yeah, that wouldn’t have been good. Yeah,
David Porter 25:05
yeah. Wait, you’re the way you put that, you know, was really a great way for me to think about it. And, you know, there there were blood in this. There was blood in the streets at that time, right. I mean, again, the economy was falling apart. People were very concerned about what what’s going to happen. You know, I’m telling my friends, hey, I’m buying these houses in Indiana. So I’m here in California. They’re like, okay, Dave, you’re buying houses in Indiana. That’s really strange, hot, you know. And so they probably thought you were crazy. Right? They thought I was crazy. Absolutely. And, you know, I didn’t know of course, at the time that we were buying these homes over the course of the next really three years. You never know if you’re buying at the bottom or really where you’re at, but I had a lot of, I’m a very conservative investor. I don’t like a lot of debt. And I felt it was a very conservative investment because based on what I knew the rents were And the rental market was relatively strong, despite everything else, because everybody was losing their homes and the rental market is still a great place to be. Even went down 10% or whatever. I mean, how much more? How much lower? Could it go, given the fact that I’ve got this plot of land in a nice suburban area, and relatively new construction in good size? Right? How far low how much lower? Could it go? couldn’t go to nothing like a stock,
Jason Hartman 26:24
right? Yeah, I agree with you. And even if it did, you’re still really, I mean, a prudent cash flow investor, right? So cash flow is the name of the game. If you do the capital appreciation, hey, you know, I’ll take it you’ll take it that’s the icing on the cake. But you know, either way, cash flow is a pretty reliable thing. I mean, it’s it’s not perfect, it does change but right, it doesn’t fluctuate a lot. You know, these these investors that are, well they call themselves investors. I call them gamblers. But you know, who invest in these high priced markets just waiting for something incredible to happen. I don’t know why I think they’re, they’re in trouble. You know, that’s, you know,
David Porter 27:05
that’s speculation, right. And, you know, one of the one of the biggest regrets I have in my real estate career is like the first house I bought to live in, in California went through one of its down markets, and I sold it at a loss and wrote a check to, to leave. And I wish I would have just held on to it. I’m sure you’ve heard that a million times. But other than that, I’ve never sold a property. You know, I think that, you know, there’s only so much real estate, you’re not making new real estate and if you have a property in a solid area, that’s a great long term investment, and you talk about cash flow. So my whole strategy around this is really to create a nice income stream a nice passive income stream to take me eventually into retirement.
Jason Hartman 27:49
Absolutely. Well, I think you’re doing a great job at that. So tell the listeners if you would, Dave, how many properties did you end up buying in Indianapolis or you know, the greater metro area Indian, right.
David Porter 28:00
So bought nine all together and the greater Indianapolis area.
Jason Hartman 28:06
And what gave you you know, you saw the blood in the streets. I mean, back then you were in the shipping business. So you were in the container shipping businesses I recall. And that was experiencing a downturn. I mean, global trade was suffering. I used to read articles and I remember asking you about this about how, you know, the there were just empty shipping containers everywhere. And, you know, it wasn’t even wise to run these these big freighter ships because, you know, there was just so little trade. I mean, it was a scary time, what what gave you the confidence to invest back then,
David Porter 28:43
you know, it was really, it was the best place to go I felt at the time with with your money. So I had a career in shipping for about 20 years at that point. And so you’ll learn here I’m not a very good market timer, and 2007 I left the transportation business to go into financial consulting, you know, for investors were putting together portfolios of stocks, basically mutual funds for high net worth investors. And at the time, I heard your commercial. I mean, things were just falling through the floor, you know, Lehman Brothers, everything was happening at that particular time. And I was just kind of, I was just kind of curious, there must be another way, you know, and when I when I thought about, I learned about the approach and when I saw again, you know, these, these assets, that in some overbuilt markets that had taken just such a hit, but the rents had stayed solid and my goal was rents. My goal was the cash flow to if my welfare would be independent of the value of The underlying asset really, as long as the rents held up, and I really liked that idea, because if you think about a stock portfolio, mutual fund portfolio, you know, the rule of thumb for advising clients for retirement is you can take out about 4% of your portfolio per year. And that’ll last you’ve, you know, well into retirement, perhaps even, you know, 3040 years, things like that they’ve run a lot of back testing. There’s no guarantees with that, but that’s kind of safe. So when I looked at the kind of the kind of income I was going to generate with a portfolio of houses, I would need much more money invested in mutual funds to generate that equal amount of income. So that’s the way I looked at it, what would I have to invest in order to generate a certain amount of passive income, and the real estate was clearly the winner at the time. It was just kind of fact based and Seeing the market was so beaten up I didn’t see a big downside even on the value of the asset itself.
Jason Hartman 31:05
Yeah, I agree with you. Well, when you were buying the properties in Indianapolis and I know you did some other stuff too, which maybe we can get to sure but um, when you were buying those, were you paying cash for them? Are you getting financing on them? I can’t remember I think he may have mentioned it on the on the show we did a few years back but
David Porter 31:25
well, it was a combination of the two and at the time I went into this Jason I had zero debt in my life but zero debt and honestly and
Jason Hartman 31:36
you met me and you got it Yeah, right. I you know, I have done my job.
David Porter 31:42
Yes, but I’m still conservative. My cash flow is paid off several these properties. But what I did is I honestly I just had some other property that was owned outright. And basically if you were credit worthy at the time, you know, they were throwing money at you at very low interest rates right? historically low. So I did take out a loan, and I’m paying on it still today. It’s 3.49% fixed interest for 30 years.
Jason Hartman 32:11
You know, until recently, Dave, you have been getting paid to borrow that money for sure. Yeah, I would say and I have to admit as much as I don’t like admitting this or even even having it be this way, that inflation is actually pretty darn low the last year now, it was definitely higher in the last few years, but it’s it’s calmed down. I’m really surprised and
David Porter 32:36
I don’t you listen to the podcast regularly. Not regularly, but sporadically. I’ve listened to a couple dozen of them over the years, so I haven’t heard any recent ones. Yeah, yeah.
Jason Hartman 32:44
And you know, I’m just I’m just surprised inflation isn’t higher. I’m surprised interest rates aren’t higher. I think that inflation is coming back though. I will tell you that I don’t think I don’t think we’re gonna see it. Low for very long.
David Porter 32:58
It’s it’s not gonna last for forever. You know, I did hear you interviewed Richard Duncan. Mm hmm. And he’s one of my favorite He is my favorite economists. And even he is brightest he is. And he does this full time. You know, are we going to die a death of ice deflation or hyperinflation? Right? I mean, it’s hard to tell. And neither one of those scenarios is very good. But clearly what we’re doing isn’t sustainable. So, you know, I don’t know,
Jason Hartman 33:28
who the heck knows. I mean, I, you know, it would be sort of possible to really predict economic scenarios with some accuracy if it wasn’t for central bank and government intervention. Yeah, I mean, you just never know what they’re gonna do you know, you can they just interfere with markets and they pervert the whole thing. So you can’t you just can’t predict stuff very well because of because of them. I mean, you can think what would they logically do and you can sort of predict that but it’s, it’s still You know, it’s it’s difficult.
David Porter 34:01
I don’t think we’re operating in a logical world right now. And and Richard Duncan puts it real well, and I think he said on your podcast, and and when I was in this is really what broke my heart when I was in the financial services industry as with a very good firm, they they were thinking about things that they weren’t speculating in stocks or penny stocks. I mean, that kind of thing was a pretty conservative approach. But, you know, people would like to think that they’re investing in capitalism, but they’re not investing in capitalism. And as Richard Duncan says, so well, it’s statism. And that’s to your point. What is the what’s the government going to decide to do with the banking system? What’s the reserve requirement were they going to do with interest rates, all these things, throw stocks for a loop, and it’s your you know, what you’re taught in school, and I have an MBA. I’m a finance major, and that’s my training. They tell you that you evaluate stocks by the value of the earnings of the company. Well, I wish that was the case. It’s not the case. That’s part of the equation.
Jason Hartman 35:05
It’s more by the story, right?
David Porter 35:07
Yeah, yeah. It’s the story. And it’s what the government decides they’re going to do with their policy and how that’s going to impact the particular industry. Yeah, that’s just ridiculous. And there’s no way to factor that into a spreadsheet, right?
Jason Hartman 35:18
Yes, I agree with you. So what exactly was your background in financial services? I mean, were you were you an advisor, or did you work with clients and help them invest their money?
David Porter 35:28
Yes, I was. Yeah, I was a registered investment advisor. And yeah, so we dealt with high net worth clients and we put together portfolios of index funds. So within the world of investing, that’s a pretty conservative, reasonable, well diversified way to go. We had all types of portfolios that would be in alignment with somebody’s age and risk tolerance. Basically,
Jason Hartman 35:51
ladies and gentlemen, what we have here is a defector.
David Porter 35:58
I still have a foot in a car And I, you know,
Jason Hartman 36:01
I’m glad you came over to the other side.
David Porter 36:03
Yeah. Yeah. And I am too in. And so, you know, going back to the, you know, my investing in real estate story, what I came to realize, largely With your help, and I can honestly say if I hadn’t, you know, attended some of your sessions and had some of the conversations and read some of your material, I wouldn’t have thought about it this way. But, you know, having untapped ability to borrow, having that ability to borrow and not utilizing it is kind of like, you know, sticking money under your mattress. And, you know, it’s maybe it’s even worse than that, because you don’t even get the money. So, what I did is, you know, I took that ability to borrow, and I put it to work in a very, very, very conservative way. And it was clear to me that my income stream would you know, more than pay for any debt service that I would have in addition And you get all the benefits of, you know, what our tax code allows us to do with those interest payments. So it really helped me a great deal. So I I don’t borrow as much as I could borrow. And I’m comfortable with where I’m at. I’m still in a very conservative position. But so what I did is I took some money out of property holdings I had and paid cash for a number of properties in Indiana.
Jason Hartman 37:25
And so you didn’t really completely follow my plan. I mean, I would have said letter everything
David Porter 37:30
up, you know, because, because
Jason Hartman 37:32
it’s kind of counterintuitive, you know, like, I think the more conservative position is actually to be the borrower. You know, and I know I know that goes against the grain of what a lot of people think I completely get it, you know, I used to, in the old days think pay everything off and, and, you know, I remember having this conversation with a friend of mine, we were on the board of a cancer charity in Orange County, California, where I used to live Then, and her name is Catherine. And I remember that, you know, her parents were in, you know, had some financial hardship. And I remember, you know, thinking, gosh, they were losing their house, they had this gorgeous home and in Mission Bay Area, and they were they were going into foreclosure. And I remember thinking that, you know, the thing to do is to just pay off your own home. So at least you own that. And, you know, all the other investments could be leveraged and you might lose them, but you’ll never lose your house. Right? But the reality is, you know, we have a perpetual lien on all our properties called property taxes, and in some cases, maybe a second lien called a homeowners association. And, you know, those those agencies or the their investors because people buy tax liens as a tradable asset. You know, they look at those in a predatory fashion. If you’ve got a lot of equity, you’re a target, you know, so I don’t like having big equity in real estate even though you know, I do own some properties, with With equity, but if I couldn’t ever the more Believe me, I would.
David Porter 39:03
So you’ve taken so you know, I’m kind of in between where I was and where you are now,
Jason Hartman 39:09
move the needle a little
David Porter 39:10
bit move at you moved a lot really, you know, so it’s worked out well. So and then also with
David Porter 39:17
with platinums help, I went into Arizona. And so that’s a different market. Right? Yeah. That the time that I went to Indiana, he said, Dave, you were causing me so you need to get more diversified. You’ve got too much in Indiana right. And so in you said Indiana is like a bond, you know, you shouldn’t expect a lot of appreciation there but it seems like the rents are pretty stable and so it’s good for that if that’s what you want to have and that is clearly what I was looking for. right the the income the stable long term income, but you know, the Phoenix market as you well know, and you’ve taken good advantage of got beat down awfully hard and, and I think the dynamics of that market are that you know, you’ve got the weather there. And a growing, growing economy and it attracts people. And if you look at the demographics of North America, I knew that people were going to be coming back to Phoenix again. And so we bought a couple of properties in suburban Phoenix Gilbert. And those have worked out extremely well. So not only from a thing I love about Phoenix or Arizona is a property taxes are low, the insurance is low. And I did get some really nice appreciation on those properties as well.
Jason Hartman 40:31
Yeah, you know, Phoenix is a very desirable city. It’s kind of it’s now that I’ve lived here for a little over three years, you know, it’s kind of a gem. A lot of people don’t know about it when, you know, people from California that live in Orange County where I used to live and La where I grew up as a kid. They think I’m not, you know, but and I asked him like, when’s the last time you were actually here? You know, this is a really nice place. We’ve got super swanky restaurants and you know, All kinds of nice things here. It’s, uh, you know, other than other than three or four months when it’s a hot but it’s a dry heat. It’s a pretty nice place. Although right now, it doesn’t make sense from an investment standpoint, it’s just too expensive. It’s a it’s a hybrid market. You know, it’s it’s not like Indianapolis has a linear, virtually the whole state of California and you’re in Southern California, right? That’s right. Yeah. You know, that’s, that’s a cyclical market. So Phoenix is in between the two. But right now, you know, we’ve moved in and out of Phoenix a couple of times, and sometimes it just gets overvalued, and or at least, maybe I don’t even want to call it overvalued. I just want to call it where the cash flow isn’t good enough for a sec. And that was one of those times
David Porter 41:45
Yeah, yeah. But I’m holding on to those properties there. And I think that basis as well. So yeah, it’s it’s it’s worked out very, very well for me. So and then on top of that, we have a couple properties that I’ve held for a long time in in California. So yeah, so I’m a happy real estate investor. Good for you. Good for you.
Jason Hartman 42:05
Well, um, one of the things I wanted to go over was that concept that you were talking Oh gosh, forgive me. I can’t remember. I’m having a senior moment here. So I can finally say I’m having senior moments. That Are you over the line now? No, I’m not over the line. The AARP is still a long ways away, I’m glad to say for you. But oh, gosh, it was something that you just mentioned. And it was the concept of debt, or I don’t remember. I’ll remember after we finished the talk here today, okay. Yeah. But um, but what are what are your thoughts, you know, with? Now you’re in the you’re in the trucking business now. Right. So do you like what do you do exactly in the truck? Yeah.
David Porter 42:47
So the company that I’m associated with in Southern California, we do local trucking and a large part of what we do is taking domestic shipping containers to the railroad. From all the warehouses that are unloading all these containers that are coming in from China and Vietnam and Japan and Korea and so forth, right? So, we, we do a lot of local trucking shuttling goods, essentially from the harbor to the railroad most of the time. And then we also do consolidation deconsolidation, some, some warehousing work as
Jason Hartman 43:22
well. Okay, so you have your bit, your industry has a really good barometer on the economy. I mean, you know, what the volume of trade looks like, where it’s coming from, where it’s going to? Are there any thoughts that you have or ideas that you just want to share? And maybe we can just hash them out? I just
David Porter 43:42
yeah, I guess, you know, I mean, what I’m noticing, so we deal with a lot of the large retailers from all over the country because the goods that we’re picking up here, they wind up in Chicago, New Jersey, Atlanta, Dallas, Memphis, wherever, for the large retailers and it seems seems to have been a strong retail season. I mean, at least they ordered a lot of stuff. I don’t know if it’s going to sit in a warehouse on the East Coast somewhere or not. But I can tell you in previous years, we haven’t seen this level of activity. This what we call peak season and shipping is the season from basically Labor Day up until just after Thanksgiving leading up to you know, Black Friday there and all the shopping that gets done. That is the busiest time of the year and this peak season was it was unbelievable. It was extremely busy. I haven’t seen it as busy for many, many years. And are most of these goods coming from good old China? Yeah, yeah. Well, especially in California here. You know, our, our manufacturing zone is called Tijuana. I mean that there are nobody’s making anything here, right? What ships out of here is brought in from overseas or just over the border. Mexicali or Tijuana? And then we can think NAFTA for that, for better or worse. Exactly.
Jason Hartman 45:06
Yeah. In the what are those called the mckaela? Dora zones? Right, exactly. I remember ross perot talking about them in the giant sucking sound.
David Porter 45:14
sucking sound. Well, he was he was right about that.
Jason Hartman 45:17
He was he was right about a lot of things. I, I wish he would have been elected as nutty as he seemed. I think it would have been the only guy that would have actually shaken things up and made something different.
David Porter 45:28
You know, it’s funny, I voted for him the first time and then I voted for him the second time, and he kind of got a little off kilter there with some of his theories about the republican dirty tricks committee trying to ruin his daughter’s wedding and all that and like, you know, even if that was true, I wouldn’t say it.
Jason Hartman 45:42
That makes him sound like a paranoid freak. Right. Exactly. Yeah. Well, very interesting. So, um, you know, there’s a lot of talk about how China is really beginning to slow down and they are suffering. And, you know, years ago, you used to hear people like Peter Schiff. And others like him, the sort of the doom and gloom community talk about this concept of decoupling how you know, China will decouple from the United States meaning that they will create their own middle class and their own consumer base. And they all have countries around them that trade with them, and they won’t need us anymore. And when they don’t need us, they will stop buying our treasury bonds, and our interest rates will skyrocket and we will be dead. But the exact opposite has happened oddly, right. It’s it’s really interesting because they just have not been successful in creating their own middle class. Well, they’re in their own consumer base. Right and and the people with money their upbringing over here
David Porter 46:46
actly and that that’s great for this real estate situation we’re talking about
Jason Hartman 46:51
great for this everything situation.
David Porter 46:53
Yeah, yeah. And the stock market as well. So yeah, and for what I read about their their real estate market, you know, Things are you know that the bubble is finally at least some airs coming out of it now, right. Yeah. So it’s interesting. I mean, my my view on that, you know, Peter Schiff, he’s interesting. I like I read his books and but, you know, I think maybe he’s a little bit got too much invested in that gold camp. Yeah. all that type of stuff. I agree.
Jason Hartman 47:23
I agree the gold camp really has has gotten it wrong most of the time.
David Porter 47:28
Well, you know, they’re, they’re gonna be right, you know, when they say broken clocks right twice a day,
Jason Hartman 47:33
right. I love it.
David Porter 47:35
I don’t discount entirely. I think that over time I do. I would not be surprised to see all that come to fruition over time. I don’t think it’s going to happen, you know, by 2020 or anytime real soon. I mean, we just heard some statistics recently how China, their GDP is going to surpass RS earlier than what everybody had expected prior to 2020. Some measures of that are coming Enemy would show that there our economy is in fact larger than ours right now. So I think that over time, you can kind of see how the trend is going and what the direction is. But nobody wants to piss off their largest customer. And that’s us. Yeah. Right. And, you know, it’s, it’s, for better or worse, it is kind of hard to bet against the United States. In the long run. I do have some very serious concerns about, you know, this house of cards we have with the, you know, the our debt situation and all that. I don’t know how that’s going to play off. But again, going back to Richard Duncan, I hate to keep quoting him, but this could continue for much longer than what most people would think it could continue. Japan has shown that I mean, their economy is not like the model economy or anything, but people would certainly rather hold yen than say rubles right now and people thought Russia was the way to go not long ago. I know.
Jason Hartman 48:53
I know. I just think I just think that is illogical and unfair is that maybe the United States finds itself in a Really impressive place in history and has benefited from a lot of that. So I, you know, is is mismanaged as easy as it is in so many ways I think they can kick this can down the road for decades long.
David Porter 49:14
That’s exactly right. You know, and so to prepare your entire life are something that, hey, it could happen, China could make some nutty announcement next year. I kind of doubt it, but it could happen. But I would tend to agree with you sometime after 2020 we’ll be well into retirement and who knows you can’t live your whole life in fear. Yeah, I agree with you. I agree with you. But the interesting thing is about China and we don’t have to, you know, talk about this forever,
Jason Hartman 49:40
is that with China, you know, as soon as they start to maybe gain a foothold, say things go really well for China, you know, then they’re going to be facing this this really huge, ugly demographic problem. And and that’s the same thing that is is really behind what’s hurting In Japan so much, or at least, inhibiting their recovery is that they just don’t have any young people in China, China has just far too big a male population, not enough females. And you know, the one child policy in 10 years, they’re going to be looking at a really tough demographic problems. So if they ever hope to get any real social safety nets there, I just don’t know that that’s ever going to happen. I hope it goes well for them. I mean, listen, you know, it would be nice if the whole world would just prosper. And we’d all live in harmony, it’d be great. But, you know, if you’re comparing countries, and like you say, it’s really tough to bet against the United States. I just don’t know how you can really do it.
David Porter 50:44
Yeah, it really is. But one thing that is very interesting, and I’m sure you’ve read about this, how China and Russia are getting away from reading outside of the dollar of the reserve currency of us. So the thing that saved us I think the only thing that saved us that can’t save a Greece or an Italy, nobody will allow them to indefinitely print their money and accept it. You know, we’ve got this, this weird license that allows us to do that. Other people can’t do that, or they would be fine, too. So I don’t think it’s that we’re so smart are so great or whatever, I think you put it well, we’re in a unique spot in history. I think we’re allowed to do that. It’s kind of a relic of what we used to be. It’s not rational or logical. We do get to do that. And it saved our butts. Nobody else gets to do that.
Jason Hartman 51:34
Yeah, I agree. I agree. We’re just we’re just kind of, you know, we worked. We worked our way through the Industrial Revolution. And we won that game. And now we’re just kind of lucky.
David Porter 51:47
So yeah, let’s just hope we could catch up. There are some neat things going on right now. I’ll throw out a book to have you happen to have read rate. Kurt’s Wiles abundance.
Jason Hartman 51:58
Oh, well, that’s actually Peter Diamandis Nice. Yeah, thank you and see they talk about Ray Kurzweil a lot in there. But and Steven Kotler was actually on the show. I love that book. It is amazing. Yeah. And it leads me to another question. But what were you gonna say about that?
David Porter 52:14
Well, as you say, there is lots of reasons to have hope. And and there are with the advances in technology and the speed that things are moving along, people don’t even realize, you know, you’ve got Moore’s law, and the technology is increasing every year and a half or so for the same cause. And we’re at a point now, initially, you were making exponential gains in what we’re capable of doing and what we’re going to have access to, and that’s can provide a better standard of living for everybody. And I think that the next 10 years is going to be just an amazing time for us. I think so too, for the whole world. The whole
Jason Hartman 52:49
world is going to benefit from this. Because, you know, now we’re in a position where we have what I like to call the democratization of everything. Yes, and You know, other than the Wall Street cronies and the crony capitalism and the unholy alliance between, you know, government and mega business I’m not even gonna call big businesses mega business, okay? Whether it be pharmaceutical companies or the banks or whatever, right. And and Elizabeth Warren, you know, I’m definitely not a democrat but she gave a great speech that I just posted on my Facebook page, and you know, where she just outed all these, you know, criminals with Citibank and, you know, criminals I’m losing using that word loosely, obviously, but just my humble opinion. Okay. And, you know, it’s just a total scam, what’s going on, but the, the, the technology is just leveling and flattening and flattening the earth. I mean, crowdfunding is 3d printing all of these things, gene sequencing. You know, last night I watched a TED talk about this. Have you heard of this Kickstarter project for this glowing plant,
David Porter 53:57
though? No, I don’t know about though.
Jason Hartman 53:58
It’s mind boggling. Basically what you can do is you can go to a website now and you can do this today. And you can design for better or worse. You know, it is scary. I’ll admit it’s you know, Frankenstein, whatever, okay? But you can design your own life for made of whatever DNA sequence you want. You can put your credit card in. And you basically this website helps you make the blueprint and you can order this life form and the UPS guy will deliver it to you. And and someone did that and made a glowing plant. And it’s a Kickstarter project. They raised a ton of money, and they hope that ultimately trees will replace streetlights. I mean, just fathom that for a moment. It’s incredible. Like, it’s unbelievable. Google it. It’s amazing. It’s an amazing time to be alive.
David Porter 54:52
In like, you sit so the everything is leveling out. Take another great example. I was listening. They’re talking about this Sony hack. situation with North Korea
Jason Hartman 55:01
right that’s scary
David Porter 55:03
for for those that I haven’t found my way onto it but you know this is dark side of the internet that you can get to to do the dark net. With I heard yesterday was that if you were I wanted to do that it would cost us about $1,000 to find somebody in Russia or China that will do that for us. Wow, to take down a corporation for 1000 bucks. When they started to talk about this I thought the person was gonna say $10 million or something like 1000 bucks you could do it so it is mind boggling now
Jason Hartman 55:35
now it you know it also might cost you your freedom and your life. Oh, yeah. Yeah, right. Wow. That’s that’s mind boggling. It really is. Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday. The power is moving to the people and it is it is really, really cool.
David Porter 55:57
Jason Hartman 55:58
thing though, I want to ask you Because you’ve got so much familiarity with shipping is and in the book abundance, they talk about it. And I’ve been talking about it for years on my show, but 3d printing is that going to move a lot of manufacturing back to the US, you know, and it’s not for mass production. I understand 3d printing is for more like artisan type production. And there’s a great book I read last year when I was in Europe, and it’s by Chris, Chris Anderson, who’s written three great books that I know of, he’s the editor of Wired Magazine, and I believe he owns Ted now the conference and, and the book is called makers and it’s all about 3d 3d printing revolution. And, I mean, you know, are those are those ships not going to be needing to come here quite as much because we’re just going to print stuff. I read an article yesterday where we we basically emailed a wrench to one of the astronauts at the International Space Station. What I mean by email, this email the design for the 3d printer they have now in four hours later, he had a wrench in his hand made of matter made of atoms.
David Porter 57:10
Is that amazing? Yeah, it’s incredible. So I’ve sat in some of these conventions I go to in transportation and logistics, and that’s a very real thought. I mean, so it’s not gonna happen real soon. But, so, to you, it kind of has two questions. Is 3d printing going to have a big impact on shipping? Yeah, I think it will in time, I think it will in time. And the second part is a lot of things are coming back again with the dynamics in China wages are increasing their it’s they’re calling it nearshoring. So it’s not necessarily coming back. The United States although son is but a lot of its going back to Mexico. Some stuff. It was in Mexico and those McCulloh doors move to China now it’s coming back.
Jason Hartman 57:53
Wow, really, it’s really quite fascinating what’s going on around the world. I mean, what an amazing time to be Live and there’s just just sit back and witness all of this stuff. You know, I mean, certainly we got our share of problems. But you know, like I say, technology might save us all.
David Porter 58:09
Well, I think so too. And I think that, you know, for our kids, I really believe that there will, there’s never been a better time to be alive in terms of, there’s never been more opportunity for everybody. I mean, you can be the the poorest poor person, maybe not the poorest purse, but if you have access to the internet, you’ve got unlimited education and access to information and role models and
Jason Hartman 58:34
anything at the Khan Academy. It’s free, you can you can learn. You can get 10 PhDs at the Khan Academy for free, you know, it’s amazing.
David Porter 58:42
And so that’s just it’s just tremendous opportunity. And I read where they’re predicting within the next 10 years we’ll have our first high school billionaire, right we already have plenty of kids that dropped out of college to become billionaires. But imagine a high school kid becoming a billionaire that’s not just because our currencies debase but Be careful creating real value. And yeah, so it’s it’s it’s amazing time there’s unlimited opportunity out there. Yeah, there’s problems. But you know, Jason, you’re younger than me. But when I was growing up, and you probably heard some of this stuff, too, I literally in my elementary school, my elementary school teacher in third grade told us, you know what, I don’t think you guys are going to leave live to see 30 because there’s going to be a nuclear war. Wow. What kind of maniac you would you would totally get fired? I think probably justifiably so. Because that was a ridiculous thing to say to young kids. But that’s the you know, that’s what we’re worried about nuclear annihilation, the Cold War, all this crazy stuff. There’s really, you know, we’ve got these terrorists and you know, this type of thing, but not massive nuclear annihilation is a very real possibility.
Jason Hartman 59:50
Yeah, that’s like, there’s always something to worry about. There’s always something to worry about. But hey, I want to just before you go, I want to just ask you about real estate for a moment. So, um, do you have you estimated your returns on your portfolio? Or have you been tracking that closely? Or do you just like collecting your checks? And you know, you don’t think about it too closely. I’m just gonna carry it.
David Porter 1:00:14
Yeah, I tend to do it each year, you know, as I’m getting the taxes done. I can tell you that. I can tell you that, you know, we don’t just over the last 10 years, which is really kind of my real estate investment timeline outside of personal residences and vacation properties that we use for our family and so forth. We’ve seen, you know, a seven digit, you know, well, I shouldn’t call that because that can apply up to $9 million, but over a million dollars and just appreciation and then the return that we’ve earned. Again, it could have been much greater because of, we didn’t choose to use a lot of leverage but When I’ll tell you this when I was running my numbers when we did the when I was doing my analysis in terms of what I was going to buy routinely, my returns with a moderate amount of leverage, not very much leverage was 25 to 30% annually. Yeah. And that was only assuming a 4% annual appreciation and I have received much more appreciation than that. So I haven’t figured it out in terms of what’s my appreciation, really, the right way to think about this, I think is what’s your appreciation, Ben, what’s your cash flow, Ben, and what’s your think of that cash flow in terms of the tax advantages that you’re getting? Because here’s the other thing, the great advantage of these properties that we bought in for closure, you get your statement from the county, and it gives you your assessment and the value of
Jason Hartman 1:01:51
your property tax assessment.
David Porter 1:01:53
Yeah, property tax assessment. The 80% of the value was in the building. Right. So you get depreciation on all that. And so I’ve I’ve had some very nice sessions with my CPA, because these properties I get to depreciate so much, I get to depreciate so much, it’s totally legitimate. I’m using the documents that the government’s giving me and it’s so it’s a very much a tax advantaged return. I’m not paying any taxes obviously on the appreciation and on my cash flow, I’m getting a nice depreciation benefit.
Jason Hartman 1:02:29
depreciation is the depreciation is the holy grail of tax advantages it is it makes income property the most tax favored asset in America by a long shot. I mean, I don’t know anything even close because it’s a phantom write off it’s a non you don’t pay anything to get that Yeah, your property could go up in value, have positive cash flow. It doesn’t the way the IRS looks at it, you’re still losing money, which is good in that sense. You know, I don’t want to ruin that.
David Porter 1:02:57
Yeah, it’s a it’s a beautiful thing. So if you Go back to the bond analogy that you gave me all those years ago. It’s almost like a municipal bond. Right? I mean, you get those wonderful tax advantages. So, you know, the other thing I want to share with you to Jason was you know, the kind of the experience of being a real estate investor as a person that has a full time job a family of three kids and you know, on the go, you know, some people like okay, Dave, you’re buying these odd estate properties. First of all, that’s nuts. You know, how are you gonna ever see your properties? And the my answer to that has been well, I’ve had rental properties in California, and they are like in the same city I live in and I very rarely went by there. If you got good property managers, and you’re kind of managing your property managers and my management, my property managers and consists of calling them when I see I have a vacancy, or sending them chocolates a Christmas each year, I don’t spend a lot of time doing it.
Jason Hartman 1:03:56
You send them chocolates. Wow. I never give anything to my managers. That’s where they like you better.
David Porter 1:04:03
You know, my Prop, I’ll give you a great example. And this was a property manager that one of your local market specialists turned me on to, again, this was in Indianapolis. I was I wasn’t happy with my insurance premiums out there. And so your local market specialist is one that turned me on to the property management company property management company turned me on to a Insurance Group that allowed me to package all these properties and reduce my insurance premiums by 50%. net market with and I wish I could remember right now, but it was I checked it out at the time very high rated insurance companies. So um, you know, they they can take very good care of you. I want them to like me more than the other landlord that they have when they have one tenant and two houses to decide except, you know,
Jason Hartman 1:04:50
I think maybe we’ll get some chocolates from
David Porter 1:04:51
Yeah, exactly. Let me get that chocolate benefit. Yeah. So um, you know, it’s been, I spend very little time on those because I do use property managers. I’ve gone the other route and tried to manage them myself.
Jason Hartman 1:05:05
You did self management from a distance because I do both. And I’m just shocked that I could even do that. How was your experience? Well, it’s like you weren’t keen on it.
David Porter 1:05:15
I wasn’t well, I try to be a property manager here on the properties in California. And what happened is when it started to go south, I wasn’t going by the properties enough. And then when it started to go south, quite honestly, I didn’t quite know what to do as far as this whole taking people to court stuff and all that. And that
Jason Hartman 1:05:34
was what happened. What do you mean, did you have an eviction?
David Porter 1:05:37
Yeah, I had an eviction. And so what happened is, at that point in time, I just found a property manager. I said, Hey, get me out of this mess. And then you can manage these properties from now on, and that’s what we did. And it’s worked out great. I think these people learn their seven or 8% or whatever it is that you’re paying them. For me now Muay Thai is retired guy and I you know, and I like doing that stuff fine. What I would. So the work I think, with getting these investment properties is really in deciding which ones you are going to buy and doing your due diligence in that regard. Certainly, you were a big help your team was a big help and helping me to locate the appropriate markets that had good returns in certain areas within those markets and all that. But even after that, you gotta decide, okay, which house are you going to buy? Right? And, but I actually really enjoy that process. And again, with all this technology we have, you can drive down the street, you can look in your neighbor’s backyard, you
Jason Hartman 1:06:34
can do it in Google Maps you can read on the street.
David Porter 1:06:36
Oh, I do. I did it. Every single one of them in one of the earlier podcasts I talked to I would look at the schools with the whole situation with the schools. Dave, I forgot you
Jason Hartman 1:06:47
are the guy that created or it discovered the free lunch metric. Do you remember this? I remember naming it that it was such a good idea. You feel free to tell the listeners it’s on the old podcast, which I’m sure Still posted. You can find it at Jason Hartman calm and or maybe on iTunes. I don’t know if there’s old ones on iTunes I think they drop off after a while I gotta check that but but it’s on our website I’m sure it’s still posted. But that was a great idea that you did tell tell the listeners about yeah so really what that you know everyone has their own view on the types of properties they want to invest in. And you know what there’s a need for section eight housing there’s a need for penthouses, and there’s a need for solid single family residences, which is what I was looking for, and I didn’t really want any trouble. So what I looked at was, what was the percentage of of children in the local school that qualified for free lunch. And so if it was below 50%, it was an area that I was comfortable with. Now the houses that we purchased I always wanted to think of it as you know what i would live there or my kids I would be totally comfortable and happy with them living there. And and I’m very proud of our Real estate portfolio, I think they’re very nice properties. And I’m proud to own them. And I think we provide a very nice housing arrangement for people. So that that kind of just was one of those tests for me a litmus test if less than 50% of the kids in the local school, get free lunch, I was happy with it, I consider it to be a reasonably solid Economic Area. That’s a good metric. So like you said, there’s a there’s an investor and a property type for everybody. Yeah, you like the A property’s kind of a nicer properties, right. And we have those we have B properties and we have C properties, right? Honestly, the C properties, they have the great numbers, but they they do the tenants are just more flaky, they’re just more difficult to deal with. So the thing I say about see landlords is it’s gonna require probably a little more of your attention, and it’s going to require you to manage your emotional state better, because you’re just gonna have more trials with C type properties, you know, yeah. And, and we’ve got them all, we used to only do a Type A and B type properties, we got into the C stuff, because just a lot of our clients wanted it. So, you know, they can take their pick and you know, you’ve got your pick and your model and it works for you. So that’s awesome. I love it. Yeah. So
David Porter 1:09:15
that that’s kind of that’s worked well for me. But you know, with the, you know, there were some of these properties that I bought that I hadn’t, I certainly had never seen them because they were out of state. I may have driven through the general area. And I didn’t go to see him for a couple of years after the fact. I mean, it happened. And I’ve talked to people about that. They’d say, you know, how can how can you do that? You know, how can you just trust that everything’s okay, well, I didn’t just trust I did my research. I can walk through the house virtually I can walk through the neighborhood virtually I know everything about the schools. I know everything about the crime report in the area, I can pull all and I did pull all that information up. What I would ask them though, is what about these companies that you’re investing in in your Mutual funds and that you’re buying, do you know what’s going on? If you sit at the board of directors meeting, do you know how if they’re about to get sued or their middle of the lawsuit or they’re considering being bought, or they’re going to buy something, or there’s some legal problem, or they’re or the the CEO just is about to get nailed for some huge sexual harassment?
Jason Hartman 1:10:17
Yes, sir. If you don’t know this stuff,
David Porter 1:10:20
yeah, I know more virtually on my fundamentals of the investment on this real estate. If I never ever go there, people who goes if they own Apple stock, they’ve been to Cupertino and visited with them. They don’t do that. But they’ll have no problem putting 50 hundred thousand dollars in Apple stock. I know. And so, people really need to understand, you know, how they’re thinking about things and everyone hears the nightmare land, you know, tenants stories,
Jason Hartman 1:10:46
like the one story right but everybody’s had Yeah, discourage them, you know? Yeah.
David Porter 1:10:50
But it’s, uh, you know, I don’t know my tenants. They don’t know me. I’ve got great property managers. I spend way too It’s really just the accounting stuff, you know, I spend an hour a month on it. And it’s not a big deal. And it’s just an investment. I’ve been very happy with
Jason Hartman 1:11:08
an hour a month for how many properties by the way 13 rental properties. So 13 rental properties only takes you an hour a month. See, I tell people, and I know this is high, but occasionally if there’s like a problem property, it will, it could suck up a little more time. So I just tell people assume one hour per property per month. So you got 13 I’d say 13 hours a month, but you only spend an hour a month for all 13 properties.
David Porter 1:11:30
Hmm, yeah, I mean, there I had fortunate good fortune, I guess. I mean, I just don’t have big piles up by tenants. I mean, you know, you’ve got the occasional dishwasher air conditioner. It’s an email in the middle of other stuff I’m doing so yeah, do that. No, get another quote. It doesn’t take much time. Once you’ve got them established and you’ve got the property manager taking care of it. I don’t see how it could take me 13 hours a month.
Jason Hartman 1:11:54
Yeah, I agree with you. I agree with you. I think you know, as humans I mean, we certainly are I’m sure we all do this, I know I do it, I’m sure you’ve done it at times, and everybody listening probably has to, we all kind of get in our own way. And we sometimes micromanage stuff or Yeah, you know, we get upset about something and then we just get all freaked out about it. And, ya know, when it sort of just occupies our emotions, and we go dump on other people. It’s not exactly a good quality, but you know, we all have to admit we’ve all done it. Well, you
David Porter 1:12:24
know, I’ve been more than willing to pay whether it be property managers or an initial stage, you buy these properties that aren’t new properties that need a little bit of rehab. Now, you know, my brother in law, who is a client of yours, I referred him to you, he kind of had a different approach. He took vacation time he flew down there he helped rehab the properties he’s more he’s a hands on
Jason Hartman 1:12:45
David Porter 1:12:46
Yeah, a little more handy type guy. I I didn’t want any kind of experience like that. Right?
Jason Hartman 1:12:50
I mean, either I don’t know we don’t do that stuff.
David Porter 1:12:53
You know, he slept in the property when my gosh, he’s like my mom out there working on it, and Payton’s stuff, but he likes it. And so God bless him. He’s that’s what he likes to do. And that’s, that’s what he should do them. But I consider that to be like some type of torture and I
Jason Hartman 1:13:09
do that that’s called work and I don’t like work like that.
David Porter 1:13:13
To me, it’s all about passive income. And so we’ve developed that. And that provides some nice benefits from paying down some of these. And not only that, but we’ve used the proceeds to invest in another business, which is actually doing quite well right now and generating more passive income. So it’s just been really good all the way around.
Jason Hartman 1:13:33
Good for you. That’s awesome. Well, so just to recap, and I’m keeping you along here, but this has just been a great conversation. So thank you so much for coming on the show. But um, you so you’ve had you’ve made over a million dollars in appreciation, and how many years when did you start what do you do certain 2009.
David Porter 1:13:51
So that would be starting in 2004. If you look for Okay, yeah.
Jason Hartman 1:13:58
So you started with us. I mean, Was your California stuff? Right? Yeah, yeah. See that? Arizona, I take it, you know, it’s hybrid. But you gotta be careful. You don’t give it back. Well, you bought early enough that you’ll be okay. But if someone were to buy today or in 2006 in Arizona, they could eat it.
David Porter 1:14:15
Right. Yeah. Right. Right. Right. California to you know what, and I think you say there’s no such thing as a bad route. You know, there’s all these different markets all over the country, right, and everyone rises and falls in. That’s the great service that you and your team provide. Right? Which market makes sense to be in right now? Based on what your goals are?
Jason Hartman 1:14:37
Right? Yeah, absolutely. That’s, that’s what we do. That’s what we watch for people. And, you know, the comparison though, is those indie properties gave you much better cash flow than the California and even the Arizona properties.
David Porter 1:14:49
Yeah, they absolutely those. Those are going to be hard to beat from a cash flow perspective. And that’s really what I was after. And I’ve been very pleased with the stability that 10 base the economy there. And you know what, because we did buy at the time that we bought, we’ve gotten, you know, much greater appreciation than one would expect normally to get in Indianapolis, I think you can still buy in India and do real well from a cash flow
Jason Hartman 1:15:12
state. Oh, yeah, no Indies, India is still good. The prices are definitely higher than they used to be, but, but you can still make your cash flow numbers there. And that’s why it’s kind of our perennial market. I mean, we’ve got other markets that are great, too. But I know MD MD has been a very good market for us. I’ve, I’ve personally made a lot of money in Indy myself buying properties there. So I love it. It’s good, good stuff. Well, Dave, that’s a very inspiring story. And thank you so much for sharing it with our listeners and coming back on the show again, I really appreciate it and it was just great talking to you.
David Porter 1:15:42
All right. My pleasure, Jason.
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Jason Hartman 1:18:38
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