In this Flashback Friday episode, Jason Hartman shares how to handle late rent and eviction for long-distance self-managed properties. Then, Jason and his mom talk about their road trip through several markets, including Cleveland, Cincinnati, Columbus, Nashville, Birmingham, and Dallas. They also discuss minimalist management philosophy in creating bulletproof rental properties.
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 creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine self made multi millionaire who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities, this program will help you follow in Jason’s footsteps on the road to financial freedom, you really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:05
Welcome to the creating wealth show. This is your host, Jason Hartman. And this is episode number 389. Thanks so much for joining me today, I kind of feel like I haven’t been with you in a while, at least not directly in that we’ve played a lot of interviews with guests and so forth, but not that many where I’ve just kind of been talking to you. So I’m really glad to just be talking to you today and going over a bunch of issues. And I’m actually on the way to the airport. I’m here in the south in beautiful Gulf Shores, Alabama, and mom is with me, she’s taking me to the airport. The first thing I wanted to say is, since I announced my mom’s medical condition on the show several weeks back, thank you so much to all of you, I guess we’ve got a lot of doctors in the audience. So we really appreciate the calls and the emails and the advice we got from you. So thank you very much for that. And I’ll give you a little update as to what has happened since then. Here’s Mom, mom saying hello.
Jason’s mom 1:54
Hi, everyone. I just want to say thank you also for all of the concern that Jason’s audience seem to show about my carotid artery operation. And just want to let you all know that everything turned out terrifically Well, at the Cleveland Clinic, that is just a class place to go. If you have everything anything wrong.
Jason Hartman 2:18
Good stuff, I would totally agree. The Cleveland Clinic is an incredible operation. I was very impressed. So with all of that, you know, real estate is kind of in our DNA. What happened is I actually flew to Cleveland to meet my mom there. And she drove up there. And well, I was in Cleveland, we were there for about a week with her recovery and so forth from the surgery that went very well, as you just heard, and I met with our Cleveland, local market specialist who actually is one that we’ve been working with for quite a while in another market. He formed an alliance with a group up in Cleveland, and I met with him and I looked at their properties. And I got to say, I did not think I would like Cleveland very much. We have shied away from a lot of the previously blighted markets. We’re still shying away from the real blighted ones like Detroit. But you know, I was pleasantly impressed with Cleveland, I really was It was amazing. Now, I was impressed with all of the extensive downtown redevelopment projects, I was impressed with the properties and the cash flow on those properties. I was impressed with the rehab again, we’re working in Cleveland with the same provider we’ve been working with for many, many years in another market. So you’ll hear more about that. And you’ll hear more about his partner in the Cleveland market that’s doing the direct business more on that to come. I did shoot some video, and I’ll share that with you on our YouTube channel. And maybe we’ll even play the audio track from some of that video, we might even do it on this podcast time permitting, because one of those audio tracks is really just a conversation while the other videos are looking at properties. And so the visual helps, but for the conversation, we can probably just play the audio part of that video on the podcast here today. And then mom and I after looking at Cleveland, Oh, Mom, you got to share the funniest thing. And I was very concerned about you, you know, during the surgery as I was pacing around the waiting room and so forth there at the Cleveland Clinic, but I knew you were okay. When you were in the intensive care unit. And you demanded your iPhone. And what were you doing on your iPhone? I actually took a funny picture of you. Why don’t you talk about that?
Jason’s mom 4:22
Well, I had the operation the second or third day of the month.
Jason Hartman 4:26
It was the second it was July 2.
Jason’s mom 4:27
Okay, it was July 2. Anyway, you know, the rents are supposed to be in my bank account on the first day of the month. So I was simply calling those that I didn’t think had paid yet that weren’t registered in my bank to pay the rent immediately.
Jason Hartman 4:42
I know my mom’s been on a few shows before everybody and you’ve heard her talk before. She’s the I call her an extreme do it yourselfer. She’s not a do it yourselfer. She’s an extreme do it yourself or that mansion in which you live you probably would have built it yourself if you could have
Jason’s mom 4:58
I could have gotten rid of all of it. Help.
Jason Hartman 5:00
Yeah, I tell you building a house isn’t a nightmare project. So I would never recommend that to anybody. But you know, that was your childhood dream ever since you saw Gone with the Wind as a little girl. But anyway, what you do that I think is kind of interesting is number one, you self manage all your properties, you don’t use managers, and you self manage from a long distance, you have properties as far away as about 2000 miles or so. And then you have closer properties that are within maybe I don’t know, 6080 miles, Biloxi, Gulfport, that’s where you’ve got one, you’ve got another one in Tuscaloosa, I think right? Yes. Those are the closest, do you have anything in Mobile, Alabama? No. So those rental properties, what you do that’s interesting is you have all your tenants deposit the rent into your bank account. So you bank with a big national bank, and they’re responsible for going to the bank and depositing the money into your account on the first. And I remember when you were in the intensive care unit, and this was literally I mean, look, folks, I tried to stop her, I tried to take the phone away, she wouldn’t have it, it’s just you have to know my mom understand that. You’re not gonna, you’re not gonna stop her from doing anything. And so you had a sheet of paper there. And you were looking at the deposits and you had a pencil and you’re writing down on a sheet of paper, which ones had deposited and you discovered that OF ALL your rental properties for people had not made their deposit, and you were calling them on your iPhone from the ICU where they strictly say that you’re not allowed to have phones in there?
Jason’s mom 6:28
Well, actually, it was only three people, the bank had kind of made a mistake on one of the tenants deposits, I couldn’t quite recognize it. But they corrected that the next day. And the tenant told me that they had definitely deposited, and they were telling the exact truth. So it was only three people that had deposited it immediately.
Jason Hartman 6:48
What strikes me as interesting. And again, if you use property managers, you don’t have this opportunity. But I remember listening to you talking to your tenants on the phone. And what strikes me as interesting is how I think that because you have this kind of a personal relationship with them. Of course, as a business relationship, you’re not friendly with them, so to speak, you’re not getting too close to them, in other words, but because they know you and they view you as an actual person, rather than sort of some sort of nameless, faceless institution, I feel that you exert some more pressure over them to get them to pay and to pay quickly. Do you agree or have anything to say about that,
Jason’s mom 7:24
I just make it very clear that I cannot tolerate late rent payments, or when they sign that lease. And they know that I expect and demand that my rent be paid the first day of the month.
Jason Hartman 7:36
So tell the listeners kind of how you handle that and what you say to people and things like that. And by the way, folks, we’re gonna cover a lot of other subjects in this show. So in this episode, so I’m just going over a few things here that struck me is kind of funny with mom. But But tell us tell the listeners how you handle that what you say to them?
Jason’s mom 7:54
Well, I simply call them and say, you know, hi, whoever it is, on the other end of the line, I don’t see your rent in my bank deposit yet. And is there a problem? Or did you already put it in or what is going on? And they tell me what has happened? And I say, look, you know there’s a $60 late fee, if you don’t have the rent in there the first day, I really do not want your $60 I simply want your rent on time, when will the rent be put in the bank? And they tell me? And if it isn’t in there on that first day of the month? I say well be sure to put in the $60 for the late fee.
Jason Hartman 8:31
Okay. And do they usually do that with a cooperative and put it in?
Jason’s mom 8:35
Yes, have most of them all do that there is one tenant that does not do that. And that all of those $60 late fees will simply be depth deducted out of their security deposit when
Jason Hartman 8:47
they leave. Okay, so now you did have a problem, though, that was kind of stressing you out on one of your properties. And this is a long distance property again, it’s about 2000 miles away from you. So it’s far away. And you actually called up a real estate agent. I think you were calling a century 21 office and, and kind of described for the listeners that whole story. And that happened this month. You know, these are unusual, but it happened to happen this month, you happen to be in the intensive care unit at the Cleveland Clinic, which I think is ridiculous that you were doing this. I don’t know. Maybe that’s what keeps you alive is you have a purpose. You know, we you knew you had to recover from surgery and recover quickly because you had to collect your rent. So it’s kind of like Victor Frankel’s Man’s Search for Meaning. You know, another version of it, the modern version.
Jason’s mom 9:38
Well, what happened is that this tenant is now we’re in the eviction process, and the candidate had moved in a girlfriend and he simply didn’t pay so I called a local real estate agent. And I told them the situation and I asked them to what they please go over there and just check and see if the place looked like If it had been abandoned, if tenants were still living in there or what? Anyway, the gentleman, very nicely did go over there. The realtor, the realtor and his he was there, someone was coming out of the door, and it happened to be the girlfriend. And I said, Please let me speak with her. And so she just took his phone and took it in the house to get to the poor. he’d lost his phone, it was ready to call the police to get his phone back. And she carried out a 10 minute conversation with me about when they were going to pay rent and all of the details. I said, Please now give that man back his phone. I talked to the realtor.
Jason Hartman 10:40
This is hilarious. It’s like a reality show. You know,
Jason’s mom 10:44
I talked to the realtor A few hours later, I called him and said, I wanted his address, I wanted to send him a check for his for his work and helping me out. And he refused the check. And he says that’s just my job to give really good service to people. So I thought that’s a great guy. And I will certainly go back to him when I need to. Yeah,
Jason Hartman 11:05
so so the realtors You know, there’s what you’ve got to realize, if you want to self manage your properties. And if you want to be, you know, an extreme do it yourselfer like my mother, I mean, the vast majority of our clients, you know, and I’m talking vast, vast majority, maybe, you know, 95% of our clients use property managers. And, you know, I do it both ways, myself some of my properties I self manage. And as I said to you on many episodes, for a long time now, I was happily pleasantly surprised that I could do this from a long distance. I never thought that was achievable. And I, for our members, I taught a whole webinar on that topic. And I’ve talked about it on the podcast as well, in prior episodes about long distance, self management of your property itself. There are advantages and disadvantages to each. What you’re hearing now is from a an extreme do it yourself are so so good. Anything else on that?
Jason’s mom 12:02
No, other than the fact that I have now done all of the eviction preparation work, and
Jason Hartman 12:08
in turn, so So how do you handle a long distance eviction like that, without a property manager, tell us what you do. You go online, you find an eviction service, etc. You tell us what that’s about and how it works and how much it costs?
Jason’s mom 12:21
Well, first off, I do file a three day notice to pay rent or quit because I know all of the details. And I then hire a process server, which costs anywhere from 30 to 50, or $60, to get a thing served, then you send the proof of service to the return to the attorney. Now you can go online and just Google eviction services, you always want to get a firm that specializes in evictions don’t get a firm that does every other kind of legal work, just evictions online.
Jason Hartman 12:55
So there are lots of law firms out there they are technically law firms that are eviction services that are like an assembly line. They’re they’re a mill, and they just process evictions and deal with tenant issues like crazy. And one of the things I say when I talk about self management is that sometimes your property managers will actually do this process themselves, you know, they will go and they will post a three day notice right on the door, sometimes they nail it right to the door. And it’s kind of embarrassing, you know, for the neighbors to see that. And they will actually do all of this and they will handle the eviction, they will show up in court, they will take it all the way through getting your judgment against the tenant, which you can later collect on, or at least try to collect. And I’ve talked a lot about that a lot of those judgments are a lot more collectible than people think. In fact, when you were online today, I saw on your computer screen mom, when you were online looking at eviction services, I saw that there was like a banner ad there on that website that said, we want your old judgments. And so a lot of these services and a lot of other people out there will actually buy these judgments from you. Now, of course, they’re going to buy them at a discount. So if you have a tenant who owes back rent or has damaged the property, and you’ve got a judgment against them for say, $2,000. I’ve never sold off a judgment like this, but I would assume that these services will buy the judgment from you and do all the collection themselves for maybe 5060 cents on the dollar, depending on how big it is, how collectible it is, etc, etc. But you can just sit there with a judgment and wait and collect eventually too. And those judgments do accumulate interest. So this can actually be kind of a good investment. Oddly, and if that tenant ever tries to get an auto loan, or apply for credit somewhere or someday buy a house, that prospective lender will usually say, Hey, you got to pay off this judgment before we’re going to give you a loan. So don’t just assume because the tenant is broke today or they’re a deadbeat today, fortunes change. And that won’t stay the same forever. So what else happens in the eviction service? Tell us about that. Any Anything else? You did you hire the attorney on that one already?
Jason’s mom 15:08
Yes, he sent me a couple of forms to fill out. And his price for an eviction and Riverside County is $670.
Jason Hartman 15:16
Now, that’s pretty expensive. Actually,
Jason’s mom 15:19
the prices went up, I think about a year ago or within a few months ago, because it was usually around $599. Something like,
Jason Hartman 15:29
well, I’ve heard of people hiring them for a lot less than that. I’ve heard of people getting them for two $300. You know, I bet you the now those are old properties that are in the Socialist Republic of California. And I’ll bet you Although I do not know, this is just a guess that part of that has to do with the fact that California is such a tenant friendly state. And it’s just harder to evict people there. You know, one of the reasons, we don’t recommend it as a market.
Jason’s mom 15:57
You know, I don’t know, in some in some counties, it. Los Angeles County has a different price. And I think San Bernardino County has a slightly different price. And Riverside County has a slightly different price. So it depends upon which county you’re operating in.
Jason Hartman 16:14
Have you ever done one? Did you do one here in the south where you’ve got your southern United States properties?
Jason’s mom 16:20
No, I’ve never done any eviction here.
Jason Hartman 16:22
And your cash flow is so much better here, too. You got to you got to see my mom’s strategy. Now look, folks, you know, of course, your family’s never going to really listen to you too much. But now, now I can see that you should see her expression right now. Here we go. Again, rolling the eyes, but selling those properties, those properties that she’s had for decades, okay, from the 70s 80s 90s, maybe about some of the 90s I think he did and selling them on 1031 exchanges, and exchanging those into other properties in more tenant friend or more landlord friendly places, I should say, and you know, with much, much better cash flow, that would be a great strategy for you. But speaking of that, let’s talk about some of the markets we saw because we took a road trip after your surgery, they let you out of the hospital, after two days in ICU and one day or one night, I should say in the regular room in the hospital where we watched a fireworks from your room. And it was pretty good. Actually, Cleveland had I don’t know how many fireworks displays did we see there maybe 1315 fireworks displays and a beautiful sunset. The Cleveland Clinic is like a hospital that sort of on the Swank Enos level, almost as the W Hotel. But with the service of a Ritz Carlton was just totally impressed. And I know you are too. And so we watched fireworks there and you checked out the next day. And then we we drove around Cleveland and number one that was super impressive. But then we took a road trip. And we went to Cincinnati, we looked at properties, we went to Birmingham, we looked at properties, we went to Nashville, and then back home to Gulf Shores, Alabama. And then I took off to Dallas to go look at some discounted mortgages, discounted notes, and we’re thinking of offering that to our investors. So we’ll talk about that on a future episode in more detail. But it’s interesting to talk a little bit about Cleveland if you would mom. And then let’s talk about maybe the other highlight would be Birmingham. I’ll talk a little bit about the properties I looked at in Dallas. And, and then we’ll kind of wrap up here.
Jason’s mom 18:20
I was really, really, really impressed with the city of Cleveland. I had it in my mind that it was one of these old steel kind of rust belt cities, blighted, blighted area. Wow was I impressed downtown, beautiful, beautiful displays of flowers everywhere and darling restaurants and shops. I just couldn’t get over how lovely it looked. It was it was incredible. And then the drive that we took along Lake Erie, or all of those big beautiful houses were I mean, some of them were just like castles. I was just blown away.
Jason Hartman 18:59
They’re like, you know, those are like the old money, probably old industrial money, homes. And they were they were very impressive.
Jason’s mom 19:07
But there were also beautiful neighborhoods that these weren’t castles, but they were beautiful big homes, just one house after another huge big lawns. Everything was green, lots of trees, flowers, just a lovely sight to drive around.
Jason Hartman 19:23
Amazingly, you know, some of these former Rust Belt cities are really finally getting it. They’re not doing the idiotic thing. You know, the the big government liberal thing where they drive all the businesses out like, like California has been for so many years. And they’re getting it. I mean, there are a whole bunch of incentives to move your business to Cleveland. They’ll give you free real estate, they’ll give you free warehouses. And I mean, one of the things that just I couldn’t believe it, you know, we went to the Rock and Roll Hall of Fame. We have lunch downtown. We had dinner downtown the night before that beautiful restaurant what was that called Blue nose or something?
Jason’s mom 20:01
I think it was blue point or point blue. And then there was, it was blue point. Yeah, there was a horse with carriage that you could drive around the city with
Jason Hartman 20:10
there. There were a few of those, remember and remember my dog Coco, who’s in the backseat here.
Jason’s mom 20:14
More than one of them. Definitely.
Jason Hartman 20:16
Remember her Coco freaked out thinking that horses a big dog, and she didn’t know what to think about. But, but that was amazing. And it was so clean. I didn’t see a single homeless person anywhere. Now maybe it’s just too cold to have many homeless people. But it wasn’t cold when we were there, of course in the summertime, but it is other times of year. And I mean, I was just amazed. I did not think it would be that nice. It certainly Wasn’t that nice. Last time I was there years ago.
Jason’s mom 20:47
And there was one charming area called Little Italy, with all of the cables out out on the sidewalks and the tablecloths and people eating out in the evening, it was just just totally charming. I was
Jason Hartman 21:02
I liked it a whole bunch. Okay, let’s switch gears. And let’s talk about our next real big property stop. I mean, we did some others. But you know, these are the major highlights we’ll give you. And that was Birmingham, Alabama. Now, we’ve been doing business in Birmingham for a while, we stayed at that beautiful Westin Hotel in Birmingham, and that whole new area of redevelopment there, that was really, really nice, shops, restaurants, it was gorgeous. It was really nice. Then we went out with our provider who had been working with for a long time, we saw some of the homes that you the listeners, our clients have purchased and rented and some that are in escrow or under contract, I should say and, and you know, you haven’t closed on them yet, we saw some of those and took some video. And the thing about Birmingham is that there are different management styles, different rehabbers, or local market specialists that we work with have a different style of doing business. And you know, one of the things I say is that this is a very fragmented industry, everybody works a little differently. That’s what keeps the institutional investors largely out of our business. I know we’ve been talking about hedge funds and private equity being in the real estate business, but they don’t like it very much. And they’re not really staying and they’re not here to stay. Because it’s just too fragmented. for them. It’s It’s not easy for them, like other institutional investments that offer lower returns, but when it’s not your money, your return is not that critical of an issue. Okay. And that’s how they think is they just get paid to manage capital, right. So Birmingham, the key thing there is our local market specialists, there is what I call the minimalist manager. What I mean by that is that these properties are really designed and the rehab is done in a way, in such a way so that the property is kind of bulletproof, if you will, where there’s just not that much to break. And, you know, I was thinking about all the properties I own and have owned over the years. And the things that break and the things that I get, you know, calls on or, you know, the property manager shoots me an email on asking me, do I approve this expense to fix this or that? And I couldn’t believe our manager, our local market specialists there who’s also a property manager. You know, Mom, do you want to talk about some of this minimalist management that you you, by the way, loved it, okay, I was a little bit less enamored of it, the new but the more I think about it, the more I think, gosh, you know, you really could have nearly expense free properties with this style. What are your thoughts?
Jason’s mom 23:33
I was impressed because if you don’t have a garbage disposal to fix,
Jason Hartman 23:38
or a dishwasher, you know, they said they actually prefer properties with no garages. And if it has a garage, they usually take the garage door out and just make it a room. Because it’s less, it’s less things to break, you know, there’s never going to be a garage door to repair. There’s never going to be a garage door opener to repair things like that.
Jason’s mom 23:57
Yeah, and no, no, no, a microwave oven to replace. I just love the whole concept of this minimalist type of thing. It reminded me of houses that were built in Los Angeles in the 1940s. They didn’t have all of these great modern improvements, you know, all of these kitchen packages, the stove, the refrigerator, the microwave, the garbage disposal, that wasn’t in existence in Birmingham, and those would be great houses, the rent might be lower, but you’re not going to spend all of that money fixing them up and hiring plumbers to go out there.
Jason Hartman 24:31
Well, the rent really is quite good. I mean, these are lower middle houses, okay. And so the typical deal there that we looked at where you’ll buy the property for maybe 55 to $65,000. I mean, there are you know, this fluctuates, but this is what we kind of looked at that day, and it will rent for about 1.2% of the value, maybe somewhere in that range. So your $60,000 property will rent for $800 a month. And it’s a minimalist deal. So again, the tenant doesn’t have very high expectations, they get a single family detached home, and they get a yard front and back. And they get three bedrooms and one or two bows.
Jason’s mom 25:14
And another nice aspect of those homes is because they are the older homes is that they typically have hardwood floors in. So hardwood floors are much more desirable than carpets. And you don’t have to keep replacing the carpets. Yeah,
Jason Hartman 25:27
a lot less maintenance there. So that’s the minimalist style of management and what it means. No garbage disposals, no dishwashers, no microwave, no garage, and obviously no refrigerator, washer and dryer, the tenant supplies their own. And the tenant, you know, can treat the dishwasher, just like any other appliance, you know, they they don’t, a lot of times expect a washer dryer or a refrigerator. So you know, they can they bring those, and they can bring a dishwasher to you know, there are dishwashers that are mobile that are, you know, not built in, when I
Jason’s mom 26:05
said the rents are lower, they’re not lower in their lower in the rents that you would get in California. But in relation to the prices that you pay for those houses, you are having positive cash flow, I mean, great positive cash flow. And the point is that you get to keep most of it because you don’t have to spend it all in repairs.
Jason Hartman 26:24
Yeah, good stuff. And we’re gonna be touring, by the way, slated for mid May be late September, but our little rock property tour by the time you hear this, I’m pretty sure it’ll be on the website at Jason Hartman calm. So there’s another great market that you can look at. And I just, you know, we’re kind of running out of time. So I think I’m gonna skip telling you about our Dallas tour. I mean, not ours as a company, but my Dallas tour. And I’m not going to tell you about discounted notes. And those kinds of opportunities in this show, because we’re already at about 30 minutes here, but I do want to tell you go to Jason hartman.com. Join us for our little rock creating wealth seminar, and property tour. And that will be in mid to late September. More details to follow very soon. But you can register and get the early bird pricing at Jason hartman.com in the events section.
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