Jason Hartman starts the show by talking about being an empowered investor. In the interview segment, Jason hosts his Aunt Joan, an incredibly successful real estate investor who, together with her husband, owns more than 70 single-family homes around the Sacramento, California area. Joan shares how she started into real estate and gives advice about property management and keeping your tenants on your side.
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. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:16
Thanks for joining me today where you will hear a Thanksgiving interview of my aunt Joanie. And I finally got her to come on the podcast. And you know, the reason this is interesting is because, as a child, my aunt and uncle in Sacramento, Joan and john, they really really influenced me a lot in my thinking about real estate investing, as they were accumulating properties and it seems like every time we would go up there, for whatever reason, whether it be Christmas or Thanksgiving or just for a visit some other time of year, I, you know, my mom and I would go around with him and See all these houses they owned and we were constantly looking at houses, I guess that’s why real estate is in my blood. Joan claims to own over 70 rental properties. She would only say over 70 I have a feeling it’s quite a few more than that. But it’s pretty amazing if you think about it. And one of the things I’ve been focusing on a lot lately is this concept of alignment. And that’s really our theme for our upcoming meet the Masters event, there will be many talks and much focus on the concept of being an empowered investor. And one of the themes here is how, you know, how do you get empowered? How do you become an empowered investor? Well, number one, you follow my 10 commandments, but especially commandment number three, you maintain control, you don’t go and invest in someone else’s deal. Now, this is also interesting because it brings If the concept of well when you don’t maintain control, you know, the problems there, you might be investing with a crook, you might be investing with an idiot. assuming they’re honest and competent, they take a huge management fee off the top for managing the deal. And I was talking recently with a provider, a local market specialist in the Phoenix area A couple of weeks ago, and they said that they were going to open up a new fund to help people invest in single family homes. Get this, okay. I mean, this is such a crappy deal. It’s, it’s not even, you know, it’s not even on my radar, okay. And they said they thought that they could return eight to 10% to the investor investing in single family homes. And I said, well, and they, they, they claimed that they could cure a lot of the problems that single family home investors have and, you know, they do fund investing and you know, like to go money together and get people to invest in funds. And of course, we all know the problems with that. But the interesting part is, when he says, Well, we think we can return pretty consistently eight to 10% by buying and fixing and renting out single family homes within this fund. And I said, well, gosh, eight to 10% is a terrible return. I mean, you and I both know that investors can make 2030 40% annually, all things considered on their prudent good, smart, single family home investments. And I said, Well, why would an investor do that? And he, his answer is, well, you know, they’re just some investors that don’t want to deal with anything. And I thought, you know, that is amazing. If you just figure out how to deal with some stuff. It’s not that difficult, okay, it’s really not that difficult. You can triple or quadruple or make a return of five times, what they were suggesting would be a good return of eight to 10% annually. So just mind boggling here, right? But part of the problem when you maintain control when you follow commandment number three that presents some new challenges, and all of you listening notice, it brings on some new responsibilities that you, the investor have to deal with. Well, one of the ways and one of the things, we’re going to focus on it meet the masters and you’re going to hear in my interview with Aunt Joan, who owns over 70 houses. And by the way, I want to just do a little math for you, because she claimed to having 62 of those over 70 we don’t know what the exact number is over 70 she’s being modest. I have a feeling it’s a decent amount over 70 but I just don’t know, I was used to think they owned about 100 hundred and 20 homes. But if you just take a $450,000 or let’s just Make it more conservative. Let’s take $400,000 is the average value of those homes. Now when the market got really bad see they did it the old school way when the market got really bad in Sacramento, California, and we had the financial crisis. In some areas, I remember reading a stat that Sacramento was down 48%. And Diane, Joan doesn’t think her portfolio was down that much. Let’s say it was, you know, only down 30 or 40%. That’s still a pretty big loss, okay, which could have been prevented through diversification. But, you know, this is the old school way. It’s the old school way of, you know, buy a bunch of houses in your neighborhood, manage them do a lot of elbow grease, you know, go around to the houses all the time spend, you know, a lot of time doing that, but it does have some pretty big rewards, even the old school way. And you could accelerate this dramatically with refi till you die with inflation induced debt destruction with my risk evaluator formula and with diversity vacation, okay, but still and Uncle john and Joan did pretty pretty darn well for themselves. So let’s take $400,000 times 62 free and clear homes, okay? And that gives them a net worth, just from that real estate portfolio of $24,800,000. And I don’t know how many more than 70 and Joan and Uncle john own, but I have a feeling that’s a decent amount more. So just from their real estate portfolio, they’re probably worth 25 to $30 million. I mean, look at the number of people who are retiring broke. All they did is the simple old school form of keep buying houses, rarely sell them and manage them well. So back to this concept of alignment and empowerment. If You have your interests aligned in your investment portfolio, you are going to be an empowered investor. And when I was 17 years old and I discovered Denis waitley Earl Nightingale, Zig Ziglar, Jim Rohn. Those are basically the people who brought me up. You know, they were pretty good influences on me as a wayward teenager, and really, really made a huge difference in my life. Well, one of the things Denis waitley used to always talk about is win win. And later, the late Stephen Covey talked about Win Win or No Deal in the Seven Habits of Highly Effective People. And this concept of Win Win is a great concept. So as an investor, we would probably think, Okay, well, I’m gonna hire a property manager. And I’m gonna have the property manager, manage my, my properties, and then I need to make sure that The deal between my property manager and myself is a win win deal. Okay, and that’s one layer of it. But I say, you really need to go on to one more layer. And then where there really are more layers, but at least one more layer. It needs to be Win, win, win, so that you as the investor win, okay? your property manager wins, meaning your interests are aligned, and then your tenant wins so that they’re going to stick around and want to be a good tenant. Win, win win. Now, where does this stuff get out of alignment? Well, I’ve been focusing a lot on this lately. And I have as you probably know, a couple of apartment properties. Two are in Phoenix one recently sold and I heard from one of my partners on one of those deals. That our property manager was charging the tenants, a lockout fee. So for example, if one of your tenants in this apartment complex, lost their keys or locked their key inside the house inside the apartment building, they would charge them $150 to let them back in to the property or make them a new key. That is absurd. And my partner called me and he was pretty irate about this. And I agree with him completely. It was our manager that you know, who we bought this apartment building on partnered with was doing because he said almost exactly this. He said, How is your tenant going to feel if their rent is $700 per month, and they’re charged $150 to get back in their unit. So this is an example of non alignment where the manager is basically screwing your tenant over and your tenant is not Not going to want to be a good long term tenant in the property. The same person who’s saying we can return eight to 10%. Buying single family homes inside of a fund, you know, non alignment all over the place here non alignment, not win win. So this is the kind of deal you want to avoid. You want to make sure it’s a win deal for you a win deal for your manager and a win deal for your tenant. Your tenant is your customer. If you own a business, if you had a restaurant, you would want your customers to come back, right. And you know, you need to insist that your customers pay the bill. And when they don’t pay the bill, your rent in other words, or when they don’t take good care of your property. You need to be firm with them and make them live up to their part of the bargain. That’s their part of the deal. Remember, you’re listening to flashback Friday. Our new episodes are published every Monday. And Wednesday, but it goes too far when your manager is basically screwing your tenant over. And this gets completely out of alignment. And that’s one of the reasons I do like the concept of self management. So I’m working on some tools that can make it much easier for you to self manage your property and buy all a CART services from your manager, your property manager rather than whole complete services. The way traditional property management game is usually played, and by all ecard services from local real estate agents, it is amazing to me that you can really really and I’ve done it many times, self manage a property you’ve never seen. That has a tenant you’ve never met from 2000 miles away, or it doesn’t matter. It could be 8000 miles could be 200 Miles doesn’t matter the distance the point is property you’ve never seen an attendant you’ve never met, you can actually do that. And in our member section, I did, I believe two of our monthly members only conference calls on self management. And I’ve done some podcast episodes on as well. But I went pretty deeply into it in the members section, and all those calls are available, if you just join for a whopping hundred and 20 bucks a year, and you get some big fat discounts. In fact, if you’re coming to meet the Masters, you can recoup more than your membership fee, if you just join first, and then you buy your ticket for me the masters. Okay, so check that out at Jason Hartman, calm and listen to the self management conference call. It’s all recorded, it’s in the archives there. And it really would be a good opportunity for you also, go to the website and in the little screen bar, just type self management. And you can see all of the prior podcasts and some blog posts on the website about self management. And the whole focus here is become an empowered investor. Follow commandment number three, and then take on these additional responsibilities. When you do follow commandment number three and increase your returns dramatically. But you make these responsibilities easy for yourself. So you get the best of all worlds. You create a win win win deal. You you capture much, much higher returns than investing in some fund or some pooled money asset where you might be investing with a crook, or you might be investing with an idiot. And even if they’re honest and competent, they take a huge management fee off the top for managing the deal and you make the deal a win for your tenant. That’s what aunt Joan is going to talk about in this episode as well. So I think you’ll enjoy this interview. We did have a few times that guests were coming over for Thanksgiving and rang the doorbell at my mom’s Southern mansion. And Coco, the dog started barking. So, excuse those, hopefully our editor got a lot of those out of there. And anyway, this is really interesting to hear from someone who has accumulated over $25 million, I estimate in net worth, just being a very simple old school real estate investor. And you can do it much, much better than this. With some of the new techniques, the risk evaluator, the rent to value ratio, I mean, and Joan is getting lousy rent to value ratios, the refi to die concept, and the concept of inflation induced debt destruction. Those are the major things missed in the old school investing concept. So you can take this, what she’s done and amplify it dramatically. Maybe you can triple it, maybe you can quadruple her results. Okay, maybe you can do even better than that. Make sure you get your tickets for the upcoming meet the Masters event in January, where we’re going to share all of our experiences and tools for you to become the empowered investor. Do that at Jason hartman.com. Now, the pricing is going up as more and more people register and we get near to selling out. So here is aunt Joan, with a Thanksgiving message for real estate investors. And Joanie, how are you?
Aunt Joan 16:46
Just fine. Thanks. Okay. Join Gulf Shores.
Jason Hartman 16:49
Okay, good. Well, thank you for coming on and recording with me today. And I really wanted to, you know, just have you share with the audience a little bit about your tremendous success as a real estate investor. And, you know, my first question for you is, when did you start investing in real estate?
Aunt Joan 17:09
Probably about 1975 or 78 1978.
Jason Hartman 17:12
Okay, so 1978, you started in real estate investing? And why did you start investing in real estate? What was it? I mean, look, tell them a little bit of your background. My mom’s been on the show before. So, you know, growing up on a farm in upstate New York, what was that? Like? Just, you know, briefly?
Aunt Joan 17:33
Well, it was a lot different from the world that I’m living in today, of course, and I didn’t have any ambitions about getting into the real estate market at that time of my life. However, when I came out to California, I went to UC Berkeley, and I majored in two fields. One was real estate and the other was personnel, human relations management,
Jason Hartman 17:57
human resources, human
Aunt Joan 17:58
resources. Yes. So I’ve come to use both of them. Uh huh. And you have to use the Human Resources sub part of it when you are choosing tenants for your properties.
Jason Hartman 18:11
Yes. And so my mom also went to Berkeley, and you are her older sister. Yeah, just by a couple of years there. And she had she got a degree in social welfare loss. Not quite so usually
Aunt Joan 18:23
lately, when she decided she didn’t he was all sick about after a
Jason Hartman 18:27
while. Right, right. So I mean, that’s funny, Berkeley in the 60s and a degree in social welfare. You would think my mom is a flaming liberal, but she’s definitely not kind of funny. But okay, so. So you went to college? And how long would you say it was after college before you started investing in real estate?
Aunt Joan 18:51
Aunt Joan 18:54
maybe 10 years or so. 10 years
Jason Hartman 18:56
or so. Okay, great. So why why are we here? State I mean, what did you do? Well, we were
Aunt Joan 19:03
at that time, we were in that restaurant business. And we had absolutely no tax write offs. And we we needed to have something to to defer some income. And so we bought our first house in Sacramento. And just little by little, we kept acquiring more and more the, we had come from the very expensive San Francisco, San Francisco peninsula real estate market. And when we get up to Sacramento, things were so cheap, so to speak, that we just but sort of crazy.
Jason Hartman 19:47
A couple comments before you go on. So number one, listeners, you know, I always like to say that income property income producing real estate rental property is the most tax favored asset in America. So in Joanie here. Really became interested from a tax perspective. And then you look at the relativity concept. I
Aunt Joan 20:07
talked about the theory of relativity as it applies to real estate investment. And so you lived in a very expensive place, even back then in the 70s. San Francisco was very expensive. Oh, we were in Hillsborough, actually, which is even more expensive over the over the top, you might say, and then coming up here, or coming up to Sacramento, I kept looking at these houses these charming, darling little Craftsman houses. And I couldn’t believe how inexpensive they were. And so the more I looked, the more I said, Wow, why don’t we buy one? And so we bought our first one. I
Jason Hartman 20:47
don’t know what your first property that you ever bought. Was that a home in which you lived for you know, john? Yeah, it was a rental. It was
Aunt Joan 20:54
around home or home.
Jason Hartman 20:56
You didn’t buy your own home first. That’s
Aunt Joan 20:58
no excuse me. We bought our own home for a while, we also bought a home in San Mateo first before that, we bought a home in Hillsboro first I’d mean afterwards but but I mean now in terms of the investment prop part of it. We bought our first one I really and Sacramento.
Jason Hartman 21:17
Okay, great. Okay, so so the theory of relativity concept is that you came from that very expensive real estate market in the San Francisco Bay Area. And then moving to San Sacramento, everything looked really cheap. Everything looked really inexpensive. And so what happened there is it you know, things really worked back then probably the cash flow actually back in those days work pretty well. Okay. And well,
Aunt Joan 21:46
well, that’s sort of I yes and no. The point was in terms of in relation to the San Francisco Hillsborough Hillsboro market prices in Sacramento, where extremely inexpensive, but at the same time, the rentals were considerably lower. And so we were never, in most situations in a case of penciling out,
Jason Hartman 22:14
okay, in terms of cash, and even even then California didn’t really work from a cash.
Aunt Joan 22:21
That’s right. That’s right. And so but at the same time, I never wanted to buy in lower or lower property areas because I just didn’t want to have the problems connected with somebody my rentals and and very low income property. So
Jason Hartman 22:40
I agree with you. That’s one of the deceiving things and I talk about that on the show a lot. Is that is that in lower price markets, you know, those deals look good on paper, but in reality, with the collection problems and the eviction problems, they just don’t work. So whatever city you’re in, I think you should be just Low the median price is the kind of ideal, okay, so if you’re in $150,000, median price marketplace, or even a sub market doesn’t even have to be the whole city or the metro area, then you know, if you’re doing something at 120,000, that makes sense that works because you’ll have a decent quality tenant in that kind of a scenario.
So okay, now, just to give entice our listeners a little bit, Antonie, where are you now how many houses do now?
Aunt Joan 23:32
Well, a little over 70 that’s over 78. Most of them are single family residences. We have a few duplexes and we have one four Plex, but I’ve never gotten into the apartment situation.
Jason Hartman 23:47
That’s, that was my next question for you. How come you stuck with single family homes all those years? Why? Why was that the thing? Why not? Why not apartments? Well, we
Aunt Joan 23:59
just heard a lot of horror stories about renting apartments. And we just wanted to stay away from that and deal with families living in single family houses.
Jason Hartman 24:11
Yep. So this is one of the things folks, you know, look at I own apartments myself, I have two apartment complexes now. And I had three before I sold one of them a while back. And then I have a bunch of single family homes too. And I’ve definitely done both. I’ve done, you know, many more single family home deals than apartment deals in my career, but you know, the apartments, they can be good. And I know everybody, a lot of investors, they kind of have their eyes on Oh, I’m going to do this big stuff and do big apartments and, you know, I’m going to be big and I’m going to build an empire and all this. And you know, that’s great. It’s ambitious, it’s wonderful. But apartments are more complex, for sure.
Aunt Joan 24:54
And they can make too many troubles. You tell us about
Jason Hartman 24:57
that. What do you think about that?
Aunt Joan 25:00
For one thing, you have to make sure you get a good manager. And that can be a very, very hard thing to do. And then you’re really at that managers mercy if he decides to take another job, you’ve got a major problem.
Jason Hartman 25:16
You’re, you’re talking about like a resident manager. Yes. Right. Yes. Yes. Right. Can I it’s usually a tenant that lives on the properties on the property. Yeah. So if you have over
Aunt Joan 25:27
six units or eight units, something like that you have to have some live in person.
Jason Hartman 25:32
There may be a California roll to that is no, I don’t I don’t know those rules state by state. But it sounds like something they would do in the Socialist Republic of California because there’s a rule for everything. You know, when you look around the country, every lawyer you will talk to in every part of the country, in every business person you talk to in every part of the country when it comes to the legal climate in laws, California. New York always have their own set of additional laws on top of everybody else. So they’re like the like, like if, if if the rest of the country has, you know, X number of laws, California and New York have 50% more laws, right? Like, that’s crazy. you’re rolling your eyes. You know this. Okay, so what else did you hear about apartments?
Aunt Joan 26:22
Well, I I’ve just heard quite a few horror stories. In fact, we had a manager of our restaurant whose wife was a manager of an apartment house. And I just heard many tales from him. And I just realized that I didn’t have the time or nor interest to get into a possible situation. And you know, look at
Jason Hartman 26:45
apartments or like my second favorite real estate investment after single family homes. I’ll just state that for the record. And then, you know, I like the idea of mobile home parks. I’ve tried to do many mobile home park deals they have never completed One and I kind of like Self Storage I do not like office. I do not like retail property. I do not like industrial property. So housing housing housing is worse and I put in the single family homes you get generally speaking a much better quality tenant.
Aunt Joan 27:16
Yes, you do. Yeah. Well, also in our four Plex, of which is just a one bedroom, four Plex, we get excellent quality homes there. We have, yes, we just have a professional people are no pets, no smoking, that type of atmosphere, and that works very well.
Jason Hartman 27:35
Okay. Now, tell us about some of your property management practices. I mean, I remember the funniest things growing up as a kid and I tell you, if you asked me where I put my keys, I couldn’t tell you, but if you ask me what happened 20 years ago, I can tell you, because I have a funny memory like that. And I remember all of your funny little property management practices, you know where you would give your tenants colored envelopes, the kind of envelopes that a greeting card comes in, you know, like a happy birthday card. I
Aunt Joan 28:05
know it’d be, there would be a long legal colorful card in very bright cars. And so when these would come into the peel box, we would know that those are our rent checks. Yeah.
Jason Hartman 28:18
Okay, good luck getting those calls. Yeah. One other property management things would you like the listeners to know about?
Aunt Joan 28:27
Well, I frequently encourage people when they come, they’ll call our office and say, Are you a property management firm? And we’ll say yes, we are have our own properties. And they said, well do Don’t you? Wouldn’t you work for us? We say no, we have enough on our plate just doing what we do. And we really just take care of our own properties. But people especially if they’re running their property for the first time, they want someone to take over and they’re nervous and they’re frightened about To the prospect of doing this, and so we have a branch out to the point where a lot of first time renters or landlords, we’d give them a course. And the courses expanded itself over years. That was about two and a half years, two and a half hours long. And at the end of the session, depending on how many questions I asked if the baby three and a half hours, but there there’s pretty much a full fledged landlord.
Jason Hartman 29:28
So do you charge for this property? Yes.
Aunt Joan 29:31
Very, it’s a very minimal price.
Jason Hartman 29:34
And I didn’t even know you were doing this until today told me just
Aunt Joan 29:38
it’s charge $189 100 meters, and we give them all sorts of materials that they need. We don’t give them leases, but we give them
Jason Hartman 29:47
all sorts of materials. Oh, really? Okay, cool. Good, good stuff. I think we ought to, we got to record that and turn it into an info product and sell it at my website at Jason Hartman calm which reminds me I you know, I’m always forgetting this We are having a black or not a black friday special, but a cyber monday special on all our digital products next week, or after you hear this, we’ll probably get it going this weekend. You get 40% off all our digital products. This is our biggest sale of the year. It’s our cyber monday sale, you know, the retailer’s do Black Friday that online, people do Cyber Monday. So that will be available, I believe until December 4. Okay, so it’s just a few days long, and 40% off all the digital products at Jason Hartman calm. But john, we should add your course to
Aunt Joan 30:42
our hours is a one on one here, you know, so it’s difficult,
Jason Hartman 30:46
however, you’re so sure. So some of the tricks of the trade.
Aunt Joan 30:50
Well, let me tell you something that we learned not at all at first, but
Aunt Joan 30:56
maybe 10 years into doing this. We’ve been doing this for at least 30 30 3040 years, about 10 years into doing this, we realize the fantastic necessity of having house rules,
Jason Hartman 31:11
house rules. So tell us about house rules. Now there’s a movie Cider House Rules for your house.
Aunt Joan 31:19
Well, any rate, and we expand them as things occur in our residences. Yes. And and some people when we’re going over these, they’ll think that that maybe we’ve had some wild dreams in the middle of the night. But all these things that have happened, all these households are based on actual situation to the record. Okay.
Aunt Joan 31:42
Well, for example, we,
Aunt Joan 31:45
most of our houses in the Sacramento or at least in the market that we’re in, want to have hardwood floors, and the whole world loves hardwood floors. However, there are a lot of people who have no idea how to take care of hardwood floors, and so it’s very important that they have pads under larger pieces of furniture and small little pants that you can just paste on to the small things like coffee tables and chairs.
Jason Hartman 32:11
The average age of your houses, your houses are older.
Aunt Joan 32:14
Yes, right. What’s our, I guess make our oldest ones about 1916.
Jason Hartman 32:21
But so that’s like 100 years old is your oldest house?
Aunt Joan 32:24
Yes. Yes. And our most modern house is 1960. Wow. So
Jason Hartman 32:30
1960 is the newest? Yes, yes. So that’s 50 years. 34 years old. Wow.
Aunt Joan 32:38
But but in the market that we’re in, everyone wants to have houses with character. Okay. And my real estate agent when we were doing this, she says, Tony, why are you wanting these old the moldings that was her expression? And I said Sally, I love these older movies. And I said, I think a lot People like these Holy Moly folders these are these are Craftsman houses with little with ironing boards that come out and little mailboxes with fancy little grow work and maybe no holes at the front door you open up a little door and see what’s outside lights and things like that. Okay
Jason Hartman 33:20
definitely houses with character you know the one of the funny things is I can always tell your houses like if I just drive down any of the streets in which you own properties. I can tell which ones are yours because of your address placards. Yes. Right. Those are that’s like
Aunt Joan 33:35
your trademark. Right, right. Right.
Jason Hartman 33:38
Yeah, so that’s kind of neat. Do you want to talk about that at all? Well okay, so what other tricks of the trade house rules that’s interesting I most of our investors number one, they don’t have houses that old and number two, they’re not micromanaging them that much. So any tips for like the national the nationwide investor? I mean, you know what you you did The old school way. Now nowadays people are diversifying technology allows them to do that geographically and be in multiple markets and so forth. So what what are some of the problems?
Aunt Joan 34:11
Well, the other thing that’s very important is to have a very good background crew that can take your rental problems. And we don’t just have a handyman, who does it all. We have electricians, we have plumbers, but we have contractors, everyone is a specialist in his field. And this is very important. So things get done properly. Right. And we even have a fence person. I mean, we probably can name 15 different traits of specialists that we use. Right, right.
Jason Hartman 34:47
And you know, those people are getting repeat business from you.
Aunt Joan 34:50
Oh, yes. And they take very good care of us. Yeah, especially, especially the plumber, right.
Aunt Joan 34:57
He has all of our houses number one And then whenever we give our landlord course, we first recommend him. What do I want to do when I’m going to stop doing this? Because sometimes I don’t want to cut off my finger to, to where?
Jason Hartman 35:15
Exactly. Because his business is getting easy might get too busy for you. Yes. Right. So, you know, here’s one of the things that’s interesting. One of the strategies that I haven’t talked about very much on the show that I want to recommend to our investors who want to build big portfolios is your strategy. And I want to take your strategy and recommend that people do it in three different cities where they can if they want to, if they want to have a portfolio of say, you know, say it’s 60 houses or more, you know, get 20 in each city, okay? I want them to diversify you you did it the old school way, you know, and that’s fine. But the new school way is different. versified in like three different cities, okay. But the thing is they can get some economy of scale when they have 20 houses in each of those markets. Yes. And the other thing they can get is they can get certain vendors, like you just mentioned to really take good care of them.
Aunt Joan 36:16
Yes, because they know that I’m going to be calling them up maybe two times a week right
Jason Hartman 36:21
now with an issue. Yeah. Now, the other thing they can get is they get this sort of, I’ll call it bumper pool or pinball type concept. And the thing I’m trying to convey here is, you know, the ball, it sort of bumps around there. And what I mean by that is you have a semi monopoly in your market, where if a tenant is looking in that area, they’re looking at a few of your houses usually and you have some control over rental prices, where you can start trashing the rental market and you can improve the area and make it look better and bring the values about them, right?
Aunt Joan 37:00
Well, we have a website. Should I tell them? Yeah, sec sec, Reynolds calm sec, our end als calm
Jason Hartman 37:09
nobody else being a promoter at
Aunt Joan 37:12
any rate people that weekly we hear people say I go to your website all the time I don’t know if they’re trying to really buy a rental house or they’re trying to see how some some nice furniture arranging tips are. But some people say, Oh yes, I love your website, and it is done very well. And so we at first we were just putting our own houses on our website, but that pretty soon it when we got everything rented up, we were out of inventory. And we had this nice, big website. And so people kept seeing this and they crossed up and said, Well, how about putting our house on your website?
Jason Hartman 37:54
So now they want you to manage their properties and you only do it for your own right
Aunt Joan 37:58
right but but but we Help market their properties. Oh really? Oh yes they love it. And in your ears, we have these magnificent pictures, maybe 20 pictures at a small three bedroom, two bath house or maybe a two bedroom one bath house. And backyard pictures for an Eric pictures. Outdoor pictures app in the pictures are sell the whole thing. And my son is responsible for doing that. He has a real gift of photography.
Jason Hartman 38:30
That’s my cousin.
Aunt Joan 38:31
Yeah. And then we have a little blurb on the side with nine boards for describing the house. We put the price on, we put a nice big picture on and then they then there’s a button you say inside pitch. Also, we also put a satellite map on and a rental application. And so people are reading our houses from afar very frequently. I can’t tell you how many houses we’ve read at this last summer where people have been in New York Los Angeles, Florida, Michigan, renting our house
Jason Hartman 39:04
without even maybe having seen them. Right. Right. That’s great. That’s awesome. And talk to us if you would about your I mean, your your strategy is pretty much the old school strategy of pay off your mortgages, right? Yes, you have all your houses free and clear now.
Aunt Joan 39:20
They’re just about eight that we don’t have that are free.
Jason Hartman 39:23
So So, so you, you have a little over 70 but let’s just use 70 for round numbers. So you’ve got 62 of them free and clear. Yes. Why couldn’t I have been your son? Boy, your kids are gonna inherit a nice, nice portfolio there. Okay, so 62 free and clear. And your average price in Sacramento has got to be in those but 400,400 and now that that’s when the economy This is why I like diversification because Financial Crisis A few years ago, Sacramento basically got cut in half.
Aunt Joan 40:04
Yes. But here’s the thing. Interesting thing, most of our property show in this East Sacramento, and land Park areas, which are the really the best areas in town. And so our properties, they changed. Yes, they did. They went down, but nothing like what would happen in the outskirts. Now,
Jason Hartman 40:23
tell us what happened in rent with rents. So during the financial crisis, and this is the odd thing. Now, I don’t know what you’re going to say here. Tell me what you’re going to say. But I think I know what you’re going to say.
Aunt Joan 40:33
Well, naturally, rent went down some support, but we didn’t. I don’t know by by in terms of percentage, but maybe 15%, maybe even 20% in somebody’s been, like by surprise, there were there were a lot maybe 10%. You know, depending some houses are very rentable, and some houses are maybe a little harder to it. It also depends exactly
Jason Hartman 41:00
when you catch them, like if that if that lease comes up for, you know, for re renting and the tenant moves. And it’s during the depths of the financial crisis, like the worst time of all, when you know, the value of your house went from 450 to 225 never it never happened. Right? No, no. But, you know, that might be the 15% down, and then you know, the rest of them 10% now, yeah. And what are your numbers like they’re, you know, for house that’s worth I mean, is your average house about 450,000? Ha
Aunt Joan 41:34
Aunt Joan 41:38
three of 335 to maybe 450.
Jason Hartman 41:42
Okay, so also 450 is the height.
Aunt Joan 41:44
Well, I am actually more than that, but
Jason Hartman 41:49
comparison, I’m talking about the palace in which you live, okay, which is a palace. So, it’s right near where ronald reagan live when he was governor. So
Aunt Joan 41:59
it’s called the family For a nation of
Jason Hartman 42:00
fabulous 40s, the fab 40s. That’s the streets in Sacramento where they live. And I’ve been there many, many times. Now. Um, so what does that tell us about your rents? You know, for a house, that’s 330,000 and a house. That’s 450,000. What are those rent for? Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every
Aunt Joan 42:23
Aunt Joan 42:26
I mean, I can tell you, yeah, I can guess and
Jason Hartman 42:29
I’ll probably do,
Aunt Joan 42:30
actually, a lot of our two bedroom, one bath, little cracks, which can be anywheres from 1000 square feet to maybe 1250 square feet.
Aunt Joan 42:41
They probably the minimum price is 1695. Okay,
Jason Hartman 42:46
and that house is about 330,000.
Aunt Joan 42:50
It could be 332. Maybe three, maybe 400.
Jason Hartman 42:54
Okay, okay, so it’s how much did you say the
Aunt Joan 42:57
1695 might be the My rock bottom price,
Jason Hartman 43:01
okay, so 1695 a month for 330 to $400,000. So you’re getting about point four 2.5 Rv or rent to value ratio.
Aunt Joan 43:12
Right. But then the tenants do not just pay the the rental price. They also pay the city utilities, which Sacramento has a very unusual situation. Five services are all wrapped together into the utility
Jason Hartman 43:28
of course they pay the utilities. That’s normal. They do that everywhere. I mean,
Aunt Joan 43:32
that wasn’t the customer in Sacramento. Oh, no.
Jason Hartman 43:35
You would pay for tenants utilities. I never paid attention.
Aunt Joan 43:38
I’m not talking about smud I’m not talking about gas electric. I’m talking about water. sewer in three garbage cans.
Jason Hartman 43:45
Yeah, I never pay water. And in most places water and sewer go together. And then trash pickup. I never pay that either. For anything,
Aunt Joan 43:53
right? Well, non cargo used to be it used to be this situation in Sacramento. One change that
Jason Hartman 44:01
you know you did because of you.
Aunt Joan 44:05
As a user, we don’t we don’t pay that for it. So they pay that. However, we had a real quick lesson in that having the tenant send it into City Hall, because we found out some of them weren’t quite so bad chances, and we got acute liens on our property. So
Jason Hartman 44:22
because those weren’t paid they like hate when they do that, by the way, some cities do that if if the tenant doesn’t pay their utility bill. In some cities, most don’t do best, but the few do, they actually lien the owner and the owner becomes responsible for a lanky tenant, right. Tell us about late fees and eviction policies and I want to make a note and Joanie, we said you said I said How long are you going to talk for it? He said it was about three or five minutes 3430 minutes. So we’re not going to do our guests. This will be a whole episode unto itself, but it’s really This is great information. I love hearing it again. You know, this is the old school style of investing. And it’s it’s awesome. I mean, you obviously created a ton of wealth with it. What about how do you deal with tenants when their rent is late? And with evictions and stuff like that? Now you’re in California, which is not landlord friendly at all. That’s true. Yeah.
Aunt Joan 45:20
And so the idea is to try to get into a situation where you’re having to evict someone. In our earlier years. We made some wrong choices and tenant selection. And this happened. But I think that in our total experience, we’ve had no more than four evictions.
Jason Hartman 45:39
Are you kidding? I’m not kidding. And what happens is your average tenants say,
Aunt Joan 45:45
I’d say two, two years, maybe two, three years.
Jason Hartman 45:48
Okay. So two or three years is here so you don’t your vacancy rate and with the turnaround.
Aunt Joan 45:54
Our vacancy rate is like to tip
Jason Hartman 45:57
Yeah, yeah, but what I’d say to your listeners, listeners is your rent is too low. See, we’d like to get 1% of the value every month, you’re only getting point four 2.5% of the value, but that’s how California is. I mean, you know, that’s just the way it is in California.
Aunt Joan 46:12
Well, we find that tab.
Aunt Joan 46:16
Right with proper tenant selection. That’s, that’s the most important thing.
Jason Hartman 46:23
Yeah. Okay, so tell us about general selection. What are your practices there?
Aunt Joan 46:25
Well, we we have to make sure that they’re properly employed, they’ve been there a little while, and that their rent is that exceed at least a third of their income.
Jason Hartman 46:41
Aunt Joan 46:43
we just look at the we always check landlord references. And we also always run credit checks. And those are pretty good indicators right there. When you do the credit check, do you do an unlawful detainer check and a criminal We know that we used to, but we found out that this was completely empty. Was that
Jason Hartman 47:06
you just do credit only? Yeah, we just do credit. Okay, and what do you charge for an application fee? $30 $30 if we’re married or single or no, it’s $30 per person. Okay. And you probably only pay about 10 bucks per person to run there, right?
Aunt Joan 47:22
Maybe that but then it’s our time Yeah. And and pay for and then we get to get back to the landlord or to whoever we’re running them for, you know, and so dollars a deal. And some people will not some of our customers who, you know, they’re not anything to do with our ownership, but they just come in as a way of life and to run credit checks, and they will not move until they get our report on the credit checks. And we get what you mean by that. I don’t understand that. They will last for the last Many years, we always insist on writing credit checks.
Jason Hartman 48:04
Well, I would think that would just be
Aunt Joan 48:05
standard practice that well, we for a while, we didn’t do that with everyone, but now we do.
Jason Hartman 48:12
Oh, really? You do? credit checks? Well, okay. Now your your philosophy is let’s prevent the eviction. Okay, that’s right. Let’s not get there. So how do you how do you prevent the eviction from happening? I mean, that’s an amazing I want to I want to just say, that is an amazing property for evictions with 70 houses, and all the years you’ve been doing this. That’s amazing. So how do you prevent it?
Aunt Joan 48:36
Well, for one thing, we made sure that people
Aunt Joan 48:40
were that gainfully employed Yes. Right. And, and that sort of thing. And then we tried to keep people happy. You know what they have a report that there have a sewer stoppage or whatever, we try to get a problem for somebody over there right away. And we also in our house rule type reasons. I have several ways to Make sure that they don’t have plumbing problems. We have a certain we have a whole list of things that that to put down garbage disposal, and we also do drains, bathrooms and that and dishwashers and
Jason Hartman 49:14
that whole that whole subject but how would you How would you check that? How would you know if they did it if they put out what our Q tip like say q tip or
Aunt Joan 49:22
like things about the plumbers.
Jason Hartman 49:27
Yeah, they don’t make when they Yeah, well that’s interesting. Okay, so any other points on preventing evictions tenant selection house rules How do you when they’re late on the reg I mean certainly people must be late on the rare
Aunt Joan 49:42
we always have so people that are late player there’s just like
Jason Hartman 49:46
they’re it’s sort of just their ways.
Aunt Joan 49:48
It’s that’s we just what I’ve said my assistant, our eyeball wrench but in and she says she’ll say all but the usual
Aunt Joan 50:00
About four or five.
Jason Hartman 50:01
Okay, so out of 70 you only got four or five there later.
Aunt Joan 50:04
Yeah. Okay. But I mean, some of these people that are running us for us for
Jason Hartman 50:09
10 years me out.
Aunt Joan 50:11
Yeah, we know that. Okay,
Jason Hartman 50:13
so what do you do with them? What’s your policy? how strict? Well,
Aunt Joan 50:17
first of all after the rent is due on the first we have a grace period from the first to the third after the third. It’s due, it’s late. And we don’t use punitive practices here and charging some huge a late fee. We charge $25 that’s pretty Wow, that’s light. Uh huh. And here’s the thing after the fifth day, if it’s not paid after the fifth day, then there is an additional charge of that one is $25. But $5 per day until the rent is paid in full. Joan, for for a rent it’s 1600 to $2,000 a month. You are easy.
Jason Hartman 50:58
Yes, not Not bad at all. I mean, that’s a cheap late fee.
Aunt Joan 51:02
Right? That is it? We do you’re okay
Aunt Joan 51:06
Aunt Joan 51:06
We’re okay with that. I guess we, because most of time people pay really well, I believe we, we don’t have that much of a problem. Okay, good, good.
Jason Hartman 51:16
Okay, any other? Just, you know, as we kind of wrap up here, you know, we’ve gone like 13 times longer than we thought we would. So what? What other things would you like people to know about real estate investing? You know, why real estate? I mean, you, you know, after all these years, do you still think it’s the greatest thing? I mean,
Aunt Joan 51:39
I do. I know my husband is into stats and a little bit of the balance but I mean, ease into investments like that. But I really like we all say we’re doing a thing. It’s a very tangible thing. And it pretty much depends on yourself and your efforts is throughout the whole thing works. Yeah, and Do we have such a very small vacancy fee? And we have a minimum of problems because we have most of our properties in very good areas. And we have just a high caliber of
Jason Hartman 52:12
tenants. Do most of our tenants work for the government? I don’t Sacramento is the capital of California. So
Aunt Joan 52:22
not not most of them, but quite a few do
Jason Hartman 52:24
more government related.
Aunt Joan 52:26
Uh huh. We have probably the medical profession. We have in terms of just the Sacramento itself. We have six major hospitals within five minutes. Yeah,
Jason Hartman 52:39
some of our ears are like that. Houston’s got tons of medical, you know, medicals, pretty good because those people make good money.
Aunt Joan 52:47
Aunt Joan 52:48
places keep expanding. Yeah,
Jason Hartman 52:50
right. Yeah. You see the medical the medical industrial complex.
Aunt Joan 52:53
You see the Med Center looks like a five star hotel.
Jason Hartman 53:00
Yeah, it really is. Okay. Good. So anything else about real estate or
Aunt Joan 53:05
no, I’m happy we got into it. And my husband was always opposing it. And I would see what house for example, and he says he would come by and he says, I would think this house needs to be
Aunt Joan 53:18
Jason Hartman 53:20
Like tore down,
Aunt Joan 53:21
like, like, yeah, removed
Aunt Joan 53:24
earlier. And I’d say, john, I took it just needs a little TLC. And when we were first started out, I didn’t even want to
Aunt Joan 53:35
be involved. If a house near plots, doors that were working in a few things like that. But after a little while, we got into all sorts of things and problems and of course, we got workers to handle these problems. And so we got very adventurous with then we got into kitchen remodels, bathroom remodels, adding rules to properties and then taking when you add rooms to them.
Aunt Joan 53:57
Oh yes, but
Aunt Joan 53:58
we’ve done a lot from making them from twin ones into three and to sell because we have a very, the whole world wants to live in these type of items. So it is 1920 houses are not exactly suited if someone comes in with children in a couple and then and then they want an office to sounds fantastic.
Jason Hartman 54:21
Yeah, good stuff. Well, Antonio, thank you so much for sharing this with my listeners today and it was just great to have you on the show. Thank you so much. Well, there you have it, folks. That is the word from my rich aunt Joanie. And don’t wait to buy real estate buy real estate and then wait. And you know, you just gotta stay at this and you know, let time and all these great factors just be on your side and you know, you just can’t help them make a lot of money in real estate. I think she has one more thing to say here.
Aunt Joan 54:54
Yeah, and in even with these ups and downs in real estate, people will say wow, Real Estate is lost on this much money. I said yes, but I’m not selling. Why do I care? Right? Yeah. So yeah,
Jason Hartman 55:07
you treat it as as a value investor like the Warren Buffett philosophy applied to real estate value investing. You hold it for cash flow. You don’t be a speculator just buy them and hold them. You know,
Aunt Joan 55:20
despite this by philosophy, yes. Is that in all of our lives? We’ve only sold two houses. Wow.
Jason Hartman 55:27
Wow. Yeah. Yeah, that’s, that’s I regret most of the houses I sold. Yeah, I should have just kept them. Yeah, no, I agree. I agree. Well, good stuff. And Tony, thank you so much, and happy investing.
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Jason Hartman 57:57
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Jason Hartman 58:35
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