At the start of the show, Jason Hartman is joined by a long-time real estate investor, Drew. They talk about the pitfalls of trying to time the market, bulletproofing your properties when you first purchase them, and what happens when you over-diversify your real estate portfolio. Then, Jason plays a recording of the self-management expert panel to answer questions such as the difficulty of finding tenants when self-managing properties, best communication tools to use with tenants, and how to facilitate move-out inspections and handle legal infringements.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Announcer 0:12
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 we estate investors.
Jason Hartman 1:03
Welcome listeners from around the world. Thank you so much for joining me. This is your host Jason Hartman with episode number 731 731. We are going to have the second half sort of a q&a session that I think you’re going to get a lot of information out. This is a meaty high content q&a session from one of our live events. We’ll have that coming up in a few minutes. But first, I wanted to do a kind of a roundup circling back with one of our prior investor case studies from several years ago, you might remember the young gentleman in his 20s, who was on the show, back maybe I want to say about five years ago, maybe four years ago, I’m not sure. He was talking about how he had his own business and how he was buying rental properties in Indianapolis and then in Memphis after that, and over the years, he’s had some definite bumps in the road. It hasn’t always been easy for sure. But he left me a nice Vox message about two weeks ago. And he said, You know what? I know I’ve complained now and then but overall I’m really happy because I just checked the value of my property on Zillow. And he was super happy. And that was drew and drew is a new father. Well, relatively new father, since he was on the show last he got married and had a kid. And he talked before about his warehouse in Laguna Beach. And that’s where I am. I’m with him at his warehouse, because he was kind enough to take in some boxes for me, and I’m picking them up out here after being in San Diego for a couple of days. And so we are in Laguna Beach, California.
Drew, welcome back. How are you?
Drew 2:42
Hi, welcome. Thanks for having me. Yeah, sure. Beats being 106. England. It’s a, it’s a little cooler here. A little cooler, but still pretty hot. So we’re in the canyon right now. But yeah, thanks for having me on the show.
Jason Hartman 2:56
So what’s been going on with you the past few years with your investments business has grown dramatically. So congratulations. Yeah, yeah, great business.
Drew 3:04
Yeah. So I mostly sell stuff on Amazon. That’s kind of that business has kind of exploded for me and you sell printer cartridges. That’s your main thing, right? Yeah. So when I started, I kind of focused on customers that were small businesses and quickly learned that really where the money is, and where the least amount of complaints are, are the people that have the deep wallets, who buy larger cartridges that go in commercial machines, and mercial printers, commercial printers that do banners and blueprints and that sort of thing. So I sort of focused more on that inventory, you know, then the $20 cartridges so these cartridges might be $250 rather than $20. So I’ve kind of explored that, you know, built my website, so if you have a plotter, feel free to go to my website.
Jason Hartman 3:50
I didn’t know this was gonna be self promotional, but Go For It Ain’t Safari.
Drew 3:53
Yeah, ink safari.com. So Ink safari.com and it’s a small
Jason Hartman 3:59
He’s a shameless self promoter here. We wanted to talk about your real estate investing.
Drew 4:04
But yeah, so my, my real estate investing was kind of interesting. I had bought four properties and in Indianapolis, and that kind of gave me the money to, here’s what happened really, I wanted I’d save a bunch of money to buy a house in California. And since I’m self employed, once the economy fell out, I had probably about 50% of funds to put down on a house in California. And I found that since I’m self employed, and I’m really self employed, I’m not, you know, stated income self employed, that a lot of issues I was having was no everyone laughed when they wanted to lend me money.
Jason Hartman 4:43
Hey, they don’t want to let you qualify for loans. So your investments actually on the investment side, I mean, that’s kind of what kept you from buying a house for a little while. Yeah,
Drew 4:51
you know, so I ended up buying a house I bought a house in 2013. And we bought a house in Old Town orange, which is a smaller All area walking or walking to the sir. You know, like the
Jason Hartman 5:03
university there’s,
Drew 5:04
there’s like, you know a bunch of antique shops and restaurants it’s a cute area but we moved from Laguna Beach inland because you can’t buy anything. Yeah. And Laguna Beach you know, if you want you get crap shack for a million dollars and now they’re it’s 1,000,005. Now they’re Yeah, now they’re about 2 million so. So we bought a house out there and actually did really well even we probably would that was the luck.
Jason Hartman 5:25
That was it. It was up to us about your investment property. Okay, so those are the sensible cash flowing properties. And here’s one of the things I wanted to say about that. I just met one of our other clients who many of you have met. He’s also my partner in a couple of properties. We own together some large properties, a mobile home park and an apartment complex. And many of you met him his name is Steve at some of our events, maybe at our meet the Masters he was at the one last year but the year before last. And I pointed him out in the audience and I know several of you listening may have talked to him. But here’s one of the things he said drew and I think that’s kind of interesting. It goes was in line with your story. He said that he was talking with a real estate expert who compared buying a property in San Jose, California in 1986. Okay, like before that well before, a lot of the Silicon Valley boom, I mean, certainly there was some of that going on back then. And then comparing it to buying a property like St. Louis and some other of these linear markets, and how much more money you would have made on that property. But I said, Wait, Steve, are you really doing the math right? Because the Silicon Valley property in San Jose, back in 1986. And listen, I remember 1986 and I, I remember, actually, I was dating I this gorgeous Canadian girlfriend from Vancouver, and I dropped her off because she came down to visit me in Southern California. We drove up the coast and went to San Francisco and stuff like that, and I dropped her off at the San Jose airport. And I remember that’s the last time I saw so remember how I was
Drew 6:59
feeling leaving Long Distance short term.
Jason Hartman 7:01
Yeah, well, it wasn’t that short term here. But anyway, here we go on another tangent. Right. Okay, back to real estate. But I remember consciously thinking of, you know, how San Jose was and the Silicon Valley market back then. And it’s, you know, for a long time when a high flyer of markets, right, but even back then your rent to value ratio was only point 4% versus 1%. So, yes, you would have made a lot more money in appreciation on the San Jose property, but you would have been feeding in all these years, okay. Because, you know, you you would have received six tenths of a percent less money and income every month for all those decades, versus what you receive on a St. Louis property, for example, or a Chicago land property or a Memphis property. Yeah, that’s the
Drew 7:55
more I think a lot of it comes down to timing. I think there were more a longer period. of opportunity possibly in these other markets that you recommend. Then maybe in California, like I’ll give you a perfect example, when we lived in Laguna Beach, we were living in a four Plex that they bought in 2010. For 810,000. we’re
Jason Hartman 8:13
renting it you’re renting, okay. And
Drew 8:15
they had an eight, an eight, four Plex for $810,000. They probably put, you know, 50 grand into fixing it up. So all together, you know, let’s say they were in there for 850. The house next door to me in orange, that’s a two Plex sold last week, basically, for 830. So about the same amount of money. So a four Plex at the beach versus a two Plex inland. So the price is that same place in Laguna Beach is probably worth 2.5. And they bought it for 810. So but nobody,
Jason Hartman 8:49
there’s two things though. Nobody knew that was gonna write right it was speculative. Yeah. This is what I always say, look, lots of people get lucky and these high properties, they don’t view them right, their brain gets all cloudy and foggy and turns to mush because the property basically becomes because the cash flow is so crappy, it becomes a forced savings program where they for, you know, 10 years are supporting that property, either by not getting the the cash on cash return they should have received. You can’t hear the dogs that don’t bark or nobody, nobody looks at the profound impact of what didn’t happen. And what didn’t happen is they didn’t have a self supporting property or a cash flow positive property with good return on invest. Yeah, I think that that’s what didn’t happen what they didn’t notice. They had the forced savings program, and they think, Oh, God, the value went way up. But you know, and that’s great. And they got their their windfall, but they’ve been supporting it for a long time in a forced savings program, which in a way look at for undisciplined people at the very least. least some real estate is a four saving program, right? It’s like, Look, you don’t have a choice, you have to contribute to Social Security. Now we know that’s a big Ponzi scheme, of course. But if it were a legitimate savings program, as it was designed to be originally, that’s what sometimes your real estate can be, because it’s not easy to pull the equity out and spend it like in a checking account.
Drew 10:21
Yeah, I think what’s there is there’s a couple factors here. I mean, when I bought my properties in Indianapolis, you’re looking at, you know, a house that I bought for 50 grand, and I probably put 10 grand into it, you’re gonna make everybody very jealous, because you can’t repeat that nowadays.
Jason Hartman 10:38
No, you can, but it would not be a property like what he got,
Drew 10:42
yes, I I bought in these clustered neighborhoods where they were all built fairly, you know, 2005 2006. And so they’re all new builds, and boom, bust, boom, bust time, so everyone that got in there bought at a bad time. So there was a Since most people paid put nothing down, there was an incentive to walk away, because they had very little skin in the game. So since there was such a gluttony of inventory, you know, I sort of was able to buy something below the cost of construction. So I’m buying it, I’m probably getting close to like a 1.7 return on investment of the RV ratio. Whereas like, probably if I bought in Laguna Beach, my RV ratio would be point seven. And if I bought it the best time ever, ever, ever, ever,
Jason Hartman 11:32
it’s the best time ever and we’re gonna beat you would have been point five probably like, Yeah, no, no. prices were the lowest Yeah, most depressed and the rents were the highest as a ratio.
Drew 11:41
Yeah, probably. Yeah. Between. Yeah, I think that, okay, something like that. So, you know, and the thing is, I wasn’t I couldn’t buy a house in Laguna Beach, and I couldn’t get financing. So the ability of me being able to buy a house was how much money I had as cash in the bank. So I sort of was doing this thing every six months. I would just scrap And save and do as best I could.
Drew 12:03
With cap, I know you buy finance, I bought a rental property with cash and then the rent that I was getting from those rental properties paid for my rent in Laguna. So, you know, then I grew up and moved to move to a house
Jason Hartman 12:18
and got married, got married. So
Drew 12:20
I think the one lesson that I learned along the way that I would just encourage people to do is that when you buy the property, make sure you have a buffer to add improvement value to the property when you purchase it. So I’ll give you an example. A lot of these houses that I bought, they needed carpet replaced, and I hadn’t saved up quite enough money to the only thing I could do is just put in kind of the cheapest carpet you could get to get a renter. But let me just
Jason Hartman 12:48
because one of the things we may actually have that on this segment, I can’t remember. But one of the things, folks and I talked to this Steve about this at lunch, I want you to start bulletproofing your properties In the long run, it’s gonna be a lot less expensive in the short run it’s gonna cost only a little more yeah so the example being vinyl plank flooring and eggshell or low sheen right throughout small difference, but it can it can make those turns a lot less expensive and
Drew 13:17
I don’t think Jason Jason we haven’t talked about this so I’m this is not on the air. Yeah, this is this is not this is not a coordinated effort, but I completely agree with Jason. I went and every single property once the property management company said this carpet needs to be replaced. Here’s the bid for you know, here’s the bid to replace $1 square foot it costs you know, 1500 dollars to replace the vinyl. Replace it with carpet. I went with vinyl plank flooring 500
Drew 13:46
Yeah, vinyl plank flooring, you
Jason Hartman 13:47
know, and it’s well it’s it might
Drew 13:49
be more than that. But yeah, it’s it’s it’s way worth it because if it’s two times or at the most three times of replacing cars anymore, okay, well the thing is, you can Buy vinyl plank flooring now for about the same amount as carpet well,
Jason Hartman 14:03
little, little,
Drew 14:04
little little more because of the installation. We did.
Jason Hartman 14:06
We did the comparison on the last show Fernando and I were at a on the Wednesday show not the flashback Friday. But Fernando and I were at a real estate Expo and the prices we got there were you know decent rental type carpet a buck 20 a square foot vinyl plank $2 Yeah,
Drew 14:24
that’s what wasn’t quite double. And yeah, that’s that’s true. You can get the cheap stuff for a buck but I wouldn’t recommend that spend $2 get the nice stuff. So it doesn’t you know, and the thing that’s nice about vinyl plank flooring, it has a residential warranty usually lifetime. It’s extremely simple to install. You could do it yourself, but you’re probably not there. And what’s also really nice about it is it’s waterproof so it can seamlessly go from the bathroom to the kitchen to the living room and just try and just do one flooring throughout your house. Don’t have tile here and vinyl plank. Bear and just have it all the same, it looks much better. It doesn’t cut the house up. And it’s a lot simpler when you need to do a replacement and take the exacto knife and cut out one of those pieces of plank
Jason Hartman 15:11
to put another one in.
Drew 15:12
Yeah, so I kind of systematically went through each one of my properties and replaced it and kind of upgraded as I went and added, you know, added value to the house and added you know, what would be rental, a little bit more rental income to cover the gap because people it has a nicer appeal inside. And so I call it you call it What did you call it? I call it baby proofing. I call it a bulletproof baby proofing.
Jason Hartman 15:38
Yeah. So that’s our babies, aren’t they?
Drew 15:41
Yeah, and I think it’s actually really helped in the rehab in the, in the in the rent ready beds. You know, so I recently got a rent ready bid, and it was probably half of what it would have been if I had carpet.
Jason Hartman 15:54
So. So look at as the next time any of you have a make ready that you need to do Then, you know, just do get the eggshell paint in there. And that’s the finish, not the color. That’s just the finish the the good paint that you can, you can wipe it off with 409 are fantastic. And it’s clean, it doesn’t scuff up very easily or anything and get the get the vinyl plank type floors and make your properties more bulletproof. So that’s a good lesson. But Drew, look, we got to get to our segment. And it’s funny because you said you didn’t have anything to say. It’s been 16 minutes we’ve been talking right. Okay, so but here’s what I wanted to tell people is, I think one of the big lessons from your experience as an investor. I mean, you’re excited about investing again now, but you had some years where you were getting pretty discouraged where you were looking at it like this and I remember talking to Katie, your wife about it, where it’s like you can make so much more money focusing on your business than screwing around with these little rental properties. You know, that was kind of the attitude for a while. But what you don’t notice a lot of times and this is the thing investors is what is kind of happening happening behind the scenes. Yeah, there is some real wealth being created for you there. Because the properties are like a big cruise ship. It goes very slowly. You know, the business is like an airplane, if you’ve got a successful business, okay, and it’s going from place to place really quickly, the cruise ship is just chugging away real slowly. It’s only going 20 knots, but it gets there, you know. Alright. So I think that’s the lesson I kind of wanted to share.
Drew 17:25
Yeah, so I, you know, there’s, there’s, you know, there’s obviously active income and passive income, if you want to call it that, and my
Jason Hartman 17:33
bubble wrap. Yes.
Drew 17:34
Yeah. So there’s plenty. There’s plenty of that here. Your injuries were on. But, you know, and so I kind of have changed my tune a little bit. And, you know, you need to focus on both because, you know, one is going to pay the bills now, and one will probably pay the bills later. That’s kind of what I’ve focused on. And, and so yeah, I am interested in investing in the future and Jason always tells me Not to time the market but it seems quite frothy. Well I
Jason Hartman 18:04
mean depends on where you live in California it’s
Drew 18:08
crazy but but yeah I’m I’m sort of waiting for the where the smart money will go and trying to sort of see I gosh I wish I bought some silver back when it was 14 but I know you’re not a gold bug but
Jason Hartman 18:21
precious 20 now Yeah, yeah precious metals are overrated But hey, silver was at 46 that’s truly $7 and they all said then it was going to 75 but it never did
Drew 18:31
yeah it’s I don’t be a speculator
Jason Hartman 18:34
cashflow investor, folks. That’s that’s really the rule and and you know, I know you’re trying to time the market, but I’m telling you, I’ve never seen a market timer win in the long run.
Drew 18:45
No, and honestly, the thing is, is I think I was pretty good at timing the market last time. Oh, you
Jason Hartman 18:52
back then. And that’s 2020 hindsight is 20 in the Ruby, and of course you made a fortune
Drew 18:58
yet. So I think I time the market. Well, but here’s the here’s to your point is that my plan of buying a house in California at the bottom was I got blindsided by some unknown factor. And I couldn’t buy a house at the bottom I wanted to but I couldn’t because they were lending money out. So I kind of had to change my change my plan. So, you know, now I’m trying to figure out where to throw the dice now and I don’t know what do you think
Jason Hartman 19:25
don’t throw dice invest for cash flow. That’s what I think. But here’s, here’s one of the things you got to realize about that. You were trying to buy property when nobody was buying, and you did that with some rental properties. You got what you got seven or nine rentals, ultimately, yeah, I have a eight Okay. And then you’ve got your house in which you live. And the reason it’s the bottom of the market. One of the reasons is that the the lending just contracts dramatically and the amount of available financing. It just evaporates from the market. The banks got very conservative Obviously, they were very scared to land. And people were very scared to buy. So that’s that’s what goes on in a contraction. And we got to wrap this up. But did you have one final comment there because we got to get to our segment Actually, we always go too long. You know what I’m going to do? I’m going to never announce that we’re going to have a guest or a segment and I’m just going to go on and start talking and if I shut up soon enough, we’ll play the segment but that’s what I got to do.
Drew 20:26
Yeah, so I don’t know if I have any other thoughts for you but I’m I’m interested in keeping my eyes open I had a friend send me a property in little rock that looked beautiful that I’m
Jason Hartman 20:36
little works pretty great, most landlord friendly market in the country.
Drew 20:39
Yeah, that was that was interesting. That perked me up, you know, I was looking at Was that your friend Aaron?
Jason Hartman 20:44
Yes. Yeah. Aaron Colson and I was looking at us at our last event.
Drew 20:48
And I you know, and I was looking at some properties in Indianapolis again, and I kind of was actually gonna put an offer in on a place recently and come to find out it was in a bad area, so I kind of ended There was a place in Memphis I was looking at so I’m still kind of keeping keeping the pulse on things, but I’m waiting for the next next downturn whenever that
Jason Hartman 21:08
don’t try and time the market. I’m telling you, there, it probably is another shoe to drop, folks, I have said that many times the economy is pretty weird. There’s a lot of crazy stuff going on out there. But remember, our philosophy if you’re following it, and I hope you are, is linear markets, which will be far less affected by whatever happens in the economy. Yeah, they’ll be affected but far less and I think not as
Drew 21:36
they’re not as volatile. You know, and the other thing too, is like I we bought in a time that’s completely irrational The other way you know, it was completely crazy. Everyone was, you know, jumping out of the ship. So I think some of the deals now are, you know, if you look at these houses, I mean, I can’t believe you can buy a house for $100,000 and
Jason Hartman 21:55
rented for 1000 a month.
Drew 21:56
That’s That’s pretty good. You know, and, and one other thing and I’ll just kind of leave it at this is I think it’s really important that when you look at an area that you’re going to invest in, I think, you know, Jason has kind of come around to this that that you buy in, I buy in four packs. So like, if I buy in an area I’ll buy, I’ll try to get a crew, a couple of them. So I just don’t get diversified to into non existence like I want to buy in packages. So you want to
Jason Hartman 22:25
have a little chunk here.
Drew 22:27
Yeah, you know, and, and, you know, I call the property management company recently. So I was having a problem getting a hold of somebody. And I said, Hey, I have four properties with you guys. If I don’t get a call back today, I’m gonna start looking for another property management company. So
Jason Hartman 22:39
you have some leverage. That’s good. Yeah.
Drew 22:41
So you know, and then I get a call from the owner and he explained that, you know, I didn’t get your call at five o’clock on Tuesday, and I’m sorry, and you know it, we worked it out. It was fine. But
Jason Hartman 22:51
you have some leverage. Yeah, it’s a good thing. Yeah. One of the things I freely admitted is that I the one of the mistakes I made is I over diversified. So three to five markets at least three ultimately, no more than five. And of course, depends how big your portfolio is. So let’s do we got to get to our q&a. Okay, one more, you know, he has one more
Drew 23:10
comment I can tell Well, yeah, I will kind of in wrap up is that I’m sort of trying to find where the next places that people want to be. So where do people want to live? I say like, does this tap does this city have cancer? Or is it in the infancy? Is it blighted? Or is it? Is it a place that’s attractive? Is this is this place? Does this place have cancer? Or is it in its infancy? And so I’m trying to find, you know, the next Austin, the next Portland, the next Seattle try to see where this where the money is going to go? And so I think that’s kind of what I’m gonna look into.
Jason Hartman 23:48
Yeah, interesting stuff. All right. Well, hey, our panel. Let’s finish that this is actually the q&a portion. And I think you’ll find this to be very interesting. You may actually hear Drew’s friend Erin on This because I think he had some of the questions that you’re going to hear here in a moment. And let’s just jump to that. And in the meantime, check out Jason hartman.com for our properties and some of the areas Little Rock is on there that drew mentioned Indianapolis, of course, and Memphis where he owns properties. We will look forward to talking with you on the next show. We also are about to make an announcement it’s not too far away. Now Drew’s climbing up his shelves here to get boxes. That’s funny. By Drew, we will be announcing our meet the Masters event pretty soon here. So stay tuned for that announcement.
Let’s get to the rest of our panel session. And the all important QA Any questions? Yes, name and city,
Recording of self-management panel session 24:49
larger Union City, Michigan. I just wonder about finding tenants when you’re self managing because when we were at meet the Masters, it sounded crazy to self manage, but the short time later, it’s Sound, we can do it.
Recording of self-management panel session 25:01
Because we’ve learned a lot from our managers for sure. Let me tell you one
Jason Hartman 25:05
self management pitfall, I don’t want to forget to say this Okay, then we’ll have him answer the question is, be careful, you know, when that property is vacant number one, insurance will make this difficult for you. Because some insurance companies will not give you insurance certainly not give you a reasonably priced insurance if you don’t have a manager, okay? And they also limit the amount of time they will insure a vacant property unless you pay a fortune. So if it’s vacant for a long time, it can start getting costly. I had
Recording of self-management panel session 25:35
to I had to educate an insurance company just the other day
Jason Hartman 25:38
you had to educate an insurance company. Well,
Recording of self-management panel session 25:40
I could manage properties across the country. Yeah. You want to get me going? You know, I just okay here all the different companies in the business. I gave them like 100 things that they probably didn’t care about. But they were asking they were wondering the same thing you know, you know, is this for real, you’re living somewhere in the property. Is there somewhere else in the capture about this? But you know, people will catch up? You know, it’s a What was your original question though? He said some tenants?
Recording of self-management panel session 26:11
Sure, there are many, many ways that you can actually find tenants without having a property management company. For one, you can actually hire a property management company, you actually hire 2345. Exactly. You just tell them up front, I’m not looking for property management service, I need to find a tenant, they may be a little more inclined to actually provide tenants to some of the properties that they currently have. But for example, like James, they turned out 100 potential renters last month, you know, they definitely have a need. So you know, they would charge you probably a bit of a higher lease fee than what they would charge their their actual clients. But that’s one way. Another way is, you know, you can actually post you know, there’s obviously Craigslist and you can put your stuff on Zillow and whatnot. And I think through cozy now they actually have a plugin where you can screen we can actually post your your your your property and have it on some of the some of the different outlets they have available. That’s obviously an extra feature and added costs. But yeah, those are definitely some of the ways
Recording of self-management panel session 27:09
at folio works. Similarly the one that I’m using for the Atlanta properties, they have a feature where you can syndicate you, you they make it easy for you to create a web page with the property for marketing purposes, and then you syndicate that through all of the you know, rentals COMM And Zillow and
Jason Hartman 27:29
it’s basically like it creates a little website for you on your property. Right. Oh, one other thing about that is make sure you have good photos of your property. Okay. And this is probably going to happen the best opportunity is when you buy it, okay, so get a set of good photos, make sure they’re properly labeled in your computer so you can find them and I think it is well worth hiring a literally This is a specialty a real estate photographer to take photos for you because they will come with a wide angle. And you know, you need a set of really good photos of each of your properties. That’s super important.
Recording of self-management panel session 28:06
There’s a company called z inspector calm, Jason, you probably know about these. I’ve heard of that. That’s what they do. Okay?
Jason Hartman 28:11
Yeah. What, how much does it cost? I don’t know.
Recording of self-management panel session 28:15
Okay. Do your tenants have your phone just from Scottsdale? Do your tenants have your phone number? Or do you create a separate phone number just for the property management side,
Recording of self-management panel session 28:23
what I do for the Austin tenants, they have an email address, I just created a Google email address with the name of my company. And they’ll send an email through that we also created there’s a company called grasshopper. And grasshopper is a company that allows you to create your own phone number. And you can then give that phone number to the to the tenants. And then through the website. You can have all these options on what happens when somebody calls that number. Your messages are forwarded to your phone or whatever. So I have both
Jason Hartman 29:00
So here’s one of the things I want you to think of too. One of the things Fernando could do with that is he could set up an email address for maybe all the properties in one geographical area. And if he had a relationship, and he probably does with like a handyman in that area, or a TaskRabbit person or someone who’s just a, like an assistant that you pay, just pay for play, that email could go to you into that person like Austin, Prop, Austin, you know, Fernando’s, Austin properties@gmail.com, right? And that address could go to multiple people, right? voxer could be another great tool for this to know. So lots of ways you can distribute the communications and guess what, they’re free. These are free tools. A lot of
Recording of self-management panel session 29:48
grasshopper I think, charges a nominal fee. Yeah, 1015 bucks a month. You can have like five different extensions. So you can actually have the same phone number and five different properties,
Jason Hartman 29:57
four or five different states. For Indianapolis, please press two for Quad Cities you know if you need, you know service for your quad cities property press two, you know exactly.
Recording of self-management panel session 30:09
If ever you do add your tenants onto boxer, you can actually do so with just using your email address. You don’t have to give them your phone number. Just
Recording of self-management panel session 30:16
an FYI. To answer your question directly. No, I don’t give out my phone. I hate getting calls. Kevin from Indianapolis. Just want a quick question about the assistant side of things. Have you hired that person? And if so, what kind of what did you look for? Who did you look for? And was that person experienced at all? Or is that something that you’ll be looking for? What kind of things would you be looking for? So the assistant that I hired in Atlanta had property management experience, and he’s an accountant. He’s an older person, and he was with a financial it’s kind of a special case is what I’m going to get it. He He knows how to deal with tenants. He thinks like a landlord. So it’s kind of the right person to handle high stress situations and But the decisions are mind at the end of the day, he just pre filters a lot of stuff. And as I mentioned in the beginning of the talk, when he brings up an issue he already thinks of, you know, solutions to it. And it’s not just the dispatcher, so that makes a huge difference.
Recording of self-management panel session 31:17
Kelly from Washington DC. So I actually have several questions. So I’m gonna have the mic for a second. How do you handle move out inspections when the tenant leaves?
Recording of self-management panel session 31:28
So the last house we had a move out inspection on what we did what the assistant did is there’s a company called vineyards calm, which we’ve I think we’ve mentioned that before in the meet the masters and they specializing make readies, getting property ready for the next move out. So they coordinated with the tenant a time for them to go to the property, inspect the property in part of their services is to provide a list of repairs that are needed. So that becomes Our move out inspection and then you can feel it we have forms that you can pull from the web or move out forms and then those forms can be sent to the tenant later on with whatever deductions are present
Jason Hartman 32:14
in Fernando vineyards, we discovered them at the note conference it no worthy, right. CG. CG Okay, all right. Okay,
Recording of self-management panel session 32:22
good. Yeah, he just yeah, just to elaborate a bit on vineyards, they provide a fantastic service. So you may be thinking, Oh, how do I get a make ready done? How do I turn the property over? How do I get a painting and everything else, then yours is fantastic company, they actually do all of that for you. Or they’re ripping out floors and doing full paint jobs. Even if you want to put a new roof on if needed, they’ll actually do the whole thing for you. Just bear in mind that if you do use an ala carte service like that, you will be paying a bit of a premium. It’s pretty obvious, but just get ready for that.
Recording of self-management panel session 32:57
I don’t remember how much I paid sorry. Yeah.
Recording of self-management panel session 33:02
Yeah, yeah, they’re expanding fast. But that’s one option. I use Angie’s List quite a bit. Angie’s List, you know works well in many markets, they have specials all the time. And you can hire a plumber for 200 bucks and they’ll go and take care of whatever that issue is. Sometimes those work really well also gives you a chance to filter out some providers, some contractors that don’t do a good job.
Recording of self-management panel session 33:30
And the importance of using some company like Angie’s List is that they come somewhat pre qualified. There’s, yeah there’s reviews on there and everything else and oftentimes they have specials but the biggest factor with that is if you were to just find someone off Craigslist or awesome website and you don’t really know who they are, and you provide them with the lockbox info, everything else they can easily go in there, steal all your appliances, everything because they know the property is vacant, and then just head off and you never hear about them again. So just be careful.
Recording of self-management panel session 33:58
Amazon is also getting into To that service provider business, if you search for a particular appliance, you know, they’ll
Jason Hartman 34:04
suggest and they’ll do the installer and installer. So if you need a new ceiling fan, you can buy the ceiling fan on Amazon and get it installed. But I was super excited about that idea, but the prices are too high. You know, like are now yeah, hopefully it’ll really start to become competitive. No.
Recording of self-management panel session 34:21
Okay, second question. There are so many legal aspects to management, how do you handle things like evictions or giving 24 hour notice for a contractor to get access and all of these aspects of of, you know, legal, legal things.
Recording of self-management panel session 34:36
I haven’t had any interesting talking about self management that I haven’t had any horror stories. There’s the wood here is what on my self management properties, so I haven’t had to choose what to do. But one well, you know, we Jason just interviewed Novick. Nationwide eviction expert that can handle part of that process. That would be one option. But if I had to do it, I would proceed the same way with everything else, I would just search for companies that specialize in that particular part in hire them all a cart for that particular job.
Jason Hartman 35:19
Half of the time, we don’t know how empowered we are, and how many resources are out there. It’s amazing how a lot of the time the property manager, all they do is call an eviction service. You can call them direct, they’d be happy to have your business that’s why I did that podcast about it. So you know, some some property managers actually go to court and do the evictions themselves. But a lot of them just outsource it. You can just do it.
Recording of self-management panel session 35:45
Yeah, sure. I mean, the eviction notices and things like that are certainly one part of it. But I was thinking of like, okay, the plumber is coming in tomorrow and you have to give tenants 24 hours notice notice post on the door kind of thing. I don’t know if that’s what
Jason Hartman 35:59
you do. I don’t think there’s a requirement to post it on the door. No, there maybe there are inside it might depend where
Recording of self-management panel session 36:04
Yeah, we just sold a property in Phoenix and the amount of notice, you know, official formal received verified notice that we had to give to tenants just in the process of selling it was. Well, you can do that by email. Okay. If they confirm that they’ve received the email, yeah. But if the tenants not, you know, checking, then you have a problem. Okay, do you ever worry about veil lifting suits if the tenants have information about you personally?
Jason Hartman 36:32
In other words, piercing the veil of if you have an entity like an LLC, that’s what you mean, right? That’s a veil lifting suits. losses. Yeah. So that shouldn’t matter legally, if you’re managing your entity, right?
Recording of self-management panel session 36:48
Yes. And no, I mean, I’m aware of it, but I’m not. I don’t think I treated any differently because it’s self managed versus not. You know, we have life liability insurance. I mean, that’s kind of the first level of protection. And the LLC is set up for asset protection, and I do the best job I can with, you know, keeping accounts separate and, you know, not giving any ammunition for any potential lawsuit. And that’s the best I can do, I think for now, without going to extremes and complicated anything else.
Recording of self-management panel session 37:24
One last question. Do you find that you’re managing enough that you qualify for the real estate professional material participation time?
Recording of self-management panel session 37:32
I do, but I’m not. I decided that for 2014. It didn’t make sense for me to become a professional. I didn’t have enough losses in order for you to capture the benefits of real estate professional needs to have losses,
Jason Hartman 37:46
passive losses
Recording of self-management panel session 37:49
in your real estate business and real losses, passive losses.
Recording of self-management panel session 37:54
And
Recording of self-management panel session 37:56
so the answer is yes, I do qualify. I have enough I qualify. from a legal perspective, but it’s not to my advantage, at least it wasn’t 2014. I’m doing 2015 taxes in the next month or so. And preliminary discussions with the CPA didn’t seem like that would be also helpful. In as times go as time goes by, at least given my current situation, as the rents keep going up and depreciation stays steady. I’m not going to see losses from that perspective, unless I have lots of repairs and that sort of thing. But if things just go as, as they have been in the data that I’ve shown, the tendency is for me to have increasing incomes steadily, which again, goes against capturing the benefits of being a real estate professional. So you know, right now, I’m not, you know, not qualified. I’m not going to be checking that box in the in the tax return.
Jason Hartman 38:55
Last question over here from Tempe
Recording of self-management panel session 38:59
awesome. And, Oliver, you’d mentioned in vetting your property managers asking the questions, what is the one question that I should definitely be asking?
Recording of self-management panel session 39:12
That’s almost like asking a potential mate. What’s the one question the one thing I should know about you?
Recording of self-management panel session 39:19
Is there one question you standardly? Ask
Recording of self-management panel session 39:21
every single or I mean, I don’t sure
Recording of self-management panel session 39:23
how many. Yeah, man, what an interview what I would definitely ask. It’s not just the one question asked a slew of questions. But amongst one of the most important ones is how do you vet your tenants? And what kind of questions you ask them? What’s the criteria that the property management company has to actually bring tenants into into the some of your homes? That’s one of the most important factors some tenants I mean, some companies only look at like the three X Factor so does the rent is the rent Elise, you know, a third of the overall gross income that they bring in every month. If so, is yes, and you’ll get that check mark, and they allow the tenant to potentially rent your home. Whereas other property management companies will actually draft up a budget with the tenant. And that’s more of a specialized service. And only few companies really do that. But if anything that provides a heck of a lot better property management, in my opinion, because then you actually get a qualified tenant that knows exactly where their accounting is, where their budget is, and they know what they can really afford. And if they can’t afford the specific property that they’re looking for that property management company will actually give them something else that they can.
Jason Hartman 40:35
And that’s kind of a service that is more likely to happen in the lower end C class properties where they’re going to do that budgeting thing.
Recording of self-management panel session 40:43
You know, actually one of our providers, James actually does that for all of them ABC. And that’s included, not a service added but some of their property management companies probably do that as a bonus thing. Good stuff.
Recording of self-management panel session 40:58
So one thing that I would just say Add to that it’s a question but you have to answer that yourself by looking at the project property manager and the contract and so on. You really want to know that they are aligned with your interests. It goes back to what Jason said before. If they’re going to make money when you do make money, then it’s to their best interest to to do the best job they can. So if they have a lot of fees that have to do with that are easy for them to abuse without you making any money off of that, then that’s a red flag.
Jason Hartman 41:32
Thank you so much. That was just a wealth of information.
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