Jason Hartman starts the show talking about Las Vegas, casinos, and their impact on local economies. In the interview segment of the show, he hosts a long time client from Los Angeles. Joe has 90 properties in his real estate portfolio across five markets. He illustrates how he has been able to achieve financial independence.
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 handpicked to help you today in the present, and propel you into the future. Enjoy.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on Now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:16
Well, I’m back home from lost wages Nevada. That’s Las Vegas. Pardon the joke there. I was at a conference there for the last three days. And Gosh, I’ll tell you, that city is you know, in some ways, of course, it’s cool. I don’t need to tell you the cool things about it. Everybody goes there for great shows. And in terms of the man made environment. I think the architecture is pretty awesome of a lot of these new hotels, but I’m not a person for any more laws. You know that about me, right? As a libertarian. I don’t want to see the government make any more laws, but I should tell you, it is so depressing to see the way these casinos are ruining people’s lives. My friends. friend was telling me there that he read a report about how every time a casino opens in an area, the divorce rate increases, the suicide rate increases, poverty rate increases, and just tons of social problems. He says that the increase is not minor. It’s dramatic. You know, I remember I get up fairly early most of the time. The first day I was there, I was down and you know, ready to go. Our conference started at 8am. So I was down in the casino, and I’m not a gambler. I wasn’t gambling, but I was just looking for a place to eat breakfast at 6:30am. And I saw people who were sitting at slot machines, bunch of bad habits of course, smoking cigarettes, sitting at slot machines. This is at Planet Hollywood, by the way. 630 in the morning, it’s like misery it’s it’s terrible what these casinos are doing to people. So between that and the Wall Street crowd In the pharmaceutical industry, and the government, we got a lot to watch out for don’t have a lot to watch out for for sure. Anyway, I’ve had some technical problems with my microphone lately. And so I decided to record this episode. And by the way before I tell you where I am, save the jokes because I know you know, you could easily make a joke about this. Okay, I get it. I am recording this episode, in my closet. Yes, in my closet because the sound is pretty good here. You know, when you’ve got a bunch of padded clothing all around you. It really is good for audio quality. Speaking of audio quality, that kind of leads me into another topic and I guess I will formally announce what I announced at the Memphis property tour a few weeks ago, and that is that I am actually moving. Yes, I’m moving to the Socialist Republic of California. Moving back after four years in Arizona, and it has been Have a fantastic four years here. I really do like Arizona. I’ve been in denial about this move. I have not wanted to do it. I have been putting it off. But here’s the story, just in case you didn’t catch it from a prior episode that I did in, I believe January when I was in La Jolla. That is that my accountant last October, I filed my tax returns on the very last day you possibly could. And my accountant says to me, Jason, you do realize that you have a $738,000 tax write off, you haven’t taken and I said No, I did not know this. What are you talking about? And he goes on to say that? Well, you you took the you took the write off at the federal level, but you have an accumulated write off in California that you have not taken and the state of California we’ll give it to you. But because you moved during your audit You don’t live there anymore. So there’s no way for them to actually give you the write off because you don’t earn money in their state. And I thought, Oh, my God, this is the biggest irony of the world, the person who sort of famously left California complaining and grousing about paying too much tax, you know, you add into the two major costs, right? taxes are the single largest expense any of us will have in our life. And what’s the other largest expense, it’s our housing expense, right? And so living in California, when I left California and moved to Arizona four years ago, I probably saved pretty easily about $300,000 a year in taxes and housing expense. I just love that. I mean, when you live in a lower cost place, you can accumulate wealth so much more quickly. Really, really think about these things that you know you spend money on in your life that I sort of didn’t think about for years. Why do I have an $11,000 mortgage payment living in Orange County, California, that’s a rageous, it would have been so much such a better deal to just rent an expensive property, of course, because I could have rented that same property for 4500 a month and had all the same, in fact, more enjoyment out of it, because I wouldn’t have to take care of it and be responsible for the repairs. You know, of course, the whole shows about real estate investing. So I love owning lots of properties. And the metric is, by the way, and you know, we’ve talked about this in the past, but the metric is, if you live in a house that is worth over 150 or over $200,000, then it’s time to consider because the rent to value ratio will be very much in your favor and and the higher price that house, the more favorable it becomes, then it’s time to consider you know, should I’ll be a renter of the personal residence, and an owner of as many investment properties as I can buy, because I want to own things that have favorable rent to value ratios for me, the owner or the landlord, and I want to rent things that have favorable rent to value ratios. For me, the investor owner landlord, did I say, I may mix that up, you get it right. As a tenant, you want to rent when it’s a higher end property. And as an investor, you want to have lower end properties probably now given the time of this recording about $100,000 give or take that you rent to other people because that’s the way that you arbitrage remember, arbitrage is really just exploiting the differences in things. That’s my, my elementary school definition for arbitrage. Remember, I do have some funny definitions for things. I call derivatives, those sophisticated financial instruments that should make us all run for the hills and scared to death, that wall street may collapse our economy, I call derivatives. Here’s my definition you’re ready. You’ve heard me say this before on the show, but not for a long time. The definition of derivatives, maybe, you know, maybe someone can just go and enter this in Wikipedia and in cite me This is Jason Hartman’s derivative definition. The thing about the thing, yes, derivatives are the thing about the thing. So, anyway, arbitrage exploiting the differences in things, you know, really elementary definitions here, but that’s really what they are. I mean, my definitions are accurate. So yes, I am moving to San Diego here very shortly. So there is my formal announcement. I got a really nice place. It’s almost 2000 square feet. It’s only two blocks from the beach. It’s got an ocean view. It’s a little bit obstructed. It’s not like a panoramic. My kotian view, I wish it were a little better. But it’s pretty good, nice walkable area. So I’m really I’m really kind of excited about it. Look, the government, the state of California is basically paying me to live in California. So I can live there for free for about a year, maybe two years, depending on how it all pencils out. And that’s not a bad deal. I would love to get something from the state of California. I’ve certainly given them enough over the many, many years that I live there. So and guess what the price of that places that I got? Well, you know what, maybe I just won’t say it. Okay. Because I rented, and I think it was a much better deal than buying the realtor who helped me kept saying, why don’t you buy something? And I said, because it doesn’t work. The numbers don’t work. It doesn’t make sense to buy anything. Today our guest will be a client and we’re going to do a case study another case study and folks listening. We would love to have you come on the show and tell Your story, case studies are great. Again, we know and our listeners are mature people, sophisticated people, they know that income property is not perfect. It’s just better than everything else. So what before we get to our case study? I’ll just share with you real quickly here, an article for what it’s worth. And I kind of say for what it’s worth, because, you know, everybody’s always pitching their own thing of course. Right. And we’ve got to we’ve got to be on guard for that and the the spin doctoring. I’m sure there are some who think I do it too. I try not to, but you know, we all fall in love with our own ideas, right? It’s, it’s just part of our nature. So the realtors Association Yes, n AR, the National Association of Realtors, the trade group that is allegedly the largest trade lobbying organization in the world I’ve heard. I don’t know I’m kind of wondering if that’s true when you look at like teacher unions. They’re pretty big unfortunate. BN ea, the National Education Association, who Steve Forbes, who is of course been on the show, Steve Forbes called them the national extortion Association. And I would agree, you know, teachers are great love teachers, but all the bureaucracy that’s been built around our public school system and what a total scam that is, and and of course, the leftist solution is, well, let’s just throw some more money at the problem. No, let’s not throw more money at the problem. Let’s throw less money at the problem and make them more innovative. The price of education should be dropping dramatically, because of all the technology available. I mean, you know, you want to get educated, go to the Khan Academy website, I donate to the Khan Academy or I should say my Charitable Foundation donates to the Khan Academy. If you have an extra seven minutes, you can learn about quantum physics, organic chemistry, or trigonometry or you No differential equations or whatever you want, there’s some great stuff on there. And guess what the price is? Free. Not bad. Anyway, where was I going? National Association of Realtors article tangent alert, they are predicting that prices will increase slightly faster than they did in the last 12 months, coming up in the next 12 months. So they’re saying prices are going to increase more quickly. We’ll see if that’s true. You know, I’m not really doubting that I kind of think in AR is probably right this time. We’ll see how it works out. But what’s interesting, they’ve gotten a little interactive map here that I’m looking at. And it says the map below shows the median expected price change in the next 12 months for each state based on February 2015 to April 2015. surveys. realtor respondents from Colorado had the most upbeat price expectations now Wait, calm down. Before you go saying Jason. Why aren’t you talking about the Colorado market? Look We have properties in Colorado. We haven’t really done much business there many of you listening have purchased through our network in Colorado. And by the way, I love Colorado. And maybe that’s I don’t know, because I’m such a big john Denver fan. Colorado is a beautiful, beautiful state. The problem is the prices are too high. They don’t work, you know, Colorado, it’s it just well, and I shouldn’t say Colorado, I should say, Denver metropolitan area. It just got too expensive. You know, same thing happened in many markets Phoenix, where I am right now, in my closet. That market got too expensive as well. So, again, we are area agnostic. When something makes sense. We’ll be recommending it. When it doesn’t make sense. We’re going to recommend something else that does. If you have a property in one of these markets like Phoenix, like Denver, hold on, just you’ve got a stabilized property. You’re doing great. You’ve made some money. Congrats. Thank you for being our client, and just sit tight, keep your properties rented, and just manage your managers get your nice return every year, you’re probably making a good 35 40% annually on your investment, all things in, you can go to Jason Hartman calm and look in the property section and look at those performance. Well, many of those performance have been dramatically exceeded in many of our markets over the past several years. Everything’s worked out better than we thought in some of these markets. So and sometimes it works out worse, you know, everything’s individual. It’s funny, too. When I talk to people, they ask me questions. Well, you know, what’s your average for this and that, you know, how’s this gonna work out? And unfortunately, I can’t answer a lot of those questions because everything is so individual. Every property is individual. Every circumstances individual, every tenant is individual. It’s a very fragmented business. As you will know, because we we talk about that a lot here on the show. Anyway. So the median price expected growth at 6%, followed by Washington DC, the capital of free government bailouts. Boy, that has done wonders for that market. Obama anism has done wonders for property owners in Washington DC, and it has hurt property buyers in Washington DC. When you start throwing out government money, and every every person, every business person on the planet is flying into DC to get their share of the government pie. That’s the kind of thing that happens. Okay, but again, you can’t get good rent to value ratios in Denver. Certainly you can’t get them in Washington DC or do better in Denver. You know, a lot of these markets, they just don’t work. Okay. Price expectations were also upbeat in Washington, Oregon, Nevada, Florida, Georgia, Michigan, Hawaii and New Hampshire. I’m sure with a median price growth expected before to 5%. with oil prices still at a slump. realtors expected price increases more modestly, at a median price growth of two to 3% in North Dakota, Oklahoma, Wyoming, Louisiana, in Texas, where the economy is more diversified. The median expected growth in prices over the next 12 months is about 4%. So there you go. There you have it from the realtors. And you know what? I have no love for the National Association of Realtors. I criticize them often. We’ve had their chief economist Lawrence Yun on the show before I got a couple of pieces of hate mail on that one. One guy wrote in Jason, why did you have this tool? Why did you have this tool on your show? They’re promoting their own thing, obviously. So you know, anyway, it’s whatever.
Jason Hartman 16:58
Remember, you’re listening To flashback Friday, our new episodes are published every Monday and Wednesday. It is what it is. But this time, I think this is probably a fairly reasonable estimate of what will happen over the next 12 months. But overall, it’s going to increase and it’s going to increase at a faster pace than it did over the last year, according to the National Association of Realtors. Well, I had a couple more things to share with you. But as usual, I’ve gone long. Let’s get to our guest today. Our client Joe has purchased I believe nine properties from us. He’s been with us for years. And we’ve got him and Sarah, the investment counselor Sarah, who you’ve Of course heard on the show before In this segment, so let’s dive in and hear what they have to say. Hey, it’s my pleasure to welcome one of our clients to the show. It’s Joe consol this and because investment counselor Sarah are with us, and we just want to hear a little bit about his case study the good, the bad and the ugly. And he’s got I believe Leave eight or nine properties now, and has continued down the path of real estate investing and retirement and financial independence through real estate. So Joe, welcome. How are you?
Joe Goncalves 18:13
Good, Jason, how are you?
Jason Hartman 8:14
Good, good. It’s good to have you. And we’ve got Sarah here to Sarah with us.
Yep, I’m here. Thanks for having me.
Jason Hartman 18:19
Great. Great. Joe, tell us a little bit about your story. You originally I think heard about us on
Joe Goncalves 18:24
the radio on maybe KBC possibly on Los Angeles radio station is KBC. I don’t know about us here on Charolais or not also but either one of those two. And I made it easy to advertise on people that I trusted. So there you go.
Jason Hartman 18:39
And so you live in the Los Angeles area. Is that correct? Yes, I do. Good. Good stuff in you had a long career with the stater brothers organization. And then what got you interested in real estate investing?
Joe Goncalves 18:50
Well, I’ve always wanted to real estate I just didn’t want to deal with tenants and all the phone call so I just never got into and then when the market really went down in 2008 That’s when I started listening to radio and I heard you on radio. And that’s when I decided to do it because I, your method works with where I have to deal with tenants and, and unless, you know, issues that come up even though I do deal with it, it’s not the same. Yeah, right.
Jason Hartman 19:17
So did you invest like locally before you came to know us? And, you know, that’s how you knew that tenants were a bit of a hassle. Is that or did you know someone else who did or
Joe Goncalves 19:30
I have plenty of friends have plenty of friends who did and my dad also did. That’s why I knew Yeah, good stuff.
Jason Hartman 19:35
So basically, our system our slogan is the complete solution for real estate investors. And so, you know, having the the managers that were pre screened and, you know, having them manage your tenants and that kind of stuff. That’s really what attracted you. Right, right. Correct. And then a lower prices in California. Well, definitely, you, you can’t do anything that makes sense from a cash flow perspective. And amazingly, it’s not Los Angeles has just anywhere in California that it’s that way. It’s, it’s, it’s really mind boggling. I mean, like I’ve said on the show before, over the years, you know, even Bakersfield and Fresno and these, like, you know, fourth tier cities. Even those don’t work. It’s amazing to me, you know, you just can’t even make that work, you know?
Well, it’s it’s so funny when I first met you, Jason, you know, I had never even thought of going outside of California. It just never crossed my mind. I mean, we thought about and then Empire areas, and because the prices were lower, but I mean, what about you, Joe? Did you ever even think of investing in California before you met Jason?
Joe Goncalves 20:41
Because I didn’t think it was a possible thing to do. Yeah, no, I never crossed my mind. How would you do that so far away, so I’d never, never crossed my mind to do that. So
Jason Hartman 20:51
yeah, you know, it was really about 12 years ago that I even first started thinking about investing outside of California and what I didn’t realize after So many years is that of all the properties I purchased and owned and rented in California over the years. I really wasn’t even an investor. I was a speculator, you know, and, and most of the time, you know, I got lucky but it was really just luck. It wasn’t, you know, any extremely good market knowledge because I’m, you know, you’re investing for appreciation and I’ve just never met anybody that can really predict appreciation or depreciation in any reliable fashion, you know, so. So yeah, what tell us Joe, more about your story like you. You heard us on the radio. Did you come to one of our live events then or start listening to the podcast or what was next?
Joe Goncalves 21:41
I heard I heard about your listen to your podcast. I think you were still in the teens. So I must listen to two or three times and then that’s when I emailed your company and when you’re when your investment counselors emailed me back, so I drove out to new as a new port to to The tour router or we used to be in Newport Beach. Yeah, years ago, I think because I was able to sit down face to face with him and see who he was. And he seemed very honest, I died pretty much on the spot. decided to buy two properties. Good. And where were your first two? My first two was a condo in Ohio and Columbus and my son in dollar run in Indianapolis brand new. Uh huh. Good, good stuff.
Jason Hartman 22:25
And so those were your first two long distance experiences? Did you go out and look at those properties first, or did you just buy them? It sounds like you just
Joe Goncalves 22:34
bought them right? I just bought them. No, I did. I went through years and years later to look at those actually about a few more slides to look for different properties on the area. But that was like four years after I bought them. So Right, right. Yeah,
Jason Hartman 22:47
we have like people asked the question, do your clients look at these properties? And you know, mostly before they buy them, they don’t look at them we would actually like them to because you know, they all understand what they’re doing better. But um, you know, they some Don’t even ask for they buy them. I mean, it was four years before you went and looked at them.
Joe Goncalves 23:07
Did they perform? Okay, like, you know what happened on those first couple of properties? There were flying. I think actually those first four or five that I had were priced at just quiet and how many issues lately it’s been a little more different. Maybe it’s because I have more. Well, there’s more chance of things going wrong. But the first few, four or five, there wasn’t really many issues of the tenants for long term. Not Not much. We’re proud of that the first two that I bought were pretty much brand new, so there was nothing to repair. They were very cash flowing, because at the time you weren’t really you weren’t really offering rehab was all pretty much brand new stuff. So it was a much cash flow, but they took care of themselves. Yeah, yeah. Good. Good stuff.
Jason Hartman 23:50
I mean, what was it that got you so interested in real estate the Why
Joe Goncalves 23:53
did you think real estate I know, the bad side is you didn’t want to deal with tenants. But what was the positive side? You know, what was your Exposure before this people I think people made money with real estate it’s it’s it’s been proven you know my dad was doing it many family friends that I have they were doing it actually I’m a real estate license two years ago I just at the time I didn’t care for it so so I knew it worked I just don’t want to have the headaches which thinking back now I should have been had the headaches I would have been even better off but but that was my thinking back then. Yeah, cool. Good, good stuff.
Jason Hartman 24:27
And so what happened next you purchase some more properties in some other markets, right?
Joe Goncalves 24:31
Yeah. kannapolis I got one there. Then I went to Atlanta. I think about one of the euros $6,000 or $5,000 down properties in Atlanta. Don’t we wish we still have those? I tell ya.
Jason Hartman 24:43
We can get those again. We’ll be loving life Believe me.
Joe Goncalves 24:46
And I think that was the first time I actually bought through Sarah so in So Sarah,
Jason Hartman 24:50
what what did you see is Joe was building his portfolio. Well, he and his wife we should say it wasn’t really just Joe. You know what, what did you see as he went along?
Joe Goncalves 24:59
Well, I Just saw him continue to grow his portfolio at a pretty moderate pace. I mean, he, you know, he’s your everyday Joe. He, you know, he was a hard worker, I mean, he was working in his career and, as was his wife, and he just continued to, to add to his portfolio, he did have some bumps in the road. In fact, our conversation today started with a another little minor bump in the road and one of the newer markets and, you know, he just continued to manage his managers and you know, check in with us and you know, obviously he’s attended several events, you know, since and, and, you know, slow and steady wins the race, right?
Jason Hartman 25:43
Yeah, definitely does. Joe, I love what you said to me in January at our meet the Masters event. Do you remember exactly what you said?
Joe Goncalves 25:51
I have no idea what you’re gonna was about
Jason Hartman 25:53
Joe Goncalves 25:55
right? Oh, yeah. Well, yeah. I just retired a couple years. A month before that, yeah.
Jason Hartman 26:03
Joe Goncalves 26:04
I was gonna say, Oh, no big deal. He just retired.
Joe Goncalves 26:07
That was really like a month ago that was, you know, I retired but I didn’t retire. I’m gonna do something else eventually. I was I got tired of working where I was at a grocery store for 37 years in the same building. I qualified for my retirement. So I took that and as of right now, I haven’t done anything else but I will find something else to do to fill my time and help out with more financial stuff so I can buy more stuff. Yeah, good, good stuff. So what happened next, what’s your portfolio building? What else did you do? Well, the last one that I bought actually I bought was with chicken guys recommended a checkbook IRA. So I, I bought that was mine. My wife’s IRA, we combined it and we bought a, I guess a classy house. But you know what, it’s the easiest one I have so far. It’s section eight. I get my rent every month and I’ve had the same tenant since Well, good stuff. Yeah. So do you like do you like the section eight properties better? I mean, you have a blend of both right? I’ve only had I only have one and that’s right now it’s the one with the least complaints that I have. So I had to maybe I would be a different story, but I have one and I have no issues right now.
Jason Hartman 27:14
And you know what I’ve said about that on the show, you know, some people love them. Some people hate them. It’s just a really different thing next year, I hate him, but this year, I think it’s great. Yeah. Sarah, what do you find with your wide variety of clients at our firm, you know, with with section eight, I kind of think and I don’t know what you’re gonna say to this because we haven’t talked a lot about this but Sarah you generally like the newer properties, that sort of class a type properties more and I’m assuming you don’t really like section eight stuff.
Joe Goncalves 27:46
Well, I don’t have any section eight properties myself. I, I’m, I don’t have honestly I don’t get very many complaints from clients about them. No. So I’m not opposed to that. I just think that having it’s more of like a maintenance issue for me with the newer construction, you’re less likely to have any maintenance in the first, you know, few years. And that was my experience with my very first property I purchased years ago in Texas, I bought it brand new. I don’t think I’ve put more than $2,000 into that house. And it’s been like eight years, you know, so maybe I’ve been lucky, I have had a good long term tenant. You know, but I think, you know, with section eight, usually those come with older properties and older properties come with more maintenance. So, but, you know, here’s the thing, sometimes the cash flow is so good that it can make sense. You know, as long as you’re willing to shop around a little bit on the maintenance items. I just think it’s a little more time intensive. So it depends on the investor. You know, I get clients that call and they have a big chunk of money. They want to invest they want Want to invest it all at once, and they don’t want headaches. And so for somebody like that, where they don’t want to be involved in the day to day and negotiating maintenance items and things like that, I suggest that they start with newer properties until they, it doesn’t have to be brand new, but just, you know, nicer neighborhoods, newer properties until they get some experience. And once they get the experience of making decisions, and they, they’re comfortable, and they can make quick decisions about maintenance items, and they have their teams in place and, you know, they know some contractors and areas, then as they get into some of the older neighborhoods, you know, they have that experience to make quick decisions and they’re not, you know, losing income. Because they’re, they’re sitting on decisions. And I don’t know if that made sense.
Joe Goncalves 29:50
To all your seminars, I think from what I heard from from your some of your vendors, section eight depends on the city, some cities are terrible, some are good. I have a friend who has section eight here in LA He wants nothing to do with it anymore. But I think the one of the things too is maybe there has to be more careful about how they take care of the property because they don’t get thrown out of this section A program. That’s one of my beliefs, I think there has to be a little more careful because you get a you get inspected every year. But they probably got to be careful, because if they’re not careful, they’re probably gonna not be a session anymore. And that’s a big loss for them. And,
Jason Hartman 30:26
therefore the tendency mean, right, correct. Yeah, yeah. Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday. I agree with you. That’s one of the great levers the landlord has over the tenant is that the tenants can lose their section eight status and God forbid, they would want to lose their free government handout, you know, so that’s, you know, they, they’re on the dole. But you know, one of the things I wanted to talk about is some of the property management practices and you I think it’s very important for investors to take an active role, even if they have property managers, to direct the managers to state what they want. And I’m seeing a lot more clients and I think this is a pretty good policy demand two year leases, from their tenants, because it’s more likely that that tenant will stay longer. And then you don’t have any turnover fees, any cleanup, any painting any stuff like that in between. So it’s it can be very helpful. Joe, any thoughts on that? Or Sarah? I like the idea. Not so my landlord, property manager actually doing that already. I don’t know if it’s because of tenants asking for it. But I got like two or three properties or two or leases. I think it’s great, right? And you can put a rent increase. You know, if you’re concerned about inflation happening in two years, or, you know, just increasing your yield. You can write that right into the lease. So you can just say, you know, the rent the first year is $1,000 a month the rent the second year is $1,040 per month and why Lots of tenants will agree to that. The other practice that I really think investors should try and do is to do hard flooring throughout their house, or, you know, at least carpet in the bedrooms only and hard flooring everywhere else. And then either low sheen or eggshell paint. an eggshell is not a color, it’s the texture of the paint, and it makes it just really durable. You know, I’ve had eggshell paint in some of my properties, and you know, that’ll that’ll last you eight years. I mean, you know, you put flat paint on the walls, you’re probably going to have to repaint after one tenant cycle, you know, maybe in just a couple of years. So, I think that’ll really save you money in the long run. It’s going to lead to another tenant themselves to Well, yeah, it certainly does. It always depends on the tenant. Yeah, Sarah thoughts.
Joe Goncalves 32:51
Yeah, I really like the idea that a two year lease but don’t forget to put that red increase in there, especially in today’s media. rental climate, I think rents are on the rise. I’ve been kind of checking on my properties. And it seems like rents are starting to trend up. So you definitely don’t want to forget that that piece. So that’s great advice. Well,
Jason Hartman 33:12
Joe, what are your next plans for your portfolio? What are your goals?
Joe Goncalves 33:15
Well, I’d like to buy some more of a since I’m between jobs, it’s harder for me to qualify for a loan because there’s no the incomes not the same. So really, when it is in I will like to buy, I like to get out of a couple markets and get into either condensed down or less markets, like you’re suggesting it now. Since you’ve changed your mind last few years, to three or four.
Jason Hartman 33:37
I’ve learned my lesson. So let me just elaborate on that if I can. So, you know, you hear at the intro to the show, you know, 11 states in 17 cities. And I used to think that was good because I was always buying before our clients would buy in, you know, given areas right? And now I really think people should be no more than five markets. I think the big mistake most investors make is they’re only in one market. And that’s a big mistake. But the other mistake on the other side of that is that they’ll be in too many markets. And then you’ve got too many different providers to deal with too many different tax collectors and cities, and you just don’t get the feel of the climate. So three to five markets are enough. And so let’s kind of play that out for the investor that’s buying nine properties. Three properties in each of three markets, I think is a great plan. If the investor is buying 90 properties, then 30 properties in each of three markets. But if they’re buying that money, you know, they could be in five markets. And there they’d have say, it’s well rounded off at 100. And it’s, you know, 20 properties in each of five markets, but I really don’t think anybody should be in more than five markets. So how many are you And now Joe, are you in eight markets? I believe no 1234 I bought, I think it’s five, you’re always you’re in, you’re in five different cities, but you want to become a little less diversified
Joe Goncalves 35:11
properties. Right, right, exactly. But you want to be less diversified. Do you want to get it down to three, I would like to get it down to three or four. The problem is some of the newer markets are really exciting. And I had no no phone anymore. Like, for instance, Memphis and Arkansas sound really, really good. But then be more so I wouldn’t mind three or four I think could make a lot less. So as property managers, it’s like a stainless taxes. It’s, it makes sense. It makes a difference. Yeah, it’s less
Jason Hartman 35:40
people you have to deal with and you know what else insurance because insurance is run state by state. And, you know, we tried working with the National Insurance Company, national real estate Insurance Group, they go by the acronym of the first letter of each word and also affinity group. Or affinity insurance, they kind of go by both names. And I had a bad experience with them and I know a couple of couple of other investors I know had bad experiences with them. And I was I was loving the idea of having one source for my portfolio nationwide would have been great, but they didn’t work out so I’m back to you know, just local brokers one in each state where I have properties and and you know, it makes it easier when you don’t have to deal with that many different insurance companies
Joe Goncalves 36:29
to write I have them on one of my my last property about was to was affinity and I’m not sure after what you just said, if I should keep them or not. Oh, yeah. Well, I’ll be happy to tell you my story if you want to hear it.
Jason Hartman 36:44
Yeah, I’m pretty upset with those guys. Basically, what they did and this is affinity group management or national real estate Insurance Group. This was kind of unusual. I mean, it was a surprise happening is I had a property and when we had that polar vortex, you know, the thing that surprised all the global warming people. And it got really, really cold. The property happened to be vacant at the time. And I’m not sure this is what happened, but I had a pipe break. Okay, and I’m not sure if it froze or, or what? And they said they wouldn’t pay the claim. And I said, Yeah, you have to pay the claim. And they said, No, there’s a clause in the insurance policy that says, if it’s not occupied, that you know, you have to do certain things, and I didn’t do them. And so are really my property manager didn’t do them. And so I said, No, no, you have to show that the cause of the pipe breaking and the subsequent damage was because of the weather because the pipe froze and they they have no proof of that whatsoever. And it got even worse. They tried to hide the insurance adjusters report. They said, I did not have a right to a copy of it. And so I went and my lawyer found that area of the law that says I have a right. And we wrote him a stern letter, and they finally turned it over. They tried to suppress that report, which I just thought was completely scummy of them. And then I was communicating back and forth with him in an email and I was just, you know, in a very Matter of fact, tone, I was not being rude or difficult, which I completely realize that I’m capable of.
Joe Goncalves 38:38
Show numbers this, I gotta make a mental note.
Jason Hartman 38:42
But I wasn’t doing it this time. Okay. I was completely civil. And I just said, Hey, you know, are you gonna pay this claim or what? And I explained my reasons, kind of, you know, more elaborately than I just explained now, you know, I mean, I thought I had a very good case. And I said, you know, please Don’t you know something along the lines of Please don’t tell me we have to litigate over this. And then shortly after that, they sent me a letter, basically, retaliating against me saying they’re canceling all of my insurance policies. Because I was difficult. Wow. Apparently they have a difficult clause that allows them to get out of the deal. Amazingly, so,
Joe Goncalves 39:28
anyway, everybody that I’m canceling anyway, right? Yeah.
Jason Hartman 39:32
And my attorney says that they can be liable for punitive damages for doing that what they did is completely wrong, you know, retaliating like that. So I have not entered into litigation with them yet, but I don’t know. I might have to I’m not sure. Hopefully, I won’t. But, you know, I just I think that was really, really unethical what they did, and you know, I think they, they deserve to be held accountable for it. So yeah, and then we had another client who has Another claim, it was a smaller claim, but that one was also denied. And the way they do their insurance is that they basically from what I understand, and I could be wrong about this, okay, but my understanding is that they, they do the insurance by getting a master policy through I believe, Lloyds. And maybe they have a couple different vendors for it. I’m not sure it’s for only the larger part of the claim. And the small claims they I believe, and you know, I don’t know this for sure, because it’s not been discovered, but I’m pretty sure that’s the way it works. They just self insure for the small claims. So, you know, just as I’m plucking a number out of thin air here, but you know, maybe if it’s a $25,000 or lower claim, they’re actually paying that money. And that’s why they’re really quick. My theory is that’s why they’re really quick to dispute those claims and not pay them because You know, that’s, that’s their money rather than the insurance company’s money. And so, you know, I think that’s just that’s just problematic. And I don’t like it,
Joe Goncalves 41:10
you know, in business like that. Yeah,
Jason Hartman 41:12
yeah, I’ve heard a few more horror stories, I believe a British woman living in England. She wrote me several big emails about them. She’s not one of our clients, but she just was livid about them denying claims and thought they were just doing all kinds of bad stuff. I can’t remember her name offhand. But yeah, so unfortunately, local insurance that’s what I’ve come back to just regular old insurance, but that is state by state. So you know, if you have multiple cities in Tennessee, or Texas or whatever, you know, you can use one broker and have all of those covered. Okay,
Joe Goncalves 41:48
so for me to think about something different. Yeah, definitely is, but
Jason Hartman 41:51
what we didn’t finish Joe is your goals for your real estate investments.
Joe Goncalves 41:55
My goal is maybe get into real estate also help my friends do what I’ve been able to do. Love before asking me about it, you know? So and spend more time with my family and hopefully grandkids my daughter’s married three years now so maybe in the near future we’ll have grandkids to take care of There you go,
Jason Hartman 42:13
there you go. You’ll be you know, isn’t it nice the freedom you can achieve with you know, this is the most historically proven asset class. It really does give you a lot of security although What did you do you know before you were investing in real estate were you were you investing in stocks and stuff like that?
Joe Goncalves 42:29
I you know, I did that years ago and I
Joe Goncalves 42:33
feel the bubble of 2000 I was doing I thought I was the smartest self investor out there and I’ve ever have you check on my stock quotes five times a day and then 2000 came around is like,
Jason Hartman 42:48
half the money that I lost. If I put into the stock market even I mean into the real estate even in much better shape. A lot of people have thought that same thing themselves. But you know, listen, Joe, you don’t have to worry because every time There’s a stock market crash. All of the insiders always get paid really well. You know, the people Goldman Sachs get their bonuses, the CEO, their company of that company. You know, God has huge salary and his bonuses you know, it’s just a little investors that get screwed over. So unfair, isn’t it?
Joe Goncalves 43:22
Yeah, I’d like his money in there everything.
Jason Hartman 43:25
But no, well, what can you do? It’s the modern version of organized crime as I always say.
Joe Goncalves 43:31
I tried options. I think I tried everything.
Jason Hartman 43:34
Were you doing? Just, you know, good old mutual funds and kind
Joe Goncalves 43:36
of simple stuff. Yeah, it was it was mainly about mutual funds. I did do some, some, some single stocks. I found this this little newsletter out of out of Oregon, that were were like four stocks a month. And what I found out was it was it was mailed out every month. And because I live in a West Coast, I got my letter the first day and I start noticing after about two or three months by the end of the day by the standards the market close all those stocks for quite a bit the next morning it was sometimes it doubled and so I started doing that I didn’t care what the code because they were like two or three four or $5 stocks they were just penny stocks I could double my money and in in 24 hours but then they went online so that it lost the male parts so everybody got their email at the exact same time so I couldn’t rely on the on the on the post office worried it delivered to the west coast first and by the time we got to the east coast when they start buying stuff he drove up the price of the people who had bought already bought from the west coast Yes, I even got a peel box so I can rent to the public post office every like fourth fifth or sixth of the month. I’d go there see if my letter in there as soon as it was in there. I rush home click on my buy 234 thousand shares of this and that and wait till the next day. Yeah,
Jason Hartman 44:58
yeah. Well, you You got it. Just know that that is not sustainable when things are going that well, right? Because this be that back then. Yeah, yeah, no, I Well, I didn’t know you back then. Otherwise I would have tried. Believe me. I love real estate. We all know that. Yeah, good stuff. Well, good. Well, Joe, thank you so much for joining us today and just kind of talking telling your story and congratulations on your retirement and, you know, it sounds like in you know, Next you’re going to be working as more of a hobby, really than a must,
Joe Goncalves 45:27
you know, then you know, then you have to write well, not as well off as Fernando. So no, we’re there. But
Jason Hartman 45:33
we’re getting by Yeah, good, good stuff. Well, hey, Fernando, is also working for just general stimulation and fun. And you know, it takes on a whole new meaning when you’re not really working for the paycheck when you’re just working because you want to work. It really, it’s just a whole different experience. It’s It’s wonderful when it’s like that. So, so congratulations to you and keep up your investing and keep building your portfolio and we’re happy to help you and thanks for being our client.
Joe Goncalves 45:58
We really appreciate it. Thank you. Jason,
Jason Hartman 46:00
Sarah, thanks for joining us as well, we’ll wrap it up.
Thanks for having me.
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Jason Hartman 47:24
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