Jason Hartman hosts Investment Counselor Sara as they go into some of the issues clients are having. They also talk about interest rates and how they have been so low. They end the discussion looking at whether you should get a refinance or a line of credit.
Investor 0:00
So far I haven’t had any issues in the sense of with the turnkey vendor or the management company. The management companies have been exceptional, you know, responsive, quick, professional. It’s great. You know, for somebody who’s really busy, this is a great way to invest. Now, I have to say that being a skeptic, we went outside of your network. We did go to another turnkey vendor. We went to, you know, the place where they did their work. They had this beautiful binder with pamphlets, and they looked at it, and then they went to show us the houses. And it was not what I expected. You know, the thing that scared me is we went to an older house like this, this is a great investment property. They went into the basement, and there was literally a electrical junction box with four wires coming out and one of the side hanging in midair, hanging in midair. So at that point, it was well, we’re not doing anything with this team of people and we went back. We went back to organizations because I hate this I’m a commercial, but they’re just quality people.
Announcer 1:03
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 1:53
Welcome to Episode 1297 1297 on the E of Episode 1300. Thanks for joining us. I’ve got our investment counselor, Sarah, who you’ve heard on the show many times over the years, over the last 12 years. We want to talk about some things going on the market, congratulate some of our clients who are just doing awesome things in the investing world, and kind of go from there. Sarah, welcome back.
Sara 2:21
Hey, Jason, thanks for having me back. Give us your
Jason Hartman 2:24
kind of pulse on the market. There’s a lot of talk about, you know, when will the next recession hit and hit will hit it will be here, folks. So we’re going to help you be ready for it. You know, people are kind of wondering what is coming next.
Sara 2:39
I’ve been wondering a little bit myself, but to be honest, the only time I hear about a recession is when I listened to your podcast, or when I turn on the news.
Jason Hartman 2:47
I’m Mr. Negative.
Sara 2:53
You know, people are pretty upbeat. I think everybody’s excited that interest rates have once again dropped A little bit. This is really allowing new clients to get into the game and our existing clients to restructure some of their debt and their portfolio. I’ve been doing a lot of portfolio reviews with our clients to see, you know, where we can do a cash out refinance and roll into more properties. You know, sometimes you’ve had a property for several years, the rates go down a little bit, you can stretch out that termit alone, pull cash out and, and increase the cash flow a lot. Yeah.
Jason Hartman 3:31
Good stuff, good stuff. So so that’s the refi till you die plan. You can also just renegotiate your interest rate with your lender and potentially get a non refi interest rate reduction. Yes, that is really happening, folks. It is really happening. So don’t be afraid to ask if, especially if that loan is a portfolio loan with your lender and they have not sold it off. Many times because they know if you refuse Finance, you’re probably gone, you’ll probably go to a broker that could broker your loan to any one of a whole number of lenders, and they’re probably going to lose you. That’s a customer retention strategy, that they may just lower your rate without a refi now won’t help you get cash out if you want cash out, you got to refinance. But that is another option, another strategy to consider. So the portfolio makeover, I’m really glad you’re doing a lot of those lately. Sarah, listeners, that’s something you should be doing with your investment counselor every single year. And if you don’t have an investment counselor, if you’re not working with us yet, again, it’s free. You know, we earn our income when you buy properties with our referring affiliates, okay, that we refer you to. That’s how we get paid. So our advice is free. Just take advantage of it. Get free consultations. Have Sarah or other investment counselors help you restructure your debt help you make the Plan, move assets around, reallocate, rebalance your portfolio, if you will, and any other things you want to share, like some examples here of any clients that have been doing that specifically with you. He’s in Southern California has been working with us for many years. Basically, what I did is I sent him a blank spreadsheet for him to and it’s pretty brief, he just filled out some very basic information that I needed, you know, property address, the estimated value, and then I calculated, you know, what his equity was and his rent to value ratio. And sometimes it makes sense to sell a property and sometimes it just makes sense to do the refinance. You know, we did the review, we found some places where he could pull some cash out and lower his payment, lowers interest rate rather. And we just got him in touch with one of our lenders and we do have some lenders that can lend in all 50 states. So if you’re looking to cash out and two different properties that are in different states, you can do that with one lender simultaneously. So this lenders really do make it easy. Now he’s working on his identification into a new market looking at some new construction. And, yeah, we’re really excited, he should be improving his cash flow pretty nicely, you everything you can do is you may want to do the refi and pull cash out on your primary residence. And many of you listening live in expensive markets, the West Coast, the Northeast, South Florida, or, you know, anywhere around the world for that matter, you can refinance that property. And that can be a really good source of equity for Remember, you still have essentially the same amount of equity, you’ve just diversified it more into other properties and other markets. Yeah, and the only thing I would caution without on your primary residence, and the lender will stop you from over leveraging, right, they’re going to require you to keep some equity. Usually they require you to keep about 25% of your equity in the property, but just be careful not To over leverage, at the end of the day, you still have to make that mortgage payment on your primary residence. And so when you pull cash out, your payment will go up. And so nowadays, you don’t really even need to give that warning because the bank isn’t going to allow it in before the Great Recession when they were being really silly and stupid, then you have to give that warning maybe, but right now, the banks have become so conservative that not too much to worry about. But yeah, go ahead. And one common question I get around that is, should I do a refinance on a 30 year fixed rate loan? Or should I just put a lock in place he lock has a home equity line of credit. And the answer is, you know, really depends. Depends what your existing interest rate, if you’ve got a really low good interest rate on your primary residence, it might make sense to just keep that in place and do the line of credit. But you know if you can get about the same interest rate that you already have, and Then you can lock in a new 30 year fixed rate loan, that’s probably the route to go today because the rates are still pretty low. And the home equity line of credit usually is a 10 year loan and then you know, can adjust, and you don’t have that 30 years locked in. So if you can refinance your entire loan and improve your position, then I think that’s the way to go. What are your thoughts on that? Yeah, well, I agree if you can reduce your risk by having a little more leverage, which doesn’t make you a target for a creditor for a foreclosure, if things really go down the tubes again, like they did during the Great Recession, that higher loan balance actually offers protection. And I’ve talked about it many times over the last 15 years. I know it’s counterintuitive. If you’re new listener, you’re probably not going to get it but you know, listen to the old shows, it’s been talked about many times, just go to Jason hartman.com. and search the best insurance is a high loan balance. Okay. If you search that You’ll find our episodes on that where we have taken a very detailed look into that. And that’s a good plan. And Sarah, you you also alluded to, although you didn’t mention it, specifically, the portfolio makeovers where you’re helping clients do 1031 tax deferred exchanges, a great vehicle. Income property is the most tax favored asset class in America. And taxes are the single largest expense in anybody’s lives. I have done many, many 1031 exchanges myself. I’m in one now, but there may actually be a couple of options that are better. Yes, I really said that. Better than a 1031 tax deferred exchange. I have been geeking out taking a deep, deep. I mean, anybody who knows me knows that. I have a little bit of OCD, okay. Little bit obsessive compulsive. When I get intrigued by something, man Am I just chased that to the end of the earth? And this is one of the things I’ve been doing. I’ve spent hours and hours reading, learning, watching videos, consulting with people, financial advisors, lawyers, law firms exchange accommodators on Well, what? Well, I’m not going to tell you, I’m going to tease, okay. Because here’s the deal. I’m going to talk about this at profits in Paradise, okay? It’s, it needs really a whole episode or a couple of episodes, just to go through it. Okay, just like a 1031 exchange, what I mean, you know, we do entire episodes on 1031 exchanges, and there’s still more to know. Okay, so I’m going to talk about our profits in Paradise, but it is a way that you can potentially relinquish properties sell properties or a business, and it’s not the opportunity zone. I want to just say that, I think the opportunity zone as you’ve heard me on past episodes, is totally overhyped. I think it’s overrated. You know, there’s a few small number of people that it fits and makes sense for I’m not saying I’m not saying it’s completely invalid I just think it’s completely overhyped is all there’s all these promoters out there making tons of money essentially, it’s a bait and switch in a lot of ways from most people. It’s just no big deal okay?
Sara 11:25
I remember Jason years ago there was the go zone now the go
Jason Hartman 11:28
zone was a great deal.
Sara 11:31
It was a great deal however, I purchased a property that was initially in the go zone and then they read designated the lines and I lost that deduction. So yeah, you don’t be
Jason Hartman 11:44
anything that you’re doing in a mixer you know about it. There was another was another flaw with the go zone besides that one, okay. And by the way, just so you know, even though they redrew some of the lines, or there were misunderstandings and misinterpretations about them, a lot of people took that deduction and got away with it. Okay, so I’ll just put that out there. But here was the thing that happened with the go zone. Now this was years ago. And again, past episodes are up there of the podcast, you can find them at Jason hartman.com. Just use the search engine there to search goes on. But here was really the problem with the go zone is that tax incentives like that, and it’s happening with the opportunity zone to they distort markets, they really cause a lot of distortion. And almost immediately after the go zone tax incentive began, the money just rushed into these certain markets, and the properties became overvalued, so quickly. We recommended it at the beginning, and it was a great deal. I bought a whole bunch of those goes on properties myself. I just loved the tax benefit. It was phenomenal. But after a while, all these promoters were still out there promoting this stuff and I’m like looking at these deals. saying it’s crap, these deals are just not good. I remember I got into arguments with some people. They said, Well, you know, we want to bring your property our properties to your network and have you promote them and stuff and we’ll pay you. And I’m like, I’m not promoting this chunk.
Sara 13:17
I remember. Yeah, I remember there was one group and I don’t even remember who it was half away, maybe. I don’t know. But it was it was a group I want to say it was like in Biloxi, Mississippi, and they wanted to promote their stuff and the properties look kind of junky or janky. I don’t know they didn’t look great. And for whatever reason, our gut said not to work with that group. And they ended up getting into some, like legal trouble. They ended up being a bad apple. So you do you know when these opportunities come up, you really do have to just keep in mind, the deal has to make sense without the opportunity
Jason Hartman 13:49
exact without the tax benefit.
Sara 13:51
Without the tax benefit, right.
Jason Hartman 13:53
Don’t let the tail wag the dog. The deal must make economic sense by itself without Any special model leaseback or subsidized rental income or tax benefit or anything it needs to just make sense by itself. And and then if you get these extra benefits, it’s icing on the cake.
Sara 14:14
One of the clients I’m working with on an exchange, you know, everybody’s on everybody’s email list, right? And so, there were somebody we used to work with years ago, we don’t work with anymore, and he was on their list. There was a model leaseback opportunity, which is just a brand new construction home.
Jason Hartman 14:28
I saw that Yeah. Hey, listen, listeners, I want to tell you something. When we stop working with someone, there’s a reason, okay. So if you want the updated information, you better talk with your investment counselor, you need to be talking with us, because
Sara 14:47
you worked with them. And five years ago, that doesn’t mean today are so good. And just I’ll just make this quick but basically what happened was that the seller sent out a performer with like 20 $600 in rent Is that what the builder is going to pay for two years,
Jason Hartman 15:02
which is not the market rent and not the market? Right?
Sara 15:05
The market rent and he he had an appraisal and the appraiser said that the market rent was about 2100. That’s a $500 a month Mrs. Yeah,
Jason Hartman 15:14
ridiculous. It’s totally overstated. Here’s what these scumbags do these weasels, what they do is they guarantee the rent back, and not all of them do it. But sometimes it’s a ploy. They guarantee that rent back through some different LLC or corporation, and then they just don’t honor it. And what are you going to do sue them it’s such a small amount of money, it’s not worth suing them. That’s the problem. Our legal system is such a disaster, you know that it just doesn’t make economic sense to actually hold anybody accountable sadly. And even if you do sue them, it’s just this entity that’s like this entity with the little to no assets, so they’re just gonna bankrupt it.
Sara 15:55
Yep. So check back in with us, you know, before you put a property under contract chuckwei Let us run it through our Performa and make sure that the deal actually makes sense.
Jason Hartman 16:06
And Sarah, I heard your dog taken in the background I think he’s taken agrees with that talk to your investment counselor it through Jason Hartman calm we’ll have a phone consultation with you and go over all that stuff. Okay, so we got off on this goes own tangent opportunities own it’s not you’re going to love this folks, if you’re selling stocks, properties, a business, any of these highly appreciated assets, we really have a couple of vehicles that can help you. You’re going to hear about it at profits in paradise register at Jason Hartman live.com. That’s Jason Hartman live.com. And we’re going to have the property Tour The day before. I’m really excited about that. I just think this is going to be a great event. It’s not a big event. Now. Some of you have complained, hey, listen, we’d like to have huge events right for our own self interest, but You guys love the small to mid size events, you know, you get more attention, you know, frankly, and it’s not as crazy. So this is one of those events it was, you know, when we held it last year in Hawaii was a small moderate group and it was nice. I think we had, you know, 60 people give or take. And so it’s not crazy. It’s not, you know, 200 it’s not 300 people, I think you’ll enjoy it. So be sure to register for that. And we’re combining it with a property Tour The day before. So that’ll be fun. You can actually see properties and purchase them
Sara 17:32
the day before the event really excited for the tour. As I’ve mentioned before, I’m bringing my son Jordan, he’s 13. So be his first property tour and conference. And he’s really into real estate. So I’m really excited for it. I’m excited to hear your new talks and hear what you’re learning about and what you’re into. You’re always into something new.
Jason Hartman 17:50
Yeah, I’m trying to be I’m trying to be you know, real estate is very slow changing industry. That’s why there’s no TV station like CNBC, dedicated to real Because there, there just wouldn’t be enough to talk about 24. Seven, right? versus stocks, you know, they’re up there down. It’s a rollercoaster. You know, the insiders are stealing all your money. There’s always a story. Right, right. But that’s not the case with income property because it’s just a really stable, true good asset class. So that’s what you want. Sarah, did you want to talk any more about any of your clients that have purchased or closed on properties recently and what they’re up to?
Sara 18:30
I am working on a pretty good size 1031 exchange with our client, Jim. I’m also from Southern California. He just identified some properties, and people don’t do this. And Jason, you did this to? You called me last Friday or Saturday and said, Sarah,
Jason Hartman 18:47
I’m getting scolded here about something. What is she gonna say?
Sara 18:51
You called me you boxed me. Oh, I was at a wedding. This was a few weeks ago. I was
Jason Hartman 18:55
at my brother’s wedding. So I know I did that to you myself.
Sara 18:58
Yeah, and I’m like in some garden with no reception out in Temecula
Jason Hartman 19:02
like in the middle. They don’t know what you’re gonna say What did I do? scold me? Yeah,
Sara 19:06
yeah so like I gotta identify my 1031 exchange properties by tomorrow Can you find me some property
Sara 19:15
at this wedding like texting everybody emailing everybody trying to get you some properties and
Jason Hartman 19:21
and thank you You came through by the way you give a I got a bunch of them yeah you know sometimes I feel like the shoemaker with no shoes you know I’m too busy helping other people to help myself So
Sara 19:34
Jim did the same thing to me last weekend and I was surprised he he didn’t seem stress about it at all but we’ve been talking you know, working together closely we’ve been looking at some deals, nothing quite he really wanted multifamily and it’s hard to find like good deals and multifamily so we found a few that he didn’t really like. And I’m like, Jim, you’ve got like three days we got to find you some properties like let’s look at some single family. So I you know, sure enough at the last minute I found him a 10 unit deal and very rare and hard to find that deal. But he literally identified his property the day before. So don’t don’t be like Jim and Jason. Okay, get it started early, you get 45 days from the time you close to identify your property. So call me early. Let me know when you’re getting ready to sell your property so that I can be on the look for you.
Jason Hartman 20:21
Yeah. Now, just so you know, listeners, what’s here is referring to is that when you do a 1031 tax deferred exchange, and you sell the properties, you have 45 days to identify what’s called the up leg property, the properties you’re buying a property or properties, you’re buying to replace what you’ve relinquished. And then you have 180 days to close on them. But in 45 days, you have to identify them. And that identification has to be time stamped, either by a postmark or any you know, nowadays, it’s usually an email right? So I had to email my exchange accommodator Saturday at midnight. This time Sarah is talking about a couple weeks ago, I did have some properties already lined up, you know, I was ready. I wasn’t as prepared as you’re making me out to be. But I just wanted to see if there were any better deals. That’s why I asked you. So thanks, Sarah, for helping me out with that. I appreciate it. But yes, do not wait to the last minute for sure. How about some other clients? Or what’s the vibe? What are they asking? You know, what are what are the clients feeling just this sort of anecdotal stuff, I think is good for people to hear. We present a lot of empirical data on the show, but just this, you know, the conversation, the vibe is is important to
Sara 21:35
Yeah, I mean, the conversation I’m really having with people is just do your due diligence, make sure you don’t skip your inspections. You know, I like properties that are like A or B class. And I know we’ve talked about that a million times. Some people still go after the cheaper properties and it’s fine. I mean, you can buy a couple of those cheaper properties, but just make sure your overall portfolio is You know, in good areas, I like that bread and butter rental property, you know, that little rock property that’s 115,000 and rents for, you know, 1100 a month and said three bedroom, two bath, you know, just maybe a 1500 square foot house, just a basic rental property. And so that’s what I’m working really hard on sourcing for our clients, in addition to the new construction, which I love. So you want to have a diverse portfolio have a few different types of properties, and not just different markets, but different classes and right ranges.
Jason Hartman 22:34
Good stuff. All right, great. Anything else you want to share with clients as we wrap it up?
Sara 22:40
No, just I really urge you to come to profits in paradise. I will be there and look forward to meeting with a lot of you. I’m excited for the tour the day before. If you have questions about anything, give us a call. We’re happy to answer and yeah, we look forward to seeing you in just a few short weeks.
Jason Hartman 22:56
Right. And by the way, you know, we always talk about websites. And everything. But if you want to just pick up the phone and reach out to any of our investment counselors and our team members, you can just call one 800 Hartman that’s one 800 h AR t ma n. for international people, it’s probably better to just go through the website, but our regular line is 7148200 4210 because the 800 number doesn’t work outside of the country will look forward to seeing you at profits in Paradise and talking with you soon. Until then, happy investing. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional and we also very much appreciate you Reviewing the show, please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
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