Jason Hartman starts by talking about the insurance industry and The Algorithm Echo Chamber. Then, he interviews Andrew Freitas about his investing journey. He shares how Covid-19 has impacted his workplace, how to deal with property managers, and why he has slowly gravitated toward more expensive properties.
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 multimillionaire 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 1000s 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 0:52
Welcome to Episode 1661. How are you beautiful people doing today? I hope you’re well, because I got some bad news for you. Our installed President, Mr. Biden planning the biggest tax increase in three decades. Yes, Bloomberg reports that tax rates might rise to pay for the next White House initiative. Well, surprise, surprise, surprise, oh, sleepy Joe, come on. We knew you were going to do this, we knew this was coming. And you are going to want to make sure you only make $399,999 a year because if you go to $400,000, they’re going to hit you really hard. They’re going to increase the corporate tax rate, they’re going to increase. And that means, you know, those big giant corporations, they probably won’t be very affected. And if they are, all they’ll do is raise their prices. Hashtag inflation coming through your way because corporations are a pass through entity. But the small businesses that compete in a more difficult, more competitive environment, they will find it hard to pass those tax hikes through to the consumer. And the big companies. You know, they do the double Irish twist. It is St. Patty’s Day After all, by the way, don’t be spreading the Blarney today. Happy St. Patty’s Day tall. Hope you’re wearing your green. I must admit I am not wearing green today. Because the one green shirt that I own. I couldn’t find. Not that I looked very hard. But I’m just saying I couldn’t find it.
So here in the office today with all of these people, no one pinched me for not wearing green. So I’ve made it so far. We’ll see how it goes. All right. And I’m sure you’re, I’m sure very few of you are in a big office with a whole bunch of people. Because nowadays, we work remotely, which has created big new real estate opportunities for all of us investors, hasn’t it. And back to Biden and his tax increase, make more than a million bucks, you’re gonna pay a higher capital gains tax, and the estate tax is going to be expanded if he gets his way. So a lot of tax hikes coming your way, folks, what is the most tax favored asset class in America, income property, income property, so we can help you with that. But yours truly, I did. Another thing that I’ve been researching, toying with thinking about for about 10 years, never pulled the trigger. Until last year, I spent a lot of time researching this at the end of the year, and a lot of time dealing with it in January, frankly. But I set up my own insurance company. Now, I’m thinking of doing one of our monthly empowered investor calls on this topic. Or maybe we’ll do a public web class on it, I’m not sure. But it is pretty interesting. You do have to have your own business and your own business needs to be you know, doing a bit of revenue to sort of make it work and make the extra costs work. But I must tell you, as I have said before, insurance is a interesting, interesting business. Why? As I have been saying for the last decade, I have mentioned this even though this is not an insurance show. I have mentioned to you the idea of that is quite fascinating that the insurance business is possibly I think it is the only but I say possibly because whenever I’m Talking to a large group of people such as yourself, someone always fact checks me, and they call me out. And they, they write me an email and they say, Jason, you are wrong Wang Wang about this.
So I have come to self censor a bit, be more careful, which is not all bad. I will be the first to admit, but the insurance business is the only business in the world with a negative cost of capital, I want you to really let that one sit in for a moment. And negative cost of capital. Think about it. If you’re an insurance company, what do you do? You receive money before you spend money. I mean, on actual cost of goods, right, like a normal business, you make your widgets, you spend the money, maybe you’re making maple syrup, maybe you’re making shoes, I don’t know, whatever you’re making, right in your business, you’re spending money to make that. And then you sell it in the marketplace. And you get money back. And hopefully, you earn a nice profit by creating a win win transaction, where the consumers want your stuff. And you have enough pricing power to where you can charge good price to make you a reasonable profit. For your efforts. You have a positive cost of capital, because you had to spend the money before you could bring the money and before you can bring the revenue in, but insurance, you receive the money as a shared risk premium before you pay out the claims. So it is an interesting industry. And it’s got interesting tax structures. And I think if you tell me if you go to Jason hartman.com slash ask Jason hartman.com slash ask. And you say, Jason, told me more about how I could be in the insurance, business and shelter more money than I’m just sheltering on my income properties alone and escape the wrath of Joe Biden and communist Harris. I mean, Kamala Harris, communist heroes, which one is okay, communist, let’s call her communist.
Okay. So, if you’re interested, let us know, tell your investment counselor, I’ll do a class on this because I spent about a decade researching this thinking about it. You know, me, I’m not quick with all my decisions. I am a Libra after all, as great of a sign as Libra is, and let me tell you, Libras are really good sign. They have one flaw. They’re a bit indecisive. I mean, I used to be indecisive. And now I’m just not sure. Okay, enough of that. So maybe we’ll do a class on that, at least for the empowered investor network. We’ll do that. And by the way, empowered investor members, we put a new vintage recording we have we had our archaeologist team. Yes, we have a team of archaeologists over here, and they dug up 238 I kid you not. We don’t really have archaeologists. But we did dig up 238 vintage recordings from 10 plus years ago. And we are now putting those vintage recordings in to the empowered investor network. So as part of your membership, as a surprise bonus, we put one in there yesterday, that is on due diligence, good subject, good subject due diligence. So check that out empowered investors, if you’re not a member, well reach out to us. And we’ll let you know how you can become one. Alright, our guest today is one of our wonderful clients and also in the hero league as a medical professional. Our guest today will be talking about his client case study. So we always appreciate when you clients come on the show. If you’re out there listening and you’re thinking, hey, I want to come on the show. Just reach out to us, we’ll be glad to have you on because we always love hearing client case studies, the good, the bad and the ugly. We want to help our other clients learn from your successes, your challenges, and everything in between. So we will have that in a few minutes. But first I do want to talk to you for a moment about debt to GDP ratio because I have noticed something I have noticed that and maybe I’m just more sensitive to it. Maybe I’m trapped in algorithm echo chamber. We all have to be careful with that today because the powers that be are listening to us of course the Mike on your cell phone that’s always on the Hot mic on your computer, your TV, your al e xa. devices, if you have them. They’re listening to you. They’re reading your mind.
They’re looking where you click on your mouse and looking at what you surf on the internet. And they’re doing all this stuff, right? So you might be trapped in an algorithm echo chamber. Maybe I just coined that phrase. And I just coined that phrase, I might have, anyway, algorithm echo chamber with a little tm after it for trademark. So I might be caught in that, but I have noticed that there is a lot, a lot, lot, lot, lot lot more talk about inflation expectations now than even a month or two months ago, from not just the people that are usually saying that, no, not just Peter Schiff, the sky is falling, it’s the end of the world. You’ve been saying that for decades, but a lot more mainstream, this inflation expectation really seems to be headed to the forefront. And it’s definitely related to the debt to GDP ratio of a country. So the gross domestic product, the economy’s value in any given year, right, versus the debt that country has. Well, we all know Japan is the worst, it has the highest debt to GDP ratio. And that is about 230%. Next in line Greece third about 200%. Greece is an epic disaster, Japan is sort of a disaster in a different way because of its demography and various other things. But at least in Japan, you have hard working really smart people in Greece, you got people that like to be a lot more leisurely, okay, so it’s a very different environment than Japan. Next in line, you still got some leisurely people, and I’ve got quite a bit of this blood in my genetic background, and that’s elite.
Okay. You can say a lot of things about yours truly. But you definitely can’t say I’m lazy. No one’s ever gonna be able to say that. But Italy, they like leisure over there. Let dolcevita you know, the life of indolence and self indulgence, le dolcevita. About 150% debt to GDP ratio, Italy is in big trouble. Amazingly, Singapore, now Singapore, that is a country of winners. Okay. And Singapore got ahead so much and rose up so much over several decades because of its very libertarian policies. It really, really zoomed ahead because of that. And it’s it’s really a marvelous, incredible country. Portugal, another sort of leisurely country debt to GDP ratio, about 130. And guess who is next in line? Guess who’s next in line? That good old US of A with about 120% debt to GDP ratio. I’m pretty sure that’s the highest it’s ever been ever even post World War Two. fact check me I could be wrong about that one because I’m, I’m not looking at anything that would tell me that now. After the US we’ve got France, Spain, Belgium, canadia, aka Canada, Argentina. Argentina has so many other problems besides their debt to GDP ratio. We’ve got the UK, Brazil, India, South Africa, Hong Kong, even though it’s not a country, Germany, Ireland, China, Poland, Netherlands, Australia, New Zealand, Turkey, Mexico, Denmark, Norway, Sweden, Indonesia, Switzerland, Russia, Russia has pretty low debt to GDP ratio. So that indicates that is an inflationary indicator. There are others, but that is definitely one of them. And all of these countries are running up the debt. And the USA has extraordinarily high debt. Remember, just in the last year, about a third of all the dollars ever printed? Ever. Right? You got that as ever, like in the country’s history, what 240 years ish, give or take printed last year in one year. So folks, there are many more indicators out there, showing that there is definitely inflationary pressure in the system. And we like that as real estate investors as income property investors. We’re fine with that. Because we will be enriched through inflation, while others will be hurt by inflation. So that is part of my inflation induced that destruction strategy. If you want to learn more about that go to Jason hartman.com type in inflation induced debt destruction. I know, it’s a long phrase, but it works. And check out some of the prior episodes on that, and some of the blog posts and articles on that. Okay. Without further ado, let’s get to our guest. And let’s hear his client case study.
Hey, we always get great feedback from you whenever we do client case studies. And so we really appreciate volunteers like our guest today, Andrew fritas, who’s with us. He’s got seven properties. He lives in Vancouver, Washington, and has been working with one of our investment counselors, and really just a pleasure to have him on the show. Andrew, welcome. How are you?
Andrew Freitas 15:55
I’m quite well, thank you so much for having me, Jason.
Jason Hartman 15:57
Good, it’s good to have you. So you know, maybe we’ll start at the beginning. First off, what attracted you to real estate investing,
Andrew Freitas 16:04
I’ve always kind of known that real estate would be something that I would want to some vehicle to pursue, you know, for income. My parents told me they even own a business when I was growing up a little coffee shop. And they told me that even with that for 15 years or so the only money they ever made was actually owning their own houses and having an appreciation, and then selling them and moving somewhere else. And they were very lucky in their life have some good appreciating market. So they happen to be moving into at the time, then they had a rental property for a while they were the old style of letting the property pay itself off, you know, and just have it be free and clear. And it worked well for them. Fine. And again, that’s the money in their life that they’ve made, even though they’ve worked really hard and been diligent workers they have their actual income or wealth has been because of real estate. And so I was never really afraid of real estate as a thing. My brother also has in this area remodeled houses, he’s bought his own places and remodeled and flipped them and done the work himself and also done some buy and hold stuff. So I knew real estate, I was never afraid of real estate as a thing. You know, it was never like, it didn’t feel like a risk to me as a concept as a vehicle for wealth. So yeah, that’s kind of how I as a child, or as a kid even was not afraid of it.
Jason Hartman 17:10
Good stuff. You know, just to mention something on that. You talked about your parents in the business they owned and you know how really the money they made was on real estate. And you made me think of something a friend of mine, who was I had I had a very wealthy parents, he said to me something interesting. And you know, I’m not really a fan of commercial real estate, mostly, I think housing is really the key, you know, single family homes being my favorite apartments being my second favorite mobile home parks also good. But housing, right? Not office space, or retail so much. You can make money in anything. But I just think the housing assets the best, I said to met, you know, how your dad gets so successful, you know, what’s his secret sauce in business? And he said, you know, interestingly, he didn’t really make his money from the businesses. He just made his money from all the real estate, the business is occupied. I thought that was interesting, you know, the business kind of just becomes the tenant. Right? And it pays the mortgage, but it’s really the properties that made the money. And then, you know, they purchased a whole bunch of houses and did stuff outside the businesses directly to so I thought that was sort of an interesting aside.
Andrew Freitas 18:23
Yeah. And my parents never owned the commercial properties that the their coffee shops were in, you know, it was never probably even in their thoughts at the time. Right, you know, but they certainly lived in. It was nice, you know, and again, that’s as you talked about this kind of the icing on the cake. And for them it just happened that they just luck of the draw year after year, they kept getting in the right markets looking to say,
Jason Hartman 18:42
yeah, and you and you live near the place where they pretty much invented coffee in America.
Andrew Freitas 18:47
Yeah, by quite a lot of here. Yeah, for sure. Yeah.
Jason Hartman 18:50
Good stuff. When did you discover the creating wealth podcast.
Andrew Freitas 18:54
I lived over in Sweden for about seven years. My life is from Sweden and 2009 I was painting my roof there metal roofs over there. You got to sometimes you got to paint them and I was a do it yourselfer kind of a guy. So I was up on my roof, scraping off paint and paint I had downloaded or had ripped some some CDs that I had had of real estate investing prior to this onto an mp3 player. And it was 2009. And my friend had just gotten the first iPhone in the States. And he sent me his iPod Touch. So I like had this new cool device that I don’t even know was available in my town in Sweden, you know, up in the north of Sweden. And so like kind of gotten podcasts, you know, iTunes and all that kind of stuff. And so I was looking for something else to listen to, you know, real estate. I was listening to real estate thing. And I was like, Huh, so I discovered you through a searching on the whatever it is iTunes Store, whatever it is now, you know, the podcast and just yeah, I had heard a couple different ones. And you were talking about just resonated with me. And so that was great. Yeah, I don’t even know what number of episodes you were back in 2009. But I think it was probably still in the double digits. Maybe in the low one hundreds by then.
Jason Hartman 19:55
Yeah, in 2009. I don’t know either offhand, but but we You have a lot more episodes now. So you discovered us about 12 years ago, then how long did you listen to the podcast before? You know reaching out and becoming a client?
Andrew Freitas 20:09
Yeah, so I kind of did often on you know, kind of had some periods of time where I just wasn’t listening anything I was doing, you know, hunker down knows that the grind doing my own stuff. And I think 2013 was when I attended meet the masters and it was an Irvine. And you know, if I’m just being transparent, I thought it was a cool event, but I don’t know maybe I just wasn’t ready for it. You know, I kind of knew that was still a vehicle you’re the concept you were talking about so certainly resonated with me I thought, platinum properties Jason arm, I thought that was the way to go. But I was like, I just, I’m not quite ready yet. You know, maybe that was just a risk thing. I was nervous about jumping in the pool. Who knows? But 2013 was my first like, event with you. And I enjoyed it. You know, it’s nice getting out of the limit Pacific Northwest and in January as well, and get
Jason Hartman 20:47
down and coming down to Southern California. Yeah,
Andrew Freitas 20:49
for sure. That wasn’t a bad thing. But then in 2000, I think 2016 Yeah, December of 16, is when I bought my first property threw you off. And that was my first investment property. And then like about one in 17, then one in 18. And I had cashed out of retirement plans, I was working for the local county here. And I had some sort of vested retirement plan kind of thing. And I was like, This is ridiculous. They decided to like protect people and start choosing what investments you could and couldn’t do, and taking a portion of your investments and making it less risky. And I’m like, I just want to go all in, you know, I’m not, I’m not a conservative investor in that way. You know, it’s gonna be something that I don’t have control over or something I can’t touch or whatever, I want to just, you know, go full bore and as much as possible. And so I was kind of disappointed with that. So I decided to cash it out and take the hit on the taxes and hit on the on the withdrawal penalty. So
Jason Hartman 21:39
that was a retirement plan now, you know, taking on the withdrawal penalty, paying the tax. In hindsight, was that a good decision?
Andrew Freitas 21:46
Oh, she’s Yes. Okay. Yeah, of course. Yeah.
Jason Hartman 21:50
So you made more on the income properties through our network, then you lost on paying that tax and penalty?
Andrew Freitas 21:57
Yeah. And that’s because of the stuff that you talked about a lot. You know, yes, there was cash on cash. That was great, you know, but there was also depreciation, you know, writing stuff off your taxes. So I mean, the overall return on investment has been phenomenal. It’s I, I probably should have done it earlier. But it was what it was. Yeah. So I bought, like I said, about one in 16, one in 17. And then because I cashed it out, I bought about one in 18. And I cashed out the very beginning of 19. And I, yes, with 19, and about three properties in 2019. And then last year, I didn’t buy any properties, and then I just closed on my seventh one in January, just this January.
Jason Hartman 22:29
Fantastic. And you were kind enough to do a surprise testimonial video for us, we sent out a link where people could give us a review. What I loved about yours is you were standing in, I guess, like office room in your home. And you’ve had all of our property tracker performers on your wall behind you of your properties. I just I just love that.
Andrew Freitas 22:51
And I think it’s it’s good to have, for me anyway, to have visual reminders and things like that, you know, it’s really important to say, you know, this, yes, this is, you know, a goal of mine, I need to like, present this in front of me. And yeah, it’s been kind of fun, you know, to have this reminder. And, and, you know, even though I’m not, I wouldn’t say super far along in my real estate journey by any means. It’s fun to kind of see that well slowly grow. Yeah,
Jason Hartman 23:11
that’s great. Yeah, more more posters on the wall mean more income for you? Right? Yeah.
Andrew Freitas 23:16
It’s close to the goal. Yeah,
Jason Hartman 23:18
good stuff. Good stuff. Andrew, tell us a little bit about what you do for a living if you care to share it. We talked OFF AIR about it. And I thought it was fascinating.
Andrew Freitas 23:27
Yeah, so I’m a nurse, I actually got my nursing license over in Sweden initially, even though I’m from the Pacific Northwest here. And now I work in a psychiatric hospital, here in the Greater Portland metropolitan area. And yeah, I really love it. You know, it’s fun to work with people and to help people and, you know, sometimes it’s exhausting mental work, you know, working with people always is, but it’s a it’s really rewarding. And I think the team that I work with, certainly makes it so much better. You know, it’s it would really make or break, you know, the work that you do. Sure, sure
Jason Hartman 23:54
they do. What I didn’t know, which you mentioned is is your facility as an emergency psychiatric facility? Yeah, I sort of never even considered there was such a thing. But given going on in the world the past year, maybe Can you share some things with our listeners? Of course, not confidential things, but just in general, what’s happening to people out there?
Andrew Freitas 24:16
Yeah, as you know, I mean, it’s been a very, very rough year for most people in the United States, and many people around the world of course, too. And folks who would normally be able to check in with their therapist, or psychiatrist or whatever it would be along the way, have been bumped into the zoom world. And that’s very hard sometimes to not have that human contact and very hard to not, it’s just a different relation, you know, a relationship is very different over the web than it is in person. And I think a lot of people kind of fell off, you know, a path where they were already on that was kind of a supportive structure for them and got into the zoom world and it just, it’s the game is falling apart for them. And when that, you know, mental health starts falling apart for them to the rest of their worlds starts falling apart. And so I think a lot of we’ve seen a lot of that, I think over the last year Folks who otherwise would never probably needed a psychiatric emergency department seek help and service because they’re in crisis,
Jason Hartman 25:07
I hope out like, I mean, you deal with, sadly, you know, suicide attempts and things like that. Have you seen maybe just anecdotally, because I know, empirically, there has been an increase given what’s going on. But anecdotally, like, what have you seen? What can you tell us?
Andrew Freitas 25:24
It’s a good question. I don’t know that I have, honestly, you know, I mean, again, we’ve been a psychiatric hospital there. I’ve been working there almost three years. And so that’s always been a daily part of the work, you know, so I haven’t really noticed there being like, somebody, I don’t deal with somebody who suicide on Sundays, I do. You know, every single day, there’s somebody I’m working with who is struggling with thoughts of suicide, and that’s just, I’m glad the hospitals there for them, you know?
Jason Hartman 25:44
Sure, sure. Here’s kind of as a superstitious aside, and I don’t know if you have anything to say about this, but you just made me think of it. For years, I’ve heard about these possible wives tales about the moon cycle, right. And I’m just curious, do people talk about that in your profession? You know, lots of like, lunar issues and
Andrew Freitas 26:05
the classic like, you know, the, the moon’s out this lunatic, right, that, that, you know, that’s
Jason Hartman 26:10
where the word comes from? I never.
Andrew Freitas 26:12
Yeah, totally. I don’t know. I mean, it’s funny, when when there is an odd day, people say, Oh, it’s a full moon, you know, so that there’s, I don’t know if it’s superstitious, but there’s, it’s ironic, and it’s funny, and sometimes it does seem to line up with that. But you know, again, we we have days that are less crisis than other days, it feels like, and they’re not always lining up at the lunar cycle that we’ve all heard those things that, you know, emergency rooms fill up on full moon nights, and DUIs increase and all this kind of stuff. So I just was kind of wondering, I
Jason Hartman 26:41
thought I just ask that as an aside,
Andrew Freitas 26:43
I haven’t noticed that Jason Yeah. But it’s entirely possible. Yeah. Yeah.
Jason Hartman 26:47
In terms of real estate bit, where are your properties?
Andrew Freitas 26:50
So the first one I bought was in Montgomery, Alabama, and that was going back in 16. I think you guys were in that market really briefly. And then it just didn’t quite work out. The relationship with the provider over there was kind of fell. Yeah,
Jason Hartman 27:00
we didn’t like that provider too much. But you know, we had some bumps in the road. I hope you weren’t one of them. So you know, some have worked out fine.
Andrew Freitas 27:08
as Sarah said, I got in, I got a good one. So that was great. So I my first one there, and then you all were no longer in that market or recommending that market just because the you know, whatever the relationship, the inventory, whatever wasn’t there. And so I moved on to Jackson, Mississippi for the next five properties, yeah, down there. And those are primarily in Jackson. And one of them’s in Clinton, which is just a suburb of Jackson. And that’s, that’s probably been my best. My best property has been that Clinton, Mississippi property, it’s been really good. And then the last one I bought here in January, I was back in Montgomery, I figured I’d start trying to maximize my relationship with the management company there. And so yeah, I want to get a few more at least in Montgomery before I moved to a third market. Right.
Jason Hartman 27:47
Great. So you’re in two markets now then. Right? Yeah. Good, good stuff. And so your first one was five years ago, now you’re up to seven properties, share some of the experiences or you know, lessons learned good things, bad things, whatever you want to share in it. And also, I was want to ask, are there any tools you’re using? You know, whether it be software or ideas or contractors? Or just, you know, anything like that? Without giving out necessarily?
Andrew Freitas 28:15
Yeah, totally understood? Yeah, you know, I, I’ve tried to let the professionals that I’m recommended by or to to be the professional. So I, you know, I work a lot, I work a lot of hours, I put a lot of overtime. So my ability to really engage in the day to day kind of stuff has really been limited. And I don’t have a desire to do that yet, either. You know, I have a desire to really let the management companies kind of run those pieces and just monitor the management companies, you know, and if things don’t look right on the page, and ask a lot of questions, you know, so for me, I don’t want to be more engaged right now in day to day stuff at the properties someday I will. But at this point, I’m working a lot right now. And the work that I’m doing, and my focus is on the work that I’m doing, and I’ll let my business be the business, but let the professionals, the professionals and do that part for me. And it’s been an okay, I think, you know, it’s not been perfect, like anything like you always say to it’s not a perfect thing, but it’s certainly better than anything else. Or some of this stuff, you know, in that first Montgomery house that I bought back in 16, that one had two kind of bad tenants in a row. That’s always tough. You know, thankfully, like I’ve mentioned kind of before, I’ve always been just convinced that real estate was the vehicle anyway, so it didn’t like the real me at all I didn’t get I mean, I get discouraged. I mean, who wants to pay out money rather than receive money, but it didn’t derail my plans at all. And I knew that I knew that was a part of the business at times too. And unfortunately, hit that kind of in the first year, a couple, couple of rough tenants who just and they didn’t destroy the place, they left it very dirty and filled with junk. And, you know, there’s costs involved in that turn, you know, and that wasn’t very fun because the profits were shot for the year, but still, it’s been a good ride so far. One of the things that I didn’t you mentioned this to being able to, you know, pay attention to the management companies. That was one of the things that in that particular property that I’m mentioning there, went over to a national company for management after the particular company that I originally bought it from and had managing it transferred all of their properties over This national company as well, I just went along with for the ride on that one. And that was done. That was That shouldn’t have happened for me because they didn’t actually even have an office in Montgomery. And so how can you pay attention to a property or that if you’re not even, like, geographically located there? So that was, that was a little rough. And I think I got a little burned on that one, but learned a lesson, you know, and then got a local company there. That’s been been great. So far, I’ve been joined. Yeah, they’ve been they’ve been really on top of it.
Jason Hartman 30:24
So are you, you know, really looking at your property management statements every month? And it sounds like you’re holding the managers to account if something doesn’t look right. If you know, you’re concerned that you’re paying for stuff you don’t need to pay for, or, you know, costs are too high. Right?
Andrew Freitas 30:40
Yeah, I mean, I don’t know about costs are too high, because I I don’t know enough yet in those markets, what things you know, cost, you know, like, for doing stuff on my own home here in Washington, you know, I do a lot of my own construction work, I do a lot of my own repairs and those kind of things. So for me, things are, you know, the cost of materials and a little bit of my time. So I don’t really know what the market costs are for a lot of things, just to be honest with you. But it’s interesting, you know, with real estate, you don’t have a lot of times know, if something’s happening until after it happens. And you get the statement at the end of the month. And you’re like, Oh, you know, I’m having a conversation after the fact, which isn’t always the best time to have a conversation. But you don’t always know about the information or the situation. In the moment that it’s happening. There’s been a couple times where like, a larger expenses coming up and you know, on, you know, right away, you know, the management company, lets you know, right away, hey, there’s something that’s going on here that we need to have sussed out and see what the repairs are going to be. But for the most part, it’s been, yeah, it hasn’t been too bad. Sometimes I’ll see like, oh, somebody didn’t pay, and I will call the management company, like what’s going on? You know, tell me about this, you know, whatever your action steps been, since, you know, this has been going on for a month, you know, rather than like, what are we going to do now? Because their job is said no, in a moment than to be responding to things in the moment.
Jason Hartman 31:46
Yeah, you know, the thing I always have noticed, and I say is that, you know, even when you have a, an expense, that’s a surprise, or, you know, a manager who’s a little too liberal on the spending money, right? You know, it’s still better than those Wall Street investments where you just don’t know what’s going on. I mean, here, you notice it, but they’re, you know, you just get your return at the end of the deal, or along the way, right, and you look at your stock portfolio, and you have no control over what they’re spending, you have no control over whether, like Intel, for example, just got nailed with, I think a $2.1 billion patent infringement lawsuit or something like that. I just read about that. And, you know, that affects all the shareholders. You know, if you own stock in Wells Fargo, and they got like a scandal every week, they’re you know, and they’re getting fined by the government, they’re paying these giant fines to the SEC, you know, it doesn’t really affect, at least not very much the executives, it affects the shareholders, they go for that stuff.
Andrew Freitas 32:52
Right, the regular the regular person on the street. so unfair. Yeah. You know, one of the other things too, is, aside from being just, you know, a frivolous expense that nothing’s done on, if there’s an expense, you’re still improving your property. So the money is still going back into the investment, which, even though it doesn’t feel good, like I said earlier, to pay money, it’s much better to receive money than it is to pay it, but it’s still there’s some, you know, some some comfort in knowing that the money is going into your investment, rather than just loss, you know, which it is in the wall street side.
Jason Hartman 33:22
That’s a good point, you know, few people think of it that way. So when you get an expense, at least you’re not paying for the executives and their private jets, and you’re not paying for corruption, necessarily. Sometimes you might, but you got to watch that, obviously. But the ability for a property manager to be corrupt is dramatically lower than it is for a CEO or a fund manager to be corrupt. Right?
Andrew Freitas 33:48
I would expect so I mean, again, the degrees of separation are much farther with the Wall Street’s you know, scenario, right? Where I’m a phone call away from my management person.
Jason Hartman 33:55
Yeah, absolutely. Interesting, interesting. Any other experiences or tools, you want to share any anything people can learn from any? You know,
Andrew Freitas 34:03
I’ve just noticed, like, my first house that I bought in Montgomery, Alabama, was, it was probably a C class property, right? You know, I know, you’ve talked about, you know, try to stay away from the C class properties and get into the B, Class D class properties just a lot less work a lot less trouble, you know, better tenants, all that kind of stuff. And, and it’s true, you know, I can’t say it’s not true. I probably was a little excited back in 2016, about the pro forma and the, you know, the starry eyed gains of cash on cash, you know, so every one of my properties, interestingly enough, every one of my properties has been increasingly more and more expensive as I’ve gone along. So the first property of button
Jason Hartman 34:34
in other words, you’re buying more expensive properties, correct? Correct. Yeah, yeah. Now is that is that due to the appreciation that’s been happening? Are you buying Are you up leveling the quality of your properties?
Andrew Freitas 34:45
I think it’s just been up leveling the quality honestly. Yeah. You know, there’s been definitely the last year particularly it’s been an incredible amount of appreciation, but I’ve only bought one property, you know, but again, the first one I bought was like 68,500, right and rents are at 25, which is phenomenal. rate. And when they’re paying, it’s great, right? that’s a that’s a phenomenal cash flow. But again, that level of tenant can be one who, you know, leaves without paying and causes a more expensive term, shall we say? The last property I just bought was like 131. Nine. So I’m still relatively inexpensive property. Yeah,
Jason Hartman 35:17
that’s, that’s really inexpensive.
Andrew Freitas 35:20
And that’s, again, that’s in Montgomery as well in Montgomery, as the cash flow is going to be on that one, probably really close to $200, maybe just a hair over $200 with all the, you know, incidental, and But still, that’s I mean, I can’t get that on Wall Street consistently, year after year after year, there’s no way you know, there’s no way maybe in it, maybe in a boom year, right. That’s the way I can do it otherwise, and
Jason Hartman 35:40
that boom, can retrace and go backwards very quickly on Wall Street,
Andrew Freitas 35:45
they can sneak real quick.
Jason Hartman 35:46
Yeah, with the real estate, it it just not that volatile. You know, so
Andrew Freitas 35:50
yeah, so so it’s been good. You know, I think I remember, one of your guys who lives in Augustine, who’s kind of a provider of newer construction out there I can name is the surfer guy. He talked a lot about that, too, when at the meet the Masters, I think in 2018, or 2017, I went to both of those as well. And he was talking, he was one of the speakers. And he was talking about how he went from a lot of properties that many of them were lower quality, lower price to consolidating to fewer properties that were much more valuable properties. Still cash flowing, still still a great investment. But I remember him talking about that transition that really resonated with me, just with my brief experience in the in the C class property, kind of getting that Yeah, well, getting up to the B class makes a lot of sense. So yeah. B class properties.
Jason Hartman 36:35
I agree. And, you know, I think the thing I want to just say about that again, so everybody knows is look, you can make money in anything. Okay, you can make money and F class properties, or a class properties, right. But we find that for the tolerance of most of our clientele, is that they like the better properties, they just have better experiences with them on the whole, there are certainly those out there who are kind of the bargain hunters that want those el cheapo properties, they’ve got great numbers on paper. And if they pay more attention to them, they can work, they can do great with them. But by and large, the A and B class properties tend to work out better for at least for our people, we find
Andrew Freitas 37:18
Yeah, I’ve done a little bit of remember all of it right now. But But I think they’re pretty close to each other pretty active B class properties and the C class properties right now. But again, you know, I think I went into real estate investing already knowing that it was the vehicle I wanted to do. So the difficulties that a C, Class B present is not something that I was like, afraid of, you know, it wasn’t like I wasn’t worried about the tenant who’s going to trash my property, I just, I was never afraid of that. I don’t mean that in a bad way. Just I was always exposed to real estate, you know, from from a younger age, too. So there was no hindrance or barrier for me to get into real estate and to be worried about those properties. And I’ll be honest, I talk with a lot of folks too at work, you know, a lot of nurses who are in the place where they could probably they have some expendable cash, they can probably get into real estate investing too, if they want to. And I certainly promote this style of investing, I enjoy it, you know, and it makes a lot of sense to me. And it’s been well for me, I always tell them to you know that, yeah, there’s risk. But the people that work with the people on your team that I’ve worked with, you know, you Sarah, the folks that I’ve connected with, at the the meetings that you have the events that you have, you know, conferences, and all the management companies and that to you know, everybody is a professional, sometimes the management companies don’t do a good enough job and you decide if you want to stick with them and you know, hopefully get better or you or change that, but, but it’s not like I’m working with a bunch of people that don’t know what they’re doing. Right. It’s so comforting, you know what I mean? It’s like going in with novices, you’re like, uh, you know, we’re going with somebody who’s been doing it for a long time and understands the questions to ask, it just takes so much for me the risk also away, you know, just dealing people who this is what they do all day long. You know, the mortgage people that the buyer’s broker in the market, you know, all of those things. They’re just, they’re just all professionals. They know what they’re doing.
Jason Hartman 38:57
Yeah, thank you for that, by the way. that’s a that’s a compliment to us, obviously. And you know, I’ll tell you, Andrew, that’s the reason I got into this business back in 2003 2004. It’s because I tried to do this myself. And it was so difficult. I mean, you know, I had been in traditional real estate all my life up until that point. And then I tried to become a nationwide investor. I couldn’t get return phone calls. I was flying around the country, I was meeting with people who didn’t know anything about investing. A lot of them were just a bunch of slocks frankly, you know, or worse, they could be just really sleazy and unethical too. I thought we have the greatest investment of all and yet there is no easy system to take advantage of it for people I thought there’s got to be a business here. I basically became my own first customer and created the business out of that so it was out of necessity You know, that’s, that’s kind of what what entrepreneurs do you know, they they notice a need and a hole in the market. Place and then they feel like, you know, so Yeah,
Andrew Freitas 40:02
I know. for it, yeah, their vision for it and they and they make it happen. So that’s great. Yeah,
Jason Hartman 40:06
totally understand what you’re saying there because
Andrew Freitas 40:09
I’ve always been kind of a nuts and bolts kind of a guy. So like, you know, you have people who envision this Oh, there’s a problem I see this, this I envision a solution for this problem. You know, I’ve always been the one who said, Okay, tell me what your solution is. Let me make it happen. You know, I’ve always been kind of like that guy. I’m just not a visionary thinker. And that’s it is what it is. But definitely a rubber meets the road. how’s that gonna get done? That’s pretty much what I’ve done. And so again, having your system already in place was perfect for me. You know, I don’t need to envision a new pathways. I say, Oh, that makes great. That’s that’s a great path. Let’s let’s just make that happen.
Jason Hartman 40:37
Yeah, Fantastic. Fantastic. Hey, I’m curious. Where in, in Sweden did you live?
Andrew Freitas 40:42
So I was two years down in Stockholm when my wife and I, we lived down there for two years. And then, when we were going to have our son, we moved up to the north of Sweden, Pete to Sweden, which is pretty far north overall, not quite as far north as where you were in the Icehotel which I visited before. Yeah.
Jason Hartman 40:56
That was such a neat trip.
Andrew Freitas 40:58
Yeah, it’s pretty, pretty amazing up there, honestly. Yeah. It’s a five hour drive south of that, which is still very hard for us, you know, probably about an hour and a half drive south of the Arctic Circle, roughly. What I was there for about five years.
Jason Hartman 41:09
Yeah, that’s amazing. Yeah, I
Andrew Freitas 41:10
have a lot of snow in my life. Yeah,
Jason Hartman 41:13
I couldn’t do that. But, but for some it works. Good stuff. Well, anything else you want to say to wrap it up? Do you have any questions about any of the, you know, the techniques that we teach or any anything that you like, that you want to talk through real quick?
Andrew Freitas 41:26
Yeah, I didn’t, I hadn’t really thought about the questions side of things, to be honest with you. Um, yeah, I don’t think I have a whole lot of questions right. Now. I again, you know, when I have questions, I just reach out to Sarah or, or somebody that the team and usually they know exactly what I’m talking about? And can answer really quickly. So good stuff. Yeah, one of the things I did mention that I think that would be that was kind of cool was that the whole business that you have, there’s a referral business, it’s a business that, you know, connects, you know, buyers and sellers and, and that, and I just remember one time, Sarah, that my investment counselor told me not to invest in a particular property that that was very interesting to me. And she’s like, yeah, just matching you up with that particular seller wouldn’t be a good idea. They don’t match your style. And I was I was interesting, and I was glad that she gave me that feedback. And she was right, you know, but you know, as an investor, you don’t, you don’t have a relationship with the seller, you know, ahead of time, which is what you guys also do, too. So that was just kind of an interesting aside to all of this to you know, steer you in the right direction, but also steering you away from the wrong direction, which was very helpful.
Jason Hartman 42:17
Yeah, that’s great to hear. And, and, you know, I, I certainly take a long term view of business, and I hope all of our team members always do, we really don’t hire sales people. You know, we hire counselors, who really take a long term view and want to make sure clients have good experiences. They hopefully are always doing the right thing for them. And, you know, we just did a survey, and I can’t wait to read all we do an annual survey. And I can’t wait to read all the results. I skimmed over some of them yesterday, and, and they all looked pretty good. So I built mine out. Okay, good. Well, I look forward to seeing yours too. Yeah, good stuff. Well, Andrew, thank you so much for sharing your story with us on behalf of all the listeners, because everybody really appreciates these client case studies. And we appreciate your business and just want to wish you a very happy investing journey. And again, thanks for coming on the show and sharing your experiences.
Andrew Freitas 43:12
Yeah, thanks. I hope in some small way This encourages other other folks who haven’t gone this route to to jump in because it’s it’s been great.
Jason Hartman 43:18
Thank you. Well, thanks again.
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