Jason Hartman invites his mother, Joyce, and Fernando on the show. The two guests have both appeared on the show before and have both experienced great successes in real estate investing. Joyce talks to the audience about some of the benefits of joining the Apartment Owners Association and and Fernando let’s everybody know that there’s a new product on the JasonHartman.com store called Financial Independence Day where he will do personal one-on-one consulting with you to help you achieve your dreams for financial freedom.
Key Takeaways:
2:30 – Jason and Fernando are developing a software tool where property owners can use property managers in an a la carte fashion.
8:00 – When it comes to income property, Joyce is an extreme do-it-yourselfer.
13:40 – An Apartment Owners Association membership costs $79 a year.
20:20 – Joyce uses eviction attorneys that charge a flat rate to help her with problem tenants.
28:00 – There are lot of benefits towards focusing on buying up a neighborhood.
29:10 – Fernando talks about his new product that’s currently on the JasonHartman.com website.
32:10 – Today’s supposed guest, John Michael Greet, will be on Wednesday’s show.
Tweetables:
Mentioned In This Episode:
JasonHartman.com.
Transcript:
Jason Hartman:
Welcome to the Creating Wealth show. This is your host Jason Hartman. This is episode number 487 and today I’m planning, but you know what they say about plans, they don’t always happen. The best laid plans of mice and men don’t always happen that way, so I’m planning to have as our guest today John Michael Greer, the author of The Wealth of Nature. However, I have two people to help me with this intro portion, because I’ve got some interesting stuff and I just have a feeling we’re going to go too long and we’re going to do the entire episode in our discussion here. We will see, so if we don’t have John Michael Greer on today, I’m telling you in advance, he’ll be on the next episode. So, I’ve got Fernando with us that you’ve heard on the show before. Fernando, how are you doing?
Fernando:
I’m doing great, Jason. How are you?
Jason:
Good good. And then I’ve also got my mother who has been on the show, I think this is, mom, I think this is your fourth time on the show, right?
Joyce:
I’ve been here a few times for sure.
Jason:
And every time you’re on the show, mom, everybody says, “We would rather have your mom host your show than you.”
Joyce:
That’s a joke!
Jason:
You could put me out of a job. Well, anyway, so I wanted to talk about a couple of things and Fernando and I are working hard on developing a software tool that will help people either use property manager in an a la carte fashion where they can just buy the services they need rather than buying the whole thing and I think that’s just going to be awesome. So, we’re working on that and we’ll talk about it a little bit today and then also this software tool would empower people to self-manage their properties and Fernando, I don’t know if you notice this, but when you spoke at our Meet the Masters event in January, you talked about the 70 doors you have; 50 properties and 70 doors total, 70 units total; and you made a little offhand remark that a lot of people picked up on. I’m not sure if everybody did, I’m not sure if you even heard the feedback on it, but you said that sometimes your self-managed properties are easier than your properties that have property managers. Do you care to elaborate on that?
Fernando:
Well, it’s based on what I’m actually seeing. My personality is the type that wants to look at every owner statement that comes for my property. I wanna make sure I’m not being overcharged for items. A lot of times simple items that handyman could fix are sent over to full-fledged professionals, plumbers, electricians, for things that really don’t make sense and I spent a lot of time overseeing and arguing at times with the property manager about why was this done and why was that done and if I’m finding that much time overseeing charges and sometimes having to correct these charges, it makes sense for me to find a system to do this myself. I’ve been able to do this self-management on several of my properties and therefor I can control the costs. I’m the one that is directly impacted by the maintenance and repair costs that add up fairly quick, but I think the main thing I mentioned in the Meet the Masters is the fact that the tenants seems to have a different dynamic when they’re dealing directly with the owner.
Jason:
Yeah, I notice that and mentioned it years ago. I completely agree with you by the way and my mom is going to agree with this too. Go ahead and explain that.
Fernando:
Yeah, so I noticed from our properties, self-managed properties, I sometimes I wonder if everything is okay, because I don’t hear from the tenants for months and I sometimes will contact and check on them just because I’m thinking anything that could possibly be wrong and they’re not reporting and it’s just amazing how that works. It’s not true for all cases, but I notice it is true and the direct contact with tenant also sets up a different relationship than the property manager, which is kind of a black hole to the tenants. The dynamic is definitely different.
Jason:
Right, so let me just elaborate on that if I can and mom you’re going to definitely agree with this, I’m sure. Now, look, the first thing I wanna say with this folks is that property managers, some of them are awesome, I’d say some of them are definitely not awesome and some are pretty bad too. So, it expands the gamut. One of the things we do is if we get a bad apple through our network, we weed them out pretty quick, because we are constantly assimilating this feedback we get from our clients and eventually we get a few complaints and we’re going to just get rid of this guy if they’re just a bad apple or we’re going to be able to put a lot of pressure on them to change, but in comparison to other investments even if you have a property manager who dings you, nickle and dimes you, and even if they overcharge you, think of how much better this still is than any type of Wall Street oriented investment or any type of fund where there are all sort of overcharges that you never know about. You have no concept that they’re going on. Okay, so I just wanted to put that in context. Fernando, fair statement?
Fernando:
Yep, fair statement.
Jason:
One of the things though with this self-management is..now, how many doors do you have that you’re self-managing versus you have managers on, Fernando?
Fernando:
I self-manage about 8, maybe 8 to 10 properties depending on how you count it. It’s a good amount.
Jason:
So, you’re saying, depending on how you count it because some are duplexes or fourplexes?
Fernando:
Yeah.
Jason:
Okay, so out of 70, you’ve got 8 to 10 depending on how you count that are self-managed and all the rest have property managers. Now, mom, you’re self-managing everything now right? Your entire portfolio is self-managed?
Joyce:
Everything.
Jason:
My mom, for those of you who may have not heard her on a prior episode, I call her the extreme, like you’ve heard of extreme sports, well, my mom is an extreme do-it-yourselfer. Mom, you just blow me away at your level of energy and you think you’d be kind of scaling back and so forth, but you are not even close to doing that. You are just always running around and the level of extreme is that you now live in Gul Shores, Alabama, moving there from Los Angeles several years ago. You go back to California to manage the California properties you still have.
Joyce:
Yes.
Jason:
And you just did that recently. I mean, this, to me, seems like a terrible idea. You literally self-manage every part now. I self-manage some of my long distance properties and I’ve been surprised that you can actually do that so well, but when it comes to doing the new lease up, I don’t travel anywhere. I just have an agent do the license up and do the walk throughs for the tenant leaving and the tenant coming and so forth and handle any repair issues in between, but you do literally everything. I mean, you don’t have an agent do anything for you, right?
Joyce:
Right.
Jason:
You’ve been really excited lately, I mean, I remember many years ago I was a member of the Apartment Owners Association in Orange County and recently you’ve been commenting to me a lot about how you love the Apartment Owners Association. Tell us a little bit about that.
Joyce:
I just recently joined. Again, I was a member a long, long time ago, but I just recently joined and they have this magazine that comes out monthly, maybe that’s what got me so excited about it, because you read all the articles in it. There’s a whole bunch of classes you can take and then there are all of these vendors that advertise in the pages and there are all classified in the front of the book. All the plumbers together, all the evictions services together, you know, everything from soup to nuts. All the people that sell stoves, refrigerators, etc. It’s a great organization.
Jason:
The reason it’s great is because, like our network, it arrogates things and it helps those vendors that are listed in the directory of the apartment association, you know, they’re kind of used to dealing with shrewd property owners who are expecting good deals, right?
Joyce:
Absolutely. For example, the man that I finally chose to fix my floors, he wrote AOA on the top of the sheet, because he knew he had to give me a good price.
Jason:
AOA meaning Apartment Owners Association.
Joyce:
Yeah and the difference between his price for fixing a floor, you know, installing hard wood floors, and the price of the people that I’ve gotten out of the yellow pages of the phone book.
Jason:
The phone book. You hear that folks? My mom actually uses the yellow pages and a phone book.
Joyce:
Well, the internet too you know. Sometimes you can’t get enough on the internet and those people that advertise in the yellow pages are usually always there. They are still in business. Anyway, the difference it went from $3,700, yellow pages, $3,400, yellow pages to $2,000 Apartment Owners Association person.
Jason:
Tell them about the painter you just hired. I mean, you got the whole inside of this house for a bargain price, about what, $700-800?
Joyce:
Oh, yeah. Previously for that particular house I had been paying $1,200, $1,300, and $1,400 and sometimes it looked like a lot of touch up too. It wasn’t a complete paint job. This was a complete paint job for two story house, three bedrooms, two and a half bath, inside the laundry room, $785. I did not have to tell the man to, you missed this, you missed that, you missed something else. I didn’t have to tell him to clean up his mess. It was so amazing that I called up the Apartment Owners Association guy, Todd, who referred me to him, and told him how pleased I was.
Fernando:
Joyce, I have a question. Is the Apartment Owners Association only for California?
Jason:
That’s a great question. There’s a National Apartment Owners Association and let me just say what this.. and that website by the way is NAAHQ.org. That’s the National Apartment Association NAAHQ.org. We had them on the show years ago. I just asked my guest booker to invite them back on to the show and then they have a directory on that website where you can find local Apartment Owners Associations like the one my mom is a member of and so not every area will have them obviously. It’s going to be bigger cities, but they have one in Birmingham, Alabama for example. That’s one of our markets and there are different sizes and so forth. I think this can be a very handy thing. My mom does all her own tenants screening.
I mean, she is the extreme do-it-yourselfer. So, just so you know, listeners, this interview, you know, we have many different types of investors listening. We have investors who are completely busy with their business, their career, their profession, and they just wanna buy six or ten investment properties and not deal with it. This is talk is not for you, okay. The investor this show is geared towards is one who wants to be a little more involved and maximize the returns a little bit more. So, if you don’t mind being involved and maybe you like being involved, that’s who this is targeted at.
So, what I would say is, you know, joining these apartment associations, I mean, the one that my mom is apart of is $79 a year, you know, maybe in a city where you own a couple 3, 4, or 10 or 20 properties, it would definitely be worth it to join the association.
Joyce:
You mentioned the word tenant screening and it doesn’t matter, you know, where you are in the United States, they will do this tenant screening for you, because it’s with the national credit companies, you know, Experian and..
Jason:
Equifax, and TransUnion, yeah.
Joyce:
Yeah and they simply will come to your home or your office and inspect it and for, I think it was $59 or $55 or something and then you have the right to run these credit reports 24/7.
Jason:
Yeah, so what they do is they make sure they make sure that you have a locking file cabinet and a paper shredder, right?
Joyce:
Right and a lock on the door.
Jason:
And a lock on the door. They came into your 9,600 sq ft mansion and what did they think? I gotta invest in real estate, right? Is probably what the guy thought.
Joyce:
No, the guy took pictures inside, outside, everywhere.
Jason:
He probably thought, boy, to get a mansion like this, I need to start owning some real estate, be a real estate investor. That’s good. So, I’m looking here on the website and they have, you know, different levels of screening. They have the 5 star screening, the 4 star, the no inspection. I assume that’s no inspection of you, right?
Joyce:
No, but it does..the problem with that one is that you have to send them copies of all of your licenses. So, I thought that was too much work, so I had the guy come in and do the inspection.
Jason:
Oh okay and they can come out to your house anywhere in the country, because these are just outsourced services who will just go do this inspection, right?
Joyce:
Right, right.
Jason:
And you got to pay $59 and then you are setup..
Joyce:
Well, I can’t remember what it was, but it was something like that. A minor charge.
Fernando:
I’m curious, Jason, if you don’t mind, I’ll ask Joyce and you, both of you, so this is an apartment association, right, so imagine there is a similar group or company that is focused on single family homes, ownership or a land lord.
Jason:
There isn’t really.
Fernando:
If there is one, why would you choose the apartment one versus the single family home one?
Jason:
The apartment one is, don’t let that turn you off, you can join even if you don’t own apartments. When I first joined the Orange County Apartment Owners Association, I was 20 years old and I had my little condo in Huntington Beach. IT was just a crappy little one bedroom condo and I joined.
Joyce:
They should change the name to Owners Who Have Rental Units.
Jason:
Yeah. It should be called the Real Estate Investors Association, really, but don’t let that turn you off. It’s not, it doesn’t need to be apartments. Anybody can join it, it’s not big deal. These are really old school type organizations, but they have some great resources. If you look at the website of the local chapters, they’re pretty primitive websites. I remember when I was a member they used to send out this little like, stapled together monthly newsletter, it was just really basically, but that’s great. Look it, this is not some high-end marketing organization. It’s just a place where you can get some good resources and the vendors go there, because they can get a lot of business.
Fernando:
I was looking at this website as you know and looks like they’re now seeing this new and improved debt reporting service that sounds really amazing.
Jason:
I love that, yeah. So, what that is, when I was serving around the website I posted that in our company internet site, Fernando you commented on it right away, this is where if you have a dead-beat tenant who owes you some money, you can send them to this collection agency really quite easily and this is pre-judgment. So, you don’t need to have a judgment from a court.
Joyce:
Yeah, you don’t have to have a money judgment for them to do it.
Jason:
But it’s limited in what they can do, basically what they do is they bug the person who owes you the money is what they do. They don’t have legal power to go and levy a bank account or garnish wages or anything like that, which you do have when you get a real judgment, but a lot of these people will just pay because they’re getting their mail boxes full of collection letters and they get phone calls or whatever. Mom, have you used that service yourself?
Joyce:
No because I just joined, but I’m certainty going to, because sometimes I don’t get a money judgment because I just figure these tenants will never ever, ever be worth it for that extra hundred of dollars or whatever it is. So, these people will go to work with the money judgment.
Jason:
I’m going to disagree with you on that, but just expand on that a little bit more if you would. So, when you have an eviction and you’re obviously self-managing everything, tell the listeners who you do your evictions.
Joyce:
Oh, I, myself, serve the three day notice of the pay renter or quit.
Jason:
If you’re local though.
Joyce:
No, no. I make it up myself and I fax it over to Snap Legal, because they are the least expensive ones. They serve the notice for like $33.
Jason:
So that’s a process server is what Snap Legal is, right?
Joyce:
Process server, right.
Jason:
And they go and they serve the tenant, they serve the three day notice to pay or quit, right?
Joyce:
Correct and since I know how to make them out, they’re perfectly legal and if we have to do the eviction, actually get started on it, then I simply send that information to the attorney.
Jason:
When you say the attorney, the listeners don’t know what you mean, so you have an eviction service law firm and I wanna make a distinction there, because when you say to the attorney, most people think, oh, they’re going to sit down with an attorney, they’re going to pay $300 an hour and they’re going to get totally ripped off.
Joyce:
No, to the eviction attorney service. I use only eviction attorneys.
Jason:
So, this is like, what I’d call a mill or an assembly line time of legal service where they are setup and they might process hundreds or even thousands of evictions every month and they just charge a flat fee now. How much do they charge you?
Joyce:
In different counties it’s different amounts. It’ll be a little bit different amount in Orange County, a little bit different amount in LA County, a slight different amount in Riverside County.
Jason:
Okay and what about your properties, where do you have, Mississippi and Alabama too, right?
Joyce:
Yes.
Jason:
What about those? Have you had any evictions on those?
Joyce:
I haven’t had an eviction on those yet.
Jason:
Okay, so you’ve only dealt with evictions on the California properties so far, knock on wood.
Joyce:
Well, that’s why I want to be in contact with Apartment Owner Associations in Mississippi and in Alabama so that I know that I am doing the correct thing that I have the correct form.
Jason:
Right, right, and you’ll be ready in case you ever need them for, even if it’s not for an eviction, it could be for repair items and getting the best contractors for all that stuff. Good, good. Fernando, questions?
Fernando:
No, it sounds good. I’m already thinking about joining the association.
Jason:
It’s cheap and easy. Now, one of the things and, Fernando, since you’re on, I want to talk to our listeners about this idea a little bit. I’ve alluded to it on the show before. I think I talked about it in more detail at the Meet the Masters event we had. That is the concept of doing larger things in larger portfolios and I had aunt Joan on several episodes ago around Thanksgiving time. Of course, that’s my mom’s sister, okay. By the way, if you listen to that interview, I asked our editor to go back and improve the sound quality and he says he made it a quite a bit better.
The echo was pretty bad on that originally and he said he re-did that episode, so should be a lot better if you want to listen again, but with that, I think one of the really good ways to approach this if you’re looking to do bigger stuff and this is one of the things I want to explore and actually implement with my Venture Alliance master group is the idea of owning neighbors. I really do like this idea quite a bit. I like single family homes the best and I think the idea of picking three cities so that you are diversified and where in three cities you get on a plan, you don’t do this all at once, of course.
You get on a plan where you got a couple three properties in each city and you keep doubling down and focusing on these three different cities and eventually you get to the point where you own 10-20-30 properties in each of these cities and hopefully they’re in sections and kind of broad neighborhoods of these cities so that you can eventually get to the point as an investor in the growth of your portfolios where you can hire your own handyman and that person will go and do all of these things and Fernando, you mentioned that the beginning, you know, rather than having a professional, very expensive plumber come out and do everything, you know, you can just have a good, reliable, high-quality handyman do a lot of this stuff and even if they’re not your own person that actually works for you, if they’re getting a lot of business from you, they’re going to really care about and pay attention to your account and provide you with really good service and really good prices. You’re going to be able to call them at 11am on Sunday morning and say, hey, can you go check this thing out? You can shoot them an email. They’re going to be very responsive because they’re going to go that you have a lot of business in this area and they’re going to want to take care of you. You know, Fernando, we’ve talked about that idea before. Any thoughts or elaboration you want to share on that?
Fernando:
I think the idea of buying, as you mentioned in the beginning, the idea of buying a bigger units, you know, apartment complexes is very interesting, especially as we talked to clients that want to, they want to achieve their financial independence and buy a large number of properties quickly, some of them have talked to me about buying apartment complexes upfront and there are some issues with buying the big, the big size investments upfront. You’re not necessarily facing an advantage of the 10 spots that Fanny Mae or Freddie Mac allows you to take up as you’re doing financing. So, if you become of a group that is able to buy under a company, I suppose or an LLC and the LLC is the one who invests in this larger apartment complex, then there is a different, an alternative, for doing this, for building your portfolio more quickly than trying to do this on your own, which could create some issues.
Jason:
Definitely. So, I want to make a comment about apartments. I currently own both. I have single family homes and apartments and one of my apartment complexes, well, one I sold several months ago, and another one I got and it looks like it sold. We’re going to be doing a 1031 exchange on that one and myself and my partner, who was at Masters, by the way. He talked on the microphone a little bit. That’s Steve I’m referring to. This is a 125 unit complex in Scottsdale, Arizona and I gotta tell ya, apartments, they’re like good and buy, you know.
You can do great with them obviously, you can do bigger things with them, but the quality of tenants is just, it’s just lower, and it’s much more high maintenance. You have very high maintenance tenants in apartments, because they know it’s a big management company and like you started to at the beginning of the interview, it’s sort of this black hole concept like, the tenant doesn’t have any reservation, they don’t feel like putting on someone, sort of like the laws of civility and courteousness don’t apply when it’s a management company like it does when it’s a person.
Mom, I know you’ve experienced this, because your tenants don’t ask you for much and you don’t do a whole lot in terms of repair items and things like that, but in the apartment, they expect every little thing and in an apartment, you’re running a business. You will be reviewed on Yelp just like the dry cleaner or the restaurant down the street. It’s a whole different game when you have an apartment complex. It’s just a completely different thing.
So, the single family homes, I like them the best, but the advantage of the apartment is you can have this centralized management, you can have this centralized repairs, you can have economy of scale. The way my aunt Joan did that, I like that plan pretty well, you know, when you start to own a neighborhood of single family homes, because what you can do there is that you can actually start to increase your rents pretty dramatically and improve the values of the neighborhood. If every time a tenant is looking in a given neighborhood, they’re bouncing on your houses like a pinball machine. You can do a lot to increase rental income and increase values if you have good upkeep of that neighborhood.
I think this is a pretty good opportunity and by the way, Fernando, I wanted to mention, we’ve not mentioned this on the show yet, but we have a new product in the JasonHartman.com store and it is consult with Fernando. It’s called financial independence day consulting and basically Fernando will do what he did for himself starting three years ago where he created some awesome spreadsheets and a plan to lead to his financial independence day and Fernando, you retired from Apple computer last May. Do you want to share anything about the financial independence day consulting?
Fernando:
Sure, just a few thing. As you know, you and I have been talking about this and we’ve had a lot of interest from clients and people that want to do what I did myself, which is achieve my financial independence. We coined the phrase financial independence day as really embodying the idea of being able to have enough income from properties to augment, in my case, completely replace the income from your corporate job from your God-be-true job.
So, with that in mind, we’ve been putting together some material to create a product that I think will be able to offer later on that will have a full version of how to achieve this financial independence day and as a compliment to that, we are offering this consulting, this hourly consulting where I’ll basically share my experience and help create a plan that is personal to the client and takes into account their situation. It starts out with the software, the spreadsheet that looks at how many properties, what sort of properties are needed to replace their income and we talk about different financing options and how to sequence mortgages in order to take advantage of what we have now in different offerings such as agency type financing with Fanny and Freddie backing, commercial banking, and portfolio landing.
There’s a lot that goes on behind the scenes in order for this financial day to happen and I went through this process myself and by having done it, I can certainty provide some ideas and help people along that want to achieve it. So, this is something we’re just starting out with and I’m pretty excited about it. I think it feels very good to be able to share the role that I’ve been going through that has been exceptional and there’s been a lot of interest in learning how to do this and having an actual plan on how to get there with a fixed date in mind and fixed ideas on how to do it.
Jason:
A goal defined is half achieved as the saying goes and that’s what the financial independence day consulting is all about. So, check that out and sign up at Jasonhartman.com and Fernando will create that financial independence day for you, you’ll meet on the phone or Skype and talk for just under an hour maybe and he will work those spreadsheets out for you. I think that’s a really cool produce you’re doing, Fernando. So, congratulations on that.
Fernando:
Thank you.
Jason:
Mom, any tips you want to leave people or anything I didn’t ask you, anything we didn’t share before we wrap up and obviously, listeners, we’ll have the guest on the next episode, because of course, we went really long as we knew we would.
Joyce:
Well, I’d like to learn about Fernando’s financial independence day.
Jason:
You’re already there.
Fernando:
You’ve done pretty well for yourself. I should say I want to learn from you as I learned today, so I think we’re in the same boat.
Jason:
Well, that’s what we’re doing is learning from each other, learning from each other, so maybe a final tip before we go if either of you want to share anything or an experience or whatever just as we wrap up here.
Joyce:
The only thing I can say is that and Jason, you do this in your seminars all the time, it’s the education and what I see in belonging to the Apartment Owners Association is the constant education.
Jason:
Yeah, yeah, good stuff. Good stuff. Fernando, any closing thoughts?
Fernando:
I think that’s an excellent point. I think it’s the first step in achieving financial independence and it definitely was my first step in just trying to learn, listen to podcasts and books, and any information that you can about the different facets of real estate income and real estate investing. There’s so much to learn and there’s always new things. So, without that backing, without background information gathering and learning, it’s really difficult to achieve anything. There’s a big value in that.
Jason:
Education is the shortest distance between poverty and wealth. So, that’s definitely important, but the great thing about today is you don’t need to pay for that education because it’s pretty much free. I guess what I’ll leave you with is go back and listen to the old episodes. We’ve got almost 500 episodes here for you and we do play them on flashback Friday some of the selected old ones, but of course, getting through 500 will take almost forever.
So, go back and just listen to the yourself and really take advantage of them and there are some great contents and some great guest interviews that I’ve done. We’re going to keep them coming. We’ve got a lot of great stuff coming up for you as well.
So, we will have our guest talking about the Wealth of Nature on the next episode and be sure to go to Jasonhartman.com. We’ve got some awesome properties right now in Atlanta, in Little Rock, in Chicago; boy, Chicago, a lot of interest in that market. We did that on the last show, we talked about that one. Just a lot of great stuff coming up and we will look forward talking to you on the next episode. Thank you so much for listening and happy investing.
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