Jason and Sara talk on the different price ranges an investor can expect on A, B, and C class properties.
Introduction:
Jason invites his top investment counselor, Sara, to the show. Jason and Sara share their thoughts on the Memphis market and what potential investors might expect. Sara also lists the importance of having the right mindset when investing in a C property and Jason gives a break down on the price ranges of A, B, and C class properties on the show.
Key Takeaways:
[2:20] Jason shares his impression on the Memphis market.
[5:00] Sara shares her thoughts.
[6:50] Section 8 tenants do stick around.
[11:50] How much is a class A home? It varies.
[18:45] You need to have the proper mindset for C properties.
[20:15] Jason talks about the general pricing of A, B, and C properties.
[28:15] Try and target a 4% annual rent increase.
[37:50] Remember, every property is an individual case.
[43:45] Be careful who you listen to!
Mentioned In This Episode:
http://www.propertywire.com/news/europe/us-property-prices-rents-2015043010455.html
Tweetables:
“When you’re on the dole, what real motivation do you have to change anything?”
Transcript:
Jason Hartman:
Hey, welcome to the Creating Wealth show. This is your host Jason Hartman. This is episode 512. 512. I’ve got Sara here with me. She was in Memphis and Jackson as you heard on the last show and she is our top investment counselor and has been with me many, many years and has lots of insights. I’m always trying to twist her arm to get her on the show, Sara, welcome, how are you?
Sara;
I’m great. I have a little bit of a Memphis hang over.
Jason:
What does that mean?
Sara:
Oh, well, you know, we flew in late last night and just a busy, busy weekend. Lots of fun, lots of learning. So, just playing at little bit of catch up today.
Jason:
Yeah, good, good stuff. Yeah, it really was a good weekend. We did three days in Memphis and one day in Jackson, Mississippi. As all of our listeners know who listen to the last episode, we recorded the Jackson, Mississippi just as we were going out to look at properties, so now having spent the entire day yesterday looking at properties, we have some impressions to share with the listeners and I’ll start, because I don’t know if you want to start, so shall I start on my impressions there?
Sara:
You should start.
Jason:
So, my impression is that Jackson is a good, mostly C class market. Now, of course, there are some beautiful areas in Jackson that can be A and B class markets or property types, but in Jackson, you know, the stuff we saw with our provider there was, I think, a solid C, maybe C plus class neighborhoods and, of course, as is almost always the case, those properties have really good cash flow at least on paper, but most demands in terms of management. They really require a little bit more attention.
Again, it comes down to the concept of my commandment of the ten commandants for successful investing. My commandment about financial planning, which is very important and that’s commandment number four, but also part of that is not really planning, because financial planning would involve things like what is your risk tolerance as an investor.
Are you willing to take large risks, are you very conservative, are you somewhere in the middle, do you want to allocate some of your portfolio to higher risk properties that could appreciate more and have more appreciation potential, but the cash flow is not as good and then another, and then your time horizon, your investment goal, whether it be capital appreciation, cash flow, tax benefits, income, but then another part of that is really your own psychology.
Your own personality as an investor and that for that I would really say that, you know, the properties we have now in Jackson are good properties for someone who wants to or is willing to, I should say, maybe nobody wants to, but someone who number one has experience with investing and they’ve, they’re not new to the game and they are also willing to pay a little bit more attention to their portfolio, because of the type of tenant quality that you will most likely be dealing with and those C class tenants or even those C plus, B minus tenants, not always, every case is individual, but they do require a little more attention, most of the time.
So, that’s really the thing I wanted to convey about Jackson. I like it quite well, but again, these are not brand new homes in yuppy neighborhoods. We have homes like that too, properties like that that make good income properties, but again, cash flow, not as good, at least, on paper. Sara, what would you say that is a fair assessment?
Sara:
Yeah, that’s a good assessment. I think that Jackson has some potential. I like the provider. I had a great time. We probably looked at, I don’t know eight to ten properties and my takeaway was that of those eight to ten properties, there was one that I thought, I would buy this, this looks like, you know, a good, clean property, better neighborhood, nice curb appeal, still not a cookie cutter neighborhood, but just a good solid rental property.
We discussed after me giving that feedback to the provider, we discussed the possibility of getting more properties like that. So, again, depending on your risk tolerance, you may be interested in the lower $50,00 price point properties, but I don’t see Jackson as a big growth market. I don’t see you’re going to get any big rent increases in there. Very good for cash flow, but I think a little more risky in terms of the amount of maintenance you might have. You might get lucky and have a good long term tenant and that’s one thing he did say was that these tenants tend to say. A lot of section 8, you know.
Jason:
Yeah, let’s talk about that for a moment, okay. So, the reason the tenants tend to stay, because a lot of them are on some sort of government assisted program like a section 8, okay. When you’re on the dole, what real motivation do you have to change anything? You know, when you are type of the renter who is paying $700 a month rent and living in a property that our investor can buy for $45,000 or $50,000, moving is a pretty expensive affair.
You know, of course you’re going to do it yourself, of course you’re going have to rent a truck, but you’re going to have to change your utilities over, you’re going to have to put down new deposits. These are not in that class of property. They are not commonly, I mean, it’s pretty rare actually that they are upwardly mobile type of tenants, so they do stick around and that’s the one nice benefit and, again, on this tour that we went on, on Monday, yesterday, it was you, Fernando, and my mother and I, you know, my mom has lots of experience section 8 government assisted tenants and I joked when we were in Memphis at the Creating Wealth seminar and I joked in front of the whole audience, I said, yeah, my mom complained about her section 8 tenants all the way to the bank, because as I was growing up and hearing her bitch and gripe about section 8, she was creating a lot of wealth for herself. I mean, a single mom who basically started with just one property and got another and got another. You know, she would complain about the section 8 stuff, but gosh, it’s dependable. It’s dependable.
The interesting thing is is that you didn’t, I’m just going to say, you did not love what we saw at all. You said one out of eight, I think, that you liked. My mom didn’t like it that much either and my mom is pretty scruffy. She’s the extreme do-it-yourselfer. Oddly, she has much of a diseconomy in her personality as I do probably, because well, I’ll get my hands dirty and dive into something and do it myself too, I don’t mean fixing up properties, because I don’t do that anymore, although I used to do that a little bit. She’ll do that, but then, you know, she lives in this beautiful mansion and, you know, really likes, really, really nice things and buys designer clothes. So, it’s just kind of a contradiction.
It’s a funny thing, but Fernando, though, was the one who was different and I was just trying to be quiet and get the feedback from all over you and throw in my opinion later. Can you imagine that? That I didn’t insert my opinion, but Fernando really liked it. I mean, you know, he was like, oh yeah, I like this, because government rent, very dependable, and you know, great cash flow, but again, now he’s got four years of investment experience under his belt with a big portfolio and it’s diverse. He’s got some class A stuff, he’s got some class B and some class C and his tolerance is willing to accept those more attention sucking tenants that just need more attention, because they are not upwardly mobile, usually, and it’s just a different type of manager.
Sara:
Yeah and I think that initially these properties will out perform some of the nicer areas, because they are higher cash flow, but I don’t know, I would be curious what the five year picture looks like.
Jason:
Generally speaking and you’re right, because generally speaking and I mean, at least historically and we don’t know if this would hold that way, but historically, the nicer properties tend to have better appreciation. There was an old rule I remember many years ago listening to one of the many real estate gurus I followed for many, many years in my 20s, okay, and one of them said, if you’re in a neighborhood and you’re driving around looking at properties and you see someone jogging, get out!
You don’t want to invest there, because that, in other words, his point was, it was a yuppy type neighborhood and by the way, I hope everybody knows when I say yuppy, that means young urban professional, that’s an acronym from like the 80s and so, he would say don’t invest there, because he liked that C class stuff. Fernando liked it, my mom used to like it, I think, now she isn’t in favor of it, because she just doesn’t want to deal with the government. It depends, right?
Sara:
Yeah and I think at some point you want to have a good healthy mix of A to C properties. So, I think the key is to be a seasoned investor before you, like you said, have experience before you go into a C type property or a properties and I would definitively encourage you to go visit the market.
Jason:
So, what Sara was saying I think is very good advice, there are three basic types of properties that we talked about. A, B, and C and the A properties right now, now of course this is subject to change, because everything is dynamic and fluid, but right now, if we’re talking a snapshot in time in the markets that we recommend, Sara, would you kind of agree that we could define some of this by price range? I’m going to throw out some numbers, let’s see if you agree with them, you know, we don’t rehearse anything or talk about anything much in advance, so it’s all, it’s all raw and here it is, okay, I’m going to say that an A property in the markets that we recommend is anywhere from $120,000 to a $170,000, for a single family detached home, would you agree with that?
Sara:
It depends on the market. I don’t think you can compare all of our markets to each other. Like, Tex, that would be a good, like the Texas property, Indianapolis, maybe, but like Memphis, for example, we saw a lot of Memphis properties, right, so they’ll define sometimes a $90,000 property, you know, which is significantly less as a property and then, you know, some people will distinguish an A property versus and A area, you know, so keep in mind it’s a matter of opinion.
Jason:
It is, it is. It’s going to change, you know. If you’re listening to this episode two years from now, which I know people love to do. They go back and listen to the old episodes and, of course, we do flashback Fridays, at least, currently. So, I’m just trying to give the listeners some sort of idea as to what that means and different providers define them differently too and it depends where, it varies, but right, so if you say..
Sara:
So, let’s separate it by the linear markets and the hybrid markets. So, the linear markets, I think the price point could be like, $90-120-130,000 would be your A area.
Jason:
Let me explain that first, okay, so three types of markets, linear, cyclical, and hybrid. We don’t recommend cyclical markets. So, we’re not even going to talk about that. We do have mostly linear markets. The markets that chug along and appreciate slowly and then we have some hybrid markets who have a little it on the edge, they get more toward cyclical, but not much, they still make sense from a number perspective and you can still get decent cash flow. Okay, Sara, that’s a good way to look at it. So, what are right now in your eyes the strict linear markets? They would be what, Memphis, Jackson…
Sara:
Memphis, Birmingham, Indianapolis. Those are the top markets that I would say are linear.
Jason:
And hybrid markets that we have right now and we’re not really doing much business in these market, because they don’t really work that great, okay, but at times we kind of move in and out of them, but I would say a hybrid would be Austin, Texas; Denver, Colorado; Phoenix, Arizona; Atlanta is becoming a bit of a hybrid market, because, I mean Atlanta has appreciated 10% in the past year.
Sara:
And maybe even Dallas.
Jason:
Yeah, Dallas is becoming a bit of a hybrid too, you know. Now, you don’t think Houston has moved there at all or has any hybrid-ish nature to it, do you?
Sara:
A little bit. You know, we talked about that market this weekend. There’s definitively a buzz about Houston still and I know we talked about the oil prices, but I talked to a lot of people that still think Houston is hot.
Jason:
Well, it is hot in the summer and it’s humid too.
Sara:
Well, it seems to have appreciated over the last year, which is good for our clients that bought there a year ago, right?
Jason:
I’ve been very happy with my Houston properties for over many, many years now. So, Houston I did know of issue a yellow light warning when oil prices were really, really crashing. They seem to have, you know, found maybe a floor. It’ll remain to be seen. So, this is not a matter of you can say this is linear, that’s hybrid always for sure. It’s a 50 shades of gray issue. Boy, see, that, just saying that on my show is going to increase my show’s transcript SEO value. 50 shades of gray, okay. Yeah, see, folks, that’s known as keyword stuffing. So, another if I say other keywords like Harvard University and Enron, then I put a stock symbol next to it, all the search engines will love us, right.
Okay, so, linear, I would say other linear markets, let’s talk about more of those. St. Louis, Kansas City, what else?
Sara:
I think we said them all.
Jason:
We said all the ones that we’re recommending at the moment, okay.
Sara;
So, I’m sure there is some others. Columbus would be a good linear.
Jason:
Good, so anyway, that’s the idea and what’s Sara is saying and I think it’s excellent advice that you’re giving the listeners is that get your first experiences in A and B property types and then once you’re comfortable as an investor, so if you’re new, we want you to start with A and B and once you’re comfortable and you’ve built up some mental muscle in this whole investing game, then dip into the more of the C type properties, but the Cs can be great, but they are a different, a bit of a different animal.
Sara:
Keep in mind, once you have a big portfolio of properties, your portfolio, you know, will cover your vacancies and your maintenance items, and you don’t feel it as much, you know. When you’re just getting started and maybe you have five properties that you’re stilling kind of building the momentum and so, those vacancies and maintenance items that come up hurt a little bit more and again, it goes back to the psychology of investing.
Jason:
So, if you have a portfolio and you have ten properties and two are vacant or two are – now remember there’s a difference between economic vacancy and physical vacancy. Say two are economically vacant, which means the tenant is in them, but they are not paying, okay, so you only have a 20% vacancy loss in that situation whereas if you only have two properties and one is vacant, you have a 50% vacancy and you feel it a lot more. We’ve had lots and lots of clients over the show. In fact, we’ve got some great client interviews coming up who have been on the show recently. I love it when they share their real world experience as, you know, we call it the good and the bad and the ugly. The good, the bad, and the ugly.
You know, one of your clients Sara who has been on the show a few times and that’s Bob from Colorado, by the way, hi Bob. You said, you’ve purchased nine properties from us so far and eight have been great and one is a problem child. Well, you know, if you have nine kids, it”ll probably be about the same.
Sara:
And you know what, Bob, he’s like the perfect example of somebody who has the right mindset for investing and he does well with some of the C area properties and I forget exactly what he said to me, but he was kind of telling me about that one bad property and he said, well, jeez, I learned a lot.
Jason:
That’s the thing in life. At least if you learn something from it, you’ll be in good shape, but the idea is to learn on our experience not your own whenever possible, because we sort of all aggregate all these client experiences. The good, the bad, and the ugly and we share them with you on the show and I think all of our listeners know we’re just super transparent about that. The ones we don’t always share are the ones where the clients really shot themselves in the shoe.
Sara:
You’re never going to let me live that one down.
Jason:
I’m not, because you’re so funny. You have a few of those. You had a couple of others too, but very good. Good stuff. Okay, so, anyway, there way we have summed up Jackson, Mississippi, I think for our listeners for the moment. So, if you’re interested. JasonHartman.com. You can compare A, B, and C properties and eventually when we come out with our new software we are going to actually be grading the properties right on the software. So, you know, I think most of our investors, if they’d been listening for a little while, they can identify an A, B, or C property, but actually, we didn’t finish the price criteria think. So, I want to try and take a stab at it.
So, hybrid markets. $120-170 is probably likely, though not always, to be an A property and now there’s some overlap. I’m going to say $80-130,000, you notice there’s an overlap, right, that’s intentional. $80-130,000 is probably going to be a B type property and then $40,000, yes, we do occasionally have these $40,000 properties although we don’t recommend them too much. Those are for more experienced investors, usually. So, I’m going to say $40,000 to $90,000 could be a C type property, but I don’t know Sara, maybe you’ll disagree with me. We’ve seen people get A properties for $75-80,000 sometimes too, right.
Sara:
Yeah, sure. In 2010.
Jason:
Oh, well. Oh yeah, I meant B, I meant B. Sorry. Did I say A? I think I said A.
Sara:
I think you’ve got it narrowed down pretty well.
Jason:
Okay, good, so I just wanted to give that kind of guideline and then you can tell by looking at them and all kind of counseling that we can help give you. But hey, let’s talk about rents for a moment. I’m looking at an article in New Wire. This is really, it’s amazing how this happens, you know, what goes on in the housing market is you always have prices take the lead when it comes to increases and rents follow prices and they follow them rather slowly. So, the title of this article is Rents Increasing More Quickly Than Home Values In Many Markets.
Well, duh. I could have told you that, okay, that’s pretty much always the way it happens and even when home values level off or declining slightly, you’ll still see rents increasing, because those are the lagging indicator. They always lag the prices and here’s one of the core differences between commercial property and I’ve owned several commercial properties, apartment complexes, and residential properties, meaning under four units, four units and under, okay. When you get over four units, so five plus, that’s considered commercial property and other types of commercial property like retail, centers, office buildings, industrial buildings, that type of stuff. The core difference and one of the reasons I really like housing better, residential property better is because it’s illogical. It doesn’t follow the income!
Is, if you’re going to sell your apartment complex, now, granted, this of course changes, but generally speaking, the price or the value of that apartment complex will be determined by the income it produces. In the residential property, you listeners as investors, you determine the value of the property based on the income it produces, but remember, you are a tiny percentage of the market, the rest of the world out there, even people who consider themselves investors, but they are really, speculating and they’re just gambling idiots, gambling fools, most of them.
They don’t consider income to be a big part of the deal and if you want to know more about this you can watch the HGTV show called Income Property. I mean, I don’t know, Sara, I don’t know why they call it income property. It doesn’t produce enough income! I would call that alligator property. That’s property that loses you money.
Sara:
Jason, I think you and your mom need your own reality TV show.
Jason:
Hey, you liked hanging out with my mom, didn’t you? She’s pretty funny, isn’t she?
Sara:
Your mom is fun, she’s a lot of fun, just so your listeners know, we had a three hour drive from Memphis to Jackson. Mom was driving.
Jason:
And she was letting me DJ part of the way, so I got to control the music a little bit, not always.
Sara:
Yeah, she gave Jason a hard time about his music selection.
Jason:
We put on US, now, who listening does not like U2? Right? I mean, that song One by U2. That’s got to be one of the best songs ever. It’s like Stairway to Heaven. It’s great. It’s a phenomenal song. Sorry listeners if you don’t like it, but you’re crazy! You’re like my mom, okay, because that’s an awesome song!! Check it out. Go to your computer or your device and type in One by U2. It’s an awesome song. Anyway, I put that on and my mom is, “Oh no, his voice sounds too ugly.” Mom, that’s Bono! I mean! He’s big time. She goes, “I know who he is. He’s always talking about all these causes and political things.” That’s how she knows who he is, okay, but yeah, I got to control it a little bit, not all the way, but she’s fun. She’s very opinionated, isn’t she?
Sara:
She is. Apple doesn’t fall far from the tree.
Jason:
Okay, I guess you’re right about that. Okay, back to rent increase. I’m going to just cut that one off. So, it says, “Residential rents in the United States are continuing to rise, up 3.7% year on year to $1,362 a month,” Okay, so they don’t say if that’s a median or average, okay, but, “And keeping pace with house price growth of 3.9% over the same period.”
So, of course, these are nation wide stats and they are almost meaningless a little bit because all real estate is local, of course, but anyway, it is what it is. Here is what I notice though, listeners. That $1,362 as the average or the median, because the article doesn’t say, interestingly, most of our rents fall slightly below that and one of the things as Sara and I were talking about A, B, and C class property a few minutes ago, one of the things that I want you to consider as an investor and one of the things we generally do, something we kind of break these general rules, but it’s a general rule is that when we are at an area, we want to be investing in properties that are slightly below the area’s median price and we want our rents that we are charging our tenants to be slightly below the median rent in that area, because that always, I think, and this is just an opinion, it’s not exactly data driven, but it’s just kind of so many years of experience doing this, it always gives you the opportunity to catch a bargain hunter in the way up or down in the socioeconomic ladder or it gives you a chance to have your price of your property and your rent on your property pulled up a little bit just by generally what they’re comparing you to around that market. Sara, is that a fair statement?
Sara:
Yeah, that’s a fair statement and the other thing we were dicussing is rent increases per the type of property. So, an A property might have a higher precentange of rent increase annually than your C property.
Jason:
That is true and see the key there and the same goes for appreciation by the way, generally. These are all general things we are talking about. Nothing is set in stone, but generally speaking what you’re going to see on those A properties is that you have more potential for value increases and more potential for rent increases because the people that are living in those properties or purchasing those properties from you if they’re living in there as a renter or purchasing from you when you sell them in the future, hopefully 27.5 years down the road, because that’s how long I generally want you to keep your properties, you know, the more upwardly mobile, so the income, they’ll find a way to increase their incomes and be able to pay you more, okay, so that’s why.
I always say try and target, but it depends on the market, try and target a 4% annual rent increase. So that just means if you’re charging a $1,000 a month now, hopefully in a year, you can get $1,040. Now, what is going to make that possible or impossible. Here are some of the factors and again, every property is individual, so this is not an inclusive concept, but what is going to make that possible or impossible is what are the interest rates at the time that you try to get the rent increase. If rates are very low and at the same time if financing is plentiful and easy to get, it’s going to be very hard, if not impossible, for you to get a good rent increase.
You may have to even, when the market was really, really hot in 2004 and things were going crazy and we were obviously in a bubble time and I predicted the end of the crazy and expansive market in late 2005 that I was right about that, I predicted that just completely accurate and I was saying that at all kinds of seminars. I had arguments with Orange County, California realtors and, you know, they’d say I was crazy. Prices are going to go up 25% next year. I said, no, they’re not. We’re at the end. This is about it.
Everybody is tapped out, but what’s going to depend is whether that renter has another option and remember, if rates are low, that renter can go and buy and that means prices are probably going up and if they are paying attention to the housing market, their feeling a sense of lose, a sense of scarcity. They’re feeling like, you know, they’re having conversations like, hey, honey, if we don’t buy a house, we might be left out.
So, they’re likely to be hunting for a house. This is the upwardly mobile tenant, but the section 8 tenant who is living off the government, okay, they don’t usually, they’re not delaying gratification. They’re not pushing themselves as hard, they’re not exerting themselves as much, usually, this is a general statement, of course. Them saving money for a down payment, even if the down payment is only $3,000, that’s a big deal for them to do that.
So, it just depends. If interest rates are very high and the option to buy isn’t possible, then the likelihood is, you’ll be able to get higher rent increases, but the value of your property won’t usually, in that type of market, be appreciating. In fact, it might be softening and deprecating, but your cash flow will be increasing. So, this is kind of that three dimensions of real estate concept. Sara, what do you add to that?
Sara:
I agree. I don’t have a lot to add to that just based on my own experience, I agree, I agree that nicer properties tend to yield a little higher rent increase and my B properties, you know, they’ve been kind of slow, but steady, and I have yet to venture to the C class, which is why I have my opinion on the Jackson C class properties.
Jason:
Now, I want the listeners to know something though. Is that when you see an article or when you hear stories about rent increasing in a place like Los Angeles, for example, and maybe you hear me talk about this article and you hear me say, quoting the article, that rents are up 3.7% year on year and in this article, prices are up 3.9%. Now, remember, this includes the entire nation. Here’s one that’s interesting in this article, “Of the 17 metro areas where rents are growing more quickly than home values, the biggest differences are in San Francisco with rents up 14.8% year on year and home values up 9.6%,” So, that’s San Francisco, okay, well, check this out, “While in Kansas City rents are up 8.6% and price up 4%,” One more, “And Pittsburgh,” Okay, I used to live in Pittsburgh as a little kid, “rents are up 6.3% and prices are up 4.3% respectively.”
So, what does that tell you? It tells you that in high priced markets like San Francisco. I used the example of LA before I glanced at the article and decided to read that little clip from it, you know, those rents are so out of sync with values that it absurd. I had one of our people on the show that does some video production and podcast editing for us. His name is Patrick and he was on an episode, maybe two-three months ago. If you want to find that episode, just go to JasonHartman.com and type, ‘Patrick’ in the search bar and you’ll find him.
He lives in San Francisco and he lives right on a prime area in a rent controlled house that he pays I think $2,300 a month for and it’s worth about 1.5 million dollars and his wife is a trade mark attorney or an intellectual property attorney, I should say. He’s a great guy and they are basically trapped, but oddly they’re not trapped in a bad deal, they’re trapped in a great deal. I mean, when you can rent a 1.5 million dollar house for $2,300 a month, you know, he says that they think about moving and they kind of want to move, but their deal is so deal that they’re trapped.
Sara:
How did they get that deal? I want that deal.
Jason:
They got it in 1997.
Sara:
And so their landlord just hasn’t raised the rents?
Jason:
They can’t. It’s rent controlled. It’s against the law.
Sara:
Ohh.
Jason:
So, it’s the socialist republic of San Francisco, just like the socialist republic of Santa Monica down south, okay. These rent control, it always leads to shortages and disaster and every socialist communist program, they never work. I mean, repeat with examples of this, of course, right. So, they’re trapped, but if their rents went up by 20% next year, they would still be getting a phenomenal deal. You see what I mean? That’s what I want the listeners to understand. These are why these stats are so misleading. It’s because the rent to value ratios in high priced market, whether they be Miami, LA, San Francisco, San Diego, New York, Boston, you know, whatever. Just any market that’s high priced around the world, those rents are so far behind prices, they are lagging so much that it wouldn’t matter if they had a huge rent increase, it’s still a terrible deal for an investor.
If you buy a new property today in San Francisco and you turn it into a rental, you could pay 1.5 million dollars for that property and because that renter hasn’t been in there for years and hasn’t been benefiting from these very limited rent increases that the rent control laws require, you know, you could maybe rent your place for $5,000 or maybe even $6,000 a month, but that deal still stinks, because, you know, for $6,000 a month, that should be a $600,000 value property, not a 1.5 million dollar property with that 1% rent to value ratio target. So, that’s what is so misleading.
Now, just remember, Sara, that years ago, like 2004, there was a Los Angeles Times article and it just show you how stupid the media is and how they mislead people. It talked about the ten best and the ten worst rental markets in the country. It said, if you’re a land lord and investing in Oklahoma city, you’re really out of luck, because the average rent there is only $763, you know, that’s not exactly, but that’s about what it said, okay, and if you’re a land lord in Los Angeles, you’re doing great, because the average rent is like $1,600, but they failed to even consider the price of the property in Oklahoma city versus the price in property in Los Angeles. Actually, it’s the reverse was completely true. That article was absolutely 180 degrees wrong, but most people read that and they think, oh, well, I better invest in Los Angels then, duh!
Sara:
And yet it seems so obvious.
Jason:
It is obvious, but you know, you gotta be listening to the Creating Wealth show, listening to my podcast to really know. We try to get, you know, this is not exactly sophisticated stuff we’re talking about, but compared to most of the world and even investors with a lot of money don’t let it fool you that people with a lot of money are sophisticated. Sometimes they are, most of the time maybe they are, but not always, you know. Sometimes a lot of money makes you kind of careless and not pay attention to things. So, I guess the take home point is, with everything we talked about today Sara, is that everything is an individual case, right. Every property is individual, every investor is individual, every tenant is individual, and you really got to think through the numbers and think through what type of investor you are, what type of psychology you have, and all of that.
Sara:
Think, but more importantly act.
Jason:
Actually, that’s the best advice you’ve heard all day, folks, because thinking will not make you any money, only taking action will make you money, so be sure to get your investment portfolio going and if you’ve got it going, make sure you are always, always, always expanding it.
There’s an old saying for investors and, of course, not all states have escrow, but in California and other states you use escrows when buying a house and one of the sayings is, always be in escrow. In other words, always be buying something. So, if you’re escrow last about 45 or 60 days, that means you’re buying six properties a year. Always be in escrow, always be acquiring something. That has made people incredibly, incredibly wealthy over the course of history. Gotta acquire assets, you gotta control assets.
Sara:
I just have to say, I know we’ve gotten a little long here.
Jason:
What’s new?
Sara:
So much for 20 minutes, right, you guys have got to come to Jason’s Creating Wealth seminar. I mean, I go and I sit in the back of the room every year, twice a year.
Jason:
You’ve been to like a 100 and some of them probably by now.
Sara:
This is my, you know, this month is my eight year platinum property anniversary.
Jason:
So, you’ve been with me eight years and we’ve put up with each other that long, huh?
Sara:
We have. We may actually like each other now.
Jason:
You know, I do like you. Awhh.
Sara:
Awwh. How sweet. Hey, we did ride in a car for three hours together. Not many people can do that.
Jason:
We did. We gave Fernando and my mom the front seats and we were in the back just hanging out and Djing there.
Sara:
Yep, more like karaoking, right?
Jason:
karaoke, yes, yes. Bye, bye miss American pie, drove my Chevy to the levee. We did sing that one, remember?
Sara:
Yes, I do remember that. So, you know, but back to the, you know, seminar. You have to stay plugged into these events. There’s nothing like going to one of Jason’s live event, sitting in a room full of people that are like minded. I mean, I get pumped up every time I just network with our own clients, our new providers, it’s just really an incredible experience. I was sitting back there this time thinking, man, there were a couple of people that really wanted to come, couldn’t work out their schedules, and I was really feeling bad that they couldn’t make it because it was just, you know, very inspiring.
Jason:
You know Sara, I want to comment on one other thing that you told a couple of weeks ago. Every once in a while we get someone who starts listening to the podcast and their skeptical. This sounds like it’s some big show and everything is contrived. You know, I understand. Listen, there’s a lot of shisters out there, there’s a lot of scam artists out there, but we’re real people, we’re a real company. We’ve been around for a very long time.
You know, if you’re skeptical, here’s the best thing you can do. Come and meet, not us, meet our clients, because they are in the room. You’re going to meet people who are real people that you can talk to you without us there. You can go have coffee with them, you can go have lunch or dinner with them, you know, without us, and you can hear their real experiences.
Our clients who have been investing with us for years still come to our invests. They repeatedly come over and over again and I always feel like I’m getting up there just totally repeating myself and thinking they must be bored and, I don’t know, maybe they are a little bit, but they still come and one of the big parts of our events is the networking with other investors.
Of course, you get to meet us too and our team, but I think it’s really more important you’re going to get to meet our clients and, you know, maybe, I don’t know, help me with this one, Sara. Maybe 30-40% of the room is a client. In other words, they’ve purchased one property at least and then 60-70%, they haven’t purchased anything from us yet. Would that be about right? That’s my guesstimate
Sara:
Yeah, that’s a fair statement. You know, some people buy and they never met us in person and then a year goes by and they’re ready for more deals, so they’re coming out to tour properties, but they are getting the education too and so yeah, and then some of the clients that come out have been to several events, so the thing about the seminar is that there’s a lot of new content even tho it’s the same philosophy and, you know, the same overall message. Everything changes. Every year things change and having the lenders come up and talk about these changes and it just, it’s endless.
Jason:
Yeah, there’s one more thing I wanted to say before we let everybody go today, you know, we always going longer than we think we’re going to go, but when you start investing and when you start talking to people about investing and when you even talk with the providers we refer you to, okay, whether it be our local market specialist who provide properties in areas, whether it be our lenders, our legal advisers, and we’ve got a whole team.
So, our slogan is the complete solution for real estate investors. We can refer you to pretty much everybody you need to make this happen for you, but the thing I do want to say is be careful who you listen to. Don’t just go off far field. We are the objective ones who provide referrals to all these different services. Don’t make a mistake by just listening to some, you know, half-baked advise.
One of the worst areas of half-baked advise by the way are real estate investors who, you know, we talk about the ten commandants, you might follow all that, but it’s when you go and you buy a one off property, a one off deal. One of the huge resources that we offer is that we have such a big volume of customer and a big volume of business is that we have leverage over these service providers and I just see people that go, you know, in one of the forum groups I am in, people were talking about oh, you know, some guy has got three properties that he’s going to liquidate in McAllen, Texas and someone tag me like I should look at this. No way! I don’t care.
We don’t do one off deals. We do deals based on relationships where our providers have a big stake in our referrals continuing and our clients being happy with the results. So, I’m telling you, if there’s one thing to avoid, it’s the one off deal syndrome, because you’re never going to get great treatment in a one off deal.
Alright everybody, this was just kind of an open, raw conversation today, so..
Sara:
I hope you don’t have an interview after this.
Jason:
No interviews. This is it. This is the show today, but listen, go to JasonHartman.com. Check out the properties, check out the educational products, the blog articles. If you’re not a member yet for a whooping $120 a year. By the way, a lot of people have been becoming members lately, so that’s great. You can get on those monthly members only Jason Hartman University calls and those are really a great resource. Anyway, we just thank you so much for listening. Thank you to everybody who came up to our Memphis property tour and it looks like our next property tour, although it’s not totally confirmed will be in Atlanta in probably late July. So, listen to more on that. We’ll do the Creating Wealth seminar and the property tour at that event as well. So, more to come on future shows and on the JasonHartman.com website in the events section. Thank you so much for listening. Happy investing to everyone. Thanks for joining me, Sara.
Sara:
Thank you.
