Unfortunately, in today’s business environment, there are shysters out there who promise you big rewards—once they have charged you a hefty fee for working with them. This can be true in the world of real estate investment counseling, as expert Jason Hartman and his counselors at Empowered Investor Network know full well.
That’s why Hartman and Company conduct a deliberate vetting process when they choose which local investment counselors with whom they might work, Hartman told a group of his Empowered Investor investors at a recent conference. Hartman and the Platinum network oversee investment properties in thirteen states, which cover thirty-plus markets across the country. They vet and choose local marketing experts with whom they work-hire in each of those market’s cities.
Hartman also covered a couple of other areas in which investors were seeking some answers at the recent conference, including whether you as an investor can repair your credit after a mortgage foreclosure, whether it’s a good idea for you to have a partner in real estate investing, and which housing markets might be the best for you to invest in the years ahead.
First, Hartman and Company on Vetting Local Market Experts
Hartman clients or potential clients often ask him or other counselors in his network why they don’t have any properties in certain markets, such as Philadelphia or North Dakota. Hartman and company did investigate whether to enter into any North Dakota markets in recent years, because of the oil and fracking boom that started in that area with the discovery of the Parshall Oil Field in 2006. But that boom peaked in 2012, and there has been much less growth in the area since 2015 because of the decline in global oil prices.
Hartman, et al., learned of the North Dakota prognosis by talking to a local marketing expert in that area who foretold the boom’s decline, and they decided not to enter the market there.
“It was just overpriced real estate,” Hartman told his investors, “and that’s sort of a secondary thing … you have an oil boom, and in response to that, you have a real-estate boom, and it’s just a one-horse-town type stuff.”
Empowered Investor takes many factors into consideration for you when choosing a local marketing expert with whom to align. Those include the market’s projected business-climate growth, its population growth, and what might drive renters who rent from investors to live in that market—and stay there.
Once Empowered Investor decides upon a market, they match the market with a local provider or expert as well as that provider’s properties and inventory. While they’re screening these potential providers, they ask such questions as: Will the provider give us enough inventory in single-family homes (a Hartman and company specialty); what’s the cash flow; and, are the properties in the Hartman and Empowered Investor price range? Hartman partners go through an entire questionnaire with such questions when screening the potential local experts.
“We would rather have an A team in a B market than a B team in an A market, because you are so dependent when you’re doing long-range investing,” Hartman said. “It’s mind-boggling how many people are fly by night … with a stream of broken promises. And that’s throughout our society, not just the real estate business.”
Hartman associates also conduct background checks on a potential local market expert, and once they do decide to hire someone, they introduce that expert on Hartman’s popular podcast show, “Creating Wealth.”
“We like to have them on podcast to get a lot of promises they make, and you get to hear that, on record,” Hartman explains.
During the pre-hiring vetting, “A lot of these people kind of weed themselves out because they don’t return calls quickly, or we give them a simple task of uploading a property and there’s just no follow-up,” one Hartman associate told the investors. “If they’re not communicating with us very well, they’re not going to communicate very well with you guys, so that’s really a big part in vetting them.”
Empowered Investor keeps “large, fragmental investors” out of its local market referral and expert business, Hartman said. “Goldman Sachs is not in our business, because it’s just too large to deal with, too hard to manage, and not worth it, for them, to deal with this ‘smaller stuff’ … the middle-class investor.”
You and others as Hartman clients are asked to keep watch on the local experts early on, too, and report any red flags you see. Empowered Investor starts working with the experts by conducting conference calls with the expert, a client and a Hartman associate all on the line. Thus, “More than one person hears what they’re saying and promising what they’ll do” for that market, Hartman said, and you as a client also receive Platinum’s help in asking the expert the right questions.
Hartman started investing in real estate while still in college and has become a self-made multi-millionaire since then, via his specialization in investment rental properties. He said the vetting help that Empowered Investor seeks from clients is something that falls under the first commandment of his 10 Commandments of Real Estate Investing.
“Commandment Number One is what?” he asks his investors, who—like you, perhaps—are well-versed in these lessons of his. “‘Though shalt become educated.’ We want you to become educated (in real estate) so you can be your best adviser, so you’re not relying heavily on us. We think an educated client is a much easier client to work with.”
Said a Hartman associate: “There are some days where I’ll get two calls from clients, one raving about how great a property manager (or local expert) is, and another call about the same manager, saying, ‘Uh, I have this vacancy.’ … So, it varies per each individual experience and property. You have somebody who hates a certain property manager and another who loves the same one.”
Those experts or managers who get too many complaints face the possibility of getting vetted out of the Empowered Investor network, of course.
Can You Repair Your Credit After a Foreclosure in Order to Buy Investment Properties?
Hartman was asked several questions by investors attending the same conference at which he addressed vetting. Those questions included whether you can repair your credit after a foreclosure in order to buy investment properties.
“Good news on the foreclosure—you can hire services for that, or read books that teach you to do it yourself,” Hartman said. “Many people have done this.” However, he adds: “Be careful of anyone who wants to charge you big fees upfront and promises big services. You want low monthly fees. Because this is a process, (hiring someone) is the recommendation I would have.
“Feel free to ask our investment counselors for referrals; we do have a couple with whom our clients have had good success with.
“Many people, many millions of people, chose—out of free choice, not out of desperation—to let properties go after the financial crisis (of 2008), and they call that ‘strategic default,’ and we’ve done many shows on that.”
“It was a very good decision” for most people to default strategically a decade ago, Hartman adds.
“I call it the ‘nuclear option.’ It’s the last decision you want to make, but sometimes it can be a good decision, because remember, that’s the deal you enter in with a lender. The deal says exactly this, ‘Either I will pay you the payments with interest or I will give you the collateral.’ That’s the deal. You may choose just to give them the collateral at times, so that is certainly an option out there.”
Is It a Good Idea for You to Have a Partner in Real Estate Investing?
Most often, yes, Hartman says in response to this question.
“Partners can be good or bad,” he said. “My late grandmother used to say, ‘The hardest ship to sail is a partnership.’ You can have some great partners in the real estate business. In business (in general), I have had some bad partners over years. It’s more complicated with a business deal than a real estate deal.
“I did have one bad real estate partnership. All others have been very good. They have brought a lot to the table. In a real estate deal, as long as nobody lives on the property and it’s an arm’s-length deal for both of you, the partnerships can be pretty good. I have detailed in past (podcast) episodes how to structure those partnerships and stay out of trouble.
“When it’s a business, though, there can be much more complications. The partnerships can get sticky, for sure.”
Which Markets Are Best in Which to Invest in Upcoming Years?
“Well, easy,” Hartman replies to that question. “Go to jasonhartman.com/properties, and there they are” for you.
“They’re all the markets we recommend, and I take you back to that Meredith (Whitney podcast) episode I did a couple of years ago. She wrote that book called ‘Fate of the States’ and really outlined the states that have the best futures (interior ones) and the ones that have the worst futures (coastal), and we have in many ways followed those guidelines in picking the markets that we recommend to our clients.”
Vetting local market specialists, helping to repair credit, knowing which markets in which to invest in the years ahead—these all area areas in which Jason Hartman and Empowered Investor can help you and other clients, as Hartman duly noted at the investors conference.
