Jason Hartman starts the show responding to listener questions about renting versus owning. He delineates the cyclical and linear markets and gives an analysis of which one is better for rent and which one is better for owning. Later on, he hosts Josh Simon to discuss states like New York and California having difficulties enforcing social distancing. He examines how this affects migration patterns away from densely populated areas and the potential effect on real estate.
Announcer 0:02
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 thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:54
Welcome to Episode 1506 1506. Thank you for Joining us today, as we do Part Two from yesterday, as we dive into the commercial real estate market for some big surprises, some actually some pleasant surprises. But the quote for the day, now this was on, you’ve heard our investment counselor Kerry on the show before, and you’ve actually heard her daughter on the show before speaking Mandarin Chinese amazing what these kids know nowadays, isn’t it? Anyway, she has a great quote on her email signature that I’ve always liked. So I thought I’d share it with you today. And it is from Karen lamb. And it goes like this. It’s very simple, but sometimes the greatest truths are so simple. And think about this in the context of real estate investing, or in the context of anything that you’ve been wanting to do, or do more of, or you know, some something you’ve been procrastinating about. You’ve been Putting this off, and the quote is a year from now. You will wish you had started today. amazingly simple. a year from now. You will wish you had started today. Think about it. Think about if you started last July, and that was your first rental property. You would have gone through the last boom phase of last year 2019 you would have gone through the Coronavirus, COVID crisis, and you would have been worried. And now you would be jumping for joy. Because everything is going your way even though you were really worried a couple of months ago. Isn’t that funny? How time just has an effect? You know, thing I always say is Time heals all wounds. And the Karen Lam quote is someone like the quote, what’s the best time to plant a tree 20 years ago. What’s the second best time to plant a tree today. That’s not exactly true. But you get the idea, right? The idea makes so much sense. And amazingly, the people that win in life are the people that just do things. In life, there is a certain wisdom in action, even if it is the wrong action, amazingly, just doing things tends to just work out. And I’ve mentioned it before, but make sure you see the movie Yes, man with Jim Carrey. It’s kind of a dopey funny movie, but it has a big lesson, you know, saying yes to more stuff is generally not not always. You got to be smart, obviously. But saying yes to things that you exert control over, saying yes to being a direct investor, rather than putting your money in some fund or some stock or mutual fund or whatever. But even if you that a lot of times you just win it that and in the Jim Carrey Yes man movie to shows you how his sort of dumb luck, you know, just by saying yes to a lot of things they it tends to just kind of work out tends to just work out. It’s a very odd thing about life. But that’s why just intrinsically, action has its own intrinsic wisdom. It has its own intrinsic wisdom. So I got a couple listener questions that I want to get to today before we get to our guests. Joshua Simon, CEO of Simon care, he of course means commercial real estate. He was very insightful when he talked to us about this. But let’s see here is a question from a tool and he is saying, hello, I live in San Francisco Bay Area. Both my wife and I work in San Francisco Bay Area, but we have been renting. Well, that’s a smart move in San Francisco area. Right. Renting is a much better deal. Especially if you have that ridiculous government rent control, right? And he goes on to say we have saved more than $400,000 and have not been able to buy a home or have been reluctant. Hey, read The Reluctant investors lament. But don’t think of San Francisco when you read it. That’s the only thing. Okay. And that’s that great poem, but by Donald wheel we’ve shared with you in the past or have been reluctant because of low RV ratios. Well, hey, you’re right about that. That’s a good, good point. We do want to live in the Bay Area, but are keen to get guidance and learn about opportunity. In a few years, we will not necessarily be bound to the Bay Area, our daughter graduates from high school in 2023. So we have much more mobility after she goes to college. Thank you at all. Okay, so that’s a good question. Now, first of all, I was always I just got to tell you a personal thing here as a child I was bugged by the seeming indifference of moving me around. And it seems like even though you know, I grew up in Los Angeles and was always in LA, okay, pretty much most of my childhood, but we move around Los Angeles to different areas. And it felt like I was always starting a new school every two years. It’s pretty much how it went for me. I went to school until fifth grade, and then I changed Well, first grade, I went to one school then, you know, second through fifth, another one and then sixth grade another one. And then junior high. Of course, you have to change schools for junior high, which is normally three years I only went there for two and a half. And then I changed and lived in upstate New York with my grandparents and really got a culture shock without living on a dirt road. That was pretty interesting living on the farm, though, you know, it’s good to have perspectives for sure. And did that and then came back to LA and 10th grade, I went to one school in LA. And then I went to another school for the last two years of high school in Long Beach. And so I moved around. Now I didn’t much like that as a kid, I have to tell you, but you know, in some ways, it was definitely definitely good for me. You know why it was good for me? Number one, because I got diversity of experiences, diversity of people, diversity of opinions, of lifestyles, of education, all of this kind of stuff. But also, it forced me to get good at making new friends. And an easy life is not always a good thing. Sometimes you got to stir things up, even if you do it intentionally. If life doesn’t stir it up for you stir it up yourself. So when I hear parents say, oh, gosh, we can’t move because our kid is in school or whatever. Right? You know, I get it. But there’s a flip side of that. Because compared to what Yeah, your kid will have all the same. Friends, but guess what, they won’t have any new friends. And they won’t experience something different. You know? So it’s, there’s always trade offs with everything. But enough of that. What do I know about bringing up children? Nothing. Okay, so I will shut up with my advice there, because I’m horribly unqualified, but real estate on qualified. So I really would just keep reading a tool that that’s my suggestion. Just keep renting and by the way your rents in San Francisco if you haven’t been scared away by Coronavirus and civil unrest, and the extremely high cost of living and the extremely high taxes and the fact that nothing is opening because it’s all locked down and shut down. If that didn’t scare you away, and hate this decision might get a lot easier, by the way, you know, to move somewhere else right now. So that’s a good point. Think about it, think about it. But if you’re going to stay there until 2023 then just keep Reading and renegotiate your rent, see if you can get a better deal or a better property in general, because rents in high density areas like San Francisco are falling, they’re already extremely high. So they needed to have an adjustment anyway, but there’s much more downward pressure on those rents now, and take that money and invest in properties nationwide, and get good at it. Treat it seriously. Treat it like a business. Treat it like it really, you know, it really matters. A lot of people go into this and you know, they don’t treat it with enough respect. Sometimes. I’m not saying that you would do this, I’m just making a general statement to try and speak to everybody listening. Because, um, you know, it really is the most historically proven asset class in the entire world. Of course, go have fantastic rent to value ratios. It’s much better than locking up that $400,000 in a San Francisco property that’s going to cost you $2 million. And it’s probably almost almost assuredly going to go down in value with the civil unrest and the flight from the cities and The Grapes of Wrath by john Steinbeck 2020 version. By the way, I watched that movie last week. You know, I had never seen the movie, we had to read the book in high school, in my last high school that I went to for two years 11th and 12th grade in Long Beach. And we had to read that book, The Grapes of Wrath about the great American migration. And I watched the movie last week, and it was really interesting to see that it didn’t have a lot of the cool symbolism that the actual book did. hate when people say that, when the intellectual snob say, well, the book was better, who Yes, of course, you’re so literary. But the book actually was better. I think in the movie, although that was a long time ago. So maybe I can’t remember. But yeah, watch The Grapes of Wrath, and just get a perspective for how good we have it nowadays. Okay, just how Good, we have it. But it, it truly is amazing to just see the perspective of how people lived back then, what they experienced how poor they were, how scarce everything was in the world, and just how hard it was to get by, you know, it’s really, if you think you have suffering Now, watch an old movie like that for some perspective. But as we see this mass migration going on, out of high density, urban areas, and the D, urbanization of the United States, and maybe the world too, but you know, not sure about the rest, but definitely of the US, you can get some great properties in these markets. That’s where the, you know, as Wayne Gretzky, the famous hockey player said, You know, I skate to where the puck is going, where’s the puck going? the puck is going to suburban markets. It’s even going to rural markets to some extent, but that’s a bit extreme. Frankly, suburbia is more than adequate to socially distance and not have Ridiculous civil unrest by protesters who are largely clueless. So skate to where the puck is going. the puck is going out of high density, expensive, overpriced overtaxed cities that are risky. And it is going to nice suburban markets, especially when you’re buying properties below the median price in those markets. And you can find those at Jason Hartman comm slash properties. And at our upcoming meet the Masters, we will be holding some properties, especially for that event, as we customarily do, and we will be showing them to you, if you are attending, go to Jason hartman.com slash masters and get your tickets. And those tickets have been selling really, really well. So we are just very grateful that so many of you who have expressed an interest in our first virtual conference, our 22nd anniversary event with Ken McElroy Rich Dad, author Ken McElroy, Rich Dad author Sharon lechter, George gammon, and economist, Harry dent, and many others. So it’s going to be a great event. So make sure you get your tickets for that Jason hartman.com slash masters, and the properties, of course, at Jason hartman.com slash properties. Okay, another question we had, and then we will get to our guests. Where is that other question as I’m scrolling, scrolling, scrolling. Okay. Michael Patrick asked this question. And I believe, Michael, you are a client. So thank you for being a client. Hey, Jason, I participated in the funding webinar and signed up for their service. I haven’t heard any mention about the company from you since the webinar, like I have with the asset protection webinar. Well, reason is, is that number one, we wanted to get a little feedback and see how people were liking the experience, which is what you’re asking about. So I’ll get to that in a moment. But number two, that asset protection webinar has just been really, really well received. And you can check out the asset protection webinar at Jason Hartman comm slash asset, lots of convenient times, I’m sure that you can fit into your schedule. That is a very educational webinar. And I have an appointment with our featured attorney tomorrow actually to talk to him about it. So that’s why I’ve mentioned it, that webinar just was very much in high demand. People wanted to watch it twice. They learned a lot from it. That’s why I’m saying it. But as far as the funding Yeah, we have been heard hearing good things. You know, it’s a process it takes a while that program is not super quick. Now most people have received. Well, most people that I can’t say most because I haven’t surveyed everybody, but people I have talked to our clients and attendees that I’ve talked to said they have received somewhere in the neighborhood of like 30 to $40,000 in funding pretty quickly, and they’re still working on more. So it’s a process that unfolds. Over time, and we’re waiting to hear more about it before we invite that speaker back to do another webinar. So that’s it on that. And I did when I posted that in our content group, I got a comment actually from our client, Sean Carroll, who you heard on the show, and he’s going to be participating in our upcoming meet the Masters event, because he is actually a professional actor, who, by the way lives in New York City. And he’s always telling me, Jason, you’re right, people are moving out of New York City. Ah, well, yep. And he’s always giving me examples of that. But he says that he signed up for the service, and he is using the credit. He’s told me some good things about it. So he seems to have liked it. And then Michael goes on to say, he says thank you for everything you have done to change the lives of my family. I’ve been investing in your properties for 12 years now. And recently had my daughter buy her first investment property through your network. getting her started young. Hey, Michael. I love hearing that. That’s awesome. That is totally awesome. So glad to hear that your daughter is now a real estate investor, and that you’ve been investing with us for 12 years. So thank you so much for your continued support. And hope that’s helpful. And let us know how the funding works out for you. We’d love to hear more. And I’m sure we’re gonna get more feedback over time from more of our clients and our listeners. All right, without further ado, let’s get to Joshua assignment Part Two today. And again, you don’t really need to listen to part one. Occasionally when we do break a guest up because it was a long interview. If it was really important that you hear it all at once. We wouldn’t have split it. You can make sense of these without hearing the other half. Okay, so, just wanted to mention that for you. And here is Josh Simon talking about commercial real estate and the impacts on the economy as a whole So one thing on balance, I think we need to mention for the listeners is that, you know, we’ll have a worldwide audience, hearing this presentation 189 countries, but mostly in the US, and you are in an environment and your properties, I’m guessing are all in an environment where you’ve got a low rise suburban environment, right. So this is obviously going to be very different in a place like San Francisco, New York City, downtown LA, downtown Seattle, isn’t it?
Josh Simon 17:30
Oh, for sure. You know, I think it’s gonna I think that’s also a long term trend that will continue is the value of something being located next to a transit center isn’t nearly going to be as desirable as something maybe out in the suburbs, and I think that’s why places like Phoenix, which is done pretty well through this whole, you know, COVID period, I think we’ll continue to see really well good growth because we are spread out we don’t have the mass transit infection spreading and So I think long term trends, you know, for the West Coast overall, California has its own animal are
Jason Hartman 18:07
its own set of problems.
Josh Simon 18:09
One set of problems
Jason Hartman 18:10
California is the problem child of the country. And New York’s then second one, I’d say. But yeah, no, that’s that’s a very good point. I mean, you know, we’ve been talking about this mass migration for two and a half months that we predicted is going to happen and now the media is finally catching on from high density environments to low density environments. And I think the two dangerous the highest danger zones that are sort of necessity, participation are elevators, and mass transit. Those two are probably the most dangerous places, at least in my opinion. You know, going to a gym is optional, going to movie theaters, optional, that kind of stuff but elevators so when you’ve got buildings that are three four storeys and above, people are pretty much in an elevator. And in Phoenix, you don’t have that type of thing. So that’s good and in city environments that are very urban, even once you get out of your own house, you know, everything is crowded, the street is crowded, the sidewalk is crowded, the restaurants are crowded, the coffee shops are crowded. And of course, there’s new laws and regs about that stuff, limiting it. But still, whenever I’m in New York City, if I want a cup of coffee, I got to go to a crowded coffee shop. They’re all crowded. That’s just the way it is. So I don’t know how they’re going to serve that many people there because in a normal environment, there’s just been a shortage of supply of anything you want those environments. So how do you enforce social distancing? I don’t know if it’s even possible.
Josh Simon 19:39
It’s tough, right? Like six feet away. Like how do you do that? Even in an eye, it’s just really hard to even do that in an office environment. You’re walking down the hall, and you know those coffee shops in New York. I hope they just can reopen because if you’ve been shut down now for what is it going on 6075 days and they can still be closed for a couple months more You know, I find it probably pretty disheartening you and I can imagine as business owners if we weren’t able to transact. You know, it’s gonna be an interesting case study looking forward, you know, a year on which business is open or who relocates but you know, I find that places like Florida, Phoenix people are gonna want to be here.
Jason Hartman 20:18
Yeah, no, I agree with you any. So, you know, there’s going to be a mass migration to the suburban markets, I call it The Grapes of Wrath. 2020 It’s from john Steinbeck’s, old novel, right, you know, and that’s, this is a whole new world we’re moving into. Very interesting, okay, talk to us about lending operations, e commerce kind of where all this stuff is going.
Josh Simon 20:43
Yeah, so for lending I was almost gonna put declining but it is negatively affected, but I do see some stability in it. If you’ve got the right type of product and you have existing lending relationships. There’s still money out there. The debt is cheap. You know, if you can refinance or Do any kind of floating rate? I mean, now’s the time. I really believe that. And then you know, from an operations standpoint, it really just depends on really where geographically where you’re located and what kind of type of business do you have. We saw a huge demand and spike in hotel rooms and Phoenix over Memorial Day weekend. And then up in Sedona, there was a big increase in demand. And then obviously, we talked about e. e comras. That’s going to continue to force brick and mortar retailers to get smarter with their inventory and really migrating their online presence with their store presence. And you know, I think you look at like nordstroms I think they’re the best example of it where Hey, in order online, pick up in store, you can go to the store, if they don’t have your shoe size, they’ll ship it from their distribution center, and you have it the next day.
Jason Hartman 21:46
Yeah, very interesting. So we didn’t mention hotels until just now, when you say big spike, I mean, compared to what is the question there was no ban for hotels the last 75 days or so. So do you know like having enough occupancy numbers or anything like that for? I don’t have
Josh Simon 22:02
occupancy numbers, but I’ve talked to a couple hotel owners in the valley, and they were pleased with the progress overall. And yeah, so what is actually pleased mean? That’s a good question. I mean, Phoenix, I had several friends from Chicago that moved down here for the last two months, and stayed in like an extended stay hotel. And I think those have done overall pretty well, the extended stays versus some of your full line hotels.
Jason Hartman 22:26
I agree. I agree, because they’re inexpensive enough to be affordable. And people wanted to escape those urban environments. And, you know, they probably spent a lot of time looking at neighborhoods when they were there and thought about moving because now everybody’s really realized, you know, we can work remotely. Not that the technology is anything new. But, you know, people just weren’t using it enough. Now, everybody’s using it, you know, even non techie people are all on zoom. They’re all on Skype. They’re all using all of the online now. Systems down. So that’s really great. And see those efficiencies will stay with us long after this is over. So that’s a that’s a good thing. All right snapshot here.
Josh Simon 23:10
Yeah, I just put that in there just Hey, we we are still very overall bullish. Obviously activity has been affected, but we feel like, you know, in the places we develop, the economy will come back. And I think it’ll come back pretty quick. We’re seeing construction costs, I don’t think there’s gonna be a huge dip in construction costs, but there’s definitely going to be some pricing impact, which I think is positive. And look, we’re going to do more deals this year from a new development standpoint than we have in the last 10 years that we’ve been in business in any single year. So we’ll do over 40 this year and you know, at least 65 escrows close so extremely busy year and I don’t really see that changing.
Jason Hartman 23:52
That’s You know what, congratulations that is great to hear. And that is so different. From the picture. We’re getting on the news. Media You know, it really is just very different but we do need to keep in mind everybody that based on your suburban location and also property type so it’s it’s very dependent on a lot of these things you know, I’ve got to ask you before we wrap it up How about self storage in this kind of environment? I haven’t owned any Self Storage yet I do have mobile home park and and apartment certainly have had a lot of apartments. But what about something like Self Storage, you know, this sort of specialized asset class? how’s that gonna do through all this?
Josh Simon 24:35
I think it’ll do gray. I think in some markets, it was over built. Funny you asked that we actually are doing we have three projects that are RV and boat storage, which is very popular in a place like Phoenix. And so we’ve got one project under construction Tucson, which is, you know, about a million people million person MSA to our southeast of Phoenix and we’ve got two more and what we kind of found out is like hey, If you have these retail projects, like a mall down the road or a bigger shopping center, if you’re able to redevelop part of it for, you know, an alternative use, like storage or RVM. Bo, I think you can really create a lot of new value. And so we’re pretty excited for that. new opportunities that come with it. Good stuff. Josh, give out your website. It’s Simon care calm. Simon commercial real estate.
Jason Hartman 25:24
Okay, excellent. Simon cr e.com. Thank you so much. One final question before you go. And and thank you for sharing this great information with us. Let’s talk for a moment about reuse. You know, and we didn’t talk about office properties. I know that’s not really your thing. But I think office properties. That’s kind of a big deal in the commercial real estate sector as to what’s going to happen with offices now that you know, Twitter, Facebook has said, folks go home, you know, you can work at home indefinitely. And lots of companies are saying that and I think that’s really a good thing. thing, it’s going to be good for the environment because there won’t be as much smog and pollution or consumption. And I think people will like their lives a lot better. Not completely, it needs some human interaction. But um, most people will kind of like working at home, I think, at least nowadays, these office properties, and then some retail properties, not the ones that you’re engaged in as much. Are we going to have a big change in zoning laws? Do you think in different parts of the country, maybe turning some of these properties into alternate uses? I mean, shopping malls you mentioned, you know, what do we do with you said that that’s a really hard hit segment of the retail portfolio. What’s gonna happen with these properties?
Josh Simon 26:43
Yeah, and malls are super complicated because of the ownership structure. there can be multiple owners that own different different department stores and then the core of the mall. And there’s lots of agreements that kind of dictate the rules and who can what, you know what the allowed reuse is, you know, that is I think it comes down to having municipalities that really see what needs to be done now and not waiting till it becomes blighted. Most cities count on the retail sales for sales tax revenue. And so I think, you know, look, it’s a partnership on those bigger shopping centers to to redevelop them before they come become blighted. And I think what things will continue to change and evolve and I’m pretty bullish on all of that, like, we’ve got a couple malls here in Phoenix that are gonna be redone in the near future, and they’re gonna be great multifamily. They’ll have, you know, probably some self storage in the back, but they’ll have new uses, and they’re being reimagined. Is that a complete
Jason Hartman 27:38
teardown? Or can you can you make a reasonable reuse out of that property in its existing configuration or residual a wrecking ball and then build something new.
Josh Simon 27:51
A lot of it can be a wrecking ball, a lot of its reimagine. We’re selling about five acres right now part of about 110,000 Perfect shopping center, we’re in the middle of redeveloping that was mostly vacant, and we’re selling it to a charter school. And they’re actually going to use the footprint of the existing it’s about 30,000 square feet used to be retail space. And they’re going to reimagine the facade and make it a school and they’ve got their bustling their playground in the back. And so I think it’s, you know, hey, how do we, you know, talk about being environmentally friendly. Hey, how do we kind of reimagine repurpose existing buildings?
Jason Hartman 28:26
Yeah, but schools I mean, a school gonna look the same. You know, I don’t know. It’s just hard to know. But yeah, that’s, that is a creative use for sure. Very interesting times we are in. Josh, thank you so much for joining us and everybody listening. Thank you for joining us and happy investing and stay well.
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