Philip is like many a Platinum Properties real estate investor: He started listening to the “Creating Wealth” podcast show produced by Platinum founder Jason Hartman and eventually starting buying properties through the network.

However, his path was a bit unusual in that instead of buying properties immediately, he became a hard-money lender for the network over a dozen deals or so, learning some of the ins and outs on the financial end of real estate investing along the way.

Then he started buying the real estate itself, and today he owns an investment portfolio that has grown to 13 properties and counting.

Philip’s path along the Platinum investing trail was presented as a client case study on a recent episode of the “Creating Wealth” show. During Philip’s interview with Hartman, the two discuss issues you should know as a real estate investor.

They include: Being aware of local homeowner associations (HOAs) and their rules; hard money loans for real estate; how diversifying investments geographically and by price range can be healthy for your portfolio; and, getting homes inspected for such potential problems as roof condition and termites can spare you some money down the road.

How Philip Built His Platinum Properties Portfolio

Philip started listening to Hartman’s “Creating Wealth” podcasts in late 2007—and has listened to every one of them since, which is nearly 900 episodes in all. At the time, though, his job of fixing hail-damaged cars took him across the country. “So, it was kind of hard for me to think about investing in real estate while I was traveling.”

Philip attended his first Platinum Properties and Hartman sponsored event in 2008, but it wasn’t until 2011, after he scoured many a podcast, that he discovered hard-money lending opportunities with the Platinum network. He provided hard money loans for real estate deals that Platinum’s local market provider in Georgia offered at the time.

“I think I remember your first deal,” Hartman tells Philip in the recent podcast. “You didn’t start out with an actual real estate deal. You started out by becoming a lender on real estate, and I think your first deal (was) like a small, $40,000 hard money loan and you probably got, I assume something like 12 percent on that deal?”

“It was 12 percent,” Philip says. “But then I quickly learned there was another provider there in Phoenix who was doing 12 percent plus a $500 upfront fee. So, I went back to the Georgia provider and asked for $500 upfront plus 12 percent, and they matched it. So, I stuck with them and did a bunch of loans with them. I actually became one of their primary, you know, money sources at one point.”

Philip estimates he did “10 to 15” such loans, which helped him build capital and form his own company, before he bought his first Platinum property, which was a single-family home in Atlanta, in the spring of 2012.

Since that time, his portfolio has grown to include seven properties in Atlanta, all higher-end, single-family houses in the $140,000 to $150,000 range, plus four triplexes in the Kansas City area and two fourplexes in Little Rock, Arkansas.

“Fantastic,” remarks Hartman. “You’re building an empire. Congratulations—that’s just awesome.”

When Philip started buying Platinum properties in 2012, “We were doing pretty much all kind of class A, maybe a little bit of class B type nicer properties, and, of course, you typically get a much better tenant in those properties,” Hartman says.

The podcast host recently detailed Platinum’s property classes in another “Creating Wealth” episode.

Philip says he has stuck with Class A type properties in all three of the markets in which he invests.

“I was really trying to maximize my leverage, you know, per mortgage for Fanny (Mae) and that was my main reason,” he tells Hartman. “I was trying to maximize, you know, the amount of leverage I could get.”

Such a strategy made it tougher to get lower-priced housing, he says, “but that’s what I was trying to do and that’s why I really went to Kansas City (triplexes), because each mortgage was so high, basically a $400,000 for a Fanny mortgage, 30-year fixed (interest rate) for 5.25 percent is just great.”

“You (and the podcast) really got me into the idea of going into debt at fixed rates.”

However, in one of his newer deals, the fourplexes in Little Rock, the newly constructed property is designed for lower-priced tenants.

“I think it looks stable to me,” Philip says of the Little Rock market, “and I’m not really expecting appreciation much, but I do like it from a stability standpoint and with the units that I’ll have, they’re lower-priced. So, I like the idea of having properties rented to people with lower incomes and more middle-class incomes, not just concentrate on one income, but multiple-income tenants.”

Hartman commends Philip for taking the “the most historically proven asset class and diversifying geographically,” but also by income segments with the lower-income housing in Little Rock.

“You know, you’ve heard me say this stuff a million times, but you’re not just diversifying geographically, because you know, all real estate is local, but you’re also diversifying in terms of market segments by having those different income ranges in your portfolio, those different types of tenant classes.”

Hartman asks Philip if he might enter yet another Platinum market. “I mean, I think three is enough,” Hartman says, “but you know, I’d say to people they could do up to five, or are you going just keep kind of doubling down in those areas that you’re in?”

“I think I’ll probably double down in the areas that I’m in,” Philip says. “I might be tempted by some other market if something attractive comes along, but I would be OK with just staying in those three markets, really.”

Philip Ran Into Problems With an HOA Right Away

Not long after buying his first property from Platinum, the single-family home in Atlanta, Philp was forced to sell it, because he learned that with the purchase and plans to make it a rental property, he would be exceeding the maximum number of rental properties allowed in that Atlanta neighborhood by its HOA.

Nonetheless, after selling the home, he still made $20,000 from his investment.hard money loans for real estate

Hartman explains to his podcast listeners a little more about what happened on that deal with the HOA.

“This is another one of the reasons I really despise condos,” he says. “This is not a condo we’re talking about, but it’s just that they get more strict. It’s unusual that we see this in single-family homes, but you see it more in the condo/townhome thing.”

“Basically, an HOA can, believe it or not, dictate what the rental requirements are, how long or short properties can be rented. Some of our clients are toying a little bit with like the Airbnb thing or renting their properties on short-term rentals, and some HOAs just completely won’t allow that. Some cities even have problems with it.”

“You know, they can restrict. They can say we don’t want more than, you know, 10 percent renters in the community or 20 percent or whatever the number they pick.”

Philip has learned that you should find out about an HOA as quickly as possible when buying a home.

“When you buy a property, you have to really make sure you know who the HOA is, a name or a phone number, because if you don’t, you’re definitely going to at some point find out” he says. He explains that he didn’t know about some HOA fees with a purchase or two and found himself paying late fees and the like, thanks in part to the postal service.

Hartman calls such scenarios “one of the little minefields that you’ve got to plan for” when purchasing a property.

“Always forward the mail to yourself from every one of your properties,” he advises podcast listeners. That’s because not just HOAs, but perhaps the tax collector, your insurance company or your lender, will send the statements to the property’s address rather than to your home address.

“Then they’ll say, ‘Hey, you know, your association fee … you didn’t pay it, you now owe us $650, because we’ve tacked on late fees and a legal fee’ and some of this kind of stuff.”

He says listeners should go to the U.S. Postal Service website to forward mail to their home addresses for a small fee, or perhaps go to the post office yourself and fill out a little post card and do it for free.

“Now, just to understand, too, the forwarding address goes by name, so it won’t affect your tenant in the property at all,” Hartman says.

If you purchase the property in the name of an entity, perhaps after you’ve set up an LLC, you should add the name of the LLC, too. “So, in your case, ‘Philip or ABC LLC’ … when you do that, that will really, really help prevent this kind of problem.”

He also offers another option that could be useful to you and the Philips of the world as investors—a virtual mailbox service.

“What they do,” Hartman says, “is they receive your mail, just like a PO box would or the UPS store would, but they open it and they scan it and they put it onto a web portal that is password protected.”

“And you go in and you just look at your mail online, and if there’s a check in there, you can actually instruct them to deposit that check to, you know, whichever of any various accounts you might have. They’ll actually deposit your checks. It’s pretty cool.”

He cites Virtual Post Mail as one such example, but he urges listeners to go to a search engine—he favors DuckDuckGo over Google these days, because it doesn’t track your searches—and compare such services.

He says one of his investment counselors, Fernando, uses such a service.

“He just loves it, and they deposit all his checks,” Hartman says. “He showed it to me last time he was on it several months ago when I happened to be near him on the computer. He said, ‘Jason, you gotta use this, look.’ He’s just going through his mail and it’s on the screen.”

“It’s sort of amazing the whole postal system doesn’t work that way, frankly, because it should, but that’s a different discussion.”

Philip Advises to Seek Inspections for Roofs, Termites

After his beginning days lending hard money loans for real estate, Philip has learned many lessons. One of the recently learned lessons is to get inspections of your prospective properties while you’re purchasing them.

“I think one thing to really look for is the roof,” he says. “You know: What state is that roof in, how old is it … how much more life could you expect of it. I think that’s pretty big. It’s a big expense that’s going to come up.”

Hartman says he once sold a North Carolina property and then engineered a 1031 exchange to buy two Memphis properties after the sale, because he knew the North Carolina roof was getting old.

The buyer of the North Carolina property “hit me up after their inspection and said, ‘Hey, you know, this is going to need a new roof.’ And I said that ‘I know, that’s why I am selling, that’s one of the reasons. I’m not giving you any more money. You just gotta take it like it is. You saw that the roof was old when you bought it. So, you know, that’s what it is,’ and they still went through with the deal and bought it.”

Hartman often tells podcast listeners to keep their investment properties 27.5 years and then sell, “kind of jokingly, because that’s the depreciation schedule” you can use to save on your taxes.

“It just makes sense to get another property and start that schedule again,” he says.

“The property doesn’t need to be new, it just needs to be new to you, and one of the great things is you can do a 1031 tax-deferred exchange and exchange it and not pay the tax, you just defer the tax indefinitely.”

“So, I think the roof is a very good point, because roofs are not cheap. That’s probably the most expensive item (to replace or fix on a property). I don’t know. There can be other things occasionally, too, but those are sort of surprise things. The roof is one you know about.”

Another lesson Philip has learned? Getting termite treatments on each of your houses, even if they pass a termite inspection.

“That’s just something I didn’t think about,” he tells Hartman. “No one really talks about it, and I did that for all my houses.”

For preventive termite treatments on each of his properties, “I got a five-year bond, and I think it was $500. It’s normally more, but I got a deal with a recommended vendor who does it. He treated each house, so I got a really good price, and then it has a $125 renewal fee per year.”

Such treatments, Hartman says, depend on the area in which your property sits. “Some areas are much more prone to termite issues, and I think Atlanta would be,” he tells Philip. “You’ve got a lot of properties in Atlanta.”

Hartman asks Philip if he likes any of the three markets in his portfolio better than the others.

“Not really,” Philip says. “I like the appreciation of Atlanta, you know, with the houses, but I’m going to like the cash flow from Little Rock and Kansas City with multi-units.”

“So, I think it’s just a nice portfolio all combined, really.”