Jason would like to remind his audience that the Memphis property tour is coming up and there’s still a few seats left. Jason invites Brad, a market specialist for the Jackson, Mississippi market to give an extensive market profile on the area and why it’s a good time to invest there.

Key Takeaways:

2:40 – There will be a Venture Alliance mastermind meeting in San Diego.

4:25 – For the mastermind meeting in June, you can come as a guest to get a feel for it.

5:35 – Jason welcomes Brad.

9:20 – Brad sold some of his properties in 2005 and regrets it.

15:40 – You can buy a house in Jackson for $50k and have it rent for $750.

18:10 – Brad shares his thoughts on section 8 tenants.

21:40 – Brad lists some key things he likes about Jackson.

29:10 – There will always be people who will have a renter mentality and not purchase a home.

Mentioned In This Episode:

JasonHartman.com

VentureAlliancemastermind.com

Tweetables:

I don’t think there’s another market where you can buy $50,000 house and have it rent for $750.

We have investors that love section 8 and we have investors that hate it and there’s not much middle ground.

To become a home owner from a renter, it always seems like you have to take one step back to take two steps forward.

Transcript

Jason Hartman:

Hey, welcome to the Creating Wealth show, this is episode 508 and this is your host Jason Hartman. Thank you so much for joining me today. Our guest will be our new provider in Jackson, Mississippi. Now, I did quite a bit of business in this market years ago, but we just hadn’t really been too happy with our provider that we had many years ago. We’ve got the new one. I think I like this guy. He said some really good stuff, which you’ll hear. We did of course talk off tape, off air, as well and I like what he had to say there too. So, it’s worth checking out.

Now, after the Memphis property tour that is just coming up of this weekend, you still, there’s still a couple of people, a couple of people that have kind of trickled in. I think we have over 30 people for that tour. You can still register for it at JasonHartman.com. We have a few spots left where we can accumulate you if you wanna do it last minute. A couple of us are going down to Jackson, Mississippi on Sunday night following the property tour there. We’re going to meet with our provider and look at some more of his offerings directly. So, of course, I’ve been to Jackson before, definitely not my first trip, but wanted to go back and see the latest and greatest that it has to offer. So, you’ll hear more about that today.

Also, just wanted to let you know, well, I don’t want to launch into all that. I’ll save that for another time what I was going to say, because I want to keep these little intros a little shorter. I am really excited about our upcoming event for the Venture Alliance mastermind in San Diego. I just got to tell you this group as small as it is, it’s just a humble little beginning right now, we’re all ready starting to look at some things. I have hired an analyst, one of our clients, and that is Oliver who is probably listening. So, Oliver, welcome aboard to help with analyzing deals with the Venture Alliance. I’m really excited about that.

Again, the purpose of this group is to look at out of the box deals, the deals that would not fit in the typical mold of properties that usually is single family homes that I talk about on the podcast and to look at other things, so we’re looking at a couple of interesting apartment deals in Columbus, Ohio. One of our members, Neil said that he had has a local friend who’s I believe a real estate investor who is going to check these properties out for us, just do a physical look at the properties for us, which is great.

You know, we are looking at some interesting stuff. I mean, portfolio of properties in different markets. There’s another one that is a portfolio of notes, 74 properties, just some really cool stuff and I’m hoping that the venture alliance members will get together and invest in these deals together and, of course, I’ll invest in them because I don’t expect our investors to do things I wouldn’t do myself. So, if you want to invest with me, look at some of these out of the box deals. Get to our Venture Alliance meeting.

We probably won’t continue this practice that I’m about to share with you, but since it is our first event in June in San Diego, if you’re not sure about the Venture Alliance mastermind, if you’re not sure you wanna join, if you’re not sure it’s worth it, if you’re not sure you’ll get value, you can come as a guest, you know, this is a high-end group. We’re going to have high-end experiences. It’ll be a first class weekend, really, really nice stuff. So, you can register as a guest and you can do that either at Jasonhartman.com and I think Brittney should have that in the events section now, but if not, you can go to VentureAlliancemastermind.com and you can either join on the annual basis, the quarterly basis, or just as a single for the event in San Diego in June. So, hope you’ll join us for that. Without further adieu let’s keep this intro short for once in my life. Well, there have been a couple of short intros, this will be one of them. So, let’s get to our guest today and talk about Jackson, Mississippi.

Hey, it’s my pleasure to bring you a market profile on a market that we were busy in years ago, but have not been doing business in lately and I’m getting pretty darn interested again and that is Jackson, Mississippi. Brad, welcome, how are you?

Brad:

I’m good.

Jason:

Good, we got our local market specialist is here and he’s got a great story. What’s great about him is that he really likes to  buy and hold. So, he’s doing exactly what he’s telling you to do, which is just like me, you know. There’s too many false prophets out there and too many gurus that say, you know, you do this while I do something else, right. Tell us a little bit about what interests you in Jackson, why other people should be interested, and what you’re doing with your own investment portfolio.

Brad:

Okay. Well, thanks for having me on. I appreciate it. When I started in real estate 15 years ago, I was just looking for any way to make some extra money and I had a job, I thought I was making pretty decent money at the time, but I had my first child a year before and so I started looking for other ways to make money and a friend of mine was in the real estate business and I got with him and asked him some questions and he happened to be exciting the real estate business at the time and opening up a restaurant, so I bought, I read half a book, and went ahead and bought ten properties right off the bat. That was probably pretty crazy, but I’m always kind of a jump in and learn guy.

Jason:

You know what, there’s a lot to be said for that. I mean, you just got to do things in life. That’s where all the real wisdom comes from is just doing something. You know, you can sit and debate theory and go to seminars forever, listen to podcasts like this one forever and never do anything. You gotta actually do stuff. That’s where the wisdom is, you know.

Brad:

Believe me, my first six months owning ten rental properties, I got a Harvard education in six months.

Jason:

The school of hard knocks, right?

Brad:

It was tough, but I made it. I went back and forth everyday saying, I’m going to sell these properties, I’m going to keep them, I’m going to sell them, I’m going to keep them, and then finally one day I just committed and I said there has got to be a way for me to make this work. I’ve just got to learn how to do it. So I did. I set about learning how to buy houses myself, learning how to sell them, learning how to rent them out, learn about the management business and that was 15 years ago and it’s been really good to me. I’ve done – if I had to go back and count, I think being conservative I’ve done 1,500 deals in those 15 years.

Jason:

How many of your own buy and hold properties do you own now?

Brad:

I got a 117.

Jason:

Only a 117?You slacker!

Brad:

Jason, I’m trying to get to 500.

Jason:

Yeah. It’s just amazing. I mean, wow. You know, think about it, what other business can just a, I’m going to call you a regular guy, okay, which you’ll probably agree with, I think, but I don’t know, you know, just a regular – what kind of business can a regular guy get into and in 15 short years you can have 117 properties and a business! You’ve got a business of, you know, renovating properties and reselling them, too, but I’m just talking about your personal portfolio. This is the accessible thing. Show me a story please somebody of someone who has done a similar comparative thing in the stock market like that. I mean, you’ve got a mini real estate empire. It took me longer than that. I’ve got about 150ish, give or take units, and those aren’t single families all of them, some are, and I’ve got a couple of partners on some of them, but you know, that’s just an awesome story. I mean, you sold a bunch of your properties though in sort of the hay day in like 2005, right?

Brad:

I did, I did.

Jason:

But you regretted it, I think.

Brad:

I did. From 2005 to probably earlier than that to the end of 2008, I sold 50-60 properties a year and after the crash, you know, when everything was tight for everybody, I sort of looked back and said, if I had just kept half of what I had sold, I would have been in a much better position, you know, going forward through the crash, so that’s what, after that, I realized that the true way to build wealth and real estate is to buy and hold and I said about doing that for the last three years. I’ve been doing a little bit of selling, but it’s very tough for me to sell these properties because they’re so good, the cash flow is so strong. It’s, I enjoy selling, believe me, but the buy and hold is where the true wealth comes for me.

Jason:

I always like to say that the people who buy and flip have spending money and the people who buy and hold have real wealth. That’s kind of one of my long-time quotes. I’m looking at a property now at JasonHartman.com/properties and you’ve gotta go down to the map, because we don’t have Jackson, Mississippi icons there, so we’ll get one of those up for you, because we start to do more and more volume and kind of revamp this market, but we did quite a bit of business there years ago.

Looking at these properties, I mean, this is pronominal, a $50,000 house that is rented already, it’s not speculative, it’s not a projection – it could rent for this. It is rented now, okay, and it’s rented for $750 dollars. So, that’s much more than 1%, which is the RV ratio, the rent-to-value ratio that we recommend is the 1%, which would only be 500, so this rented for $750 and just looking at some of these numbers, the debt coverage ratio is 2.15.

I mean, that’s phenomenal, that’s phenomenal, 2.15 and the cap rate and of course now, this stuff has to be projected because it’s based on income and expenses over the course of the first year, but the cap rate is projected at 10.4% and, get this, cash on cash return of 19%. Don’t fall out of your chair folks, that’s pretty darn good, yeah. This property is three bedroom, one and a half bath. What do you want people to know about, you know, this property or kind of your typical template deal?

Brad:
Right, those are properties that I buy myself, that I hold myself as well. That’s a very, it’s on a very good street located near a school, but when we – it’s got a new roof, new pluming lines, new sewer lines, when we rehab a house, we try to take care of all the deferred maintenance upfront when I identified the areas that always gave us problems on these homes, they were the water lines, the sewer lines, and the HVAC and the roof, so we go in and we take care of all that up front. Those were the major maintenance areas we had going forward, so we decided just to on every renovation we take care of these up front.

Jason:

Yeah, I wanted to talk about a specific property and what it looks like there for a moment, but back to your investing strategy and the buy and hold concept and anything else you want listeners know about that.

Brad:

That particular property, I’ll refresh everybody’s ideas about it real quick. We go in and we do our typical cosmetic package, hard wood floors, it’s a large home, nice area, great tenant, our motto is quality houses, quality rehabs, quality tenants, and we screen our tenants, so that’s a great house that’s going to produce income for a long time to come. As far as our strategy, I think, we look obviously for great deals. We try not to be anywhere over a certain loan to value ratio, but these, and we like three bedroom, one and a half bath houses, but I have plenty of three bedroom, one bath houses and they rent just as good as the three bedroom one and a half bath houses or three bedroom two bath houses, but what we look for is cash flow, cash flow, cash flow. I can look at a property anywhere in my area and tell about what it’s worth, so I know right away if I’m getting a good deal. I can walk through a house in less than five minutes and decide what I need to spend on the rehab. I also know what it’s going to rent for right off the bat.

Jason:

Why would someone want to invest in Jackson? I mean, you know, we’ve got many areas across the country that people could invest in, what makes you like that area so much, and by the way, you didn’t grow up there. So, that’s important. Your business partner did, but you didn’t and you’ve been there for – have you been there 15 years, is that about how long you’ve been there since you started real estate there or were you already there?

Brad:

I’ve been here for 18 years. I didn’t get into real estate until I was already here three years.

Jason:

Right, okay, so there had to be some conscious decision about like, you know, I’ve only been here three years, but this looks like a good area to be investing, right?

Brad:

Well, yes. I had friends in the business that helped me get into it and then as I started going forward I realized what an opportunity there was. Now, the reason that I think if you don’t invest in Jackson, Mississippi, you’re absolutely crazy is that you can buy a house here for $50,000 that rents for $750 dollars a month, you take that same house and move it to another market, it’s a $100,000, $150,000, even a $200,000 house. Our rents to prices here are just so much better than anywhere else in the country. I don’t think there’s another market where you can buy $50,000 house and have it rent for $750. In fact, our average rent is actually a little bit higher than that, Jason.

Jason:

By the way, that’s a moving target, because right now as we’re recording this in 2015, you are pretty right. I mean, there’s maybe a few, you can do this in really crappy areas, of course, all day long. Really blighted areas, but in quality areas to get a 1.5 RV ratio is a pretty big accomplishment. That’s awesome. So, you’re definitely right when you say that, but you know, years ago, I mean, in the thick of despair, in the troth, in the worst time, the time where people had to have the most faith and obviously those contrarian thinkers were proven right, you know, you could get phenomenal rent-to-value ratios like this all the time, the fact that you can do it today in 2015 is the amazing part. What is this profile, like what’s this kind of target tenant like? What do they do for a living? What are they like? What’s their stability like and so forth?

Brad:

I have typical blue collar tenants, basically. Some we do a good portion of section 8. I love section 8 down here, because our rents are calculated on a national average, so taking into account if they try to average Mississippi with California, it’s going to benefit the Mississippi rents.

Jason:

Right, right. That’s interesting by the way and it just goes to show you how wasteful and lame the government at pretty much everything, but I just have to get my jabs in there all the time, but I definitely want to drill down on the section 8 thing, because we have investors that love section 8 and we have investors that hate section 8 and there’s not much middle ground. People are either kind of hot or cold on this and there’s some real benefits to it. You like it, what percentage of your portfolio is section 8, did you say or did you say that?

Brad:

I try to stay around 60%.

Jason:

Okay, so you have more than half, slightly more than half as section tenants and you, when you acquire a property, you want to get a section 8 property, that’s what you’re saying?

Brad;

Well, any of them qualify for a section 8 tenant.

Jason;

I know, but there’s a target. I mean, of course, I didn’t mean to imply that only certain properties can be section 8, but you know, there’s a target kind of property that fits the mold.

Brad:

We typical accept a cash  paying tenant or a section 8 tenant on almost all of our properties. The ones further out, most of the ones we do accept will be in Jackson. The reason why I like is, you know, it’s direct deposited into your account every month and if you’re paying a note, it’s nice to know that money is there before for your notes due and it’s guaranteed. We have – the other reason why I like it is that they typically tend to stay longer, believe it or not, they typically tend to stay in a house longer.

Jason:

Well, they’re on the dole, why wouldn’t they stay?

Brad:

Exactly and you have leverage over them. If they don’t pay you their portion, they can get kicked off the program.

Jason:

But the objection is, and you’re absolutely right, and they get kicked off the program for life, okay.

Brad:

Yep, that’s it for them.

Jason:

It’s a big risk for them. So, mostly they wanna be good citizens and play ball and be decent tenants, but you know, there’s a certainty an element of investors, the ones who have had bad section 8 experiences who say, oh, you know, I got to do more stuff to the property, you know, these tenants are just lower quality, how would you respond to that?

Brad:

Some of them are, we still screen our section 8 tenants, we are not a, we’re not slum lords that if you give me a deposit, I’m moving you into a house, that’s not the way it works with us.  We screen even the section 8 tenants. We check references, check previous land lords, everything. I have had really, really good luck with section 8 tenants. I have some in the houses for 6-7 years and they love me. It’s hands on. They are a little more needy…

Jason:

Well, because they’re dependent on government, so they just have that sort of neediness is kind of part of their programing, you know, unfortunately.

Brad:

That’s true and they all got my cell number and they can get in touch with me any time they need to and, I’ve met a lot of good people being tenants whether they’re cashing paying section 8 or either way.

Jason:

And with your section 8 tenants, are they on a full free ride or a partial, like, what percentage is being paid by the government?

Brad:

It varies depending on their income. Some can be a 100% subsidized. One I just rented six weeks ago, she’s only getting, her rent is $767 and she’s only getting a $138 subsidized by the government.

Jason:

Okay and back to the Jackson, Mississippi, the broader discussion. I want to make sure we hit on that, why Jackson? You know, it’s not a very big city, the metro area is only about 575,000. You like the averages on the section 8, that was one of your reasons, by the way, before we got off on another tangent, which by the way, I’m always guilty of. I just want to disclose that to you, but what other things do you like about Jackson?

Brad:

Well, Jackson, you know, being the capital has a rich culture and rich history. It’s actually a vibrant, thriving metropolitan city. We’ve got, we’re three hours from the beach, three hours from Memphis, being a capital city, there’s a lot going on here. We have one of the best children’s hospitals in town. We have a good industry. We have large medical facilities here, university medical system, employs a lot of people, state government employs a lot of people. Obviously we have, unfortunately, big population of lawyers here too as well. We have a large Nissan plant just 20 miles north of the city that employs over 4,000 people immediately and about 8,000 people indirectly. So, there’s a lot going on here. It’s growing. Jackson itself may not be growing as fast as the suburbs, but the suburbs are exploding.

Jason:

And distinguish the suburbs from the city itself and what areas you like and don’t like.

Brad:

There are some suburbs where I’ll invest. Some are better for retail deals. I typically don’t buy rental properties outside of Jackson, very far outside of Jackson. There is a suburban just to the east of here where you can still get pretty good deals, it bums up against Jackson and I typically only do business in Jackson and this little town that’s just to the east of here. Now, you go 20 miles north of here is where I live and it’s a nice suburb, it’s growing. They anticipate 60,000 people will be moving into that, just north of here. The county just to the north of Jackson in the next ten years. So, typically I do all my stuff in 95% of my business in Jackson. There’s just plenty to keep me busy down here.

Jason:

Sure and how do you select the neighborhood and a property. Just tell us a little bit more about what you look for in a property and a neighborhood.

Brad:

Well, the street, obviously, is key. It’s easy to say what my criteria, where I will not buy a property is just I’ve blacklisted certain streets. I farm a particular pocket of Jackson. It’s about five square miles and I know – I look at the street first and then I look at the house, what kind of condition it’s in. I typical go for housing that are light rehabs, cosmetically. I don’t want to go and rebuild an entire house. Just really the reason for that it’s too time consuming when I can go and pick up, by one that’s basically a total rebuild versus one that needs a light cosmetic redo and all the mechanical redone is a lot quicker and as busy as I am, it’s just I have to turn them over quicker. So, it’s mainly a time thing.

So, I look at the area of the streets, the condition of the house, and I know that area like the back of my head. If I have a house that somebody calls me on and wants to sell, I know right away whether or not I’m going to be interested in it.

Jason:

Anything else you’d like people to know about, you know, your operation in terms of how you manage properties, what they should expect when they’re buying in Jackson?

Brad;

Well, they can expert to have my cellphone and be able to call me anytime they need something. They will have their own, as far as management goes, they’ll have their own log in portal to see how their property is preforming. They can expect good service. They can expect, you know, I don’t know if – we give certain incentives to buyers from time to time and I just think they can expect a very strong net positive cash flow. High rents, lower property values than they’re probably used to, you know, I think it’s just a great place to do business. I just think people – even the people that live here that aren’t buying property are really missing out.

Jason:

Hey and one other great things about your market is that you actually offer financing of these property with between 30-50% down and, you know, that may sound like a lot, but the properties are pretty inexpensive, we’re talking with 30% down on a $50,000 property, if it’s only $15,000 and you got some nice terms on these and that can really be a good option. Who is this for, this financing?

Brad:

It makes sense for the buyer of a property that wants to utilize leverage, that has an LLC already setup or they want to set one up, but it’s just for someone who  has a maybe a limited amount of funds, but still wants to invest in real estate.

Jason:

So, the IRA buyer, the person who has got more than 10 properties, the person who wants a pre-approved loan, because this is an asset based loan, okay. So, there’s no credit reports and messaging around with qualifying or anything like that and the foreign national buyer too, right? I mean, we’ve got clients from all over the world. So, it’s good for all those types, right?

Brad:

That’s correct.

Jason:

Excellent. Good stuff. More on the financing, just have our investment counselors, we’ll put clients directly in touch with you, but Jackson, Mississippi market does offer some good financing. One of the questions we get asked a lot is if the deals are so great, why wouldn’t all the tenants just become buyers? And, you know, we’ve identified a whole list of reasons for this, I’d like to hear any from you, but maybe I’ll start to get you thinking and one is obviously financial immaturity.

I’ve definitely found when I was in traditional real estate for many years that to become a home owner from a renter, it always seems like you have to take one step back to take two steps forward and people who like the instant gratification of just having everything done for them and, you know, you probably rent a nicer place than you can buy. I’m not totally sure that’s true nowadays with the mortgage rates being so low, it depends what city you’re talking about, of course. It’s really pretty amazing in that vein and just the willingness to delay gratification and of course, if you ‘re getting the section 8 assistance from the government, heck, why give that up? But you know, maybe address that questions. Are there any other things or do you want to elaborate on any of those point?

Brad:

I think you’re right on financial immaturity. I think the main reason is lack of liquidity in the market place with lending rates or lending qualifications still being pretty strict, I think a lot of these people do have damaged dings on their credit, damage credit, lower income, and they just have a hard time buying a house. Now, the other that there is a certain group of people that have just a renter’s mentality. They’ll always be tenants. I come across, I rent to people in their 60s.

Jason:

Yep, that are just lifelong tenants. Yeah.

Brad;

They’ve never owned a home. They’re forever perpetual tenants. I think the big thing is that they’re on a tight, most of them are on a fairly tight budget and if they, you know, they’d like the security of knowing that somebody else will replace their water heater if it goes out.

Jason:

Right, yeah.

Brad:

If their radiator in their car goes out, they can spend the money on that instead of having to buy a new water heater.

Jason:

Right. Right. It makes sense, make senses. Good stuff. Well, this is a great market to take a look at folks. Contact one of our investment counselors, go to JasonHartman.com, and click on the properties page to look at properties there. You’ll have to scroll down, as we’re recording this, you’ll have to scroll down to the map toward the bottom to pick Jackson specifically, but it’s a great market and thank you so much for joining us today.

Announcer:

This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email [email protected] Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.

Episode: CW 508: Jackson Mississippi Real Estate Investment Market Profile with Local Market Specialist Brad

Guest: Local Market Specialist, Brad

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