CW 524 – Jason and Fernando – FAQs About Real Estate Investing

When Fernando first met Jason, he had a goal to purchase enough properties to successfully achieve ‘financial independence day’. A couple of years later, he built an impressive portfolio and is now retired from his job at Apple Computers. Fernando is now one of Jason’s investment counselors and today he hopes to answer some common questions his real estate investor clients have been asking him.

Key Takeaways:

[2:00] Jason would love to have listeners on the show. Fill out a guest form at JasonHartman.com/Jason.

[4:45] In the membership section of JasonHartman.com, the audio players use Flash. Jason’s team is fixing this.

[9:15] What’s the process if you want to get started in real estate?

[16:35] Listen to the Creating Wealth podcast to get a free education on real estate.

[18:25] Please listen to episode 405 and learn how to read a property pro forma.

[21:45] You learn a lot just by coming to one of Jason’s live events.

[29:45] Jason’s business model is a simple one. They work on referrals and don’t charge you a dime.

[32:00] You can own property without an LLC, but please read Mark Kohler’s book, What Your CPA Isn’t Telling You.

[37:35] You can have a good or bad tenant on any A, B, or C class property.

[39:25] Last thoughts? Don’t over think the numbers too much. We are here to help you through the process, all you have to do is start.

Mentioned In This Episode:

https://www.jasonhartman.com/cw-485-real-estate-investing-chicago-jason-hartman/

https://www.jasonhartman.com/cw-508-market-profile-on-jackson-mississippi-with-market-specialist-brad/

https://www.jasonhartman.com/creating-wealth-255-memphis-foreclosure-profits/

https://www.jasonhartman.com/cw-405-how-to-read-a-property-pro-forma/

https://www.youtube.com/user/JHartmanRealEstate

https://www.jasonhartman.com/cw-514-client-case-study-with-philip-sullivan-in-the-atlanta-kansas-city-and-little-rock-real-estate-markets/

https://www.jasonhartman.com/cw-458-david-porter-platinum-properties-client-speaks-succesfull-income-property-investment-retail-shipping-us-economy/

https://www.jasonhartman.com/cw-459-client-case-study-70-units-fernando/

What Your CPA Isn’t Telling You by Mark Kohler

MarkJKohler.com

Tweetables:

We call it the complete solution for real estate investors and it usually all starts by you just visiting our website.

Get educated with a podcast and then network with existing clients.

You can protect your assets pretty well by just getting good insurance.

Transcript

Jason Hartman:

Welcome to the Creating Wealth show. This is episode number 524 and this is your host Jason Hartman and today I thought we’d talk about just sort of some listener questions, some common questions, FAQ type of things that we’re always getting from investors and just kind of cover those, because there’s just an endless amount of these and listeners, please, go to JasonHartman.com and leave us a message. I don’t play every message on the air, by the way. Some messages are not necessary. It doesn’t make for good podcasting, necessarily.

It’s just sort of maybe an operational type message, but you know, we do listen to all of those and we love to hear your feedback on anything and everything and, of course, you’re listener questions are much appreciated and also, speaking of participation, if you’d like to come on the show, we’d love to have you come on the show as a guest; talk about your investing experience, ask questions in real time, you know, kind of discuss issues. We’ve got such an intelligent listener base out there and that’s why we just love to hear from ya and have you on the show. Feel free to do that.

If you want to book a time with me, just go to JasonHartman.com/Jason, take 30 seconds, fill out the little appointment request and we may well just put you on the show, okay, but in the meantime, you can also go to JasonHartman.com, click on the send voicemail message and we may well air your voicemail on the show. A couple of those questions I got just before we start in, I got Fernando here who’s going to be some of these listener questions with me, but two of them were, number one, it’s kind of funny, why was I recording in the closet on the last episode.

Fernando:

Good question.

Jason:

Fernando, you’re here too, okay, so I thought I made that clear, but I guess I didn’t. Just so you know, as an audio person, one of the things you look for is soft surfaces. Hard surfaces are terrible, okay, glass, hardwood floors, marble, you know, these is all the stuff we don’t like. We like fabric, we like soft, because it makes the sound really good and in my house that won’t be my house for very much longer, actually, because I am moving to La Jolla California. I have 18ft ceilings and hardwood floors. So, this place, it’s like an echoplex, it’s terrible. It really is terrible for audio.

My new place is going to be a little bit better even if I have marble floors. I kind of thought about how I’m going to put some baffling up and make the sound better and I am not recording in the closet today, but I tell you, podcasters, audio, if you want to do an audio recording, the best place to do it is in your closet, because it’s got basically, basically it’s got patted walls with clothing hanging from the racks. So, that’s that.

Hey, Fernando. Anyway, you’re here, I guess. So, welcome.

Fernando:

I am here. You gotta makeshift recording studio in your closet, that’s good.

Jason:

It’s pretty good. I’ve only recorded one time from there, but I’ve done it in a couple of hotel rooms too when I’ve been traveling. It’s pretty good, you know, the closet is the place, for sure.

Fernando:

Hey, if it works, that’s all that counts.

Jason:

And save the come out of the closet jokes, because I can just hear them now, you know? Oh gosh, okay, so, another question I got is someone joined our member section, that was [#4:37?]. So, thank you for that comment by the way and we are working on it. I guess in the member’s section, our audio recordings use a Flash player, and of course, Flash and Apple don’t get along very well and Fernando since you used to work for Apple before you retired with your investment portfolio with your properties, maybe you can comment on this, but Steve Jobs and Adobe kind of had a fight years ago, Adobe makes Flash and so, he wanted us to do that another way and put them on to Vimeo and, you know, I think that’s a great idea. I’ve got one of my guys working on it now. Patrick who is in the San Francisco area who does some of our production work for us is investigating that.

So, thank you for the feedback, we’ll work on it. But remember, the content in the member’s section, you know, whether it be the monthly member calls or other audio content we have in there, it’s never going to be as easy as the podcast. The podcast system, especially if you’re an Apple user, is the easiest thing in the world the way RSS feeds work and so forth and it’s just a great, a great technology that is obviously revolutionized the world of media.

This kind of stuff is a little bit harder, you know, when I download audiobooks or audio files from none podcast sources, you know, there’s some few extra steps for me too and I do it all the time, so I hear ya, but the feedback you gave us good and we’re working on it, okay. Fernando, any comment on Flash and Apple or anything like that?

Fernando:

Oh, Steve Jobs had a long explanation why he didn’t think Flash was the future and this basically has to do with Adobe’s Flash products have been basically proprietary. 100% proprietary and they control the development, the future enhancements, pricing, etc, and that’s something that Steve Jobs, late Steve Jobs did not want to see and he had concerns about reliability, security, performance, and basically he just wasn’t seeing Flash as the future and I think there’s newer standards that have come out, but Flash is still very popular and I get messages every now and again that I need to upgrade to my Flash version and if you don’t, you just can’t use the web very effectively, which is bad.

Jason:

Isn’t it nice listeners to have a retired Apple executive here with us? Retired based on his real estate portfolio and now owns 70 units, so Fernando, once again, congratulations that’s awesome. So, hey, you wanted to kind of do some QA stuff today and I think that’s a great idea. So, dive in!

Fernando:

Yeah, so I’ve been going through a great experience as I get more involved with platinum properties and work with you and as you know and listeners know, we’re starting a new company that is going o provide a better experiences for investors and part of that process, part of my learning process in being able to contribute to this new startup is to understand the business from the inside and how clients interface with platinum properties and the [cuts out].

I know how that works from the client’s side, since I started as a client myself and I needed to get a more holistic understanding of the business and since I’ve been doing this, I’ve been talking to a lot of clients, I’ve been coaching clients on the financial independence day consulting. I’ve been answering questions, meeting with people, and I noticed a few patterns that have come up as clients are asking some fundamental and some basic – very important questions. So, I wanted to just bring these up and address some of them and also have you, Jason, talk about some of this and give the clients a good starting point for these fundamental questions.

Jason:

Yeah, absolutely. Fernando, I know that’s really been an interesting experience for you, moving from client to becoming an investment counselor. Yeah, what kind of questions? What’s the first one?

Fernando:

So, for clients that are new, the common question is this, Fernando I have no experience in real estate. I want to get started, but I basically don’t know anything. What’s the process and basically what are the fees that I should expect.

Jason:

Okay, well, let’s talk about the traditional process first and then let’s talk about our process version 2.0, maybe version 3.0, which is much, much better if I must say so myself. So, first of all it’s important maybe for the listeners to know that my background for 19 years is in the traditional real estate business. I started at Century 21, I went to work for Re/Max, was one of their top agents in the world for several years. You know, I used to list and sell people’s houses.

I first started out for a little while, from a first year in the business selling HUD and VA repos mostly in the inland empire of Southern California and I did work with a lot of investor clients then and then I kind of switched working with investors, a little bit, but mostly regular home sellers, mostly, because I had listings, but also home buyers as well, and that was mostly in Irvine, New Port Beach area of Orange County California.

So, the traditional process, the way people have always “invested” in real estate. They would think, hey, you know, my home has been a good investment, I am getting these post cards, note pads, and maybe a pumpkin from this realtor in my neighbor who I recognize, maybe I should call them up and ask them about investing and here’s where the mistake begins, okay, because first of all, the area in which you live, probably, isn’t the best area in which to invest, because you probably live, if you’re listening to this show, in a reasonably nice area, maybe a very nice area and those areas never have good cash flow.

So, if you’re going to go around your neighborhood, you’re going to look locally, you’re not going to really be thinking like a real investor and, you know, you’re going to buy a property that’s maybe similar near you, not really ever considering any concept of rent to value ratios, land to improvement ratios, what I call the LTI ratio that reduces your risk when you invest and you’re also going to be working with a person who just is not usually very competent when it comes to investment properties.

The vast majority of the real estate industry is dedicated to people that are just, you know, really nice people who next work and have friends and they get business because they network and have friends, not because they are very good at what they’re doing or very knowledgeable of what they do and look, I can say this, because, I are one, as it were, improper grammar intended. You know, the real estate industry is just not staffed by very good people, for the most part. Maybe 20% of them are pretty darn good.

You know, when I owned a real estate company for eight years that I eventually sold to Caldwell Banker in 2005, you know, I trained real estate, thousands of them really at seminars I would do at the industry and stuff like that and then working for my own company most of them aren’t just very serious about their career at all, they don’t take courses, they don’t want to learn, there’s a joke in the industry that real estate is for people who couldn’t get a real job. I’m not the only one who says that, I’ve heard it many times from other people.

You know, so that’s what you’re usually faced with, okay, that’s the traditional way to invest and certainty there are, you know, that said, there are great real estate people out there that are engaged in the traditional real estate business, but it’s like anything in life, you know, it’s the 80/20 rule, right, the pareto principle and maybe in real estate it’s worse than 80/20, it’s maybe 90/10, okay.

So, it’s important to understand that’s the way most people do it and they achieve vastly inferior results and that’s what I used to do. I used to help people do that plan and it just didn’t work very well. It worked when you were lucky, when you, maybe, you had some appreciation that happened by accident, not necessarily by anything you did it isn’t the way to go. It’s not the way to be a good prudent investor, a good conservative, prudent, successful investor.

So, the way we do it is that you listen to the podcast you gain some education for free, okay, you learn about it. You learn a solid philosophy for investing and an unique philosophy for investing. So, you listen to the show and you learn about it and then you go to our website JasonHartman.com and you fill out an inquiry form, an interest form on the website, just take you 30 seconds to do that or you call us and you talk with one of our investment counselors and we help you assess your investment goals whether they be income and cash flow or appreciation or tax benefits or asset protection and then we help direct you to different pre-screened markets nationwide that we have affiliate relationships in, that we can refer you to those vendors, those providers of property, those local market specialists or LMSs; not to be confused with MLS, Multiple Listing Service.

I know those are the same letters in different order and we can refer you to these people who will help you acquire investment properties and we basically act as an area agnostic source for you to bounce ideas off of, for you to learn from, and also we help you exert a lot of leverage over the different providers who are selling the properties to you. We are area agnostic, so if one market doesn’t make sense or if that provider, that local market specialists isn’t doing their job, we’ll refer you to someone else and there’s really no other place that you can go to get that exact formula, the way we do it.

We call it the complete solution for real estate investors and it usually all starts by you just visiting our website, filling out a contact form and then we contact you and we have a conference call with you, we arrange three-way calls after that we different local market specialists and we help you select properties in markets that we recommend, that we researched, that we recommend and that we have relationships in, so Fernando do you think that answers the question?

Fernando:

Yeah, so in summary, number one, get educated on what we do and podcasts are a great way to get education. Choose a market, number two, choose a market that we recommend on the website and number three, let us know when you need help and/or is ready for an introduction to the provider or local market specialist for that market and that kind of summarizes it.

Jason:

Okay, so Fernando, I think you said it much better than I did and you took like eight less minutes than I did. That’s not fair! Hey, listeners, Fernando is making me look bad.

Fernando:

No, you give the full answer, that’s valuable. Let me just, Jason, if I may, when we talk about educated, the podcasts are obviously the preferred vehicle, because they are free and there are so many different podcasts/ I usually recommend clients to listen to a few podcasts. There’s a few about certain markets that we have done recently and the one on Chicago was done awhile ago. It’s podcast 485, real estate investing Chicago with local market specialist John, that was a good one. There was one that we did on Jackson, Mississippi and this is podcast 508, Jackson, Mississippi real estate investment market profile with local market specialist Brad, and there’s another one for Memphis that we’ve done. This is podcast 255, this is also pretty interesting. This relates to the property tour that we did in Memphis a few weeks ago. Listeners that are interested in general education could listen to podcast 405, this is the one that talks about how to read, sorry, the investing 101, how to read a property pro forma.

Jason:

Oh, that’s a critical one, yeah, thank you Fernando. That’s, and by the way, there is a YouTube Video on that too that you can find on my YouTube channel, which is called, I believe it’s called JasonHartman.com real estate, I think it’s like the lowest rated channel on YouTube, but you know, we’re just not big in video over here. I don’t know why. I think it’s because I have a face for radio, but the podcast is hugely popular, so thank you listeners for making it so, but yeah, we just never mastered the YouTube thing, but anyway, that is, you know, it’s great audio, you can listen to the podcast, but if you want to see it, there’s a video too and it’s about 27 minutes long, really foundational content, okay. Super important.

Fernando:

I remember when I got started you told me, Fernando, if you learn how to decipher the pro forma, how to play with various assumptions, this will teach you so much and I agree 100% that was critical, so this is very important. This podcast 405 is very important.

Jason:

405. So, episode number 405, folks. A little over a 100 episodes ago. Listen to that one, it’s really fantastic, okay. So, yeah.

Fernando:

And client studies are very, very popular. Those podcasts..

Jason:

The case studies, yeah.

Fernando:

Client case studies, these are very, very popular. You just did one with Joe, I just listened to it today, that was very good. I don’t remember the number for the one today, but I can list it in a minute. The other ones that were, I think, would be great for new clients to listen to are episode 514, client case study with Philip Sullivan

Jason:

Yeah, Philip Sullivan is great. He was on just recently. 514, okay.

Fernando:

514. 558, 558, is another client case study.

Jason:

You misspoke, you said 558, so 458, right?

Fernando:

Yes, 458, sorry, yeah.

Jason:

Who is that one with, Fernando?

Fernando:

This is with David Porter.

Jason:

Oh yeah, awesome guy, great investor, yeah.

Fernando:

Yeah, David is a great guy and the one that I was on which is 459 and this is the client case study with Fernando.

Jason:

Fernando? Wow, really? You’re promoting your own thing. You sound like me.

Fernando:

Well, you know, it is actually interesting. When I talk to clients that already know about me, it makes the conversation go a lot faster, which is great.

Jason:

It does, it does. That’s one of the great things, you know, folks, you listen to the podcast, it’s asynchronous, so that’s just a big word for saying that you get to listen at your convenience, we publish it at our convenience, you know, it’s just a great thing and then after you do some listening and you get to know us, you get to know our clients, you hear it right from them, okay, our clients and their own experiences – come to a live event, that’s another thing I really want to stress, Fernando.

Come to a live event. Some of these events we’re kind of crappy at promoting them sometimes, so some of them are relatively small where we might just have 25 people on a property tour and come to a live event, meet us, undoubtedly some of our past clients are at these events and some new clients as well, you know, you share a bunch of meals with us and get to hang out with us, get to know us, get to know the process, so that’s another thing I’d really recommend is a live event, yeah.

Fernando:

I agree 100%. I always tell people that that is one of the best ways to really step up their game, you know, get educated with a podcast and then network with existing clients and come meet us.

Jason:

Yeah, good stuff, good stuff. Okay, so you want to switch to another question.

Fernando:

Sure. So, do you want to talk about fees as well.

Jason:

Oh, yeah, yeah, fees. So, we charge $900,000 upfront, no refund at all, no refund available.

Fernando:

You’re going to scare some people right now!

Jason:

Yeah, I know, I’m obviously joking around here. No, we don’t charge anything. I mean, our services are free. Now, why are they free? Do you think we’re doing this as a charity, heck no! I’m a capitalist, okay. No, what we do is we operate a referral network, so we get a referral fee from the local market specialist when you buy a property.

I do want to stress something about that that’s very important. See, most of the sort of real estate guru models are based on the idea that, you know, they get you all jazzed up, they sell you, you know, a coaching program for, you know, an outrageous price, $27,000. I met one of our clients that spent $62,000 on I think Robert Kiyosaki’s coaching programs, you know, we don’t do that, okay. We’re in the real estate business, now, what does that mean to you, the listener?

Well, it means a lot, because there’s no disconnect between the real world and what we talk about here on the podcast and what we talk about and we do have some educational products that are very inexpensively priced, but you don’t need to buy any of those. Heck, if you want to, go to JasonHartman.com, we do have some products there.

For a couple hundred bucks you can get some good educational products, but you know, there’s no requirement to buy anything from us, not even real estate! But the difference is what we say here on the podcast, what we say in our home study courses, it has to come true in real life or we don’t make any money. We’ll go out of business, because we offer properties for sale.

We’re an actual real estate company versus the typical guru model, get you all jazzed up by telling you a bunch of unrealistic things that, you know, you could potentially find the needle in a haystack deal, you could potentially do this in real life, that’s what, you know, their promise is, but it is so hard and so time consuming that it is just not realistic, so Fernando, you wanna hear a joke, a bad joke?

Fernando:

Go ahead.

Jason:

I had a feeling you’d say yes.

Fernando:

I should say no!

Jason:

So, here’s my bad joke, okay, and this one is something that is commonly used in the world of multilevel marketing or network marketing, because those deal we’ve all heard the presentations, there are always, you know, sort of the too good to be true category, right, and so this one is similar to that and it’s about a guy who dies and he goes to heaven and he’s at the pearly gates and, who’s at the pearly gates, I think it’s Saint Peter, right.

Fernando:

Peter, yeah.

Jason:

Saint Peter is at the pearly gates and says to them, well, you are here at the gates of heavy and you have a choice to make and he says, well, what choice is that? Well, the choice is do you want to go to heavy and spend eternity here or do you want to go to hell? And the guy who had just passed away says, of course, I want to go to heaven, that’s a silly question. He says, well, actually, some people decide they rather go to hell. Some people think it’s quite fun down there and he says, here’s the thing, no obligation you can go and try it tonight and you can go and check it out and if you don’t like, just come back and you can spend eternity in heaven.

So, the guy says, well, what the heck, I’ll try it, and so they send him down to hell, and the guy is totally impressed, you know. There’s beautiful women down there dressed in gorgeous evening gowns, all the guys are dressed in tuxedos, they’re holding champagne flutes, drinking Dom Pérignon. There’s beautiful buffets with food and there’s dancing and music and he couldn’t believe it! He thought this is phenomenal, I guess hell isn’t so bad after all and he goes back up to Saint Peter and he says, you know what, you were right, I loved it down there.

So, send me back and he says, are you sure? You know, once you make the decision, it’s for eternity and he says, yeah, I can’t see anything wrong with it, it seems pretty good. Well, he gets back down to hell and it’s nothing like it was the night before. It’s really, awful, and first off it’s hot, but you know, it’s a dry heat, like they say about Phoenix where I live, where I live for not too much longer.

And he looks around and people are wailing in pain and they are disheveled and there’s nothing to eat, nothing to drink, and you know, people are clawing and yammering and trying to get scarce resources and it’s just awful beyond belief and he pulls someone aside and he says, hey, what happened? I just made the decision to spend eternity here. I was here last night and it was great and he says, oh, you came last night, well, that was the opportunity meeting. Yeah, well, that’s how it is. That’s basically what these real estate gurus out there are doing, okay, they’re selling this opportunity that’s almost impossible to achieve.

Fernando:

Yeah, I actually have a client comment on that. He’s just weary of the Kiyosaki type programs where they charge $1,000 for a bunch of classes for day dreamers, you know, you could use that money to buy property. I think in someways we’re the opposite.

Jason:

We say, you know, don’t spend any money with us, buy properties, okay, now, look, if you’re a more advanced investor and you’ve got more money and more resources and you’ve developed some wealth already, you know, you can join our new thing, the Venture Alliance Mastermind group and that’ll cost you a little bit of money, but as you’ll see on our first weekend coming up and by the way, Gary Pinkerton just joined us as a guest for that weekend, so welcome Gary, we’re looking forward to seeing you in San Diego.

Fernando:

Oh, that’s great.

Jason:

You know Gary, Fernando.

Fernando:

Oh yeah, I know Gary well, that’s great.

Jason:

He’s a great guy, it’ll be great to have him there and that’s something, if you want to do some bigger deals and partner with some other people in that group, it’s a unique mastermind group dedicated to that kind of thing, but you certainty don’t need to do that. You don’t need to spend one penny with us. Get the free education on the podcast and talk to an investment counselor.

We will refer you to the local market specialist and what we talk about here when we talk about pro formas and properties, you know, if we can’t show you properties like that in real life, don’t buy them, you know, and then if you don’t buy them, we’re not going to earn a referral fee and we’re going to go out of business, ultimately, right? And we’re in business, we’ve got a thriving business, so obviously, it seems to be working and it has been working for many years and there are problems, it’s not perfect by any means, it’s just better than everything else. Anyway, good, good question. So, thank you for asking that. What’s next? Let’s do one more.

Fernando:

Okay, next one. Question about what entities are usually used for real estate income investing.

Jason:

Okay, so, LLCs, the limited liability company is the most common vehicle, but you don’t have to use any entity a tall, you can just buy real estate in your own name and you can protect your assets pretty well by just getting good insurance. Liability in real estate is very easy to insure around, there are complicated discussions that we could have on entity formation, the reasons for doing that, I’m not a lawyer, I’m not a tax advisor, so, there are a lot of complexities to that, we’ve talked about them on prior episodes. I have interviewed attorneys on prior episodes and tax advisers on prior episodes that have discuss that in detail.

One of the great things you can do is go to JasonHartman.com and just search various keywords, you know, like asset protection would be one of them and you can find all the occurrences or at least most of them where I’ve talked about that on prior episodes. But, the LLC is the most common entity, Fernando, did you want to add something to that without us getting into a very long conversation about entities, there’s a lot of complexity there, so.

Fernando:

Yeah, we could spend a whole episode on that or more. No, I usually point people to one of Mark Kohler’s book. Mark Kohler is an attorney CPA, he’s spoken…

Jason:

Who’s been on the show before.

Fernando:

He’s been on the show, spoken in our events and the book that I like is called What Your CPA Isn’t Telling You and you can find it on iTunes or Amazon, you know, you can also find more about Mark on his website, MarkKohler.com.

Jason:

Yeah, and it could be Lawyers are Liars, that’s another book, he’s older book, and he’s spoken at our events, our Meet the Master events several times, you know, most people listening know him and yeah, he can offer some good advice on that too, yeah, good.

Fernando:

Yeah, that book, just quickly, What Your CPA Isn’t Telling You, he describes a different entities that could be formed and how they can be arranged for real estate investment, so it’s an interesting book.

Jason:

Good, good stuff. Okay, good. Did you want to get maybe one more in? We got to wrap up here, but we can do one more.

Fernando:

Yeah, let’s see, yeah there’s a question from Eliot that I wanted to discuss and his comment was, it seems you guys really like Memphis right now, but the properties are a bit more expensive than say Birmingham, Alabama. Is the quality of the properties reflective in the $30,000 price difference?

Jason:

Ooh, that’s maybe a good question for Fernando, but I would say yes, it is. I would say, and a lot of this, it doesn’t necessarily mean that it’s because of Birmingham or Memphis. It’s not necessarily related to this city itself, but it’s related to which ever local market specialist we happen to be working with in that city and their focus on what kind of properties, they are focusing on, right.

So, you could have, you know, a higher or lower end property in any given market, you know, every city pretty much offers a range of properties, right, and that may be more speaking to the local market specialist in what they like or what their focus is at the time and we have local market specialists that we will change them in our business relationship with them, for example, in Birmingham, we’ve been talking to our local market specialist there about getting some B and A type properties rather than the C and B type properties that they mostly specialized in and so, you know, it’s just a different kind of investor for each A, B, or C property class and what they like, you know, it’s not necessarily the market, but I would say, yes, the 30, you know, and it’s not really 30 as a standard, but 20-30,000 on average maybe price difference is reflective of the properties. Fernando, what do you think?

Fernando:

Yeah, so, a couple of comments, the first one, we, you know, as we upgrade our software and be talking about the work Jason and I have been doing on this. We’re going to come up with a dashboard metric, which is like going to be called some sort of barometer that quickly can tell the investor what sort of quadrant this property falls under and it’s going to slide from income to appreciation in one axis and from class A B and C on the other axis.

What this will tell the investor i this is a lower-end property, maybe a Birmingham property, the skew is going to be towers more income, more cash flow for a class C type property, so it’s going to fall into a particular quadrant, which would give you a basic understand of what sort of investment this is, because the investment is different when you go for a lower-end property as a class C property as you compare to a class A property.

In general, when you look at the lower priced properties, Birmingham is a good example, Jackson, Mississippi is another example, they have lower prices for the homes, that’s typical and rents also are lower, but the projected return on investment is usually higher in many cashes, if not in most cashes, but what this also means is the tenant base can be more transient, which turns into, will create more turnovers.

What I’ve seen and what probably should be expected is over an extended period of time, markets like Memphis and Birmingham might perform similarly, but the lower end properties such as the ones in Birmingham and Jackson, might require more baby sitting from the investor, more involvement from the investor, so I tend to think of the lower class C properties in markets that specialize in class C  more towers the more experienced investor. A new investor wouldn’t necessarily have the experience or sometimes the patient and the understanding to deal with more issues, which should be expected when you have lower rents.

Jason:

Yeah, I agree, you know, for investors, look it, you can have a good or bad tenant on any property, okay, there have been bad tenants who’ve rented mansions from people and, you know, caused problems, okay, but by enlarge, as a general rule, and of course it’s general, it’s a stereotype, I get it, that if you stick with the A and B properties, you’re going to have less attention that you need to pay those properties. The C and even lower properties in some cases, they will generally look better on paper than they work out in real life and that’s something to know, okay, so yeah, good point, good point. Fernando, it’s already 39 minutes. We gotta wrap up.

Fernando:

More questions if you want.

Jason:

We do have more questions and let’s save those for a future episode. So, those were great and I thank you for bringing those to the listeners, Fernando, that was really good. Do you want to share any general thoughts before we go, just as we wrap up here?

Fernando:

Just one other trend that I am seeing when I talk to clients, again, I’m learning quite a bit in this process, but there’s a lot of apprehension to get started to buy the first property. I know Sara, our other investment counselor, has mentioned this in the past that that’s one of the main piece of advice that she gives to clients is that don’t wait to get started and bu your first property, because the learning for that first property is going to be so much greater and the depth of the learning is going to be much more than you can get from listening to the podcast and listening to the other clients. Really, by buying the first properties when you learn.

So, don’t over think the numbers too much, you know, there’s slight differences between one property or another, but if you are picking one of the properties from the markets that we recommend, you usually going to be in the – going in the right direction with a property that has a good chance of performing well.

So, don’t spend too much. I spend six months before I got started buying properties, analyzing different properties with a spreadsheet and trying to understand the minute differences between one property tax versus another, you know, how much is being paid for insurance or one versus another and it’s really, it wasn’t necessarily. I think I lost about six months. I should have started six months before. So, don’t wait.

Jason:

Yeah, right, that’s a great thing Fernando. You know, this business of investing and anything in life, it’s always on the job training, if you will. You’re going to learn the most when you actually do it, when you actually have a property and you have your money in the game, it brings a new you to the whole thing, okay, when you got something at stake and so I think that’s important, you know, don’t agonize about stuff. Get started, you know.

The journey of a 1,000 miles begins with a single step. It is amazing how time passes so quickly and how you can grow your investment portfolio so quickly and really, really do some amazing stuff. I’m going to talk here on an upcoming episode about my own experience as I have throughout the last 523 episodes, but more about my own experience and just this amazing growth you experience.

I recently along with one of our clients sold a 125 unit apartment complex and now we’re buying potentially three more properties through that 1031 exchange. A marina, yes, I never thought I’d own a marina, a mobile home, an RV park, and another larger, better apartment complex and, you know, this is how you become a real estate mogul, you know? It all started with the first little crappy one bedroom condo that I bought when I was 20 years old and, you know, diversified into a whole bunch of other properties, so there’s a lot you can do here. The most important thing is that you get started.

So, Fernando, thanks for talking to me about this stuff and bringing these great questions to us today and listeners, thank you so much for your continued faith in us, thank you for listening to the show, go to JasonHartman.com, leave us a message, check out some of the home study courses, the blog, contact us, we’ll be glad to help you, no charge, as your investment counselor and we just look forward to growing with you and helping you invest and I wish everyone happy investing. Thanks again for listening.

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