In the first part of the show, Jason Hartman shares feedback from a listener about Self Directed IRAs for real estate. He encourages doing thorough background checks on the custodians. Afterward, Jason welcomes a long-time listener of the Creative Wealth show, Greg Scott, to talk about Detroit. He talks about the trends in the Detroit area, optimism for the city proper, and possible opportunities in Southern Michigan.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Announcer 0:14
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 multi millionaire 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 1000s 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. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:05
Welcome to the creating wealth show. This is your host, Jason Hartman. And we are at episode number 548 548. You know, I cannot believe how far we have come, it really amazes me constantly, and we got some great episodes coming up for you. Of course, 550 is right around the corner. And that will be a 10th show. And we will have Joe Vitaliy. You’ve probably heard of Joe Vitale before, he’s a famous guy, he was in the secret bunch of other things. And that’ll be really good. And then our flashback Friday, which is coming up Episode 549 will be just yours truly just a monologue, where we talk about the 30 mistakes that investors make that are preventing them from financial independence 551 an interview I just cut yesterday with the ever so famous Gary Hoover, you may have heard of the company Hoover’s big wig games book stop, which was a chain of bookstores that he sold for $42 million, many years ago, which, you know, 42 million was a lot back then adjusting for inflation. And then our next flashback Friday for 552 will be Thomas soul, talking about the housing boom and bust. Today we’ve got a great client and listener, I actually didn’t know that this gentleman was a client. He just reached out to me when I was in Detroit and talked about some information about that city and wanted to correct some of my perceptions about Detroit. And then we got into a bunch of other interesting topics as well. And turns out, he’s been a client for a long time and a listener for a long time. So we’re going to talk with him today. And I think that will give you a lot of good insights in terms of your own real estate investing portfolio. So before we get to Greg, and that’s Greg Scott, by the way, who will be with us today. Let’s take a listener question a little bit of feedback, really, on one of the recent episodes that we did on self directed IRAs. And before you hear this question that I’m about to play or this comment from our listener, I want to tell you, I agree with him. And I’m gonna give you one part of a solution to the problem that he so rightly points out. This is Scott McManus, not to be confused with our guest, Greg Scott, two different people. And he’s got a good comment here on self directed IRAs and one of the big pitfalls,
Listener 3:35
Jason, regarding self directed IRAs, you just had a podcast on one, a word of warning, my first foray voyage into that area, using my IRA and Roth IRA money to buy a six Plex, the custodian promptly went bankrupt. And now now is in receivership and I’m going to have to pay probably 10 15% out of my IRA savings to cover for the custodian who was just a total fraud. The guy was APS American Pension Service out of Salt Lake City, Utah. I opened my IRAs in December, bought real estate in january first, and by April 15, a guy was in receivership. And I had done my due diligence, there was nothing, nothing on the internet about him being bad or any investigations going on. But they must have been going on just the prior four months or the four months prior when I was setting up my accounts. So a word of caution. The investors need to really watch the custodians and perhaps use one of the larger ones.
Jason Hartman 5:00
Yeah, that is some great advice. So, you know, to two basic broad comments on that. One is when it comes to background checks, be careful with that, folks, because a lot of people rely on, you know, background checks and internet searches and stuff like that. And it is really amazing. I mean, think about it. I’ll bet you, although I don’t know this, but it’s just speculation, but I’ll bet you Bernie Madoff would have passed background checks with flying colors. You know, certainly his resume being the former president of NASDAQ. Certainly john corizon, former governor of New Jersey and the MF Global scandal, a lot of people will pass a background check with flying colors and their total krux. Okay, so be really careful of relying on that kind of thing. That’s one point on that. Then the other point is, I think one of the ways to mitigate your risk of doing a self directed IRA with some bad apple is, number one, check them out, you know, kind of defeating what I just said, but you certainly should do a little bit of checking for sure. And some due diligence, because they might be an overtly obvious bad choice. But also go with one of the bigger, more established companies possibly that’s that’s good advice, too, although big companies do really bad things. Certainly, we see that all the time on Wall Street. But the concept being that, you know, maybe the bigger player has more to lose. And so you know, maybe they will be more careful, maybe, you know, they’ve invested so much in their reputation over the years, that they have more incentive to keep it clean, and do right by people. That’s a thought. And then the other part of it is have a entity inside of your IRA, have your own LLC, you know, you can have multiple LLC in your IRA, depending on how big your account is, and what you want to do. But I would say if you have an entity inside of your IRA, and that the money in the IRA, if there is cash in it, there’s probably got to be some cash in it. But cash or properties or whatever investments you have inside of it, maybe notes, loans, that you’ve made hard money loans that you’re doing, or, you know, mostly properties, having them inside of the entity that’s inside of the IRA. Because in that way, I would think if you have a problem, like like Scott was mentioning, then you will still be in control of the entity, they will not I mean, your IRA is in control of the entity technically, but the money and the assets are inside of that entity, not directly in the custodians account, where, you know, if they are crooks, they could they could just rip you off. Same is true with 1031 exchange companies, you got to be careful of that to exchange accommodators. And, you know, any company, you know, escrow companies, title companies, lawyers, certainly lawyers, I mean, God, there are tons of lawyer crooks out there. I’m sure nobody will dispute me on that. Sorry, lawyers, we love some of you, but some of you not so much. It’s just a mix game. But you know, lawyers take money in their trust accounts and, and take off with that money from time to time escrow companies do it. This kind of stuff just happens. Okay. So obviously, be careful. But I would think one of the ways you can really mitigate risk there, again, in the self directed IRA, is to have an entity inside the IRA, and keep the cash in that entities bank account, because then it’s not directly in their hands. I’m not a lawyer again. But I think that that would probably helped mitigate a lot of that risk. So that’s my thought.
Hey, we’ve got a fairly long discussion with Greg Scott today. So let’s just get right over to it. But before we do, I want to just remind you, of our big event coming up in San Diego, at the end of the month, just about a month from now, actually, it’s going to be in the Mission Valley area of San Diego, very accessible and easy to get to whether you’re driving from somewhere in Southern California, or whether you’re flying in it’s close to San Diego airport, I would recommend that you do not rent a car. Just come in and take Lyft or Uber over to the hotel. And you know, there are some good attractions and shopping and restaurants right by the hotel within walking distance or a very short ride with a Lyft or Uber car or you know if you’re old school you could take a taxi but that’s kind of old school, right? So join us for that event. We’ve got earlybird pricing just for a couple more days. Okay and it goes away quick. People have been signing up for that event. So go to Jason Hartman dot com, click on events and join us right away. Because that’s going to be Jason Hartman University live, it’s going to be a totally new event, of course, you’ll hear some of the same concepts that we talked about regularly. But there’s going to be some real new stuff there, too, that I shared on the last podcast. So be sure you join us for that. And by the way, we appreciate all of you so much who are going and reviewing the podcast on iTunes or Stitcher Radio, or whatever platform you’re using. We really appreciate your reviews, it helps us get the word out about the show. And anyway, thanks so much for that. And let’s go to our guest today, Greg Scott.
Hey, it’s my pleasure to welcome Greg Scott to the show. He has been a listener to the podcast for I’m not exactly sure how long but he’ll tell us. And he called or reached out to me after I was in Detroit, because I talked so much about it and wanted to give us another perspective on that market, and then maybe talk about some of his other investments as well. Greg is also a client. So it’s just a pleasure to have him on the show. Greg, welcome. How are you?
Greg Scott 11:09
I’m doing well. Thank you for having me on the show. Jason, how are you?
Jason Hartman 11:11
Yeah, well, it’s good to have you. It’s good to have you. So you know, I was in Detroit recently, sort of a side mission from a property tour there that we did in Chicago and in Grand Rapids. After hearing that show, you reached out and said, Hey, you know, you really might want to think twice about some of your thoughts about Detroit. And, you know, I love to beat Detroit up. It’s probably not fair. But it’s just such an amazing story really, of, you know, how that was one such a great city and, and what it’s become, but like I always say all real estate is local. And that doesn’t just mean you know, the difference between Chicago and Detroit or Atlanta. And you know, Memphis, it also means within a city or the suburbs, the neighborhoods, the sub markets. And there is quite a bit of distinction there, according to you. Right, Greg?
Greg Scott 12:06
Oh, absolutely. Night and day, depending on where you go within Metro Detroit.
Jason Hartman 12:10
Well, as some people say jokingly, educate me.
Greg Scott 12:12
Well, first of all, Jason, I want to answer your original question, how long have I been a listener? Actually, when I first discovered your podcast, I could still find episode number one, and iTunes, and I’m proud to say I’ve listened to actually every single episode.
Jason Hartman 12:23
Oh, my gosh, you are my favorite listener of all.
Greg Scott 12:27
One of the early ones, actually, and I do I do very much credit you with getting me involved in real estate investing. I had tried to do a flip originally, that went sideways. And I ended up having a condo that I had rented out after that after a bad flip. And I realized that being a landlord wasn’t all that tough. And eventually, I found you on the web. And that really got me into real estate investing. So thank you for that.
Jason Hartman 12:54
Good, good. Well, well, thank you. Thank you for being a client too. I didn’t know until we have this phone call that you you actually purchased five properties through various cities.
Greg Scott 13:01
I have two in Indianapolis, one in Atlanta, one in St. Louis. And then actually I had the first one, the first investment property that I sold was one that I bought in Arizona with you and after two years has it gone up about 60% in value, and I decided I could put the cash to more investing use rather than just sitting on the cash flow. That was probably a very good decision.
Jason Hartman 13:23
We have been in and out of Phoenix over the years and in and out of a couple different markets that you know, they just get a little too frothy for us. And then we get worried we’re we’re just too too scared of making a bad decision. But when did you buy that Phoenix property? How long ago was that was the first one you bought through us?
Greg Scott 13:38
No, no, actually, I live in Detroit. And I was just starting to get into investing. And I was a little nervous to go too far. So my first property was in Indianapolis with you. That was further down the road. And I don’t remember now the exact year I bought it. But I remember looking at the charts on Zillow. And with that one, we just got super lucky. We bought it right at the bottom. And then we hit a little plateau. Two years later, we sold it and turned it into other real estate investments. So it was a good deal for us.
Jason Hartman 14:06
Yeah, yeah. Good for you. That was a that was sounds like it was a perfect decision. But gosh, you know, when you when you look around the country, it sounds like you played the Phoenix market very well. Because that’s, that’s kind of a hybrid market. And you’ve lived in Detroit all your life. And you’ve been listening to me all these years beat up on Detroit and you use you still a client. I appreciate that. Thank you.
Greg Scott 14:28
In real estate circles, I know Detroit is kind of the poster child for a bad real estate market and the bankruptcy proceeding certainly didn’t help that reputation.
Jason Hartman 14:39
Well, that but that actually might help the city though, that you know, like years ago, I was saying the best thing California to do would be declare bankruptcy, although it’s never happened that a state has done that. You know, it’s a fresh start. I mean, that’s why that’s why you know, that’s why in the US, there are so many our system is so forgiving to people and you know, many people say oh, it’s not fair. Those deadbeats get away. With Murder type stuff, but there are a lot of stories in the US about people, you know, entrepreneurs specifically who went bankrupt and, you know, they got their fresh start and did something great after that. And the same is true for a municipality, you know, you can, if you wipe the slate clean and start over a lot of times, that can be the best thing ever.
Greg Scott 15:19
Oh, you’re absolutely right. And I can tell you a few stories about some of the changes that I’ve seen in Detroit. But before we get too much into that I want to I wanted to mention you talked about is that all real estate is local. And certainly the city proper Detroit has been really rundown. And if you look at demographic charts, its population peaked in 1950 and has gone down since then. But Metro Detroit actually peaked in 2000. Census. And it I think it only dipped because the automotive industry was having a terrible time in the last census. But the the automotive manufacturer has been hiring like crazy, a lot of people have been returning from having moved out of state. So wouldn’t surprise me when we get to 2020 if you see an uptick in population again, Wow, that’s amazing.
Jason Hartman 16:04
Actually, before we dive into this too deeply, there’s one more thing I’ve got to say. Do you still have my old episodes like episode number one downloaded on your computer or your iPad or anything? Or your iPhone or? No, it wouldn’t even be iPhone, iPod.
Greg Scott 16:20
You know, I may I had. I recently upgraded my computer, so a lot of that stuff got purged, but I could check if you want.
Jason Hartman 16:28
No, I actually, you know, I’m embarrassed. So I really don’t want anybody to get a hold of that. Because I, I I think I’m better at this now than I was back then. I hope so at least.
Greg Scott 16:40
Oh, I’m sure you are but you couldn’t have done too poorly. Cuz you got a lot of listeners now. Yeah.
Jason Hartman 16:46
Well, anyway, I just thought that was funny. You’re you may be the only person around that heard episode number one, and is still listening to the show. I don’t know.
Greg Scott 16:56
I love your podcast, I think you educate you entertaining. And I want to learn something, even if it’s not real estate related. Well, great.
Jason Hartman 17:03
Well, I’m glad I’m glad. And I it really is so great to hear that. That’s what that’s what keeps me going with this stuff. And you know, a lot of this stuff I do say I have to admit, kind of for entertainment value. Like I’ll try to be intentionally controversial sometimes just to sort of get people you know, get them a little a little a little huffed up Abby. So it’s, so they all kind of stick with it. But well, you know, so what is going on? In Detroit? I mean, obviously, it’s like a, it’s like a tale of two cities in a way, you know, there’s the the inner city, which is a mass. And then the suburbs, which a lot of people have, those have actually improved, maybe because of this, you know, because of people leaving the city proper. Right. And in going into the suburbs, that kind of flight in that direction?
Greg Scott 17:50
Well, I would say certainly between 1950 and 2000, there was an exodus from the city and the population and the population in the suburbs grew. But, you know, just a little factoid for Oakland County, which is one of the suburbs of Detroit is the 11th wealthiest county in the United States. And people live in Oakland County, which they have I’m part of Metro Detroit, but it certainly paints a different picture than, you know, the falling apart buildings and the bombs and the garbage.
Jason Hartman 18:18
Yeah. dramatically different picture. So, I mean, are those values going up? I in, you know, in the suburbs? Are there any places to invest? I mean, are the properties too expensive to have good RV ratios? Is the climate in those areas, like a homeowner climate versus a, you know, a thriving rental market for, you know, for landlords is what I mean, of course,
Greg Scott 18:42
I would say again, Jason, just like you always say, everything’s local depends on where you go, I can take you to a place with multimillion dollar homes that probably aren’t good rentals. I have a lot of friends that have rentals in different parts of the city, Dearborn, which is where I work. I have a friend that has six properties. They’re his wife’s a real estate agent, and they’re just knocking it out of the park. But there’s a lot of homeowners there, too. It’s not strictly rentals. And so you can find the gamut. You can find those $500 houses, they’re probably not worth $500. And but you can also find multimillion dollar properties and and you just got to find the neighborhoods that are, you know, in the right zone for renting, if that’s what you want to do. Yeah. So what you know, now, do you have I know you bought the size properties through our network in the markets you mentioned, but do you own properties in Detroit area two, we currently only own one rental property aside from our own residential property. And actually, the majority of our single family right now is in Dallas, but we’ve been starting to move into multifamily too. And so I have a lot of colleagues that I work with down in Dallas and they know that I’ve been getting into multifamily. And they say well, how can you not do in multifamily in your own backyard, you’ve learned enough to go do it. And so I started thinking about it. And at first, I wasn’t sure. And that’s why I actually developed that paper that I shared with you is kind of convinced myself that it was a smart thing to do. And that’s why I did all the research on the demographic trends and what was happening in the state. Right, right.
Jason Hartman 20:15
Yeah, that was an interesting presentation you sent over. So thank you for sending that. Tell us about some of those trends. I mean, I don’t have that in front of me now. But just, you know, share some of that stuff with the listeners,
Greg Scott 20:24
if you would? Well, as I mentioned, the Detroit population peaked in 1950. And I think you actually hit it right on the nose. In some previous episodes, there was a lot of social programs that impacted that the unions became very, very strong, which drove some of this as well. A lot of corruption that happened in the city. I had a friend that about 10 years ago, was trying to start a restaurant in the city. And he said, he had so many government officials and religious leaders coming to him for handouts, after spending about $50,000 trying to get up and go and he just said, I can’t make it work here and pulled the plug. So I mean, it’s hard to do business when you got everybody’s hand in your pocket. Right.
Jason Hartman 21:07
But you know, it has that tone down as the government kind of gotten under control a little bit more, because what’s interesting is you look at a place like Pittsburgh, you know, which is a rust belt area. We haven’t done anything in that market at all. But we’ve certainly been looking at it for several years now. And you know, it’s kind of having a bit of a Renaissance. I mean, I, I’m not going to say it’s, it would be on par with Atlanta, Memphis, Dallas, Houston, you know, any of these other cities that we we like, but these areas do change over over time. I mean, it’s pretty long periods of time. But, you know, they do kind of that pendulum is always swinging in other words, right, you know, things will, things will be on the right side of the political spectrum. And then, you know, capitalism will flourish, job growth will happen. And then everybody gets really complacent and comfortable. And, you know, they start moving to the left, and then they get really bogged down too many regulations do not need too many taxes, business starts to subside, and job growth subsides. And then ultimately, it might get even worse than that, and really take a downturn. And then, you know, it might swing back years later, right?
Greg Scott 22:23
Well, you know, actually, I have never been more optimistic in my entire life than I am right now for the city, Detroit. And I’m not talking the metro area right now. But the just the city proper. I do think that the bankruptcy proceedings was cleared out a lot of bad debt, and cleared out a lot of departments that should have been cleared out of the city a long time ago, as well as the feds, recent corruption charges that put a number of people in jail really changed a lot of things. I used to work downtown downtown Detroit, and you get about two or three blocks away from the shiny buildings. And it would just be bumps and garbage. for miles. I went down there last summer, and they built a new walkway along the river. And as I’m walking in the place where there used to just be bumps in garbage, I see young couples jogging with the baby strollers, and people biking and people hit hanging out in the sun. And there’s no bike paths where there used to be just deserted streets. And my son, my son is actually going to go to college this fall and Wayne State University, which is right downtown, and 10 years ago, I might not have led him but we’ve gone down there a number of times, and it’s really looking nice. There’s some we saw he got excited about buying real estate there. So it’s good from all the things that I’ve been sharing with him. He He said, I want to go buy something down there dead. I went to look. And there’s a one bedroom loft within a couple blocks of the of the university there for 500,000 bucks. It’s uh, yeah, I think it’s a little too pricey.
Jason Hartman 23:58
That’s a that’s a little that’s a little pricey. I don’t think I’d want to spend that kind of money. But tell us about, you know, in this area that you were impressed with, tell us about like the type of property and investor could buy in that area. How much does it cost? What will it rent for? I mean, what is the whole picture look like? It sounds like you You think the area’s coming back? And that’s great. But tell us about a sort of a typical deal one might get,
Greg Scott 24:22
Wow, well, some of those neighborhoods are really transitional. So you got to be very, very careful if we’re if we’re talking, you know, the city proper,
Jason Hartman 24:29
I would assume it’s very spotty. Yeah, yeah.
Greg Scott 24:32
And in fact, I I’m still would be nervous, unless I really knew a neighborhood well, and I knew what was going on. I have a friend who is completely rehabbing an apartment now that’s probably 100 years old. And there’s but he’s in one of the areas that’s really seeing some redevelopment where there’s already tall buildings and such. But literally, you go two blocks over and you can be in an area of complete blight. So you gotta you gotta know what you’re doing. But There are other neighborhoods around Metro Detroit where, you know, feel super comfortable. Like, like I mentioned Dearborn, where my friends is buying, you buy houses very much similar to what you see on your network, they tend to be a little bit older. So they might be 1920s 1930s bill, but there’ll be about 100,000 bucks and rent for the 1700 bucks a month.
Jason Hartman 25:21
Okay, so that’s like a little better than a 1% Rv ratio, which is, which is great, you know, but you can do that in other markets that don’t appear to me to be as risky, would you? I mean, just trying to be really objective, of course, Detroit’s your hometown. So maybe you’re gonna be a little partial. But, you know, why would you do that in, in the Detroit suburb versus doing it in Memphis, Atlanta, Houston, you know, any one of a number of markets that we might recommend?
Greg Scott 25:54
Well, for me, personally, my wife and I both worked in the automotive industry. And at one point, in the deep dark days of the recession, we looked at each other and said, Oh, my gosh, this is kind of scary, because we could potentially both get laid off. And at the time that our house was completely underwater. So that was 2007. Around the time, we started getting into real estate investing, and we actually made a conscious choice at that time, that we actually wanted to invest out of state, which is how we ended up discovering your network. And so most of our investing has been out of out of Michigan, but now that we’re looking at multifamily, and that’s not something I want to do long distance, that we’re kind of coming back home. And there are opportunities here. We’ve, we’ve been out looking and and like I said, there’s just depends what community you’re in. Some are more stable. Only 40 minutes from my house is the city of Ann Arbor, where the University of Michigan is in a lot of medical businesses and some very, very stable markets. So there’s, there’s still a lot of opportunities in southeastern Michigan right now.
Jason Hartman 26:57
Okay. Okay.
Greg Scott 26:58
Good.
Jason Hartman 26:58
So tell us what you think about the future. I mean, you mentioned you and your wife worked for Ford. And initially, I think you were making a very smart decision in that you did not want to have your investment portfolio tied to the same industry, your income from your job was tied to right. Correct. Yeah. Yeah, very, very wise, by the way, but now that you’re diversified in terms of your properties, you know, that’s not as much of a concern, you could have some properties that are in your area that are that are tied to that industry, right?
Greg Scott 27:30
Oh, yeah, well, and certainly, depending on where you pick to, because there are neighborhoods that are far more susceptible to a downturn in the automotive industry, as I mentioned in arbors, very close by even the neighborhood that I live in right now isn’t as highly correlated to ups and down to the automotive industry as some neighborhoods where you’ll have, you know, like Dearborn is where ford motor company is headquartered. And it goes very much up and down with the automotive history, because so many people want to live near where they work. And, therefore, if there’s any layoffs or there’s a lot of hiring, the real estate values go up and down accordingly.
Jason Hartman 28:08
Well, I found your PowerPoint presentation. And I just thought maybe we could take a look at some of this stuff. This is a great presentation. By the way.
Greg Scott 28:16
Who are you showing this to one so far? I’ve only showed it to a handful of friends and you.
Jason Hartman 28:24
But why did you go through the effort? I mean, are you are you looking to raise money for deals in Detroit? Or what?
Greg Scott 28:31
What do you have in? Well, as I mentioned, I’ve joined a few other people, actually, mostly in Dallas, which is where I’ve met a lot of folks. I’m currently in two apartment deals, and we should close on another one here within 30 days. And, you know, I’ve heard you talk in the podcast about Be careful of syndicated groups, and I absolutely agree with you. I’ve had some friends foreword, me some from other people on there. A lot of times they’re skimming all the profit right off the top almost all the time,
Greg Scott 29:01
but not always. But
Greg Scott 29:02
yeah. Okay, go ahead. When I’ve seen somewhere, I’ve seen somewhere they come in, they said the syndicator gets 40% of the profit. So like, Okay, well, what’s left for the person that put their money in? Oh, but wait a sec. It’s worse than that. Because that’s only the disclosed share here, right?
Jason Hartman 29:17
They’ve got all these all these other little fees, that would be disclosed, probably. But then they’ve got all these relationships that they’re getting all this favoritism with. And you know, that that adds to it and it gets worse and and then they’ve got whatever they’re doing that is not aboveboard, you know, if they’re doing that, and a lot of them are because a lot of these things are kind of like gray areas, you know, that’s why I just, gosh, be a direct investor. But so you’re, you’re doing this anyway, at least you’re jumping in eyes wide open.
Greg Scott 29:49
But you know, I’ve heard you talk about your venture Alliance group, and it surprises me how much what you’re describing is similar to this group of people that I’ve gotten to know because we work together to find deals. And it’s amazing. And they’re not. They’re not these big syndicators like wall street who are trying to just grab as much money as they can. They’re more of a mom. And that’s the kind you definitely want to avoid. Yeah. So their mom and pops that get 10 people together and say, Hey, if we all pull our money, we got enough to buy an apartment, I’ll run it. And yeah, they get a little bit of extra kind of bonus, I guess you call it because they’re doing all the work. But it’s a small group of people, I usually know all the other investors that are in there with me. And after doing a few of those, the people that are listening, how can we not doing in Detroit? We’re we’re all down in Dallas, and we’d love to be a little bit more diversified. If you’d find something up in Detroit, we might be interested in going in with you. And like, Oh, okay. And so again, I came back to this presentation, I was trying to convince myself that I could do it because my immediate thought was, anybody I approach out of state is going to have the same impression that you hear on on your podcast, and some of the other ones like Detroit, who the heck would ever want to invest in Detroit? So I wanted to see if there was a compelling argument there. I can counter argument to say, Well, look, yes, there are some issues at the city proper. And you can see that in some of the demographic data that I’ve put in this presentation. But there’s also some big upsides. And there’s some areas that are doing very well. And actually, some of the information may surprise you, because, as I mentioned, actually, the population of Metro Detroit kept growing through the year 2000. And I’ll bet you it’ll be bigger again, as we hit 2020. Right? You
Jason Hartman 31:33
know, what, though, see that that population number that can be deceiving? I’m not saying it is in your case. But for example, you look at the state of California, it has had for the first time in a long time, in the early mid 2000s, I want to say like 2003 ish, I can’t remember. But there were actually a couple of years, where the population of the state of California actually declined. It was slight, okay, it wasn’t major. Okay. But it did decline a bit. And that is an amazing thing. Considering that you have the Sunshine State, you know, this, this area where, of course, shares a border with Mexico, and you have that kind of immigration, and you have just a place where the population is really just always gone up for the longest, longest time since the West was set, you know, the West was settled. Okay. But But the interesting thing is, when you really drill down on that population, you got to ask yourself, what type of population? Is it? Is it illegal immigrants from Mexico? Or is it people from other states, because California had this reputation for a long time, maybe it still does, I don’t know for sure. Because I haven’t heard the comment lately, that literally, if you’re in any other state, especially a neighboring state, and you want to get on the welfare rolls, you want to get stuff for free. California is like the best place. Just come to California, and be a slacker, and you’ll get lots of free stuff. That was the deal. And so, you know, at that same time, the middle class in California was fleeing. I mean, and you know, I haven’t really looked at this much lately, to be very honest with you. And that’s why I say was in the past tense. Maybe it still is, but for a while there, and when I left California, I was looking at a lot of those stats, you know, in the in the maybe a couple years beforehand. And I mean, it was not looking good, even though the population was increasing slightly. At that point. It’s, you know, what is the makeup of that population? That’s the other question. You’ve got to ask yourself, not just, you know, raw numbers, but what kind of numbers right, and one of the charts that you you talk about is somewhat interesting. When you talk about, hang on, I’ll find it here, the income profile, and you look at like, you know, per capita income comparison, of course, New York, $119,000. You know, Maryland Fairfax, all that East Coast stuff. You got to make a lot of money there because you can’t afford to live there. Santa Clara, that’s an expensive area to 66,000. And then you get down to Oakland, Michigan, Oakland County, and you get $55,000 a year, and the Detroit MSA is 42,000, Michigan as a whole 38,000 in the US 43,000. So that’s kind of really not that bad.
Greg Scott 34:32
Like I said, Well, yeah, Oakland County is pretty well. So you do have a lot of the automotive executives live there. But you also have there’s there were some other big companies polti I think their headquarters may still be up here in Woodland Hills, Michigan, although I know they were they were moving some of their operations to California. There were some banks Comerica Bank until recently was headquartered here. They moved downturn, down to Texas, but there’s still a lot of interest. around here. And so there is some money. Yeah, yeah,
Jason Hartman 35:03
yeah, there definitely is. So what do you do for Ford? What What do you and your wife do? What kind of positions do you have in the auto industry, if you care to share that with our listeners,
Greg Scott 35:12
I’m in marketing. And my, my expertise is what they call Product Marketing. So usually, I’m working with the engineers to develop the products for the different markets I support. Currently, I’m in an export role. So I help support about 80 countries around the world and work on making sure their advertising is is getting out to those markets. So we sell a lot of product. And then my wife works in finance. Right now. She’s in the profit forecasting group. And so tomorrow, tomorrow morning, Ford Motor Company’s announcing profits, we’re all gonna wait anxiously to see what those are. Well, you already know. I don’t know nothing. She knows? For sure. I’m sure she does. Yes,
Jason Hartman 35:59
I gotta just ask you, you know about the auto industry in general. I mean, are you guys talking much about my favorite thing in the auto industry, which is the coming of the self driving car, the autonomous vehicle? I know that really the auto companies that seem to be paying a lot of attention to that are outtie Tesla, Mercedes? Who else’s Oh, a Hyundai. And you know, those, those are really, and BMW are really into the self driving car thing. I don’t know how much Ford has to do with it. But, you know, what do you think about that, I
Greg Scott 36:31
mean, is that I that just seems like such a game changer on so many levels. That’s huge. Jason, and everybody in the industry is focusing on it. I think the ones you mentioned is probably done the best with the press releases, and maybe prototype vehicles, but everybody’s working, everybody’s working hard on it. And you’re already actually starting to see pieces of it in the car where they have reverse sensors that beep, and cars that like the Ford cars now have auto parkade, which allows you to say hey, find the spot, and you let go the steering wheel and the car will steer itself into the spot, for you have to manage the brake and the throttle. But otherwise, the car will actually turn into the spot for you. And those are all bits and pieces of technology that will be added together, that eventually will allow you to do it. But from a uniform a manufacturers perspective, it’s fairly easy to say, hey, what if a car gets on the freeway and goes from point A to point B? But what you got to pay attention to is all the other things like well, what if it’s snowing out? Or what if the bridge falls down? Or what if tractor trailer rigs falls over sideways across the road? How does a car recognize those things and keep the driver safe? Are the occupants user even driving now? But how do you keep the occupants safe? And I think that’s going to be the hardest part is they’re going to have to work through all those issues. Until everybody’s comfortable, that is pretty safe.
Jason Hartman 37:55
I mean, I think about this as I’m driving down the road, and you know, I want to be the total early adopter, I just cannot, you know, I’m not I don’t like to drive, I think driving is an obligation more than a pleasure, for sure. You know, unless you’re out on a, you know, deserted road with nice curves, and you can drive really fast, that’s fun. And crank up the music, you know, or, or crank up the creating wealth podcast, whichever you like the most, you know, whatever really gets your blood flowing, you know, but there are so many little funky contingencies. I mean, what if an animal runs out on the road? What if I remember one time I was driving on a freeway, and there was a work truck in front of me, you know, some contractor type person, and it was a pickup truck, and a pick axe fell off the truck on the freeway. And I remember that thing tumbling toward me, you know, head over heels, quite literally that axe and you know, that could have hit me right in the windshield. And that might have been the end? You know, there are so many like little things. I can’t imagine that a computer can actually figure all of this out. But I guess we’re just about there almost right?
Greg Scott 39:01
Well, it wouldn’t surprise me if we get there. But against the all the engineers and all the government officials, and the lawyers are gonna have to figure all that out. But I think before you’re gonna really start seeing it happen, but we’re getting there fast. And I’ll point out something that may be of interest to you. There is an automotive association that supports primarily the US based automotive manufacturers that have engineering here in the United States. In the city of Ann Arbor, they just built a fake city to to test self driving cars. There’s a bunch of news articles that came out this last week on it so you can take take a look at some of those pictures. Yeah, yeah. So
Jason Hartman 39:42
what would I What would I search for that? I’m just curious. I’m curious about it.
Greg Scott 39:46
I bet if you just searched Ann Arbor self driving car test, you’ll get a pop up though. There’ll be articles in the detroit news and the Detroit Free Press for sure.
Jason Hartman 39:54
Do you agree with my thesis on the self driving car in that it may be a reality game changer for the world of real estate. Because, you know, the three cardinal rules, we all know, Greg, what they’ve been location, location, location, and my whole idea of, you know, you could live in the lower cost area, and, you know, visit the higher cost area very easily if you had a self driving car. But the example I’ve used many times is, you know, you could live in Phoenix where I used to live for four years. And if you want to come to La Jolla, where I live now, which is just ridiculously expensive, you know, you can, you could go to bed and, and wake up in La Jolla, you know, from Phoenix. Now, of course, the energy costs, you know, you still have to have propulsion, that has to stay low, and you have to be able to, you know, sleep in a moving vehicle, but I’m sure we can adapt to that. A lot of people can already, you know, it’s like when you have a chauffeur, 24, seven, that doesn’t get tired. I mean, you’d really like you could really live nomadically I mean, I can’t wait till they have self driving motorhomes, I used to have a big motorhome. And I love that except for the driving my own The only downfall, I think you’re 100%, right. And if we get to self driving cars, and I can’t even you made some good predictions, but I really have no sense for how dramatically it could change things. Because you’ve talked in one episode, I heard you say, gee, you have all these parking spots in cities, and you can move all those parking spots farther away to less desirable places. Wow. Then also you can have new apartments there and new restaurants, whatever, wait, it gets even better. You don’t even need parking spots. Because the drive around forever. It doesn’t ever need to stop. Okay, the car can run for 24 hours, seven days a week until it breaks down, you know, and then it will just take itself to the shop, you know, and one of the techno futurists that I was reading an article about Greg, this was fascinating to me is that this sort of socialistic concept of maybe self driving cars don’t actually need to be owned by anybody, the car would literally own itself. Now, that’s such a weird idea. I can’t even sort of fathom it, but but the idea is, it would be like an Uber car or Lyft car, and it would charge people for rides, you know, they’d probably be on a smartphone or a watch really, or some kind of wearable computer at that point. And you would just jump in, it would take you wherever you want. And then when the car needed to be recharged with electricity, it would stop and at a charging station by itself of its own accord. When it needed. If it needed gas or hydrogen or whatever it runs on, it would just go to the filling station and fill itself up. And when it needed repairs, it would take itself to the shop. And when it in here was the amazing thing. And when work slowed down in a city that it was serving, it would migrate itself to another
Greg Scott 42:54
city that was busier theoretically, yeah, you could do that. And one of these I’m just more shorter term excited about is, if we got to the point where we have self driving cars, and they’re really good at avoiding accidents, we could probably start removing a lot of the safety features that at that point become irrelevant, that are actually weigh a lot most of the safety. Most people are recognized with a lot of the safety features airbags and side intrusion beams, the roof crush requirements. They are very, very heavy. And I mean, we could easily have 5060 mpg cars if we didn’t have all this weight in it. That’s a good
Jason Hartman 43:30
point. I thought you were going at the expense angle. But yeah, you’re right. The weight of course, that makes the car a lot heavier to make it safe. But also the the cost I mean, airbags have to cost a fortune, and they’re all over the car now. And you know, those steel beams and all the all this stuff? Yeah. And the engine has to be larger because the car is heavier. And it’s you know, it’s Yeah,
Greg Scott 43:52
interesting, very interesting point. Not many people recognize, but a huge portion of the cost of cars are regulatory related. And we’ve talked about, you know, the middle market getting squeezed with income and such. But you’re seeing that also in a lot of products from, you know, home air conditioning systems, to water heaters to the cars you drive. Is it becoming more expensive? Because the regulations are forcing higher and higher technologies to achieve the government mandate? And that’s really squeezed in the middle class too.
Jason Hartman 44:19
Yeah, it sure is. It sure is. And that’s, you know, that’s what government regulation does, but I I don’t know, sometimes I kind of loosen up on the government regulation thing. And I think, you know, maybe government, you know, it’s kind of annoying. And, you know, most of us don’t like it, or at least people thinking, right, don’t like it. But you know, sometimes that just forces people to get more innovative and, and maybe that does create progress. I don’t know where, you know, it’s sort of hard to tell about a lot of this stuff. But I want to just go back to that one point and I’ll let you go. I know we’re going a little long, Greg. So I appreciate you sticking with us, but that that whole concept of the average City, the space, the real estate in that city parking, taking 40% of that space, that’s an estimate that I saw 40% of the space of a city dedicated to parking, if nobody needs to own a car, and if the car never needs to stop, if it just never parks, right, then think about what that does to the price of real estate in high density locations. And you were mentioning that a couple minutes ago. So granted, you could use these parking lots for apartments, but don’t just know it first, you might think that 40% number is absolutely psychotic and crazy. But if you really think about it, think of all the parking on streets, where the setback of the buildings is required to be bigger, because you’ve got to allow for parking spaces right on the streets, or the street has to have fewer lanes because of the parking needs. And then there are, of course, parking lots, both big commercial lots, or small, lots of each little store every little dry cleaner, you know, the little sort of mom and pop dry cleaner down the street from my place in La Jolla air, I’d say exactly half of the footprint of their piece of real estate is parking. And the other half is the building where they actually work and do the dry cleaning. So I mean, that’s like 50% of that equation is parking. So you know, if you could see that it could add up to 40% dedicated to parking. So what does that do to real estate prices? In high, it’s really affected more in high density areas, it won’t matter in less dense areas, suburbs, rural areas won’t matter at all. But in in high density cities. I mean, wow. If if you take away all that need for parking, the prices of real estate should come down, right? Well, you think so supply and demand all sudden you have effectively a bigger supply of land. So yeah, it should have a dramatic change to the high end places. Yeah. It’s interesting. Well, anything else you’d like our listeners to know, maybe a question I didn’t ask you, whether it be about investing, or Detroit or the auto industry, you know, we kind of meandered around as
Greg Scott 47:19
we dig around a little bit, but actually wanted to thank you for giving me a chance to paint another picture of Detroit because I know it gets beat up a lot in the press, and particularly in real estate circles. But there actually is, you know, some very good places to invest in Detroit. And actually, the city itself, which has had a rough time, and has been in decline is actually starting to show real signs of a turnaround. So I’m excited to see what happens here over the next few decades. Yeah.
Jason Hartman 47:45
Would you ever do the urban Detroit? I mean, the really bad areas where you can get a house for $1 or $500?
Greg Scott 47:53
I know, I know, people that do. But you know, you heard you mentioned another episode, sometimes you’re going to end up, you know, having, you may find that there’s some clouds on the title, or you’re going to end up getting citations from the city because your property is not fixed up the right way. And, you know, a $1 property is probably not worth $1 is probably worth a lot less than that. And well, because it’s
Jason Hartman 48:19
a it’s a negative cost. That’s why they want to give it to you for $1. Because there’s a cost and obligation of owning it, you know,
Greg Scott 48:27
absolutely yeah. And then usually, you know, the tenant base in that area is really tough. Now, you may get lucky and you may, you may buy that place and end up in the path of progress. And five years later, it’s now worth 20 or $30,000. But your best bet is if you’re going to do that, just buy it, maybe knock it down or cement it over so it doesn’t get destroyed. And then hope that 10 years from now it’s it’s it’s gone up there certainly better places in the city, you can invest places that actually has some high values. But there’s plenty of other places that have moderate value. So you can get cash flow that also have upside. Yeah, I would say that’s probably pretty great advice there from Greg, folks. So,
Jason Hartman 49:07
so thank you for that advice. What interested you in real estate investing? I mean, you’ve been listening to my podcasts for what, nine years now? I mean, really that long? Or how long? I mean, Episode Number one,
Greg Scott 49:19
I think I think I found you first about about 12 months after you had started. So your first podcasts were still on iTunes. So it was about 2008 I mentioned I I got I first thought real estate investing I’m going to be a flipper like you see on the TV shows. And I ended up buying a place in a high end neighborhood called Birmingham. And it was a house that I thought was valued at about $500,000 once it was fixed up, and they bought it for 280 and I thought I’m gonna be rich, and I closed on it. The day that both General Motors and Ford announced about 20,000 layoffs in the city and Took me 12 months to sell it. And the only way I could sell it is if I bought the condo of the guy who was stepping up to a much nicer place. And it would have been the best thing in the world because I went from a property that I couldn’t really lease out. Well, that was costing me $3,000 a month to one that was worth about $100,000. But rent rented for $1,000 a month. So it had positive cash flow, although it was a condo, so after you throw in the condo association, it didn’t rent out too well. But I held on to it for five years, the value went down at first, but then came back up, and I sold it last year for about a $30,000 profit. So that’s how I got into real estate investing.
Jason Hartman 50:40
Yeah, it’s I mean, did you do stock market investing and that kind of stuff and just decide that that that wasn’t where it’s at, you know, I
Greg Scott 50:47
have. And at first, when I first started saving money, I thought, gee, if I study real hard in here, too attention and read everything I can read, then I’ll do really well at stock market investing. And after getting bruised and bumped a number of times, I realized there’s people on wall street that sit there and do that 80 hours a week, and there’s no way I’m gonna beat them. And I’m just getting bloodied by the whims of other people. So for the most part, I don’t invest in stocks anymore. Well, let
Jason Hartman 51:17
me tell you something, Greg, it’s worse than that the people, the quants that study it 80 hours a week. It’s much worse than that. Because you know, your other competitor is the high frequency computer that you can’t trade better than that. So you know that that beats us all lightspeed faster than lightspeed. Practically, you know, so? Yeah, that’s a that’s an insider’s game for
Greg Scott 51:40
sure. Study in milliseconds.
Jason Hartman 51:42
Yeah, that’s right. And soon it’ll be AI and the computer will actually, you know, really know how to make good decisions versus, you know, just just algorithms which it is now. So yeah, so amazing.
Greg Scott 51:54
Yeah. So I don’t dabble in that real estate’s done so well. And you’ve heard some of my stories, some of my properties. If you take a look at like that, Arizona property I bought from you. I think it was about $25,000. down, and I ended up pulling about 40,000 out of it when I sold it and not including the cash flow I had in the meantime. So it was a good deal. Yeah.
Jason Hartman 52:14
So you say your return on investment, there was what like 200%, almost or something like that. He had two years. And then we turned it into two more rentals. So we keep going. That’s the great thing about real estate, you can use one to build the rest of your empire. So that’s awesome. Well, good stuff. Well, Greg, thank you for sticking around longer. I know we we kind of made this a little longer than we expected. But you’re an interesting guy to talk to. We appreciate your business. Thanks for being a client. And thanks for coming on the show.
Greg Scott 52:42
My pleasure, Jason, again, thank you for everything you do. Like I said, I don’t think I would have gotten going in real estate if it wasn’t for you and your podcast, and I very much appreciate it.
Jason Hartman 52:47
Well, it’s my pleasure. Thanks for joining us. Thank you.
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