Jason Hartman talks with Steve about his recent trip to the British Virgin Islands (BVI) including Necker Island owned by Richard Branson, the founder of the Virgin group of companies.
Jason and Steve discuss the gold crash, goldbugs, the silver markets, Harry Dent’s prediction of gold dropping to $750, Peter Schiff’s incorrect prediction of gold at $5,000 by the end of Obama’s first term. Is Gen Y deflationary? We’ll see.
Other talking points include; judicial foreclosures, streamlining the foreclosure process and price discovery, British Virgin Islands (BVI) asset protection and several other issues.
Next up, Jason talks with his South West Florida Local Market Specialist (LMS) about bulk foreclosure REO purchases in the markets following markets:
o Desoto County
o Estero
o Fort Myers
o Englewood
o Marco
o North Port
o Punta Gorda
o Sanibel
o Sarasota
o Venice
o Bonita Springs
o Naples
o Orlando
o Captiva
Female Voice: Welcome to Creating Wealth with Jason Hartman. During this program Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing fresh new approaches to America’s best investment that will enable you to create more wealth and happiness then you ever thought possible. Jason is a genuine, self made multi-millionaire who not only talks the talk but walks the walk.
He’s been a successful investor for twenty years and currently owns properties in eleven states and seventeen cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it. And now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman: Welcome to the Creating Wealth Show. This is your host Jason Hartman. This is episode number 314. Thanks so much for joining us today and we are going to do the intro portion with Steve and I and then we have a new market — not a totally new market actually, we’ve done business in this market before but a new local market specialist that we’d like to share with you to talk about the southwest Florida market and I know that’s a pretty big area, but you’ll hear more about it in the interview with him here in just a few minutes.
Also I want to mention — my heart goes out to all of the people affected by the tragedies in Boston of course, last week and then in Texas with that fertilizer plant explosion. Some terrible stuff and I just did an interview actually, with Cornel David Hunt for my Holistic Survival Show and we talked about terrorism and we talked a lot about the Boston situation. So, if you want to hear that, that will be published relatively soon on the Holistic Survival Show. You can of course find that on iTunes or HolisticSurvival.com, but again some terrible stuff happened last week.
As I was actually away, I was out of the country, I was in the British Virgin Islands and Steve, I know you didn’t hear anything about my trip yet so first of all I want to welcome you back to the show. How are you doing?
Steve: I am doing well. I’ve — I’ve been excited. I’ve been dying to hear about the trip. I wanted to go to the BVI forever. I’ve heard actually a lot of people say it’s a great place for asset protection. I don’t think that’s what you were doing there. You were living the swank life, apparently.
Jason Hartman: Well, I try to live the swank life. I went to Necker Island and that is — there’s something — maybe our listeners have heard of it, is the private island owned by billionaire, entrepreneur, founder of the Virgin companies and that is Richard Branson, Virgin United, Virgin Airways, Virgin America, Virgin Records, you know etcetera, etcetera, etcetera. And Richard Branson is just a fun guy. He’s a real character. Obviously, an incredibly successful founder of four hundred companies. So, he likes to say he has attention deficit disorder and — and he’s into a lot of things, but —
Steve: Can you sign me up for some of that attention deficit disorder?
Jason Hartman: Yeah, that’s — that’s pretty good. And I tell you, Necker Island is — is a beautiful place. Do you know Steve, he has — he has sixty-five people on his staff that manage the island and it’s interesting because when I got there, you pull up to a — to a dock and you know there’s this beautiful like a — sort of entry house, which is like a beach cottage kind of thing, and I — I really shouldn’t say cottage, it’s — it’s pretty large. It’s not huge and imposing, but you know it all looks very — in keeping with the sort of the island theme and the island motif, and so a — a big room of course, with a — a big bar in the center and a pool table and a big — big huge — big screen TV and sofas and we’re just really comfortable, basically, doors — big doors that open all around it so there’s lots of glass and stuff. And then there’s an upstairs which is where we ended up having dinner and then behind it is a tennis court and Branson likes to play tennis. And we were originally going to have dinner outside, but then a — a little bit of rain came so they moved the dinner inside and — and our group was a group of entrepreneurs and people had to donate to Virgin United — Richard Branson’s donation, forty thousand dollars to go on the trip. So, it was a pretty high end experience and met some pretty neat people. And I went with Yanik Silver’s maverick group and we had Yanik Silver on the show several episodes ago, talking about Internet marketing and so forth, and he just does a lot of great stuff.
He does a great job with his group and once a year he does the Richard Branson thing the Necker Island excursion and it was just — it was just real fun. I mean, Branson’s got all sorts of exotic animals there on the island. He’s got lemurs, a bunch of different kinds of lemurs, and I guess they’re only found in one country, I think it’s Madagascar —
Steve: That’s right.
Jason Hartman: — they’re only found in Madagascar, and they’re endangered, so he has a whole bunch of them, different types and they’re in different sort of sections separated and one of the sort of lemur habitats I went into and — and fed them and got to pet them and stuff, and they’re just a really neat creature. I mean what a cool — what a cool, interesting creature. And he’s got all these exotic birds and turtles, big giant turtles roaming around and it’s — wow, it’s neat. But you know I’ll tell you, the life of a billionaire’s got to be pretty good.
Steve: You can have a private island with sixty staff members and rare animals. So, you — you flew into the — the British Virgin Islands, then had to take a boat over to Necker.
Jason Hartman: Yeah, well actually, there were lots of boats and flights on the strip. It’s hard to get to which is you know one of the things that makes it so exclusive. So, I flew from Phoenix to San Juan, Puerto Rico and then took another plane from San Juan, Puerto Rico over to one of the British Virgin Islands and then took a ferry to another island and then took another boat to Necker Island. So, it’s — wow, it’s — it’s a major hassle. And actually, with so much traveling I got a little sick and that’s why I — it’s been a little while since I’ve had — had a podcast. It’s been a little over a week, which is unusual for us, but I lost my voice and that wasn’t all the traveling. A little bit of it was the partying and so anyway —
Steve: A lot of it was the partying, just level with us.
Jason Hartman: Okay. Now, a little bit of it was the travel too, definitely but yeah, it was quite an experience and one of the things we did there in the daytime is we did these Necker — Necker Island Olympics and so we had these funny Olympic games where we separated into teams that did all kinds of wacky things like you had to put one fin, you know like a swimming fin on one foot and then run across the — run across the beach and run around a pole five times and run back and it was really racy. We had to do that a few times and then we did like this sumo wrestling where they put on these big, giant, fat sumo guy suits — you put these suits on and then they had to wrestle and it was — it was just hilarious.
The pictures are so funny. I posted them on my Facebook.
Steve: So, let’s just lay it out for the listeners here. When you make a couple of billion dollars, you can buy your own island and then have a bunch of people give forty thousand dollars to your foundation and then just bring them down and have them sumo wrestle?
Jason Hartman: Yeah, sumo wrestling and do all kinds of other fun stuff.
Steve: Yeah, that’s what you get to tell people to do —
Jason Hartman: Yeah.
Steve: — when you have what Branson has.
Jason Hartman: It was fun. And you know I’ve got to tell you, Richard Branson is a fantastic host. I mean in — in the beach house on the way in, of course there’s a great staff and they’re just waiting on you hand and foot. Can I get you anything to drink, and you know they made these cool, exotic drinks, and then you — you take a tour up to another part of the island. We went up to the top of the island and of course, there’s another beautiful structure there, like a big open air house and another big infinity pool where the water’s cascading off the edges and you look on both — you can see both sides of the island from there, and everywhere you go there’s drinks, a bar, there’s a coffee bar with espresso, cappuccino, anything you can possibly want. I mean it was just a first class affair.
But — but then, you know after we did the beach Olympics and we — we hung out for a while at the pool and did all that stuff, he’s got his own champagne — this Necker Island champagne, and so they put a bunch of champagne bottles in the pool and you know, after the Olympics, it was like, okay, jump in the pool and go grab the champagne bottles and people were popping them and the champagne was flying all over. And that was really fun. And then we got dressed up and the evening theme was bring a super hero costume. So, we all dressed up in our super hero costumes and I was of course Superman, that you could sort of — the easiest one, right?
Steve: Of course.
Jason Hartman: And I — I — I — I was Superman again. I’ve been Superman for a few halloweens too, for lack of a better or a more original idea, and that was really fun. And so, we had this fantastic dinner and Richard Branson is a character. He is like a fun guy, not stiff and starchy at all but he dressed up in a kilt and had this really cool you know like British flag costume on. And after dinner, as we were kind of finishing up dinner, he got up on this big long table and sort of danced across the table right in front of us. And I don’t know how he didn’t number one, fall or didn’t spill anybody’s drink or knock anything over. It was pretty amazing. I — I — I — I have a feeling he’s practiced that move before. But yeah, it was — it was just an — it was an awesome experience. I’m so glad I went.
Steve: He can just do whatever he wants. Yeah, that’s great.
Jason Hartman: Yeah, definitely, he can, definitely he can and — and he does a lot of good you know through his foundation and some of the entrepreneurs were there pitching business ideas to him and the ways they can engage in his foundation, and he toured us around one of his developments the day before, actually on Mosquito Island and on that island he’s doing a one hundred percent self-sustainable resort, where it’s really hard to do that where the water is self-sustainable, the energy is self-sustainable. It’s all totally green. The guy is very into the environment and really — you know it’s really quite interesting. I learned a lot and had a great time and met a lot of new people. But I tell you no matter where I go, it’s always great to come home.
Steve: I’m guessing that Richard Branson’s efforts as a private investor on this green island, he will make more progress and do more good for the environment than all the mandated, bailed out, Chevy volt, B.S. — I mean, it — it — he is going to be the one to solve that issue, mark my words.
Jason Hartman: Entrepreneurs in general, when the government is not incentivizing and creating false motivations, things obviously just work out so much better.
Steve: How are you going to increase your carbon footprint for earth day coming up? How are you going to add to that?
Jason Hartman: Well, we — no, earth day was yesterday, Steve.
Steve: Oh, it was yesterday?
Jason Hartman: You’re — you’re behind. Yeah, I can tell you were not worried about celebrating —
Steve: It shows you how much I care.
Jason Hartman: Yeah.
Steve: I just let my car idle in the driveway all day long.
Jason Hartman: Now listen, don’t be — don’t be so anti-urban. We all love earth, we just have a different way of going about it. Some of us think that government will solve the problem. I think that’s crazy, and others think that private enterprises will solve the problem. And one of the things the environmental movement doesn’t really look at very well, and I think when I had Sonia Arrison on the show I was talking with her about this. I believe that’s episode number 290 by the way, just from memory. But we were talking about longevity and how people living longer, what impact would that have on the environment?
Steve: Yeah, I liked that episode.
Jason Hartman: Yeah, and — and you know really what people need to understand is people are a resource. People are not the enemy of earth. I mean granted, some are but — but they’re a resource and just by their own profit motivations, they will solve a lot of these problems. They already have solved so many of them just by their own greedy, capitalistic profit motivations. So, anyway —
Steve: And that’s a bit of a pet peeve of mine is people say well, this — all this man made stuff, it’s not natural, it’s ruining the environment. Man wasn’t bused in from mars. We’re — we’re from earth.
Jason Hartman: Yeah.
Steve: You know, and we are very much a resource, and — and you look at America and capitalism and how much cleaner and how much better quality of life continues to get, even for the very bottom rung, the poor.
Jason Hartman: Yeah, no question about it, and — and — and that my episode with Bill Whittle, people should listen to that one too when we talk about the poor and how rich the poor are now days, very interesting. But — but yeah, how much cleaner the environment is here than it is in China —
Steve: Yeah.
Jason Hartman: — than it is in — in Russia under the Soviet Union. You know, I remember reading years ago, Greenpeace magazine that I picked up talking about the environmental destruction in Russia, and I tell you on my visit to Cuba, it — this occurred to me again that when people own things, they take care of them. And so when people own the land, when there’s private ownership rather than common ownership, people care and they take care of stuff. So absolutely.
Steve: Great.
Jason Hartman: Very good point, but hey we got a couple of things we want to cover. Let’s get on our tangent here real quickly and then let’s get to our guest and talk about the southwest, Florida market but what do you want to talk about first, Steve?
Steve: Well, I have some comments about that market when we’re done, but what I want to talk about first is Rodney Johnson who is the — the CEO I believe for Harry Dent’s Company —
Jason Hartman: Sure.
Steve: — Harry’s been on the show and Harry is one of the very few people out there who thinks we’re going to have deflation. And Rod — Rodney wrote a good piece here about gold potentially going to seven fifty an ounce. Under what circumstances could that happen?
Jason Hartman: Yeah, yeah. Well so Harry Dent like me, is not a gold bug although I think we’ll have inflation, but at the same time I — I — I think the metals for the reasons I’ve explained on many shows, are just not that good a deal. I think they’re a mediocre strategy at — at best and I’m not even saying they’ll go down in price, but it’s interesting because I looked at Peter Schiff’s email to me yesterday, where he said, oh, gold is way down. You know, it’s had a big correction and a long waited correction after twelve years and now is a buying opportunity. And this is the same guy that told us all, gold would be five thousand dollars an ounce by the end of Obama’s first term. Okay, not even knowing there was a second term coming, and now Harry Dent is saying, gold is going to be less than half of — of its already depressed price, seven hundred fifty dollars an ounce. I don’t know what it’s at today, but I assume it’s just under fifteen hundred.
Steve: Yeah, I don’t know what it’s at today either. Does — does Peter Schiff’s company, Europe Pacific Capital — I mean, he’s just pumping people to you know invest into gold and that — well paper gold so to speak, that you don’t actually own.
Jason Hartman: Well no, no, no, he also has another company that sells gold bullion. It sells actual physical gold. So —
Steve: So he — I didn’t know he was selling bullions.
Jason Hartman: Yeah, yeah. I know, he — he got into that a couple — three years ago, I think and so either way now you know it’s always a good time to buy gold.
Steve: Always.
Jason Hartman: You know, according to these guys and I — I just think they talk out of both sides of their mouth. I think it’s — it’s so hypercritical the gold bug thing. It just — it just doesn’t make any sense.
Steve: That’s why — that’s why — I mean somebody could just as easily say, well hey Jason, isn’t it always a good time to buy real estate? Ha, ha, ha, but with the income it’s different. It’s there.
Jason Hartman: Yeah, it — it — that’s the thing. Income property as the name would imply, is — produces income. It’s a multi-dimensional asset class. So, I don’t know if it’s always a good time to buy — buy income property, but it’s mostly — I mean through my career it’s — it’s — as long as you’re structuring it right and you’re in the right place because all real estate is local, it’s definitely — definitely there are some markets you shouldn’t buy in today as prices are appreciating. That’s why I don’t like being tethered to geography because all real estate is local. So, I don’t know. I guess people could accuse me of that too, but I think it’s different. I think it really is different because I am not recommending a one dimensional asset class like gold or silver. I’m recommending a multi-dimensional asset class, and when you parse up the multi-dimensional aspects of the asset class, you can either make the cash flow work or you can make the capital appreciation potential work or you can make the tax benefits work, or you can make the inflation induced debt destruction work. There’s so much more to it.
Steve: Well yeah, because it is an income stream. Whatever the economy as a whole is doing, or housing going up and down, if you purchased it right, rents are so much less volatile. You just keep making income all the way through that. With gold, I guess you could — you could speculate on — on it and sell it later but it just — I — I agree with a lot of the gold bug’s point, but at the same time I see a lot of the inherent weakness in that.
Now — now see, how would you reconcile then because this article — you know they’re talking about gold going to seven fifty an ounce, yet Harry Dent is promoting deflation and those two concepts don’t really gel in a lot of people’s heads. What do you have to say about that?
Jason Hartman: Well no, I — I think those gel because — well I mean the — the — the gold would down in value in a deflationary environment. I mean, gold is traditionally an inflation hedge, so if we have deflation, wild gold, dollars become more valuable — more valuable in a deflationary environment. So metals are not good to own. It’s better to own dollars. Here deflation is — you’re basically saying the dollar is going to appreciate in value. A piece of paper with ink on it, is going to appreciate.
Steve: Yeah. Okay so, why does Harry Dent think there’s going to be deflation? I can’t — I can’t do the math in my head. Maybe I’m just some kind of backwoods yokel and I don’t get it, but I feel this activity by the Fed — and people talk about the velocity of money and the money’s not in play, but —
Jason Hartman: But — well, velocity is a factor no question and I think that’s one of the reasons the velocity we have now is not high enough and that’s why we haven’t seen that much inflation yet. I think with the amount of money creation that we’ve had, we would, if we have more velocity see a lot more inflation. But what Harry Dent basically thinks is he thinks that inflation and deflation are a non-monetary phenomenon and virtually everybody else on the planet disagrees with him because — because history says that inflation is a monetary phenomenon. Yeah, a — a large supply of dollars or whatever currency, chasing a limited supply of goods and services, that creates inflation. And just the creation of money is the academic definition of inflation. Most people think its price is rising. Technically that’s not correct but let’s just go with what most people think, price is rising.
So, I mean, we — we should have him on the — back on the show to talk about it himself, and I like Harry’s work. Don’t get me wrong even though I disagree with him on this point, I think studying demographics is a great way to know what is coming in the economy. I — I very much agree with that philosophically, but on the inflation — deflation issue, Harry thinks that inflation is more phenomenon of the age wave and you know again, I’m probably butchering his philosophy, so forgive me. But the thing he has said to me is that Generation Y is going to cause deflation, because when young people leave the nest and they’re not being supported by their parents — and again, I can’t make any sense of this. I don’t understand what he’s saying. Maybe someone can call in and try and explain Harry Dent to me, because even Harry Dent can’t get me to understand it. But yeah, I still like Harry’s work and I want to have him on the show many more times, okay.
But he thinks that when these young people leave the nest and they’re out on their own, and they stop costing their parents money okay, and they — they become self-sustainable, that it creates — deflationary creates deflationary pressure. And when young people are in the nest and they’re under 18, that’s an inflationary sign. I — I — what am I missing. I just don’t get it. I — I do not understand it.
Steve: I — I’m not connecting the dots. We’re probably missing some dots here and need to have Harry on the show.
Jason Hartman: Yeah. Yeah, we do. We do. Well, let’s get him back.
Steve: Yeah.
Jason Hartman: He’s been on twice before and we — we’ll — we should get him back a third time just to talk about this one issue. Keep it totally focused one this one issue.
Steve: Harry, come on the show.
Jason Hartman: Yeah.
Steve: We — we don’t get it.
Jason Hartman: Absolutely.
Steve: We need you to explain this.
Jason Hartman: You — you got to explain it to us. Okay. He — I want to talk about some upcoming shows too. Of course today we’re going to talk about southwest Florida with our local market specialists, there. The next episode we’ve got Doug Wead, we’ll talk about some great political things and philosophies and economic stuff. You’ll really like that. Episode 316, Jed Kolko with Trulia the chief economist for Trulia. Number 317, we’ve got our client Chasen Sonia on to talk about crowd funding and 318, we’ve got Anthony Lolli to talk about New York City market. Not saying you should invest there. I just think there are some interesting prospectives and we’ll talk about the nation with him as a whole. 319, George Wolford, the Spectrum Group. 320, that’s the 10th show with Bob Wright — Dr. Bob Wright talking about transformation and we’ve got a whole bunch of other great stuff coming up. One that we’ve got coming up is one with Doug, and we’ll talk about advertising schemes. You all hear these too good to be true things, well we’re going to — we’re going to bust some of those advertising schemes for you and explain them to you and — and we’ve investigated them, and you’re going to hear about what they really mean and how they really work.
And we’ve got Wilhaun Matthew coming up as well to talk about micro-lending and how that impacts the global economy, as well. Some great stuff coming up.
Steve, what else do you have before we get to our guest?
Steve: Well, we ought to do a — a regular segment on that on the show you know, the weekly, cheesy advertising scheme busted. That would be fun because there is no shortage of content there.
Jason Hartman: Yeah, there — there — you know, whether it be people in our business who you might think of as our competitors selling junk properties or junk ideas or junk syndications, or people in the gold and silver markets selling gold and silver, and — and you listen to their half hour video and — I mean I listened to one the other day and you know this guy was promoting an investment key that was supposed to be this amazing thing and he’s not on Wall Street and he’s bucked the Wall Street trend. I listened to the whole thing. It turns out he’s talking about options.
Steve: Well, next time I’m on the show I’m going to have a — a — a good, con for us to expose.
Jason Hartman: Yeah. We should — we should expose some more advertising con —
Steve: Yeah.
Jason Hartman: — so —
Steve: Yeah.
Jason Hartman: — so that would definitely be good. Hey but Steve, before we get to our guest today, any property highlights or feedback from clients you want to share from the past week or two?
Steve: We’re continuing to have good success in Austin, Texas believe it or not. The properties move quickly there, but we’re — we’re going to have the LMS — the local market specialist on the show. I’m liking the numbers that we’re seeing. I’m liking what we have in Florida right now. Florida is very active. A lot of foreign money is pouring into Florida. Now, I — I said this in an email to my clients last week. If — if you look at the types of foreclosures that — that are out there, when we see this big foreclosure mess that happened over the last few years, there’s a couple of states that are always mentioned, Arizona; Nevada; Florida and California. There are a few others but these are the states primarily that just boomed out of control with new construction. We don’t hear a lot about Florida — or about California, Arizona and Nevada anymore because they have — they are non-judicial foreclosure states. To foreclose, a lender doesn’t have to go in front of a judge. They can move — if the foreclosure is unimpeded, and I won’t get into that, they could move through foreclosure in five and a half, six months, typically in those states.
In Florida it is a judicial foreclosure. A judge has to sign off on it and as you can imagine, that’s not easy to do to get in front of a judge. These foreclosures are taking years. So while Arizona and California, especially Nevada to a lesser extent but they’re picking up momentum, they’ve cleared through most of this shadow inventory backlog. Investors and some owner occupants have purchased them, but in Florida that’s not the case. There’s still a lot of backlog and so that’s why we’ve seen some more opportunity there, as to more inventory becoming available because the population is growing there. People have to have somewhere to live. When they get foreclosed, they don’t get vanished off the books. They still have to live somewhere.
So, there’s a interesting proposal going back and forth in the Florida state house of representatives right now about streamlining the foreclosure process, still making it judicial but they’re trying to knock the time off of how long these things are — are staying on the bank’s books and are in limbo there. So, I think that’s going to make for a good entrance into the Florida market, because we can still get cash flow there, and I think that we could be getting ahead of some growth. That’s just gravy, not — you know we never do something exclusively because of that but I think it’s going to happen because of this massive backlog of foreclosures and all the interest.
It’s a sunshine state. People like it. I think they will continue to buy it.
Jason Hartman: Um hmm, very interesting, very interesting stuff. And you know — you know what else is interesting about it is that you know I just got to remind everybody, when it comes to Florida, be careful. Florida is a big place. You know it’s like California, it’s a big place and there are several different economies. So you really, really need to be careful about where you go and what you’re doing there and — and Steve, you’d agree with that right?
Steve: Oh yeah, yeah. Jacksonville is north Georgia, right or south Georgia. Tampa is a completely different universe than Miami or Pensacola. It’s a big state, a lot of people there. It’s a very long state, different economies drive Florida, so that’s something that you — you certainly need to — to be aware of.
Jason Hartman: Absolutely. Well good stuff. Well hey, let’s get to our guest here and we will be back with our Florida local market specialist. We’re talking about southwest Florida actually, here in just a moment.
Female Voice: Now, you can get Jason’s Creating Wealth in Today’s Economy home study course. All the knowledge and education revealed in a nine hour day of the Creating Wealth Boot Camp, created in a home study course for you to dive into at your convenience. For more details, go to Jasonhartman.com.
Jason Hartman: It’s my pleasure to welcome Jack to the show. He’s our local market specialist for several areas in Florida, and he covers a pretty large area because that is the way you have to do it when you’re buying from banks. The banks — if you don’t take enough inventory off their hands and help them liquidate it, they kind of don’t call you back. So, they — they want you to take a big swab of inventory. So, some of the highlighted areas we’re going to talk about today are Sarasota, Fort Meyers and a few other — other cities and towns as well, kind of on that southwest portion of Florida but not extreme south. Jack welcome, how are you?
Jack: Thank you, Jason. I’m really looking forward to this opportunity.
Jason Hartman: Well, good. First of all, let’s talk a little bit about the real estate market in general. This doesn’t have to be too specific to your areas yet. We’re going to kind of drill down to that, but what — what are your thoughts on — on the market and the economy as a whole right now?
Jack: Jason, that’s a great question. The real estate market is very cycle[inaudible], as you know. Our Florida market [inaudible] below five years ago and we were probably one of the first markets to drop. Our bubble burst, but now we’re one of the first markets to come back. We’re really enjoying a two percent appreciation in prices, which is good news and bad news. It’s good news for the investor and bad news for us because it’s very difficult to buy properties.
Jason Hartman: So, would you — you say — you quoted a number there, two percent. Two percent per what?
Jack: A lump. Is it — the [inaudible] list re — reported that we’re up twenty three point seven percent —
Jason Hartman: From the bottom.
Jack: — from the one year ago.
Jason Hartman: Yeah, right, right. You know —
Jack: No, no, no, from one year ago.
Jason Hartman: Oh, from one year ago, yeah. That’s a — that’s almost as amazing as Phoenix. I mean Phoenix has gotten really — sort of too expensive for us to — to recommend or at least promote heavily. We still do a little bit of business in Phoenix, but certainly not as much because the prices are up so much, but when you say that, what city are you talking about? People like to refer to Florida and there are really so many different markets in Florida. You know the panhandle is so much different than southeast Florida. That’s the — sort of the high flying area in southeast that has big swings, big ups and downs. The panhandle would be the most linear area I would — I would assume. I own a few properties in the pen — the greater Pensacola area and have for many years, and then your areas — we’re talking about Sarasota, Fort Meyers, you know and a few other areas, as well. Do you want to define those and — and then talk about what areas you’re talking about that two percent per month?
Jack: Yes, Jason. The — the gloom theory’s been for the Cape Coral Lehigh Northport portions of Lee county, which is really Fort Meyers with its small cities within the area, Cape Coral at the height of the market, a three — two CVS home, new fourteen hundred fifty eight, was selling between two seventy five and three hundred thousand.
Jason Hartman: What’s that, about two hundred dollars per square foot then?
Jack: Right. At — at the bottom of the market, we were buying those for forty thousand — forty two thousand. We’re now buying them for sixty five and seventy thousand and we still have to put new air conditioners, appliances, water systems, etcetera. So, there’s great shifts. We’re up, but we’re still far from the top.
Jason Hartman: Yeah, yeah. No, I know. That — those — those deals aren’t too bad. I mean, they’re not the best deals that ever occurred, but they’re still pretty good. So, how much money — you alluded to that rehab cost, were any sort of a metric of what you’re typically spending on rehab for your properties?
Jack: Okay, our average rehab is six hundred — I’m sorry, six thousand four hundred fifty eight dollars.
Jason Hartman: Oh, so not too bad. That’s not bad at all.
Jack: Yeah. And that is — that’s over three hundred and fifty something houses.
Jason Hartman: So over three hundred and fifty something houses, you’re spending about sixty four hundred dollars per rehab and I assume that just — and this is what the listeners really need to know about that is that if they did that rehab themselves, it would probably cost them ten — twelve thousand dollars because I assume with doing so much volume you number one, know how to get the best deals. You’ve got crews of people and you’re — you’re buying stuff at volume. Is that correct?
Jack: Absolutely Jason, and everyone thinks they can do this themselves. Over the years, we’ve established a great relationship with Home Depot. They’re our primary vendor. We have another vendor who supplies us with carpet, another vendor with A/Cs, appliances. Our relationships are built on paying our bills on time and demanding the best possible price. And for that reason we can get great deals. We have our own crews. We pay them well. We don’t use a least expensive product. We use a good quality, because we don’t want the buyer, the investor to suffer maintenance issues. Our goal is to repair once. If there’s a problem, if there’s a slight leak in the hot water heater, replace it, don’t repair it. That’s been our motto for years.
Jason Hartman: Yeah, yeah. So, you — it’s really preventative maintenance. Oh, okay. Well, tell us about some of the differences between some of these different cities. I mean, it’s sort of rare. It’s not totally rare, but not too many of our local market specialists cover such a large area. We’ve got some vendors in Texas that cover pretty large slots, but — but how to distinguish these different markets and — and tell us why would an investor or a home buyer for that matter, be attracted to Sarasota over Lehigh Acres, for example? Those are — that’s a pretty big contrast there.
Jack: Okay. Sarasota is more of a — a bedroom. It’s got some industry. It’s got heavy — heavy tourist based with economy. Cape Coral is a little cooler than we are. Lehigh Acres is a very large bedroom community that was developed back in the ‘50s. They sold land there by mail, fifty dollars down, five dollars a week for the rest of your life. And that’s how Cape Coral is — originally started as where — other communities in Florida.
But they have been developed down. There’s a very large community — in ’06 I think there were roughly eight thousand new homes built and they’re still building out there. It’s a great rental market for the working man. Cape Coral is a little different. The houses in Cape Coral, the same house is about ten thousand dollars higher. You have closer access to the water in Cape Coral than you do in Lehigh, but so totally different. Those are absolutely phenomenal rental markets. As a matter of fact, I’ve talked to one large competitor in the rental business today who said, we have for the first time, zero vacancies out of fourteen hundred houses.
Jason Hartman: Wow, that’s [voice over].
Jack: Which is phenomenal.
Jason Hartman: Yeah, what do you — now, tell — tell us about — let’s talk about that for a moment. Zero vacancies out of fourteen hundred houses, what do you attribute something like that to? Is it the — the recycles of all the foreclosures and short sales? Those people have to go and live somewhere. This is what the statisticians and the prognosticators on TV never seem to put into their math equations is that, every time there is a foreclosure, you create a new tenant.
Jack Absolutely. Someone who has been foreclosed, they still want to live in a house.
Jason Hartman: Right, they don’t want to —
Jack: If they were —
Jack Hartman — they don’t want to — they don’t want to move to an apartment, exactly.
Jack: Yeah, they want to live in a house. They’re great renters. If you screen them well, they’re great tenants because they’ve taken care of a home. They know what it’s like to fix the hot water heater, to change the — the filter in the air conditioner. They usually have lawn mowers, conversely throughout the whole home and we don’t have a mortgage program for them yet. So, they have to rent.
And every time we have a foreclosure, you’re absolutely right, you’ve just created a new tenant.
Jason Hartman: Yeah, fantastic. That’s — that’s so true.
Jack: We — we try to help our tenants because we tell them, if they will pay their rent on time we’ll help them rebuild their credit. We’ll report to the credit bureau on time payment.
Jason Hartman: So — so you basically become a trade account, improving their credit?
Jack: Correct, and that’s a great motivation to pay — pay your rent between the 1st and the 3rd. You know, we — we — we really try to help those people. Now, if they have — if they’ve been foreclosed because of many other issues, we don’t take them as a tenant, obviously. We — we try to screen and get the right people in. We don’t want to release the property, we want to rent it one time. And the only other thing we do is — is we only want to show that house once or twice. Therefore, that house has to be in — in perfect condition. We’ll even go so far as stage it – stage it, stage the kitchen, put some towels out, pots and pans, etcetera, put some things in the bathroom. We want them to walk in and say, wow and rent it. That’s our goal.
Jason Hartman: Did you go over all of the cities? I mean I know there are more of them including even Orlando, but did you — did you kind of distinguish all of those for the listeners?
Jack: No. The reason we’re in so many markets Jason, is not by our choice but when we deal with banks and I’ve been doing this for about forty something years, we’re establishing good relationships. When a banker calls and I’ve got ten houses, you can’t say, gee I’ll take the two that you have in Fort Meyers, thank you very much. To build a relationship, you’ve got to take all ten. You may not like it, and we don’t like it sometimes, and we may sell them to a competitor. But the reason we’re in so many markets is we want to keep that banking relationship. And now as the market has gotten very tight that there are fewer foreclosures, it’s paid off extremely well. Banks still call us, but we will do deals in Orlando; Sarasota; Brighton; Northport; Cape Coral; Lehigh, are our bread and butter areas. We’ll work in the other areas and we’ll give our investor the same quality deal. We’ll travel our staff up there to fix them, to the same quality as we do here.
Jason Hartman: And when you say here, where is here?
Jack: We’re — we’re located in Fort Meyers.
Jason Hartman: Okay. And what do you say — you know, during the boom times — I mean Florida just went absolutely crazy and of course the bubble burst there first and other high flying areas like California burst pretty — pretty harshly too. But there were a lot of areas in Florida Jack, that the — the building was just nuts. I mean, they just were over built like crazy and putting houses up everywhere you look. It was unbelievable. And one of those was — sort of experienced this with Lehigh Acres, I believe and what — what do you say and how do you address some of the concerns about over building?
When you mentioned your — your fourteen hundred home competitors, no vacancies, in what areas were those homes?
Jack: We manage in Northport, which is about twenty miles north of here, bedroom community like Lehigh. We manage in Lehigh and Cape Coral. Lehigh has gotten a bad rap. President Obama was here in February — I think of ’07 and called it ground zero of the real estate market, and he was right. There was vast over building. There was no rhyme or reason other than investors didn’t want to get left out, but they did get left out.
Jason Hartman: It — it was a — it was a game of musical chairs and the greater fool theory, you know. Don’t — don’t be the last one standing when the music stops. That’s — that’s the key. That’s — that’s why we don’t like speculation and gambling. We like invest for cash flow because it’s just so much more reliable.
Jack: Yes. The reason why I liked Lehigh, for all the bad press, Lehigh is a great community. You cannot build a new house in Lehigh for anywhere close to what you can buy at two hundred four thousand and two hundred five thousand and two hundred seven thousand built house. The same — that same house today will cost one seventy nine. We have a sixteen thousand dollar pro-lot impact fact fee, plus you have to now add fielder to all the lots which average at seven thousand dollars. Lehigh right now, is a great economic buy. It’s not a fool’s buy, it’s a great economic buy. You can get cash-on-cash return. You can get appreciation and you can get a solidly built home.
Jason Hartman: So, let’s talk a little bit about tenant the profiles and the management side and — and then I want to talk about more — maybe a little bit more about how you acquire the properties and — and such.
Jack: Tenant profile, is — is — is, as — as you said, and I said I would guess that seventy five percent of our tenants have suffered some kind of economic downturn, basically foreclosures. They’re families, two to three small children. Lehigh, we have a high percent of Spanish population, which we love because they’re — they’re hard working, they pay their bills on time and they take care of the property. In terms of age, I’d say thirty five to forty five.
Jason Hartman: What kind of jobs though, you know, major employers and so forth?
Jack: Okay, our major industry here, number one is tourism which we had the best year just finished with Easter. Lee County had its best year since ‘06. Occupancy was incredible, as was the traffic which for us natives, we judge it on traffic. How long it takes you to get from A to B.
We also have a great new airport, which is a freight center because Miami is too crowded and the planes can come here and have freight distribution easily. We’ve offered Lee County for the first time in years, it started about forty years ago to figure out we needed to attract industry. So now we have Gartner, which is a very large computer information company. I think they’ve got about four hundred employees here now. We’ve got some small biotech. We’ve got some incubator areas. So, you know we are — and Chicos — Chicos — Chicos is a large woman’s fashion company. They’re here. So, we are expanding but we still rely on construction and tourism. And the baby boomers, not like you and I Jason, but our children are flocking here. Florida, or southwest Florida we have sunshine, we have beaches and palm trees, and you can’t beat that.
And I know you in Arizona, got sunshine and sand, but you don’t have a beach.
Jason Hartman: I don’t like ground. That’s one of my complaints about Arizona. I’ve got to tell you, as much as I’m glad that I left the Socialist Republic of California, whenever I go back there, one thing I really do like besides seeing some of my friends and business associates, I just love the lush, green landscape. I — I really didn’t realize how much I liked that until I left it. It’s too brown around here for me, for my taste. Some people — I mean the desert has its own beauty, but it’s not my thing. It’s nice for a weekend, but I wouldn’t want to live here. I’m just kidding, I do live here.
Jack: I know.
Jason Hartman: But — no, I — I mean I like so many other things about living in Arizona, but that’s one thing I’m not crazy about is — is the brown — brown desert kind of thing.
Jack: I live on the water, so every day I get up I can look out and see green and blue water.
Jason Hartman: Good stuff, and you’ve got those gorgeous white sand beaches, at least up in the panhandle area. It’s unbelievable. My mother lives in Gulf Shores, Alabama and we’ve taken some trips down the Florida Coast, on the west coast and wow, just a beautiful place.
Jack: Just one more comment about what distinguishes us from many others is our ability to buy these low market — our — our business motto has been do not buy below market, improve, add value, install a tenant, and sell it to an investor.
Jason Hartman: And sell to an investor, yeah.
Jack: As long as we — and as long as we can buy below market quietly, the motto really works and we’ve been able to do that even though prices have increased and — as a matter of fact, we got a couple this morning from a bank well below market, but they know we’ll close and they don’t have to hassle with us.
Jason Hartman: Sure, yeah, yeah, absolutely. Do you want to talk any more about the way you buy the properties and what that means to the investor and then I just want to review your management fees.
Jack: The way we buy is just based on relationships, you know it’s the only time we go visit the bankers. We don’t try to do things on the phone. Once a quarter — every couple of months, we jump in the car and we’ll drive three, four, five hours or jump on a plane and go meet the banker. But that’s the face-to-face relationship, and we stay in touch with them.
We don’t — we don’t try to buy way below market. We — our philosophy is, the banker’s got to be happy. We’ve got to be happy. And we can steal from them once, but it will never happen again.
Jason Hartman: Yeah. Yeah, you usually don’t get a second chance at that.
Jack: Yeah. Yeah, I mean I — I did learn a few hours ago, I’m way overpaid in my mind, but it’s a fair deal for the bank, it’s a pretty good deal for us, not the greatest deal but there’ll be another deal behind it where we’ll both do well. As long as we all win, we’re fine. And you know if — if we win, we can insure that the investor will win, because that’s the ultimate trust fund.
Jason Hartman: Yeah, yeah, absolutely. So management, let’s talk a little bit about management and kind of review the fee schedule on management, if you would.
Jack: Okay. Our management system is very simple. Nine percent of gross rent collected. We charge — whenever we sell a house, we will have a tenant in place on the day of closing or before.
Jason Hartman: So, pre – so everything is pre-rented.
Jack: Pre-rented, so we — when — when you close you have cash flow. You don’t have to wait for me to rent. When we — if there’s a re-lease at the end of the year, we charge one hundred twenty five dollars. We inspect the house at that time, a new application. If they move out at the end of the year, we charge fifty percent of the first month’s rent as a leasing fee. We do the majority of the maintenance with our own staff. There’s no markup on that, just our hourly charge. If we have to go outside to hire an outside vendor, we do charge a ten percent markup and we inspect their work. We do a before and after pictures which are given to the owner. For all of our houses under management, we visit the house once a quarter and take pictures. We tell the tenant on day one, that’s a condition of your lease.
We also, I think you really need to know, we will offer to mow your yard, take your — your landscaping and we’ll build that cost into your rent. That gives us another chance to view the house a week later or every other week. We probably only — a third of the people take us up on that offer. If they’re young, they don’t have lawn mowers or they don’t understand how to take care of a yard, they’ll pay us the twenty or twenty five dollars per mowing to do it and we’ll assure that it’s taken care of.
Jason Hartman: Okay, good. Good stuff. Well, if you’d like to get in contact with Jack, just go to Jasonhartman.com or talk with your investment counselor or give our office a call and we will set up a conference call and make the introduction and help you select properties through — through his group and just help you with these investments.
Jack, thanks so much for joining us today. I appreciate it.
Jack: Thank you very much. I enjoyed the opportunity. I look forward to hearing from you.
Male Voice: What’s great about the shows you’ll find on Jasonhartman.com is that if you want to learn how to finance your next big real estate deal, there’s a show for that. If you want to learn more about food storage and the best place to deep those onions from smelling up everything else, there’s a show for that. If you honestly want to know more about business ethics, there’s a show for that. And if you just want to get away from it all and need to know something about world travel, there’s even a show for that. Yep, there’s a show for just about anything only from Jasonhartman.com or type in Jason Hartman in the iTune Store.
Female Voice: This show is produced by the Hartman Media Company. All rights reserved. For distribution or publication rights and media interviews, please visit www.HartmanMedia.com or email [email protected]. Nothing on this show should be considered to be specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Empowered Investor, LLC., exclusively. (Top image: Flickr | D@LY3D)
Transcribed by Debra
* Read more from JasonHartman.com
Sallie Mae Splits for a Share of Lucrative Private Loans
New College Grads: A Lost Generation?
The Jason Hartman Team
