On today’s show, we listen in on a live speech from the 2019 Meet the Master’s event. A Jacksonville local market specialist discusses why he got into the Florida market and gives listeners an insight into new construction projects and short-term rentals in the area.
Investor 0:00
Once we did encounter some challenges because we were part of your network and because I have an investment counselor, I always felt like I had somewhere to go for an answer. I always felt like I had somebody with more experienced than me that I could lean on and Sarah didn’t know the answer, she got the answer.
Announcer 0:16
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 thousands 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 1:06
Welcome to Episode 1243 1243. Thanks for joining us today. Today, we will do something that we haven’t done in a while. And I’ve been asking our producer to get more of these on the show. What are these? Well, they are clips from our live events. And so we will play a clip from our meet the masters of income property event A few months ago, and it will be a local market specialist clip. This is a market profile, but it’s live. So I hope you enjoy it. We will have that for you in a moment. And I want to say thanks to all of you who have expressed interest in our upcoming launch of the empowered investor community. We are very excited about this. We think this will be one of the best things we’ve ever done. So it’s super exciting. And we wanted to ask you one of the things we want to do in the empowered investor community among other things is we want to help You collect rent from tenants who owe you money. And I want to ask, just put a request out to all of you listeners, if you have any referrals for collection agencies, collection attorneys, investigators, whatever, anybody who can help collect debts, we want to pass those on to our listeners and members and just share information. So please go to Jason Hartman comm slash ask. I have people that owe me money, I got way too much money owed to me out there. And I want to collect too, and have used various collection methods over the years with varying degrees of success. And so anyway, just want more input on this topic. If you have any referrals, or just suggestions in general, maybe not a referral, but maybe something that’s worked for you. We’d love to hear from you. Jason Hartman comm slash ask. Also, our upcoming Cruise is approaching quickly. So go to Jason Hartman doc COMM slash cruise, we’ve got a great itinerary lined up for that. And we hope to see you there. Remember, this is open to non members. If you’re not a member of the venture Alliance, you can still come as a guest to that cruise and we will be opening up membership for the venture Alliance here in the near future. We do that about 45 days before our profits and paradise event. And we will be announcing dates for that very soon as well. Jason hartman.com slash ask with any questions or comments, but also specifically focused on collections. If you have anything for that we’d love to hear from you about anything though, at Jason Hartman comm slash ask and let’s jump in to our live presentation today.
Specialist 3:50
I’ve always had a very simple approach to investing right or wrong. There’s lots of ways to skin the cat. It’s cash now in cash later see what I found was being California, like I told you guys, when I had the headset on, I was looking at these different foreclosures I saw in Bakersfield, California. I started to read up on all the growth patterns that were going to happen and I’m not an expert on on data, definitely not. But there were some key fundamentals there that I’ve later learned to hone in on. That gave us quite a run. We went into Bakersfield in the mid to late 1990s and got out in 2005. Pretty good timing. I didn’t know that time and perfectly like I told you is just everyone else is coming in overbuying. So I didn’t know what else to do. But what I like to work in is I want to sacrifice a little bit of cash flow from going to more flat markets, because I want to have cash flowing growth. That’s always been my way of investing, going from Bakersfield, and then going down to Northeast Florida. And there was a fascinating book. It was me and you Kevin, we were talking about it at lunch the other day, Kevin came to the market. And if you’re a real estate nerd like me, you’ll find it fascinating. Otherwise, it’s like a math textbook from seventh grade. But it was called grow rich with property cycles was written by a kiwi, a New Zealand guy named Karen Trask. But he was based off a guy named Homer Hoyt. And Homer hoyts. Wrote how the real estate actually cycles in first world countries back in 1933. So this is just post depression, which was fascinating. And you can see it. Again, Kevin, you read it, it holds true today, right of what he said the media would be saying what new builds are happening, where rents are going, and I was really interested in growth, because I’ve been taught to look for certain things. And these are the five factors that he identified what will drive a real estate market without all speculation, but for real methodical ways up is economic growth, population growth, affordability, desirability, and healthy supply and demand. Now, if you can get at least three, you can probably get pretty good results. But if you can’t get that you’re not and if you can get all five, man, that’s good. And let me tell you, that’s very, very hard to find. But that’s what brought me to Northeast Florida. That’s what brought me to Bakersfield in the beginning with. And again, Johnny Carson made fun of it. But I had a really nice run. One of the key things here that takes New York, San Francisco, Orange County out of the equation is the one right in the middle, right 40 ability just shoots down cash flow. But if you can get all those other things around it, that’s the key. And that’s what I was learning to look for. But you had to go into markets that had these. So going to Northeast Florida was 15 years ago. We grow in Northeast Florida, Jacksonville, Western Ocala, and then to a section of Southwest Florida called Punta Gorda, all based off of that five things I wanted to look for, of course, it had to have cash flow, but I wanted to have those five factors. So just we’ll go through Jacksonville in the last two to three years. These are some of the rankings and just remember those five steps that we just talked about that Jacksonville is had markets to watch markets to watch developing an echo monoculture fastest growing city best city for jobs no state young educated workforce. I used to joke that when I left California, I saved 10% of my money. And again, I think it was Kevin’s I don’t know you’re saving 13.2% of your money. I didn’t even follow that your state income taxes going up, but it has. So that was another nice thing. Number four for rent to income ratio, best city to find work, jobs, bring rent, ability to pay higher rents, right? Top 10 for logistics, infrastructure, best US city to start a business. These are some of the fundamentals of Jacksonville, which is why I went there. And again, I’m not a data expert. But one of my mentors said to me, actually, that I met through Tom and a few other people was follow the baby boomer migration, where the baby boomers going they control a massive, massive amount of money. And it’s only going to grow from there. So in 2005, when I was looking around, it wasn’t that hard. You have to be a research expert to go where the baby boomers go when they retire, I mean, everyone watch Seinfeld, we all know they go to Florida, right? So that’s why I went to Florida. And I want to stay warm and by the water because I think it’s very important to have your investments tie into your lifestyle. I love the beach. I’m in the water every day with my family. I want to have the best of both worlds if I could buy low, sell high cash flow along the way. Again, that is the key of this entire book that I read. Boom slump recovery, boom slump recovery, it’s fascinating to read the different things that’ll be happening. Now we all know when the actual slump of slumps was it was oh 809. But where are we at? Well, there’s different markets at different points. I have friends that have invested in Vegas, Phoenix, they’re already past peak pricing. Does everyone know what peak pricing is? What was stuff selling for in 2005? Basically what peak pricing means right now. Jacksonville, luckily is still a little below peak pricing. So we’re other markets have already cycled back and gone up. We’re still climbing back I’m okay with that. Because when you think of Florida, you think of Miami, you think of Tampa, these are good markets, lots of economy. But they’ve already gone up there kind of popular Big brother of the state, right? We’re a little less known, which I like, although we’ve kind of come out of the closet now with our success, because of how many things and how many rankings that we’re getting. Now, new construction, I prided myself for many, many years. Again, I’ve been doing this into my 21st year full time. And I’ve done over 1000 rehabs, so kind of that teach a dog old dog new tricks is kind of tough. I was that old dog. I fought this tooth and nail. But the new construction is the direction we took our business a few years ago. And there’s a couple of reasons why we did that, which I’ll talk about. But the main reason is and these are just samples of some of our work, which some of you have seen as somebody moved the cheese who’s read this book. love this book. I’m all about again, the short, quick, easy need to learn lesson reads because I’m entrepreneur and I’m add. So that’s going to be something that I need to keep short. But the cheese moved. So in 2009 2010 Now we were able to find in fact our sales girl acquisition girl Jen’s been with me over 10 years, we were writing 30 contracts a week and getting probably 10 of them because the bank was just getting rid of all their inventory. Right. And that was a great run. But the market changed. All of the inventory got bought up, Jacksonville became more popular. And then if I want to do what Jason said, new roof, new heating and cooling, new plumbing, upgrade electric new kitchens and bath, the point I would have to get you guys in it just wasn’t working for you guys anymore. wasn’t working for me anymore. So I had to take a hard look at that. And new construction was again someone moving the cheese on me. And it wasn’t easy at first we have to figure out building department and new inspectors and timelines. But that was three years ago, the best move I’ve ever made. Because I couldn’t have continued to do what we were doing successfully with you guys, with this market being as popular, and as growth oriented as it is a couple of things about new construction. Any way you look at it again, I own several classic turnkey homes, these have less headaches, new home features, less maintenance and repairs, you can get them in areas that are poised for growth. And if you have a good system like we have, where we’ve bought into a good amount where we can get our subcontractors down, we can make sense and make them cash flow. You know, the modern construction, that creates happier tenants because there’s less vacancy, you get a 210 warranty, which takes a lot of the things out of the equation that we talked about earlier, because that’s two years on the small stuff. 10 years on the big stuff. My job, as a provider I learned this a long time ago was I have to mitigate risk and make you money. You can’t if you leave one of the two out, then we’re in trouble. But keeping that balance has been very, very good for the clients that we work with. There’s a high resale of ability. Most people hold rental property for about seven years. Well in seven years if you try to sell a new construction property, it only has a seven year old roof seven year old AC seven year old plumbing system that’s considered new for first time homebuyers. And then also gives you time again, this is one of my more time to do what matters most to you. That’s what real estate is provided for me planting the little seeds started in Bakersfield, California 21 years ago. Cash no cash later. So what we basically offer in our market is new construction. I do a few of the classic turnkeys here in there. But again, I’ve kind of moved the cheese eating at 15 to 25% down. The average on our Phil is right around 30 days. You get it to 10 warranty and the management is in place. Now I’m going to go over three different types of properties that we work in, and then do some q&a and open up to any questions. So this is properties that we have here with us. Hammond, which is in West Jacksonville I think we have a couple of people that own some cocoon properties in here. This is right next to cocoon smallest model over 1200 square feet. Our properties in Jacksonville that are single family homes new construction, will return about 7% cash on cash return, our single family homes in Ocala will get about 10% cash on cash return. Again, the beauty of the Platinum group of Jason’s group is that you guys want to put different things in your portfolio, I will not even try to keep up with the cash flow of other markets. That would be silly and I’d have to take you into dangerous areas of Jacksonville. I’m just not willing to do that. I’ll only invest where I personally own property with you guys. And I wouldn’t do that for myself. So what I do is we went to the new construction, and this will get you a little lower cash flow, but again, a longer runway and also from what we’ve seen a greater growth because I make money cash now cash later, equity growth is a very important part of my strategy. It always has been and I don’t depend on appreciate Because I have some cash flow coming in now, but I’m going to do my best to get in the way of appreciation using those five factors. So this is what we do three bedroom, two bath, we can go over the sheets with you, on average. Again, Jason uses a template formula, which I totally agree with. But I can tell you our new construction they can see is running below 2% because they’re in such high demand. And our appreciation in our area has been a lot higher than what is estimated here, which is a good thing. Now we do two different types of properties. We do single family home construction, and we do small Maltese duplexes, triplexes quads, and an important thing that deciphers us from the bigger competitions from getting wiped out. The big builders in our area, they don’t really want to do anything below 240 because they have big overheads and they need to make their spreads, they can’t make their spreads on the smaller properties. So you’ll see that our most of our new construction again is between 100 15 180 so we’re not competing with the big boys. And another thing that big builders don’t do is they don’t really build duplexes, triplexes. And quads. You don’t normally see Toll Brothers rolling out a bunch of duplexes. It’s just not something that they specialize and they want their custom homes with upgrades. And we all know that. That is an ugly word who has built their own home before anyone? Do you guys know the ugliest two words in the English language of building your own home? change orders? Right You guys remember those? I hated those words when I first learned this. So a couple of things I’ll stop and tell you about right now for our new construction. We have a no change order policy. And only because it was fair, but Jason insisted on as well. So that’s a good thing. The triplexes we have two of those here with us right now. two bedroom, two bath units. These have done really well for us in the open Calla area took a little bit to figure out the building departments and how they worked. But these returns go to about 10 to 14% cash on cash in good appreciating markets. In fact, I’m going to bring up David and Gina are closing this week on two duplexes. They are three of the four units are pre leased, and they’re all pre leased for $50 higher per unit than I estimated, and the value has crept up pretty nicely and makes me feel so good. That’s exactly what I’m supposed to do making money and mitigate risk. Ocala is the main place that we’re doing our multi units, although some of you I know bought into our quads in Jacksonville area and we will have more coming. We only do about six to eight a month or a smaller building operation. But that keeps us honest, it keeps us in good shape and keeps us from forcing deals and that’s really important to me. So single family homes, multis, and then like we talked about today, which I think Jason Once had me on the podcast so we can have a fun argument about the short term rental market, short term rentals. And again, these are all of the performers for Jason’s group. This is not something I’m doing on a large scale, but I own a few myself. And it’s been again, an aha for me, because what I was told is you cannot cash flow, expensive properties, right? Have we all been told that for the most part, except if you go from a monthly to a weekly, and from our monthly to a weekly now, all of a sudden, can you hold a property that’s poised for growth again, on a barrier island, where there’s a ton of homeownership, but also they allow short term rentals. I’ve seen that the growth has been substantial for us. And the cash flow can be about 10% that a cash on cash return in an area like this used to be impossible, because we either looked at it as monthly or like I told you, is there any people here from New Jersey? Where the Northeast, okay, raise your hand proudly we’re okay. We’re not jerks. It’s a cliche. Again, it used to be between Memorial Day and Labor Day. Those were the only months it rented right you’d call the the rental agent down the Jersey Shore and, and you’d order your house for the weekend. But it died after that. When you go to certain areas like Colorado, like I’ve seen more affordable areas of California, although those words don’t go well together, and where we are in even in Orlando, this has become a good thing. Now there’s some pros and cons like Jason talked about. But again, these are three that we’re going to be selling four bedroom, three bath with a pool, which we found to be important. And producing again, when all is in about 10%. I figured I go through a few Q and A’s. They’ve given me half hour up here, but I really don’t want to take up too much of your guys time. The one thing I wanted to say was definitely that story that Tom sparked to me. I love overturning the odds. I love being told something’s impossible, and then proven them wrong. Like Does anyone else not enjoy that. I really enjoy that. And I think this is what real estate investments can do. You can define who you want to be. You can have a way to get the things that you want. And you can do it on your own terms. super important. I’ll get some questions in a minute, but I’m going to answer some Q and A’s some FAQs first, okay. The people that I work with and have subcontracted out have managed my own portfolio for many years and done it well. I don’t like to manage property. Jason and I are the exact opposite on that. I think Jason your mom, you are like an expert at managing I stink at it. I know my, my flaws. I’m not good at managing my own property. In fact, when I first moved from Bakersfield to Jacksonville, I hired and fired for property managers for and then I took them in house and was managing over 100 houses, I hated it and finally found this group started subbing out. They do a better job than I do. Now, something interesting too, because it’s a family business is the owners of the property management company. I went into my building partnership with now This has been a very good accountability piece for us. Why? Because it’s one thing to have a warranty. It’s another thing to have a warranty and know where to find the builder. And very, very, very, very, very, very few builders are tied into a property for the long term, right? They give you a warranty, but they’re not there. We have taken an obnoxious amount of time with our building partners since he’s also managing them to figure out the best ways to tweak whether it’s the wood plank flooring, the stainless steel appliances, the granite countertops, what brings the people in what’s most durable, because they don’t want to inherit headaches. They want to avoid headaches because they’ll make more money easier. But I do not personally own them. I have no financial interest, except for the fact that my personal portfolio is there. What is the average build time for new construction, six to eight months. However, for having this event, we have properties that are ready in the next 60 to 90 days that you guys can come by because we want to make sure if some of you Want to get in quick, we can get gn if some of you want to be delayed out, we can delay out. But the average build time six, eight months, we have plenty of properties here that are 90 days or less if you’re looking to get in, do you need a construction loan? A lot of times when people hear that we’re building new construction, they say, Oh, we must need a construction loan. I’ve heard those are difficult. I heard they’re a real pain. And yes, they are. You guys don’t have to worry about that. You are buying a finished product, whoever you’re going to, they’re getting you a permanent loan for the final product. all that’s required for us is $5,000 deposit down to secure the property and then about 120 days before the property should be done. When final permits are pulled, you need to put up the remainder of 10% but again, you do not need to get a construction loan. It is a totally different piece of paperwork, totally different risk. That puts you guys at a higher risk again to alleviate risk. We are on the hook until it’s a finished product. So that gives one more or less step for you guys as well. Now, how do you handle the concern of rising interest rates? I’ve talked to a number of you on the phone. And interest rates are a huge bit of conversation right now. Huge No matter if you’re going into my market or other markets, and saying, gosh, are they going to raise we’re going to raise, what I tell you to do is let’s look at what’s happening right now. Because people have spent so much time worrying on this. Not that you shouldn’t be aware of it, but it just drags you down. And two things you need to remember, first off interest rates right now I wrote a two year low. That’s nice to know. Secondly, if you’re concerned about the six to eight months, you can pay for a lock. Sometimes it’s free up to a certain amount of months, and then there’s a small fee. So if you’re wanting to hedge against that, you do that into your numbers, but the way that we work against the rising interest rates is right now as Jason said the Fed is probably not going to raise anything for the rest of the year. So you’re at a two year low. And if you really want that extra Side comfort, you can lock in the rate. Very, very simple. This is one that you don’t want to spend too much time on, because there’s easy solutions. So that is all of my questions. I wanted to open it up to more questions and answers. Again, I think that if I can recommend one thing is, you guys have great options. I’d be the last one to say, Come to Jacksonville and buy, you know, all your properties here. There’s other good markets. There’s lots of good team effort here, you can definitely work together with your coaches. Again, we’re just a great option for that hybrid market of cash flow growth. So, any other questions real quick? Not you had one.
Specialist 23:53
Yeah, so the question was, do we cap the amount of rentals compared to owner occupied? The answer is yes. So one of the ways We find a lot of our properties like Pritchard point which I know a few of you have properties under contract, then we bought out the remaining lots that were already there from one of the big builders because they must add to and they moved on to the next big project. So what we did is we bought into an existing area that was already up and going, the majority of those were already owner occupied. And then out of the, let’s say, 20, something lots that we bought. My building partner has a retail arm. I don’t want anything to do with it. He invited me and I said I don’t want to work with retail buyers. I like investors. So he sells a certain percentage of those to retail buyers. So everything that we’re doing, whether it’s Pritchard point, or Ocala, those are there’s a division of it. And we go into areas like Ocala, for example, at 1% when we went and checked it out in 2015 81% of all properties were on rock, which meant there was plenty of room to grow and also the 19% that were left for rental real crap. So new construction, you know, was a nice place to be in. So yes, we do do that because we buy an existing areas where there’s a large amount of on a rock.
Specialist 25:11
Yeah, so those ones that I showed you right there and volando Beach, those are new builds, they’ll be done in six months. I have done some new builds like Gary and forget who else bought the short term rentals there. So yes, we do new construction, short term rentals, those come with the same warranty
Specialist 25:28
resale?
Specialist 25:36
Well, if you’re returning 10% on a short term rental in the area that normally if you just bought it and rented it, you’d be in negative cash flow position. Does that make sense?
Jason Hartman 25:48
That short term rental thing allows you to buy property that you wouldn’t otherwise be able to make sense of, right? So you know, it’s just a different business.
Specialist 25:55
He has a question. We gotta go. So one more here. Yeah, just Quick question. So you mentioned 15 to 20%. Down on your properties, how I understand most lenders land on 20% down, is there something I’m missing with that? Well, we have local person for our short term rentals, they like short term rentals. So they’ll do 15%. And then you can talk to some of the other brokers most do want 20% but there are some that go to 15%. So it depends on the property. I know for our short term rentals, which again, we only do a few, but we have a 15% down lender, that’s local.
Jason Hartman 26:32
Okay, and Stefan had a question, Carrie. And then drew, are you ready? Were you go Drew.
Specialist 26:38
Just real quick question about Oh, Carla, can you just give a highlight of the industry and the type of jobs that attendance have over there?
Specialist 26:48
Sure. Real quick on Ocala. So Ocala just west of Jacksonville. Honestly, when I went out there in 2015, I thought it was 10,000 person market. I just didn’t know anything about it. I never paid attention to Marion County where it’s In the middle of is over 400,000 people to the north of Maine. Ocala is Gainesville, University of Florida many medical centers to the south by about 12 miles is the villages. Has anyone ever heard of the villages? Yeah, I think it’s the second largest retirement community and growing in the US. It’s like Disney World for young retirees. So we’re set right in the middle of that and in Ocala, besides being the equestrian center of the world where there’s all the schools and all that and john Travolta’s farm, there’s also the shipping logistics. FedEx just set up a $200 million plant there for for their shipping logistics. There’s a small infrastructure of name business and then those two outfielders right there. The again 81% of the homes when we went there were owner occupied, the remaining rental property there was really crappy, so it puts us in a great position again, I think David and Gina is the perfect example two duplexes closing this week, three of the four units rented already pre least $50 higher than what we had even estimated. So It’s actually been the surprise runner for market.
Specialist 28:03
Thank you.
Specialist 28:05
So if you guys want to talk to us, we’re here all week, all weekend, my son’s here getting to learn and soak up the knowledge which I’m super excited about. love to work with you guys talk with you guys. Again, either way, whether it’s me or another person, just get an educated understanding and take action because it’s done way more good for me to take action than not do so appreciate the time. Thank you for having me.
Jason Hartman 28:31
Thank you so much for listening. Please be sure to subscribe so that you don’t miss
Specialist 28:35
any episodes.
Jason Hartman 28:36
Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional and we also very much appreciate you doing the show, please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.