David Porter’s Real Estate Investment Advice
With a master’s degree in business administration and an eye toward a future as a financial services adviser who peddles stocks and bonds, David Porter listened to a Jason Hartman podcast one day and thought his future might lie in real estate investments instead.
Porter already had invested in some real estate in his home state of California, but Hartman’s “Creating Wealth” show made him decide to give more real estate investments a shot. He jumped on Hartman’s bandwagon, namely the Platinum Properties Investors Network, and decided to diversify his portfolio geographically by buying a rental property that Platinum had just listed in Indiana.
Some 13 income-property investments later, Porter now owns a Platinum-generated portfolio that has increased more than $700,000 in value over an eight-year period.
How can you mirror David Porter’s success?
You can listen to a Hartman podcast, just as he did.
In a recent “Flashback Friday” episode on Hartman’s “Creating Wealth” show, Porter himself returns as a guest to tell us his real estate investment advice, and what strategies he applied to his real estate investments to make his portfolio grow. Along the way, we learn that hiring a good property manager was one key move in Porter’s investment success—and that none other than Hartman has named an investment strategy, “the free lunch metric,” after Porter.
What Is the Platinum Properties Investors Network?
Jason Hartman and the Platinum Properties Investors Network have been involved in several thousand real estate transactions, owning income properties in 13 states and several dozen cities.
Starting with very little, Hartman embarked on a career in real estate while still in college at the age of 19. As he brokered properties for clients, he invested in his own portfolio, and, through what he says was a lot of creativity, persistence and hard work, he rapidly joined the ranks of the top 1 percent of Realtors in the United States.
He purchased an Irvine, California real estate brokerage firm, which he expanded dramatically and was later acquired by Coldwell Banker. He then combined his dedication and business talents and founded the Platinum Properties network, also becoming a public speaker, author and media personality along the way.
What will you learn from Platinum Properties investors?
With their investment properties spread across the country, Hartman and Platinum use what they call an “area agnostic” approach to real estate investments, selecting the most suitable and sensible markets to recommend to investors so those clients don’t waste countless hours doing such research themselves.
Knowing which markets are currently hot, as well as which ones are not, helps Platinum Properties build diversified portfolios for its clients and give invaluable real estate investment advice.
“Diversify, because real estate is local,” Hartman often tells clients and podcast listeners. “When you diversify geographically into different markets, and there are 400 distinct markets in the United States, you protect yourself from downside risks.”
David Porter’s Strategies for His Real Estate Investments
In his “Flashback Friday” appearance on Hartman’s podcast show, Porter says, “Everyone has their own view of the types of properties they want to invest in. There’s a need for Section 8 housing; there’s a need for penthouses; there’s a need for solid, single-family residences, which is what I was looking for.”
It was in March 2009, when big banks and Wall Street were failing and a year after the real estate crash of 2008, that Porter decided to buy his first Platinum property. The 3,000-square-foot, then 5-year-old home would cost him $85,000 in that year’s foreclosure climate. Today, he rents it out for $1,250 per month.
“I hadn’t had any debt in my life,” says Porter. But, in 2009, “They were throwing money at you at the time if you were credit worthy.” He did take on debt, signing a 30-year loan on that first property at an interest rate of 3.49 percent. He’s still paying on the loan.
“Wow,” says Hartman in the podcast. “Till recently, you’ve been getting paid to borrow that money, I’m sure.”
Porter didn’t stop there.
Soon, he bought eight more Indiana properties from the Platinum group, and later, he would further diversify his portfolio geographically by buying two Platinum properties in Gilbert, Arizona, outside of Phoenix.
“You told me to diversify because I had too much in Indiana,” Porter recalls in his podcast with Hartman. The Phoenix market had gotten beaten down in the 2008-2009 climate, when there was “blood on the streets,” so, again, prices were attractive in Phoenix at the time.
“My whole strategy around this is to create a nice income stream, a nice, passive income stream, to eventually take me into retirement,” Porter says of his portfolio. “Having an untapped ability to borrow and not utilize it is kind of like sticking money under your mattress.”
Porter says that over the past 10 years, he has seen his portfolio gain more than $1 million in appreciation, “and I’m getting nice depreciation on my tax benefits.”
“Depreciation is the Holy Grail of tax advantages,” Hartman says.
“It makes income property the most favored tax asset in America, by a long shot. It’s a phantom write-off; you don’t pay anything to get that. Your property could go up in value and have positive cash flow, and the way the IRS looks at it, you’re still losing money. So, it’s good in that sense.”
Hiring Good Property Managers Key Move for Porter
Friends in his Orange County, California area, where Porter works in finance for a major shipping and transportation company, often ask him why he invests in properties in other states if he hasn’t set eyes on those properties, he says. “I tell them I have rental properties in California I rarely see—I don’t go and visit them. You don’t need to see them if you have a good property manager.”
Good property managers, he says, can make your life as an investor much easier.
“My (time with) property managers consists of calling them when I see that we have a vacancy and sending them chocolates at Christmas time every year.”
Platinum Properties helped Porter find one of his good property managers, he notes.
“This was a property manager one of your local marketing specialists turned me onto in Indianapolis,” Porter tells Hartman.
“I wasn’t happy with the insurance premiums out there, so your local marketing specialist is the one who turned me on to a property management company. And the property management company turned me on to an insurance group, who allowed me to package all of these properties and reduce my insurance premiums by 50 percent in that market.”
Porter tried to manage his properties himself, initially—with the California property in which he had invested before joining the Platinum network. He didn’t visit those properties enough, and, though he has had little trouble with tenants overall, he did have to evict one of them while his managing on his own.
At that point, he turned to a property management company for his California holdings. “I said, ‘Hey, get me a property manager, get me out of this mess, and you can manage these properties from now on.’ It has worked out great. I think these people earn their seven or eight percent or whatever you’re paying them.”
Porter still pays “due diligence” to selecting the right properties to buy, working with the Platinum Properties team for real estate investment advice and to help him pick the appropriate markets. But he leaves most business to his property managers, other than spending about an hour per month on the accounting work that his portfolio requires.
He also tells those who wonder why he buys out-of-state properties, some of which he didn’t actually seen till two years after buying them: “Who goes, if they own Apple stock, to Cupertino to visit with a manager? They don’t do that, but they have no problem putting $15,000 in Apple stock.”
Porter’s brother-in-law, to whom Porter recommended investing in Platinum Properties, is the opposite sort of property searcher than Porter is. The brother-in-law, Porter says, actually takes vacation time to inspect any property he’s about to buy and even has slept in them before making a decision.
“He likes that (approach), but I consider that to be some type of torture,” says Porter with a laugh.
“To me, it’s all about passive income, which provides nice benefits, including paying down some of these (properties),” Porter says. “And, we have put proceeds into another business, which is doing well right now and generating more passive income.
“It’s just been good all the way around.”
Porter Invents the ‘Free Lunch Metric’ for Investing
What sort of tools should you use when searching for properties to add to your portfolio?
Because he was seeking “solid, single-family residences” for his portfolio, as opposed to Section 8 housing on one end or penthouses and mansions on the other end of the scale, as earlier noted, Porter developed a tool of his own. He would check with a property’s local school district to see how many students were eligible for free lunches in that area.
“What I looked at was the percentage of children in the local school that qualified for free lunch. If it was below 50 percent, it was an area I was comfortable with. With the houses we have purchased, I always liked to think of it as ‘would I live there’ and ‘would my kids be totally happy living there.’”
All in all, Porter says, “I’m really proud of our real estate portfolio. I think they’re very nice properties, and I’m very proud to own them. They provide a nice housing arrangement for people.”
Hartman remembers that when Porter had previously appeared on his “Creating Wealth” show, he first learned about Porter’s free-lunch checks and that the podcast host had decided to dub them “the free-lunch metric.” (Porter also refers to the free-lunch checks as a “litmus test.”)
“You like ‘A’ properties, the nicer kind of properties, and we have those,” Hartman tells Porter in the podcast.
“And, we have ‘B’ properties and we have ‘C’ properties. Honestly, the ‘C’ properties … they have all the great numbers, but the tenants are more difficult to work with. If you’re a ‘C’ landlord, you’re going to have more work to do. We used to only do ‘A’ and ‘B’ but then got ‘C’ because some of our clients wanted them.”
Hartman Associates Serve as Your Therapists
When hearing about the numbers in Porter’s portfolio, Hartman comments that he and his Platinum Properties associates have helped “thousands and thousands of people make a lot of money.”
You as a Hartman client or follower should know, he says, that Platinum and its team members in effect act as “investment therapists,” giving real estate investment advice and reminding clients now and then not to worry about the little things but to keep their minds on the ‘big picture.” That picture, of course, would be the goals that you’ve set for your investment portfolio.
Sometimes “you can be your own worst enemy,” Hartman says, and “we all need a little therapy at some point.”
The challenges that you or anyone could face while building an investment portfolio make Hartman think of a lesson he learned from former president Richard M. Nixon. He compares that lesson to those whose lives are built on real estate investments and successful financial futures.
The late president served before Hartman was born, but the avid reader he is, Hartman has read Nixon’s autobiography, “In the Arena: A Memoir of Victory, Defeat, and Renewal.” Nixon certainly experienced his share of political ups and downs, but Hartman finds that the former commander in chief was “an educated and developed person.”
In his autobiography, Nixon talks about his first visit to the Grand Canyon as a child and gazing at its panoramic beauty from the South Rim. But then he hiked down to the bottom of the rim and gazed upward. “It was only from below, from the depths, that he could truly appreciate one of the seven wonders of the world,” Hartman says.
Nixon at that point in his book quotes philosopher Sophocles to sum up the former’s storied career: “One must wait until the evening to see how splendid the day has been.”
For you as an investor, Hartman concludes, “That’s a good metaphor for earning your own way, for experiencing hardship, for dealing with hardship and overcoming hardship.”
For David Porter, the course with Platinum Properties proved to be a much smoother way.