Jason Hartman centers the show on the Jackson, Mississippi market. He invites Brad, the network’s market specialist. They go through the local economy and why it’s a great place and time to invest.
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This show is produced by the Hartman media company. For more information and links to all our great podcasts visit Hartman media.com. Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is handpicked to help you today in the present, and propel you into the future. Enjoy.
Announcer 0:26
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 than 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 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to find 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 1:09
Hey, welcome to the creating wealth show. This is Episode 500. Nate, and this is your host, Jason Hartman, thank you so much for joining me today. Our guest will be our new provider in Jackson, Mississippi. Now, I did quite a bit of business in this market years ago, but we just hadn’t really been too happy with our provider that we had many years ago. We’ve got a new one. I think I like this guy. He’s got he said some really good stuff, which you’ll hear. We did of course talk off tape off air as well and I liked what he had to say there too. So it’s worth checking out now after the Memphis property tour that is just coming up this weekend. You still I know there’s still a couple people, a couple people that have kind of trickled in. I think we have over 30 people for that tour. You can still register for it. Jason hartman.com we got a few spots left where we can accommodate you. If you want to do at last minute, a couple of us are going down to Jackson, Mississippi on Sunday night following the property tour there. We’re going to meet with our provider and look at some more of his offerings directly. So of course, I’ve been to Jackson before, definitely not my first trip, but wanted to go back and see the the latest and greatest that it has to offer. So you’ll hear more about that today. Also, just wanted to let you know, well, Adam want to launch into all that. I’ll save that for another time. What I was gonna say because I want to keep these intros a little shorter. I am really excited about our upcoming event for the venture Alliance mastermind in San Diego. I just got to tell you, this group as small as it is, it’s just a humble little beginnings right now. We’re already starting to look at some things. I have hired an analyst one of our clients and that is Oliver who’s probably listening. So, Oliver Welcome aboard to help with analyzing deals for the venture Alliance. And we’re really excited about that. Again, the purpose of this group is to look at out of the box deals, the deals that would not fit in the typical mold of properties. That usually is single family homes that I talked about on the podcast, and to look at other things. So we’re looking at a couple interesting apartment deals in Columbus, Ohio. One of our members, Neil said that he has a local friend who’s a real estate investor who’s going to go check these properties out for us, just do a physical look at the properties for us, which is great. You know, we’re looking at some interesting stuff, I mean, portfolios of properties in different markets. There’s another one that’s a portfolio of notes, 74 properties, just some really cool stuff and I’m happy Hoping that the venture Alliance members will get together and invest in these deals together and of course all invest in them, because I don’t expect our investors to do things I wouldn’t do myself. So if you want to invest with me, look at some of these out of the box deals, get to our venture Alliance meeting, we probably won’t continue the this practice that I’m about to share with you. But since it is our first event in June in San Diego, if you’re not sure about the venture Alliance mastermind, if you’re not sure, if you want to join if you’re not sure it’s worth it, if you’re not sure you’ll get value, you can come as a guest, you know, this is a high end group. This is where we’re going to have some high end experiences. It’ll be a first class weekend. Really, really nice stuff. So you can register as a guest. And you can do that either at Jason hartman.com. And I think Brittany should have that in the event section now, but if not, you can go to venture Alliance mastermind.com and you can either join on the annual basis, the quarterly basis or just as a single for the event in San Diego in June. So I hope you’ll join us for that. Without further ado, let’s keep this intro short for once in my life. Well, there have been a couple of short intros, this will be one of them. So let’s get to our guest today and talk about Jackson, Mississippi. Hey, it’s my pleasure to bring you a market profile on a market that we were busy in years ago, but have not been doing business and lately, and I’m getting pretty darn interested again. And that is Jackson, Mississippi. Brad, welcome. How are you? I’m good. Good. We got our local market specialist is here and he’s got a great story. What’s great about him is that he really likes to buy and hold so he’s He’s doing exactly what he’s telling you to do, which is, which is just like me. You know, there’s there’s too many false prophets out there and too many gurus that say, you know, you do this while I do something else. Right. Tell us a little bit about what interests you in Jackson, why other people should be interested in you know what you’re doing with your own investment portfolio. Okay.
Brad 6:19
Well, thanks for having me on. I appreciate it.
Brad 6:23
When when I started in real estate 15 years ago, I was just looking for any way to to make some extra money. And you know, I had a job. I thought I was making pretty decent money at the time. But I’d had my first child a year before and so I started looking for other ways to make money. And a friend of mine was in the real estate business. So I that was him and asked him some questions and he happened to the exiting the real estate business at the time and opening up a restaurant. So I bought, I read half a book and went ahead and bought 10% Right off the bat that was probably pretty crazy. But uh, I’m always kind of a jump in and learn
Jason Hartman 7:08
guy. You know what, there’s a lot to be said for that. I mean, you just got to do things in life. That’s where all the real wisdom comes from is just doing something. You know, you can sit in and debate theory and go to seminars forever. listen to podcasts like this one forever and never do anything. You gotta you gotta actually do stuff. That’s where the, that’s where the wisdom is, you know,
Brad 7:29
well, believe me my first six months owning 10 rental properties. I got a Harvard education in six months.
Jason Hartman 7:35
That’s the school of hard knocks, I bet right?
Brad 7:37
It was it was tough, but I, I made it I went back and forth every day saying, I’m going to sell these properties. I’m going to keep up I’m going to sell them I’m going to keep them. And then finally, one day I just committed and I said there has got to be a way for me to make this work. I’ve just got to learn how to do it. And I saw I did I said about learning how to buy houses myself. Learn how to sell them learn how to rent them out. Learn about About the management business and that was 15 years ago and it’s been really good to me. I I’ve done if I had to go back and count I think being conservative I’ve done 1500 deals.
Brad 8:15
In those in those 15 years,
Jason Hartman 8:17
how many of your own buy and hold properties do your own now? Got 117? Only 117 you slacker.
Brad 8:27
Jason I’m trying to get to 500
Jason Hartman 8:30
Yeah. Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. Yeah, that’s it’s just amazing. I mean, wow, what you know, think about it. What other business can just say? I’m gonna just call you a regular guy. Okay, which you’ll probably agree with, I think but I don’t know. You know, just uh, what kind of business A regular guy get into and in in 15, short years, you can have 117 properties and the business, you’ve got a business of, you know, renovating properties and reselling them to, but I’m just talking about your personal portfolio. You know, this is the accessible thing. Show me a story, please somebody if someone has done a similar comparative thing in the stock market like that, I mean, you’ve got basically a mini real estate Empire. It took me longer than that. I mean, I’ve got about 150 ish, give or take units, and those aren’t single families, all of them summer, and I’ve got a couple partners on some of them. You know, that’s just an awesome story. I mean, what so you sold a bunch of your properties, though, in in sort of the heyday in like, 2005. Right? I did. I did. And but you regretted it? I think
Brad 9:51
I did I from 2005. To probably earlier than that to the end of 2008. I sold 50 to 60 properties. A year and after the crash, you know, when everything was tight for everybody, I sort of looked back and said, If I had just kept half of what I had sold, I would have been in a much better position, you know, going forward through through the crash. So that’s what after that, I realized that the true way to build wealth in real estate is to buy and hold. And I said about doing that for the last three years I’ve been doing. I’ve been doing a little bit of selling, but it’s very tough for me to sell these properties, you know, because they’re so good. The cash flow is so strong, it’s just, it’s, I enjoy selling, believe me, but the buy and hold is where the true wealth comes. For me.
Jason Hartman 10:44
I always like to say that the people who buy and flip have spending money and the people who buy and hold have real wealth. That’s kind of one of my long, longtime quotes, and I’m looking at a property now at Jason hartman.com. slash properties. And you’ve got to go down to the map because we don’t have Jackson Mississippi icons there. So we’ll, we’ll get one of those up for you as we start to do more and more volume and kind of revamped this market. But you know, we did we did quite a bit of business there years ago, looking at these, these these properties. I mean, this is phenomenal, a $50,000 house that is rented already. It’s not speculative. It’s not a projection, it could rent for this. It is rented now. Okay. And it’s rented for $750. So that’s much more than 1%, which is the the RV ratio, the rent to value ratio that we recommend is the 1%, which would only be 500. So this is rented for 750. And just looking at some of these numbers, the debt coverage ratio is 2.15. I mean, that’s phenomenal. That’s phenomenal. 2.15 The the cap rate and of course now this stuff has to be protected because it’s based on income and expenses over the course of the first year but the cap rate here is projected at 10.4% and get this cash on cash return of nine teen percent don’t fall out of your chair folks. This is a that’s pretty darn good Yeah. And this is this property is three bedroom one and a half bath what do you what do you want people to know about you know this property or kind of your your typical template deal right those are those are properties that I buy myself that I hold myself as well.
Brad 12:40
That’s that’s a very it’s a very good street located near a school. Excuse me. But when we it’s got a new roof. New plumbing lines, new sewer lines. We when we when we rehab a house, we try to take care of all the deferred maintenance up front When I identified the areas that get always gave us problems on these homes, they were the water lines, the sewer lines and the back and the roof. And so we go in and we take care of all that up front. Those are the major expense maintenance areas we had going forward. So we so we decided just to on every renovation we take care of these up front
Jason Hartman 13:24
Yeah, I wanted to you know talk about a specific property and what it looks like there for a moment but But back to your investing strategy, and the buy and hold concept and you know, any anything else you want listeners to know about that
Brad 13:37
that particular property. I’ll refresh your everybody’s ideas about it real quick. It’s, we go in and we do our typical cosmetic package, hardwood floors. It’s a large home nice area, grade 10 and our motto is quality quality houses quality rehabs quality tenants, and we screen we screen our tenants That’s so that’s a great house that’s going to produce income for a long time to come. As far as our strategy, I think, you know, we look obviously for great deals, we try not to be anywhere over a certain loan to value ratio. But these and we like three bedroom one and a half bath houses we like but I’ll buy three you know, I have plenty of three bedroom one bath houses and they rent just as just as good as the three bedroom one and a half bath houses or three bedroom, two bath houses. But what we look for is cash flow, cash flow, cash flow. I can look at a property anywhere in my area and tell about what it’s worth. So I know right away if I’m getting a good deal, I can walk through a house in less than five minutes and decide what I’m going to need to spend on the rehab.
Brad 14:57
I also know what it’s going to rent for right off the bat.
Jason Hartman 15:00
Why would someone want to invest in Jackson? I mean, you know, we’ve got many areas across the country that people could invest in. What what makes you like that area so much? And by the way, you didn’t grow up there. So that’s that’s important. Your part your business partner did, but you didn’t. And you’ve been there for Have you been there? 15 years is that about how long you’ve been there? since you started real estate there? Were you already there? I’ve been here for 18 years, I’ve lived 10 years.
Brad 15:26
I didn’t get into real estate until I was already here three years.
Jason Hartman 15:29
Right. Okay. So, you know, you there had to be some conscious decision about like, you know, I’ve only been here three years, but this looks like a good area to be investing,
Brad 15:40
right? Well, yes. I had friends in the business and that helped me get into it. And then as I started going forward, I realized what an opportunity there was. Now the reason that I think if you don’t invest in Jackson, Mississippi, you’re absolutely crazy. Is that you can Buy a house here for $50,000 that rents for $750 a month, you take that same house and move it to another market. It’s 100 hundred and 50, even a $200,000 house, our rent, our rents to prices here are just so much better than anywhere else in the country. I don’t think there’s another market where you can buy a $50,000 house and have it rent for 750. In fact, our average rent is actually a little bit higher than that. Jason,
Jason Hartman 16:32
by the way, that’s a moving target. Because right now as we’re recording this in 2015, you are pretty Right. I mean, there’s maybe a few you know, you can you can do this in really crappy areas, of course, all day long, you know, really blighted areas, but in quality areas to get a 1.5 Rv ratio is is a pretty big accomplishment. That’s That’s awesome. So so you’re definitely right when you say that, but you know, years ago, I mean, in the, in the thick of despair in the in the trough in the worst time, the time where people had to have the most faith and obviously those contrarian thinkers were proven right. You know, you could get phenomenal rent to value ratios like this all the time. The fact that you can do it today, in 2015 is the the amazing part. What is this profile? Like? What’s this kind of target tenant? Like what what do they do for a living? What what are they like, what, what’s their stability like and so forth. I have
Brad 17:37
typical blue collar tenants, basically, some, we do a good portion of section eight. I’d love section eight down here because our rents are calculated on a national average. So taking into account if they try and average Mississippi with California, it’s gonna benefit the Mississippi rents.
Jason Hartman 17:56
Right? Right. That’s, that’s interesting, by the way, and it just goes to To show you how wasteful and lame the government is at pretty much everything, but I just have to get my jabs in there all the time. But I definitely want to drill down on the section eight thing, because, you know, we have investors that love section eight, and we have investors that hate section eight, and there’s not much middle ground people are either kind of hot or cold on this. And there are some real benefits to it. You like it? What percentage of your portfolio is section eight? Did you say or did you say that?
Brad 18:30
I try to stay around 60%. Okay, so you
Jason Hartman 18:32
you have more than half slightly more than half as section eight tenants and you when you acquire a property, you want to get a section eight property. That’s what you’re saying?
Brad 18:42
Well, any of them qualify for section eight tenants
Jason Hartman 18:44
I know. But there’s a target. I mean, of course, I didn’t mean to imply that only certain properties can be section eight. But, you know, there’s a target kind of property that fits the mold, right.
Brad 18:55
We typically accept a cash paying tenant or a section eight tenant on Almost all of our properties, the ones further out. Most of the ones we do accept will be in Jackson. The reason I like it is, you know, it’s it’s direct deposited into your account every month. And if you’re paying a note, it’s nice to know that that money’s there before your notes do and it’s just guaranteed it’s guaranteed. We have the other reason I like it is that, you know, they they typically tend to stay longer, believe it or not, they typically tend to stay in a house longer.
Jason Hartman 19:27
Well, they’re out there on the dole, why wouldn’t best
Brad 19:31
exactly and you have and you have leverage over them. If they don’t pay you their portion, they can get kicked off the program.
Jason Hartman 19:38
Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday. But you know that the objection is and you’re absolutely right, and they get kicked off the program for life. Are you okay? Yep, that’s it. It’s a big risk for them. So mostly, they want to be good. citizens and play ball and be decent tenants. But you know, there’s a there’s a certainly an element of investors the ones who have had bad section eight experiences who say oh you know I got to do more stuff to the property you know these tenants are just lower quality well how would you respond to that
Brad 20:19
some of them are we we still screen our section eight tenants we we are not a we’re not slum Lords that if you give me a deposit, I’m moving you into a house. That’s not the way it works with us we make we screen even the section eight tenants we check references check, previous landlords everything. I have had really really good luck with section eight tenants. I’ve had some in the houses for six, seven years and they’ve loved me
Jason Hartman 20:49
it’s hands on they’re a little more needy well because they’re dependent on government so they just feel they have that sort of neediness is kind of part of their their their purpose. Programming you know, unfortunately,
Brad 21:01
that’s true and they’ve all got my cell number and they can get in touch with anytime they need to. And they there. I’ve I’ve met a lot of good people being tenants whether they’re cash pan section eight or or either either way
Jason Hartman 21:15
Yeah. And with your section eight tenants, are they on a full free ride or a partial like what percentage is being paid by the government?
Brad 21:23
It varies depending on their income, some can be 100%, subsidized. One I just rented six weeks ago, she’s only getting her rent is 767 and she’s only getting $138 subsidized by the government.
Jason Hartman 21:41
Okay. And back to the Jackson Mississippi the broader discussion. I want to I want to make sure we hit on that. Why Jackson, you know, it’s not a very big city. The metro area is only about 575,000. You like the averages on the section eight that was one of Your reasons, by the way before we got off on another tangent which I, which by the way, I’m always guilty of, I just want to disclose that to you. But you know what, what other things do you like about Jackson?
Brad 22:10
Well, Jackson, you know, being the capital has a rich culture and rich history. It’s a it’s actually a vibrant, thriving metropolitan city. We’ve got we’re three hours from the beach three hours from Memphis, being the capital city. There’s a lot going on here. We have one of the best Children’s Hospital hospitals in town. Where we have a good industry, we have large medical facilities here University Medical system employs a lot of people. State Government employs a lot of people obviously we have unfortunately a big population of lawyers here too, as well. We have a large Nissan plant just 20 miles north of the city that employs over 4000 people immediately and About 1000 people indirectly. So there’s a lot going on here. It’s growing it’s Jackson itself may not be growing as fast as the suburbs, but the suburbs are exploding
Jason Hartman 23:12
and distinguish the suburbs from the city itself and what areas you like and don’t like
Brad 23:18
I there are some suburbs where I will invest, some are better for some are some are better for retail deals. I typically don’t buy rental properties outside of Jackson, very, very far outside of Jackson. There is a suburb just to the east of here where you can still get pretty good deals. It’s it bumps up against Jackson. And I typically only do business in Jackson and this little town that’s just to the east of here. That now you go 20 miles north of here is where I live, it’s and it’s a nice suburb, it’s growing. they anticipate 60 things Now some people will leave moving into that into just north of here, the county just to the north of Jackson and then in the next 10 years. So, typically I do all my stuff in 95% of my business in Jackson, there’s just plenty to keep me busy down here.
Jason Hartman 24:17
Sure. And how do you select a neighborhood and a property? Just tell us a little bit more about what you look for in a property in the neighborhood?
Brad 24:24
Well, the street obviously is key.
Brad 24:30
There’s it’s easier to say what my criteria were, I will not buy a property. It’s just I’ve blacklisted certain streets. I farm a particular pocket of Jackson. It’s about five square miles. And I know all the I look at the street first, and then I look at the house what kind of condition it’s in. I typically go for houses that are that are light rehabs cosmetically I don’t want to go and rebuild an entire house. Just really the reason for that is, is it’s too time consuming when I can go and pick up you know, buy one that’s basically a total rebuild versus one that needs a like cosmetic redo and all the mechanical redone is a lot quicker. And as busy as I am, it’s just I have to turn them over quicker. So it’s mainly a time thing. So I look at the area of the streets that condition to the house. And I know that area like the back of my hand if I have a house that somebody calls me on and wants to sell, I know right away whether or not I’m going to be interested in it.
Jason Hartman 25:37
Anything else you’d like people to know about, you know your operation in terms of how you manage properties, what they should expect when they’re buying in Jackson,
Brad 25:47
well, I would I would, they can expect to have my cell phone and be able to call me anytime they need something they will have their own. As far as management goes. They’ll have their own login portal to see how their property is performing. They can expect good service they can expect, you know, I don’t know if, you know, we give certain incentives to buyers from time to time. And I just think that they can expect a very strong net positive cash flow, high rents, low prot lower property values, and they’re probably used to, you know, I think it’s just a great place to do business. I just think you people are that don’t that even the people that live here that aren’t buying property are really missing out
Jason Hartman 26:37
here. And one of the great things about your market is that you actually offer financing of these properties with between 30 to 50% down. And you know, that may sound like a lot but you know, the properties are pretty inexpensive. So, we’re talking with 30% down on a $50,000 property if it’s only $15,000, and you’ve got some nice terms on the And then it can really be a good option. Who is this for this financing,
Brad 27:04
it makes sense for the buyer of a property that wants to utilize leverage that has an LLC already set up or, you know, they want to set one up.
Jason Hartman 27:15
But it’s just for someone who, who needs who has a, maybe a limited amount of funds, but still wants to invest in real estate. So the IRA buyer, the person who’s got more than 10 properties, the person who wants a pre approved loan because this is an asset based loan, okay, so there’s there’s no credit reports and messing around with qualifying or anything like that. And the foreign national buyer too, right. I mean, we’ve got clients from all over the world so it’s good for all all those types. Right?
Brad 27:46
That’s great.
Jason Hartman 27:48
Okay, excellent, good stuff, and more on the financing. Just have our investment counselors will put clients directly in touch with you but Jackson, Mississippi market does offer some good financing. One of the questions we get asked A lot is, you know, if the deals are so great, why wouldn’t all the tenants just become buyers? And you know, we’ve identified a whole list of reasons for this. I’d like to hear any from you. But, you know, maybe I’ll start to get you thinking and, and one is obviously financial in the charity. I’ve definitely found when I was in traditional real estate for many years, that to become a homeowner from a renter, it always seems like you have to take, you know, one step back to take two steps forward. And people who like the instant gratification of just, you know, having everything done for them and, you know, having you probably rent a nicer place than you can buy. I’m not totally sure that’s true nowadays, with the mortgage rates being so low, depends what city you’re talking about, of course, it’s really pretty amazing in that vein, and just the willingness to delay gratification and of course, if you’re, if you’re getting, you know, the section eight assistance from the government, heck, why give that up. But, you know, maybe address that question. Are there any other things? Or do you want to elaborate on any of those points?
Brad 29:05
I think, you know, you’re right. When you financial immaturity, I think the the, I think the main reason is lack of liquidity in in the marketplace with lending rates or lending qualifications still being pretty strict. I just I think a lot of these people do have damaged dings on their credit, damaged credit, lower income, and they just, they just have a hard time buying a house. Now. The other is that there is there is a certain group of people that have just a renters mentality. They’ll always be tenants. You know, I come across, I rent to people in their 60s
Jason Hartman 29:46
that are just like long tenants that have
Brad 29:47
never owned a home they’re, you know, forever, perpetual tenants. And I think the big thing is that, you know, they’re on they’re on a tight lot. Most of them are on a fairly tight budget, and if you know they They’d like the security of knowing that somebody else will replace their water heater if it goes out. Right. Yeah, you know, as you know, if their radiator on their car goes out they can spend the money on that instead of having to buy a new water heater, right?
Jason Hartman 30:11
Yeah, got it makes sense. Makes sense. Good good stuff. Well, this is a great market to take a look at folks, contact one of our investment counselors go to Jason Hartman calm and click on the Properties page to look at properties there. You’ll have to scroll down as we’re recording this had to scroll down to the map toward the bottom to pick Jackson specifically, but it’s a great market. And thank you so much for joining us today.
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Announcer 31:15
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