Jason Hartman shares possible new projects in Phoenix, Charlotte, St. Louis, Dallas, and Austin. He also encourages listeners to use Property Tracker and Property Evaluator to help evaluate real estate deals. Then, he talks to Chris about the Birmingham Market Profile. Chris shares that the city of Birmingham has been investing to revitalize the city, and the cost of living and barrier to entry in Birmingham is lower than in other markets. They also discuss Section 8 investment properties and the ROI of the properties in Birmingham.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Announcer 0:13
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in 1000s of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:03
Welcome to the creating wealth show, Episode Number 631 631. I hope you enjoyed our last 10th episode that happened to fall on a flashback Friday. But I remember this interview from a couple of years ago and it was a goodie, it was from Episode Number 330. So 300 episodes ago, power and strategy with Robert Greene, the best selling author of many great books, mastery, power and seduction, and the 48 Laws of Power. And those are those are some good books. Let me tell you really interesting. A lot of history is learned so much history from reading Robert Greene’s work so anyway, Hey, I know there’s a couple of you out there by the way, I have a bone to pick with you listeners, a few of you only a few of you. But I have heard from like, two of you. And I know you’re listening that say you’re skipping flashback Friday. Shame on you. That’s terrible. Don’t do that. Flashback Friday is good stuff. And you know what? As good old Tony, you know, Tony, Tony Robbins, that guy? You’ve heard of him? As he says repetition is the mother of skill. So, you know, a lot of you listen to these podcasts. I know over and over. You’re telling me that all the time, which I can’t believe I haven’t bored you to death already. But I’m glad I haven’t. So yeah, be sure to catch those flashback Fridays. those are those are good. There’s a lot of good stuff there. When I listened to them, I’m thinking Gosh, I forgot this interview. This was really good. I learned a lot. And so you got to listen to them again.
But anyway, hey, so today we are going to talk about renting to Uncle Sam. Yes, Uncle Sam, the government section eight. Very, very good cash flow strategy, because Uncle Sam always pays. And you know why Uncle Sam always pays the rent, because Uncle Sam gets to print the money and create money out of thin air fiat currency. Right? So that’s why Uncle Sam always pays the rent. Now, you know, you always get the amount of dollars promised. But what those dollars will be worth Well, that’s in flux. You know, we don’t know that changes over time. So we’re gonna talk about that we’re gonna do a little Birmingham market profile again, with one of our newer providers, one of our newer local market specialists there. And I’ve got one of our investment counselors who I have been bugging for, like, I don’t know, how long has it been maybe a year or more to be on the show. And she’s finally here. Ladies and gentlemen. Say hello to Carrie. Carrie, how are you?
Carrie 3:46
Hey, Jason. I’m good. How are you?
Jason Hartman 3:47
Good. I’m glad we’re finally recording a show.
Carrie 3:49
I know. I know. I’m excited. Debut day.
Jason Hartman 3:52
Yeah, I know. You know, it’s only been like a year that I’ve been bugging you about this. Right?
Carrie 3:56
That’s all. Takes time.
Jason Hartman 3:58
I know. I know. You know, folks, this is one of my ongoing challenges is I have some very shy investment counselors. Now they’re not shy, they’re just busy. And you know, getting them to get around, getting on the show. And booking a time is not always easy. But Carrie, I’m glad you’re here. And you have an incredibly important job in our company because you sort of split your time. Being an area manager or an area coordinator. We haven’t really we’re not too formal about titles here. I mean, I’m the chief cook and bottle washer, okay, so that’s what I do. But you you kind of split your time between doing bringing on new local market specialists, researching markets and researching local market specialists who are in those markets and being an investment counselor. And you’re really the only one in our company that has that dual role of doing both of those things, not just investment counseling, so I think it would be a great insight for our listeners to hear maybe a couple of your worst stories. Oh, I know you’ve got some.
Carrie 5:07
Oh, I do I do.
Jason Hartman 5:09
You know, you’re you’re dealing with these local market specialists or I should say proof perspective, local market specialist and, and you know, a lot of them are, they’re really pitching they’re, they’re salespeople. So they’re selling hard. And they’re trying to talk you into, you know, affiliating with our group and, and getting our client’s referral business. Tell us a little bit about that.
Carrie 5:33
Sure. So yeah, like Jason said, I mean, a lot of people are coming at us, you know, Hey, what about my properties? What do you think of my market? And, you know, you got to take everything into consideration, you might have a good property. But let’s look at your property management team. You know, it all has to come together for us to even consider taking you on board. And once we actually consider it, you know, do your numbers work? How was your communication, everything has to play a role in if you’re going to be coming on board with us and presenting your properties in front of our investors. So there are several stories and pitches that come across to me, and, you know, you’re just shaking your head. And All right, well,
Jason Hartman 6:18
Like, who who is this? Who is this sleazy snake oil salesman?
Carrie 6:22
Right, exactly. So, yeah, one of my stories, I had one of the potential providers pitch us and his numbers were just outstanding, it was a provider in Indianapolis. And we didn’t end up going with them, of course, because
Jason Hartman 6:40
And I just want to clarify, when we use a provider, we’re talking about a local market specialist. They are our affiliate that we refer the clients to, you know, to buy the property. So. Okay, go ahead.
Carrie 6:53
Right. So their numbers were outstanding, their RVs were one, one and a half to 2%. You know, we’re thinking this is a great,
Jason Hartman 7:02
That’s a really good rent to value ratio. Yeah,
Carrie 7:05
Very good. So Sarah, and I were talking, hey, you know, let’s, let’s research other properties around the area, let’s call other property management’s, you know, see what their rents are matching to this potential provider? Well, of course, this provider was pitching us way above average for that neighborhood and that market and come to find out, you know, when we brought it up to him, you know, okay, these numbers that, you know, no one else has the numbers, why do you have these numbers? Well, he kind of hid away from us, and we really haven’t heard much from him since. So, not only did his numbers not match up, but then he fell short of communicating with us, and, you know, justifying why his numbers were higher or anything, he just kind of went dark. So that was one that we had to deal with. And we out to get the the other better ones that we do have currently, and make sure that they’re up and running, and their numbers are working, their communication and know things are flowing with them. So it took a lot just to go through that. I mean, it was about a month or two months that we had to go through that and ended up not even taking them on board.
Jason Hartman 8:13
You know, it sounds like my love life, you got to kiss a lot of frogs before you get to kiss a princess. Yeah, that’s true. These local market specialists, you know, they all they know about our group, because, you know, we’re pretty established. It’s a small cottage industry, and we’ve been doing this a long, long time now. And, you know, we’ve done 1000s of transactions for 1000s of clients, and, you know, they’re, they’re trying to get in with us. And what’s interesting too, is that, you know, they, they sort of come back around, and they recycle themselves. I’ve always noticed this and thought it was interesting, you know, it’ll be four years ago, or six years ago, they tried to get in with us and, and they didn’t, or, you know, maybe they were in with us and they were doing some business, and then they, you know, the typical thing, it’s like that old quote by Napoleon, you know, the most dangerous moment comes with victory. And that, you know, what that means it’s really important concept is, you know, once we, once we get comfortable and complacent, once we’re winning the game, you know, we’re, you know, the money’s coming in the businesses there, then we get complacent and we slack off, right? It’s just part of human nature. We all do this, right? You know, I’m sure nobody’s immune to it. But I remember one, one of the providers or local market specialists in Texas, who we actually did a lot of business with in the day, you know, his company just started you know, it started out great. And it went, we had a good run, you know, made made a lot of money together. A lot of clients got good properties and and then you know, it just got bad to use it, Texas saying, you know, it was like big hat no cattle. It was too big for the britches type concept. Right. And you know, the customer service got bad, not responding to emails very quickly, or phone calls. And, you know, and I remember when this company tried to get back in with us just a while ago, Carrie, you might have been copied on this email, I’m not sure. I remember, you know, it was an email to all of our investment counselors from him. And I was copied on it too. And he said, Hey, I’d really love to get back, you know, doing some more business with you guys. And, you know, I think Jason’s got a great team and all this stuff. And it was Sarah, who just replied all and just cut his head off. I mean, quite literally, like, you can’t even return my clients phone call. And you know, it takes you two weeks to get back to someone, are you crazy? We’re not gonna do business with you and put our name on, you know, in with you? No way. This is, we haven’t heard from him again.
Carrie 10:58
Well, yeah, that’s part of the vetting set, you know, we we need to vet those ones out, that’s not going to communicate with us, and we don’t want to take our name to the investor, and then they’re not going to communicate with them. So
Jason Hartman 11:09
Yeah, yeah, no question. You know, it’s really it’s like an audition, you know, we make them jump through some hoops, you know, we make them upload properties to our website. And, you know, some of them can’t even get past that they can’t handle, you know, uploading the data. And, you know, they want to send us some Excel spreadsheet, or some, you know, thing done in their format. And we’re like, No, we have a very specific way of doing this. We, you know, when Jason started this business and got into this many years ago, he decided the first most important thing was data standardization, you got to standardize the data. So you learn how to read that one page, Performa. And you don’t have to be a detective, you know, if you just learn how to read that, and watch my video on it on the front page of Jason hartman.com, it’s a 27 minute video that’ll teach any of you listening a heck of a lot about real estate investing, just that one core piece of content? You know, they won’t even do that they can’t do that. They can’t return phone calls quickly. If they can’t attend to our needs and concerns. There’s no way they’re gonna attend to the clients. Right?
Carrie 12:18
Yeah, I mean, and a lot of them want to go, you know, just to you, you know that, you know, that’s not a nobody, but you know, someone we haven’t heard of, they want to say, hey, Carrie, give me to Jason, how do I connect with him? While there’s, you know, certain criterias you need to go through before you get to you. And you know, some of them just drop the ball that way, too. They don’t even want to take the time to listen to us to listen to how you know we operate. They just say, Well, if I can’t talk to you know, you, then I’m not going to pitch you Well, you know, then that’s too bad. Because, unfortunately, that’s our system. And that’s how we roll.
Jason Hartman 12:53
Yeah, yeah. So you know, we’re not saying listeners, you know, by telling you these, what goes on in the back office, right? You know, we’re not saying that we want to be just really difficult to work with and really rigid, but it is a test for these people. I mean, I’ll give you an example one of our local market specialists last year, their entire company, you know, and they, they have a big staff, I’ve been to their office, and they got a great operation, they did 172 transactions their company did last year. And from just us, they got 90 of those 172 transactions, so our referrals, and that’s from you listeners, make up more than half of that company’s business. And that’s how we really get good service for our clients is by doing the volume and dangling the carrot in front of them, because they know if they if they don’t take good care of our people, you know, they’re just not going to keep getting referrals. And it doesn’t have to be the kind of thing where with these local market specialists that we formally terminate them, and we end the relationship. We don’t always need to do that, you know, it’s done in more subtle ways. Look, if you know, if our clients are having better experiences with local market specialist a, and, you know, local market specialist B is slow to return calls, their rehabs aren’t very good. Maybe they were good in the beginning, and now they’re starting to do schlocky work, then, you know, we’re gonna send the business to a, that’s taking care of you, you know, because we don’t want to have to deal with the problems and the complaints, we want you to have a good experience. So you’ll buy more, you know, this is a this is a repeat customer type of business. You know, we want you to build big real estate portfolios with us. And you know, Carrie, I haven’t talked to you about this before, but I was talking to Sarah about this just last week. We got word we have our ways of finding this stuff out. It’s a very small industry. A couple All of our local market specialists, we’re working with some former investment counselors that used to work for us. And Sarah says, you know, Jason, you could, you could stop that, right? You know, you could have the lawyer, send them a letter, and you can stop them from doing that. And I thought, you know, maybe it’s actually a better strategy, not to stop them, to let them do it. Because we know what those local market specialists are, like, they’re terrible. So, you know, it’s like, it’s like, having some really bad employee, right, that doesn’t work for you anymore. And saying, you know, why don’t you go work for my competitor? and make their life miserable, you know, but but that’s exactly what’s happening. And I and I just said to Sarah, you know, I don’t know if I want to stop this, because let them have a bad experience. You know, I know what those providers are like, they’re terrible. We got rid of them for a reason, you know, let them go work with a guy that used to work for us who thinks he’s, you know, stealing them? And good, you know, fine. I don’t know. Maybe I’ll change my mind about that later. But that’s how I felt at the moment. So interesting. So what what markets are you working on? And we’ve had a bit of a, you know, I want to say we’ve had a bit of a challenge lately, opening new markets, you know, or even new old markets that we, you know, we’re in in past years, and we’re area agnostic. So we move in and out of these markets as they make sense. Tell us what you’re working on. Give us a little insight.
Carrie 16:33
Sure. So we’re currently working on getting Phoenix back up and running. And
Jason Hartman 16:41
Which, which, by the way, we don’t know if we can do that yet. Because, um, you know that the hedge fund and private equity groups really ran the market up in Phoenix a lot. And I’d love to be doing business here. Again, I love living here in Scottsdale, and just recently moved back, which I think everybody knows by now left the Socialist Republic of California. Again, I left her twice. And, you know, but I don’t know, are you finding we can make the numbers work. It’s, you know, this market got fairly expensive during the run-up, you know,
Carrie 17:11
I know, I know. So that’s why we’re trying to talk with a few that are making sense and local market specialist potentials. So we’re still on the on the fence about that one. But we’re also speaking with Tampa, and Fort Myers. So Florida, a few more markets there. As well as we’re trying to get Charlotte, I know, you really want Charlotte. So,
Jason Hartman 17:36
I love Charlotte, you know that that was a great market. we’ve, we’ve been in we’ve been very fickle with Charlotte, North Carolina over the years we’ve been in, we’ve been out, you know, it’s like a Katy Perry song, you’re up and you’re down. How does that song go? It’s very catchy tune, you know, but yeah, you know, that market, it got oversaturated with investors for a while. And then of course, you know, it’s a big banking center. So, of course, when the banking crisis hit, it wasn’t doing so well. But yeah, I think Charlotte’s a pretty solid place. It’s not a very big city. But it’s a decent place. You know, how are you? How are you doing there? By the way?
Carrie 18:11
Yeah. So like you said, it’s, it’s not there’s not a lot to reach out to that want to be with investors and investment counselors and all our whole team. So it’s just kind of tricky to find the right team there to work with our team. But another one, that of course, Texas, looking at Dallas and Austin, having some troubles with some of the numbers. So
Jason Hartman 18:36
Yeah, you can’t make it work in Austin. I mean, Dallas is hard to you know, it’s, it just got too expensive. I mean, we’ve we’ve had hundreds of clients invest in or maybe not actual hundreds of clients, but hundreds of properties in Austin, Dallas, Houston, Charlotte, Atlanta, Indianapolis, you know, those markets in Memphis, you know, those markets have just been huge markets for us over the years on and off. But you know, some of them that they just the prices have run up. And it takes a long time for the rents to catch up, you know, that the the appreciation on the price always happens before the appreciation on the rent, the rents always lag. And the RV ratios get out of sync, and then they catch up. And then there’s another appreciation cycle. And you know, that’s how it goes there. You know, one one leads the other.
Carrie 19:30
Right, right. Yeah. So, so we’re working on those. And, you know, it just takes time. We did just launch a new market as well, this week. So we’ll be learning more about Kansas City as it comes about.
Jason Hartman 19:43
Which is not new, but you know, it’s everything old is new again, or how’s that saying go? But yeah, but it’s new again. And we’ve got a new provider there who by the way I interviewed today on the show, so I recorded that market profile and that’ll be up soon for our listeners and he seems pretty good. Not a big volume operation. But you know, seems pretty solid.
Carrie 20:06
Right? Right. And when that’s kind of nice as well, I mean, then, you know, you’ll get the one on one attention, and you’ll be dealing straight with him as investor.
Jason Hartman 20:14
Yeah, yeah, you know, some of the things that we turn down, and we do need to wrap up here to get to our actual interview segment. But some of the things that we turn down are, we definitely turned down one off deals, or small size deals. In other words, a lot of people come to us and carry, I’m sure you get the calls to I know, I get them all the time calls, emails, whatever. And they say things like, Oh, you know, I’ve got a 12 houses in Dallas or whatever, and I want to sell them, you know, we’re just, we’re not interested in that type of business, because we can’t exert leverage over that local market specialist. They know that, you know, it’s usually just an individual who bought 12 properties, and wants to exit for whatever reason. And you know, we have no power to make them provide a really good product to our clients. We need people in control, really companies that are in the business of doing this day in and day out, and have experience and are looking toward a bright future. That’s just a really critical component for our clients to get good service. You know, because if they look at it as a one off thing, or a, you know, small number of deals there, they’re here and gone. And that last deal, believe me, it’ll be a nightmare. Because they won’t care. They just won’t care anymore.
Carrie 21:38
That’s right.
Jason Hartman 21:39
Any other markets?
Carrie 21:40
No, not that we’re currently looking at. St. Louis is always a possibility. And North Dakota is off the map again. So
Jason Hartman 21:50
Yeah. And that’s where you’re from? Are you from south or north dakota?
Carrie 21:53
North Dakota.
Jason Hartman 21:54
Yeah, yeah. So you’re, you’re you’ve been around the oil world. Yeah, that’s way off the map, because it’s just, you know, what’s happening with oil, as we all know, down the tubes. Yeah. Good, good stuff. Good stuff. Well, hey, Carrie, before we jump to her interview, I want to remind everybody, make sure you’re using property tracker. It is such an awesome program, we’ve got an either random episode recently, I can’t remember or we’ve got it coming up with Joel, who created property tracker. And it’s such an awesome tool. And it really helps you evaluate real estate deals and helps you manage your portfolio. And also in the App Store, get the apps for your iPhone, your iPad, in the iTunes App Store. For a property evaluator, you know, you can quickly analyze real estate investments and find the best deals, you can email PDF reports to clients, lenders, Investment Partners, you can compare multiple properties in a portfolio analysis, see how they’re all doing, you can create custom rent schedules for multi unit properties. I mean, it’s just amazing, these tools, and they’re, you know, they’re so inexpensive, it’s just unbelievable, they’re free. And then you can upgrade, you know, to the pro versions if you want. So just go to the iTunes App Store, if you’re an apple user, and get a hold of property evaluator, and you know, put that on your iPad and your iPhone, you’ll absolutely love it. And then just go to property tracker.com. Or you can really go to, if you want the discount on it, go to Jason hartman.com. And click on the resources page, look for the property analysis and tracking software. And you get a discount on that. It’s only 1995 a month with a discount. It’s just a phenomenal program. So take advantage of that, folks, it’ll really make you a better investor. That’s how I got to be good at understanding deals is I used to use that program. I use simply property tracker. And I would just plug in different numbers and run different scenarios. And after a while you just get it becomes second nature to you. It’s super, super handy. So that and then also carry you know, we’ve got our Salt Lake City event coming up, go to Jason hartman.com. Click on events and join us on March 12. in Salt Lake City, Utah, for a JHU. Jason Hartman University live event. And we’re going to do that as a one day event. So if you want to come out and you want to go skiing on Friday or Sunday, you know, we’re doing our event on a Saturday. So, you know, get a little skiing, you know, it’s the best snow on earth there and in Park City, Utah. Sounds good. Anything else you want to mention before we get to our interview?
Carrie 24:38
I think we’re good to go.
Jason Hartman 24:39
Okay, let’s talk about renting to Uncle Sam and the Birmingham market. Carrie, thanks for joining me.
Carrie 24:46
Thank you, Jason.
Jason Hartman 24:49
Today, we wanted to bring you a market profile on Birmingham, Alabama. Chris, how are you?
Chris 24:55
I’m good. How are you, Jason?
Jason Hartman 24:56
Good to have you on the show. So talk to us a little bit about why real estate. What intrigued you about real estate versus all the other businesses? You could have gone into, you know, working on wall street or working in banking or something like that?
Chris 25:11
No, that’s a great question, Jason. And the biggest thing for me in real estate is you’re actually investing in an asset, you actually have a physical assets that, in my opinion, you’ve got more control over, you know, in the stock market, there’s only so much control, you have volatility, in terms of, you know, buying and selling and the ups and downs of the stock market. For me, it just made more sense to get into real estate, because it’s an actual asset, you have a little man, I should say, a lot more control over the asset you have control over, you know, picking what asset you’re going to buy, the areas you’re going to buy, the you know, picking the right asset is more, you know, along the lines of picking areas where the rents, you have an understanding of where the rents are in these properties, you know, you can do a lot more due diligence. And understanding what you’re investing in versus the stock market and, and other forms of investing. So that’s just been a huge selling point for me, in investing in real estate,
Jason Hartman 26:11
Tell us a little bit about the Birmingham market. I mean, you know, why Birmingham. You’ve done business all around the country, and in several markets, what’s so great about good old B-ham,
Chris 26:21
You know, Birmingham, it was one of those markets that, you know, back in the recession, it was hit just like every other place was, but it really wasn’t hit quite as hard as the other areas, some of the bigger markets out there. So you know, the thing I really enjoy about Birmingham is that the cost of living is a lot lower in Birmingham than some of these other areas. The barrier to entry is what I call it for real estate, you know, a lot of people have a difficult time jumping into real estate based off the price points of certain real estate investments, and a lot of their real estate investments, you can get in really good areas, you know, freshly rehabbed properties for you know, instead of going into the six figure range, you know, you can get in for as low as you know, kind of the mid 50,000 range on a property that you know, has a rent at $800 per month. So it produces a phenomenal return on investment for the investor.
Jason Hartman 27:18
What’s happening in the city. And maybe you want to kind of blend this in with a discussion on some of your target properties or target tenants, where they work, and what they’re like. And you know, what, what else intrigues you about it, I mean, it’s a low-cost market. So the barrier to entry is lower, which is great for investors, the cash flow is quite good because you get those good rent-to-value ratios. What else?
Chris 27:46
Well, the biggest thing that I look at is, of course, you know, what, what is the city doing to help prop up the local market. And, you know, within the last year to two years, you know, the local city of Birmingham in Jefferson County is where it’s at, as you know, began investing in over a billion dollars to really revitalize the city. You know, you’ve got Telecom, such as at&t that have a large presence there. You’ve got automobile manufacturing plants, in the state of Alabama. So I mean, you know, you look at all these factors, and I mean, it definitely creates an environment that is strong for the investor. And the other thing I look at is, you know, it’s one thing to buy an investment property, but it’s another to have an investment property that’s marketable, because if a tenant moves out, how fast can you replace that tenant? and Birmingham is an area that, you know, if a tenant moves out, and you’ve got a good marketable property, and in a decent area, you’re going to be able to find a tenant at a pretty good pace, rather than having a property sit vacant and not producing income for you. So it’s important to look at all those factors. In my opinion, when you’re looking at an investment property,
Jason Hartman 29:04
You really specialize in the acquisition side, tell us about how you acquire properties. You know, maybe for listeners that want to do the Do It Yourself route, you know, they might be interested in learning a little bit here. It’s a lot harder than you think, to acquire good properties. That’s what I’ve discovered. And that’s why I’m not in your business. Because I I’ve done it and man, it’s hard, and then you got to manage contractors and do rehab. And it feels like the contractors always trying to rip you off. You know, very few businesses have as poor reputation is as the legal profession or the contractor profession. I think those do really take a lot of flack. accountants aren’t so great either. I find people complain about them a lot too. But tell us about acquisition and what you do where you do your acquisitions and what makes it really work well.
Chris 29:55
Well, you know, there’s the traditional method of course, and having a good real estate agent. So we’ve got real estate agents that will send us over bank-owned foreclosure properties. I mean, that’s, that’s a good method to get some investment properties. So of course, you know, if we have a realtor that sends us over some real estate owned investment properties that banks have foreclosed on, that they’re looking to get off their books, and they’re motivated to sell them, you know, we’ll go over and we’ll have our crews have a look at them. And put together Of course, the scope of work, you know, what needs to be done to the property, then we go over and we determine the ARV after repair value on the property to make sure it makes sense for us to see what our acquisition cost is versus what the estimated value of the property will be after we’re finished with the rehab on the property. So going through all this, I mean, you’re absolutely right. Jason, it’s, it’s it’s not an easy way to do business. But we’ve dialed it in. And we’ve got the right crews working for us. We’ve got contractors that have worked for us for years, that do a great job on the rehabs that we can trust. And so we go through all these these methods and determining valuations, seeing what the what we can get for the area for rents is huge. Because it’s like we discussed, it’s one thing to get a property. But if the property is just sitting in your end goal is to rent it out, you need to understand what you can actually get for the property, what the area will support in terms of rents. So we go through and do you know all of this due diligence, before we even buy the property, then of course, we go through and do the rehab. And property manager is essential on real estate investment. You have to have a good property manager that will communicate that will actually do their job in placing good quality tenants screening them, you don’t want a property manager that’s just going to throw a warm body in the property and hope it works out.
Jason Hartman 31:51
Well. Let me, let me stop, let me stop you there for just a moment. Okay, but I want to circle back to the acquisition a little bit more and drill down on that. But we have had some challenges with property management in Birmingham, you know, some of its gone great, but some of it’s been challenging, it’s it’s been, it’s been a little worse than we’d want it to be. I mean, you know, there’s always challenges everywhere you go. But this has been one of the, you know, I’d say the more challenging situations. So tell us about property management, you use four different property managers. So you spread the risk a bit with them. And, you know, maybe that’s a good plan because nobody gets all of your business and everybody’s, you know, in the back of their mind vying for more of it for a bigger share of your pie of business that you dole out. And so maybe that keeps them on their toes. Hopefully, that’s what, that’s what free markets are all about. Right? But how do you, that property managers, how do you hold them accountable? Dive into that a little bit for our listeners?
Chris 32:46
Yeah, absolutely. So I mean, one of the biggest things I look at in property managers, just how long have they been around? You know that that’s not to say you couldn’t get a good property manager, that’s just starting out. But typically, I like to do with property managers that have been around for a little while they have their processes dialed in a little bit better than somebody just starting out trying to get a feel for property managing, you know, interview the property manager, see how many properties they have under management right now? What’s the process for leasing up a property? You know, check out all their fees, what do they charge per month to collect rent? What do they charge for an eviction, it is best to do your due diligence to understand everything about that property manager, before, you know, kind of joining up with them. And then what we’ve done is we’ve started out slow with property managers, we’ve put one or two properties with them. And you know, have them manage, you know, one or two properties for a few months and see how it goes, if they communicate well, and everything has been, you know, as smooth as possibly can go with real estate investing. And then we slowly, you know, throw more properties at them to manage. And a lot of the property managers we’ve, you know, use have come from referrals from people that have used them for their properties. So that’s a great method to ask for referrals as well.
Jason Hartman 34:01
Yeah. So you’re dangling the carrot, you’re evaluating reputation. And you’re, you know, getting referrals from your own relationships in the business. And that’s, that’s what everybody just has to understand. You know, when you’ve been around a while in any business, you have relationships, and you just know, things that unfortunately, you just can’t find on the internet. No, it’s not all there, as great as the internet is, you know, it’s just not all there, you know, there’s still still a informal world of just conversations and hearsay and so forth. What else do you do anything else in terms of holding them accountable? You know, or just anything else you want to mention on property management in general. And then I also want to ask you to talk to our listeners about how the landlord friendliness of Birmingham and you know, how difficult is it to get rid of a bad tenant? You know, what, what kind of situations do you deal with air and do you love, hate, or are you neutral on section eight, you know, government-assisted housing. Do you do that?
Chris 35:04
Yeah, no all great questions. Now, in terms of holding the property managers accountable, I think it’s important to be upfront with the property managers on what you’re looking for in a property manager, to make sure that those property managers will fit what you’re looking for, you know, the property managers that we are dealing with, they understand that, you know, we’re doing a good amount of volume out there. And of course, like you mentioned, they, we paint, we dangle the carrot out there, so to speak, because they want more business. So that’s important. Of course, you know, looking over your owner statements and holding them accountable for their accounting of your properties. It’s important to understand everything that goes on your owner statement that they send over, and making sure that they have invoices to support, you know, the the fees that they’re charging, for repairs, or anything of that nature. So definitely hold them accountable and understand exactly what they’re doing with your property. You want somebody that communicates well with you, you need to understand what’s going on with your property if you have a question on your property. So that’s, of course, the the, you know, some of the things we look for in property managers. Now, you know, in terms of section eight, I actually enjoy section eight. For me, it’s definitely a way to ensure
Jason Hartman 36:21
Some people love it, some people hate it, I don’t find a lot of people being neutral on it, I will tell you that, but go ahead.
Chris 36:27
Yeah, no, absolutely. I mean, it can definitely be a love-hate type thing. But for us, we’ve found success in dealing with section eight investment properties. And one way of looking at it is, as an extra guaranteed rent check per month as you can possibly get, based on the government is subsidizing the renter being in the property. So you know, there’s a good understanding that, you know, you’re gonna get a rent check, like I said, is next to guaranteed as possible. So that’s kind of, you know, my take on section 8.
Jason Hartman 37:02
What what do you say, though, about section eight, and you know, that quality of tenant you get and dealing with inspections and bureaucracy? What do you think about that,
Chris 37:11
You know, it’s definitely something you have to deal with, with section eight, because they’re going to go through and do their inspections. And it you know, of course, it depends on the inspector going through, but they’re gonna go through and pick out items that, you know, may seem like, why, why are they asking for this to be repaired as simple as a window latch, that they want repaired, but at the same time, you know, I have to kind of look at it from both perspectives. And if, if they’re going to be essentially paying the rent for the tenant, they want to make sure that the house is in a habitable condition that warrants them, of course, making the rent. You know, it’s like anything, when you’re dealing with government, there’s the good and the bad of dealing with government. And, you know, some of the stuff, the quality of tenant, we found that typically, we can hold the tenants a bit more accountable for, you know, being on section eight in our properties, just due to the fact that, you know, they have a caseworker that the property manager or you know, or we can reach out to and have a discussion if we have concerns about the tenant. And typically the tenants very motivated to, you know, I guess any corrective action that’s needed, or any concerns would be addressed in a positive way with the tenant.
Jason Hartman 38:31
Yeah. Okay. All right. Good. What else do you want people to know, just anything I maybe haven’t asked you yet?
Chris 38:38
Well, the biggest thing, you know, in the in the Birmingham market is, you know, of course, the barrier to entry is a little bit lower compared to some other markets based off price points. And looking at ROI. You know, on a lot of these properties, you’re typically above a 40% ROI on a lot of these properties in Birmingham, which is a very attractive rate, in my opinion.
Jason Hartman 39:02
Okay. Now, let’s stop you there for a moment because you say that kind of thing. And anybody who’s not familiar with the virtues of investing in a multi-dimensional asset class, like income property, is going to really doubt what you say they’re gonna say, 40% You’re full of it. You know, this is a scam? Well, not really. Because when you get your return from cashflow, appreciation, tax benefits, leverage, you really can achieve those types of returns. Some people do much better, some don’t do as well. Nothing is guaranteed except death and taxes. Do you want to drill down on that a little more?
Chris 39:40
Yeah, yeah. I mean, no, you’re absolutely right. There’s gonna be the skeptics out there. They’re gonna say 40 plus percent. I don’t know that. I believe that. But, you know, of course, I would invite them to look at the properties on your website, and look at the financials on those properties. Look at
Jason Hartman 39:58
So so let me just turn where to go. So you can go to Jason hartman.com. And click on the Properties page. And you can see full-length performance that show all of the breakdown all of the details with vacancy rates included with repairs included, you know, it’s, it’s all there. And if you don’t, if you think those numbers are either too conservative or too aggressive, you can buy that little software that we use to calculate that, and you get the first month free after that, it’s just, you know, 20 bucks a month, currently, prices are always subject to change. And you can evaluate that or you can get the apps for the iPhone or the iPad and do the same thing. And that’s what will teach you how to really become a good investor is doing that evaluation of those properties, and changing the numbers and playing with him. So you know, but but it’s all there, you know, look at how the numbers break out. And what I always say to people, even if it only goes half as well, as expected, and you earn 20% annually. I mean, my God, that’s phenomenal. You know, even if it only goes one fourth, as well, as expected, say your vacancy rates are higher, you have more repair costs than you think you end up paying a higher interest rate than you planned on on the loan, whatever it is, you know, even if it only goes one fourth as well, and you make 10% annually. That’s, that’s, you know, that’s better than you’re probably going to do in the stock market. Okay.
Chris 41:22
Oh, yeah. No, absolutely, Jason
Jason Hartman 41:24
And a lot better than the bank.
Chris 41:28
Definitely a lot better than a CD at the bank for sure. For sure. So, but yeah, I mean, that’s I would definitely invite investors to go through and look at those and see how those numbers are being calculated to see that those are actual numbers that can be achieved. For sure.
Jason Hartman 41:44
Yeah, absolutely. Okay. Do you want to say anything more about that? or what else have we not covered?
Chris 41:49
I mean, I think we pretty much touched on, of course, property management. It’s definitely important. I mean, I can’t think of anything we haven’t necessarily touched on. For the Birmingham market.
Jason Hartman 42:00
Yeah. Okay. Okay. Good, good stuff. Well, talk about your target property, if you would. The target investment property, what type of property is that? Talk about your rehab, you know, what you do to rehab? Do you have a standard package that you do when you fix up these properties before you sell them?
Chris 42:17
Yeah, no, no all great questions. In terms of rehab, what we look at is we want to make sure that as we are selling properties to investors, that they’re getting a good quality, solid product. So a lot of these properties, you know, they are in the the C class range, we like to deal in the C class properties, because you know, typically, your ROI tends to be a little bit higher, and your cash flow tends to be a little bit higher, because the price points are lower. And the rents, in many cases is similar to a B class property. So we look at it from that perspective. But when we get a property, we go through an update to electrical, we update the plumbing, put new light fixtures, carpet paint, we put a central AC unit on the property, basically, the whole idea is is we want tenants to be able to walk through the property, and we want people to live there, because again, it goes back, we’re discussing if the property sitting vacant for months and not you know, not producing cash flow, you know, no investor wants to have a property just sit if the intent is for cash flow. So we definitely make the marketability of these properties desirable to a tenant by offering amenities such as you know, every every house has a central air unit, you know, things of that nature, just to have the appeal to the renter. So, you know, we look at it, as you know, definitely taking care of the investor that’s going to own this property for years to come and make sure that they have a good solid return on their investment.
Jason Hartman 43:50
Okay, more about the rehab, though, you know, what, what do you do in your rehabs? And what is that target property? Like? How many bedrooms is it? How many baths is it? What do you do for flooring? Do you have a standardized package?
Chris 44:04
Yeah, I mean, in terms of a standardized package, you know, I wouldn’t say it’s necessarily standardized because each property is going to have its own set of, you know, customisations, so to speak. But in terms of standardized, like I said, some of the amenities that that we put in there in terms of central air and you know, that we usually just do carpet, if there’s hardwood floors that can be salvaged. Hardwood floors are a great selling point. In terms of tenants coming to the property, they do enjoy hardwood floors, we do cap off the fireplaces, you know, we definitely want to have a good secure property and we just find it’s just better to cap off the fireplace rather than letting tenants have access to a fireplace and in these rental properties. So you know, things like that, that you know, we’re definitely looking out for for the investor.
Jason Hartman 44:59
Do you have dishwashers in the properties? Garbage Disposals? Are you really into that like, minimalist style? It doesn’t sound like it when you say you have air conditioning, because not all properties do, especially in the older homes and the C class type stuff. What is your philosophy there?
Chris 45:15
Yeah, I mean, in terms of that, you know, we definitely like to add dishwashers, and some of those amenities. You know, just again, it comes down to the marketing for the the tenant, you know, a lot of tenants, they want those amenities and these properties. So, you know, we’ll go through and if there’s a spot to put a dishwasher in, we have no problem putting a dishwasher. A lot of these properties, you know, I would say, you know, it depends on the size of the kitchens and things like that. So, again, it just varies by property. But if there’s, you know, areas where we can add certain amenities, we definitely tried to do that in each of the properties. What about warranty in terms of the warranty, what we what we like to offer as a six month warranty and the work that we’ve done, meaning, you know, if we move in, in a property to an investor, and let’s say we installed a dishwasher, or we installed, you know, there’s some plumbing leakage or anything like that, we went through and corrected the plumbing, when we initially went through and did the rehab, we’re going to send, you know, our contractors out there to fix it in no charge to the investor, because, again, it comes down to, you know, taking care of the investor, we want to make sure they have a solid investment property.
Jason Hartman 46:25
Okay. And do you recommend that people buy? Well, of course, the dishwasher itself, if it’s new will have its own warranty on it, you’re talking about the installation? So that dishwasher is probably going to have what a, one-year parts and labor, I’m guessing, and maybe a five-year parts warranty or something like that? Right?
Chris 46:44
I would imagine. Yeah.
Jason Hartman 46:45
I mean, that’s each individual manufacturer varies. do you suggest that people buy a home warranty? Or? Or will you include that for them? I should say,
Chris 46:52
we don’t usually include a home warranty. You know, it’s one of those things that depends on the investor, if they feel more comfortable having that Home Warranty? You know, I would, I would never disregard it and say you should not buy home warranty. But a lot of the investors that we deal with at the price points that we’re dealing with, not many of them have purchased a home warranty.
Jason Hartman 47:15
All right, anything else? Or did we cover it?
Chris 47:18
I want to say we covered it, I think, you know, based off of the discussion and a lot of the properties that we’re you know, discussing in the market, I think we kind of covered all the topics we were planning on,
Jason Hartman 47:30
Go to Jason hartman.com, click on the Properties page and check out some of these properties in Birmingham and our other markets. Thank you so much for joining us.
Chris 47:38
Thank you, Jason, appreciate it.
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