Jason Hartman starts this Flashback Friday episode by talking about the multi-dimensional nature of income property, making it extremely profitable even in varying market conditions. One example, is increasing rents when financing becomes expensive or difficult to qualify for. They also discuss Macro and Micro Markets and “Revolutionary Wealth” by Alvin and Heidi Toffler, a book that Jason recommends.
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 0:10
Welcome to the flashback Friday edition of the creating wealth show with Jason Hartman. As he rapidly approaches 1000 episodes of this podcast, he has hand picked individual episodes that he feels is going to be good review for you to prepare you for the future by listening to the past. Let’s dive in.
Announcer 0:29
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 Get 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 1:19
Hello, this is Jason Hartman, thank you for joining us for another podcast. Today I’d like to talk about a commonly misunderstood or not understood at all subject when it relates to investing especially real estate investing. See, most investments are one dimensional in nature. Conceptually, they’re all about buy low, sell high, you buy a stock, you buy it low, you want to sell it high. Now maybe it’s a dividend paying stock. So you buy low, you get some tiny little dividends and pay taxes on them all along and then sell it and pay capital gains tax again. I’m kind of alluding to here the fact that real estate is such a tax favored asset. You really never have to pay tax on your real estate. If you do it right. It’s very tax efficient. But if you buy precious metals you want to buy low, sell high, if you buy bonds, same idea, right? Real Estate, though, is so misunderstood because real estate has a multi dimensional nature. Now, what do I mean by a multi dimensional nature? Well, real estate has many dimensions. But in this podcast, we’re just going to talk really about three of them. And we’ll call this as we’ve called it for many years now, the three dimensions of real estate investing, and the three dimensions are explained in a brief outtake I have coming up from one of our recent live seminars here in Newport Beach, California, in the OC Orange County. So listen and enjoy this and think about how real estate has a multi dimension Nature, it’s not just about buy low and sell high. Here at the Empowered Investor investor network, we consider appreciation to be the icing on the cake when it comes to our real estate investments. The reason we say that is because appreciation is not it’s not as predictable as cash flow. One of the other dimensions of real estate, cash flow is pretty darn predictable when it comes to real estate investing. And what you’ll notice that’s happening currently at the time I’m talking to you here in August of 2007, is that there is tons of press in the media about the mortgage meltdown about how there is a credit bubble. By the way, I agree with all of this stuff. There is a credit bubble. There is a mortgage meltdown, no question. But the question is, does that ruin our chances of making a killing in real estate? Absolutely not. We’ve just got to adapt to what’s going on and adjust our strategy, you’ll see that landlords actually benefit from high interest rates. Landlords benefit when it is harder to qualify for loans, because it puts upward pressure on their rents. So this improves our cash flow as investors. Now many times I have talked about how money is on sale, in not one way, but two ways. Most people think of money being on sale as well. Interest rates are low. They’re the lowest they’ve been in what three, four decades. Very good thing. But also there’s another dimension of the money sale, and that is ease of qualifying or ease of obtaining loans. Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. Now this ship is leaving The dock, I want you to understand is I have been trying to say for years now, to our listeners, that you have got to do what you do when every other product is on sale. When you go to a store and you want to buy something, and you see that it’s on sale, I bet you do just what I do. When it’s on sale, you probably stock up. Well, you know what? Money is on sale, it’s still on sale. Historically speaking, money is very cheap. And even in the midst of all of this talk about credit bubbles and mortgage meltdowns and so forth due to totally irresponsible lending over the last several years. By the way, this is no surprise to us. I predicted this three, three and a half years ago, everybody told me I was crazy. The Ponzi scheme can continue. And banks can just keep loaning money to people that should never be borrowing it in the first place. Blah blah blah You have no idea how much dissension I was met with when I used to say this three, three and a half years ago. But guess what, like so many of my predictions, this has come to pass as well. So point is, money has been a little bit cheaper in recent years in the post 911 world, but it is still historically, very, very cheap. When I got into the real estate business in 1985, if you wanted to buy a rental property, you had to put 2025 or even 30% down, even in the midst of this credit bubble, this mortgage meltdown we’re in now, which had to happen, this adjustment had to come. You can still get properties with 10% down on high quality, very cheap loans, very good fixed rate financing. Think about it. Yeah, lock in your cost of borrowing for the next three decades. Where else can you do that, as the mortgage rules get tighter, and I think rates will initially dip a little bit here, as the Fed has loosened the money supply. Last week, they just announced that they have lowered the discount rate to pump more liquidity into the capital markets. So these things benefit us as investors but it is getting harder to qualify. A few years ago, you could get nothing down on conventional financing for investment properties, you still might be able to do 5% down but that is quickly coming to an end 10% down you can still do and I say my prediction is that in the future, you will have to put 15 or 20% down. So take advantage of the money sale. It’s still occurring, but Supplies are limited. stock is running out, borrow money, we have loads of inflation. coming at us in the coming years here. We have two and a half billion people in China and India that are moving toward middle class lifestyles. We have wealth that is being created on a global scale that has never before been seen in human history. The deep fundamentals of this real estate market are incredibly good. As long as you buy right, you buy prudently you buy in the right markets. And by the way, when I talk to the right markets, I want to mention something else about that. We’ve done a couple podcasts profiling certain areas, and I want to give you a word of caution. We’ve profiled I believe, Austin, Texas on prior podcasts, Mobile, Alabama, Dallas, Texas, all very good markets, very good markets to invest in at the moment, but within the larger markets when we do those profiles. I want to caution you don’t just wait run out and buy properties in these markets. You have to look at not just the macro market, but the micro market, the areas of each city is it on the north side, the south side. And then within those areas north south east west city center within those areas, what are the right neighborhoods within them to look at? What are the right tracks of homes to look at? Who are the best builders to be dealing with to purchase from what are the best styles of properties single level two storey what type of architectural style is most appealing? What community amenities Do you want to have? I want to really caution you please do not listen to market profiles, where we talk about macro city markets. That is not enough information you need to talk to our investment counselors and our area managers and get the scoop on the exact micromanage. Within that city, we are currently in 33 markets around the US. And within each of those markets, there are micro markets that you need to pay attention to, because you can buy in the right macro market, but still make mistakes, because you’re not in the right micro market, within that macro market, make sure you talk to us about details when it comes to those markets. So without further ado, why don’t we listen in to this live tape here. And this will be about 18 minutes long, I believe 1718 minutes, and then I will be back with you to kind of recap and talk to you about a couple of other things. So enjoy. Getty another Getty quote, buy when everybody’s selling, sell when everyone’s buying problem with real estate is this is great advice. By the way, this is how he became a billionaire because he bought up oil companies stocks in the Great Depression when they were really cheap, and everybody was selling them, but so this might be good advice for us as well. estate investors, right? The problem is this. When people invest in real estate, they don’t really understand fully what they’re buying and selling. I say that real estate is not a one dimensional asset, like most people think it is. But it’s at least and there really more dimensions than this, but it’s at least a three dimensional asset. Three major dimensions of the real estate asset, Men’s Health and other non real estate publication. interesting article in here. It says 10 incredible trends that will make you rich, and this alludes to that asset shortage issue that we discussed a few minutes ago. It says build your castle, 2020 and investment strategy. Well, the future find you secure or struggling gaze into the year 2020 and discover where your money needs to be. And here this graphic is kind of a compilation of an Indian and a Chinese architecture all in one. And the little call out here says India plus China they will come More than 50% of the world’s gross product by 2020, so only 13 years away, and to illustrate the concept of how that rising economic tide floats almost all the ships, and there’s this huge asset shortage and the the wealth that will be created from these two and a half billion additional people playing a big part in the economy. Is this on page 77 is kind of a funny thing. But it says, If China really prospers, think about how much Botox you can inject into 2 billion Chinese foreheads. I mean, just know all of the markets for goods and services and it’s just amazing. Another thing I want to bring to your attention, my friend Gary purchase an investment property from us his first one, he never owned a rental property. He owned lots of houses over the years but never rental property. He said to me, You know, I really liked this property investment. Because I’ve invested in everything pretty much I’ve invested in oil and gas asset exploration. I’ve invested in precious metals, gold mines, stocks, bonds, mutual funds, they can always create another stock. You know, that’s just someone’s idea taken to the public markets through an IPO, there’s another stock, no limited supply, they can always find another gold mine, they can always find another oil. Well, that hasn’t yet been discovered. But all real estate has been discovered. I mean, really think about the incredible wisdom of that statement and the impact of it. Every piece of real estate on earth is mapped and catalogued. We know it’s there and where it is. Now, granted, there is a lot of vacant land on Earth. I understand that. But I’m not investing for land values. I’m investing for improvement values, and the way the structure of the taxes and the debt works, as we’ve talked about today, and then this one was kind of interesting because this is the Wall Street Journal in January 13. Jim wore these are real diamonds. Only they cost about 15% less than the other stones of similar size and quality. The reason they were produced in a lab, they’re real, they’re not fake. They’re real diamonds. They were produced in a lab, how a new generation of high quality diamonds is shaking up the jewelry world. People invest in diamonds, that’s an investment. And so with real estate, it’s all been discovered. We all know that the supply is limited. Other than colonizing Mars, the moon and the lost city of Atlantis. That’s my disclaimer. Just a reminder, you’re listening to flashback Fridays are new episodes are published every Monday and every Wednesday. The other great thing about this type of investing is you know how many of you are homeowners. You know that when you bought your home you probably got all these things in the mail from mortgage companies write little checks, you know, and stuff like that, saying, you know, here’s a check for $49,000 just apply for a loan with us on your equity. Well, the great thing now is I’m getting all these on my rental properties all over the country. So this one is, which property was this? Oh, this is on my Chapman falls property in Richmond, Texas. And this says GMA See? We’d like to loan you $49,000 then folks, I’ve only been doing this out of state investing for just over two years. It hasn’t been that long. These are several of them from countrywide, you probably get these for your own house. And this one says, you can borrow $18,096 I don’t know where they got that number, but some computer this one says you can borrow 100,000 You know, this one says I can borrow $17,988 in equity. This one’s $18,423 folks, like I got all these little banks all over the country. Isn’t this great? This is the refi till you die plan. You don’t get them right away. By the way. I didn’t get these immediately. They had to kind of season a little while develop some equity, but it really starts to happen and it’s just a wonderful, wonderful thing. Feeling, Jay Paul gettys, quote, people don’t understand the multi dimensional parts of the real estate asset they’re selling. What are you really buying or selling? Well, one of them is the property price and its future potential. This is the one most people are very obviously aware of. The second one is not too many people are aware of is the mortgage. The mortgage is a major part of the asset. I just cannot stress that enough. The mortgage is one of the biggest assets in the real estate deal. Interest rates have ticked up just a little bit since since they’re low, but they’re still very low, low historically, one of our investors who doesn’t get it who doesn’t understand how to calculate rate of return, and frankly, he just won’t listen. So this guy is going to shoot himself in the foot and by the way, he is a commercial real estate broker, you would think he would know better, but he’s too smart and you can’t tell him anything. He’s decided his property isn’t that great and investment I offered to buy His half out, he split it with someone else. I offered to buy his half out and I come to discover that this thing is way better than I thought it was. Because he hasn’t he has a single loan on it for 5.5% 30 year fixed. Wow, what a deal. I mean, think about it. That is something that can no longer be replaced that loan, you can’t get it today. So that asset even if the price of the property is not appreciated at all, say that were the case, the mortgage has become an asset relative to the owner, because every other owner or buyer that comes after him has to pay more for the money. That mortgage can no longer be duplicated. And like I said before, in the next five or 10 years, two classes of people, those who stocked up on this cheap debt, easy to qualify for debt while they could and those who missed the boat. Don’t miss it. You will really regret it later. cash flow in the rental market. That’s sort of the third dimension of real estate and its future potential. Let’s look at how these three dimensions have played out over the past few years, and how I think they will play out over the coming years. Let’s look at four dates, the tech wreck the.com bubble, the stock market crash, whatever you want to call it, early 2009 11. Terrorists tragedy today, the future four major points in time, what was going on with one dimension interest rates? Well, interest rates were on the rise, and then the.com bubble burst, and they tried to loosen up the money supply the Federal Reserve did thinking it would stimulate the stock market and it probably did to some extent. And so they were lowering rates and making money more available and more liquid. But then 911 came along, and there was a huge historic drop in interest rates, that huge decline that occurred. Of course, no one could forget that day. There was a lot of talk that’ll be there’ll be a global depression. Who knows what will come after this. I mean, it was just a major, very scary event. Obviously, the Federal Reserve acted very decisively and lowered rates a whole whole bunch. Now, the effect this had is it overstimulated real estate in the what are now the bubble markets, it was too much stimulation, we didn’t need that much help. But in the linear markets, which are the markets, we are now recommending, where prices just sort of chug along, there’s not these big ups and downs like California, those markets really didn’t get so much stimulation. So what happened in reaction to the lower rates, the cyclical markets really had a big price jump. Remember what happened post 911 you do about a year later, and the housing market went crazy here. I mean, you couldn’t find a house, there was nothing for sale. I remember in Irvine there were like 140 houses for sale in the whole city. Whereas normally inventory is maybe a Four or 500 at a time, no inventory. Now it’s like I don’t know what it is lately, but it’s probably 13 1400 homes, maybe even more. It’s really bad now. So prices went up a whole bunch, they went to the peak now we’re past the peak and going down linear markets, not quite so sensitive to the large reduction in interest rates. Linear markets get a little bit of a bump, but it was no big deal. I love how they talk in these out of state markets we deal in, get better act now. The next phase the price going up $1,000. Being from California, we’re thinking if it doesn’t go up 40 grand a phase it’s no big deal. Right? What’s wrong? So you know how that is if you shop for new homes, so the prices went up a tad nothing major though. They just kind of chug along and do their thing. So what do you do? You lock in the cost of your money for the next three decades? Think about it every investor or homebuyer that comes after you have to pay more for that money. When rates go up. This is a great thing. Why Because the other dimension of real estate investments that landlords absolutely love, is they love to see higher interest rates. What happens when there’s higher interest rates, less affordability, fewer people can qualify rents go up. Now, when rates went down, rents went down. I remember about six months after 911. I ran into my friend Nancy, who works for the largest apartment owner in Orange County, IAC, Irvine apartment communities, the Irvine company right across the parking lot. I said, Nancy, how’s it going? Irvine company apartments, she says, terrible. We’re having an awful year. And I said, Why is that? She says, well, all of you realtors are selling them houses. They’re all buying and not renting. We’re having to offer huge concessions. Low security deposits, bring your Guana and your snake and your dogs, whatever you want. You know we’ll rent to you okay, because the rental market was very soft when the interest rates were low, the same time happens it with the mortgage meltdown issue. Like crom said fewer people can qualify now, it is tougher for them to get financing. And with that in mind, they are renting. The other thing that happens when rates go up. All the people that fell for the live for today instant gratification mentality. They got adjustable rate loans, their rates adjusted fantasy land, the honeymoon is over. Now, they’ve got to be in a position where they are having their rates adjust up dramatically, and they’re forced to either sell their houses, they can’t refinance them a lot of people or that worst as they go into foreclosure, they recycle back into the renter market. So when you see rates go up or qualify and get harder for whatever reason the rental market strengthens. The point is here, that you win the game either way, as long as you understand the dynamics of it, and you play it right. Yes, interest rates go up your profit. may not appreciate in value, worst case could even go down in value, but not when you’re buying. It’s so close to the cost of construction. And he got 3 billion people consuming materials for building. We talked about that. So you raise your rents though, because you the landlord market strengthens when interest rates go up. Try ideally to raise your rents about 4% per year. So if you’ve got $1,000 property per month, thousand per month, hopefully next year, it’d be $1,040. Raise your rents every single year. The time you can’t do it, or you can’t do it very aggressively, is when rates are low, but then your house should be appreciating in value a whole bunch. So you’re winning either way as long as you understand the dynamics of that. Now, just some articles on how the rents are going up and renters are losing ground. realty times is one of the largest news outlets for the real estate industry realty times calm. August 10 of last year, renters lose more ground with potential buyers forced to rent a strengthening landlords market is moving to new heights, with concessions for renters vanishing, like ever increasing home prices. You see what happened there, the prices started to soften, but that was really mostly in the bubble markets anyway, and rents started going up, look at what look at what else this is just two months later, October 11. bidding war maybe moving to the rental front. So the rental market is strengthening. I’m starting to pump my rents up on all my properties. I try to raise them every year. Now I can be even more aggressive because it’s harder for them to qualify. It’s just supply and demand. When you understand this, you win either way. A few different scenarios and kind of my opinion is a way they could play out for you. One is that the dollar will weaken. I think the dollar will continue to weaken and get a lot weaker over the coming years. This is due to inflation. inflation, by the way, is our friend when we play it properly. So dollar weakens. That means there’s more foreign investment in our market because why our properties look cheap when exchanged into dollar denominated assets. What else happens inflation, that means there’s upward pressure on rents and real estate prices. And the little side benefit is our debt is essentially being paid off by inflation. Beautiful Thing. higher interest rates, affordability declines, people can’t buy because they can’t qualify. So you increase your rents. What if we have the cost of construction increasing? Well, I think that’s a foregone conclusion over the next several decades, supply of any piece of improved real estate declines less people build when it’s more expensive to build, right. sounds logical. That means upward pressure on rents and prices. What about affordable People are forced to rent rents go up, same concept as before. stagflation that’s kind of an interesting concept. Well, value could decline. But if there is stagflation, it’ll be similar to the Houston market over the last 25 years. until a couple years ago, the Houston one of our markets, I own a few houses in Houston. The Houston market has been like flat, it’s done nothing, you know, since oil well crashed, and then it just flattened for like two and a half decades. So here’s the thing. When that happens, there’s no urgency for people to buy. Why do people all want to buy here or at least until recently, because they were scared of loss? They were scared if we don’t get in now, we’ll never get in. That was the feeling right? You’re all nodding your heads in agreement. So stagflation occurs, there’s no real incentive to buy values either flatten out or decline, but people rent so there’s upward pressure on rents, because you have Have more renters. And the likelihood is interest rates will decline and you refinance. That is the one time I could be wrong about my recommendation to get 30 year fixed rate loans. But I still get fixed rate loans on all my houses. I like it better. What if we have an overall depression like we had 78 years ago? Isn’t it amazing that so many of our financial philosophies and our thinking about debt is rooted in what happened 78 years ago? Because our grandparents and our parents even may have told us save for a rainy day while we were on the gold standard back then. Okay, folks, they didn’t have rampid inflation. It’s a different strategy today. If we have an overall depression Now you remember The Waltons. Good night, john. Boy, if we have an overall depression today, we’re all screwed. Sorry, I can’t solve all your problems. I just want to make the full disclosure there. But actually, if you finance your purchase properties correctly, at least you have options. Because you can go to your lender and your lender is probably more screwed than you are. You can always negotiate with them in a worst case, calamity. tragic situation. That’s what’s happening here in California now, people are doing what they call short sales and workouts where they’re saying to their lender, look, I’m a moron. I got into a house over my head and I couldn’t afford it. Do you know in the Jersey, New Jersey, I actually if you email me, I’ll email you this article. I just saw it yesterday on Inman news, there is actually a government financed mortgage bailout program now. It’s like it pays to be irresponsible nowadays. Isn’t that ridiculous? Where they are floating government bonds to bail people out that got Adjustable Rate subprime loans. Disgusting, you know, from a philosophical perspective, but the point is, our society for better or worse and I say worse rewards That, so do what they want you to do. So either way you play the game right, your cash flow should improve, and you win the game. Okay, welcome back. Well now you’ve heard a little bit from that recent life seminar about the three dimensions of real estate. Remember, there are actually more than three dimensions real estate is a multi dimensional asset class. Unlike other more simplistic investments, like commodities, or stocks or bonds, things like that real estate is multi dimensional. And as long as you adapt and adapt quickly to the type of market you’re in, you can always maximize your investment potential. So for example, if interest rates go way up, and that is causing prices to be stagnant or even fall God forbid, course if you listen to the prior podcast on eliminating downside risk in your investments and you buy based on construction cost value versus land value, the likelihood Any downturn is extremely low. That’s another subject, go back and listen to that podcast. And we explain that. But say, for example, you have a situation where we’ve got high interest rates. Well, that is going to mean that you should be able to raise your rents more aggressively. Also, not just a matter of interest rates, but just ability to qualify. The type of market we’re in at the time of this podcast recording, is we’ve got this credit bubble, this mortgage meltdown, if you will. And with this, this is a good time and we are seeing it in many markets all over the country. We are seeing rent increases, because tenants cannot qualify to buy a property. So what do they have to do they have to rent a whole other group of people got themselves into trouble, where they’ve got to sell their home because they took an imprudent adjustable rate mortgage, or they got into a situation where God forbid even worse, they went into foreclosure. They recycle back into rental market and those people become your renters increasing rental demand. So, multi dimensional asset. If you have more questions about this and I know on the podcast, you don’t have the benefit of the visual aids, meet with talk with any of our investment counselors, they will be glad to explain this to you in more detail. Okay. I want to give a little disclaimer kind of on a different subject. In recent podcasts, we have profiled a couple of markets. And we got kind of concerned about this because we profiled some great places to invest. Dallas, Texas was a recent podcast, Mobile, Alabama, Austin, Texas, other great places to invest in will profile many other markets in the future. But we need to make a disclaimer to you don’t run out and follow our advice. Can you believe I’m saying that? Well, I don’t exactly mean that. But here’s what I do mean. You’ve got to understand Stand the distinction between the macro market of places like Dallas or a place like Austin, or a place like Mobile, Alabama, or Salt Lake City, Utah, wherever it is. Those may be good markets. And we’re talking about them kind of generally in the macro sense. But within every city is a micro market. So there are a lot of questions that need to be answered here. What area of the city Do you want to be in? What is the best area to invest in every city has a wide variety of areas, what neighborhood or subdivision drilling down even further. I brought Marcus who was interviewed on a prior podcast. He’s a senior area manager for us and senior investment counselor, and just wanted to have him comment on some of these micro considerations. So Marcus, thanks for coming in to comment on this.
Marcus 32:50
Oh, sure. One of my biggest areas is Houston and we’ve talked about this before. Houston is a very large city. There are a lot of places to invest in in Houston. There are a lot of builders are there good and bad, good and bad. There are a lot of neighborhoods that are in there good and bad. And our objective and really how you leverage us is that I fly out there. I have an agent out there. I have agents out there. I have property managers out there,
Jason Hartman 33:16
and you’re talking to them all the time. So you have your finger on the pulse phone
Marcus 33:19
visit, if we buy in the neighborhood or want to buy in a neighborhood, I’ve either been there I will be there. And what we do with them is you don’t want to just buy a house in Houston, you want to buy a house with the best value that’s going to get a great rent that’s going to be in a very good neighborhood that’s going to have a long history, you have a long future ahead of it. And that’s what you want to get. And that really takes a lot of selection to do it. There are loads of homes by lots of neighborhoods, and there are for plexes and apartment buildings and different options in Houston. In that particular case, a four Plex is not a good idea in other places it is and there are reasons for that. And that’s something we can go in depth and at another time. So when we sell a house there, that house has been cleared by me by the agent that found it by the property manager who will go look at it say will rent for this much is this a good house to rent because some houses aren’t really beneficial to renters in the city or the neighborhood you’re buying in. So everything’s been vetted so that when you buy a house, it’s one that we ourselves would invest in. And it’s very selective and it’s one that we ourselves
Jason Hartman 34:27
do and because we must follow our own advice, and if you want to just comment on that again, Marcus, maybe
Marcus 34:34
cuz I’ve got three homes in Houston I have to buy in the cities that I sell in,
Jason Hartman 34:38
that’s one of our rules here is that every area manager has to purchase and invest in the area before they’re allowed to recommend it to you, our client. So that’s our first stage of quality control, is they got to put their money where their mouth is. So that’s helpful.
Marcus 34:54
You can call any agent in Houston and you can ask them to find your house. It’s 100 and $50,000 with 2500 square feet brick on the outside. And there’s a an incredible range of homes that you could get. And they will sell it to you even though it’s not the right size to rent, even though it’s in a neighborhood that’s maybe not as good as could be. The school district didn’t as good. The layout isn’t a type of layout or the size that renters are renting at that area. They will sell it to you because all they’re concerned with is that you’re going to buy the house and they’re going to they’re going to get their income on it.
Jason Hartman 35:31
Yeah, the other considerations are leverage the human capital of our network, you know, we have people that are flying around to these areas like Marcus and checking them out, and they’re doing their own investing there. Marcus, I remember one time we were in Charleston, South Carolina, I believe it was, and we were looking at properties. And we drove through this one area that agents had told us was a good rental property type of market and we saw these sort of duplex Type attach style homes remember those you remember what is a builder? We didn’t discuss this before recording right? But it was built by believe KB home if I’m not mistaken then it was a builder and they were awful they were just terrible. mm attract the front doors were right next to each other get out of the car. Oh, I wish we would have taken pictures of that because it was it served as a bad example
Marcus 36:22
was right next to an area of the city that was an excellent place to buy and a much much better builder. You could have gotten that house that we looked at those duplexes for a good bit less than what we were buying ours for, but it would have rented for very poorly, you would have a lot of maintenance costs. And you just never would have gotten any appreciation out of those that you would have gotten from the homes that we did choose. We found another one if you remember was next to a landfill.
Jason Hartman 36:48
Yeah, that was up in Charleston area also. And that was in an area called moncks. Corner. Right. And remember, we thought we had discovered this sort of a goldmine. Yeah, because we were there first and it was just a little too trailer they had no sales office. So yeah, and we thought it was really good at first Marcus. But then we drove around. And we went around the whole area. And we saw one sign that said landfill. Yeah. The other said, I believe like, you know, waste recycling center. You
Marcus 37:15
know, you don’t want to live on the other side. Yeah.
Jason Hartman 37:16
And so on each side, it had a problem,
Marcus 37:19
right. And our agents know in those cities that we don’t want to have one of our clients buy a house and find out later that it’s next to a landfill. I mean, if it is, then they should tell you and tell you that the price is so exceptionally low that it’s still worth it. But you need to know this and that’s how you leverage us. We go out and we look at the places like this I had in Houston. Someone came in, it looks like they may be going bankrupt. They had bought two homes in Houston, great city to buy them. They both cost 250 something thousand dollars.
Jason Hartman 37:49
They bought too high for that area. So
Marcus 37:51
you never buy a house that high because the rents only go up a certain level. Yeah.
Jason Hartman 37:55
And then they become buyers. So they’re out of that market. And
Marcus 37:58
so she was getting maybe To $300 a month rent more than what I was getting, but we were paying almost half as much for the homes in the same neighbor. So the RV ratio was already good, they were rent ready. And so here she is about to go bankrupt because she was trying to get a rent to make up for the cost of 250,000. And all we had to do is get the rent that was going to make up for $135,000 house. And we nailed it. And we got about 1% the value of the house and we did well. And she may very well be going bankrupt. It’s because she heard Houston was a good place to buy, called an agent agent sold her house. He convinced her that it was going to rent for a certain amount. So hey, there’s a second one. Maybe you ought to buy it before it falls off the market. She did that. And she came into me to ask for advice on how to deal with this.
Jason Hartman 38:46
Yeah, so very interesting. Yeah, that’s it. Don’t let that happen to you. Don’t be caught in that situation. leverage the human capital of our network by calling our office talking with our investment counselors here and they will To help you with all of these micro considerations, the considerations some of them and this is not all of them just to review area of the city neighborhood or subdivision within that area of the city type of property, housing, floor plan, single level two storey what size is optimum at that time, and all this stuff is really a moving target because I remember what happened years ago in Arizona in the Phoenix area, which by the way, don’t invest there now that markets totally overvalued at the moment. But this stuff is dynamic and it changes. Here’s what happened. Everybody from California, it would seem ran out to Phoenix as the market was starting to boom in about 2002 2003. They bought two or three rental properties out there with their home equity from California. And they flooded the rental market with all of the things that people think Marcus makes the good typical rental, a smaller three bedroom, two bath house, okay. And they they put so many of these on the rental market that nobody was Renting so in that time, it Phoenix The best thing actually was to buy something more expensive to buy something larger, nicer neighborhood, maybe four bedrooms, three baths, and spend a little more for it maybe 50,000 more because there was a total shortage at that time in the rental market. So it depends. This is all dynamic and it’s always changing. So the other considerations, price range higher or lower school district shopping, homeowners association, yes or no good or bad. It differs depending on area, community amenities, those differ in their desirability garage or no garage, employment centers, what type of employment What is your ideal tenant profile? So there’s a lot of stuff to know and outside of these micro market considerations. There are also things regarding the micro aspects of what type of financing and what type of plan you have and sort of financial plan for your investments. So that’s what we’re here for. We just wanted to make that disclaimer, use us take advantage of the human capital by giving us a call. Okay, any other comments on that Marcus?
Marcus 41:11
That’s it. That is our jobs is to really look these over and sift through because there really are a lot of places, a lot of homes, a lot of areas you can buy into. So you may as well buy in the best areas and the best areas of the areas, the best size house and have a property manager basically approve of it before you actually put it up to one of our clients to purchase.
Jason Hartman 41:34
Excellent. Well, thanks for commenting. Oh, Matt, thank you so much for joining us today. We look forward to talking to you on the next podcast. We’ve got some really good podcasts coming up. One is going to address the big China and India factor and the looming asset shortage. The other one is going to be a property selection, like an in depth property selection podcast. We’ve just got a lot of good stuff in the wings. So keep listening Thank you for making us so popular we recently I just returned from Europe. And by the way, we got a future podcast on that probably the next one talking about international investing, kind of interesting and a little bit out of the box. But I just returned from Europe. And while I was gone, we are very happy to say that we broke the 10,000 listener mark. So thank you for listening and we appreciate your tuning in. And please keep doing it and recommend our podcast to all of your friends, family, co workers, etc. I want to recommend a book today. I finished it when I was on my trip in Eastern Europe, and it is called revolutionary wealth by Alvin and Heidi Toffler. They are futurist. It’s not about real estate at all. But it’s always about real estate. And the reason it’s always about real estate is because all of the trends, they discuss very many of them talking about China and India which is a big issue in the world today a good issue that is going to really cause us to prosper in the future without Real Estate Investments are sort of chronicled in there. And so I’ll talk about that in more details in a future podcast, but get a copy of revolutionary wealth by Alvin and Heidi Toffler, I think you’ll really enjoy it a lot of good stuff in there. And until next time, we want to wish you happy investing, and we will talk to you soon take care. I’m here with area manager and investment counselor, Linda Molly, and she just returned from Kansas City, and also Grand Junction, Colorado. And Linda, tell us about what you saw in Kansas City.
Marcus 43:31
Kansas City is a great market, Jason, it’s very stable and solid. It’s a market where there’s good growth and lots of things going on. And there’s some great projects there that I took a look at that I think the investors would love to hear about. Now
Jason Hartman 43:45
one of the things we always do is you got to go buy your own house, they want to recommend the area to clients. And of course, you know, I’m already in Ohio in Kansas City. I bought a four Plex there. But tell us what you’re recommending today in Kansas City.
Marcus 43:56
What we have is a great single family home three bedroom To bath about 1400 and 50 square feet for 189
Jason Hartman 44:04
nine brand spanking new right brand
Marcus 44:06
new rent ready close to schools and a beautiful shopping center big upscale shopping center called Zona Rosa, which I had lunch at and just fell in love with.
Jason Hartman 44:16
Excellent what’s the projected return on investment?
Marcus 44:19
projected investment return here is 34%. Based on our usual assumptions that we put on our performance projections and the loan that you could get
Jason Hartman 44:27
excellent boy 34% annually, don’t try that in a mutual fund or the stock market, you probably won’t get it. But you can do it pretty conservatively and prudently with the right real estate investments with the right structure. Linda, thanks so much for talking about the property in Kansas City.
Marcus 44:41
You bet. Thanks so much.
Jason Hartman 44:43
Hey, I just wanted to announce a couple of quick things for you. If you are interested in the Empowered Investor investor network franchise in your area. We are now approved for franchising in 18 states, please visit Jason hartman.com and click on the franchise link and fill out the short application. If you are able to come to one of our live events. We would love to see you and meet you in person. We’ve had people fly in from all over the US for them Tuesday January 8, we have real estate investing using your IRA or other pension plan other qualified plan that will be at our office here in Newport Beach soon to be our old office. Remember, we’re moving soon, and that is from six to 9pm. On January 8, register at Jason Hartman calm for any of these events, creating wealth our core program. Our main educational event is Saturday January 12. From 10 to four at our office in Newport Beach. We have a mini creating wealth on January 15 at a location to be announced in the San Diego area. So visit Jason Hartman calm for details on that one. We have a conference call about declaring financial independence Tuesday, January 29. And that’s on the telephone so you can join in from anywhere Details at Jason hartman.com. And then we have another meeting creating wealth. Wednesday, January 25. Third here at our office in Newport Beach, that’s a weeknight event are one in a year. So far masters weekend event. This is a very special event where we fly in experts from all over the United States. We call this the Masters weekend the gathering of experts. And this is planned for March 8 and ninth at our new offices in Costa Mesa near South Coast Plaza in California. So hopefully you can join us for some of those events. Also, if you are interested in career opportunities with us, our company is growing quickly and we would love to talk with you about career opportunities. Also, remember our rental coordinator is here to help with your rental properties. If you need assistance with your rentals, your property managers, your advertising, remember we’re here to help and we stay with you through the life of the investment. So feel free to call our office anytime and ask for the rental coordinator for assistance on your rentals. also want to remind you listen to our old podcasts, at least go back to podcast number 13. forward and listen to all the podcasts after that, you’re welcome to listen to all of them. The ones before number 13 are older, but they’re also good, but the newer ones are number 13 and forward, which are really good ones to listen to. So please take advantage of that. Be sure to see appropriate disclaimers and disclosures on our website at Jason Hartman calm remember that we are not tax or legal advisors. So give us a call on any of these issues. And remember, we are here to help and we will look forward to talking to you on the next podcast.
Announcer 47:55
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Jason Hartman 48:50
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