Jason invites you to hear something different this time, something we’ve never done before. Listen in to a conference call covering many topics including: the myth of the “national real estate market”, foreclosures / REO’s vs. new homes, contractor and fix-up rip-offs, the leverage amplification technique, Grand Junction, Colorado, Columbus, Ohio, Jackson, Mississippi, RV Ratio, natural disasters, mortgage update, good and bad rental markets, etc.
Announcer: Welcome to Creating Wealth with Jason Hartman, President of Platinum Properties Investor Network in Newport Beach, California. During this weekly program, Jason is going to tell you some really exciting things that you probably haven’t thought of before, or a new slant on real estate, fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible.
Jason is a genuine self-made multimillionaire, who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in nine states. This program will help you follow in Jason’s footsteps on the road to financial freedom through real estate. You really can do it. And now, here’s your host, Jason Hartman.
Jason Hartman: Good day, and welcome to another edition of Creating Wealth. I’m your host, Jason Hartman. We’re glad you’re listening today. We wanted to mention a couple things before we get into the meat of this podcast. No. 1, tech problems. Don’t you love it when there are tech issues? I’m sure all of you endure them from time to time, and we had some technical problems recently with several of our podcasts, and they were actually kind of starting in the middle or at some odd place in the podcast, and they may have still sort of made sense in listening to them, but if you have one of these podcasts and had downloaded it or listened to it, you may want to delete that episode and re‑download it.
If I didn’t start off with an introduction kind of introducing myself and the podcast and saying welcome to you, then you definitely have one of these where they kind of started in the middle and you missed a lot of content. So please feel free to go back and listen to those, re-download them, delete the old episode at your convenience and get the full information and the full content in its proper context.
Okay. Thank you for listening. Now, we want to do something we’ve never done before today. As you know, on prior podcasts we’ve talked about a lot of different subjects. We’ve had live recordings of small pieces of my various seminars, and we’ve also had many guests on various topics, professionals from different parts of the investment industry, and we’ve got a whole bunch more of those coming up this year that we’ve been lining up for you. But on today’s show, what I want to do is just broadcast for you a conference call that we recently did where we had several different viewpoints and several different guests on the line, and I think you’ll find this to be of interest.
And by the way, if you are not in one of the areas where we conduct seminars, and right now we do that mostly in Southern California, and as most of you know that are regular listeners, we are franchising so our business is expanding rapidly. And by the way, I should mention to our clients, thank you so much for making last year a record year for us. Our revenues were up last year about 33 percent, and business is just great so we appreciate your support and your loyalty to us. And we plan to continue to repay you with the very best education and the newest, most innovative, cutting-edge techniques and new thinking on investment and investing and creating wealth from every part of the investment industry, especially of course real estate, which happens to be my favorite investment.
But we are expanding and we’ll have live seminars in a lot of other areas in the future, but if you’re not in one of the areas where it’s easy for you to attend a live seminar, get on one of our conference calls. I think you’ll enjoy those. They’re free. You can register for them at www.jasonhartman.com, but feel free also to attend the live seminar. I want to mention Trevor who flew in recently for one of our live seminars from New York. He flew across the country 3000 miles, and if you’re listening, Trevor, hello to you. Thank you for flying in to see us. And we’ve had people at various times fly in from all over the country and attend our events, but we just want to make it as easy as possible for you. And we will be coming out with a complete copy of our Creating Wealth 202 seminar on CD because so many of you have asked for that. That’s on it its way so we’ll let you know when that’s available, as well.
Let’s listen in to this conference call now. Speaking of technical difficulties, we had a small technical difficulty with this one, too, where it seems as though we started recording just a little late into the call, but I don’t think that’s any big deal. It seems like we’re picking up where I’m discussing the negative media news and how there’s no such thing as a national housing market but only a bunch of small local markets in a country as large as the United States. But the media perception can really benefit us as investors because so many people think that the real estate market may be bad nationwide, and of course there’s no such thing as a national housing market.
So the question is where to invest and when to invest in that certain area, and that’s where we pick up here on the J. Paul Getty quote where he says, “Buy when everybody’s selling; sell when everybody’s buying,” and I can definitely tell you we are negotiating some fantastic deals for our investors with many of the developers we work with around the country in 35 markets around the US. So listen in to the conference call and thanks for being on the podcast.
When he talked about the quote that he says, “Buy when everybody’s selling; sell when everybody’s buying,” so certainly down markets can be a very good buying opportunity, but many of the down markets that people are thinking may be good investments really aren’t because it’s like trying to catch a falling knife, and it’s better to just let the knife land on the floor and pick it up carefully. So overpriced markets like most of the West Coast and most of the East Coast are places that we are now avoiding, and we certainly don’t want to look at anything in California, Arizona, Nevada, or Oregon. Those are all overvalued markets. Most of Florida is totally overvalued.
In the center part of the US, the Chicago land area is pretty much overvalued, and then the northeastern United States, whether it be Massachusetts, New York, those kind of markets, Washington, DC, are pretty much overvalued, as well. But there are many good markets around the US that are counter-cyclical to the markets that the media is talking about, and it’s important to understand that in the United States, you’ve got to sort of take everything you read and hear in the media with a grain of salt because there is no such thing as a national housing market in a country as large as the United States.
There are many local markets. In fact, there are about 300 major local metropolitan markets within the United States, so there is no such thing as a national housing market. There’s an old saying in real estate that all real estate is local. All real estate is local. That’s what we should really consider, so we’re looking at markets, since we are area agnostic and we’re not attached to any one market, we only go where it makes sense. And when it stops making sense, we just go somewhere else. We don’t have any physical presence or expensive offices in these markets or big overhead, so that makes it very easy for us to be what we call “disloyal” to markets.
So when one market doesn’t make sense anymore, we simply move out of it, we abandon it, and we recommend another market that does make sense because we are area agnostic and not attached to any one market. So just remember in a country as large as the US, there’s no such thing as a national housing market. And by the way, if any of our team members have comments on any of this stuff, please just chime in at any time.
But the next thing I’d like to say, barring any comments, is I’d like to talk a little bit about foreclosures because foreclosures seem to be getting a lot of headlines right now in the media, and many investors and investment groups are running around chasing foreclosure properties, and I want to just say something and give you a word of caution. Foreclosures are not necessarily by any means a good deal. Twenty-two years ago, when I was 19 years old and I started selling real estate, traditional real estate when I was in college, I remember I started out for the first couple of years selling government repossessed foreclosure properties, HUD and VA repo properties.
And I would drive people around and show them houses just like a traditional realtor does, and they would buy these properties. And what I started noticing after I kind of got into my career a little bit is that sometimes the worst deals, believe or not, were the foreclosure properties. And a lot of these properties were sold on a bid process or a sealed bid process where they have multiple offers on the properties, and people would really pay more than they could by just a traditional new home or resale home because it had the word “foreclosure.”
And the other thing I noticed is when I put little classified ads into the newspaper, back then it was pre-Internet days. When we put little classified ads in and you said, “government repo” or “REO,” which you may have heard that term REO. It means real estate owned, real estate owned by lender, a foreclosed property, and/or if I put foreclosure in there, the phone would ring off the hook and people would just call and they would automatically assume that the property was a good deal just because it said “REO” or “foreclosure” or “government repo” or any of those sort of buzzwords. So in the real estate business, as a broker this was a very good advertising gambit because it would really make the phone ring and it was phenomenal for business.
But what I found after a while is that these properties were not necessarily a good deal. Now, a foreclosure could be a good deal, but it may be a very bad deal, too. Everything is an individual case-by-case basis. And so people have asked, “Why aren’t you recommending foreclosure properties?” And people are calling us all the time that represent banks and are saying, “The foreclosure rate is high. There’s a whole bunch of REO properties that these banks want to sell and they want you to recommend them to your group of investors.” And we’ve looked at them, and so far they just have not been that great a deal. When they are a great deal, we’ll recommend them. Again, we’re area agnostic.
Right now we just specialize in recommending brand new homes. They’re very easy to manage and easy to deal with. There’s no fix-up work. There’s nothing complicated. There’s no contractors ripping you off fixing up the property or anything like that, and we found that we can just negotiate very good deals with developers. Some of the nation’s largest homebuilders in many of their markets are hurting for business, but in some of their markets they’re doing great. But they, again, like the media, which we talked about a moment ago, look at real estate as a national market.
So for example, you take large national builders, DR Horton, Lennar, KB Home, Centex, all of these large national companies, and there are many more. They have pressure from their shareholders, from their lenders because some of their homes are in overpriced markets that are really in trouble like California. But other markets that we like are very good markets to be investing in right now because their cycles are counter-cyclical to what is going in California. There are some very, very good buys in markets that are still appreciating.
I’ll give you two examples of markets. Most people think doom and gloom, real estate is over, and it’s just not something to invest in right now. Well, Austin, Texas, one of our top markets, appreciated at over 8 percent last year. Mobile, Alabama, another one of our very good markets, appreciated nearly 15 percent last year. Keep in mind that real estate because it has very special characteristics that other investments like precious metals, stocks, bonds, mutual funds do not have and do not share, these returns are dramatically amplified in real estate through the use of leverage meaning borrowed money.
We always give two quotes at our seminars. We say, No. 1, real estate is a great place to invest someone else’s money. You use very little of your own money to buy real estate, and that’s why it’s such a powerful wealth creator. You use leverage, the power of borrowed money, but many people, as we see now, get themselves into trouble with leverage, so there is a prudent, conservative, sensible way to use leverage, and there are risky, dangerous to get you into trouble. Leverage can be used and it can be abused.
Back to the example of leverage or borrowed money. Ten percent down in a market that appreciates at 15 percent amplifies that appreciation by ten times so that your cash-on-cash return before anything else is considered, which will actually reduce this debt, is 150 percent annually. Now, you lose a little bit of that because you may have the next part of the subject, which we call deferred down payment. And any of our investment counselors can explain that to you in more detail, or you can go to www.jasonhartman.com and we have free audio and video podcasts on our website that you can listen to at your convenience.
Team members, any comments on the national media, the national housing market, or foreclosures? And then I want to talk about the Complete Solution and present our first area.
Gia Jurevich: I just – I have one comment. We had a client come in yesterday who owns about six or seven rental properties, and he said his biggest headaches were the foreclosures. He thought he was getting a good deal, and at the end of the day it turns out he had to put in thousands of dollars over the year with repairs. It was an older property. It looks good on paper as far as getting a discount and getting a high rent, but he agreed 100 percent. He said, “New properties are the way to go,” so –
Jason Hartman: Well, Gia, that’s such a good point because they’re so much easier, the new properties. You start with a brand new clean slate. You have a one-year home warranty and you’re going to have three, four, or five years before the property needs any maintenance at all probably, so it’s just really nice to start fresh in a brand new property. The other nice thing is that the – most of these newer properties, brand new properties, are in beautiful new yuppie master-planned communities which – that have all the amenities people like, and they just have so much better design and everything is better about them. You start fresh and it’s really a nice feeling. They even have that new car smell. I’m just kidding about that. I love that new car smell.
Yeah, that’s a good point. So keep that in mind with the foreclosures that many times it’s far more complicated than it looks, and in many states around the country, banks are exempted from many of the disclosure laws that a normal seller has to make in terms of what they have to disclosure to the buyer. The government has given them an exception many times because they know that the banker doesn’t live in the property, so they don’t have to disclose things like a traditional seller does in many cases, and that can hurt you as the buyer, as the investor. Any other comments from the team?
Karam: Another area our investors are making mistake is when they buy these foreclosed properties in especially far away areas, like one of our clients came in and said, “One of my friends bought,” we were talking about Indianapolis, how great that area is and how quickly houses get rented. By the way, in Indianapolis we have sold dozens of houses and we have no vacant property there. Everything is leased and we are waiting for some more to close and to get leased, but just to give you an example, this client said, “My friend bought in Indianapolis foreclosed properties $50,000.00 apiece, so she bought five of them for $250,000.00, and for the last ten months it’s still sitting vacant. Can’t get it leased. The property is not in a good area.” I would rather go and buy a $125,000.00 brand new single-family house, which by the way is available today, three-bedroom, two‑and‑a‑half bath, 1500 square feet. It’s specially marked down from $149,000.00 to $125,000.00, and you get it rented real quickly. And like Jason says, they all have the new car smell, and that’s what the tenants like and you want to look at the areas. We micromanage the areas, areas that appreciate.
Jason Hartman: Yeah. Karam, that’s a really good point, and you said it a little differently, but one of the things you want to consider is that you can’t just go to these cities and buy a house. I mean, look at – you can look at www.jasonhartman.com, look at any of the properties on our website and you can learn the markets, many of the 35 markets we recommend on the website. That’s simple, but there are micro markets within any city and the areas can different dramatically. I’m sure everybody on this call can think of examples in your own city, and I know we have people from all across the country listening to the call.
Think of your own city. There’s an example right here in Orange County. There’s a city called Irvine, and right next door to Irvine is another city called Santa Ana. Now, Irvine has great schools, yuppie environment, excellent planning. It’s one of the cleanest cities on the planet probably besides Singapore where they don’t even let you chew gum, right? And it’s a very high-end market. It’s one of the best cities in the country. And then you go next door to Santa Ana and you’ve got much higher crime. You’ve got sloppiness, poor planning.
It’s just a whole different experience one city to the other, and these cities are right next to each other. It takes five minutes to drive from one to the other, so you’ve got to be very cautious about the micro markets in the specific neighborhoods and school districts and markets within any city you look at. You can’t just run over to Austin, Texas, or Grand Junction, or Kansas City, and these are all good markets, and buy a property. You could get yourself into trouble, so that’s the word of caution that we want to give to all of you. Any other comments from maybe Lynda?
Lynda Mulley: No. Everybody’s right on the money here tonight.
Jason Hartman: Okay, good. Okay. Two more things I want to talk about, and then we’ll go into our area presentation. What we do here at Platinum Properties Investor Network is we provide what we call the complete solution for real estate investors, and we do it through a unique and trademarked five-step process. The first part of the process is education and individual consultation where any of our investment counselors will be happy to sit down with you or talk with you on the phone and do an individual investment counseling session. We don’t charge for any of this. We give away our education. We lose money on it.
When you come to a live seminar here at our Orange County office, or when we do them in other areas, as well, you’ll pay a nominal fee that will just cover the cost of the meals that are included with the seminar. We lose money on education. We give it away for free to basically help people invest. We are a real estate broker. We are not in the seminar business. We don’t sell expensive books and tapes or coaching programs or anything like that at all. All right.
So step one of the complete solution, education and individual consultation. Step 2, financial analysis and the proper prudent use of leverage, borrowed money, using it correctly. Step 3, acquisition and allocation. So here’s where the rubber meets the road, where we actually help you acquire the properties and allocate your national real estate portfolio so that if you’re looking at a pie chart of all the properties you own, it’s nice and colorful and it’s cut up into little diversified pieces so that you are safe. You are properly and conservatively diversified into several markets because all real estate is local.
Also, many people ask us, since I’m on the acquisition part, “How much does it cost to start investing in real estate with you?” Well, first of all, we don’t charge you anything. The way we get paid is by arranging referrals to the markets where we have deals with developers and real estate brokers, and they pay us a small referral fee for any clients we send them. All right. So we are attached to the result of your investment versus these many other companies who sell seminars and expensive coaching programs, and they sell you the stuff and they send you on your way and then you try to implement their advice in the real world.
And if you’re anything like me – because I read my first real estate investment book in 1981, many years ago – and I tell you, I got really excited when I was a teenager, and I thought, “I’m going to go out and do this.” And when I went out into the real world after going to countless number of seminars – I’ve gone to the tapes, the CDs, the books I’ve read, all of that stuff – I found there was a huge disconnect between what they told me and what happened in real life. Okay. So we are with you through the entire process, through the life of your investment, and that makes us attached to the result of the investment so that we don’t just sell you something and send you on your way. We help you get your properties rented.
Well, actually, that leads me to step four of the complete solution. Step 4 is management, mailing, and monitoring of your investments and of your real estate portfolio, and we help you with all of that. We have a full time rental coordinator here that will help you get your properties rented. We prescreen and recommend property managers in the various markets we’re in. We do not make any money off of property management. That’s just a free service that we offer to you.
And I think I skipped my part on how much does it cost to be an investor. You can typically start with as little as about $20,000.00 and purchase one property. Most people that invest with us use home equity, stocks, bonds, mutual funds or savings as their seed money to start building their investment portfolio, and they do that with as little as $20,000.00 or so per property. Our typical client will buy six properties or so and they will go ahead and start building a little mini real estate empire in diversified markets around the country. So it’s pretty inexpensive to get this started.
Our typical client that comes in is sitting on about $200,000.00 to $300,000.00 in unused home equity, and equity in properties is a very bad investment because real estate is a great investment but it’s a really lousy bank. Any equity you have in real estate right now is earning exactly zero percent interest and there is no FDIC insurance on that equity, so you want to put that equity to work so you don’t have what we call the lazy money syndrome where your money has fallen asleep on you and it’s not working for you. You’ve got to make your money in all your assets work for you at all times. Final step of the complete solution is wealth accumulation and asset preservation, and that’s the five-step complete solution for real estate investors that we offer here.
Now, after our first discussion on a specific area, I want to talk to you about what’s going on nationally with the rental market and what we call the three dimensions of real estate investing, but I’ve said enough now. Let’s get Ken on the line and Lynda on the line and let’s talk a little bit about the Grand Junction market, and then we’ll talk about another market after that and we’ll have a lender visiting us, as well.
Ken and Lynda, are you there?
Lynda Mulley: Yes, thanks Jason. Ken, let me just kind of lead you through a couple questions here because I just came back from Grand Junction where I purchased a real pretty little brand new home in a great area. There’s a tremendous amount of growth going on in Grand Junction, and at the very beginning of the call you alluded to what’s driving that growth, and I’d like you to share that with everybody on the call because this is a little boom town right now and there’s not very many of them going on in the United States at the moment, so this is a great market to take advantage of. So Ken, tell us a little bit about what’s driving the incredible growth in home appreciation in Grand Junction.
Ken: Thank you, Lynda, and welcome all of you folks on the line. I’m very, very fortunate I’ve been in the business for 18 years doing investment properties, and I have never seen where I have a location that not only has appreciation driven by the economic environment that I’m sitting in, but also the appreciation on the demand for rental properties where a majority of the properties on these brand new homes that I have available for the investor are rented before closing.
We are experiencing a significant amount of economic growth there due to the demand for energy in this country and the economic environment of the world internationally when it comes to energy. We have a situation here that is right on target to have by the year 2010 over 43,000 wells for natural gas drilled. Each well alone is $1 million dollars capital investment. If you do the numbers, you’re over $51 billion in capital investment on the west side of the Rockies in Grand Junction.
Grand Junction is about 25 miles east of the Utah border right on Interstate I-70 for folks who are not familiar with Grand Junction. The environment is such where it’s not just quite a boom town but it’s more a long-term significant amount of appreciation and growth due to the fact that not only the natural gas is coming on board significantly but also the fact that there is a backing by the United States federal government when it comes to the shale oil – that’s spelled s-h-a-l-e – which is pulled out and melted out of the rock versus drilled.
It’s another major, major step in energy, and now that we’re expecting to see $100.00 a barrel by the end of the year for oil, economically it’s being able to go forward majorly in the country. Matter of fact, it’s the largest fossil field I understand in the world for shale oil. The reciprocal of that, Lynda and the folks out there, are such where we have the opportunity for investors to – where I’ve been working with a builder for the past five years where he has properties ranging in price point between $222,900.00 up to $270,000.00. The rental market is strong where in most cases with $20,000.00 you easily can have a positive cash flow.
The other point alone this year, we’re expecting up to 18 percent. I figure conservatively at 15 percent appreciation alone, but that’s not just this year. We’re looking out for the next 15 years of energy development and the demand for housing and rental. Matter of fact, uniquely the situation, for example, in the past six months, the same housing went up in rent from $1000.00 per month for renting the property to $1500.00 a month, so it’s very interesting what’s happening. I have never seen a market where not only do I have the regular appreciation of real estate do very well where in the last – for example, the city has grown 26 percent, or about 63,000 people in the last – since 2002.
We are in a market that continues to grow because of the economic environment because of energy, but not only that, but it has become a very strong retirement market based on the fact that the medical industry, especially – help me out, heart –
Lynda Mulley: Cardiac research?
Ken: Cardiac.
Lynda Mulley: Is that, yeah, what you were showing me?
Ken: Yeah, right. Where there’s over $200 million capital investment in new facilities just for that industry alone, but overall we certainly have a very interesting market, and one that was written up in Money Magazine, the December – month of December illustrated it being Grand Junction at 14.3 percent appreciation; median price was $217,000.00. That’s a little low right now for new properties.
Lynda Mulley: And what we’re seeing, return on investment for these properties is real solid. It’s 31 percent or better, and so for a minimal amount put down on a property, you’re getting in in some cases with some built-in equity because I know these properties are appraising for a bit more than what we’re buying them for, but a great return on investment in a great area that is an excellent long-term investment.
Jason Hartman: Excellent. Anything on Grand Junction you want to mention? And by the way, can we have callers – certainly you can call us directly after the conference call, but we always like to take a question or two in case we have one, and I think you can try it any of you callers, so if you want to “raise your hand,” just press five-star on your phone and Karen who is running the call here, our Operations Manager, will un-mute you and you can ask away. So we do have two questions it looks like. Okay. So un-mute the first one calling from the 348 number. I’ll say the first three digits of your number, so un-mute that one. Okay, yes. Your question?
Caller: Okay. Real quick, I’ve been an investor for about five years, and so in terms of other investment networks, what is it that you have to offer or do better than the other networks?
Jason Hartman: Well, what we have is we have a complete solution, a real complete solution, No. 1, and No. 2, we have a real philosophy. We benchmark all of our investments. We standardize the way you look at the investments so it’s incredibly simple. Other groups, I notice that the information is very hodgepodge and it’s not put together in a standardized format. So if you look on our website, you will see completely standardized performance on every investment, and I think you’ll like that a lot. And also we have a very specific philosophy that works, and it’s been proven for many years. It’s not based on radical appreciation. Our projections and assumptions with our investments are extremely conservative, below all historical averages, and those are some of the things that definitely differentiate us.
Would any of the other Platinum team members like to comment on that question?
Lynda Mulley: Sure, I would. I think one of the best differentiators that I see at Platinum and one of its core strengths is the one-on-one individual attention and consultation, and the approach is very much customized and tailored to the individual. You won’t see us in big club meetings where we gather hundreds of people together and bring in hundreds of different areas. This is very much like, as Jason would say, the Merrill Lynch of real estate in that we sit down and we help you build a strategic plan. We help you get some ideas on a portfolio that’s diverse. And this one-on-one counseling is very much a differentiator, as well as the control of the markets we go into as far as you won’t see us opening up a hundred different areas just to offer lots of product, so there’s a lot of product.
Jason Hartman: Oh, thank you for mentioning that, Lynda. Yeah. That’s a very good point you mentioned because one of the things I’ve noticed about other groups is they just recommend anything, and it’s amazing to me. I’ve seen these other groups because I get their emails and so forth and they’re recommending all kinds of bad product that just doesn’t make any sense when they actually have some decent product, too. And what we do is we just recommend the good stuff. Anything that doesn’t work, and remember all our people have to put their money where their mouth is. All of our area managers are required to buy in their own markets before they can recommend them to our clients.
So when we have a market that isn’t that good anymore or the market conditions have changed, we just stop recommending it. An example would be we have deals with 35 developers and real estate brokers around the country, but currently because we’re area agnostic, we only recommend about maybe a dozen, maybe 15 of those 35 markets that we technically have arrangements in. We’ve got a few more questions here, so any other quick comments on that question?
Karam: The comment on this part is the – we being the area agnostic, like Jason says, when the market doesn’t make sense, we leave that market. One of the examples is Charlotte, North Carolina.
Jason Hartman: That was one of our top markets last year.
Karam: That’s right.
Jason Hartman: But it stopped making sense so we moved out, yeah.
Karam: The real estate market is great over there, don’t get me wrong, but the rental market is very, very soft. It takes about four to six months to get your property rented. Not only that, you have – you’re competing with other investors with the vacant houses so you have to lower your rent, so that market doesn’t make sense so we left it last November and this is in all one year we didn’t do any marketing on that – for that area.
Jason Hartman: Yeah. That’s a good point, Karam. We could be making money recommending a lot of imprudent markets that don’t work, but the most expensive and most valuable thing we own is our reputation. So when a market doesn’t work, we just go somewhere else. Okay. Let’s take another question from Steve who’s on the line. We’ll un-mute you, Steve. Okay, Steve, are you there?
Steve: Hello.
Jason Hartman: Yes, how are you?
Steve: I’m doing good.
Jason Hartman: Good.
Steve: I’ve invested in one property. I’m going for the second one, and Karam, you owe me lunch.
Karam: I do.
Steve: But my question is how often are you guys updating the properties? I see the same properties for a long period of time and maybe one or two just sit there. When do new markets open up and how often do you do that?
Jason Hartman: Okay. Let me first address that. I think, Steve, you’re talking about on our website, right?
Steve: Correct.
Jason Hartman: And I must say the website is not completely up-to-date. To get the most updated, most current information, you have to talk to the area managers about it. So some of those properties on the website are sold. We just don’t have it completely up-to-date.
Karam: Some of them we get it and we don’t get a chance to put it on the site even and it gets sold so they never go on the site, and other properties may be just sitting there that need cleaned up. They may have sold it locally over there and we haven’t taken that out from our website, so –
Steve: Right. And Karam, you did call me when you did Columbus, and so I knew that market opened up, but I didn’t know if there’s other markets opened up. Since I deal with you, Karam, do other markets open up, and how do I know about that? Just for reference because looking at each area gives me an idea of what’s going on in the area and I didn’t know if the website was up-to-date.
Karam: The Marketwise website is up today, and some markets we do – like for example Jackson, Mississippi and Columbus, Ohio, we are really doing good business so those inventories change real quickly. In fact, Columbus, Ohio, Tom will be on to talk about it, and we hardly have any inventory left there.
Lynda Mulley: Well, and to answer your question, as well, we do podcasts, so when we come up with a new area, you will see us putting a new podcast out there. I don’t know if you check our website, but we did one last week, about a week ago on Kansas City and we’re going to put up another new podcast on the Grand Junction, Colorado market in the next couple days, so that’s one way to keep up-to-date. And then the properties will be loaded on the website immediately, so –
Jason Hartman: Okay.
Lynda Mulley: – that’s how you’ll stay up on it.
Jason Hartman: Yeah. Good point, Lynda. And one of the things I want to say to you is if you want to make sure that you get our email newsletter, just to go www.jasonhartman.com and fill out the “contact us” section so that you’ll be getting updates that way, as well. But one of the best things is what Lynda said is listen to our free audio and video podcast on our website. We have listeners in 26 countries and well over 33,000 downloads of net podcasts now, and I think you’ll really enjoy them. We’ve had excellent, excellent feedback on them. We interview a lot of different experts and I think you’ll really like it.
Okay. Our next question, and this will be our last one for now because we’ve got to move on is – you want to do that one? Sorry. Okay. The person with the 818 number. Well, I meant you. Okay. Yes, 818 number.
Caller: Peter?
Jason Hartman: Yes.
Caller: Well, actually you answered some of the questions already. I’ll make it short. One is how much is your price versus rent, say 100 times?
Jason Hartman: Yeah.
Caller: And then things, is there any negative things like earthquake or a fire in California?
Jason Hartman: Yeah, good questions. The first one is we use – one metric that we use, and it’s a rather simplistic one but it is a good, quick rule of thumb is what we call our RV ratio, the rent‑to‑value ratio. And our ideal target there is .7 percent, so if the property costs $200,000.00, the .7 percent of $200,000.00 would be $1400 a month. That is our ideal RV ratio. Now, many of our properties do better than this, and they do like a .9 RV ratio, but .7 is very good. If you get a .7 RV ratio, your return on investment will typically be around 30-35 percent annually. That’s pretty good. You’re not going to get that in a mutual fund or in the stock market probably.
And then the second question is – oh, by the way, .7 percent is ideal. Acceptable is .5 percent. In that example, a $200,000.00 property rents for $1000.00 a month. Anything below .5 is unacceptable and not recommended. Second question, every area is pretty much susceptible to some sort of disaster. I mean, in California you’ve got wildfires and earthquakes. In the Gulf area you’ve got potential for hurricanes. In the Midwest you’ve got potential for tornadoes. All of these areas – every area is susceptible to something. There is no immune area, but of course you would want to make sure you have adequate insurance on your property.
And one of the other things we say, and we’ll be doing a podcast on this one soon, is that the best insurance is a high loan balance because your lender actually becomes kind of your advocate in making sure that you are covered. They go and haggle with your insurance company when you have a claim, and also in terms of the hurricane-affected areas, the new building codes in these areas are really extraordinary. Many of the properties have 140-mile-an-hour rated roofs, and a lot of the properties that were destroyed in these areas – I hate to say this because it almost sounds callous – they really sort of needed to be destroyed. And I don’t mean that in any bad way for anyone who lost their home, God forbid, but I’m just saying that many of these properties were really junky, old properties that should not have been built where they were built in flood zones, and were never built to the higher standards and codes that they have nowadays to make sure that they stay up and hold themselves up during severe weather conditions or things like that. All right?
Okay. We’ve got to move on because we’ve got a lot more to cover on this call and only about 15 minutes left. Why don’t we invite our lender, I think it’s Robert, onto the call?
Karam: Tony.
Jason Hartman: Karen, can you un-mute him?
Karam: Tony.
Jason Hartman: Oh, it’s Tony? It’s Tony, sorry. She’s looking for Tony now. Any other comments from our team members? Okay. Tony, you’re un-muted. Are you there?
Tony: Yes, I am here.
Jason Hartman: Hi, how are you?
Tony: I’m doing very well. How is everyone else doing?
Jason Hartman: Good. What is going on, Tony, in the mortgage market right now? It’s been quite a fiasco lately.
Tony: Yes, it has.
Jason Hartman: Tell our callers real quickly if you would, just give them a one- or two-minute update if you can.
Tony: Oh, no problem. Just to kind of give it all in a nutshell, once formerly with Countrywide and now I’m with Wells Fargo, so now you have kind of an idea of where – what happened with the market. Basically, one of the things that is happening is the stated income investment property loans, some of the high-risk loans have gone the way of the dodo bird.
Jason Hartman: Um hm.
Tony: They’re not really available anymore. Rates have gone up the past year and a half, but –
Jason Hartman: But lately they’ve come down pretty nicely actually, although qualifying standards are higher.
Tony: Yeah. The past two quarters we have seen a drop in the interest rates, so right now they’re pretty – I think they’ve pretty much plateaud, at least for the next year. You don’t really see too many increases in rates during an election year, and that’s just because you never know who’s going to be here in the presidency.
Jason Hartman: One of the things we found, Tony, is that in terms of the rental market nationally, the mortgage meltdown or the credit bubble or however you want to refer to it has really strengthened the rental market and really helped our clients quite a bit. Karam can share kind of a nice example of this, if you want to, Karam, real quickly.
Karam: About the mortgage market?
Jason Hartman: Yeah, about Bart in Austin. That’s always a good one. I really like hearing it.
Karam: Yes. The rental market after the mortgage meltdown really got strengthened, and we noticed that in Austin, Indianapolis, Columbus, all these three areas remarkably improved in the vacancy rates so to speak. So what happened is right after the mortgage meltdown I got a call from my property manager, Bart, in Austin, saying we’ve got only two vacant properties, and at any given time he would have four, five, six to ten vacant properties, and it takes 30 to 60 days to rent. And even now, in October, November, we have no vacant properties from our network, and we have about – in Austin we have about 150 properties that our property manager manages, so as they close they get leased, and all through summer that was happening. Within a week they were getting leased and –
Jason Hartman: So Tony, this is kind of the good thing about the mortgage situation that’s going on is that the fact that it is harder to qualify strengthens the rental market because there are fewer investors, and really most of them didn’t know what they were doing anyway out there buying properties and putting them up for rent, so less competition for inventory of properties. And also you have a lot of people that are renting because they can no longer buy, so when they can’t buy they’re forced to stay in the rental pool, or even worse you have people that go into foreclosure, getting themselves into trouble, and they’re recycled back into the rental market.
Tony: Right.
Jason Hartman: So as long as you own rental properties, it’s pretty good for you as a landlord.
Tony: Well, that’s where –
Jason Hartman: What else – sorry. What else specifically on the lending climate, though, Tony?
Tony: Well, that’s very true. One of the things that you get out of the – he had all the bad apples so to speak in the area on the business. Even though the guidelines have tightened up, I mean, you’re still able to get a loan. You’re still able to get good rates. You’re still able to do 10 percent down. I could still do stated 10 percent down through Wells Fargo.
Karam: Right.
Tony: The loans are still out there for sure, it’s just don’t be put off if you have a little bit more questions asked of you about something
Jason Hartman: Yeah. And remember –
Tony: Because you still want to get the loan, and that’s really the only thing. Things have tightened up, but with the kind of clients that we deal with, you can still get the loan and you can still get the proper financing. You can still get the RV that you want.
Jason Hartman: Yeah. The RV ratio, the rent-to-value ratio.
Tony: Yes.
Jason Hartman: That’s great. Well, good Tony. Thank you for that update, and I think it’s just really important that all of our clients on the call remember that real estate is a multi-dimensional asset class. And we have a podcast I really highly recommend you go back and listen to on the three dimensions of real estate investing and take a look at that one, or listen to it I should say, and it will explain a lot more about the mortgage market versus the rental market and how prudent investors actually benefit when things like this occur.
Okay. Next we want to talk about one of our newer markets, which is Columbus, Ohio, and I want to get Tom on the line from Columbus, Ohio, and I think you’re on. You’re un-muted, right Tom?
Tom: Yes, I am.
Jason Hartman: Tom, welcome to the call.
Tom: Hey, thank you. Good evening everybody.
Jason Hartman: And Karam is the area manager for Columbus, so I don’t know which one of you wants to start.
Karam: In the interest of time, I will let Tom proceed with it.
Jason Hartman: Go ahead, Tom.
Tom: Fantastic. I just thought I’d give you a little overview on Columbus. A lot of people don’t realize what Columbus has to offer. With it being the state capital, just under 2 million people actually located in the metro area. What’s really unique about Columbus is we’re very much a white-collar town. That keeps our market very, very stable. Our property values have only gone down one time in 45 years.
Jason Hartman: Wow.
Tom: That’s very remarkable.
Jason Hartman: Now, they probably – in fact, you know Tom, I’ll bet you they have been appreciating since 1492 when Columbus sailed the ocean blue.
Tom: I believe they have.
Jason Hartman: Yeah.
Tom: But there’s a couple of other things just about Columbus as far as to give you a little background about how white collar we are as far as we’ve got six Fortune 500 companies located in Columbus, AEP Nationwide Insurance, Limited brands and things like that. Sixty percent of the nation’s population is within 550 to 600 miles of Columbus, so that makes it very, very nice for an awful lot of things. We have two international airports located here, one for cargo and one for passengers.
With the top ten employers, a lot of – employers are located here, Honda, America’s very large presence, Ohio Health, JP Morgan Chase, all of these have anywhere from 10 to 20,000 employees in the metro area. So what this is allowing us to do is create a very nice rental property market, and to be able to acquire very nice cash flow areas using examples from the standpoint of from an average home that we’re actually offering through your network is approximately right around $145,000.00 to $150,000.00, and we’re able to cash flow these with only 10 percent down anywhere from $200.00 to $250.00 a month.
Jason Hartman: That is amazing, Tom. I mean, positive cash flow with 10 percent down, huh?
Tom: That’s correct. Give you an example, with us being newer to the network, Karam, I ended up coming to Karam and finding out that there’s an awful lot of really nice things that we’re able to offer because we’re offering, for the most part, already leased out property so we’re trying to say, “Okay. Somebody has already raised their hand and said, ‘Yes. I want to go ahead and rent this property for that rent.’” So we’re actually throwing out true rents, and being able to cash flow the properties with those type of numbers is absolutely fantastic.
Jason Hartman: And so these are pre-leased properties at that positive cash flow at 10 percent down. That’s excellent. And so 10 percent down on $150,000.00 property, it takes about what, 3.5 percent for closing costs, and so for 13.5 percent of that price, you’re in a property with positive cash flow right off the bat, huh?
Karam: Right. And properties are anywhere from $10,000.00 to $20,000.00 discounted. Like we have three properties. I’ll give you an example of one of them. It’s 1595 square feet for $146,000.00 instead of $156,000.00, and your return on investment is 53 percent.
Jason Hartman: So a projected return –
Karam: That is before the tax benefit.
Jason Hartman: So a projected return of 53 percent, and Karam, did you say that’s before tax benefits or after?
Karam: Before tax benefits.
Jason Hartman: Wow. And so if you qualify for all the tax benefits, your projected return would be up above 53 percent annually.
Karam: That’s correct.
Jason Hartman: I tell you, callers, don’t try that in a mutual fund. It’s just not going to happen.
Karam: I will give you something else here. With the 10 percent down, your positive cash flow, $123.00 per month. That’s before the tax benefit, and if you take into account the tax benefit, you are positive $204.00 a month.
Jason Hartman: Wow.
Karam: That’s with 10 percent down only, and these are brand new properties.
Jason Hartman: How much is that house, Karam, that you’re talking about?
Karam: $146,000.00.
Jason Hartman: Wow. So $146,000.00.
Karam: Um hm.
Jason Hartman: That means if you take 13.5 percent of that, that means you need $19,710.00 about approximately to buy the property, and you’ve got positive cash flow before tax benefits of how much, Karam?
Karam: Before tax benefit is $123.00.
Jason Hartman: $123.00.
Karam: Yes.
Jason Hartman: So you multiply that times 24 months, for example, if you just want to look at your first two years, $123.00, you’ve got $3,000.00 in positive cash flow coming back to you in the first two years before tax benefits on an asset that only took you $19,700.00 to acquire. That’s amazing.
Karam: Right.
Jason Hartman: Excellent. What else about Columbus?
Karam: Three such properties. Tom, go ahead.
Tom: Oh, no. I was just going to jump on the bandwagon there as far as an awful lot of the other things that make our product a little bit unique from the standpoint of they’re great for absentee landlords. What we’ve included, for the first two years we’ve included all of your – as far as from the management expenses for the area manager, which is traditionally 5 percent of your rentals, we were including that in there and we are also including 24 months of the homeowner association dues. All of our product, these are actually condo serviced products, and what’s really nice about that is with an absentee landlord, you don’t have to worry about your product. You don’t have to worry about your property manager driving by to make sure the grass is mowed and things of that sort. All of that stuff is all taken care of with the homeowner association, and that really makes it nice so a person can just go ahead and look for other investment properties to invest in.
Jason Hartman: Excellent. Karam, do you want to talk –
Karam: You have a smart work force also, right? University over there.
Tom: As far as with the university? Oh, absolutely. What’s kind of unique about Columbus, Ohio, there’s actually – there’s Ohio State University is located here. We have the state and federal government located here. We have four universities and we have eight other colleges and universities that – those are the major universities and then eight other two‑year universities that are located here. The – 34 percent of Columbus, Ohio, has their bachelor degree or higher, so when I was mentioning that we are very, very much a white-collar town, industry really isn’t here. We just go and we’ve got banking, insurance, and an awful lot of those things are what made Columbus roll.
Jason Hartman: Excellent. Good stuff. Karam, any other comments on Columbus?
Karam: No. Just that since we opened this area about three months ago, we have been selling very heavily, and because these are pre-leased, the day it closes you have the tenant already in the property so you don’t have any down time, any vacancy to take into account. From day one you are positive cash flow.
Jason Hartman: Excellent.
Karam: I would highly, highly recommend this, and besides Columbus we have two properties in Indianapolis that make great sense. One of them, $102,000.00 and the other one I mentioned about $125,000.00. Those are the two properties, so these must – the properties that we are describing now in Columbus, in Indianapolis which has a special discount, they must close by December 31, and we are already at the end of November so if anybody is interested, give me a call at my direct line 949-262-9833 and I’ll get these properties lined up for you.
Jason Hartman: Excellent. And by the way, we won’t take any more questions on the call since we’ve go to wrap up, but I know that many of you probably have questions. So Lynda, what is your direct line number?
Lynda Mulley: It’s 949-999-0565.
Jason Hartman: Okay. And Gia, what is yours?
Gia Jurevich: Mine is 949-999-0514.
Jason Hartman: Okay. And I think we’ve covered everybody on the team that would need to receive a call, so that’s great. You can call any of the investment counselors and area managers here. And Lynda also covers Kansas City as well as Grand Junction. And Karam, you have a whole list of areas that you cover.
Karam: Yes.
Jason Hartman: Do you want to mention those to the callers real quick?
Karam: Austin, Texas; Houston, Texas; Indianapolis; Columbus; Jackson, Mississippi. Another darling area is Mobile, Alabama; Tuscaloosa, Alabama. All these things are great, very active areas.
Jason Hartman: Excellent. Good. One of the things we want to mention to you is don’t sit on the fence and wait for your investment. Realize that interest rates right now are so low, the mortgage is such a substantial part of the real estate asset and it makes sense to lock in on these rates, lock in on your cost of construction materials, which is what you’re really doing when you buy. And lock in your construction costs for the next five decades. A house will last you a good 50 years, and you just buy and hold these properties. Lock in your mortgage for the next three decades, 30 years of some of the lowest fixed-rate loans in the last four decades.
I mean, think about that. I know rates got a touch lower a few years ago in the post-911, but they are still historically extremely, extremely low, so you want to lock in that mortgage asset for the next three decades. And many of these markets are still appreciating dramatically. You look at some of them at 14, 15 percent; 8 percent appreciation. Don’t wait and don’t lose out on that. Real estate is the safest, most historically proven asset class in America. It has created wealth for tens of millions of people. You’ve just got to do it right to make sure that you don’t get in trouble. The property must make sense the day you buy it. Nothing extraordinary like dramatic appreciation should have to happen for you to make a nice return on your investment every single year.
Anyone want to talk about the fence sitting or urgency issue on the team real quickly before we go? Any thoughts on that?
Lynda Mulley: Well, I think that there’s always a compelling reason to purchase real estate, take advantage, whether it’s to buy this year to take advantage of tax benefits and the power of ownership and building equity, and there’s always that first step you have to take, and whether it’s a little bit of fear or that you don’t think you’re educated enough, that’s one of the reasons that we are here as investment counselors. We’ve done it before. We can help walk you through it if it’s your first time, or if you’re a seasoned investor and you just want a solid partner, a trusted advisor to work with, that’s the benefit of working through our network so it’s prudent to move forward rather than wait.
Jason Hartman: Excellent point, Lynda. Since you’re on right now, why doesn’t everybody just give their phone number once more. So please grab a pen or pencil and jot this down and our investment counselors will stay here to answer calls. Many times after the conference call they’re here for a good half hour just taking your calls and setting up individual appointments with you to do your personal portfolio makeover and your investment counseling session. If everybody has a pen and paper handy, everybody you want to just give your number again, and we’ll start with the ladies. Gia, you want to go first?
Gia Jurevich: Sure. Mine is 949-999-0514.
Jason Hartman: And Lynda.
Lynda Mulley: Yes, 949-999-0565.
Jason Hartman: And Karam.
Lynda Mulley: And Karam’s is 949-262-9833.
Jason Hartman: Boy, Karam, your voice has changed.
Lynda Mulley: Yeah, thank you.
Jason Hartman: Okay. Well, it sounds better. Our last seminar of the year here at our office in Newport Beach is on December 8, and any of the people listening in to the call now are certainly invited to that seminar. It’s our core program. It’s a Saturday seminar from 10:00 to 4:00. It’s called Creating Wealth 101, and again we’ve had thousands of people come through those seminars with very, very good feedback, so please register for that at www.jasonhartman.com, and while you’re at the website www.jasonhartman.com, check out our free audio and video podcasts. There’s a wealth of great information there, interviews with all sorts of experts and authors on different real estate subjects. I think you’ll really enjoy those.
And I want to just leave you with the importance of taking action and starting to build your real estate empire, create wealth through real estate, and secure your retirement through America’s most historically proven asset class, prudent, sensible real estate investing with a quote from Robert Allen that is, “Don’t wait to buy real estate. Buy real estate and then wait.” Thank you very much for listening to our call tonight, and all of our investment counselors are here to answer any of your questions so give us a call. Thank you.
I’m here with Area Manager and Investment Counselor, Lynda Mulley, and she just returned from Kansas City and also Grand Junction, Colorado. And Lynda, tell us about what you saw in Kansas City.
Lynda Mulley: 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 are some great projects there that I took a look at that I think the investors would love to hear about.
Jason Hartman: Now, one of the things we always do is you’ve got to go buy your own house there –
Lynda Mulley: Yes.
Jason Hartman: – if you want to recommend the area to clients, and, of course, I’m already an owner in Kansas City. I bought a four-plex there. But tell us what you’re recommending today in Kansas City.
Lynda Mulley: What we have is a great single-family home, three-bedroom, two-bath, about 1450 square feet for $189,900.00.
Jason Hartman: Brand spanking new, right?
Lynda Mulley: Brand 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: Excellent. What’s the projected return on investment?
Lynda Mulley: Projected investment return here is 34 percent based on our usual assumptions that we put on our performance projections and the loan that you could get.
Jason Hartman: Excellent. Boy, 34 percent 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. Lynda, thanks so much for talking about the property in Kansas City.
Lynda Mulley: You bet. Thank you so much.
Jason Hartman: Hey. I just wanted to announce a couple of quick things for you. If you are interested in a Platinum Properties Investor Network franchise in your area, we are now approved for franchising in 18 states. Please visit www.jasonhartman.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. 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 No. 13 forward and listen to all the podcasts after that. You’re welcome to listen to all of them. The ones before No. 13 are older, but they’re also good, but the newer ones, No. 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 www.jasonhartman.com. 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.
This material is the copyrighted creative work of either Jason Hartman, the Hartman Media Company, Platinum Properties Investor Network, Incorporated or the J. Hartman Company, all rights reserved.
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Duration: 67 minutes
