On this episode you’ll learn about what type of financing is best for investors. Jason also talks about the importance of avoiding adjustable rate mortgages.
Announcer: Welcome to Creating Wealth with Jason Hartman, President of Platinum Properties Investor Network in Costa Mesa, California. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing, fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible.
Jason is a genuine self-made 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 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it. And now, here’s your host, Jason Hartman, with the complete solution for real estate investors.
Jason Hartman: Good afternoon and welcome. This is Jason Hartman broadcasting from Laguna Hills today live and it’s great to be back home. I’ve been travelling for the last couple of weeks. Went to Morocco and Spain and Portugal, and it’s just great to be back home. Before we start, I want to thank Norm and Mike, who host the Real Estate and Finance show here on KRLA, for graciously inviting us into their studio to broadcast live.
And so we appreciate that, and that means that you can call in. Feel free to give us a call today if you have real estate questions and you want to talk about creating wealth in real estate. The number is 949-640-0505. Again, that’s 949-640-0505, and Karen will take your calls. We call her Roz, like on the Frazier Crane show. And MT is producing and we appreciate their help as well.
Just as I predicted, the markets, the bubble markets around the country are starting to cool. I’ve been in real estate for almost 21 years now and without exception, April of the 21 or so April’s I’ve been through have always been the very busiest month of the year. And in most of these markets, spring is not that springy and we’re seeing the bubble markets cool down.
When we talk about bubble markets, if you’ve been listening to the show or have been to our seminars, we’re talking about most of the state of California. We’re talking about the Northeast, Boston, Washington D.C., New York, South Florida, Miami area, the really expensive, highly appreciated markets. And so what we’re doing is we’re shifting and relocating our investments and our assets to markets with much greater upside, much lower risk, and much better cash flow, and it’s very exciting to do that.
Most surveys will tell you that last year, the average California homeowner got a tremendous gift, and that gift was for well over $200,000.00 in appreciation and I say don’t look a gift horse in the mouth. Use it or lose it. It’s time to access that equity in your home that is asleep, that’s not doing anything, that has no velocity, and put it to work in diversified markets all over the United States. Reduce your risk and really, really increase your returns.
There is some definite urgency to this and we have a guest here in a few minutes, who will be commenting on this, and the urgency is really one of the three dimensions of real estate, which is the financing dimension. And that is so critically important, the financing dimension, because most people think, when they think about financing, they think just about the interest rate and the vast majority of people out there now, commentators, forecasters, will predict that rates are on the upswing. There are little ups, peaks and valleys along the way, but overall, if we’re talking a year from now, we’re going to see rates higher than they are today.
But the second part of that equation – and I’m sure our guest will be happy to comment on this – is the ability to qualify for the financing in the first place. When I got into the real estate business back in 1985, if you wanted to buy rental property, you had to put 20, 25, 30 percent down. Nowadays, you can occasionally put 0 down or 5 percent down, and the low down payment dramatically increases your returns because you use the bank’s money to grow your wealth and the bank is helping you become rich a lot faster.
So let’s introduce our guest. It is Steve Dexter, and Steve is the author of a new book that is coming out. There’s some applause for him. He is the author of a new book coming out in July, called Real Estate Debt Can Make You Rich, published by McGraw-Hill. Steve is president of National Capital Funding since 1997, and since 1990, he has personally funded over $500 million in mortgage financing and currently works with many homeowners and investors in Southern California and across the country. He’s a real estate investor, who personally owns 26 properties all over the country and it’s great to have him on the show. Steve, welcome.
Steve Dexter: Thank you, Jason. How are you?
Jason Hartman: Good, good. Tell us about your new book.
Steve Dexter: Well, Real Estate Debt Can Make You Rich I wrote last summer in response to my students that I teach at the community colleges. They were having a lot of questions about real estate and how it works, how to qualify, and really, how do lenders look at you.
Jason Hartman: What’s going on in the mortgage market? How are lenders looking at people?
Steve Dexter: Well, mortgages today, there’s two-trading dollar industry right now, two trade originations per year, and what’s happening is that lenders have never been more aggressive. They have been scaling back on some specific programs. However, lenders, like any industry, want to do loans.
Jason Hartman: Absolutely, absolutely. When you speak of scaling back, most of America has been using their home like an ATM machine, where they think that that equity will always be available to them and they can always borrow from it, and we’re noticing there are still lenders out there who, of course, they want to do loans; that’s their business, that’s their product. But they’re tightening up a bit. I mean what do you predict over the next year or two?
Steve Dexter: Well, the most vulnerable segment of the market are people that have very little skin in the game, the 5 percent down guys, the zero percent, 100 percent financing guys. We will look for, as properties come back to the lenders, they’re going to scale back on a lot of these 5 percent down programs and a lot of these 100 percent financing guys because what’s going to happen, a lot of the people are going to fall out and lose their properties, unfortunately.
Jason Hartman: A lot of them have been taking very high-risk adjustable rate loans, and one of the things at our seminars and in our education with our investors, we really recommend fixed-rate financing. We like interest-only loans as long as they’re fixed rate because in my opinion, mortgages are on sale now. So when something’s on sale, I like to stock up. How about you?
Steve Dexter: Jason, you’re exactly right and one of the best accommodations that are out these days, we’ve been having this product for the last two to two and a half years are 30-year fixed 10-year interest-only. It has two good factors about it. You get to lock in that rate for the entire 30 years. By the way, long-term rates are a bargain in these days compared to where the short-term hybrids and the adjustable rates are. With this 30-year fixed rate loan, you can do a 10-year interest-only for the first ten years. So you get safety as far as interest rates not going up on you and you get the low payments that interest only loans provide.
Jason Hartman: Yeah, so that’s one way that people can get in and make their cash flow better is with the interest-only loans, as long as they’re not adjustable. As the housing market gets more expensive in so many of the markets, what kind of future loan products are being developed to make house payments more affordable?
Steve Dexter: It’s good that you asked me that question right now. Next week, I’m going out to Charlotte, North Carolina, listening to Doug Duncan, president of the Mortgage Banker’s Association and what he’s going to be telling us are all the new and innovative products that are in the pipeline that they’re going to be talking about. One of the things that’s going to start happening is that we’re going to see the amortization periods stretch out, from 30-year fixed to 40s, which we have now, and we also 50-year fixed now.
Jason Hartman: You know, that’s interesting you mention that. In today’s Wall Street Journal, I woke up this morning, picked up my Journal, and I was at the coffee shop. They were talking about 50-year loans.
Steve Dexter: I know. They got it from me.
Jason Hartman: They better expect life expectancy to increase dramatically.
Steve Dexter: Well, Jason, one thing that is happening is our future is what’s going on in Ireland right now. Ireland, one of the most common loans they have out there is 80-year fixed rate loans.
Jason Hartman: Unbelievable. That’s amazing. Amazing. Eighty-year loans. Can you believe it? What areas of the country are showing the highest rental appreciation? Where do you look for investments and what do you think about that in terms of the rental market?
Steve Dexter: That’s a very good point. I always look for areas of high rental appreciation, where we have dense commercial activity. Where you have a lot of jobs moving into the area, a lot of jobs coming into the area, your rents are going to go up. Specifically, we see things like West Palm Beach has the highest rental appreciation in the country. The figures just came out from REIS.com showing that West Palm Beach had 12 percent appreciation in rents last year.
Jason Hartman: That’s fantastic. That’s more than normal. But when you see that, you can’t just take that at face value alone, right, Steve, because the prices have appreciated in that area so much that the rents are just kind of starting to barely catch up because these prices have gone through the roof over there.
Steve Dexter: And thank God the rents are catching up. Here we have Los Angeles, Riverside, San Bernardino. The last two years, I’ve been watching these figures. Southern California has had the highest rental appreciation across that period of time of any other in the country.
Jason Hartman: Fantastic. Yeah, we’ve definitely seen that and as interest rates increase, I think we’re going to see rents up go up a lot more as more people are forced to stay in the rental market or people that did bad things and bought homes today on adjustable rate loans, when they get that sort of payment shock, we’re going to see them be forced to sell their home or, God forbid, foreclosure even, and rent from our investors.
Steve Dexter: Yes, landlords will celebrate high interest rates. As inflation comes to the fore, rates go up. Less people can buy and actually, a lot of these homeowners will lose their homes that are taking these dicey loans. Every foreclosure household becomes renter household and as we have more renters and less rental supply, these i.e. condo-conversions, taking rental units off the market, we are seeing a lot of renters and the supply is dwindling.
Jason Hartman: Yeah, absolutely. Just real quickly, Steve, what mistakes do you think investors are making when they choose their financing?
Steve Dexter: Well, they are taking short terms. They’re taking short-term type financing and for cash flow. They want to increase their cash flow, at the expense of later on, they’re going to have negative amortization on some of these loans, or they’re going to have an entire principle balance that’s not paid down in two to three to five years when these loans come due.
Jason Hartman: Yeah, that’s something to be careful of. Don’t finance long-term projects with short-term debt is what Donald Trump says. Steve’s book will be available in July. I’m sure it’s on Amazon.com and in bookstores. Real Estate Debt Can Make You Rich. Steve Dexter thanks for joining us.
Steve Dexter: Thank you very much.
Announcer: To attend a Platinum Properties Investor Network educational event, visit www.realtyinvestornetwork.com. That’s www.realtynetworkinvestor.com. Or call 949-640-0505. That’s 949-640-0505.
Announcer 2: Are you winning the rat race? Would you like to get off that treadmill and retire early with real wealth and some steady passive income? Well, here’s Jason Hartman, President of Platinum Properties Investor Network.
Jason Hartman: Everybody dreams of financial freedom, but how do you actually live that dream? The Platinum Properties Investor Network has the answer, the wealth-generating power of real estate. Our five-step process is your road map to financial freedom. The first step is Education and Consultation. Step 2 is Financial Analysis. We are the only financial planning firm for real estate investors. Next, we identify outstanding opportunities and make it easy to buy properties. Fourth is Portfolio Management. And the final step, Wealth Accumulation and Asset Preservation. We’ve helped hundreds of real estate investors achieve wealth through real estate.
Announcer 2: Call Platinum Properties Investor Network now and attend one of their nearby educational events, 949-640-0505; that’s 949-640-0505. Or visit www.realtyinvestornetwork.com. That’s www.realtyinvestornetwork.com.
Jason Hartman: Welcome back to Creating Wealth. I’m Jason Hartman, your host, and before we bring our next guest on, I just wanted to follow up on some of the great information that Steve Dexter was just sharing with us. When we talk about specifics and specific real estate investment opportunities in some of these markets there, they just make sense. They’re just prudent markets where the properties make sense the day you buy them. No speculation involved, nothing major has to happen to get exceptional returns.
I give you one example of a property that’s available through our network, Birmingham, Alabama, property for $165,000.00, 1,730 square feet. For those of you listening in Southern California or any of the highly appreciated markets, that’s only $95.00 a square foot. Can you believe it? Projected rent of $1,100.00 per month, which means our investor gets a return on investment of 51 percent and if they can take advantage of all the tax savings, and that depends on your personal tax situation – call us for details or attend one of our events and we’ll tell you more – the return on investment there is 67 percent.
I’ll highlight a couple other cities. And I own properties, again, in the vast majority of these markets that I’m recommending to you and all of our area managers who promote certain markets are required to buy properties themselves in the markets, so they have a vested interest that’s in alignment with all of our investors.
Austin, Texas, you won’t believe this: 3,520 square feet, five bedrooms, two and a half baths, $209,000.00. Charlotte, North Carolina, 2,352 square feet, four bedrooms, two and a half baths, $238,000.00. It just goes on and on. Salt Lake City, both of the Carolinas, North Carolina, South Carolina; there’s just phenomenal opportunities out there when you look beyond the sort of provincial California market and you look outside.
Okay, I’ve got a great guest for you. Those of you investors and landlords really need a service that our next guest is going to talk about. Jerry Hassen is an executive director – and there’s a little applause for him; welcome, Jerry.
Jerry Hassen: Thanks.
Jason Hartman: And he is an executive director with a terrific company that’s been in business for 33 years. I got involved with this company about 12 years ago originally and they do a terrific service, especially for landlords because as a landlord, eventually, you’re in the best investment, which is real estate, but eventually, you’re going to have a challenge or two. You’re going to have a tenant that won’t pay. You need an attorney in another state that you don’t want to go hunting for to write a stern letter to the tenant, to counsel you, to help you with the eviction if it comes to that, and Jerry will talk to you about what he calls, or what they call A Life Events Legal Plan. So Jerry, what exactly is that?
Jerry Hassen: Well, the Life Events Legal Plan is basically to the judicial system what medical insurance is to the healthcare industry. I mean imagine having unlimited phone consultation with an attorney, who specializes in the area of law that you need assistance in, with an unlimited number of topics, whether it be real estate or any other type of legal need.
Jason Hartman: Fantastic. So this is like legal insurance, like a legal HMO, if you will?
Jerry Hassen: Kind of like an HMO, only you get more than just telephone support. They’ll write letters, as you mentioned, and this is particularly important because even if you had an attorney on retainer, he’s only going to know the laws of the state that he practices in, and this plan offers countrywide assistance.
Jason Hartman: That’s fantastic because one of the things I’ve also noticed in dealing with attorneys over the years being a businessman, is that attorneys aren’t really required to specialize like doctors are, and that just drives me crazy because you come to one attorney and he’ll say, well, we do estate planning, divorce, family law; we’ll get your kid out of juvenile hall.
Jerry Hassen: Right.
Jason Hartman: And we’ll help you with your business contract and your lease on this commercial property. No specialization.
Jerry Hassen: You wouldn’t go to a general practitioner to have your appendix out. You can go to a specialist.
Jason Hartman: I completely agree. Is this something that is really needed by the average person, though?
Jerry Hassen: I believe it is. I think we really believe in equal justice for all and most people just can’t afford to pay those huge hourly attorney fees, especially when you can’t retain one attorney. You’re going to need a bank of attorneys who specialize in all the different areas. So it’s something that I think everyone needs.
Jason Hartman: Yeah, I’d agree, especially in today’s litigious society, for better or worse. So you’re saying this isn’t just something when you’ve been served with a lawsuit or charged with a crime. It’s something you use proactively.
Jerry Hassen: Yeah, you use this for not just being served with a lawsuit, but to avoid those issues. With the telephone support, if you have a legal question or tax question, you can get on the phone with a person who specializes in that area of the law to answer your questions to prevent those issues. They’ll also write letters for you, as you mentioned, to help your tenants get out of the property because they’re not paying their rent before you have to initiate an eviction process.
Jason Hartman: What else is included?
Jerry Hassen: Well, obviously, if you are sued, you will get representation. They will defend you. And remember if you have questions pertaining to real estate, you’re going to have a real estate attorney helping you. There’s that unlimited phone consultation. If you ever get a traffic ticket, that’s going to be included. Not only is that important in your own state to have representation to help reduce the points, but let’s say you’re in another state, perhaps checking out some property and you’re now back home. You’ve gotten a ticket in another state. You don’t want to have to go back to that state. You’ll get an attorney who will represent you there.
Jason Hartman: That’s terrific, yeah. As investors, we’re traveling around; we’re looking at properties in markets that make sense, so that’s important.
Jerry Hassen: Absolutely.
Jason Hartman: I understand there’s now a new service being offered and you probably remember that movie – oh, what was it – probably about ten years ago, when the internet was just sort of coming on and being used.
Jerry Hassen: With Sandra Bullock. I remember that.
Jason Hartman: Sandra Bullock. It was called “The Net,” I believe.
Jerry Hassen: “The Net,” uh huh. Her identity was stolen.
Jason Hartman: Identity theft and that’s a scary thing. It’s probably happened to some of our listeners. Talk to us about the identity theft protection.
Jerry Hassen: Well, obviously, identity theft is now the No. 1 crime in America today. I mean everyone is worried about it and it’s not just when you lose your wallet and your license is stolen, your credit cards stolen. It’s when some hacker breaks into a company that you do business with and they steal all their files with all of your social security numbers and your passwords and mother’s maiden name, and this is really important. Let’s face it. Everyone’s at risk. And to protect themselves, people might pay for that continuous credit monitoring that is offered by other companies, but that’s only part of the problem. You really need identity theft protection and restoration.
Jason Hartman: Right.
Jerry Hassen: You need a battery of lawyers and specialists who will correct the problem when your identity has been stolen.
Jason Hartman: So knowing about the problem is just one half of the equation, or even 20 percent. Correcting it is the hard part.
Jerry Hassen: When you have fire protection, if you have a fire alarm, and your house is burning down, you don’t want to call the fire company and say my house is burning down, and they say, no, I’m sorry, all we do is monitor.
Jason Hartman: Right.
Jerry Hassen: You have to go put out the fire. This is not like that.
Jason Hartman: Yeah, absolutely. That’s fantastic. So identity protection and restoration, very important.
Jerry Hassen: Right.
Jason Hartman: Is there anything in these plans that’s not covered?
Jerry Hassen: Well, a lot of what I’ve described is covered and a whole lot more. Now, there are certain things that aren’t covered. Obviously, certain criminal actions aren’t covered. But anything that isn’t covered for free will fall into what we call Title 5 and in that area, it will be covered, but at 25 percent discount. It won’t be totally free. You’ll be able to hire an attorney who specializes in whatever area you need at a 25 percent discount.
Jason Hartman: It sounds like this must be pretty expensive. It’s a very inclusive service.
Jerry Hassen: Well, you would think that if you were to add up all the services that are included that it would be expensive, but in reality, the identity theft protection, the legal shield, the legal plan, the Life Events Legal Plan, all of that is $35.95 a month. And that even includes in the event you’re stopped in the middle of the night by a policeman or perhaps someone comes to your home to arrest you or something, you can get an attorney on the phone in the middle of the night.
Jason Hartman: Yeah, fantastic. So that’s very important. Talk about the business side of it or real estate investing and what else can the attorneys help you with? Will they review leases? Will they review property management agreements?
Jerry Hassen: Yeah, they will actually review unlimited numbers of documents up to ten pages each, at absolutely no charge. We have a saying in this business: The big print will give you, but it’s the small print that taketh away. And you really need to have someone who understands the law, who can read those contracts and documents that you’re signing, and they’ll advise you of your rights.
Jason Hartman: Super. Anything else you want to tell us about it?
Jerry Hassen: Well, it’s a program that I’ve used successfully a number of times. It’s not just for those catastrophic legal challenges you come across every rare instance or every once in a while. It’s for those every day nuisance challenges that you just don’t want to deal with. I mean it wasn’t too long ago that I was getting overcharged on my Verizon bill and I would have to call up Verizon and spend an hour on the phone being passed from person to person to get it corrected. And I was thinking why am I dealing with this? I’m going to have my attorney handle this. And they handled it. They wrote a letter and I never had to deal with Verizon again.
Jason Hartman: Sure, yeah, that’s fantastic service. So if anyone is interested in this type of service and would like to implement this, it’s very inexpensive. Just $36.00 a month. Give our office a call, 949-640-0505. Jerry, it’s been great having you on the show. Thank you very much.
Jerry Hassen: Thank you, Jason.
Jason Hartman: I appreciate you joining us. A couple things just in closing here, a couple more hot properties I just thought I’d tell you about, Lehi, Utah, $124,000.00 at 1,210 square feet property; Clinton, Utah, $169,000.00 for 2,100 square feet. Great rental values on these properties. Give us a call, visit our website, and join us for an upcoming event and we’ll be glad to fill you in and tell you more about all of them. Thank you for joining us today. I’m Jason Hartman and we will see you next week.
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Anyway, we’ll talk to you next week. Thanks for listening.
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