Jason hosts investment counselor Sara as they start a discussion on the Memphis market. They look at the different class types of properties. Sara lists some things to note when investing in a C Class Property. Jason later explains the different price ranges of each class property.
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Jason Hartman 1:15
I’ve got Sarah here with me. She was in Memphis and Jackson, as you heard on the last show, and she is our top investment counselor, and has been with me many, many years and has lots of insights. And I’m always trying to twist her arm to get her on the show. Sarah, welcome. How are you?
I’m great. I have a little bit of a Memphis hangover.
Jason Hartman 1:38
What does that mean?
Oh, well, you know, we flew in late last night and just a busy busy weekend. Lots of fun, lots of learning. So I’m just playing a little bit of catch up today.
Jason Hartman 1:51
Good, good stuff. Yeah, you really was a good weekend. You know, we did three days in Memphis and one day in Jackson, Mississippi, as all of our listeners who listen to the last episode, we recorded a Jackson, Mississippi, just as we were going out to look at properties. So now, having spent the entire day yesterday looking at properties, we have some impressions to share with listeners and all start, because I don’t know if you want to start So shall I start on my impressions you should start. Okay. All right. So my impression is that Jackson is a good, mostly C class market. Now, of course, there are some beautiful areas in Jackson, that can be a and b class markets or property types. But in Jackson, I didn’t you know, the stuff we saw with our provider there was I think a solid C, maybe c plus class neighborhoods. And of course, as is almost always the case, those properties have really good cash flow. At least on paper, but more demands in terms of management, they really require a little bit more attention. So again, it comes down to the concept of my commandment of the 10 commandments for successful investing my commandment about financial planning, which is very important and that’s commandment number four, but also part of that is not really financial planning, because financial planning would involve things like what is your risk tolerance as an investor, you know, are you willing to take large risks? Are you very conservative, are you somewhere in the middle where you want to allocate some of your portfolio to higher risk properties that could appreciate more and have more appreciation potential, but the cash flow is not as good and and then another and then you know, your time horizon, your investment goal, whether it be capital appreciation, cash flow, tax benefits, income, but then another part of that is Really your own psychology, your own personality as an investor. And for that, I would really say that, you know, the, the properties we have now in Jackson are good properties for someone who wants to or is willing to, I should say maybe nobody wants to. But you know, for someone who number one has experience with investing, and they’ve, you know, they’re they’re not new to the game, and they’re also willing to pay a little bit more attention to their portfolio because of the type of tenant quality that you will most likely be dealing with. And you know, those C class tenants, or even c plus b minus tenants, not always every case is individual, but they do require a little more attention, and most of the time, and so that’s really the thing I wanted to convey about Jackson. I liked it quite well. But again, these are not brand new homes and yuppie neighborhoods. We have homes like that two properties like that, that make good income properties. But, you know, again, cash flow not as good at least on paper. Sarah, would you say? That’s a fair assessment?
Yeah, that’s a good assessment. I think that Jackson has some potential. I like the provider, I had a great time. You know, we probably looked at, I don’t know, eight to 10 properties. And, you know, my takeaway was that of those eight to 10 properties, there was one that I thought I would buy this, you know, this looks like a, you know, a good clean property, you know, better neighborhood, nice curb appeal. Still not a cookie cutter, you know, neighborhood but just a good solid rental property. And so, you know, we we discussed after me giving that feedback to the provider, you know, we discussed the possibility of getting more properties like that. So, again, depending on your risk tolerance, you may be interested in the lower you know, $50,000 price point properties, but I don’t see Jackson as like a big growth. market, I don’t see that you’re going to get, you know, any big rent increases. They’re very good for cash flow. But I think a little more risky in terms of the amount of maintenance you might have. I mean, you might get lucky and have a good long term tenant. And that’s one thing, you know, he did say was that these tenants tend to stay a lot of section eight, you know? Yeah,
Jason Hartman 6:20
let’s talk about that for a moment. Okay. So the reason that tenants tend to stay is because a lot of them are on some sort of government assisted housing program like a section eight, okay, when you’re on the dole, what real motivation Do you have to change anything, and you know, when you’re when you’re the type of renter who’s paying $700 a month rent and living in a property that our investor can buy for 45 or $50,000. Moving is a pretty expensive affair. You know, of course, you’re going to do it yourself. Of course, you’re gonna have to rent a truck, but you’re going to have to change your utilities over you’re going to have to put down new deposits. You know, these these are not in that class of property, they’re not commonly. I mean, it’s pretty rare actually, that they’re upwardly mobile type of tenants. So they do stick around. And that’s the one nice benefit. And, and, you know, again, on this tour that we went on on Monday yesterday, it was you, Fernando, and my mother and I, you know, my mom has lots of experience with section eight government assisted tenants, and I joked when we were in Memphis at the creating wealth seminar, I joked and in front of the whole audience, I said, Yeah, my mom complained about her section eight tenants all the way to the bank, because as I was growing up and hearing her bitch and gripe about section eight, you know, she was she was creating a lot of wealth for herself. I mean, a single mom who, you know, basically started with just one property and got another and got another and, and, you know, she would complain about the section eight stuff, but, gosh, it’s dependable, you know, it’s dependable. And the interesting thing is, is that you didn’t I’m just going to say you did not love what we saw at all. You said one out of eight, I think that you liked. My mom didn’t like it that much either. And my mom’s pretty scruffy. You know, she’s the extreme do it yourselfer. Oddly, she has, I guess as much of a dichotomy and her, her personality as I do, probably because, well, I’ll get my hands dirty and dive into something and do it myself too. And I don’t mean fixing our properties, because I don’t do that anymore. Oh, I used to do that a little bit. And she’ll do that. But then, you know, she lives in this beautiful mansion and, you know, really likes really, really nice things and buys designer clothes. So it’s just a kind of a contradiction. It’s a funny thing. But Fernando though was the was the one who was different as I and I was just kind of trying to be quiet and get feedback from all of you and throw in my opinion later. Can you imagine that? That I didn’t insert my opinion, but for Fernando Really liked it. I mean, you know, he was like, Oh, yeah, I like this, you know, because government rent, very dependable, and you know, great cash flow. But again, now he’s got four years of investment experience under his belt with a big portfolio. And it’s diverse, you know, he’s got some class A’s stuff, he’s got some class B and some class C. And his tolerance is willing to accept those more attention sucking tenants, you know, that just need more attention, because there are people that aren’t upwardly mobile usually. And it’s just a different type of manager.
Yeah. And I think that initially, these properties will outperform some of the nicer areas because they are higher cash flow. But I don’t know, I would be curious what the, you know, five year picture looks like generally
Jason Hartman 9:54
speaking, and you’re right, because generally speaking, and I mean, at least Historically, and we don’t know if this will hold that way. But historically, the nicer properties tend to have better appreciation. There was an old rule I remember many years ago, listening to one of the many real estate gurus I followed for many, many years in my in my 20s. Okay. And one of them said, if you’re in a neighborhood, and you’re driving around looking at properties, and you see someone jogging, get out, you don’t want to invest there. Because that in other words, his point was, it was a yuppie type neighborhood. And by the way, I’m hope everybody knows when I say yuppie, that means young urban professional, right? That’s an acronym from from like the 80s. And so, you know, he would say don’t invest there because he liked that C class stuff. Fernando liked it. My mom used to like it. I think. Now she isn’t in favor of it because she just doesn’t want to deal with the government. It depends, right?
Yeah, I mean, I think at some point, you want to have a good healthy mix. Have a to see properties. So I think the key is to be a seasoned investor before you, you know, like you said, have experience before you go into, you know, a C type, property or properties. And I would definitely encourage you to go visit the market.
Jason Hartman 11:20
So what Sarah saying, I think is very good advice. There are three basic types of properties that we talked about a, b, and c. And the A properties right now Now, of course, this is subject to change because everything’s dynamic and fluid. But right now, if we’re taking a snapshot in time in the markets that we recommend, Sarah, would you kind of agree that we could define some of this by price range, and I’m gonna throw out some numbers. Let’s see if you agree with them. You know, we don’t rehearse anything or talk about anything much in advance. So it’s all it’s all raw, and here it is. Okay. I’m going to say that in a property in the markets That we recommend is anywhere from 120,000 to $170,000 for a single family detached home, would you agree with that?
It depends on the market, I don’t think you can compare all of our markets to each other like, like text that would be a good like a Texas property. Indianapolis maybe but like, in Memphis, for example, we saw a lot of Memphis properties, right? So they’ll define sometimes a $90,000 property, you know, which is significantly less as a property. And then, you know, some people will distinguish, distinguish in a property versus in a area, you know, so, keep in mind, it’s a matter of opinion.
Jason Hartman 12:44
It is it is and it’s, it’s going to change. You know, if you’re listening to this episode, two years from now, which I know people love to do, they go back and listen to the old episodes. And of course, we do flashback Fridays to at least currently. So I’m just trying to give a little Some sort of idea as to what that means and in different providers to find them differently to. And it depends where it varies, but right, if so you say,
well, let’s separate it, let’s separate it by the linear markets and the hybrid market. So the linear markets, I think the price point could be like 90 to 120 130,000 would be your area.
Jason Hartman 13:24
Let me explain that first. Okay. So three types of markets, linear, cyclical, and hybrid. We don’t recommend cyclical markets. So we’re not even going to talk about that. We do have mostly linear markets, the markets that just chug along and appreciate slowly. And then we have some hybrid markets who have a little bit on the edge, they get more toward the cyclical, but not much. They still make sense from a numbers perspective and you can still get decent cash flow. So okay, Sarah, that’s a good way to look at it. So the let’s What are right now? Yeah, in your eyes, the strict linear markets they would be what Memphis, Jackson,
Memphis, Birmingham, Indianapolis.
Those are the top markets that I would say are linear and
Jason Hartman 14:11
hybrid markets that we have right now. And we’re not really doing much business in these markets because they don’t really work that great. Okay, but at times we kind of move in and out of them. But I’d say a hybrid would be Austin, Texas, Denver, Colorado, Phoenix, Arizona. Atlanta, is becoming a bit of a hybrid market because it’s so yummy. Atlanta has appreciated 10% in the past year,
and maybe even Dallas.
Jason Hartman 14:38
Yeah, that was becoming a bit of a hybrid too. You know, now you don’t think Houston is moved there at all or has any hybrid ish nature to it. Do you? Remember you’re listening to flashback Friday? Our new episodes are published every Monday and Wednesday,
a little bit. You know, we talked about that market this weekend.
There’s definitely a buzz about Houston so you know and I know we talked about the oil prices but I talked to a lot of people that still think Houston is hot so it’s
Jason Hartman 15:11
it is hot in the summer and it’s humid too.
Well, I mean, it seems to have appreciated quite a bit over the last year which is good for our clients that bought there a year ago right you know,
Jason Hartman 15:21
I’ve been very happy with my Houston properties for over many many years now. And so, you know, Houston I did kind of issue a yellow light warning when oil prices were really really crashing. They seem to they seem to have you know, found a maybe a floor will remain to be seen. So this is not a matter of you can say this is when you’re that’s hybrid always for sure. Okay, it’s a 50 Shades of Grey issue. Okay. Boy, see that just saying that on my show is going to increase my shows transcripts SEO value 50 shades of Gray. Okay. Yeah, see there? There were key. That’s folks, that’s known as keyword stuffing. Okay. And then if I say other keywords like Harvard University, and Enron and you know, then I put a stock symbol next to it. That’s all the search engines will love us. Right? Okay. So linear hybrid. Okay. So linear, I would say other linear markets. Let’s talk about more of those. St. Louis, Kansas City. What else?
I think we said, we set them all.
Jason Hartman 16:30
We said all the ones that were recommending at the moment, okay,
I’m sure there’s some others Columbus would be in good. Good. So anyway, that’s the
Jason Hartman 16:39
idea. And what Sarah is saying, and I think this is excellent advice that you’re giving the listeners is that get your first experiences in a and b property types. And then once you’re comfortable as an investor, so if you’re new, we want you to start with a and b and once you’re comfortable and you’ve got, you’ve built up some mental muscle, okay, in this whole investing game, then dip into more of the C type properties because the C’s can be great, but you know, they are a different bit of a different animal. Okay, so
And keep in mind once you have a big portfolio of properties, your portfolio, you know will cover your vacancies and your maintenance items and you don’t feel it as much, you know, when you when you’re just getting started and maybe you have, you know, five properties, you’re still kind of building the momentum and so, those vacancies and maintenance items that come up hurt a little bit more and again, it goes back to the psychology of investing. So
Jason Hartman 17:44
so if you have a portfolio and you have 10 properties, and two are vacant, or two are now remember there’s a difference between economic vacancy and physical vacancy say two are economically vacant, which means the tenant is in them, but They’re not paying, okay? So you only have a 20% vacancy loss in that situation. Whereas if you only have two properties, and one is vacant, you have a 50% vacancy, and you feel a lot more. And you know, we’ve had lots of clients on the show over the years. In fact, we’ve got some great client interviews coming up, who have been on the show recently, and I love it when they share their real world experiences, you know, we call it the good and the bad and the ugly, okay, the good, the bad and the ugly. You know, one of your clients, Sarah, who’s been on the show a few times. And that’s Bob from Colorado, by the way, hey, Bob. You said, you’ve purchased nine properties from us so far, and eight have been great. And one is a problem child. Well, you know, if you had nine kids would probably be about the same.
You know, and Bob, he’s like the perfect example of somebody who has the right mindset for investing and he does well with some of them. You know, C area properties. And I forget exactly what he said to me. But, you know, he was kind of telling me about that one bad property. And he said, Well, geez, I learned a lot.
Jason Hartman 19:12
So that’s the thing in life you Do you at least if you learn something from it, you’ll be in good shape. But the idea is to learn on our experience, not your own whenever possible. You know, because we sort of aggregate all these client experiences, the good, the bad, and the ugly, and we share them with you on the show. Okay, and I think all our listeners know, we’re just super transparent about that. The ones we don’t always share are the ones that were the clients really shot themselves in the shoe.
You’re never gonna let me live that one down.
Jason Hartman 19:43
I’m not because you’re so funny. You know, you have a few of those. Well, you had a couple of others too, but very, very good. Good stuff. Okay. So anyway, there we have summed up Jackson, Mississippi, I think for our listeners for the moment. So if you’re interested, Jason Hartman You can compare and a BNC properties. And eventually when we come out with our new software, we’re going to actually be grading the properties right on the software. So, you know, but you know, I think most of our investors if they’ve been listening for a little while they can identify an A, B or C property. But actually, we didn’t finish that price criteria thing. So I want to try and take a stab at it. So hybrid markets 120 to 170 is probably likely, though not always, to be an a property. Okay. And now there’s some overlap. And I’m going to say 80,000 to 130,000. You notice there’s overlap, right? That’s intentional. 80 to 130,000 is probably going to be a B type property. And then 40,000 Yes, we do occasionally have these $40,000 properties, although we don’t recommend them too much. Those are more for more experienced investors usually, so I’m going to say 40,000 to 90,000. Could be a C type property. But I don’t know, Sara, maybe you’ll disagree with me. I mean, I, you know, we’ve seen people get a properties for 75 80,000 sometimes do, right?
Yeah, sure. And 2010
Jason Hartman 21:19
Oh, well, well, oh, yeah, I’m gonna be sorry. Did I say hey, I think yeah,
I think you’ve got it narrowed down pretty well.
Jason Hartman 21:26
Okay, good. So I just wanted to give that kind of guideline and then you can tell by looking at them and all kinds of other counseling that we can help give you. But hey, let’s talk about rents for a moment. Okay. I’m looking at an article in new wire. This is really, it’s amazing how this happens. You know, what, what goes on in the housing market, is you always have prices take the lead when it comes to increases and rents follow prices and they follow them rather slowly. So the title of this article is rents increasing more quickly than home values in many markets. Well, duh, I could have told you that. Okay, that’s pretty much always the way it happens. And even when home values level off or are declining slightly, you’ll still see rents increasing, because those are the lagging indicator, they always lag the prices. And here’s one of the core differences between commercial property and I’ve owned several commercial properties, apartment complexes, and residential properties meaning under four units, four units and under, okay, when you get over when you get over four units of five plus that’s considered commercial property, and other types of commercial property like retail centers, office, buildings, industrial buildings, that type of stuff. The core difference and one of the reasons I really like housing better residential property better is because it’s illogical. It doesn’t follow The income. So if you’re going to sell your apartment complex, Now granted, this, of course changes, but generally speaking, the price or the value of that apartment complex will be determined by the income it produces. In a residential property, you listeners as investors, you determine the value of the property based on the income it produces. But remember, you’re a tiny percentage of the market, the rest of the world out there, even people who consider themselves investors, but they’re really speculating. And they’re they’re just gambling idiots. Okay, gambling fools. Most of them. They don’t consider income to be a big part of the deal. And if you want to know more about this, you can watch the HGTV show called income property. I mean, I don’t know Sarah, I don’t know why they call it income property. It doesn’t produce enough income. I would call that alligator property. That’s property that loses you money.
Jason. I think You and your mom need your own reality TV show you like
Jason Hartman 24:03
hanging out with my mom didn’t hear that she’s pretty. She’s pretty funny. It’s
just fun. She’s a lot of fun. Just so the listeners know, we had a three hour drive from Memphis to Jackson. Mom was driving
Jason Hartman 24:16
and she was letting me DJ part of the way so I got to control the music a little bit. Not always.
Yeah, she gave Jason a hard time about his music selection.
Jason Hartman 24:25
We put on YouTube now who listening does not like you too, right? I mean, that song one by you too. That’s got to be one of the best songs ever. It’s like Stairway to Heaven. It’s great. Okay, it’s a phenomenal song sorry listeners if you don’t like it, but you’re crazy You’re like my mom. Okay, cuz that’s an awesome song. Check it out go to your computer your device and type in one no any by YouTube. It’s awesome song. Anyway, I put that on in my mom is Oh no, that his voice sounds too ugly. Mom that’s Bano. He’s big time and she goes, I know who he is. He’s always talking about all these causes and political things. That’s how she knows who he is. Okay. But yeah, I got to control it a little bit, but not all the way but she’s funny. She’s, she’s very opinionated, isn’t she? She
is. apple doesn’t fall far from the tree.
Jason Hartman 25:20
Okay, I guess you’re right about that. Okay, back to rent increases. I’m gonna just cut that one off. So, it says residential rents in the United States are continuing to rise up 3.7% year on year to 1300 and $62 a month. Okay. So that’s, they don’t say if that’s a median or average, okay, but and keeping pace with housing price growth of 3.9% over the same period. So of course, these are nationwide stats, and they’re almost meaningless a little bit because all real estate is local, of course, but anyway, it is what it is. Here’s what I will want you to notice though, listeners, that 1362 as the average or median? I’m not sure, because the article doesn’t say, interestingly, that most of our rents fall slightly below that. And one of the things is Sarah and I were talking about A, B and C class properties a few minutes ago. One of the things that I want you to consider as an investor and one of the things that we generally do, sometimes we kind of break these general rules, okay, but it’s a general rule is that when we are in an area, we want to be investing in properties that are slightly below the area’s median price. And we want our rents that we’re charging our tenants to be slightly below the median rent in that area. Okay, because that always, I think, and this is just an opinion, it’s not exactly data driven, but it’s just kind of from so many years experience doing this. It always gives you the opportunity to catch a bargain hunter on the way up or down in the socio economic ladder. Or it gives you a chance to have your price of your property and your rent on your property pulled up a little bit, just by generally what they’re comparing you to around around in that market. Okay, Sarah, is that a fair statement?
Yeah, that’s a fair statement. And the other thing we were discussing was, you know, rent increases per the type of property. So, you know, in a property might have a higher percentage of rent increase annually than your see property
Jason Hartman 27:41
that is true, and see the key there. And the same goes for appreciation. By the way, generally, these are all general things we’re talking about nothing’s nothing’s set in stone, but generally speaking, what you’re going to see on those a properties is that you have more popular control for value increases, and more potential for rent increases. Because the people that are living in those properties are purchasing those properties from you, they’re living in there as a renter, or purchasing them from you when you sell them in the future, hopefully 27.5 years down the road, because that’s how long I generally want you to keep your properties. You know, they’re more upwardly mobile, so their incomes, they will find a way to increase their incomes and be able to pay you more. Okay, and so and so that’s why I mean, I always say try and target but it depends on the market, try and target a 4% annual rent increase. So that just means if you’re charging $1,000 a month now, hopefully in a year, you can get $1,040. Now, what is going to make that possible or impossible here are some of the factors and again, every property is individual. So this is not a conclusive concept. But what is going to make that possible or impossible is what are the interest rates at the time that you try to get the rent increase if rates are very low. And at the same time, if financing is plentiful and easy to get, it’s going to be very hard, if not impossible for you to get a good rent increase. You may have to even when the market was really, really hot in 2004, and things were going crazy, and we were obviously in a bubble time. And I predicted the end of the crazy expansive market in late 2005. And I was right about that. I predicted that just completely accurate. And it’s, you know, I was saying that in all kinds of seminars, I had vociferous arguments with Orange County, California realtors, and, you know, they’d say I was crazy prices are gonna go up 25% next year, I said, No, they’re not. We’re we’re at the end. This is about it. Everybody’s tapped out. But what What’s going to depend is you know whether that renter has another option. And remember, if rates are low, that renter can go and buy. And that means prices are probably going up. And if they’re paying attention to the housing market, they’re feeling a sense of loss, a sense of scarcity. They’re feeling like, you know, they’re having conversations like, Hey, honey, if we don’t buy a house, we might be left out. And so they’re likely to be hunting for a house. This is the upwardly mobile tenant, but the section eight tenant who’s living off the government, okay. They don’t usually, you know, they’re not they’re not delaying gratification. They’re not pushing themselves as hard. They’re not exerting themselves as much usually. Okay, this is a general statement, of course. So, them saving money for a downpayment, even if the downpayment is only $3,000. That’s a big deal for them to do that. And so it just depends if Interest rates are very high, and the option to buy something isn’t possible, then the likelihood is you’ll be able to get higher rent increases, but the value of your property won’t usually in that type of market be appreciating. In fact, it might be softening and depreciating, but your cash flow will be increasing. So, this is the kind of that three dimensions of real estate concept. Sarah, what do you add to that?
Um, no, I I agree. I mean, I don’t have a lot to add to that just based on my own experience, I, I agree that nicer properties tend to yield a little higher rent increase. And you know, my B properties, you know, they’ve been kind of slow and, but steady.
Jason Hartman 31:49
And I have yet to venture into the C class, which is why I have my opinion on you know, the Jackson C class properties. Now. I want the listeners to know something now. Is that when you see an article or you hear stories about rents increasing in a place like Los Angeles, for example. Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday. And maybe you hear me talk about this article and you hear me say, quoting the article that rents are up 3.7% year on year, and in this article, prices are up 3.99%. Now remember, this includes entire nation. Okay. Here’s one that’s interesting. In this article, it says of the 17 metro areas where rents are growing more quickly than home values. The biggest differences are San Francisco with rents up 14.8% year on year and home values up 9.6%. So that’s San Francisco. Okay, well check this out. Well, Kansas City rents are up at Point 6% and the price is up 4%. One more in Pittsburgh. Okay, I used to live in Pittsburgh as a little kid. rents are up 6.3%. And prices are up 4.3% respectively. So what does that tell you? It tells you that in high priced markets like San Francisco, I use the example of La before I just glanced down the article and decided to read that little clip from it. You know, those rents are so out of sync with values that it’s absurd. I had one of our people on the show that does some video production and podcast editing for us. His name is Patrick and he was on an episode. Maybe you do three months ago. If you want to find that episode. Just go to Jason Hartman, calm and type Patrick in the search bar and you’ll find him. He lives in San Francisco. And he lives right in a prime area in a rent controlled house. That he pays I think 20 $300 a month for And it’s worth about $1.5 million. And his wife is a trademark attorney or an intellectual property attorney, I should say, you know, he’s a great guy. And they’re basically trapped. But oddly, they’re not trapped in a bad deal. They’re trapped in a great deal. I mean, when you can rent a $1.5 million house for 20 $300 a month, you know, he says that they think about moving and they kind of want to move, but their deal is so good that they’re
crap. How did they get that deal?
Jason Hartman 34:35
I want that they got it in 1997.
And, and so their landlord just hasn’t raised the rent. They can’t it’s rent control.
Jason Hartman 34:41
Law. Yeah. So it’s the Socialist Republic of San Francisco, just like the Socialist Republic of Santa Monica. down south, okay. And these these, these rent control, it always leads to shortages and disaster and, you know, it’s every socialist country. communist program never admit they never work. I mean, history is replete with examples of this, of course, right? So they’re trapped. But if their rents went up by 20%, next year, they would still be getting a phenomenal deal. You see what I mean? That’s what I want the listeners to understand. These are why these stats are so misleading. It’s because the rent to value ratios and high priced markets, whether they be Miami, LA, San Francisco, San Diego, New York, Boston, you know, whatever, just any market that’s high priced around the world. Those rents are so far behind prices, they’re lagging so much that it wouldn’t matter. If they had a huge rent increase. It’s still a terrible deal for an investor. Because if you buy a new property today in San Francisco, and then you turn it into a rental, you you could pay $1.5 million for that property and because That renter hasn’t been in there for years and hasn’t been benefiting from these very limited rent increases, that the rent control laws require, you know, you could maybe rent your place for 5000 a month or maybe even 6000 a month. But that deal still stinks. Because, you know, for $6,000 a month, I mean, that should be a $600,000 value property, not a $1.5 million property with that 1% rent to value ratio target. So that’s what’s so misleading. And I’ll just remember Sarah, that years ago, like 2004, there was a Los Angeles Times article, and it just shows you how stupid the media is and how they mislead people. It talked about the 10 best and the 10 worst rental markets in the country. And it said, if you’re a landlord and investing in Oklahoma City, you really out of luck, because the average rent there is only $763. You know, that’s not exact, but that’s about what it said, okay? And if you’re a landlord in Los Angeles, you’re doing great because the average rent is like 1600. dollars, but they failed to even consider the price of the property in Oklahoma City versus the price of property in Los Angeles. Actually, it’s the reverse was completely true. That article was absolutely 180 degrees wrong. But most people read that and they think, Oh, I better invest in Los Angeles then.
Yet, it seems so obvious,
Jason Hartman 37:38
is obvious. But, you know, you gotta be listening to the creating wealth show and listening to my podcast. to really know you know, we try to get you know, this is not exactly sophisticated stuff we’re talking about, but compared to most of the world and even investors with a lot of money, don’t let it fool you that people with a lot of money are sophisticated. Sometimes they are Most of the time, maybe they are but not always, you know, they, sometimes a lot of money makes you kind of careless and not pay attention to things. So, I guess the point, the take home point is, with everything we’ve talked about today, Sarah, is that everything is an individual case. Right? It’s all every property is individual. every investor is individual, every tenant is individual. And you really got to think through the numbers. And think through what type of investor you are, what type of psychology you have, and all of that
think but more importantly, act.
Jason Hartman 38:38
Actually, that’s the best advice you’ve heard all day, folks, because thinking will not make you any money. Only taking action will make you money. So, so be sure to get your investment portfolio going. And if you’ve got it going, make sure that you are always always always expanding it. There’s an old saying for investors and you No, of course not all states have escrow. But in California and other states you use escrows when you buy a house, and one of the sayings is always be in escrow. In other words, always be buying something, you know. So if your escrow lasts about, you know, 45 or 60 days, you know that means you’re buying six properties a year, always be in escrow always be acquiring something that has made people incredibly incredibly wealthy over over the course of history got to acquire assets, you got to control assets,
and I just have to say, No, we’ve gotten a little long here and you know,
Jason Hartman 39:37
So much for 20 minutes, right?
You guys have got to come to Jason’s creating wealth seminar. I mean, you know, I, I go and I sit in the back of the room, you know, every year, twice a year you’ve
Jason Hartman 39:53
been but you’ve been to like 100 and some of them probably by now.
This is my you know, this month is my eight year And property anniversary. So
Jason Hartman 40:01
you’ve been with me eight years and we’ve put up with each other that long, huh?
We have we may actually like each other now.
Jason Hartman 40:07
You know, I do like you.
Oh, how sweet. Hey, we did ride in a car for three hours together. Not many people can do that.
Jason Hartman 40:17
We did. We gave Fernando and my mom in the front seats. And we were in the back just hanging out. DJing from there
yep. karaoke, more like karaoke, right?
Jason Hartman 40:25
karaoke? Yes. Yes. Bye bye Miss American Pie. drove my Chevy to the levee. We did sing that one. Remember?
I yes, I do remember that. So you know, but back to the, you know, seminar, you have to stay plugged into these events. There’s nothing like going to one of Jason’s live events, sitting in a room full of people that are like minded. I mean, I get pumped up every time I just network with our own clients and you know, our new providers and it’s it’s just really an incredible experience. So you know, I was sitting down Back there this time thinking man, there were a couple of people that really wanted to come and couldn’t work out their schedules. And I was really feeling bad that they didn’t make it because it was just, you know, very inspiring.
Jason Hartman 41:10
You know, Sarah, there. I want to comment on one other thing that you told me a couple of weeks ago, every once in a while, we get someone who starts listening to the podcast. And they’re skeptical. The sounds like it’s some big show when everything is contrived, right? And you know, I understand, listen, there’s a lot of shysters out there. There’s a lot of scam artists out there. But we’re real people. We’re a real company. We’ve been around for a very long time. You know, if you’re skeptical, here’s the best thing you can do. Come and meet not us. Meet our clients because they’re in the room. You’re gonna meet people who are real people that you can talk to without us there. You can go have coffee with him. You can go have lunch or dinner with him, you know without us and you can hear their real experiences. Our client who have been investing with us for years, still come to our events, they repeatedly come over and over again. And I always feel like I’m getting up there and just totally repeating myself and thinking they must be bored. And maybe they are a little bit, but they still come and one of the big parts of our events as the networking with other investors, of course, you’ll get to meet us to an our team, but but I think it’s really more important, you’re going to get to meet our clients. And you know, maybe, I don’t know, help me with this ones here, but maybe 30 or 40% of the room is a client. In other words, they purchase one property at least, and then some and then you know, 60 70% there, they haven’t purchased anything from us yet. would they? Well, that’d be about right. That’s my guesstimate.
Yeah, that’s a fair statement. I mean, you know, some people are coming back for me it was some people by and they’ve never met us in person and then you know, you’re goes by And they’re ready for more deals. And so they’re coming out to to our properties, but they’re getting the education too. And so, yeah, and then some of the clients that come out have been to several events. So it’s the thing about the seminar is that there’s a lot of new content, even though it’s the same philosophy and you know, the same overall message, everything changes every year things change, you know, and having the lenders come up and talk about these changes. And, you know, it just, it’s endless. Yeah,
Jason Hartman 43:33
I, you know, there’s one more thing I want to say before we let everybody go today, you know, we’re always going longer than we think we’re going to go. But when you start investing, and when you start talking to people about investing and when you even talk with the providers, we refer you to, okay, whether it be our local market specialists who provide properties in areas, whether it be our lenders are legal advisors, and we’ve got a whole team so you know, our slogan is The complete solution for real estate investors, we can refer you to pretty much everybody you need to make this happen for you. But the thing I do want to say is be careful who you listen to, don’t just go off far afield. We are the objective ones who provides referrals to all these different services. Just don’t don’t make a mistake by just listening to some, you know, half baked advice. One of the worst areas of half baked advice that I see, by the way, are real estate investors who, you know, we talk about the 10 commandments, you know, you might follow that, but it’s when you go and you buy a one off property or a one off deal. One of the huge resources that we offer is that we have such a big volume of customers and a big volume of business is that we have leverage over these service providers. I see people that go and you know, in one of the forum groups I’m in, you know, people were talking about, oh, you know, some guy’s got three properties that he’s going to liquidate in McAllen, Texas. And someone tagged me like I should look at this. No way. I don’t care. We don’t do one off deals. We do deals based on relationships, where, where our providers have a big stake in in our referrals continuing, and our clients being happy with the results. So I’m telling you, if there’s one thing to avoid, it’s the one off deal syndrome, because you’re just never going to get great treatment in a one off deal. All right, everybody. This was just kind of an open raw conversation today. So
I hope you don’t have an interview after
Jason Hartman 45:53
No, no interviews. This isn’t this is the show today. But listen, go to Jason hartman.com. Check out the process. properties, check out the educational products, the blog articles. If you’re not a member yet, for a whopping hundred hundred and 20 bucks a year, by the way, we’ve been a lot of people have been becoming members lately. So that’s great. You can get on those monthly members only Jason Hartman University calls and those are those are really a great resource. Anyway, we just thank you so much for listening. Thank you to everybody who came out to our Memphis property tour. And it looks like our next property tour, although it’s not totally confirmed. We’ll be in Atlanta in probably late July. So, listen to more on that. We’ll do the creating wealth seminar and property tour at that event as well. So more to come on future shows and on the Jason hartman.com website in the events section. Thank you so much for listening. Happy investing to everyone. Thanks for joining me, Sarah. Thank you. What’s great about the shows you’ll find on Jason hartman.com is that if you want to learn how to finance your next big real estate Deal. There’s a show for that. If you want to learn more about food storage, and the best way to keep those onions from smelling up everything else, there’s a show for that. If you honestly want to know more about business ethics, here’s a show for that. And if you just want to get away from it all and need to know something about world travel, there’s even a show for that. Yep, there’s a show for just about anything only from Jason Hartman calm or type in Jason Hartman in the iTunes Store.
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Jason Hartman 48:09
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.