Jason Hartman hosts an investment counselor, Sara, and they discuss some current properties that are on the network’s website Jasonhartman.com. They discuss a few investor questions regarding appreciation and how to plan your loan limit and mortgage sequencing. In the interview section, Jason is joined by three guests to discuss each of their real estate journeys.
This is my very first Jason Hartman conference. I’ve been listening to his podcasts and I have been learning a lot there. But already in the past couple hours I’ve learned about what more to look for on pro formas. I’ve already learned quite a bit that I didn’t know I didn’t know. And I’m looking forward to learning so much more the rest of this conference so that I can make better investments. Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you find In Jason’s footsteps on the road to your financial independence day, you really can do it on Now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:14
Welcome to Episode 1392 1392. I’ve got our investment counselor, Sarah here with me, and she has some hot properties hot off the press. Sarah, how you doing? Hey, Jason, I’m good. How are you? Good to have you doing well, keeping busy as are you? I know you are busy, busy as a one armed paper hanger. As the saying goes. You know, that expression doesn’t even make any sense anymore because hardly anybody uses wallpaper, right? That’s referring to wallpaper, something that’s not so popular nowadays. But anyway, hey, these properties look pretty great. Wow. I’m looking at some of them and they are nice looking houses. Yeah, so I sent out this heart. Last night, in fact, I believe we have a contract request on one of them already. So just a combination of new construction and a few existing properties. You know, just to start off, we’ve got Birmingham and Huntsville is is our newest new construction market. And we just had a client go out and visit yesterday to meet with our local market specialists. That was Pat and his wife darcel. They were also on the Ocala tour, and went back and visited with our market specialist there as well. Yeah, we’ve got some great, great new construction properties. Let me let me add something to that really quick. I just want to say that to people, because we probably don’t mention it enough on the show here. If any of you would like private market tours of any of our markets, to go look at our inventory, any of our investment counselors would be happy to set up a meeting with our local market specialist. It’s so cheap to fly everywhere nowadays, you can just grab a flight or you know, maybe it’s within driving distance of where you Live. And you can go see any of our local market specialists, meet their team, meet their staff, visit their operation, look at their property inventory, get a tour of the area and of the market, and really learn a little bit more about the community. So we do that all the time. And then of course, we have group property tours as well. And we had one in Florida just a couple of months ago, as an adjunct to our profits and paradise conference. And a lot of people went to that. And then of course, we’ll have more property tours announced as time goes on. And then also at some of our events where we don’t have property tours. We invite our teams out our local market specialists, their property managers, and so forth, and you can meet them there. But of course, you can’t always see properties at those. And the vast majority of our clients don’t bother to go look at the properties which is, you know, fine, you can do it either way. Just make sure you have home inspections, make sure you do the good due diligence online. We teach you how to do but suffice it to say, Sarah or any of our other investment counselors can arrange individual meetings and property tours with our local market specialist. Go ahead, sir.
Yep, yeah, we’re glad to do that. So right now we have birmingham alabama for to 29 nine brand new construction. It’s a four bedroom, three bath built this year, brand new and estimated rent is 1795 a month. And if you’re getting my hot sheets or any of our investment counselors hot sheets, you’ll will send these out and you’ll get the the link to the Performa with the breakdown, you know the cash flow and and estimated cash, return
Jason Hartman 4:39
all the numbers, all the numbers and you can also get this on the property cast. So we have a podcast that instead of us talking, it sends you property performance, just whatever podcast platform you’re using, type in Jason Hartman property cast property and then ca st and you will Get these properties delivered right to your phone, your iPad, your computer, whatever you want, and they come right to your device with all the numbers. Sarah, let me just very quickly review a couple of numbers here. You said to 29 nine, this is almost 2100 square feet, it’s brand new construction, eat about $68,000 to buy it and that’s based on 25% down with closing costs, you’re out the door on a brand new property and this is a nice looking home for $110 per square foot. That’s pretty darn good in today’s market. Your projected cash flow is just under 30 $500 a year and your overall return on investment on brand new construction. With by the way this this appreciation rate is extremely conservative in here. I noticed that you’ve got a vacancy rate of 8%. The appreciation I’m sure is understated. The property management fee at 9% maintenance percentage at 3%. Brand new home you’re not gonna have any maintenance your first year for sure. Would that be extremely unlikely, and the overall return on investment projected at just around 20% on here, we got to adjust that appreciation rate. It’s understated.
That brings me to a common client question that we get right, especially now that you know, the economy is strong. And we’ve seen some appreciation in a lot of these markets. And you know, we should explain to the listeners that we usually use 6% appreciation across the board. And when we onboard this new LMS, this new construction provider, he was very uncomfortable for Birmingham putting in 6% he insisted that we lower it cut in half and
Jason Hartman 6:38
I love that that that is usually the opposite way. Usually they want to put in eight and 10% no vacancy, no maintenance costs, you know, they understand everything they understand the insurance, the taxes, and this is great. I like this local market specialist already.
And I went on to explain where that you know soon percent appreciation number comes from on our end that you know you you found a 30 years study and maybe you want to explain a little bit more about where you found that ready? Sure. For the listeners,
Jason Hartman 7:10
it is common thinking that on a nationwide basis properties appreciate cyclical linear and hybrid markets combined at about 6% annually. Some people say 6.7% I cite a the longest study I could find, which is from I think 1931 up until 1996. It’s a Wall Street Journal study showing a 11% depreciation that would be I would not be comfortable projecting anything like that, but I think 6% is a reasonable number. So that would probably bump this overall return on investment up into the 28% range. I’m guessing I don’t have the math in front of me. It looked like something there.
I just think it’s important for the investors to know you know, we don’t know what the appreciation is going to be. We put 6% across the board crystal
Jason Hartman 8:00
The idea is diversify get into some different markets you maybe you’re in some hybrid in some linear right and you know the appreciation is the icing on the cake.
Jason Hartman 8:11
Absolutely you know we we invest for yield for cash flow, not appreciation Anyway, let’s jump in the interest of time. Let’s jump to this pre construction Ocala property if we could, this one 179 nine, you need about 53,000 to buy it with closing costs and 25% down by the way, you could potentially put 20% down so there were being a little bit conservative to 1500 dollars a month projected rent in the cash flow projected at about 20 $800 a year to 36 per month, overall return on investment projected at 29% annually. there you’ve got nice conservative assumptions driving those numbers. Sarah, what else would you like people to know about this one?
Well, we do have a couple properties in the Ocala community for single family. What I want the investors to know if you scroll down, there’s one more pre construction in Jacksonville, Florida. It’s a quad and this is the quad we have right now. So if you’re looking to make a good use of your financing, you’re going to be getting four units under one conventional loan. Right, the beautiful thing.
Jason Hartman 9:21
And so what Sarah is alluding to there is that of course, many people know the Fannie Mae Freddie Mac loan limit is 10 financed properties per person. If you’re married, you could potentially get 20 it’s 10 each as long as the spouse can qualify, and here you’ve got a four Plex, so this is $114 per square foot for 89 940 $100 a month projected rent, and that leaves cash flow of almost $10,000 annually, almost $800 per month, and an overall return on investment projected at 31% annually. By the way, I didn’t mention it on the other performance. And you can see these yourself at Jason Hartman comm slash properties. But the debt coverage ratio, which is interesting ratio, we, you know, we don’t talk a ton about this one. But I think for the very conservative investors, and I’m, I’m pretty darn conservative probably could make more money if I take more risk. But hey, I’m getting a little older and I don’t want to have lose my money and have to earn it again, it’s a real hassle. So I’ve gotten much more conservative in my old age. But debt coverage ratio here is 1.42%. And, or I should say just 1.42 is really the way you express it not as a percentage. And what that means Sarah, is the likelihood of you ever getting into trouble with his property extremely low. Meaning if you had a debt coverage ratio, one you would be at par, meaning, if anything went wrong, it’s got to come out of your pocket to pay for it. But here you have a nice buffer of that point four to almost 50%. In other words, where your debt coverage ratio is well above your cost of owning and operating this property. So that’s a really good safeguard to keep in mind.
Yeah, and you know, one of one more common question I get, just taking it back to the Fannie Mae, Freddie Mac loans and loan sequencing, I often get questions about Should I buy an existing property that’s maybe a little bit cheaper in the hundred thousand range? Should I buy new construction, you know, closer to the 200,000 range, and we’re talking single family, and I was talking to a client yesterday, and I said, Well, because you have more capital to invest, I think you should use if you can get a property that’s already built brand new. You should use your first four loans for the more expensive properties. Your first for at 20% down. So you really want to take advantage and use that good 30 year fixed rate debt with, you know, historically low interest rates and use that for these more expensive new construction. And then you can add in some of the higher cash flow properties with the lower loan amounts on your 25% downloads.
Jason Hartman 12:18
Yeah, that is a very good strategy. And our investment counselors can help you with this whole discussion of what we call mortgage sequencing. So when you’re building a portfolio, you want to use the highest loan balance. You want to do those properties first. So you can do the lowest down payment on those maximum loan balances and get the most leverage. That’s a very good strategy. Let’s talk about and you can pick it let’s pick one of the resale properties, that remodeled properties. You know, those you definitely get more bang for your buck, if you will. Off the great new construction, but you know, certainly more bang for your buck on these. Do you want to pick one of those, Sarah?
Yeah, maybe the Little Rock duplex. Okay,
Jason Hartman 13:09
sounds good. There we go. Little Rock duplex 144,900. This is just under 2000 square feet, you’re at $73 per square foot. That is phenomenal. Now these, these are car ports, no garage, just carport. But a nice enough looking house. You know, not as nice as the others, but certainly nice enough and be projected rent 1250. That’s for both units. Oh,
yeah. So that’s 625 aside, and each side is two bedrooms, one and a half bath. And, you know, the LMS actually had a higher rent in here. The numbers looked much better when he sent them to me. And I just did a real quick search and to see what was for rent in the area and I just came in and lowered it a little bit.
Jason Hartman 13:58
So this has remodeled, and I really can’t imagine you’re not going to get more than 625 per unit for two bedroom, one and a half bath. You got, you know, almost 1000 square feet per unit there. I mean, that’s only think about it. This projected rent folks is only 63 cents per square foot. Now, I go and look at institutional apartments in virtually every city I visit because I always want to see what the institutional landlords are doing. And, you know, in most markets, they’re well above $1 50 a square foot. They always push the rents a lot better than we do as single family. homeowners are investors. The institutional landlords really do a good job of just pushing those rents. They raise them regularly. They do a good job of that and they also do a good job of nickel and dining their tenants with pet rent, extra fees, a lot of them charge common area fees. Just Like a just like a homeowner’s association, but it’s a rental. It’s an apartment and you pay part of the electric bill at the pool and to light the whole facility. Tracy what they’re able to get away with?
Yeah, absolutely. Well, you know, you can get nickel and dimed as a landlord or you can get nickel and dime as a tenant. I mean
Jason Hartman 15:23
it’s, it’s better
on about the the property management nickel and diamond, but
Jason Hartman 15:28
no question about that. But it’s better to be on the right side of that equation one possible.
Jason Hartman 15:35
Okay, so what else do you want to say about this one?
Well, I don’t know if you mentioned it’s all brick 144, nine 2000, almost 2000 square feet. Again, it’s a duplex so you can get two units under one loan. And this particular seller will pay the first two months of your mortgage payment if the property is not yet least, you close on today, and you don’t have a tenant, you know right away. They’re going to cover your mortgage payment, not the rent payment, but the more payments, which it’s better than nothing, right? I’d rather than just pay the rent but
Jason Hartman 16:04
Right, right, because the rent is higher than the mortgage is what you’re saying. Right? Yeah. By, by $224 a month. So there you go. Overall return on investment on this one projected at 30% annually. Debt coverage ratio just to compare to the other is 1.4. Not 1.42. Very good, Sarah, thanks for sharing these anything else you want to mention before we wrap it up?
Just reach out to us with any questions. We’re happy to help answer questions about any of the markets set up any property tours for you. And hopefully we’ll see you at the next event. Whenever that may be Jason.
Jason Hartman 16:40
We will be announcing it soon be patient people. Rome wasn’t built in a day.
Looking forward to it
Jason Hartman 16:49
good stuff. And if you’d like again, a private property tour with any of your local market specialist, just reach out any of our investment counselors can arrange that for you, Sarah, thanks. Thank you very much for joining us. Hey, thanks for having me. I hope you enjoyed that. And this will be a little segue to a fireside chat. Yes, the cliched fireside chat, and it is from one of our recent live events. So I think you’ll enjoy this and there’s a little bit of giggling and laughter and silliness. But to hate we’re very serious about real estate investing here. Anyway, enjoy this clip. All right. So let’s get a few people up on stage and have a fireside chat. How about let’s see, what if we get we got four chairs. 1234. Let’s go with Doug. Over there. Give Doug a big hand. Let’s go with Evan. We need Evan up here with Doug Gavin and give him a big hand. Oh, have a seat. Have a seat. Pick yourself. Whichever one you want, and then I know she doesn’t want it. But let’s go with Sarah. Yeah, give her a big hand. So let’s have a little fireside chat here. We haven’t introduced herself. We’ve heard you on the podcast, Mike. Yes.
Jason Hartman 18:19
I’m a rabbi. So maybe the I don’t know if the other rabbis have attended this conference. I’m just so honored to be here. I’m how many rabbis do we have in the room? What’s the rabbi barrier to entry?
It’s a lot. It’s a we have to be Jewish. So that’s one thing.
Then it’s five years. So it’s a five year school program, first year in Jerusalem and then four years here in in the US, so have to go to Jerusalem as well for the movement that I’m in you have to spend the first year on Jerusalem just to learn Hebrew and to sort of soak up the culture. Cool. Yeah. So I’m in Chicago. You’re an investor.
Yes. Yes. I’m work with Which I’m very grateful for is your investment counselor. Yes,
Jason Hartman 19:02
I wanted him up. Yeah, I own properties in Memphis Little Rock and, and one of the new constructions in St. Augustine. Fantastic. Now you didn’t close on your new construction yet closing still in construction February or March. And so the other rentals are long term buy and hold rentals. That’s a short term rental, right? Yes. Yes. Okay. Yes. How much was it? For 69? furnished? Yeah. So the short term rentals are definitely in a different price category than the long term rentals is most of you know. Yeah. and pass the mic to that.
Thank you, Jason. Oh, is it an intro time now?
Jason Hartman 19:38
This is your 32nd in Okay.
Yes. My name is Doug. I’m an Aries. I like long walks on the beach. Different kind of intro. Sorry. I’ve been married for a really long time. So I don’t do that anymore. So yeah, the minute you stop
Jason Hartman 19:51
dating when you got married, actually, so
I got married when I was pretty young. So online dating. It was really really primitive. When I was single, I was still athletic enough to where I could go to the bar and meet people. And I didn’t have to like have the internet as an intermediary. So Jason would always ask me, hey, down here heard about my Jason, if it’s an online dating app, I don’t know about it. I have absolutely no reason to get smart on Tinder, or whatever the hell people are doing now. But anyway, my story is that I’m an investment counselor, as Evan was just saying, and I have background in technology and finance. You know, as far as properties I own I own properties in Indianapolis and St. Robert, Missouri, which is outside of Fort Leonard Wood. And then in my hometown, which is around Portland, Oregon, actually my old primary residence, I’m now renting out actually on a lease option with the seller finance deal to basically extract equity. I also have a short term rental in Central Oregon in the Redmond area that we are self managing within our family. So we went in my family within myself and my wife and then her brother and his wife and then her folks all went in on a short term rental, it’s actually performing quite well
Jason Hartman 20:57
and I could not do
Well, we’ve been pretty well, we’ve had it deployed for about a year. And we were able to get the occupancy up and get the pricing up quite a bit faster than I had expected as I figured we’d be eating losses for about a year or two and we were profitable within about four months. So that that actually ended up pretty good. Cool. And I’m also a closet econ dork or not so much the closet if you’ve heard Jason, you’re out of the closet on that.
Jason Hartman 21:24
So you’ve heard all these people on the podcast, of course, Tara.
Yeah. I’m Sarah litski. And I’ve been with Jason since 2007. Married with two kids. I brought my son Jordan to the conference. Everyone say hi to Jordan Jordan. embarrass me. teenager. So know
Jason Hartman 21:39
how many Jordan now 13. Jordan, you’re 13 you’re a teenager. You got to start acting really badly now. Yeah, you know, talk back to your mom, for sure. You don’t seem like to do that enough. No. He knows that. My mom is here. And she’s thinking Yeah, I know.
Yeah, so I’ve been with Jay Since since 2007, so about 12 years old. Yeah, I’ve helped lots of investors all over the country. We have our own portfolio of properties in Houston, Atlanta, Memphis, Little Rock, Southern California, I only self managed one. You know what it was so eye opening to start managing my own property. And in between there I became a renter. So I got the renters perspective for about five years. So doing a lot of great things here with Jason helping a lot of investors. And I will say one thing, some of our most successful clients come to these conferences. I think it’s a huge game changer. I was talking to one of our clients, Laura at the start here, and one of the things she said was, every time I come to a conference, I take away something new that just changes the game. So congratulations for being here. And I hope you enjoy the weekend.
Jason Hartman 22:49
Yeah, those are bits and bytes. They take away
bits and bytes. Yeah, can I actually just riff off of what Sarah was saying a little bit. So I had a wonderful conversation, the property tour yesterday, a couple of us were talking about just all the new Nonsense that’s going on in the tech world, and how everybody that has a tech startup somehow thinks that they’re changing the world. And it’s like okay, it’s nice to be around people who are reasonable and real and you know, don’t think that just putting a TV screen on an exercise bike is changing the world. The TV screen on an exercise bike mom people know peloton, peloton which has like a $7 billion valuation, which is nonsense. It should have a $7 valuation.
Jason Hartman 23:27
How many people have a peloton? You love it? Yeah, now what’s so great about it? The convenience just get up in the morning. We’re not going to gym. By the social aspect your activity. Following it’s like its own kind of social thing that makes fat incredible idea. Oh, hey. The thing that makes that such an incredible idea is the way they basically like people to Virtual classes, you know, yeah. And see that doesn’t have a barrier to entry. It’s a brilliant idea that someone should have thought about a long time ago, right? But people can’t live in a virtual house very well. They need a real house made of atoms. Again, high barrier to entry. Now a lot of people are starting to copy peloton, and there’s no barrier to entry for that, right? And of course, they’ve got their own issues with litigation and copyright issues and stuff because what’s interesting about that, is that when you watch the class of people doing a spin class, okay, you hear the music of that quote, I’ve never used a peloton, so forgive me, but you hear the music of that class come through there, right? So peloton got sued for copyright violation because they say, Oh, no, you can’t broadcast that music. And that’s what they’re doing. Right. So that’s a it’s going to be interesting to see how that one goes. But again, there’s no copy that information that song is the same to you as it is to the people in that swaging Studio. New York right? But he likes his peloton. I agree it’s overvalued, totally.
And you know, there’s nothing wrong if you like the peloton, but it’s there’s just these ridiculous valuations going on for technology. And there’s, you know, you’re talking paybacks of 10 years, 20 years, 50 years, or maybe never, maybe never. Yeah, I think, yeah, Uber is never going to pay back, Tesla’s never going to pay back Tesla’s prices going to zero there is literally no way Tesla can ever possibly turn a profit. You do know that they just had a really good quarter, right? Okay. Yeah, that’s accounting. As far as cash generation. They’re permanently upside down. Again, this is just me, don’t short Tesla on what I’m thinking. I’m not shorting Tesla, just because that’s not the game I play but their business models completely upside down. But Elon Musk is really good at raising capital. And so they can just keep getting suckers to invest. test was the most overrated company in the universe.
just my opinion, isn’t these over ratings and overvaluation. It’s good for the consumer, right? Because we can get Uber because they’re taking a loss, but we can get it for peloton may be taking a lot
Jason Hartman 26:01
It is initially until they either raise their prices once they own the market or they go out of business and everybody’s left.
In fact, I really
Jason Hartman 26:08
do have to talk about real estate. Okay.
Jason, are you telling us not to go on a tangent?
Talk about pot cafe block, kettle, your black.
Jason Hartman 26:21
Go ahead, buddy.
Okay, yeah, the 32nd tangent, then we’ll get back to whatever the topic is supposed to be. Actually, we’re really interesting article about how with companies like Uber where they’re going to have their cost structure going up, because they have to basically bring on their drivers as employees as opposed to contractors that that’s actually going to be hitting millennials because a lot of millennials have become dependent, right? Like, you know, Uber deal.
Jason Hartman 26:45
They don’t even borrowed ash.
Yeah, they don’t even buy a car. And so now what’s happening is the millennial lifestyle is going to start getting more expensive making them even pinching them even more as far as trying to get into homeownership or something like that.
Jason Hartman 26:58
Well, they’ll have to give up all that beard conditioner.
Jason Hartman 27:06
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