1326 FBF: Indianapolis Market Profile, Long Term Tenants & Travel Hacks

Welcome to this week's edition of Flashback Friday. Your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present and propel you into the future. Enjoy.

All right, we're here with Kristen.

Kristen, give us a little background on your investing experience. I started investing just over four years ago and I branched out on my own and I quickly learned in California that the market there was probably not the best place to invest, as Jason could tell you. I started listening to podcasts and I attended one of my first events with the Hartman media people and I've been with them ever since. I'm in three markets now, also Arkansas and Tennessee, and those produce for me very well and I'm really happy with my relationships. Good. And what are you looking for this weekend? I've been kind of going all over the country. I've been to Texas, I've been to Florida and scoping out those markets. I haven't committed yet, but I'm here at Meet the Masters so that I can find my next market.

Great. Well, good luck.

There you have it.

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 assets asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine, self made multimillionaire 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 follow in Jason's footsteps on the road to your Financial Independence Day. You really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome listeners from around the world. This is your host, Jason Hartman with episode number 983. 983. Thank you so much for joining me today as we talk about a few things. Well, we're going to have a little market profile for you on one of our markets. But first, you know, I've been predicting a lot of things about renters and what is going to happen with the rental market and how incredibly favorable, incredibly favorable the rental market is to investors. The next decade is going to be nothing short of amazing. It's already pretty amazing in terms of what landlords can expect in terms of the rental market. A lot of factors influence this, but I want you to hear this clip from the Wall Street Journal, just a short clip on what people are thinking in this recent survey and how favorable and how okay it is becoming to be a renter. And that's great news for us because we love renters. They are our customers and our marketplace is grow. The pie is getting bigger and bigger and we are going to reap more and more profits from this expanding pie. Isn't it nice to be in a marketplace where you are offering a product housing that has absolute universal need? Every single person on this earth needs what you own and you know, they beat a path to your door to rent it from you. And now where is. I don't know. I believe there used to be a bit of a. I don't want to say a total stigma toward renting, but there was definitely a. Well, I'll just speak from my own personal view. I was a bit of a homeowner snob, I will admit to you. I remember as a traditional Realtor selling properties in Orange County, California, in Irvine, in Newport beach, being many times the number one top Realtor in the city of Irvine. If I wasn't number one, I was number two or three or four or five. And I was certainly the youngest. And I was very, very successful as a traditional real estate agent when I was 24. Just to brag a little bit, when I was 24, I was ranked number 59 in the world in the entire ReMax system. Out of. What did they have at the time? About 45,000 real estate agents. And mind you, that ReMax used to be. They haven't quite held their cachet in the marketplace. They've watered down their system and diluted it. Still a good company, but not what they used to be. And ReMax used to be the, really the premier company where the best real estate agents worked. I would say that's not really the case anymore, but it certainly used to be. At the time I was there, it was really the prestigious place where you always had the best real estate agents. And. And it was because of their business model where they would essentially share costs. You know, agents would sort of come together and share cost, where you'd have this office rental or desk rental model. And that was much more risky for the agents. The agents would have to think like actual business people and they would have to manage their overhead. And only the serious agents were doing that. You know, most just wanted to work on a split where there was no risk. It was just pay for play. Ultimately, the people who were more serious were willing to spend a lot of money on their business like I was. I was willing to reinvest a lot of money in my business and I was always a very long term thinker and this is what made me so successful as a traditional real estate agent at a very, very young age. It was just kind of amazing, you know, And I remember a lot of traditional agents being very envious of me, thinking I was cheating the system. I was. And back then the cheating was this. You would cheat by cutting your commission, being one of those evil sleazy commission cutters, you know, that was very frowned upon in the if you were doing that and I wasn't doing that, interestingly, I was just good and I was just willing to delay gratification. I was willing to invest for the long term and I had a very successful long term career. So what can we learn from that? Well, as investors, it's the same thing. You know, we'll have bumps in the road, we'll have problems, we'll have things. And we can look at the short view and we can demand instant gratification like a child would, or we can keep our eye on the ball, if you will. Our mind focused on the big picture, the long term view. We know that income property is the most historically proven asset class in the entire world and we gotta keep focused on that big picture. Anyway, let's listen to this quick clip from the Wall Street Journal about renters. Okay, here we go.

First, these money items you need to know. The Wall Street Journal Properties team reports a growing percentage of apartment renters aren't interested in buying a home as affordability challenges take a bigger toll on American aspirations of homeownership. In all, 20% of renters say they have no interest in owning a home. That's up from 17% in August and 13% in 2016. That's the word from a semiannual survey of renters by mortgage company Freddie Mac in January. And two thirds of renters who plan to continue renting say they're doing so for financial reasons, up from 59% two years ago. And the journal's Real Time Economics desk says that new research says American women should keep working after their husbands retirement if they want to catch up. In terms of Social Security benefits, married couples often choose to stop working at the same time, taking advantage of the opportunity to travel or otherwise spend time together. But most married women are younger than their husbands, and some have delayed or interrupted careers due to child rearing. Social Security retirement benefits depend on how much someone earns over the course of their career, calculated based on the 35 highest earning years.

Isn't that amazing though? The stigma has just left. And it's interesting for young millennials or older baby boomers, even the maturers, the older than the baby boomer generation, they are more than willing to rent. They like renting, they like the flexibility, they like the offerings being different of renting properties. And, and you know, we live in a very mobile and portable society and as landlords we serve that need. So it really is, of course, it's an amazing time to be alive, as I always say, with technology and all the things that are going on in the world. But it's also an amazing time to be a landlord. It's an amazing time to be a real estate investor. So very, very good stuff there. Hope you enjoyed that little clip. Please pardon the sound quality. I recorded it off of Alexa. No, I'm not talking to you. She's lighting up over here. Anyway, we've got some great events coming up for you. I am on my way to Stockholm, Sweden today, hosting the Venture alliance and one guest, by the way, Carmen, one of our guests who's not a member, everybody else is a member at the Ice Hotel in Sweden. That is going to be just totally amazing. Now get this. Talk about a difficult trip to pack for. Right now I'm going to Stockholm, Sweden and then I fly back into Florida and I've got several things to do in Florida. Gonna do a little house hunting because you know, I am planning to move. I don't know where yet, but I do not like Las Vegas. I just like living in a no income tax state. And as I've told you before, if you can plan your life and think for the long term, even if it's not something you can do in the next year or two, try to get yourself into a no or low tax jurisdiction. Tax time is coming up and taxes are the single largest expense any of us have in our lifetime. We will give away about 50% of all the wealth we create to the government in some form of tax. Maybe 60, 65% depending on where you live. So a lot of it's determined by geography and of course it's determined you invest in the most tax favored asset class in America, income property. But a lot of it is determined by the size of your real estate portfolio. So you can obviously save on taxes by building a large real estate portfolio. Income property portfolio. I'm gonna land in Florida on the way back from the, from Stockholm and the Ice Hotel trip. Hopefully we'll see the northern lights. I'll be in the Arctic Circle and then I'm going to the tropics. Get this. So what I did yesterday is I took a big box of clothing for tropical weather and I shipped it to my Florida hotel. Travel hacking. Travel hacking. When I open that box with my warm weather clothing, I will put my down jacket and all of my thermal underwear into that BO and ship it back home and just flip the clothing. So quite an interesting trip to pack for this, but in terms of events we've got coming up. Oh, let me tell you about the rest of that trip though. You might be interested or maybe you won't, but here it is. Quickly, I'm going to a real estate mastermind event in Florida that a friend of mine is putting on with about 30 or 40 real estate investors. So that should be interesting. And then I am flying to Puerto Rico because yet another couple of friends of mine, very successful people, moved there. And as you know, Puerto Rico has this phenomenal tax deal. Now listen, I've been to Puerto Rico several times. I've never been a big fan of the place. But I'm going to go look once more. I'm going to investigate, look at some real estate opportunities there. I'm going to reconsider the tax deal. And I have profiled this extensively on my Jetsetter show. That's another podcast I have out of the many, many podcasts we produce. I believe the domain is jetsettershow.com but you can go on itunes and search Jason Hartman. You'll see all my different podcasts and and on the Jetsetter show, I've profiled and interviewed some experts on the incredible Puerto Rico tax deal where basically with these incentives, you can lower your total total tax rate to about 4 to 7%. Somewhere in that range. Yeah, Federal taxes, truly amazing. It's the best tax opportunity ever for Americans. And then I will come back home and we'll go from there. But our next events coming up are in May, of course, we've got the Philadelphia, the first time doing a seminar in the northeastern United States. So if you're an east coast person, if you are east of the Mississippi anywhere, this is a really easy event for you to attend. Tickets have been selling like hotcakes and it will definitely sell out. The hotel does not have a larger room. We have got a gorgeous hotel and a fantastic room rate at that hotel. So go to jasonhartman.com or jason hartmancreatingwealth.com and check out that event. We will be in Philadelphia on May 19th. That's going to be a super exciting event. And then the following weekend I'm going to stay in the East Coast. The following weekend we have the Venture Alliance Mastermind event in New York City in the Big Apple. The first time we've done it there. You can check out both these events@jason hartman.com in the events section or for a specific event only page on the Philadelphia event. Jason Hartman creatingwealth.com Jason Hartman creatingwealth.com this is the longest running seminar I've ever done. I've been doing this one for about 14 years now. We have had thousands of people come through us. They absolutely love it. I have literally got two banker boxes, you know those file boxes, right, full of testimonials about this event. There are so many of them. I mean, I just wouldn't even know where to start, you know, with all of the positive, incredible, like life changing testimonials for the person writing it that we've had the reviews, the evaluations on this event. People just love it. Price goes up 50 bucks each week on Friday. So there is emergency. It is definitely filling up and it will. I am very confident. Not all of our events sell out, by the way, you know, I don't want to be one of those lying promoter people that tell you everything sells out. Not everything does, but this one will. So you want to get your tickets for the Philadelphia event asap. Jason Hartman creating wealth.com so that's a long domain name. Jason Hartman creatingwealth.com okay, let's listen to the rest of the show here and let's listen to them on this, this market profile. So here we go.

So what is it about the Indianapolis market that makes it attractive for investors?

So what makes the Indianapolis market attractive to a lot of investors is such a stable market. It's one of the top markets and has been for many years for cash flow. So a lot of conservative investors that are looking for cash flow, really target markets like Indianapolis and a few others, we've just had such steady values for so long and steady rents that it's really attracted to a lot of investors.

All right, and how long have you been in the indie market doing the turnkey and property management things?

So myself and my partner have been in the Indianapolis market since 1997 is when I got my start and he started a couple years after and then we partnered up soon after that. We've got almost 20 years in this market together.

And what is the average price point for properties you're offering?

So our average price Point for properties is around 100,000. We really have kind of two price point properties though. We have some that are 70 to 80,000, bring in rents of the 7 to 900. And then we focus on the 100 to 120, 130,000 single family homes, kind of that first time home buyer type neighborhood, kind of newer construction or way out in the suburbs. So that average to about 100.

What can you get in Indy for 100 grand?

So for that kind of first time home buyer type of property, you can get either a newly built, meaning built in 2000 or newer, you know, single family ranch or even a two story, that's at least three bedroom, two bath. Or you can get a nice suburban home, generally brick, that's again at least three bedroom, two bath.

And what industries support the local economy and what is your typical tenant profile?

So the industries that support the Indianapolis market, there's really three main ones. The first one is the biopharmaceutical and that's because Eli Lilly is headquartered here and that's kind of a magnet company that's brought in a lot of other health insurance companies, biopharmaceutical research companies and the like. So that's a major employer here. The second major sector in Indianapolis is manufacturing because we're just a good old Midwest town, just like a lot of the others you hear. So we've got car manufacturing, all kinds of different manufacturing industry. And then the third is sports and tourism. I know a lot of cities have NFL teams and NBA teams, but we've got things like the NCAA headquarters here, CBS Sports, we've got a lot of those companies, headquarters here. And when you see the stats on how much employment that has, it's actually kind of shocking. Including the Indianapolis 500, a lot of race teams. So that sports area has been a sector and I include tourism in it because that brings in a lot of tourism. I just actually saw yesterday that we have finally hit the number one convention city in the US So it looks like we finally passed Vegas, which surprises people. But we've got a downtown area and a new convention center surrounded by again the NCAA headquarters and things like that.

Are there any economic developments currently happening and if so, how do you think those will impact the rental market?

Well, we've got the pretty normal growth going on right now. You know, everyone's talking about being in the Amazon. What cities are left in the hunt to land? Amazon, second headquarters and Indy still in that hunt, which is great. But we also have a lot of other movement going on here. Salesforce just acquired the largest building in downtown Indianapolis and plans to bring, I believe it's over 20,000 jobs for that. So we have a lot of tech growth because of companies like Salesforce and then hoping for companies like Amazon. We're very attractive with taxes for businesses. So our city's done a good job of being attractive for companies to grow here, especially with our cost of living being so low.

And what sorts of renovations are you doing before offering your properties to Jason's investors?

So our properties go under a full renovation prior to, you know, a client acquiring them. Each property is obviously different, what it needs, but in the end, I'm really proud to say that once you've seen two or three of our houses, people generally get bored because they all look exactly the same. And the reason I'm proud of that is because we want to bring them all up to the same exact standard. The same flooring, the same paint on the walls. And the reason we do all that is obviously for lower deferred maintenance. We also get our properties inspected twice by a third party independent inspector and provide those to our clients so that you can see everything has been done. So all of the main issues are very important. Obviously things like the roof, the plumbing, electrical, the H vac, mechanicals, and those are the things that we make sure are in top working order, as well as making it all pretty again, just like the day it was built.

And what sort of inventory do you have now in terms of new construction, rehab, turnkey, and not only what do you have now, but is the number that you have now consistent?

Usually through time our inventory fluctuates. However, we generally have 10 to 15 properties at any given time available. We've had to expand kind of geographically and go out even further in the suburbs, which is actually great for our investors because the suburbs is where we can get some really long term tenants. People tend to stay in those areas. And values obviously in the suburbs tend to appreciate a little better than when inner city type areas. So we're able to maintain our inventory. It takes a lot more work for us to be able to, to keep that inventory available. But at any given time, we generally have 10 to 15 properties for our investors.

Are there any specific neighborhoods investors should either avoid or focus on in any areas that the numbers may look good or bad, but have circumstances that make them the opposite in real life.

So in Indianapolis, there's a lot of neighborhoods that look great on paper, but in reality, getting them to perform is not the easiest thing in the world. And we avoid Those neighborhoods, obviously we see investors get in trouble a lot with trying to search those out. There's a lot of areas that look great or are right next to an area where it's kind of speculative what they'll do. And we just tend to stay away from all of those. So when investors go out and do it on their own, I do caution, you know, we have 20 years experience doing this as a team, hundreds of years experience combined. And so we know which neighborhoods those are. If anyone ever wants to, you know, talk over different neighborhoods, I'm always available to kind of give our perspective and why we, why we buy, where we buy and why we avoid where we avoid.

And moving over to the property management side, how many doors does your property management company currently have under management?

We have in house property management, we currently manage just over 500 doors.

What's your vacancy rate and what is your practice on rent increases?

So our vacancy rate is approximately 4%. It goes up higher in the winter and drops significantly in the spring and summer. Of course, Indianapolis has pretty tough winters, so we try to get our properties off of what we call the winter cycle. And we do a lot of 18 month leases that if someone moves in in December, we try to make sure that they have an 18 month lease to keep that vacancy rate low for everyone as well. As far as our typical tenants, because our typical rent, our average rents are over 1100, we're in the top 5% of rentals for the city. Indianapolis, that's according to the Census Bureau, which means that we get the top 5% of tenants as far as quality goes. So when you're trying to qualify, we ask for three times the rent as far as income in order to qualify. So our typical tenant has significant income. A lot of them are families, but our typical tenant is that top. The cream of the crop is what we want to go after.

And what was your practice on rent increases?

So our practice on renting increases is if a tenant is paying well and is in there, we try not to push it very much. We don't want to lose that tenant that's paying well just in order to try to get an extra. You know, if you raise it by 20, $25 a month, you're looking at most $300 extra a year. It's not worth that vacancy of losing them. However, if they've been in there for years, we do look at the market, see how much the market rent should be, and we will do it then. However, we are fairly aggressive on tenant terms with raising the rent at that time. So anytime that you're between tenants, we look at the market again and we reprice the house.

What maintenance deposit, if any, do you require from your investors?

So as far as maintenance deposits and holding back rents, we don't do any of that. We have a great relationship with all of our owners and we've never once had a problem. So if it goes above and beyond the tenants damage deposit, our owners have been good with sending in, you know, what's needed. So we're not interested in trying to hold onto our owners money for them. Most of our owners are obviously professional real estate investors and we want to honor that.

And is your maintenance done in house or contracted out?

As far as our maintenance goes, we have a lot of in house contractors that do a bulk of the work. We found that we're able to do it for below market pricing that way by keeping it in house. As far as some of the specialists though, we do use subcontractors for some of those things like H Vac or some something that needs a specialized contractor. And in those cases we use a scale as far as markup, depending on the price, between 15 and 20%.

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