1393: Property Tours, Empowered Investors, Hybrid Property Management & Malthusian Thinking

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Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slant on investing, some exciting techniques and fresh, 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 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 to episode 1393. And we have more properties to talk about today. I've got our investment counselor Carrie with me. You've heard her on the show many times, Kerry, welcome back.

Hey, thanks for having me, Jason.

It's good to have you. So, Atlanta area, well, this is technically just outside of Atlanta. It's only nine miles from the Hartsfield Jackson Airport and looks like you've got some good properties there, right?

Yeah, we have a really good development here. New construction, townhomes. They're a three bedroom, two and a half bath. And the price on these are only $167,900. So it's a reasonable price for new construction.

Very good. So brand new construction, three bedroom, two and a half bath, 1547 square feet and projected rent is 1350, so almost 1%. And pretty darn good rent to value ratio for new construction, that's for sure.

Yeah.

The reason I like these a lot is because of the new construction factor and how Atlanta itself is just booming. So you're going to have quality tenants. You're going to have the need for tenants in that area. And they do these in phases. So they'll do one development of townhomes in one month and then they'll close on another development the next month. This particular local market specialist I'm referring to. So they stagger them out so your rents, the rent opportunity will be more available than if they did a whole development.

You won't have a bunch of competition with other properties all at the same time, right? Yeah, it's good the way they stagger it. That's very responsible.

Good.

Okay, so projected cash flow is positive cash flow of almost $2,300 a year. And that offers an overall return on investment projected at 29% with our conservative assumptions in there, even maintenance at 3%. And this is a brand new property.

So you probably won't have any maintenance.

At all your first year or two. And then the estimated completion for these, you've got to know that because new home, you know, new construction, you're going to have a longer lag time. April to June. Okay. So you got to wait a little bit longer for those, but not too bad. Not too bad, right?

No, no. These will be complete in the summer. If you put them under contract, you know, sometime this month or next month, you'll be closing in the summer.

Okay, great.

Now do you want to go to.

The other end of the spectrum and talk about this not so pretty house? I'm just going to say it. In Mobile, Alabama. Mobile's great market. I own property there and have done well with it. I like that market. So this one is just $83,000. And this is a renovated property.

Right, Right. So what are Mobile, Alabama local market specialist offers is pre construction properties. So this is the before picture. Jason, he'll have a prettier picture and groomed up property landscaping. In the end.

This is, this is an ugly ducking. I mean, it's not the. It's not terrible. I'm just. It's the contrast of, you know, we're looking at pictures here, folks. So you have to understand that the contrast of looking at that beautiful new property that you just talked about to this one is, is quite a difference. But this is pre remodel, Right? Good.

Right? Yep. So the reason we really enjoy Mobile, Alabama, in Alabama in general, is the low taxes, the property taxes that they offer. So that helps definitely with your higher returns. So this particular property is $83,000 and the monthly rent is 975. So you're at a well over 1% RV ratio.

Okay. That's of course, projected rent. Yeah, go ahead.

Right. And giving you an estimated monthly net cash flow of 291.

That's great. Wow, that's really good. So almost $3,500 a year in positive cash flow on the pro forma here. Yeah. Wow.

Right. Yep. And then of course, your cash on cash is one of the highest we'll have in this market.

In particular, 14% projected cash on cash return is 14%. That is like unheard of nowadays, you know. And by the way, debt coverage ratio on this one, super high 1.9. So the chance of you getting into trouble with this property is almost nil. Overall return on investment projected at 27%. They're projecting just half the standard appreciation rate here. And they've got high maintenance costs in this one, in the performance. So those numbers look pretty solid and conservative. They're probably going to do a little better than that.

Yeah, exactly. That's very conservative. So expect those higher projections in the long run.

All right, good stuff. Do you want to go to Hammond, Indiana? We're really moving around the country here.

Where in the world? Yeah, so this one in particular, it's three bedroom, one bath. One bath is pretty common in this market. So don't be discouraged from that if you're set on your three bedroom, two baths. But the listing price on this property is 127,500 and it rents projected rents at 1325. So another good rent to value.

You're above the 1% target. Yeah, good.

Yep, yep.

And so then this one has around projected net cash flow of 227 per month and around a cap rate, almost 7%.

Yeah.

Oh, that's pretty good. You don't get that nowadays too much. So debt coverage ratio at 1.45 and total return on investment projected with all the multidimensional stuff at 30% annually. As I always say, if it only works out half as well as projected and you make a 15% return, you should be as happy as a clam. And clams. They're always smiling, so they got to be happy, right? Okay, Carrie, do you want to just quickly mention before you go your little mini property tour? It's right around the corner. It's this weekend. Tell us about that. You know, from time to time, folks, our investment counselors will conduct a little mini property tour that they'll just meet some clients in a market and tour properties with them. And then also we can arrange individual meetings with you and appointments in any of our markets with our local market specialist, if you want to go out there individually. But this is a small group and, you know, if someone wants to reach out to you, there might be a space left for them or a couple spaces. Tell us more about it.

Yeah. So we are going to travel to the northeast to York, Pennsylvania, and we will get on a bus with our local market specialists, their property management team, and tour before, during and after construction homes There'll be properties available for the investors on the tour. And you know, it's tight with inventory these days. So getting on a tour kind of gives you first in line opportunity at properties.

Right. Which interestingly probably is why you didn't talk about any properties in York today, because you're saving them up for the tour. I'm guess that's right, Jason. Okay, so no, no, we're not going to hear about any specific properties today.

No.

Okay, good.

Yeah, so it's a nice market. It'll be great to actually get into these remodeled homes because as you've seen on Properties page, they've really cute remodels, they do a really solid job and just a different market, a different opportunity than your traditional Memphis Jacksonville. So it'll be interesting to see.

Right.

Good, good stuff. All right, Kerry, well thanks for joining us and we will talk to you real soon with some more properties.

Thanks, Jason.

Okay, let's talk about a few things today for the second half of the show. First off, I want to say congratulations to one of our clients who has become the latest empowered investor, that is our client, Bruce. Here are a couple of things he had to say about becoming a self manager taking the hybrid approach. Now you know I have taught you about the hybrid approach over the years where you're not completely self managing. You hire either a property manager on an a la carte basis or you hire a traditional real estate agent simply to do the tenant turnover, to do the lease up, to handle the walkthrough, to get the new tenant moved in and that kind of stuff. That's the hybrid approach. You can either do this through a property manager without them actually managing the property on a month to month basis. They simply would do the lease up, the tenant turn for you or you can have a real estate agent do that. So here, congratulations Bruce. Here are a couple of quick things that he said.

Hey Jason, quick update. Just want to let you know that I made the transition and let my property manager go for my property. Talk to all the tenants and set up a new Gmail address and sign it all up through Cozy. Cozy seems to seems like it's going to work out pretty well. All the tenants and said hey, email me with all your requests and what you'd like done and this and that. So I'm currently kind of chipping away on all that and so far so good but just wanted to give you an update saying I appreciate all the advice. I'm definitely heading with the hybrid approach until it gets too much for me to handle. So thanks for everything. Talk to you soon. Yeah, Jason, of course you can definitely play it on the podcast, you know, I mean, just to kind of go into it a little bit more. I just got sick of all the back and forth between the property manager and myself and what was going on. And I wrote all the tenants a letter to the units and I sent it out to them and they responded back to me. So I called them and talked to them all, asked them if they had signed an addendum and go with me and let me manage the property and kind of cut out the middleman. And they sounded delighted. They were like, we would love to deal directly with you. I said, hey, look, I own the property. I'm going to treat you guys as my customer and I'd love to keep you there. So let me know what I need to do to make you happy and I'll start working on it. So I started looking into Cozy and Tenant Cloud, but I think Cozy is free both ways if you're paying through checking accounts. So I signed up for that and created a new Gmail address so that they can contact me directly through that. And seems to be going pretty smooth so far, so we'll see. Thanks for everything, Jason. Appreciate it.

Okay, so what he's referring to there is he was dissatisfied with, I think, a couple of his property managers, maybe it's just one, I can't recall. And is now dealing directly with the tenants and again through our network. You can go either way. You can use property managers. We have some great ones. I always say, kind of I like to let circumstances decide. I do both. I have some great property managers that I really like and they manage my properties for me. And if they ever have a bump in the road and they become bad, you know, I just decide that they're not doing a good job, then I will try self managing the property. You know, the properties I've got self managed, they're easy. It's really small, so easy to do this. It is not some big mysterious thing and we're here to help you with it every step of the way. So congratulations to Bruce for becoming a self manager and now getting that middleman out of the way and dealing directly with the tenants. I bet what you'll see happening is the tenants, like he said, they were delighted because they're probably getting crappy service from the property manager and he can now improve his properties, make them appreciate better, just be more engaged and this becomes second nature after you've done it before. So it is really not difficult. If you are interested in self management, go to jasonhartman.com, type in self management on the search bar and look for all the episodes on that topic and listen to those specific episodes so we can help you more with that. Okay. We talk a lot about the three basic economic maladies, inflation, deflation, and stagnation on this show. And I came across something interesting, a piece of nostalgia from, well, not from my childhood, but from somebody's childhood. I'm not old enough to have been a kid at this time, but it was the ticket prices for Disneyland back in 1964, so I was yet unborn. And it's very interesting to see. And that's why I love to watch old movies and old TV shows and listen to old music because. And read old books because there's a lot to learn from the past. Those who do not learn from history.

Are doomed to repeat it.

So here's the problem with this Disneyland thing. Using this as a barometer for inflation is not the greatest. The reason is, of course Disneyland has changed, right? It's been upgraded. There are many more attractions now than there were in 1964. It's not the same experience, but I'll venture to say that probably in 1964 you hardly ever waited in line and now those lines are really, really long. So maybe it was a better experience back then, I'm not sure. But here's one thing that hasn't changed and gives us a very, very good barometer for inflation. This is a litmus test that is really, really good to know what has taken place in the economy. And it is parking. Parking. Yes. Our friend Nathan pointed this out in our Facebook content group. And parking hasn't changed much, right? If you, if you are the government and you want to hide the rate of real inflation, what are the three basic ways they do that? You know, I've taught you this before. Weighting, hedonics and substitution. Weighting, hedonics and substitution. I won't explain them today. We've talked about that many times in the past. Those are the three ways they malign the real inflation rate. So we don't really know what's going on. But guess what? It's hard to do waiting on parking. It's hard to do substitution on parking. And it's hard to do hedonic indexing on parking in a parking lot. Guess how much parking cost at Disneyland in Anaheim in 1964. Parking for one day was 25 cents. Our client and self manager who's been on the show many Times is a big fan of Disneyland. He lives near Disneyland, he and his wife and two kids. And that is Drew Baker. You've heard him on the show before. He told me. I said, drew, you're an expert on Disneyland. You know, he buys season passes and all this kind of stuff. You know, I don't know if he does it anymore, but he used to. And parking, he tells me now, is $25 a day. So it went from 25 cents to $25 from 1964 to today. But then you ask, what did the government tell us the real rate of inflation was? If you index 25 cents in 1964, how much is that today? What is 25 cents today from 1964?

Well.

Drumroll, please.

You ready for this? It's $2.08. So according to the official rate of inflation published by the government, the Consumer Price Index tells you that parking at Disneyland today should be not 25 cents as it was in 1964. It should be $2.08 cents, yet it is more than 10 times that price. It's 25 bucks. So clearly, the inflation rate is wildly understated because parking hasn't changed much. The user experience is. Actually, I would argue that it was probably better in 1964. Why? Well, the spaces were larger. I'm sure you didn't have to get into these little crummy parking spaces and ding your doors. You probably didn't have to go as far, park your car as far away. Right. They have trams. Of course, we all know that if we've been to Disneyland. But the parking experience probably hasn't changed much. So you can't argue that. Well, it's better today than it was in 1964. So that's why it cost $25 versus $2.08. Okay. Yeah.

Nope, can't.

Can't make that argument. It's a losing argument. Hey, I want to share with you, speaking of the old times, something from the 70s, and this is a very short sound clip from CBS News of Jimmy Carter's infamous they say famous malaise speech. Remember, the Carter era was typified by. By Malthusian thinking, right, that resources were scarce. We have peak oil. Don't heat your house, don't cool your house, wear a sweater, go naked. Whatever it takes to be comfortable. Okay? If it's too hot or too cold. And, you know, live on less, expect less from life, because we are running out of everything. That was the thing that typified the Carter administration during the era when the misery index was developed, where we had high inflation and a stagnant, really anemic economy. Then you have stagnation, which is the worst of all things. Okay, it's worse than inflation, which is usually part of a booming economy, or at least a healthy economy, healthy in other ways. And deflation, which is a whole different concept. We won't get into that today. It takes too long. But just listen to this short clip about Carter and then Carter speaking himself. It's kind of an interesting historical perspective.

Two years ago today that Jimmy Carter gave his famous Malaise speech. He never used that term, but that's the name that was given to a speech in which the President said the country's economic woes were due in part to a crisis of confidence in the country. It has come to be known as perhaps the most politically tone deaf speech in modern American history. Take a look.

It is a crisis of confidence. It is a crisis that strikes at the very heart and soul and spirit of our national will. We can see this crisis in the growing doubt about the meaning of our own lives and in the loss of a unity of purpose for our nation. The erosion of our competence in the future is threatening to destroy the social and the political fabric of America. The confidence that we have always had as a people is not simply some romantic dream or a proverb in a dusty book that we read just on the 4th of July. It is the idea which founded our nation and has guided our development as a people. Confidence in the future has supported everything else, public institutions and private enterprise, our own families and the very Constitution of the United States. Confidence has defined our course and has served as a link.

So that's interesting. First off, I would say the irony of that talk is that Jimmy Carter did a lot to destroy American confidence, okay? I mean, he was the. He just typified the sort of Malthusian. That's the best way to say it. It's the Malthusian idea that resources are scarce and humans are not a resource when I say humans are the biggest resource of all. So just kind of interesting to look back on that. Now the question is, and by the way, would love to hear your feedback on this, go to J. Jason hartman.com Ask Jason hartman.com Ask. Tell me, listening to Jimmy Carter there in the 70s, do you think Americans at least have more confidence in their future today than they did back then? Do you think this is a time of more confidence or less confidence? And obviously we made it through. And what do you think happened in the 80s? How do you think, you know, when Reagan came aboard after Carter. What do you think happened to American confidence then? So many people will say it's not all about the economy. It's not all about financial things. It's not all about money. Well, okay, sure, it's not all about that. But let me tell you, that's a big part of it. That's a big part of life. That's a big part of how people feel. It's a big part of how a nation feels. But Carter even referenced back then how there's a lack of unity of purpose. Well, compare that to today. I mean, what do you think about today versus that? Right? Unity of purpose. I mean, I'd say that gap is even bigger today. Right? Something to think about. Go to jasonartman.com ask and tell us what you think. Anyway, tomorrow we got to talk about the record number of renters who believe renting is a better deal than owning and what that means to you as an investor. What does that mean to you? Also tomorrow we have another technology tool that can help you better manage your property managers or better self manage your property. Either way, whether you have property managers or you are self managing, this app.

That we're going to go over tomorrow.

A free app, is going to help you take another step in becoming a more empowered investor. Until tomorrow, happy investing. Go to Jason hartman.com for more or call us anytime at 1-800-hartman.

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