1606: Tony Hsieh's Creativity, San Francisco, Vantage Point Acquisitions, Andrew Cushman Client Case Study, Part 2

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 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 1606. 1606. Otherwise known as. Hey, did you see that monolith in the Utah desert? Well, guess what? It disappeared. I guess it disappeared. Remember, hopefully you saw the movie 2001 A Space Odyssey. It is a masterpiece. Stanley Kubrick, brilliant director. Hey, why do the good die so young, right? He was just a brilliant director. And it started off with that scene of the monolith and the primates and wow, that was, you know, everybody's tried to interpret that ever since he made that movie way back in, what was it, 1968? Well, you know, this monolith showed up in the Utah desert and it has disappeared. Wow, this is a big mystery, folks. Maybe the aliens came to get it. Who knows? Who knows? Anyway, so we've got part two of our interview regarding demographics and rental housing future and so forth coming up in a few minutes. But first, we've talked a lot about the mass migrations. I predict this will go in multiple phases. We're just in phase one. Maybe just starting a little bit of phase two tomorrow. It'll be like these concentric circles as people migrate out of the cities. And guess what I'm looking at an article about San Francisco. Here we come. Right back where we started from. Or maybe not. It's entitled San Francisco Renters Regain something They lost Leverage. Leverage. Vacancies are up, so they have more choice and some negotiating power. The median price of a one bedroom apartment in San Francisco is $2,800. And that is encouraging news according to some. Okay, now we've had apart and I think we've had Zumper on the show before, but certainly apartment list has been on and I think they're booked again. I think we've got another interview with them coming up. So they provided this data and they say the pandemic has caused many residents of the city to depart. Bye bye San Francisco. Same is true in LA, NY, Philadelphia, Boston, etc. Etc. Yes, it is happening. The mass migration is underway. And this article goes on to say that the year over year rents in San Francisco have decreased. Yes, rents are down.

And that sound effect was a bomb being dropped from a plane. Right, that's what it is. Rents are down 20.7% year over year. Wow. And vacancy rates are up. You ready for this one? They are up more than 100% over last year. So the tenants have a lot of power in a state where you shouldn't have been investing. I hope none of you are investing in the Socialist Republic of San Francisco or the Socialist Republic of California to think of it more broadly, because that is a jurisdiction on both counts that is extremely tenant friendly and unfriendly to evil landlords. You evil landlords. You. How dare you expect tenants to actually pay you rent.

Yeah, so there you go. So rents are down in San Francisco and New York and all the others. So it's really no big surprise. No big surprise. Okay, so I did an interview today that we will probably air for you next week and I just wanted to share with you something that the guest shared with me off air before we started the interview. Now, he commented on this during the actual interview that we'll probably have up for you next week, but he said that a friend of his owns an excavating business. Right. So they are the ones that get in on a development project of a housing tract. Early on. Early on they're in there, they're pushing the dirt around. And after they excavate, what do they do? Well, maybe they bring in streets and streetlights or maybe they bring in the utilities. Right. So this is early on in the game. And this person sees what is happening in the real estate market. Early, early. And he said that his friend has been in that business for 20 years. Not as long as I've been in real estate. I've been doing it longer. But I'm not an excavator, as you know. Hopefully you know that.

I'm on the brokerage side and the education side. Right. So for 20 years, he said he has never seen the land development business at such a fever pitch where developers who hire him are buying up every piece of land they can possibly buy and they are building every house they can possibly get entitled and approved to build. He says it's absolutely just crazy. Crazy, crazy, crazy. Yep. The market is en fuego, on fire. So I don't know that that necessarily comes as a big surprise to a lot of you, but it is pretty amazing going on out there. And one of our clients who is in our content group, Marc Anthony, he posted an article and said, cue the U Haul trucks. Nearly half of all Americans, 46%, are considering moving within the next year, according to a recent LendingTree survey. The online financial services marketplace based the report on a survey of more than 2,000 participants in September. But certain groups of people are much more likely to consider relocating than others, as they have some pretty compelling reasons to do so.

Folks, I think this market is going to be pretty solid for a while. Pretty solid for a while. Also, I talked about him on the show before, but many of you know that when I lived in Las Vegas, I went to brunch several times at the very interesting homes, two different ones of Zappo's founder and the iconic developer, a redeveloper of downtown Las Vegas, Tony Hsieh. And you probably heard by now he passed away at age 46. Sadly, apparently he died of injuries in a house fire in Connecticut. And I don't know what he was doing there or what, but he was such an interesting CEO. He sold Zappos to Amazon for hundreds of millions of dollars. His net worth was about $850 million, I believe.

Going to those brunches at his very interesting homes. I talked about them on the podcast before, but one of them was a combo hotel that he bought, a little sort of old fashioned 50s style hotel in downtown Las Vegas. And he turned the parking lot into a trailer park and brought in a bunch of Airstream trailers. And not big ones, small ones and tiny houses. And people would rent them from him and live there. But he would only, you know, rent them to really cool people that he thought was doing interesting things. And he had to be the most unassuming billionaire or near billionaire that I've ever met. And I've met several billionaires in my life. And Tony Hsieh, wow, an amazing success story. And sadly he has passed away. You've probably heard that in the news, but I just thought I should mention it on the show because I had talked about going to brunch at his places several times over the time I lived in Las Vegas. What he would do is he'd have these Sunday brunches and he had a couple of llamas, the animal llamas. I would bring my dog and my dog would actually freak out. She thought, what is this Martian creature, this llama? And you'd go up and Talk to the llamas and sometimes they'd sort of spit in your face. It was pretty gross. But yeah, the llamas would be roaming around and the setting of Tony Hsieh's place was like Burning Man. And I've never been to Burning man, but I've certainly seen the pictures and many of my friends have been to it. That's where they auditioned. The former CEO of Google who got the job at Burning Man, Sergey Brin and Larry Page, said, for your job interview, we're going to invite you to Burning man and you spend several days with us or a week and we'll see how you cope at Burning Man. It was a pretty funny way to do a job interview, but that's the way the evil Google operated, right? Anyway, Tony Hsieh's place was decorated like Burning man, sort of, and he had a stage and sometime he had some musicians up there performing and there was a fire pit and then he'd have a brunch and there was all sorts of different odd food. Sometimes it was like a potluck or he had some caterers and this and that and it was just interesting. I was glad to have that experience and.

Go hang out at Tony Hsieh's place. It was pretty cool and he was just the most unassuming guy. And by the way, he lived in one of the little Airstream trailers. There's a, I believe it was CNBC did an interview with him and they interviewed him inside his little 200 square foot Airstream trailer that he lived in and he could afford anything.

And he said on that interview, he said, I really want to spend my money having experiences more than things and doing things. And boy, he sure did stuff. I mean, he redeveloped downtown Las Vegas and had big, big plans. I remember the first time I met him was actually as part of a mastermind group I was in. But then I went to his house for brunch several times and met him again. The first time he showed us his plans for redeveloping downtown Las Vegas and they were just amazing. And he finished a lot of it. But I hope that someone picks up the slack where Hsieh left off and finishes Tony Hsieh's vision for downtown Las Vegas because it certainly pretty creative and pretty unique and pretty awesome. So sad to see Tony Hsieh go. So I just wanted to mention that. Now let's get to part two. Oh, one more thing I want to mention. I always do that, don't I? I want to thank everybody who joined us last Night for our empowered investor inner circle. We had such a great call. So much participation. I want to especially thank our team members, our internal team, and then our client Muthaya who shared a little bit and we did that podcast with him a couple of years ago. He asked to come on the podcast and talk about property management agreements. You can go find that old episode@jason hartman.com and we reviewed them. Last night we got on Zoom. I shared my screen, we looked at maybe four or five different property management contracts and agreements and picked them apart and said, hey, this is ridiculous, this is normal. Anyway, it was just a great time. We have these monthly Zoom meetings with all our empowered investor inner circle members and last night was just great. I really enjoyed it. So thanks to all of you who came and attended. We were on for about two hours and it was just great to see everybody. We don't meet in person anymore, but it's nice to have the community of our social network and our monthly Zoom meetings. It's really great to see all of you. Anyway, here is part two of Andrew Cushman talking about demographics, the rental housing market and more. So here we go.

Nothing extraordinary should have to happen for you to make a good return on investment. No extraordinary appreciation, nothing. Just it should make sense from day one. Now if some great things happen, like a bunch of appreciation, great, you know, but don't, don't count on it. And by the way, Gen Z now, the oldest gen Z is 23 years old and that's the biggest of all, 82 million people.

They're about to get out and start renting when we change it over to domestic migration again. Florida looks really good. Lots of markets in Texas, Tennessee, Carolinas, Arizona still has that migration. As you said, it might be tougher to get the numbers to work. I don't invest in Arizona just because I don't want to be too spread out. So I don't have as much in depth knowledge there. Utah, you can almost see where Highway 15 runs up through the center of the state. There's all kinds of growth there.

We love Utah, but again, too expensive. You know, we. Many years ago we were recommending properties and a lot of our clients purchased in Salt Lake City and around Salt Lake City. It's awesome. But again, that's a hybrid market. It's just too expensive. You know, many years ago we did a lot of business in Denver, great market. But again now it's people are priced out. So a lot of our clients made a lot of money in those markets though.

Well, and so, and this could apply. So let me ask you, you seem to be doing a really good job of getting ahead of these markets. What you're doing is you're identifying emerging markets where you're, you're getting, you know, we're looking at this data now, and everybody knows, oh, wow, Denver's been hot, Nashville's been hot. Memphis is great. You've been there for a long time.

Well, we never got into Nashville. We just could never make Nashville work. But, and I love Nashville. It's great town. That one never worked for. But we did do Denver, Salt Lake City, Austin, if you can believe it. You can't even touch Austin now for the prices you need to as an investor. And even Dallas has gotten too expensive. You know, even most of Atlanta. We do have Atlanta properties today. You know, if you go to jasonartman.com, you know, one of our investment counselors, they can get your properties in Atlanta, amazingly. But it's really hard to make Atlanta work.

Yeah, Yeah. A lot, especially a lot of the primary markets of Atlanta have gotten even. A lot of the secondary have gotten much more expensive and difficult to get them to pencil out.

Yeah, yeah. Tell us more.

Yeah, Well, I was going to say. So how did. Maybe just for listeners, you've done a really good job of getting ahead of the curve. Right. One of the biggest ways to make money in real estate is to find an emerging market where population growth is about to happen or income growth is about to happen. Jobs are about to move in. So what did I know what we do? But what did you use to identify these markets early so that your investors benefited so much, whereas it might be tough to get in now? But if they were investing with you five years ago, they already have a portfolio.

Yeah. Or 10 or 15 years ago. I can't say there's any one thing. There's just a whole bunch of things.

We interview people on the podcast all the time. Just constant reading and research, and it's a bunch of fragmented stuff. There's. It's not like I can give anybody one great website to go to.

Yeah.

You know, and all the answers are there. I wish. It's just not that simple, you know, but, you know, over time, you notice trends and chatter and, you know, you.

Know, and another thing I would say is, you know, if you're out looking at, okay, you know, do I buy a single family house in this market or a small apartment, or do I do a syndication here or whatever, the same principles apply whether you're looking at the whole country or a state or a city or region. So like for example, take it, take Atlanta. You know, if you look at these charts that we've been been sharing, most of Atlanta is dark green, right? Population growth, incomes have been going up there as well. But there are sub markets in Atlanta that I wouldn't touch with a 50 foot pole. They're declining. Very low income, very high crime. Right. And so the same principles of positioning yourself, where the right demographics are coming in, incomes are rising. You ideally have a business and landlord friendly environment. You want to position yourself in those markets. So you start big picture like, okay, Florida, Texas, Georgia. All right, well what markets do I want? Okay, maybe Atlanta, maybe Tampa with inside of Atlanta. Am I going to invest in East Point or am I going to go out to Duluth? Right, those very, very different markets. And so you want to apply those principles to every property you're looking at to help guarantee success. Right. So if you're going to buy a single family house in Duluth versus East Point, you want to look at the income trends, you want to look at the population growth trends, you know, and if you can get the data on that level, who's moving there, right? And it might take some digging, but you can find that out. And you know, I can tell you between those two, if I had a choice between East Point and Duluth, I'd be in Duluth hands down. So the same principles apply. That's a question I get a lot of times is, well, Andrew, how do I pick a market? So one of my mentor, you know, one of the questions I get a lot is, well, Andrew, how do I decide, decide what market to invest in? I live in San Francisco, it's too expensive and I want to go out of state. Well, how do I find one? Right? Well, one way, like one of my mentors, Tim Rhodes says is ski in somebody else's wake. If you've ever gone water skiing, you try to smooth behind the boat. So find a guy like Jason who's already really good at identifying markets and invest with him. The other way is to look at a map like this and say, wow, Florida is looking really good. I'm going to invest in Florida. Then you drill down to Florida and say, okay, well Tampa, the Panhandle and Orlando look really good. Okay, I want to do those markets. Markets. Then you pull up Tampa and you say, okay, you do the same analysis, right? It's the same process, just narrowing down, okay, well inside of Tampa, I like this market and this sub market, this one has population decline and low incomes. I'm going to stay out of that one.

Right.

And you say, okay, so within these submarkets, that's where I'm going to invest. So that's how you determine where you're going to invest. Number one, you could find a great operator like Jason. Or if you're going to do it on your own, you get onto a map like this, you understand the overall trends, and then you just start drilling down and apply the same principles that you applied at the large macro level down to the micro level and the market level.

Yeah, definitely. You know, here's one thing I do want to say about that and I agree with everything you said, but every property, not every property, but every property I've ever bought looks like a great deal in the rear view mirror. Okay. And, and it's sort of easy to look like a genius in the rearview mirror because we've had this market. So that just goes back to the old saying, don't wait to buy real estate. Buy real estate and then wait. It would be easy to try and take credit for everything you said. And I appreciate it, I'll take the credit. But look it, I mean, real estate's just such a solid investment with so many things going for it that it's just hard to lose. If you buy a property that makes sense the day you buy it, if you do that, you're going to be pretty good.

Can I give an example to illustrate what you just said? Let's say you buy a house for $100,000 and you put a 15 year mortgage on it and you rent it out, right? In over 15 years, you picked the wrong market, you put 20% down. So you put 20 grand into it. $80,000 loan, you picked the wrong market. And over 15 years it does nothing. It's still worth 100 grand at the end. But guess what? A tenant, somebody else paid off that mortgage for you and you put in 20 grand. Now you have 100 grand. Is that the best investment in the world? Is that a home run? No, but she's not bad. You didn't lose and your risk was minimal. Right. So a lot of times even the worst case in real estate isn't all that bad.

Yeah, it's not. Especially if you know how to do the math. And you really, a lot of people in real estate, they think they're losing when they're really winning because they just don't know how to keep score. Learn how to do the math. So that's another important thing because a lot of this return is below the surface of the water just like an iceberg.

You're absolutely right. You've got appreciation, hopefully principal pay down, depreciation, cash flow. I mean there's all kinds of ways to win with real estate.

Yeah, definitely. All right, good. What else do you want people to know, Andrew? Anything else on the map? Anything else in general.

I think we.

Covered it pretty well.

I would just say I know it's turbulent times. I know a lot of folks are scared to invest. This is short term in the scheme of real estate. This is short term. Even if this is a two or three year ordeal, if you're going to buy and hold for 10 years. We are very likely to get into, in my opinion, very likely to get into an inflationary environment with all the worldwide money printing that is going on. One of the the best ways to protect yourself against that are hard assets like real estate. Those will appreciate in an inflationary environment. Those are hedge against inflation. I can't think of a better way to not only earn a good return but to protect investment from, like I said, the likely inflationary wave that's coming. And even if we don't get inflation, we haven't really even had it. Well, again, it depends on how you parse it, but.

Right. It depends on whose stats you're watching. Yeah.

So many people would say we have not had the high general inflation over the last 10 years and look how well real estate has done right now. We have had asset inflation. So don't be scared about the next 12 months or whatever. If you buy something that makes sense today. Again, repeating that and hold it long enough, it's very difficult for that to not work out to be a good investment.

Yeah, definitely. Andrew, do you want to share a social media page or a website or anywhere where people can find out more about you?

Yeah, easiest way to connect with me is my company is Vantage Point Acquisitions. So the website for that is just vpacq.com or if you just Google Vantage Point Acquisitions, it'll come up. There's a little couple tabs on there. One just to contact us and reach out that comes to my email inbox if you just want to have a conversation. There's a tab on there for our multifamily accelerator, mastermind and some additional information. But yeah, that's the best way to get in touch. I'm on LinkedIn and all that but a real conversation. Best way is to reach out to the website.

Good stuff. Andrew, thanks for joining us and happy investing.

Likewise. Take care. Jason, good talking with you.

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