1716 FBF: Finding & Keeping Great Tenants + Tips for Landlords & Property Managers with Real Estate Investor Barb Getty

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.

Welcome to Creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven't thought of before. And a new slant on investing fresh new approaches to America's best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine self made multi millionaire who not only talks the talk, but walks the walk. He's been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason's footsteps on the road to financial freedom. You really can do it. And now, here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome to the Creating wealth show. This is your host, Jason Hartman. This is episode number 295 and we are just returning here from our Meet the Masters event in Orange County, California. And we'll share some great stuff with you on future episodes from that excellent event. But thank you so much to all of you that flew out for it. It was our biggest Meet the Masters event so far and we had people from all over the country and it was just a great weekend, a lot of good learning and I think all of you really enjoyed my new puppy Coco, who was there, who you may be actually hearing in the background. She's kind of whining right now. How many events do you go to where you have a house dog, huh? It adds a great dimension to the event if you ask me. And a lot of our attendees have said so over the years. But yeah, it was a fantastic weekend. And again, I will be sharing some stuff with you on future episodes from that event. But we did our first ever exposure to the next 10 commandments. So now we have 20 in the pipe and we'll be talking about that in future episodes as well. And again, thank you so much for all of those who attended and to all of our speakers who flew out for that as well. Really a fantastic weekend as so many of them have been over the years. Really enjoyed that. So today we'll be doing two things on the show. Number one, let's take a caller and we'll do that in just a moment. And then after the caller we have Barb Getty talking about the Landlord Chronicles and a whole bunch of great episodes that have already been recorded yet to be published. So keep listening and we will try and get those out to you as quickly as possible. Be sure to check out the blog at jasonhartman.com, which by the way, one of the resources that one of our lenders who spoke at Meet the Masters on one of the panels shared his information on the three credit bureaus, which has just been posted on the blog@jasonhartman.com as well. And then now we kept mentioning Property tracker and the virtues of it during the event. And I just want to remind you, first of all, use that it's just a great resource. And if you go to jasonhartman.com, click on resources and there are two columns on that page. If you look in the left hand column and scroll down under other Resources, Platinum Property Analysis and Tracking System, that is where you will find the link to the discounted and one month free of Property Tracker. So again, take advantage of that. It's jasonhartman.com resources, left hand column, the third section down under Platinum Property Analysis and Tracking System. And there's a bunch of other great resources. Click on all of those links and take advantage of those. You know, they're just a bunch of free resources there for you. So be sure to avail yourself of those things. So now let's go to a caller and then we will be back with Barb Getty for the Landlord Chronicles.

Hey, I've got Neil from Minneapolis calling in to the show. Neil, how are you?

Hi, Jason. Doing good, Good, good.

I guess you have a question about performas and evaluating properties and having a duplicatable model. Can you elaborate on that?

I do. Well, I'm a sales professional. I'm in the medical device industry. And one thing I preach to my reps all the time is try to discover or develop a sales model that is repeatable and measurable. And you know, and it just makes sense since I've been listening to you. I have purchased the property evaluator and the property tracker and I do use those. But I was wondering, is there any other software or tools that you would recommend? And then secondly, within those that I mentioned, are there certain indices that you like to particularly key in on? There's so much information there, but is there two or three that you key in on and why do you find those important?

Okay, yeah, great questions there. So first of all, just so everybody knows, I know that we've had Joel, our client and my friend, creator of PropertyTracker and his whole suite of apps on the show a few times now, talking about his apps, which he seems to be most excited about. I just want to let everybody know that I use the desktop version of Property Tracker, the good old fashioned web based version. It was his very first product and I just like it better on the desktop. Some people like to use apps, frankly. I like being at my computer and typing and of course I use an iPhone and all the latest mobile gadgetry and iPads and stuff. But for real stuff like this, I like it on the computer. I like using the actual website itself. So there are several different products he has, but he does use the same Performa for all the products. And that is the one that I like to look at is the one page performance projection. And since we're talking about that now, before we talk about the rest of the things you can do to make your real estate investment business duplicatable, maybe just look at a performer here since you had that question too. And then you know, I'll answer a little bit more about your duplicatable and other tools question. But I've got one up here. And this is a property in actually Indianapolis that I posted on my Facebook page yesterday. And you ask about what numbers do I key in on? Well, first of all, if you just kind of get used to this one page document which is the one year performance projection, then there's really not that much on here when you get used to it. I know it may look like a lot it first there's probably, I don't know, a couple dozen things on here, but you sort of get used to it and where you can just look at it, it's like looking at the back of your hand, right? You get really accustomed to it. But the things I key in on are cost per square foot. So for example, this house that I posted yesterday, I couldn't believe how good a deal it is. And I just bought another one in Indianapolis myself with a client of ours. And I don't know, I think this one's a better deal than what I bought. But I don't always get all the best ones. Sometimes our clients do. This one was $32 per square foot. It's a $78,000 house built in 2002. And by the time you hear this message, folks, it's not going to be available. Okay, I'm just going to warn you. But it's an example. And the Projected rent is 1195. And then you look at cash flow and these are all the numbers in bold. Originally, Joel did not have these numbers in bold and later per actually My suggestion, I'm glad to say I had a hand in it and influencing him. He made these numbers print out in bold on the projection. So cash FL is a good indicator. $443 a month or just over $5,300 per year. And then I go over to the next column, the right hand column, and there one of the things that is not in bold, that is sort of interesting is the DCR or debt coverage ratio. And on this property, the debt coverage ratio is like a good indicator for really conservative people who are using financing to buy properties. Because what it tells you, it really shows you how not to get in trouble. I mean, should there be another big downturn, should the economy really hit the skids again, which, you know, I think it certainly could, but I think the next time it does, it's going to be hitting the skids in a whole different way than it did a few years ago. And it's going to be, as I've talked about, an inflationary recession or an inflationary depression. The last one was deflationary, so we'll have a totally different flavor to it. But the debt coverage ratio, it shows you here, 2.5, which means that this property is producing 2.5 times what you need to cover the cost of owning it.

Right.

And here I'm going to publish a show real, real soon with a guest who sort of didn't really get it about income property at all. He definitely got it about inflation monetary policy. He, as I recall, he was kind of a gold bug. Usually those people, they have all the right premise, but they don't have the full answer right. And he talked a lot about something very smart, though. He called it dur risk. And duration risk is a valid thing. Okay? Duration risk means how long can you hold on to that property through a bad time? And so properties inherently have duration risk because unlike a piece of gold that you can put in a safe deposit box and, well, you have to pay safe deposit box rental, that's not too expensive, a property does have real ongoing cost. Right. And that's why I think a lot of people who don't understand real estate, they kind of shy away from it because they're scared of duration risk. But with a debt coverage ratio of 2.5, your duration risk is almost nil. It's almost nothing at all. So if you stop me if you've got a question, I want to go down to a couple more here.

No, I'm listening. You're doing great.

Okay. Okay, so the next one, capitalization Rate or otherwise known as cap rate. Now that's an indicator that a lot of commercial real estate people use and I think it's really, it's a very inadequate indicator, but it is used by commercial real estate people more than residential people because it evaluates a property based solely on income versus cost. It doesn't evaluate it based on appreciation, tax benefits or very importantly, leverage. And the, the leverage on a, on a residential style income property is nothing short of phenomenal. I mean, it is the most, it's the most. It's not only is that the most tax favored asset in America, it's also the most debt favored asset in America or the most leverage favored or the most financing favored asset in America because nowhere else really can you get better leverage as commonly as you can on residential real estate. So cap rate doesn't take that into account and it doesn't account for any appreciation. And I think the appreciation may well be nominal, that's happening now and coming at us in the future, but it is still appreciation nonetheless. And when I say it's nominal versus real, what I mean is that it's only keeping pace with approximately inflation, not necessarily beating inflation, but it doesn't have to because if you leverage it, then you've got a leverage ratio to beat inflation of. If you put 20% down, you've got a 5 to 1 outpacing of inflation if you don't buy the property below cost and if the property only keeps pace with inflation. Now remember we talked at the beginning of this, looking at this performa about the cost per square foot. Well, Neil, this one, do you remember the cost per square foot on this one? I don't know, I went through it pretty quick.

$32.

Yeah, $32 per square foot. So I mean, you can't build it for that. And by the way, I just got insurance for my entire portfolio and they said that the lowest they will allow you to insure any house for is $65 per square foot. Because they said, look, there's no way we can rebuild it for less than that. And the reality is they're probably going to pay $85 a square foot to rebuild it. And that won't include land, but the.

Land actually thought it, actually thought it was higher. I thought to a builder and he told me 120 a square foot.

Well, if you're in the Socialist Republic of California, you're any place where there's big government restriction and a lot of liberals running the government, the cost will always be higher in those places. But really, I don't think you can build a house much of anywhere for less than about 75 bucks a square foot plus land cost. Here you can buy this one for $32 a foot, including land. So it's only 10 years old.

So that's one of the lowest I've ever seen. I don't think I've seen below $45 a square foot. So when you look for a rent to value ratio, you look for something that's above one. That's kind of a goal. And we're seeing one and a half to 1.8 is pretty fairly common. It seems to be sliding down.

It is sliding down. No question. The deals, you know, look, I'm going to, I'm going to announce again, Neil, like I've said on the past few, the deals are getting worse. Okay? I'm not kidding, folks. If there ever was an urgency, you need to have it because the deals just aren't as good as they used to be. I mean, look, whether it's a real recovery or a fake inflation induced recovery, the fact is prices are going up and rents never keep pace with price increases. Historically, the rents always lag the purchase prices. So the deals are getting worse. They're getting a lot worse. So get off the fence and get in, folks. That's my advice.

So another question for you. I bet there's a lot of your listeners are like me. I own six rental properties. I have two that I'm working on right now. I'm trying to get to 10 by the end of the year, if that's even possible. But I hear this term do your due diligence. And I know what that means to me and what I do. And I'm wondering if I'm doing my due diligence, if that definition. I call up the local market specialist, I call up the local property manager. I do go on Trulia and I will do a search and kind of just see what the area looks like. But where else and how else do you do due diligence?

Okay, well, hang on. Okay. Because I want to finish this. Okay. And the Performa part is almost finished. So let's just talk about the Performa. Let's answer your other questions about systematizing your business so it can be repeatable and duplicatable. And then due diligence is a really big subject. But, you know, I'm happy to talk about it. So next we go down to cash on cash return or ccr. Now, on this property, the cash on cash return is projected at 14%. And by the way, I said projected. Again, understand that all of this stuff is a projection. Even when the property is pre rented, which many times our properties are pre rented and there's been a tenant in there for three, four, five months paying the rent. But it's still a projection because maybe the cost will go up, maybe it'll be higher than was projected, maybe the tenant won't pay the rent two months after you buy it or they'll cut you you short by $200. So everything's a projection. Just understand that. But the, the cash on cash return here is projected at 14%. I mean, look, what that tells you, Neal, is that if the property goes down in value to zero, say it's worth $0 the day after you buy it, but you still maintain the income and expense ratio, you're going to get 14% on your money before you get any tax write off. Assume you don't qualify for any tax write off, you got 14% on your money, and then make it even worse, assume it only goes half as well, you got 7% on your money with no other benefits considered at all. So cash on cash is a really, really nice way to look at the sort of doom and gloom like worst case scenario, just run the property, manage it, create that income, maintain those expenses and there's your cash on cash return. You got it. And just remember to keep it in perspective. Crooked Bernie Madoff, who made off with billions of dollars, right? He was like the star of the exclusive investment club of celebrities and wealthy people because he promised people in his Ponzi scheme that he could get people between. I don't know what he said. I think he said 10 to 12%. I think he even said 8 to 12% consistently year in and year out. And I mean here you got 14% if you never raise the rent. And so that's just phenomenal. And then the last single number I look at is in bold, and that's the total return on investment or the overall ROI. This one projected at 24%. And that's the last number. But then there's another section you want to always look at and it's the last section there on the right hand side in the lower right. And that is the assumptions. Make sure those assumptions are conservative and reasonable. What a lot of my competitors do is they all make the purchase price different from the initial market value, which will skyrocket the roi. They'll make the appreciation rate unrealistically high. They'll put zero vacancy. They'll say, hey, it's pre rented. There's no vacancy. Well, you know, that's not really. Yeah, always figure one month per year, if not more, and they'll put some artificially low management fee, lower than normal maintenance expenses. So just make sure those assumptions are in line. Now let me go to your next question and then we'll get to due diligence. Your next question was what other tools are there? What other software is there? And a lot of people use Quicken or QuickBooks, and I think that's fine. Honestly though, what I have found even easier than that is to simply use your online bank. Now, my bank, I bank with one of the big banks and I have numerous accounts with them and I bank online. And one thing I do with all my lenders is instead of paying their mortgage payment online, I have them auto debit from my account. I tried it the other way at first, but I didn't like it because I found that things would adjust and the escrow or the impound account would adjust. I don't really believe in adjustable rate mortgages too much, so it was pretty rare that I'd have one of those. But I just make it the lender's responsibility to go and get the money from my account. Now, of course, you got to make sure you maintain a balance so they can get their money every month. And then just banking online and just paying all your expenses online, I found that to be very convenient. The other thing is, as I alluded to before, having one single insurance broker to insure your entire nationwide portfolio so you don't have to pay a bunch of little policies that expire all at different times that have varying levels of coverage. The single source for insurance I think is just really, really handy.

Can you give me a reference for that? Because I do not do that currently.

Yeah, I sure can. I'm just really excited about that. I mean, few things have excited me this much, I should say, about the operational side of investing. This one is big. It's really convenient. But yeah, you know, so as far as tools, those are some of the things I would recommend. And then due diligence. Now that's a huge area. Okay. And we've talked about it on prior shows, but you know, I don't want to do a comprehensive thing on due diligence now because it'll just take too long. But do you have like some specific questions or do you want me to just talk generally about it?

Well, you can take whichever direction you want, but like I said, I call the property manager, I call the Local market specialist. I'll even go as far as calling a sales rep that works for me in the area, give me his opinion. I'll go there if I can. But that's not always possible, especially in today's market where you want to move fast on these deals and you don't want to miss them. So how do you do it? Well, from afar?

Well, you do everything you said, but in addition to it, you call at least one more property manager. You don't just call the one we refer you to, okay, you call another one that you just find yourself on Google and you get an independent, unbiased opinion. That's not someone we connected you with. I always say, look, commandment number one of my ten commandments of successful investing is thou shalt become educated. Become educated so you can be your own best advisor. Don't rely on anybody. Don't rely on us. Don't trust us. We don't want you to. You know, I don't want to have clients that say, hey, I just completely trust you. Just, here's my money. Go do it. That's just way too much liability for me, okay? I want an educated client who does their own good, due diligence. So just Google and find a property manager and that area and just find a totally independent person and get an opinion. Now, you take everything with a grain of salt, remember, you know, everybody's got an agenda, even me, and just kind of take everything with a grain of salt, as the. As the saying goes, and just kind of see through what they're saying. And you can use sites like Rent O Meter. I mean, these are not real accurate. Trulia and Zillow aren't real accurate either. But they're a guide. They're better than nothing, which is what we had years ago. We had nothing. Now we have something. So do that. But the other thing you definitely want to do is go on Google Earth or the new Apple Maps on your iPhone, if you've got an iPhone, although they've had some problems with that at the time of this recording, but they are fixing them and. Or look at the Google satellite images and look at the property from above. Many times they have a street view. Look at the street view when you look at the property from the air. Look around and see and ask yourself, do you see any train tracks? Do you see what looks like a big building with fences around it? It might be a prison or a jail, right? Do you see anything that looks like a garbage dump or a landfill? What do you see? And do you See shopping nearby and do you see conveniences in the neighborhood and so forth. Those are things that I would look at as indicators. Now, all of that said, does it mean that you couldn't get a good deal next to a prison? No, you might get a great deal, you know, but most people listening don't want to buy a house next to a prison. Right. Because that, that could imply danger. Most people don't want to buy a house next to a railroad track. Although certainly you could get a great deal by a railroad track. As long as everything is priced into the deal, then everything's a good deal at the right price. But you want to know what you're getting into. And so definitely the satellite images and the street view, very, very nice tools that we have nowadays that you didn't have before. I want to announce something also on the show for the first time. I've never talked about this before that I can remember. There is a client of ours who we did interview on the show a while ago who hires people off of Craigslist to go take pictures of his properties. He's like Mr. Super Careful Guy. Okay. And he admits that he's probably too careful. You know, sometimes when you're too careful, you talk yourself out of things. But he'll hire someone off of Craigslist and have them take pictures of his properties every month. And, you know, he tells them, I want you to take a couple of different views. I want to make sure you get this and that and email them to me every month and I'll pay you 25 bucks or something like that. Now there's actually a company that is now doing this type of thing. Not for properties per se, for anything. And I discovered them when I attended Blog World in New York City several months ago. And I actually had them on my Speaking of Wealth show, which is a show for authors and publishers and things like that. It's not about real estate, but it's a company called Raw Porter R A W P O R T E R instead of reporter. It's Raw Porter and you can hire people on their website to go and get raw footage. They'll go do video, they'll go take still pictures, they'll go even interview people for you. It's really kind of a cool concept and I really hope they get it off the ground and make it very successful because I think for us remote long distance real estate investors, this could be a very convenient thing.

Yeah, that's really interesting.

Yeah. You know, you could hire a Raw Porter to take pictures of the Property to take pictures of the street scene, to take a video driving away from the property to see what you see around the neighborhood, what the shopping center looks like, who knows? The applications are limitless.

Yeah, that's a fantastic entrepreneurial idea. I like it.

Nowadays, I mean, look, years ago, when I first read one of Robert Allen's books, I remember he said, always buy a house that's within an hour of where you live so you can keep an eye on it. Folks, we've all got to understand, and I think most of us do, that geography is far less meaningful than it's ever been in human history. It's still meaningful. It still means something, but it means a lot less than ever before. And what do I mean by that? Look, I hire people to do various jobs all over the planet for me on Craigslist in a matter of minutes. I mean, it's just so easy now. You can just. You can go online, you can get great hotel deals, great airfare deals. I mean, the geography is not the obstacle it was in the past. I mean, think about it. Before the Internet, in the early 90s, you could get on a plane, you could fly across the country in four and a half hours, and you could do that as of the 1950s, and it's still about the same amount of time now. But what was it like before that? Well, you drive across the country, it'd take you a week, and before that, you'd take a stagecoach, and you might not even live through. The journey would take you months and months and months. So geography is becoming less and less meaningful and less and less of an obstacle nowadays. So use that to your advantage. There's so many tools now that allow us.

I'd have to say that that is probably the thing that slows me down the most, is the fear of the unknown. But lately it's becoming the fear of missing out overwhelms the fear of the unknown. Well, you've got to jump in and move.

Yeah, yeah. And I. And I think that's a pretty good philosophy. You know, Know what? You can do a prudent amount of due diligence. Don't overdo it.

Jason. Yeah, thank you very much. That answers my questions very well. I think I'm doing most of things. I pick up a few new things. I like the raw porter concept. That's actually something I might incorporate.

Good stuff. Hey, Neil, happy investing to you, and thanks for calling in again.

All right, Jason, thank you. Keep it up. I enjoy the podcast.

Take care.

All right, bye. Bye.

Jason provides an Extremely unique service. Deal evaluator. Are you interested in a property outside of our network? Need a second opinion? No problem. Let our experts evaluate the deal. Find out more about it@jasonhartman.com.

It'S my pleasure to welcome Barb Getty to the show. She is the author of the Landlord Chronicles and she is an investor herself and owns about 27 units of her own in Indianapolis, one of our markets that we've been doing in business in for many, many years. And it's just a pleasure to welcome her to the show. Barb, how are you?

I'm good. How are you doing?

Fantastic. Well, tell us a little bit about your background and how you came to write the book.

Well, I kind of backed into this career. I was the mother of three teenagers and we had moved to Indianapolis in 1980 and then in 1992 when my son was 17 and my daughters were 16 and 14, my son was killed in a car accident.

That's just awful. I read that in your bio, boy.

Yeah, yeah. And I. It was just a devastating event, of course, for all of us. And so I needed to find a home for myself and my girls because my husband, we ended up splitting up about eight months after Todd died. And so I found a little house here in our suburb and needed some work. So.

One of my daughters, she was 16 then said, she took one look at it when I, before I, before we bought it and she said, oh my God, you mean we have to live here?

I just, you know, tried to get through it and after this rehab was done, you know, my friends started saying, barb, you should do this for a living. So anyway, I ended up buying my first duplex shortly thereafter. And so I've just kept on going. And today I've got 27 units, like I said, and I do property management. And I ended up writing this book because when I started out in this business, I mean, I read the books, I read a lot of books and I tried to do networking, but what I found was the books just didn't really tell you everything you needed to know. And having been an English major at Purdue, I thought, you know what, I can write this book. So I just did a very, you know, simple start to finish. It's a how to and also a how not to because it's got some hilarious stories in it that were my own screw ups as I started out in this business. But it just pretty much goes through all of the phases of finding properties, deciding what you want to do, you know, what's your niche, finding Good tenants. And then there's a big section on, you know, managing your property, fix ups, tools, techniques, and then, you know, there's a section on exit strategies. So, and I put a lot of my own forms that I use in there. So it's just an overall written in conversational tone. There's a lot of humor in it, but it's packed with information.

There's a lot of misinformation out there. Of course, the most expensive seminar is the life seminar where you learn from your firsthand experience.

Isn't that the truth?

Yeah, it sure is. It sure is. So it's a lot cheaper to get education from other people and learn from their experiences. But you know, you got to be careful because there's just a lot of people hawking a lot of junk out there. It's just not really true and not really the real thing. But tell us a little bit about how people can be better landlords, what, what advice they can follow to do that. And you know, I want you to talk from in two ways if you would. Number one, how people can be their own landlord. But number two, and I think you'll be qualified to talk about this as well, how people can better work with a property manager if they're using a property manager. How they can do a better job of not managing their property directly, but managing their manager. Give us some of the tips from the book, if you would.

Okay, the second part, that is a great question. You know, working with a property manager, I mean, first of all, you have to really check out the property manager or the property management company. Make sure they're, you know, well qualified, honest, that they have integrity and you know, get their references, talk to people who have used them and then from that point on, trust them. Let them manage your property. I mean, good property managers do not need to be micromanaged.

Get everything set up with them and let them do it. I mean, that's what you are paying them for. And a good property manager, I mean, I say to my clients, you know, you don't even have to know that you own this property. I mean, a good property management company should take care of all facets or whatever the owner wants to have taken care of. And if you're paying someone to manage your property, you should have total trust and peace of mind and just get that money coming in. That's my comment about, you know, hiring a property manager. And the other thing is there aren't a lot of people who have the personality to manage their own properties. I had someone ask Me one time. So, Barbara, what does it take to be a property manager? I said, well, you have to be really organized and really laid back. And they just started laughing. They just said, okay. Those two qualities do not appear very often in the same person. And that's true. I mean, because a lot of people who are organized are not laid back. They're very type A. And a lot of people who are laid back are totally disorganized. So you know, there's got to be a balance there in your personality. And another thing is you cannot worry about the stuff you can't control because if you do, you will drive yourself and everyone around you crazy. So you look, I mean, stuff happens, people lose their jobs, they move out sometimes they move out in the middle of the night, sometimes they're not very clean. I mean, you need to protect yourself, of course, in your lease with that and do apartment checks. But there's so much that happens repair wise and tenant management wise that you can't control. So just don't get upset about it, just take care of it and move on. And you know, after you've been in the business for a few years, every problem you face is just really a variation of a problem that you've already faced before. So it just, it continues to get easier and easier. And I also, I really talk to people a lot about having an airtight lease. Protect yourself in that lease so that you have the ability to evict for a myriad of reasons when things start going downhill. And lastly, I mean, you can have the best lease in the world, but if you don't adhere to it, why even have a lease? I mean, I know other property managers who, and also people who manage for themselves who have somebody in their place and they haven't paid for two months. And I'm just thinking, oh my God, this is an income producing business. What are you doing? You know, you've got to get those people out and you know, get that thing turned around quickly so that you can be making money again. So, you know, you've got to have a really good lease and you have to adhere to it.

Well, you, you mentioned that you had some funny stories about some of your screw ups when you started out. Experience is the best teacher. The problem is you got to have the experience to get the lesson, unfortunately. And the experience is always a positive one. But tell us about some of your funny screw ups and even if they're not so funny, I think people can learn from them. So they'd love to hear.

Oh my God. Well, okay, here's one. I, this, I had this guy who was in his early 40s and, and he lived by himself and he wanted, he asked me if he could paint his apartment. He's a great guy, paid his rent on time. And I said, well, I don't know, Robert, I, you know, what kind of painter are you? He goes, I used to help my dad and his painting company, you know, when I was young. He said, trust me, I'm great. So he called me when he was done and I went over there to check it out. I mean, he was thrilled and I was appalled. I mean, he had painted the living room a bright blue and he had bumped the ceiling several times with the roller. There were drips down onto the baseboards. The kitchen was bright yellow with a rooster adorned wallpaper border that was pasted haphazardly along the ceiling. I mean, it was just awful. And the bedroom was a dark muddy brown and then the dining room was turquoise.

Okay.

He was so proud.

So the guy was colorblind and he.

Was a terrible painter. I mean he was just so proud. And so, you know, I just let it be. And I thought, okay, Barbara, you are to never ever allow anyone to paint their apartment again.

Well, okay, but here's the thing. I mean, just on balance, Barb, I mean that's a funny story, but on balance, the rule always is they've got to restore it to the original condition. So really, I mean, other than sort of emotionally, who cares, right? I mean, did he not restore it to the original condition? Oh no, he didn't. Okay. So when I see something like that, I might tell the tenant they got to give me a higher deposit right then on the spot. Like, yeah, if they want to do, if they want to do painting, they gotta increase the deposit maybe.

And you know, really with some of my higher income properties, I will trust the people. And I still do make a lot, I still do make exceptions and allow people to paint occasionally. But for the most part, I mean my places are painted very, I mean I do all my own painting. They're painted very nicely and that's just something they don't need to do. I mean, I'll let them put up a border or you know, something like that, but I just try to stay away from, try to stay away from that.

So yeah.

Okay, well, other stories.

Oh gosh. Okay. I had a guy who, very nice guy, but his life started falling apart and he was also a hoarder and he would like to work on electronics and stuff. And so his whole apartment was filled with all kinds of little gadgets and tools. And so, you know, I ended up having to file eviction on him. And when I went back in there, I mean, I opened the door and the smell just hit me. He had had his electricity turned off, which I didn't know. And there were open bags of, of garbage just sitting in his kitchen. I opened the refrigerator door and there was a gallon of milk that was dated six months earlier. You can imagine how that smelled. And there were some, you know, containers of just weird looking stuff in there that had green fuzz on it.

And this, Barb, is why they say you never really know somebody until you marry them or rent to them.

Exactly.

What I really. Exactly. Employing them is even more difficult than renting to them.

I bet it is sometimes.

Yeah, it certainly is.

You know, after, after that incident, I just, I really started doing more, more frequent apartment checks and I, you know, allowed for that in my lease. And when people aren't keeping their apartment up, I, I pretty much tell them, okay, you know, I'm going to come back next week. This is this, this and this, and I document everything. And, and if they can't hold up their end of the bargain, I just, they have to leave. And I never let people know that I'm the owner of the property, which is a wonderful ploy because it protects me. You know, when someone's being evicted or when they're asking for some, you know, for an upgrade or something ludicrous or whatever, you know, I can say, you know, let me talk to the owner about it and I'll get back with you. And that has been a really good thing that I've implemented over the past probably 10 years. And it's just, you know, it keeps you as a middle person and the tenant then does not get angry or resentful towards you. And when they're behind in their rent and you know, that they have to go, you know, I mean, I can just come back to them and say, you know, I'm sorry, I'm going to have to file eviction on you. Well, did you talk to the owner? I said yes, yes. But you know, he's just not willing to let this go any longer. I'm so sorry. And then I usually just try to.

Bribe them out and they usually figure out, a lot of times they figure out a way to pay. You know, a lot of. That's sort of a game of chicken, frankly. Yes, they think the owner's not going to really do anything. So that's what that's why? As a landlord, you got to be strict. The rules are the rules. Your mortgage company, they want their payment no matter what. You got to collect your rent no matter what. But I find it interesting, Barb, that in chapter three of your book, the Landlord Chronic, you've got a chapter about the F word and the F word is financing. I wanted to ask you about private loans. You know, I have a chapter about being creative with private loans because a lot of our clients, they have more than 10 properties, they can't get any more Fannie Mae, Freddie Mac mortgages. So they're looking for more creative alternatives. Anything you'd like to share with private lending there?

I just know that when you get to know people in the business, there are people like yourself, other people similar to me who have been in the business for a long time and they end up sort of moving out of the owning properties into becoming lenders.

For people like us.

Yeah, and I do a lot of lending, by the way, let me just mention that you said people like yourself. So I do a lot of private lending and I find our clients are doing a lot of private lending nowadays. And I do like it. I like owning the property the best. I think it's, there's much more upside in owning the actual property. But for simplicity sake, the private lending isn't bad. It's not bad, but, but owning the property by far is, you know, a better investment.

That's, Yeah, I, that's, I totally agree with that. And that, you know, my, my investment goal from day one was to buy these properties for income and long term investment. And so I've just kind of stuck with that. And you know, there are so many different ways you can go in this, in this business. And you know, I find, I find that there are some investors who say, oh, that sounds good. I'm going to try that. I'm going to try that too. I'm going to do this.

The flavor of the month is a dangerous philosophy.

Oh my gosh, yes. Find your niche. Find out what suits your personality and your lifestyle and the amount of time you have and stick with that. I mean, I think it's a pretty simple formula to do.

I agree. The people that are always chasing the end of the rainbow never seem to find it.

No.

Now that I'm a little older, I've known those people for 20 years and they still haven't found the end of the rainbow.

But they're still chasing it, aren't they?

They're still chasing it because they're delusional, frankly.

Yeah, yeah, they're sure it's just around the corner.

They really are. What do you have to say about. Well, first of all, on private lending, have you been able to get any longer term private financing or was that always short term type stuff?

For myself, I, what I did was I, I bought my first property for 19,000 bucks. It was a duplex with cash that I received from my divorce and I.

And what year, what year was that?

What year that was in 90.

1995. Okay, so about 17 years ago. Okay, go ahead.

And. And I had to, I had to pay cash because I had no credit. I mean, I had never thought of getting a credit card in my own name. I had no accounts in my own name so the banks wouldn't touch me. So I had to pay cash for that property. And then, so I just started building credit for myself. And then I sold that property after about 15 months for about.

Almost three times what I paid for it. And then I turned around and I bought two more properties. And then I just kept going like that. And then I got a home equity line on the house that I own and so I bought properties that way. Then I bought a couple more and then I fixed them up and then I mortgaged them. So I got three mortgages. And that is all that I have done as far as the lending route. I've continued to buy and I have flipped a few properties along the way, maybe just two, but basically I've just, I've just bought and held.

Yeah. And I find that that's really the ultimate strategy. Buy and hold. Tell us about insurance and liability. What have you learned there?

Oh, well, you have to really protect yourself. I mean, I, I had a major fire at one of my places one time and I was sitting here on my couch having a glass of wine with one of my friends and, and got a phone call and I heard sirens in the background and it was my tenant saying, barb, the house is on fire. So I went and I mean, one of the units was totally destroyed and thank God I had it, well insured because, you know, everything was paid for. And also, like with liability, I mean, I've never even been threatened with a lawsuit in these 17 years. But.

And you know what, I just want to make a comment on that, folks. Same with me. I tell you, there are too many lawyers and there are too many promoters out there that are promoting, and they're not even law firms, they're these firms that are promoting all these entities. They'll sell you $15,000, $20,000 worth of LLCs and corporations and trusts and all this junk. I can't say that's bad, but I can say a lot of these companies are bad because, you know, I have. I have been in litigation in my businesses, but I have never litigated over like a landlord tenant thing that I find that that liability is easy to insure around. It's totally overplayed. People talk about the slip on the banana peel. I don't know anyone that's ever happened to. And by the way, I. I had a. I had a small fire in one of my properties recently. And, you know, it's no big deal that now the tenant caused that one. So, I don't know. Was yours. Did you have any responsibility for that fire or did the tenant cause it?

Well, I had evicted a person out of that unit and he had a space heater in there that was faulty. And so it started with the space heater.

So was that your fault? Did someone determine your fault?

No, no, it wasn't. It wasn't my fault. But. But I never saw that kid again. He left. He just left. And so my insurance people just took care of it.

Yeah. Okay, good. So have good insurance. Anything you want more you want to mention on having good insurance, I totally agree with you.

I mean, really, if you treat your tenants with respect, which I always do, even when they don't deserve it, some of my tenants have been less than stellar. But if you treat your tenants with respect, no one is going to sue you. So you just get, you know, like you said, you protect your properties, make sure that they are well maintained, and you're going to be fine.

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Anything on physical space. In chapter six of your book, you talk about the physical space of the property and the physical attributes. One of the things that I think is an extremely simple tip that everyone listening should follow is when you have the first chance to repaint any of your properties, paint all the walls with eggshell or low sheen paint because it is so much more durable than that junky flat paint that, you know, scratches and scuffs all the time. Yes, yes, but that's just a real simple one. Of course, there are more complex things than that. But do you have any advice on baseboards or walls and ceilings, windows, doors, kitchens, bathrooms, floors, locks, keys, you know, any of that kind of stuff?

I do have a really good tip on keys. Now, when I started out, you know, when you just have one property or two, it's no big deal, but when you get up in numbers in your properties, you're juggling all these different keys. And so I went with a master key system whereby like if my place had a front door and a back door, I would have a set of tenant keys and I would take the locks off of the front door, take him to my locksmith and tell him to master it to this other key. So I have one master key on my key ring that lets me into the front door of every single property that I own. And I give that master. I have a copy of my master key that I have given to my H Vac guy, my plumber, my carpet guy. And that way I don't have to go down there and meet them for anything.

Okay. Now I do want to mention, I do want to, I do want to mention something on that though, that could create some liability for you. So you got to be careful of that one. So number one is those people, you really had better trust them. Know that they're insured, bonded, etc. Because you don't want to be given keys out to your tenant's house to just anybody.

Right? Right. My carpet guy's been with me for 15 years. My furnace guy's been with me for 15 years. Yeah, I would never, I would never give it out to anyone that I didn't really know, you know, very well. So. But yeah, that's. It's so much easier to just have one key that lets you into all of your properties as far as space, you know. A comment on flooring. I prefer carpeting in the main rooms, aside from the kitchen and bath, because it is quiet, it's warm. I prefer that over wood or laminates just because of the noise factor.

Now, are these two story apartments you're talking about?

A lot of mine are two story. I do have some one story.

But you have a different tenant below than you do above. Right. And so if you had a wood floor above, that would. Or tile, it would make a lot of noise below. If you. Unless you have a really newer, high quality construction type building or.

Right, exactly, exactly. I just had one of my kitchen. I had ceramic put in there and that of course is very durable, but it's kind of costly to put in. A lot of my kitchens have just vinyl. I also used early on, I used a lot of the peel and sticks on some of my lower end places and they looked good and they were easy to maintain. And now I notice the peeling sticks. There are some that actually have a beveled edge so they actually look like ceramic. And those are very easy to use too.

You have a chapter on accounting and tell us a little bit about some of the things people can do to better organize their business. And what do you mean when you say confessions of a 70s girl?

Well, I mean, accounting and all the numbers stuff is just not my deal. I struggled through geometry in school and, you know, I just was not a math person. And so tackling that part of the business was kind of a dread of mine. And when I started out, I started keeping everything, all my properties on 13 column ledger sheets, paper. And so when I finally got into the computer, more into the computer stuff, now I keep them on Excel spreadsheets. I don't. Some of my friends do Quicken or QuickBooks, but I've not taken the time to buy one of those programs and get up and running with it because these spreadsheets have been so easy for me to use. And you know, I just send them to a hard drive. I file my monthly receipts at the end of every month and it's been very easy for me to do. So I just, I really like to keep things simple in my life as much as I can. And that's been a simple thing for me. So I think everybody needs to find out, find what their easiest way is for the accounting stuff. But I file all of my. You have to file all your receipts for each individual property and you've got to keep really good and tight records. So I can't stress that enough.

Yep, you sure do. What would you say about real estate investing and what some of the benefits are? We've talked about certainly about a lot of the problems, but what are some of the benefits and what do you think about where we are right now in the market cycle?

You know, I keep hearing in the media how, oh, you know, the housing depressive time is done. You know, we're totally in recovery and I'm thinking I don't think so. I mean, I think, I still think that we're kind of in the middle of it. What do you think?

Yeah, I think the recovery is a fake recovery. I think it's sort of a recovery in a way, but it's a fake one. And here's what I mean by that. If you look at the alleged, which is of course totally understated rate of inflation, they put it around 2%. If you look at the GDP, that's around 2%. So basically the economy is not growing at all. It's just stagnant. But if you take real inflation at I believe about 10% and you compare that the economy is actually shrinking by about 8%. And my listeners, and I hate to be political, my listeners will know well that I'm no fan of Obama. And one of the things I just learned today, I hear you. Okay, well you agree every. Everybody in business who actually, yeah. Very rarely an Obama fan in business. So I feel pretty safe saying that. But I know there are a few out there, so I apologize in advance. But, but here's one of the things I just learned actually. And this is kind of an amazing statistic for every job created under the Obama administration, not necessarily giving them credit, but you know, the economy has created these jobs, right. 75 people went on food stamps at the same time. So I think overall, yeah, I mean, isn't that unbelievable? For each job, 75 more food stamp recipients. And you know, of course that's a way to build in your permanent voting block, give people stuff. But I mean, it's, I think, I think the population is getting poorer and I think we ain't seen nothing yet. I think, I think the population is going to get a lot poorer. But the deception is going to be this, it will feel like there's a recovery, just like it does now because the stock market could even go up or at least hold its own, which it's not lately, obviously, but you know, it might. And real estate prices could go up. But the question to ask oneself is are those prices in real dollars or nominal dollars? Are they adjusted for inflation? And if inflation is higher than appreciation stocks or you know, what other investments are paying or gdp, people are getting poorer. The economy is getting smaller. And I think that's happening. And so I think what we're going to see, and you may have seen this already over the last 17 years in owning your real estate, but I think we're going to see it a lot more. And it's this, we're Going to see a lot more people moving down. We're going to see a lot lower homeownership rate. If you talk to your tenant five years from now, this tenant of the future, it's 2017, say you have a conversation with your tenant. I guarantee you you could have a lot of conversations like this. Oh, yeah, you know, what's your story? Ask them about their past and they'll say, oh, yeah, we used to live in a house that was twice this size in a nicer neighborhood and we owned it. Now we rent it from you. It's half the size and it's not as nice a neighborhood, but that's the way people are going to slide down the economic ladder, in my opinion. And I think it's just happening all around us.

Right. And that. And they will just try to make it work. They're just going to try to make it work for themselves because they're probably fearful and they do have less spendable income. And I think that's going to continue. I mean, it's good for those of us who are investing in real estate.

It's great for.

Yeah, rentals are going to abound and rental prices have continued to go up. So it's great for us, but not so great for our country.

You know, it's not so great for the country. But I'll tell you the other big thing that's actually great for us and that is the student loan debt crisis. I mean, student loan debt now is over $1 trillion with a T1 trillion. And it's never been so high. And let me tell you something, these Gen Y kids that are coming right into their prime renting years, they're not going to be able to buy a house for a long, long time. And they're going to be renters and they're going to be renting from us. And especially if you own single family homes, I think that's kind of a really unique opportunity. And I own both. I have apartment buildings and single family, but the single family is kind of unique because when someone wants to feel like they own a home, they're going to want to rent a single family home.

Yes. And they will take good care of it.

Yeah, yeah. So I think homeownership is going to be long put off by this generation and it's not going to be by choice. But at least we're here as landlords to serve them, and that's what we do.

And there are good landlords and bad, bad landlords, of course. But yeah, I think the future is really strong for those of us who are investing, especially in the single family homes. Like you said, I do too.

No question about it. Well, hey, Barb, people can get the book, of course, on Amazon.com and you have a blog as well. Do you want to give out your blog web address?

Sure. The blog address is www.thelandlord Chronicles. One word Lord.

Thelandlordchronicles.com and they can buy my book through my blog. And my blog just has a bunch of posts on it that are of value to people who are investing or people who are landlords themselves.

Great. And on Amazon, it's available on the Kindle format as well. So I commend you for doing that. The book, the full title is the Landlord Investing in Low and Middle Income Rentals. Barb Getty, thanks so much for joining us today.

Thank you so much, Jason.

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