1933: Creating The Perfect Tenant, Self-Management, Maintain Control, Empowered Investor Live

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Hey Jason, just wanted to send you a quick message of gratitude. So grateful that I got into the.

Game and got in with properties that.

Make sense because the rent income keeps coming in.

So thank you.

Glad we connected and I'm glad to.

Be in the income property game instead.

Of the Wall street game for my future. Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slant.

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Hundreds of tenants and been involved in thousands of real estate transactions.

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Welcome to episode 1933. 1933 and thank you for joining me Today we are going to talk about two important but very related topics. We're going to talk about self management tools and we've got a guest here today with an educational program on self management that is very rare. In fact, I don't know if anybody else besides our guest today has that besides us. Well, we have that. We've been educating you on self management for a long, long time. But our guest has a course on that as well and I think you'll like what he has to say and learn from him. You're going to surprised but I got to tell you I agree with him about one major point that he makes and I think it's toward the beginning of the interview if I remember correctly, because this is counterintuitive. It really is counterintuitive. But check it out, we will get to that in just a moment. But speaking of maintaining control and that's what self management really is about. Commandment number three, thou shalt maintain control. And if you are not self managing your properties that's fine. You know, I recommend it. You know I'm a big fan. When I have self managed properties I just find that there's a much smoother, friction free type of arrangement going on. Whereas when I have a manager and you know I've had both many, many times over, many, many Years. I find that when there's a manager in there, you got someone with another agenda. Now, the question is always compared to what? Well, if you compare it to pretty much any other investment opportunity you have, you're going to have lots of middlemen, lots of people in the middle with their own agendas. If you invest in stocks, bonds, mutual funds, syndications, any type of pooled money investment, you're going to have all these people, all these intermediary parties, and you have risk with those parties. You all know about my commandment number three that I developed a long, long time ago. And commandment number three has resonated so well. Thou shalt maintain control. Because when you don't, you leave yourself susceptible to three major problems. Might be investing with a crook, might be investing with an idiot. Assuming they're honest and competent, they take a huge management fee off the top for managing the deal. But. But wait, there's more. It's actually much more than this. And that's why I wanted to talk to you about that today before we get to our guest. When we look at what is going on right now with investors in a hugely significant way. You know, I was thinking about this the other day. I was reading an article about how one of the big mutual funds, they had to sell a bunch of their assets to raise money for other liabilities that they had. And in doing so, they triggered a big taxable event for the investors in this fund. And the investors are thinking, I didn't sign up for this, you know, but here's how it happens with some third party, they can cause you a tax liability because of the way they are managing the investment. You have no control over this. So commandment number three, thou shalt maintain control. Now, when you think of the three issues you leave yourself susceptible to, might be investing with a crook, might be investing with an idiot. Assuming they're honest and competent, they take a huge management fee off the top for the deal. But in this case, none of those is necessarily true. I mean, I don't know, maybe they're a crook and they had some crookery and that led them to have to sell the assets. Maybe they're stupid and that led them to have to sell the assets and trigger a tax liability for all of their investors. Maybe that was one of the issues. But let's just give them the benefit of the doubt. And assuming it wasn't, let's assume they did everything right and it's just the way the market went. You still, at the end of the day, have a tax Liability because you invested in a pooled money asset. If you were a direct investor, you would have complete control over this. Imagine getting this surprise tax bill that you didn't think you'd have to pay just because you put your money into this fund. And that's what can happen, folks. But wait, there's even more. So let's take a look here. So this you may have heard about in the news, but of course, Blackstone is this ginormous company. Huge, huge company. And Starwood is another big one. Well, this article, this is from the Wall Street Journal, says investors yank money from commercial property funds, pressuring real estate values. So these commercial real estate deals that they're invested in could go down in value as they have to sell assets to raise money to satisfy the withdrawals. So guess what they did. They froze the withdrawals, and they said to the investors, hey, sorry, you know, just like the cryptocurrency exchanges, we are freezing your money. You can't get it out. I mean, folks, if you are in control, if you follow commandment number three, you can get your money out. So look at this on the screen. If you're watching this on one of the video platforms, if you're just hearing it on the podcast, you know, just listen along, you'll be fine. Okay, Big and small investors are queuing up to pull money out of real estate funds. The latest sign that a surge in interest rates is threatening to upend the commercial property sector. Now, you know, we're not into commercial real estate over here. We like residential real estate for all of the reasons. The only necessity at the end of the day is housing.

Right?

Retail can be outsourced to the Internet. Offices can be outsourced to home offices and remote work, or overseas to India, the Philippines, China, whatever. Manufacturing, industrial properties outsourced to China. The workshop of the world. Obviously, we know what's happening now with the trade. And, you know, globalization is kind of contracting. Well, not kind of, it's seriously contracting. So that's changing some things for sure. And this will be better for industrial real estate in the US but remember here you still got a million challenges. You've still got all of the regulations, you've got all of the OSHA issues, you've got all of the environmental issues, you've got all of the human resources issues, the wages so much higher, yada, yada, yada, the liability of having employees so much higher. And you just don't have this in China. And it's not fair. You know, like I've always said, if you're gonna have free trade, which I'm a believer in conceptually, but only conceptually because a lot of difference, concept and practice are very different things, as we know. And by the way, I'm on a little bit of a tangent, so this is a tangent alert. But concept and practice different in a, in an ideal world, yeah, free trade, you know, open the borders, let, let the goods flow freely. I'm a free market person, of course, but the trading.

Need to be equally yoked. We go back to that biblical concept. And as a biblical concept, in the Bible they were talking about how that applies to marriage. Both marriage partners need to be equally yoked, right? To have a successful marriage. And I agree that's a legitimate idea, right? But in the trading world, in the business world, you've got to have partners equally yoked too. Now another way you could look at this is a phrase I use often, which is an alignment of interest, right? Aligned interest. That is like being equally yoked. And the problem with having some middleman or some pooled money asset that you're investing in, right? You don't have an alignment of interest. You have different parties with different interests. When you are a property owner and you own residential property and you have a manager, you have one party that is out of alignment with you, that's the manager, because they have to serve two masters. So it's difficult, right? I mean, even if they're the most well intentioned, great, phenomenal, honest manager, and there are many of those, but not as many as there are crooked, bad, lazy, awful property managers. That's why we vet them and recommend them to you. But even then, it's still not perfect. I get it, I totally get it. But you only really have one party that has an interest that may not be aligned with you, but you invest in a fund, a stock, a mutual fund, a bond, you've got a slew of people that are out of alignment with you. If you invest in a syndication, any kind of pooled money deal like we're talking about now with Blackstone and Starwood, those are, you know, big funds, big REITs, real estate, investment trust, there are so many parties that are out of alignment with you, okay? It's better to have fewer parties that are out of alignment with your goals than many parties that are out of alignment with your goals, right? At least if you're going to have people out of alignment, minimize the number of them, right? And ideally, if it's just one. Now, when you directly self manage a property, of course you have One person, that is the counterparty and that is the tenant. So they're obviously out of alignment with you, right? The tenant obviously wants lower rent, you want higher rent. They are a counterparty. But folks, every transaction has a counterparty. You always have a counterparty. That's the way markets work. That's the way capitalism works. That's the way, hey, that's the way socialism works. That's the way communism works. There's always a counterparty with an opposite interest of you, okay? And that's fine. Just expect that. But when you put these people in the middle, like a bunch of investment bankers and a bunch of brokerage firms and executives of the company, C level executives and all the vendors of the company and the employees of the company and the customers of the company, you got so many people with interest that are not aligned with yours as the investor or the shareholder. Why would you want that, right? You want to be as direct as possible. And look, folks, I get it. Being direct, it involves some more responsibility. You got to pay more attention to everything, right? You've got to do more stuff. You got to be a little more involved. And I tell you, just with my own life and you know, I had a kind of a big deal happen in my life that sort of woke me up not too long ago. And you know, I'll be the first to admit I'm having a little bit of a midlife crisis. It's caused me to re examine my life. But it's a positive way. I think it's actually really quite good. And I am lightening my load. I'm lightening my load of direct investments, okay? But folks, I may be at a different stage than some of you, right? I've been doing this a long time. I've made a fortune in this, right? You know, at some point in your life, you got to realize, okay, and maybe it took me longer than most to realize this, that, you know, ambition and money and success isn't everything, right? You know, it's definitely something. And as I've always said, take care of the money problem, take care of it, get it out of the way, handle it. Right? And you know, I mean, I think most people would agree, at least I do. I've handled it, I'm done with it, right? I don't need to do it. But you know, I want to have myself in the game. So I have an understanding of it, you know, But I want to lighten that load a little bit. And you can do that too. When you get to the stage that you feel comfortable when you've gotten to the stage where you have enough net worth to live many lifetimes over, even if you invest it at a low yield, then you gotta really question yourself, like, what is the point? All right, what is the point? And so, you know, that's another subject, probably for a 10th episode show. But it's a worthwhile question. You know, maybe go back and listen. If you're thinking about some of this stuff and the idea of moving from success to significance, which people usually do a lot of times in the second half of their life, then go listen to. The interview I did was a 10th episode show with the author of 4,000 weeks. 4,000 weeks, which is the typical lifetime. It's 4,000 weeks, right? That's the average lifetime. And what's funny about that is in the book, the author talks about how, you know, surveying people and what they consider to be old or elderly. And people said 85, yet the average life expectancy is like 79.

So, you know, that's pretty funny, right? It's pretty funny that people would. Cognitive dissonance is all around us, folks. It's all around us. We do it to ourselves. We do it in all kinds of ways. You know, we're so funny as humans. We're just so. So illogical. You know, we end a relationship. Maybe it's a romantic relationship or a business relationship or whatever, right? And somehow when that relationship was happening, we loved the relationship. We thought the relationship was, you know, pretty good. Maybe we didn't love it, but we thought it was good enough, okay? So, you know, we kept the relationship going, but if for some reason the relationship ends, you know, you feel like the other person does something wrong, the other company does something wrong. You know, if it's a business deal, they rip you off, then you find all of these reasons. These, like, petty, silly, just dumb reasons that, oh, they were a bad company or they were a bad person, or this is why we can't have that relationship, you know, blah, blah, blah. And we start, like, rationalizing it in their mind, right? This funny association, the littlest, dumbest things, right? And we just do that. That's our human nature. That's what we do as people. So people pulling money out of these funds. So direct investing, that's the topic of today's episode. And here, Blackstone Inc. Said last week that it would limit the amount of money investors could withdraw from its $69 billion flagship real estate fund following a surge in redemption requests. Starwood Capital Group, shortly after notified investors that it Was also restricting withdrawals in a $14.6 billion fund according to a person familiar with the matter. You know, I hate when they say that. And I gotta tell you, as much as I generally like Wall Street Journal, I frickin hate when they say that they should cite the person. Now again, you know, under the first amendment, reporters do not have to disclose their sources. But I doubt this is something where you need to protect a source, okay? This is not Watergate, okay? This is a simple thing. I hate when they say this according to a person familiar with the matter. Are you freaking kidding me? I mean that just. I just hate that. And you know Wall Street Journal does that all the time. I like you, Wall Street Journal, but that's not cool. You got to fix that, okay? Now sometimes it's appropriate when you want to protect the source. And it's good that we can protect the source and have what's called the reporters shield law. I've used that before because I'm a reporter. Okay? And it's a legitimate thing. But again, you know, they do this all the time when you don't need to protect a source. Right. It's just silly. Okay. The Blackstone and Starwood funds are two of the largest non traded real estate investment trusts. Non traded, so they're not publicly traded. A popular investment structure with wealthy individuals. Now look at this chart. This chart blows the mind. It's absolutely mind blowing. Look at the withdrawal. These are withdrawals from non traded real estate Investment Trust or REITs in 2018. Minimal. Well below the 500 million which is the first. The first number here. And then it bumped up right before 2020. Or is that 2020? It might be 2020. That's probably the COVID era, so probably right about there. Or maybe it was the end of the repo market, I'm not sure. Or the repo market, not the end of it. But the disaster that was noted at the end of 2019. And then you see these redemption requests go up, but they have skyrocketed. Absolutely skyrocketed. Okay. To $3.7 billion. How much? Non traded REITs paid out in redemptions in the third quarter. That marked the highest withdrawal figure in years and a 12 fold increase from a year ago, from the third quarter of last year. That is absolutely shocking, folks. And this is what happens when you invest in a pooled money asset. It's another counterparty risk. And in these pooled money assets you have lots of counterparties. Why not just have one or two counterparties in a typical deal that our investors do. Of course, I'm referring to my real estate company. You know, I have other businesses too. But in those deals, right, for those of you listening to this, the typical deal is you have one or two counterparties. You have, if you have two, you have a property manager and a tenant. Okay. And if you are self managing, you only have one, just the tenant. And usually the tenants are extremely easy to deal with. I know there's like this myth that tenants are so difficult. I get it. I've heard it all, okay? You know, I saw the movie Pacific Heights, okay? You know, I've heard these horror stories, but let me tell you, after decades of doing this myself, they're just so infinitesimally small as to be just negligible. Yeah, occasionally they happen and they get lots of publicity and everybody talks about them and. But it's just not that common, folks. It's just not that big a deal compared to the other kind of stories you hear. Well, you know, you don't hear it though, because you know why? When someone can't withdraw their money from Blackstone or Starwood or the mutual fund triggers a huge tax liability for them, you know, that's just not as personal, it's not as emotional. It's not something that we were sort of really engaged in. Right. It's just a. It's an accounting. Yeah. People bitch and complain about it. They'll say, yeah, I'm losing money in the stock market, yada yada. And you know, Robert Ardelli paid himself a huge bonus and all the shareholders lost money. A lot of times they don't even connect the two. They don't even know why. Right. But in real estate, we feel the bumps in the road and it's something that we notice more emotionally. It's more firsthand, and that's why it gets blown out of proportion. So that's that. Let's get to our guest. But first, of course, you need to join us. Get your ticket for our Scottsdale event coming up, end of January, folks, we are just 45 days out about. We're about a month and a half from that event. And you've got the last early bird available right now. So get your discounts. Go to jasonhartman.com or empoweredinvestor.com live. Get your tickets at any either place. And I want to say for all of you who have purchased tickets already and those who are about to practice your air guitar, because remember, we're going to have an air guitar contest. And the winner. Wow. I think we'll have like first, second and third place air guitar contest. Okay. We'll have some good prizes for you and it'll be a lot of fun. Our conferences are fun. They're social and they're super educational. Everybody loves them. We got a whole slew of great speakers, by the way. The latest and greatest speakers are. Sharon Lecter is confirmed. Joe Brown just confirmed. He's Heresy Financial. Sharon Lecter, you know her, she's written like a zillion books. Rich dad series books, a lot of books on her own. She is awesome. And Joe Brown with Heresy Financial are our latest speakers to confirm. So it's going to be a great time. We look forward to seeing you in about a month and a half. All right, let's get to our guest and talk about self management.

It is my pleasure to welcome Greg Slaughter to the show. He is the author of the upcoming book entitled the Perfect Tenant. And you know, the property management industry and the real estate industry in general has many flaws. We've talked about that extensively on the show and a lot of people focus on finding the perfect tenant. But the question for today is instead of worrying about finding the perfect tenant, can we just create the perfect tenant? And that's what Greg is here to talk to us about. He's coming to us from Gilbert, Arizona. Greg, welcome. How are you?

I'm doing fantastic. Thanks for having me, Jason.

It's good to have you. So the industry is flawed. Tell us about that.

Yes, absolutely. So you know what, the industry is flawed because as most people, when they first get started out, they want to use property managers. I mean, let's be honest, nobody wants to manage owned properties when they first start out. Nobody wants to do that. But so generally speaking, most of us go hire property management companies and then we feel like we pretty much are getting messed over and then we end up managing our own properties. And that's kind of the evolution of how it happens. And I was no exception. And what I found out is just from my own experiences and also from speaking to many other investors through the years now, is that I thought property management companies only charge the 8% or 10% or whatever is their marketing. And what I discovered is for me and my numbers are closer to 30%. So most people, people can't afford to pay 30% to a property manager. I know I could and I don't think most people can.

Yeah. So tell us about how you arrive at the 30% number. And just so you know, my audience has heard me talk about this stuff before. You Know, the property management fee isn't really the fee, right. And that's the thing because, you know, they'll say they're going to charge you 8, 10, whatever percent, right? But then they're nickel and diming. They're, they're keeping the late fees, which puts a conflict of interest with the tenant and your goals as a, as a landlord. And then, you know, they got all this other stuff, right? They all mark up repairs and things like this. So how do you arrive at that 30% number?

Well, obviously everything that you just mentioned, as well as what I have found and discovered is that when you have ownership into it. So for example, if I have a rental property and have a mortgage payment on it, I can't have vacancies because if I have a vacancy I have, I still have a mortgage payment, right? So I'm going to make darn sure that I get a tenant in there immediately, as soon as possible. Well, the property management company is supposed to as well, but it's not the same sense of urgency because they have, you know, another 50 properties, 200 properties, whatever the case may be. So even if it's just an extra three or four or five days of vacancy, just that vacancy adding up over a period of time, same thing with repairs. I, what I found out is that I can do a much better job of getting my cost repairs lower than a property management company ever could because, you know, I have a vested interest in making sure those costs are as low as possible. So when you start adding in of all those extra costs, extra repair costs, extra vacancies, plus on top of everything that you mentioned, that's where I come up with a 30%.

Yeah. So I think what you're describing here is why communism failed and why socialism fails. Exactly. You know, look at, nobody cares as much. I mean, I remember when I went to Prague for the first time in the early 90s, and you know, I met this girl, I was talking to her and she was just describing the way things used to be under communism methodology. You know, right after it fell, she said something that was like so obvious, but coming from her perspective, it was so interesting to hear it this way. She said nobody cares about the shop as much as the shopkeeper. And I'm like, yeah, of course, you know, 100% so. Absolutely right. Okay, good. So certainly there's the component of all the fees we talked about, but then there's the component of just doing a good job and making and optimizing the property's performance. And look, I do want to say that we always have to ask, compared to what? Right. Compared to pooled money investments like you find on Wall Street. Yeah, property managers, we have our complaints about them for sure, but there's no way even the worst property manager can really rip you off as much as a Wall street, you know, investment banker. A CEO with a company who's skimming the profit if it's off the top, you know, or mismanaging or, you know, getting sued for sexual harassment or patent infringement or whatever they're doing. Right. That's worse. Okay, you know, so we got to keep it in perspective here, but absolutely. And that's why we really want our people to self manage if they'll, if they'll take it on. And I always say, Greg, just try it with one property. You know, get your system set up, get your things working, and it's really quite easy. You know, it's amazing how easy it is. But is it really screening and finding the right tenant or can you create the right tenant?

Well, I always thought it was screening and trying to find the right tenant because that's what the industry teaches. So that's what I started doing. So, you know, just screen, screen, screen, screen as much as possible, and ultimately you find this needle and haystack. Well, that wasn't quite working out well for me. And so one day I decided I have to do something different or I, or I have to get out of this business because I just can't do this anymore. It was supposed to be cash flow, and I wasn't getting any cash flow. And it was supposed to be passive. And it certainly wasn't passive because I was working my butt off to get no cash flow. So I took my background, I actually come from corporate America. So I was with 19 years of McDonald's corporation. And what I excelled out there is that when and when I retired in 2002, from there I oversaw all of the McDonald's franchisees in the southwestern part of the United States. So I oversaw hundreds of restaurants and thousands of managers. And what I was really good at was finding potential individuals and then creating them into really good managers. So then one day, I don't know why the light bulb just clicked, is like, why do I keep looking for the perfect tenant? Why can't I just create the perfect tenant? Why can't I just do and copy what I did in corporate America and just apply it toward my tenants? So that's what I started to do. So I no longer look for the perfect tenant. I'm just looking for a Potential prospect. And I think most of the industry actually teaches us to screen those potential perfect prospects out. And so I had to change my screening process completely. And now I have someone and now I can train them to be the perfect tenant, just like I did in corporate America with managers.

How do you do that?

Okay, so first of all, I had to change my screening. And so I'll give you one, I'll give you a great example because I know 99% of the industry does this. 99% of the industry uses credit scores. And if you think about it, you know, the industry teaches, you know, make sure they have really good credit score and make sure they make three to four times the rent. Right. That's, that's in general guidelines. Well, if you do that, think about it, what's going to happen sooner rather than later? If they have really good credit and they make really good money, what are they going to do? They're going to buy a home, right? They're eventually going to buy a home. Well, my perfect tenant, I want in the home for six years or longer. That's my minimum goal. Six years. There's no way I can get a tenant to stay in a home for six years or longer if they make really good money and have really good credit because they're going to buy a house. Right.

That's an excellent point. And by the way, I want to throw one more in there for you. The ideal tenant is not this super well quality. I've had a lot of these types of tenants apply to my properties. And because I'm self managing my entire portfolio now and it's working great compared to having managers, I had a lot of attendance in this kind of thing. We're building a house, you know, the house is going to be done in like 12 to 14 months. And they're super well qualified. These are like the golden tenants that the industry thinks you want. But I'm like, I don't really think that tenant is that great. I mean, yes, they make a lot of money, they drive nice cars, they have great credit. But I know they're leaving. They've already told, they've given me notice 12 months early. You know, I, I want someone who's going to stick around.

Absolutely. I discovered that for that very reason. Because I started looking like every two years my tenants are moving out. Moving out, why? So I started. Why are they moving out? Buy the house. Bought a house. This is crazy. So I actually do the exact opposite. I'm just like you. I don't take anybody with really good credit anymore. I don't want those individuals. So I actually look for people with bad credit and I actually market that. So then when people hear me say that, they almost kind of freak out. I was like, oh no, if you get someone bad credit, they're never going to pay the rent. And what I always say back to them is like, well, think about this for a minute. Because I know everybody knows these individuals who do, you know, that had really good credit but unfortunately had something bad happen in their life. Maybe they were in a car accident, maybe they went through a divorce, maybe they lost a job, destroyed their credit, but now they're back on their feet. And they've been back on their feet for, you know, four, five, six months now. And so they're, they're still the same person they were, but they had this ugly event in their life. You know, sometimes bad things happen to good people. Those are the people I want. I want someone that was a. Had really good credit, somehow got it destroyed and now they're back, but they just don't have the credit yet. Those people will take 3, 4, 5, 6 years to get their credit back. Those are the best tenants in the world.

Yeah, right. I agree with you. That's a very good point. Are you doing any lease options or rent to own deals or anything like that? It doesn't sound like you are, but I just thought I'd ask that because usually that's the market for what you're saying, right? In terms of investors and their business models.

Right. I have done lease options in the past. I'm not doing them now because I want to hold on to all of my. I'm at the age, I don't want to constantly be trying to get new deals and new deals forever. And so I don't want my deals to go away. So right now it's 100% just rentals.

Okay, good, good stuff. Okay, so how do you make them the perfect tenant? I mean, okay, so they come in like, how low of a credit score are you going to accept? And what else on that background report are you going to accept? What about evictions, criminal records, anything else? Or strictly credit? And what kind of credit?

Yeah, their credit score means nothing to me. So I don't care about the credit score. We'll actually market your credit score does not matter. And we'll actually attract three to four times more of the people because we actually market that way. Now obviously you have to filter through that. So when I filtering through that, I'm looking for two things. One, I'm looking for the reason their credit is bad, and I need to confirm that story. So you got to do your homework there. Confirm why their credit is bad now, right? Because otherwise, you know, there's a reason some people have bad credit. It's not because they had bad things happen to them. It's just because, you know, they're just not good credit people. Right. So you got to verify their story. And the other thing is, I'm looking at their mindset, and what do I mean by that? Is that my perfect tenant? I want them. When something goes bad, people do one of two things. They either one, stick their head in their sand and ignore everybody and just protect themselves, or they're the individual that we all know that says, you know what? This is a bad situation. Let's try to work something out. Let's make a win, win situation. Right? So you don't know someone's true character until during times of distress. So what I want to do is look to see how have they handled the stress in the past. Evictions is one of those. Those ways to do so. Also, collections is another way. So I tell people all the time. So, for example, let's say they have a $40 collection with a phone company. So something went wrong with the phone company. They got a $40 collection. What do they tell the phone company to do? Why is it in collections? Why did they not pay that off? Why do they not work that out with the phone company? Basically, in my opinion, they just told the company, the phone company, no, too bad. You come get the money from me. That tells me their mindset. So from my point of view, if they have any evictions whatsoever, any collections whatsoever, they're out. There's no debate for me from this point forward because they've already told me what they're going to do. If they're going to screw a phone company over over $40, what are they going to do to your thousand to $2,000 rent?

Well, but you know, what if they. I mean, like you said, bad things happen to good people, right? So what if they were under financial stress? I mean, why is the rest of their credit bad if they don't have a collection?

There's exceptions to every situation. There could be exceptions, but generally speaking, somebody can usually make good on a $40 phone collection. I mean, there's usually a reason why they're just blowing that $40 bill off.

Yep. Okay. So you're looking at their credit score, you're looking at their credit report and really understanding it. Rather than just looking at the score.

Correct? Okay, right, absolutely. And then to answer your question as far as how do you create perfect tenants? Because right now I'm just looking at prospects. I want the potential prospect. But in order to create the perfect tenant, I've completely changed the way we do business. So, for example, like people will do lease signings. I don't do lease signings anymore. I do what's called an orientation. So the analogy I like to use is pretend like you're hiring someone into.

Into a business and you're onboarding them.

Correct? I'm onboarding them. So the first thing you do when you bring somebody on is you go through an orientation so they understand what their responsibilities are. Right, right. So their responsibilities to take care of the home and everything. So we will do an hour to two hour orientation actually at the home where we will go through and say, you know, this is how you use a fire extinguisher. This is how you turn off and on the breakers. This is how you turn off and on the water, that's how you turn off and on the gas. This is how the grass should look, this is how the trees should look, this is how clean the home should look.

But I'm curious, I mean, some of These properties are 1800 miles away from your house. So what are you doing?

Yes, well, we have boots on the ground, so we have staff that we've hired in house. So I have somebody in house that will do that for me. I come from McDonald's Corporation. So everything to me is about a system.

Right, right. That's good.

So we have systems in place and it's literally online and they just have to follow it step by step by step. It's like a checklist that they have to follow. So every single person goes through exactly the same situation every time. So once they do the orientation, once you hire someone to put them through the orientation, next thing you got to do is you got to train them. Right. And everybody goes through a 60 to 90 day probationary period. Because if you hire someone in corporate America and you know they're not going to work out in the first 60, 90 days, what happens? You terminate them. Right.

Probation.

I'm exactly the same way with my tenants. If I know they're not going to work out in the first 60, 90 days, I will terminate them and get them out of my house. Now. There's no reason to wait for a year until the lease is up, which I think what most people do. I will get them out now. And that training Process is like we will actually go buy the house up front approximately about every two weeks. And we're looking for to. We're basically training the tenant, making sure they're cutting the grass, making sure they're taking care of the home, making sure they're doing all the things they need to do. And we, we will reward them to, for doing so. So we'll give them like a little thank you card, a little $10 gift card or something. But it's. That first 60 days is extremely critical in training them because once you train them, if you got the perfect prospect and you train them from that point forward, it's very easy to follow up on them because they've been trained and they just stay. And if you get the right person in there, it's literally almost like they're just self managing the home. I like to, I like to tell people it's like what I'm trying to do is hire a property manager, which is the tenant.

Right.

But you don't pay them.

Yeah, I agree. They pay you. And that's the best kind of property manager, one that pays you. And you know, that's what a lot of people don't really understand that number one, most tenants are good people. They just want a good place to live. And you know, they're great people. I mean, you get a few bad apples, but it's really quite rare actually. I mean, most tenants are great. They're just great people. They're very helpful. They'll go get, I mean, I've had tenants go, go get quotes from me. They, they meet all the vendors. Of course, you know, when they come over to give you a quote on the air conditioning or the painting or whatever the thing is. But you have to also understand that the property manager doesn't live in the property. They don't know what's going on. Okay, maybe they inspect it once a year or something, maybe they don't. But the tenant knows what's going on. The tenant is reporting to the manager. The manager is this middleman that gets in the way and charges money. And you know, why not just take out the middleman, let them report directly to you. And if you're using some good software for this, it's all done through the system. It's so it's. I mean, these tools nowadays are phenomenal. By the way, be sure you check out for software specifically. I have a whole YouTube channel dedicated to just that. It's the real estate news and Tech channel on YouTube. I just started it recently. So it's got a small subscriber base, but I demo all of this different great real estate software on the R E N T channel. Real estate news and tech. Okay. Sorry about the shameless plug, but I just want to give them a resource. Go ahead.

Yeah.

So the tenant reports to the manager. The tenant is your manager, correct?

Yeah, that's actually part of my philosophy is that I make. The tenant is the property manager, so I treat it that way. And my job as the owner of the property is to hire a property manager. That's the entire analogy that I use. A thought process. And then even when you're doing the screening, like, we don't show homes. I don't. I don't show homes. Right. So I do an interview process. It's literally an interview. So, yes, the tenant needs to like the home, of course, because otherwise they won't put an application. But that entire process. Process. I'm interviewing the tenant because, for example, if they're going to take care of the yard, shouldn't they have a lawnmower? I might want to ask that question. So part of my interview questions is like, do you own a lawnmower? Do you know how to use a lawnmower? Do you know how to use a weed whacker? Do you have tools? Do you know how to use a screwdriver? I don't want to be hassled for any and every minor repair out there, so I actually put all the minor repairs onto the tenants. So. But that's part of the screening process is, do you have tools? Do you know how to use them?

Yeah.

So I don't want them to move into the house and then find out they've never used a lawnmower before in their life and they don't know how to take care of a yard. That's just crazy to me. So when you're screening someone, that's part of the process. I need to make sure that they have the potential to be my perfect tenant.

I can hardly wait till this becomes a protected class. You can't ask if someone is handy.

It's probably coming, so get ready. Yeah.

In certain parts of the. The country, they may already be working on that.

I'm sure. I'm sure they are. All right, so, Greg, tell us more. And by the way, they're working on that in New York and California, I'm sure, but probably Oregon.

Probably. Maybe up in Oregon. Yeah, I was gonna say probably up in the Northwest in Oregon as well.

Crazy in these places. Okay, good. So what else in terms of creating the Perfect tenant, or have we covered that part?

Well, to me, it's an ongoing process. Again, just like when you hire someone, you're going to do the orientation, then you train them, and then you got to give them performance reviews. So we don't do. I don't like to call them inspections, I call them performance reviews because that way it puts the perspective in place. So when we go to, quote, unquote, inspector, we're actually there to give the tenant a performance review or to give our property manager performance review. And that's a philosophy I take because I know a lot of landlords, they're afraid to go do inspections because they don't. They don't want to see. They're afraid of what they're going to walk in on. So but when it's when you train the tenant and train them to do what they're supposed to do, now you're going in the. Give them a performance review. Now it's more of a positive thing and you're just not dealing with all the negative. So sometimes being a landlord can be extremely negative, especially if you do what the industry teaches. Because the only time you ever speak to your tenant is if you're collecting. If they haven't paid the rent and you got to collect the rent, which is a negative situation, or they're chasing you down to make a repair. Right. Outside of that, most landlords don't talk to their. Talk to their tenants. So. And it just becomes draining, which is why people don't like to do it long term. So I want to put the positive into and build that emotional bank account with the tenant by giving them little rewards for doing things. Well. If you go by the property, you know, once a quarter or whatever, and the grass is cut, well, then I will compliment them and give them performance or you've done a nice job. And it's amazing. We're getting the prospects that nobody else wants to work with because they have bad credit. So they already come in and appreciate and respect what you're doing for them anyway because you're giving them a second chance. Right. So they already appreciate that. And then when you're going through and you're rewarding them for getting good performance, it's amazing how much longer your tenants will stay with you.

Sure. Yeah, absolutely. Okay. What's the average length of your tenant stay? Do you have a number on that?

Yeah, I. I mean, let me put it this way. Like, out of all my rentals, I manage about 160 properties now. I have properties here in Phoenix And I have properties in Indiana. We went through a period in Phoenix where we literally went like four or five years with no turnover at all. Zero. All of my tenants right now probably been in there a minimum of six to eight years. In my properties here in Phoenix and in Indiana it's not, those are more C class properties so we don't get quite the same numbers, but it's not that far off. I'm going to probably say my average tenant has been there now is about four years, but I've only been investing there for about six or seven years.

Okay, so tell me about your Indiana portfolio. And those are all your properties, right? You don't have any, you don't manage for anybody else, I'm guessing?

I do not manage third party properties. Some of them I do manage for my friends only because when we went to Indiana, I purchased about 230 properties at the tax sale there. And then when we rehab them and rent them out and then I took some of those for cash purposes and sold them to some of my friends as turnkeys. So I do manage some of their, their properties, but I will not manage any other third party properties or anything like that. So.

Got it, got it. So with those properties, C class properties, and that's even more amazing to self manage those, what is the typical value of one of those properties and what's the typical rent?

Okay, so right now those properties on average are worth somewhere between 70 and 80,000 where I'm at. And the average rent right now is about 850.

Okay, yep. That sounds just about like I thought. Tell us about your team, your boots on the ground. You know, not everybody has access to this kind of thing. So that's going to be important. I want to think about how can people listening do this or do some hybrid of it. They don't have to do all of this to have success. Right. You can do a hybrid and that's what I really do recommend is a hybrid self management approach where you have an agent, a local real estate agent or a property manager on an a la carte basis, do the tenant turn, but, but be involved in it. Okay. And you know, this just does not take that much time. Everybody thinks this is so time consuming. It's just not that difficult. I say you're going to spend more time dealing with a property manager that has a different agenda than you do and different agenda than the tenant does. Then you're going to spend dealing directly with the party, the tenant. But tell us about team. I mean you got a lot of properties. Okay, so you do agree with me, right?

I absolutely, I agree with you. So 100%.

Yeah. But you have a lot of properties in one concentrated area. So what's your team consist of there?

Well, I, and I didn't all. Okay, so to answer your question, I'll answer that question. But first I want to make clear that I've also had properties in other areas where I only had little onesies and twosies. So when we had to do the hybrid method. So I agree with you on that as well. And some of what I've. What I did is that I actually used the neighbors that actually lived on the same street, like the next door neighbor or maybe two houses down. And I use them as part of my hybrid. So they were the ones doing my showings. They had a vested interest. Right. And making sure the tenant is a good tenant in their street. So I like using people to actually live really close to my property. So when I only had one or two properties, that was my strategy is to use them.

My mom has done that many times. She totally self manages and she uses the neighbors to help her.

And the neighbors will bend over backwards to help you because it's in their best interest as well.

Right.

They have a vested interest and to make insurance.

But there could be a little conflict of interest with the neighbors. Like they might not, you know, they might not want the property rented at all. Right. You know, so yeah, it's mostly the interest of the landlord.

I've been lucky and fortunate. I haven't had that situation. So.

But okay, so how much do you pay the neighbors? How do you enlist their help? Tell us about that.

Okay. Every situation is a little bit differently. So when I was doing the little hybrid method, like for example, I had some properties in Las Vegas. So with those neighbors up there, I would just give them a few hundred dollars or gift and a gift card or whatever just for the time for showing the home and everything and helping me get it rented. So other than that, I didn't really cost me anything other than their time or maybe if I came into town I take them to dinner or something. It really wasn't that expensive because again, they had a best interest and they were more than willing to help me. Especially because before I bought the property it was also some of those properties are already rentals and they couldn't stand the tenants that were in there and stuff. So they're like, let us help you make sure that we get some good people this time and stuff. So. So I was, I guess I Was lucky in that aspect. As far as my team in Indiana, like, I don't believe in having employees. So I don't have. I have zero employees. So they're all 1099. And what I do is I give them. So they have a vested interest, and so I give them. The way I have it set up is I set it up basically like a property management company. So I have a. I create an LLC, a property management company that takes 10% out of my own properties, and then out of that 10%, they get a percentage of that 10%. So currently I have three people on the ground because we got 162 properties, I believe right now is what we have there. So I have three people, and they each get a percentage of that 10% of the rent. So if no rents come in, then they're not getting paid. So they also have a best interest.

What are their duties?

Okay, so I have three. So one of them is basically the face, which is the one that's creating the emotional bank account with the. With the tenants. So they're responsible for approving the applications as they come in, going through and approving them through our process. They're the ones doing the orientation, they're the ones doing the initial training, and they're the ones doing all the renewals. Okay, so that's her job. I have another individual that just oversees maintenance because we have a whole process of maintenance. When maintenance repairs come in, I want not just my maintenance involved, but I want my property manager involved, because we go over and beyond, like we call them and verify that everything's 100% to their satisfaction. So that way, later on, we don't get into this. He said, she said, well, you never fixed it type of situation. So she's involved with overseeing all. All the repairs and also filling any vacancies. And then I have another individual and she's responsible for doing all of the inspections on all the properties. So after the. After the training process, she does all the inspections and all the performance reviews and also help helps fill any vacancies.

Okay. And in terms of marketing for tenants, what are you doing there? The face person sounds or well, or the third person, I guess both of those work in tandem to do the tenant turns and fill the vacancies. Right. So how are you marketing them? Are you just sticking them on all the usual websites, Zillow, etc.

Yeah, we just have it syndicated. Yeah, absolutely. So we don't. Just on Thumper and all those. All those sites out there.

So what software do you use?

Well, for the properties in Indiana, we're using appfolio.

Okay. So you put the listings on there. But I bet it's very different in terms of maybe what you say in the listing, certainly how you screen people because of what you told us at the beginning. Do you say something different in the listing, like, you know, bad credit. Okay. Or anything like that? Yeah.

Your credit score does not matter. We will literally put that in the listing. Your credit score does not matter.

Okay.

So we will put that in there. And we also, we also, when we market our properties, we try to go paint the emotional picture that they can fall in love with and that kind of stuff. So we do our marketing slightly different as well. Just because my goal is to generate as many quote, unquote leads as I possibly can so we can filter through them.

Okay. Okay, good. What else do you want people to know, Greg?

Well, I guess the reason I'm doing this, why I'm doing this, and it's.

A great reason you're doing it, by the way. So. Yeah, tell them that. And that'll tie in with the special offer as well, because you offered a discount off the 1109. So.

Yeah. Right. Okay. So the reason this even came about. So I've been investing in real estate since 1999, is when we got our first rental property. Actually went to my first real estate conference in 1986 when I was just 19 years old. It was a Robert Allen conference. And that what got me interested in real estate. So. But through the years, you know, I've been fortunate and real estate's been really, really good to me. And unfortunately, I've had two daughters that were full term stillborns. And so we weren't. And we weren't able to have any other children. And I did what most. I won't say most people. I did what a lot of people do, especially from a male perspective. I just kind of worked my way through it and just kind of put my head down and just work my way through it. But when I turned 50 years old, I don't know if I was going through like a midlife crisis or something, but suddenly you just kind of. I just kind of woke up and it just, it hit me really, really hard. And I may get emotional just talking about this. I'm gonna apologize in advance because it's really emotional for me. But when I turned 50, then it really, you know, why am I here? Type of thing. So, you know, I can't be just here just to have a bunch of rental properties. And so I Needed something to leave a legacy. You know, I wanted to leave something behind. And so that's why I decided to. I loved teaching real estate. I love helping other people with real estate. And I had the opportunity to do some speaking at Ria's just as a guest speaker, just to help. I never had any program or anything to sell anything. I was just literally helping people. And for about four and a half years I donated 10 to 12 hours a week where I would just help new, new investors just, just to give them my time, just help them. Because I've, you know, I flipped so many properties and everything. So I decided when I turned 50 is I need to do so I need to leave a legacy. And so that's basically how these programs came about is teaching people and so it allows me the opportunity to leave something behind. So I'm doing this in dedication and hon of my daughters, you know, Nerissa in particular. So.

So that's, that's basically why I'm doing this. So that's, that's why all my social media spreads are legacy. And it just is about a legacy at this point. I can live off my rental properties just fine and go enjoy life, but at this point I enjoy helping people and this is my legacy.

That's great. That's awesome. And you know, we talked about that before the show and that's just a great story. And, and so you've got a course that you priced based on your daughter's birthday, right?

Yes, that is correct. So yes, in honor and tribute of her, we just took her birthday. So that way every time there's a purchase then it was in honor of her. It was an honor of Nerissa.

Yeah, that's great. And you did one better though. You even offered our audience a special discount on that, which was just very nice of you. So this is a video based training, right? Videos, checklists, things like that?

That is correct. Everything is 100 online. It's all me. You get me one on one. I'm doing it all. I record all the videos. I come from McDonald's corporation, so everything is systemized. Basically. I created a little franchise. I create a little franchise is what I did.

And what.

And I just put it all into. Just like McDonald's does and I just hand it over to someone so they get all, all the same exact forms. They get my. They get every. Basically my entire system is what they get that I'm personally using.

That's great. And so. And then you also do weekly Q and A sessions on Zoom, right?

That is correct. So every Thursday I jump on anywhere from one to two hours depending upon how long the questions are. And I just answer any questions they could be questions on. Obviously I'm not an attorney or property manager, so I'm not going to answer those type of questions. But I can answer any advice that you have as far as implementing a lot of questions about staff and hiring staff and, and you know, that type of stuff. So anything involved with systems or whatever. And I've had some great questions over the last. I just started that about 30 days ago. Four weeks ago. Four or five weeks ago. It's been awesome and I actually enjoy doing it. So it's fun for me.

That's great. Good stuff. Well, the course is priced based on your daughter's birthday, which is 11 of 09, right? Correct. And so that's the standard price of the course and you offered $112 discount. So it's 997 just for our people. And they can go to jason hartman.com Perfect. That's the link you set up for that Jason hartman.com Perfect. Because it is all about not finding, but creating the perfect tenant and that perfect relationship with the tenant. And that McDonald's background is fantastic because if any company on earth figured out how to systematize, it's McDonald's. I mean, I mean just think about it. They hire some of the lowest quality people and I don't mean that in a bad way but you know, it's just they hire like teenagers that are flaky and they don't know anything yet. Right. And they have massive turnover and yet they run a very successful company. It's all about the system. So that's great, Greg, 100%. We really appreciate you spending some time with us today and sharing your heartwarming story. And your, your passion to help investors is great too. And I think you really help a lot of tenants too because these people would just be turned down left and right. They, you know, a lot of these people wouldn't be able to get a house normally. And you know, this is something that is just a win win all around. So if you want to check it out, go to Jason hartman.com perfect. And Greg, we really appreciate you.

Oh thank you. Thanks for having me on.

Jason, thanks for joining us.

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