1966: Collective Mastermind, Empowered Investor Pro, Hybrid & Self-Management, Alabama Market Update

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Thank you, Jason. I would not have as much money today if it wasn't for you. You know, Sissy and I both made a ton of money and you know, thanks to you and your guidance and your show and everything, it's been great. And now cash flow for all your clients on top of it. Not only appreciation, but cash flow. You made a lot of people rich, my friend. You're a good man. Thank you, Jason.

Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slant on investing, some exciting techniques and fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine, self made multimillionaire who's actually been there and done it. He's a successful investor led developer and entrepreneur who's owned properties in 11 states, had hundreds of tenants, and been involved in thousands of real estate transactions. This program will help you follow in Jason's footsteps on the road to your Financial Independence Day. You really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome to episode 1966.

1966, and thank you for joining me today.

I wanted to record this episode from beautiful Jekyll Island, Georgia, the birthplace of.

The Federal Reserve, where we had our collective retreat for the Collective Mastermind group over the weekend. And it was just such an awesome retreat. That was my second visit to Jekyll Island.

Of course, you have hopefully read the.

Book, heard the many episodes I've had on the show previously with the author G. Edward Griffin, who is the author of the famous book the Creature from Jekyll Island. And it's such a great book. And he appeared at our meeting via Zoom and Robert Barnes, George Gammon, Ken McElroy and I, all four of us were on stage interacting with him on Zoom for the audience, the Collective Mastermind members. And that was a really great Zoom presentation.

You know, it's kind of hard to.

Make a Zoom presentation for a live audience.

Good.

But I gotta say that one was just fantastic. Very, very insightful.

And we had our breakfast and lunch both days in the Federal Reserve Room.

The actual room where they met to create the Federal Reserve just over a hundred years ago.

So very historical.

I hosted my other mastermind group, the Venture alliance, there about five years ago. You probably heard me talking that on.

The show and maybe even on a flashback Friday episode. But it was a great time and.

We learned a lot.

And I gave a presentation the second.

Day and I just thought I would share a couple of things from that presentation. But if you are seeing this on video, look at these pictures of the Jekyll Island Club resort where our event was.

It's just such a gorgeous, gorgeous, you know, being in a gorgeous place like.

That and it just inspires you.

It feels so nice.

The weather was just beautiful and you.

Know, the weeping trees and the grass.

And the greenery and it was just such a, such a pleasant experience, really. What a wonderful weekend.

But in my presentation and by the.

Way, I'm just going to give you a couple highlights of this before we.

Go to the topic for today's meeting.

And we have a guest, our Alabama.

Local market specialist, of course. We've got an upcoming property tour in Alabama.

Many of you empowered investor live requested.

That and we are here to serve you and provide what you ask for. So you know, we're like the genie.

That comes out of the bottle. Your wish is our command.

So we're having a property tour coming up. Go to jason hartman.com for details on.

That and we'd love to see you there.

We're going to tour two Alabama markets.

We've got some phenomenal new home opportunities there.

Brand new construction, well below in fact even more than $200,000 below the national average new home price. And that's what makes this opportunity so.

Rare and so unique.

It is very difficult to get new homes, brand new class A properties with great management in place. Of course you can self manage if you wish.

Most of our clients don't self manage.

Even though I recommend. And I just want to say something about that because some idiot wrote me.

A negative review last week. What a fool.

Again, let me make this very clear about self management.

I want to make sure everybody hears this.

I am not saying at all that.

Self management takes more time.

My assertion is that it takes less time. Make sure you hear that, okay? Because look, in the economy and in the world, sometimes when we have a third party involved, it makes things easier and the third party has knowledge and resources that we don't have and they.

Bring that to the table and it makes it easier.

But sometimes that is not true. And one of the things that happens with these arrangements where it is not always true is where there's a conflict.

Of interest, just a natural conflict of.

Interest where the third party is trying to serve two masters. And in those cases, a lot of times the third Party doesn't help and they just make things more expensive. I have definitely noticed this over the years in many third party relationships. You know, for example. So let's talk about litigation and lawyers.

You all know, because I did a show on it, I recently won a huge, huge trademark lawsuit and RICO lawsuit. And the jury originally awarded me and.

A couple of my companies just under $50 million. And then there was a motion we made for prejudgment interest for over $12 million.

So this was, you know, like almost $62 million award.

And then of course it was whittled.

Down and I told you about that. And it was Wh to like $28 million plus lesser interest, which added up to about $31 million. And the other side, these six defendants that really tried to ruin my reputation and do all kinds of evil things, they are still fighting it. So, you know, I'm just spending more money and haven't collected a penny yet.

But, you know, look, I will, right?

And I have faith in that. But what, what was my point about that?

My point was third parties, like property managers, sometimes an attorney, you know, which, you know, you mostly need an attorney, right? Because they know things you don't.

They have connections you don't, they have resources you don't.

But a lot of times the third party, that attorney will not do things in your best interest because they're acting in their own best interest. You know, they have a different set of motivations than you as the client have many times, because they want to maintain friendships and relationships with opposing counsel and the judge and the court. And sometimes something needs to be done that flies in the face of that. And this happens with property managers too, where they're trying to placate the tenant, they're trying to placate the owner, and they're trying to serve their own interest too.

So they've got like three masters they're.

Trying to serve, right? You know, some property managers are great and look, we refer you to the great ones, but even they sometimes have.

Conflicts of interest, right?

And this is just an ongoing problem. There are some things in life that are problems you don't solve.

You simply manage the problem, right? You don't solve it, you just manage it. And that's the way it is a lot of times with property management.

So, you know, the vast majority of our clients, they go with property managers.

We recognize, recommend, and we refer them to.

But again, I really do think the hybrid self management approach is the ultimate approach. And I have taught it many times.

We talk about it all the time.

In our Empowered Investor Pro and Empowered Mentoring programs. And again, it's not a full self management approach. I don't recommend that because for non local properties that is too difficult. But the hybrid self management approach where you use vendors, property managers or realtors for a la carte services, that is.

A great, great approach. Okay, so enough said about that.

Let me just touch on a couple of things from my presentation in Jekyll Island, Georgia.

The creature from Jekyll island and the creature by the way of course is the Federal Reserve, if you didn't catch that.

And then we will get to our.

Guest talking about Alabama Markets and the Up Alabama Property Tour that you can.

Get tickets for@jason hartman.com okay, so I talked about the Chinese symbol for crisis, which is the same as the symbol for opportunity. And they represent these dualities, right? Where literally translated, that symbol is crisis is an opportunity riding the dangerous wind. And a lot of people, a lot of folks would say we're in a crisis stage now, right? The economy has certain things are cooling off, it's changing. But like the yin and yang symbol representing the feminine and the masculine, the night and the day, the passive and the active, the sun and the moon, the intuitive and the logical, the cold and hot, the hard and soft, right? You know, this yin and Yang symbol is so insightful about everything in life because, for example, take the polarities of.

Masculine and feminine, right?

We've got the black and the white and the yin and the yang, but then there's a dot of the opposite in there. So every masculine has a little bit of feminine and every feminine has a little bit of masculine. And hey, look, this is called balance, right? We need to balance things out in life in Buddhism.

And I'm certainly no expert on Buddhism and I really call that more of a philosophy than a religion. But, but again, I'm no expert, so feel free to argue with me. Comment below if you're watching this on YouTube and educate me, educate me, please. Some things I need to be educated about, and that's one of them.

But in Buddhism they have the thing they call the middle way, right? The middle path where the extremes are not good. The, the middle path is that path.

Of balance and understanding and enlightenment.

So something to think about, the yin and the Yang and these alternating polarities that are within all of us and.

Within all situations as well, and how.

Crisis is an opportunity riding the dangerous wind.

Okay, I'm going to skip ahead here.

I talked about the most important chart in real estate, of course, Because I.

Would be remiss if I did not talk about this in virtually every presentation.

And this chart, of course, I've talked.

To you a lot about it really.

Shows us how we are going to have a shortage of resale properties for.

The next 28 to 29 years.

There is a big incentive to lock.

Up the resale home market where these.

Houses just will be in limited supply for 28 to 29 year old. So literally these markets don't unlock until about 2050. Whoa, that is shocking. But here's the comparison I want to.

Make that maybe I haven't shared on the show. I just, I did share this with the collective mastermind at my presentation in Jekyll Island.

And that is the comparison to rent control.

Why compare it to rent control?

Well, if you look in the infamous rent controlled markets, New York City, San.

Francisco and the People's Republic of Santa Monica, where I actually lived for a little while when I was a kid in Santa Monica, California.

So in these markets you have massive housing shortages. But wasn't the goal of rent control to make it easier and more affordable and more accessible for people to rent a house?

Yeah, of course it was.

But the unintended, or maybe intended because.

The people are either stupid or evil that are running things.

The result of rent control is always.

Shortages because fewer people invest and there's less development and just fewer people providing.

Housing because there's less incentive to.

Because the rent is controlled, obviously. Right.

So we all understand how that works. But rent control markets are these like ossified markets where they're just in decay, where there is just limited housing supply. And this is the poison pill that the Federal Reserve has put into the real estate market. That is a three decade long poison pill.

I mean, talk about a long.

Sometimes you take a pill, right, and the effect takes effect in like 20 minutes.

Maybe it makes you feel drowsy or whatever so you can go to sleep and it wears off in four hours.

Or it wears off in 12 hours or whatever, right? Well, this pill doesn't wear off for.

28 to 29 more years. Just sit with that for a moment.

Because all of these people have these cheap mortgages and they're just going to be incentivized to hoard their properties and not sell them.

Almost 25% of the country has a mortgage below three percent, 65% of the country has a Mortgage below four percent. And 42% of all homes in the country have no mortgage whatsoever. Like I always say, show me the.

Distress in the home ownership Market, there just isn't much to stress.

The default rate at any given time, remember we covered this on a recent show, is about 1%. Typically at any given time, boom times, recessionary times, just average them all out, right? Boom and bust times. At any given time, 1% of all the mortgages in the country will be in some stage of default. Are they 30 days late, 60 or 90 days late, or has the lender actually filed the notice of default and started the official foreclosure process? Or are they at the end of that process where the only way to save the home from foreclosure is to pay cash on the courthouse steps?

There are all these different stages, right?

So some are very mild.

Oh, the payment's 30 days late, no biggie. Right. Easy to recover from that.

Or they're at the end of the.

Process and they're about to go into foreclosure.

Right? So at some stage of default, typically about 1% of all mortgages are in some one of those stages.

It's a big spectrum, but they're somewhere in the default stage.

Well, right now we only have about.

Half a percent in some stage of default, which is extremely low.

It's 50% off, right? It's half of normal. So again, very hard to have a.

Real estate crash when you have this type of situation.

And if you're watching on video, you.

See the charts that I'm showing here.

Showing of all the share of paid off mortgages, right? The US has more free and clear homes in areas with more retirees. So the top market on this chart is where I live, it's Paul, Palm Beach County, Florida.

Okay?

And 567,283 homes in this market are there, right? And 235,657 are free and clear. They're paid off. That's 41.5% of all homes where I live are free and clear. And then on the county, just South Broward County, Florida, that's number two, where you got 35.8% of all homes free and clear. So this is just interesting. And what's also interesting is you look at some of the areas where I used to live.

Orange county, only 16% free and clear. But again, that's not a big retirement area. Louisiana, where I grew up, 15.9% free and clear and so on and so forth.

Okay, this is the last thing.

And then let's go to our Alabama market specialists.

And that is the frame, folks. The way we view anything in life is through a frame.

Well, you could use the other metaphor of the glasses, right?

Oh, you see the world through rose colored glasses, right? It all looks rosy and great, right? Or you see the world with your.

Cynical eyes, as the lyric from the Styx song goes. You know, you see the world through your cynical eyes. You're such an angry young man, I can tell. And that's a great song by the way.

But it's all about the frame in.

Which we see the world.

And so many people are focused on the frame of agonizing over whether real estate prices are going to go up, down or sideways. And those people are missing the point. Investors don't invest for capital appreciation. They don't agonize about that. The value investing philosophy along the lines.

Of a la Warren Buffett, the most successful investor ever, right? But you know, that's different world stock market.

But the value investing philosophy says that you invest for yield, you invest for cash flow. And if you go to your favorite website, if you go to Jason hartman.com, which by the way, we did update the software a little bit there so you're going to see some different stuff. And you click on the properties page and here is a property and this is a property that is very much like the stuff you'll see on our Alabama property tour. Okay, so this is in Clanton, Alabama and it's a brand new property for $264,900. And with everything considered, you get free property management for two years.

So you wouldn't want to self manage that one because property management's free for two years. But maybe after that you want to self manage.

The projected return on investment for this property is 34% annually. 34% annually when you consider all of the areas in which you get return on investment. Because income property is a multi dimensional asset class and so you earn your return a lot more ways than you do in other assets. So what I always say is even if it only goes half as good as projected, then your return on investment is 17% annually.

Just show me how you're going to beat that. Comment below.

If you're watching on on video, you.

Know that's I wish on the podcast.

You could comment below. You can only do that on the videos.

They need to fix that, don't you think? Because it would be great to have some more interaction. But if you're listening on the podcast, not watching video, you can always go to jason hartman.com ask and ask me any questions and I love to answer.

Them on the show. Our investment counselors will reach out to you and answer those questions for you. And we're happy to do that. But that is a phenomenal return and that's what people are investing for.

Yield that return on investment. That's the investment. It's not agonizing over market timing of price. And look, history has proven in every asset class that market timing over the long term does not work more important to be in the market than try.

To time the market.

So I hope that is helpful to you.

And let's get to our guest as we talk about the Alabama market profile here and talk about our upcoming property tour in Alabama. Go to jason hartman.com for more info on that.

But here is Kate as we jump.

In to our Alabama Market profile discussion.

It is my pleasure to bring to you today an Alabama market profile. We are excited because we have a property tour coming up in this market. And when I say this market, it really covers several markets in the big.

Great state of Alabama, which is where my mother has lived for about 15 years or so. And this has been a fantastic market for a lot of our investors. You know, Florida has become a little.

Bit expensive and right next door you've.

Got Alabama where those rent to value ratios are holding up very, very nicely.

So let's welcome Kate and go ahead and dive into this.

Give us the overview if you would.

Sure. Well, thank you, Jason, for having me and our companies here today. So like he mentioned, my name is Kate, located in Alabama and that is a con, a new construction product that's built with the intention of being used as an investor product. So for rental, this is something that we've been in the space for about 20 years now. So it's not new to us and it's always been a great performer, a great vehicle for investment. So you know, our companies as a whole manage about 2100 properties across the state of Alabama. So when we look at that data, our average vintage of home is about five years old. So most of them are relatively new. And detailing out that data, when you, when you run down the actual maintenance cost across the portfolio of properties, our average maintenance cost is under $300 a year on each of these properties. So for you, the investor, that that is a predictable maintenance cost year over year, at least for those first seven to 10 years, you know what you're going to be spending and you know that you're not going to be spending a significant amount on any of your major appliances or, or systems. And then single family, you know, we like to go into a development and build at least 50 houses per neighborhood. So we're not scattered site, we're whole development builders. And what we like to offer is that that single family detached property, that you get a very stable tenant population and you get people who want to live in that house for a long time. Going back to that, that rental data that we have across our portfolio, we can look at the average span of a tenant cycle and we're between 18 and 24 months per tenant per property. So people will move into these houses and they want to stay there long term. And I again, I think that speaks to the stability of the, the single family detached property as a whole compared to your duplexes or your apartment complexes.

Yeah, you know, that's one thing I.

Really would like to mention.

The tenant turn in a single family home, if you screen your tenants properly and if you've got a good product, a good property to offer them, they a long time.

And you know, I've had my mother on the podcast several times over the years.

She lives in Gulf Shores, Alabama and she has one property that we have.

Talked about many times on the show.

Where the tenant has literally been there. Are you ready for this? The tenant has been there since 1989. Okay. And I have had tenants stay as long as nine years. And this is one of the things you really don't hear enough about in.

The multifamily industry, which is a detriment to that side of the equation. But a benefit to the single family.

Industry is that these tenants, they just stay a lot longer. What I always have noticed is one of the best sort of tenant avatars you can have is a family with kids in a school district where they're.

Just gonna fight to keep that house and they're gonna stay there and they're gonna be great tenants for many years to come.

And I've talked a lot over the.

Years about my strategy. I call the three dimensions of real estate. There are really more dimensions than that, but that's a good name, kind of, kind of memorable.

And what it implies is that when the for sale market cools, as it has been since we've seen these interest rate increases, the rental market flourishes. And so a lot of people talk about real estate as though you want prices to keep going up, you want interest rates to be low, you want housing affordability to be high. But actually that isn't great for the rental market. As a landlord, when affordability is low, interest rates are high, and the for sale market is not booming and prices are not appreciating quickly. That's when you see upward pressure on rents, and that's when you see tenants stay for a long time. And no one chronicles length of tenant stay as one of those metrics because it's really quite hard to do. But you'll never hear a survey on that. You'll never hear statistics on length of stay. But it is one of these sort of behind the scenes metrics that nobody's talking about.

So I just wanted to mention that it's a good thing.

Sure, absolutely. I mentioned briefly that we've been in this space. This is a little. A funny story. So when we started, there wasn't a name for it. That's only become a name in more recent years, really starting in about 2017 is when you started hearing people call it that. But we just use the model of we're going to build new houses that are beautiful, that tenants want to move into and that they want to feel proud to live in again, you know, to keep a happy tenant and also to keep a happy owner, because that owner is going to be glad that they have a consistent tenant and they have a product that's easy to maintain. So this is not a new model to us. It's not something that we started doing a few years ago. So our general market, I know Jason mentioned this before, but we, we try to cover the whole state of Alabama. So we have three, three main regions. One of those being central Alabama, which spans basically from Montgomery through Birmingham up toward Huntsville and across the state. And then we have our North Alabama region, which is Huntsville, really popular market right now. And then Gulf coast region, which is Orange beach, where Jason's mom lives, Gulf Shores and the surrounding inland areas from there. So just to run through a few of these markets specifically and to give you a visual of the product that we actually build, the North Alabama market, which includes the Huntsville metro. So we have three different developments in that metro area. All of those houses are going to be in your low to mid 300 price point today. And the rent ranges in there are your high 1900-2200 range. The houses that we build across the state are pretty consistent. We have about 16 floor plans that we build from, and those range from three to four bedroom and two to three bathroom. And almost all of our houses, with the exception of one neighborhood, include double garages. So again, these are, these are properties that tenants are proud to live in that there's room for a family or room for a remote worker who needs an office at their house. So just a little bit about that Huntsville market and Then central Alabama, like I mentioned, includes everything between Montgomery, Birmingham, Tuscaloosa and Auburn. So anything in that central Alabama region, your price point's a little bit lower in those markets just because the lot costs are a little bit more affordable. But same type of floor plan, same level of finishes that we provide throughout the state. And you've got a wide range of tenant, commuter and metro area workers that live in that area. And then our Gulf coast region, you know, we've got two different products really. In the Gulf coast region we have our long term product which is similar to what we've already talked about, that three and four bedroom long term rental home that your long term tenant is going to move into. And we've got several different neighborhoods in that area. But we also have two short term or vacation rental developments on the Gulf Coast. One of those is in Orange beach and the other is in Gulf Shores. Both of those have a little bit higher price point. So you're going to be starting in the high five hundreds, through the eight hundreds depending on the area. And those are going to be your Airbnb or VRBO type products. This is something that we moved into about two years ago and we've seen some success with that. But Jason has talked about this before. The, the short term and vacation rental market is starting to cool. So we've, we've seen a little bit of a shift towards some long term or mid to long term tenants in both of these developments. You know, those six to 13 month leases of snowbirds or people who just want to have a second home but don't want to pay to purchase a second home. I want to run through a quick case study. This is an actual Hartman investor. He started purchasing long term properties from us in early mid 2020. So right after Covid and to date he's purch about 52 properties. His investment to date is 11 and a half million. And these numbers are amazing. Right now he can recognize about $81,000 a month in rental income from those long term rental properties. And since he's been purchasing, he's been able to recognize almost $2 million just in market appreciation, just in the market value appreciation of his overall portfolio. So he's been a tremendous example of what you can do with purchasing long term rental properties even in just an almost three year period.

Yeah, yeah, he's done amazingly well. And overall he has more than double this in his portfolio that he's purchased through our network. So really a phenomenal testimonial.

But one of the things depending on what scale? Anybody listening or watching this is, as an investor, you know, you want to.

Work with a network and their partners.

Who can help you scale and scale.

Up your portfolio quickly and easily with the fewest problems. And that is really one of the other sort of hidden benefits that there aren't specific metrics for. But it's definitely there in the background and it's definitely an important factor, right?

Absolutely. So again, one of the important parts pieces of purchasing these rental properties is how you actually structure your financing. So that's one of the things that our team has been really aggressive on, is always looking for the best financing options out there, especially for investors. You know, investor financing is so nuanced and can be really difficult. So we like to find options that work for people based on their specific goals. So just these are three investor financing products that are available out there right now. One of those is a lender that offers 5% on their, their ARM products. One of these is a 30 year fix. So if you want to set it and forget it on your payment, they've got a 575 floor product. And then we actually have another lender that's offering right now, which this could end anytime, but they have 100 investor financing, which has been a game changer for a lot of these folks, especially with the rates being a little bit higher and more unpredictable this year. Last year and moving into this year, we've seen several people take advantage of all three of these products. So, you know, pick up 15 or 20 properties just depending on whether their portfolio or Fannie Freddie and structure it in a way that even on the 100% product where the rate's a little bit higher, you can still recognize positive cash flow depending on the structure of the rest of the portfolio that you're buying. So yeah, we, we like to really work with what your goals are and try to meet the needs to make sure that you're still recognizing your cash flow and the long term goal.

Right. And so you, you're basically buying down these rates. At least on the first two examples. You're offering a buy down for the investor. So their rate is over a point lower than it would be otherwise. Well over a point lower on that 30 year fixed.

Yeah.

Good, right? Right, absolutely.

Great. Well just wrap it up with anything else you want people to know. We're super excited about the upcoming property tour.

People can go to jasonhartman.com to register for that and they can come and.

They will get to see two of the markets we've done discussed and it'll.

Be a nice time. Good opportunity to work network with our team and other investors and enjoy some nice meals together and property tour. So we're really excited about that. Be sure to go register@jason hartman.com but just any closing comments?

Again, I mean we offer these property tours throughout the year. We try to do a few at a time. So we would love to have y' all join this next tour. We try to make it a really good time. So like Jason mentioned, we're going to have some meals together. We're going to enjoy each other's company and and see some great properties too.

Good stuff.

Well, there's a little Alabama Market update for everybody and thank you for joining us.

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