2094 FBF: Client Case Study Ani Wee

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.

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Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new new slant on investing, some exciting techniques and fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine, self made multimillionaire who's actually been there and done it. He's a successful investor, lender, developer and entrepreneur who's owned properties in 11 states, had hundreds of tenants, and been involved in thousands of real estate transactions. Jackson, 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 the Creating wealth show. Listeners from 164 countries worldwide, welcome to episode number 824. 824. This is your intrepid. What exactly does that mean? Intrepid? Yeah. Well, I don't know. Am I intrepid? This is your host, Jason Hartman. And thank you so much for joining me here today. I just got back from another brunch over at Tony Hsieh's house. Yeah, Tony Hsieh, the founder and CEO of Zappos. He has these interesting Sunday brunches at his very unassuming trailer park here in Las Vegas and he does them every Sunday. Really a very generous guy to host everybody there. And, you know, it's an interesting crowd to say the least. Tony Hsieh is definitely a hipster. So going to his brunches, it's probably not what you would expect from a billionaire. And he is likely the most popular man in Las Vegas. He's redeveloping the whole downtown and really doing some phenomenal stuff. So I just love it. And you, you may have read his book Delivering Happiness or, you know, heard about all the corporate folklore about Zappos and what amazing customer service they have and so forth. And, and then he sold the company to Amazon, you know, did Incre incredibly well. And, and then he's using his money, do all kinds of cool things in the city and, and other stuff as well. So that, that's the one thing I want to say. I just Want to remind you of that. You know, when I was in Peru a couple of years ago, I remember I did a show from there, or at least an intro from there. And maybe you'll catch this on a Flashback Friday episode, or you already caught it. And you remember what I said there because the group I was with in Peru, one of the hotels they put us up in was. It was so beautiful. I mean, it was just. It was spectacular. And a couple of us were just so impressed. And we went down to the front desk and found out that like, you know, and of course, hotel room prices are all over the board. I know you all know that never pay the rack rate for a hotel. You can always negotiate a hotel price. But, you know, that hotel was so gorgeous and like in the closet, you know, they had four bathrobes, two women's bathrobes, two men's bathrobes, you know, so you could take your pick of different styles. And I mean, it was just. It was phenomenal. This is a phenomenal hotel. And I have stayed in some gorgeous hotels over the years, but this one was phenomenal. And it just came to mind. And what I said when I was recording the show that day is, take care of this money thing. Take care of this money thing. It's a thing, right? It's a thing in all of our lives, and we've just got to take care of it. And look, I grew up poor. I did not have money at all. And you know, money isn't everything, as the old saying goes. We've all heard it, but it is something. It is definitely something. And you would have to be completely immature and jealous and green with envy, as the saying goes, to deny that money isn't something. It is something. It matters. Matters. It matters in our world. It matters to capitalism, to freedom, to being able to do good in the world. And I just kind of thought of that again today because I was looking at all the stuff Tony Hsieh is doing, and it's just really phenomenal. And also, I am going to be talking to you in the upcoming weeks from Europe. Yeah, I'm going on another trip to Europe. And you know, speaking of that money thing again, it is. I mean, look it, I like getting a good value better than anybody, okay? And, you know, I got a very good deal on my airfare. I can't believe how cheap it was, really. And then I upgraded, you know, my class a little bit there. But I don't like to waste money either. Right. But you know what I'm thinking about My first trip to Europe as an adult, right, when I rented a car, drove around with friend. And you know how a couple of different trips to Europe just really, or anywhere in the world for that matter. I've been to 80 countries now. How I just always try to economize and stuff like that. And you know, I'm thinking, isn't it just so freeing not to have to think too terribly much about money, right? Hey, look at even billionaires. And I know a few billionaires and many, many deca millionaires and, and sent a millionaires a couple of those two. DECA means more than 10 million and SENTA means, you know, like a hundred, right? More than 100 million. So, you know, even they like getting a good value. They don't like just wasting their money, especially if they didn't come from money, you know, then they appreciate it more because they remember how their life used to be usually. And that's one of the, one of the good things. But it's really just a. It's much more efficient for you to live in such a way where you don't stress about money. So take care of this money thing. That's the first thing I want to say on this episode today. And we're going to talk to a client of ours, a client case study Ani we, who will be with us in a moment here. You know, her story's interesting. A single mom really did some phenomenal things in real estate. You know, she talked to me the other day and just went on and on about how, you know, listening to this one specific podcast episode of mine changed her entire life. Changed her entire life. Listening to that one episode. Now, what could change your entire life? You know, what do you want to do in your life that could completely change it? I would urge you just get to that breakthrough point. I mean, for example, if you're listening to the show and you're thinking, well, you know, I'm on the periphery, right? You know, I bought a couple of properties, but I'm not like really doing it right. I'm not really building a big portfolio. And maybe that's what you want to do. Hopefully it is, because income property is the most historically proven asset class in the world, right? It is. And that's what we, we teach you about here. A little bit of business and life success stuff as well on the Creating wealth show. But it's mostly about income property investing, of course. It's the most historically proven asset class in the entire world. So what do you need to do to get More immersed in that whole thing. Immersion. Get immersed in it. Well, one of the things you could certainly do as a shameless self promoter, I will say, is join the Venture alliance mastermind. That will get you immersed because you'll be hanging out with some friends that are really going after it. They're going after life in general, but certainly after building good real estate portfolios, come to our live events. When we have live events. Come to them. Come to all of them. And by the way, if you're a Venture alliance member, those are included with your membership. But that's a really important thing, you know, get yourself more immersed.

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.

That is a key thing in life. Immersion. Be immersed in. In the thing you want to do more and more. Very, very important. Now, I want to talk to you about crap rate. I mean, cap rate. No, for this episode, for the first time, I'm going to call it crap rate. And it's not the rate of how much crap you're willing to tolerate or anything like that. I'm calling it crap rate because I see some clients making a big mistake focusing on the crap rate for a property. The capitalization rate. Cap rate. Capitalization rate, obviously. You know I'm kidding, right? I'm making that word up. Crap rate. But why shouldn't you focus on the cap rate? Why is it, you know, look at, we have never promoted this metric that is commonly used in commercial real estate where they are used to making a lower return on investment for many reasons we've discussed on many prior episodes in commercial real estate, they're used to using cap rate. And why is it the thing in commercial real estate? Well, in commercial real estate, it's much harder if you're buying a big building, a big office building, or, you know, hopefully not a big retail center, as the retail apocalypse is in full swing, as I predicted it would be 20 years ago, more than 20 years ago, I remember going to a presentation at the Pacific Club, a swanky private club in Newport Beach, California. I used to be a junior member there. I remember hearing a presentation from some retail brokers who were talking about commercial real estate. And I said, hey, you know, this Internet thing, I think it's going to turn into something. You know, I said this 20 years ago, before anybody really knew what the extent of that would be, obviously, right? But I said, don't you see this putting downward pressure on shopping in the physical world? And they said, well, you know, one guy, I got him to kind of come around, you know, he was an old timer, made a ton of money and you know, in retail properties. And I got him to kind of come around and see my point of view on that. And I, I'll bet you nowadays he really sees my point of views 20 years later because the retail apocalypse is upon us and we're going to talk a little more about that and what it means to our tenants. Tenants need to have jobs to rent our properties. Well, actually they don't really need to have jobs because they could be on the dole and have Section 8 government handouts, but that's another type of investing. So not necessarily good or bad. By the way, you know, a lot of people do very well in section 8 and some people hate it. I find that there's not much middle ground there, as I've talked about before. But back to the crap rate, because that is where we were going. At the risk of being on a tangent here before we get to our client case study interview, the crap rate is not that meaningful. Why? You know what I'm going to say, right? You know what I'm going to say? Because it doesn't include a couple of very important things. It doesn't consider appreciation and it doesn't consider leverage. And see, in commercial real estate, typically, of course, there are every. By the way, I wanted to make a disclaimer. Everything I ever say on this show, ever, there is an exception. There's always an exception. No rules or laws apply universally. Including this one. Including this one does not apply universally. Even the universal law is not universal. And so typically commercial real estate does not appreciate as well as the good old humble single family home. Talked about that, analyzed it many other episodes, not going to go into it here. So that's one thing. The other thing is the financing is not as good on commercial real estate as it is on residential real estate investments. So if you're using crap rate and you're comparing it to say buying a Walgreens on a triple net lease, buying the property a Walgreens leases from you or an office building or something like that, that would not be an accurate comparison. Crap rate is not a very good metric for the residential real estate investor. What you should look at is the overall return on investment. So when you go to jason hartman.com properties and you look in our properties section and you look at the overall return on investment, that is the key metric that is the proper number to look at. Now if you want to look at something close to crap rate, okay, look at the cash on cash return if you want. Okay, but you know, I'm telling you again, you can't compare that to other investments because it doesn't give you enough information. It's not multi dimensional enough. Now even the overall return on investment does not include a couple of things. It doesn't include my trademark mouthful phrase that you can't say 10 times fast even if you try really hard. In fact, maybe we should have a contest who can say this 10 times fast and you'll win a prize. Inflation induced debt destruction. Inflation induced debt destruction. Inflation induced debt destruction. Blah blah blah. Okay, so that's the metric that of course cap rate doesn't include. But even the overall return on investment doesn't include inflation induced debt destruction, the hidden wealth creator in real estate investments. Additionally, what else doesn't include? Well, none of the returns on any of our performers. Look at the overall lifetime value of your property portfolio. When you get the advantage, the huge advantage by the way of the 1031 tax deferred exchange, when you rebalance your portfolios, when you do the 2 for 1 or the 3 for 1 rebalancing of your portfolio and you take advantage of the 1031 tax deferred exchange. So you get to reinvest all of that capital without paying tax. You sell your business, you sell stocks, you sell bonds, you sell that mutual fund, you're going to pay tax. You got to pay the government before you get to reinvest the money with income property. Under the 1031 Tax Deferred Exchange you can reinvest the whole thing. That is beautiful. Not your post tax dollars. You get to reinvest your pre tax dollars. Phenomenal, phenomenal deal. None of it includes that. So if you're going around and you're comparing even the overall return on investment, which looking@jason hartman.com in the properties page, you know, typically you're going to see overall return on investments. And of course this is a performer. Of course it's a projection. Look, just assume it's not going to work out as well as projected. Okay? It might be better. I mean it happens better many times. In fact. The client case study we've got coming up, you're going to hear a story that's way better than what's on our performer. Okay, when you hear Ani, we talk in a few minutes here. Okay, but just assume it's not going to be as good as that. Cut it in half if you want and take that projected 35% return and cut it in half. 17.5%. But just know that even the 17.5%, which is phenomenal, it's truly amazing. And those of you new listeners who don't believe anything I say and think I have no credibility and think I'm crazy and I'm, you know, the hokey broker that's about to go to jail. Right? Because you don't know how to calculate return on investment yet because you haven't listened to me teach you that. And by the way, you should go to Jason hartman.com and on the front page watch that free video we have because that really leads you through reading the performer and understanding the numbers in 27 minutes for free. You can learn to be a great deal analyzer. Okay, a great deal analyzer. And that's a critical component. But, but yeah, even the overall return on investment does not include the benefit of inflation induced debt destruction, which is huge. You know that from those of you who've been to my Creating wealth seminar or my JHU Jason Hartman University Live seminar or have listened to the show and heard me talk about that, you know that's very significant. It also does not include the tax benefit of the 1031 tax deferred exchange, which plays out over time. Even internal rate of return irr the holy grail of metrics does not include that either of those things. Okay? So there you go. All right. Hey, without further ado because I risk the already this intro is getting very long and I have a whole nother part of the show for you. Our interview a client case study with Ani We. So let's listen to Ani and hear her story. It's a great story and she is one of our clients from Alaska. How unique is that? So here is Ani.

Hey, it's my pleasure to welcome another client back to the show and this will be a client case study with a listener and now client from Anchorage, Alaska of all places. We don't have that many listeners in Alaska, but it's always great to have one. And I have been to Anchorage and Fairbanks before and through the Yukon Territory as well up in Alaska and Canada a long time ago. If you. It's very beautiful up there. And our client is Ani we and Ani, welcome. How are you?

I'm doing very well, thank you, Jason.

Yeah, well, it's good to have you on and I just loved it when one of our investment counselors introduced me to you. The other day it was so great to hear your story and I just always love to hear someone tell me I changed their life. And that's always great, hopefully for the better.

And I think so in your case it sounds like. But give us a little bit of your background. First of all, what do you do for a living?

Yeah, I work for the federal government as an auditor and that's, you know, most people with it's basically accounting work pretty much all the reconciliation of schedules and doing audit. So I think we've done for close to 10 years now and I'm pretty happy there.

Good stuff. Did you grow up in Alaska?

No, no, I grew up actually if I am from Taiwan, the Republic of China. I relocated to America when I was 16. I went to a boarding school in Michigan and then I just settled down and went to college in a different state and then I moved to Alaska actually for the job.

Okay. So that's, I was going to ask you how did you end up in Anchorage, Alaska? You know, that's sort of an out of the way place. Give us a little insight you where before we talk about your real estate investing story because I think a lot of the listeners will be interested. You know, not a lot of people go to Alaska. I have been and I feel very fortunate to have been there. And you know, I did an Inside Passage cruise from Vancouver on, on the way there and then on the way back did some backcountry stuff and I remember going to was it Denali Park, I think and, and, and seeing all of that. And you know, it's just gorgeous up there obviously. But hey, I was there. Actually, I got to tell you something funny. I have a picture, I got picture. It would be great for a Facebook flashback Friday or Throwback Thursday of me standing on the Alaskan pipeline at midnight and it's as bright as day because I was there on the longest day of the year, the summer solstice, June 21st. And you know, it really messes up the sleeping patterns. I remember we were in that famous fish restaurant. You have their Simon and Siefferts, I believe it's called. That's when I really loved Alaskan halibut and discovered it. And I thought it was about 6 o' clock and I looked at my watch and it was 10pm.

Yeah, that's.

A challenge for me because a lot of time I have to, I really have to have a military clock here. Otherwise I have a hard time remembering whether that's 2 o' clock in the morning or 2 o' clock in the afternoon. And because the light is, you know, in the summertime, it's all 24 hours available. Much more so in Barrow, Alaska, which is the.

Northernmost town here in America, rather than Anchorage. Anchorage is a little south and it's a little easier in terms of daylight to recognize what time it is. But I lived for many years in Barrow, Alaska and that was a challenge for me to try to figure out what time is exactly the time, a.m. or p.m.

So you, you lived way up there. Wow, that's just amazing. And so do a lot of people use the military clock, the 24 hour clock up there?

A lot of people do because it's easier to know, you know, like 2 o' clock in the military time would be 14 hours. So it's just easier to recognize because you can, you, you no longer can, can trust your sense of pine from.

Our darkness a lot of places. Yes. And so, yeah, it's just a lot easier.

Yeah, absolutely. You cut out for just a moment, but I think people got the message. It's very hard to recognize time with that. So, I mean, you, you, you work for the government, you're an auditor. Tell us a little bit about your real estate story. I guess. How did you happen to come across my podcast a few years back In.

I, in 2008, I, I was going through a personal divorce at the same time the market crashed. So I had a lot of questions about the economy at large. So I was looking for answers with the alternative media. I went into Kerry's.

Website and podcast, I started to listen to him and pretty soon I remember he did an interview with you.

And I. It resonated with me because I was listening to a lot of messages given to me by people who are more of a gold and silver investment.

And a lot of people were telling me that in terms of the global economic crash, real estate will be a liability more than an asset. So a lot of people were advising me to purchase heavy metals such as gold and silver.

Yeah, right, right. And the interesting thing about all those precious metals people Ani, they have the right premise and their arguments are correct. They just don't have the right conclusion. I've been very, as you know from listening to the show, I've always been very fascinated with them, but they just, they just don't, they don't give the whole picture.

Yes, I, I definitely resonated with, with your idea that about, about precious metals. I use precious metal more as an insurance policy versus an investment strategy.

And before, I think before I ran into your podcast I was just buying real estate. I was, I started the real estate investing actually because of the book Rich dad, poor dad by Mr. Kiyosaki. But then I didn't really know what I was doing, so I would buy. I was, you know, like, say, for. My neighbor died of breast cancer. I bought her her condo, which is just right next to mine. I live in a multiplex and I just went and paid cash for it. You know, I just didn't really think about leveraging or anything because in my world, where I from, people tend to pay for things in cash and if they don't have the money, they just don't buy. So. So it was very strange to think to. To hear you talk about leverage because it was the antithesis is what how I was brought up, you know. But then I keep listening, I just, I said, well, you know, heaven, you know, please keep an open mind because it is true, using leverage, you can buy more.

So I made some silly investment just, you know, buying condos and whatnot here in Anchorage, Alaska.

And they're not as lucrative an investment. Now, looking back, after having heard your podcast for several years, I look at my old investment, real estate investment. I realize they're really not generating very good income for me. But. But then in the meantime, fortunately during that period of time, I just happened to live in an area where we have a lot of military personnel wanting to move out of base. So despite the fact condo investing wasn't the greatest investment I can think of, but it wasn't the worst investment either, such as putting your money in a CD account.

So I ended up breaking even. I later sold a condo and then move the investment to Florida instead. So I first started purchasing property from you, I think after hearing your podcast for several years in 2013, that's when I decided to purchase a property from your network.

Yeah. And so the first property you bought through us, I believe was a duplex, right?

Yeah, it was. You interviewed this gentleman named Jack and. And I mean I heard many, many interview before and I don't really know why, I just really like that interview. And so I went to your website and then I noticed there is a duplex. I said, oh, multifamily, because most of the properties on your property website, you know, on your website is single family.

Yeah.

So that was the first time I saw duplex and it was 208. It looks, you know, kind of new. And so I started doing some research around the area and I discovered an issue with Chinese drywall. So I called up Sarah and Then she gave me the name of Jack. So I contacted him, I discussed about this duplex. So I purchased it from Jack Lee for $78,000. At the time I didn't really have the money because my money were all tied into these condos. I bought a couple, you know, investment condo plus I live in the condo myself. And most Alaskan, you know, a lot of Alaskan like condos is because it's really hard to do maintenance. Oh, I believe it.

Yeah.

In the Alaskan winter, it's very difficult. Yes.

Yeah. And on top of that there's, you know, I mean, and then the problem with the condo is always the condo due and which is pretty hefty, maybe about three, four hundred dollars a month. So. But at the time, you know, that's what I did. So I talked to Jack, I said, you know, he, I think originally was listed for 80,000. And I said if I pay cash, you know, he agreed to take some th. So I just went to the bank and for the first time put a, got a line like equity, equity work, what I call a line of equity loan against my condo. I didn't have a mortgage because I was paid for cash. So I just got a low interest loan and paid Jack and bought the duplex from him.

Now that one, that one just about doubled in value. Right. Did you, you did a cash out refi, I believe on that.

Yeah. Well, I continue listening to your podcast afterwards. And then you know, Jack, secretary Lori manages, managed the condo until Jack decided to retire. So, so I bought it in somewhere in April 2013. I just recently, maybe around like January of this year, I did a cash out refi for it was appraised at $150,000.

And, and you bought it for how much did you say? 89,000, 78,000.

78,000.

Wow.

So, yeah, that's fantastic. Congratulations. It doubled in value and you bought a bunch more of them. Right. Didn't you buy several?

Yes, I did.

And the reason why I only did I did a cash out refi is because the rent has also gone up. I would have sold it if the rent stayed at $500 per side each month, but the rent had gone even 850 per side each month from, from 500. So it was not really a good idea to sell even though I, I was getting, getting a lot of offers, people writing me postcards or letters wanting to buy.

Yeah. By the, by the way folks, if you don't have investment properties yet, if you haven't started your investment career yet, you're going to start getting. And it's such a great feeling, isn't it? It to. Every month on all of my properties, I get constant postcards and letters from people saying they want to buy my property. And I just know that I am controlling the world's most valuable commodity income property, you know, and the whole world beats a path to your door. You know, there's such a limited supply of it. It's just a wonderful position to be in to, to be the, the seller. You know, you're in the driver's seat when you're the seller and, or, or the owner, I should say you're not hopeful, you're not selling them. But you know, occasionally we do sell and when we rebalance our portfolios, but. Yeah, isn't that a great feeling though?

Yeah, it was. I, I know I never gotten any postcard for my Alaskan condos even, you know, but, but I, I was starting getting postcards for this particular duplex, many postcards, and I decided not to sell. And then I just continue rent them, you know, just rent it out. And I used the proceed of the money to purchase I think one more property, a single family home for $10,000 in Fort Myers this time. The duplex that was sold to me by Jack back in 2013 was located in a suburb of Fort Myers, Florida called the Lehigh Acres. So I bought a. I didn't really leverage either. I just put them cash down, just make the transaction faster.

But.

I was very surprised by the appraisal record of $150,000. And then later on I attribute to the fact that that for Myer area has the number one job growth or number two, it's one of the top, at least top 10 in the nation for job growth and population influx.

So if you, I'll tell you though, if you talk to any of our clients that bought properties back in. And I love how you say the numbers, you always go 2002008 instead of 2008. You know, but any of our clients that bought but you know, anywhere in the last seven years, I mean, they have just cleaned up, you know, it's, it's incredible the kind of appreciation they've had. And that leads to the next issue. You know, generally, as you know from listening to the podcast and as all our listeners know, we believe in buy and hold investing. You know, why would you sell an asset that produces 20, 25, 30, 35% or even, you know, 40, 45% return on investment every year? Right. That'd be crazy. You know, when you look at the overall return because it's a multi dimensional asset class. And you know, if you want to look at those, go to jason hartman.com click on properties and look at the actual performance. If you're not familiar with how we calculate all that, but you know, we generally believe in buy and hold but occasionally the properties appreciate so much and you know, that's a great problem to have. Okay. It's a great problem to have that you really do need to rebalance your portfolio because the, the rents, the income never keeps up with the appreciation. You know, it's, it's always out of sync a little bit. And, and so I would ask you, and this is an interesting part of our case study for the listeners today, that your property, you bought it for the first one that you were talking about here, the first one you bought through a, you bought it for 79,000 and it appreciated to 150,000. Now what is the rent on that and do you remember what the rent was when you bought it and what it is now? For example, like give us a comparison there.

Yes. When I bought it into a 13 from Jack, it was $500 on each side. So it would be a thousand dollars, a thousand total.

Okay, so a little better than 1% rent to value ratio when you acquired it at acquisition.

Okay, yeah. And now it's 850. So I'm getting $1,700 a month.

Wow, that's fantastic. Those rents have gone up very, very nicely. And you know what? You don't need to sell that property. Don't feel you need to do that at all because you're still getting better than 1% rent to value. I would even almost question, I wonder if it's worth more than the appraisal you got. You know, maybe it's really worth 160.

170, 180 according to the appraisal report. Because they use different methods to come out with their figure. According to the appraisal report, they said if they use the rent method it would be appraised at maybe around 168,000 to 170,000.

But then the appraiser decided to use a more conservative cost approach or some other approach and then he came out with 150,000. But yes, if you look at the, it's on a quarter acre lot, it has a septic and a. Well, probably not exactly. If I had known it has a septic and well and sometimes it does involve more work when you are responsible.

You wouldn't have favored that. Yeah, those are that's not ideal, by the way.

Yeah, not ideal, but it was better than buying.

A lot of properties have it, so.

Yeah, yeah. So I bought it and I have a little repair, you know, with the wells and the septic tank. But it's not nothing big, nothing major happened. I think I had to change a well pump one time. But it, but I, I think that the area has a lot of potential. And I got a lot of yellow postcards during the years, you know that.

The yellow postcard. The famous yellow postcard. Please sell your house to us. Yeah. Yes.

And I think that people who are true investors knew the intrinsic value of the duplex because of economic development in that area.

And demographic studies like Mr. Dent has done also indicated that a lot of.

People really like to move to a warmer climate. And Florida is considered a very desirable area. And I think Fort Myers, Cape Coral, Lehigh Acres happen to be without any major industry in a sense. Pollution control. There's really no pollution, there's no heavy industry.

The area enjoys sunny weather which is almost like the opposite of Alaska. A lot of sun.

Well, it's the polar opposite of Alaska, almost.

Pardon the pun. Yeah.

So I, I guess just to attract that baby boomer population, you know that I guess 10,000 people reach their 65th birthday every day now and just more and more people moving in.

Amazing. Yeah, it's amazing for sure. Okay, so I want to make sure I mentioned a couple things so the listeners get some more education out of this. You talked about the appraisal and you know, I've talked about this in the past, but just for everybody, there's three basic methods of appraisal. There's the comparison approach which applies to condos and single family homes mostly there is the income approach. And you talked about how the appraiser did the income approach and wanted to appraise it basically for more money, but then he got more conservative on you and he did the cost approach. So three basic approaches, Comparison income approach and replacement cost approach. Okay, just so the listeners know that. Because I didn't want to gloss over that. It was an important point.

Yeah, that was. And I think because the lender wants the most conservative approach, so that's why he chose. And so basically how it works is that one side of the duplex, one tenant pays the mortgage, the property tax and the insurance and the other side is pretty much pure cash flow unless I have issue repair related issue such as replacing washer and dryer or issues with the garbage disposal. But I'm not self managing it. I have A property manager. And my property manager's name is Kevin. And I find him extremely reasonable.

Because I learned from your podcast, you know, to scrutinize the property management agreement. What I have found is that Kevin is also a real estate investor. He's not just a property manager, he's not just a realtor. He's also an investor. So he has experience in all three areas. So he immediately agreed with me that the late fee should be split 50. 50. So, you know, a lot of time when you look at a property.

Agreement.

They, they want to keep the late fees. We've, we've talked about that before and I don't, I don't like that. Yeah, yeah, yeah, folks, you know, one of the things I want to tell you is that don't be afraid to push back a little bit on property management issues. You know, you can negotiate, read that contract. Don't give them too much latitude on discretionary repair items because there's just a funny thing about life that when you give them a lot of latitude, they tend to take it. So, and we've talked about that many times in past episodes. You gotta be in control of your property management experience. Okay? So very important, very important.

And the second thing I like about him is that he doesn't charge me the markup fee for repair. So those are the two things. And in exchange for that, I agree to make payments on all the repair directly to the vendor. So save him a little bit of paperwork and that also give me some level of control if I, you know, and I can contact the vendors directly.

So, and if it's an expensive repair, ask for more quotes and call them a quote, not an estimate. You know, in your emails and your discussions. Granted, it may not come out exactly that way, but calling it a quote will help you in case you need to argue with them later. But Ani, you know, I want to ask you, how many units do you have now total in your portfolio?

Well, because I was so happy with my, my duplex investment in Lehigh Acre, I later on purchased four more. So I have a total of five duplexes. I also.

Okay, so that's ten.

Yeah, ten. And then I also own two single family home in the area where Kevin.

Manage, you know, so 12, 12 properties. And then you own your own condo and the one next door to you, right?

Oh, I, I, I sold the one next to me. But I, what I did is I bought another one from your network in Jackson, Mississippi from a gentleman named Brad. And I, you know, again, I heard your interview with Brad. So I decided that's an interesting opposite strategy because he is a, I consider him more of a specialist for Section 8 housing at times. So it was a $50,000 investment in a single family home in Jackson, Mississippi and it produces $725 a month on rent. And I know that when I purchased that property I knew the appreciation of, you know, in Jackson, Mississippi would not be as high as in Lehigh Acre or Fort Myers. It's pretty much just a cash flow.

Yeah, that's a much more linear cash flow oriented market. I agree. Yeah, absolutely, absolutely. Good stuff. Well, what are your plans next, Donnie? You've got, I guess what that sounds like it's about 15 units now total, right?

Well, yeah, I have, I have one, I have two more single family home in Arizona that I purchased prior to becoming a podcast listener and those were purchased in 2011 and 2012.

Oh, you did good on those too. We were back in the Arizona market for a little while. It got too expensive so we stopped recommending it. But in Phoenix, you know, that's a sort of a hybrid market so it gets a little expensive at times. And then we'll stop recommending it and you know, throughout the cycles we'll go back in and recommend it for a time and you know, if you're, if you're there and you have properties, just keep them. I mean you're stabilized, you know, you've got hopefully a good tenant and so forth.

Yeah, good tenants and different property manager. And then on top of that, you know, I had really cheap debt at a time because when I was in 2011 and 2012 the interest rate were 375 for 30 year mortgage.

3.75.

Yeah. And now the ones that I purchased in Lehigh and the rest of the southwest Florida, that was 4.75. So the debt in Arizona at the time was considerable, considerably cheaper. So I think talking to Sarah about at some point I would need to do a 1031 exchange because the rent in the area didn't keep up. Unlike Florida, the rent in this little Arizona town that I purchased real estate pretty it gang up. But they didn't go up as high as the rent situation in Florida. But this Florida situation is kind of abnormal because that Fort Myers has a number one rent increase in I think in 2014 and 2015 out of the whole entire nation.

So while my Arizona rent also increased on the time when I purchased it, I think at the time, when I purchased it in 2011 I was only getting maybe about 7, 7 50. But now I'm getting 1150 currently. So it has gone up, but then the property itself has even gone higher.

Yeah, the rents, the rents will never keep up with the, with a, with a hybrid or definitely not a cyclical appreciation market. You're always behind on the rent and rents, they lag because they're one year leases because the comps aren't good for rental value. You know, it just, it just doesn't, it's a much more fragmented market. You know, there's just not a, an exchange of data when it comes to sales prices. There is a true exchange of data in the multiple listing service and at the county recorder's office, but that's not true on rents. And that can work for and against you as an investor. And you know, we've talked about that on past episodes. Ani, we've got to wrap up though, but you know, I just wanted to ask you kind of in conclusion, any thoughts you have for investors, anything you want to share with them before we wrap it up?

I think it's important to make up your mind. Buy real estate first and wait, don't wait to buy real estate. I think it's important. And then also.

I would consider.

Duplex investing side by side duplex.

Because even if you, they say if you lose a renter, you still have another renter paying the mortgages and property tax and insurance. That will make it a lot easier for you to hold the property. And another thing I realized with my single family.

Let me just comment on that for a moment, Ani, if I can, and I don't mean to like totally disagree with you there or anything, I think the plexes are okay. But I'll tell you something, you always get a better quality tenant in a single family home. And the single family homes generally, although listen to your story, which is a great story, they generally appreciate better than the plexes. And you know, we've sold lots of duplexes, triplexes and four plexes and then some big apartment complexes from time to time too. You know, you can do that, that same diversification with two single family homes. Right? So I, I just don't want people to like totally go overboard on that idea. I've heard that argument a lot. There's a lot of people out there that sell four plexes and develop them and say, well, you know, one's vacant, you only have 25% vacancy. If you have a single family home and it's vacant, you have 100 vacancy. Yes, you're right, I get that. But you Know, you can have four single family homes. Okay.

So, yeah, you know, what I have found is that with my single family home, even though I may have four or five hundred dollars a month on cash flow, but when the tenant move out, pretty much all the cash flow will put into.

Updating the paint, the carpet. A lot of updates. So. And I think you should. And with the multiplex, I think you should be very selective. Personally, I don't like triplex or fullplex because I think too many renters can gang up on the property manager.

They do gang up on you. That's the other thing I meant to say. Even in duplexes, they'll do that. When those people get together and talk, things can become difficult for you. It's true.

And so you have to be very selective. I don't like the up and down kind of duplex. I only buy side by side because it gives a little more sense of independence. And.

So I think you need both. I think you do need.

You know, duplex and single family home. One should have a pretty good mixture. But, you know, you gotta start somewhere, right?

And we're all about diversification, so. Yeah, totally, totally hear you there. Yeah, good stuff.

Start with a single family home and then just kind of, you know, use that as an example to learn, you know, as a good starting point. Because truthfully, I don't think I would have learned as much about real estate investing if I didn't buy it and then start making mistakes. But I would say pretty much all the silly mistake I had made, my tenant basically paid for them, so.

Right. Isn't that great? I love that comment, Ani. That's a great comment. All the, the, all the silly mistakes you made, your tenants basically paid for them for you. Isn't that beautiful? We outsource our mistakes and our debt to other people called tenants. Love it.

Yeah. And you learn and then, and then you make a better decision. You know, by the time when I moved to 2013, when I started purchasing real estate outside Alaska, I already made a lot of mistakes that I can and pay for. So when I look at something, I would be able to see why that's a better investment than the one I made before. But if you don't have any investment, real estate investment, you will not have the opportunity to learn to make mistake, learn from it, and then you would not be able to tell which one is a better investment. I think you just have to get it started somewhere and with the help of your investment counselor and then just keep moving forward.

Very good advice. Aniwe from Anchorage, Alaska. Thank you so much for joining us today and sharing your your client case study with our listeners. And I'm sure everybody learned a lot from you. So thank you listeners out there. If you're a client of ours and you want to come on the show, reach out to us and let us know. We always love to hear these case study stories. So Ani, thank you very much for sharing.

Thank you. Bye bye.

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