2397: From Lazy to Legally Retired: Why Being a "Lazy Investor" is the Ultimate Compliment for Early Retirement

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I'm in St. Augustine now. You know, if I had never worked for you and had that wonderful experience and gotten to know you, buying this investment property was life-changing. It has not only been very profitable, but it's a wonderful place for our family. And I just— I mean, I'm here right now and just thinking about and wanted to thank you for that.

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

In 1967, just over 2 decades after his first entirely accurate prediction, Kingsley Davis wrote something that I find extraordinary. He said that if a government wanted, they could control population by following these steps: squeeze consumers through taxation and inflation, make housing very scarce by limiting construction, Force wives and mothers to work outside the home to offset the inadequacy of male wages, yet provide few childcare facilities. Encourage migration to the city by paying low wages in the country and providing few rural jobs. Increase congestion in cities by starving the transit system. Increase personal insecurity by encouraging conditions that produce unemployment.

Yeah.

Let that sink in. Now, he said that he didn't think that governments would do this because it was, like, obviously immoral and evil, but I reckon he was probably on to something there. Seems like a few governments did it by accident.

This May, become an empowered investor. Join Jason and his team as they empower you to gain control of your financial future and create wealth. Get your tickets at empoweredinvestorlive.com.

It is my pleasure to welcome Dion McNeely to the show. He is known as the Lazy Investor, and if you call him lazy, he considers that a compliment. Dion, welcome. How are you?

I am doing great. It was funny getting ready for this. I opened up my YouTube app and I went to the Jason Hartman channel and it's all red. Because the bar goes across every single video for the last few months.

Yeah, okay.

Yeah, I'm definitely somebody that watches your— learn from you for years now.

Good, good stuff. Well, I'm glad it's been helpful, and, uh, thank you for liking, subscribing, and commenting. That's what I— I keep forgetting to say that to people, but that's what the algorithm likes when you feed it that stuff. So that's good. Well, Dion, you wrote an encyclopedia On Being a Lazy Real Estate Investor. It's almost 500 pages long. Wow. How long is the audiobook version of that? I got 7, 8 hours.

It's about 11. And the reason— oh my gosh, the reason the book Financial Freedom for the Lazy Person is so big is because I'm really lazy and I don't ever want to write another book. I wanted to make sure it was a full brain dump, everything I've learned, reaching financial freedom, starting in a bad position. Like, my starting position wasn't good. Most of my life I've never made more than $60,000. I tried for a pension twice, right? I tried the Marine Corps. They downsized after Desert Storm. I tried law enforcement. They downsized after 2008. And so my pensions kept getting taken, and I thought at 40, I was a single parent with 3 kids, get laid off from law enforcement, found out about $89,000 in bad debt in my name I didn't know existed until the divorce. And I started teaching at a CDL school making $17 an hour. So that was my starting position. And then 10 years later, about a decade. I retired in 2022 and have been just traveling, chasing good scuba and warm weather. And so I wrote the book. I work a lot with Michael Zuber from One Rental at a Time. You guys have met— you guys met you at the event in Las Vegas, right? And for so long, people kept asking for a book and asking for a book. And after I retired, I thought I could dedicate a year to putting all of this together and putting it in paper form because some people don't learn through audio or video. So I made the book and I wanted to make sure it was a one and done.

Yeah, good stuff. So how did you retire? It was on your real estate investments, right?

It was, it was very slow, not sexy. I invested, uh, I'm, I'm kind of a combination of you and Coach Carson, uh, the small and mighty investor. Um, but I was also working full-time raising the, the kids, so I never, never did a BRRRR before I retired. I've never done a rehab. I buy from the MLS. It took 2 years to save the down payment for the first house hack. And I actually had such a bad debt-to-income ratio, I had to move from my house into an apartment and rent my house out so that I can get 2 years of rental income on my tax return so I could buy the first duplex. And then it was 2 more years till I got another duplex. So in 4 years, I did 2 transactions. And that's when usually I think people quit in the beginning because it's so slow and so, you know, you don't see the actions happening. But after about 6 years you hit this thing called the income snowball. And I had more levers to pull, you know, one rent increase from the binder strategy where my tenants asked me to raise the rent, which is what—

and we're going to talk about the binder strategy. That's going to be the main focus today. Before you move on though, I just want to comment on what you just said, because this is the part— if there is one discouraging thing about my career, it's what you just said. It's that people just aren't impressed with real estate investing in the beginning, but then if they stick it through those first few years, they become really impressed. You know, it's, it's, it's this snowball effect. You said the, the snowball, right? And, and that's really what it's about. And, you know, of course you follow my content, so you've heard me say this, but it's the iceberg, right? Most of the action is below the surface of the water, okay? That's where most of the iceberg is. You don't see much. The stuff you see on the top Usually cash flow, usually appreciation. And, you know, people look at a deal and they think, okay, I invested $75,000 to acquire that property and I'm getting $200 a month or $250 a month, like whoopie-doo. But there's a lot going on below the surface of the water there, folks, that is making you wealthy that you don't even see, you don't even realize. Unless you stick with it for a couple of years to start reaping the benefit. Please comment on that. Let them hear it from somebody else besides me. Okay. Yeah.

Yeah. So it's when we first start and you only have 1 or 2 properties, you don't have a lot of opportunity for value add. A rent increase, it's 1 or 2 units. You're just building up the reserves. But after that 5 or 6 year point and you have the reserves built and you have several rentals, you know, 3 or 4, not even like dozens, just 3 or 4. A rent increase now hits 3 or 4 units. You have the reserves to call your insurance company and say, hey, I'd like to raise my deductibles as high as possible because I'm not going to make a claim unless I really need to. That lowers my premium.

Well, it's not going to be a claim on— you have the law of large numbers starting to work for you, right? Because you're not going to have all of them wiped out at the same time, right? Statistically.

Right. So, but you reduce your premium. So your cash flow increases. You've now had chance for tenant turnover. Maybe you add a closet to a den and it becomes a bedroom and you get, you know, So it's after those 5 years that, that, that like magic starts to happen. I wasn't even planning on retiring early. I just wanted to own some rentals so that when I get too old to work, I wouldn't become a financial burden to my kids. That was the original goal. But when the income snowball kicked in, that hockey stick, after, you know, 7 or 8 years, started going up so fast, I actually felt silly going to work. I was making more money off my rentals. And I, I targeted several things. So we, we were talking at the One Rental at a Time event, and somebody was coming at me with, like they usually do, cash flow. Like, the focus of everyone is cash flow. For me, as I started to own rentals, I wanted— it's not passive, but I wanted as close to passive as I could get. And that meant keeping tenants long-term. So I'm a very boring investor. I don't do short-term, midterm, nothing creative, no seller financing, no special deals. Like, I'm going to some new markets.

You're not only lazy, you're boring.

It's boring too. I'm going to be reaching out to someone like you that has those turnkey properties that I'll be looking for. Because all my deals, they're not turnkey through a company, but they were from the MLS that needed— I wanted tenants in place. And I target 7 things before cash flow. And those 7 things are what gives me the life that I have now. Because I just spent 3 months in Thailand. I actually flew back from Thailand for the Vegas event. And in those 3 months, I totaled up all the time it took to self-manage my 18 units that I have now. It was a little over 2 hours.

Yeah.

That happened because of the things that I target outside of cash flow. 3 of my properties I purchased were break-even deals when I purchased them. And I know that in the investing world, that's sacrilege. You have to—

Yeah, right. Cash flow day one. Why would you do that? Yeah, yeah.

Right, but if you target the right things that give you long-term, like, peace in management, then financial freedom, again, taking a decade.

Dion, take us through those things. People are dying of curiosity. You said cash flow was number 7 on the list, right?

It's, it's number 8.

So it's number 8. Okay, so there's 7 things before that. So what are the 7 things before?

Right, so every— so you make content. How many thousands of times have somebody emailed you a deal and said, hey, can you tell me this is a good deal or a bad deal? Here's the price, here's the rate, here's the rents, right? That's the question almost every time, because you can come up with a yield calculation. Well, I want tenants to stay long term, so the first thing I look at is I want it to be a single-family house, because the average tenancy in a single-family house is 7 years. The average tenancy in an apartment is 2. But in market, single-family houses don't cash flow. I've never seen one unless you had a big rehab or a burr or something. So my first criteria is as similar to a single-family house as possible. So while I go for 4 units or less because I like that fixed-rate debt, 30-year conventional loans, I'm looking for side-by-side duplex, better than over-under. Like, I own an over-under, but I prefer side-by-side because it's more like a single-family house. And so the more single-family house-like the longer my tenants are likely to stay. So if I'm looking at a duplex or a fourplex and it— to me it looks like one of those Frankenstein houses, they divided into a few apartments— that's not my preferred asset type because you have higher turnover there. If you have tenants that feel like it's home, they're more likely to stay. The second thing is I don't want to invest in a war zone. The people that come at me and just look how good the math is on this deal— the best math is in the area where the officers serve all of the warrants, right? You can't keep— you can't send a handyman there. You don't want to go collect rent there, right? You'll have so much turnover. And so before even looking at math, I'm looking at, is this a safe neighborhood? And I don't use CrimeStop or any of those. I'll actually call a police department, ask for the non-emergency number, and ask a police officer for a short conversation if I'm looking to buy there. Is this a safe area? I'll call property managers and say, would you manage a property on this street in this neighborhood? Or I'll find out the data through a couple of different ways. The third thing I look at, again before cash flow, is this is an instant deal killer for me. I will not buy a rental in an HOA. There are some people that do great in HOAs, but it's a personal problem for me.

Look, I just wouldn't need to comment on that. Homeowners associations, I hate them.

Me too.

But I will tell you, I have lots of properties in HOAs over the years, and they appreciate better. That's what, you know, I mean, I'm not in the game for like appreciation. That's the icing on the cake. I always say that.. But for some reason, those HOA areas, they just tend to appreciate better. They tend to be the, you know, newer communities. They're not always newer anymore. HOAs have been around for a long time, but, um, it's hard to escape an HOA in America anymore. And listen, I will tell you that maybe 25 years ago, maybe even longer, I registered a domain name because I am always fighting with HOAs. I'm on the verge of suing one right now. I haven't done it yet, but really thinking about it. I registered the domain name illegalgovernments.com because I think HOAs are illegal governments. I think they are unchartered illegal governments that don't have the right to do what they do. Now, you know, you're going to say, well, legally they do, Jason, they obviously operate. Well, yeah, but that doesn't mean it's right, okay? Wall Street does a lot of shit that it shouldn't be doing either, okay? And they're, they're a bunch of crooks, but They can legally do it. So, you know, you can be a crook and still be legally operating as a crook, okay? You know, and if you understand what is moral and ethical and what is not, okay, if you have a moral compass.

So anyway, but yeah, no, so, so for a larger portfolio, I think an HOA is a risk you could take. With, with me wanting— I never wanted a big portfolio. I wanted the right amount of cash flow from the least amount of units. Yeah. And, and the HOA problem is HOA fees suck. The board of directors is usually like the good old boys club where if you're in the club, you're fine. If you're not, you get fined for everything. But the problems for me are the random assessments. Like the lumberjack landlord who you met at the event too, uh, he got a $78,000 random assessment on one of his—

oh my God, that must be a condo.

It was a condo and he just sold it.

Don't buy condos, folks. If— listen, when I say HOAs, I'm talking about what I call the minimalist HOA, okay? It's a single-family home, They don't have much governance over the structure or anything like that. You're paying maybe $30, $40 a month. It's not a significant HOA. The HOA, in fact, that I'm thinking of suing right now is only like $115 a year. That's all they charge. But guess what we found out? Okay, we already found out— get this— one-third of their revenue is from fines. Okay. So basically, I think that's fraudulent inducement because they're telling anybody who buys a home in that community, all you have to do is pay $115 a year. But really, the dues are higher than that because on average, in the aggregate, they— and those are two different things, I know, but you know what I mean— they're fining people, and a third of their revenue is from fines, not dues. So they're misrepresenting their actual dues. That's my position on that.

I actually— hopefully you make videos about it. I'd like to see how that turns out.

Believe me, I will. Yeah, I haven't gotten into it too deep yet.

The fourth thing of this list of 7— I look at some of these things because they impact how the numbers will go. I want, again, as similar to a single-family house as possible. I want washer dryer hookups because the type of properties I'm going for in the Pacific Northwest where I invest in Washington People don't like to use laundromats and they don't do shared laundry. That might be more of an East Coast thing where people are used to the laundry being in the basement. There's no basements in Washington. That would just become an indoor pool if we had them here. So if it has a washer dryer, it continues on in my list. If it doesn't have a washer dryer, I look at the layout and I think, where could I add one? What would the cost of adding it be? Because that wouldn't impact the yield on the cost to acquire, would include adding the washer dryer. So again, this is 4 things before I've looked price rates, rents, or anything like that that everyone always presents me with the deal. The, the next one is I'd specifically target properties I don't want to do a large rehab on. So if it says conventional lending not allowed, or it's not going to— it's going to have to do some kind of rehab loan or something, I just pass. I'm looking for preferably tenant-occupied properties. That in my market usually means the power's on, the water and plumbing work, and there's probably floors, right? If you buy it and it's not occupied, a lot of landlords want that so they can rehab it and get the best rents. I don't want that. I wanted to buy the property that took the least amount of my time because that was my resource that was really limited when I was starting out.

Right. Yeah. And so that's interesting too. You buy properties that are tenant occupied and then what you do is you go to the tenant, you send them a binder.

Okay.

Which, well, I'm jumping ahead. Go ahead, finish your—

I'll go through these 7 and then we can definitely do that. Okay. This is the one that has ended a lot of the deals for people who look at small multifamily. And if they don't think of this aspect, they'll buy one and then regret it later. But with small multifamily, all of mine are duplex, triplex, fourplex, or a house with an ADU, is parking. In some neighborhoods, maybe around Chicago or something like that, off-street parking is normal. But in the Pacific Northwest, if you don't have a carport or a garage, it's a temporary house, right? It rains so much here, people want covered parking when they go there. So my type of parking is, is, you know, at least 2 per unit or more, um, whenever I'm buying small multifamily. That stopped me from buying some deals because I don't want to deal with the tenant turnover, even if the yield was better. And people say, well, you just raise the vacancy rate. Sure, but you increase the time that you are managing tenant turnover, which is what I wasn't looking for. So I have 18 units. I think in the total 13 years now of owning rental properties, I've probably had less than 20 tenant turnovers total. And most of them over the last few years.

13. Wow, that's amazing. So 13 years of owning properties and 20 turns, that's it.

And some of those are because I encourage all of my tenants—

wait, how many properties though?

So it's 8 properties with 18 rental units, and most of the tenant turnovers were in the last few years.

18 doors, 13 years, only 20 turns. That is a very low number.

Yeah, well, I, I target properties that keep tenants long-term, like a single-family house, washer dryer hookups, good parking. And then I— the, the seventh thing here— so that was the sixth thing, was parking. The seventh thing, and this is the thing that I get arguments from, from other investors all the time, is I want pet-friendly fenced yards. If it doesn't have a fence, I'm going to add one, because people don't like to relocate their animals. Because even if the human moves, that's a pet relocation. And so I'll have tenants that stay longer, pay higher rents because there's so few options for them to move to, pay a pet fee, pay a pet rent, and stay long term. Those— so those 7 come, and then I'll look at math. And there are some other things I look at that are weird, is I don't want to invest in a good school district. So many people will target that. That's not one of my criteria. I won't just— I won't like say no good school districts, but I don't hunt for them because those increase tenant turnover.

First, why does those increase turnover?

So the school district is good because the taxes are higher, so they have money for the school district. But the tenants are there for the middle school or the high school, and when those kids age out of those brackets, there's no reason for them to stay there anymore. So the better school districts get a 4 to 8 year tenancy. I have tenants in place 26 years, then I buy the place. Like, if they've been there 26 years, I buy it, they live there 10 years and die. Like, those are the tenants I'm looking for. And it's not based on where their kid's going to go, because sometimes the middle school that's best in your area isn't where the best high school is in your area. So you can even shorten that tenancy by going for good school districts. I do Several things like that that might confuse other investors.

Yeah, that's interesting. So let me just share my experience on that. I always found that the best tenant is the family who has kids in a school district that they just don't want to move. They will like fight to stay there. The longest tenant I've ever had was 9 years. My mother though has a tenant that has been there over 30 years. I mean, he has to be there about 35 years now. He could have bought the house, got a mortgage, paid it off. He's still there. A tenant. Yeah. Truck driver.

Yeah. And so, so I'm kind of on the other end of the spectrum. I, I try to avoid families. I will legally rent to them. Of course, I'm not going to discriminate. But examples are, I try to have my leases end in the winter, not the summer. And most people say they want their leases in the summer because it's easier to find a tenant, right?

Yeah.

Why is it easier to find a tenant? They want to move. If I want low tenant turnover, I want my leases in the winter so they're less likely to want to move. If I have a bathroom repair, I will rip out bathtubs and put in walk-in showers. Less likely to get kids because kids is where all my damage came from in my properties. I've had a total pet damage of less than $300 ever total, all combined. Tens of thousands of damage from kids. So I target these things.

That's so interesting. Most people wouldn't think this way. They would think like— and of course, you know, I just do want to mention and you alluded, you mentioned it before. You cannot discriminate on family status and things like that unless it's 55 or older. That's the only age category you can, you can do. But that's quite interesting that you love pets but you don't like kids, and you have kids, you have 3 of your own.

So I've got 3 kids too, right? And the damage they did to my own house, so, and the damage I did to my parents' house. Exactly. So it's the things that will keep tenants long-term. Pets, they don't like to move. Kids age out. And so you'll have families change the number of kids, so they either add bunk beds or need another bedroom, or the kid moves out and they don't need that space now. So the constant tenant turnover comes from targeting families. I have two families right now that have kids, been there a long time. I don't know if I'll have any problems. But my other tenants— the only tenants I've had move out either leave the area or bought a house. Because at lease renewals, I always tell my tenants, you shouldn't be renting, I'll help you buy a duplex like this, you live in one side, rent out the other, like I started, life will be better for you. And I've never had one do that, but I've had 3 now buy a house.

Let's talk about that for a moment. Okay. You know, a common misconception and really one of my own mistakes over the years at times has been preferring tenants that have really good credit. And you know what? Those people don't stay. They buy a house. Okay. If you got these 720, 740 FICO score people, they seem great on paper, but they leave too quickly. You know, if you get someone with a 660 FICO, they're just not moving to buy a house right away. Okay, so, you know, that can be a better tenant that you can serve for a longer period of time. You know, you might have something to say about that, I think.

No, I think it's a brilliant way of looking at it. I've always used credit score more important than income, right? Because I think if you've worked to have a higher credit score, it's important. I I do notice the ones that had the high credit scores, they're the 3 that did buy a house. So you've got a brilliant point there. But I diversify my, my tenants because I don't own any stocks. Up until last year, I had never owned any. I bought some Tesla because it went on sale. I was like, sure, I'll put 1% of my net worth into it. But I don't have retirement accounts. I don't have crypto. I'm 100% real estate as far as retiring goes. So I diversify my properties by spreading them out. I want it at least 10 miles apart, right? So I'm close to different economic drivers. But I also diversify my tenants. I have 1/3 military, 1/3 Section 8, 1/3 working or retired. So again, you can't discriminate. I can't add a— put up an advertisement saying Section 8 only or no Section 8 allowed, right? But if I put an advertisement with the housing authority on the closest to me, Joint Base Lewis-McChord, I'm probably going to get a military person. If I call the housing authority and I say, here's the listing, can you share this with your clients, I'm probably going to get a Section 8 tenant. And if I just put it up on Zillow and Apartments.com, I get a random thing. So it's not a perfect science, but it gives me that stability of having different types of tenants. And the military people, I've never had one buy a house. They do tend to move when they get orders. So you just kind of plan for that. But the retired people are basically the ones that I have. They've basically said, can I just stay here until we pass? Like they're not looking to move. So it's that long-term tenancy that, that is why the binder strategy exists.

Like, this is why— let's get into the binder strategy. We haven't really— people are dying of curiosity about this, so tell us how you do it. You told me and I love it.

This is probably top 3 reasons why I was able to retire early would be house hacking, the binder strategy, and then networking with people like you and Michael Zuber and the Lumberjack Landlord and Millennial Mike and all of the people that invest in real estate and show you how to better your processes. Like, I learned from every one of you in this community. But the binder strategy, I like to buy properties from the MLS with tenants in place, and they're usually for sale because the landlord's not making any money. There's so many landlords who say, I didn't want to raise the rent because I would lose a good tenant. So they lost a good asset instead, right?

I love that. This is the problem with mom-and-pop landlords. They don't raise rents enough. You know, I, I say try and target on average 4% annually. For your rent increases and they just don't do it. They rationalize. They say, this tenant's not giving me any problems. I'm just going to let it be. You know, they don't lose the tenant, but they lose an asset. That's a great way to put it. They lose an asset. Yeah.

Good. And so those are the ones I'm looking for. The tenants have kind of been ignored. Some maintenance might be deferred, right? Nothing major. But I mean, they're not, they're not keeping up on it. And so I buy it. The rents don't make sense. Other investors would say, well, at current rents, you're going to lose money on that product. Absolutely. At current rents. That's why they're selling it. People don't sell sell something that's making a ton of money if it has no headaches, right? But if they have a tenant that hasn't been taken care of, a property that hasn't been maintained, and I buy it from the MLS, I'll go through the inspection report and I'll fix the emergency stuff. I'll— I even ask the tenants, if you own this place, what would you fix? So I fixed the things that matter to the tenants, and that's never been like, I would add a room or I'd pave the driveway. It's been, I would like a screen door so we can have the door open in the summer. I would like the ceiling fan replaced because it squeaks. You know, a couple hundred bucks Very happy tenant, right? And I don't do my binder right away because I didn't get to vet those tenants. I don't know their credit score, work history. I want to know, are they going to pay on time? Are they going to call me for trivial things? Or am I going to get noise complaints, right? So I take a couple of months. And so yeah, I'm not getting top dollar rents for a couple of months, but I'm figuring out if I want to keep those tenants. And it's pretty rare not to. I think I've had one I wanted to get rid of, but the rest, they're still there. After about 2 months, I show up with a binder. That's why it's called the binder strategy. Now, my friend the lumberjack landlord Matt does it through email or text, so you can do this virtually too. I invest locally and self-manage, so I do it in person. With the housing authority, I do it through emails for Section 8. But the binder, the very front cover has a picture of the property with basically what I paid for it, because the tenant's going to be able to find this on Zillow or Redfin in a month or two anyway. So I'm not, I'm not worried about transparency or hiding anything. And I tell the tenants Your rent made sense to the previous owner, but my taxes and insurance are based on this new value from me buying it. And the tenant doesn't care about the price, but I'm showing them these— this just online website, you can go look this up yourself. So it's complete transparency. Open up the binder, the first page is a printout from Apartments.com or Zillow of all the rentals in the area, like the little pinpricks on the map, so they can actually see where their school is, where their work is, how far their commute is. They're looking at the rents in the same area. The next page is from the housing authority, the fair market rents printed off the federal website. This is what Section 8 would pay if you move out. I'll get this much. And so the— this was the last one that I used. I might have taken all the papers out, but it has the fair market rents in there. I highlight the number of bedrooms because the tenant cares if it's a 2-bedroom or a 3-bedroom, and Section 8 pays this amount for that. So the tenant was paying $1,460. So their current rent was $1,460, and the Section 8 housing authority for this will pay 1987. 1987 is what they'll pay for a 2-bedroom in this area. So I show them that and I say, look, you're paying $1,460. That the government would pay me for 1987 if you moved out. Then I show them the basic, uh, allowance for housing is in our area, what the military gets paid to live off base here. It's about $2,200 a month for an E-5. And so I just show them a printout of that, and then I have several examples in here of rentals that are available. And like I didn't say, I took them out, but there's like 1 or 2 left of what rents are, the number of bedrooms, so they can see. And I'm— if they're in a house, I would show them houses. If they're in a duplex, I would show them duplexes or townhouses, right? I'm showing as similar as possible. So most of the examples for a 2-bedroom in this area are between $2,000 and $2,200. The government will pay $1,987, the tenant's paying $1,460. As a landlord, if I said, I'm the new owner, I'm going to raise your rent $100— it's like, nice to meet you, I'm going to raise it $100— I would be a jerk. They would flame me on social media, they would probably move out, they because they would tell the other tenants how bad.

So you, you're giving them the comps, and the other thing you're giving them besides the comps is you're giving them pride of authorship so that they can name their rent. And when someone does that, they own it, and it's just a whole different feel.

That's very interesting. So they're in a conversation to set their rents. How many tenants get that opportunity, right? And they don't even actually realize it yet. The next step is I go, so you're paying $1,460 the government would pay $1,987, the area average is $2,000 to $2,200. And I slide the binder to them and I just say the magic sentence: what do you think would be fair? I've never had a tenant say the rent should go down, right? If the area average was below theirs, they should say that, and you should lower the rent. You shouldn't have rent higher than the area average because area average rent sets rents. I've never had one say, well, we should go to $2,000 if that's the average, right? They're not stupid. They pretty much usually split the difference. In this case, the lady said, let's go to $1,800 or $1,850. And I said, that would be great. That's fair to me. That's really close to that. How about we go $1,750 or $1,700? It was like a $300 increase, lower than what she suggested, but way higher than the $100 I could have done myself and still been a bad person. So she makes a suggestion. I bring it down to the $1,700 or $1,750 that we settled on. I'd have to look it up to remember what it was., but it was lower than she suggested. She was happy. She was happy with a $300 rent increase. That's a tenant who now knows what rents are, is going to stay long-term, got things repaired that, you know, I asked her, what would you like, knows I'm going to take care of it the previous month. Do you self-manage all your properties? I, I do.

And yeah, and if I invested at a distance— we love self-management.

So yeah, if I invested at a distance to start, I might have started with a property manager, but I invested in my market, got all my systems in place, and now when I move, I will still self-manage even at—

yeah, you can self-manage from across the country, it doesn't matter. It's quite easy to do nowadays, and we, we are very much in agreement with that. Okay, so you get the rent increase. Anything else you want people to know about the binder?

Binder? Yeah, so I made a free course. There's no charge, just diontalk.com. D-I-O-N, diontalk.com is a free course on the binder. So it covers how it works with Section 8, how it works with property manager, with self-managing at a distance. And then the last thing that really makes the tenant happy is like this. In this case, the lady suggested a number and I say, well, let's go to $1,700. That's a— that's enough of an increase for me, or $1,750, whatever it was. And I said, but next month's going to stay the same and then the next month will stay the same. So today, if we were doing it today, we would say, okay, so March rent's going to stay your $1,460. April, it's going to stay $1,460 because the tenant suggested the amount and started calculating next month. Month. Now I suggest we put it off 3 months, and the tenant just saved $600 in their head. And really what I did is I met the legal obligation of enough rent notice before a rent increase happens, but I don't present it that way. I say, we're going to delay the increase for 3 months, so now May 1st, this will be your, your new rent, and it gives you some time to prepare for this. So the tenant leaves with an amount they contributed to. Some— I've had 1 or 2 tenants say, can we think about it? I'm sure I'll leave the binder with you, you let me know next couple of days. Because I'm not in a hurry, I'm not in a rush, because it's logic that brings us to the new number. They know the most logical thing for me to do would be to kick them out, rehab the unit, and get market rents. Like, that's what most investors would want because they want market rents. I don't want market rents. I want to make a profit. And to me, the profit doesn't happen from kicking tenants out, feeling like I displaced somebody, having to do a rehab, spending $5,000 to $10,000 on the rehab, and then having to screen new tenants. We're talking months without income, months of money going out to get market rents. Sure, it might feel better at market rents, but if I get that $300, $350 a month increase, and then I'll do like you— I was, I was always 5% every other year after, after the first binder. But then the binder strategy was there for black swan events. So in 2020, we have a pandemic, an eviction moratorium, a stock market crash, a rent freeze. So in 2021, when all of that stopped, I went around and bindered every single tenant. Rents had gone up so much, they asked on average for about a 25% 5% rent increase. 40% was the average increase in our state. So if I kicked them out, I would have done better. But I'm a lazy investor and I don't want to kick tenants out of their house. So then in 2024, rent control was talked about in Washington State. So I went and bindered all the tenants again. And then in 2025, rent control passed where I'm at in Washington. So now instead of 5% every other year, I'm doing 7% every year. The rent control law is making me a ton of money. I feel really bad for the tenants. They actually started 2025 with an email to the tenant saying there will be no rent increase this year because we did the one last year unless this bill passes and then we have to do 7%, which is the new cap. All of the tenants understood and they all got the 7% increase because the law passed. So that's the binder strategy in a nutshell. It's kindergarten simple. But if you look at the steps and the psychology to it, happy tenants don't leave and happy tenants don't trash your property. And that's how I keep— one of the ways I keep tenant turnover to a minimum.

I agree, I agree. And you know, I just spoke with Jared, who, you know, we did an interview with him, and I just think it's such a mistake how so many property managers and, and investor owners think of their tenants. They think of them as their enemy, or, you know, like, this person is your customer, take care of them, right? Think of them in a positive light. Most tenants are wonderful wonderful people. Yes, there's some bad apples, of course. There's some bad customers too, right? Of course there are. But the vast majority of tenants are just great people, and they'll do a lot of things for you. They'll become your advocate. They'll interview contractors. They'll get quotes. They'll just do all kinds of stuff for you. And this is another reason you want to self-manage your properties— just be in control of it. And you get that relationship with the tenant. You get the social pressure of them needing to maintain that relationship. And they're just great. I mean, they're—

the vast majority of them are just wonderful people. I love self-managing. There's, there's two main reasons why the property management idea never works for me. The first one is, well, first I buy with leverage because I watch this guy that talks about inflation-based debt destruction, and he's educated me on how important that is.

Yes, that would be Jason Hartman.

You should check him out. You should find him here on YouTube. So my properties are purchased with debt, which means means in most cases, if I had a property manager in those first 5 years or so, they would make more money than I did. I don't want someone making more money and me taking all the risk. And the second reason is I want tenant turnover to be as low as possible. That's how I maintained wanting to add more units. Property managers benefit from turnover, so it can just be the casual way they talk to the tenant of, hey, would you like to resign the lease? This will be the new rent, because they want the tenant turnover, whereas I want to present here's what area comps are, here's how below area average you are. You know, when I was doing the 5% every year, I would still show them the binder and go, we're only doing 5%, and we didn't do one last year, and we won't do one next year unless there's something crazy. Happy tenants stay, and property managers don't want that. And I've had so many property managers say, well, I don't want tenant turnover either, that's work. Yeah, it's work, but you get a month or half a month's rent, which is more than the rest of what you're going to make for the rest of the year, right? And, and so that the divergence of goals makes me want to self-manage. So I've got friends with property managers, they do fine. Michael Zuber uses a property manager.

Yeah, I think, and it might be for my money, you want to have aligned interest, and that's why you want to, you want to just be in control of your own stuff. You're just going to do much better that way, and it doesn't take a lot of time or effort. Maybe speak to that, you know, how much time or how little time do you spend managing your properties? I mean, it's just really like, some people think it's hard. They say things like, I don't have time, It doesn't take much time. There's hardly any time. Speak to that, if you would. I mean, I don't know what you're going to say. Maybe you're going to say I'm wrong.

Well, if I was going to say you're wrong, I would. I would tell you if I had a completely different opinion. What I will clarify is learning a skill is much harder than using a skill. And when we first own a property, it feels like it takes 20 hours a week to manage one tenant because you don't have your systems in place. You're probably not interacting with other landlords that tell you, here's how you get a lease. Here's how you stick to your lease. Here's how you negotiate with handyman and contractors. Here's how you build your list of handymen so you're not the one going to fix the thing. You're just sending a text to get the thing fixed. So in the first few years, learning the skill is time-consuming. I get it. It's frustrating. Learning the skill of finding a deal is frustrating too. It's just this learning the skills, the hard part. Once you have the skill, like how long does it take you to analyze a rental? Like a couple of minutes probably before you go deeper on it. Well, it's the same thing with managing tenants. In retirement, after a decade of learning the skills and learning from guys like you, on average it's 2 hours per month. So most months are 30 minutes. I, yeah, I got the rent checked off, looked at, I'm not missing any rent payments. That's about it. Once in a while I'll have a lease renewal, so that's a couple emails back and forth. And then when I have a tenant turnover, it's probably 5 to 7 hours that month for the tenant turnover because I'm not doing it work, the handyman, the contractors, that, that's happening. I'll do the showing and, you know, that, that's one 2-hour block for me. But you take those 5 hours and the rare tenant turnovers, average it out, it's always about 2 hours a month. And the total for Thailand— I was gone for 3 months, I went November, December, January, came back middle of February— I totaled it up because I was doing YouTube videos while I was there, and it was just over 2 hours total. And that was because the last week I had about an hour to handle a septic issue with one property. But once your systems are in place, and I think, I think this is what we need to say more because it's not always rainbows and kittens. Acquiring rental properties is life-consuming. Learning your market, learning your asset class, hunting for deals, dismissing deals, learning your systems, learning how to manage tenants. So yeah, 5 years of suck. It's why we call it that. Once you have those skills down and you're— I'm not in acquiring mode. I'm going to buy 1 or 2 properties a year because the money keeps piling up, but I'm not out there hunting for deals. I'm not spending the time doing that and managing my tenants. Is, I want to say, minimal. I mean, I have to think about how much time I spent. There's tenants I have that I haven't talked to in 5 or 6 years, and emails back and forth to renew a lease every 2 years because we do the 2-year lease thing. But that's it. And then an occasional dispatch of a handyman. But yeah, it took years to get those systems in place.

It doesn't start easy. Yeah. And you can really shorten that learning curve by having someone help you do it, someone who's been there, done that, guide you through all that. So absolutely. Dion, thanks for joining us. Really appreciate it. Anything you want to wrap it up with? Maybe a question I haven't asked you.

No, no, I really appreciate the chance to come on here. I think we say this often in YouTube University where there's no one right way for anybody, but there's, there's like for everyone, but there's one right way for each person. And I think some people don't want a small portfolio like me, but some of my systems make it easier to find the bigger portfolio and some people don't want the big one. Find people like Jason, people who've done what you're trying to do. I wish I found YouTube sooner. My first 5 years— my first year was so bad I tried to quit, but the next few years were more challenging than they had to be. If you find somebody who's done what you're trying to, watch their content, reach out to Jason, figure out how they, how they did it. Because this is— a lot of this is evergreen. You don't need a certain market condition. Buying and owning a rental long term works the same at almost any market. If somebody could have bought in 2008 just before the crash and did just fine if they had long-term debt, tenants that they wanted to keep in place. They're, you know, there is no one time that you had to invest because I think that's the thing I would like people to take away and then I'll stop. How many times do you hear you're only successful because you bought before today? Yeah, you bought during the crash, you bought after the crash, you bought before the pandemic, you bought during the pandemic. Anyone who thinks that it's because of the last 10 years is pretending the next 10 years isn't going to happen.

There is a shortage of housing, folks, and you want to be one of the suppliers of a product that is in short supply. So that's, that's very, very good point. You know, it's, uh, that old saying, when's the best time to plant a tree? 20 years ago. Well, when's the second best time? Today. So just get in the game and buy some properties. I mean, all of the demographics are in your favor right now. They're not going to be that way forever, but for now you've got a nice runway ahead of you. So get in the game. And Dion, thanks for sharing this experience. We really appreciate having you, and happy investing to you.

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