Jason Hartman walks through real estate numbers with his investment counselor Carrie and her 8-year-old daughter Jacelyn, who wants to become an investor. They analyze a Memphis house at $73,900 with 34% ROI and a Florida duplex at $229,900 with 31% ROI, breaking down cash flow, debt-coverage ratio, and returns.
Chapters
Welcome. This is a bonus episode, a very short bonus episode. And as we have listeners all over the world, many of whom are cooped up at home, they have their kids home from school because school has closed down. I figured we all need a little bit more economic and personal finance advice and we're going to give you some of that in this little bonus episode. But also maybe you'll have a laugh and a smile out of this. And at times like this, we certainly all need that. So we'll get to that in just a moment. But one of the great silver linings that I already see coming out of what's going on in the world is that people are using their time at home to improve their skills. They're learning things. They're learning how to code and write software, they're improving their physical fitness level. Around my neighborhood there's all kinds of people out jogging and walking that I've never seen doing that before. Now granted, the gyms are closed, so maybe that's the reason. But anyway, a lot of good is coming out of this situation we are in as a global community and not the least of which is people learning and increasing their skills, increasing their knowledge and looking at starting a new home based business. In fact, you have received our emails about our home based business tax sale opportunity. Many of you have joined that course. And I'm hearing good things. So keep it up. Keep learning and growing. Like Ray Kroc said, as long as you're green, you're growing and as soon as you're ripe, you start to rot. This is a great time to improve your skills, to start a business, to maybe take a new career path, whatever. And it's also a great time to teach your kids stuff when they're home from school. So today we have one of our future investors and investment counselors on. And that is. You've heard our investment counselor Carrie on the show before. Well, today she and her daughter are on the show and her 8 year old daughter is now studying to become an investor and an investment counselor. Here they are. I'm not sure you are aware of this, but at the company here we have a mentorship program where we mentor future investment counselors and investors because pretty much every investment counselor is always going to be an investor too, naturally. And we have the mentor and the mentee on today to talk about a couple of properties that might interest you. Remember my prediction, there's going to be a migration to the style of investments that we have been recommending for many years. Low density housing where you can easily have good social distancing. It's a new world we're in, folks, and the home is becoming the center of the universe. So with that note, we've got mentor Kerry and mentee Jacelyn here with us today. Carrie, how you doing?
Hey, Jason, Good. Thanks for having us on.
It's good to have you back on again. Jacelyn, how are you? Good, good. Okay, now, folks, Jason is. How old are you? Jacelyn, tell the listeners.
Eight.
You're eight years old. And what do you want to be when you grow up?
An investment counselor.
Wow, that's awesome. Okay, good. This is great training. And of course, Jacelyn is Carrie's daughter. Okay, so we're going to go through a couple of performas today. And Jason, you're getting pretty good at reading these things, so I can't wait to go through it with you. The first one, let's go through it with your mom and you. And then the second one, let's see if you can do that one all by yourself. Okay? So, Carrie, what do we have here? We got a property in Memphis, right?
Yep. Memphis is still happening for us. We have a three bedroom, one and a half bath in Memphis and it's listed for 73,900.
All right, great. Hey, let's have Jacelyn tell us the projected rent on that property.
$750.
So for $750. Now, Jacelyn, since you're going to be an investment counselor soon, you know that that is more than a 1% RV or rent to value ratio. Just slightly over 1%. So that's good. And Jacelyn, what's the projected cash flow per month on this property?
$193.
Excellent. Kerry. It looks like this is all based on 25% down, 75% loan to value ratio. And by the way, listeners, we've really kind of highlighted, especially as the economy is changing so much and, and the world is changing so much, recently we've been talking more and more about the debt coverage ratio. And the reason I bring that one up is because that is a ratio of how likely is it that you could ever really get into trouble with this property. And this property has an excellent, excellent debt coverage ratio. In fact, one of the best I've seen lately. Jacelyn, what is the debt coverage ratio on this Property in Memphis?
1.70.
1.70. That is an excellent debt coverage ratio. Excellent. Hey, Jaisalyn, can you tell us the projected cash on cash return?
10%.
Okay, and what's the estimated total return on investment?
34%.
Excellent. You are good. Hey, we don't even need your mom here. You can do the whole thing yourself. Good job.
Yeah, no, this is a solid property. You know, it has new flooring, new roof, updated kitchen, bath. So it's our really solid property that an investor is going to luck out on at a low initial cash invested of 22,724 if you're going with a 25% down payment.
Excellent, excellent. And one thing I do want to tell you, hopefully by the time any of our listeners go to jasonhartman.com properties to look at this property, a little error will be fixed, and that is that the secondary pictures on the property, some of them are turned sideways. So you might be turning your computer or your neck until look at them. Hopefully we'll have that fixed by the time you actually go there and see it. Okay? And of course, all of these properties have our assumptions in them of appreciation rate, vacancy rate, management fees, and maintenance fees included in them. So good stuff. Okay, let's see. Let's have Jacelyn do the second property all by herself. This is a pre construction duplex in Citrus Springs, Florida. It's brand new. Okay, so there's a brand new property and a duplex. This will be a hot commodity, obviously. Jacelyn, tell us the price of this property.
$229,900.
Excellent. And how much cash does someone need if they want to buy this property? What's their initial investment based on? 25% down with closing costs?
$66,096.
Excellent. So $66,096, basically. 66,000. Excellent. And cost per square foot is $117. Projected rent, $2,000 a month. And folks, that's pretty great for brand new construction of a229.9 property. Okay, so almost 1% RV. Of course, with a renovated property like the Memphis one we just discussed, you're going to get a better rent to value ratio. But if you want new construction, this is pretty good. Jacelyn, what's the monthly cash flow on this Property?
Looking like $362.
Excellent. So as we look at this first year projection, 362 per month and $4,348 per year. That's the annual number and debt coverage ratio 1 point on this property. And Jacelyn, what do you think the total return on investment is going to look like on this one?
31%.
Okay, folks, there you heard it. Jacelyn, thank you so much for sharing this pro forma with us and these first year projections. Carrie, anything else you want to say about this property?
No, the new construction. It'll be ready estimated end of 2020 into 2021, depending on which property you end up lock. And property management, as always, does come with these properties.
Excellent. And those, all those assumptions are on the pro forma, where you're paying the property management. You've got a vacancy rate of one month per year. You've got maintenance costs built in there and, you know, brand new construction. You shouldn't have any maintenance costs for the first year or two. All right. Well, thank you very much. And, Jacelyn, I can't wait till you become an investment counselor. You've got a good mentor. Your mom is going to mentor you very well. And we'll talk to you guys real soon.
