CW 138: Income Property Real Estate Investment Opportunities in Saint Robert, Missouri

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Welcome to Creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven't thought of before. And a new slant on investing fresh new approaches to America's best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine, self made multimillionaire who not only talks the talk, but walks the walk. He's been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason's footsteps on the road to financial freedom. 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. This is episode number 138 and this is your host, Jason Hartman. Thanks for joining me today. Couple of announcements. First of first of all, we are building a gorgeous new website that is going to organize our very rich and in depth content, whether it be audio, video or text. We've been putting this off for a long time and we're finally in the thick of it. As I speak.

We're almost ready to launch the new website.

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This and I have not mentioned that to you. Our our website was getting pretty darn old. It's kind of like that sort of used car paradigm. You've got this old used car and you kind of think what do I do? Just keep upgrading it and fixing it or do I just build a new one from the ground up? So we finally decided to cut the check and spend a lot of time.

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A while now to rebuild a totally.

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So look for that. It's not up as I record this intro, but it may be by the time you listen to this show. So that's all@jason hartman.com also we have our economic forecast that we do every year. We've got a 20 plus page white paper that we've been working on for you and that will be available and we have a conference call that is free and you can register for that@jasonhartman.com and that is on January 7th and at 12 noon Pacific Time here, if you're in the west coast of the United states, that'll be 12 noon January 7th. So join us for that. January 23rd, as you probably know, is our Creating wealth boot camp and then the Masters weekend in March and just a lot of great stuff. Today we're going to talk about income, property, investments. We've got a whole bunch of shows coming up on Internet marketing, home business and working that four hour workweek that I know we all desire. So look for those in the upcoming shows. And today we're talking about a new area which is St. Robert, Missouri. Now, this is not one of those sort of major flagship cities, but it has got some startlingly good characteristics and statistics. I'm looking at a population graph that Ari, one of our investment counselors here, handed to me and it is pretty impressive. And you're going to hear more about that on this show. But Fort Leonard Wood, this is a big military base. The population since 2000 has increased there by 29%, whereas the population of the entire state of Missouri has increased 5%. And the population of the United States as a whole has increased 7%. So that's pretty amazing when you think about it, that in just the last nine years or really eight years, because that's when this survey ends, the population has increased by 29%. You can get into these brand new duplexes we have there for very low down payments and they are brand new. So this is one of those sort of special offerings again with unique financing opportunities, excellent cash flow, excellent RV ratios, excellent cap rates. So listen in. But before we do that, I want to share with you the last episode, which is just about two minutes long, of the Speed of Money, which is one of my other shows. This particular Speed of Money episode was about thinking big and thinking small. And it's about home businesses and lifestyle entrepreneurship. So let's listen to that. And then we will go to a description of St. Robert and then we will go to the interview with our local market specialist, Zach in St. Robert. Alright, so a few parts to the show coming up. Here is the speed of Money.

Welcome to the Speed of Money. This is your host, Jason Hartman. Thank you. Think small and win big. Followers of people like Donald Trump and David Schwartz are well acquainted with the virtues of thinking big. The virtue behind thinking big comes in its power to open your mind to new possibilities and opportunities. But there can also be advantages for people who think small and concrete things that can be done Right away. By focusing on something that can be achieved right now in this moment, it creates the momentum that is critical to accomplishing the big things. When you start a small personal business by doing something like buying and selling on ebay, dog walking, website design, network marketing, teaching people how to use Facebook or something else, it can help you quickly generate 500 to $1,000 per month of additional income. And you know what? For so many Americans, that can make all the difference. This income can be used to pay down credit cards, save your house from foreclosure, or start an investing program for your financial future. With just thousand dollars you can buy an excellent rental property in a great market with positive cash flow from day one. The critical mistake that people make when they are thinking big is to delay taking action while they are looking for the big get rich quick scheme or the home run investment or waiting for their ship to come in. An extremely important point to consider is the power of taking action right now. Small actions taken immediately and repeatedly lead to big things. When you think of something small that can be done right away, that action can grow into something bigger and more powerful over time. Remember, consistent small action makes the difference.

From a successful life or an unsuccessful life.

So let's be successful with consistent small actions. One thing that everybody can do right away is become educated about small business, about entrepreneurship, and about successful investing. One way to do this is by relentlessly reading and seeking information, becoming a sponge for knowledge. Another way to accomplish this goal is to enroll in a coaching program with experienced professionals. As you are being educated, it is critical to begin building your personal business. The key for achieving this success is to act decisively. Start with the decision that is in front of you right now and act. Action eliminates doubt.

Much success.

All right. I hope you enjoyed that short little show. Be sure to subscribe on itunes or@jasonhartman.com so be sure you're subscribing to all of our shows. The Creating wealth show, the Speed of Money show, the Holistic Survival show, and the Creating wealth video show as well. All right, let's talk about St. Robert. Here is the area overview and then we'll go to the interview with our local market specialists.

I'd like to introduce you to a unique new opportunity that we've developed in St. Robert, Missouri.

These are duplexes and they have a very good ROI projection and I think you'll want to hear about this. These have a projected ROI of about 50 50% and that is 5 0% 50%. So make your money back plus 50% annually is the projected ROI on these.

As a buy and hold long term.

Investment, that should hopefully be your average return. And the other thing I always want to say is even if it doesn't.

Go as well as projected, think about it, if it only goes half as well or if it only goes 1/4 as well as projected, you would make.

12.5% or 25% annually. So residential real estate income, property, multifamily.

Units, et cetera, have those unique multi.

Dimensional characteristics that are way beyond the concept of buy low, sell high. There's a lot more to a good income property investment than that. And we have the developer on the phone with us.

Welcome, Zach.

Hello, how are you?

Just want to hear more about these properties, these duplexes.

These are pretty phenomenal looking. Tell us more.

Well, they are located in St. Robert and the reason for the development and stuff is because of Fort Leonard Wood, very large military installation that is located roughly about five miles from base entrance to subdivision entrance because of the growth there and the constant troop movements that are there because the school graduates. Well, as of two years ago when we started the development, they were graduating roughly 55 to 60,000 soldiers a year through the base, per the Chamber of Commerce. Actually came out with a report the other day just this summer. They are actually up to graduating 97,000 a year through it.

Wow, so this is a big base then, right?

Correct. It is roughly between. I've heard a couple different things from credible sources being between 70,000 and 100,000 acres.

Okay, so there are two questions I have here for you, Zach. I think one concern that some landlords have in buying and holding good long term income properties is number one about military tenants. Now, I think military tenants are fantastic.

But there are some people out there who really don't know how good they are. I have had them as tenants before in my properties.

I find them to be very respectable. And if they don't pay their rent.

On time, you know, you can always.

Call the commanding officer and get some help there.

And it really has been pretty good.

In my experience and the experiences I've heard about from some of our clients.

But some people have that concern that.

Military tenants aren't good tenants. What do you say to that?

I would say you're spot on with being able to go to their commanding officer and stuff. With military, you have the pro or a big pro in my mind of that extra leverage that you don't have with the general public of being able to go to their commanding office. The military obviously does not like their people to be in any kind of financial trouble. So if they're not paying rent, rather than trying to kick them out and file a collection, you just go to their commanding officer and it does come down. I always kind of like to describe it kind of in a sense, kind of like section 8, you kind of have the best of both worlds. From the point of view that you have much better tenants typically than Section 8 as far as taking care of the property. But then you also have kind of the guaranteed rents from the point of view that military is not losing their jobs, they're not getting paid decreases. None of the local or the national economic problems are in a sense being imposed on the military. So it creates a very advantageous rental situation.

Okay, so that's the other question I need to ask you then.

There's always some concern in the back.

Of a potential investor's mind is what.

If they close the base? What if they decrease the size of the base?

Or what if all the troops are moved out and at war?

I mean, what do you say to.

Those kind of concerns? Because we're looking at a large military population here. So it's a big factor in the rental market, right?

Absolutely. No beating around the bush with a wheelchair. We rent 95% military people within our subdivision. So it's definitely heavily military. As far as a couple different tiers on that. As far as approaching that, question one is Fort Leonard Wood's been there since World War II. It is a massive installation. I would pretty much squash out the fear of ever having the installation just completely wiped off. More of a credible fear would be the fear of something being downsized or just reduced. And from that point of view, generally speaking, it takes the government a long time to do a lot of different stuff. The wills of government moved fairly slowly with a lot of different things. Right now Fort Leonard Wood is on a big growth spurt. They're adding new schools are set to open next year. The military installation has partnered with the University of Missouri. It actually does all the military combat engineer training and all the different engineers at the military, the chemical engineers, all those for the every branch of the military all train and do their schooling through Fort Leonard Wood along with all the military police. All that training and schooling is also done through Fort Leonard Wood. They have a new school that's set to open in 2010. It is actually going to add 120 permanent party people there along with upping the amount of graduating classes coming through right now with, like I said, with the 97,000 being graduated, that's almost 2,000 per week. So even though it's a smaller metropolitan area, it does operate like a much larger metropolitan area along the lines of vacancy and rental market and demand and stuff.

Okay, and is there anything else really.

Going on here in any major way besides military, or is this pretty much a military play?

Military has been forcing the growth in the area and forcing the private sector outside the military base to respond and create things to help grow the community along with the military installation. I spoke with the local economic developer the other day. He's been in conferences and at expos and stuff like that. He's really courting and trying to bring in a big defense contractor manufacturing type jobs. They had a labor study done over the summer, the chamber of commerce did, and there's a huge labor force that's not being utilized in St. Robert, Fort Leonard Wood area. So they're trying to figure out a way to bring in some outside engineering jobs because the University of Missouri Rolla is right up the road, which obviously spits out a lot of engineers from their school. So there's a huge labor force that they are trying to quarter round to some of these bigger manufacturers and bring some jobs to the area. So right now, yes, Fort Leonard Wood is the main reason for all the growth. But in the next five to 10 years, there should be a lot of things that spur off of that to growth and create a much more stable are even more stable and larger economy in the area.

Okay, now I want to talk about.

The properties specifically in a moment, Zach, but tell us anything more you want us to know about the state of Missouri or St. Robert in particular. And then let's drill down to the properties.

St. Robert, it's a small up and coming area overall. If you look at the demographics, if you look at St. Robert, you're going to find roughly 3,000 people as a population of St. Robert. So it flies under the radar. They are working to get the Fort Leonard Wood population, which is around 20, 25,000. They're working to get that annexed into St. Robert right now. Once they do, it will pick up on the radar from the point of demographic studies and stuff like that. Right now, it does not pick up. So it typically does not attract outside investment from a lot of other areas because it doesn't look like it is there to do it. So it is definitely a small hidden niche market that seems to really work.

Yeah. Okay. So that's kind of good that investors sort of don't notice it because it's a smaller city. And it kind of flies under the radar here.

But you say 3,000 people.

I mean, when listeners hear that, they're thinking this is really small. But it's not really 3,000 with a military base, right?

Absolutely not. It operates technically. If you take Waynesville, St. Robert and Fort Leonard Wood, which are all three pretty well interchangeable schools or interchangeable names, it technically has a population of around 30,000 people, which again, that's not even very large, obviously. But when you start running and graduating 97,000 soldiers a year through the base, and they're there for anywhere from three months to three years, even sometimes longer, obviously that creates a rental market and a rental demand that is Nowhere near a 30,000 person population area. As far as our vacancies and stuff like that, it almost sounds unheard of. But we are literally 1.8%, 2.3% on different properties and stuff.

In terms of a vacancy rate.

In terms of a vacancy rate, that.

Is amazing because we calculate as Our standard an 8% vacancy rate, which is equivalent to one month per year.

So what you're saying is that on.

Average, these are occupied, what, 98% of the time?

Absolutely. We have literally turn times between tenants moving out, tenants moving in of anywhere to three to seven days every now and then. I mean, obviously with military, if they're coming in from overseas, that can get delayed in two to three weeks. But my management team, they do focus on really coordinating those in and out times and keeping the days vacant down to just a bare minimum. I mean, we've gotten it so good before that people have moved out one afternoon and people clean it that evening and moved in the next day before. So we keep it as tight as we possibly can. Obviously by the vacancy numbers. It shows.

Yeah.

Okay, good. And by the way, this pro forma.

Where we had a projected 50% ROI, includes an 8% vacancy rate. So if it's lower than that, your ROI should actually be better. Now talk to us about the properties, if you would.

2640 square feet, $183,000.

Takes about $18,000 and change to buy it. And rent is basically projected at a 1% RV ratio, which means the projected rental income here is $1850 for the two units. And by the way, this is for the duplex. So they're like 1320 square feet each side, right?

Correct.

Three bedroom, two bath units, brand new construction.

And you're the developer, right?

Correct.

Okay.

The property management company and stuff?

Yeah. Excellent.

So it's a sort of a turnkey solution. What else should people know? About the properties themselves.

The property themselves. Overall, to be really blunt, they're nothing fancy. They're just solid rentals for the military. They're nice units, brand new. We do make them completely rent ready down to washer and dryer, window treatment, stuff like that. Down to garage door openers actually. So I mean it's definitely a turnkey type scenario. From an investor point of view, the rentals just really appeal to military. Really? Well, typically E6, E7, E8 rankings, if you're familiar with rankings, typically rent these things, which is typically a married couple with maybe their first child or something.

So what are the E rankings? Just tell the listeners that E ranking.

It varies how long they've been in the military typically. And I can't talk super in depth about it just because I'm not super familiar with it. But typically what that means is to an investor is that depending on their ranking, it controls that dictates how much their bar is, which their baw is their basic allowance for housing. Which depending on that also varies depending on dependents and stuff. But for an E6 E7, E8 ranking soldier, their basic allowance for housing, typically it starts out about $850 a month and goes up.

All right, so these are more stable.

Longer term military tenants. That is basically what you're saying, right?

Correct. We do 12 month leases and up on duplexes.

All right, good.

What else about the properties in terms.

Of their amenities nearby?

You've got Walmart Super Center. Tell us about that.

Well, Walmart super center went in about five or six years ago. They actually one of the first Walmarts altogether was in the St. Robert area. San Walt started, I think it was either the second or third. So Walmart has had a presence in the area for a long time, but they just came in here recently, being within the last six years I believe and created a Walmart super center in the area. Along with that a brand new Lowe's just opened up fall of 2007. So New Lowe's just came into the area and the subdivision is located roughly about two point, call it two and a half miles. So about a five to ten minute drive from those things. So it's in really good relation to all the Commercial District, St. Roberts and Business district.

How does the property management work?

Do you want people to know about that?

Yeah, I obviously own a property management company. So we just charge a flat 8% of collected rents. There's no hidden fees, no lease up fees, no advertising fees, just 8% of collected rents on these properties. With the investor carrying a construction loan, the construction interest is all built into the 183 price point. So that risk is carried by the general contractor and stuff from that point of view. Also, you do not have an interest payment until there's at least one tenant in place. Once there's one tenant in place, that's when you will take over your interest payments.

Okay, so basically you've got a guaranteed renter then.

Correct.

Okay.

And no payments until you have income.

So fantastic. All right.

Now these are projected at positive cash.

Flow every month of $272. Positive cash flow, Right.

All right.

More about the properties. The Performa, if you want to talk about that in any more detail, or just the income, I mean, sounds like a pretty good opportunity.

One thing I can add that in the subdivision as a whole, we kind of front end loaded the subdivision with two bedroom units. So we've had those online the longest. But in roughly a 12 to 14 month time frame, we've taken those rents from 765amonth to 825 in 12 to 14 months. So that's roughly an 8 to 9% rental increase in right around a year. So that's really solid. We have not had a chance to do that with these three bedroom units yet, but it's there to potentially do it in the future. We just haven't had them online long enough to back it up. But we have seen some really strong rental increases.

What kind of competition for renters should.

Our investors be concerned about?

Well, overall, it comes back to this area kind of flies underneath the radar. And that's a big positive in a lot of ways. And one way that is a positive is that it does not attract outside investment or outside developers from the point of view that they're going to come in and put in a 500 unit apartment complex. It's not advantageous for them to do that. And technically the market's probably not big enough to come in and just drop 500 units on it like that. So that kind of helps to eliminate a lot of the competition. So you mainly just compete with local other developers and builders. And a lot of those just build and keep for themselves. A lot of them have 5 and $10 million portfolios of real estate in the area of multifamily. But overall, from a development point of view and new competition that's coming in right now, there's not a whole lot current economic situation that's, that's kind of plaguing everybody with the credit crunch. It's also not immune to this area from the point of view that it's tough to get construction loans and develop. So that's kind of also hampered some of the competition. And the few other builders that are in the area that are doing things, a lot of them are doing single family homes, believe it or not, and actually still moving those spec homes pre construction, having contracts on them before they're complete. It's a pretty strong area that demonstrates it.

Okay, good. Anything about your prior business as a developer? You've been really catering to investors. Why do you do that and what's.

In the business model? I mean, is that why that model and what does it mean to the investor?

Well, prior to starting my own real estate company and working with investors and everything, I had worked with another company and worked with investors with real estate. But prior to that I had my securities licenses and insurance licenses, had dabbled in the stock market stuff and all those fun things but didn't really have a. Didn't really appeal to me much. So I moved on to real estate, started this company.

Just out of curiosity, how come you couldn't sleep at night selling that junk?

Loaded mutual funds just don't work very well for some reason. No offense to anybody out there, but not a real fan of front end loaded mutual funds.

Yeah, the stock market just doesn't work.

No, it does not. Especially long term mentality just guarantees you to lose. Just my opinion.

Well, the listeners love to hear about that stuff. So tell us any more of the inside dirt on the stock market if you want to real quick.

There's more hidden fees in mutual funds than you could ever imagine. And.

You take all the risk while they take all the gain when it does do well to sum it all up. So I'm not a fan of mutual funds. Not an anti stock market. I think there's lots of money to be made. It's just got to be done in the right way. And mutual funds in my opinion are not the right way.

Yeah, I think you can make money in stocks, but it's very speculative and you got to be a trader. You got to be a very active trader. This whole buy and hold stocks mentality just never seems to work. And the next 20 years are going to be very different from the last 20 years which weren't so good.

I agree. And stocks a lot of ways, it's tough to make money in real estate. You can make money multiple different ways and you have more control over your property.

Yeah, I agree.

I don't know. I don't want to call myself a control freak. But I do, I do like a.

Decent amount of control when it comes to your money. You better be a control freak everybody, because no one else cares as much as you do, correct?

And nobody can spend it as well as you can. The government does not demonstrates that all.

The time, that's for sure.

The cap rate on this Property is at 8.6% projected, but the return on.

Investment at 50% with some very conservative assumptions here. Anything else you want people to know about the process? Just quickly they talk to one of our investment counselors. They can arrange a conference call with you and just buying the property, how long does it take for completion, how does that process work, etc.

Typically three to four months for completion. Right now we obviously we're going into the winter months. That can vary some depending on how quickly we can get concrete in the ground. Once we have concrete in the ground and we're framed and somewhat start doing all the dry work on the building, it gets fairly predictable on our timeframes, but generally speaking, 90 to 120 days. If we get more into the summer months, we can actually get down to about 60 days on construction. So we can really fly on the buildings, which obviously is to everybody's benefit and the quicker we can start creating returns, the better off everybody is.

Thank you for listening to the Creating Wealth Show. This is Jason Hartman, your host and we appreciate you following the show. We have many, many episodes, hundreds of episodes, and some of the older episodes have been archived and placed in our members section and that applies to this one. So we include a sample that's about 25 minutes long. And then for the rest of the show you can go to our members section@jasonhartman.com Many of the other shows are still in their full length complete version. However, some of the shows like this one are in our Members section where you can hear the show in its entirety. And again you just need to go to jasonhartman.com and you can get the full show there in the Members section. Plus a whole bunch of other great members benefits and resources, whether it be documents, forms, contracts, articles, other video and audio content. Just a great resource. So be sure to join as a member at Jason Hartman and thanks again for listening to the Creating Wealth Show.

This show is produced by the Hartman Media Company. All rights reserved. For distribution or publication rights and media interviews. Please visit www.hartmanmedia.com or email mediaartmanmedia.com Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network, Inc. Exclusively.