CW 211: Touring Distressed Investment Properties in Phoenix Arizona

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Welcome to the Creating wealth show. This is your host Jason Hartman and this is episode number 211. Today we've got a great profile on a fantastic market full of opportunity and it is of course Phoenix. I mentioned that on the Last show on 210 when we talked about our 10th show concept of creation versus evolution, we got off the financial topic and onto a non related topic. So I hope you enjoyed that show and would love your feedback on it by the way. I thought it was pretty interesting. Anyway, so today let's do a profile on Phoenix and let's talk to our local market specialist there. We'll talk with two of them, both Fred and Chris, as they profile that market. Talk about some of the specific opportunities they have there including multifamily apartment type properties and single family residential income properties as well. So I think you'll really like this show. Our room block at the Ritz Carlton, I do not have the exact numbers but I think we've got two, maybe three more rooms left. It's almost sold out so be sure you get signed up by registering@jasonhartman.com for the Phoenix Distressed Property or Phoenix Foreclosure Tour. And I think you'll see some phenomenal opportunities there as well. So listen to this and we will be back with our guest in just less than 60 seconds.

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It's my pleasure to welcome Fred and Chris to the show today. I want to talk to you very specifically about the opportunities, the distressed property opportunities in the greater Phoenix market. We have just been doing loads of business in Phoenix. I'm not quite sure. Statistically, it may actually be our top market right now. And we have an upcoming tour, it's the Phoenix Foreclosure Tour, May 20th through the 22nd. And I really want to see a lot of you listeners joining us on that tour. Many people have already purchased their tickets for it. In fact, our room block at the Ritz Carlton is almost sold out. So there is some urgency that you register right away. You can do that@jasonhartman.com and I was talking to someone about it today and they said that is an incredible deal. I've stayed at Ritz Carlton's before, they said, and I can't even stay at the Ritz Carlton for two nights for that price. And that is so true. We were able to negotiate a really phenomenal group rate for the accommodations. And not only do you get accommodations, but you also get six meals. We're going to be eating breakfast, lunch, dinner together in a very intimate, small group environment. Accommodations at the Ritz Carlton, luxury motor coach. And most importantly, incredible property deals, incredible opportunities. And I hate to sound like this is, you know, a bunch of hype, but this may really be the best opportunities of a lifetime because with a combination of interest rates, inflation on the horizon, or I shouldn't say on the horizon, it's already here. Smart people can see that it's here. And all of the various factors going on with, with the blood, literally the blood in the streets in terms of the distressed property market, this may well be a once in a lifetime opportunity to really capture some incredible opportunities in Phoenix that will provide you income, wealth creation and financial stability and security for decades to come. So Chris and Fred are here. How you guys doing?

Excellent.

How you doing, Jason?

Good, thanks.

Great, Jason.

Well, we've been working with Chris and Fred for quite a while now and they are our local market specialists for Phoenix. And we've worked with several different groups in Phoenix and these guys are by far the best. They do a full service turnkey operation everywhere from acquiring distressed properties with their relationships with banks and even hedge funds and also at the auctions as well. And they have single family homes, they have multifamily. I just purchased a small apartment complex from them myself for my own personal portfolio. And really just the opportunities in Phoenix are phenomenal right now. I don't know which one of you wants to start as our local market specialist from Phoenix, but go ahead and dive in and tell us about why someone really would want to be on this tour May 20th through the 22nd.

Well, this is Fred and I think one of the reasons, you know, anytime that you're purchasing real estate or making an investment, it's always good to first do due diligence. And by coming to the Phoenix market, I know there's a lot of articles and things that are written, you know, and don't ever believe everything you read. It's a good idea to come out and see for yourself, put your feet on the ground, look at the properties before, during and after. Because a lot of the properties we're buying are distressed. And of course, we're fixing them up using our own rehab company and then remarketing them either for sale or for rent if we're working with an investor. So being able to come out, look at the market for yourself, see where the properties are located, see what they look like, see something that's in progress, then you get a better feel for it. It's really difficult sometimes when you're remote, you're reading articles, you're hearing different things, you don't really get to see what's happen. And most importantly, when you come here, we're going to show you a bunch of great investments that you'll have the opportunity to jump on. Because a lot of the properties that we, after we rehab and rent them up and put them on the market, they don't last very long. And so therefore, you'll have the first opportunity to get into a great investment.

And really what will happen on this tour, I'm just going to kind of interweave the agenda and some of my thoughts about it throughout this conversation as we talk about the opportunities and the market and the economy and the real estate economy as well in Phoenix. But we're going to meet Friday evening at the Ritz Carlton. We'll have dinner either at the Ritz Carlton or one of the nice restaurants across the street in the Biltmore area. All you need to do is get yourself to the Ritz Carlton in Phoenix, and for $597, you won't need to take your wallet out for the entire weekend again. So just get yourself there and we'll have a nice dinner and kind of a briefing with dinner and some good food and drink and conversation. And then Saturday morning we'll get up and we'll do kind of a more formal but still casual briefing session in one of the ballrooms at the Red Scarleton, and we'll kind of tell you about what we're going to see and do that day. We'll interweave a little investment education in there, and then we'll get on the motorcoach, we'll drive around and we'll see about. We don't know yet because it's all subject to availability at that time that weekend. And the market is moving very quickly in Phoenix. But we'll probably see about 10 to 20 properties in various stages of rehab. So you'll see some properties that may were just acquired and they're a real fixer upper and you just bought them at the foreclosure auction, for example. And then we'll see other properties that are in the middle of the rehab process, some properties that are all finished and ready to go and ready to be rented. And you learn a lot about the rehab process where it makes sense to spend money, where it doesn't make sense to spend money when you're not fixing it up enough, when you're overdoing it. And this will just be education that you can use for any of your investments in any area in the future. But in Phoenix, you get a turnkey finished opportunity where our local market specialists do it all for you. Chris, why don't you tell us a little bit about your thoughts on the upcoming tour.

Just to build on what Fred and you have both said, this is a great opportunity to give yourself coming to this tour, the confidence not only to buy, but to own. We're going to give some good education on every aspect of not only the purchase, but what happens afterwards. And when you come, you'll be able to see exactly the level of detail that our company puts into bringing these properties to the level that you'd want to own them in. Let me give you an idea of some of the stuff that we're looking at right now. We have properties that we're buying for $35 to $55 a square foot and able to return to your clients at about the same level, which means that if you were to buy this property, actually, if I were to give you the land to purchase this property and you were to build it yourself, you'd be building it for about $85 a square foot. We have a property for sale right now that's 3,000 square feet. It would cost you $41 a square foot to buy today and probably $100 a square foot to buy near new. It's fully leased and the ROI on it is incredible. These deals are not going to last forever. And really what we've seen is that competition has increased, that we've had a shortened window to be able to buy these types of properties. We really want to bring as many People as possible to see what the opportunity is before it's gone.

Chris, that's a really good point. When you say competition is increased, I think that really happens at many levels or many stages of the process. And remember, when an investor is purchasing these distressed foreclosure properties or real estate owned reos owned by the bank, they're really improving the economy for all people concerned because they're helping the economic recovery, recovery and the real estate recovery occur more quickly because they're taking properties that are ill maintained, they're adding value, they're improving the rental market, they're improving the housing stock and they're just making more properties available and they're speeding the cycle up for the banks. And that's why it's really incumbent on people who can do this. And I'm not just saying from a personal level of making money from greed or just financial goals, but this is really a social mission too. It really does help the greater economy and people in general. And so you look at these properties with these tremendous roi and the first level of competition is getting the property right from the bank or getting the property in pre foreclosure. And then if the property does go to sale, it's going to the auctions. And you guys are at the auctions all the time. And I can tell you, not just talking to you, but all of the other different rehabbers and auctions, auction buyers, investors that we've spoken with in your market and worked with in your market, they just constantly tell us how incredibly significant and competitive it is at these auctions nowadays. I mean, it's like the people are just circling, trying to acquire good properties at the auctions. Do you want to talk about the auctions and your acquisition of the properties for a moment in that vein?

Yeah. You know, really what you, what you're seeing is everybody sees the opportunity at this point in time. Well, I wouldn't say everybody. I'd say the smart investors see the opportunity and really that's grown for the last two years. We've seen consistently month after month, quarter after quarter, more and more people buying because they see prices are actually going up and they see rents are going up, they see vacancies going down. So all those indications have just brought more and more players to the table. Now what does it take to buy an auction property? It's actually a very complicated process. We have to look at about anywhere between 1200 and 1800 properties a day. Narrowing that down to the 20 properties that are actually good deals requires a whole team of People and actually a proprietary system that we've created to do that. Once we get down to that point, we usually look at purchasing between 20 and 40 properties a day. And at that level we have to go through, do detailed inspections, detailed valuations, detailed title work, including checking for liens and all kinds of other nasty things that can come up to haunt you. At the end of the day we may buy two properties, one property for the day. And so going through that on a daily basis, which happens five days a week, every week, turns out to be a pretty involved operation.

What this really allows us to do.

Is buy properties for your clients that we can purchase below market, remodel and deliver at a price that is actually very, very competitive, maybe less or at the same level as the REO that's on the market.

So when you acquire these properties, say that you've purchased one at auction, what is your process in terms of the fix up, the rehab of getting these properties rent ready and how long does that cycle take?

You know, it depends on the property. In most cases it takes about two to three weeks. In some cases it takes less and obviously in some cases it takes more. What we do is we train project managers within our company that go out work with one of the principals in my company to evaluate what needs to be done for each specific property. We actually have a 600 point work order that they go through and fill out to find all the different areas that need to be either improved, replaced or can be left alone. And we go through basically the same process with every property just depending on what level they the property needs as far as work.

600 points. Kris, that is quite a to do list. 600 different items. Wow.

We are detail oriented. We can't help ourselves.

Yeah, well I would definitely, since I'm.

One of your clients also I would definitely agree that you're very detail oriented and you guys deliver a good product. So the fix up depends how long. One of our clients just recently bought I believe a 38 unit building from you. The first property you mentioned was a single family, that 3,000 square foot home. Right?

Right.

Talk maybe either one of you or both about the multifamily, the multi unit, the apartment opportunities in your market.

Well, one of the nice things about Phoenix versus let's say Las Vegas, there are a lot of multifamily meaning duplexes, triplexes, fourplexes, eight plexes in reasonably nice areas throughout the valley. In Vegas if you look at the 4 Plex market, they're all in very undesirable areas. So here in Phoenix, we don't have that issue. And one of the things, when the housing boom was going on, they really overbuilt the single family homes, not the multifamily. However, much like the residential market, people paid way too much dollars per door for these duplexes, triplexes and four plexes. For instance, I own myself have an eight plex or six plex and I think I after rehab and everything, all in, it's 92,000. The original loan amount on that was 175.

So that's just the original loan amount, Fred.

Somebody had to put 10% down to get into it.

Exactly.

So they probably paid close to 200,000 for that.

Yes, exactly. And so now when you pay $90,000 for a rehabbed unit and you're getting 5, 90, $600 a door, so you multiply that times three, you're getting.

$1,800 a month per triplex. So I got two triplexes. So I'm getting $3,600 a month in revenue on $180,000 investment because I get two triplexes next to each other. So it's a nice ROI and it's great cash flow. Now if I wanted to, I could go back in and go get a loan, let's say a 50% loan to value on it so I don't over leverage myself and I can pull another 90,000 out of those two properties and.

Go buy another one.

And just so you know, from my.

Corner, I love leverage, Fred. So, you know, you probably know that.

By now I would see if I.

Could get a 75 or 80% loan to value on that property. Not 50%, right?

No, I'm just saying if you just be conservative in your numbers, you can see what kind of great deals there are. And yeah, if you can get an 80% LTV, then that's even better. You know, obviously then your cash on cash return really goes through the roof.

Now looking at some of the properties on our website@jason hartman.com, we're looking at return on investment here projected at anywhere from like 20, 21, 24% up to, I believe the highest projection here is 38%. Well, that one sold. Actually, that 38% sold.

Not a surprise, but.

Yeah, not a surprise. But keep in mind, folks listening, it's more than just strictly looking at the ROI numbers. There are some intangibles and this is what we help you with. Our investment counselors here at our office and then also our local market specialists like Fred and Chris and Their team help you determine. But you've got a lot of projected ROIs in the 29 to 31% or even 35% here, and fantastic cash flow on these properties. I mean, look, what I always say to investors is, even if things only work out half as well as projected, say it's just sort of a disaster, say it's half as good, and say the Projected return is 30%, for example. Well, I don't think anyone in their right mind is going to object to a 15% return on investment. That's literally 15 times what someone would get in the bank, and it might be 200 times what they're going to get on Wall Street.

Yeah. And Jason, as you know, we keep our numbers on our pro formas, especially in considering appreciation. Very conservative. We personally are a lot more aggressive on our numbers because of the fact that you are buying at such a discount to replacement cost and because there was such a big crash in this market, you're really buying at an undervalued rate at the moment today. So there's a lot of upside in what we call a regression to replacement costs, where you can actually see a bigger upside. But we'll keep that out of the numbers for now.

No question about it. When we talk about regression to replacement costs. We talked about about that a lot in our last Financial Freedom Report newsletter. And by the way, if you're not a subscriber, I have to just plug that because our newsletter, it's literally besides our live events, it's like the best thing we do. It's awesome. And we did a whole article about that and, and what that really means, regression to replacement cost is because you're buying these properties at so far below what it costs to actually build them. The example, I believe it was you, Chris, at the beginning of this conversation, gave the example that it would cost $85 per square foot to build this property that someone can buy for what I think was $41 a square foot.

$41 a square foot. Unbelievable.

But what that didn't include is that it might cost 85 to build it, but you also have to pay for the actual land. I mean, the lot values vary, of course, but you know, in this market, and this is just a very rough number, depends where it is, etc. But you might be looking at $40,000 in land cost. Tell me what you think about that number. But then you add that to the $85 a square foot, which is really probably about the minimum you're going to build it for, because Inflation is upon us and some of those commodity prices are definitely going up. Everybody listening needs to remember that when the price of gas and oil go up, the price of building a house goes way up. So that is like a direct impact. In fact, I'll just tell you, I recently had the windows cleaned on one of my properties here in Southern California. And you know what the window cleaner did? They charged like $120 to do the job, but they added a $11 fuel premium. And I said, what's this all about? I've been using you for years, you didn't do this before. They said, well, the price of gas is just, it's just too high. We can't afford to move our truck out here and bring our crew to clean your windows without charging you a fuel premium.

Wow.

It's, it really, this all benefits the person who owns the property once they own it, because they've already locked in those costs. And if you think oil is going higher, if you think the cost of lumber, copper wire, petroleum products, which houses are full of petroleum products, if you think any of those things are going higher, you better be stocking up on investment properties right now because those packaged commodities as we call them, are really going to soar in value. And if you think prices of those things are going up, that is nothing more than inflation. And that means you also better stock up on long term fixed rate debt because you're going to win the game if you do. Anyway, not to get off on one of my famous tangents here, but I love this stuff. So tell us more about the local economy and the rental market and the strength or weakness of the rental market and maybe what kind of areas you're targeting, what price segmentations you're targeting, where things really work really well.

Chris has got some statistics, but I believe over the last seven quarters vacancies have been going down and rents have been going up. A couple of things that drive that are of course people are getting displaced from their homes because they're getting foreclosed on and so they have to go find a place to rent for some period of time because in the multifamily segment they weren't overbuilt, they're starting to get filled up. A friend of mine, she works for a large property management company, they manage the 500 unit, the 700 units, the 300 unit building, and many of their units are at 85 to 95% of capacity. So they're rented up. All of our units that we are managing for our investors are rented up, I think we have two or three vacancies. So from a real pragmatic standpoint, we're seeing rental rates go up, we're seeing vacancies go down. So the rental market is good and getting better. And so for people that are coming in and buying properties to hold and having a renter in them, the market is very good. If you're in the buy and hold strategy, then you would want to go for the multifamily as well. So whether you want to do single families or multifamily, I think the rental market is great. I think the traditional type of where everybody's underwater, people that are in their homes, that can afford to stay are going to stay. And so if you look at what's transpiring on the mls, a lot of the transactions, of course, are the foreclosure markets, the REO markets, the short sale market. So I think being able to buy a property well under replacement costs, putting a renter in there and holding on to it for five years is an excellent strategy. I think the reason that Phoenix is so good is that we still have an increasing population. We have positive increase in our population month on month, every month, every year since 1976. So sooner or later, as our population continues to grow, the empty inventory will get filled up. And as that empty inventory gets filled up, you'll start to see an upward increase on pricing. And so at some point in the future, you'll be able to sell that for a handsome profit. We don't need some ridiculous 50% appreciation. All we need to do is watch the market price get back to equilibrium.

In other words, we need to see regression to replacement cost with no appreciation, no actual appreciation. Just come back to replacement cost and you've made. You've probably doubled your money.

Yeah, that's a scary thing to say about an investment, but that's what we believe is true.

Let me take a brief pause. We'll be back in just a minute.

Are you interested in a property outside of our network? Do you need a second opinion? No problem. Let Jason's experts evaluate the deal. Our deal evaluator is only $50. For more information, go to jasonhartman.com now.

What do you say to people who are following the market? And this is true in many markets around the country, but what do you say to people who are following the market and might say, oh, gosh, I just read that there's a huge number of foreclosures in the greater Phoenix area, and they interpret that as being a bad thing. I See opportunity when I hear that kind of stuff. But that also happens early in the cycle. The cycle goes.

If you're looking at kind of a.

Chart, you see, it starts out and then things start getting really interesting. Investors are jumping in, and then a lot of people jump in at the last minute at the peak of the bubble. And that was really 2005 or 6 for you. And I got to give us credit, I'm going to pat my crew here at Platinum Properties Investor Network on the back. We got out of that market back four, four and a half years ago because we thought it was a bubble. I mean, things were going crazy there. And of course we were right. And then we came back in at what we believe to be the right time. Because, see, today, even if. Even if you have depreciation in values, which I just don't really see how that could happen, but say I'm wrong, okay? Say that does happen. If you have more depreciation in values. And we're talking about the kind of properties that we're looking at for investment. We're not talking about million five homes in North Scottsdale here. We're talking about good investment properties. If by chance they were to go down in value. Well, you just look at it like an income property bond. I mean, the cash flow makes so much sense. It just works from a cash flow standpoint. If you have good cash flow and you manage cash flow properly, you're never put in the position where you're forced to sell a property because it's working. Why would you ever become a distressed seller or distressed owner? If you've got a working property, you don't ever need to sell it, even if values went down because you've got good cash flow and the rental market is only strengthening. And you know, one more thing to add to what you were saying. I read some of the institutional real estate magazines that are the ones going out to big property owners, REITs, real estate investment trusts and so forth. And all of the smart institutional money, I mean, figuratively, I'm saying that of course all of the smart institutional money is I flocking to apartments because they see that the residential housing market is just totally underserved. And the demographics coming at the rental market and the future of the rental market are nothing short of phenomenal right now because of what you mentioned about people being forced out of their homes through foreclosure. That's one big part of it. The population's increasing. That's another big part of it. But yet another big part of that is Generation wide, the largest demographic cohort in American history. 80 million people, 4 million more than the size of the baby boomers, which the baby boomers changed everything. Right. And they are moving right into their prime rental years right now. And there's several years more of that as they're getting out of school. And you look at the greater Phoenix market and you've got one of the largest universities in the country right there. And one of the things I love about how dynamic that place is from a social perspective is that all the people that come from Ohio and the more northern states, Michigan, etc. And go to ASU in Tempe, they love the weather and they got out of the cold, they went to college there, they graduate, maybe they stick around and get a master's degree, maybe they don't. But they can afford to live there. There's job creation for young people in your market, whereas you look of lot at a, a place like I live in Southern California. There's no job creation for young people here. There's no dynamism in terms of that. And people can't afford to live here. So you've got a good market.

We take a pragmatic approach. When we look at our market, we do look at the news and we do look at a lot of the different national institutions and what they're putting out. But I work with Elliot Pollock, who's a very well known local economist who really tracks our local numbers, our numbers in, in our market that show a different story. And then we take a look at, we do a bi weekly review of the actual mls, the actual stats on the market as it exists today. We have our own inventory of property. We do hundreds of properties a year. So we really have a good feel on the pulse of what's really happening. And the truth is we're able to lease faster, we're getting higher rents, we're finding that prices are going up in areas that are more desirable for these types of properties and that it's time to, it's been time to jump in. And it's still, we don't know how long the windows going to last. But I'd rather jump in now when I know it's good than wait six more months and say, hmm, I should have jumped in six months ago.

Yeah. And let me just address that if I could, because the jumping in now versus six months from now, here is what I think the difference will be. And I'm not even addressing values or rental values or income or anything like that. I'm just Going to purely take it from a financing standpoint. If you are wanting to finance a property, do not miss the window because that window is closing quickly. There's lots of pressure from every angle to see interest rates go up. Rates are artificially low. They've been artificially low for years. And that game cannot continue. The Federal Reserve and the government or the pseudo governmental and entities, they do not have the power. They simply can't keep rates low even if they want to because of the pressures from the bond market. And if you look at Pimco, which is a local company right here in Newport beach, right next to us, the biggest bond trader in the world at Pimco is Bill Gross and He's not buying U.S. treasuries anymore. And that is a really ominous sign for mortgage interest rates because that is going to alter lead to higher interest rates. It simply has to. Those are tied.

Yeah. And that's why we got together with you. Jason said we need to get people out soon. We want to do this tour right away because really, the sooner the better. Once your folks get a chance to see what we have and see what the opportunity is, I know that they'll see the same thing that we do.

Absolutely. So maybe talk about a couple of other properties. Do you have any other samples? Properties have been. I'm looking at them right now on our website and anybody listening to this podcast can go and see them there. Jason hartman.com Just click on Properties and then available Properties. Click on the state of Arizona and you'll see just a bunch of incredible opportunities. The cash flow numbers, by the way, are $137 a month, $305 per month positive cash flow. Everything we have is absolutely positive cash flow from day one. Here's one. $355 a month positive cash flow and 35% projected ROI. There's some, just some incredible opportunities here. This is a property that's only $79,000 to buy it. There's just very little risk in these types of things.

Yeah, we have quite a few up for sale still, and they are moving pretty quickly. Usually get a couple of calls as soon as they go up. Folks tend to. They have a hard time jumping between the multifamily, the apartment complexes in the single family. The best thing to do is if you're considering one or the other, maybe you don't know much about apartment complexes. Let's just get on the phone together so that we can give you an idea of exactly what we go through when we consider buying that type of property. The deals that are on the website are fantastic. When your people come to this tour, they're going to be able to see deals that probably won't even be on the website or will be coming up soon. So they'll get first crack at things. So that'll be even a better opportunity as well to jump in without any competition.

Absolutely. Anything else you want to say before we wrap up talking about properties, the Phoenix market, your process. And by the way, you were doing business in Las Vegas previously, right? Or were you just looking at it?

Yeah, I used to be a broker in Las Vegas and my brother is doing real estate in Vegas. And here's the, you know, just kind of a bird's eye view of the economic situation. Vegas is a one sided economy. It relies on gambling and until that recovers, they're not going to have the.

Big boom they have.

You know, my buddy's a casino manager for the MGM Mirage. They own 12 properties, you know, and they're going through 30% layoffs. So you need new money, you need new blood, you need job creation and they're just not there yet. So they're, you know, I would estimate an 18 month lag time behind Phoenix before the recovery hits. So although we've looked at it and I, I get deals from Vegas, in fact, I just had my brother look at 10 unit deal right now. I haven't got the report back in Vegas. So we keep our eye on it. It's just not the appropriate time to buy right now, especially when there's so many good deals right here. And I think as we use up this market, if you will, then we can move into the Nevada market. But I think they're a little bit further behind on the recovery field.

And the reason I ask you that is because we have people all the time asking us, why aren't you recommending Las Vegas? Well, we're not recommending it because we don't believe in it yet. And maybe in nine months, maybe in 12 months it will make sense.

People keep asking us that about California too.

And my answer is the same. California. It's just got to decline a little bit more from an investment perspective to really work. Remember folks, we're area aggregators, agnostic here. We'll go wherever it makes sense. And it doesn't cost us much to do that because we work with good partners in these markets. And right now Phoenix is just a very sensible market. There's another thing I want to say about Phoenix and you guys might have some comments on this, but there's basically two kinds of markets. When you look around the country from a mathematical or statistical standpoint, there's a linear market that sort of chugs along and just returns on average about 6% appreciation every year when you look at it over time, at least historically. And then there are cyclical markets. So the vast majority of the state of California would be a cyclical market, for example. And those are markets that have big ups. And if you catch the cycle right, you can become a zillionaire. But they also have big valleys and.

They really go down in value.

There's kind of this roller coaster ride and we from an investment perspective, really pretty prefer the long term buy and hold strategy. And that's why we like linear markets, because you can just put your investment in there and really kind of just let it ride and be very secure for a good long term investment that you don't have to watch so much and you're not going to have a big risk in that. But what happened really to Phoenix, that I think is quite interesting is in the last boom cycle, Phoenix, which was always a linear market, it became a hybrid market. And that happened as you saw so many people buying up properties there that were largely from California. And you saw all these California investors, I mean, in 2004, 2005, it sort of seemed like anybody you talked to who owned real estate in California always had a rental property or two in Phoenix. And it was. You overheard the conversations at restaurants and just every, everywhere you went, everybody, it seemed like they had a rental property or two in the greater Phoenix market. And so they really drove up the prices there. And then now you look at the US Dollar being pretty much at parity with the Canadian dollar, and you see a lot of Canadian investors, you see a lot of Australian investors, you see a lot of New Zealand investors. Of course, you see Asian, Middle Eastern, you know, every part of the world, European, etc. Buying property in good, sensible markets like Phoenix. And what's interesting about it is we talked just about minor appreciation that just sort of chugs along in a linear fashion. And that's what's on your performance at 4% most of the time. But we also talked about regression to replacement costs. Now, if you take that and you combine it with the similar trend that I see emerging, albeit somewhat slowly, but I do see it emerging again of that pressure to be a hybrid market, to put a cyclical cycle into Phoenix again, like what happened five years ago, then you get in the position where you really could have a big win. So if you like to have those big wins. I mean, I think it was 2005 where depending on what stats you look at, Phoenix appreciated between 49 and 55%. Now obviously that was a bubble, obviously that was not sustainable and now it's back on sale again. The half price sale is occurring now and so we've seen prices push right back to where they were. But the difference is this next time around is we have a future that we believe will be laden with heavy, heavy, severe inflation. And that will really, really kick into play in a hybrid market like Phoenix. Any thoughts on that?

There's a couple different types of recovery that occur after a crash this big. And one of those types is called a U shaped recovery, which is what we're expecting in Phoenix. Just to give you some insight, our personal business model between myself and the other partners here is that we're in it for the big win. So we're trying to acquire as many assets as possible to hold them for that upside. So we, not only do we preach this, but we also do it. The U shaped market works like this. You have a big, big drop off and then you have a bottoming of the market, which is what we've had happen all the way from 2009, beginning of 2009, all the way through to today. And in that bottom you're going to see some variation, some ups, some downs, 5% up, 5% down, that kind of thing. But really what you're doing is you're bouncing along the bottom. That's what we've been doing for a while now. That's why we think that now is the best time to buy. What happens on the other side of the U is that you see a big jump, a very relatively quick jump when essentially, you know, inventory dries up, people realize that the deals are there, whatever needs to happen to have that happen happens. People move, supply goes down. And that big jump is really what you've been talking about this whole time. That regression to replacement cost, that's where you see that same cyclical upside. From there you're going to hit normal appreciation again. But you don't want to miss on.

That big piece, that big win that's coming up. Just tell the listeners about your operation, like how many employees and contractors and so forth you have. I just want listeners to get a sense of the size of your organization and the power you have to buy properties and source them at good prices and pass a lot of that savings after you, of course, make a profit along to the listeners.

Sure. What we do Is we find ways to take all the cost of real estate, which is usually considered to be a very high cost investment, out of the equation as much as we can. So we own a real estate brokerage. The brokerage has a designated broker and multiple agents. And the point of owning a brokerage is that we can take a lot of the broker fees out of the equation and put them back into the profits of the deal. Again with the volume that we do. Over the last two years we've done about 300 homes just in single family homes alone. We're able to get discounted title fees, discounted escrow costs and things like that. And then the size of our organization. We actually have four partners and we've got about 10 full time people that do various levels of what we do. We've got agents, sales agents through the brokerage and we've got about four or five remodeling crews that have a project manager and then their various aspects to the crew. So each one of the crews is about five people or so.

And I've been to your office personally a few times and I've got to say I'm impressed with your operation. You guys are doing a great job. So keep up the good work and let's wrap this up. Anything else you want to tell the listeners about the upcoming tour and why they really need to be there? Folks, you need to be on this tour. Beg borrower steal to get there. Okay. We really want to see you there in Phoenix. Again, like I mentioned, the room block is almost sold out. So there's a limited opportunity and this kind of thing can't be really large like some of our other events.

Well, I think what ends up happening a lot of times is banks have properties that are attempting to clean up their balance sheet. So toward the end of every quarter they're really pushing to get things off their balance sheet. So by coming by the end of May, the quorums in June, you know, we're going to be seeing, you know, a lot of REOs, a lot of bank owned stuff, really trying to get pumped out because they want to clean.

Up their balance sheet at the end of the quarter.

So I think it's a prime opportunity.

For people to be here.

That's a very good point, Fred. Because the bankers, they have their own cycle of when they need to close their books up for the quarter and get things done. And also you move into vacation season and they got kids graduating from school and stuff like that and they want to just get things done and get them done. So that they can move into the next quarter without being encumbered with these properties, get them off their books, out of their portfolio. And they're getting a lot of pressure to do that from the government and the powers that be, aren't they?

Yeah, for all those reasons and a great deal think they should be here.

Well, good. Hey, thank you so much for being on with us today. We appreciate it and we'll look forward to seeing you guys on May 20th for the Phoenix Foreclosure Tour. And we're going to look at a lot of great distressed properties and heck, maybe I'll pick up another one from you or maybe two even, who knows. We'll look forward to it. One more thing I want to say to the listeners, and I didn't mention this before, but if you purchase a property that weekend, we are going to pick up the cost of your foreclosure tour. So at the closing we're going to reimburse you your $597 and of course you can bring your spouse significant other to this as well. You need to be there in May. This is going to be a phenomenal tour. We look forward to seeing you there again. Thank you guys. Appreciate having you on the call today.

Thanks a lot Jason.

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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.