CW 227: Real Estate Market Profile & Income Property Investment Tour of St. Louis Missouri

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 227 and I'm your host, Jason Hartman. Thank you so much for joining me today. This show is kind of a quickie show because we are talking about a tour and a market profile for the St. Louis market and that is coming up so fast. I just wanted to get this show out to you as we profile this market. And we will be back on show number 228 with a lot more of our usual content about all sorts of things financial and investing. And maybe we'll have a little chat about an update on Occupy Wall street and some of the other big events going on in the economy and how we can of course, all be more prepared for them to succe and, well, not only survive but to thrive through these very challenging and really opportunistic at the same time economic times that we're in. So here's a little profile of the St. Louis market and I hope to see you in St. Louis. I will be there, of course. I will be on a trip of visiting several different cities of ours. I'll be going to Kansas City, to St. Robert, Missouri and St. Robert has been a great market for us, kind of under the Radar Market, St. Louis and then Indianapolis. I'll be doing all of these in one trip. So I will be there for this and I hope to spend the weekend with you in November on the St. Louis tour. And there's more information about that of course@jasonhartman.com and here is the info with one of our local market specialists with some more details about that tour and we will look forward to talking with you on show number 228 after this. So we will be back in less than 60 seconds with the market profile for St. Louis.

Did you know that we offer one on one coaching? This includes six months of one on one coaching for more information, go to jasonhartman.com hey, let's talk about the St. Louis market.

We've got a tour coming up November 11th through the 13th for St. Louis, and this is a market that we've done a moderate amount of business in. We have never promoted it that much. We've sort of taken the approach with St. Louis that someone asks us about it. We have properties on the website@jasonhartman.com if someone's interested in the market, we would connect them with with local market specialists there. However, it hasn't been a market that's been one of our front runners, but one of the things we're finding about some of the different markets as the market heats up around the country for investors and people are acting as bottom feeders. Right now, they're looking at the deals in the real estate investment market are nothing short of phenomenal in so many markets around the country, even though we've got many markets that are still overinflated, bubble markets that have yet to decline even more. Many markets in the country we feel, have reached a bottom or really have nowhere to go but up in terms of their regression to replacement costs because we're buying them so far below the cost of replacement or construction. And they have good fundamentals and good job growth opportunities and areas where companies are relocating, where companies are expanding because the governmental climate is favorable. So let's talk about that in St. Louis. One of the things about St. Louis that has kind of kept us, I guess, from promoting the market in a bigger way over the years is the properties are older, most of them. Course, there are the suburban properties that are newer. But we're finding frankly, in this particular market, as it's not a big giant city, it flies below the radar of a lot of investors. And we're finding that some of the core areas in the inner part of the city, the inner circle, are really some of the best opportunities for investors. But of course, those are the areas that were developed first, as is true with pretty much any city. And the properties are older. So we're going to talk about older properties and newer properties as we look at this and on the tour, we will look at both as well. And I think you'll find the numbers in St. Louis to be pretty darn attractive. So Richard is here with me and we're going to talk about this a little bit. How are you?

I'm good, Jason. How are you?

So tell us a little bit about your experience in the greater St. Louis area, and let's Kind of dig into it.

Well, we've been in the St. Louis market for about two years now, and what we do is we buy the foreclosures and we do a total rehab. And we put tenants in place and offer investors turnkey properties where they can start earning building wealth from the day of ownership. We've gone into the market, we've set up a team which consists of property management, we've got our construction, we offer financing options, both conventional and private. And we just went into the market and set up a whole team so we could offer a total currency solution to the real estate investing that a lot of investors want to do. A lot of people before with real estate investing were kind of limited to their local market. So what we wanted to do was give people an option to expand out into other markets around the country that offer, as you said, a better return on their investment and produce more cash flow than, say, here in California, where they may have to put more money up to buy a property. Whereas in St. Louis, you can purchase a property for half of what you might pay here in California or even Arizona.

We've done a fair amount of business with you guys in Texas. One of the things that really makes sense is Talking about the St. Louis market in terms of how it flies under the radar, these Texas markets. And, you know, we love Texas. I own many properties in Texas, and we've been doing business there for years. But everybody's looking at Texas. It's like every smart investor has checked it out or they've purchased in there. And that in some ways it creates more competition, more competition for renters, more competition when buying properties. So that's one of the things, like, we love about our little St. Robert market. And we do a fair amount of business, of course, in Indianapolis, as you know, and another market that's sort of not as. It just doesn't have, like, the onslaught of investors like some of these markets do. So that's one of the things about not being on the flagship, isn't it?

Correct, correct. You hit the nail on the head when you said that St. Louis Market right now is really under the radar as far as investors are concerned. As you mentioned, there are those markets such as Indianapolis and Dallas and Memphis that right now a lot of investors are high on, and rightly so, because they are good markets. But St. Louis has a lot of good opportunities as far as not only in the single family market, but also in the multifamily, the duplexes and the fourplexes, where your cash flow can be Double that of what a single family property could bring in. So that's one of the reasons why we went into the St. Louis market. As you mentioned, there's a lot of competitions in the other markets. And so in St. Louis, there wasn't anybody that was doing turnkeys at the time that we got into the market. So we wanted to get in there and establish ourselves and set up a good solid team to provide a good product for investors that were looking for another market as an option to invest.

In and tell us about that market in general and the employment prospects and the Fortune 500 companies that are there and so forth.

Well, St. Louis, as you know, is the gateway to the west, which it actually fits pretty much geographically right in the center of the country. And it sits on the Mississippi River. And as well as being an inland port for shipping of goods, it's also a big rail center for goods and services that go out to the rest of the country. And with St. Louis, it has a lot of Fortune 500 companies. It's got nine companies that are headquartered within the city of St. Louis and 21 within the metropolitan St. Louis area, which gives a good broad base for employers and employment opportunities for potential renters.

Fantastic. Now, in terms of the Fortune 500 companies that are there, let's kind of take a look at those. And we've got Express Scripts, Emerson, Monsanto, Reinsurance, Ameren Charter, Peabody, Graybar. There's a pretty good number here and some of them are very high ranking companies on the Fortune 500 list. What would you say about the employment prospects? I mean, it's looking like we're expecting to add 25,000 jobs in 2011 here. When we're talking about an economy that is in most parts of the country shrinking, that's a 1.9% growth rate. I mean, that's phenomenal.

Absolutely. One other point I want to make about St. Louis and the prospects for employment is St. Louis right now is going to be a major hub for an aviation, export and import business. The St. Louis has agreements in place with the European Union and also with a lot of the Asian markets where products are going to be brought in from those markets and also US Products are going to be shipped out. And right now with Lambert Field, the international airport there, right now, they do 1.5 million business annually. That brings the impact into the St. Louis region. So with this going to be a huge impact on the region as far as the United States goods, which will help the economy, but also it's going to provide a Lot of jobs for the area. And as you mentioned, 25,000 jobs are projected to be added in 2011, whereas a lot of other areas of the country, they're not experiencing that growth, as you mentioned.

Yeah, no question about it. It's got a low cost of living and wages that are higher than the national average. Ranked number seven is best cities for renters. We like that because we like renters as landlords. It has the nation's second largest inland port and third largest rail center, named one of the most underrated destinations in the World in 2009 by the LA Times. And so it's kind of like this whole sort of undiscovered thing. One of our investment counselors grew up in St. Louis, and that's why we've done some business there over the years. But you again, it's kind of one of these markets that a lot of people, when they think about investing, they don't think about this market necessarily. It made the annual list of the top 50 Labor Day destinations for 2010. One of the nation's leading metropolitan areas. When it comes to Building Green. St. Louis was recently ranked ninth in LEED certified buildings. It was ranked number eighth. And it's America's best housing market based on low foreclosures, rising home prices and affordability by Forbes magazine in 2010. So there are some real facts here that make this a very attractive market. Talk to us, if you would, about some of the properties. And let's talk about the core properties that are the older brick built properties and the newer suburban type properties.

Okay. Well, our buying motto in St. Louis is that we, the city of St. Louis is where we concentrate, buying all of our duplexes and our fourplexes. And as you said, those are buildings that are older. You're talking about properties that are 50 to 60 years and above in age, but they're all solid brick construction. They've got great bones. And when we acquire a property, what we do is we go in and we do a total rehab. And that's from top to bottom on the inside as well as the outside. If there's any minor repairs to be made, usually with the brick building, they're so structurally sound that there's really no issues. But we go in to the interior of the property and we replace all the electrical, we replace all the plumbing, all the systems are updated. And so what we do with the older buildings, they may be physically older in age, but the inside of the building is practically brand new.

Okay, I got a couple, got a couple questions. For you on this, I just want to be really specific so our investors know what they're getting and what they're not getting here. On these older properties, are you saying you repipe the entire house?

Pretty much we do. We do a thorough inspection of all the systems and anything that is wrong or can possibly pose a problem down the line, we will go in there and replace it. So that way we want to make sure that we're given a quality product, that we're not just trying to hand off the product and let the owner deal with something that may occur down the line. We want to be proactive and make sure that there's not going to be any system failures or any problems that could arise within the near future.

So are you doing a new furnace and air conditioner in each one, correct?

Yes, we do.

Okay, so brand new furnace and air conditioner in all of the older properties, what else in terms of rehab are you doing? I mean, are you replacing in terms of the electrical? Like, talk to us about that for a moment. What amount of electrical rehab are you doing?

Oh, we run all new wiring, we'll put all new outlets, we'll do the electrical panels, we'll replace those. And when we do this work, it's not just done by our contract, it's also has to pass the city inspection. So we make sure that it's done correctly the first time. So that way there's no issues down the line for our investors.

And you provide a one year warranty on the properties, right?

Correct.

And I've seen the rehabs and I mean the before and after pictures are, they're really amazing. I mean, these are very tastefully done. These are very nice looking properties. When you finish them.

We want to make sure that we can, as I said, a quality product, but we want to make it attractive to renters so that way when they're looking to rent a property, they're going to look at our properties and say, hey, I want to make this my home. So we're not just trying to, as people would do in this business, as they say, put lipstick on a pig. We want to make sure that this is a quality product that's going to attract the renters and it's going to attract the right type of renters that are going to stay in the building for the long term and getting back, if I could really quickly. You mentioned that we do have a one year home warranty. Now the home warranty that we do have is with a national company that will cover things on that policy. But in addition to that, if something were to go wrong in that property within that first year due to our construction, anything that goes wrong that we've done, we'll be happy to go back in and rectify the situation and repair it at our cost for our clients.

Great. Now talk to us a bit about the process in terms of buying in this market. The person is buying a fully rehab property. You want to mention anything about financing, how it all works?

Well, each property, as you said, is fully rehabbed. It's top to bottom as far as the financing. We do have conventional lenders that we have great relationships with that specialize in dealing with investors. And we also have our own private owner financing programs that we can offer to buyers where it could make it a little bit easier for people to get in and buy investment properties where they may have some issues. As far as with conventional financing, we can offer them programs so that they can get in and start earning money on an investment property.

So investors can really approach this market in three ways. They can either pay cash for properties or they can finance them creatively by getting a private loan or hard money loan at first and then having that for three or four months and then refinancing into a conventional loan and getting in with a nice low down payment. Very attractive. I must say, though, there are some challenges on doing those deals. Sometimes the lenders are making them a little more challenging than they were in the past, that's for sure. And we've done those in other markets that way. Or they can just get a standard conventional loan and go the route of 20, 25% down, that type of thing. Tell us any distinctions on those financing options, if you would.

Well, we do have a no money down program in St. Louis market where an investor can get a hard money or private money loan. And as you said, it takes about three to four months for the whole process. And that's from the time that they acquire the property with the private financing to when they actually refinance into a conventional loan. Typically, we do have select properties that are no money down. And then we have another program where it's a low money down, typically between 5,000 and 7,500 down. It all depends on the numbers for each property. And as you said, there are some challenges on the back end with the conventional financing. So therefore, that's why some deals may require partial or a lowdown of 5,000 to 7,500 now. But what we do is we have built in equity. So when it's time to get the conventional Financing, we give ourselves some wiggle room. So that way we can make the deal work for our clients. So that way we can stay true to the low down or the no down financing and be true to our word.

Fantastic. Anything more on the properties? You talked about the older properties that are in the inner core, really close to employment and so forth. What about the newer properties in the sort of suburban real estate in St. Louis?

Well, the newer properties out in the suburbs are the single family properties and those are newer builds, typically 20 years and newer. We go in there and we do the same thing that we would do with our older properties and we perform a full rehab, same with the one year home warranty. And we'll also repair anything within that first year that may be a problem that has come up. So we want to give investors a variety. We want to give them the properties that are in the city, as you said, close to the employment centers that are the duplexes and the fourplexes. Then we also want to provide families that may want to live in the suburbs, three or four bedroom houses. So we provide those properties as well. Nice neighborhoods, good school districts not too far from the city. So that if they do want to commute to the city for employment, it's.

Not a problem, not prohibitive. Let's talk about some of the numbers. I mean, if you had to pick, and every investor sort of has their own style, their own kind of area of interest. If you had to pick, what type of property there do you like best? Would you rather have an older duplex or fourplex that's really close to everything in the urban core, or would you rather have a single family home in the suburbs? Do you have a personal favorite?

Actually, I like to do a little of both. In our own portfolio, we have the duplexes and the four plexes, which our cash flows are typically anywhere between 800 and $1,000 a month. And we also have the single families that typically are about $300 and up a month on the cash flow. So I think any successful real estate investor, you don't want to put all your eggs in one basket. So therefore you want to diversify. So, you know, we like to have a mix. So if you're asking me my personal preference, I want to have a little of both. That way I'm covering all bases.

So diversification. All right. Anything else you'd like people to know about St. Louis? And in terms of the tour itself, we're going to start Friday evening and then go Saturday and Sunday, right?

Correct. Friday night is going to be a cocktail party and actually be a dinner provided as well. And it'll be a meet and greet where you can meet the team that we have in place in St. Louis just to kind of get everybody familiar with each other and, you know, just network. And then Saturday we're going to hit, we're going to have a full breakfast provided and presentations from 8 to 11:30 where we're going to have, we're going to have an asset, asset protection and estate planner. We're going to have a financial planner on board. We're going to have, we're going to have a 401k and retirement custodian there to talk about how to invest with your retirement fund. We're also going to have our St. Louis market experts there to talk more about the St. Louis market. And then we'll be out on the bus tour for the afternoon where we'll see probably five to six properties. On Saturday, those will be the single family properties out in the suburbs. And then on Sunday we'll do the same thing again. Sunday morning we'll have more speakers. We'll have our property insurance, we'll have our title company and we'll have our property management company there to speak as well. And then in the afternoon time we're going to stay within the city of St. Louis and we're going to look at the duplexes and the fourplexes. It should be a good tour. This will be our second one. The first one we did in August. We had a lot of positive feedback and we're really looking forward to this next one.

Fantastic. Well, thank you so much for the information and I'll look forward to seeing you on Friday, November 11th.

Thank you, Jason. I'm looking forward to see you as well.

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