CW 248: Property Acquisition Tips with Michael LeBeouf Author of ‘The Greatest Management Principle of the World’

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 your host, Jason Hartman and we are here with episode number 24048 almost at 250. That's a tenth show again folks. And you know what we do on 10th shows? We talk about non real estate, non economic, non financial topics. But of course they always seem to relate back to it in some way. And gosh, we've got some really good 10th shows coming up, by the way, some guests that I'm working on that you're really, really gonna like. So anyway, stay tuned. But we're only at episode number 248 today, so let's talk about some stuff there. First of all, we're gonna have a great client case study today and you're gonna hear about what you can learn from a really of ours who has all sorts of great ideas. He's always talking to me about them at our Meet the Masters events which by the way, of course I have to mention that is coming right up in about a week and a half in Irvine, California. So make sure you join us for Meet the Masters at the Hyatt Regency in irvine. Register@JasonHartman.com and I think we've got two more price escalations before that event. So register right away and get in on the lower prices while you still can. Boy, folks, I tell you, in a lot of ways the good news just keeps coming in. In every silver lining there's a cloud. I know that's the opposite of the way that's saying supposed to go, but it's good and bad really. Since I now live in the greater Phoenix metro area, this is the first time that I've really had the opportunity to spend a lot of time, basically my life living in one of our markets. We would always be in a situation where we would scout markets, travel to the markets from time to time, look at the inventory and, you know, work with our provider there. And that's one of the big values that we add, is that we exert a lot of leverage over the providers in the various marketplaces. But it's been interesting because we have always found the greater Phoenix metro area to be a rather difficult market in which to do business. Now, of course, we weren't here for the big bubble that got all the hype. We were in this market a long time ago, and then the prices got too high, and being area agnostic as we are, we bowed out. Any of our clients that bought in that market, they just continued to rent and operate their stabilized properties. That's a much different scenario than entering a market at the wrong time. And then we came back into the market somewhat recently, what was it, about a year ago, maybe a little more than a year ago now, when we saw all of the prices having declined so much. And it's crazy, but I've been networking with people here. I've been meeting with various vendors to try and get more good inventory. In fact, the last two nights, it's 10:26 here as I'm recording this, 10:26pm and you know, I went to a real estate club meeting here in Phoenix tonight, and last night I went to another real estate club meeting here. And I got to tell you, the, the dark cloud that seems to be a bit of a problem is that it is getting really tough to find inventory here. You know what one of the speakers said at the club I went to tonight? And I didn't verify this because it's not really. And I honestly just don't know how to really explain this to you what I'm about to say. In fact, I haven't come to terms with it myself. But when you look at prices of properties and of course they go up and they go down and they chug along and do their linear thing and you know, it's all different at different time periods in different markets, of course, but when you look at prices, it is hard to say that overall there is appreciation or depreciation sometimes. And here's why, because one of the speakers that got up, there were three speakers at this meeting I went to tonight. And you. I really don't have the opportunity to do this very much to go to like real estate club meetings and networking groups in our local markets because I live here in Phoenix, you know, I've had the opportunity to do that, which is kind of a different thing for me, honestly. So I'm developing a much Greater depth of understanding. Almost like I'm a traditional realtor in this market. Like I used to be in Orange county for many, many years. And what was interesting tonight is one of the speakers who's a rehabber who buys properties at auction and then sells them to people, he said to me, since the or, he didn't say to me, but he said to the whole audience, sorry to be so, I guess, selfish in saying that. But he said to the whole audience, prices have gone up about 20 to 25% from the bottom in the greater Phoenix market. And I'm thinking, you know, you can't read a survey. I don't think you can find a survey that says that. Certainly the Case Shiller Index wouldn't tell you that the government's, whatever that acronym of acronym is, Federal oversight, Housing Oversight, blah, blah, blah. Sorry, it's late. I'm going to bed after I record this. Okay. Anyway, you can't find a survey that's going to tell you that. But the interesting thing is when you talk to the ground troops and you talk to me, we're going to all say that's true in the segment of the market in which we operate, where the, the most sensible investment properties are in the right cities, in the right neighborhoods. And again, you can't find a survey that's going to show you this. It's anecdotal, more than it is empirical. I would tell you that what he said is true, that prices have increased by 20 to 25%. And again, you're not going to document that anywhere in any survey. But in the small segment, in the narrow guidelines in which we like rental properties in this particular market, I would say that that is true in Indianapolis. You know, you heard our client Drew on the show several episodes ago, maybe about six, seven episodes ago. The, the young guy that I interviewed, and he'll be at Meet the Masters, by the way, so you can meet him in person if you're attending. And he just emailed me yesterday, he said, I want to buy another property. I'm ready, maybe two more properties. I'm about on the verge of having enough money to buy two more. And he just saves up cash and buys them with cash. So it takes him a while to save that money. But he lives frugally and saves quickly and that's all very prudent. And he says to me in this email, he says, indianapolis, where I have the three properties, the first three that I bought, it's just dried up. I can't find any deals like that anymore. And I'm like, yeah, I know. Believe me, we're experiencing that same inventory problem that you are we're experiencing as a whole company. So again, I guess the moral of the story is that in some aspects, I would say this. You certainly don't have to talk anybody into buying good income properties nowadays. A few years ago, yeah, you did. You needed to really sell it, if you will. But nowadays, not at all. I mean, anybody with a brain gets it that this is the time. And of course, I don't mean everywhere. All real estate is local. I don't mean every deal, every price segment, every product type. I don't mean that. I certainly still don't like condos and I don't like retail or office properties and I don't really know much about industrial properties, so I'm not going to comment on that. But with housing, with good housing in the right places, in the right neighborhoods, the right cities and the right price segments and product style segments, boy, inventory is really, really scarce. Our investment counselor, Sarah, who you have heard on the show before, I've had her on the show a few times. She's been telling me this for the last several weeks. She keeps complaining about it. She says, jason, we have got a real inventory shortage problem. I've got clients that want to buy and I don't have enough properties to sell them. And wow, it's like you can't win for losing sometimes. Maybe we ought to stop talking to people who want to buy properties and try and work on more people that want to sell properties. I guess that's the problem with every business. You know what we do, we're a broker, right? So we match people up. We're a matchmaker. So we've got to always balance out that supply and demand equation for our clients in order to make our business run and the supply chain run as effectively as possible. And, you know, it reminds me of a comment that one of my traditional agents in my old real estate company said to me. She didn't say it to me at first. She wrote me an email on it and we discussed it later. But I'm going to say that this was probably 2003 to 2004. And for those of you who don't know, I owned a traditional real estate company that I originally bought a failing franchise, turned it around, and then that franchise sold out and it was kind of a big disaster right around 2001. What was in 2001? Well, it was 9 11. And like every bad thing that could happen happened to me in that Business, it was pretty tough. I've got to tell you. It was the biggest business challenge of my life. And then when the market got really good again, when the Federal Reserve, when the maestro, as they called him, Alan Greenspan, who was nothing more than a Keynesian, and it was a sellout, okay? He was a total sellout. Mr. Inflation, Mr. Money Creation himself. I don't think history will reflect too well on Greenspan. And you know, by the way, if there's one person, if you're looking to place blame on the financial crisis on one human being, I think the most to blame would be Alan Greenspan. Really, because all of the things that preceded the financial crisis in his cheap, easy money policies, that's what happened. He just overdid it. I admit that if I was chairman of the Federal Reserve post 9 11, I would have loosened the money supply. But he just loosened it way too much. And it led to all kinds of dysfunctions. Well, my agent, Marty, I remember she wrote me this email and I've known Marty for years. I met her when I. We used to work at ReMax together years ago, before she came over. And I recruited her to my company. I owned a company. And, you know, she wrote me this email. She said, I wish, I just never forget this email. She said, I wish interest rates would go up. And I thought, wow, isn't that odd for a realtor to say that? And she was just complaining that there was just no inventory in Orange county, in the city of Irvine where the office was based, and she had buyers that wanted to buy and she just couldn't find them. Every house had multiple offers. And again, this was not dealing with investors. This was traditional home buyer types. But every blessing is a curse, you know, and every curse is a blessing in some ways. And I guess I'm just kind of, kind of whining a little bit here about how hard it is to find inventory. So that's why I've been going to these investor clubs here in Phoenix, because I'm just looking for inventory providers. Inventory is so scarce and it's really becoming that way in a lot of our markets. So, folks, I'm telling you, if you find good properties in the right locations with all the stars being aligned, maybe even a few of the stars not being perfectly aligned, you better buy them. Because I am not being a salesman, I am telling you. Just look at our website. Look@jason hartman.com and if you've been looking at our website for a while, compare it to how it was six months ago or a Year ago. I know a lot of you have been following us for years, and you haven't even called us yet to express interest. You're just listening. You're looking at the website. I know you're out there because we get calls from you all the time. Or people that go to the jasonhartman.com and fill out a form and say, you know, I've been following you for years, and I just finally decided to contact you. We know you're out there. Okay? So if you're out there, just compare it. I mean, don't you think we would want to have more properties on our website in the properties section? Of course we would. You know, as Bob Dylan said, the times, they are changing. Well, speaking of which, I got a great little email today. It's dated today, March 13, 2012, at 1:38pm and it's from Angie, my insurance agent in Indianapolis. And she says exactly this. This is the exact email. Hi, Jason. Couple of questions on Valhalla. That's the street name of one of my properties there. Couple of questions on Valhalla. The rebuild value for replacement cost comes back at $147,644. Talk about an exact number, huh, Angie? So, you know, the insurance companies, they model this stuff, and that's what they're saying the replacement cost is. So Angie goes on to say, what do you feel comfortable insuring the home for? I can do the stated value, but the $62,000 you paid for the property seems way too low. Hmm. Can you tell there's a smile on my face, folks? Let me see. I paid 62,000 for the property. And the insurance company, my own insurance company is telling me that it's worth $147,644, to be exact, more than double what I paid. Angie goes on to say, please let me know if you would like a flat $100,000 or any other amount for replacement cost or any other amount up to the replacement cost. And that is how I will insure the property. Have a wonderful evening, and I look forward to hearing from you. Angie Allstate Insurance. Well, Angie, boy, I was happy to see that email. Maybe I got to pay for a little more insurance, but I got a great deal, didn't I? Because I bought way below the cost of construction or replacement. And I guess that's not just my opinion. My insurance company, the tax assessor, the appraiser, everybody thinks so. So that's really, really heartening. It's very good news. Okay. Interesting article in the Orange County Register, the paper for my old hometown. Well, one of David Jerome emailed this to me, one of my YEO Young Entrepreneurs Organization's friends and he put this on my Facebook page the other day and it's really an interesting article so I'm going to read it to you just a little bit here. Maybe not the whole thing, but here I want to show you how people can misperceive things right and it says US apartment sector in quote, full expansion, unquote article dated March 9, 2012 apartments are becoming scarce in most US housing markets, resulting in rent hikes throughout the nation. A new apartment outlook states broker Marcus and Millichap's 2012 National Apartment Report forecasts that employment and average rents will go up this year in all 44 U.S. metro areas. It tracks, quote, recovery has moved beyond the cyclical surge in demand to a more sustainable expansion as remarkable shifts in demographic, economic and social patterns underpinning demand for rental housing, the report said. Now folks, I've talked to you about a lot of this, so this is just reconfirming what I have been saying. But the article goes on to say it says America created 900,000 new households last year in part due to 20 to 34 year olds taking 70% of the new jobs and moving out on their own, the report said. Now remember, this is my comment. Remember what I talked to you about a few shows ago where I talked about how so many of the people in that age group, the Gen Y age group, are still living at home and ultimately they're going to be moving out, creating a whole bunch more rental demand and how this benefits us as landlords. I mean, I don't know if there has ever been a time in U.S. history where you have had the convergence of all of these wonderful factors coming at the rental housing market. It's really phenomenal. And remember, by the way, this report is talking about apartments. So there are some nuance differences for sure when it comes to what we do, which is mostly single family homes, duplexes, fourplexes and in some apartments. But this is solely about apartments. Okay, so there are some differences and I'll talk about those in a moment. It says foreclosures, tight credit for home purchases and people choosing renting over buying as a lifestyle preference contributed to a net rise in rental households, the report said. Specifically, the report says, and there are some bullet points here that I'll just share with you asking Rents are projected to increase by 3.8% in 2012 to an average of $1,101 per month. Effective rents, I.e. asking rents less landlord concessions or discounts are projected to go up 4.8%. So what that means, folks, is that a lot of times these landlords will offer a concession. So they might say first month's rent free if you'll sign a 12 or 15 month or 24 month lease, right? So when you amortize that first month into the overall picture, you get the average rent increasing at, well, no, I'm sorry, just the actual rent, the coupon rate increasing at 3.8%. But when you, when you intermingle all of those things, the concessions or discounts in with the rents, they're saying it's actually projected to increase by 4.8%. Another bullet point, the number of empty apartments is projected to drop to 5% nationwide, down from 5.4% in 2011 and 2009. Eight percent of apartments were vacant. So you see how the vacancy rate is just plummeting as occupancy increases. Next one. Builders are projected to complete 85,000 apartments this year, too few to relieve the demand problem. The US is projected to need 120,000 new apartment units. Okay, so see, there's a shortage right there of what? That's 35,000 units is the shortage. Okay, now here's what's interesting and I want you to see if you see the fallacy in what is said here in this bullet point. It says San Jose. San Jose, California ranked first in the nation as the best market for apartment landlords. San Francisco ranked second. Both are projected to benefit from new high tech jobs and income gains. Other markets benefiting from technology, financial services and leisure and hospitality are projected projected to have strong landlord markets in 2012. Before I talk to you about that fallacy, maybe you've already noticed it. I want to read the next bullet point because it also is part of the fallacy. Los Angeles dropped to. That's where I grew up. Los angeles dropped to 13th best from 11th last year because of slow payroll growth, housing woes and government budget constraints. Average asking rents are Projected to increase 3.5% to now notice the rate. $1,446 per month. What is the fallacy in those last two bullet points, folks? Here it is. The casual observer who doesn't listen to the creating wealth show and who doesn't know any better would think, well, gee, if I am an investor, I better run out to San Jose, San Francisco, or maybe even Los Angeles, buy an apartment building. What did they not tell you there? They left out a hugely important factor, the fact that they're so expensive to buy in those markets and the rent to value ratio is so completely out of sync. It's just stupidity, folks, because there's a chart next to this that talks about it ranks the markets in order. Okay? And watch this. Look at what it ranks. Just the top five markets. Well, we'll go top seven, San Jose, number one. San Francisco, number two. New York, number three, Boston, number four, Orange county, my old hometown number five, San Diego, number six. Those are all incredibly expensive places to buy real estate. Those are all high end markets. The rent to value ratios in those markets stink. They're awful. So while you may have low vacancy and you may have rents rising, they're not rising enough to compensate for the lousy benchmark that they started with. I mean folks, people just, they don't get it. And this is the way the major media reports stuff. It is so misleading, it is so deceiving. And down at the bottom of this list, by the way, let me point out some of the markets at the bottom of the list as we go down. I'll just give you a few highlights. Houston, number 18. I like Houston, great place to invest. Phoenix, number 22, another good place to invest if you can find some inventory. Good luck. Charlotte, North Carolina. I like Charlotte pretty well. We're not doing business there at the moment, but Charlotte's good market. Number 25, turn the page. Number 34, St. Louis.

Great place to invest. I mean the properties there are so cheap that the rent to value ratios in St. Louis, phenomenal. Now I'm going to point this one out. Even though I don't like the market, there's some other markets I don't like to which I haven't mentioned. But Las Vegas, the big market that gets too much attention that I don't think is a very good place at all. Yet in six months to a year I'm probably going to say Vegas is okay, it's getting there. But there's still a lot of vacancy rate is just too high. The economy is not that well diversified. So again, listen, we've got providers and one of our providers that we do business with now in another city keeps bugging us to do Las Vegas. We won't do it. We could sell it. Hey, we need inventory. We could recommend that clients go there. But you know what a reputation. You only get one of those in life and they're very, very expensive. So we're not going to risk ours to just for the sake of doing some business. Okay? But number 37, love this market, Atlanta. And that's a bad market, they say. Now actually, I do want to point out one other thing that might tip the scales a bit. See markets like Atlanta, Indianapolis, those kinds of markets for apartments. Because by the way, Indianapolis, number 39 on the list. Those markets, the single family homes are so inexpensive there that they're probably not great, great apartment markets. Okay, they're probably, they're, hey, as far as a rent to value ratio, I am sure they are much better than Los Angeles, San Jose, San Diego, San Francisco, New York, Boston, or any of the markets at the top of their list. But again, those are markets where single family homes get very cheap. Last two bullet points, the Inland Empire. That's right outside of my old hometown, Orange county and la, both my old hometowns, the Inland Empire, ranked best in the nation in 2005, had slipped to number 29th. And that's by the way, the Inland Empire. That means Riverside and San Bernardino counties in California slipped to 29th out of 44 metro areas this year. The 2012 report cited below average rent growth. Still, tenants there face a 3.8% rent hike this year, bringing the average rent to $1,069 per month. Now, the Inland Empire's. I keep looking at that one because I keep kind of being interested in it. I don't think it's ready yet. Kind of like Las Vegas maybe. But there's going to be a point at which I'm actually going to recommend that market. And can you imagine, it's actually in California. Would Jason Hartman actually recommend California? Yeah, maybe reluctantly, but I could see it happening. Not yet, but I could see it happening. As much as I like to bash California. Last thing here before we get to our interview. Underwater Borrowers eligible for Settlement write downs. Little excerpt from an article here. And if this just doesn't show you what I talked about on the last show, remember, what is the greatest management principle in the world? What gets rewarded gets repeated. What gets rewarded gets repeated. So notice how that's happening here. And this, if you're a responsible citizen, this should just get your goat because it makes me mad too. It's just not that good. But, you know, you can see why people do strategic defaults when stuff like this is out there, because that's who gets the write down. Wait till you hear what I'm going to tell you. It's going to make you mad. So the title, underwater Borrowers eligible for Settlement write downs, meaning writing down the principal balance of the mortgage, a calculation by A Brookings Institution economist narrowed down a pool of Underwater homeowners to 500,000 who could qualify for principal reduction from the $25 billion mortgage settlement. Using the parameters of the settlement, Ted Geyer, I guess that's some kind of consultant or something. Oh, maybe that's the Brookings Institution economist. Sorry, it's probably who they're talking about. Using the parameters of the settlement, Ted Geyer found just 5% of the nation's 11.1 million underwater borrowers could get the principal reduced on their mortgage. First reported by the Washington Post, about $10 billion of the settlement. So the settlement is $25 billion. Ten billion of that in the form of credits, will go toward principal write downs. In other words, if your mortgage says 200,000, suddenly it might say 150,000 or even 100,000, it'll just be written off. Boy, aren't you glad you borrowed as much as you can? Aren't you glad you didn't pay down your mortgage because you got nothing? If that's you doing the seemingly responsible thing, I know it's counterintuitive. You don't get anything. The article goes on to say, that was me talking, obviously. So it said, listen to this, what I'm about to say here. So who gets the write downs? Only homeowners delinquent on their mortgage are eligible. I'm going to repeat that. Only homeowners delinquent on their mortgages are eligible. So in other words, my commentary, if you didn't buy the new iPad3, if you didn't go on that extra vacation, and if you did the seemingly responsible thing and paid your mortgage rather than enjoying life and buying goodies and gadgets, you don't get the benefit of this. You got to be delinquent on your mortgage to get the benefit. Huh. So I wonder why people are strategically defaulting, folks, because what gets rewarded gets repeated. Again, I like chuckle at this stuff. Stuff. And if you're a new listener, you may not understand all of what I'm saying, but if you're a regular listener, you get where I'm coming from with my sarcasm on this. Okay, so they estimate others according to the underlying requirements, including Fannie Mae and Freddie Mac loans and homes not owner occupied. It's a rough calculation. Gayer warned that he made some assumptions in the process. He estimated any loans not held by banks on the balance sheets as well as any with a second loan that mortgage bondholders may not take kindly to the principal write downs. He said, well, of course they won't because when you're a bondholder, you're nothing more than a lender. So you're getting burned. If you loaned your money in one of these mortgage backed securities, you're going to get burned. If you borrowed the money and you decided to go delinquent on your loan, whether by choice or necessity. I know it's not always a strategic default decision. Sometimes it's just economic hardship. You are getting rewarded. So it's just counterintuitive, folks, you got to follow my strategy because what gets rewarded gets repeated. So anyway, enough of that. Let's go to our guest and we will be right back with our case study from our client who's got some great ideas on property management, on keeping track of your properties, on what kind of research to do before you acquire them. You're going to love this interview and this is why with one of our clients. So we'll be back with that in just a moment.

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.

It's my pleasure to welcome one of our clients to the show. One of the things that I've mentioned before is that I learn and we as a group at company learn so much from our clients. And at the last Meet the Masters event I was talking to David and he's just such a wealth of ideas does so many unique things that I never thought about in terms of property identification and management to make management easier and just all kinds of stuff that I think you'll really glean some valuable information. So, David, thank you so much for coming on the show today. I really appreciate having you on and having you talk about your experiences and what you do to be a more successful investor. So thank you.

My pleasure. Jason, I've really enjoyed working with you and your entire staff and hope to buy some more properties in the future.

Well, we appreciate having you as a client. First of all, maybe a little background. What got you interested in investing in Income Property?

Well, I'd been looking at Income Property as an idea for many, many years. I had read just about every book there was on how to buy and rent small properties. Everything you can imagine from the rich dad books to the XYZ books. And I was one of those people that really had the info down but didn't have the practice down. I know you like to say there's some paralysis there and I think that is probably the case. And I did think that it was probably going to be one of the best options for me for long term retirement funding, something that if I could get and maintain and hold on to a good number of properties, that inflation and just the way the world works would make the income on those grow every year. And even if I never decided to sell any, that that would be something that would help me fund my own retirement. And so then when I found your podcast and listened to them, you know, from front to back, it all made sense to me and I decided to jump in and actually try it.

And how did you happen to find the podcast?

I think it was just real estate and I went to iTunes, real estate podcast, something like that and found you there.

Okay, great. And how long have you been listening to the show?

Since 2007, I believe.

Okay, so quite a while. Yeah. You're one of our listeners from a long time ago. Not the oldest listener, but one of one of them. In the beginning, do you remember what show number you started with by any chance?

I don't. I do remember going backwards in time after the one that I'd listened to and I had a good 10 or 12 to listen to, I think.

Great. Well, good. Well, what did you start with? Which one was your first one?

That was Kansas City, Missouri, the duplex.

Okay, great. And you have some processes. You strike me, and this is not a fair statement, please tell me so. But you strike me as a pretty analytical person who's methodical, who really wants to integrate good practices into things. And that's why I wanted to talk to you on the show about it, so that other investors could learn from you. Because I really like some of the things you do. I mean, I never thought of some of this stuff and you've got some great things. So maybe we'll start with the beginning of the process about where to invest. Why did you pick the markets you picked? I think you flew out and looked at property and what struck you about them and then get into more of the management end too.

Sure. Yeah. I'm a fairly risk averse person. I like to make sure that the risk is managed and it's much because I don't want to ever lose the property. You always talk about playing to win, not playing to lose. But I do think that a key component in playing to win is making sure that you never lose the property. You don't have a foreclosure or an insurance claim or something that would, would stop you from having the benefit of that property after all the years of getting a tenant, you know, to pay that mortgage for you.

Yeah. And let me just, let me just clarify that for a moment. The, the analogy I made, I just want to make sure people understood that what you said. It's. Some people, most people in life are playing not to lose. They're very, you know, security minded. They're playing not to lose. Whereas I say play to win, but first you've got to not lose in order to win. So those are the steps, right? Yeah. Anyway, go ahead.

Yeah. So I'm one of those people that actually wanted to go out and open the door myself and listen if the hinges creak and see what the neighborhood looked like. And I've done that on all my properties. And I really think it's a good idea for somebody that has the time and doesn't mind spending a little extra money to go do that, because you'll be able to take a look at a couple of different properties in that area and really see why one is correct for what you want to do with it. Sometimes it comes down to more than just cash flow, because I think that will come in the future. Sometimes you're looking more for a neighborhood or more for a style of property that will have less type of maintenance, that type of a thing. So I really do enjoy going out and seeing it. But before I go out and see it, I don't want to waste my time. So there's a whole group of websites that I like to use, and I guess Google Maps is probably the first one that I go to that'll just give me a real good street view of kind of generally what's in the area and an overview.

Such a great tool. I mean, investors. One of the things you want to do is you want to look at those satellite images and notice what is the property next to. Is there a railroad track? Is there a landfill? Is there some sort of commercial facility? It might be a sewage plant. Is there an airport? Do you see a Runway there? There's absolutely all kinds of things to look for, like that. Is there a prison nearby? I love, whenever I drive from California to Arizona and you go by that prison, there are signs that say, don't pick up hitchhikers. I guess that's good advice.

Yeah. Actually, I have found prisons, landfills. I don't think I found a hazardous waste site. But all of those are keywords that I do type into Google Maps once I'm on the page that allows me to search nearby. You just click search nearby. And I do type in things like prison Landfill, hazardous waste site or super site. And then also positive things, shopping, pizza joints, Home Depot, entertainment. Because I like to see how far people are going to have to drive and what kind of the quality of life would be. One of the things that really impressed me about the Kansas City property that I bought is they had just completed a new Bass Pro shop less than a mile and a half away and I had not yet been in a Bass Pro shop.

Those are huge. The big giant stores, right.

Sporting goods store. And the minute I walked in that place, I knew that people would want to live near that, to be able to go to Bass Pro Shop and get their sporting goods. It's an event to go to. And so, yeah, so Google Maps and Bing, I was going to mention, has their bird's eye view. It's another, you know, satellite imagery. Just gives you a little different angle, little different dates. Sometimes those images aren't. Aren't really all that fresh, but gives you a good overview of the area. And then besides physically looking at it, then there's all the data you want to figure out about the area. What is the population like? What is the average income like? What are the average rents like? What percentage are renters versus owners? What's the age category? And that's available through a bunch of websites. One that I like a lot is city-data.com.

We use city data all the time. It's great.

There's another one called Zip, Skinny Z I P S K-I-N-N-Y.com does similar type thing to try and compare. If a manager is telling me that the rent is going to be a specific amount, I'll go to the rentometer.com website and type in the address and the bedrooms and it'll give you just a rough idea of whether that's a little more or a little less than the average will bear in that area. Because I don't know what the rents are in Kansas City, Missouri before I've gone out there.

Right. One thing I do want to say, Dave, is with Rent O Meter and Zillow and all these websites, whether it be prices or rents, those are both pieces of market data you want to know. Always take them with a little bit of a grain of salt because it's a computer trying to do what does require some human interpretation. Right. I mean, is that a fair statement?

Absolutely. In fact, yeah, none of this is 100%, but it gives me another piece of data that I can compare with what I'm hearing or what I found on my own. And again, if it's way out in the ballpark, then you have to throw it out as an outlying number. But. But there's another one, crime reports. There's one called crimereports.com and it lets you search sex offenders, which, no matter where you live, there's sex offenders everywhere. But you probably don't want your rental house in the cluster that's the darkest red with dots. It also lets you look at violent property, violent crime, property crime, police calls in the area. And so it's nice. You can just kind of get an idea of what is this area like, what am I going to expect for my tenants to expect? There's a home estimator for replacement costs that I like to use. Now, when you get an insurance policy, your insurance agent will give you an estimate of what the rebuilding cost will be. And as you've said many times, people will buy a home in your network, and then they make them insure it for much more than the actual price they paid.

Right. Which they initially get kind of angry about, but ultimately they realize they just got themselves a great deal, too.

Exactly. And so that's a free service from your agent. But sometimes the agent doesn't get the number of chimneys right. Or the detail on what the flooring is made of. And, you know, it's not quite an accurate number. In fact, they say something like two out of three homes is underinsured in most cases. And so there's a place I like to go called Accucoverage. Accucoverage.com and for $7.95, you're the one putting in all the data. And they will then generate that replacement cost report to you. And it's the same type of report that they use for the replacement from the local materials and the local contractors to rebuild that home to the same specification.

Yeah. And you have a background in risk management. Is that fair to say? So that's why you. You think of all these things, huh?

Sure. Well, it's part of it just gives me a little more comfort. Yeah.

Before we. I don't want to move on and forget to say this, but one of our other clients who was on the show a long time ago, I'm gonna guess that the show number was like number 89 or something. Maybe, but a long, long time ago, and you may have heard the show, David Porter, he was talking about another metric that he uses, and you may remember this one if you listen to the show. Show, it was the free lunch metric.

Yeah. School lunch program.

Yeah. You remember that. So he thought that if. And he bought a whole bunch of properties in Indianapolis from us. And then he's. I think his latest thing is he's buying Phoenix, but great guy. And he just thought he'd see how many free lunches are being given out at the, at the local schools as an indicator of what the neighborhood was like. And so he just kind of. That kind of tickled me. The free lunch metric. Who would have ever thought of that one? Right?

I do remember hearing that. And I looked at the lunch metric and I didn't think it was that good a metric for me because the more I'd been hearing, the schools were sending home the permission slips for the free lunch to everybody, regardless of income. And so who isn't going to get a free lunch, right? There's no such thing unless the government's paying for it.

Right.

And so there were huge numbers of people that wouldn't normally qualify for the free lunch program saying, what the heck, let's just take the free lunch. And so it wasn't necessarily that good look at what the area would be like, but I thought it was a clever way of.

It is, but that's our point really, is that all of this stuff needs some human interpretation. These are. What these are, folks, is if you look at yourself like a detective, it's a clue. This is a clue. That's a clue. And then you assimilate all this stuff in your own head and you start to see it kind of come together. If you've ever watched a crime show like CSI or something like that, they have clues. No one of them is necessarily conclusive. They build upon each other and then they ultimately lead to a conclusion. And one other thing I wanted to say about the other, David. In addition to the free lunch metric, one of the things he loved and you, you mentioned it, is the insurance policy on, on his first, I think it was his first property with us, he paid, I believe, $89,000 for the property and the insurance company, forgive me if I get these numbers slightly wrong, folks, you can go back and listen to the show, but this is a ballpark. And the insurance company told him he had to buy $280,000 worth of insurance. And at first he thought, well, this is kind of ridiculous. But then he thought, well, they told him if the house burns down and they have to rebuild it, that's what it will cost to rebuild it, because it was a 3,000 square foot house, so less than $100 a foot. Absolutely. Interesting. So what else? You know, I just didn't want to forget to point out those two things before we moved on.

A couple other things. I definitely have a professional home inspector go out and look at any property that I have an offer on and definitely think it's something that I'm interested in. Something I'm going to add as of my last property is a sewer camera inspection, something I hadn't thought about. And one of my properties did have what they call a belly in the sewage line, which is just a little dropout so that you don't have a level exit of the sewage line. And luckily, right now I don't have to do anything with it. And the tenants have figured out how not to get it to back up on them. But in the future, I probably will have a sewage inspection done on properties that aren't brand new with. With a warranty from a builder. Just one more thing to take a look at and something else I'm thinking about doing, if not initially, then maybe in my annual inspections, which we'll talk about more once I own the property. Maybe thermal cameras, because I noticed that a lot of home inspectors now have thermal cameras and they'll actually look at the walls and be able to tell by the heat signature where water has leaked through, where insulation is either slipped or missing altogether. And of course, where weather stripping or other things that would help you save on energy could be placed. And that would help both me and the tenant.

I already hate to admit this, David, but you are far more thorough than I've ever been. And I'm supposed to be the guru, right? You are. You are very, very thorough. Now, do you do this on brand new properties or just retail properties?

Yeah, I do. I don't. I haven't done the sewer inspection before. That's a new one and that's because of a foreclosure property that I bought. But yeah, I've done everything else on a new property, even going to the flood maps of the Federal Emergency Management Agency, fema, they have flood maps and your agent will tell you whether or not you're in a flood zone. But what they won't normally tell you is how close you are to say, 100 year zone or has something changed since the last time the flood maps were printed? And so you can take a look at the flood maps and then kind of make your own decision. How close is this to a river or a stream or a lake or something, which in the future isn't necessarily in the flood zone, so they don't have to declare it, but might just be a Little too close for your comfort.

Yeah. One of the things you'll find, and this happened to me on one of my properties, I think this one was South Carolina, where it wasn't. I bought the property new from the developer. You know, that was in a different era when new properties made a lot more sense than they do today. I mean now, now you can buy below cost of construction, so why would you buy from a developer most of the time? But this particular property was represented as not in a flood zone. And initially I didn't have to pay flood insurance, but then later they required flood insurance and I thought that's ridiculous.

Yeah, they redrew the map.

Yeah, they redrew. Yeah. Right, right.

So absolutely, because there's hundred year floodplains, there's 500 year floodplains and you know, how long are any of us going to be around here? But you might as well be as far away from anything as you can.

Right, right. Good. Well, okay. So now you also go, you fly to the properties, right?

Yes, I do.

Now, do you do that every time? Have you done that?

All I have so far.

And so you are one of the. I'm going to guess that about 3% of our clients actually go to look at the properties and, or at least before more of them go after the fact and you know, maybe then we'll get 10, 15% that at some point visit the properties they own. But you know, and I certainly would always, as a point of disclosure and as a way to frankly reduce my company's liability, I would always encourage people to go to property. But I'm just saying that I own many properties I've never seen. And the vast majority of our investors, they don't go visit the properties. So since you have visited, have you ever gone and looked and decided it's a no go or what do you look for when you go and visit, David?

Sure, absolutely. In fact, nice folks that you were working with in Georgia took me to a couple of properties and I put a bid on one or an offer I should say. And there were a few things that I didn't like once I was there physically and they were nice enough to actually come out and try and address some of those. One of them was the front lawn actually had a large slope where the driveway would go down into where the garage area was. And so I felt like a kid playing on the lawn, you know, maybe playing football or something could fall off this seven or eight foot drop going off the edge of the lawn. So they put a nice little picket fence in Things like that, you know, nice little. But in the end, if I notice that there's perhaps a slope that I don't like and I think it's going to cause a drainage problem in the future. One time I went out and there was sewage or a septic tank instead of city sewage and city water with a well, all those types of things. I have to decide if I want to be ready to manage a septic tank that's no longer out in the leach field properly.

Just to comment on that. Growing up the vast majority of my life in Southern California in a suburban environment, or even semi urban environment, mostly suburban, I would never imagine that I would own a property with a septic tank. But I own a couple of them and they've been okay. But that does bring on different issues. They have to be cleaned once in a while and serviced. But again, a lot of areas require you to pay for sewers or sewers are paid through property taxes. One way or another you're paying for this stuff. But it's just a different thing. And in, in Georgia, especially greater Atlanta, you, you move out into the suburban areas of Atlanta and lots of properties have septic rather than sewer. I, I was rather surprised to learn that myself several years ago. But that's, that's just normal there. It's not, it's not uncommon, it's not strange. But if you live in a place like Southern California or you know, any sort of a city, you're going to think, wow, this is just crazy. Who would ever, who would ever do this? It's such a different thing.

Right? Right. Well. And in the end, the septic was not what made me walk away from the property. But I have found that there's an enzymatic or bacterial treatment you can do. One of them is called Sewer Genie. But I'm sure there's a lot of different services out there. And they actually add this aerobic bacteria and a water bubbler like an airline to the septic pre treat and it actually clears out any of the problems that normally would happen with the anaerobic bacteria that winds up clogging the leach field. So if you wind up having septic problems, that might be something to look at. And I would definitely look at it if I bought one with a septic tank. But other things I look at is one or two stories. I prefer ranch style one story homes just simply because I don't want something leaking from the top to the bottom. If it's going to leak, it's going to leak at the bottom. And only ruin one floor at a time. I think it's easier maintenance, easier repairs.

You do have. Another slight advantage with single level properties is we have the graying of America, the aging baby boomers. But then again, we have even more gen wires that are. That's by 4 million more so those people can climb stairs.

And basements. I typically choose properties without basements because of the pumping problems and the moisture problems that the things.

Yeah, basements are problematic. I would agree with that. But one thing, look at investors. One thing I do want to say, and I just want to caution everybody, all things being equal, all things are not equal. So anything can be a good deal at the right price. So, you know, absolutely, I would buy.

All of those things at the right price.

Right. You know, near a prison, near a landfill, near a sewage treatment, you know, near an airport, whatever, you know, I mean, if you look around lax, those are some pretty, pretty rough areas around lax, but they're not super cheap, oddly enough, even when they're in the landing path, because it's just expensive real estate around there. Okay, well, tell us more.

Well, then pretty much once, once I have decided and I buy it, then once I own the property, then I have another whole list of things that I like to either find out about or do to kind of just make my life a little easier. The first thing I typically do is I'll again go to Google Maps and type in fire extinguisher, either service or fire extinguisher inspection and find a local company, somebody in the same city that it won't be a very far drive for them to go and let them know that they're going to have an annual chance to come do the inspections on a fire extinguisher. And of course they get the initial install. And I'll put a 5 pound ABC extinguisher in a cabinet and have that installed on every level of a property. And it has the tamper proof door that are made out of polycarbonate that are breakaway so that if a tenant does have to use it, there's notice you can see that the door has been broken and that the extinguisher needs to be refilled. And so it's just again, another little piece of mind thing for me that I like to know if something's happened in a property that maybe they didn't tell the property manager while the tenant's still in the property and I have some recourse.

Okay, so you put fire extinguishers in all of your properties?

Mm, I do in the little cabinets. Yeah. With the breakaway doors.

Okay.

And then I have a professional inspection service come out and every year do the inspection and stamp, you know, stamp the little, little card on it that says this was professionally inspected. I think that would also be good going towards liability if there ever were a problem and someone was trying to question whether or not you were a responsible landlord or owner.

And how much does that cost? You know, again, I've never done that and I've never heard of any investors doing it so distinguished.

Yeah. Extinguishers are about $100. The cabinets are about 40 to $50. The installation is about $50. It's typically about $200 per extinguisher and cabinet installed.

Oh, so those extinguishers are a lot more involved than the little ones that you buy at Home Depot or Lowe's that are 12, 20 bucks, right?

Yeah. These are the five pound ones like you see in the hallway of an apartment complex or a hospital. They're five pound abc, which means it covers all the types of fire.

Right. Whether it be an electrical fire, fire, a grease fire or whatever. Right.

And they're meant to be inspected and refilled. They're not the disposable ones. These are going to last you many, many years.

Okay. All right, good.

Yeah. And so those. And then, and then the inspection service, again, depending on the area, goes anywhere from about 30 to $60 a year to have somebody come out and physically do the inspection. And another thing I like to do is I like to have kind of a separate set of eyes on all my properties. And so although I have professional management, which is the supposedly watching everything for me, I do hire a local photographer to take pictures once a month and email them to me in kind of a higher quality format, like a 10, 12, 14 megapixel type digital photo, so you can really zoom in and see what's going on on the roof or on the lawn. And those people are sometimes professional, sometimes just college kids or high school kids doing it for me. And that's typically somewhere between $15 and $20 a month, depending on the area.

And that one I loved. That's why I got really interested in having you on the show because I thought that was such a creative great idea. How do you find them? Just Craigslist.

Yeah, I started with Craigslist, although in the creative gigs area. Even though I'm posting it and it's a job and it's for money for some reason, Craigslist always bounces that out about a day later. But by then I've already got 10 or 15 people responding. So it's never really been a problem that it gets pulled quickly. But the other one I found is getphotographyjobs.com and that's where I found my one for the most recent property in Texas.

Does it cost you anything to post an ad on getphotographyjobs.com Nope, neither one.

Both for free.

Great. The other thing folks that could be useful for is probably, I assume they do videographers as well as still photographers, right?

Sure. Anything to do with a camera.

Well, listen, there's one for you right there because if you don't have time or you don't have the interest or inclination to go to to the properties, you know, you could have a person do due diligence for you in advance. Picture doesn't tell you everything. A video doesn't tell you everything. But you know, you could have them go around and videotape the property, videotape the neighborhood, videotape the shopping nearby at the retail store and get a real sense of it. It's an interesting idea.

It's a great idea. And it's an independent third party that's not trying to sell you anything but their photography.

Right? Right. It's always nice to have an independent.

And I had, I don't know if you remember, but I had some problems back in 2008 with my first property. Just before we got tenants in it, both of the air conditioner compressors were stolen. And that was kind of my first test by fire as to whether I wanted to be a property owner. And so since then I've had either the air conditioner units put on cement bases instead of those plastic bases and bolted down to them, or I've actually been also looking at those air conditioning cages that some companies sell and install for hurricanes and those types of things. Haven't installed those yet. Although my Texas property that I bought with you guys did come with one of those automatically. So that was kind of nice.

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

What's great about the shows you'll find on jasonhartman.com is that if you want to learn about investing in and managing income properties for college students, there's a show for that. If you want to learn how to get noticed online and in social media, there's a show for that. If you want to know how to save on life's largest expense, there's a show for that. And if you'd like to know about America's crime of the century. There's even a show for that. Yep, there's a show for just about anything only from jasonhartman.com or type in Jason Hartman in the itunes store.

Just a comment on that, folks, just so the listeners know. There's a couple, two interesting points on that. Number one, that really goes to show that there is a real commodities and resource shortage going on on planet Earth because people are stealing air conditioners for the value of the whole air conditioning unit. But a lot of times they're just stealing them for the value of the copper or they're stealing the copper parts, they're stealing plaques off of tombstones and it's just crazy. Catalytic converters out of cars are being stolen for the precious metals value. And what this is showing is that these commodities, these materials that it takes to build a house, they're valuable. And another interesting point on that, and this is in Arizona, I just heard this on the news a week ago, I believe, where they are trying to pass a law because the air conditioning theft problem is reasonably significant problem where people will not be allowed to sell the copper parts unless they have like an industrial license or something like that. No dealer can buy it from a them unless they have a license. And they're also subject to a much stiffer crime penalty now because what's, what's happening is the value of the parts is so much less than the value of the whole that it's really kind of an unfair theft. If someone's going to steal 10 bucks from you, let them steal 10 bucks from you. But when they steal 10 bucks, let them not do a hundred dollars worth of damage. That's kind of the thought. And so this is just really one of these annoying crime that occurs. And so just two notes on that I wanted to mention.

And in some cases it's just me when I go out to the property physically, I can see that maybe there's something I'm uncomfortable with. Maybe it would be a stair railing that's not bolted down properly and I want that to be reinforced. In the case of my Kansas City property, there was actually a sewage cleanout pipe which is just a piece of PVC sticking up out of the front lawn, which was huge. I got a giant lot on this duplicate, maybe a foot and a half tall. And I didn't want someone either tripping on it or falling onto it and injuring themselves. So I went to Home Depot and located online that they have those plastic landscaping rocks that you can, you know, put over your pool Equipment or whatever. And for $30 or $40, you know, I had the rock shipped from homedepot.com to the property manager and they went out and secured it with a couple of tent stakes. And it's been there through the snows and everything for the last three years. And there's been no problem with the sewage cleanup. What else? Physical inspections. I have usually the same inspector, but sometimes a different inspector go out at least once every two years and go through the property again. In some cases they'll just do kind of a quick checkup for me. And if they know that you're going to be a regular customer and tell them that, hey, maybe I'd like to have an annual inspection or once every two year inspection, they'll usually give you a special price because they see you as a repeat customer. And that really gives you a good look at what's going on with the, the property, in addition to what the property manager tells you is going on with the property with turnovers and repairs and those types of things.

I think what people really need to understand is that far and away income property is the most historically proven wealth creator around. It works, it's a great business, but like anything, it's not perfect. Okay, there are issues that come up, there are problems that come up, come up. But one of the things we're here for is to help people mitigate these problems, to bring you the resources, the staff and the information to help you mitigate these problems. And David, that's why I so appreciate having you on the show. Because of any of our investors, I'm going to nickname you Mr. Careful.

You are very careful and very cautious. And you have your background being a risk management person. That's something that's part of your thinking. And this really tells people how they can prevent problems. An ounce of prevention is worth a pound of cure, as the saying goes. But if you get into problems, having a photographer handy that can help you deal with things, right? Sure.

Well, it really is a game. I mean, if any of this was enough to say it's not worth doing, I wouldn't be doing it. You're going to have headaches in anything that you do. But at least here you have the options of doing something about it and in many cases, something about it before it even happens. You know, as much as you can predict, you can avoid. And whatever still happens, you still have the option as to how to, how to resolve that. You know, am I going to fix that sewer line? Am I going to wait and see? Am I Going to do the trenching where they dig up the front yard to redo the sewer line? Or am I going to do that trench list where they run a new pipe directly through the old one? I mean this is the fun, this is the game of trying to see if you can hold onto that rental property long term because the benefit is going to be there. That's really part of it for me.

Yeah, absolutely. Now in terms of you have managers for all, you don't self manage anything, right?

I don't yet. I've been listening to your recommendations and at some point I may get to that, but I do still have professional managers in all the properties.

I have sort of this like love hate relationship with property managers and the listeners know that because I've talked about it on the show. But what are some of your frustrations? If you've had any? I have no idea what you're going to say when I ask you this question. With property managers, have you had any problems with them or anything like that that people should know about?

Oh sure, there's no bargains out there. So if somebody's quoting you say 6%, which is kind of a low ball quote for property management per month versus something like an 8 or a 9 or a 10%, they're probably going to get a little extra money out of you during repairs, adding on to receipts or adding on to the cost of the job, that type of a thing. But in the end for me it's easier to have the property manager there to physically take care of the day by day stuff. My real frustration, more than a few extra dollars for fixing this or that, is when the communication isn't there. And these days with every possible means of getting to somebody, with texting, with email, with messenger, with telephone, everything you could imagine. If you can't get a hold of a property manager within 24 hours and get get some type of an answer back, that's unacceptable to me. There's just no reason they can't come back with some basic answer to your question.

One of the things that I say about the income property business is that even if you have a property manager who is, they've got their hand in the cookie jar a little bit, it's still better than Wall street because they've really got their hand in the cookie jar. The people at Goldman Sachs cry and complain when they don't make a $600,000 average bonus every year. So the thing is, the difference is though with an income property investor is when there is a bump in the Road, you feel it because you're a direct investor, you notice it. But when it's a traded asset, when it's a stock or a bond or a mutual fund or any kind of a partnership, a tenant in common deal, some sort of LLC that somebody invests in, a real estate deal, you don't notice those bumps. And it makes you almost think that maybe that's better, it's easier, it's a better return, but it's not. You have much less complexity as a direct investor in income property and much more control, just so much greater control. And the great thing is about it now is you can just get online and find things out. So, David, you've heard me talk about this before in the live events that you've been been to, but the property manager is saying, hey, you know, we've got to replace the garbage disposal and we want to bill you $200 for this. You can just go to the Home Depot website and how much does the garbage disposal cost? Okay, you know, $99. How much is labor? You know, you can just figure this out. It's not complicated stuff and you have the resources of having it all online or you can just contact another plumber and really get a sense as to whether or not someone is overcharging you. The resources are there. It's, it's just not that difficult to be good at this stuff, is it?

No. And again, it's a game. And you learn as you, as you go the game, the game unfolds before you. So if you have, you know, that air conditioning problem in your first property like I did, you know how to handle it by your second property, you know it's already under your belt. It's not a panic situation. You've got plenty of insurance, you've got plenty of reserve money. That's, that's probably my number one concern is to make sure that I've got enough money to pay the rent, pay the bills, pay the insurance, if the tenant doesn't, you know, so again, I get to hold onto that property and win the game, right?

Yeah. Real estate is a game of staying power. And at the bare minimum, you want to have 4% cash reserves, 4% of the value of each property. And if you ever have to dip into those reserves, you should replenish them just to cover any problems, vacancies, things like that. But it's a game of staying power. And when you do your tax returns, you're going to start to notice how.

Great it is, is that 4% that you recommend Is that on the price that people get through your network or on the actual replacement cost of the insurance company tells you you have to insure?

Well, that's a good question. I just say the price. So I know every $100,000 worth of property value, $4,000 in the bank that's accessible for problems and things like that. But you know what you said, like the air conditioning problem you had on your first property. And I've really noticed this as I've gone to the school of hard knocks in business over the years. Every time you experience a problem and you deal with a problem and you overcome it, it increases your capacity to deal with the next problem. And suddenly something an amateur would panic about and get all bent out of shape and worried about. It's like a pro. Listen, I've been there, I've done that. I've had, had much bigger problems than that. I can handle this. It's no big deal. And it's good for us, makes us stronger, better people, doesn't it? You grow. Absolutely. Makes you grow. Sure, sure. Steel is hardened by fire.

And speaking of steel, that's one of the next things I plan on doing is we were talking at the Masters weekend is having the steel braided water lines on the, on the washer and dryer, you know, on the toilet.

Toilets, yeah, that type of a thing.

Because again, I haven't done that yet, but I can just imagine the little fix of putting that on versus the big fix of a water leak.

Yeah, some of the builders do that, most don't. But you do the steel braided hoses, you know, because it always seems like it's that washer. It's that washer or it's the toilet. And when that hose breaks. Oh, the ice maker, that's the other one, the ice maker. So maybe try and get refrigerators without ice makers in your properties first of all. And don't even have that option because that's another one. But the steel braided hoses for that are inexpensive and obviously extremely durable. So. That's a good point. Yeah. Well, good stuff. Any other thoughts you have in closing? Just about investing in general or any other tips you want to share?

Sure, a couple of real quick ones on the ease of operation day to day. Because I didn't want it to be another job, I took your advice and automate all my mortgage payments through my banking's free bill pay so that you know the mortgage is paid every month. I don't even have to worry about, about wondering whether or not I met that deadline to meet the payment. And I also use an online calendar. Mine's with Google, but I'm sure Yahoo and everybody has them to where you can set yourself reminders in the future that will email you when something's coming up. So that'll be for a renewal of a tenant if I want to ask my property manager about raising the rent or when I need to do an inspection on a fire extinguisher or an insurance policy is coming due. Something that's not automatic and not in my daily thinking. This is a little stimulator just to tickle that file and say, hey, this is something to keep an eye out for. Finally, I think keeping in touch with other investors in that same area has been probably the best resource for me. As you know, I go to the Masters weekends when I can. People I've met there that have homes in the same areas or areas I'm thinking of buying. Some of us are on an email list where you just reply to all every time somebody else posts an email and you get to find out what's going on with their manager, what's going on with their property, how did they fix this problem, Who's a good local contractor? These are solutions for problems that you don't have yet. And yet people are already telling you in that local market the solution if you just sit there and listen.

Yeah, that's one of the things I've noticed about you when you're at our Meet the Masters events. You're very good at networking with the other investors. And one of the things that we really recommend people do at those events is we share several meals together, sit with different people each time so you'll, you'll learn some new stuff and you're good at networking with those. So you have other investors in that area that you know and you're, you're not just relying on us on, on the company line that we're giving out, right? You're, you're actually talking with other people directly and you, you know, if they have a bad experience with the property manager, if they, they've got a good experience with a different one, what kind of repair issues they're facing or things like that. Some things affect whole areas like weather related phenomena. In Phoenix about a year and a half ago, we had a big hail storm issue. So by the way, I got to tell you, I just scored big time on that. This is something I should share with the investors. I haven't mentioned it on the show. I think you know about that big apartment complex that I bought here in Scottsdale. And listen to this one. This was really awesome. I mean, what a surprise. What a big score this was. The prior owner that owned that property during that hailstorm never filed an insurance claim on the roof.

Oh, wow.

Yeah. You know what's coming here, right? And we did. And after, you know, I took that property over, we filed a claim and we got this guy to go and pursue that claim with the insurance company. He wasn't even a lawyer. He's just like a pit bul. He just, he just got after the insurance company and they paid out. Forgive me if I don't remember the exact numbers, but I think they paid out like $350,000. And the cost of the roof is only about two hundred and something thousand dollars. So we're going to make money on that. That was a nice surprise. I mean, talk about a pleasant surprise that you could have. And you know, again, that's an apartment complex that was acquired for 3.9 million. So it's a big deal. So obviously the numbers are bigger. That's not going to happen on a single family home. But you do have different weather related issues in different markets. So, you know, those are things that it's good to network with other investors about and so forth too. Right, sure.

And well. And you know, the folks that I've met with, many of them now use the same photographer I use in those local areas. I've already negotiated with the guy, I've set up the route as long as their home that they've purchased is close enough to his home because I, you know, I chose them based on, on where my property was, they'll go do a run and you know, some of these people who've answered my Craigslist ad now have little, little businesses of taking photos for people with properties in the area and emailing them back. So yeah, I think that, you know, networking is actually one of the most valuable things you can do.

Yeah. Well, I hope everybody listening will come to our Meet the Masters event. I'm going to do a little shameless self promotion here and that's March 24th and 25th, Hyatt Regency Irvine. And you can do a lot of networking with investors there. So, so that's good. What else should people know?

You know, I think that's pretty much it. I don't want to scare people away. I was scared away for many, many years because of the massive volume of information. And you know, you really do analyze everything and figure out every trick and every hook and how to avoid every problem. And in the end you're not going to. In the end, the only way you get to learn that is if you've actually stepped into the pool and started to swim. And so I would say get that first property under your belt, talk to other investors either in the area or out of the area that can help you solve those little problems that are going to happen and really find out how much fun it is to own income properties.

Yeah, there's nothing like on the job training. When you're at stake, when you have your own money in the deal, it just brings a whole new presence of mind to it. You pay attention to it and that is how you move from theory in the classroom, in the book, at the the seminar where they're trying to sell you the $40,000 coaching program to the reality of investing, which it's not that hard. Just get in the game and do it. If you haven't done it so far, it's really quite an easy thing to do. But these have been some great steps, David, so thank you so much for coming on and sharing them today. I really appreciate it.

My pleasure. Thanks again for all your great help and education and you'll see me the next Masters weekend.

Look forward to it.

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