CW 281: Do-It-Yourself Property Management Strategies & Evaluating the Real Estate Investment Market in Birmingham Alabama

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Welcome to the Creating wealth show. This is episode number 280 and this is your host, Jason Hartman. Thanks so much for joining me here today. And I have got a guest just real quickly for a couple of quick comments here on the line who was on before and I think it was episode number like 169 or something. But you all seem to love that episode and that's with my mom, Joyce. Mom, how are you?

I'm fine, Jason.

Good. So you happen to call me and I happen to mention since you now live in Alabama, having moved from Los Angeles, I mentioned that we are just opening up Birmingham, Alabama and you instantly said what? Do you remember what you just said?

Yeah, that's, that's the financial capital of the whole state. That's where the industries are and the high salaries.

Fantastic. Yeah, I think Birmingham will be a good market for us. I don't think it'll be one of our big, big markets like you know, Atlanta or Dallas or even St. Louis or Indianapolis for, for that matter, or Phoenix. But you know, I think it'll be a good solid market. I mean the rent to value ratios are great and our specialist there just uploaded a really cute house today with a cap rate of over 10%. Pretty good stuff there. But hey, I wanted you to just tell that story, if you would about that property that you have in Moreno Valley, California. And several months ago you had told me about how long I was bragging about. I had a tenant once in a property for nine years. That was my longest tenant ever. But you have blown that record away and I just couldn't believe it. Tell us about this property. When did you acquire this property? Back in the 80s.

Yes, in the 80s. And I just had one tenant there always. I, the tenant has lived there since 1989. I don't remember the month. I'd have to look at the lease.

But that's close enough. 1980, so 1989. So we had just finished with Ronald Reagan as president in 1988, and this guy moved in the following year under George Bush as president. The first George bush, George Bush Sr. And he's still there since 1989. You've got to be kidding.

He's still there. He's never moved out. They've said a couple of times that they were going to move. And one time he started jacking me around and not paying the rent. And I went through the whole eviction process with him, and he had to pay the evictions expenses, and he decided to stay. And now they absolutely pay the rent beautifully on time.

Yeah, well, you kind of like showing them whose boss sort of thing. But that's amazing. So this house that you had, this tenant, it's now, by the way, for a point of reference, folks, in case you're listening to this at some time in the future, it is now 2012. Okay. And. And we're talking about a tenant. My mom has had one of her houses since 1989. And you've been raising the rent all along, right?

Yes.

And have you raised it every year or maybe didn't do it?

Well, no, no.

Well, at first, you know, I didn't know much about being a landlord, so I didn't raise it for a long time. But anyway, the rent now is fifteen ninety five dollars. I always just stuck under that big upper numeral, sixteen hundred.

Right, Right.

It's not a great rent, but I have had practically no expenses all of these years, and there's never been a time when the tenant. When there has never been no rent on the house. You know, just steady, steady, steady income.

Yeah. So never a vacancy since 1989-2012. Totally amazing. Now, you've never changed the carpet in that property or painted it. Have you done. What have you done to that since 1999?

No.

They asked me. They asked me if they could paint it, and they told me the colors they wanted to paint. It was yellow in one room, and I think they wanted to use a light, very, very light pink in another room. The yellow the wife liked in the room that she did her artwork in because it was bright and. No, they asked me, and I was there one time, and I said, sure, go ahead.

Unbelievable. So they're painting your house for you. You haven't given them new carpet since 1989, and you've been raising the rent all along, although you could get a much better RV ratio, by the way. Rent to value ratio outside of California, for sure. But, you know, for a California property, you know, back in the day when you didn't know much about investing, as you say, and so you just bought properties close to home. We do it in a. In a more sophisticated way nowadays, but. But that is pretty darn good.

The only expenses that I ever put paid there was a. I bought the outside unit of the air for the air conditioner, the compressor, because he used to let his dog sit in front of the air conditioner, and it would get filled up with the dog's hair. So I had to buy a new compressor one time.

All right, well, that's not too bad. So what would you attribute to why does someone stay in a property? So let's just see. Let's just count here. 1989 to 1999, that's 10 years. And then to 2009, that's 20 years. They've been there for 23 years. Now, why does someone stay in a rental property for 20, 23 years and. And not buy a house? What are they thinking? Thinking?

I mean, I don't know. I don't know. He. He is a truck driver. He belongs to a union. There have been times when he hasn't had a lot. He hasn't had a lot of hours, so to speak. I mean, that's what they've told me. I don't really know. I have no idea, I guess. Well. Well, they like dogs and they have a large backyard, so. And I never complained about the dogs. And they. And their dogs are beautifully taken care of. I mean, I petted them and, oh, their fur is so soft, clean.

It's amazing. Mom, this isn't a show about dogs. Although we're both dog lovers.

Okay, well, they had those great big dogs that I love, especially big, fluffy dogs.

I know any big, fluffy dog. My mom loves them. That is incredible. Now, one more thing I wanted you to talk about is you just got back from Los Angeles, where. Or actually Orange County, Santa Ana, where you own a property that we used to live in when I was a kid, or, well, not a kid. I was like 17, 18, I guess, when I lived there, or 18 to 20, probably.

You didn't. Didn't want to go there.

Yeah.

Just protested.

I did. I don't remember that, but. Okay, but that's on Freeman Avenue in Santa Ana, California. And that property, you were just at that property for a while because you are the ultimate do it yourselfer. You know, you never have a property manager.

You.

You manage everything yourself.

Oh, I'm so happy I got rid of my two what were at that time out of state property managers. The one in Mississippi and the one in Alabama.

Right, Right.

I will never go back to property managing again.

Now that's so interesting. So you're the ultimate self manager. You don't have any property managers for any of your properties, right?

No.

Okay. And you own properties in four states, I guess Mississippi, Louisiana, Alabama, and many in California, right?

No, three states.

Three states.

Mississippi, Louisiana or Mississippi, Alabama and California.

Okay. All right. And so no property managers. Everything is self managed. And I've talked about on prior episodes about how I really kind of like self management. And many of my properties, most of them have managers. I'm not a do it yourselfer like you are, but you're. You're a total do it yourselfer. But I mean, when you go between tenants, like in your properties in California, now that you live in Alabama and you don't live in California anymore, you fly out to California and you're such a elbow grease type do it yourselfer. You put a sign, you go to the hardware store, you buy signs, you get a big marker. And do you even use Craigslist to rent your properties?

Never.

Never.

It's very simple. It is so simple. This is what you try to do. You try. You. You first, you suggest to the tenant that you will reimburse them for the last week of the month's rent. Because everybody makes the decision the last week of the month to move. And if your tenant will work with you, you fly in that week and your tenant must get out of the way and be out of there so that you can paint, do whatever has to be done all in that week. And you immediately line up the painters and whatever else you think you might, even though you might not need it, you just get those guys there the day you arrive and you look at everything and you hire them if it needs to be done, especially get the outside looking good so you can immediately post your signs. You just go to sign smart. You get those 18 by 24 inch signs, get a black Magic Marker or black marker, and you say home for rent, the address of it, and in big letters, numbers, your phone number. Put up 25 signs and the phone will start ringing before you get 10 signs put up. And people will just come in in droves and you'll have that house rented within three, four, five days.

Now, I just want to say something. Yeah, I just. I just want to say something. So I would also definitely recommend using Craigslist or when I do My self managed properties. I don't go to them. I don't do all this. I think you work too hard. I think you think there's some kind of virtue in working hard. I don't.

See. Jason, I don't know how to do anything myself. I hire it done. But I do put up my signs because I do know where exactly to put them.

Well, you mean you don't do anything yourself when you're talking about the work, yeah, you, you hire the work done by contractors when you need to do work on your properties, but you rent your own properties yourself.

Oh, surely, of course.

Yeah. Yeah. Well, that doesn't work. Most people listening don't do that. You don't think it's work even. You're so funny. But, but the thing is, like, just for people listening, if you want to employ some of mom's strategy here, you can actually do this from a distance. You just use one of these, what they call bootleg or bandit sign companies. And they're all over the country and they're really, really cheap. They call them bootleg and bandit because it's not exactly legal. You're not exactly following like the sign ordinance of the city, but big real estate developers use this all the time. It's a common practice. I'm not saying it's totally, you know, on the up and up, but, you know, I'm just saying people do it constantly. You know, you see these little ugly signs by the side of the road and that kind of stuff all the time. So those are bad signs.

People compliment me on my good advertising. They do. They really, really say, wow, you do great advertising.

I believe it. But I doubt the sign patrol guru at the city is going to compliment you on your advertising.

Once in a while they'll send you a letter and you'll have to pay a hundred dollars or something like that because of the signs you put up.

Oh, really?

You have the place rented within a week.

Well, that's, that's true. Yeah, that's a good point. It's worth paying the fine sometimes to just get the thing done. It gets it done so quickly.

But the other thing is then you pull your signs down right away because you have the house rented, and then you just store your signs in the garage for the next time that you have to rent the house. But this house in Santa Ana, that tenant was there 12 years. So that's a very good record too.

Yeah. Wow, that's good. Yeah. No, nine years is my tops. I mean, I never had one stay longer than nine Years. But you know, we perform, everybody listening to, we perform a one month vacancy per year. So if you can keep your tenants there longer, definitely do that. And let me tell you, my mom doesn't get great RV ratios because she's got a lot of California still in her portfolio. But she does raise the rent. I mean, I would be fair to say you're definitely a rent raiser. Would you agree with that?

Oh, yeah, definitely. Oh, definitely.

But I mean, you raise a chance. Yeah. Every time you get the chance every year.

Try to.

Yeah.

Right.

So any other things you want to talk about how you self manage your properties?

Well, I always try to be very kind and very businesslike. I try to be understanding, but I am not going to be taken advantage of. And when, and when that tenant does not pay the rent, I do not give a five days grace period. I give zero day grace period. The rent is due the first day of the month. I tell them that I am retired, this is my paycheck and I want that rent there. If they do not pay, if they pay late, they have to pay a $60 fee. And on the third day, if that rent isn't there, I immediately have a process server serve a three day notice to pay rent or quit. I don't pull around.

And where do you get the process server? Because your houses are in several different cities. Even though you have, you know, a bunch of them in California, but they're in many different. I mean, they're spread way apart. They're in four counties.

Well, I have a process server in. You need to line yourself up with an eviction attorney and learn the rules for evictions in whatever area you're in. And sometimes the attorney automatically does the process serving, sometimes the attorney doesn't. And you hire a separate process server. The cost is usually around $45.

Right, right. Okay. Yeah. Good. It's really cheap to do it. And do you prepare that document, that three day notice to pay or quit or do they prepare?

Yes, because I have a special situation. My tenants all deposit into my bank account and you have to put an address of the bank of the closest bank. So I prepare the three day notice myself and I just immediately fax it to the process server and that way it is done 100% correctly.

Yeah. And then they just serve it for $45 for you. Yeah. Good.

Yeah.

Okay, good, good, Good stuff. Well, hey, you're tough. I didn't know you were quite that tough. You give no grace period in, in the movie It's a Wonderful Life, you would be Mr. Potter, but, you know, that's what you got to do.

I'm kind, I understand things, but I don't like to be taken advantage of.

Yeah, right. I don't blame you. I don't blame you. Well, good stuff. Well, mom, thanks for coming on to talk about this. We're gonna go to kind of an update here from our local market specialist about Birmingham. We're gonna talk about Birmingham a little bit here and then we are going to take a caller. And I know that a lot of you have called into the show and we will get your calls out. They are in the lineup. They're in the queue. And you know, we'll try to get those out over the next several episodes. And so you will hear yourself on the show. And please be sure to call into the show because we love to get your questions and a lot of other listeners have the exact same questions. So we appreciate your call ins and let's hear about Birmingham as a marketplace now and the investment opportunities there. And then we'll take a caller and we will be right back with that in just a moment.

If you want to be a successful investor, you need to learn the truth about where to invest and how to create wealth from someone who does it successfully every day. Jason Hartman. And Jason's number one piece of advice, pretend the stock market doesn't exist. Thousands of people are growing wealthy by pulling their money out of the stock market and putting it into what is proven year after year to be history's best investment rental property. And now Jason has developed the Creating Wealth Online course, a six week intensive interactive webinar that teaches you exactly what steps to take to begin investing in rental properties immediately and you'll get intensive real estate training. No esoteric theory, just a simple, repeatable, conservative approach that can make you very wealthy. Classes are online and priced at just $197. Register for the Creating wealth online course at www.jasonhartman.com.

Hey, it's my pleasure to welcome Jeff to the show. He is our local market specialist in a market you haven't heard us talk much about. And that is Birmingham, Alabama. Jeff, how are you?

I'm good. How are you?

Good. Welcome. Well, my mom loves Alabama, as many of our listeners know. She is building her southern mansion in Gulf Shores, Alabama and has been for a few years. It's taken quite a while. I don't think I'd build a house anytime soon. That seems like a giant hassle to me. But tell us a little bit about the Birmingham market and why an investor would want to consider it.

Yeah, absolutely. Thanks, Jason. The Birmingham market is really prime for investment property right now. We are seeing an increase in monthly rents. We have an abundant supply of renters. Our last statistic that we saw was about 49% of the population of Birmingham, the greater Birmingham area are renters versus owners. So we have a very abundant pool of applicants that want to rent properties from us. And those tenants want single family homes that have been, you know, renovated and are rent ready. And so, you know, that's one of the things that we as a company provide for these individuals is, you know, high quality homes that they can rent for good rates.

Sure, sure. And one of the things we should mention is that when you say that, that's really just for the long term because the properties that our investors would buy from you, they are pre rented, right?

That is correct. Each of our properties comes with a tenant already in place. Most of our tenants are already signed to a two year agreement.

Okay, good. So two year lease in place most of the time. And why would someone want to consider Birmingham other than the large renter population? What are the industries there and what's the economy like?

Absolutely. Well, Birmingham is the largest and most populated city in the state of Alabama. It's also one of the most affordable cities in the US to live in. Our current cost of living is about 13% below the national average. So, you know, that, that definitely shows that the homes, you know, the cost of living is really desirable for individuals that want to move into this area. The other side of that is that our home prices are currently at historically low levels. With rent rates being rising and the cost of the houses being down, then that makes it very attractive from an investor standpoint because it elevates your cash flows each month.

And why are there so many renters though?

We have a very big university population. We have UAB Medical center, which is one of the nation's most respected medical facilities. And it also has attached to it a large university. And so we get a lot of renters through the local schools. We also have a lot of blue collar working environment here. A lot of the industry that is here is such as we have the Honda manufacturing plant here, we have the Mercedes Benz manufacturing plant. And so a lot of those workers choose to rent. Obviously, given the economic situations that we're facing nationally, most individuals are choosing to rent now as opposed to buy.

And that's really helping investors quite a bit. And I think that's only going to get better. I mean, I just said on One of the other episodes that, that this is probably the strongest demographic movement in the history of the world, maybe. And you know, of course I can't really say that in full, you know, with full facts, but I'm just gonna throw it out there. But probably in America in terms of renters, because right now we've got Generation Y, the largest cohort In American history, 80 million strong, bigger than the baby boomers by a slight margin. And they are saddled with major student loan debt and they're marrying later, they are having kids later. Some of them are choos to have kids, possibly. And that means that more likely they're going to be renters. And then you add to it the economic woes. And I've always said the best thing you can have on a resume nowadays, it's not necessarily experience, it's not necessarily education. You know what it is? It's mobility. The ability to move to a new city to get a job. Tenants have mobility. You know, they can sign a one year lease and the next year they can do something else and they can follow opportunities. Unlike homeowners who are saddled with having to stay in one place. It's much harder to move if you own than it is if you rent. Right?

Absolutely. And that's exactly the type of feedback that we're getting from the individuals that work with us on our properties.

What else should people know about your operation and why you're a good place for an investor to buy?

First of all, we've been doing this for a long time. The three individuals that are partners with myself, we've been doing this and been working in the real estate and development arenas for about 50 years combined. So we've done over a couple hundred projects from start to finish in our careers. We know the markets that we are in and we've put in a very good, efficient system in being able to acquire properties, get them renovated timely and get tenants placed, as well as start helping investors get cash flow immediately. So at the end of the day, that's really what it's about, is making sure that the investor gets a good high quality investment property and then it cash flows considerably high for them.

One question to ask is what is it that you like and why is your company geared toward helping investors buy income property versus just selling the properties that you, that you rehab and resell to homeowners to regular, you know, owner occupant homeowners? I mean.

Well, I guess some of that goes back to the fact that my background is I've got 18 years of financial advising experience in addition to the real estate. So I'm in tune with the investor mindset. So I know the possibilities are greater in this environment now as opposed to anytime ever before to really get the types of returns that people need on investments these days, as opposed to say going into the stock market or things of that nature. We see this as really an opportunity to not only in our market obviously us wide, to take someone that wants to earn an above average rate of return and get a very quality product that down the road will appreciate in price and pay them back second time.

Yeah, you're right. And also it's a very conservative investment, much better than those Wall street assets that you exercise no control over. So you were in the world of being a financial advisor. Tell us a little bit about that because I constantly talk about that industry and Wall street, the show. Give us a little background if you would.

Yeah, absolutely. I worked for some of the largest banks in the US and Canada as well. And basically my job, my role was to work with large institutional buyers and the CEOs of those companies in handling their investment accounts. One of the things that I noticed as I delved further into their investment process was that you look at these individuals and you go, how do these individuals get to where they are and how do they accumulate the wealth that they are, that they have? And it all boils down to they've all either started with or done the bulk of their wealth through real estate.

You know what's interesting, I just got a comment on that because a friend of mine who's in Young Entrepreneurs Organization, a group I was involved with for many years, YEO now called EO or Entrepreneurs Organization. But what was interesting is one day I asked him, I said, because his father had like a semiconductor business and he was very successful, had homes all over the place and you know, high, high end homes all over the place that he owned and just used for himself basically and his family. And I said to him one day, I said, you know, Pat, how'd your dad get so successful? I mean, you know, what was his secret in business of being so successful? And he said, well, you know what, it wasn't really the business itself, it was all the real estate he bought along the way. You know, whether it be commercial properties that the business operated out of, warehouses, like manufacturing type facilities and, and then residential properties that he invested in as well. And it was really the real estate that did it for him. And I thought, isn't that interesting? You know, most people think it's the business, because that's sort of the brand. They think, hey, what business is this guy in? Well, he's in the semiconductor supply business. Right. But it was, it was. The people don't see that behind that. It's the real estate. And auto dealerships are a great example, because auto dealerships, you think they make money selling cars, but a lot of those guys got really, really wealthy because they own such big pieces of land that their dealership operated on. And they just, the business just basically became the tenant. You know, like in our properties, we have tenants. We outsource our debt to the tenants. And that's a great business model. You know, when you don't have to get in lots of debt, if you don't have to pay your own debt, it's. It's wonderful. You have someone else pay it for you. And that's, that's what we do in our, with our real estate investments. But the business basically just becomes the tenant of the real estate. And it's the real estate that is the real wealth creator behind the whole thing, isn't it?

Absolutely. I don't know any of the individuals that I worked with over those 18 years that didn't build their true wealth through a form of real estate investment.

Amazing thing. Well, what did you see when you were investing the money for these institutions and these very successful CEOs, did you find there was a lot of crookery on Wall Street? I've never discussed this with you, by the way, Jeff, but you know, I'm constantly talking about it on the show.

There are definitely. Wall street has its, its level of ethics that they try to portray. There is, you know, a lot of that is front talk and there's a lot of behind the scenes that it's really all about. You know, what do I get paid on this deal and what, what does this mean to me? It's never really about what does it do for the investor? Is this the right option about the investor? Obviously, there are good people in the investment world as well and people who want to do right by their clients. But at the end of the day, what I ultimately found was that on the majority of the times, it was all about really what investment avenue gets me the most return for myself, not for my investor.

I couldn't agree more. And a lot of people who were in that industry like yourself, they just couldn't do it with a good conscience after years of doing it. They just saw too much fraud, they saw too much greed, too many scandals, and some level too, too much incompetency it's like I go to these financial advisor firms occasionally. Sometimes I interview with them just for fun. Nowadays it's like sport. And they all have the same stupid theory. They're all following modern portfolio theory. And you know, they show me the same damn pie chart. It's like what is original about any of this stuff? It's the same formulaic junk that doesn't work. Nobody listening. I'll bet you nobody listening to this show right now can show me one non insider person who has actually become wealthy off those kinds of investments. I always say, how many people do you know who got rich in stocks, bonds and mutual funds?

Well, I know individuals who got short term rich, but they didn't get wealthy. And that's really what it boils down to in my opinion. And the reason why we do what we do is because what we look for and what we want to do is build long term lasting wealth. Stuff that will pay you and your, you know, your children down the road. And not something that just because something happens in Greece, it causes, you know, your portfolio to blow up.

Yeah, and so what you're talking about there, you're referring to the speculators and I liken those to the house flippers in our industry because you know, I've noticed over the years that people who flip houses, they have spending money but people who buy and hold properties, they have real wealth. And you know, it's just different. It's like that speculator mentality, that gambler mentality, it's really interesting there. But hey, going back to your market and your company, some of our vendors are what we call vertically integrated companies where they have kind of maybe you know, a couple businesses in one sort of thing where they have their own property management, some outsource that to other property managers, some have their own construction companies, some outsource that. Tell us about your system and the way it works in terms of the various activities you're engaged in.

Well, we like to consider ourselves to be full service. And when we, when we sat down and really put this model together, you know, we looked at, we took our experiences and what we had all seen in the, in our environment and our, in our industry over the last 50 years and basically said, how do we sit this, how do we put this together to where at the end of the day we give the most value to the client. And the only way that we really came, we kept coming back to, we just have to do this in house and we've got to, we've got to manage and oversee each of the processes of the turnkey process. And so what that means to the investor and how we structured our company is that we go out, we have a division that is solely responsible for going out and acquiring properties. Once those properties are acquired and they meet our criteria, then we turn them over to another division which handles the renovation piece. So all of that's handled in house with us. We also have our own property management company who at the same time that we're renting, vetting those properties, is out working with our clients and from a renter perspective, to have that property rented by the time the renovation steps are completed. And then, you know, we offer for the investor obviously the ongoing management. We looked at doing an outsourcing originally of the property management side. The property management is one of those things that nobody wants to do just because of the time and the commitment that it takes. But we saw that it's only when we looked and interviewed other outside property managers. We never got the feeling that they had our best interest in mind or our clients interest in mind. It was, you know, all about more of just getting properties filled, not necessarily with the right tenant or somebody that would be a long term good tenant and so, or at the, even the, at the right prices, you know, there's. They would definitely want to look at, well, let's just get it filled. And it may not necessarily be the right price that we feel like was due on that property. So we brought that in house and we basically handled that. We think that it adds the most value for our clients to really do all the processes ourselves.

Yeah. So you have full control over every process. And the nice thing about hearing that is you're not going to pass the buck when there's an issue with a client. Right. The buck stops here.

Absolutely. Our clients will be handled. They'll get a specific rep, that will be their main point of contact. And any types of issues, the person will be in constant contact with them to let them know how their properties are doing, how their income is coming along. They're going to be in contact, let them know what's going on on a regular basis. So we're very hands on with our clients.

Good stuff. Well, anything you'd like to say in closing, Jeff?

I just basically like to say that Birmingham, the market here is really kind of the best that I've. You know, we look at a lot of different markets, but based on the prices of the homes that we can acquire here and the volume that we can get here, the returns that our clients are Getting it really is kind of one of those perfect storm environments for us. And when you couple that with the level of service and client respect that we offer, you know, we feel like we've got an excellent product here for individuals that are looking to build long term wealth through the through the real estate portfolio.

Well, hey, thank you so much for joining us today and telling us about this. And if any clients are interested, you can see properties@jasonhartman.com in the properties section there will be performas and so forth about the properties that we're talking about here in Birmingham. And you can contact an investment counselor through the website in many places@jason hartman.com and they'll be happy to connect you and help you acquire properties in this area. Thanks again, Jeff.

Thank you.

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.

Hey, it's my pleasure to welcome John. He lives in Dayton, Ohio metropolitan area and he's currently calling us from Detroit. John, how are you?

I'm really well, Jason. How are you?

Good, good. Thanks for calling into the show. We really appreciate it. I guess you're a new listener, right?

I am, I am a new listener, but I've been able to get quite a few of his shows driving back and forth from Detroit to Dayton. So while I am new, I've been able to capture quite a bit of your podcast over the past month or two.

Good, good. Well, we appreciate you listening. What was your question for today?

Okay, so for any other listeners out there, I hope this is helpful. The question I have is I don't have credit, so I don't have established credit and I've read and heard and googled and looked up. So look for private money or hard money lenders. But I'm actually in that process and I'm struggling with it. I don't know how to actually do that. So how do I search for private money or a hard money loan or something?

Yeah, good. Question. So what you need probably is, first of all, I want to compliment you because you're doing the right thing in terms of finding a partner that you can, that has something that you don't have and you bring something to the table that that other person doesn't have. So you can, you can go ahead and exchange some value there and form something bigger and better together. So that's good. And I do want to say one thing about partnerships. When I do my creating wealth boot camps, I often quote my late grandmother who many years ago, actually when I was a kid told me this great quote. And I just want to, want to share that with the listeners. I probably mentioned it before, but I say that my grandmother, she used to say, Jason, the hardest ship to sail is a partnership. And you know, that's kind of true. But I say that using the example of investing in a few fund with someone or going into business together with someone where, you know, you're buying stock in their company or you're just a small investor in a, in a pool of money. And I don't like that, as you probably have gathered from the episodes you, you've listened to. But real estate partnerships, I have several of them and you know, I've had many of them over the years. I think the longest one I ever had was 11 years long. And I found them to work out pretty well. As long as neither partner lives in the property, neither partner has any kind of emotional attachment to the property. If it's just an arm's length partnership. Real estate's a pretty simple asset class. And that's one of the other things I love about them. So first of all, when we were talking just for a couple of minutes off air before we started, you were telling me about your partnership. And I think that's a great way to go what you've mentioned to me. So that's one thing, let's get that out of the way. But in terms of finding hard money lenders, what you're looking for is you're looking for what's called an asset based lender, a lender that cares about the asset, in other words, their collateral for the loan, the property, rather than you as the borrower and income. Property is the most debt favored asset class. So if you listen to, for example, episode number 241, we were talking on that episode to an asset based lender. And we've got another asset based lender also coming up on the show that does hard money or private lending, asset based lending in many markets nationwide. And this is the kind of thing you're looking for as an asset based lender. So they're not looking to the borrower, they're looking to the property as collateral for that debt and income. Property lenders love it as collateral. It's just great collateral. I mean, try getting the type of loan you can get for an income property, even if it's a hard money loan with a higher interest rate and more money down. You can't even come close to that for a business, for example, because the business is such a moving parts asset. You know, it's so complicated and it's not as good in terms of collateral. So first of all, that's what you're looking for. Now there are many sources for these asset based loans and there are a lot of hard money lenders out there. Most of them will want anywhere between 8 and 12% and they'll want a decent amount of money down. So if you're a borrower who doesn't have maybe you're fannied and Freddied out and what that means, you use that phrase and a lot of people use it nowadays, the maximum number of Fannie Mae and Freddie Mac backed loans you can get is 10. So if you've exceeded that and it sounds like you have, you've got to look at other options. So episode number 241, if you haven't already heard, it could be valuable to you. And we've got more episodes like that coming up and more sources for this. But if you want to look outside of what I've talked about on the show, there are some other sources as well. And you know, I don't have the name in front of me right now, but I'm going to try just searching something for you online. Actually it's one of my friends on Facebook, so I'm going to look him up and see if I can find it. And I'll mention that here on the air. Does that kind of make sense what I've said so far?

No, it does absolutely. Because that would be specifically my challenge when I looked at asset based lending was they would lend towards an asset, but only in a very specific area. That was one challenge being that it's not wise to just invest in one area. So I would make some headway in reaching a local bank or maybe a credit union or something to that effect. And then it would end with, well, I can't lend to that area or I won't go that far, whatever it may or may not be. And also I'm glad because another Question that I had on the horizon was, what should I expect? So if I do go through the process, everything looks great, the deal looks good, everything is great. Now, what's that rate and what would be a cash down? And you already said 8 to 12%.

Yeah, that'll typically be the rate. And a lot of them will look for like 50% down half. So, you know, it's a pretty significant down payment. But I gotta tell you, folks, let's keep a few things in perspective with that. If you went in and you went, which you sound like you're way too smart to do this, but many millions of people do. If you walked into Merrill lynch, for example, or Ameriprise or any of these, you know, Wall street type financial companies, on any investment that they offer, you're putting 100% down. You want to buy $100,000 worth of stocks, bonds or mutual funds, you give them $100,000, there's no financing. Now granted, I know you can buy stocks on margin and stuff like that, but you know, most of those things end up as really ugly bad stories. Okay? So I'm not even gonna go there. If you go around the world and you look at real estate around the world, you're gonna typically put 100% down. Mortgage financing in the US is very, very rare and very special. And that's why even foreign investors who have to put 50% down on many properties on most types of financing in the US Compared to what you can do in many parts of Europe, in Australia, In South America, 50% down, they think they're jumping for joy. They think that's a great deal. So keep that in perspective. You open a business, you're typically putting 100% down. You know, you're not going to get financing for too many businesses if they don't include real estate. And what I mean by that is a business where you own the business property like the building that your manufacturing plant is in or whatever. So the SBA Small Business Administration does offer some financing. Mostly when there's real estate involved, is when they like it. So real estate is the most debt favored asset class. So that's one, one thing you can do. And I looked up that contact I have, and it's not on his Facebook page anymore. I know it was there and I was just going to give you a general place to get hard money loans, but you know, let's just do it together. Asset based. I'm going to just type in, I'm just googling asset based lending. Okay? So the first thing is a Wikipedia entry. The second thing is the Wall Street Journal has an article that says asset based lending grows in popularity. Here's a company called First Capital Entry on Google that does asset based lending. And you know, I don't know anything about these companies, but there are lots of sources out there that do this type of thing. And I can get back to you with another one that I know does it directly on. On income properties. Okay.

Okay. Do you have time for one more question and going a little bit further than that?

Absolutely.

Okay.

Can that down payment come from a partner? And if so, would it be a borrower, co borrower circumstance? And as a scenario, we're looking at a million dollar commercial property that is actually whatever, it's a million dollar commercial property. We're negotiating to 950,000. My partner had planned on putting just the 100% down and buying it, which is normally what we do with our properties is he pays for the deal, I find the deal, and I am a partner on that deal and I invest some sort of asset on some of them. Depending on my level of involvement on this deal, there wouldn't be a cash involvement that great. So what my plan was was to try and search for this deal specifically or if it's a possibility to take a $500,000 down payment, which would be the half you're looking for, but it would be coming from my partner and I would be leveraging the rest in my name. Is that a possibility or have you ever seen a deal structured that way?

It is very much a possibility on an asset based loan and on a. Because again, they're looking to the property, they're not looking to the borrower. Now there are varying degrees of this. Some of them look to the borrower a little bit and mostly to the property. There are varying degrees. Some are pure asset lenders, some are sort of hybrids, and there are everything in between on the spectrum there. But yes, many asset based lenders will allow you to be far more creative than the conventional Fannie Mae, Freddie Mac type of financing. So that's a case by case basis. A lot of these lenders, like the one I talked to on episode number 241 of the creating wealth show, they think the nice thing is they will actually reason something out and they'll think, gosh, you know, we're not going to follow a strict underwriting criteria. We're going to think, does this deal make sense? So credit unions, hard money or private money lenders, asset based lenders, that's kind of the same Thing as the hard money, private money. But even credit unions I find will make some thinking based decisions because they view it more based on a relationship. And I think credit unions are in under by the way. Let me just give a big plug for credit unions here. And this is a general plug. If you need a car loan, if you need a banking relationship, if you want to get just better service in general. I think some credit unions out there are pretty great and they're, they're just a lot better than the big mega banks. I love to hate the big mega banks. Most of America does nowadays. Just generally speaking, every listener should explore credit unions. So you may be in a certain affinity type group like a teacher or something or your spouse may be a teacher or the military where you have access to credit unions. But some credit unions just are. Their deal is we serve the local area that we. If you live in our area, you can be a member of our credit union. And one that I use that the deal was if you live in Orange County, California, then you can be a member. I'm not a teacher, I'm not in the military. You know, I didn't have any special affiliation. It was just where I lived. So check out credit unions. I definitely think that's a wise idea. But again, your question of can the money come from another person? Many, many times, yes. They will think it through and if the deal makes sense. I gotta ask you though, in your partnership it sounds like you have a pretty awesome partner.

I do.

It is.

It's a fantastic situation in that I'm able to not only monetarily gain from it. His down payment, but also the education that I get is just absolutely fantastic and it's been tremendous and I'm able to learn from him. He's been a mentor for years and we started working together again here as I said just back in January. But he has been the sole. I guess I am dependent on him on certain deals and he also in the same manner is dependent on me to find certain deals.

So basically he's got the money, you've got the time. Is that the trade in the system partnership. It is. You're out finding the deals.

A few other things, but they're in your podcast and that's one thing. The most valuable resource beyond water, beyond money or cash or anything, is time. And so for him I do have the time to assist with running his companies or. But also the trust. The factor is that he has had dealings with people who's worked for him in the past that have not found themselves to be trustworthy. So we're in line in several different areas of our life and we're able to trust each other and that's while protecting ourselves with documentation and other things. But that has a lot to do with it. So yes, the trust or the time is something that he is buying.

Yeah. Good, good. Well, that's great. Now let me also ask you, what type of commercial property are you considering for a million bucks?

This is a school and a church, in fact. And it's a church that was going out, you don't want to say going out of business, but the church was splitting, they could no longer afford the property. The school had closed and a charter school is coming in and has signed a. They've sent a letter of intent and is looking to make a lease agreement for 10 years. And the just the deal in its entirety is just fantastic.

And is it in Detroit?

It is not. Absolutely not. It is completely on the other end of the spectrum in Florida and so down, down a ways. And that's why a credit union was difficult because I'm not in the military, I'm not a teacher, I don't live in the area. And so a banker that I had met to do my. When I was beginning, I won't get in too deep, but when I was beginning and investing, I had a house in the Detroit area and then was moved to Tex. So that house became a rental property and I was very much under it. It was not a wise investment. I did a poor job throughout the entire process and it was previous to, you would say, the crash. So then I moved to Texas, purchased a house there. Then I ended up moving to the Dayton area. Dayton, Ohio. So then I had two investment properties. The Dallas property was performing, the Detroit property was hemorrhaging and being in Daytona. I needed a place to live. So I contacted through a resource, a bank president and he was able to look at, I guess you would say this possibly an asset based lender or whatever it may or may not be. But he thought through the deal and helped me out quite a bit and we worked through a deal to make it work.

So let me talk to you about this deal for a second. Okay, first of all, I want you to consider there may be two hidden pieces of value in your deal that you may not be thinking of. If you're just buying the real estate, you may be able to actually buy some other assets with the real estate. And you know, again, I'm no expert on this, but I'm making just a very general statement that school may have a charter that you can buy. You may be able to buy the, what's left of the quote business unquote of that church and school. You may be able to buy the entity also separate from the real estate and they may just throw that into the deal because it may be worth nothing to them. And so if that school has an accreditation, if that church has a entity that's formed that's a tax exempt entity, those things could have some value as well. So just be mindful of that, that you might get those thrown into the deal and they might be worth something as well. I would kind of love to own an accreditation that a school has and be able to use, for example, my educational products and my teachings on the podcast. The other products that I my one of my companies sells that educate people on finance and sort of just buy from somebody that whole accreditation like an online college like the University of Phoenix, which I hear is the world's largest university by the way. So there are some other opportunities there. There may come with that, government aid programs, which I thoroughly disagree with almost every time, but if I was benefiting from them, I wouldn't disagree with them.

Absolutely right.

I'm just being self serving and being honest about it. So there may be some other assets there as well. Now that's the good side. The downside though is that these are very specialized type of properties you're talking about. So be careful if you don't know what you're doing. In these very special, generally single use type of properties, there are a whole bunch of factors and economic pressures and motivations that if you haven't done these before, and even if you have, if you haven't done them, a lot that you're probably not aware of. So of course the red flag of caution, I want to sail that very, very high because as you've heard and you've been listening to the show only for a couple of months, but I love simplicity. Every time I get involved in something highly complex, the chance of getting burned is extremely high. And that's why I just love housing, whether it be in the form of single family homes, the simplest of all, the most historically proven of all, or apartment buildings, my second favorite. It's just simple. Everyone needs a place to live and that's not going out of style. It's interesting too, because I was reading one of my email newsletters today and it's talking about the hot new trend in investing in this and that. And I'm thinking, you know, the whole world, it seems like is out chasing these hot new trends, whether it be the hot new business, the hot new stock sector, the junior mining sector for the gold bugs, which zillions of dollars have been lost in that one. Okay? The junior mining companies, you know, you've heard about these. And it's like my business, the hot trend in my business is that everybody needs to sleep at night and they need a roof over their head. And you know what? That has not changed since the beginning of human history. That has been true for millions of years. For eons people have needed a place to live. I just love it. I love the simplicity of that. So I just want to caution you, of course, be very, very careful. You know, you could hit a home run and I don't want to talk you out of it. But those are, those are highly complex, generally single use deals. And if you're going to convert it to something else, then it becomes a development deal and history is littered with broke developers. So I just want to say be careful. Okay? That's all I want to say.

Well, I appreciate your time very much. I could literally keep going on forever with questions and I know that you don't have the time for that, but I greatly appreciate you. You're pointing in the right direction. And I'll definitely go back and listen to episode 241. I'm actually not a part of your newsletter yet. You mentioned that. Just looking at these takeaways on my notes that I had, there's just a lot in here, so I greatly appreciate it.

Good stuff. Well, hey, hopefully you'll join us for one of our live events sometime and we'd love to meet you. We just appreciate you listening and spreading the word about the show. And thank you for calling in, everybody listening. We love call ins, so keep calling in. It's interesting. I get to learn a lot and so do all the listeners. So I really consider that a contribution when people call into the show. So appreciate your call and call in again with more questions.

Okay, great. Thanks, Jason.

Thanks, John. Be sure to call into the Creating wealth show and get your real estate investing and economics questions answered by me personally. We'd love to have you call in, share your experiences, ask your questions. And a lot of other people listening have those very same questions. So be a participant in the show at 480-788-7823. That's 480-788-7823 or anywhere in the world via Skype. Jason Hartman ROI. That's Jason Hartman ROI for return on investment. Be sure to call into the show and we are going to enter all of the callers in a drawing for some nice prizes as well. So be sure to call into the show and I look forward to talking with you soon. This show is produced by the Hartman Media Company. All rights Reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email mediaartmanmedia. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network, Inc. Exclusively.