CW 446: How Old-School Real Estate Investing Still Works with Jason's 'Aunt Joan' A Successful Real Estate Investor in Sacramento California

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Welcome to Creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven't thought of before. And a new slant on investing. Fresh, new approaches to America's best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine, self made multimillionaire who not only talks the talk, but walks the walk. He's been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason's footsteps on the road to financial freedom. You really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome to the Creating wealth show. It's Jason Hartman, your host and this is episode number 446. Thanks for joining me today where you will hear a Thanksgiving interview of my Aunt Joni. And I finally got her to come on the podcast. And you know, the reason this is interesting is because as a child, my aunt and uncle in Sacramento, Joan and John, they really, really influenced me a lot in my thinking about real estate investing as they were accumulating properties. And it seems every time we would go up there for whatever reason, whether it be Christmas or Thanksgiving or just for a visit some other time of year, you know, my mom and I would go around with them and see all these houses they owned and we were constantly looking at houses. I guess that's why real estate is in my blood. Joan claims to own over 70 rental properties. She would only say over 70. I have a feeling it's quite a few more than that, but it's pretty amazing if you think about it. And one of the things I've been focusing on a lot lately is this concept of alignment. And that's really our theme for our upcoming Meet the Masters event. There will be many talks and much focus on the concept of being an empowered investor. And one of the themes here is how do you get empowered? How do you become an empowered investor? Well, number one, you follow my 10 commands. But especially commandment number three, you maintain control. You don't go and invest in someone else's deal. Now this is also interesting because it brings up the concept of, well, when you don't maintain control, you know the problems there, you might be investing with a crook, you might be investing with an idiot. Assuming they're honest and competent, they take a huge management fee off the top for managing the deal. And I was talking recently with a provider, a local market specialist in the Phoenix area a couple, couple of weeks ago, and they said that they were going to open up a new fund to help people invest in single family homes. Get this, okay? I mean, this is such a crappy deal. It's, it's not even, you know, it's not even on my radar, okay? And they said they thought that they could return 8 to 10% to the investor investing in single family homes. And I said, well, and they claim that they could cure a lot of the problems that single family home investors have. And you know, they do fund investing and you know, like to group money together and get people to invest in funds. And of course, we all know the problems with that. But the interesting part is when he says, well, we think we can return pretty consistently 8 to 10% by buying and fixing and renting out single family homes. We within this fund. And I said, well, gosh, 8 to 10% is a terrible return. I mean, you and I both know that investors can make 20, 30, 40% annually, all things considered, on their prudent, good, smart single family home investments. And I said, well, why would an investor do that? And his answer is, well, you know, there are just some investors that don't want to deal with anything. And I thought, you know, that is amazing. If you just figure out how to deal with some stuff. It's not that difficult, okay? It's really not that difficult. You can triple or quadruple or make a return of five times what they were suggesting would be a good return of 8 to 10% annually. So just mind boggling here, right? But, but part of the problem, when you maintain control, when you follow commandment number three, that presents some new challenges. And all of you listening know this. It brings on some new responsibilities that you, the investor, have to deal with. Well, one of the ways and one of the things we're going to focus on at Meet the Masters and you're going to hear in my interview with Aunt Joan, who owns over 70 houses, and by the way, I want to just do a little math for you because she claimed to having 62 of those over 70. We don't know what the exact number is over 70. She's being modest. I have a feeling it's a decent amount over 70, but I just don't know. I always used to think they owned about 100, 120 homes. But if you just take a $450,000 or let's just make it more conservative. Let's take $400,000 is the average value of those homes. Now when the market got really bad, see, they did it the old school way. When the market got really bad in Sacramento, California and we had the financial crisis in some areas, I remember reading a stat that Sacramento was down 48%. And Aunt Joan doesn't think her portfolio was down that much. Let's say it was, you know, only down 30 or 40%. That's still a pretty big loss, okay. Which could have been prevented through diversification. But you know, this is the old school way. It's the old school way of, you know, buy a bunch of houses in your neighborhood, manage them, do a lot of elbow grease, you know, go around to the houses all the time, spend, you know, a lot of time doing that. But it does have some pretty big rewards, even the old school way. And you could accelerate this dramatically with refi till you die, with inflation induced debt destruction, with my risk evaluator formula and with diversification, okay? But still, Aunt and Uncle John and Joan did pretty, pretty darn well for themselves. So let's take $400,000 times 62 free and clear homes, okay? And that gives them a net worth just from that real estate portfolio of $24,800,000. And I don't know how many more than 70 Aunt Joan, Uncle John own, but I have a feeling it's a decent amount more. So just from their real estate portfolio, they're probably worth 25 to 30 million dollars. I mean, look at the number of people who are retiring, broke. All they did is the simple old school form of keep buying houses, rarely sell them, and manage them well. So back to this concept of alignment and empowerment. If you have your interest aligned in your investment portfolio, you are going to be an empowered investor. And when I was 17 years old and I discovered Dennis Whateley, Earl Nightingale, Zig Ziglar, Jim Rohn, those are basically the people who brought me up. You know, they were pretty good influences on me as a wayward teenager and really, really made a huge difference in my life. Well, one of the things Dennis Waitley used to always talk about is win, win. And later, the late Stephen Covey talked about win, win or no deal in the 7 Habits of Highly Effective People. And this concept of win win is a great concept. So as an investor we would probably think, okay, well, I'm going to hire a property manager and I'm going to have the property manager manage my, my properties. And then I need to make sure that the deal between my property Manager and myself is a win, win deal, okay? And that's one layer of it. But I say you really need to go on to one more layer. And there really are more layers, but at least one more layer. It needs to be win, win, win, so that you, as the investor, win, okay? Your property manager wins, meaning your interests are aligned and then your tenant wins so that they're going to stick around and want to be a good tenant. Win, win, win. Now where does this stuff get out of alignment? Well, I've been focusing a lot on this lately and I have, as you probably know, a couple of apartment properties, two were in Phoenix, one recently sold. And I heard from one of my partners on one of those deals that our property manager was charging the tenants a lockout fee. So, for example, if one of your tenants in this apartment complex lost their keys or locked their key inside the house, inside the apartment building, they would charge them $150 to let them back in to the property or make them a new key. That is absurd. And my partner called me and he was pretty irate about this. And I agree with him completely at what our manager, you know, who we bought this apartment building and partnered with, was doing because he said almost exactly this, he said, how is your tenant gonna feel if their rent is $700 per month and they're charged $150 to get back in their unit? So this is an example of non alignment where the manager is basically screwing your tenant over and your tenant is not going to want to be a good long term tenant in the property. The same person who's saying we can return 8 to 10%, buying single family homes inside of a fund, you know, non alignment all over the place here. Non alignment, not win, win. So this is the kind of deal you want to avoid. You want to make sure it's a win deal for you, a win deal for your manager, and a win deal for your tenant. Your tenant is your customer. If you owned a business, if you had a restaurant, you would want your customers to come back, right? And you know, you need to insist that your customers pay the bill. And when they don't pay the bill, your rent, in other words, or when they don't take good care of your property, you need to be firm with them and make them live up to their part of the bargain. That's their part of the deal. But it goes too far when your manager is basically screwing your tenant over. And this gets completely out of alignment. And that's one of the reasons I do like the concept of self management. So I'm working on some tools that can make it much easier for you to self manage your property and buy a la carte services from your manager, your property manager, rather than whole complete services, the way the traditional property management game is usually played, and buy a la carte services from local real estate agents. It is amazing to me that you can really, really, and I've done it many times, self manage a property you've never seen that has a tenant you've never met from 2,000 miles away. Or it doesn't matter. It could be 8,000 miles, could be 200 miles, doesn't matter the distance. The point is, property you've never seen and a tenant you've never met, you can actually do that. And in our members section, I did, I believe, two of our monthly members only conference calls on self management and I've done some podcast episodes on as well. But I went pretty deeply into it in the member section and all those calls are available if you just join for a whopping 120 bucks a year and you get some big fat discounts. In fact, if you're coming to Meet the Masters, you can recoup more than your membership fee if you just join first and then you buy your ticket for Meet the Masters. Okay, so check that out@jason hartman.com and listen to the self management conference call. It's all recorded. It's in the archives there. And it really would be a good opportunity for you. Also, go to the website and in the little search bar, just type self management and you can see all of the prior podcasts and some blog posts on the website about self management. And the whole focus here is become an empowered investor, follow commandment number three and then take on these additional responsibilities. When you do follow commandment number three and increase your returns dramatically. But you make these responsibilities easy for yourself. So you get the best of all worlds. You create a win, win, win deal. You capture much, much higher returns than investing in some fund or some pooled money asset where you might be investing with a crook or you might be investing with an idiot. And even if they're honest and competent, they take a huge management fee off the top for managing the deal. And you make the deal a win for your tenant. And that's what Aunt Joan is going to talk about in this episode as well. So I think you'll enjoy this interview. We did have a few times that guests were coming over for Thanksgiving and rang the doorbell at my mom's southern mansion. And Coco the dog Started barking. So excuse those. Hopefully our editor got a lot of those out of there. And anyway, this is really interesting to hear from someone who has accumulated over $25 million, I estimate in net worth, just being a very simple old school real estate investor. And you can do it much, much better than this with some of the new techniques. The risk evaluator, the rent to value ratio, I mean, Aunt Joan is getting lousy rent to value ratios. The refi till you die concept, the concept of inflation induced debt destruction, those are the major things missed in the old school investing concept. So you can take this, what she's done, and amplify it dramatically. Maybe you can triple it, maybe you can quadruple her results. Okay, maybe you can do even better than that. Make sure you get your tickets for the upcoming Meet the Masters event in January, which where we're going to share all of our experiences and tools for you to become the empowered investor. Do that@jasonhartman.com now the pricing is going up as more and more people register and we get near to selling out. So here is Aunt Joan with a Thanksgiving message for real estate investors. Aunt Joanie, how are ya?

Just fine, thanks.

Okay.

Enjoying Gulf Shores?

Okay, good. Well, thank you for coming on and recording with me today. And I really wanted to, you know, just have you share with the audience a little bit about your tremendous success as a real estate investor. And, you know, my first question for you is, when did you start investing in real estate?

Probably about 1975 or 78.

1978. Okay, so 1978 you started in real estate investing. And why did you start investing in real estate? What was it? I mean, look, tell them a little bit of your background. And my mom's been on the show before, so, you know, growing up on a farm in upstate New York. What was that like? Just, you know, briefly.

Well, that was a lot different from the world that I'm living in today, of course. And I didn't have any ambitions about getting into the real estate market at that time of my life. However, when I came out to California, I went to UC Berkeley and I majored in two fields. One was real estate and the other was a personnel human relations, management.

Like.

Like human resources.

Human resources, yes. And so I've come to use both of them. And you have to use the human resources part of it when you are choosing tenants for your properties.

No question.

Big time. Yes.

And so my mom also went to Berkeley and you are her older sister. Just by a couple of years. There's. And she got A degree in social welfare, not quite so useful, which she.

Decided she didn't was all that enthusiastic about after a while.

Right, right. So I mean, that's funny. Berkeley in the 60s and a degree in social welfare. You would think my mom is a flaming liberal, but she's definitely not. Kind of funny, but. Okay, so you went to college and how long would you say it was after college before you started investing in estate?

Probably about maybe 10 years or so.

10 years or so. Okay, great. So why, why real estate? I mean, what prompted you to buy your first property?

Well, we were at that time we were in the restaurant business and we had absolutely no tax write offs and we, we needed to have something to, to defer some income. And so we bought our first house in Sacramento. And just little by little, we kept acquiring more and more. We had come from the very expensive San Francisco, San Francisco Peninsula real estate market. And when we got up to Sacramento, things were so cheap, so to speak, that we just. But sort of crazy.

A couple comments before you go on. So number one listeners, you know, I always like to say that income, property, income producing, real estate, rental property is the most tax favored asset in America. So aunt Joni here really became interested from a tax perspective. And then you look at the relativity concept. I talk about the theory of relativity as it applies to real estate investment. And so you lived in a very expensive place even back then in the 70s, San Francisco was very expensive.

Well, we were in Hillsborough actually, which is even more expensive over the top, you might say. And then coming up here or coming up to Sacramento, I kept looking at these houses, these charming, darling little Craftsman houses, and I couldn't believe how inexpensive they were. And so the more I looked, the more I said, wow, why don't we buy one? And so we bought our first one.

Now, your first property that you ever bought, was that a home in which you lived for you and Uncle John or it was a rental.

It was a rental home.

So you didn't buy your own home first. That's interesting.

Oh, excuse me. We bought our own home first. Excuse me. Yeah, well, we also bought a home in San Mateo first. Before that, we bought a home in Hillsboro first. I mean, afterwards. But I mean in terms of the investment property part of it, we bought our first one, really, in Sacramento.

Okay, great, great. Okay. So. So the theory of relativity concept is that you came from that very expensive real estate market in the San Francisco Bay area and then moving to Sacramento, everything looked really cheap. Everything looked really inexpensive. And so what happened there Is, you know, things really worked back then. Probably the cash flow actually back in those days worked pretty well. Okay.

And well, well, that's sort of a yes and no. The point was in terms of, in relation to the San Francisco Hillsboro market, prices in Sacramento were extremely inexpensive, but at the same time the rentals were considerably lower. And so we were never in most situations, in a case of penciling out okay.

In terms of cash flow, even then, California didn't really work from a cash flow perspective.

Yeah, that's right. That's right. And so, but at the same time, I never wanted to buy in lower property areas because I just didn't want to have the problems connected with some rentals in, in very low, low income properties.

So I agree with you. That's one of the deceiving things and I talk about that on the show a lot. Is that, is that in lower priced markets, you know, those deals look good on paper, but in reality with the collection problems and the eviction problems, they just don't work. So whatever city you're in, I think you should be just below the median price is the kind of ideal. Okay, so if you're in a $150,000 median price marketplace or even a sub market, doesn't even have to be the whole city or the metro area, then you know, if you're doing something at 120,000, that makes sense, that works because you'll have a decent quality tenant in that kind of a scenario. So. Okay, now just to give entice our listeners a little bit, Aunt Joni, where are you now? How many houses do you own now?

Well, a little over 70.

That's over 70.

70. Most of them are single family residences. We have a few duplexes and we have one fourplex. But I've never gotten into the apartment situation.

That was my next question for you. How come you stuck with single family homes all those years? Why, why was that the thing? Why not apartments?

Well, we just heard a lot of horror stories about running apartments and we just wanted to stay away from that and deal with families living in single family houses.

Yeah, so this is one of the things, folks, you know, look at, I own apartments myself. I have two apartment complexes now, and I had three before I sold one of them a while back. And then I have a bunch of single family homes too. And I've definitely done both. I've done, you know, many more single family home deals than apartment deals in my career. But you know, the apartments, they can be good. And I know everybody a lot of investors, they kind of have their eyes on, oh, I'm going to do this big stuff and do big apartments and you know, I'm going to be big and I'm going to build an empire and all this. And you know, that's great, it's ambitious, it's wonderful. But apartments are more complex for sure.

And they can be extremely troublesome.

Tell us about that. What did you think about that?

Well, for one thing, you have to make sure you get a good manager and that can be a very, very hard thing to do. And then you're really at that manager's mercy if he decides to take another job, you've got a major problem.

You're talking about like a ra. Resident manager.

Yeah. Yes. Right.

It's usually a tenant that lives on the property.

Yeah. So and if you have over what, six units or eight units, something like that, you have to have some, a live in person.

That may be a California rule too.

Yeah. Excuse me, that is, Yes.

I, I don't, I don't know those rules state by state, but it sounds like something they would do in the socialist republic of California because there's a rule for everything.

Right.

You know, when you look around the country, every lawyer you will talk to in every part of the country and every business person you talk to in every part of the country when it comes to the legal climate and laws, California and New York always have their own set of additional laws on top of everybody else. So they're like, if the rest of the country has, you know, X number of laws, California and New York have 50% more laws.

Exactly.

That's crazy. You're rolling your eyes. You know this. Okay, so what else did you hear about apartments?

Well, I, I've just heard quite a few horror stories. In fact, we had a manager of our restaurant whose wife was a manager of an apartment house. And I just heard many tales from him and I just realized that I didn't have the time nor interest to get into a possible situation.

And you know, look at apartments are like my second favorite real estate investment after single family homes. I'll just state that for the record. And then, you know, I like the idea of mobile home parks. I've tried to do many mobile home park deals. They have never completed one. And I kind of like self storage. I do not like office, I do not like retail property. I do not like industrial property. So housing, housing, housing is where it's at.

Right.

But in the single family homes you get, generally speaking, a much better quality tenant.

Yes, you do yeah, well, also in our fourplex, which is just a one bedroom fourplex, we, we get excellent quality homes there. We, we, yes, we just have a professional people, no pets, no smoking, that type of atmosphere. And that works very well too.

Okay, now tell us about some of your property management practices. I mean, I remember the funniest things growing up as a kid. And I tell you, if you asked me where I put my keys, I couldn't tell you. But if you ask me what happened 20 years ago, I can tell you because I have a funny memory like that. And I remember all of your funny little property management practices. You know, where you would give your tenants colored envelopes, the kind of envelopes that a greeting card comes in, you know, like a happy birthday card.

No, it'd be, there would be a long legal color colored envelope in very bright colors. And so when these would come into the P.O. box, we would know that those are our rent checks.

Yeah, I bet you love getting those colored envelopes.

Yeah.

What other property management things would you like the listeners to know about?

Well, I frequently encourage people when they'll call our office and say, are you a property management firm? And we'll say, yes, we are of our own properties. And they say, well, wouldn't you work for us? We say no, we have enough on our plate just doing what we do and we really just take care of our own properties. But people, especially if they're renting their property for the first time, they want someone to take over and they're nervous and they're frightened about the prospect of doing this. And so we have branched out to the point where a lot of first time renters or landlords, we give them a little course. And the course has expanded itself over the years. Now it's about two and a half years, two and a half hours long. And at the end of the session, depending on how many questions as I ask, it could even maybe be three and a half hours. But there, there's pretty much a, a full fledged landlord.

Yeah. So do you charge for this property?

Yes, very, it's a very minimal price.

And I didn't even know you were doing this until today.

You told me just before it, it's, we charge $189. $189 and we give them all sorts of materials that they need. We don't give them leases, but we give them all sorts of other materials.

Oh really? Okay, cool. Good, good stuff. I think we ought to, we ought to record that and turn it into an info product and sell it at My website@jason hartman.com. which reminds me, I, you know, I'm always forgetting this stuff. We are having a black or not a Black Friday special, but a Cyber Monday special on all our digital products next week or after you hear this, we'll probably get it going this weekend. You get 40% off all our digital products. This is our biggest sale of the year. It's our Cyber Monday sale. You know, the retailers do Black Friday, the online people do Cyber Monday. So that will be available, I believe, until December 4th. Okay, so it's just a few days long and 40% off all the digital products@jason hartman.com. but Joan, we should add your course to this in the future.

Well, ours is a one on one here, you know, so. So it's a little bit difficult.

However, share some of the tricks of the training.

Well, let me tell you something that we learned. Not at all at first, but maybe 10 years into doing this. We've been doing this for at least 30, 40 years. About 10 years into doing this, we realized the fantastic necessity of having house rules.

House rules. Okay, tell us about house rules. Now there's a movie, cider house rules. What are your house rules? What are Joni's house rules?

Well, anyway, and we expand them as things occur in our residences. Yes. And some people, when we're going over these, they'll think of that. Maybe we've had some wild dreams in the middle of the night, but all these things that have happened, all these house rules are based on actual situations that are occurring.

Okay, tell us about some.

Well, for example, most of our houses in East Sacramento, or at least in the market that we're in, want to have hardwood floors. And the whole world loves hardwood floors. However, there are a lot of people have no idea how to take care of hardwood floors. And so it's very important that they have pads under larger pieces of furniture and small little pads that you can just paste onto small things like coffee tables and chairs.

Tell the listeners the average age of your houses. Your houses are older.

Yes. Right. What are they typical? I guess maybe our oldest one is about 1916, but.

So that's like 100 years old is your oldest house.

Yes, yes. And our most modern house is 1960.

Wow. So you 1960 is the newest house you have. So that's 50, 54 years old. Wow.

Yeah. But, yeah, in the market that we're in, everyone likes to have houses with character.

Okay.

And my real estate agent, when we were doing this, she says, joanie, why are you wanting these oldie Moldies. That was her expression. And I said, sally, I love these oldie moldies. And I said, I think a lot of people like these oldie moldies. These are Craftsman houses with a little. With ironing boards that come out and little mailboxes with fancy little drill work and maybe a little hole at the front door where you open up a little door and see what's outside. Nice little things like that. Definitely houses with church.

Now, one of the funny things is I can always tell your houses, like, if I just drive down any of the streets in which you own properties, I can tell which ones are yours because of your address placards.

Oh, yes, right.

Those are. That's like your trademark.

Right, right, right.

Yeah. So that's kind of neat. Do you want to talk about that at all?

Oh, well, no.

No. Okay. So what other tricks of the trade? House rules that's interesting. Most of our investors, number one, they don't have houses is that old. And number two, they're not micromanaging them that much. So any tips for, like, the national, the nationwide investor? I mean, you know what? You. You did it the old school way. Now, nowadays, people are diversifying. Technology allows them to do that geographically and be in multiple markets and so forth.

That's true.

What. What are some of the.

Well, the problems. Well, the other thing that's very important is to have a very good background crew that can take care of rental problems. And we don't just have a handyman who does it all. We have electricians, we have plumbers, we have contractors. Everyone is a specialist in his field. And this is very important so things get done properly. And we even have a fence person. I mean, we probably can name 15 different traits of specialists that we use.

Right, right. And you know those people are getting repeat business from you.

Oh, yes. And they take very good care of us. Yeah. Especially our. Especially the plumber.

Right. Why do you say the plumber?

He has all of our houses, number one. And then whenever we give our landlord course, we of course recommend him.

Right.

In fact, I'm wondering. I'm wondering when I'm going to stop doing this, because sometimes I don't want to cut off my finger to enhance his business.

Right, yeah, exactly.

Exactly.

Yeah, I get it. Because his business is getting. He might get too busy for you.

Yes. Right.

So, you know, here's one of the things that's interesting. One of the strategies that I haven't talked about very much on the show that I want to recommend to our investors who want to build big Portfolios is your strategy. And I want to take your strategy and recommend that people do it in three different cities where they can, if they want to, if they want to have a portfolio of say, you know, say it's 60 houses or more, you know, get 20 in each city. Okay. I want them to diversify. You did it the old school way, you know, and that's fine. But the new school way is diversify in like three different cities. Okay. But the thing is they can get some economy of scale when they have 20 houses in each of those markets.

Yes.

And the other thing they can get is they can get certain vendors like you just mentioned to really take good care of them.

Yes. Because they know that I'm going to be calling them up maybe two times a week.

Right. With an issue. Yeah. Now the other thing they can get is they get this sort of, I'll call it bumper pool or pinball type concept. And the thing I'm trying to convey here is, you know, the ball, it sort of bumps around there. And what I mean by that is you have a semi monopoly in your market where if a tenant is looking in that area, they're looking at a few of your houses usually and you have some control over rental price where you can start pushing the rental market up and you can improve the area and make it look better and bring the values up.

Right, tell us about that. Right, well we have a website. Should I tell them? Yeah. Sacrentals.coms a c r e n t a l s.com now my aunt's being a promoter.

I didn't know she was going to.

Do this any, any rate people weekly we hear people say, I go to your website all the time. Now I don't know if they're trying to really buy and rent a house or they're trying to see how some nice furniture arranging tips or something. But some people say, oh yes, I love your website and it is done very well. And so at first we were just putting our own houses on our website, but pretty soon when we got everything rented up, we were out of inventory. And if we had this nice big website and so people kept seeing this and they would call us up and say, well how about putting our house on your website?

They want you to manage their properties and you only do it for your own.

Right, right. But we help market their properties. Oh really? Oh yes, they love it. And here is, we have these magnificent pictures, maybe 20 pictures on a small three bedroom, two bath house or maybe a two bedroom, one bath house and backyard Pictures, front yard pictures, front door pictures. I mean, the pictures are. Sell the whole thing. And my son is responsible for doing that. He has a real gift of photography.

Yeah, that's my cousin.

Yeah. And then we have a little blurb on the side with nine bullets, further describing the house. We put the price on, we put the nice big picture on. And then there's a little button you say inside pics. We also put a satellite map on and a rental application. And so people are renting our houses from afar very frequently. I can't tell you how many houses we've rented this last summer where people have been in New York, Los Angeles, Florida, Michigan, renting our houses without even maybe having seen them.

Right, right. That's great. That's awesome. And talk to us, if you would, about your, I mean, your, your strategy is pretty much the old school strategy of pay off your mortgages, right?

Yes.

Do you have all your houses free and clear now?

There are just about eight that we don't have that are free.

So, so, so you have a little over 70, but let's just use 70 for round numbers. So you've got 62 of them, free and clear.

Yes.

Why couldn't I have been your son? Boy, your kids are going to inherit a nice, a nice portfolio there. Okay, so 62, free and clear. And your average price in Sacramento has got to be in those, what, 400,450.

And now that's, that's where it is.

And when the economy. This is why I like diversification. Because during the financial crisis a few years ago, Sacramento basically got cut in half.

Yes. But here's the thing, interesting thing. Most of our properties are in this East Sacramento and Land park areas, which are the really the best areas in town. And so our properties, they changed. Yes, they did, they went down, but nothing like what would happen in the outsourcing.

Now tell us what happened in rent with rents, though, during the financial crisis. And this is the odd thing now, I don't know what you're going to say here. Tell me what you're going to say, but I, I think I know what you're going to say.

Well, naturally rents went down somewhat.

How much?

But we didn't. I don't know by. In terms of percentage, but maybe 15%, maybe even 20% in some.

That's pretty big. Wow. I'm actually surprised.

But there were, there were a lot, maybe 10%, you know, depending. Some houses are very rentable and some houses are maybe a little harder to rent.

It also depends exactly when you Catch them. Like if that, if that lease comes up for, you know, for re renting and the tenant moves and it's during the depths of the financial crisis, like the worst time of all when you, you know, the value of your house went from 450 to 225.

Never. That never happened. Not that bad, right? No, no, no.

But you know, that might be the 15% down and then, you know, the rest of them. 10%. Yeah, yeah. And. And what are your numbers like there? You know, for a house that's worth. I mean, is your average house about 450,000 and that's.

I'd say between three. About 335 to maybe 450.

Okay, so. Oh, so 450 is the high.

Well, well, I have actually more than that, but just for comparison.

Well, I'm not talking about the palace in which you live.

Okay.

Which is a palace. It's right near where Ronald Reagan lived when he was governor.

So it's called the Fab 40s.

The Fabulous 40s. The Fab 40s. That's the streets in Sacramento where they live. And I've been there many, many times now. So what does that tell us about your rents, you know, for a house that's 330,000 and a house that's 450,000. What are those rent for? Well, I mean, I can tell you. Yeah, I can guess. And I'll probably be pretty close.

Well, actually a lot of our two bedroom, one bath, little craftsmans, which can be anywhere from 1,000 square feet to maybe 1250 square feet, probably the minimum price is 16.95.

Okay. And that house is about 330,000.

It could be 330 to maybe three. Three maybe 400.

Okay. Okay, so it's. How much did you say 16.95 would be the.

Pretty much the rock bottom price.

Okay, so 16.95amonth for 330 to $400,000. So you're getting about a point 4.5 RV or rent to value ratio.

Right. But then the tenants do not just pay the rental price, they also pay the city utilities, which Sacramento has a very unusual situation. Five services are all wrapped together in city utilities.

Well, of course they pay the utilities. That's normal. They do that everywhere.

I mean, that wasn't the custom in Sacramento.

Oh, really?

No.

You would pay the tenants utilities? I never pay the tenants utilities.

I'm not talking about smud. I'm not talking about gas and electric. I'm talking about water, sewer and three garbage cans.

Yeah, I never pay Water, and in most places, water and sewer go together. And then trash pickup. I never pay that either. I don't pay for anything.

Right.

Well, not garden.

It used to be. It used to be the situation in Sacramento, to be very frank. In fact, we sort of changed that.

Yeah.

You know, you.

You did. Because of. Yeah. You changed.

Yeah. We said, hey, that's a user fee. We don't pay that. And so they pay that. However, we. We had a real quick lesson in not having the tenant send it into city hall because we found out that some of them weren't quite so conscientious, and we got a few liens on our properties.

Oh, because those weren't paid.

They didn't.

I hate when they do that, by the way. Some cities do that if. If the tenant doesn't pay their utility bill. In some cities, most don't do this, but a few do. They actually lean the owner, and the owner becomes responsible for the flaky tenant. Right. Tell us about late fees and eviction policies. And I want to make a note, Aunt Joni, we said. You said. I said, how long are you going to talk for? And you said, oh, about three or five minutes. What's 30? We're 30 minutes. So we're not going to do our guests. This will be a whole episode unto itself. But it's really. This is great information. I love hearing it again, folks, you know, this is the old school style of investing, and it's. It's awesome. I mean, you obviously created a ton of wealth with it. What about. How do you deal with tenants when their rent is late and with evictions and stuff like that, now you're in California, which is not landlord friendly at all.

That's true. And so the idea is to try to not get into a situation where you're having to evict someone. In our earlier years, we made some wrong choices in tenant selection and this happened. But I think that in our total experience, we've had no more than four evictions.

Are you kidding?

I'm not kidding.

And what. How long does your average tenant stay?

I'd say two, two years, maybe two, three years.

Okay, so two or three years is your. So you don't. Your vacancy rate. And with the turnaround between.

Our vacancy rate is. Is like zip.

Yeah. Yeah. But what I'd say to your listener, the listeners, is your rent is too low. See, we like to get 1% of the value every month. You're only getting 0.4 to 0.5% of the value, but that's how California is. I mean, you know, that's just the way it is in California.

Well, we find that with proper tenant selection, that's the most important thing.

Yeah. Okay, so tell us about tenant selection. What are your practices there?

Well, we have to make sure that they're properly employed, they've been there a little while, and that their rent does not exceed at least a third of their income. Also, we just look at the. We always check landlord references, and we also always run credit checks. And those are pretty good indicators right there.

When you do the credit check, do you do an unlawful detainer check and a criminal.

No, we do not. We used to, but we found out that this was completely. It was not.

You just do credit only?

Yeah, we just do credit only.

Okay. And what do you charge for an application fee?

$30.

$30? If we're married or single or.

No, it's $30 per person.

Okay. And you probably only pay about 10 bucks per person to run that, right?

Maybe that. But then it's our time.

Yeah, yeah.

And. And the paper. And then we get a. Get back to the landlord or to whomever we're running them for, you know, and so $3 is a deal.

Yeah, right, right. Yeah, I did.

And some people will not. Some of our customers who, you know, they're not anything to do with our ownership, but they just come in as a way of life to run credit checks. And they will not move until they get our report on the credit checks and we give.

What do you mean by that? I don't understand that.

They will not. For the last many years, we always insist on running credit checks.

Well, I would think that would just be standard practice. I'm surprised.

Well, for a while, we didn't do that with everyone, but now we do.

Oh, really? You didn't run credit checks? Wow. Okay, now your philosophy is, let's prevent the eviction.

Okay, that's right.

Let's not get there. So how do you prevent the eviction from happening? I mean, that's an amazing. I want to just say that is an amazing track record. Only four evictions with 70 houses and all the years you've been doing this. That's amazing. So how do you prevent it?

Well, for one thing, we make sure that people.

Tenant selection.

We got through that and gainfully employed. Yes, right. And that sort of thing. And then we try to keep people happy. You know, if they have a report that they have a sewer stoppage or whatever, we try to get a plumbing person right over there right away and we also, in our house rules, have reasons, have several ways to make sure that they don't have plumbing problems. We have a certain. We have a whole list of things that not to put down. Garbage disposals, and we also do drains in bathrooms and dishwashers and that whole subject.

But how would you check that? How would you know if they did it? If they put a what, I Q tip, like say a Q tip or what?

Those things come up on the plumbers.

Yeah, they'll. They'll get it in the snake when they. All right, well, okay, that's interesting. Okay, so any other points on preventing evictions, tenant selection, house rules, and how do you. When they're late on their rent? I mean, certainly your people must be late on the rent.

We always have some people that are late player payers. Right.

Just like they're. It's sort of just their way. Right.

That's. We just. When I say to my assistant, I have all the rents put in, and she says, she'll say all but the usual.

How many usual is that?

Well, about four or five.

Okay, so out of 70, you only got four or five that are late every month?

Yeah. Okay, but I mean, some of these people have been renting us for, for us for 10 years. Yeah.

And they're late.

Yeah, yeah, yeah, we know that.

Okay, so what do you do with them? What's your policy? How strict?

Well, first of all, after the rent is due on the first, we have a grace period from the first to the third. After the third, it's due, it's late. And we don't use punitive practices here. And charging some huge late fee, we charge $25.

That's pretty. Wow, that's light.

And here's the thing. After the fifth, fifth day, if it's not paid after the fifth day, then there is an additional charge of not only the $25, but $5 per day until the rent is paid in full.

Joan, for, for a rent that's 1600-2000amonth, you are easy. Yeah, that is not, not bad at all. I mean, that's a cheap late fee, right?

That is, yeah.

You're okay with that?

We're okay with that because we. Because most of the time people pay really well. I mean, we, we don't have that much of a problem.

Okay, good, good. Okay. Any other. Just, you know, as we kind of wrap up here, you know, we've gone like 13 times longer than we said we would. So what. What other things would you like people to know about? Real estate investing. You know, why real estate? I mean, you know, after all these years, do you still think it's the greatest thing?

I mean, I do. I know my husband is into stocks and a little bit into bonds, but I mean, he's into investments like that. But I really like real estate. One thing I think it's a very tangible thing and it pretty much depends on yourself and your efforts as to how the whole thing works.

Yep.

And we have such a very small vacancy fee. We have a minimum of problems because we have most of our properties in very good areas and we have just a high caliber of tenants.

Yeah, yeah. Do most of our tenants work for the government? Sacramento is the capital of California, so.

Not most of them, but quite a few do.

Yeah. Or government related.

We have probably the medical profession. We have. In terms of just East Sacramento itself, we have six major hospitals within five minutes of one another.

Yeah, yeah. Some of our areas are like that too. For example, Houston's got tons of medical. You know, medical is pretty good because those people make good money.

And these places keep expanding.

Yeah, right. Yeah.

UCD Med Center.

I call that the Medical Industrial complex.

Yes. UCD Med center looks like a five star hotel now. Yeah, yeah. It's amazing.

It really is. Okay, good. So anything else about real estate or.

No, I'm happy. We got into it and my husband was always opposing it. And then I would see a house, for example, and he says, he would come by and he says, I would think this house needs to be skip loaded.

Skip loaded? Like torn down?

Like. Yeah. Removed from the face of the earth. And I'd say, john, I said, it just needs a little tlc. And when we were first started out, I didn't even want to be involved. It's a house. They have closet doors that we're working in, a few things like that. But after a little while, we got into all sorts of things and problems. And of course we got workers to handle these problems. And so we got very adventurous. But then we got into kitchen remodels, bathroom remodels. Adding rooms to properties and then making.

You add rooms to them.

Oh, yes, we. We've done a lot to. From making them from two in ones into three and twos because we have a very. The whole world wants to live in East Sacramento to be very interesting. And so these little 1920 houses are not exactly suited if someone comes in with two children and a couple, and then they want an office too.

So that's fantastic. Yeah. Good stuff. Well, Aunt Joanie, thank you so Much for sharing this with my listeners today. And it was just great to have you on the show.

Thank you so much.

Well, there you have it, folks. That is the word from my rich Aunt Joanie. And don't wait to buy real estate. Buy real estate and then wait. And, you know, you just gotta stay at this and, you know, let time and all these great factors just be on your side. And, you know, you just can't help but make a lot of money in real estate. I think she has one more thing to say here.

And even with these ups and downs in real estate, people say, wow, the real estate has lost all this much money. I said, yes, but I'm not selling. Why do I care? Yeah.

So, yeah, you treat it as. As a value investor. Like the Warren Buffett philosophy applied to real estate value investing. You hold it for cash flow. You don't be a speculator. Just buy them and hold them, you know?

Exactly. That's my. That's my philosophy. Yes. In fact, in all of our lives, we've only sold two houses.

Wow. Wow. Yeah. Yeah, that's. That's. I regret most of the houses I sold, I should have just kept them.

Yeah.

No, I agree, I agree. Well, good stuff, Antoni. Thank you so much and happy investing.

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