CW 631 – Renting to Uncle Sam, Section 8 Cash Flow Property, Birmingham Market Profile

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Jason's footsteps on the road to your Financial Independence Day. 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. Episode number 631. 631. I hope you enjoyed our last tenth episode that happened to fall on a Flashback Friday. But I remember this interview from a couple of years ago and it was a goodie. It was from episode number 330. So 300 episodes ago. Power and Strategy with Robert Greene, the best selling author of many great books, Mastery, Power and seduction and the 48 laws of power. And those are, those are some good books, let me tell you. Really interesting. A lot of history. You learn so much history from reading Robert Greene's work. So anyway, hey, I know there's a couple of you out there, by the way, I have a bone to pick with you listeners. A few of you, only a few of you. But I have heard from like two of you and I know you're listening that say you're skipping Flashback Friday. Oh, you are in trouble. Shame on you. That's terrible. Don't do that. Flashback Friday is good stuff. And you know what? As good old Tony, you know Tony, Tony Robbins, that guy, you've heard of him. As he says, repetition is the mother of skill. So you, a lot of you listen to these podcasts. I know over and over. You tell me that all the time. Which I can't believe I haven't bored you to death already. But I'm glad I haven't. So, yeah, be sure to catch those flashback Fridays. Those are, those are good. There's a lot of good stuff there. When I listen to them, I'm thinking, gosh, I forgot this interview. This was really good. I learned a lot. And so you got to listen to them again. But anyway, hey, so today we are going to talk about Renting to Uncle Sam. Yes, Uncle Sam. The government, Section 8. Very, very good cash flow strategy. Because Uncle Sam always pays. And you know why Uncle Sam always pays the rent? Because Uncle Sam gets to print the money and create money out of thin air, fiat currency, right? So that's why Uncle Sam always pays the rent. Now, you know, you always get the amount of dollars promised. But what those dollars will be worth while that's in flux, you know, we don't know. That changes over time. So we're gonna talk about that. We're gonna do a little Birmingham market profile again with one of our newer providers, one of our newer local market specialists there. And I've got one of our investment counselors who I have been bugging for, like, I don't know, how long has it been? Maybe a year or more to be on the show. And she's finally here. Ladies and gentlemen, say hello to Kerri. Kerri, how are you?

Hey, Jason. I'm good. How are you?

Good. I'm glad we're finally recording a show.

I know, I know. I'm excited. Debut day.

Yeah, I know. You know, it's been like a year that I've been bugging you about this, right?

That's all. Takes time.

I know, I know. You know, folks, this is one of my ongoing challenges is I have some very shy investment counselors. Now. They're not shy, they're just busy. And, you know, getting them to get around to getting on the show and booking a time is not always easy. But, Carrie, I'm glad you're here. And you have an incredibly important job in our company because you sort of split your time being an area manager or an area coordinator. We haven't really. We're not too formal about titles here. I mean, I'm the chief cook and bottle washer. Okay. So that's what I do. But you. You kind of split your time between doing. Bringing on new local market specialists, researching markets and researching local market specialists who are in those markets.

And.

And being an investment counselor. And you're really the only one in our company that has that dual role of doing both of those things, not just investment counseling. So I think it would be a great insight for our listeners to hear maybe a couple of your war stories. And I know you've got some.

Oh, I do. I do.

You know, you're dealing with these local market specialists, or I should say prefer prospective local market specialist. And, you know, a lot of them are. They're really pitching. They're salespeople, so they're selling Hard. And they're trying to talk you into, you know, affiliating with our group and getting our clients a referral business. Tell us a little bit about that.

Sure. So, yeah, like Jason said, I mean, a lot of people are coming at us, you know, hey, what about my properties? What do you think of my market? And, you know, you got to take everything into consideration. You might have a good property, but let's look at your property management team. You know, it all has to come together for us to even consider taking you on board. And once we actually consider it, you know, do your numbers work? How well is your communication? Everything has to play a role in if you're going to be coming on board with us and presenting your properties in front of our investors. So there are several stories and pitches that come across to me, and, you know, you're just shaking your head and.

All right, well, like, who is this? Who is this sleazy snake oil salesman?

Right, exactly. So, yeah, one of my stories, I had one of the potential providers pitch us, and his numbers were just outstanding. It was a provider in Indianapolis, and we didn't end up going with them, of course, because.

And I just want to clarify, when you say provider, we're talking about a local market specialist, our affiliate that we refer the clients to, you know, to buy the properties. So. Okay, go ahead.

Right. So their numbers were outstanding. Their RVs were one one and a half to 2%. You know, we're thinking, this is great.

That's a very good rent to value ratio.

Yeah, very good. So Sarah and I were talking, hey, you know, research other properties around the area. Let's call other property managements, you know, see what their rents are matching to this potential provider. Well, of course, this provider was pitching us way above average for that neighborhood and that market. And come to find out, you know, when we brought it up to him, you know, okay, these numbers, you know, no one else has these numbers. Why do you have these numbers? Well, he kind of hid away from us, and we really haven't heard much from him since. So not only did his numbers not match up, but then he fell short of communicating with us and justifying why his numbers were higher or anything. He just kind of went dark. So that was one that we had to deal with and wee out to get the other better ones that we do have currently and make sure that they're up and running and their numbers are working and their communication and things are flowing with them. So it took a lot just to go through that. I mean, it was About a month or two months that we had to go through up not even taking them on board.

You know, it sounds like my love life. You gotta kiss a lot of frogs before you get to kiss a princess, so. Yeah, that's true. These local market specialists, you know, they'll. They know about our group because, you know, we're pretty established, it's a small cottage industry, and we've been doing this a long, long time now. And, you know, we've done thousands of transactions for thousands of clients and. And, you know, they're. They're trying to get in with us. And what's interesting too, is that, you know, they they sort of come back around and they recycle themselves. I've always noticed this and thought it was interesting. You know, it'll be four years ago or six years ago, they tried to get in with us and. And they didn't. Or, you know, maybe they were in with us and they were doing some business. And then they, you know, the typical thing, it's like that old quote by Napoleon, you know, the most dangerous moment comes with victory. And that, you know what that means? It's really important concept is, you know, what, once we. Once we get comfortable and complacent, once we're winning the game, you know, or, you know, the money's coming in, the business is there, then we get complacent and we slack off. Right? It's just part of human nature. We all do this, right. You know, I'm sure nobody's immune to it, but I remember one, one of our providers, our local market specialists in Texas, who we actually did a lot of business with in the day. You know, his company just started. You know, it started out great, and it went. We had a good run, you know, made. Made a lot of money together, a lot of clients, got good properties and. And then, you know, it just got bad. To use a Texas saying. You know, it was like big hat, no cattle. It was too big for the britches type concept, right? And, you know, the customer service got bad, not responding to emails very quickly or phone calls. And, you know, and I remember when this company tried to get back in with us just a while ago, Carrie, you might have been copied on this email. I'm not sure I remember. You know, it was an email to all of our investment counselors from him, and I was copied on it too. And he said, hey, I'd really love to get back, you know, doing some more business with you guys. And, you know, I think Jason's got a great team and all this stuff. And it was Sarah who just replied all and just cut his head off. I mean, quite literally, like you can't even return my client's phone call and you know, it takes you two weeks to get back to someone. Are you crazy? We're not gonna do business with you and put our name on, you know, in with you. No way. It's just we haven't heard from him again.

Well, yeah, that's part of the vetting set. You know, we, we need to vet those ones out. That's not going to communicate with us then we don't want to take our name to the investor and then they're not going to communicate with them. So.

Yeah, yeah, no question. You know, it's really, it's like an audition. You know, we make them jump through some hoops. You know, we make them upload properties to our website and you know, some of them can't even get past that. They can't handle, you know, uploading the data. And, you know, they want to send us some Excel spreadsheet or some, you know, thing done in their format. And we're like, no, we have a very specific way of doing this. We, you know, when Jason started this business and got into this many years ago, he decided the first most important thing was data standardization. You've got to standardize the data so you learn how to read that one page, Performa, and you don't have to be a detective. You know, if you just learn how to read that and watch my video on it on the front page of jasonhartman.com it's a 27 minute video that'll teach any of you listening a heck of a lot about real estate investing. Just that one core piece of content. You know, they won't even do that. They can't do that. They can't return phone calls quickly. If they can't attend to our needs and concerns, there's no way they're going to attend to the clients. Right?

Yeah, I mean, and a lot of them want to go, you know, just to you. You know, they, you know, that's not a nobody, but, you know, someone we haven't heard of. They want to say, hey, Kerry, give me to Jason. How do I connect with him? Well, there's, you know, certain criteria you need to go through before you get to you. And you know, some of them just drop the ball that way too. They don't even want to take the time to listen to us, to listen to how, you know, we operate. They just say, well, if I can't talk to, you know, you, then I'm not going to pitch you. Well, you know that. Then that's too bad because unfortunately, that's our system and that's how we roll.

Yeah, yeah. So, you know, we're not saying listeners, you know, by telling you these what goes on in the back office. Right. You know, we're not saying that we want to be just really difficult to work with and really rigid. But it is a test for these people. I mean, I'll give you an example. One of our local market specialists, last year, their entire company, you know, and they have a big staff. I've been to their office, and they got a great operation. They did 172 transactions their company did last year. And from just us, they got 90 of those 172 transactions. So our referrals, and that's from you listeners, make up more than half of that company's business. And that's how we really get good service for our clients, is by doing the volume and dangling the carrot in front of them. Because they know if they don't take good care of our people, you know, they're just not going to keep getting referrals. And it doesn't have to be the kind of thing where, with these local market specialists that we formally terminate them and we end the relationship. We don't always need to do that. You know, it's done in more subtle ways. Look, if, you know, if our clients are having better experiences with local market specialist A, and, you know, local market specialist B is slow to return calls, their rehabs aren't very good. Maybe they were good in the beginning and now they're starting to do schlocky work. Then, you know, we're gonna send the business to A that's taking care of you, you know, because we don't want to have to deal with the problems and the complaints. We want you to have a good experience so you'll buy more. You know, this is a, this is a repeat customer type of business. You know, we want you to build big real estate portfolios with us. And you know, Carrie, I haven't talked to you about this before, but I was talking to Sarah about this just last week. We got word we have our ways of finding this stuff out. It's a very small industry. A couple of our local market specialists were working with some former investment counselors that used to work for us. And Sarah says, you know, Jason, you could, you could stop that, right? You know, you could have the lawyer send them a letter and you can stop them from doing that. And I thought, you know, maybe it's actually a better strategy not to stop them, to let them do it because we know what those local market specialists are like. They're terrible. So, you know, it's like, it's like having some really bad employee, right. That doesn't work for you anymore and saying, you know, why do you go work for my competitor and make their life miserable? You know, but that's exactly what's happening. And I just said to Sarah, you know, I don't know if I want to stop this because let them have a bad experience. You know, I know what those providers are like. They're terrible. We got rid of them for a reason. You know, let them go work with a guy that used to work for us who thinks he's, you know, stealing them. And good, you know, fine. I don't know, maybe I'll change my mind about that later. But that's how I felt at the moment, so. Interesting. So what, what markets are you working on? And we've had a bit of a, you know, I want to say we've had a bit of a challenge lately opening new markets, you know, or even new old markets that we, you know, were in, in past years. And we're area agnostic. So we move in and out of these markets, markets as they make sense. Tell us what you're working on. Give us a little insight.

Sure. So we're currently working on getting Phoenix back up and running, which, by the.

Way, we don't know if we can do that yet because, you know, the hedge fund and private equity groups really ran the market up in Phoenix a lot. And I'd love to be doing business here again. I love living here in Scottsdale and just recently moved back, which I think everybody knows by now left the Socialist Republic of California again. I left her twice. And, you know, but I don't know. Are you finding we can make the numbers work? It's, you know, this market got fairly expensive during the run up, you know.

I know, I know. So that's why we're trying to talk with a few that are making sense. Some local market specialists, potentials. So we're still on the, on the fence about that one. But we're also still speaking with Tampa and Fort Myers. So Florida, a few more markets there as well as we're trying to get Charlotte. I know you really want Charlotte, so I love Charlotte.

You know that. That was a great market. We've, we've been in. We've been Very fickle with Charlotte, North Carolina over the years. We've been in, we've been out, you know, it's like a Katy Perry song. You're up and you're down, you know. How does that song go? It's very catchy tune, you know, but yeah, you know, that market, it got over saturated with investors for a while and then of course, you know, it's a big banking center. So of course when the banking crisis hit, it wasn't doing so well. But yeah, I think Charlotte's a pretty solid place. It's not a very big city, but it's a decent place, you know, how you doing there, by the way?

Yeah, so like you said, it's. It's not. There's not a lot to reach out to that want to be with investors and investment counselors and all, our whole team. So it's just kind of tricky to find the right team there to work with our team. But another one that, of course, Texas, looking at Dallas and Austin having some troubles with some of the numbers. So.

Yeah, you can't make it work in Austin. I mean, Dallas is hard too, you know, it's. It just got too expensive. I mean, we've had hundreds of clients invest in, or maybe not actual hundreds of clients, but hundreds of properties in Austin, Dallas, Houston, Charlotte, Atlanta, Indianapolis, you know, those markets in Memphis, those markets have just been huge markets for us over the years, on and off. But you know, some of them that they just, the prices have run up and it takes a long time for the rents to catch up. You know, the appreciation on the price always happens before the appreciation on the rent. The rents always lag and the RV ratios get out of sync and then they catch up and then there's another appreciation cycle and you know, that's how it goes. They're, you know, one. One leads the other.

Right, right. Yeah, so. So we're working on those and you know, it just, it takes time. We did just launch a new market as well this week. So we'll be learning more about Kansas City as it comes about, which is.

Not new, but you know, it's everything old is new again. Or how's that saying go? But yeah, but it's new again and we've got a new provider there who, by the way, I interviewed today on the show. So I recorded that market profile and that'll be up soon for our listeners. And he seems pretty good. Not a big volume, volume operation, but, you know, seems pretty solid.

Right, right. And, and when that's kind of nice as Well, I mean, then, you know, you'll get the one on one attention and you'll be dealing straight with him as investor.

Yeah, yeah. You know, some of the things that we turn down and, and we do need to wrap up here to get to our, our actual interview segment, but some of the things that we turn down are we definitely turn down one off deals or small size deals. In other words, a lot of people come to us. And Carrie, I'm sure you get the calls too. I know I get them all the time, calls, emails, whatever. And they say things like, oh, you know, I've got 12 houses in Dallas or whatever and I want to sell them. You know, we're just, we're not interested in that type of business because we can't exert leverage over that local market specialist. They know that. You know, it's usually just an individual who bought 12 properties and wants to exit for whatever reason. And you know, we have no power to make them provide a really good product to our clients. We need people and, well, really companies that are in the business of doing this day in and day out and have experience and are looking toward a bright future, that's just a really critical component for our clients to get good service, you know, because if they look at it as a one off thing or a, you know, small number of deals, they're, they're here and gone and that last deal, believe me, will be a nightmare because they won't care. They just won't care anymore.

That's right, yeah.

Any other markets?

No, not that we're currently looking at. St. Louis is always a possibility and North Dakota's off the map again, so.

Yeah. And that's where you're from? Are you from south or North Dakota?

North Dakota, yeah.

Yeah. So you're, you're, you're, you've been around the oil world? Yeah, that's way off the map because it's, it's just, you know, what's happening with oil, as we all know, it's down the tubes. Yeah, good, good stuff, Good stuff. Well, hey, Carrie, before we jump to our interview, I want to remind everybody, make sure you're using, using Property Tracker. It is such an awesome program. We either ran an episode recently, I can't remember, or we've got it coming up with Joel, who created Property Tracker. And it's such an awesome tool and it really helps you evaluate real estate deals and helps you manage your portfolio. And also in the app store, get the apps for your iPhone, your iPad pad in the itunes app store for Property evaluator. You know, you can quickly analyze real estate investments and find the best deals. You can email PDF reports to clients, lenders, investment partners. You can compare multiple properties in a portfolio analysis, see how they're all doing. You can create custom rent schedules for multi unit properties. I mean it's just amazing these tools, tools and they're, you know, they're so inexpensive, it's just unbelievable. They're free and then you can upgrade, you know, to the pro versions if you want. So just go to the itunes app store if you're an Apple user and get a hold of property evaluator and you know, put that on your iPad and your iPhone. You'll absolutely love it. And then just go to propertytracker.com or you can really go to. If you want the discount on it, go to Jason hartman.com and click on the resources page. Look for the property analysis and tracking software and you get a discount on that. It's only 1995amonth with a discount. It's just a phenomenal program. So take advantage of that folks. It'll really make you a better investor. That's how I got to be good at understanding deals is I used to use that program. I use simply product tracker and I would just plug in different numbers and run different scenarios and after a while you just get, it becomes second nature to you. It's super, super handy. So that, and then also Carrie, you know, we've got our Salt Lake City event coming up. Go to Jason Hartman.com click on events and join us on March 12th in Salt Lake City, Utah for a JHU Jason Hartman University live event. And we're going to do that as a one day event. So if you want to come out and you want to go skiing on Friday or Sunday, you know, we're doing our event on a Saturday so you know, get a little skiing. You know, it's the best snow on earth there in, in Park City, Utah.

Sounds good.

Anything else you want to mention before we get to our interview?

I think we're good to go.

Okay, let's talk about renting to Uncle Sam and the Birmingham market. Carry. Thanks for joining me.

Thank you, Jason.

Hey, today we wanted to bring you a market profile on Birmingham, Alabama. Chris, how are you?

I'm good, how are you? Jason?

Good to have you on the show. So talk to us a little bit about why real estate. What intrigued you about real estate versus all the other businesses you could have gone into, you know, working on Wall street or working in banking or something like that?

No, that's a great question, Jason. The biggest thing for, for me in real estate is you're actually investing in an asset. You actually have a physical asset that in my opinion, you've got more control over. You know, in the stock market, there's only so much control. You have volatility in terms of, you know, buying and selling and the ups and downs of the stock market. For me, it just made more sense to get into real estate because it's an actual asset. You have a little, I should say a lot more control over the asset. You have control over, you know, picking what asset you're going to buy, the areas you're going to buy. The, you know, picking the right asset is more, you know, along the lines of picking areas where the rents, you have an understanding of where the rents are on these properties. You know, you can do a lot more due diligence in understanding what you're investing in versus the stock market and other forms of investing. So that's just been a huge selling point for me in investing in real estate.

Tell us a little bit about the Birmingham market. I mean, you know, why Birmingham? You've done business all around the country in several markets. What's so great about good old Bham?

You know, Birmingham, it was one of those markets that, you know, back in the recession, it was hit just like every other place was, but it really wasn't hit quite as hard as the other areas, some of the bigger markets out there. So, you know, the, the thing I really enjoy about Birmingham is that the cost of living is a lot lower in Birmingham than some of these other areas. The, the barrier to entry is what I call it for real estate. You know, a lot of people have a difficult time jumping into real estate based off the price points of certain real estate investments. And a lot of the real estate investments you can get in really good areas, you know, freshly rehabbed properties for, you know, instead of going into the six figure range, you know, you can get in for as low as, you know, kind of the mid 50,000 range on a property that, you know, has a rent at $800 per month. So it produces a phenomenal return on investment for the investor.

What's happening in the city. And maybe you want to kind of blend this in with a discussion on some of your target properties or target tenants, where they work and what, what they're like. And what else intrigues you about it? I mean, it's a low cost market, so the barrier to entry is lower, which is great for investors. The cash flow is quite good because you get those good rent to value ratios. What else?

Well, the biggest thing that I look at is of course, what is the city doing to help prop up the local market. And you know, within the last year to two years, you know, the local city of Birmingham and Jefferson county is where it's at, has, you know, began investing, you know, over a billion dollars to really revitalize the city. You know, you've got telecoms such as AT&T that have a large presence there. You've got automobile manufacturing plants in the state of Alabama. So I mean, you know, you look at all these factors and I mean, it definitely creates an environment that is strong for the investor. The other thing I look at is, you know, it's one thing to buy an investment property, but it's another to have an investment property that's marketable because if a tenant moves out, how fast can you replace that tenant? And Birmingham is an area that, you know, if a tenant moves out and you've got a good marketable property in a decent area, you're going to be able to find a tenant at a pretty good pace rather than having a property sit vacant and not producing income for you. So it's important to look at all those factors. In my opinion, when you're looking at.

An investment property, you really specialize in the acquisition side. Tell us about how you acquire properties. You know, maybe for listeners that want to do the do it yourself route, you know, they might be interested in learning a little bit here. It's a lot harder than you think to acquire good properties. That's what I've discovered and that's why I'm not in your business, because I've done it and man, it's hard. And then you got to manage contractors and do rehab and it feels like the contractor is always trying to rip you off. You know, very few businesses have as poor reputation as the legal profession or the contractor profession. I think those two really take a lot of flack. Accountants aren't so great either. I find people complain about them a lot too. But tell us about acquisition and what you do, where you do your acquisitions and what makes it really work well.

Well, you know, there's the traditional method, of course, and having a good real estate agent. So we've got real estate agents that will send us over bank owned foreclosure properties. I mean that's a, that's a good method to get some, some investment properties. So of course, you know, if we have a realtor that sends us over some real Estate owned investment properties that banks have foreclosed on that they're looking to get off their books and they're motivated to sell them. You know, we'll, we'll go over and we'll have our crews have a look at them and put together, of course, a scope of work, you know, what needs to be done to the property. Then we go over and we determine the ARV after we repair value on the property to make sure it makes sense for us to see what our acquisition cost is versus what the estimated value of the property will be after we're finished with the rehab on the property. So going through all this, I mean, you're absolutely right, Jason. It's not an easy way to do business. But we've dialed it in and we've got the right crews working for us. We've got contractors that have worked for us for years that do a great job on the rehabs that we can trust. And so we go through all these methods and determining valuations, seeing what we can get for the area for rents is huge. Because like we discussed, it's one thing to get a property, but if the property is just sitting and your end goal is to rent it out, you need to understand what you can actually get for the property, what the area will support in terms of rents. So we go through and do all of this due diligence before we even buy the property. Then of course, we go through and do the rehab. And property manager is essential. On real estate investment. You have to have a good property manager that will communicate, that will actually do their job in placing good quality tenants, screening them. You don't want a property manager that's just going to throw a warm body in the property and hope it works out.

Well, let me stop you there for just a moment. Okay? But I want to circle back to the acquisition a little bit more and drill down on that. But we have had some challenges with property management in Birmingham. You know, some of it's gone great, but some of it's been challenging. It's, it's been, it's been a little worse than we'd want it to be. You know, there's always challenges everywhere you go, but this has been one of the, you know, I'd say the more challenging situations. So tell us about property management. You use four different property managers, so you, you spread the risk a bit with them. And, you know, maybe that's a good plan because nobody gets all of your business and everybody's, you know, in the back of their mind vying for more of it, for a bigger share of your pie, a business that you dole out. And so maybe that keeps them on their toes. Hopefully, that's what. That's what free markets are all about. Right, but how do you vet property managers? How do you hold them accountable? Dive into that a little bit for our listeners. Yeah, absolutely.

So, I mean, one of the biggest things I look at in property managers is how long have they been around? You know, that's not to say you couldn't get a good property manager that's just starting out, but typically I like to deal with property managers that have been around for a little while. They have their processes dialed in a little bit better than somebody just starting out trying to get a feel for property managing. You know, interview the property manager, see how many properties they have under management right now. What's the process for. For leasing up a property? You know, check out all their fees. What do they charge per month to collect rent? What do they charge for an eviction? It's best to do your due diligence to understand everything about that property manager before, you know, kind of joining up with them. And then what we've done is we started out slow with property managers. We've put one or two properties with them and, you know, have them manage, you know, one or two properties for a few months and see how it goes. If they communicate well and everything has been, you know, as smooth as possibly can go with real estate investing, then we slowly, you know, throw more properties at them to manage. And a lot of the property managers we, you know, use have come from referrals from people that have used them for their properties. So that's a great method to ask.

For referrals as well. Yeah. So you're dangling the carrot. You're evaluating reputation and you're, you know, getting referrals from your own relationships in the business. And that's. That's what everybody just has to understand. You know, when you've been around a while in any business, you have relationships and you just know things that unfortunately you just can't find on the Internet. You know, it's not all there. As great as the Internet is, you know, it's just not all there. You know, there's still a informal, formal world of just conversations and hearsay and so forth. What else do you do? Anything else in terms of holding them accountable, you know, or just anything else you want to mention on property management in general? And then I also want to ask you to talk to our listeners about how the landlord friendliness of Birmingham. And you know, how difficult is it to get rid of a bad tenant? You know what, what kind of situations do you deal with? There is end. Do you love, hate or are you neutral on Section eight, you know, government assisted housing? Do you do that?

Yeah. No. All great questions. In terms of holding the property managers accountable. I think it's important to be upfront with the property managers on what you're looking for in a property manager to make sure that those property managers will fit what you're looking for. You know, the property managers that we are dealing with, they understand that we're doing a good amount of volume out there. And of course, like you mentioned, we dangle the carrot out there, so to speak, because they want more business. So that's important. Of course, looking over your owner statements and holding them accountable for their accounting of your properties, it's important to understand everything that goes on your owner's statement that they send over and making sure that they have invoices to support, you know, the, the fees that they're charging for repairs or anything of that nature. So definitely hold them accountable and understand exactly what they're doing with your property. You want somebody that communicates well with you. You need to understand what's going on with your property if you have a question on your property. So that's of course, the, the, you know, some of the things we look for in property managers now. You know, in terms of Section 8, I actually enjoy Section 8. For me, it's definitely a way to.

Ensure some people love it, some people hate it. I don't find a lot of people being neutral on it, I will tell you that, but go ahead.

Yeah, no, absolutely. I mean, it can definitely be a love hate type thing, but for us, we've found success in dealing with Section 8 investment properties. One way of looking at it is it is as next to a guaranteed rent check per month as you can possibly get based on the government is subsidizing the renter being in the property. So, you know, there, there's that good understanding that, you know, you're going to get a rent check, like I said, as next to guaranteed as possible. So that's kind of, you know, my, my take on section 8.

What, what do you say though about section 8 and you know, the quality of tenant you get and dealing with inspections and bureaucracy. What do you think about that?

You know, it's definitely something you have to deal with with Section 8 because they're going to go through and do their inspections and you know, of course it depends on the inspector going through, but they're going to go through and pick out items that, you know, may seem like, why are they asking for this to be repaired? As simple as a window latch that they want repaired. But at the same time, I have to kind of look at it from both perspectives. And if they're going to be essentially paying the rent for the tenant, they want to make sure that the house is in a habitable condition that warrants them, of course, making the rent. It's like anything when you're dealing with government. There's the good and the bad of dealing with government and some of the stuff, the quality of tenant. We found that typically we can hold the tenants a bit more accountable for being on Section 8 in our properties just due to the fact that they have a caseworker that the property manager or we can reach out to and have a discussion if we have concerns about the tenant. And typically the tenant's very motivated to, I guess any corrective action that's needed or any concerns would be addressed in a positive way with the tenant.

Yeah. Okay. All right, good. What else do you want people to know? Just anything I maybe haven't asked you yet.

Well, the biggest thing in the Birmingham market is, of course, the barrier to entry is a little bit lower compared to some other markets based off price points. Looking at ROI on a lot of these properties, you're typically above a 40% ROI on a lot of these properties in Birmingham, which is a very attractive rate in my opinion.

Okay, now let's stop you there for a moment because you say that kind of thing and anybody who's not familiar with the virtues of investing in a multi dimensional asset class like income property is going to really doubt what you say. They're going to say 40%. You're full of it. You know this is a scam. Well, not really because. Because when you get your return from cash flow appreciation, tax benefits, leverage, you really can achieve those types of returns. Some people do much better, some don't do as well. Nothing is guaranteed except death and taxes. Do you want to drill down on that a little more?

Yeah, yeah. I mean, no, you're absolutely right. There's going to be the skeptics out there. They're going to say 40 plus percent. I don't know that I believe that. But you know, of course I would invite them to look at the properties on your website and look at the financials on those properties, look at how.

So let me just tell you where to go so you can go to Jason hartman.com and click on the Properties page and you can see full length proformas that show all of the breakdown, all of the details, with vacancy rates included, with repairs included, you know, it's. It's all there. And if, if you don't, if you think those numbers are either too conservative or too aggressive, you can buy that little software that we use to calculate that and you get the first month free. After that it's just, you know, 20 bucks a month. Currently, prices are always subject to change. And you can evaluate that or you can get the apps for the iPhone or the iPad and do the same thing. And that's what'll teach you how to really become a good investor, is doing that evaluation, valuation of those properties and changing the numbers and playing with them. So, you know, but, but it's all there. You know, look at how the numbers break out and what I always say to people. Even if it only goes half as well as expected and you earn 20% annually, I mean, my God, that's phenomenal. You know, even if it only goes 1/4 as well as expected, say your vacancy rates are higher, you have more repair costs than you think, you end up paying a higher interest rate than you planned on, on the loan, whatever it is, you know, even if it only goes 1/4 as well and you make 10% annually, that's better than you're probably gonna do in the stock market. Okay.

Oh, yeah, no, absolutely, Jason.

And a lot better than the bank.

Definitely a lot better than a CD at the bank. For sure, for sure. But yeah, I mean, I would definitely invite investors to go through and look at those and, and see how those numbers are being calculated to see that those are actual numbers that can be achieved. For sure.

Yeah, absolutely. Okay. Do you want to say anything more about that or what else have we not covered?

I mean, I think we pretty much touched on, of course, property management. It's definitely important. I mean, I can't think of anything we haven't necessarily touched on for the Birmingham market.

Yeah. Okay. Okay, Good, Good stuff. Well, talk about your target property, if you would. The target investment property. What type of property is that? Talk about your rehab. You know, what you do to rehab. Do you have a standard package that you do when you fix up these properties before you sell them?

Yeah, no, no, all great questions. In terms of rehab, what we look at is we want to make sure that as we are selling properties to investors, that they're getting a good quality, solid product. So a lot of these properties, you know, they are in the C class range, we like to deal in the C class properties because, you know, typically your ROI tends to be a little bit higher and your cash flow tends to be a little bit higher because the price points are lower and the rents in many cases is similar to a B class property. So we look at it from that perspective. But when we get a property, we go through and update the electrical, we update the plumbing, put new light fixtures, carpet, paint, we put a central AC unit on the property. Basically, the whole idea is we want tenants to be able to walk through the property and we want people to live there because again, it goes back to. We were discussing if the property is sitting vacant for months and not, you know, not producing cash flow. You know, no investor wants to have a property just sit if the intent is for cash flow. So we definitely make the marketability of these properties desirable to a tenant by offering amenities such as, you know, every. Every house has a central air unit, you know, things of that nature, just to have the appeal to the renter. So, you know, we look at it as, you know, definitely taking care of the investor that's going to own this property for years to come and make sure that they have a good, solid return on their investment.

Okay. More about the rehab, though. You know, what, what do you do in your rehabs and what is that target property? Like, how many bedrooms is it, how many baths is it? What do you do for flooring? Do you have a standardized package?

Yeah, I mean, in terms of a standardized package, you know, I wouldn't say it's necessarily standardized because each property is going to have its own set of, you know, customizations, so to speak. But in terms of standardized, like I said, some of the amenities that, that we put in there in terms of central air and, you know, we usually just do carpet if there's hardwood floors that can be salvaged. Hardwood floors are great selling points in terms of tenants coming through the property. They do enjoy hardwood floors. We do cap off the fireplaces. You know, we definitely want to have a good, secure property, and we, we just find it's just better to cap off the fireplace rather than letting tenants have access to a fireplace. And in these rental properties. So, you know, things like that, that, you know, we're definitely looking out for for the investor on that.

Do you have dishwashers in the properties, Garbage disposals, or are you really into that, like, minimalist style? It doesn't sound like it when you say you have air conditioning, because not all properties do, especially in the older homes. And The C class type stuff. What is your philosophy there?

Yeah, I mean, in terms of that, you know, we definitely like to add dishwashers and some of those amenities. You know, just again, it comes down to the marketing for the tenant. You know, a lot of tenants, they want those amenities in these properties. So, you know, we'll go through and if there's a spot, spot to put a dishwasher, you know, we have no problem putting a dishwasher. A lot of these properties, you know, I would say, you know, it depends on the size of the kitchens and things like that. So again, it just varies by property. But if there's, you know, areas where we can add certain amenities, we definitely try to do that in each of the properties.

What about warranty?

In terms of the warranty, what we, what we like to offer is a six month warranty on the work that we've done. Meaning, you know, if we move an improvement, a property to an investor and let's say we installed a dishwasher or we installed, you know, there's some plumbing leakage or anything like that, and we went through and corrected the plumbing. When we initially went through and did the rehab, we're going to send, you know, our, our contractors out there to fix it at no charge to the investor. Because again, it comes down to, you know, taking care of the investor. We want to make sure they have a solid investment property.

Okay, and do you recommend that people buy. Well, of course, the dishwasher itself, if it's new, will have its own warranty on it. You're talking about the installation. So that dishwasher is probably going to have what, a one year parts and labor, I'm guessing, and maybe a five year parts warranty or something like that, right?

I would imagine, yeah.

I mean that's. Each individual manufacturer varies. Do you suggest that people buy a home warranty or will you include that for them?

I should say we don't usually include a home warranty. You know, it's one of those things that depends on the investor. If they feel more comfortable having that home warranty. You know, I would never disregard it and say you should not buy home warranty. But a lot of the investors that we deal with at the price points that we're dealing with, not many of them have purchased a home warranty.

All right, anything else or did we cover it?

I want to say we covered it. I think, you know, based off of the discussion and a lot of the properties that we're, you know, discussing in the market, I think we kind of covered all the the topics we were planning on.

Go to jason hartman.com click on the properties page and check out some of these properties in Birmingham and our other markets. Thank you so much for joining us.

Thank you Jason. Appreciate it.

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