CW 633 FBF – Joel Grasmeyer – Real Estate Investment Property Evaluation Software Founder of PropertyTracker.com

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Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slant on investing, some exciting techniques and fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine, self made multimillionaire who's actually been there and done it. He's a successful investor, lender, developer and entrepreneur who's owned properties in 11 states, had hundreds of tenants, and been involved in thousands of real estate transactions. This program will help you follow in 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. This is your host, Jason Hartman. We are going to talk with a guest who's been on a couple of times and we've got some freebies for you today. No strings attached whatsoever. These are just some free things that we'll be giving away and you'll learn about that. Our guest is Joel with PropertyTracker and he's going to talk about some of the apps that he has. And when I say apps, I mean iPhone and iPad apps and talk about the real estate market and the opportunities there as it interplays with technology and how you can make your your business more convenient with technology. But before we get to that interview last week, and I've talked about this a few times, and I won't keep harping on this subject, I promise you. But you know, it is interesting as I had Zach on a few episodes ago where we talked about institutional investors and last show I talked to you about a property that you could buy, a commercial property you could buy, but you would be crazy to buy it. It wouldn't be a good deal. It's not from us. And it's a $4.7 million triple net property that's a Bank of America branch, a B of A branch with a lousy cap rate of 6.56%. Well, I just thought I'd share this one real quickly with you because this one was even worse than that. And I got this in my email box today. It's from the Case Group, Kase Group, and that's a commercial brokerage who is peddling a CVS pharmacy ground lease opportunity here. And I really noticed this when I was in Oklahoma City. I think, think, yeah, that was last Year I was in Oklahoma City and I was looking at properties there and we didn't open that market because I couldn't find anything good enough. But I look at a lot of these other markets where we never open anything, never recommend anything just because we can't get it to fit. We can't get it to fit our model and make it work. And I realized when I was driving through there and this happens in many, many cities across the country, but I just, it sort of struck me I hadn't really noticed it before how many Dagarn was Walgreens, CVS stores and Rite Aids. There are. I mean, just how many drugstores do we need in America really? It's just overkill. Well, here's another one. And here's another. I say lame investment that an institutional investor would take or even a private investor because this one isn't that expensive. Let me tell you about it real quick. It's $3 million and it's a 25 year absolute triple net lease. Now what that means. Nnn. You know, you see that sometimes triple net just means all the expenses pass through to the. So you know, landlords like these leases because they're, they're simple. The tenant is responsible for everything. But usually they're single tenant deals almost always there, whether Circle K, a 7 11, CVS, a Bank of America, whatever, or a Dollar General store. A Piggly Wiggly. You gotta love that name. Piggly Wiggly. I couldn't believe that was actually a store. It is. If you haven't seen them, they're largely in the south, in the Southeast. Piggly Wiggly. Who would name a store Piggly Wiggly? I don't know. Just name just makes me laugh. So those are triple net leases. And you know, landlords like them because they're simple. All the expenses pass through to the tenant, providing the tenant can actually afford to pay those expenses and they don't default on the lease. Well, here's a CVS store and the cap rate is only 5.5%. Are you kidding me? That is junk.

Let's throw that in the round file. That is junk, junk, junk. Now I have here some good properties. Here are some properties you can find right now on jason hartman.com. these just went up this morning. And that's why I'm telling you about them, because I want you to compare these. Here we've got the 5.5% cap rate on that CVS store. Here We've got this 6.56% cap rate on B of A. Let's throw that one away too.

Remember, you're listening to Flashback Friday. Our new episodes are published every Monday and Wednesday. Toss it in the round file. Get two points there. And look at this. Here are some of our deals. You can find them@jasonartman.com Indianapolis 2001. This is an REO bank owned property. REO Real Estate owned. Three bedroom, two and a half bath plus a loft. 1700 square feet, only $62,000. And it will take you all in subject to qualifying for financing and, and paying for the rehab and the financing everything. $33,925 $36 per square foot. Now I'm going to go through several of these, you know, in the projections on a bunch of properties for you just in rapid fire succession here before we get into today's show. So here you've got $36 a square foot for a 10 year old property. It's not old. Okay. Houses last a long, long time. Projected rent 1150 per month. Cash flow 453 per month. Positive almost $5500 per year. Your debt coverage ratio. Debt coverage ratio. That shows you how your income for that property covers the debt. Now if the debt coverage ratio is below 1, then that means you have a fairly risky deal there because you could get into trouble with your debt. But this debt coverage ratio, check this out. It's 2.84 a. 2.84 a debt coverage ratio of almost three times. So very, very unlikely you could ever get yourself into trouble with this cap rate. 13.5%. Yes. 13.5% compared to those other two deals. 5.5% and 6.56%. Junk, junk, junk. Institutional investors, why is that so important to us? It shows how because our industry is so fragmented that we are able to exploit the imperfections in the real estate market. We are able to take advantage of properties that institutional investors, they're too small for them. It's too fragmented. It's too difficult to manage these little tiny properties. I mean an institutional investor, they've got to be buying something that's 5, 10, 20, 30, $40 million to even move the needle. They haven't been able to institutionalize the buying and holding of thousands and thousands of swaths of small single family homes or small apartment buildings or mobile home parks or these kinds of properties that we can take advantage of. The other point about that, there's another side to it as well. When you invest in traded assets, we, when you invest in Wall street promoted and Wall street sold assets through stocks, mutual funds, REITs, real estate investment trusts on a smaller scale, ticks, tenant and common deals. Any sort of institutional or pseudo institutional opportunity like that. Look at the crap they're buying. I mean, these properties just don't. They're just. No, they're no good. I mean, those properties are risky. That those tenants will even stay in business. Number one, B of A, one of the most hated companies in America, bank of America. And then you've got cvs. And I don't know, maybe I'm just wrong about this, but my anecdotal, just simple man view of the world says we are totally overbuilt on these drugstores. I just can't believe we need this many cvss. You drive around Scottsdale, Arizona here and it's like there's a CVS or a Walgreens everywhere. There's so many of these stores, they all sell the same thing. It's unbelievable. So anyway, 13.5% cap rate. Better than double either of those two properties that the big sophisticated people invest in, right? Cash on cash return projected here, 16%. Where are you going to get 16% on your money? Overall return on investment 25%. That's just one property. Let's look at another. This one, St. Louis, Missouri. This property is $43 per square foot. The total price, 47,500. This is a cheapo deal. This is a really inexpensive one. Total cash needed to buy this one. It will be rehabbed and turnkey and rented. And total cash needed to buy this. $12,160. $43 a square foot rent 795. Positive cash flow, 309 per month. Over $3,700 per year. Debt coverage ratio 2.56. Cap rate or capitalization rate. The one all the sophisticated commercial brokers like to use. That is an incomplete, slightly flawed metric, by the way. I've talked about that in prior shows. I won't go into it now, but it doesn't take everything into account. But the cap rate on this house. 12.8%. Thank you very much. Great cap rate. Cash on cash return. Are you sitting down? Cash on cash return is phenomenal. I think this is the. This has got to be the highest cash on cash return we have ever seen on any property on our website. And this is why St. Louis looks so good to so many people. 31%. Let me repeat that. 31% projected cash on cash return. If you only do half as well. If that property only performs half as well and you get 15.5% cash on cash you will be hitting the ball out of the park. If it only does 1/3 as well and you only get 10.33% cash on cash, you'll be doing pretty darn well overall. Return on investment on that one, 47%. Wow. I should have saved that one for last because the numbers are the best on that one. But on this one, one of the numbers is better on this next one. Back to Indianapolis. $39,000 property built in 2000 you0've got an 11 year old property for $39,000. It's $39 per square foot because it's a little house, single family detached, 1,000 square feet. And by the way folks, I was on a radio show the other day for a renowned and well liked, well thought of personality, I'll say in the real estate business. And that person was saying they just bought a condo. I don't like condos. I make an exception here and there occasionally. But I tell you, all things being equal, I don't like condos, I don't like townhomes. I want single family homes. There's going to be have to be something incredible about the property to get me to buy condos. So these are all single family homes. We're talking about four plexes, fourplexes, duplexes, etc. So this one again, positive cash flow. $316 per month. Almost $3,800 per year. Cap rate 14.5% cap rate. That's a capitalization rate 14.5%. A debt coverage ratio of 3.04%. That is the highest debt coverage ratio of any we've talked about today. And that's the highest cap rate to cash on cash return. 16% total return or ROI on the investment here, 24%. Last but not least, one more Indianapolis. By the way, we have lots of other markets. This is just what went up on our website this morning. So I love Atlanta, I've told you that recently. Atlanta is doing very well. Hey, I like Dallas. I like a lot of them. It's like asking a mom, which kid do you like the best? Well, a lot of them secretly have a favorite but don't tell the kids. Okay, so this one, this one in India again only talking about these just because this is what went up on our website this morning. 2001 property again fairly new. 1700 square feet, $60,000 even. Total cash needed with your rehab cost 34,450 monthly rent 1095 positive cash flow 421 per month, almost $5100 per year, positive cash flow debt coverage ratio 2.77 cap rate 13.2% cash on cash return 15% total return 24% unbelievable. Let's talk about the homeownership rate, folks, in our Meet the Masters event. What this was three sessions ago. I think our next one's coming up and that's at the Hyatt Regency Irvine. I hope you're going to join us on March 4th and 25th, Saturday and Sunday. We've got a great room rate at the Hyatt Regency Irvine. Beautiful hotel. We've had our event there several times, as you probably know, and that's in Southern California. And our room rates, if you register early@jasonhartman.com and get in on the room block, it's only $99 a night. So really nice rooms at the Hyatt and very, very beautiful resort property as well. So hope you'll join us for Meet the Masters. Register for that@jasonhartman.com in the events section. And we will see you in March for that. You'll have a lot of these local market specialists coming out to talk to you about their properties, their property management, asset protection, tax planning, lots of stuff, great stuff on income, property investing. But we predicted the homeownership rate falling to 64%. Well, guess what, it's almost there because here this article, which is what is this, CNN Money? Sorry, this is USA Today and it says homeownership rates fall to 66% as downturn nears a bottom. And folks, every 1% decline in the homeownership rate is 1 million new renters that need to rent property from someone like you, a lucky landlord. Just a reminder, you're listening to Flashback Friday. Our new episodes are published every Monday and every Wednesday.

So I don't know how this whole scenario can get much better. But a few more things before we go to our guest, John Burns, Real Estate Consulting. We had John on the show before, probably one of the episodes, about a hundred episodes ago. Can't remember the exact number, but I want to say it's like 133. Anyway, John's group put out a newsletter entitled Veterans can't get the Mortgages They Need. And this is really a sad commentary. I totally support the troops. I don't support the wars in a lot of ways because I think a lot of these wars are just business ploys and we just can't fight every war anymore. We just got to get out of that business of all these wars. It's just, it's Just too much. It's weighing too much on our country and it's making people too angry with us around the world. And they just don't really seem to be. It's kind of like saying, who wins a fight? Well, nobody wins a fight. Both people get hurt, right? Same with war. But these veterans, they risk their lives. I really think this is a sad commentary here. Veterans cannot get the mortgages they need. One of the reasons people go into the military is all of these great benefits that are supposedly offered to veterans. And here it says the John Burns Newsletter. Our survey of 188 home building executives last month turned up a very interesting and disturbing finding. More builders are shying away from selling homes to vets because VA appraisers have become so conservative that the deals rarely close. So this whole article is talking about how builders don't want to sell to veterans because the deals won't go through. And that's sad, but it does actually, again, just show a greater need for rental housing. And think about, I want you to think about all of these factors that we've talked about on prior shows. And I'm just going to kind of outline a few of them that I just jotted down real quickly here for this show. Number 239, what's going on with the populace? What are people experiencing? And then what's going on with government, the central banks and the property buying economic situation? So we've got Gen Y, Generation Y, the young folks nowadays in their 20s and late teens. And this is the largest demographic cohort in American history. 80 million strong, 4 million stronger than the baby boomers. Which baby boomers changed everything? Their spending changed everything about the economy. Huge difference. Huge thing to watch, the baby boomers, right? But Gen Y, larger than the baby boomers. Well, what do they have? A lot of them are living at home. We've talked about that on previous shows. They have huge student debt obligations. Student loan debt. We talked about the default rate going up. We talked about how it's not dischargeable in bankruptcy. Basically student loan debt. If I want to get conspiratorial on you, I think it's a way to sort of economically enslave people. And that is going to defer homeownership because you can't get a second chance. You get into student debt and it follows you your whole life. You can't discharge it in a bankruptcy. Then we have poor veterans that can't get the loans they need to buy houses. We have virtually. I mean, of course there's some I say this is a figure of speech. But virtually no construction, new home construction is at a virtual standstill for several years now. The population has been increasing all this time. Tens of millions of people are seeing declines, if not huge declines, many of them on purpose through strategic default. Huge declines in their credit report or their FICO score going down, down, down. Homeownership rates in serious decline. That's what people are experiencing. Just a few things I jotted down. There's more to it than that. But then you look at the economic, fiscal and monetary side of the equation. You've got massive money printing which leads to. Well, it academically now means inflation. We know that because we've talked about that before. We already have inflation. The real inflation rate being around 10% in my estimation. Some people say it's about 13% right now already. So huge expansion in the money supply which is going to lead to higher prices for virtually everything. The government is insolvent. The national government, the federal government is broke, broke, broke. State and municipal governments, many of them broke, broke, broke. We've got at least a $60 trillion entitlement time bomb coming our way. Medicare, Medicaid, Social Security, the list goes on and on. It's unbelievable. And then just throw in a national health care program to add to the completely illogical child way of spending in this country. So our entitlement time bomb, $60 trillion, maybe up to $130 trillion by some estimates. We've got ultra, ultra, ultra low mortgage rates. If you can get mortgages right now, you better stock up on long term, high quality investment grade, fixed rate debt, phenomenal asset that long term three decade mortgages that you won't be paying off until 2042. Just think about that. Think about how much the world will change by 2042. When you, or not really you, because you don't pay your own debts. When it comes to income property, your tenants do. We outsource our debts to other people. You can buy properties far below replacement or construction cost right now some of the properties I just told you about, far below replacement or construction costs, you can't build them for even double that number today in many cases. We've got tens of millions of Americans and probably billions of people now around the world who realize that Wall street is a complete, total, abject scam. I think it's the modern version of organized crime. So what are people doing? What are people gonna do? They're putting their money into, into directly controlled assets. They are following my commandment number three. A lot more People are doing this and hopefully a lot more will. Thou shalt maintain control. Be a direct investor. Do not relinquish your financial future to somebody else. Buy, own and control your investments, your income, properties, your notes, trustees. Be a private lender. That fits for some people, especially when it's short term. You know, I like being a borrower better. But private lending, that's, that's pretty good. It's really clean, really simple, very scalable, low on the hassle factor. Again, if you want more information on private lending, it's not available to everybody in every state. There are lots of different laws that govern it and so forth. I'm not an expert, but I'll refer you to the people who are and just email me jasonason hartman.com and I will refer you to the right people. And that's it for me right now. Let's go to our guest today and my discussion with Joel. We've got some great freebies here. And these are no strings attached, they're just free. So Joel's going to talk about how we're going to give those away to you and we're going to give you an email address in this interview where you can just send an email, say you want the free app and you'll get a promo code, you can download it and it's again free, no strings attached whatsoever. It's not an upsell, it's not anything. It's just that Apple, the App Store allows him to give out a certain amount of freebies and he agreed to do so since, you know, we've been friends for, I don't know, eight, nine years now and he wanted to come on the show and give away some freebies to our listeners. So we will be back with that in less than 60 seconds. We hope to see you at Meet the Masters. A lot of you have registered already. Keep all those registrations coming in. By the way, at the Hyatt Regency in Irvine, we've got the big beautiful conference center. This and this is where everybody has stadium style seating, big leather chairs, big, comfortable, adjustable leather chairs on wheels like boardroom style chairs. And you got your own desk, your own power supply for all your gadgets right in front of you. So it's a really beautiful room. It's my favorite room there. It's called the conference center. The stadium style seating at the Hyatt Regency and Irvine. So that's our room this time. So register and get in on that room block for those $99 room rates ASAP. Remember the early bird Pricing, it goes up the wait the more the price increases. So that's it. Go to jasonartman.com for that. We'll be back in just a moment with Joel and we will talk about software, technology and the real estate market.

Now you can get Jason's Creating wealth in Today's Economy home study course. All the knowledge and education revealed in a nine hour day of the creating wealth boot camp created in a home study course for you to dive into at your convenience. For more details go to jasonhartman.com.

Hey, it's my pleasure to welcome Joel Grassmeier back to the show. My friend from Utah who is a client of ours and who developed a wonderful program that we just love so much. One of the important things about being an investor, of course, is not just the returns you make and how you can beat Wall street by a long shot and have direct control over your own investments as a direct investor. Commandment number three of my ten commandments is thou shalt maintain control. When you relinquish control to the guy in the nice suit with a good gift of gab at Merrill lynch or Ameriprise or one of these companies that are part of the vast Wall street conspiracy as I call it, you basically, you really risk your financial future. And if we want to have a good financial future, we have got in control of our investments. But remember, with control comes some degree of responsibility, of course. And one of the things we do is we help make those various responsibilities a lot easier for you. And one of the ways we do it is by using good technology and good software. So we're going to talk today about software. And one of the key things that I did a long time ago when I really started getting serious about being a nationwide area agnostic investor, is that I decided, you know, in order to do this well, you've got to have data standardization. You've got to standardize your data so that you don't have to be a detective every time you look at a new deal. I want you just to be an expert at reading a one page report. And you can find these on my website@jasonhartman.com in the properties section. And if you can really just become an expert at this simple one page report, it tells you just about everything you need to know about this investment in terms of the numbers side. Now of course there are non analytical issues, non numbers issues, like what is the in and out migration of an area, what are the future prospects, the job growth, etc. But when you look at a deal and you want to analyze it from just the pure numbers perspective. Property tracker and property evaluator and property shopper that we use on our website@jasonhartman.com offers some fantastic tools and opportunities to really just be a much better investor. So, Joel, welcome. How are you? Great.

Thanks for having me on the show.

Good, good. So how are things in Utah?

I'm doing really well.

Good. What's going on with your business? You've been busy developing iPhone and iPad apps. And of course, when I originally met you many years ago, it was just a web based application, property tracker. Tell us what the latest and greatest is since we've had you on the show last.

Yeah, you know, things have really been evolving in the technology space, not just for real estate, but in technology in general. You know, like for real estate in particular. People used to do a lot of this analysis was by building their own spreadsheets or buying some other spreadsheets from different companies. And that kind of evolved into some web based apps and those were very good. But they always require an Internet connection to use them. And the real growth area in the last few years in real estate and outside has been in the iPhone, the iPad, and native mobile apps where you can use them even without an Internet connection if you're on an airplane or if you're driving around looking at properties where you're outside of the cell phone range. And then Apple launched the MA App Store last year as well. And I think that's going to change how people buy software in general.

Well, what do you mean when you say native mobile apps? You just mean the app that's got all of the software to do everything without an Internet connection, Is that what you're saying?

Yeah, that means it runs native on the iPhone itself. There are a lot of apps that work with mobile devices, but they're still web apps, so you have to be connected to use them. And the web apps can't take advantage of a lot of the native things built into the phone a lot of times, like the camera, the gyroscope, the gps, things like that. And I'm taking advantage of some of those things in the app and I'm able to build a user interface. That's what I could ever do with a web app.

Yeah. Great. And just must compliment you. You build some great products and I really like using them. Now, Joel, before we get into it too deeply, I just think it's kind of interesting and I don't know if the listeners now heard you on the show. You were probably on about 120 episodes ago, I think I had you on somewhere around the early one hundreds, and now we're well into the two hundreds. And what's interesting is you are an aerospace engineer and your wife Debbie is a rocket scientist.

That's right, yeah. I spent eight years designing unmanned airplanes from little tiny spy planes that are about 6 inches in size, up to a 250 foot solar powered airplane. And after the stock market crashed in 2000, my wife and I said, you know, I think we should diversify out of just stocks and mutual funds and get into some other types of investments. And so in 2002, we started buying some real estate. And being an engineer, I bought a bunch of software to analyze those deals before I bought them. And it was all pretty lousy. So I started building my own spreadsheets initially and then sharing them with some friends in Jason's network and some other investment clubs that I was in at the time in Southern California, and people were giving me some great feedback on it. So I started a little side business called propertytracker.com in 2004, and a year later quit my engineering job, and I've been doing it full time. My main motivator is to give people the tools to do a fast and easy due diligence on their investment properties before they buy. I think if people would have had these tools several years ago and run the numbers and looked at some worst case conservative scenarios, maybe they would have invested a little differently and we wouldn't have all these problems with foreclosures and things like that today.

Well, Joel, when I was talking to investors many years ago, before the bubble, during the bubble, after the bubble, one of my ten commandments, another one of them is also, the property must make sense the day you buy it or you don't buy it. So that is very important. Again, the property must make sense the day you buy it or you don't buy it. And when I say make sense, I mean from a cash flow perspective, even with the concept of deferred down payment, which really isn't necessary anymore in today's market. But it was something that we were talking about years ago. Analyzing the numbers, running the numbers could have made investors rational. It could have prevented a large part of this financial crisis, probably, huh?

Right, Right.

Well, first of all, I got a question for you about these unmanned drone planes.

Just kind of as general interest here. So you told me. I remember we were talking once and you told me the name of the type of plane that they're working on now that actually Mimics a bird, like with flapping wings.

Yeah.

And you said, you said you had these six inch drone planes. That's unbelievable. What is that called? The one that imitates a bird? I mean, you know, anything that imitates nature is called bionic. Remember the bionic man and the bionic woman? But there was a name for that.

Yeah, it's called an ornithopter.

Everybody you're gonna remember that. An ornithopter.

And the more general name is a nano air vehicle. What I was working, working on back in the late 90s were micro air vehicles which were 6 inches and smaller. Now they're working on nano air vehicles which are shooting for three inches and trying to mimic nature as much as possible. So the idea is you can have something that looks and sounds just like a hummingbird cruising around, taking video and sending it live back to some soldiers that want to see what's around the corner over the hill. So instead of sending a scout out to see, a lot of times he didn't come back, they send one of these little air vehicles instead.

Yeah. And the amazing thing about the small, small nano type of drones, it's really hard to shoot something down that's so small.

Yeah. A lot of times with a little 6 inch airplane, we'd be flying a couple hundred feet overhead and you wouldn't even see it or hear it. If you did, it would have looked like a bird. And it has a motor so you can't even, doesn't even make much noise.

Yeah, yeah. Amazing. Well, hey, back to the world of real estate investing. Tell us what more specifically are some of the updates and some of the things investors can take advantage of nowadays in terms of the products you offer?

Yeah, I'll kind of give you the timeline. So in 2004, I launched propertytracker.com and the goal there was to do two main things. The property evaluator tool helps you evaluate potential investment properties before you buy. And you just put in some basic information like the purchase price, square footage, income and expenses. And it gives you a one year projection with things like cash flow, cap rate and return on investment and a multi year projection with things like internal rate of return. And that lets you create a true apples to apples comparison between those properties and takes the guesswork out of finding the best deal. And then I also added a property tracker tool there to help you track the performance of the properties you already own. So you see those same financial metrics, but now they're based on your actual income and expenses rather than projections. So every month you put in your income and expenses into Property Tracker and it helps you by showing you kind of what I call the instrument panel for your properties. So you can see whether it's better to buy, hold, sell or maybe do a 1031 exchange on a property and leverage that money into other properties. And then at the end of the year you can schedule E for your taxes, a schedule of depreciation, and when you go to apply for another loan, you can see a schedule of real estate owned with all your mortgage balances, property values, etc.

Property Tracker is an invaluable side of the equation. So the software is called Property Tracker but really we're just talking about the web based version, the original product. Now it's really two parts. It's an evaluation part where in just really moments and I've done this live in many of my seminars where I'll just have the audience give me the numbers and I'll be connected to the Internet and I'll just have it right on the big screen and I'll just it put pushing the numbers in for a property, we're trying to evaluate whether or not it's a good deal. And one of the things I say to investors is on our website@jason hartman.com great resources there in terms of being able to evaluate properties offered through our network. But that information is static. And what I mean by that is the numbers are put in by our local market specialists. But if you want to be a really good investor, then it's great if you put the numbers in in so you can play with them. You can reduce the rent, increase the rent, reduce the appreciation, increase the appreciation, reduce or increase the vacancy rate or the maintenance cost and change the expenses and just sort of run scenarios. And you know, I got to tell you that is one of the ways that I became, I think a really good investor is that I would run the numbers over and over and see how changing this would influence that and starting to understand those relationships of how one thing will change the cash on cash return, the cap rate, the overall roi, the debt coverage ratio, just some great things. And I highly recommend that investors do that. And by the way, at the end of this interview, Joel has been very generous and offered some giveaways. So we're going to have giveaways for a bunch of listeners, quite a few of them actually, where you can get some of this stuff for free. So anyway, go ahead Joel and tell us.

Yeah, so the web based version works great, you know, with any kind of computer, Whether it's a Mac or a PC or a tablet, it just requires a web browser and an Internet connection. But in 2008, I think the world really changed when Apple launched the iPhone. I bought my first iPhone in 2008 and I was really blown away by it. Steve Jobs described it as having the Internet in your pocket. And I can kept thinking how great it would be to have a property analysis tool in your pocket. So when you're driving around looking at properties, you can just punch a few numbers into your iPhone, take some photos, and create a complete property analysis right there on the spot. And then I also added the ability a few years ago to email a professionally formatted PDF report to your lenders or investment partners directly from your iPhone. And if you're a real estate agent, you can add your own branding to the COVID page, the header and the footer of that report, and email it to potential investors. Kind of like the format you see on Jason's website there. And then Apple announced the iPad in January of 2010 and I thought, wow, this is even more perfect. It was really a major paradigm shift, I think, in the history of personal computing because it's still a mobile touch screen device connected to the Internet through wi fi Networks or the 3G cell phone networks. But now the larger screen makes apps like property evaluator much easier to use because you can fit so much more information on the screen and build a much more friendly user interface. Like for example, in the iPad app, you can view a full size preview of the PDF report before you send it out via email. And I just added the ability to print those reports directly from the iPhone or the iPad as well.

Fantastic. What are the actual different products? Just kind of summarize them because it used to be really simple. It was just property tracker. And if people subscribe to that, say you don't have, you don't respond and get one of the giveaways today. But if you just want to subscribe to it, the best way to do it is through our website. You go to jason hartman.com click on the resources page and if you use the link there, and I want to just disclose to listeners, we don't make a penny off of this, we just like it and recommend it. So there's, there's no money coming to us off this one. And they get a month free and they also get a discount where normally it's 24.95 per month, but they get it for 1995 per month and they get that, they go through our website because we have a special discount program with you.

Yep. Yeah. So there's the web based version that gives you the property evaluator and the property track. And then the iPhone, iPad and Mac apps are sold as standalone apps, so there's just a one time fee. And on the iPhone and the iPad, they're sold in three versions. There's the standard, the premium and the pro edition. The standard version lets you analyze one property at a time. And then if you upgrade to the premium version, you can save multiple properties and email the PDF reports. And then the pro version has all the bells and whistles. You can add the portfolio analysis, which I'll talk about in a little bit here, multiple photos, the ability to itemize your closing costs and improvement costs and you can look at multi unit and commercial properties. And then like I mentioned, add your own branding to those PDF reports. And the way I set it up is the only version offered in the app App store is the standard version. But then you can upgrade to premium or pro directly within the app via an in app purchase. And so the standard version sells for $1.99 on the iPhone, 499 on the iPad. The premium version is 999 on the iPhone and 1999 on the iPad. And the pro version is 29.99 on the iPhone and $49.99 on the iPad.

Yeah. So just to keep this in perspective, you know, here we're talking about your real estate investing business and we're talking about making thousands, tens of thousands, hundreds of thousands, hopefully millions of dollars over the course of our investing career. And this is just nothing. These are nominal amounts of money. You say $1.99?

Yeah, it's amazing. I think the iPhone and the iPad app store economy has really changed the way people perceive software and not only the process of buying it, but also the pricing of it. Like for example, Apple used to sell each major update of their operating system for $129, and now it's $29. You used to be able to get the iWork suite for I think $80. That had pages keynote and numbers which are like Apple's equivalent of Word, PowerPoint and Excel. I think they used to sell that for $80 and now it's like $20 for the Mac and $10 for the iPad or the iPhone. So Apple's approach is really to kind of address the mass market, make software cheap and easily available. And, you know, I'm just kind of following in Apple's footsteps and trying to Take the same approach. And another point about Apple's approach is, you know, as opposed to Microsoft, they tend to focus on the 80% of the features that 80% of the people are going to use and focus the remaining effort on building a really good user experience. Whereas the Microsoft approach is to throw the whole kitchen sink of features into an app like Word, and you've got this entire array of tiny little buttons and icons at the top of the screen. And for a typical person using the software, that can be pretty overwhelming. So I really take a focus, especially in the native apps, on making it very easy to use. So that you want to change a number on the iPad app, you just touch the number and change. If you want to see the definition for what internal rate of return means, you just tap on the word and it shows you the definition in a little pop up.

Yeah, fantastic. Well, what can you tell investors that is really important about evaluating investment purchases? One of the things I especially. And you know, we've discussed this over the years, Joel, One of the things that I especially agree with is that when we see these quote, unquote, sophisticated investors come to us who have been around the commercial real estate market, they always talk in cap rates or capitalization rates. And it's interesting to me because that metric leaves so much out. It's the most commonly used metric, but I think it's very flawed in that it doesn't really give a good picture of an investment opportunity. Like some of the other metrics. Metrics available in property Tracker and Property evaluator.

Yeah, absolutely. So, you know, that would be like buying a stock or a mutual fund only for the dividend and not even looking at the capital, the potential capital gain. So in real estate, we have our cash flow, which is kind of analogous to the dividend and buying a stock or a mutual fund, but we also have appreciation. And on commercial properties, the valuation is based on the net operating income, which is factored into the cap rate. But for residential properties, single family homes to fourplexes, for example, really it's what the value of the property is in the comparable sales of properties like those in that market. So appreciation is a huge part of the equation for why we buy those properties. And the two big numbers I like to look at in terms of financial metrics are the cash on cash return. That tells me what my money in and out of my pocket is from day one when I own this property. And it projects that 30 years into the future as well. So that has to make sense on day one. You don't want a property with negative cash flow because that's setting yourself big risk right away. And then the other bottom line indicator for the future is the internal rate of return. And that basically compares your real estate investment with taking that same initial cash invested and putting it into a savings account. So it says what interest rate would I have to have in this savings account to match this real estate investment? And for a lot of good real estate investments, you can see an internal rate of return of 10 or 20 or more percent.

Oh sure you can. You can even see better than that. It's pretty amazing. And I remember when I first at age 19 or 20 in my real estate classes, I first learned how to calculate internal rate of return, otherwise known as IRR. And I did it on the good old fashioned HP12C, the Hewlett Packard 12C computer or not computer, but calculator. I guess it is a computer as well. And I still have those. And I still, believe it or not, use my HP12C. But I don't use it for things like IRR because it takes so much time to calculate it on there. And you know, I remember what you'd have have to do in the old days to do this. And maybe I'm aging myself by talking about this, but I remember I took a three day course just on using the HP 12C.

Right, right.

It's so much easier nowadays.

You know, in fact, IRR is the trickiest one because there is closed form solution and you can't really calculate it just using pencil and paper. You have to use a root finding algorithm and an iterative analysis.

Yeah, it's pretty amazing. But it is a great metric. One of the things, it's super simple metric that I just love lately because the cash flow on these properties is so desirable nowadays. Thank God for the financial crisis because that leads to so much opportunity and just the good old fashioned cash on cash return. I mean the cash on cash returns nowadays, if you look at the properties on Jason Hartman.com, i mean mean they're in the range many times of 13 to 18% or even better sometimes. It is amazing. And one of the things to keep in mind folks is that cash on cash assumes that you get no appreciation, no tax benefits. And by the way, I want to qualify what you said about appreciation and cap rate and just kind of circle back to that for a moment in a second. But cash on cash is just such a simplistic analysis and it just shows that you can outperform the bank by 6, 700, a thousand two or 3,000% annually. It's unbelievable. And I mean by multiplying what you would get in the bank versus what you would get on the property, it's not you're only getting 13 to 20%, maybe cash on cash, but you get almost nothing in the bank bank. So it's quite a bit more generous than that. Let me take a brief pause. We'll be back in just a minute. Be sure to join us and meet the Masters on March 24th and 25th at the beautiful Hyatt Regency in Irvine, Southern California. Register now to take advantage of the very special $99 block room rate at the Hyatt Regency and our early bird pricing. Register@jason hartman.com so one of the things about appreciation is I think, Joel, most appreciation for the next couple years is really in the rearview mirror with the financial crisis. I don't think, certainly not broadly, and the s and P500 or sorry, not S&P500, but the S and P Case Shiller index is so misleading because it only covers 20 markets. And when you look at a country as large and diverse as the United States, we've got about 400 markets. So when I look at the Case Shiller and index, I only like five or six of those markets out of 20. I think 14 or 15 of them, I wouldn't touch them yet because they've still got further to fall. But again, we buy properties for cash flow, not for appreciation. If appreciation comes, it's the icing on the cake.

Yeah. I think the big difference today versus say five years ago is even in those markets that may still have a little ways to go before they bottom out, there's very little downside risk and a lot of upside potential. Whereas five years ago exactly the opposite was true, where we had a lot of downside risk, not a lot of upside potential. Like in California, for example, the affordability index was less than 10%. And that means less than 10% of people with the median income can afford to buy the median priced home. And when people are maxed out like that, there's just no way properties can go up in value because the buyers are just disappearing.

Right? Yeah, no question about it. And the only thing, by the way, that I think was a little bit misleading in the California market back then, and I'm a fan of Bruce Norris, we've had him on the show, and I know you are too, but I took issue with some of his stuff just looking at housing affordability, which I think is a great metric for sure, and I'VE looked at that for many, many years in the business. But when you have a market like California where you have so much foreign investment, that is the one thing that really skews the housing affordability thing. And I know it may sound like I'm sticking up for California, I'm not. I don't like California. But.

Just wanted people to keep that in mind. The Housing Affordability Index is the internal thing of the people who are living there. And if you have an outside foreign population of Middle Eastern and Asian populations that are really investing in an area, you could miss something by just looking at the Housing Affordability index, I think.

Yeah. In fact, I've seen that even among my customers buying the apps, I've seen a lot of people from Canada, Australia, Europe looking at the US property market as being incredibly cheap. I mean, when you can buy a low end end condo for about the price of an expensive car, you know that something skewed in that market and it's, you know, maybe a good time to buy.

Well, actually you can buy a low or even almost medium end condo for the price of a cheap car.

And used cars have actually gone up in value lately.

Well, yeah, they have. That's kind of an interesting thing in and of itself. But one of the things I just wanted to say about, you know, when you were talking about CAP a few minutes ago, remember that there are three basic approaches to valuation of real estate. One approach is the income approach. And this is how commercial properties. And what I mean when I say commercial, it's important to define that because people use that term too loosely, is that from a lending perspective, from a lender or banking perspective, a commercial property is anything over four units. So it could be a five plex residential property that is considered a commercial property or a 10 unit or 200 unit apartment building. Right. That's a commercial property. But also commercial properties are industrial properties, retail properties, office properties, etc. And they are sold on the income approach or valued on the income approach. How much income do they produce? Whereas residential properties are sold on the comparison approach. And oddly enough, Joel and I think you'll agree with me on this, although I don't know what you're going to say about it. The comparison approach actually leaves a lot more room for investors to get good deals and increase the future potential of those deals because it's less logical, really. It creates more opportunity. And that's one of the things I don't like about the, the commercial real estate market. I just don't think there's nearly as much upside potential in it because it's. It's too refined. It's too. There are too many sophisticated people that went to business school using their MBAs in that market, and the opportunity isn't there the same way it is in the residential market. What are your thoughts?

I mean, if you were to look at a graph of. If you were to look at a graph of rents over the last 20 years, it would probably be pretty linear regardless of which area you're looking at. We didn't see rents double or triple in California and then drop to half of what they were five years ago, whereas the price of real estate, especially residential real estate, has fluctuated all over the place. If you looked at a graph of residential real estate over the last 20 years, you'd see these cycles where you see the peaks. Every 10 years or so you get a cycle that repeats itself going all the way back to the 70s. So if you can see where you are in that cycle for your particular area, you can buy at a time when people are capitulating and they want to get out of property and the banks want to get rid of properties, and then you can sell. When people are desperately trying to buy properties, when they're saying, I better get on this bandwagon before I can't afford a house anymore, like they were saying five years ago.

Right. And that's when the hysteria develops and people become really illogical. And, you know, as investors, we kind of bank on them being illogical and look at how that'll benefit us. It's not just about the market fundamentals. It's about the psychology of the market, too.

Absolutely. Yeah.

But one more thought on appreciation, and that is that it's not really about just appreciation anymore. It's also about what I developed this term. I call it regression to replacement cost. And one of the great things about the property tracker program is that it just calculates and it's a very simple calculation, but it's right in front of you. Sticking out like a sore thumb is the cost per square foot. And I think that is such an important little simple metric because it really shows people what kind of deal they're looking at. In areas with high land value, like overpriced California markets or overpriced Northeastern markets or Chicagoland area markets or some areas still in Florida, you look at cost per square foot and it just doesn't work. But in the markets we recommend, you're buying in every market we recommend now far below the cost of actual replacement or construction. So when you buy a property for, for $44 a square foot or $60 a square foot, or even less, sometimes $30 a square foot, it would cost anywhere from 80 to maybe $120 or so per square foot to rebuild that house. And that doesn't even include the cost of the land. So you buy below the cost of construction, you get the land for free. It's a pretty good opportunity, isn't it?

Yeah, it's amazing. You know, I think that the combination of the deals available, the inventory available, but also the interest rates available, I mean, we're at historic lows again. We thought we would never get lower than where we were a few years ago, and it's even gotten better. The actual monthly payment on those properties is probably close. Even if some of those markets bottom out a year or two from now, we might be seeing higher interest rates by then. So that monthly payment might go up, up, even though the purchase price is a little less.

Yeah, it's pretty amazing. I mean, just as a pure bond type cash flow oriented investment, I call them income property bonds, you can make a great return even if the property declines in value. You don't need it to go up in value. If you can just maintain the cash flow, the returns will be phenomenal. But if it does regress toward the replacement cost, and after it regresses to replacement cost, the $50 per square foot property goes to $100 a square foot. So now you're even is what I say. You're even. Right. And then after that, if in the future you have appreciation or inflation, whichever way you want to look at it, or both, and ultimately you end up refinancing that property on, you know, our kind of refi till you die program, or selling that program property, doing a 1031 exchange, taking out the tax free capital gains into another property where maybe another geographical area that is somewhat depressed at that time, and you sell on a high, buy on a low, you do that all your life. You never pay capital gains tax. It's just the ultimate thing. It's so tax favored. And taxes are the single largest expense anybody has in their life. And you just can't do it with, with stocks, you can't do it with a business, only with income property, huh?

Right. Yeah. In fact, one of the features that I added last summer that was probably the most popular feature request I got over the last year was the ability to look at an entire portfolio of properties. So now you can create multiple portfolios within the iPhone, iPad or Mac apps, and then add Multiple properties to each of those portfolios. So then you can look at a portfolio analysis report that shows the apples to apples comparison between those those properties. Say you just want to buy one and you want to find out which one out of these 12 is the best deal. That's one use for it. But then the other use for it is you can say what if I Want to buy 5 properties today? What's the combined cash on cash return and the combined internal rate of return of that entire portfolio that's in the app now? And people are loving that feature.

Yeah, that's a great feature because then you can really look at your real estate empire as a whole portfolio. Now what about doing that portfolio in the property tracker web based software?

Yeah, that does it as well. So in Property Tracker you can look at a performance report based on your actual income and expenses for your entire portfolio. And I like to do a health check on all of my properties every six months to a year to see which ones I should hold, which ones I might selling. So I can look at the current cash on cash return and the current internal rate of return and return on equity of all my properties and make smarter management decisions about those properties. So you know the property manager for your property is going to take care of the maintenance issues and getting the rent checks and things like that, but they're not going to make the smarter high level management decisions to manage the business of your real estate. Like when you should buy and sell details, exchange, do a cash out refi, buy another property, etc.

Right, yeah, you've got to think of that. And that's one of the great things about being a direct investor. You are in control of all these decisions where if you invest in a stock or a mutual fund or a real estate investment trust or a tic tenant in common deal or anything like that. Someone else is in control of all of that. They have a different agenda, they have different motivations than you do as an investor sometimes. And so you don't leave yourself susceptible to those three major problems of not being a direct investor when you relinquish control. The three major problems are number one, you might be investing with a crook, number two, you might be investing with an idiot. And number three, assuming they're honest and assuming they're competent, they take a huge management fee off the top for managing the deal. And as a direct investor, all those profits come to you. You know, you don't give them to some, some guy on Wall street flying around in his private jet and paying himself giant Bonuses. And that's the great thing about the, the American opportunity. And, you know, you talked earlier, Joel, about so many foreign investors looking at US real estate, thinking how cheap it is. And, you know, as you know, I'm a huge fan of traveling. I love to travel. I've been to 64 countries now. Some countries I've been back to many times. So it's not just 64 once, some, some repeatedly. And you know, I've looked at property in so many countries, maybe two dozen countries now with real estate agents. Most of them are unlicensed. They don't have licensing in a lot of these other countries. Some they do. And I, I just can't find anything that even comes close to American real estate. We've thought of recommending some Eastern European and Central American markets, Australian markets, and frankly, our friends from around the world. I think the best place for you to come is to the US to invest. We would be going to you and your country if we thought it worked. I mean, we've negotiated deals with people in Argentina, Panama, Australia, and for some reason, the American real estate market. I know one of them is the mortgage market. I mean, it's really been subsidized since the Great Depression through Fannie Mae and Freddie Mac, but not just even from a mortgage perspective. For some reason, it's just got a sort of a more developed or more mature real estate market here. And I'm not quite sure I can explain why. I just know it's true. Do you have any thoughts about it?

Yeah, I mean, I think there are a couple of other factors. One is because we have a strong legal system where you have.

Good rights to those properties, there's title insurance, things like that. You're never worried about potentially losing properties. I think there were some issues in Baja California down in Mexico several years ago where the Mexican government basically said, you don't own this anymore. This is ours. That kind of thing doesn't happen in the US and you can get title insurance to protect against it. And then like you said, the mortgage advantages and the tax advantages where the government incentivizes people to buy and own their own homes. A lot of countries just don't have a lot of these things that we have in the US to encourage home ownership.

Yeah, yeah. As much as I complain about all the corruption on Wall street and in the banking system and the political system in the US we really are one of the, the strongest, if not the strongest rule of law country in the world, and it's going the wrong direction. I think but still, it has a lot further to fall before I think many other places beat the US in terms of that and many other things. So, yeah, good stuff. Well, hey, Joel, you know, we mentioned that we would have some free gifts for our listeners, and these are totally free, no strings attached whatsoever. Thank you for your generosity. And we just wanted to give these out here on this show. And the way you get these is just email contactasonhartman.com that's contactasonhartman.com and Joel, tell people how it works and what you're giving away.

Yeah, so just send Jason an email at that address and tell him you heard about the apps on the podcast and just let us know whether you have an iPhone or an iPad or both. And I'll send you a promo code that you can redeem for a free copy of the standard version for the iPad.

And they're just going to go to the itunes store then, where most of our podcast listeners are listening from. I think about 70% of our audience is using the itunes store to download the podcast. And this promo code that you give them, they just put that in the itunes store and then they get the apps for free, right?

Yep. Yeah, you just type in the promo code, kind of like a gift certificate code, and it'll download the app for free. And then if you want, you can play around with it. And if you'd like to, after that you can upgrade to the premium or pro version for some more features.

Fantastic. Well, that's very generous. Now, Joel, is there a limit on the number of apps that you're giving away today?

I can do 50 right away. Maybe later on as I get more of these promo codes available from Apple, I can do some more. But right away, within the next week or So, I have 50 available.

Fantastic. Well, folks, there's a 50 person limit here, so email contactasonhartman.com and just tell us if you have an iPad, an iPhone, or both, and the first 50 people will get the app for free. So that's fantastic. Thank you so much. Joel, anything you'd like to say in closing?

If you want to get some more info on the apps, you can go to realestatetools.com you can see some screenshots and some more details there. Again, if you want to just search clean the app store, you can just do a search for property evaluator. There is a Mac version as well. And the Mac App Store is a standalone app that runs on the Mac. You have to have 10.6.6 or OS 10.7 lion to have that app store installed. And the Mac version has the same features as the Pro versions on the iPhone and the iPad, but it's just presented in a more traditional desktop interface.

And if you want Property tracker and that's the original product that you know, I have just used so much and love so much, get it through jasonhartman.com because you get the free month and the discount. Definitely go through jasonhartman.com and the resources page to get that one. But if you want the apps for your phone or iPad, email contactjasonhartman.com and the first 50 people will get them for free. Thank you so much Joel and keep up the great work. I love your products and I know many of our listeners and our followers do too, and hope we have exposed them to some more people today as well.

You're quite welcome. Thanks for having me on the show.

What's great about the shows you'll find on jasonhartman.com is that if you want to learn how to finance your next big real estate deal, there's a show for that. If you want to learn more about food storage and the best way to keep those onions from smelling up everything else, there's a show for that. If you honestly want to know more about business ethics, there's a show for that. And if you just want to get away from it all and need to know something about world travel, there's even a show for that. Yep, there's a show for just about anything only from jasonhartman.com or type in Jason Hartman in the iTunes store.

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