CW 819 - S&P Overvalued Says 18 Metrics, REI P.E Ratio & Surprise Market Profile

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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 with episode number 819. 819. Thank you so much for joining me today as we talk about a market profile and this one is going to be kind of a surprise for you. You'll get the word here in just a moment. We did that because we have these people that, that stalk us. You know, we have, we have stalkers, right? We really do. And every time we launch new market, they are stalking us and they go and try to launch the same market. So we are not giving it away in the title, but you may already know because many of you are talking with our investment counselors. And so we will get to that in just a moment. And stalkers be damned, you'll have to listen to the whole show and really stalk us properly before you can get the information you need. Right. Oh, gosh, I tell you, business is business, bidness is business. Right? Yeah. That is it. Okay, so the stock market. Let's talk about the stock market for a moment. Do you think it's overvalued? Do you think we're in for a correction? Do you, do you think we're in for a crash? Do you think the stock market is just massively overpriced, as many people do? Well, let's take a closer look at that just for a moment before we get to our market profile and talk about how to win the best way to win on Wall Street. Here are two ways you can win on Wall Street. Either, number one, be an insider. You, you know the old saying, where are all the clients? Yachts. Right? Yeah, that's exactly what it is. Be an insider. Don't be an investor, be an insider. Remember Michael Lewis, you heard him on the show here when he was talking about during his 60 Minutes interview how Wall street is an absolute scam and you cannot beat the high frequency traders and all the other insiders. Right. You really think you're going to beat some super high speed computer? No, you're not. Okay. They are going to take the profits before can execute your trade. So as consumers, as normal typical investors, hey, we're screwed on Wall Street. So the second best way to win on Wall street is to be absent. Yes, be absent. I think it was Woody Allen who had that great quote that said 80% of success is just showing up. Well, sometimes 80% of success is not showing up. Right. Because you can't hear the dogs that don't bark. And if you show up on Main street and you buy some good income properties rather than on Wall street, you know, maybe that not showing up, depending on how you look at it, you show up, you don't show up one place, you show up in another. You could do much, much better. And you know, I was thinking about how we can't hear, hear the dogs that don't bark and how I talk about that a lot. And think about that in the context of regrets. Think about that in the context of really anything in life. Could be a car you didn't buy, a property you didn't buy, or a mutual fund you didn't buy because you chose to buy a property instead. Could be the S and P index fund that you didn't buy because you bought a property instead. It could be the relationship you didn't get into because you got into another relationship instead. Or maybe you decided to not get into any relationship. You know, it's just funny how our mind does not evaluate the profound impact of things that didn't happen. The profound impact of things unseen, of things unknown. So let me ask you this, what do you regret more? Do you regret more the things you didn't do or the things you did do that didn't turn out the way you wanted them to? You know, it's just an interesting part of our psychology. And as investors, it is incredibly important to give big value to the psychology of investing. The psychology of investing. Because not only do we need to give value to, to the market psychology, right? The big macro picture, the macroeconomic market picture. What is the psychology of all of the other investors out there? And it depends, you know, first of all, you gotta ask yourself what asset class and then what asset class which assets within that class. In real estate, for example, you would have to look at the overall psychology, the sort of consumer sentiment, Right. Of real estate investing. But then you'd have to look at each market, each product type and a lot of things. So understand the psychology of the marketplace. But then, of course, understand your own psychology, your own psychology, because your own psychology will cause you to do things that may really, really mess things up for you. Let me give you one little example. And this is not exactly Prof. Given that, well, it might be profound if you're new to the show, but if you're not new to the show and you've been listening for the last 818 episodes, then you will know that this is not that profound. But even if it's not profound, you know, sometimes we need a little refresher and this is simple. Sarah posted this in our Insider Facebook, our private Facebook group where we do show content. And the Venture Alliance Mastermind group members get to participate and interact in here as well. So Sarah posted this and she said what my local real estate peeps, you know, people, cute. What my local real estate peeps are promoting here in Southern California. Here is one of her Realtor friends looking for some rental income. Three question marks. Well, maybe you'll have to question this after you hear the rest. I have a triplex coming up for 599,000 doll.

With rental income of $3,350. And the property is located in Santa Ana near Santa Ana Lofts, the train station and 10 minutes from downtown. Renters are month to month. Call or message me if you're interested. So far at the time Sarah posted this, it got six likes on Facebook. Now this deal, of course, sucks because first of all, I, with my vast experience, and my experience is pretty vast, so I can brag about that. Nowadays, you know, I've been involved in, well, thousands and thousands of real estate transactions and in this particular area, I know it quite well because we used to have a satellite office for my traditional real estate company right there in those Santa Ana lofts. Okay. Well, actually, this is not one of the nice Santa Ana lofts, part of a downtown redevelopment of Santa Ana. This is a triplex near the Santa Ana Lofts. And when he says it's near the train station, let me tell you, he's probably not kidding. Did you ever happen to see that old Lucille Ball episode? I think it's even in black and white on like Nick at Night or one of those rerun channels. It's where Lucy was in this hotel, well, motel, motor lodge, I don't know, whatever it was called you know, before Holiday Inn revolutionized the world of the motel world many, many years ago, I think somewhere around the 50s, you know, traveling across the country was quite a big hazardous deal. You didn't know where you were going to stay and it could be pretty bad. Anyway, the train went right by and the bed that Lucille Ball was sleeping in, you know, would move across the room. You, A lot of, you know what I'm talking about. You know, this episode, I remember this, seeing this when I was a kid. So yeah, this is right near the train station. So these are month to month renters in some, I'm sure crappy, low end triplex because I can't, I'm, I, I don't know of. And you know, I used to live in Santa Ana. Okay. And then, you know, we had this satellite office there many years later in the redevelopment area of downtown Santa Ana, you know, so this is probably some totally crappy old property. And the tenants are month to month. Are you sure they're not hour to hour like it's a, you know, it's a flop house? Scott, this deal, I mean it's terrible. But this is what people who consider themselves to be investors invest in in these high priced markets that don't make any sense. They don't make any sense at all. And the same invest in the stock market. Now granted, I agree. Listen, you can get lucky sometimes. A lot of people been getting kind of lucky in the stock market recently and a lot of people got lucky in the high end cyclical real estate markets, not only around the country, but around the world as they've had quite a run. But for me, I like the good old conservative cash flow oriented investing. So here's an article that I recently found and where is it from? I don't have the actual article. I downloaded the table and I always want to give the source, but I do not even see the source on here. Oh well, source is S P, Compustat, Bloomberg fact set first call B of A Merrill Lynch. Oh, you can trust them. US Equity and US Quant strategy. Okay, this is a chart I'm looking at from these guys. Chart, really a table. It's a table of valuations. And basically the concept here is 18 of 20 of these indicators of the S&P 500 index, which is probably the best index when you're looking at the stock market, show that the market is radically overvalued. Now when it comes to real estate. And you compare this, what does your host Jason Hartman think?

So ridiculous to talk about yourself in the third person. Isn't that just silly? Remember that? Speaking of memories of old tv, remember Al Franken on Saturday Night Live back in the day? What does this mean to me? Al Franken, and later he became a senator. I think he still is, right? Isn't he a senator in, like, Minnesota or something like that? Anyway, yeah, Al Franken, left wing guy. So look at these metrics with me for just a moment and I'll tell you if they are above average and by how much, because this chart is very telling. Now, I have always wondered one thing, and maybe some of you dear listeners can enlighten me as to this concept. And maybe they're not related, but I've tried to make a connection here, and I'm not exactly sure what the connection is. Here's the connection. When the stock market is down, does that mean money flows out of stocks into, say, real estate? Or when the stock market is up, does that take the tide of money into the stock market? Or is it the opposite? Or is there a lag time? You know, is it six months before or after one is up or down that something happens? Or is it what's known as the wealth effect? Right? So when real estate goes way up and people go. And they harvest the equity and use their home as an ATM machine, which, by the way, is back in vogue. That's coming back, but it's nowhere near where it was right before the Great Recession. So lest you not worry too much because the banks have been far, far more prudent this time, let's give the banks some credit for being more prudent.

Yes. Hip hip hooray to the banks. Because they have been much more prudent this time. In fact, I think they've been overly prudent. Like a dog bearing bones. Bearing his bones for the future. That was a little passage out of the Prophet by Kahlil Gibran. A brilliant little book that you must read. It's just brilliant. The Prophet, you know, this book probably, right? Kahlil Gibran, Am I pronouncing that correctly or is it Jabran? I don't know. I think it's Gabron. Anyway, brilliant little book. Okay, so looking through this little index really quickly before we get to our market profile, because we are on another tangent. Okay, trailing PE ratio, the price to earnings ratio. That is a very good indicator of stock valuation, the PE ratio. And in real estate, what ratio do we like? Is our first metric RV ratio? Rent to value ratio, similar to the PE ratio. All right, so trailing PE, 25% above average trailing GAAP, generally accepted accounting principles PE ratio, 31% above average forward consensus PE, 15% trailing normalized PE, 3% median forward PE ratio, meaning forward earnings or backward earnings. Right, the trailing earnings or the forward earnings. And the forward earnings, of course, are always an estimation that's 20% overvalued. The Shiller PE is, get this, 73% overvalued.

Mama. 73% overvalued. Whoa. Yowza. That's crazy. Okay? The. And I don't even know what some of these metrics are. The P slash BV.

Stumped me again. I don't want to become an expert on the stock market. You know why? Same reason. I don't really want to learn how to play poker or any gambling games at all. Because I might get fascinated with it and I might want to throw my money at it, and I know that will not be wise. Okay? So it's sometimes better to just be a little ignorant about things, right? Because then you won't be interested in them. You know, we're. I think we're generally interested in things we know about and learn about. Right? If you learn about something, you might become interested and you might fall down off the cliff or down the rabbit hole and lose all your money. I got to tell you a quick story since I live in Las Vegas here. I had these clients years ago. They were buying a condo in Irvine from me in west park in Irvine. That's a village in Irvine. And sort of the second phase of west park was being built and I was farming as realtors do a. You know, these new condos. And I remember I had a listing in there and this really sweet older couple called me and I showed them around and showed them some properties and. And took them back to this one property that they called on, and they actually ended up buying the property from me. And, you know, they were. They were just the most humble, just wonderful, decent people. And, you know, probably in their, I'll guess, late 60s, somewhere in that range. Not older by today's standards, but back then it seemed like that was called older. Nowadays it's not, because late 60s is the new 50 and so forth. We've talked about that. Listen to the longevity and biohacking show for more information on that. You know, they. They would talk about, especially the man, because you could tell his pride was kind of hurt over this talk about how they used to own this big, gorgeous property, you know, a couple of acres, I believe it was, in Beverly Hills. I want to. Maybe it was Bel Air. I get those two confused easily. I mean, I know the difference because I grew up in la, but. But anyway, it was like Beverly Hills or Bel Air, I can't remember. We were signing the papers for them to buy this property. And you know, I had written the contract and I was having them sign it. We were sitting there at the, the dining room table. I said, you know, I just gotta ask you, you tell me about. And he wasn't bragging. You know, you can tell when someone's bragging, right? He wasn't br at all. He was just talking about his life and the wife did as well. I said, you know, whatever happened, you had this big mansion in Bel Air, Beverly Hills, whatever it was. And he handed me his pen and I looked at the pen and he didn't say anything. He just handed me the pen. And, you know, when I asked what happened and the pen had the name of one of the big Las Vegas casinos, I can't remember, maybe it was MGM or something like that. And he says that the, that's where all my money went. So, you know, sometimes it's better not to learn about something, right? Because then you'll get interested in it and think you can beat the system. And nobody beats the house in the stock market. That's that the house. That's the insiders, right? The brokerage firms, the investment bankers, the high frequency traders, all the insiders. Warren Buffett, he's an insider. Obviously he does not play. Don't take advice from Warren Buffett. You'll be, be absolutely stupid if you do, because Warren Buffett does not pay the same price you pay. Okay? He's an insider. So, you know, in real estate, there really isn't a house, if you will, there isn't a casino because it's fragmented. So I always say embrace the fragmentation. The, there's only, there's a counterparty. And see, real estate would be more like poker. See, in poker, you're not really playing against the house, right? You're, you're playing against the other players more. And you know, again, I'm no expert at how these games work, but one of our venture alliance members, Keith, he's a professional poker player and he does incredibly well. I said, well, you know, how does the casino make money? How do, how do they, how do they make money off poker players? Because whenever you go into these casinos, the poker is always like in the kind of the back room, you know, the poker tables. And it's not real plush and lush and nice like the rest of the Casino. And he, and he says, well, you know, they just charge you like $30 an hour to sit there and play and rent the chair. Basically. I think they get a very small cut of the overall pie or whatever it's called. The turn, the river. I don't know. They have such funny names, right? And see, I do know a little bit, just a little bit, a tiny bit about this. So in real estate, because it's so fragmented and I always say, embrace the fragmentation. There is no centralized house. There's no institution or group of a bunch of institutions. On Wall street there is, right, okay, back to this little chart. So that's one of the other wonderful things about real estate. Trailing peg forward, peg overvalued. 12%, 18%, 16%, 30%. What's this 30% one? That's a 30% overvalued. That's the P.

OCF. What the hell does that mean? I have no idea. But check this one out. This is the most overvalued metric of all. And this is called the S and P 500. In WTI terms.

What is WT? God, I knew what WTI meant. Can't remember. Okay, but here's a good one. And I like this one. Okay, S&P 500 in gold terms. Remember gold? Although I don't like precious metals at all. But I do like using. I don't like them as an investment, I should say. But I do like using them as a measuring stick. And as a measuring stick, the S and P is 20% overvalued compared to gold. If you price it in gold, right. And then here's the last one. I'll just share with you real quickly. S&P 500 market cap versus GDP of the country. Right? And this is pretty bad. Overvalued by 85%. 85% overvalued. So if you are in the S and P right now, you better be careful. Okay? Now here's the thing about bubbles. You never know when they're gonna pop. Look at Los Angeles is overvalued. San Francisco's overvalued. Miami's overvalued. Boston's overvalued. New York's overvalued. Washington D overvalued. And many of these ritzy areas in Connecticut are overvalued. And a bunch of other areas, right, they're overvalued. You know, all of these high flying cyclical markets around the planet are overvalued too. But does that mean they're gonna crash tomorrow? I don't Know, what do you think I am? I don't have a crystal ball. I'm just guessing like the rest of you, making intelligent hopefully guesses. And a lot of my predictions have certainly come true over the years. But hey, you know, you never know. I mean, look, get a piece of chewing gum, put it in your mouth, chew it a little bit and blow a bubble. Can you tell when that bubble is going to pop? I mean, you know, I bet your kid, if you have kids, can probably blow a really big bubble, maybe 5 inches in diameter, 8 inches in diameter. Right. And maybe you or I can only blow a bubble that's two or three inches in diameter. Right. So you just don't know how big the bubble can get before it pops. But you do know that it will definitely pop for sure? Absolutely, positively. There is no question the bubble will pop. The question is when and by how much. Right. So that we don't know. But if we want to be good, conservative, prudent investors, we gotta stay away from bubbles and we gotta invest for yield. Because over the course of time, if we are yield or dividend same concept type investors, we know that we will win the game as the fortunes are made and the fortunes are lost in the cyclical markets. We're the slow and study, you know, it's the tortoise and the hare concept, right. We're the slow and steady racehorse that just runs with endurance because life is a marathon, it's not a sprint. Life is a marathon, not a sprint. Okay, so you can do you know, there's a great rush lyric. Rush is this of course, great band. The most talented, brilliant band ever in all world history. Not that I'm given to big huge statements, but I guess so. Anyway, the lyric goes like this. You can do a lot in a lifetime if you don't burn out too fast. But first you've got a last something to that effect. And that's the point and that's the. To the slow and study goes the race. It's always that way. We know that. Anyway, let's get to our surprise market profile. Check out jasonhartman.com for properties. Check out the resources there and all the educational products. Hartmaneducation.com also check that one out and realestatetools.com for some handy dandy software. Let's get to our surprise market profile. Here we go.

Hey, it's my pleasure to welcome our local market specialists for the Oklahoma City market in that greater metro area. And we're going to talk about some of the reasons that that this oil town, well, that's one of the components of it, but there's a lot more to it than that. Is a good place to invest and just dive into some of the dynamics of the Oklahoma City metro area. Some target properties, target tenants, what to expect in the future and what kind of investments can be had there. Chad, welcome. How are you?

I'm well today. Thanks for having me on, Jason. I appreciate it.

It's good to have you. So tell us about the Oklahoma City market and, you know, what's going on there and what the future will hold and target properties and, you know, just give us an overview.

Yeah, absolutely, absolutely. So one thing that most people don't know, Oklahoma City as a metropolitan area is one of the largest land cities in the United States. It's comprised of 642 square miles, but only about 53% of the Oklahoma City metropolitan area is actually developed at this point. So we do have a lot of farmland that leads us to a lot of the new construction that we constantly have going on here as compared to other parts of the United States. So new construction is definitely something that focuses in terms of the economy here.

Yeah, no question about it. I own an apartment complex with one of our clients in Oklahoma City and it's, it's been good so far. You know, we just picked it up last year. It's a big complex, but 139 units there. And so I like that market. We tried to get into that market many years ago, a couple of different times and just couldn't really find the right team to there at the time or the right properties. It's always a combination of the two. And you know, one of the things I'm kind of attributing that to, although I'm not sure how much of a factor this is, but you know, how does the change in oil prices impact your market?

That's a good question.

Not to the extent of what people would think. I mean, it is one of those things to where the oil prices dip down, everybody stands back, takes a gas, but it doesn't affect our day to day commerce. We've had no slip in the housing market, no slip in the retail market. So it's one of those things we definitely, everybody takes notice when the large oil and gas companies go on a hiring freeze. But until there's big rounds of layoffs like it was in the last oil bust back in the late 80s, I mean, it's really nothing compared to that. Oklahoma, statistically, we've never really had a market to burst Per se. Even back in 2008 when everybody else was in a downturn. Oklahoma City, Oklahoma as a whole continue to plug along. 2 to 4% appreciation, constant climb, steady increase, never got out of control. But it was never anything that was going to be drawn back either. So it's a great area, It's a great place.

The interesting thing is on that price issue is that as the real estate market has, you know, dramatically recovered, oil prices have actually softened. So those have been kind of counter. But I remember visiting Oklahoma City on one trip just as we were kind of, I guess, you know, it depends how you look at it. But coming out of the great recession, we just didn't find that much in terms of great deals there. There weren't, you know, as many foreclosures as we wanted to see. You know, these are things at the time we were the typical bottom feeders, right? We were looking at all these different markets around the country and just looking for these great deals. Now that was when oil prices were real high. So what's happened now is kind of interesting. Oil prices have actually softened, but real estate prices have gone through the roof and rents have too. Rents have really skyrocketed. You know, just. Is there any commentary you have on that?

Yeah, definitely. Being we're actually the largest buyer pre foreclosed homes in the state of Oklahoma. So on average, Oklahoma as a whole averages about 1600 less pendants every month. We're able to capture anywhere from 30 to 40 of those houses every month throughout the state. So it is one of those things unless you have the. And I don't know which angle you guys were going for to try to pick them up. If you're buying them as REOs or if you're trying to buy them as bulk tape or if you're buying them into less pendants or the pre foreclosure status. I mean, there definitely is the inventory. But you know, luckily with the experience we've had here, you know, we're going into our 15th year, I'm going into my 15th year in the real estate industry and it's just time under tension. I think a lot of the times the longer that you're in a market, the more you become known, the more, you know, you push, put your time into the market, the more stuff starts to flow. So I mean, on average, you know, with what we do both on our retail flip and what I mean by that is we go and renovate, sell to a retail end buyer or even on our sub market where we consider long term Broad buy and rehab them and hold them. I mean, you know, we'll average 30, 40 deals that we can potentially get every month for either ourselves or for your investors. That would work.

So, yeah, fantastic. Okay, so talk a little bit about some of these sort of bullet points, if you will. I'm looking at one of your presentations and you know this, you know this rapidly expanding market, obviously you talked about that. Rents compared to purchase prices are excellent. The RV or rent to value ratio, they're very good. There's a good solid demand for rental units. Income is high relative to home prices as it is in several of our markets. One of them that comes to mind is Indianapolis. That's a really good market in, in terms of that stat. And we've done hundreds of transactions over the years in Indianapolis, but it's the 17th fastest growing city in the country according to Forbes, seventh best in population growth per Bloomberg, second best place to start a small business. Business journal. You know what, what other things would you like people to know about these types of factors?

Absolutely. Because we have such large growth in our new construction sector. When I was first approached about the turnkey model for potential investors, I, I asked your company said, hey, tell me exactly what your buyers are looking for. Number one, obviously cash flow, apparently. Number two, low crime area. Number three, great schools, great location. Well, the reason these builders and developers are building in the new construction where they're building at is because it's in the low crime area, it's in the best school districts. So what it's going to do for your investor or for anyone that comes here to the Oklahoma market is allows a quicker rent out and they vary, you know, for our new construction, most of our stuff at about a 0.8 multiple off of purchase price.

The renovated market, you know, you're typically looking at a 1 to a 1.2 on average. But it's a great area. It's a thriving economy. It's a great economy. You can get into it at pretty low entry point, comparatively speaking, to most parts of the United States as well. And like I told you earlier, it's constant appreciation, 2 to 4% annually, which doesn't sound sexy to a lot of people, but if you cultivate that over 10, 20, 30 years, as most of these investors are going to hold these homes, it makes sense long term because like I said, we don't have that large economic downturn that most people typically experience when the market bursts.

Well, and interestingly, you have an insulator from that downturn, which, which is exactly what happened Several years ago where you saw oil prices being very good, very high. And when I say good, I mean it in that way. You know, the, the real estate market was, was not very good. And so, you know, but it's still kind of buoyed your, your market, which I thought was quite interesting. You know, just a little aside here. What do you say to people that are concerned about, you know, tornadoes? I mean, that's one of the, one of the things that you have to worry about in the, in the Midwest, of course, and, and some areas even in the Southeast. But you know, interestingly, tornadoes are very surgical. As terrible as they are, you can have one house destroyed in the, all the houses around, it could be just fine. Right?

Yes, they're, you know, it's one of those things when you've seen them as many times as I've seen them, you, you get a little mute to it. You don't really notice them as much. But anytime I've ever had someone from out of states and the tornado sirens go off, you know, they, you would think that we're getting bombed and we're in a war.

Yeah, they are. They are definitely. You know, I've never lost a house to a tornado, if that says anything. I only know a handful of people that have ever lost their house in a tornado. And that's what's known a lot of different people. And you know, the interesting thing, enough tornado alley, believe it or not, I don't know, you guys probably obviously don't hear about as much out there, but it's really shifted east. We don't get near the tornado traffic that we did in years past. About the past three to five years, it's really started to shift more to Arkansas and Louisiana. We used to average, I mean, Jason Beckman as a kid we would literally have tornado once a week, every other week in some part, you know, it's in about a 50 mile radius, hundred mile radius of where I lived. And really the past, like I said, five years we haven't had that. It's the same thing with the Health Corp. Hell, predominantly would come through Oklahoma twice a year in total roast. There's a lot of insurance companies that pulled completely out of the Oklahoma market as a whole because they couldn't sustain the annual losses. And again, past three to five years we haven't had those. So unfortunately for a lot of the roofing companies, it's forced them to go out of market or to close up shop here in Oklahoma. But on a good note, for a Ford investor, the insurance Pricing has come down as well because of that. So pros and cons.

Yeah. So tell us about the insurance prices there. I mean, I assume it's not nearly as challenging as is in some of the hurricane prone areas. Give us an insight into that.

Oh, no, no. The insurance here, it's, you know, obviously depending on the location, how close you are to a fire station and whatnot, it averages about 1% of the, of the gross sales price for the value of the home on average, depending on the location, how rural you are. But 1% is pretty average.

Okay, good stuff. Okay, so take us through, you know, any other highlights you want to share, share about the metro area in terms of employment, schools, you know, whether or not you believe the market is undervalued or not. And then let's talk about some target properties and kind of target tenants. Who, who occupies those properties?

Yeah, absolutely. Back to the growing markets. I mean the main areas that we're looking in for the value add potential are going to be in the outlying suburbs of Oklahoma City for the new construction side that we want to talk about and approach. So they're going to be in areas that are up and coming, quote unquote. School districts, school districts are already great and established, but there are towns that might have been, you know, 15 years ago, they might have been a 10 to 15,000 population town and now they're going to 30 to 35 to 40. But they're all still tied in obviously to the Oklahoma City metropolitan area. So it's not like they're rural or anything like that. So if you can get ahead of those pricing curves or get into those markets, as you well know, before they really start to rapidly grow and expand, the value increase for the appreciation is going to be, going to be great for the potential investor long term there. Like I said, the whole reason why new.

Let me just interrupt you for a moment if I could. You know, one of the things that I've talked about many times, listeners on the show before and I talk about it in depth at my Creating wealth seminar, which by the way, we have one coming up in Memphis soon. When we look at these linear versus cyclical markets and the fact that in the, in the, you know, in the cyclical market you give a lot back and when you give a lot back in the downturns compared to the linear market markets that don't give much back, but of course they aren't the high flying markets with a big appreciation, you know, over the long haul, you generally do a little bit better in the Linear markets, the boring markets that never make the news. Right. So I just wanted to point that one out and I've. I illustrate a couple comparisons of that on prior episodes. But go ahead with what you're saying.

No, I mean you're nailing it right on there. Like I said when I first talked to most people about the appreciation rates for Oklahoma as a whole hold, you know, they man. Well, but then I go back to tell me exactly the cyclical market in the downturn. I mean it can affect you adversely. So it is a long term play, it's a buy and hold, it's a long term plan to get thing. The constant appreciation, constant appreciation that Oklahoma provides over the long haul is better suited for an investor like you guys have. So.

Yeah, good stuff. Talk to us a little bit about something that you really stress in your presentations, which is the home home value to income ratio. And you look at, you know, the median home value, the monthly housing cost versus the income in the area. And I assume you believe that's a predictor of appreciation, right?

Oh yeah, absolutely. Anytime you follow the money, it's going to naturally raise the value. Everything comes along with that. I mean the property tax sector for the schools, the new construction for commercial, for retail, for office, anything that's going to help drive more income, more sales tax into the area, definitely.

Okay, so tell us about that. You know, give us some examples. You've got, you know, in some different areas, in the greater metro area, you've got some examples of these home value to income ratios. Talk to us about that.

Well, I mean, it's as simple as it looks. So the home value for the average home in Oklahoma City right now is about at $147,000, give or take. It's about most, most of the markets in Oklahoma about a 2 to 1 ratio home value to income ratio. So you're basically saying your average income for the state of Oklahoma, household income on a house that's valued at 150 household incomes at about 75,000 household.

So that's pretty darn affordable, isn't it? Oh yeah.

I mean it goes on the opposite end of the scale as well, Jason. When I have friends or family members or business associates come out and I can show them what they can buy out here for, you know, let's say a million dollars. Even if they're looking for a primary residence or something, people are shocked when they can see what they can buy for 150 or $200,000. You know, houses in Southern California or up in the parts of Oregon or Washington that we have relations in as well. I mean, they could go for easily 750,000 to a million dollars out there. So, I mean, you definitely get the value of your dollar. Definitely goes a long ways. But like you said earlier, you have to put up with the risk of tornadoes as well. So there's a given to take this.

Well, I.

You know, if you're in California, you got earthquakes, so everybody's got their thing, right? Yeah. Well, at least most places have their thing.

I'll take the beach, though. An earthquake any day of the week.

Yeah, I don't know about that yet. Yeah. Will you take the taxes? You take the 13.5% taxes.

The fact that the part of Florida and Texas that's more appealing is the state income tax.

Yeah.

So if I go anywhere, that's where it would be.

Definitely, definitely. I think if you like the beach, you better go to Florida because it's a much less expensive beach than it is in California. The interesting thing, too, is just to bag on California for another moment here, since I spent the vast majority of my life there, you know, unfortunately, is that there are all these, these hidden taxes. And I don't mean just in the cost of housing and the cost of everything you buy. The cost of California is just imputed in everything you buy. Right. Whether it be insurance or a meal at a restaurant or going to the grocery store or anything. Virtually anything. It's just everywhere the cost. Right. But the other thing about it is there's all these, you know, the government is so desperate for money there that they've gone into business against their citizens. And now this is true everywhere because the governments have just learned that they, they can get greedy and, you know, they can make all sorts of money giving their citizens parking tickets and traffic tickets and all these things. You know, there's all these little hidden taxes. I, I remember talking to a, a taxi driver in Newport beach once that said he got a speeding ticket. It was almost a thousand dollars. Wow. Wow, that's just incredible.

That's insane. Yep.

Yeah, Yeah, I know. It's amazing. Okay, so any other areas you want to highlight in terms of these home value to income ratios?

No, I mean, it's pretty cut and dry. You know, like I said, most of the areas, it's as simple as that. The value of the home, it's usually about a 2 to 1, 2 to 1 ratio to the income, which is good, low, affordable housing, you know, for a lot of people. So outside of that, like I said, your dollar Stretches a lot further than it does in other parts of the United States. And that's both for primary occupancy and also the rental market, too.

Yeah. Good. Okay. So one of the things I'm always telling our listeners is that I'd rather have a B market in terms of the marketplace itself and an A team in that market versus A a B team in an A market. Right. So it's not all about the market. A lot of it is about the relationship with the local market specialists we have in that market, about the way they manage their operation, their customer service, their responsiveness. You know, many of our local market specialists, they have made, you know, millions of dollars working with us over the years. And some they just blow it, you know, it's just. They just haven't. They just messed it up and, you know, we couldn't keep recommending them. Tell us a little bit about your operation, your team, you know, any of your business philosophies or anything like that. You want to share?

Yep. Glad you asked that, actually. So, first and foremost, customer service is the top priority. We do this for the customers first, for the profit second. It has to be that way. It's a value that is enriched in everyone that touches any of these properties or anyone that I do business with. They know the client is always first, the income is always second. Always. It has to be. Secondly, I would never put someone into a property that I wouldn't. That I wouldn't own myself. Okay? So if it's not a market or a subdivision or a school district that I personally don't own or would not own property in, I wouldn't recommend it to anybody else. I wouldn't put someone into a bad investment long term. It's not the way I operate. It's not the way I was raised. It's not the way I do business. And I think that your buyer and yourself could appreciate. In Oklahoma, it's a small market, okay. Most people say it's six degrees of separation. In Oklahoma, it's about two. Somebody knows somebody. That's just the way that it is. So it doesn't take long to get a bad reputation in town, in Oklahoma City, or in Oklahoma as a whole. So being in business close to 15 years now and handling all the different aspects of real estate, from the brokerage to the property management to the construction side, I don't think we could have gotten as far as we've gotten without putting the customer or the client first. So the value has to be back to them, bar none, always. And Again, where I see and what I feel, where a lot of people miss. You were talking about your other local market specialist that you can no longer recommend. It's probably the same way guys that are here that quote unquote rehab properties just because they put down some linoleum tile and paint the walls is considered renovated. And obviously you and I both know that's not the case. So anytime I do an existing structure, I want it to look, feel and smell like a brand new house when you're standing inside. Okay, so we touch everything from upgrading the electrical panel, new PEX plumbing throughout. If the roof is less than or older than five years, we replace the roof. If the windows are older than 5 years, we replace all the windows. If mechanicals, H vac are older than 5 years, we replace all the mechanicals. Hot water tank, it's completely new. Base case, trim, molding, fixtures, appliances, countertops, everything is new. On the inside. You have the look and the feel of a brand new house. Even if the house is 40 years old on the inside. The only way you're going to know any difference when you're pulling up and you're driving through a mature neighborhood. It's the same way on our new construction turnkey model. I wouldn't go into or put someone into a new construction property that I wouldn't want to own myself. Whether it's the school districts or whether it's the quality of the construction or whether it's the quality of the materials. I wouldn't put someone, a client into a property long term that I wouldn't own myself. So I can tell you, bar none, the value of our company, the values that we instill to everyone that touches our properties is the customer's always first, the profit's always second.

Yep, yep, Good stuff, good stuff. How do you handle management and the.

Property management side in regards to what exactly? We do both short term, long term property management.

We've done that now for as part of our real estate brokerage package. We started off obviously managing just my own personal assets and then we grew into one of my business partners assets. It's just grown from there. We do a little bit different.

I assume I can say appfolio on the podcast, but we use the appfolio system to everything on the property management side done through there. The benefit about it to a investor, the reason why it's important to them, it can itemize out every property on a monthly basis for all their, all their payouts. Come the end of the year they can show all their expenses that may or may not have been on the property throughout the year. It can track all the guest cards or inquiries that they've had on the property. If it's in the lease up position, they can see the amount of activity that they're getting on it. Another benefit too is the system actually reports to the credit bureaus. So it's a selling feature for potential tenants to be able to help them build their credit long term by renting through us. It also allows them to pay online, either via check credit card, or they can pay at local Ace cash advance stores throughout the state as well if they don't want to take the time to mail something in. So there's a lot of upside there. But property management, the way that we handle it, it's, I mean, it's all encompassing really. Your investor, once they purchase and buy out here in Oklahoma, they really shouldn't need to worry about anything. And that's the number one priority and the number one goal. It's to create, quote, unquote, what I like to call mailbox money. They go to the mailbox and they collect their check and they deposit it. And that's about all the thought they give to their properties here in Oklahoma.

One of the things we're always looking for and you know, depending on the offerings in the market, we'll, you know, we'll veer a little bit on this, but we like to try and be in what we call landlord friendly markets when things go bad. And they inevitably will. Folks, life is, life is that way, okay? When things go bad and you get out, you get just a rotten egg once in a while, a bad tent, you gotta evict them. How hard is it to do that? You know, if there are damages, if they owe you money, how hard is it to collect? Talk to us a little bit about that just quickly.

It's a very landlord friendly state. I'll start by saying that. So obviously, first and foremost, because we have the proper leases in place, all the proper signed documentation, which you think goes without saying that obviously you'd be surprised in eviction court how many property management companies don't have the proper leases signed and in place.

Outside of the basics, necessities to provide heat and water, there's not a whole lot that goes into more great detail in terms of landlord responsibilities. And so one of the things, if it does come to the point, you know, we average out of our portfolio maybe about 1%, five day notices a month, 1% of the entire portfolio will have to do a five day notice. And for the listeners that don't know, obviously if they don't make the rent by the fifth day, we send out a notice to pay now or we're going to file an eviction against. Then out of that, we might actually have to go to court on maybe one a month, two at max, you know, three on maybe a really bad month. So not a lot. There's not a high eviction rate. Like I said, it's a small market. It really is, even on the rental market. So people know, you know, it's just a matter of time. You can only do wrong by so many people. But one thing also, we do too, we don't allow previous evictions. So we never lease to someone that has a previous eviction. And that's not to always say that the past is always.

An absolute indicator of the future. But if you have two evictions in the past 36 months, we're not going to take that risk in the future with them.

You know that two and 36 months is probably an issue.

Yeah, I'm being extreme, but you know what I mean, you'd be surprised. People will still rent them. But once it's a 30 day turnover to be able to reclaim the property and you are, we charge the max, the maximum per diem rate for.

For the default under state law. And then what we do is we partner with a collections company and we turn over all the accounts to them to be able to either garnish wages or stipend bank accounts or whatever the case might be to be able to reclaim the lost income.

Yeah, yeah, good stuff. Good to hear. Okay, well, it sounds like you definitely know what you're doing in that aspect and in, in the other parts of it. Let's wrap it up. Anything you want our listeners to know. In closing, of course, they can contact any of the investment counselors at our company through jasonhartman.com or if you already have an investment counselor you're working with, just reach out to them. We will be glad to help you with the Oklahoma City market in that greater metro area. But just any closing thoughts?

Really, more than anything, what I'd like to say is I know a lot of people have expressed concern about it being a new market. Like you'd mentioned before in the past that you tried to get into this market. Just didn't happen. I would, I would highly encourage and challenge anyone to give Oklahoma a chance, come out here and let myself and my team show you around and show you what all we have to offer. And I think you'll be pleasantly surprised not only by the stable values, but also on the. In terms of the value of the property that you can buy for the money. I challenge anyone to do that.

So I want to tell listeners one of the other things they're going to find if they come out and tour your market. You know, a small percentage of our listeners do that, you know, most by sight unseen. We really do like people to go there whenever possible. You know, we may be arranging a property tour in the future, but let me tell you, the first time I ever visited Oklahoma City, the thing that surprised me the most, you'll be looking through a neighborhood, just a nice little subdivision, and you'll see oil wells in the middle of the subdivision. That's just the funniest thing. You don't see that anywhere else, you know?

Yeah, yeah.

Yep.

You'll be surprised where they can find. Find a location that you would never think possible. You'll be driving down the street or, you know, all of a sudden they'll put up an oil derek behind a gas station or they'll put one up just in the middle of a random field that there hasn't been one there ever, and they just randomly decide to open back up a well there. So it's crazy, for sure.

Yeah, it's. It's more profitable to put the well there than the house for the developers.

Definitely more. More profitable long term.

That one just really surprised me when I was there the first time, but good stuff. Hey, thank you for joining us. Check out the properties on Jason Hartman.com. contact our investment counselors. They'll be happy to help you with this market. And thanks for listening.

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