CW 896 FBF - Joe Goncalves – Achieving Financial Independence In Real Estate – A Client Case Study

This show is produced by the Hartman Media Company. For more information and links to all our great podcasts, visit hartmanmedia.com welcome to this week's edition of Flashback Friday. Your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present and propel you into the future. Enjoy.

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.

Well, I'm back home from Lost Wages, Nevada. That's Las Vegas, pardon the joke there. I was at a conference there for the last three days and gosh, I'll tell you, that city is, you know, in some ways, of course it's cool. I don't need to tell you the cool things about it. Everybody goes there for great shows and in terms of the man made environment, I think the architecture is pretty awesome of a lot of these new hotels. But I'm not a person for any more laws. You know that about me, right? As a libertarian, I don't want to see the government make any more laws. But I should tell you, it is so depressing to see the way these casinos are, are ruining people's lives. My friend was telling me there that he read a report about how every time a casino opens in an area, the divorce rate increases, the suicide rate increases, poverty rate increases and just tons of social problems. He says that the increase is not minor, it's dramatic. You know, I remember I get up fairly early most of the time. The first day I was there, I was down and, you know, ready to go. Our conference started at 8am So I was down in the casino and I'm not a gambler. I wasn't gambling, but I was just looking for a place to eat breakfast at 6:30am and I saw people who were sitting at slot machines. Bunch of bad habits, of course, smoking cigarettes, sitting at slot machines. This is at Planet Hollywood by the way 6:30 in the morning. It's like misery. It's. It's terrible what these casinos are doing to people. So between that and the Wall street crooks and the pharmaceutical industry and the government, we got a lot to watch out for, don't we? A lot to watch out for, for sure. Anyway, I've had some technical problems with my microphone lately, and so I decided to record this episode. And by the way, before I tell you where I am, save the jokes, because I know you could easily make a joke about this. Okay, I get it. I am recording this epis in my closet. Yes, in my closet. Because the sound is pretty good here, you know, when you've got a bunch of padded clothing all around you, it really is good for audio quality. Speaking of audio quality, that kind of leads me into another topic, and I guess I will formally announce what I announced at the Memphis property tour a few weeks ago, and that is that I am actually moving. Yes, I'm moving to the Socialist Republic of California. Moving back after four. Four years in Arizona. And it has been a fantastic four years here. I really do like Arizona. I've been in denial about this move. I have not wanted to do it. I have been putting it off. But here's the story, just in case you didn't catch it from a prior episode that I did in, I believe, January when I was in La Jolla, that is that my accountant, last October, I filed my tax returns on the very last day you possibly could. And my accountant says to me, jason, you do realize that you have a $738,000 tax write off you haven't taken? And I said, no, I did not know this. What are you talking about? And he goes on to say that, well, you took the write off at the federal level, but you have an accumulated write off in California that you have not taken, and the state of California will give it to you. But because you moved during your audit, you don't live there anymore. So there's no way for them to actually give you the write off because you don't earn money in their state. And I thought, oh, my God, this is the biggest irony of the world. The person who sort of famously left California complaining and grousing about paying too much tax. You know, you add into the two major costs, right? Taxes are the single largest expense any of us will have in our life. And what's the other largest expense? It's our housing expense. Right? And so living in California, when I left California and moved to Arizona four years ago, I probably saved pretty easily about $300,000 a year in taxes and housing expense. I just love that. I mean, when you live in a lower cost place, you can accumulate wealth so much more quickly. Really, really think about these things that, you know, you spend money on in your life that I sort of didn't think about for years. Why do I have an $11,000 mortgage payment living in Orange County, California? That's outrageous. It would have been so much such a better deal to just rent an expensive property, of course, because I could have rented that same property for 4,500amonth and had all the same, in fact, more enjoyment out of it because I wouldn't have to take care of it and be responsible for the repairs. You know, of course the whole show's about real estate investing. So I love owning lots of properties. And the metric is, by the way, and you know, we've talked about this in the past, but the metric is if you live in a house that is worth over 150 or over $200,000, then it's time to consider, because the rent to value ratio will be very much in your favor and the higher price that house, the more favorable it becomes. Then it's time to consider, you know, should I be a renter of the personal residence and an owner of as many investment properties as I can buy because I want to own things that have favorable rent to value ratios for me, the owner or the landlord. And I want to rent things that have favorable rent to value ratios for me, the investor, owner, landlord. Did I say I may have mixed that up? You get it right? As a tenant, you want to rent when it's a higher end property, and as an investor you want to have lower end properties. Probably now, given the time of this recording, about $100,000, give or take, that you rent to other people because that's the way that you arbitrage. Remember, arbitrage is really just exploiting the differences in things. That's my elementary school definition for arbitrage. Remember, I do have some funny definitions for things I call derivatives. Those sophisticated financial instruments that should make us all run for the hills and scared to death that Wall street may collapse our economy. I call derivatives. Here's my definition. You ready? You've heard me say this before on the show, but not for a long time. The definition of derivatives, maybe, you know, maybe someone can just go and enter this in Wikipedia and cite me. This is Jason Hartman's derivative definition. The thing about the thing. Yes, derivatives are the thing about the thing.

So anyway, Arbitrage, exploiting the differences in things. You know, really elementary definitions here, but that's really what they are. I mean, my definitions are accurate. So, yes, I am moving to San Diego here very shortly. So there is my formal announcement. I got a really nice place. It's almost 2,000 square feet. It's only two blocks from the beach. It's got an ocean view. It's a little bit obstructed. It's not like a panoramic ocean view. I wish it were a little better, but it is pretty good. Nice walkable area. So I'm really, I'm really kind of excited about it. Look, the government, the state of California is basically paying me to live in California, so I can live there for free for about a year, maybe two years, depending on how it all pencils out. And that's not a bad deal. I would love to get something from the state of California. I've certainly given them enough over the many, many years that I lived there. And guess what the price of that place is that I got. Well, you know what? Maybe I just won't say it, okay? Because I rented and I think it was a much better deal than buying. The realtor who helped me kept saying, why don't you buy something? And I said, because it doesn't work. The numbers don't work. It doesn't make sense to buy anything. Today, our guest will be a client and we're going to do a case study. Another case study. And folks listening, we would love to have you come on the show and tell your story. Case studies are great. Again, we know. And our listeners are mature people, sophisticated people. They know that income, property is not perfect. It's just better than everything else. So what? Before we get to our case study, I'll just share with you real quickly here an article, for what it's worth. Worth. And I kind of say for what it's worth because, you know, everybody's always pitching their own thing, of course. Right. And we've got a. We've got to be on guard for that. And the, the spin doctoring. I'm. I'm sure there are some who think I do it too. I. I try not to, but, you know, we all fall in love with our own ideas. Right. It's. It's just part of our nature. So the Realtors Association. Yes, nar. The national association of Realtors, the trade group that is allegedly the largest trade lobbying organization in the world. I've heard. I don't know. I'm kind of wondering if that's true. When you look at like teacher unions, they're pretty big. Unfortunately, the nea, the National Education association, who, Steve Forbes, who's of course been on the show, Steve Forbes, called them the National Extortion Association. And I would agree, you know, teachers are great, love teachers, but all the bureaucracy that's been built around our public school system and what a total scam that is, and, and of course the leftist solution is, well, let's just throw some more money at the problem. No, let's not throw more money at the problem. Let's throw less money at the problem and make them more innovative. The price of education should be dropping, drop dramatically because of all the technology available. I mean, you know, you want to get educated, go to the Khan Academy website. I donate to the Khan Academy, or I should say my charitable foundation donates to the Khan Academy. If you have an extra seven minutes, you can learn about quantum physics or organic chemistry or trigonometry or, you know, differential equations or whatever you want. There's some great stuff on there. And guess what? The price is free. Not bad. Anyway, where was I going? National association of Realtors article, tangent alert. They are predicting that prices will increase slightly faster than they did in the last 12 months coming up in the next 12 months. So they're saying prices are going to increase more quickly. We'll see if that's true. You know, I'm not really doubting that. I kind of think, think NAR is probably right this time. We'll see how it works out. But what's interesting, they've got a little interactive map here that I'm looking at and it says the map below shows the median expected price change in the next 12 months for each state based on February 2015 to April 2015 surveys. Realtor respondents from Colorado had the most upbeat price expectations. Now wait, calm down. Before you go saying, Jason, why aren't you talking about the Colorado market? Look, we have properties in Colorado. We haven't really done much business there. Many of you listening have purchased through our network in Colorado. And by the way, I love Colorado. And maybe that's, I don't know because I'm such a big John Denver fan. Colorado is a beautiful, beautiful state. The problem is the prices are too high. They don't to want work. You know, Colorado, it's. It just. Well, and I shouldn't say Colorado, I should say Denver metropolitan area. It just got too expensive. You know, same thing happened in many markets. Phoenix, where I am right now, in my closet, that market got too expensive. As well. So again, we are area agnostic. When something makes sense, we'll be recommending it. When it doesn't make sense, we're going to recommend something else that does. If you have a property in one of these markets, like Phoenix, like Denver, hold on, just. You've got a stabilized property, you're doing great, you've made some money, congratulations, thank you for being our client. And just sit tight, keep your properties rented and just manage your managers, get your nice return every year. You're probably making a good 35, 40% annually on your investment. All things in, you can go to jasonhartman.com and look in the properties section and look at those performas. Well, many of those performas have been dramatically exceeded in many of our markets over the past several years. Everything's worked out better than we thought in some of these markets and sometimes it works out worse. You know, everything's individual. It's funny too, when I talk to people, they ask me questions, well, you know, what's your average for this and that? You know, how's this going to work out? And unfortunately, I can't answer a lot of those questions because everything is so individual. Every property is individual, every circumstance is individual, every tenant is individual. It's a very fragmented business, as you well know, because we talk about that a lot here on the show. Anyway, so the median price expected growth at 6% followed by Washington D.C. the capital of free government bailouts. Boy, that has done wonders for that market. Obamianism has done wonders for property owners in Washington D.C. and it has hurt property buyers in Washington D.C. when you start throwing out government money. And every, every person, every business person on the planet is flying into D.C. to get their share of the government pie. That's the kind of thing that happens, okay? But again, you can't get good rent to value ratios in Denver. Certainly you can't get them in Washington D.C. or do better in Denver. You know, a lot of these markets, they just don't work okay. Price expectations were also upbeat in Washington, Oregon, Nevada, Florida, Georgia, Michigan, Hawaii and New Hampshire with a median price growth expected to be 4 to 5%. With oil prices still at a slump, Realtors expected price increases more modestly at a median price growth of 2 to 3% in North Dakota, Oklahoma, Wyoming, Louisiana. In Texas, where the economy is more diverse, diversified, the median expected growth in prices over the next 12 months is about 4%. So there you go, there you have it from the realtors. And you know what? I have no love for the national association of Realtors. I criticize them often. We've had their chief economist, Lawrence Yoon, on the show before. I got a couple of pieces of hate mail on that one. One guy wrote in, jason, why did you have this tool? Why did you have this tool on your show? They're promoting their own thing, obviously. So, you know, anyway, it's whatever. Remember, you're listening to Flashback Friday. Our new episodes are published every Monday and Wednesday. It is what it is. But this time I think this is probably a fairly reasonable estimate of what will happen over the next 12 months. But overall, it's going to increase and it's going to increase at a faster pace than it did over the last year, according to the national association of Realtors. Well, I had a couple more things to share with you, but as usual, I've gone long. Let's get to our guest today. Our client Joe has purchased, I believe, nine properties from us. He's been with us for years. And we've got him and Sarah, the investment counselor, Sarah, who you've, of course, heard on the show before in this segment. So let's dive in and hear what they have to say. Hey, it's my pleasure to welcome one of our clients to the show. It's Joe Consalvis and his investment counselor, Sarah are with us. And we just want to hear a little bit about his case study, the Good, the Bad and the Ugly. And he's got, I believe, eight or nine properties now and has continued down the path of real estate investing and retirement and financial independence through real estate. So, Joe, welcome. How are you?

Good. Jason, how are you?

Good, good. It's good to have you. And we've got Sarah here, too. Sarah, are you with us?

Yep, I'm here. Thanks for having me.

Great, great. Joe, tell us a little bit about your story. You originally, I think, heard about us on the radio on maybe kbc, possibly a Los Angeles radio station.

Yes, kbc. I don't know about if you're on Carolee or not also, but either one of those two, and that made it easy for me to do advertising on people that I trusted.

So, yep, there you go. And so you live in the Los Angeles area, is that correct?

Yes, I do.

Good. Good stuff. And you had a long career with the Stater Brothers organization and then what got you interested in real estate investing?

Well, I've always wanted to do real estate. I just didn't want to deal with tenants and all the phone calls. So I just never got into it. And then when the market really went down in 2008, that's when I started listening to radio and I heard you on the radio and that's when I decided to do it. Because your method works with where I have to deal with tenants and.

Issues that come up. Even though I do deal with it, it's not the same.

Yeah, right. So did you invest locally before you came to know us and that's how you knew that tenants were a bit of a hassle.

Or did you know someone else who did or.

I did. I have plenty of friends. I have plenty of friends who did and my dad also did. That's why I knew.

Yeah, good stuff. So basically our system, our slogan is the complete solution for real estate investors. And so, you know, having the managers that were pre screened and you know, having them manage your tenants and that kind of stuff, that's really what attracted you, right?

Correct, correct. And a lower prices in California?

Well, definitely you can't do anything that makes sense from a cash flow perspective. And amazingly, it's not just Los Angeles, it's just anywhere in California that it's that way. It's really mind boggling. I mean, like I've said on the show before over the years, you know, even Bakersfield and Fresno and these like, you know, fourth tier cities, even those don't work. It's amazing to me, you know, that you just can't even make that work, you know.

Well, it's, it's so funny. When I first met you, Jason, you know, I had never even thought of going outside of California. It just never crossed my mind. We thought about inland empire areas because the prices were lower. But I mean, what about you, Joe? Did you ever even think of investing out of California before you met Jason?

Well, I did because I didn't think it was a possible thing to do. Yeah, it would cross my mind. How would you do that so far away? So I never, never crossed my mind to do that.

So, yeah, it was really about 12 years ago that I even first started thinking about investing outside of California. And what I didn't realize after so many years is that of all the properties I purchased and owned and rented in California over the years, I really wasn't even an investor. I was a speculator.

And most of the time I got lucky, but it was really just luck. It wasn't any extremely good market knowledge because you're investing for appreciation. And I've just never met anybody that can really predict appreciation or depreciation in any reliable fashion. So tell us, Joe, more about your story. You heard us on the radio. Did you come to one of our live events then or start listening to the podcast or what was next?

When I heard about you, I listened to your podcast. I think you were still in the teens, so I must listen to two or three times. And then that's when I emailed your company and one of your investment counselors emailed me back. So I drove out to. Was it Newport that you, that you were at or.

Yeah, we used to be in Newport Beach. Yeah, years ago.

And I think because I was able to sit down face to face with them and see who he was and that he seemed very honest, I pretty much on the spot decided to buy two properties.

Good. And where were your first two?

My first two was a condo in Ohio in Columbus and my. And then Dollar Run in Indianapolis. Brand new.

Uh huh. Good, good stuff. And so those were your first two long distance experiences. Did you go out and look at those properties first or did you just buy them? Sounds like you just bought them, right?

I just bought them. No, I went there years and years later to look at those. Actually I bought a few more. So I. To look at four different properties out in the area. But that was like four years after I bought them, so.

Right, right. Yeah, we, we have a, like people ask the question, do your clients look at these properties and you know, mostly before they buy them, they don't look at them. We would actually like them to because, you know, they all understand what, what they're doing better. But you know, they, some don't even after they buy them. I mean, it was four years before you went and looked at them. Did they perform okay? Like, you know, what happened on those first couple of properties?

They were fine. I think actually those first four or five that I had were probably the easiest client and have many issues. Lately it's been a little more different. Maybe it's because I have more. So there's more chance of things going wrong. But the first few four or five, there wasn't really many issues. The tenants were long term.

Not much of a problem. The first two that I bought were pretty much brand new, so there was nothing to repair.

They weren't very cash flowing because at the time you weren't really offering rehabs. It was all pretty much brand new stuff, so it wasn't much cash flow, but they took care of themselves.

Yeah, yeah, Good, good stuff. I mean, what was it that got you so interested in real estate though? Why did you think real estate? I know the bad side is you didn't want to deal with tenants. But what Was the positive side, you know, what was your exposure before this?

I knew people made money with real estate. It's. It's. It's been proven. You know, my dad was doing it. Many family friends that I have, they were doing it. Actually had my real estate license years ago. I just. At the time, I didn't care for it, so. So I knew it worked. I just don't want to have the headaches, which, thinking back now, I should have and had the Hedrickson, I would have been even better off. But that was my thinking back then.

Yeah.

Cool.

Good stuff. And so what happened next? You purchased some more properties in some other markets, right?

Yeah, Kannapolis. I got one there. Then I went to Atlanta. I think about one of your $6,000 or $5,000 down properties in Atlanta.

Don't we wish we still had those? I tell you, if we can get those again, we'll be loving life, believe me.

And I think that was the first time I actually bought through Sarah, so.

And so, Sarah. What. What did you see as Joe was building his portfolio? Well, he and his wife, we should say. It wasn't really just Joe, you know. What. What did you see as he went along?

Well, I. I just saw him continue to grow his portfolio at a pretty moderate pace. I mean, he, you know, he's your everyday Joe.

He, you know, he was a hard worker. I mean, he was working in his career and as was his wife.

Continued to. To add to his portfolio. He did have some bumps in the road. In fact, our conversation today started with another little minor bump in the road in one of the newer markets. And, you know, he just continued to manage his managers and, you know, check in with us. And, you know, obviously he's attended several events, you know, since.

And, you know, slow and steady wins the race, right?

Yeah, it definitely does. Joe, I love what you said to me in January at our meet the Master's event. Do you remember exactly what you said?

I have no idea what you're gonna say.

It was about that you retired, right?

Oh, yeah. Well, yeah, I did. I just retired a couple years before that. Yeah.

Go ahead.

I was gonna say, oh, no big deal. He just retired.

Well, that was already, like, eight months ago. That was, you know, I retired, but I didn't retire. I'm gonna do something else. Eventually. I got tired of working where I was at. I worked at a grocery store for 37 years in the same building.

I qualified for my retirement, so I took that. And as of right now, I haven't done anything else. But I will find something else to do to fill my time and help out with more financial stuff so I can buy more stuff.

Yeah, good, good stuff. So what happened next with your portfolio building? What else did you do?

Well, the last one that I bought, actually I bought with which you guys recommended a checkbook, Iraq. So I bought that with mine, my wife's ira. We combined it and we bought a, I guess a class C house. But you know what, it's been the easiest one I've had so far. It's Section eight. I get my rent every month and I've had the same tenants since I bought it.

Wow, good stuff. Yeah. So do you like, do you like those Section 8 properties better? I mean, you have a blend of both, right?

I've only had, I only have one. And that's right now it's the one with the least complaints that I have. So if I had two, maybe I would be a different story, but I have one and I have no issues right now.

And you know what I've said about that on the show. You know, some people love them, some people hate them. It's just a really different thing.

Next year I hate them, but this year I think it's great.

Yeah. Sarah, what do you find with your wide variety of clients at our firm? You know, with Section 8, I kind of think, and I don't know what you're going to say to this because we haven't talked a lot about this, but Sarah, you generally like the newer properties, the sort of class A type properties more and I'm assuming you don't really like Section 8 stuff.

Well, I don't have any Section 8 properties myself.

I don't have, honestly I don't get very many complaints from clients about them though. So I'm not opposed to them. I just think that having, it's more of like a maintenance issue for me. With the newer construction, you're less likely to have any maintenance in the first, you know, few years. And that was my experience with my very first property I purchased years ago in Texas. I bought it brand new. I don't think I've put more than $2,000 into that house. And it's been like eight years, you know, so maybe I've been lucky. I have had a good long term tenant, you know, but I think, you know, with Section 8, usually those come with older properties and older properties come with more maintenance.

So.

But you know, here's the thing. Sometimes the cash flow is so good that it can make sense, you know, as long as you're, you're willing to shop around a little bit on the maintenance items.

I just think it's a little more time intensive. So it depends on the investor. You know, I get clients that call and they have a big chunk of money they want to invest, they want to invest it all at once and they don't want headaches. And so for somebody like that, where they don't want to be involved in the day to day and negotiating maintenance items and things like that, I suggest that they start with newer properties until they. It doesn't have to be brand new, but just, you know, nicer neighborhoods, newer properties, until they get some experience. And once they get the experience of making decisions and they're comfortable and they can make quick decisions about maintenance items and they have their teams in place and you know, they know some contractors in the areas, then as they get into some of the older neighborhoods, you know, they have that experience to make quick decisions and they're not, you know, losing income because they're, they're sitting on decisions. I don't know if that made sense.

All your seminars, I think from what I heard some from some of your vendors, section 8 depends on the city. Some cities are terrible, some were good. I have a friend who has Section 8 here in LA. He wants nothing to do with it anymore.

But I think one of the things too is maybe they have to be more careful about how they take care of the property because they don't get thrown out of the Section 8 program.

That's one of my beliefs. I think they have to be a little more careful because you get inspected every year. But they probably got to be careful because if they're not careful, they're probably going to not be in Section 8 anymore. That's a big loss for them.

Yeah. For the tenants, you mean, Right?

Correct.

Yeah, yeah, yeah. Just a reminder, you're listening to Flashback Friday. Our new episodes are published every Monday and every Wednesday. I agree with you. That's one of the great levers the landlord has over the tenant is that the tenants can lose their Section 8 status and God forbid they would want to lose their free government handout. You know, so that's, you know, they're on the dole. But you know, one of the things I wanted to talk about is some of the property management practices. And you know, I think it's very important for investors to take an active role, even if they have property managers to direct the managers to state what they want. And I'm seeing a lot more clients and I think this is a pretty good policy. Demand two year leases from their tenants because it's more likely that that tenant will stay longer. And then you don't have any turnover fees, any cleanup, any painting, any stuff like that in between. So it's, it can be very helpful. Joe, any thoughts on that or.

Sarah, I like the idea some of my landlord property managers are actually doing that already. I don't know if it's because the tenants asking for it, but I got like two or three properties that are two year leases now. I think it's great, right?

And you can put a rent increase, you know, if you're concerned about inflation happening in two years or you know, just increasing your yield, you can write that right into the lease. So you can just say, you know, the rent the first year is $1,000 a month, the rent the second year is $1,040 per month. And lots of tenants will agree to that. The other practice that I really think investors should try and do is to do hard flooring throughout their house or, you know, at least carpet in the bedrooms only and hard flooring everywhere else. And then either low sheen or eggshell paint. An eggshell is not a color, it's the texture of the paint and it makes it just really durable. You know, I've had eggshell paint in some of my properties and you know that, that'll last you eight years. I mean, you know, you put flat paint on the walls, you're probably going to have to repaint after one tenant cycle, you know, maybe in just a couple of years. So I think that'll really save you money in the long run.

Depends a lot to an attendant themselves too.

Well, yeah, it certainly does. It always depends on the tenant.

Yeah.

Sarah, thoughts?

Yeah, I really like the idea of a two year lease, but don't forget to put that rent increase in there. Especially in today's, you know, rental climate. I think rents are on the rise. I've been kind of checking on my properties and it seems like rents are starting to trend up. So you definitely don't want to forget that, that piece. So that's great advice.

Well, Joe, what are your next plans for your portfolio? What are your goals?

Well, I'd like to buy some more, but since I'm between jobs, it's harder for me to qualify for a loan because there's no, the income's not the same. So eventually when it is, then I will like to buy. I like to get out of a couple markets and get into either condense down to less markets like you're suggesting now, since you've changed your mind the last few years to three or four.

I've learned my lesson. So let me just elaborate on that if I can. So, you know, you hear at the intro to the show, you know, 11 states and 17 cities. And I used to think that was good because I was always buying before our clients would buy by in given areas. Right. And now I really think people should be in no more than five markets. I think the big mistake most investors make is they're only in one market, and that's a big mistake. But the other mistake on the other side of that is that they'll be in too many markets, and then you've got too many different providers to deal with, too many different tax collectors and cities, and you just don't get the feel of the climate. So three to five markets are enough. And so let's kind of play that out for the investor that's buying nine properties. Three properties in each of three markets, I think is a great plan. If the Investor is buying 90 properties, then 30 properties in each of three markets. But if they're buying that money, you know, they could be in four, five markets, and there they'd have say, it's, we'll round it off at 100, and it's, you know, 20 properties in each of five markets. But I really don't think anybody should be in more than five markets. So how, how many are you in now, Joe? Are you in eight markets? I believe.

No, 1, 2, 3, 4? I believe. I think it's five.

Oh, so you're in. You're in five different cities, but you want to become a little less diversified.

But I don't have 90 properties, though.

Right, right. Yeah, exactly. But you want to be less diversified. Do you want to get it down to 3?

I would like to get it down to 3 or 4. The only problem is some of your newer markets are really exciting, and I don't know if I want to add anymore. Like, for instance, Memphis and Arkansas sound really, really good, but then that be more. So I wouldn't mind three or four. I think it'd make a lot less property managers. It's like you're saying less taxes. It makes a difference.

Yeah, it's less people you have to deal with. And you know what else? Insurance. Because insurance is run state by state. And, you know, we tried working with the national insurance company, National Real Estate Insurance Group. They go by the acronym of the first letter of each word. And also affinity group or affinity insurance. They kind of Go by both names and I had a bad experience with them and I know couple of. Couple of other investors I know had bad experiences with them and I was loving the idea of having one source for my portfolio nationwide. It would have been great. But they didn't work out. So I'm back to just local brokers, one in each state where I have properties. And it makes it easier when you don't have to deal with that many different insurance companies too. Right.

I have them on one of my last property about was Affinity and now I'm not sure after what you just said if I should keep them or not.

Oh yeah. Well, I'll be happy to tell you my story if you want to hear it.

Sure.

Yeah, I'm pretty upset with those guys. Basically what they did. And this is Affinity group management or national Real estate Insurance group. This was kind of unusual. I mean it was a surprise happening is I had a property and when we had that polar vortex, you know the thing that surprised all the a global warming people and it got really, really cold. The property happened to be vacant at the time and I'm not sure this is what happened, but I had a pipe break. Okay. And I'm not sure if it froze or what. And they said they wouldn't pay the claim. And I said, yeah, you have to pay the claim. They said, no, there's a clause in the insurance policy that says if it's not occupied that you know, you have to do certain things. And I didn't do them. And so. Or really my property manager didn't do them. And so I said no, no, no, you have to show that the cause of the pipe breaking and the subsequent damage was because of the weather because the pipe froze. And they have no proof of that whatsoever. And it got even worse. Worse. They tried to hide the insurance adjusters report. They said I did not have a right to a copy of it. And so I went and my lawyer found that area of the law that says I have a right and we wrote them a stern letter and they finally turned it over. They tried to suppress that report, which I just thought was completely scummy of them. And then I was communicating back and forth with them in an email and I was just, you know, in, in a very matter of fact tone, I was not being rude or difficult, which I completely realize that I'm capable of.

What show number is this? I gotta make a mental note.

But I wasn't doing it this time, okay? I was completely civil and I just said, hey, you know, are you Going to pay this claim or what? And I explained my reasons kind of, you know, more elaborately than I just explained now. You know, I mean, I thought I had a very good case. And I said, you know, please don't, you know, something along the lines of please don't tell me we have to litigate over this. And then shortly after that, they sent me a letter basically retaliating against me saying they're canceling all of my insurance policies because I was difficult. Wow. Apparently they have a difficult clause that allows them to get out of the deal amazingly. So anyway, sure.

By that time. Canceling anyway. Right.

Yeah. And my attorney says that they can be liable for punitive damages for doing that. What they did is completely wrong, you know, retaliating like that. So I have not entered into litigation with them yet, but I don't know, I might have to. I'm not sure. Hopefully I won't. But you know, I just, I think that was really, really unethical what they did. And you know, I think they, they deserve to be held accountable for it. So. Yeah. And then we had another client who had a, another claim. It was a smaller claim, but that one was also denied. And the way they do their investigation insurance is that they basically, from what I understand, and I could be wrong about this. Okay. But my understanding is that they, they do the insurance by getting a master policy through, I believe Lloyd's and maybe they have a couple different vendors for it. I'm not sure. It's for only the larger part of the claim. And the small claims, they, I believe and you know, I don't know this for sure because it's not been discovered, but I'm pretty sure they, this is the way it works. They just self insure for the small claims. So, you know, just as a, I'm plucking a number out of thin air here, but you know, maybe if it's a $25,000 or lower claim, they're actually paying that money and that's why they're really quick. My theory is that's why they're really quick to dispute those claims and not pay them. Because, you know, that's, that's their money rather than the insurance company's money. And so, you know, I think that's just, that's just problematic and I don't.

Like it, you know, business like that.

Yeah, yeah, I've, I've heard a few more horror stories. I believe a British woman living in England, she wrote me several big emails about them. She's not one of Our clients, but she just was livid about them denying claims and thought they were just doing all kinds of bad stuff. I can't remember her name offhand, but yeah. So unfortunately, local insurance, that's what I've come back to, just regular old insurance. But that is state by state. So, you know, if you have multiple cities in Tennessee or Texas or whatever, you know, you can use one broker and have all of those covered.

Okay, yeah. Something for me to think about something different.

Yeah, it definitely is. But what we didn't finish, Joe, is your goals for your real estate investments.

My goals is maybe get into real estate also to help my friends do what I've been able do to do. A lot of them are asking me about it, you know, so. And spend more time with my family and hopefully grandkids. My daughter's married three years now, so maybe in the near future we'll have grandkids to take care of.

There you go. There you go. You'll be, you know, isn't it nice the freedom you can achieve with, you know, this is the most historically proven asset class. It really does give you a lot of security. Although, what did you do, you know, before you were investing in real estate? Were you, were you, were you investing in stocks and stuff like that?

I did that years ago. And.

Till the bubble of 2000.

I thought I was the smartest self investor out there. I'd be checking my stock quotes five times a day. And then 2000 came around and it's like if the money that I lost, if I put into the stock market, I mean into the real estate, it'd be even in much better shape.

A lot of people have thought that same thing themselves. But listen, Joe, you don't have to worry because every time there's a stock market crash, all of the insiders always get paid really well. The people at Goldman Sachs get their bonuses. The CEO of their company, of that company got his huge salary and his bonuses. It's just the little investors that get screwed over.

I mean, it's so unfair, isn't it?

Yes, it is. Yeah, I had my kids money in there, everything. But, oh well, what can you do?

It's the modern version of organized crime, as I always say.

I tried options, I think I tried everything.

Were you doing just, you know, good old mutual funds and kind of simple stuff?

Yeah, it was mainly mutual funds. I did do some.

Single stocks. I found this little newsletter out of Oregon that were like four stocks a month. And what I found out was it was mailed out every month and because I lived in the West Coast, I got my letter the first day and I started noticing after about two or three months that by the end of the day, by this time the market closed, all those stocks were up quite a bit. The next morning it was. Sometimes it doubled. And so I started doing that. I didn't care what the company because they were like two, three, four, five dollar stocks. They were just penny stocks. I could dub my money in 24 hours. But then it went online, so it lost the mail part. So everybody got their email at the exact same time. So I couldn't rely on.

The post office where it delivered to the west coast first. And by the time it got to the east coast, when they started buying their stuff, it drove up the price of the people who had bought already bought from the west Coast.

Yeah. So I even got a P.O. box so I can run to the post office every, like fourth, fifth or sixth of the month. I'd go there, see if my letter in there. As soon as it was in there, I'd rush home, click on my, buy 2, 3, 4,000 shares of this and that, and wait till the next day.

Yeah, yeah. Well, you got to just know that that is not sustainable when things are going that well. Right.

You couldn't have convinced me of that back then.

Yeah, I know. I. Well, I didn't know you back then, otherwise I would have tried, believe me. I love real estate. We all know that. Yeah. Good stuff. Well, good. Well, Joe, thank you so much for joining us today and just kind of talk telling your story and congratulations on your retirement. And, you know, it sounds like, you know, next you're going to be working as more of a hobby really than a must, you know, than, you know, then you have to. Right.

I'm not as well off as Fernando, so I'm nowhere there, but we're getting by.

Yeah. Good, good stuff. Well, hey, Fernando is also working for just general stimulation and fun and you know, it takes on a whole new meaning when you're not really working for the paycheck. When you're just working because you want to work, it really, it's just a whole different experience. It's, it's wonderful when it's like that. So, so congratulations to you and keep up your investing and keep building your portfolio and we're, we're happy to help you. And, and thanks for being our client. We really appreciate, appreciate it.

Thank you.

Jason, Sarah, thanks for joining us as well. We'll wrap it up.

Yeah, thanks for having me.

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