To start the show, Gary Pinkerton talks about a book that he wrote with other authors to share a story that’s pivotal to their lives. The book also advises others that have not gone through the same kinds of experiences. Then, Jason Hartman welcomes his Aunt Joan, a successful real estate investor who, together with her husband, owns more than 70 single-family homes. Joan shares how she got into real estate and offers great advice about property management.
Announcer 0:04
Welcome to the heroic investing show. As first responders we risk our lives every day our financial security is under attack. Our pensions are in a state of emergency. A single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society. We are self reliant, and we need to take care of our own financial future. The heroic investing show is our toolkit of business and investing tactics on our mission to financial freedom.
Gary Pinkerton 0:39
Hello, and welcome to Episode 103 of the heroic investing show, Episode 103, where we focus on the unique challenges faced by members of the armed services and first responders, but also those that are common to all investors, we aim to provide the tools that enable our listeners to secure their family, their future and their retirement, we help them get back time with those things that are most important. And also develop an opportunity to spend time on their unique genius. I’ve talked about that quite a bit in my speeches around different environments. But also here on the show, I believe that each of us has a unique ability to a unique genius inside that we should share with others, you know, that whole small business entrepreneurial world where we can create something, a product or service that others will value and pay us for helping to improve our quality of life, our flexibility or time with our families and our ability to enjoy this incredible earth that we live on. So that’s what drives me. That’s why I do the podcast. It’s why I am in the business. I am that paradigm life. And why I write and why I speak. So please look further into that. I have a book out. It’s called the one thing that changed everything. You can find out more about that on my website, Gary Pinkerton calm or over at Amazon. It’s a book that I did with 26 other authors. And it’s each of us sharing a life lesson, a story that pivotal kind of peak moment that we had a realization we recognized in going through some challenges in life, what really was most important what we were here to do, and a piece of advice that we can help others perhaps not have to go through those same kinds of experiences. There really are some inspiring, inspiring stories in that. So I wrote invest in 103. Jason interviews his aunt Joan, and I had a chance to spend quite a bit of time with Aunt Joan, during our most recent venture Alliance mastermind event and that was tied to and immediately following the meet the Masters event that Jason put on in La Jolla, California back in January, on June is a tremendous source of investing experience. She’s just a wealth of knowledge she is very open with, you know, all of the experiences that she’s had that she and her husband had in, there are several, several decades of investing in real estate, all of their real estate is it really doesn’t follow, you know, kind of Jason’s model, or my model, you know, it’s she bought real estate that was local, and they self managed everything very much into the weeds about a set of rules that she has for each tenant event visits all the properties. They’re obviously in very high land cost state of California. So you know that the rent to value ratio certainly would not fall in alignment with what Jason talks about. an aunt Joan also is one of those that like many people in their 60s and above, she has most of her properties paid off. She like many others. Just like that cushion of strong cash flow and no mortgage. I’m not really actually sure if that is an impact of having been invested in the high interest rate periods of the 1980s and 70s. Or if it’s just something that we will all encounter as we age. I know my my great friend Craig Horton has told me numerous times that that’s the way to live his mentor, john Shaw, both of which I’ve had on recent episodes, they live by that philosophy. So who knows, maybe we will go there as well. But those of you who have listened for very long know that I am certainly on the opposite side now and I see nothing but green lights on this path that I’ve tested for the last eight years. But I’m always open to, you know, new insights and new perspectives that I will you know, keep informing you all if things change for me, but right now, I am still building and building my portfolio growing my cash flow and partnering with the federal government and life insurance companies. Both of those to help have them put their money into my properties. I keep my equity extremely low and my properties really for two main reasons. You know, I follow two mentors Robert Kiyosaki says control everything but own nothing. He’s really talking mainly about asset protection and not having things in your own name, but not Having your own money in there and being exposed having your wealth exposed to the acts of tenants that you may not know well, and that may not have good intentions, but also to the acts of governments who can make decisions that will change the value of your properties overnight. So I’m not a fan of having my family’s wealth exposed to either one of those events. And so like Robert Kiyosaki says, I aim to control things and own nothing. And then also following Jason Hartman, philosophy that the best insurance policy is a high loan balance. And so as you as you I think, all know, and you can find out more again, at my website at Gary Pinkerton Comm. I work too and I teach others how to do what I’ve done for 20 properties, when that is have a large government back Fannie Mae or VA loan on my properties, and then have the down payments funded by loans from life insurance companies. And it’s a completely legal thing that all of the Fannie Mae lenders will support as long as you’ve educated them. So. But it’s a tremendous advantage with respect to leverage with respect to performance of the property. And again, in my opinion, safety of your family’s wealth and assets. So, without further ado, let’s get over to Jason and Aunt Joan. And then one more quick plug, if you haven’t gone to Amazon, and grab that book, please do so the proceeds all go to charity. It’s a great book. And I really was inspired in writing it but more inspired when I was editing and reading the contributions from the other authors awesome stuff. Here are Jason and his aunt Joan.
Jason Hartman 6:41
Thanks for joining me today, where you will hear a Thanksgiving interview of Miam, Joni, and I finally got her to come on the podcast. And you know, the reason this is interesting is because as a child, my aunt and uncle in Sacramento, john and john, they really really influenced me a lot in my thinking about real estate investing, as they were accumulating properties. And it seems like every time we would go up there, for whatever reason, whether it be Christmas or Thanksgiving, or just for a visit some other time of year, you know, my mom and I would go around with them and see all these houses they owned, and we were constantly looking at houses, I guess that’s why real estate is in my blood, Joan claims to own over 70 rental properties, she would only say over 70 I have a feeling at some quite a few more than that. But it’s pretty amazing if you think about it. And one of the things I’ve been focusing on a lot lately is this concept of alignment. And that’s really our theme for our upcoming meet the Masters event, there will be many talks and much focus on the concept of being an empowered investor. And one of the themes here is how, you know, how do you get empowered? How do you become an empowered investor? Well, number one, you follow my 10 commandments, but especially commandment number three, you maintain control, you don’t go and invest in someone else’s deal. Now, this is also interesting, because it brings up the concept of well, when you don’t maintain control, you know, the problems there, you might be investing with a crook, you might be investing with an idiot, assuming they’re honest and competent, they take a huge management fee off the top for managing the deal. And I was talking recently with a provider of local market specialists in the Phoenix area A couple of weeks ago, and they said that they were going to open up a new fund to help people invest in single family homes. Get this, okay. I mean, this is such a crappy deal. It’s it’s not even, you know, it’s not even on my radar. Okay. And they said they thought that they could return eight to 10% to the investor investing in single family homes. And I said, well, and they, they they claimed that they could cure a lot of the problems that single family home investors have. And, you know, they they do fund investing and you know, like to group money together and get people to invest in funds. And of course, we all know the problems with that. But the interesting part is, when he says, Well, we think we can return pretty consistently eight to 10% by buying and fixing and renting out single family homes within this fund. And I said, well, gosh, eight to 10% is a terrible return. I mean, you and I both know that investors can make 2030 40% annually. All things considered on their prudent good smart, single family home and investments. And I said, Well, why would an investor do that? And his answer is, well, you know, they’re just some investors that don’t want to deal with anything. And I thought, you know, that is amazing. If you just figure out how to deal with some stuff, it’s not that difficult, okay, it’s really not that difficult. You can triple or quadruple, or make a return of five times, what they were suggesting would be a good return of eight to 10% annually. So just mind boggling here, right? But part of the problem when you maintain control, when you follow commandment number three, that presents some new challenges, and all of you listening notice, it brings on some new responsibilities that you the investor has to deal with. Well, one of the ways and one of the things, we’re going to focus on it meet the masters. And you’re going to hear in my interview with Aunt Joan, who owns over 70 houses. And by the way, I want to just do a little math for you. Because she claimed to having 62 of those over 70, we don’t know what the exact number is over 70. She’s being modest, I have a feeling it’s a decent amount over 70. But I just don’t know, I always used to think they owned about 100 120 homes. But if you just take a $450,000, or let’s just make it more conservative, let’s take $400,000 is the average value of those homes. Now, when the market got really bad, see, they did it the old school way when the market got really bad in Sacramento, California. And we had the financial crisis. In some areas, I remember reading a stat that Sacramento was down 48%. And and Joan doesn’t think her portfolio was down that much. Let’s say it was you know, only down 30 or 40%, that’s still a pretty big loss, okay, which could have been prevented through diversification. But you know, this is the old school way, it’s the old school way of you know, buy a bunch of houses in your neighborhood, manage them do a lot of elbow grease, you know, go around to the houses all the time spend, you know, a lot of time doing that. But it does have some pretty big rewards, even the old school way. And you could accelerate this dramatically with refi till you die with inflation induced debt destruction with my risk evaluator formula. And with diversification, okay, but still, an uncle john and Joan did pretty pretty darn well for themselves. So let’s take $400,000 times 62, free and clear homes, okay. And that gives them a net worth, just from that real estate portfolio of $24,800,000. And I don’t know how many more than 70 aunt Joan and Uncle john own, but I have a feeling it’s a decent amount more. So just from their real estate portfolio, they’re probably worth 25 to $30 million. I mean, look at the number of people who are retiring broke. All they did is the simple old school form of keep buying houses, rarely sell them and manage them well. So back to this concept of alignment, and empowerment. If you have your interests aligned in your investment portfolio, you are going to be an empowered investor. And when I was 17 years old, and I discovered Denis waitley, Earl Nightingale, Zig Ziglar, Jim Rohn. Those are basically the people who brought me up. You know, they were pretty good influences on me as a wayward teenager, and really, really made a huge difference in my life. Well, one of the things Denis waitley used to always talk about is win win. And later, the late Stephen Covey talked about Win Win or No Deal in the Seven Habits of Highly Effective People. And this concept of Win Win is a great concept. So as an investor, we would probably think, Okay, well, I’m gonna hire a property manager, and I’m gonna have the property manager manage my, my properties. And then I need to make sure that the deal between my property manager and myself is a win win deal. Okay. And that’s one layer of it. But I say you really need to go on to one more layer. And then there really are more layers, but at least one more layer. It needs to be Win, win, win, so that you as the investor when, okay, your property manager wins, meaning your interests are aligned, and then your tenant wins. So that there gonna stick around and want to be a good tenant, win win win. Now, where does this stuff get out of alignment? Well, I’ve been focusing a lot on this lately. And I have, as you probably know, a couple of apartment properties to work with Phoenix. So one recently sold. And I heard from one of my partners on one of those deals, that our property manager was charging the tenants, a lockout fee. So for example, if one of your tenants in this apartment complex, lost their keys, or locked their key inside the house inside the apartment building, they would charge them $150 to let them back in to the property or make them a new key. That is absurd. And my partner called me and he was pretty irate about this. And I agree with him completely. It was our manager that you know, who we bought this apartment building and partnered with, was doing, because he said almost exactly this, he said, How is your tenant going to feel if their rent is $700 per month, and they’re charged $150 to get back in their unit. So this is an example of non alignment where the manager is basically screwing your tenant over. And your tenant is not going to want to be a good long term tenant in the property. The same person who’s saying we can return eight to 10%, buying single family homes inside of a fund, you know, non alignment all over the place here non alignment, not win win. So this is the kind of deal you want to avoid. You want to make sure it’s a win deal for you a window for your manager and on when deal for your tenant, your tenant is your customer. If you own a business, if you had a restaurant, you would want your customers to come back, right. And you know, you need to insist that your customers pay the bill. And when they don’t pay the bill, your rent. In other words, or when they don’t take good care of your property. You need to be firm with them and make them live up to their part of the bargain. That’s their part of the deal. But it goes too far when your manager is basically screwing your tenant over. And this gets completely out of alignment. And that’s one of the reasons I do like the concept of self management. So I’m working on some tools that can make it much easier for you to self manage your property and buy all ecart services from your manager, your property manager rather than whole complete services, the wave traditional property management game is usually played. And by all ecard services from local real estate agents, it is amazing to me that you can really and I’ve done it many times self manage a property you’ve never seen, that has a tenant you’ve never met from 2000 miles away, or it doesn’t matter, it could be 8000 miles could be 200 miles doesn’t matter the distance, the point is, property, you’ve never seen an attendant you’ve never met, you can actually do that. And in our member section. I did I believe two of our monthly members only conference calls on self management, and I’ve done some podcast episodes on as well. But I went pretty deeply into it in the members section, and all those calls are available, if you just join for a whopping 120 bucks a year, and you get some big fat discounts. In fact, if you’re coming to meet the Masters, you can recoup more than your membership fee, if you just join first, and then you buy your ticket for the masters. Okay, so check that out at Jason Hartman calm and listen to the self management conference call. It’s all recorded, it’s in the archives there. And it really would be a good opportunity for you also, go to the website, and in the little search bar, just type self management. And you can see all of the prior podcasts and some blog posts on the website about self management. And the whole focus here is become an empowered investor. Follow commandment number three, and then take on these additional responsibilities. When you do follow commandment number three and increase your returns dramatically. But you make these responsibilities easy for yourself. So you get the best of all worlds. You create a win win win deal. You you capture much much higher returns than investing in Some fund or some pooled money asset, where you might be investing with a crook, or you might be investing with an idiot. And even if they’re honest and competent, they take a huge management fee off the top for managing the deal. And you make the deal a win for your tenant. And that’s what and Joan is going to talk about in this episode as well. So I think you’ll enjoy this interview, we did have a few times that guests were coming over for Thanksgiving and rang the doorbell at my mom’s Southern mansion. And Coco, the dog started barking. So excuse those, hopefully, our editor got a lot of those out of there. And anyway, this is really interesting to hear from someone who has accumulated over $25 million, I estimate and net worth just being a very simple old school real estate investor. And you can do it much, much better than this. With some of the new techniques, the risk evaluator, the rent to value ratio, I mean, and Joan is getting lousy rent to value ratios, the refi to die concept, and the concept of inflation induced debt destruction. Those are the major things missed in the old school investing concept. So you can take this, what she’s done, and amplify it dramatically. Maybe you can triple it, maybe you can quadruple her results. Okay, maybe you can do even better than that. Make sure you get your tickets for the upcoming meet the Masters event in January, where we’re going to share all of our experiences and tools for you to become the empowered investor. Do that at Jason hartman.com. Now, the pricing is going up as more and more people register and we get near to selling out. So here is aunt Joan, with a Thanksgiving message for real estate investors. Aunt Joanie, how are you?
Aunt Joan 22:01
Just fine. Thanks. Okay. Join Gulf Shores.
Jason Hartman 22:05
Okay, good. Well, thank you for coming on and recording with me today. And I really wanted to, you know, just have you share with the audience a little bit about your tremendous success as a real estate investor. And, you know, my first question for you is, when did you start investing in real estate?
Aunt Joan 22:25
Probably about 1975 or 78.
Jason Hartman 22:30
1978. Okay, so 1978, you started in real estate investing? And why did you start investing in real estate? What was it? I mean, look, tell them a little bit of your background. My mom’s been on the show before. So, you know, growing up on a farm in upstate New York, what was that? Like? Just, you know, briefly?
Aunt Joan 22:49
Well, it was a lot different from the world that I’m living in today, of course, and I didn’t have any ambitions about getting into the real estate market at that time of my life. However, when I came out to California, I went to UC Berkeley, and I majored in two fields. One was real estate, and the other was personnel, human relations management,
Jason Hartman 23:13
Like human resources,
Aunt Joan 23:14
Human resources. Yes. And so I’ve come to use both of them in you have to use human resources, part of it when you are choosing tenants for your property.
Jason Hartman 23:27
Yes, happen. And so my mom also went to Berkeley, and you are her older sister. Yeah, just by a couple of years there. And she had a she got a degree in social welfare, not quite so easily
Aunt Joan 23:39
when she decided she didn’t resolve that enthusiastic about after a while.
Jason Hartman 23:44
Right. Right. So I mean, that’s funny, Berkeley in the 60s and a degree in social welfare. You would think my mom is a flaming liberal, but she’s definitely not kind of funny. But okay, so you went to college? And how long would you say it was after college before you started investing in real estate?
Aunt Joan 24:07
Probably about maybe 10 years or so
Jason Hartman 24:11
10 years or so. Okay, great. So, why why real estate? I mean, what did you do?
Aunt Joan 24:19
We were at that time, we were in that restaurant business. And we had absolutely no tax write offs. And we we needed to add that pink to to defer some income. And so we bought our first house in Sacramento. And just little by little, we kept acquiring more and more. The, we had come from a very expensive San Francisco, San Francisco peninsula real estate market. And when we got up to Sacramento, things were so cheap, so to speak. Is that, sort of crazy.
Jason Hartman 25:03
A couple comments before you go on. So number one listeners, you know, I always like to say that income property income producing real estate rental property is the most tax favored asset in America. So and Joanie here, really became interested from a tax perspective. And then you look at the relativity concept, I talked about the theory of relativity as it applies to real estate investment. And so you lived in a very expensive place, even back then in the 70s. San Francisco was very expensive. Well,
Aunt Joan 25:33
We were in Hillsborough, actually, which is even more expensive over the over the top, you might say, and then coming up here, are coming up to a Sacramento, I kept looking at these houses these charming, darling little Craftsman houses. And I couldn’t believe how inexpensive they were. And so the more I looked, the more I said, Wow, why don’t we buy one? And so we bought our first one.
Jason Hartman 26:03
I don’t know what your first property that you ever bought, was that a home in which you lived for you and Uncle John, it was a rental.
Aunt Joan 26:10
It was a rental home,
Jason Hartman 26:12
So you didn’t buy your own home first. That’s an
Aunt Joan 26:14
Oh, excuse me, we bought our own home for a while we also bought a home in San Mateo. First Before that, we bought a home in Hillsborough first, I’d been afterwards but but I’ve been now in terms of the investment prop part of it. We bought our first one I really and Sacramento.
Jason Hartman 26:33
Okay, great. Okay, so so the theory of relativity concept is that you came from that very expensive real estate market in the San Francisco Bay Area. And then it moving to San Sacramento, everything looked really cheap. Everything looked really inexpensive. And so what happened there? Is it you know, things really worked back then probably the cash flow, actually back in those days work pretty well. Okay. And
Aunt Joan 27:02
well, well, that that’s sort of like a yes or no, that’s the point was in terms of, in relation to the San Francisco Hillsborough market prices in Sacramento were extremely inexpensive. But at the same time, the rentals were considerably lower. And so we were never, in, in most situations in a case of penciling out, okay, in terms of cash
Jason Hartman 27:32
in even even then California didn’t really work from a capsule, right?
Aunt Joan 27:37
Yeah, that’s right. That’s right. And so but at the same time, I never wanted to buy in lower lower property areas, because I just didn’t want to have the problems connected with sub my rentals and very low income property.
Jason Hartman 27:56
So I agree with you. That’s one of the deceiving things, and I talked about that on the show a lot. Is that is that in lower priced markets, you know, those deals look good on paper. But in reality, with the collection problems and the eviction problems, they just don’t work. So whatever city you’re in, I think you should be just below the median price is the kind of ideal, okay, so if you’re in $150,000, median price marketplace, or even a sub market doesn’t even have to be the whole city or the metro area, then, you know, if you’re doing something at 120,000, that makes sense, that works because you’ll have a decent quality tenant in that kind of a scenario. So okay, now, just to give entice our listeners a little bit, Antonie, where are you now? How many houses do now? Well,
Aunt Joan 28:49
a little over 70 that’s over 70 nominate most of them are single family residences. We have a few duplexes and we have one four Plex, but I’ve never gotten into the apartment situation.
Jason Hartman 29:03
That’s, that was my next question for you. How come you stuck with single family homes all those years? Why? Why? Why was that the thing? Why not? Why not apartments? Well,
Aunt Joan 29:15
we just heard a lot of horror stories about running apartments. And we just wanted to stay away from that and deal with families living in single family houses.
Jason Hartman 29:27
So this is one of the things folks, you know, look at I own apartments myself, I have two apartment complexes now. And I had three before I sold one of them a while back. And then I have a bunch of single family homes too. And I’ve definitely done both. I’ve done you know many more single family home deals than apartment deals in my career, but you know, the apartments, they can be good. And I know everybody, a lot of investors, they kind of have their eyes on Oh, I’m gonna do this big stuff and do big apartments. Um, you know, I’m going to be big, and I’m going to build an empire and all this. And you know, that’s great. It’s ambitious, it’s wonderful. But apartments are more complex, for sure.
Aunt Joan 30:10
And they can be extremely trouble for you tell us about that.
Jason Hartman 30:14
What do you think about that?
Aunt Joan 30:15
Well, for one thing, you have to make sure you get a good manager. And that can be a very, very hard thing to do. And then you’re really at that manager’s mercy if he decides to take another job, you’ve got a major problem.
Jason Hartman 30:32
You’re talking about like a resident manager? Yes. Right.
Aunt Joan 30:35
Yes. Yes. Right. And I
Jason Hartman 30:37
it’s usually a tenant that lives on the properties
Aunt Joan 30:39
on the property. Yeah. So if you have over what, six units or eight units, something like that, you have to have a live in person,
Jason Hartman 30:48
there may be a California roll to that. That is, I don’t I don’t know those rules state by state. But it sounds like something they would do in the Socialist Republic of California, because there’s a role for everything. You know, when you look around the country, every lawyer you will talk to in every part of the country, in every business person you talk to in every part of the country, when it comes to the legal climate in laws. California and New York always have their own set of additional laws on top of everybody else. So there’s like the like, like if, if if the rest of the country has, you know, X number of laws, California, New York have 50% more laws?
Aunt Joan 31:31
Correct? Like,
Jason Hartman 31:31
that’s crazy. you’re rolling your eyes. You know this. Okay. So what else did you hear about apartments? Well,
Aunt Joan 31:39
I just heard quite a few horror stories. In fact, we had a manager of our restaurant whose wife was a manager of an apartment house. And I just heard many tales from him. And I just realized that I didn’t have the time or nor interest to get into a
Jason Hartman 31:59
possible situation. And, you know, look at apartments or like my second favorite real estate investment after single family homes, I’ll just state that for the record. And then, you know, I like the idea of mobile home parks have tried to do many mobile home park deals, they have never completed one. And I kind of like self storage. I do not like office. I do not like retail property. I do not like industrial property. So housing, housing housing is worth. But in the single family homes, you can’t generally speaking a much better quality tenant.
Aunt Joan 32:32
Yes, you do. Yeah. Well, also in our four Plex, of which is just a one bedroom, four Plex, we get excellent quality homes there. We have to me Yeah. So how can we just have professional people? no pets, no smoking, that type of atmosphere. And that works very well.
Jason Hartman 32:51
Okay. Now, tell us about some of your property management practices. I mean, I remember the funniest things growing up as a kid. And I tell you, if you asked me where I put my keys, I couldn’t tell you. But if you ask me what happened 20 years ago, I can tell you, because I have a funny memory like that. And I remember all of your funny little property management practices, you know, where you would give your tenants, colored envelopes, the kind of envelopes that a greeting card comes in, you know, like a happy birthday card?
Aunt Joan 33:21
I don’t know, it’d be, it would be a long legal colorful card in very bright colors. And so when these would come into the peel box, we would know that those are our rent checks. I
Jason Hartman 33:35
love getting those color. What other property management things would you like the listeners to know about? Well,
Aunt Joan 33:44
I frequently encourage people when they feel they’ll call our office and say, Are you a property management firm? And we’ll say yes, we are have our own properties. And they say well do Don’t you? Wouldn’t you work for us? We say no, we have enough on our plate just doing what we do. And we really just take care of our own properties. But people, especially if they’re renting their property for the first time, they want someone to take over and they’re they’re nervous. They’re frightened about the prospect of doing this. And so we have a branch out to the point where a lot of first time renters or landlords, we’ve given them a course. And the course has expanded itself over the years. Now it’s about two and a half years, two and a half hours long. And at the end of the session, and maybe depending on how many questions I asked you three, maybe three and a half hours, but there there’s pretty much a full fledged landlord.
Jason Hartman 34:44
So do you charge for this property? Yes.
Aunt Joan 34:47
It’s a very minimal price.
Jason Hartman 34:50
And I didn’t even know you were doing this until
Aunt Joan 34:52
today told me it’s we charge $199 180 and we give them all sorts of materials that they Maybe we don’t need them leashes, but we give them all sorts of other materials. Oh, really? Okay, cool,
Jason Hartman 35:05
good, good stuff. I think we ought to, we ought to record that and turn it into an info product and sell it at my website at Jason hartman.com. Which reminds me, I you know, I’m always forgetting this stuff. We are having a black are not a black friday special, but a cyber monday special on all our digital products next week, or after you hear this, we’ll probably get it going this weekend. You get 40% off all our digital products. This is our biggest sale of the year. It’s our cyber monday sale, you know, the retailer’s do Black Friday that online, people do Cyber Monday. So that will be available, I believe until December 4. Okay, so it’s just a few days long, and 40% off all the digital products at Jason Hartman, calm. But john, we should add your course to the future.
Aunt Joan 35:58
Our hours is a one on one year, you know, so it’s difficult. However,
Jason Hartman 36:03
here’s, here’s some of the tricks of the trade.
Aunt Joan 36:06
Well, let me tell you something that we learned not at all at first, but maybe 10 years into doing this, we’ve been doing this for at least 3030 3040 years. But 10 years into doing this, we realize the fantastic necessity of having house rules,
Jason Hartman 36:27
house rules. So I tell us about house rules. Now there’s a movie Cider House Rules out of your house.
Aunt Joan 36:35
As well, any rate, and we expand them as things occur when our residents. And and some people when we’re going over these, they’ll think of that maybe we’ve had some wild dreams in the middle of the night. But all these things that have happened, all these house rules are based on actual situations that have occurred. Well, for example, we most of our houses in nice Sacramento, or at least in the market that we’re in want to have hardwood floors, and the whole world loves hardwood floors. However, there are a lot of people who have no idea how to take care of hardwood floors. And so it’s very important that they have pads under larger pieces of furniture, and small little pads that you can just paste on to the small things like coffee tables and chairs.
Jason Hartman 37:27
The average age of your cousin’s your houses are older.
Aunt Joan 37:30
Yes, right. What’s our, I guess maybe our oldest one is about 1916.
Jason Hartman 37:37
But so that’s like 100 years old is your oldest house?
Aunt Joan 37:40
Yes. Yes. And our most modern house is 1960.
Jason Hartman 37:45
Wow. So you 1960 is the newest? 100. So that’s a 5054 years old. Wow.
Aunt Joan 37:54
But but in the market that we’re in, everyone wants to have houses with character. Okay, and my real estate agent when we were doing this, she says, Tony, why are you wanting these old the moldings that was her expression? And I said Sally, I love these old emojis. And I said, I think a lot of people like these only. these are these are Craftsman houses with little with ironing boards that come out. And a little mailboxes with fancy little grill work and maybe little holes at the front door where you open up a little door and see what’s outside lights and things like that. Okay. Definitely houses with character. Now,
Jason Hartman 38:37
the one of the funny things is I can always tell your houses, like if I just drive down any of the streets in which you own properties. I can tell which ones are yours because of your address placards.
Aunt Joan 38:50
Oh, yes. Right. Those are like your trademark. Right. Right. Right.
Jason Hartman 38:54
So that’s kind of neat. They won’t talk about that at all. Oh, well, no, no. Okay, so what other tricks of the trade house rules that say interesting I most of our investors number one, they don’t have houses that old. And number two, they’re not micromanaging them that much. So any tips for like the national the nationwide investment? You know what you you did it the old school way. Now Nowadays, people are diversifying technology allows them to do that geographically and be in multiple markets and so forth. So what what are some of the problems?
Aunt Joan 39:26
Well, the other thing that’s very important is to have a very good background crew that can take your rental problems. And we don’t just have a handyman who does it all. We have electricians, we have plumbers, but we have contractors, everyone is a specialist in his field. And this is very important. So things get done properly. Right. And we even have a fence person. I mean, we probably can name 50 different traits of specialists that we use. Right, right.
Jason Hartman 40:03
And you know, those people are getting repeat business from you. Oh,
Aunt Joan 40:06
yes. And they take very good care of us. Yeah. Especially, especially the plumber, right? He has all of our house is number one. And then whenever we give our landlord course, we first recommend him. I want you when I’m gonna stop doing this, because sometimes I don’t want to cut off my finger to enhance his business. Right? Yeah, exactly.
Jason Hartman 40:33
Because his business is getting he’s, he might get too busy for you.
Aunt Joan 40:36
Yes. Right.
Jason Hartman 40:36
So you know, here’s one of the things that’s interesting. One of the strategies that I haven’t talked about very much on the show that I want to recommend to our investors who want to build big portfolios is your strategy. And I want to take your strategy, and recommend that people do it in three different cities, where they can if they want to, if they want to have a portfolio of say, you know, say it’s 60 houses or more, you know, get 20 in each city, okay, I want them to diversify you, you do that the old school way, you know, and that’s fine. But the new school way is diversify in like three different cities. Okay. But the thing is, they can get some economies of scale, when they have 20 houses in each of those markets. Yes. And the other thing they can get is they can get certain vendors, like you just mentioned, to really take good care of them.
Aunt Joan 41:32
Yes, because they know that I’m going to be calling them up maybe two times a week
Jason Hartman 41:36
right now, with an issue. Yeah. Now, the other thing they can get is they get this sort of, I’ll call it bumper pool or pinball type concept. And the thing I’m trying to convey here is, you know, the ball, it sort of bumps around there. And what I mean by that is you have a semi monopoly in your market, where if a tenant is looking in that area, they’re looking at a few of your houses, usually, and you have some control over rental prices, where you can start thrashing the rental market up, and you can improve the area and make it look better and bring the values.
Aunt Joan 42:16
Right, well, we have a website. Should I tell the SEC sec rules that come sec, REM DLS that cop? Nobody
Jason Hartman 42:24
else being a promoter?
Aunt Joan 42:28
Anyway, people that weekly, we hear people say, I go to your website all the time? No, I don’t know if they’re trying to really buy a rental house, or they’re trying to see how some some nice furniture arranging tips. But but some people say, Oh, yes, I love your website. And it is done very well. And so with First we were just putting our own houses on our website, but pretty soon it when we got everything rented up, we were out of inventory. And we had this big website. And so people kept seeing this. And they called us up and said, Well, how about putting our house on your website?
Jason Hartman 43:10
So now they want you to manage their properties. And you only do it for your
Aunt Joan 43:13
own? Right. Right. But but but we help market their properties. Oh, really? Oh, yes. They love it. And in your ears, we have these magnificent pictures, maybe 20 pictures at a small three bedroom, two bath house or maybe a two bedroom, one bath house. And backyard pictures, front yard pictures, spread our pictures and editing the pictures are sell the whole thing. And my son is responsible for doing that. He has a real gift of photography. That’s my cousin. Yeah. And then we have our little blurb on the side with about nine volts for describing the house, we put the price on, we put the picture on, and then they then there’s a button you say inside pitch. Also, we also put a satellite map on and a rental application. And so people are reading our houses from afar very frequently. I can’t tell you how many houses we’ve read at this last summer where people have been in New York, Los Angeles and Florida, Michigan, renting your house without even maybe having seen the blade. Right? That’s great. That’s awesome.
Jason Hartman 44:24
And talk to us if you would about your I mean, your your strategy is pretty much the old school strategy of pay off your mortgages, right? Yes, you have all your houses free and clear now.
Aunt Joan 44:36
They’re just about eight that we don’t have that are free.
Jason Hartman 44:39
So so. So you, you have a little over 70 but let’s just use 74 round numbers. So you’ve got 62 of them free and clear. Yes. Why couldn’t I have been your son? Boy, your kids are gonna inherit a nice, a nice portfolio. There. Okay, so 62 free and clear. And your average price in Sacramento is gotta be in those
Aunt Joan 45:08
but 400,400. And now that’s where it is.
Jason Hartman 45:13
When the economy, this is why I like diversification because during the financial crisis A few years ago, Sacramento basically got cut in half.
Aunt Joan 45:20
Yes. But here’s the thing, interesting thing. Most of our properties are in this East Sacramento, and land Park areas, which are the really the best areas in town. And so are our properties. They changed. Yes, they did. They went down, but nothing like what would happen in the outskirts.
Jason Hartman 45:39
Tell us what happened in rent with rents, though, during the financial crisis. And this is the odd thing. Now, I don’t know what you’re gonna say, here. Tell me what you’re gonna say. But I think I know what you’re gonna say,
Aunt Joan 45:49
well, naturally, rent went down some somewhat, but we didn’t. I don’t know by by in terms of percentage, but maybe 15%, maybe even 20% and 70. Wow. Like by surprise, there were there were a lot maybe 10%. You know, depending some houses are very rentable, in some houses or maybe low power. It also depends exactly
Jason Hartman 46:16
when you catch them. Like if that if that lease comes up for, you know, for re renting and the tenant moves. And it’s during the depths of the financial crisis, like the worst time of all, when, you know, the value of your house went from 450 to 225. Never, it never happened. All right, no, no, no. But, you know, that might be the 15% down, and then you know, the rest of them. 10% now, yeah. And what are your numbers might there? You know, for a house that’s worth, I mean, it’s your average house about 450,000. And
Aunt Joan 46:50
it’s at between? Three 335 to maybe 450.
Jason Hartman 46:58
Okay, so also 450 is the height. Well, I
Aunt Joan 47:01
am actually more than that, but is for
Jason Hartman 47:04
comparison, I’m talking about the palace in which you live, okay, which is a palace. So, it’s right near where ronald reagan live when he was governor. So
Aunt Joan 47:15
it’s called the fab 40. so fabulous.
Jason Hartman 47:16
40s, the fab 40s. That’s the streets in Sacramento where they live. And I’ve been there many, many times. Now. Um, so what does that tell us about your rents? You know, for a house, that’s 330,000 and a house? That’s 450,000? What are those rent for? I mean, I can tell you, yeah, I can Yes. And I’ll probably
Aunt Joan 47:34
be actually a lot of our two bedroom, one bath, little craftsmans, which can be anywhere from 1000 square feet to maybe 1250 square feet. They probably the minimum price is 1695.
Jason Hartman 47:51
Okay, and that house is about 330,000.
Aunt Joan 47:55
It could be 332. Maybe, three, maybe 400.
Jason Hartman 48:00
Okay, okay, so it’s how much did you say the price? 1695 a month is
Aunt Joan 48:04
pretty much a rock bottom price.
Jason Hartman 48:06
Okay. So 1695 a month for 330 to $400,000. We’re getting about a point for 2.5. RV or rent to value ratio.
Aunt Joan 48:18
Right. But then the tenants do not just pay the the rental price. They also pay the city utilities, which Sacramento has a very unusual situation. Five services are all wrapped together. And for the utility of
Jason Hartman 48:33
course, they pay the utilities. That’s normal. They do that everywhere.
Aunt Joan 48:36
I mean, that wasn’t the customer in Sacramento.
Jason Hartman 48:39
Oh, really? No, you would pay for tenants utilities. I never pay the terms.
Aunt Joan 48:43
I’m not talking about smud. I’m not talking about a gas or electric. I’m talking about water. sewer in three garbage cans.
Jason Hartman 48:51
Yeah, I never pay water. And in those places, water and sewer go together. And then trash pickup. I never pay that either. For anything,
Aunt Joan 48:58
right? Well, not gardener used to be it used to be this situation. In fact. In fact, research has changed that, you know,
Jason Hartman 49:07
you did because of Yeah, you can
Aunt Joan 49:10
kind of come in as a user fee. We don’t we don’t pay that for and so they pay that. However, we had a real quick lesson in that having the tenant send it into City Hall, because we found out that some of them weren’t quite so conscientious. And we got a few liens on our property.
Jason Hartman 49:28
So because those weren’t paid they like hate when they do that. By the way. Some cities do that if if the tenant doesn’t pay their utility bill. In some cities, most don’t do this, but the few do, they actually lien the owner and the owner becomes responsible fact when he tenant tell us about the late fees and eviction policies and I want to make a note Actually, we said you said I said How long are you going to talk for it? He said oh about three or five minutes. What’s 3430 minutes in nice So we’re not going to do our guests, this will be a whole episode unto itself. But it’s really this is great information. I love hearing, again. You know, this is the old school style of investing, and it’s awesome. I mean, you’re obviously created a ton of wealth with it. What about how do you deal with tenants when their rent is late? And with evictions and stuff like that? Now you’re in California, which right? Not landlord friendly at all. That’s true.
Aunt Joan 50:25
And so the idea is to try to get into a situation where you’re having to evict someone. In our earlier years, we made some wrong choices and tenant selection. And this happened. But I think that in our total experience, we’ve had no more than four evictions. Are you kidding? I’m not kidding.
Jason Hartman 50:46
And what how long does your average tenant stay?
Aunt Joan 50:50
I’d say two, two years, maybe two, three years.
Jason Hartman 50:53
Okay. So two or three years is your so you don’t your vacancy rate. And with the turnaround the
Aunt Joan 51:00
vacancy rate is is like the tip.
Jason Hartman 51:02
Yeah, yeah. But what I’d say to your listener, that listeners is your rent is too low. So he, we’d like to get 1% of the value every month, you’re only getting point four 2.5% of the value, but that’s how California is. I mean, you know,
Aunt Joan 51:16
that’s just the way it is in California. But we find that to be right with proper pet selection. That’s, that’s the most important thing.
Jason Hartman 51:28
Yeah. Okay. So tell us about tenant selection, what are your practices there?
Aunt Joan 51:31
Well, we we have to make sure that they’re properly employed, they’ve been there a little while, and that their rent is that exceed of at least a third of their income. Also, we just look at the we always check landlord references. And we also always run credit checks. And those are pretty good indicators right there.
Jason Hartman 52:00
When you do the credit check, do you do an unlawful detainer? Check in a criminal? No, we
Aunt Joan 52:05
do that we used to. But we found out that this was completely was that
Jason Hartman 52:11
interest to credit only? Yeah. Okay, and what do you charge for an application fee? $30 $30? If we’re married, or single or no, it’s $30 per person. Okay. And you probably only pay about 10 bucks per person to run that, right?
Aunt Joan 52:27
Maybe that, but then it’s our time. Yeah. And and the paper and then we get to get to get back to the landlord or to whoever we’re running them for, you know, and so dollars is a deal. And some people will not some of our customers who, you know, they’re not anything to do with our ownership, but they just come in as a way of life and to run credit checks. And they will not move until they get our report on the credit checks. And we get what you mean by that.
Jason Hartman 53:01
I don’t understand that
Aunt Joan 53:01
they will last for the last many years. We always insist on writing credit checks.
Jason Hartman 53:09
Well, I would think that would just be standard practice. I’m surprised
Aunt Joan 53:12
that well, we for a while. We didn’t do that with everyone. But now we do.
Jason Hartman 53:18
Oh, really? Doing credit checks. Well, okay. Now your your philosophy is let’s prevent the eviction. Okay, that’s right, let’s not get paid less. So how do you how do you prevent the eviction from happening? I mean, that’s an amazing, I want to I want to just say, that is an amazing track record only for evictions with 70 houses. And all the years you’ve been doing this. It’s amazing. So how do you prevent it?
Aunt Joan 53:41
Well, for one thing, we made sure that people
Jason Hartman 53:45
go through that and gainfully employed
Aunt Joan 53:46
Yes. Right. And, and that sort of thing. And that we try to keep people happy you know that they have a report that there have a sewer stoppage or whatever we find to get a problem person right over there right away. And we also in our house rules have reasons, I have several ways to make sure that they don’t have plumbing problems. We have a certain we have a whole list of things that that to put down garbage disposals, and we also do drains a bathroom, it’s and that and dishwashers. And that whole that whole subject
Jason Hartman 54:21
would How would you How would you check that? How would you know if they did it? If they put out what our Q tip like was a Q tip or
Aunt Joan 54:28
like, those things come up and the plumbers.
Jason Hartman 54:32
Yeah, they all go get in the snake when they Yeah. Well, that’s interesting. Okay, so any other points on preventing evictions? Phenix election house rules. How do you when they’re late on their rent? I mean, certainly your people must be late on the
Aunt Joan 54:47
rare we always have some people that are late player players right
Jason Hartman 54:51
just like they’re it’s sort of just
Aunt Joan 54:53
it’s that’s we just when I send my assistant, our I ball around fit in? And she says she’ll say all with the usual.
Jason Hartman 55:03
How many years old? Is that? Wow,
Aunt Joan 55:05
about four or five?
Jason Hartman 55:06
Okay, so out of 70 you only got four or five that are later remote.
Aunt Joan 55:09
Yeah. Okay. But I mean, some of these people that are running us for us for 10 years. Yeah. Yeah, we know that. Okay,
Jason Hartman 55:19
so what do you do with them? What’s your policy? how
Aunt Joan 55:22
strict? Well, first of all, after the rent is due on the first we have a grace period from the first to the third after the third. It’s due, it’s late. And we don’t use punitive practices here and charging some huge, a late fee. We charge $25. That’s pretty
Jason Hartman 55:40
Wow, that’s light. Uh huh.
Aunt Joan 55:42
And here’s the thing, after the fifth day, if it’s not paid after the fifth day, then there is an additional charge of not only $25, but $5 per day until the rent is paid in full
Jason Hartman 55:56
jone for rent, that’s 1600 to $2,000 a month. You are easy. Yeah, there’s not not bad at all. I mean, that’s a cheap late fee.
Aunt Joan 56:08
Right. That is, and we’re, you’re you’re okay
Jason Hartman 56:11
with it.
Aunt Joan 56:12
We’re okay with I guess we, because most of the time people pay really well. I mean, we, we don’t have that much of a problem. Okay,
Jason Hartman 56:20
good. Good. Um, okay. Any other? Just, you know, as we kind of wrap up here, you know, we’ve gone like, 13 times longer than we said we would. So, what, um, what other things would you like people to know about real estate investing? You know, why real estate? I mean, do you? You know, after all these years, do you still think it’s the greatest thing? I mean, I
Aunt Joan 56:44
do. I now my husband is into stocks and a little bit advance, but I mean, you can easily do investments like that. But I really, like we always say we’re doing a thing. It’s a very tangible thing. And it pretty much depends on yourself. And your efforts is through how the whole thing works. Yeah. And we have such a very small vacancy fee. And we have a minimum of problems because we have our most of our properties in very good areas. And we have just a high caliber of of tenants.
Jason Hartman 57:18
Do most of your tenants work for the government? Sacramento is the capital of California. So
Aunt Joan 57:25
you’re right. And that not most of them, but quite a few do more government related. We have probably the medical profession we have in terms of just the Sacramento itself. We have six major hospitals within five minutes.
Jason Hartman 57:43
Yeah, some of our areas are like too radical Houston’s got tons of medical, you know, medicals, pretty good because those people make good money.
Aunt Joan 57:52
And these places keep expanding. Yeah, right. Yeah. You see the medical or medical industrial complex. You see, the Med Center looks like a five star hotel. Yeah.
Jason Hartman 58:06
It really is. Okay, good. So anything else about real estate? Or no, I’m
Aunt Joan 58:11
happy we got into it. And my husband was always opposing it. And then I would see what house for example. And he says he would come by and he says, I would think this house needs to be skipped loaded.
Jason Hartman 58:25
Like tore down?
Aunt Joan 58:26
Like, like, yeah, removes pretty severe. And I’d say, john, I said, it just needs a little TLC. And when we were first started out, I didn’t even want to be involved. If a house near closet doors that we’re working in a few things like that. But after a little while, we got into all sorts of things and problems. And of course, we got workers to handle these problems. And so we got very adventurous with then we got into kitchen remodels, bathroom remodels, adding rules to properties and then taking
Jason Hartman 59:01
you have rooms to them. Oh, yes, we’ve
Aunt Joan 59:03
done a lot from making them from two and once into three and two. So because we have a very, the whole world wants to live in the second round. So it is the 1920 houses are not exactly suited if someone comes in with two children and a couple of them in and then they want an office to sell springtails
Jason Hartman 59:27
do good stuff. Well and Joanie, thank you so much for sharing this with my listeners today. And it was just great to have you on the show.
Aunt Joan 59:33
Thank you so much.
Jason Hartman 59:36
Well, there you have it, folks. That is the word from my rich aunt Joanie. And don’t wait to buy real estate, buy real estate and then wait. And you know, you just got to stay at this and, you know, let time and all these great factors just be on your side and you know, you just can’t help but make a lot of money in real estate. I think she has one more thing to say here.
Aunt Joan 1:00:00
And even with these ups and downs in real estate, people will say, Wow, the real estate is lost on this much money. I said yes, but I’m not selling. Why do I care? Right? Yeah. So yeah,
Jason Hartman 1:00:12
you treat it as as a value investor, like the Warren Buffett philosophy applied to real estate value investing. You hold it for cash flow. You don’t be a speculator just buy him and hold him. You know. That’s my philosophy.
Aunt Joan 1:00:27
Yes. In fact, in all of our lives, we’ve only sold two houses. Wow.
Jason Hartman 1:00:33
Wow. Yeah. Yeah, that’s, that’s I regret most of the houses I sold. Yeah. should have just kept them. Yeah, no, I agree. I agree.
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