YW 84 – Aunt Joan – How Old-School Real Estate Investing Worked for Me

YW 84 – Aunt Joan – How Old-School Real Estate Investing Worked for Me

Today’s interviewee is none other than Jason’s Aunt Joan, an incredibly successful real estate investor who, together with her husband, owns more than 70 single-family homes around the Sacramento, California area. ‘Old-School’ seems to be the buzz-word of choice, but Joan talks about how she got into real estate, why she still loves it and gives some great advice about property management and keeping your tenants on side.
Key Takeaways
1.12 – Jason Hartman asks his influential Aunt Joan about the beginning of her successful lifetime of real estate investing.
5.35 – Low-priced markets might look like the easy way in, but issues could mean big problems later.
12.56 – The Cyber Monday sale at www.JasonHartman.com is now on, with discounts of up to 40%.
19.59 – The information offered by Aunt Joan is available at www.SacRentals.com
26.00 – Be aware, both as an owner and a tenant, about who is paying the city utilities. Owners, flaky tenants could mean this is your responsibility.
39.05 – With tenant selection being so vital to success, you really need to master this in the early stages.
34.25 – One of the reasons that real estate retains such popularity is because it’s such a tangible thing.

 

Tweetables
The best advice for owners and landlords is to not even get into a situation where you have to evict someone.
You really ought to be aiming to get 1% in the rent-to-value ratio as an owner.
The success of real estate investing lies with you and your efforts as an investor.

Transcript

Introduction:
This show is produced by the Hartman Media Company. For more information and links to all our great podcasts, visit www.HartmanMedia.com

Welcome to the Young Wealth Show, where you’ll truly learn how to make, spend and invest money for an awesome life. Get the real life stuff that wasn’t part of your school curriculum. Young wealth gives you innovative new ways of dealing with your finances, as well as the skills and tools you’e going to need to survive and be successful out on your own. Let the Young Wealth Show be your GPS to take you from clueless to clued in. Here’s your host, Jason Hartman, with Young Wealth.

Jason Hartman:
Hey, welcome to the Young Wealth Show, this is your host Jason Hartman. This show, of course, is produced by my foundation, The Jason Hartman Foundation, where we talk about business and investing, and how you can create a great future for yourself and start out on the right path. We’ll be back with a great guest for you in just a moment here on the Young Wealth Show. Be sure to visit our website, www.YoungWealth.com, where we’ve got a fantastic blog, lots of free resources. Take advantage of that and further your financial education.

Jason:
Aunt Joanie, how are you?

Joan:
Just fine, thanks. I’m enjoying Gulf Shores.

Jason:
Okay, good. Well, thank you for coming on and recording with me today. I really wanted to just have you share with the audience a little bit about your tremendous success as a real estate investor. My first question for you is: When did you start investing in real estate?

Joan:
Probably about 1978.

Jason:
1978. Okay, so 1978 you started in real estate investing, and why did you start investing in real estate? What was it? Tell them a little bit of your background. My Mom’s been on the show before, so growing up on a farm in upstate New York. What was that like? Just briefly.

Joan:
Well, it was a lot different from the world that I’m living in today, of course. I didn’t have any ambitions about getting into the real estate market at that time in my life. However, when I came out to California, I went to UC Berkeley, and I majored in two fields: one was Real Estate, the other was Personal and Human Relations Management.

Jason:
Like Human Resources?

Joan:
Human Resources, yes. And so I’ve come to use both of them, and you have to use the Human Resources part of it when you are choosing tenants for your properties, big time.

Jason:
No question about it! And so my Mom also went to Berkeley, and you are her older sister just by a couple of years. She got a degree in Social Welfare – not quite so useful.

Joan:
Yes, which she decided she wasn’t all that enthusiastic about after a while!

Jason:
Right, right. That’s funny. Berkeley in the Sixties and a degree in Social Welfare – you would think my Mom is a flaming Liberal, but she’s definitely not! Kinda funny. Okay, so you went to College; how long would you say it was after College before you started investing in real estate?

Joan:
Probably about 10 years or so.

Jason:
10 years or so, okay, great. Why real estate? What prompted you to buy your first property?

Joan:
At that time, we were in the restaurant business and we had absolutely no tax write-offs. We needed to have something for some income, so we bought out first house in Sacramento and just little by little, we kept acquiring more and more. We had come from the very expensive San Francisco real estate market, and when we got up to Sacramento, things were so cheap, so to speak, that we just went sort of crazy.

Jason:
Yeah, so a couple of comments before you go on. Number 1: Listeners, you know I always like to say that income property, or income-produced real estate rental property, is the most tax-favored asset in America. Aunt Joanie here really became interested from a tax perspective, and then you look at the relativity concept. I talk 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 Seventies. San Francisco was very expensive.

Joan:
Oh, we were in Hillsborough, actually, which is even more expensive. Over the top, you might say. Then coming up to Sacramento, I kept looking at these charming, darling, good craftsmanship houses, and I couldn’t believe how inexpensive they were. The more I looked, the more I said ‘Wow, why don’t we buy one?’ So we bought out first one.

Jason:
Right, so your first property that you ever bought – was that a home in which you lived, was it for you and Uncle John? Or was it a rental home?

Joan:
No. It was a rental home.

Jason:
So you didn’t buy your own home first? That’s interesting.

Joan:
Oh, excuse me! We bought our own home first.

Jason:
Oh okay, you did.

Joan:
Excuse me, yeah. We also bought a home in San Mateo first, before that. We bought our home in Hillsborough afterwards, but in terms of the investment property part of it, we bought our first real one in Sacramento.

Jason:
Okay, great. The theory of relativity concept is that you came from that very expensive real estate market in the San Francisco Bay area, and then moving to Sacramento, everything looked really inexpensive. So what happened there is things really worked back then. The cash-flow, back in those days, worked pretty well.

Joan:
Well, that’s sort of a yes and no. The point was that in relation to the San Francisco-Hillsborough market, prices in Sacramento were extremely inexpensive, but at the same time, the rentals were considerably lower. We were never in most situations, in a case of penciling out.

Jason:
Okay, in terms of cash flow?

Joan:
Yes.

Jason:
Because even then, California didn’t really work, from a cash flow perspective!

Joan:
That’s right. At the same time, I never wanted to buy in lower property areas because I just didn’t want to have the problems connected with rentals in very low-income property areas.

Jason:
I agree with you. That’s one of the deceiving things, and I talk about that on the show a lot – in lower priced markets, those deals look good on paper, but in reality with collection problems and the eviction problems, they just don’t work. Whatever city you’re in, I think you should be just below the median price, is kind of the ideal. If you’re in a $150,000 median priced market place, or even a sub-market – it doesn’t have to be the whole city or the metro area – then if you’re doing something at $120,000, that makes sense. That works because you’ll have a decent quality tenant in that scenario.

Just to entice our listeners a little bit, Aunt Joanie, where are you now? How many houses do you own now?

Joan:
Well, a little over 70.

Jason:
That’s over 70.

Joan:
Most of them are single-family residences. We have a few duplexes and we have one fourplex, but I’ve never gotten into the apartment situation.

Jason:
That was my next question for you: how come you stuck with single-family homes all those years? Why was that the thing? Why not apartments?

Joan:
Well, 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:
Yeah. So this is one of the things, folks. I own apartments myself – I have two apartment complexes, now. I had three before but sold one of them a while back, and then I have a bunch of single-family homes too. I’ve definitely done both. I’ve done many more single-family home deals than apartment deals in my career, but the apartments – they can be good and I know a lot investors kind of have their eyes on the idea of ‘Oh, I’m going to do this big stuff and do big apartments and I’m going to be big and I’m going to build an empire’ and all that. That’s great, it’s ambitious, it’s wonderful, but apartments are more complex for sure.

Joan:
They can be extremely troublesome.

Jason:
Tell us about that. What did you think about that?

Joan:
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. Then you’re really at that manager’s mercy if he decides to take another job. Then you’ve got a major problem.

Jason:
You’re talking about like a resident manager, who’s usually living there.

Joan:
Yes, that’s right.

Jason:
It’s usually a tenant that lives on the property.

Joan:
It’s over 6 or 8 units, something like that, where you have to have a live-in person.

Jason:
That may be a California rule.

Joan:
Excuse me, that is, yes.

Jason:
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 there!

Joan:
Right!

Jason:
When you look around the country, every lawyer you will talk to in every part of the country and every business person you talk to in every part of the country – when it comes to the legal climate and laws, California and New York always have their own set of additional laws, on top of everybody else. If the rest of the country has x number of laws, California and New York have 50% more laws.

Joan:
Exactly.

Jason:
It’s crazy and you’re rolling your eyes. You know this! Okay, so what else did you hear about apartments?

Joan:
Well, I’d just heard quite a few horror stories. In fact, we had a manager of our restaurant whose wife was a manager of an apartment building. I just heard many tales from him, and I just realized that I didn’t have the time nor the interest to get into possible situations like that.

Jason:
Yeah, and look at it – apartments are like my second favorite real estate investment, after single-family homes. I’ll just state that, for the record. I like the idea of mobile home parks, I’ve tried to do many mobile home park deals but have never completed one. I kind of like self-storage but I do not like office, I do not like retail property, I do not like industrial property. Housing, housing, housing is where it’s at.

Joan:
Right.

Jason:
In the single-family homes, you get, generally speaking, a much better quality tenant.

Joan:
Yes you do. But also, in our fourplex, which is just a one-bedroom fourplex, we get excellent quality tenants. We just have professional people – no pets, no smoking. It’s that type of atmosphere and that works very well, too.

Jason:
Now, tell us about some of your property management practices. I remember the funniest things, growing up as a kid, and I tell you – if you ask 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! I have a funny memory like that, and I remember all of your funny little property management practices, where you would give your tenants colored envelopes. They were the kind of envelopes that a greetings card comes in, like a Happy Birthday card.

Joan:
It would be a long, legal colorful envelope. They were in very bright colors, so when these would come into the PO Box, we would know that those were our rent checks!

Jason:
[Laughs]. I bet you loved getting those colored envelopes!

Joan:
We loved them.

Jason:
What other property management things would you like the listeners to know about?

Joan:
Well, frequently, people will call our office and they’ll ask if we’re a property managements firm. We’ll say ‘Yes, we are, but of our own properties’. They say ‘Well, wouldn’t you work for us?’ We say ‘No, we’ve got enough on our plate just doing what we do, and we really just take care of our own properties’.
People, and especially if they’re running their property for the first time, want someone to take over and they’re nervous and frightened about the prospect of doing this. We branch out to the point that a lot of first-time landlords get a little course from us. The course has expanded itself over the years, and now it’s about 2.5 hours long, and at the end of the session, depending on how many questions they ask, it could even be 3.5 hours.

Jason:
Do you charge for this property management course?

Joan:
Oh yes! It’s a very minimal price.

Jason:
I didn’t even know you were doing this until today when you told me.

Joan:
We charge $185 and we give them all sorts of materials that they need. We don’t give them leases, but we give them all sorts of materials.

Jason:
Oh really? Okay, cool. Good stuff. I think we ought to record that and turn it into an info product so we can sell it at my website, www.JasonHartman.com

That reminds me – I’m always forgetting this stuff – we’re having, not a Black Friday special, but a Cyber Monday Special on all our digital products next week. You get 40% off all of our digital products. This is our biggest sale of the year, it’s our Cyber Monday sale – the retailers do Black Friday, the online people do Cyber Monday, so that will be available, I believe, until December 4th. It’s just a few days’ long and 40% off all the digital products at www.JasonHartman.com

Joan, we should add your course to that in the future!

Joan:
Ours is a one-on-one here, so it’s a little bit difficult. However..

Jason:
Share some of the tricks of the trade.

Joan:
Okay, well, let me tell you something that we learned maybe 10 years into doing this. We’ve been doing this for at least 30-40 years, but about 10 years into doing this, we realized the fantastic necessity of having house rules.

Jason:
House rules? Okay, tell us about house rules. There’s a movie called House Rules; what are your house rules? What are Joanie’s house rules?

Joan:
We expand them as things occur in our residences.

Jason:
And as you learn stuff.

Joan:
Yes, and some people, when we’re going over these, think that maybe we’ve had some wild things in the middle of the night, but all these things that have happened, all of these house rules, are based on actual situations that have occurred.

Jason:
Okay, tell us about some.

Joan:
For example, most of our houses, or at least in the market that we’re in, want to have hard-wood floors. The whole world loves hard-wood floors. However, there are a lot of people who have no idea how to take care of hard-wood floors. It’s very important that they have pads under larger pieces of furniture and small little pads that you can just paste onto small things like coffee tables and chairs.

Jason:
Tell the listeners the average age of your houses. Your houses are older – what are they typically?

Joan:
I guess our oldest one’s about 1916.

Jason:
Okay, so that’s like 100 years old and that’s your oldest house.

Joan:
Yes. Our most modern house is 1960.

Jason:
Wow, so 1960 is the newest house. That’s 54 years old, wow.

Joan:
In the market that we’re in, everyone wants to have houses with character.

Jason:
Okay.

Joan:
And my real estate agent, when we were doing this, said ‘Joanie, why are you wanting these oldie mouldies?’ That was her expression, and I said ‘Sally, I love these oldie mouldies and I think a lot of people like these oldie mouldies.’

Jason:
‘Oldie mouldies!’

Joan:
These are craftsman houses with ironing boards that come out and little mail boxes with fancy little drill work, and make little holes at the front door where you open up the little door and see who’s outside. They’re full of nice little things like that.

Jason:
Okay.

Joan:
They’re definitely houses with character.

Jason:
Now, one of the funny things is I can always tell your houses – 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.

Joan:
Oh yes, right.

Jason:
Those are like your trademarks. That’s kind of neat. Do you want to talk about that at all? No, okay. What other tricks of the trade or house rules are interesting? Most of our investors, number 1 don’t have houses that old, and number 2 are not micro-managing them that much. Any tips for the nation-wide investor? You did it the old-school way, but nowadays people are diversifying, technology allows them to do that geographically and be in multiple markets and so forth.

Joan:
That’s true. The other thing that’s very important is to have a very good background crew that can take care of rental problems. We don’t just have a handyman who does it all; we have electricians, we have plumbers, we have contractors. Everyone is a specialist in his field, and this is very important. Things get done properly. We even have a fence person. We could probably name 15 different tradesmen and specialists that we use.

Jason:
Right, and those people are getting repeat business from you?

Joan:
Oh yes, and they take very good care of us, especially the plumber!

Jason:
Why do you say the plumber?

Joan:
He has all of our houses, and we always recommend him to our landlords. I’m wondering when I’m going to stop doing this because sometimes I don’t want to come off as enhancing his business.

Jason:
Exactly. He might then get too busy for you! Here’s one of the things that’s interesting: one of the strategies that I haven’t talked about very much on the show, but that I want to recommend to our investors who want to build big portfolios, is your strategy. I want to take your strategy and recommend that people do it in 3 different cities. If they want to have a portfolio of say 60 houses or more, they should get 20 in each city. I want them to diversify. You did it the old-school way, and that’s fine, but the new-school way is diversify in 3 different cities. The thing is, they can get some economy of scale when they have 20 houses in each of those markets.

Joan:
Yes.

Jason:
And the other thing they can get is certain vendors, like you just mentioned, to really take good care of them.

Joan:
Yes, because they know I’m going to be calling them up maybe 2 times a week.

Jason:
Right, with an issue. Now, the other thing they can get is this ‘bumper pool’ or ‘pin-ball’ type concept, I’ll call it. The thing I’m trying to convey here is when the ball sort of bumps around there – what I mean by that is that 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. You then have some control over rental prices, where you can start pushing the rental market up and you can improve the area and make it look better, thereby bringing the values up. Tell us about that.

Joan:
We have a website – should I tell them the website?

Jason:
Yeah, if you want.

Joan:
Okay, www.SacRentals.com.

Jason:
Now my Aunt’s being a promoter; I didn’t know she was going to do this!

Joan:
Any rate, weekly, we hear people say that they go to our website all the time. I don’t know if they’re trying to rent a house or if they’re trying to see some nice furniture arranging tips or something. Some people say ‘Oh yes, I love your website’, and it is done very well. At first, we were just putting our own houses on our website, but pretty soon when we’ve got everything rented out, we’ll be out of inventory. We had this nice big website and people kept seeing us and called us up saying ‘How about putting our house on your website?’

Jason:
They want you to manage their properties and you only do it for your own.

Joan:
Right, but we help market their properties.

Jason:
Oh really?

Joan:
Oh yes. They love it, we have these magnificent pictures – maybe 20 pictures of a small, three-bedroom, two-bath house, or maybe a two-bedroom, one-bath house. We have backyard pictures, frontyard pictures, front door pictures. The pictures sell the whole thing, and my son is responsible for doing that. He has a real gift for photography.

Jason:
Yeah, that’s my cousin.

Joan:
Yeah. Then we have a little blurb on the site with 9 bullets for the description of the house. We put the price on, we put a nice big picture on, and then there’s a button for ‘Inside Pics’. We also put a satellite map on, and the rental application. People are renting our houses from afar very frequently. I can’t tell you how many houses we’ve rented this last summer, but people have been in New York, Los Angeles, Florida, Michigan. They’re renting our houses without even seeing them most of the time.

Jason:
Right, right. That’s great, that’s awesome. Talk to us, if you would, about your strategy. It’s pretty much the old-school strategy of pay off your mortgages, right?

Joan:
Yes.

Jason:
Do you have all your houses free and clear now?

Joan:
There are just about 8 that we don’t have free and clear.

Jason:
So you have a little over 70, but let’s just use 70 for round numbers. You’ve got 62 of them free and clear?

Joan:
Yes.

Jason:
Why couldn’t I have been your son?

Joan:
[Laughs].

Jason:
Boy, your kids are going to inherit a nice portfolio there! Okay, 62 free and clear, and your average price in Sacramento has got to be, what, $400,000?

Joan:
Now, that’s where it is, yes.

Jason:
And this is why I like diversification; during the financial crisis a few years ago, Sacramento basically got cut i half.

Joan:
Yes, but here’s the interesting thing. Most of our properties are in this East Sacramento and land-park areas, which are the best areas in town. Our properties changed, yes, they went down, but nothing like what would happen in the outskirts.

Jason:
Now, tell us what happened with rents, though, during the financial crisis. This is the odd thing. I think I know what you’re going to say, but tell me anyway.

Joan:
Well, naturally, rents went down somewhat.

Jason:
How much?

Joan:
I don’t know in terms of percentage, but maybe 15%? Maybe even 20% in some?

Jason:
That’s pretty big, wow. I’m actually kind of surprised.

Joan:
But they weren’t a lot of them. Maybe it was 10%. It depends – some houses are very rentable, and some houses are maybe a little harder to rent.

Jason:
Well, it also depends exactly when you catch them. If that lease comes up for re-renting and the tenant moves and it’s during the depths of the financial crisis, like the worst time of all when the value of your house went from $450,000 to $225,000.

Joan:
That never happened.

Jason:
Not that bad, okay. That might be the 15% down, and then the rest of them might be 10%. What are your numbers like? Is your average house about $450,000?

Joan:
I’d say between $335,000 to maybe $450,000.

Jason:
Oh, so $450,000’s the high.

Joan:
Well, actually more than that, but that’s just for comparison.

Jason:
I’m not talking about the house in which you live, okay, which is a palace! It’s right near where Ronald Reagan lived when he was governor, so…

Joan:
It’s called the Fab Forties.

Jason:
The Fabulous Forties, the Fab Forties. That’s the street in Sacramento where they live, and I’ve been there many, many times. So tell us about your rents. For a house that’s $330,000 and a house that’s $450,000, what do those rent for? I can tell you! I can guess and I’ll probably be pretty close.

Joan:
Actually, a lot of our two-bedroom, one-bath little craftsmans which can be anywhere from 1,000 sq feet to maybe 1,250 sq feet, they probably have a minimum price of $1695.

Jason:
OKay, and that house is about $330,000.

Joan:
It could be $330,000 to maybe a $400,000.

Jason:
Okay, so you said it was $1695/month for a $330,000-$400,000, so you’re getting about a 0.4-0.5 RV (rent-to-value) ratio.

Joan:
Right, but the tenants do not just pay the rental price. They also pay the city utilities, which Sacramento has a very neutral situation. Five services are all racked together in city utilities.

Jason:
Well, of course they pay the utilities, that’s normal. They do that everywhere.

Joan:
That wasn’t the custom in Sacramento.

Jason:
Oh really? You would pay the tenants’ utilities? I never pay the tenants’ utilities.

Joan:
I’m not talking about gas or electric, I’m talking about water, sewer and the three garbage cans.

Jason:
Yeah, I never pay water, and in most places, water and sewer go together. Trash pick-up, I never pay that either. I don’t pay for anything. Not the gardener, nothing.

Joan:
It used to be the situation in Sacramento, but we changed that.

Jason:
You did, you changed the custom.

Joan:
Yeah, we said, ‘Hey, that’s a user fee, we don’t pay that.’ They then paid that, but we had a real quick lesson in not having the tenant send it in to City Hall. We found out that some of them weren’t quite so conscientious and we got a few leans on our properties.

Jason:
Oh, because those weren’t paid.. I hate when they do that, by the way. Some cities do that – if the tenant doesn’t pay their utility bill, they actually lean the owner and the owner becomes responsible for the flaky tenant. Tell us about late fees and eviction policies. I want to make a note, Aunt Joanie – I said ‘How long are you going to talk for?’ and you said ‘Oh, about 3-5 minutes’. We’re 30 minutes into this! We’re not going to do our guest; this is going to be a whole episode unto itself, but this is really great information and I love hearing it.

Again, folks, this is the old-school style of investing, and it’s awesome. You obviously created a ton of wealth with it. How do you deal with tenants when their rent is late or with evictions and stuff like that? You’re in California, which is not landlord-friendly at all.

Joan:
That’s true, and so the idea is to try to not get into a situation where you’re having to evict someone. In our earlier years, we made some wrong choices in tenant selection, and this happened. I think that in our total experience, we’ve had no more than 4 evictions.

Jason:
Are you kidding?

Joan:
I’m not kidding.

Jason:
And how long does your average tenant stay?

Joan:
I’d say 2-3 years.

Jason:
Okay, so 2-3 years is your average. Your vacancy rate and the turn-around between guests is about a month?

Joan:
Our vacancy rate is like zip.

Jason:
Yeah, but what I’d say to the listeners is that your rent is too low. We like to get 1% of the value every month, but you’re only getting 0.4-0.5% of the value. But then that’s how California is. That’s just the way it is in California.

Joan:
Well, we find that proper tenant selection is the most important thing.

Jason:
Yeah, okay, so tell us about tenant selection. What are your practices there?

Joan:
We have to make sure that they’re properly employed and that they’ve been there a little while. We need their rent to not exceed at least a third of their income. Also, we always check landlord references and we always run credit checks. Those are pretty good indicators right there.

Jason:
When you do the credit check, do you do an unlawful detainer check and a criminal check?

Joan:
No, we don’t. We used to, but we found out that this was completely unnecessary.

Jason:
You just do credit only?

Joan:
Yeah, we just do credit only.

Jason:
Wow, and what do you charge for an application fee?

Joan:
$30.

Jason:
$30 for married or single?

Joan:
No, it’s $30 per person.

Jason:
Okay, and you probably only pay about $10 per person to run that, right?

Joan:
Maybe that, but then it’s our time. We’ve then got to get back to the landlord, or to whomever we’re running the checks for. $30 is the deal.

Jason:
Right, yeah, I get it.

Joan:
Some of our customers who are not anything to do with our ownership just come in as a way of life to run credit checks. They will not move until they get our report on the credit checks.

Jason:
What do you mean by that? I don’t understand.

Joan:
For the last so many years, we always insist on running credit checks.

Jason:
Well, I would think that would just be standard practice.

Joan:
Well, for a while we didn’t do that with everyone, but now we do.

Jason:
Oh, really? You didn’t do credit checks, wow. Now, your philosophy is ‘Let’s prevent the eviction’.

Joan:
That’s right.

Jason:
So how do you prevent the eviction from happening? I want to just say, that’s an amazing track record with 70 houses and only 4 evictions in all the years you’ve been doing this. That’s amazing. How do you prevent it?

Joan:
Well, for one thing, we make sure that people are gainfully employed, and that sort of thing.

Jason:
Okay, so tenant selection, we got through that.

Joan:
Then we try to keep people happy. If they have a report that there’s a sewer blockage or something, we try to get a plumber or electrician to them right away. We also, in our house rules, have several ways to make sure that they don’t have plumbing problems. We have a whole list of things not to put down garbage disposals, and we also do drains in bathrooms and dishwashers and that whole subject.

Jason:
But how would you check that? How would you know if they put a q-tip or something down?

Joan:
These things come up when the plumbers look.

Jason:
Yeah, they’ll get it in the snake when they snake it out. OKay, that’s interesting. Any other points on preventing evictions? Tenant selection, house rules; when they’re late on their rent – certainly you must have people who are late on their rent?

Joan:
We always have some people that are late payers.

Jason:
So it’s sort of just their way?

Joan:
I say to my assistant ‘Have all the rents been in?’ and she says ‘All but the usual’.

Jason:
How many usual is that?

Joan:
About 4 or 5.

Jason:
OKay, so out of 70, you’ve only got 4-5 that are late every month.

Joan:
Yeah, but I mean that some of these people have been running for us for ..

Jason:
10 years?

Joan:
Yeah.

Jason:
And they’re late every month.

Joan:
Yeah, we know them.

Jason:
OKay, so what do you do with them? What’s your policy? How strict are you?

Joan:
Well, first of all, the rent is due on the 1st, we have a brace period from the 1st to the 3rd. After the 3rd, it’s late. We don’t use punitive practices here in charging some huge late fee. We charge $25.

Jason:
That’s pretty light, wow.. that’s light.

Joan:
Yes, and here’s the thing – after the 5th day, if it’s not paid, then there is an additional charge of $5 per day until the rent is paid in full.

Jason:
Joan, for a rent that’s $1600-$2000 a month, you are easy! That is not bad at all. That’s a cheap late fee.

Joan:
Right. It is.

Jason:
And you’re okay with that?

Joan:
We’re okay with that because most of the time, people pay really well. We don’t have that much of a problem.

Jason:
Okay, good. As we wrap up here, we’ve gone 13 times longer than we said we would! What other things would you like people to know about real estate investing? After all these years, do you still think it’s the greatest thing?

Joan:
I do. My husband is into stocks and a little bit of the bonds, but he’s into investments like that. I really like real estate because it’s a very tangible thing, and it pretty much depends on yourself and your efforts as to how the whole thing works. We have such a very small vacancy fee and we have a minimum of problems because most of our properties are in very good areas. We just have a high caliber of tenants.

Jason:
Yeah. Do most of your tenants work for the government? Sacramento’s the capital of California.

Joan:
Not most of them, but quite a few do.

Jason:
Or government-related jobs.

Joan:
We probably have the medical profession too. In terms of just East Sacramento, we have 6 major hospitals within 5 minutes of our houses.

Jason:
Some of our areas are like that. For example, Houston’s got tons of medical opportunities. Medical’s pretty good because those people make good money.

Joan:
And these places keep expanding.

Jason:
Yeah, right. I call that the medical industrial complex.

Joan:
Yes. The med center looks like a five-star hotel.

Jason:
It really is. Good, so anything else about real estate?

Joan:
Nope, I’m happy. We got into it and my husband was always opposing it. Then we got a house and he said he would buy, and then he said he thought the house needed to be step-loaded.

Jason:
Step-loaded, like torn down.

Joan:
Yeah, removed from the face of the Earth. I’d say, ‘John, it just needs a little TLC’. When we first started out, I didn’t even want to be involved if the house didn’t have closet doors that were working and things like that. After a little while, though, we got into all sorts of things and problems, and of course, we got workers to handle these problems. We got very inventive with them – we got into kitchen remodeling, bathroom remodeling, adding rooms to properties.

Jason:
Oh, you add rooms to them? Wow.

Joan:
Oh yes, we’ve done a lot from making them from 2-in-1s into 3-in-2s, because the whole world wants to live in this Sacramento area.

Jason:
Interesting.

Joan:
These little 1920 houses are not exactly suited immediately if someone comes in with 2 children, and then they want an office too, but we can make it work.

Jason:
That’s fantastic, good stuff. Well, Aunt Joanie, thank you so much for sharing this with my listeners today, and it was just great to have you on the show!

Joan:
Thank you so much!

Jason:
Well, there you have it, folks. That is the word from my rich Aunt Joanie. Don’t wait to buy real estate, buy real estate and then wait! You’ve just got to stay at this and let time and all these great factors just be on your side. You just can’t help but make a lot of money in real estate. I think she has one more thing to say here.

Joan:
Even with these ups and downs in real estate, people still say ‘Wow, the real estate has lost this much money’, but I say ‘Yes, but I’m not selling. Why do I care?’

Jason:
Yeah, you treat it as a value investor, like the Warren Buffett philosophy applied to real estate – value investing is where you hold it for cash flow. Don’t be a speculator, just buy them and hold them.

Joan:
Exactly. That’s my best philosophy. In fact, in all of our lives, we’ve only sold 2 houses.

Jason:
Wow, I regret most of the houses I sold. I should have just kept them, so I agree. Well, good stuff. Aunt Joanie, thank you so much and happy investing.

Outro:
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