As a tribute to the late Kobe Bryant, Jason Hartman reads a letter Kobe wrote about money. Jason Hartman brings on investment counselor, Naresh as they discuss a few investment properties in “The Vegas of the South,” and Citrus Springs Florida. Jason goes on to elaborate his strategy of Refi Til Ya Die.
Yeah, history wise, we got interested in and around early 2016. I knew that the real estate investing was something I wanted to do. And I just didn’t know where to start. I had no clue. My story is and my friend Khan, who’s here at the event as well, actually recommended I go look at Jason Hartman. So I spent about 30 days listening to podcasts of Jason Hartman show and then I got in touch with Sarah, a month after I started and we bought our first property a couple months after I started
listening to podcasts
in 2016. So fast forward, we’ve just been coming to events, every six months or so we go to meet the Masters we never miss. We get something new and life changing really literally every time we come. So it’s extremely crucial for us to stay educated. And we’ve been able to bless enough to pick up 26 units since we started this process. And we’re just going to keep moving forward with big vision and big dreaming
well Come 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 multi millionaire 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 on now. here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:50
Welcome to Episode 1382 1382. Thanks for joining us today. No rush has not been on the show for a while but here he is welcome back in around Hey, good to be back on now something big has changed about you since you were here last. And that is that you are now a dad. So I want to wish you a Happy Father’s Day. Tell us about your new arrival.
Thank you. Yeah, he’s two weeks old, actually. 15 days old. So a little over two weeks old. And as healthy as as can be keeping those busy late at night. Definitely our lives changed for the better. And actually, I didn’t tell you this, but we listened to your podcast late at night when I’m trying to put him to sleep. I’ll just turn on the show. And that serves as a little bit of white noise for him. And he actually so far the results have been quite good.
Jason Hartman 2:42
You mean you have him listening to the podcast? Yeah, yeah. Listen together. I love this. This is great, folks. This is great. Okay, so we have our youngest listener now. Okay, fantastic. That is absolutely great. And a future Real Estate Investor Well, he’s going to he’s going to be asking a couple of questions before preschool and in the in the next couple years number one is what property should he buy? Number two is when he should refinance. Your son is going to be way ahead of the game here. So let’s talk about a property. You’ve got a couple you want to talk about today.
Yeah, and I know that you really like the new home constructions and they’re two new home constructions that I really really like they’re currently up on your website Jason Hartman calm the first one I want to go over is a Jacksonville new construction four Plex. Yeah. So this is again for those listening. You can go to the Jacksonville section of Jason Hartman calm, these four plexes are I mean, they look they look great. They’re brand new, they’re an awesome growing areas in Jacksonville proper, not in kind of a not in a suburb. 40 minutes away. There four units. So four doors, each one is 20 bedroom two bathroom. Estimated rent is 40 $100. And of course, that’s compared to what the the price of the overall, four Plex is about $486,000. So this is on the pricier side because it is four units. It’s a four Plex. But the rent to value ratio is almost point 9%. It’s point eight 5%. You know, you know the rescue, you just reminded me of something. And I’ve chronicled this story many times I got ripped off by a property manager. years ago. It was a four Plex that I bought in Missouri. Interestingly, the rent to value ratio for this property over 10 years ago, was not that far off of this one. And this is Jacksonville a more desirable market. Yeah, it’s 10 years later. This is a really good looking deal.
Jason Hartman 5:00
I mean I mean $485,000 projected rent of 40 $100 I don’t know how you’re not going to get 40 $100 for four units. I mean these are these are two bedroom two bath and they’re only renting for what is that? 1015 no less than 1015 each. Yeah less than 10 how other 1025 peace How is that how they running so cheap?
This is I’m not sure why the rents are they’re not single family they’re two bed two bath well I know but even then I mean a two bedroom two bath for 1025 a month is pretty good new construction. It is it is quite good. You brought up $486,000 so the down payment 20% down is going to be quite steep. We’re talking close to $150,000 and down payment on this including closing costs all the the other expenses
Jason Hartman 5:52
you got projected cash flow of $817 per month in projected cash on cash return of eight percent for brand new construction in Florida. This deal I love this deal.
I absolutely love it. Yeah. And the pro forma you’re looking at that’s assuming a 25% Down, down payment. Oh, so the cash in cash is actually so it would actually be probably interesting person or yeah 8% 9% it will be higher the numbers would be even higher. Okay.
Jason Hartman 6:24
Yeah, check that out at Jason Hartman calm Alright, and so anything else on this four Plex this deal looks pretty great.
Well the four Plex is definitely a go to but I also like another property or a few other new home constructions outside of Memphis so not in Memphis proper. It’s actually in Robinson Ville slash Tunica resorts part of Mississippi. I myself closed on one of these homes recently and their new construction. We have one available it’s $150,000 for those who don’t know Tunica results. At one point, maybe 1520 years ago, it was named the number three resorts city in the United States after Las Vegas and Atlantic City. Think of like the Vegas of the South.
Jason Hartman 7:13
That’s really interesting. I’m surprised even Branson, Missouri didn’t make that list. That’s interesting. So this Tunica was number three. Hmm.
Wow. So when it goes number three, and I think it’s because I want some brands into the Ozark Mountains, years back. And I think the difference is in Tunica. It’s like a casino capital. So it’s like Atlantic City in Vegas. I mean, you got casinos everywhere. Whereas Branson I don’t think there are any casinos. It is an entertainment capital. There’s a lot to do there. It’s good for the kids. But I’m not sure that they have any casinos there. You can
Jason Hartman 7:47
say I remember I don’t gamble. So don’t think much about casinos, but interesting. Okay, cool.
So this property may rent for 1295. Again about $150,000 home. So the rents value is close to point 9%, which is for a new construction. That’s pretty great. It is.
Jason Hartman 8:07
It is well, okay, so projected rent 1295 prices 149 nine, and with 20% down, that’ll give you a cash on cash around 9%. And even though I don’t like the metric crap rate or cap rate, this one 7% pen is good. And overall return on investment projected at 32% annually. Now, if you’re new listener, and you think 32% is like really crazy, ridiculous high number. No, it’s not learn how to do the math of income property. Because income property is a multi dimensional asset class. Go check out the free video on the front page of Jason Hartman calm on how to analyze a real estate deal and I will explain in detail how we come up with the Overall return on investment. These are conservative projections. And they take into account vacancy rate management fees, maintenance expenses. You’ll see it all there on video where we look at a performance in depth for 27 minutes. And every single number on that performance is explained to you. That’s a free video on the front page of Jason Hartman, calm, beautiful, that’s great projected cash flow $283 per month. Okay, fantastic nourish. So my old neighbor from back when I lived in Newport coast, California, sadly died recently and everybody is going to know who we’re talking about because it’s been in the news, a world famous person that is Kobe Bryant. He had some good advice to his younger self a letter that you discovered, right?
Yeah, so this was a letter he wrote what really impressed me was he retired in 2016. When he wrote this letter to himself, he could have talked about his accolades, his championships, he could have talked about any of that stuff. But instead he decided to talk about money and economics and specifically, the value of money and when it’s okay to give money to your family and how you should give money to your family and your friends, and his philosophy on money, I think aligns with with you and me and many other guests who you’ve had on your show, which is give people enough so that they can invest in themselves to improve themselves. Don’t just give them a bunch of cash whenever they ask for it so they can buy houses. He specifically lays out cars and houses I guess those are the two most popular things people like to buy. But he wrote this just really, really good piece the few days after he retired and he came back with after his death, different economics. Actually. The foundation for nomic education is the one who reprinted this and added commentary to it and tied it into the government and said look like this athlete got it. And he breaks it down like an economist would, on the benefits of giving money to people or giving them enough so that they can help themselves. I think we should link to this piece will probably put in the show notes. But he makes just a lot of good cases through experience because he had family members take from him, his parents, his mom, his dad, his sisters, they basically took from him spent all the money and then kept asking for more, and he cut them off. He specifically says gangers health and education, learn a skill, but I’m not going to give you money to just go and buy a house. Right? Obviously not a rental property but
Jason Hartman 11:47
good stuff a hand up rather than a handout and I couldn’t agree more with that philosophy. Interesting coming from Kobe Bryant. You know, you don’t usually see an athlete. Usually these guys are not That smart, okay, they blow their fortune they spend stupidly, you know, they spend like drunken sailors and a lot of them. For example, in the NFL, of course, yesterday, we had the Super Bowl. You know, we’re recording this before the Super Bowl. So hey, we don’t know what happened, folks. But, you know, they end up broke these guys. I mean, you know, these NFL players that make millions and millions and millions of dollars that just go bankrupt. You know, how do you use or lose your money like that so irresponsibly? It’s really, it’s really sad, but you know, Coby talks about why his generosity and economics and human action and this article that’s it’s pretty interesting, and I like it. I like this group. You know, Effie, I’ve donated money to the myself foundation for economic education. That’s a good group. So this article is on their website, and we’ll share it in the show notes.
Yeah, and let me just read one paragraph from the article which I think the listeners will will like and Carrie goes quote investing In their future, don’t just give us your success, wealth and influence to put them in the best position to realize their dreams and find their true purpose. Put them through school, set them up with job interviews, help them become leaders in their own right. Hold them to the same level of hard work and dedication that it took for you to get to where you are now, and where you will eventually go. As time goes on, you will see them grow independently, and have their own ambitions and their own lives. And your relationship with all of them will be much better as a result. Before you sign that first contract, figure out the right budget for your parents. One will that will allow them to live beautifully, while also growing your business and setting people up for long term success.
Jason Hartman 13:53
Good books, good advice, good. It’s good advice. You know, he could be seen at the grocery store the same one, I would go All the time in Newport coast avans market on Newport coast Boulevard. He lived right around the corner from me allow just I lived on coral reef. And he I don’t know, I can’t remember what street he lived on. But I used to walk my dog near his house and you could walk to Toby’s house for mine and seven minutes, five minutes, maybe? Yeah. Oh, wow.
I had no idea. Well, you lived in a hotspot of La so I’m sure many Yeah,
Jason Hartman 14:24
yeah. Well, you know, Newport coast, California, Orange County, California, south of LA is a really, really high end area. So there were there were lots of mostly business celebrities, I’d say that lived there. The Broadcom people and well they didn’t live in Newport coast, but they live in I think cameo shores, which is technically Corona Del Mar right around the corner but yeah, Orange County is they call it orange on the Riviera. It’s a ritzy place so no surprise that Coby live there Dennis Rodman live there, you know, all kinds of Dennis Rodman or Ambassador North Korea, you know, yeah. That’s a joke. By the way, good stuff. Okay. Well, hey, you had a couple of questions you wanted to go over. So refinancing? That’s a question we get asked all the time, the rash, when is the best time to refinance my properties? What is the reason to refinance my properties? and so forth? And the answer that question is multi dimensional. But the thing I want to say about it, and by the way, pardon my voice, I’m still a little bit sick here. So hopefully, when you hear me tomorrow, I’ll be better I’m on the mend. But on the means for refinancing. First off, keep in mind my refi till you die plan, okay, that refi to you die plan, which is the model of how to refinance and extract wealth from your real estate portfolio in the most tax efficient manner possible, which means zero tax because there’s no tax on borrowed money. It’s an absolutely beautiful thing. So that’s the first thing to keep in mind. Now, remember, Rifai till you die, which is the plan I’ve been teaching people for 1516 years now is mutually exclusive from what we talked about at the last meet the Masters, which was the big boring idea, which is our own a, A, or not to be confused with ROI, ROI a, we we made that one up its return on amortization. And it isn’t quite as sexy or impressive as some of the other stuff we talked about and some of the other techniques we teach. But it isn’t bad either. It’s it’s, it’s deceivingly. Good, actually. And we showed it that meet the Masters how much return people could get from simply letting their tenants pay off their loans. That’s it. Because when you get later into that cycle, five 710 1215 10 years into that cycle of amortizing those loans down, just the return on amortization becomes pretty significant. For example,
Jason Hartman 17:10
one of the properties you just mentioned, offered a projected return of 32% annually. Now, what people need to realize is this is a first year performer when we quote those numbers, okay? though all those projections are based on first year performance. On first year, your principal pay down is almost nothing, it’s nil. Okay, but when you get 712 15 years in to your loan, you are really chunking that loan down, and that return on amortization can add 457 8% to your annual return on investment. In a very simple fashion, but you don’t get to refi to die. Now, what I want to tell you though, there is a best of both worlds option, a best of both worlds option, because one of the thing we never really get into on the refi to die plan, but we’ll touch on it here just quickly is that when you refinance, it doesn’t mean you have to refinance per se. Okay. And what do I mean by that? What the reply to you die plan is really all about is simply pulling cash out of your properties out of your portfolio, because there’s no tax on borrowed money. So this is cash that you can just simply take, you can keep, you can spend, you can enjoy, you can go buy crappy depreciating assets, like yachts and sports cars, or take vacations and you can blow it Okay, and you don’t pay tax on that money that you get to blow. So it’s it’s pre tax dollars, essentially. But that’s implying that you’re actually refinancing the first loan you have against that property. You don’t have to do that. You could simply do a heel lock or a second loan on the property and take your cash out that way. And that may be an acceptable alternative. Now, why do I say maybe not for sure? Well, because I don’t know. It depends on what’s being offered at the time that you’re thinking of doing this. as regular listeners and clients will know. The refi to you die plan is based on either a seven or a 12 year cycle of refinancing your properties. And that’s just used as an example because with the rule of 70 twos in seven years at a Somewhat average, and we can slice and dice that discussion forever, of 6% appreciation, your portfolio will increase in value by 50%, in seven years, or by 100%, it will double every 12 years. And so we just use that as an example of how you might refi till you die, okay, but you could also do a second loan, and pull cash out that way and leave the first loan in place and continue to get the full r o A, or return on amortization. So this stuff, it raises several questions. It’s complex. And this is why we have investment counselors to help you with these things. And we’ve been catering to investors only for the last 16 years. Before I was in traditional real estate, there’s a lot to some of this stuff. So just reach out to us when you’re having these questions and thoughts, and we’ll be happy to help you with it. Okay. No rush. You had another question about down payments, I get this question quite a bit.
Jason Hartman 21:08
And that is, when should I consider putting down 25% or 30% instead of 20%? down? What are your rules for bad, there’s not going to be a good hearty fast rule for this. And the reason is that I would always always always want more leverage, rather than less. The mathematician and philosopher Archimedes of ancient times, said, Give me a lever long enough in a fulcrum to place it on and I will move the entire world. And that’s literally true. Okay, you can move anything with a long enough lever and a fulcrum to put that lever on, right because that leverage makes a small amount of power, much, much bigger. And so we all understand That concept of mechanical leverage. Of course, with income property, the beauty is we have an incredible amount of financial leverage. And you get more leverage when you put less into the deal. When you put less money down, that makes your lever longer, your library is shorter, and it gets shorter the more money you put into the deal. So if you put 100% down, you have zero leverage. If you put zero down, you have Infinite Leverage, and everything else is in between the two, so your lever is longer. When you have less money down. Your lever is shorter, meaning you have less leverage when you have more money down. So I always want as much leverage as possible. However, I can only play within the game that the lender will allow. And currently the lender will only allow 80% leverage maximum and 20% of my own Cash my own down payment. However, the lender will give me a better rate on the mortgage. If I put more down sometimes many times, most times, actually. So if you put 25 or 30% down rather than 20%, you’re probably going to get a little bit better rate. So it is very, very difficult to analyze. If the rate is quarter point, should you put the extra five or 10%? down? I don’t really know. Because you can’t really do math on that. What would the math be? Well, I can tell what my payment difference will make how much less interest all I’ll pay, right? That’s easy. But the hard part is analyzing what is the opportunity cost of having less leverage and having that cash outside of the deal to do another deal with because if it was 5%, more down, and I was buying four properties, if I I didn’t put the extra 5% down, then that would give me another 20% to buy one more property, right? So I could buy five properties instead of four. That’s kind of how you have to look at it. It’s a little bit hard to analyze that. So generally speaking, though, my answer is put less down, if you can, so that you can have more cash to do more deals, that’s going to be the better option, almost always, then what are your thoughts on PMI? So a lot of lenders will allow you to put 10% 15% down, but they’ll charge you the PMI. Well, that’s now we’re not talking about investment properties anymore. we’re only talking about owner occupied properties. And PMI, by the way, for those who don’t know is private mortgage insurance. So whenever the loan to value ratio is below 80%, LTV or loan to value, lenders will require private mortgage insurance or PMI. Even then, would say it’s usually worth paying the PMI to get more leverage. So if you’re buying your own home, you know, and you can put 10% less money down just by carrying that mortgage insurance policy, that by the way goes away. When your property appreciates. To have that loan balance below 80% LTV, you can just go and ask the lender to take away the PMI at that point, I would usually want more leverage. That’s pretty much you know, the least risky thing is to have less cash on the deal. That’s always the least risky way to invest. And that’s what we would recommend, as I always say, nourish the best insurance is a high loan balance. Mm hmm. So hope that makes sense. Let’s wrap it up your rush. Thank you for talking about those properties. Did you have one more you wanted to talk about very quickly?
Yeah, I do have one more if we do have you know, just quickly. Okay, so this is one close to the Sarasota, Florida. area
Jason Hartman 26:01
of Sarasota. I’m going there this week. That’s such a beautiful area.
Yeah, so it’s in citrus Springs, Florida. So about half an hour outside of Sarasota. It’s a duplex. And this one has, it sells for $230,000 approximately, with a gross rent estimate of $2,000 per month. So we’re looking at a rent to value ratio. Not at point 9%. But about point 8%, which is still new home construction new home duplex solid cash on cash return of 7% capper no crap rate, as he say, is we shouldn’t be so sarcastic because a new listener doesn’t know what we’re talking about. So the cap rate,
So cap rate somewhere between seven to 8%. Assuming 20% down so the cash on cash return would actually be about somewhere between eight to 9%. Total ROI would be 31%. Sounds so similar to the other new home constructions that we talked about earlier. numbers look good. I think citrus springs people may not be as familiar with citrus springs or even Sarasota as much as they are Jacksonville Orlando or some of the other markets that we cover. But here the numbers make a lot of sense. It’s it’s a new home duplex, two doors. And what what are your thoughts? Jason?
Jason Hartman 27:27
I think that’s pretty good. And when you say two doors, you don’t mean the number of doors The house has, probably has a backdoor and a front door on each unit, a door equals a unit. So duplexes, it’s two units. Okay, good. That sounds like a great deal. And by the way, folks, if you’re listening to this, and you haven’t, at some point or another explored Florida a bit, the next time we do profits in paradise in Florida, which probably be later this year, when we did it in Orlando last time, give yourself some time and explore some of these areas like Sarasota for example. Just a charming area, St. Augustine, many of our listeners own properties in St. Augustine, just absolutely charming, charming area. You know, of course, there’s Jacksonville, which has been great for a lot of our clients and really just, it’s such a big world out there and I couldn’t believe it. You know, when I, when I lived next to Kobe Bryant in Newport coast, there was this mentality that Southern California is the whole world. And you know, it’s it’s pretty nice area, you may live in SoCal or some other nice area, but there are many, many very, very desirable areas around the country. And 16 Well, really 17 years ago, when I started getting interested in nationwide investing, and I started flying to all these different cities and exploring all these different markets. I was just amazed at the Quality of Life one can achieve the the great investments, they can get the opportunity to live in no income tax or low income tax states and still have great opportunities. So just want to throw that out there to any of you. And that’s not just from an investment perspective. It’s from a where you might live someday perspective as well. So just wanted to make you think about that. Go to Jason hartman.com. For more properties, the video on how to analyze a real estate deal. If you’ve already seen that video, you should watch it every six months or so, get yourself a review of that video, and make sure you are staying focused on how to really be a disciplined investor. Thanks for joining us, everyone. And until tomorrow, happy investing. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes, be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next